<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1999
REGISTRATION NO. 333-86843
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ENTERCOM COMMUNICATIONS CORP. PENNSYLVANIA 4832 23-1701044
ENTERCOM COMMUNICATIONS CAPITAL TRUST DELAWARE 4832 TO BE APPLIED FOR
(Exact Name of Registrant as Specified (State or Other (Primary (I.R.S. Employer
in its Charter) Jurisdiction of Standard Identification
Incorporation or Industrial Number)
Organization) Classification
Code Number)
</TABLE>
401 CITY AVENUE, SUITE 409
BALA CYNWYD, PENNSYLVANIA 19004
(610) 660-5610
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
JOSEPH M. FIELD
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
ENTERCOM COMMUNICATIONS CORP.
401 CITY AVENUE, SUITE 409
BALA CYNWYD, PENNSYLVANIA 19004
(610) 660-5610
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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JOHN D. WATSON, JR., ESQ. JOHN C. DONLEVIE, ESQ. JEREMY W. DICKENS, ESQ.
LATHAM & WATKINS EXECUTIVE VICE PRESIDENT, WEIL, GOTSHAL & MANGES LLP
1001 PENNSYLVANIA AVE., N.W. SECRETARY AND GENERAL COUNSEL 767 FIFTH AVENUE
SUITE 1300 ENTERCOM COMMUNICATIONS CORP. NEW YORK, NEW YORK 10153
WASHINGTON, D.C. 20004 401 CITY AVENUE, SUITE 409 (212) 310-8000
(202) 637-2200 BALA CYNWYD, PENNSYLVANIA 19004
(610) 660-5610
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1999
3,000,000 TIDES(SM)
ENTERCOM COMMUNICATIONS CAPITAL TRUST
% Convertible Preferred Securities
Term Income Deferrable Equity Securities (TIDES)(SM*)
(liquidation amount $50 per each of the TIDES)
guaranteed to the extent described herein by,
and convertible into Class A common stock of,
[ENTERCOM LOGO]
ENTERCOM COMMUNICATIONS CORP.
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The % Convertible Preferred Securities, Term Income Deferrable Equity
Securities (TIDES)(SM) or TIDES(SM) represent undivided preferred beneficial
ownership interests in the assets of Entercom Communications Capital Trust.
Subject to the deferral provisions described in this prospectus, the trust will
pay distributions on the TIDES on each March 31, June 30, September 30 and
December 31. The trust will make the first distribution on December 31, 1999.
Entercom Communications Corp. may redeem the TIDES at any time after October 3,
2002.
Entercom will own all the common securities issued by the trust. The trust
exists for the sole purpose of issuing the common securities and the TIDES and
using the proceeds to purchase the % Convertible Subordinated Debentures due
2014 from Entercom.
Each TIDES is initially convertible into shares of Entercom's Class A
common stock at the rate of shares of Class A common stock for
each of the TIDES (equivalent to an initial conversion price of $ per share
of Class A common stock). Entercom's Class A common stock is traded on The New
York Stock Exchange under the symbol "ETM." On September 29, 1999, the last
reported sale price of the Class A common stock was $40.13 per share.
The underwriters have an option to purchase a maximum of 450,000 additional
TIDES to cover over-allotments of TIDES.
We do not intend to list the TIDES on a national securities exchange or
automated interdealer quotation system.
Concurrently with this offering, Entercom is selling up to 8,000,000 shares
of Class A common stock, and selling shareholders are selling up to 1,500,000
shares of Class A common stock, by means of a separate prospectus. The
underwriters of the Class A common stock offering have an option to purchase
from us up to 1,000,000 additional shares of Class A common stock, and from some
of our shareholders, up to 425,000 additional shares of Class A common stock, in
each case to cover over-allotments of shares. This offering and the Class A
common stock offering are not contingent on each other.
INVESTING IN THE TIDES INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 16.
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PROCEEDS
PRICE TO UNDERWRITING TO THE
PUBLIC(1) COMMISSIONS TRUST(1)
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<S> <C> <C> <C>
Per each of the TIDES................................ $50 (2) $50
Total................................................ $150,000,000 (2) $150,000,000
</TABLE>
(1) Plus accrued distributions, if any, from , 1999.
(2) Entercom has agreed to pay a commission to the underwriters of $ per each
of the TIDES, or $ in the aggregate.
Delivery of the TIDES will be made on or about , 1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
* The terms Term Income Deferrable Equity Securities (TIDES)(SM) and TIDES(SM)
are registered service marks of Credit Suisse First Boston Corporation.
CREDIT SUISSE FIRST BOSTON
BANC OF AMERICA SECURITIES LLC
DEUTSCHE BANC ALEX. BROWN
The date of this prospectus is , 1999.
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[Map of the United States, identifying the cities in which we have stations
and the stations within those cities.]
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TABLE OF CONTENTS
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SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS..... ii
PROSPECTUS SUMMARY............... 1
RISK FACTORS..................... 16
USE OF PROCEEDS.................. 28
DIVIDEND POLICY.................. 28
PRICE RANGE OF OUR CLASS A COMMON
STOCK.......................... 29
CAPITALIZATION................... 30
ACCOUNTING TREATMENT............. 31
RATIO OF EARNINGS TO FIXED
CHARGES........................ 31
COMPLETED AND PENDING
TRANSACTIONS................... 32
UNAUDITED PRO FORMA FINANCIAL
INFORMATION.................... 34
SELECTED HISTORICAL FINANCIAL
DATA........................... 46
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...... 49
INFORMATION ABOUT STATION AND
MARKET DATA.................... 62
BUSINESS......................... 63
THE SINCLAIR ACQUISITION......... 80
MANAGEMENT....................... 83
</TABLE>
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CERTAIN TRANSACTIONS............. 89
PRINCIPAL AND SELLING
SHAREHOLDERS................... 90
ENTERCOM COMMUNICATIONS CAPITAL
TRUST.......................... 93
DESCRIPTION OF TIDES............. 94
DESCRIPTION OF CONVERTIBLE
SUBORDINATED DEBENTURES........ 116
DESCRIPTION OF GUARANTEE......... 128
RELATIONSHIP AMONG THE TIDES, THE
CONVERTIBLE SUBORDINATED
DEBENTURES AND THE GUARANTEE... 131
UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES................... 133
DESCRIPTION OF CAPITAL STOCK..... 137
CERTAIN ERISA CONSIDERATIONS..... 142
SHARES ELIGIBLE FOR FUTURE SALE.. 144
UNDERWRITING..................... 145
NOTICE TO CANADIAN RESIDENTS..... 147
LEGAL MATTERS.................... 149
EXPERTS.......................... 149
WHERE YOU CAN FIND MORE
INFORMATION.................... 150
INDEX TO FINANCIAL
STATEMENTS..................... F-1
</TABLE>
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information included in this prospectus may contain forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934. Forward-looking statements are not
statements of historical facts, but rather reflect our current expectations
concerning future results and events. We use the words "believes," "expects,"
"intends," "plans," "anticipates," "likely," "will" and similar expressions to
identify forward-looking statements. These forward-looking statements are
subject to risks, uncertainties and other factors, some of which are beyond our
control, that could cause actual results to differ materially from those
forecast or anticipated in such forward-looking statements.
These risks, uncertainties and factors include, but are not limited to:
- the possibility that our acquisition of the 46 radio stations from
various subsidiaries of Sinclair Broadcast Group, Inc. will not be
consummated;
- the risks associated with our acquisition strategy generally;
- the highly competitive nature of, and uncertain effect of new
technologies on, the radio broadcasting industry;
- our continued control by Joseph M. Field and members of his immediate
family;
- our vulnerability to changes in federal legislation or regulatory policy;
- the trust's inability to make distributions on the TIDES if we are unable
to make interest payments on the convertible subordinated debentures due
to a default on our secured senior debt or otherwise;
- our structure as a holding company, which limits our ability to access
the cash flows and assets of our subsidiaires;
- the possibility that you may have to pay taxes on interest prior to your
receipt of distributions from the trust; and
- the other factors described in "Risk Factors."
You should not place undue reliance on these forward-looking statements,
which reflect our view only as of the date of this prospectus. We undertake no
obligation to update these statements or publicly release the result of any
revisions to these statements to reflect events or circumstances after the date
of this prospectus or to reflect the occurrence of unanticipated events.
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PROSPECTUS SUMMARY
This summary only highlights information contained elsewhere in this
prospectus. You should read the entire prospectus carefully. Unless we indicate
otherwise, information in this prospectus assumes the underwriters will not
exercise their over-allotment option. You should refer to the introductions to
"-- Summary Historical Financial Data" and "Selected Historical Financial Data"
for the meanings of some of the financial terms used in this prospectus. You
should also refer to the introduction to "Unaudited Pro Forma Financial
Information" for a description of the assumptions and adjustments used in the
calculation of pro forma financial information. Unless the context requires
otherwise, "Entercom," "We," "Us," "Our" or similar terms refer to Entercom
Communications Corp. and its consolidated subsidiaries, excluding Entercom
Communications Capital Trust. However, in the descriptions of the TIDES, the
debentures, the guarantee, the trust and related matters, these terms refer
solely to Entercom Communications Corp. and not the trust or any of our other
consolidated subsidiaries.
ENTERCOM COMMUNICATIONS CORP.
We are the fifth largest radio broadcasting company in the United States
based on pro forma 1998 gross revenues. We have assembled, after giving effect
to our pending acquisition of 46 stations from various subsidiaries of Sinclair
Broadcast Group, Inc., a nationwide portfolio of 88 owned or operated stations.
This portfolio consists of 56 FM and 32 AM stations in 16 markets, including 12
of the country's top 50 markets. Our station groups rank among the three largest
clusters, based on gross revenues, in 15 of our 16 markets. On a pro forma
basis, we would have had net revenues of $301.9 million, operating income of
$51.2 million and pro forma income before extraordinary item of $1.2 million for
the twelve months ended June 30, 1999. In addition, pro forma broadcast cash
flow during the same period would have been $107.7 million.
Our net revenues and broadcast cash flow have grown significantly on both a
total and same station basis. Net revenues grew at a compound annual rate of
96.8% from an actual $35.9 million in fiscal 1995 to a pro forma $273.8 million
in fiscal 1998. Broadcast cash flow grew at a compound annual rate of 98.0% from
an actual $11.8 million in fiscal 1995 to a pro forma $91.6 million in fiscal
1998. During this same period, our same station net revenues and broadcast cash
flow grew at average annual rates of 15.0% and 36.4%, respectively. In addition,
our pro forma after-tax cash flow grew at a compound annual rate of 127.2% from
an actual $4.5 million in fiscal 1995 to a pro forma $52.8 million in fiscal
1998.
SINCLAIR ACQUISITION
In August 1999, we agreed with Sinclair to purchase 46 radio stations, 15
AM and 31 FM, in nine markets, including seven of the country's top 50 markets.
The purchase price for the Sinclair acquisition is $824.5 million. In connection
with the Sinclair acquisition, federal broadcasting regulations will require us
to divest three stations in the Kansas City market, where we already own seven
stations and Sinclair owns four stations. To comply with these regulations, we
plan to swap three Kansas City stations for stations in other markets, or if we
are unable to do so, we will sell three stations for cash or pursue a
combination of swaps and sales. As a result of the required Kansas City
dispositions, our portfolio of stations could be reduced to 85. We expect to
consummate the Sinclair acquisition in the last quarter of 1999; however, we
cannot assure you that we will be able to do so.
As a result of the Sinclair acquisition, we will serve eight new markets,
six of which are new top 50 markets. These eight new markets will complement our
current station portfolio by greatly increasing its diversity and national
reach. Due to this increased diversity, we will have reduced significantly our
reliance on any single market. Furthermore, we believe that many of the Sinclair
radio stations are underdeveloped and offer substantial growth potential.
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OUR STATION PORTFOLIO
Our current portfolio of stations includes a significant number of recently
acquired stations that we believe are underdeveloped. We believe that these
underdeveloped stations offer the opportunity for substantial broadcast cash
flow growth. In the aggregate, the 33 stations which we commenced operating on
or after January 1, 1997 operated at a broadcast cash flow margin of 27.4%
during the twelve months ended June 30, 1999. By comparison, in the aggregate,
the nine stations which we commenced operating prior to 1997 operated at a
broadcast cash flow margin of 48.2% during the twelve months ended June 30,
1999.
The following table sets forth selected information about the markets where
we operate and where we expect to operate following the Sinclair acquisition.
The Sinclair markets are denoted with an asterisk (*), except for the Kansas
City market where we expect to acquire four additional stations from Sinclair.
However, the table does not give effect to the required disposition of three
stations in Kansas City which we are seeking to swap for stations in other
markets; therefore, we have not listed 1998 Entercom Market Revenue Share for
Kansas City. Giving effect to this disposition, which will leave us with a total
of eight stations in Kansas City, 1998 Entercom Market Revenue Share in Kansas
City will decline, although we believe that our 1998 Entercom Market Revenue
Rank will remain unchanged. You should refer to the "Business" section for
further information about our station portfolio.
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1998
1998 MARKET RANK ENTERCOM
-------------------- 1993-1998 ENTERCOM MARKET
RADIO MARKET STATIONS REVENUE
METRO RADIO AVERAGE ---------- ------------
MARKET POPULATION REVENUE REVENUE GROWTH FM AM SHARE RANK
- ------ ---------- ------- -------------- --- --- ----- ----
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Boston, MA.............. 8 10 14.1% 2 3 17.3% 3
Seattle, WA............. 14 13 11.9 5 3 37.8 1
Portland, OR............ 25 20 13.3 4 3 26.5 3
Sacramento, CA.......... 28 28 5.9 4 1 18.1 3
Kansas City, MO......... 30 29 12.5 7 4 -- 1
Milwaukee, WI*.......... 31 33 8.3 2 1 8.7 5
Norfolk, VA*............ 36 44 4.0 4 0 26.8 1
New Orleans, LA*........ 41 39 8.9 4 2 41.9 1
Greensboro, NC*......... 42 50 10.9 3 1 24.2 2
Buffalo, NY*............ 43 41 9.0 2 4 38.8 1
Memphis, TN*............ 46 40 10.1 2 1 20.1 2
Rochester, NY........... 50 55 8.9 3 1 21.4 3
Greenville/Spartanburg,
SC*................... 58 61 7.9 4 3 23.8 3
Wilkes-Barre/Scranton,
PA*................... 64 69 7.7 6 3 38.6 1
Gainesville/Ocala, FL... 98 124 7.5 2 0 20.8 2
Longview/Kelso, WA...... n/a n/a n/a 2 2 n/a n/a
--- ---
All Markets........... 56 32
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OUR ACQUISITION STRATEGY
Since October 1, 1996, in over 20 transactions including the Sinclair
acquisition, which we expect to consummate in the last quarter of 1999, we have
acquired or agreed to acquire 83 radio stations and have divested or will
divest, for strategic or regulatory reasons, 14 radio stations. Through our
disciplined acquisition strategy, we seek to (1) build top-three station
clusters principally in large growth markets and (2) acquire underdeveloped
properties that offer the potential for significant improvements in revenues and
broadcast cash flow through the application of our operational, administrative
and engineering expertise. Although our focus has been on radio stations in top
50 markets, we also consider acquiring stations in top 75 markets to the extent
we believe we can apply our acquisition strategy in those markets.
OUR OPERATING STRATEGY
The principal components of our operating strategy are to:
- DEVELOP MARKET LEADING STATION CLUSTERS. To enhance our competitive
position, we strategically align our stations' formats and sales efforts
within each market in an effort to optimize their performance, both
individually and collectively. We seek to maximize the ratings, revenue
and broadcast cash flow of our radio stations by tailoring their
programming to optimize aggregate audience delivery.
- ACQUIRE AND DEVELOP UNDERPERFORMING STATIONS. We seek to acquire and
develop underperforming stations, which has enabled us to build a
long-term track record of achieving superior same station revenue and
broadcast cash flow growth.
- BUILD STRONGLY-BRANDED FRANCHISES. We analyze market research and
competitive factors to identify the format opportunity, music selection
and rotation, presentation and other key programming attributes that we
believe will best position each station to develop a distinctive identity
and to strengthen the stations' local "brand" or "franchise" value.
- LEVERAGE STATION CLUSTERS TO CAPTURE GREATER SHARE OF ADVERTISING
REVENUE. We believe radio will continue to gain revenue share from other
media as a result of deregulation in the broadcasting industry, which
allows broadcasters to create larger clusters in their markets and offers
advertisers a means to cost-effectively reach larger audiences. We have
begun to capitalize on this opportunity by developing specialized teams
in many of our markets to work with non-traditional radio advertisers to
create and develop marketing programs and solutions.
- MAXIMIZE TECHNICAL CAPABILITIES. We seek to operate stations with the
strongest signals in their respective markets. In addition, on various
occasions we have identified opportunities to upgrade low-powered or
out-of-market stations and transform them into competitive signals, thus
increasing their value significantly. For example, in 1998 we sold our
two Tampa FM stations, which we had purchased for an aggregate of $4.9
million, for $75.0 million after upgrading their license classes.
- RECRUIT, DEVELOP, MOTIVATE AND RETAIN SUPERIOR EMPLOYEES. We believe
that station operators differentiate themselves from their peers
primarily through their ability to recruit, develop, motivate and retain
superior management, programming and sales talent. Accordingly, we strive
to establish a compelling corporate culture that is attractive to
superior performers.
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OTHER FINANCINGS
Concurrently with this offering, we are selling 8,000,000 shares of Class A
common stock, and selling shareholders are selling 1,500,000 shares of Class A
common stock, by means of a separate prospectus. In addition, the underwriters
have an over-allotment option to purchase from us a maximum of 1,000,000
additional shares of Class A common stock, and from some of our shareholders, a
maximum of 425,000 additional shares of Class A common stock. This offering and
the Class A common stock offering are not contingent on each other.
In addition, we are seeking to replace or amend our current credit facility
to permit consummation of the Sinclair acquisition and to significantly expand
our borrowing capacity. Entercom Communications Corp., the parent company, is
currently the borrower under our current credit facility, and our subsidiaries
guarantee Entercom's obligations. When we enter into an amended or replacement
credit facility, we expect that a newly formed subsidiary will become the
borrower under this facility and that all of our station-operating subsidiaries
will become subsidiaries of this entity and guarantee its obligations. We also
expect that Entercom will guarantee those obligations on a senior secured basis.
We intend to use the net proceeds from this offering and the Class A common
stock offering, together with cash on hand and proceeds from our amended or
replacement credit facility, to finance the Sinclair acquisition.
THE TRUST
Entercom Communications Capital Trust is a recently created Delaware
business trust. The trust will issue TIDES to the public and common securities
to us. The trust will use the proceeds of those issuances to buy Entercom's
% Convertible Subordinated Debentures due 2014. We will, on a subordinated
basis, irrevocably guarantee payments on the TIDES to the limited extent set
forth in this prospectus.
For financial reporting purposes, we will treat the trust as one of our
subsidiaries. Accordingly, we will include the accounts of the trust in our
consolidated financial statements. We will present the TIDES as a separate line
item in our consolidated balance sheet entitled "Entercom-obligated mandatorily
redeemable convertible preferred securities of Entercom Communications Capital
Trust," and we will include appropriate disclosures about the TIDES in the notes
to our consolidated financial statements. For financial reporting purposes, we
will record distributions payable on the TIDES as a financing charge to earnings
in our consolidated statement of income.
OUR PRINCIPAL EXECUTIVE OFFICES
Our principal executive offices are located at 401 City Avenue, Suite 409,
Bala Cynwyd, Pennsylvania 19004. Our telephone number is (610) 660-5610, and our
internet website address on the world wide web is www.entercom.com. The contents
of our website are not part of this prospectus.
The trust's place of business and telephone number are the principal
executive offices and telephone number of Entercom.
4
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THE OFFERING
Issuer.......................... Entercom Communications Capital Trust.
Substantially all of the assets of the trust
will consist of Entercom's %
Convertible Subordinated Debentures due
2014. We will own 100% of the outstanding
common securities of the trust.
Securities Offered.............. 3,000,000 TIDES. Additionally, we and the
trust have granted the underwriters an
option for 30 days after the date of this
prospectus to purchase up to an additional
450,000 TIDES at the initial offering price
plus accrued distributions.
Distributions................... If you purchase the TIDES, the trust will
pay you, subject to the deferral provisions
described below, cumulative cash
distributions at an annual rate of % of
the stated liquidation amount of $50 per
each of the TIDES. Distributions will accrue
from the date the trust issues the TIDES,
and subject to the distribution deferral
provisions described below, the trust will
pay those distributions quarterly in arrears
on each March 31, June 30, September 30 and
December 31, commencing December 31, 1999.
Because distributions on the TIDES
constitute interest for United States
federal income tax purposes, corporate
holders of the TIDES will not be entitled to
a dividends-received deduction. The term
"distribution" as used herein shall include
quarterly distributions, additional
distributions on quarterly distributions not
paid on the applicable distribution dates
and special distributions upon certain tax
events.
Distribution Deferral
Provisions...................... We can, on one or more occasions, defer the
interest payments due on the debentures for
up to 20 consecutive quarters unless an
event of default under the debentures has
occurred and is continuing. However, we
cannot defer interest payments beyond the
maturity date of the debentures, which is
September 30, 2014. If we defer interest
payments on the debentures, the trust will
also defer distributions on the TIDES. The
trust will be able to pay distributions on
the TIDES only if and to the extent it
receives interest payments from us on the
debentures. During any deferral period,
distributions will continue to accumulate
quarterly at an annual rate of % of the
liquidation amount of $50 per TIDES. Also,
the deferred distributions will themselves
accrue additional distributions at an annual
rate of %, to the extent permitted by
law. The trust will send you
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<PAGE> 11
written notice of a deferral of
distributions on the TIDES not later than
ten days prior to the record date for the
related TIDES distribution. During any
period in which we defer interest payments
on the debentures, in general we cannot:
- declare or pay any dividend or
distribution on our capital stock;
- redeem, purchase, acquire or make a
liquidation payment on any of our
capital stock;
- make any interest, principal or
premium payment on, or repurchase or
redeem, any of our debt securities
that rank equally with or junior to
the debentures; or
- make any payment on any guarantee by
Entercom of the debt securities of
any of our subsidiaries if the
guarantee ranks equal or junior to
the debentures.
If an interest payment deferral occurs, you
will continue to recognize interest income
for United States federal income tax
purposes in advance of your receipt of any
corresponding cash distribution.
If you convert your TIDES during any
interest payment deferral period, you will
not receive any cash payment for any
deferred distributions.
Conversion into Class A common
stock......................... You may convert each TIDES into shares of
Class A common stock of Entercom at the
initial rate of shares of Class A
common stock for each TIDES (equivalent to
an initial conversion price of $ per
share of Class A common stock). The last
reported sale price of Entercom's Class A
common stock on The New York Stock Exchange
on September 29, 1999 was $40.13 per share.
In connection with any conversion of the
TIDES, the property trustee of the trust
will exchange those TIDES for debentures
having a principal amount equal to the
stated liquidation amount of $50 per TIDES
exchanged. The property trustee will then
immediately convert the debentures into
Entercom's Class A common stock. We will not
issue any fractional shares of Class A
common stock as a result of the conversion.
Instead, we will pay the fractional interest
in cash based on the then current market
value of our Class A common stock. Also, we
will not issue any
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additional shares of our Class A common
stock upon conversion of the TIDES to pay
for any accrued but unpaid distributions on
the TIDES at the time of conversion.
Liquidation Amount.............. We, as the holder of all the common
securities of the trust, have the right at
any time to dissolve the trust. If we
liquidate the trust, you will receive, after
satisfaction of liabilities of creditors of
the trust, debentures having a principal
amount equal to the liquidation amount of
the TIDES you hold.
Maturity........................ The TIDES do not have a stated maturity.
However, the trust must redeem the TIDES
upon the repayment or redemption, in whole
or in part, of the debentures. The
debentures will mature on September 30,
2014, unless earlier redeemed. Upon
redemption of the debentures on September
30, 2014, the trust will redeem the TIDES at
their liquidation amounts plus any accrued
and unpaid distributions.
Optional Redemption............. We may redeem the debentures in whole or in
part, at any time after October 3, 2002 at a
redemption price equal to % of the
principal amount of the debentures,
declining ratably to 100% of the principal
amount of the debentures after September 30,
2006, plus any accrued and unpaid interest.
Tax Event or Investment Company
Event Redemption or
Distribution.................. Upon the occurrence of specified tax changes
affecting the trust's taxable status or the
deductibility of interest on the debentures
or changes in the law causing the trust to
be considered an investment company, we will
cause the trustees to dissolve and liquidate
the trust and, after satisfaction of
liabilities of creditors of the trust,
distribute the debentures to you. In limited
circumstances, with respect to tax changes
only, we may redeem the debentures in whole,
but not in part, at a price equal to the
principal amount of the debentures plus
accrued and unpaid interest, in lieu of
distributing the debentures. Upon the
occurrence of certain changes in the tax
laws, we may also cause the TIDES to remain
outstanding and pay additional amounts due
on the debentures as a result of the change.
Effect of Redemption............ Upon the repayment or redemption of any
debentures, other than following the
distribution of the debentures to you or
holders of the trust's common
7
<PAGE> 13
securities, the trust will concurrently
redeem, on a pro rata basis, the TIDES and
common securities having a liquidation
amount equal to the principal amount of the
repaid or redeemed debentures. If an event
of default exists under the debentures or
the declaration of trust that governs the
trust, the TIDES will receive a preference
over the trust's common securities.
Guarantee....................... We will irrevocably guarantee, on a
subordinated basis and to the extent set
forth in this prospectus, the payment in
full of the following:
- distributions on the TIDES to the
extent of available trust funds;
- the amount payable upon redemption of
the TIDES to the extent of available
trust funds; and
- generally, the liquidation amount of
the TIDES to the extent of trust
funds available for distribution to
you.
The guarantee will be unsecured and
subordinate to all of our secured senior
debt, including our obligations as borrower
under our current credit facility and our
obligations as guarantor under the amended
or replacement credit facility that we are
seeking to obtain. In addition, we are
principally a holding company with
substantially no assets other than equity
interests of our subsidiaries and with
minimal operations. Accordingly, we will
depend on dividends and other distributions
from our subsidiaries in order to make the
interest payments on the debentures. Our
guarantee is effectively junior to the debt
and other liabilities of our subsidiaries,
and as a result, funds may not be available
for payment under the guarantee.
Effectively, we have, through the guarantee,
the debentures, the indenture governing the
debentures and the trust's declaration of
trust, taken together, fully, irrevocably
and unconditionally guaranteed all of the
trust's obligations under the TIDES. No
single document standing alone or operating
in conjunction with fewer than all of the
other documents constitutes a full
guarantee. It is only the combined operation
of these documents that has the effect of
providing a full, irrevocable and
unconditional guarantee of the trust's
obligations under the TIDES.
8
<PAGE> 14
Liquidation of the Trust........ We, as the holder of the trust's common
securities, have the right at any time to
dissolve the trust, subject to specified
conditions. If we dissolve the trust, after
satisfaction of liabilities to creditors of
the trust, we will distribute to you
debentures having a principal amount equal
to the liquidation amount of the TIDES you
hold or, in limited circumstances, an amount
equal to the liquidation amount per TIDES or
common security plus accumulated and unpaid
distributions to the date of payment.
Voting Rights................... Except as required by law, you do not have
any voting rights, unless an event of
default with respect to the debentures
occurs and is continuing or we default under
the guarantee with respect to the TIDES, in
which case, you will be entitled, by
majority vote, to appoint an additional
trustee of the trust.
Ranking......................... Generally, the trust will make payments on
the TIDES pro rata with its common
securities. The debentures will be unsecured
and subordinate and junior in right of
payment to all of our secured senior
indebtedness, including our obligations as
borrower under our current facility and our
obligations as guarantor under the amended
or replacement credit facility we are
seeking to obtain. The debentures will rank
equally with our unsecured indebtedness and
other liabilities, including our trade
payables. At June 30, 1999, we had a $4.9
million letter of credit outstanding and
approximately $166.3 million of secured
senior indebtedness on a consolidated basis.
On a pro forma basis at June 30, 1999, we
would have had a $4.9 million letter of
credit outstanding and approximately $538.9
million of consolidated secured senior
indebtedness. In addition, we are
principally a holding company and the
debentures are effectively subordinated to
all existing and future liabilities of our
subsidiaries. Our subsidiaries are separate
legal entities and have no obligations to
pay, or make funds available for the payment
of, any amounts due on the debentures, the
TIDES or the guarantee.
Form of TIDES................... The TIDES will be represented by a global
certificate registered in the name of Cede &
Co., as nominee for The Depository Trust
Company.
Use of Proceeds................. The trust will use the gross proceeds from
this offering and from the issuance of the
trust's
9
<PAGE> 15
common securities to purchase the
debentures. We intend to use the net
proceeds from the sale of the debentures to
the trust to fund a portion of the total
purchase price for the Sinclair acquisition.
Absence of Market for the
TIDES........................... The TIDES are new securities for which there
is currently no market. We do not intend to
list the TIDES on a national securities
exchange or automated interdealer quotation
system. Although one or more of the
underwriters intend to make a secondary
market for the TIDES, they are not obligated
to do so, and they may discontinue making a
secondary market for the TIDES at any time
without notice. Accordingly, we cannot
assure you as to the development or
liquidity of any market for the TIDES.
10
<PAGE> 16
SUMMARY HISTORICAL FINANCIAL DATA
We have derived the summary operating data shown below for the years ended
September 30, 1996, 1997 and 1998 and the balance sheet data shown below as of
September 30, 1997 and 1998 from our audited consolidated financial statements
included elsewhere in this prospectus. We have derived the balance sheet data
shown below as of September 30, 1996 from our audited financial statements,
which are not included in this prospectus. We have derived the summary operating
data shown below for the three months ended December 31, 1997, the three month
transition period ended December 31, 1998 and the six months ended June 30, 1998
and 1999 and the balance sheet data shown below as of December 31, 1998 and June
30, 1999 from our unaudited financial statements included elsewhere in this
prospectus. We have derived the balance sheet data shown below as of December
31, 1997 and June 30, 1998 from our unaudited financial statements, which are
not included in this prospectus.
As you review the information contained in the following table and
throughout this prospectus, you should note the following:
- Historically, we operated with an October 1st to September 30th fiscal
year. Effective January 1, 1999, we changed for financial reporting
purposes from a fiscal year ending September 30th to a fiscal year ending
December 31st. Accordingly, the summary historical financial data
includes information as of, and for the three month transition period
ended, December 31, 1998 and the three months ended December 31, 1997.
- We retroactively restated our fiscal 1997 and 1998 consolidated financial
statements to reflect a $25.0 million convertible subordinated promissory
note held by an affiliate of Chase Capital Partners as an indexed debt
instrument. We determined the adjustment as of the end of each relevant
period by subtracting the sum of principal and accrued interest on the
note from the fair value of the shares of our common stock into which the
note was convertible. Immediately prior to our initial public offering in
January 1999, Chase Capital converted the note in its entirety into
2,327,500 shares of our Class A common stock and 1,995,669 shares of our
Class C common stock. Accordingly, this note is no longer outstanding.
- Before completing our initial public offering, we were a Subchapter S
corporation under the Internal Revenue Code, and accordingly, we were not
liable for federal and certain state corporate income taxes. Instead, our
shareholders included our taxable income or loss in their federal and
those state income tax returns. Immediately before our initial public
offering, we became a C corporation, and accordingly, we are now subject
to federal and state corporate income taxes. The pro forma amounts shown
in the table reflect provisions for state and federal income taxes,
applied to income before income taxes and extraordinary item, as if we
had been taxed as a C corporation. These pro forma amounts do not include
the effect of the adjustment to reflect indexing of the Chase Capital
convertible subordinated note because the amount of this adjustment is
not tax deductible.
- As a result of our becoming a C corporation immediately prior to our
initial public offering, generally accepted accounting principles
required us to provide for deferred income taxes of $79.8 million to
reflect the cumulative temporary differences between book and income tax
bases of our assets and liabilities.
- For purposes of our historical financial statements, the term "pro forma"
refers solely to the adjustments necessary to reflect our status as a C
corporation rather
11
<PAGE> 17
than an S corporation. It does not refer to any of the other adjustments
described under "Summary Pro Forma Financial Information" and "Unaudited
Pro Forma Financial Information."
- All per share data gives effect to our recapitalization, which we
consummated immediately prior to our initial public offering. In the
recapitalization, we effected a 185 for one stock split and the exchange
of our prior common stock for Class A common stock and Class B common
stock.
- Broadcast cash flow consists of operating income before depreciation and
amortization, corporate general and administrative expenses and net
expense (income) from time brokerage agreement fees.
- Broadcast cash flow margin represents broadcast cash flow as a percentage
of net revenues.
- EBITDA before net expense (income) from time brokerage agreement fees
consists of operating income before depreciation and amortization,
non-cash compensation expense (which is included in corporate general and
administration expenses) and net expense (income) from time brokerage
agreement fees.
- Pro forma after-tax cash flow consists of pro forma income before
extraordinary item minus gains on sale of assets (net of tax) plus the
following: depreciation and amortization, non-cash compensation expense
(which is included in corporate general and administrative expenses),
adjustment to reflect indexing of the convertible subordinated note and
deferred tax provision (or minus deferred tax benefit).
Although broadcast cash flow, EBITDA before net expense (income) from time
brokerage agreement fees and pro forma after-tax cash flow are not measures of
performance or liquidity calculated in accordance with generally accepted
accounting principles, we believe that these measures are useful to an investor
in evaluating our performance because they are widely used in the broadcast
industry to measure a radio company's operating performance. However, you should
not consider broadcast cash flow, EBITDA before net expense (income) from time
brokerage agreement fees and pro forma after-tax cash flow in isolation or as
substitutes for operating income, cash flows from operating activities or any
other measure for determining our operating performance or liquidity that is
calculated in accordance with generally accepted accounting principles. In
addition, because broadcast cash flow, EBITDA before net expense (income) from
time brokerage agreement fees and pro forma after-tax cash flow are not
calculated in accordance with generally accepted accounting principles, they are
not necessarily comparable to similarly titled measures employed by other
companies.
The comparability of the historical financial data reflected below has been
significantly impacted by acquisitions and dispositions. You should read the
summary financial data together with "Selected Historical Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the related notes
included elsewhere in this prospectus.
12
<PAGE> 18
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, JUNE 30,
---------------------------------- ------------------- --------------------
1996 1997 1998 1997 1998 1998 1999
-------- ---------- ---------- -------- -------- --------- --------
(RESTATED) (RESTATED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues...................... $ 48,675 $ 93,862 $ 132,998 $ 28,399 $ 47,363 $ 63,687 $ 95,545
Operating expenses:
Station operating expenses...... 31,659 61,280 88,599 18,868 29,990 42,749 64,296
Depreciation and amortization... 2,960 7,685 13,066 2,880 4,358 6,079 10,019
Corporate general and
administrative expenses....... 2,872 3,249 4,527 849 1,850 2,193 3,454
Net expense (income) from time
brokerage agreement fees...... (879) (476) 2,399 -- 1,236 2,273 652
-------- --------- --------- -------- -------- --------- --------
Total operating expenses...... 36,612 71,738 108,591 22,597 37,434 53,294 78,421
-------- --------- --------- -------- -------- --------- --------
Operating income.................. 12,063 22,124 24,407 5,802 9,929 10,393 17,124
Other expense (income):
Interest expense................ 5,196 11,388 14,663 2,996 5,732 6,179 6,246
Adjustment to reflect indexing
of the convertible
subordinated note............. -- 29,070 8,841 14,903 29,503 5,693 --
(Gains) on sale of assets....... (119) (197,097) (8,661) (43) (69,648) (8,748) (467)
Other non-operating expense
(income)...................... (67) 1,504 (328) (102) 577 (123) (599)
-------- --------- --------- -------- -------- --------- --------
Total other expense
(income).................... 5,010 (155,135) 14,515 17,754 (33,836) 3,001 5,180
-------- --------- --------- -------- -------- --------- --------
Income (loss) before income taxes
and extraordinary item.......... 7,053 177,259 9,892 (11,952) 43,765 7,392 11,944
Pro forma income taxes............ 2,680 78,405 7,119 1,121 27,842 4,972 4,539
Pro forma income (loss) before
extraordinary item.............. 4,373 98,854 2,773 (13,073) 15,923 2,420 7,405
Extraordinary item, net of tax
benefit......................... 348 -- 1,488 -- -- 1,489 --
-------- --------- --------- -------- -------- --------- --------
Pro forma net income (loss)....... $ 4,025 $ 98,854 $ 1,285 $(13,073) $ 15,923 $ 931 $ 7,405
======== ========= ========= ======== ======== ========= ========
Pro forma earnings (loss) per
share before extraordinary
item............................ $ 0.20 $ 4.59 $ 0.12 $ (0.61) $ 0.64 $ 0.11 $ 0.21
Pro forma diluted earnings (loss)
per share before extraordinary
item............................ 0.20 4.59 0.12 (0.61) 0.64 0.11 0.21
Weighted average common shares
outstanding -- basic............ 21,534 21,534 22,239 21,534 24,742 21,534 34,836
Weighted average common shares
outstanding -- diluted.......... 21,534 21,534 22,239 21,534 24,742 21,534 35,251
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents......... $ 5,292 $ 3,626 $ 6,666 $ 3,497 $ 6,469 $ 6,094 $ 8,713
Intangibles and other assets...... 119,269 300,029 428,763 313,889 505,825 428,543 556,501
Total assets...................... 150,575 364,743 522,945 378,138 681,034 513,445 671,627
Senior debt, including current
portion......................... 111,000 117,000 253,784 127,000 330,281 251,785 166,276
Total shareholders' equity........ 5,079 179,019 182,970 166,986 225,467 169,509 396,886
OTHER DATA:
Broadcast cash flow............... $ 17,016 $ 32,582 $ 44,399 $ 9,531 $ 17,373 $ 20,938 $ 31,249
Broadcast cash flow margin........ 35.0% 34.7% 33.4% 33.6% 36.6% 32.9% 32.7%
EBITDA before net expense (income)
from time brokerage agreement
fees............................ $ 14,144 $ 29,333 $ 39,872 $ 8,682 $ 15,523 $ 18,745 $ 28,012
Pro forma after-tax cash flow..... 7,311 16,590 21,028 5,003 7,985 9,563 20,215
Cash flows related to:
Operating activities.......... 12,773 8,859 23,019 7,341 11,158 5,778 8,204
Investing activities.......... (96,502) (13,695) (153,651) (17,470) (86,894) (125,565) 10,001
Financing activities.......... 87,457 3,170 133,672 10,000 75,539 122,384 (15,961)
</TABLE>
13
<PAGE> 19
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following table contains summary pro forma financial information
derived from the unaudited pro forma financial information set forth under
"Unaudited Pro Forma Financial Information." You should read this table in
conjunction with "Unaudited Pro Forma Financial Information" and the financial
statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, 1998 JUNE 30, 1999 JUNE 30, 1999
---------------------- ------------------------ ------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ----------- ---------- ----------- ----------
(RESTATED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues.................... $132,998 $273,755 $ 95,545 $ 148,182 $183,820 $ 301,852
Operating expenses:
Station operating expenses.... 88,599 182,173 64,296 97,666 121,488 194,133
Depreciation and
amortization................ 13,066 42,524 10,019 20,996 18,484 43,872
Corporate general and
administrative expenses..... 4,527 12,354 3,454 5,080 6,569 12,694
Net expense (income) from time
brokerage agreement fees.... 2,399 -- 652 -- 2,014 --
-------- -------- -------- ---------- -------- ----------
Total operating
expenses............. 108,591 237,051 78,421 123,742 148,555 250,699
-------- -------- -------- ---------- -------- ----------
Operating income................ 24,407 36,704 17,124 24,440 35,265 51,153
Other expense (income):
Interest expense.............. 14,663 40,597 6,246 20,215 17,466 40,422
Financing cost of Entercom -
obligated mandatorily
redeemable convertible
preferred securities of
Entercom Communications
Capital Trust............... -- 9,375 -- 4,688 -- 9,375
Adjustment to reflect indexing
of the convertible
subordinated note........... 8,841 -- -- -- 17,748 --
(Gains) on sale of assets..... (8,661) (161) (467) (467) (69,985) (467)
Other non-operating expense
(income).................... (328) (262) (599) (599) (125) (125)
-------- -------- -------- ---------- -------- ----------
Total other expense
(income)............. 14,515 49,549 5,180 23,837 (34,896) 49,205
-------- -------- -------- ---------- -------- ----------
Income (loss) before income
taxes and extraordinary
item.......................... 9,892 (12,845) 11,944 603 70,161 1,948
Pro forma income taxes.......... 7,119 (5,138) 4,539 241 33,405 779
-------- -------- -------- ---------- -------- ----------
Pro forma income (loss) before
extraordinary item............ $ 2,773 $ (7,707) $ 7,405 $ 362 $ 36,756 $ 1,169
======== ======== ======== ========== ======== ==========
Pro forma earnings (loss) per
share before extraordinary
item.......................... $ 0.12 $ (0.17) $ 0.21 $ 0.01 $ 1.31 $ 0.03
Weighted average common shares
outstanding -- basic.......... 22,239 45,168 34,836 45,168 28,130 45,168
</TABLE>
14
<PAGE> 20
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, 1998 JUNE 30, 1999 JUNE 30, 1999
---------------------- ------------------------ ------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ----------- ---------- ----------- ----------
(RESTATED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents....... $ 6,666 $ 8,713 $ 8,713 $ 8,713 $ 8,713
Intangibles and other assets,
net........................... 428,763 556,501 1,332,119 556,501 1,332,119
Total assets.................... 522,945 671,627 1,499,495 671,627 1,499,495
Senior debt, including current
portion....................... 253,784 166,276 538,876 166,276 538,871
Total shareholders' equity...... 182,970 396,886 698,412 396,886 698,412
OTHER DATA:
Broadcast cash flow............. $ 44,399 $ 91,582 $ 31,249 $ 50,516 $ 62,551 $ 107,719
Broadcast cash flow margin...... 33.4% 33.5% 32.7% 34.1% 34.0% 35.7%
EBITDA before net expense
(income) from time brokerage
agreement fees................ $ 39,872 $ 79,228 $ 28,012 $ 45,653 $ 56,199 $ 95,242
Pro forma after-tax cash flow... 21,028 52,768 20,215 31,174 34,662 63,186
</TABLE>
15
<PAGE> 21
RISK FACTORS
Investing in the TIDES involves risk. You should consider carefully the
following risk factors, in addition to the other information contained in this
prospectus, before purchasing the TIDES in this offering. The risks and
uncertainties described below are not the only risks we face. Additional risks
and uncertainties not currently known to us or that we currently deem immaterial
may impair our business operations. If any of these risks actually occur, our
business, results of operations and financial condition could be materially and
adversely affected, the trading prices of the TIDES and our Class A common stock
could decline and you might lose all or part of your investment.
RISKS RELATING TO ENTERCOM
IF WE ARE UNABLE TO CONSUMMATE THE SINCLAIR ACQUISITION, THE ADVERSE EFFECT ON
OUR BUSINESS, ON OUR MARKET DIVERSITY AND ON THE VALUE OF YOUR INVESTMENT
COULD BE MATERIAL.
The closing of this offering is not contingent on the consummation of the
Sinclair acquisition, and we cannot assure you that the Sinclair acquisition
will be consummated. The Sinclair acquisition is subject to a number of
important conditions, including approval from the FCC and clearance by federal
antitrust authorities. We expect that this offering will close in
advance -- perhaps by several months or more -- of satisfaction of these
conditions, and it is possible that one or more of these conditions will never
be satisfied. Moreover, as described in greater detail below, we presently do
not have financing sufficient to consummate the Sinclair acquisition. For all of
these reasons, we cannot assure you that we will be able to consummate the
Sinclair acquisition.
If we are unable to consummate the Sinclair acquisition, the adverse effect
on our business, on our market diversity and on the value of your investment
could be material. For example, we expect that the consummation of the Sinclair
acquisition will greatly increase the diversity and national reach of our
station portfolio, and we would not achieve these benefits -- at least in the
near term -- if the transaction does not close. In particular, on a pro forma
basis for completed transactions but excluding Sinclair, the radio stations we
own or operate in Seattle would have generated approximately 47.2% of our net
revenues and approximately 52.7% of our broadcast cash flow for the fiscal year
ended September 30, 1998 and these percentages would have been approximately
35.2% and 43.3%, respectively, for the six months ended June 30, 1999.
Even on a pro forma basis for completed transactions and including
Sinclair, the radio stations we own or operate in Seattle would have generated
approximately 23.0% of our net revenues and approximately 25.5% of our broadcast
cash flow for the fiscal year ended September 30, 1998 and these percentages
would have been approximately 22.7% and 26.8%, respectively, for the six months
ended June 30, 1999. Accordingly, we have greater exposure to any operating
difficulties that may arise at our Seattle stations or to adverse events or
conditions that affect the Seattle economy than if we were more geographically
diverse, and our exposure will be increased if we are unable to consummate the
Sinclair acquisition.
WE PRESENTLY DO NOT HAVE SUFFICIENT COMMITTED FINANCING TO CONSUMMATE THE
SINCLAIR ACQUISITION, AND OUR ABILITY TO OBTAIN THE NECESSARY FINANCING IS
UNCERTAIN.
Of the $824.5 million in cash required to fund the Sinclair acquisition, we
expect to pay approximately $145.0 million from the net proceeds of this
offering. Concurrently with this offering, we are also pursuing the Class A
common stock offering from which we expect to realize net proceeds of
approximately $306.9 million, assuming a public offering
16
<PAGE> 22
price of $40.00 per share, to be applied toward the Sinclair acquisition.
However, even assuming the closing of both offerings, we will be required to
raise an additional $372.6 million to fund the balance of the Sinclair purchase
price. We will not be able to use our current credit facility to fund this
amount because we would exceed the committed amount under the facility.
Accordingly, we are actively engaged in discussions with various potential
lenders about amending or replacing our present credit facility in order to
obtain the additional financing. We cannot assure you that these discussions
will be successful. If they are not successful, we cannot assure you that we
will be able to obtain from other sources the financing necessary to close the
Sinclair acquisition, or what the terms of any alternative financing might be.
Moreover, this offering is not contingent on the closing of the Class A
common stock offering. As a result, if this offering closes, but the Class A
common stock offering does not, the financing that we would need from an amended
or replacement credit facility or other potential source would correspondingly
increase. The terms and availability of this additional financing is also
uncertain.
THE SINCLAIR ACQUISITION AGREEMENTS IMPOSE SIGNIFICANT FINANCIAL PENALTIES ON
US IF WE ARE UNABLE TO CLOSE THE TRANSACTION BY SPECIFIED DATES, AND WE CANNOT
ASSURE YOU THAT WE WILL BE ABLE TO DO SO.
Our arrangement with Sinclair consists of two separate asset purchase
agreements -- one for Sinclair's four Kansas City stations, for which the
purchase price is $122.0 million, and one for the remaining 42 stations in eight
other markets and other assets that we are acquiring, for which the purchase
price is $702.5 million. The multi-market agreement allocates the purchase
price, and allows for closings on a market by market basis. If Sinclair
rightfully terminates the multi-market agreement, it may be entitled to receive
liquidated damages from us in the maximum amount of approximately $43.0 million.
After we have acquired assets having an aggregate value of 45% of the total
purchase price, these liquidated damages are subject to pro rata downward
adjustment based on the value of markets that have already closed. If Sinclair
rightfully terminates the Kansas City agreement, it may be entitled to receive
liquidated damages from us in the maximum amount of approximately $7.0 million.
In addition, 135 days after public notice that the applications for consent
to assignment of the station licenses have been accepted for filing by the FCC,
the purchase price of all markets not yet closed under the multi-market
agreement will increase 0.75% if all of the markets under that agreement have
not closed due to the failure to receive any required regulatory consent as a
result of facts relating to us or our affiliates. The purchase price will
continue to increase 0.75% at the end of each 30 day period thereafter.
Similarly, 150 days after the same public notice for the Kansas City stations,
the purchase price for the Kansas City market will increase 0.75% if the Kansas
City market has not closed due to the failure to receive any required regulatory
consent as a result of facts relating to us or our affiliates. The purchase
price will continue to increase 0.75% at the end of each 30 day period
thereafter.
We cannot assure you that we will be able to obtain the necessary
regulatory approvals in time to avoid these financial penalties, or at all.
17
<PAGE> 23
WE MAY NOT BE SUCCESSFUL IN IDENTIFYING AND CONSUMMATING FUTURE ACQUISITIONS,
WHICH IS AN IMPORTANT ELEMENT OF OUR BUSINESS STRATEGY.
We pursue growth, in part, through the acquisition of individual radio
stations and groups of radio stations. Our consummation of all future
acquisitions, including Sinclair, will be subject to various conditions,
including FCC and other regulatory approvals. The FCC must approve any transfer
of control or assignment of broadcast licenses.
In addition, acquisitions may encounter intense scrutiny under federal and
state antitrust laws. Our acquisition of the Sinclair stations is, and many of
our future acquisitions may be, subject to notification under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and to a waiting period and
possible review by the Department of Justice and the Federal Trade Commission.
On September 24, 1999, we received a "second request" from the Department of
Justice with respect to the Sinclair Kansas City agreement and therefore the
Department of Justice is currently conducting a more detailed investigation of
our acquisition of the four stations from Sinclair in the Kansas City market.
Although we believe that the concerns of the Department of Justice will be
resolved by our disposition of three stations in the Kansas City market that we
are required to make in order to comply with FCC rules, we cannot assure you
that this will be the case. The applicable waiting period for the multi-market
agreement expired on September 27, 1999.
Any delays, injunctions, conditions or modifications by any of these
federal agencies could have a negative effect on us and result in the
abandonment of all or part of the Sinclair acquisition or other attractive
acquisition opportunities. We cannot predict whether we will be successful in
identifying future acquisition opportunities or consummating these acquisitions
or what the consequences of any acquisitions will be.
Depending on the nature, size and timing of future acquisitions, we may
require additional financing. We cannot assure you that additional financing
will be available to us on acceptable terms. Radio broadcasting is a rapidly
consolidating industry, with many companies seeking to consummate acquisitions
and increase their market share. In this environment, we compete and will
continue to compete with many other buyers for the acquisition of radio
stations. Some of those competitors may be able to outbid us for acquisitions
because they have greater financial resources. As a result of these and other
factors, our ability to identify and consummate future acquisitions is
uncertain.
INTEGRATING ACQUISITIONS IS DIFFICULT.
We will have acquired 83 radio stations since October 1, 1996, including
our anticipated consummation of the Sinclair acquisition in the last quarter of
1999, and we expect to make acquisitions of other stations and station groups in
the future. The integration of acquisitions involves numerous risks, including:
- difficulties in the integration of operations and systems and the
management of a large and geographically diverse group of stations;
- the diversion of management's attention from other business concerns; and
- the potential loss of key employees of acquired stations.
We cannot assure you that we will be able to integrate successfully any
operations, systems or management that might be acquired in the future,
including the operations, systems or management acquired in the Sinclair
acquisition. Consummation of the Sinclair acquisition will require us to manage
a significantly larger radio station portfolio than
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historically has been the case. Our failure to integrate and manage newly
acquired stations successfully could have a material adverse effect on our
business and operating results. In addition, in the event that the operations of
a new business do not meet expectations, we may restructure or write-off the
value of some or all of the assets of the new business.
WE MUST RESPOND TO THE RAPID CHANGES IN TECHNOLOGY, SERVICES AND STANDARDS
THAT
CHARACTERIZE OUR INDUSTRY IN ORDER TO REMAIN COMPETITIVE.
The radio broadcasting industry is subject to rapid technological change,
evolving industry standards and the emergence of new media technologies and
services. We cannot assure you that we will have the resources to acquire new
technologies or to introduce new services that could compete with these new
technologies. Several new media technologies and services are being developed or
introduced, including the following:
- satellite delivered audio radio service, which could result in the
introduction of new satellite radio services with sound quality
equivalent to that of compact discs;
- audio programming by cable systems, direct broadcast satellite systems,
personal communications systems, Internet content providers and other
digital audio broadcast formats;
- in-band on-channel digital radio, which could provide multi-channel,
multi-format digital radio services in the same bandwidth currently
occupied by traditional AM and FM radio services; and
- microbroadcasting stations (low powered, limited coverage radio
stations), about which the FCC is considering proposals.
We cannot predict the effect, if any, that competition arising from new
technologies or regulatory change may have on the radio broadcasting industry or
on our company.
WE EXPECT TO INCUR SUBSTANTIAL ADDITIONAL INDEBTEDNESS TO CONSUMMATE THE
SINCLAIR ACQUISITION, AND THIS INCREASED LEVERAGE COULD HAVE IMPORTANT
CONSEQUENCES TO YOU.
To consummate the Sinclair acquisition, we expect to incur indebtedness
that will be substantial in relation to our shareholders' equity. Assuming that
we successfully amend or replace our credit facility and that we borrow under
the facility to help fund the Sinclair acquisition, upon consummation of the
Sinclair acquisition we would have had $538.9 million in long-term indebtedness
on a pro forma basis at June 30, 1999, compared to our actual long-term
indebtedness of $166.3 million at June 30, 1999. Our leverage will increase
further to the extent that we do not complete the Class A common stock offering
and instead incur additional debt under an amended or replacement credit
facility or otherwise to finance the Sinclair acquisition. Moreover, in addition
to our obligations on our long-term indebtedness and a $4.9 million letter of
credit, we will have quarterly interest obligations on the debentures held by
the trust that fund distributions on the TIDES. These obligations will be
substantial in amount and could have a substantial impact on you. For example,
these obligations could:
- require us to dedicate a substantial portion of our cash flow from
operations to debt service and other financing costs, thereby reducing
the availability of cash flow for other purposes, including funding
future expansion and ongoing capital expenditures;
- impair our ability to obtain additional financing for working capital,
capital expenditures, acquisitions and general corporate or other
purposes;
- limit our ability to compete, expand and make capital improvements;
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- increase our vulnerability to economic downturns, limit our ability to
withstand competitive pressures and reduce our flexibility in responding
to changing business and economic conditions; and
- limit our ability to pay interest on the debentures, which in turn would
limit the trust's ability to make distributions to you.
THE COVENANTS IN OUR EXISTING CREDIT FACILITY RESTRICT OUR FINANCIAL AND
OPERATIONAL FLEXIBILITY, AND IT IS LIKELY THAT ANY AMENDED OR REPLACEMENT
CREDIT FACILITY WILL CONTAIN SIMILAR OR MORE RESTRICTIVE COVENANTS.
Our existing credit facility contains covenants that restrict, among other
things, our ability to borrow money, make particular types of investments or
other restricted payments, swap or sell assets, or merge or consolidate. An
event of default under our credit facility could allow the lenders to declare
all amounts outstanding to be immediately due and payable. We have pledged
substantially all of our consolidated assets and the stock of our subsidiaries
to secure the debt under our credit facility. If the amounts outstanding under
the credit facility were accelerated, the lenders could proceed against our
consolidated assets and the stock of our subsidiaries. Any event of default,
therefore, could have a material adverse effect on our business. Our credit
facility also requires us to maintain specified financial ratios. Our ability to
meet these financial ratios can be affected by events beyond our control, and we
cannot assure you that we will meet those ratios. To consummate the Sinclair
acquisition, we expect to amend or replace our credit facility. It is likely
that any amended or replacement credit facility will contain similar or more
restrictive covenants. We also may incur future debt obligations which might
subject us to restrictive covenants that could affect our financial and
operational flexibility or subject us to other events of default.
BECAUSE OF OUR HOLDING COMPANY STRUCTURE, WE DEPEND ON OUR SUBSIDIARIES FOR
CASH FLOW, AND OUR ACCESS TO THIS CASH FLOW IS RESTRICTED.
We operate as a holding company. All of our radio stations are currently
owned and operated by our subsidiaries. When we enter into an amended or
replacement credit facility, we expect that a newly formed subsidiary will
become the borrower and all of our station-operating subsidiaries will become
subsidiaries of this newly formed subsidiary. We also expect that we will
guarantee the borrower's obligations on a secured senior basis. Our obligations
on the debentures will be subordinated to our obligations on this guarantee.
As a holding company, our only source of cash to pay our obligations,
including corporate overhead and other trade payables, is distributions from our
subsidiaries of their net earnings and cash flow. We currently expect that the
net earnings and cash flow of our subsidiaries will be retained and used by them
in their operations, including servicing their debt obligations, before
distributions are made to us. Although our current credit facility would allow
us to make payments on the debentures and TIDES, other than if an event of
default has occurred and is continuing, we cannot assure you that even if our
subsidiaries elect to make distributions to us, applicable state law and
contractual restrictions would permit such dividends or distributions. Based on
discussions with the lenders under our current credit facility, we expect that
the lenders under an amended or replacement credit facility will permit our
subsidiaries to make upstream distributions to us in amounts sufficient to pay
interest on the debentures so long as no default has occurred under the credit
facility. However, we cannot assure you that this will be the case.
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WE FACE MANY UNPREDICTABLE BUSINESS RISKS, BOTH GENERAL AND SPECIFIC TO THE
RADIO BROADCASTING INDUSTRY, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
FUTURE OPERATIONS.
Our future operations are subject to many business risks, including those
risks that specifically influence the radio broadcasting industry, which could
have a material adverse effect on our business including:
- economic conditions, both generally and relative to the radio
broadcasting industry;
- shifts in population, demographics or audience tastes;
- the level of competition for advertising revenues with other radio
stations, television stations and other entertainment and communications
media;
- priorities of advertisers;
- fluctuations in operating costs;
- technological changes and innovations;
- changes in labor conditions;
- new laws, including proposals to eliminate the tax deductibility of
certain expenses incurred by advertisers; and
- changes in governmental regulations and policies and actions of federal
regulatory bodies, including the United States Department of Justice, the
Federal Trade Commission and the FCC.
Given the inherent unpredictability of these variables, we cannot with any
degree of certainty predict what effect, if any, these variables will have on
our future operations. Generally, advertising tends to decline during economic
recession or downturn. Consequently, our advertising revenue is likely to be
adversely affected by a recession or downturn in the United States economy, the
economy of an individual geographic market in which we own or operate radio
stations or other events or circumstances that adversely affect advertising
activity.
OUR CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER EFFECTIVELY CONTROLS OUR
COMPANY, AND MEMBERS OF HIS IMMEDIATE FAMILY ALSO OWN A SUBSTANTIAL EQUITY
INTEREST IN US. THEIR INTERESTS MAY CONFLICT WITH YOURS.
Upon completion of the Class A common stock offering, Joseph M. Field, our
Chairman of the Board and Chief Executive Officer, will beneficially own
1,788,305 shares of our Class A common stock and 9,782,555 shares of our Class B
common stock, representing approximately 72.0% of the total voting power of all
of our outstanding common stock. David J. Field, our President, Chief Operating
Officer, one of our directors and the son of Joseph M. Field, will beneficially
own 2,374,994 shares of our Class A common stock and 749,250 shares of our
outstanding Class B common stock, representing approximately 7.1% of the total
voting power of all of our outstanding common stock. If the underwriters
exercise their over-allotment options related to the Class A common stock
offering in full, Joseph M. Field's and David J. Field's shares of our common
stock will represent 71.3% and 7.0% of the total voting power of all of our
outstanding common stock, respectively. Collectively, Joseph M. Field and David
J. Field beneficially own all of our outstanding Class B common stock. Other
members of the Field family also own shares of Class A common stock.
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Shares of Class B common stock are transferable only to Joseph M. Field,
David J. Field, certain of their family members or trusts for any of their
benefit. Upon any other transfer, shares of our Class B common stock convert
automatically into shares of our Class A common stock on a share-for-share
basis. Shares of our Class B common stock are entitled to ten votes only when
they are voted by Joseph M. Field or David J. Field, subject to certain
exceptions where they are restricted to one vote. Joseph M. Field generally is
able to control the vote on all matters submitted to the vote of shareholders
and, therefore, is able to direct our management and policies, except with
respect to those matters where the shares of our Class B common stock are only
entitled to one vote and those matters requiring a class vote under the
provisions of our articles of incorporation, bylaws or applicable law,
including, without limitation, the election of the two Class A directors.
Without the approval of Joseph M. Field, we will be unable to consummate
transactions involving an actual or potential change of control, including
transactions in which holders of Class A common stock might otherwise receive a
premium for their shares over then current market prices.
WE ARE DEPENDENT ON FEDERALLY-ISSUED LICENSES TO OPERATE OUR RADIO STATIONS
AND ARE SUBJECT TO EXTENSIVE FEDERAL REGULATION.
The radio broadcasting industry is subject to extensive regulation by the
FCC under the Communications Act of 1934. We are required to obtain licenses
from the FCC to operate our radio stations. Licenses are normally granted for a
term of eight years and are renewable. Although the vast majority of FCC radio
station licenses are routinely renewed, we cannot assure you that the FCC will
approve our future renewal applications or that the renewals will not include
conditions or qualifications. The non-renewal, or renewal with substantial
conditions or modifications, of one or more of our licenses could have a
material adverse effect on us.
We must comply with extensive FCC regulations and policies in the ownership
and operation of our radio stations. FCC regulations limit the number of radio
stations that a licensee can own in a market, which could restrict our ability
to consummate future transactions and in certain circumstances could require us
to divest some radio stations. For example, in connection with the Sinclair
acquisition we will be required to dispose of three radio stations in Kansas
City, and the timing and terms of these dispositions are both unknown. The FCC
also requires radio stations to comply with certain technical requirements to
limit interference between two or more radio stations. If the FCC relaxes these
technical requirements, it could impair the signals transmitted by our radio
stations and could have a material adverse effect on us. Moreover, these FCC
regulations and others may change over time and we cannot assure you that those
changes would not have a material adverse effect on us.
OUR RADIO STATIONS MAY NOT BE ABLE TO COMPETE EFFECTIVELY IN THEIR RESPECTIVE
MARKETS FOR ADVERTISING REVENUES.
Our radio broadcasting stations are in a highly competitive business. Our
radio stations compete for audiences and advertising revenues within their
respective markets directly with other radio stations, as well as with other
media, such as newspapers, magazines, network and cable television, outdoor
advertising and direct mail. Audience ratings and market shares are subject to
change, and any change in a particular market could have a material adverse
effect on the revenue of our stations located in that market. While we already
compete in some of our markets with other stations with similar programming
formats, if another radio station in a market were to convert its programming
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format to a format similar to one of our stations, if a new station were to
adopt a comparable format or if an existing competitor were to strengthen its
operations, our stations could suffer a reduction in ratings and/or advertising
revenue and could incur increased promotional and other expenses. Other radio
broadcasting companies may enter into the markets in which we operate or may
operate in the future. These companies may be larger and have more financial
resources than we have. We cannot assure you that any of our stations will be
able to maintain or increase their current audience ratings and advertising
revenues.
THE LOSS OF KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS.
Our business depends upon the continued efforts, abilities and expertise of
our executive officers and other key executives, including Joseph M. Field, our
Chairman of the Board and Chief Executive Officer, David J. Field, our President
and Chief Operating Officer, John C. Donlevie, Esq., our Executive Vice
President, Secretary and General Counsel, and Stephen F. Fisher, our Senior Vice
President and Chief Financial Officer. We believe that the loss of one or more
of these individuals could have a material adverse effect on our business.
THE MARKET PRICE OF OUR STOCK COULD DECLINE DUE TO THE LARGE NUMBER OF SHARES
ELIGIBLE FOR PUBLIC SALE UPON CONSUMMATION OF THE CLASS A COMMON STOCK
OFFERING.
Upon completion of the Class A common stock offering, we will have
32,944,267 shares of Class A common stock, 10,531,805 shares of Class B common
stock and 1,695,669 shares of Class C common stock issued and outstanding,
assuming no exercise of the underwriters' over-allotment option. Of these
shares, the 9,500,000 shares of Class A common stock being sold in the Class A
common stock offering (plus any shares issued upon exercise of the underwriters'
over-allotment option), the 13,627,500 shares sold in our initial public
offering in January 1999 and approximately 300,000 shares of Class A common
stock sold into the public market since the initial public offering and
approximately 100,000 shares of unrestricted Class A common stock will be freely
transferable without restriction in the public market, except to the extent that
these shares have been acquired by our affiliates; resales of shares acquired by
affiliates are subject to restrictions under Rule 144 of the Securities Act. In
addition, upon conversion of the TIDES, the shares of Class A common stock
into which the TIDES are convertible will be freely transferable without
restriction in the public market, except to the extent that those shares are
acquired by our affiliates and are therefore subject to restrictions under Rule
144. The remaining shares of Class A common stock and all shares of Class B
common stock and Class C common stock were issued in reliance on exemptions from
the registration requirements of the Securities Act, and these shares are
"restricted" securities under Rule 144. The number of "restricted" shares
available for sale in the public market is limited by restrictions under Rule
144, although as to shares held by persons who are not our affiliates, many of
these restrictions do not apply.
In connection with the Class A common stock offering, our directors,
members of senior management and selling and other shareholders, including Chase
Capital, have agreed pursuant to lock-up agreements not to sell or otherwise
dispose of shares representing approximately 10,500,000 shares of Class A common
stock, 10,531,805 shares of Class B common stock and 1,695,669 shares of Class C
common stock, other than shares sold in the Class A common stock offering, for a
period of 90 days after the date of the Class A common stock offering prospectus
without the prior written consent of Credit Suisse First Boston Corporation.
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The market price of our Class A common stock could decline as a result of
future sales of substantial amounts of Class A common stock, or the perception
that substantial sales could occur.
ANTI-TAKEOVER PROVISIONS COULD ADVERSELY AFFECT THE PRICE OF OUR CLASS A
COMMON STOCK.
Certain provisions of our articles of incorporation, by-laws and
Pennsylvania law could make it more difficult for a third party to acquire
control of us, even if a change of control could be beneficial to you. These
provisions could adversely affect the price of our Class A common stock.
OUR FAILURE OR THE FAILURE OF THIRD PARTIES WITH WHICH WE INTERACT TO ADDRESS
ISSUES RELATED TO THE YEAR 2000 COULD ADVERSELY AFFECT OUR OPERATIONS.
We rely, directly and indirectly, on information technology systems to
operate our radio stations, provide our radio stations with programming,
up-to-date news and other information and perform a variety of administrative
services including accounting, financial reporting, advertiser spot scheduling,
payroll and invoicing. We also use non-information technology systems, such as
microchips, for dating and other automated functions. Information and
non-information technology systems that do not properly recognize and process
date sensitive information when the year changes to "2000" or "00" could
generate erroneous data or cause such systems to fail. As a result, year 2000
issues could have a material adverse effect on our operations. In order to
minimize the risk of year 2000 related losses, we are conducting a comprehensive
assessment of our year 2000 issues. However, we cannot assure you that we will
resolve our year 2000 issues prior to the year 2000, or that the cost of
remedying any year 2000 issues will not have a material adverse effect on our
business. Furthermore, we cannot assure you that the systems of other companies
with which our systems interact will be timely converted and, if not timely
converted, would not have a material adverse effect on our financial condition,
results of operation or cash flow.
RISKS RELATING TO THE TIDES
THE TRUST MAY NOT BE ABLE TO MAKE DISTRIBUTIONS ON THE TIDES IF WE DEFAULT ON
OUR SECURED SENIOR DEBT BECAUSE OUR OBLIGATIONS TO PAY ON THE DEBENTURES AND
THE GUARANTEE ARE SUBORDINATED TO OUR PAYMENT OBLIGATIONS UNDER OUR SECURED
SENIOR DEBT.
Because of the subordinated nature of the guarantee and the debentures, we:
- will not be permitted to make any payments of principal, including
redemption payments, or interest on the debentures if we default on our
secured senior debt;
- will not be permitted to make payments on the guarantee if we default on
any of our secured senior debt; and
- must pay all our secured senior debt before we make payments on the
guarantee or the debentures if we become bankrupt, liquidate or dissolve.
The TIDES, the guarantee and the debentures do not limit our ability or the
ability of our subsidiaries to incur additional indebtedness, including
indebtedness that ranks senior to the debentures and the guarantee. At June 30,
1999, we had a $4.9 million letter of credit, approximately $166.3 million of
secured senior debt on a consolidated basis and, on a pro forma basis, we would
have had a $4.9 million letter of credit and a $538.9 million of consolidated
secured senior debt. Because the trust will be able to pay amounts due on
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the TIDES only if we make payments on the debentures, your ability to receive
interest may be affected by our indebtedness.
THE DEBENTURES WILL BE EFFECTIVELY SUBORDINATED TO OBLIGATIONS OF OUR
SUBSIDIARIES.
Because we operate as a holding company, our right to participate in any
distribution of assets of any subsidiary upon that subsidiary's dissolution,
winding-up, liquidation or reorganization or otherwise (and thus the ability of
the holders of the TIDES to benefit indirectly from the distribution) is subject
to the prior claims of the creditors of that subsidiary, except to the extent
that we are a creditor of the subsidiary and our claims are recognized.
Therefore, the debentures will be effectively subordinated to all indebtedness
and other obligations of our subsidiaries. Our subsidiaries are separate legal
entities and have no obligations to pay, or make funds available for the payment
of, any amounts due on the debentures, the TIDES or the guarantee.
THE DEFERRAL OF INTEREST PAYMENTS MAY HAVE AN ADVERSE EFFECT ON THE TRADING
PRICE OF THE TIDES.
If no event of default under the debentures has occurred and is continuing,
we may defer the payment of interest on the debentures for a period not
exceeding 20 consecutive quarters. If we defer interest payments on the
debentures, the trust will defer quarterly distributions on the TIDES. However,
distributions will still accumulate quarterly and the deferred distributions
will themselves accrue additional distributions at the annual rate of %, to
the extent permitted by law. There is no limitation on the number of times that
we may elect to defer interest payments.
We have no current intention of deferring interest payments on the
debentures. However, the lenders under our current credit facility have
required, and we expect that the lenders under the amended or replacement credit
facility we are seeking to obtain will require, that we exercise our right to
defer interest payments on the debentures in the event a default occurs under
the credit facility. Subject to the 20-quarter limitation described above, the
lenders would require this deferral to remain in effect until the default is
cured or waived and for a period of two complete consecutive quarters after any
and all defaults have been cured or waived. However, if we exercise our right in
the future, the TIDES may trade at a price that does not fully reflect the value
of deferred interest on the debentures. If you sell your TIDES during an
interest deferral period, you may not receive the same return on your investment
as a holder who continues to hold TIDES. In addition, our right to defer
interest payments on the debentures may mean that the market price of the TIDES
may be more volatile than the market prices of other securities that do not have
these rights.
YOU MAY HAVE TO PAY TAXES ON INTEREST PAYMENTS PRIOR TO YOUR RECEIPT OF THOSE
PAYMENTS.
Because we have the option to defer interest payments on the debentures,
the debentures will be considered to have been issued with original issue
discount. As a result, you must accrue interest income, as original issue
discount, for United States federal income tax purposes. As a result, you will
have to include your pro rata share of original issue discount in gross income
as it accrues whether or not received currently in cash. In addition, if you
sell the TIDES prior to the record date relating to distributions, you will not
receive the cash distributions from the trust related to any accrued and unpaid
interest even though you will be required to recognize the interest in income
for United States federal income tax purposes.
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If you dispose of your TIDES between record dates for payments of
distributions on your TIDES, you will be required to include original issue
discount on the debentures through the date of disposition in income as ordinary
income and to add that amount to your adjusted tax basis. To the extent the
selling price of your TIDES is less than your adjusted tax basis, you will
recognize a capital loss. Subject to some exceptions, you cannot apply capital
losses to offset ordinary income for United States federal income tax purposes.
THE TRUST MAY REDEEM THE TIDES WITHOUT YOUR CONSENT IF SPECIFIED TAX CHANGES
OCCUR.
Upon the occurrence of specified tax changes affecting the trust's taxable
status or the deductibility of interest on the debentures, we may either
dissolve and liquidate the trust and, after satisfaction of liabilities of
creditors of the trust, distribute the debentures to you or we may redeem all of
the debentures. If we redeem the debentures, the trust will use the cash it
receives from that redemption to redeem the TIDES and the trust's common
securities.
WE MAY CAUSE THE TIDES TO BE REDEEMED ON OR AFTER OCTOBER 3, 2002 WITHOUT YOUR
CONSENT.
We may redeem all or some of the debentures at our option at any time on or
after October 3, 2002. The redemption price initially includes a premium
declining over time to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest. You should assume that we will exercise our
redemption option if we are able to refinance the debentures at a lower interest
rate or if we conclude it is otherwise in our interest to redeem the debentures.
The trust will use the cash it receives from the redemption of the debentures to
redeem an equivalent amount of TIDES and its common securities on a pro rata
basis.
DISTRIBUTION OF THE DEBENTURES TO YOU MAY HAVE ADVERSE TAX CONSEQUENCES FOR
YOU.
We may dissolve and liquidate the trust at any time. If that happens, the
trust will redeem the TIDES and its common securities by distributing, after
satisfaction of liabilities of creditors of the trust, the debentures to you and
us, as the holder of the trust's common securities, on a pro rata basis.
Under current United States federal tax laws, a distribution of debentures
on the dissolution of the trust would not be a taxable event to you. However, if
there is a change in the law and, for example, the trust is characterized for
United States federal income tax purposes as an association taxable as a
corporation at the time of its dissolution, the distribution of debentures would
likely constitute a taxable event to you.
THE DISTRIBUTION OF DEBENTURES UPON LIQUIDATION OF THE TRUST MAY HAVE AN
ADVERSE EFFECT ON TRADING PRICES.
We have the right to dissolve and liquidate the trust. Although we have no
current intention of doing so, we anticipate that we would consider exercising
this right if the expenses associated with maintaining the trust are
substantially greater than we expect or for other business reasons. If we
exercise our right to dissolve and liquidate the trust, the trust will redeem
the TIDES and its common securities by distributing, after satisfaction of
liabilities of creditors of the trust, the debentures to you and to us on a pro
rata basis, unless an event of default under the debentures has occurred and is
continuing, in which case you will have priority over us.
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We cannot predict the market prices for the debentures that the trust may
distribute to you. Accordingly the debentures that you receive on a
distribution, or the TIDES you hold pending a distribution, may trade at a
discount to the price that you paid to purchase the TIDES.
Because you may receive debentures, you should make an investment decision
with regard to the debentures in addition to the TIDES. You should carefully
review all the information regarding the debentures contained in this
prospectus.
WE GUARANTEE PAYMENTS ON THE TIDES ONLY IF THE TRUST HAS CASH AVAILABLE.
If we fail to make payments on the debentures, the trust will not be able
to pay distributions, the redemption price or the liquidation amount of each
TIDES. In those circumstances, you will not be able to rely upon the guarantee
for payment of these amounts. Instead, if we are in default under the
debentures, you may:
- rely on the property trustee for the trust to enforce the trust's rights
under the debentures; or
- directly sue us or seek other remedies to collect your share of payments
owed.
YOU HAVE LIMITED VOTING RIGHTS.
You will have limited voting rights relating generally to:
- the modification of the TIDES and our guarantee of the TIDES; and
- the exercise of the trust's rights as holder of debentures.
You are not entitled to appoint, remove or replace the property trustee of
the trust or the statutory trustee of the trust except upon the occurrence of
certain events. The property trustee, and the holders of all of the trust's
common securities may, subject to certain conditions, amend the declaration of
trust without your consent to:
- cure any ambiguity;
- make provisions of the declaration of trust not inconsistent with other
provisions of the declaration of trust;
- ensure that the trust will not be classified for United States federal
income tax purposes as an association subject to taxation as a
corporation; or
- ensure that the trust will be classified as a grantor trust.
THE TIDES AND THE DEBENTURES DO NOT HAVE AN ESTABLISHED MARKET.
Prior to this offering, there has been no public market for the TIDES. We
do not intend to list the TIDES on a national securities exchange or automated
interdealer quotation system. One or more of the underwriters intend to make a
secondary market for the TIDES. However, they are not obligated to do so and may
discontinue making a secondary market for the TIDES at any time without notice
and for any reason. Accordingly, we cannot assure you that an active trading
market for the TIDES will develop or be sustained. If a market were to develop,
the TIDES could trade at prices that may be higher or lower than their offering
price depending upon many factors, including:
- prevailing interest rates;
- Entercom's operating results; and
- the market for similar securities.
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USE OF PROCEEDS
We estimate that the gross proceeds from the sale of the TIDES will be
$150.0 million. The trust will use these proceeds, together with the proceeds
from the issuance of the trust's common securities, to purchase debentures from
us. After deducting the underwriting commissions which we have agreed to pay on
behalf of the trust, and the other offering expenses we will pay, we estimate
that we will receive net proceeds of $145.0 million from the sale of the
debentures to the trust, or $166.8 million if the underwriters' overallotment
option is exercised in full. We intend to use the net proceeds from this
offering and the Class A common stock offering, together with cash on hand and
proceeds from the amended or replacement credit facility we expect to negotiate,
to finance the Sinclair acquisition. Pending the closing of the Sinclair
acquisition, we intend to use the net proceeds from this offering to pay down
the balance of our revolving indebtedness under our current credit facility, if
any, and the remaining net proceeds will be invested in short-term securities.
If the Sinclair acquisition is not consummated, we intend to use the net
proceeds from this offering for general corporate purposes, including repayment
of revolving indebtedness, future acquisitions and working capital.
DIVIDEND POLICY
Since becoming a public company in January 1999, we have not declared any
dividends on our common stock. We have no plans to declare or pay cash dividends
in the foreseeable future because we intend to retain our earnings, if any, to
finance the expansion of our business and for general corporate purposes. Any
payment of future dividends will be at the discretion of the board of directors
and will depend upon, among other factors, our earnings, financial condition,
capital requirements, level of indebtedness, contractual restrictions, including
the provisions of our credit facility and provisions applicable to the TIDES,
and other considerations that the board of directors deems relevant.
28
<PAGE> 34
PRICE RANGE OF OUR CLASS A COMMON STOCK
Our Class A common stock is listed on The New York Stock Exchange under the
symbol "ETM."
The table below shows, for the quarters indicated, the reported high and
low trading prices of our Class A common stock on The New York Stock Exchange.
<TABLE>
<CAPTION>
PRICE RANGE
----------------
HIGH LOW
------ ------
<S> <C> <C>
Calendar Year 1999
First Quarter (beginning January 29)............... $35.38 $28.31
Second Quarter..................................... 42.75 31.75
Third Quarter (through September 29, 1999)......... 41.88 35.06
</TABLE>
The initial public offering of our Class A common stock was priced on
January 28, 1999 at a price of $22.50 per share.
On September 29, 1999, the last reported sale price of our Class A common
stock on The New York Stock Exchange was $40.13.
29
<PAGE> 35
CAPITALIZATION
The following table sets forth as of June 30, 1999:
- our actual capitalization;
- our unaudited pro forma capitalization after giving effect to this
offering and the Class A common stock offering at an assumed public
offering price of $40.00 per share; and
- our unaudited pro forma capitalization as adjusted to give effect to the
offerings and the Sinclair acquisition, including additional borrowings
under our amended or replacement credit facility.
This table should be read in conjunction with the consolidated financial
statements and the unaudited pro forma financial information and, in each case,
the related notes included elsewhere in this prospectus. In the event that we
elect not to proceed with the Class A common stock offering to consummate the
Sinclair acquisition, we will be required to incur additional debt under our
amended or replacement credit facility or otherwise.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
------------------------------------------
PRO FORMA AS
ADJUSTED FOR
THE OFFERINGS
AND THE
PRO FORMA FOR SINCLAIR
ACTUAL THE OFFERINGS ACQUISITION
-------- --------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents:..................... $ 8,713 $294,613 $ 8,713
======== ======== ==========
Short-term debt and current portion of
long-term debt............................... $ 10 $ 10 $ 10
Long-term debt, less current portion:
Credit facility.............................. 166,000 -- 538,600
Other........................................ 266 266 266
-------- -------- ----------
Total long-term debt...................... 166,266 266 538,866
Entercom-obligated mandatorily redeemable
convertible preferred securities of Entercom
Communications Capital Trust................. -- 150,000 150,000
Shareholders' equity:
Preferred stock.............................. -- -- --
Class A common stock......................... 249 329 329
Class B common stock......................... 105 105 105
Class C common stock......................... 17 17 17
Additional paid-in capital................... 468,239 775,059 775,059
Unearned compensation........................ (223) (223) (223)
Retained earnings (deficit).................. (71,501) (71,501) (76,875)
-------- -------- ----------
Total shareholders' equity................ 396,886 703,786 698,412
-------- -------- ----------
Total capitalization................. $563,162 $854,062 $1,387,288
======== ======== ==========
</TABLE>
30
<PAGE> 36
ACCOUNTING TREATMENT
For financial reporting purposes, we will treat the trust as one of our
subsidiaries. Accordingly, we will include the accounts of the trust in our
consolidated financial statements. We will present the TIDES as a separate line
item in our consolidated balance sheet entitled "Entercom-obligated mandatorily
redeemable convertible preferred securities of Entercom Communications Capital
Trust," and we will include appropriate disclosures about the TIDES in the notes
to our consolidated financial statements. For financial reporting purposes, we
will record distributions payable on the TIDES as a financing charge to earnings
in our consolidated statement of income.
We have not included separate financial statements of the trust because we
do not consider those financial statements material to you because:
- Entercom, a reporting company under the Exchange Act, will own, directly
or indirectly all of the voting securities of the trust;
- the trust has no independent operations but exists for the sole purpose
of issuing securities representing undivided beneficial interests in the
trust's assets and investing the proceeds in the debentures; and
- we will fully and unconditionally guarantee the obligations of the trust
under the TIDES and the common securities to the extent that the trust
has funds available to meet such obligations.
RATIO OF EARNINGS TO FIXED CHARGES
The following table contains our consolidated ratio of earnings to fixed
charges for the periods indicated.
<TABLE>
<CAPTION>
SIX
MONTHS
YEAR ENDED SEPTEMBER 30, ENDED
-------------------------------- JUNE 30,
1994 1995 1996 1997 1998 1999.
---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges............. 12.3 3.1 2.2 15.0 1.6 2.7
</TABLE>
For purposes of computing the ratios of earnings to fixed charges:
- earnings consist of income before provision for income taxes and
extraordinary item plus fixed charges; and
- fixed charges consist of interest expense, amortization of debt discount
and expense relating to indebtedness and the portion of rental expense we
consider representative of the interest factor attributable to leases for
rental property.
31
<PAGE> 37
COMPLETED AND PENDING TRANSACTIONS
COMPLETED TRANSACTIONS
In October 1997, we exchanged the broadcast frequency and transmission
facilities of our Kansas City station, KCMO-AM, for those of Kanza Inc.'s Kansas
City station, WHB-AM. Each party retained its call letters, formats and studio
facilities. We accounted for the transaction as a nonmonetary exchange of
similar productive assets, and no gain or loss was recognized. We recorded the
assets received at the historical cost of the assets surrendered.
In November 1997, we acquired KSSJ-FM (formerly KBYA-FM) in Sacramento from
Susquehanna Radio Corp for $15.9 million.
In January 1998, we acquired WDAF-AM and KUDL-FM in Kansas City plus $7.1
million from American Radio Systems in exchange for our sole station in St.
Louis, KLOU-FM.
In January 1998, we acquired KCTC-AM in Sacramento from American Radio
Systems for $4.0 million.
In May 1998, we acquired WSKY-FM (formerly WRRX-FM) in the Gainesville/
Ocala market from Gator Broadcasting, Inc. for $2.0 million, plus an additional
payment of up to $1.0 million payable once the authorized upgrade of the station
from a Class A license to a Class C-2 license becomes final.
In May 1998, we sold our rights to participate in an FCC licensing
proceeding in the Vancouver, Washington radio market to Jacor Communications,
Inc. for $10.0 million, resulting in a gain of $8.5 million.
In May 1998, we acquired KBAM-AM and KRQT-FM in the Longview/Kelso market
from Armak Broadcasters, Inc. for $1.0 million.
In June 1998, we acquired three stations, KRSK-FM (formerly KKRH-FM),
KKSN-FM and KKSN-AM in Portland, and four stations, WBEE-FM, WBBF-FM (formerly
WKLX-FM), WEZO-AM (formerly WBBF-AM) and WQRV-FM in Rochester, from Sinclair
Broadcast Group, Inc. for $126.5 million. We had operated these stations under a
time brokerage agreement since March 1998.
In August 1998, we acquired from Capital Broadcasting, Inc. the assets and
rental leases used in connection with the operation of a tower facility serving
the Kansas City market for $2.0 million.
In September 1998, we completed a transaction with American Radio Systems
to exchange certain assets used in the operation of radio stations serving the
Sacramento radio market. American Radio Systems transferred KRAK-FM's license
and transmission facility to us in exchange for KRXQ-FM's license and
transmission facility and $4.5 million. Each of the stations retained its own
call letters, programming format and studio and office property and equipment,
and the parties provided each other with reciprocal covenants against
programming competition on the respective frequencies for a period of two years.
American Radio Systems also transferred its intellectual property in the smooth
jazz program format for our use on our recently acquired KSSJ-FM (formerly KBYA-
FM) in that market. The transactions were accounted for as nonmonetary exchanges
of similar productive assets, and no gain or loss was recognized. The assets
received were
32
<PAGE> 38
recorded at the historical cost of the assets surrendered plus the $4.5 million
paid to American Radio Systems.
In December 1998, we acquired KSLM-AM, a radio station serving the Salem,
Oregon portion of the Portland radio market, from Willamette Broadcasting Co.
for $0.6 million.
In December 1998, we acquired the assets of WRKO-AM and WEEI-AM, serving
the Boston radio market, from CBS Radio, Inc. for $82.0 million. We had operated
these stations under a time brokerage agreement since September 1998. We also
sold the assets of WLLD-FM and WYUU-FM, serving the Tampa, Florida radio market
to CBS for $75.0 million, resulting in a gain of approximately $69.6 million. In
February 1999, we purchased the assets of radio stations WEGQ-FM, WWTM-AM and
WAAF-FM in Boston from CBS for $58.0 million in cash. We had operated these
stations under a time brokerage agreement since September 1998.
In June 1999, we acquired KKGM-AM (formerly WREN-AM), a radio station
serving Kansas City, Kansas, from Mortenson Broadcasting Company of Canton, LLC
for the sum of $2.8 million.
PENDING TRANSACTIONS
In February 1996, we entered into a preliminary agreement with Royce
International Broadcasting Corporation to acquire the assets of radio station
KWOD-FM, Sacramento, California, subject to approval by the FCC, for a purchase
price of $25.0 million. Notwithstanding our efforts to pursue this transaction,
the seller was nonresponsive. On July 28, 1999, we commenced a legal action
seeking to enforce this agreement, and subsequently the seller filed a
cross-complaint against us asking for damages and filed a separate action
against our president asking for treble damages, an injunction, attorney's fees
and costs. Our by-laws provide for us to indemnify our president for this claim.
We intend to pursue our legal action against the seller and seek dismissal of
the claims filed by the seller. Accordingly, we cannot determine if or when the
transaction might occur.
In June 1999, we entered into a non-binding letter of intent with the
Wichita Stations Trust, a trust formed for the benefit of Capstar Broadcasting
Corporation as required by federal broadcasting regulations, to purchase five
radio stations in Wichita for $8.0 million. We are presently engaged in
negotiations with the trust to reach a definitive agreement regarding this
transaction. We are also pursuing the acquisition of other stations in the
Wichita market.
We are not including KWOD-FM, Sacramento or the Wichita stations described
above in our station portfolio or pro forma financial information since we
cannot predict when, if ever, we will be successful in acquiring these stations.
In August 1999, we entered into asset purchase agreements with various
subsidiaries of Sinclair Broadcast Group, Inc. to purchase 46 radio stations in
nine markets. As part of the transaction, we are also acquiring 300,000 shares
of common stock, at $5.00 per share, in USA Digital Radio, Inc. The total
purchase price for the Sinclair acquisition is $824.5 million. You should refer
to "The Sinclair Acquisition" for more information regarding this transaction.
33
<PAGE> 39
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information is based on our historical
consolidated financial statements and the financial statements of those
businesses that we have acquired or expect to acquire, as described in greater
detail below. The unaudited pro forma financial information should be read in
conjunction with the financial statements of the following entities and the
related notes included elsewhere in this prospectus:
- Entercom Communications Corp.;
- The Portland, Oregon and Rochester, New York Radio Groups of Heritage
Media Services, Inc. -- Broadcasting Segment;
- The Boston Radio Market of CBS Radio, Inc.;
- Sinclair Broadcast Group, Inc. and Subsidiaries -- Radio Division; and
- Heritage Media Services, Inc. -- Radio Broadcasting Segment -- a Division
of Heritage Media Corporation.
All acquisitions included in the pro forma information are accounted for
using the purchase method of accounting. The aggregate purchase price of each
transaction is allocated to the tangible and intangible assets acquired and
liabilities assumed based on their respective fair values. The allocation of the
aggregate purchase price reflected in the pro forma information is preliminary
for transactions to be closed subsequent to June 30, 1999. The final allocation
of the purchase price is contingent upon the receipt of final appraisals of the
acquired assets and the revision of other estimates. We do not expect final
allocations to differ materially from the preliminary allocation.
The unaudited pro forma information is presented for illustrative purposes
only and does not indicate the operating results or financial position that
would have occurred if the transactions described above had been completed on
the dates indicated, nor is it indicative of our future operating results or
financial position if we complete the transactions described above. We cannot
predict whether the completion of the pending transactions will conform to the
assumptions used in the preparation of the unaudited pro forma information.
For a discussion of our radio station acquisitions and dispositions
completed since October 1, 1997 and our pending acquisitions and dispositions,
see the "Completed and Pending Transactions" and "The Sinclair Acquisition"
sections.
We presently do not have a definitive agreement with respect to the amended
or replacement credit facility. In the event that we do not proceed with the
Class A common stock offering, we will be required to incur additional
indebtedness under our amended or replacement credit facility or otherwise to
consummate the Sinclair acquisition.
34
<PAGE> 40
SEPTEMBER 30, 1998 UNAUDITED PRO FORMA INFORMATION
The unaudited pro forma statement of income for the year ended September
30, 1998 has been prepared to illustrate the effects of the following, as if
each transaction had occurred on October 1, 1997:
- the completed transactions described under "Completed and Pending
Transactions" which were entered into subsequent to the beginning of the
period covered by the pro forma financial information;
- our conversion from an S corporation to a C corporation and the related
$88.1 million distribution to our S corporation shareholders which
represents the estimate of the undistributed balance of our taxable
income as of the date we ceased to be an S corporation;
- the conversion of the Chase Capital convertible subordinated note into
Class A and Class C common stock;
- the completion of our initial public offering;
- the amended or replacement credit facility that we are currently
pursuing;
- this offering and the concurrent offering of Class A common stock at an
assumed public offering price of $40.00 per share; and
- the pending Sinclair acquisition.
We have shown the continued inclusion of the station operating results of
each of the 11 Kansas City stations, although federal regulations require us to
divest three stations in the Kansas City market. This is because we are seeking
to swap three Kansas City stations for stations in other markets, and we are
assuming for purposes of preparing the unaudited pro forma financial information
that the stations we acquire in these swaps will collectively have comparable
operating results. However, if we were to sell any of the three Kansas City
stations for cash, we would not include that station's operating results going
forward. Furthermore, we would use any cash proceeds from these sales to pay
down the outstanding indebtedness under our amended or replacement credit
facility.
JUNE 30, 1999 UNAUDITED PRO FORMA INFORMATION
The unaudited pro forma statements of income for the six month and twelve
month periods ended June 30, 1999 have been prepared to illustrate the effects
of the transactions listed above, as if each transaction had occurred on January
1, 1999 and July 1, 1998, respectively.
The unaudited pro forma balance sheet data as of June 30, 1999 gives effect
to the transactions listed above not yet consummated on that date as if each had
occurred on that date.
35
<PAGE> 41
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS
FOR THE FOR THE OFFERINGS
COMPLETED COMPLETED SINCLAIR AND SINCLAIR TOTAL
ACTUAL TRANSACTIONS(A) TRANSACTIONS ACQUISITION(B) ACQUISITION PRO FORMA
-------- --------------- ------------ -------------- ----------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................. $132,998 $38,417 $ 91,581 $ 10,759(C) $273,755
Operating expenses:
Station operating
expenses.................. 88,599 29,662 56,663 7,621(C) 182,173
(372)(D)
Depreciation and
amortization.............. 13,066 7,601 $(1,396)(E) 16,117 7,112(F) 42,524
24(G)
Corporate general and
administrative expenses... 4,527 4,362 3,465 12,354(H)
Net expense (income) from
time brokerage agreement
fees...................... 2,399 45 (2,444)(I)
-------- ------- ------- -------- -------- --------
Total operating
expenses............. 108,591 41,670 (3,816) 76,245 14,361 237,051
-------- ------- ------- -------- -------- --------
Operating income (loss)....... 24,407 (3,253) 3,816 15,336 (3,602) 36,704
Other expense (income):
Interest expense............ 14,663 14 (2,025)(J) 16,659 11,286 40,597
Financing cost of Entercom-
obligated mandatorily
redeemable convertible
preferred securities of
Entercom Communications
Capital Trust............. 9,375(L) 9,375
Adjustment to reflect
indexing of the
convertible subordinated
note...................... 8,841 (8,841)(M)
(Gains) loss on sale of
assets.................... (8,661) 8 (8)(N) (10,780) 10,780(O) (161)
8,500(P)
Other non-operating expense
(income).................. (328) 147 (82)(Q) 1 (262)
-------- ------- ------- -------- -------- --------
Total other expense
(income)............. 14,515 169 (2,456) 5,880 31,441 49,549
-------- ------- ------- -------- -------- --------
Income (loss) before income
taxes and extraordinary
item........................ 9,892 (3,422) 6,272 9,456 (35,043) (12,845)
Income taxes (benefit)........ 453 (1,300) (453)(R) 4,200 (4,200)(S) (5,138)
6,142(T) (9,980)(U)
-------- ------- ------- -------- -------- --------
Income (loss) before
extraordinary item.......... $ 9,439 $(2,122) $ 583 $ 5,256 $(20,863) $ (7,707)
======== ======= ======= ======== ======== ========
Income before income taxes and
extraordinary item.......... $ 9,892
Pro forma income taxes........ 7,119
--------
Pro forma income before
extraordinary item.......... $ 2,773
========
Pro forma earnings (loss) per
share before extraordinary
item........................ $ 0.12 $ (0.17)
======== ========
Weighted average common shares
outstanding -- basic........ 22,239 14,929(V) 8,000(W) 45,168
</TABLE>
See accompanying notes to pro forma financial information.
36
<PAGE> 42
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS FOR
FOR THE THE OFFERINGS
COMPLETED SINCLAIR AND SINCLAIR TOTAL
ACTUAL TRANSACTIONS ACQUISITION(X) ACQUISITION PRO FORMA
-------- ------------ -------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues........................................ $ 95,545 $52,637 $148,182
Operating expenses:
Station operating expenses........................ 64,296 33,618 $ (248)(D) 97,666
Depreciation and amortization..................... 10,019 8,896 2,081(Y) 20,996
Corporate general and administrative expenses..... 3,454 1,626 5,080(H)
Net expense (income) from time brokerage agreement
fees............................................ 652 $ (652)(I)
-------- -------- ------- -------- --------
Total operating expenses........................ 78,421 (652) 44,140 1,833 123,742
-------- -------- ------- -------- --------
Operating income (loss)............................. 17,124 652 8,497 (1,833) 24,440
Other expense (income):
Interest expense.................................. 6,246 (4)(Z) 9,738 4,235 20,215
Financing cost of Entercom-obligated mandatorily
redeemable convertible preferred securities of
Entercom Communications Capital Trust........... 4,688(L) 4,688
(Gains) loss on sale of assets.................... (467) 30 (30)(BB) (467)
Other non-operating expense (income).............. (599) (61) 61(CC) (599)
-------- -------- ------- -------- --------
Total other expense (income).................... 5,180 (4) 9,707 8,954 23,837
-------- -------- ------- -------- --------
Income (loss) before income taxes and extraordinary
item.............................................. 11,944 656 (1,210) (10,787) 603
Income taxes (benefit).............................. 5,374 (125)(R) (76) 76(S) 241
(5,008)(U)
Deferred income taxes for conversion from an S to a
C Corporation..................................... 79,845 (79,845)(DD)
-------- -------- ------- -------- --------
Income (loss) before extraordinary item............. $(73,275) $ 80,626 $(1,134) $ (5,855) $ 362
======== ======== ======= ======== ========
Income before income taxes and extraordinary item... $ 11,944
Pro forma income taxes.............................. 4,539
--------
Pro forma income before extraordinary item.......... $ 7,405
========
Pro forma earnings (loss) per share before
extraordinary item................................ $ 0.21 $ 0.01
======== ========
Weighted average common shares
outstanding -- basic.............................. 34,836 2,332(EE) 8,000(W) 45,168
</TABLE>
See accompanying notes to pro forma financial information.
37
<PAGE> 43
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENTS
ADJUSTMENTS FOR THE
FOR THE OFFERINGS
COMPLETED COMPLETED SINCLAIR AND SINCLAIR TOTAL
ACTUAL TRANSACTIONS(FF) TRANSACTIONS ACQUISITION(X) ACQUISITION PRO FORMA
-------- ---------------- ------------ -------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenues...................... $183,820 $ 7,285 $110,747 $301,852
Operating expenses:
Station operating expenses...... 121,488 3,960 69,177 $ (492)(D) 194,133
Depreciation and amortization... 18,484 680 $ (395)(GG) 17,991 7,112(F) 43,872
Corporate general and
administrative expenses....... 6,569 2,545 3,580 12,694(H)
Net expense (income) from time
brokerage agreement fees...... 2,014 45 (2,059)(I)
-------- -------- -------- -------- -------- --------
Total operating
expenses............... 148,555 7,230 (2,454) 90,748 6,620 250,699
-------- -------- -------- -------- -------- --------
Operating income (loss)........... 35,265 55 2,454 19,999 (6,620) 51,153
Other expense (income):
Interest expense................ 17,466 (4,989)(HH) 18,141 9,804 40,422
Financing cost of Entercom-
obligated mandatorily
redeemable convertible
preferred securities of
Entercom Communications
Capital Trust................. 9,375(L) 9,375
Adjustment to reflect indexing
of the convertible
subordinated note............. 17,748 (17,748)(M)
(Gains) loss on sale of
assets........................ (69,985) 69,518(JJ) (5,525) 5,525(O) (467)
Other non-operating expense
(income)...................... (125) (38) 38(CC) (125)
-------- -------- -------- -------- -------- --------
Total other expense
(income)............... (34,896) 46,781 12,578 24,742 49,205
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes
and extraordinary item.......... 70,161 55 (44,327) 7,421 (31,362) 1,948
Income taxes (benefit)............ 5,964 21 (736)(R) 3,754 (3,754)(S) 779
(4,470)(U)
Deferred income taxes for
conversion from an S to a C
Corporation..................... 79,845 (79,845)(DD)
-------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
item............................ $(15,648) $ 79,879 $(43,591) $ 3,667 $(23,138) $ 1,169
======== ======== ======== ======== ======== ========
Income before income taxes and
extraordinary item.............. $ 70,161
Pro forma income taxes............ 33,405
--------
Pro forma income before
extraordinary item.............. $ 36,756
========
Pro forma earnings per share
before extraordinary item....... $ 1.31 $ 0.03
======== ========
Weighted average common shares
outstanding -- basic............ 28,130 9,038(EE) 8,000(W) 45,168
</TABLE>
See accompanying notes to pro forma financial information.
38
<PAGE> 44
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE OFFERINGS
SINCLAIR AND SINCLAIR TOTAL PRO
ACTUAL ACQUISITION(KK) ACQUISITION FORMA
-------- --------------- ----------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 8,713 $ 1,133 $ (1,133)(LL) $ 8,713
Accounts receivable, net..................... 45,160 21,501 (21,501)(LL) 45,160
Prepaid expenses and other................... 6,402 899 (899)(LL) 6,402
Other current assets......................... 2,091 2,784 (2,784)(LL) 2,091
-------- -------- --------- ----------
Total current assets...................... 62,366 26,317 (26,317) 62,366
Property and equipment, net.................... 52,760 31,971 20,279(MM) 105,010
Intangible and other assets, net............... 556,501 374,872 397,378(MM) 1,332,119
5,000(NN)
(1,632)(OO)
-------- -------- --------- ----------
Total assets.............................. $671,627 $433,160 $ 394,708 $1,499,495
======== ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued
expenses.................................. $ 24,949 $ 8,219 $ (8,219)(LL) $ 24,949
Current portion of long-term debt............ 10 10
-------- -------- --------- ----------
Total current liabilities.................... 24,959 8,219 (8,219) 24,959
Senior debt.................................... 166,266 331,325 (331,325)(LL) 538,866
372,600(NN)
Other long-term liabilities.................... 83,516 9,020 (9,020)(LL) 87,258
(653)(OO)
4,395(PP)
-------- -------- --------- ----------
Total liabilities......................... 274,741 348,564 27,778 651,083
Entercom-obligated mandatorily redeemable
convertible preferred securities of Entercom
Communications Capital Trust................. 150,000(NN) 150,000
Shareholders' equity:
Common Stock -- Class A...................... 249 80(NN) 329
Common Stock -- Class B...................... 105 105
Common Stock -- Class C...................... 17 17
Additional Paid-in Capital................... 468,239 90,000 306,820 775,059
(90,000)(LL)
Retained Earnings............................ (71,501) (5,404) (4,395)(PP) (76,875)
(979)(OO)
5,404(LL)
Unearned compensation........................ (223) (223)
-------- -------- --------- ----------
Total shareholders' equity................ 396,886 84,596 216,930 698,412
-------- -------- --------- ----------
Total liabilities and shareholders'
equity............................... $671,627 $433,160 $ 394,708 $1,499,495
======== ======== ========= ==========
</TABLE>
See accompanying notes to pro forma financial information.
39
<PAGE> 45
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS)
(A) The column represents (1) the results of operations of KFXX-AM, KKSN-FM
and KRSK-FM in Portland and WBBF-FM, WBEE-FM, WQRV-FM and WEZO-AM in
Rochester from October 1, 1997 through February 28, 1998, when we began
operating the stations under time brokerage agreements, (2) the results
of operations of WDAF-AM and KUDL-FM in Kansas City and KCTC-AM in
Sacramento from October 1, 1997 through December 31, 1997, when we
acquired the stations, (3) the results of operations of WSKY-FM in
Gainesville, KSSJ-FM in Sacramento and KBAM-AM and KRQT-FM in
Longview/Kelso from October 1, 1997 through May 7, 1998, when we acquired
these stations, (4) the disposition of KLOU-FM in St. Louis, (5) the
exchange of broadcast frequency and transmission facilities of our Kansas
City station, KCMO-AM, for those of another Kansas City station, WHB-AM,
(6) the exchange of certain assets of our Sacramento station, KRXQ-FM,
for those of KRAK-FM, another Sacramento station, (7) the results of
operations of WEEI-AM and WRKO-AM in Boston from October 1, 1997 through
September 20, 1998, when we began operating the stations under time
brokerage agreements, (8) the results of operations of WQSX-FM, WAAF-FM
and WWTM-AM in Boston from October 1, 1997 through September 22, 1998,
when we began operating the stations under time brokerage agreements, and
(9) the disposition of WYUU-FM and WLLD-FM in Tampa.
(B) The column represents the results of operations of the Sinclair stations
for the year ended December 31, 1998.
(C) The adjustment reflects the operations of Max Media for the nine months
ended June 30, 1998, and Heritage Media Services, Inc. for the five
months ended February 28, 1998, which are not included in the historical
Sinclair operations, net of the operations of divested stations which are
included in the historical Sinclair operations.
(D) The adjustment reflects the elimination of time brokerage agreement fees
paid in connection with the operation of radio stations in New Orleans
and Greenville/ Spartanburg.
(E) The adjustment reflects the change in depreciation and amortization
arising from an increase in property, equipment, FCC licenses and
intangibles, as a result of the completed transactions, offset by a
decrease in those assets as a result of various dispositions and the
establishment of new estimated useful lives of the acquired assets. Under
our standard accounting policies, property and equipment are depreciated
over periods of five to twenty years, and FCC licenses and intangibles
are amortized over forty years. The adjustment consists of a decrease of
$1,501 in depreciation related to property and equipment, an increase of
$212 in amortization related to intangibles and a decrease of $107 in
amortization related to other intangibles.
(F) The adjustment reflects the change in depreciation and amortization
arising from an increase in property, equipment, FCC licensee and
intangibles, as a result of the Sinclair acquisition, offset by a
decrease in those assets as a result of various dispositions and the
establishment of new estimated useful lives of the acquired assets. Under
our standard accounting policies, property and equipment are
40
<PAGE> 46
depreciated over periods of five to twenty years, and FCC licenses and
intangibles are amortized over forty years. The adjustment consists of a
decrease of $1,141 in depreciation related to property and equipment, an
increase of $9,114 in amortization related to intangibles and a decrease
of $861 in amortization related to other intangibles.
(G) The adjustment reflects additional amortization arising as a result of
our purchase for $3.4 million of the remaining 1% limited partnership
interest in ECI License Company, L.P.
(H) These amounts represent, in aggregate, our actual corporate general and
administrative expenses, plus the historical corporate general and
administrative expenses allocated by the respective sellers to (1) the
stations included in the completed transactions, and (2) the portfolio of
stations we are purchasing in the Sinclair acquisition.
However, in such completed transactions we did not and in the Sinclair
acquisition we will not assume the corporate general and administrative
expenses relating to personnel, assets or obligations of the respective
sellers. We believe that due to operating efficiencies, our incremental
corporate general and administrative expenses relating to the operation of
the acquired stations prior to the respective dates of acquisition would
have been less than the amounts reported by the respective sellers.
(I) The adjustment reflects the elimination of net expense (income) from
time brokerage agreement fees related to the operations of the stations
under time brokerage agreements pending the consummation of purchase or
sale.
(J) The adjustment reflects interest expense, based on an assumed rate of
7.50%, as if the completed transactions, the S corporation conversion and
our distribution to our S corporation shareholders, the conversion of the
Chase Capital convertible subordinated note and our initial public
offering were completed on October 1, 1997, net of historical interest
expense. The calculation of interest assumes an outstanding indebtedness
under the amended or replacement credit facility of $168,500 consisting of
(1) $253,500 of previously incurred indebtedness, less (2) net proceeds of
$236,200 from our initial public offering, plus (3) $135,000 in additional
indebtedness incurred to fund the Boston transactions, less (4) $75,000
reduction in indebtedness following the application of proceeds from the
sale of WYUU-FM and WLLD-FM in Tampa, plus (5) $88,100 in additional
indebtedness to fund the distribution to our S corporation shareholders,
plus (6) $3,100 in additional indebtedness to fund the purchase of the
remaining 1% limited partnership interest in ECI License Company, L.P. A
change in interest rates of 1/8% will change interest expense by $211.
The net adjustment is computed as follows:
<TABLE>
<S> <C>
Credit facility............................................. $12,637
Other indebtedness.......................................... 15
-------
Pro forma interest expense................................ 12,652
Historical interest expense................................. (14,677)
-------
Net adjustment............................................ $(2,025)
=======
</TABLE>
41
<PAGE> 47
(K) The adjustment reflects interest expense, based on an assumed rate of
7.50% as if the offerings and the Sinclair acquisition were completed on
October 1, 1997, net of historical interest expense. The calculation of
interest assumes additional outstanding indebtedness under the amended or
replacement credit facility of $372,600 after using the proceeds of
$145,000 from this offering, net of estimated fees and expenses, and
$306,900 from the issuance of Class A common stock in the concurrent
offering, net of estimated fees and expenses. A change in interest rates
of 1/8% will change interest expense by $466. The net adjustment is
computed as follows:
<TABLE>
<S> <C>
Credit facility pro forma interest expense............ $ 27,945
Historical interest expense........................... (16,659)
--------
Net adjustment...................................... $ 11,286
========
</TABLE>
(L) The adjustment reflects the financing cost at an assumed rate of 6.25% on
the TIDES issued in this offering.
(M) The adjustment reflects the elimination of the adjustment to reflect
indexing of the convertible subordinated note due to the conversion of
the note.
(N) The adjustment reflects the elimination of the historical loss on asset
sale recorded by CBS.
(O) The adjustment reflects the elimination of the historical gain on asset
sale recorded by Sinclair.
(P) The adjustment reflects the elimination of the gain on the sale of the
Vancouver license rights.
(Q) The adjustment reflects the elimination of the minority interest in the
income of ECI License Company, LP, as a result of the purchase of the 1%
interest in that limited partnership.
(R) The adjustment reflects the elimination of state taxes incurred while we
were an S corporation.
(S) The adjustment reflects the elimination of Sinclair's income tax expense.
(T) The adjustment reflects our income tax expense as if we were a C
corporation with an effective tax rate of 38%.
(U) The adjustment reflects the effect of the increase in our effective tax
rate from 38% to 40% as a result of the Sinclair acquisition.
(V) The adjustment reflects (1) an increase of 11,300 in the number of shares
of common stock due to the initial public offering and 4,323 due to the
conversion of the Chase Capital convertible subordinated note into common
stock and (2) a decrease of 694 in the incremental number of shares of
common stock attributable to the amount of capital in excess of current
year earnings proposed to be distributed to the S corporation
shareholders.
(W) The adjustment reflects the increase in number of shares of common stock
issued for the concurrent Class A common stock offering.
42
<PAGE> 48
(X) The column reflects the results of operations of the Sinclair stations
for the periods ended June 30, 1999.
(Y) The adjustment reflects the change in depreciation and amortization
arising from an increase in property, equipment, FCC licenses and
intangibles, as a result of the Sinclair acquisition, offset by a
decrease in those assets as a result of various dispositions and the
establishment of new estimated useful lives of the acquired assets. Under
our standard accounting policies, property and equipment are depreciated
over periods of five to twenty years, and FCC licenses and intangibles
are amortized over forty years. The adjustment consists of a decrease of
$571 in depreciation related to property and equipment, an increase of
$4,557 in amortization related to intangibles and a decrease of $1,905 in
amortization related to other intangibles.
(Z) The adjustment reflects interest expense, based on an assumed rate of
7.50%, as if the completed transactions, the S corporation conversion and
our distribution to our S corporation shareholders, the conversion of the
Chase Capital convertible subordinated note and our initial public
offering were completed on January 1, 1999, net of historical interest
expense. The calculation of interest assumes an outstanding indebtedness
under the amended or replacement credit facility of $166,266. A change in
interest rates of 1/8% will change interest expense by $104. The net
adjustment is computed as follows:
<TABLE>
<S> <C>
Credit facility............................................. $ 6,235
Other indebtedness.......................................... 7
-------
Pro forma interest expense........................... 6,242
Historical interest expense................................. (6,246)
-------
Net adjustment....................................... $ (4)
=======
</TABLE>
(AA) The adjustment reflects interest expense, based on an assumed rate of
7.50% as if the offerings and the Sinclair acquisition were completed on
January 1, 1999, net of historical interest expense. The calculation of
interest assumes additional outstanding indebtedness under the amended or
replacement credit facility of $372,600 after using the proceeds of
$145,000 from this offering, net of estimated fees and expenses, and
$306,900 from the issuance of Class A common stock in the concurrent
offering, net of estimated fees and expenses. A change in interest rates
of 1/8% will change interest expense by $233. The net adjustment is
computed as follows:
<TABLE>
<S> <C>
Credit facility pro forma interest expense.................. 13,973
Historical interest expense................................. (9,738)
-------
Net adjustment............................................ 4,235
=======
</TABLE>
(BB) The adjustment reflects the elimination of the historical loss on asset
sale recorded by Sinclair.
(CC) The adjustment reflects the elimination of the historical other
non-operating expense (income) recorded by Sinclair.
43
<PAGE> 49
(DD) The adjustment reflects the elimination of deferred income taxes which
were recognized as a result of our conversion from an S corporation to a C
corporation.
(EE) The adjustment reflects the number of weighted average common shares
outstanding as if the shares were outstanding during the entire period
presented.
(FF) The column reflects (1) the exchange of broadcast frequency and
transmission facilities of our Kansas City station, KCMO-AM, for those of
another Kansas City station, WHB-AM, (2) the exchange of certain assets of
our Sacramento station, KRXQ-FM, for those of KRAK-FM, (3) the results of
operations of WEEI-AM, and WRKO-AM in Boston from July 1, 1998 through
September 20, 1998, when we began operating the stations under time
brokerage agreements, (4) the results of operations of WQSX-FM, WAAF-FM
and WWTM-AM in Boston from July 1, 1998 through September 22, 1998, when
we began operating the stations under time brokerage agreements and (5)
the disposition of WYUU-FM and WLLD-FM in Tampa.
(GG) The adjustment reflects the change in depreciation and amortization
arising from an increase in property, equipment, FCC licenses and
intangibles, as a result of the completed transactions, offset by a
decrease in those assets as a result of various dispositions and the
establishment of new estimated useful lives of the acquired assets. Under
our standard accounting policies, property and equipment are depreciated
over periods of five to twenty years, and FCC licenses and intangibles are
amortized over forty years. The adjustment consists of a decrease of $425
in depreciation related to property and equipment, an increase of $60 in
amortization related to intangibles and a decrease of $30 in amortization
related to other intangibles.
(HH) The adjustment reflects interest expense, based on an assumed rate of
7.50%, as if the completed transactions, the S corporation conversion and
our distribution to our S corporation shareholders, the conversion of the
Chase Capital convertible subordinated note and our initial public
offering were completed on July 1, 1998, net of historical interest
expense. The calculation of interest assumes an outstanding indebtedness
of $166,266 under the amended or replacement credit facility. A change in
interest rates of 1/8% will change interest expense by $208. The net
adjustment is computed as follows:
<TABLE>
<S> <C>
Credit facility........................................ $ 12,470
Other indebtedness..................................... 7
--------
Pro forma interest expense..................... 12,477
Historical interest expense............................ (17,466)
--------
Net adjustment................................. $ (4,989)
========
</TABLE>
(II) The adjustment reflects interest expense under the current credit
facility, based on an assumed rate of 7.50%, as if the offerings and the
Sinclair acquisition were completed on July 1, 1998, net of historical
interest expense. The calculation of interest assumes additional
outstanding indebtedness under the amended or replacement credit facility
of $372,600 after using the proceeds of $145,000 from this offering, net
of estimated fees and expenses, and $306,900 from the issuance of Class A
common stock in the concurrent offering, net of estimated fees and
44
<PAGE> 50
expenses. A change in interest rates of 1/8% will change interest
expense by $466. The net adjustment is computed as follows:
<TABLE>
<S> <C>
Credit facility pro forma interest expense............. $ 27,945
Historical interest expense............................ (18,141)
--------
Net adjustment................................. $ 9,804
========
</TABLE>
(JJ) The adjustment reflects the elimination of the historical gain on the
Tampa transaction.
(KK) The column reflects the balance sheets of the Sinclair stations as of June
30, 1999.
(LL) The adjustment reflects the elimination of certain historical balances
which are not being purchased or assumed by us in the Sinclair
acquisition.
(MM) The adjustment reflects the estimated allocation of the purchase price of
the Sinclair acquisition to the assets acquired resulting in adjustments to
the property and equipment and intangibles and other assets to their
estimated fair values associated with the acquisition as follows:
<TABLE>
<CAPTION>
ESTIMATED
ALLOCATION OF CARRYING
PURCHASE PRICE VALUE ADJUSTMENTS
-------------- -------- -----------
<S> <C> <C> <C>
Property and equipment, net........ $ 52,250 $ 31,971 $ 20,279
Intangibles and other assets,
net.............................. 772,250 374,872 397,378
-------- -------- --------
Total purchase price.......... $824,500 $406,843 $417,657
======== ======== ========
</TABLE>
(NN) The adjustment represents the increase in debt necessary to fund the
Sinclair acquisition after using the net proceeds of $145,000 from this
offering, net of estimated fees and expenses, and $306,900 from the
issuance of Class A common stock in the concurrent offering, net of
estimated fees and expenses.
(OO) The adjustment reflects the write-off of deferred financing costs related
to the current credit facility.
(PP) The adjustment reflects the effect of the increase in our effective tax
rate from 38% to 40% as a result of the Sinclair acquisition.
45
<PAGE> 51
SELECTED HISTORICAL FINANCIAL DATA
We have derived the selected operating data shown below for the years ended
September 30, 1996, 1997 and 1998 and the balance sheet data shown below as of
September 30, 1997 and 1998 from our audited consolidated financial statements
included elsewhere in this prospectus. We have derived the selected operating
data shown below for the years ended September 30, 1994 and 1995 and the balance
sheet data shown below as of September 30, 1994, 1995 and 1996 from our audited
financial statements, which are not included in this prospectus. We have derived
the selected operating data shown below for the three months ended December 31,
1997, the three month transition period ended December 31, 1998 and the six
months ended June 30, 1998 and 1999 and the balance sheet data shown below as of
December 31, 1998 and June 30, 1999 from our unaudited financial statements
included elsewhere in this prospectus. We have derived the balance sheet data
shown below as of December 31, 1997 and June 30, 1998 from our unaudited
financial statements, which are not included in this prospectus.
- Historically, we operated with an October 1st to September 30th fiscal
year. Effective January 1, 1999, we changed for financial reporting
purposes from a fiscal year ending September 30th to a fiscal year ending
December 31st. Accordingly, the selected historical financial data
includes information as of, and for the three month transition period
ended, December 31, 1998 and the three months ended December 31, 1997.
- We retroactively restated our fiscal 1997 and 1998 consolidated financial
statements to reflect the Chase Capital convertible subordinated note as
an indexed debt instrument. We determined the adjustment as of the end of
each relevant period by subtracting the sum of principal and accrued
interest on the note from the fair value of the shares of our common
stock into which the note was convertible. Immediately prior to our
initial public offering, Chase Capital converted the note into 2,327,500
shares of our Class A common stock and 1,995,669 shares of our Class C
common stock. The Chase Capital convertible subordinated note has been
retired and we have no further obligation with respect to the note.
- Before completing our initial public offering, we were an S corporation,
and accordingly, we were not liable for federal and certain state
corporate income taxes. Instead, our shareholders included our taxable
income or loss in their federal and those state income tax returns.
Immediately before our initial public offering, we became a C
corporation, and accordingly, we are now subject to federal and state
corporate income taxes. The pro forma amounts shown in the table reflect
provisions for state and federal income taxes, applied to income before
income taxes and extraordinary item, as if we had been taxed as a C
corporation. These pro forma amounts exclude the effect of the adjustment
to reflect indexing of the Chase Capital convertible subordinated note
because the amount of this adjustment is not tax deductible.
- As a result of our becoming a C corporation immediately prior to our
initial public offering, generally accepted accounting principles
required us to provide for deferred income taxes of $79.8 million to
reflect the cumulative temporary differences between book and income tax
bases of our assets and liabilities.
- For purposes of our historical financial statements, the term "pro forma"
refers solely to the adjustments arising from our conversion from an S
corporation to a
46
<PAGE> 52
C corporation. It does not refer to any of the other adjustments
described under "Prospectus Summary -- Summary Pro Forma Financial
Information" and "Unaudited Pro Forma Financial Information."
- All per share data gives effect to our recapitalization, which we
consummated immediately prior to our initial public offering. In the
recapitalization, we effected a 185 for one stock split and the exchange
of our prior common stock for Class A common stock and Class B common
stock.
- Broadcast cash flow consists of operating income before depreciation and
amortization, corporate general and administrative expenses and net
expense (income) from time brokerage agreement fees.
- Broadcast cash flow margin represents broadcast cash flow as a percentage
of net revenue.
- EBITDA before net expense (income) from time brokerage agreement fees
consists of operating income before depreciation and amortization,
non-cash compensation expense (which is included in corporate general and
administrative expenses) and net expense (income) from time brokerage
agreement fees.
- Pro forma after-tax cash flow consists of pro forma income before
extraordinary item minus gains on sale of assets (net of tax) plus the
following: depreciation and amortization, non-cash compensation expense
(which is included in corporate general and administrative expense),
adjustment to reflect indexing of the convertible subordinated note and
deferred tax provision (or minus deferred tax benefit).
Although broadcast cash flow, EBITDA before net expense (income) from time
brokerage agreement fees and pro forma after-tax cash flow are not measures of
performance or liquidity calculated in accordance with generally accepted
accounting principles, we believe that these measures are useful to an investor
in evaluating our performance because they are widely used in the broadcast
industry to measure a radio company's operating performance. However, you should
not consider broadcast cash flow, EBITDA before net expense (income) from time
brokerage agreement fees and pro forma after-tax cash flow in isolation or as
substitutes for operating income, cash flows from operating activities or any
other measure for determining our operating performance or liquidity that is
calculated in accordance with generally accepted accounting principles. In
addition, because broadcast cash flow, EBITDA before net expense (income) from
time brokerage agreement fees and pro forma after-tax cash flow are not
calculated in accordance with generally accepted accounting principles, they are
not necessarily comparable to similarly titled measures employed by other
companies.
The comparability of the historical financial data reflected below has been
significantly impacted by acquisitions and dispositions. You should read
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the related notes
included elsewhere in this prospectus.
47
<PAGE> 53
The comparability of the following selected historical financial data has
been significantly impacted by acquisitions and dispositions. You should read
the selected financial data together with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our consolidated financial
statements and the related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, JUNE 30,
------------------------------------------------------ ------------------- -------------------
1994 1995 1996 1997 1998 1997 1998 1998 1999
-------- ------- ------- ---------- ---------- -------- -------- --------- -------
(RESTATED) (RESTATED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues................. $ 29,137 $35,893 $48,675 $ 93,862 $132,998 $ 28,399 $ 47,363 $ 63,687 $95,545
Operating expenses:
Station operating
expenses................. 21,520 24,061 31,659 61,280 88,599 18,868 29,990 42,749 64,296
Depreciation and
amortization............. 2,248 2,225 2,960 7,685 13,066 2,880 4,358 6,079 10,019
Corporate general and
administrative
expenses................. 2,300 2,535 2,872 3,249 4,527 849 1,850 2,193 3,454
Net expense (income) from
time brokerage agreement
fees..................... -- 603 (879) (476) 2,399 -- 1,236 2,273 652
-------- ------- ------- --------- -------- -------- -------- --------- -------
Total operating
expenses............... 26,068 29,424 36,612 71,738 108,591 22,597 37,434 53,294 78,421
-------- ------- ------- --------- -------- -------- -------- --------- -------
Operating income............. 3,069 6,469 12,063 22,124 24,407 5,802 9,929 10,393 17,124
Other expense (income):
Interest expense........... 1,648 1,992 5,196 11,388 14,663 2,996 5,732 6,179 6,246
Adjustment to reflect
indexing of the
convertible subordinated
note..................... -- -- -- 29,070 8,841 14,903 29,503 5,693 --
(Gains) on sale of
assets................... (20,545) (228) (119) (197,097) (8,661) (43) (69,648) (8,748) (467)
Other non-operating expense
(income)................. 52 (100) (67) 1,504 (328) (102) 577 (123) (599)
-------- ------- ------- --------- -------- -------- -------- --------- -------
Total other expense
(income)............... (18,845) 1,664 5,010 (155,135) 14,515 17,754 (33,836) 3,001 5,180
-------- ------- ------- --------- -------- -------- -------- --------- -------
Income (loss) before income
taxes and extraordinary
item....................... 21,914 4,805 7,053 177,259 9,892 (11,952) 43,765 7,392 11,944
Pro forma income taxes....... 8,327 1,826 2,680 78,405 7,119 1,121 27,842 4,972 4,539
Pro forma income (loss)
before extraordinary
item....................... 13,587 2,979 4,373 98,854 2,773 (13,073) 15,923 2,420 7,405
Extraordinary item, net of
tax benefit................ -- 219 348 -- 1,488 -- -- 1,489 --
-------- ------- ------- --------- -------- -------- -------- --------- -------
Pro forma net income
(loss)..................... $ 13,587 $ 2,760 $ 4,025 $ 98,854 $ 1,285 $(13,073) $ 15,923 $ 931 $ 7,405
======== ======= ======= ========= ======== ======== ======== ========= =======
Pro forma earnings (loss) per
share before extraordinary
item....................... $ 0.62 $ 0.14 $ 0.20 $ 4.59 $ 0.12 $ (0.61) $ 0.64 $ 0.11 $ 0.21
Pro forma diluted earnings
(loss) per share before
extraordinary items........ 0.62 0.14 0.20 4.59 0.12 (0.61) 0.64 0.11 0.21
Weighted average common
shares
outstanding -- basic....... 21,534 21,534 21,534 21,534 22,239 21,534 24,742 21,534 34,836
Weighted average common
shares
outstanding -- diluted..... 21,534 21,534 21,534 21,534 22,239 21,534 24,742 21,534 35,251
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents.... $ 1,513 $ 1,564 $ 5,292 $ 3,626 $ 6,666 $ 3,497 $ 6,469 $ 6,094 $ 8,713
Intangibles and other
assets..................... 5,552 29,548 119,269 300,029 428,763 313,889 505,825 428,543 556,501
Total assets................. 19,368 52,209 150,575 364,743 522,945 378,138 681,034 513,445 671,627
Senior debt, including
current portion............ 15,250 46,554 111,000 117,000 253,784 127,000 330,281 251,785 166,276
Total shareholders' equity... 427 828 5,079 179,019 182,970 166,986 225,467 169,509 396,886
OTHER DATA:
Broadcast cash flow.......... $ 7,617 $11,832 $17,016 $ 32,582 $ 44,399 $ 9,531 $ 17,373 $ 20,938 $31,249
Broadcast cash flow margin... 26.1% 33.0% 35.0% 34.7% 33.4% 33.6% 36.6% 32.9% 32.7%
EBITDA before net expense
(income) from time
brokerage agreement fees... $ 5,317 $ 9,297 $14,144 $ 29,333 $ 39,872 $ 8,682 $ 15,523 $ 18,745 $28,012
Pro forma after-tax cash
flow....................... 2,678 4,526 7,311 16,590 21,028 5,003 7,985 9,563 20,215
Cash flows related to:
Operating activities....... 3,950 1,182 12,773 8,859 23,019 7,341 11,158 5,778 8,204
Investing activities....... 23,787 (28,636) (96,502) (13,695) (153,651) (17,470) (86,894) (125,565) 10,001
Financing activities....... (27,161) 27,505 87,457 3,170 133,672 10,000 75,539 122,384 (15,961)
</TABLE>
48
<PAGE> 54
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the financial
statements and related notes included elsewhere in this prospectus. The results
discussed below are not necessarily indicative of the results to be expected in
any future periods. This discussion contains forward-looking statements. See
"Special Note Regarding Forward-Looking Statements" for further information
about forward-looking statements.
GENERAL
A radio broadcasting company derives its revenues primarily from the sale
of broadcasting time to local and national advertisers. The advertising rates
that a radio station is able to charge and the number of advertisements that can
be broadcast without jeopardizing listener levels largely determine those
revenues. Advertising rates are primarily based on three factors:
- a station's audience share in the demographic groups targeted by
advertisers, as measured principally by quarterly reports issued by The
Arbitron Ratings Company;
- the number of radio stations in the market competing for the same
demographic groups; and
- the supply of and demand for radio advertising time.
In fiscal 1998, we generated 76.2% of our revenues from local advertising,
which is sold primarily by each individual local radio station's sales staff,
and 22.6% from national spot advertising, which is sold by independent
advertising sales representatives. We generated the balance of our 1998 revenues
principally from network advertising and rental income from tower sites.
We include revenues recognized under a time brokerage agreement or similar
sales agreement for stations operated by us prior to acquiring the stations in
net revenues, while we reflect operating expenses associated with these stations
in station operating expenses. Consequently, there is no difference in the
method of revenue and operating expense recognition between a station operated
by us under a time brokerage agreement or similar sales agreement and a station
owned and operated by us.
Several factors may adversely affect a radio broadcasting company's
performance in any given period. In the radio broadcasting industry, seasonal
revenue fluctuations are common and are due primarily to variations in
advertising expenditures by local and national advertisers. Typically, revenues
are lowest in the first calendar quarter of the year. We generally incur
advertising and promotional expenses to increase "listenership" and Arbitron
ratings. However, because Arbitron reports ratings quarterly, any increased
ratings and therefore increased advertising revenues tend to lag behind the
incurrence of advertising and promotional spending.
In the broadcasting industry, radio stations often utilize trade or barter
agreements to reduce expenses by exchanging advertising time for goods or
services. In order to maximize cash revenue from our spot inventory, we minimize
our use of trade agreements and during the past five years have held barter
revenues under 2.0% of our gross revenues and barter related broadcast cash flow
under 0.4% of our broadcast cash flow.
49
<PAGE> 55
We calculate "same station" growth by (1) comparing the performance of
stations operated by us throughout a relevant quarter to the performance of
those same stations (whether or not operated by us) in the prior year's
corresponding quarter, excluding the effect of barter revenues and expenses and
discontinued operations and (2) averaging those growth rates for the period
presented. "Same station broadcast cash flow margin" is the broadcast cash flow
margin of the stations included in our same station calculations. For purposes
of the following discussion, pro forma net income represents historical income
before income taxes and extraordinary item adjusted as if we were treated as a C
corporation during all relevant periods at an effective tax rate of 38%, applied
to income before income taxes and extraordinary item, excluding the adjustment
to reflect indexing of the convertible subordinated note (as that adjustment is
not tax-deductible), and excluding extraordinary item, net of pro forma taxes.
Our net revenues and broadcast cash flow have grown significantly on both a
total and same station basis. Net revenues grew at a compound annual rate of
96.8% from an actual $35.9 million in fiscal 1995 to a pro forma $273.8 million
in fiscal 1998. Broadcast cash flow grew at a compound annual rate of 98.0% from
an actual $11.8 million in fiscal 1995 to a pro forma $91.6 million in fiscal
1998. During this same period, we grew our same station net revenues and
broadcast cash flow at average annual rates of 15.0% and 36.4%, respectively. In
addition, our pro forma after-tax cash flow grew at a compound annual rate of
127.2% from an actual $4.5 million in fiscal 1995 to a pro forma $52.8 million
in fiscal 1998.
Because of our significant acquisition and divestiture activities, our pro
forma 1998 and 1999 results differ materially from our actual 1998 and 1999
results.
RESULTS OF OPERATIONS
Historically, we operated with an October 1st to September 30th fiscal
year. Effective January 1, 1999, we changed for financial reporting purposes
from a fiscal year ending September 30th to a fiscal year ending December 31st.
Accordingly, the following results of operations includes a discussion of the
three month transition period ended December 31, 1998 compared to the three
months ended December 31, 1997.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
NET REVENUES. Net revenues increased 50.0% to $95.5 million for the six
months ended June 30, 1999 from $63.7 million for the six months ended June 30,
1998. Of the increase, $25.8 million is attributable to stations that we
acquired or that we were in the process of acquiring since January 1, 1998,
offset by $2.3 million for stations that we divested or that we were in the
process of divesting during the same period. On a same station basis, net
revenues increased 15.5% to $94.5 million from $81.9 million. Same station
revenue growth was led by increases in Boston, Seattle and Kansas City due to
improved selling efforts and Sacramento due to our strategic realignment of our
station formats.
STATION OPERATING EXPENSES. Station operating expenses increased 50.4% to
$64.3 million for the six months ended June 30, 1999 from $42.7 million for the
six months ended June 30, 1998. Of the increase, $20.4 million is attributable
to stations that we acquired or that we were in the process of acquiring since
January 1, 1998, offset by $1.8 million for stations that we divested or that we
were in the process of divesting during the
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same period. On a same station basis, station operating expenses increased 6.4%
to $63.3 million from $59.6 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
64.8% to $10.0 million for the six months ended June 30, 1999 from $6.1 million
for the six months ended June 30, 1998. The increase was mainly attributable to
our acquisitions net of divestitures since January 1, 1998.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and
administrative expenses increased 57.5% to $3.5 million for the six months ended
June 30, 1999 from $2.2 million for the six months ended June 30, 1998. The
increase was mainly attributable to higher administrative expenses associated
with supporting our growth and increasing staff and expenses to operate as a
public company. Also included in the current period is $0.2 million in non-cash
stock-based compensation expense.
INTEREST EXPENSE. Interest expense increased 1.1% to $6.3 million for the
six months ended June 30, 1999 from $6.2 million for the six months ended June
30, 1998. The increase was mainly attributable to indebtedness that we incurred
in connection with our acquisitions offset by the proceeds from our initial
public offering, which were used to reduce debt.
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Income before income
taxes and extraordinary item increased 61.6% to $11.9 million for the six months
ended June 30, 1999 from $7.4 million for the six months ended June 30, 1998.
The net change is caused by (1) a decrease in income of $8.3 million due to a
decrease in gains on sale of assets; (2) an increase in income of $5.7 million
due to a decrease in expense because the convertible subordinated note was
converted and therefore there was no adjustment during the 1999 period to
reflect indexing; (3) an increase in income of $5.1 million due to increases in
revenues from existing stations and improved revenues and expense management
from newly acquired stations; and (4) an increase in income of $1.6 million due
to a decrease in net expense (income) from time brokerage agreement fees.
EXTRAORDINARY ITEM, NET OF TAX BENEFIT. The extraordinary item for the six
months ended June 30, 1998 resulted from the write-off of $1.5 million of
unamortized finance charges due to the early extinguishment of debt, which
resulted from the refinancing of our credit facility.
PRO FORMA NET INCOME. As a result of the factors described above, pro
forma net income increased to $7.4 million for the six months ended June 30,
1999 from $0.9 million for the six months ended June 30, 1998. The net change is
caused by (1) an increase in income of $3.2 million, net of tax, primarily
attributable to an improvement in operating income due to increases in revenues
from existing stations and improved revenues and expense management from newly
acquired stations; (2) an increase in income of $0.6 million due to the
difference between a $5.7 million decrease in the expense for the adjustment to
reflect indexing of the convertible subordinated note and a $5.1 million, net of
tax, decrease in gains on sale of assets; (3) an increase in income of $1.5
million, net of tax, due to a decrease in the extraordinary item; and (4) an
increase in income of $1.0 million, net of tax, due to a decrease in net expense
(income) from time brokerage agreement fees.
BROADCAST CASH FLOW. Broadcast cash flow increased 49.2% to $31.3 million
for the six months ended June 30, 1999 from $20.9 million for the six months
ended June 30, 1998. Of the increase, $5.4 million is attributable to stations
that we acquired or that we
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were in the process of acquiring since January 1, 1998, offset by $0.5 million
for stations that we divested or that we were in the process of divesting during
the same period. On a same station basis, broadcast cash flow increased 39.9% to
$31.2 million from $22.3 million.
Our broadcast cash flow margin declined to 32.7% for the six months ended
June 30, 1999 from 32.9% for the six months ended June 30, 1998. The decrease is
attributable to lower margins associated with newly acquired stations. On a same
station basis, broadcast cash flow margin increased to 33.0% from 27.2%.
PRO FORMA AFTER-TAX CASH FLOW. Pro forma after-tax cash flow increased
111.4% to $20.2 million for the six months ended June 30, 1999 from $9.6 million
for the six months ended June 30, 1998. The increase is attributable to improved
operations of existing stations and the net effect of newly acquired properties,
taking into consideration pro forma income taxes as though we had reported as a
C corporation during the periods presented, respectively. The amount of the
deferred pro forma income tax expense, excluding the amount of the current pro
forma income tax expenses, was $3.0 million and $3.2 million for the six months
ended June 30, 1999 and 1998, respectively.
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1997
NET REVENUES. Net revenues increased 66.8% to $47.4 million for the three
months ended December 31, 1998 from $28.4 million for the three months ended
December 31, 1997. Of the increase, $17.9 million is attributable to stations
that we acquired or that we were in the process of acquiring since October 1,
1997, offset by $2.7 million for stations that we divested or that we were in
the process of divesting during the same period. On a same station basis, net
revenues increased 16.5% to $46.9 million from $40.3 million. Same station
revenue growth was led by increases in Boston, Seattle, Kansas City and Portland
due to improved selling efforts.
STATION OPERATING EXPENSES. Station operating expenses increased 58.9% to
$30.0 million for the three months ended December 31, 1998 from $18.9 million
for the three months ended December 31, 1997. Of the increase, $11.3 million is
attributable to stations that we acquired or that we were in the process of
acquiring since October 1, 1997, offset by $1.6 million for stations that we
divested or that we were in the process of divesting during the same period. On
a same station basis, station operating expenses increased 3.4% to $29.4 million
from $28.4 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
51.3% to $4.4 million for the three months ended December 31, 1998 from $2.9
million for the three months ended December 31, 1997. The increase was mainly
attributable to our acquisitions net of divestitures since October 1, 1997.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and
administrative expenses increased 117.9% to $1.9 million for the three months
ended December 31, 1998 from $0.8 million for the three months ended December
31, 1997. The increase was mainly attributable to higher administrative expenses
associated with supporting our growth and increasing staff and expenses to
operate as a public company.
INTEREST EXPENSE. Interest expense increased 91.3% to $5.7 million for the
three months ended December 31, 1998 from $3.0 million for the three months
ended
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December 31, 1997. The increase was mainly attributable to indebtedness that we
incurred in connection with our acquisitions.
INCOME (LOSS) BEFORE INCOME TAXES. Income (loss) before income taxes
increased to $43.8 million for the three months ended December 31, 1998 from a
loss of $12.0 million for the three months ended December 31, 1997. Of the
increase, $69.6 million is attributable to gains on the sale of assets from our
disposition of stations in the Tampa radio market during the three months ended
December 31, 1998, offset by $14.6 million which is attributable to an increase
in expense resulting from an adjustment to reflect indexing of the convertible
subordinated note. We do not expect to recognize such significant gains on the
sale of assets in the future.
BROADCAST CASH FLOW. Broadcast cash flow increased 82.3% to $17.4 million
for the three months ended December 31, 1998 from $9.5 million for the three
months ended December 31, 1997. Of the increase, $6.9 million is attributable to
stations that we acquired or that we were in the process of acquiring since
October 1, 1997, offset by $1.1 million for stations that we divested or that we
were in the process of divesting during the same period. On a same station
basis, broadcast cash flow increased 48.0% to $17.5 million from $11.8 million.
Our broadcast cash flow margin increased to 36.6% for the three months
ended December 31, 1998 from 33.6% for the three months ended December 31, 1997.
The increase is attributable to improved revenues and expense management
associated with newly acquired stations. On a same station basis, broadcast cash
flow margin increased to 37.4% from 29.4%.
PRO FORMA AFTER-TAX CASH FLOW. Pro forma after-tax cash flow increased
59.6% to $8.0 million for the three months ended December 30, 1998 from $5.0
million for the three months ended December 31, 1997. The increase is
attributable to improved operations of existing stations and the net effect of
newly acquired properties, taking into consideration pro forma income taxes as
though we had reported as a C corporation.
FISCAL YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO FISCAL YEAR ENDED
SEPTEMBER 30, 1997
NET REVENUES. Net revenues increased 41.7% to $133.0 million for the year
ended September 30, 1998 from $93.9 million for the year ended September 30,
1997. Of the increase, $20.3 million is attributable to stations that we
acquired or that we were in the process of acquiring since October 1, 1997,
offset by $5.8 million for stations that we divested or that we were in the
process of divesting during the same period. On a same station basis, net
revenues increased 16.3% to $128.5 million from $110.5 million, largely due to
stronger selling efforts and radio advertising market growth. Same station
revenue growth was led by substantial increases in Seattle, Kansas City and
Portland.
STATION OPERATING EXPENSES. Station operating expenses increased 44.6% to
$88.6 million for the year ended September 30, 1998 from $61.3 million for the
year ended September 30, 1997. Of the increase, $13.2 million is attributable to
stations that we acquired or that we were in the process of acquiring since
October 1, 1997, offset by $4.4 million for stations that we divested or that we
were in the process of divesting during the same period. On a same station
basis, station operating expenses increased 11.2% to $84.7 million from $76.2
million.
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Two of the broadcast contracts with sports teams which we acquired in
connection with the December 1998 Boston transaction had an unfavorable impact.
This unfavorable impact was estimated to be $5.0 million. Pursuant to the
purchase agreement, CBS paid us $5.0 million in cash to offset the unfavorable
impact of these contracts.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
70.0% to $13.1 million for the year ended September 30, 1998 from $7.7 million
for the year ended September 30, 1997. This increase was primarily attributable
to our acquisitions during 1997 and 1998.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and
administrative expenses increased 39.3% to $4.5 million for the year ended
September 30, 1998 from $3.3 million for the year ended September 30, 1997. This
increase was primarily attributable to higher administrative expenses associated
with supporting our growth. We anticipate recording a non-cash compensation
expense of approximately $0.4 million in fiscal year 1999 and in each of the
following three fiscal years in connection with our issuance of 11,112 shares of
restricted stock and 275,562 options, at an exercise price of $18.00.
INTEREST EXPENSE AND THE ADJUSTMENT TO REFLECT INDEXING OF THE CONVERTIBLE
SUBORDINATED NOTE. Interest expense increased 28.8% to $14.7 million for the
year ended September 30, 1998 from $11.4 million for the year ended September
30, 1997. The increase was primarily attributable to indebtedness that we
incurred in connection with our acquisitions.
We determined the adjustment to reflect indexing of the convertible
subordinated note as of the end of each relevant period by subtracting the sum
of principal and accrued interest on the note from the fair value of the shares
of our common stock into which the note was convertible using multiples of
broadcast cash flow of comparable publicly held radio broadcast companies. The
adjustment to reflect indexing of the note was $29.1 million and $8.8 million
for the years ended September 30, 1997 and 1998, respectively. The decrease in
the adjustment from 1997 to 1998 is due to a reduced broadcast cash flow growth
rate from 91.5% in 1997 to 36.3% in 1998 (primarily due to the timing of
acquisitions) and a lower multiple in 1998 due to the overall market condition
for public radio broadcast companies at September 30, 1998 relative to September
30, 1997.
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Income before income
taxes and extraordinary item decreased to $9.9 million, including $8.7 million
from the gains on sale of assets, for the year ended September 30, 1998 from
$177.3 million, including $197.1 million from the gains on sale of assets, for
the year ended September 30, 1997. The gain on the assets in 1997 is primarily
attributable to our disposition of stations in the Houston, San Francisco and
Pittsburgh radio markets. We do not expect such significant gains on the sale of
assets to continue in the future.
EXTRAORDINARY ITEM, NET OF TAX BENEFIT. The extraordinary item for the
year ended September 30, 1998 resulted from the write-off of $1.5 million of
unamortized finance charges due to the early extinguishment of debt, which
resulted from the refinancing of our credit facility. There were no
extraordinary items in 1997.
PRO FORMA NET INCOME. As a result of the factors described above, pro
forma net income decreased to $1.3 million for the year ended September 30,
1998, which included the impact of the recognition of $8.8 million for the
adjustment to reflect indexing of the convertible subordinated note, offset by a
gain of $5.4 million, net of taxes, on the sale of
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assets. This compares to pro forma net income of $98.9 million for the year
ended September 30, 1997, which included the impact of the recognition of $29.1
million for the adjustment to reflect indexing of the convertible subordinated
note, offset by a gain of $122.2 million, net of taxes, on the sale of assets.
The decrease is primarily attributable to our disposition of stations in the
Houston, San Francisco and Pittsburgh radio markets during the year ended
September 30, 1997. We used the proceeds from these dispositions to acquire
stations in markets where we believed there was greater potential for
establishing market leading station clusters. We do not expect such significant
gains on the sale of assets to continue in the future.
BROADCAST CASH FLOW. As a result of the factors described above, broadcast
cash flow increased 36.3% to $44.4 million for the year ended September 30, 1998
from $32.6 million for the year ended September 30, 1997. On a same station
basis, broadcast cash flow increased 27.7% to $43.8 million from $34.3 million.
Our broadcast cash flow margin declined to 33.4% for the year ended
September 30, 1998 from 34.7% for the year ended September 30, 1997. The
decrease is primarily attributable to our exchange in 1997 of relatively mature
stations in San Francisco and Houston, which operated at higher broadcast cash
flow margins but were located in markets where we believed there were limited
growth and clustering opportunities, for less developed properties in Seattle,
Kansas City and Sacramento, which collectively operated with lower broadcast
cash flow margins but offered stronger growth and clustering opportunities. On a
same station basis, broadcast cash flow margin increased to 34.1% from 31.1%.
PRO FORMA AFTER-TAX CASH FLOW. Pro forma after-tax cash flow increased
26.8% to $21.0 million for the year ended September 30, 1998 from $16.6 million
for the year ended September 30, 1997. The increase is attributable to improved
operations of existing stations and the net effect of newly acquired properties,
taking into consideration pro forma income taxes as though we had reported as a
C corporation.
FISCAL YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO FISCAL YEAR ENDED
SEPTEMBER 30, 1996
NET REVENUES. Net revenues increased 92.8% to $93.9 million for the year
ended September 30, 1997 from $48.7 million for the year ended September 30,
1996. Of the increase, $38.8 million is attributable to stations that we
acquired since October 1, 1996, offset by $9.9 million for stations that we
divested during the same period. On a same station basis, net revenues increased
14.2% to $86.6 million from $75.8 million. Same station revenue growth was led
by substantial increases in Seattle, Kansas City, Portland, Houston and St.
Louis.
STATION OPERATING EXPENSE. Station operating expenses increased 93.6% to
$61.3 million for the year ended September 30, 1997 from $31.7 million for the
year ended September 30, 1996. Of the increase, $20.0 million is attributable to
stations that we acquired since October 1, 1996, offset by $5.7 million for
stations that we divested during the same period. On a same station basis,
station operating expenses decreased 0.4% to $55.0 million from $55.2 million.
This decrease was attributable to cost savings measures that we implemented in
connection with our acquisitions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
159.6% to $7.7 million for the year ended September 30, 1997 from $3.0 million
for the year ended
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September 30, 1996. This increase was primarily attributable to our 1996 and
1997 acquisitions and was partially offset by the net effect of stations sold
during the same period.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and
administrative expenses increased 13.1% to $3.3 million for the year ended
September 30, 1997 from $2.9 million for the year ended September 30, 1996. This
increase was primarily attributable to higher administrative expenses associated
with supporting our growth.
INTEREST EXPENSE AND THE ADJUSTMENT TO REFLECT INDEXING OF THE CONVERTIBLE
SUBORDINATED NOTE. Interest expense increased 119.2% to $11.4 million for the
year ended September 30, 1997 from $5.2 million for the year ended September 30,
1996. The increase was primarily attributable to indebtedness that we incurred
in connection with our acquisitions.
We determined the adjustment to reflect the indexing of the convertible
subordinated note as of the end of each relevant period by subtracting the sum
of principal and accrued interest on the note from the fair value of the shares
of our common stock into which the note was convertible using multiples of
broadcast cash flow of comparable publicly held radio broadcast companies. There
was no adjustment to reflect indexing of the note as of September 30, 1996 as
the face amount of the note plus 7% stated interest approximated the market
value of the note on that date. The amount of the adjustment to reflect indexing
of the note increased from $0.0 to $29.1 million for the years ended September
30, 1996 and 1997, respectively. The adjustment for 1997 is due primarily to a
91.5% increase in broadcast cash flow.
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Income before income
taxes and extraordinary item increased 2397.2% to $177.3 million for the year
ended September 30, 1997, including a gain of $197.1 million from the sale of
assets and $29.1 million for the adjustment to reflect indexing of the
convertible subordinated note, compared to $7.1 million for the year ended
September 30, 1996, which includes a gain of $0.1 million and no adjustment to
reflect indexing of the note. The increase in gain on the sale of assets is
primarily attributable to our disposition of stations in the Houston, San
Francisco and Pittsburgh radio markets. We used the proceeds from these
dispositions to acquire stations in markets where we believed there was greater
potential for establishing market leading station clusters. We do not expect
such significant gains on the sale of assets to continue in the future.
EXTRAORDINARY ITEM, NET OF TAX BENEFIT. There was no extraordinary item in
1997. The extraordinary item for the year ended September 30, 1996 resulted from
the write-off of $0.4 million of unamortized finance charges due to the early
extinguishment of debt, which resulted from the refinancing of our credit
facility.
BROADCAST CASH FLOW. As a result of the factors described above, broadcast
cash flow increased 91.5% to $32.6 million for the year ended September 30, 1997
from $17.0 million for the year ended September 30, 1996. On a same station
basis, broadcast cash flow increased 53.3% to $31.6 million from $20.6 million.
Our broadcast cash flow margin declined to 34.7% for the year ended
September 30, 1997 from 35.0% for the year ended September 30, 1996. The
decrease is primarily attributable to our exchange in fiscal 1997 of relatively
mature stations in San Francisco and Houston, which operated at higher broadcast
cash flow margins but were located in markets where management believed there
were limited growth and clustering opportuni-
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ties, for less developed properties in Seattle, Kansas City and Sacramento,
which collectively operated with lower broadcast cash flow margins, but offered
stronger growth and clustering opportunities. On a same station basis, broadcast
cash flow margins increased to 31.1% for the year ended September 30, 1997 from
27.2% for the year ended September 30, 1996.
PRO FORMA AFTER-TAX CASH FLOW. Pro forma after-tax cash flow increased
127.4% to $16.6 million for the year ended September 30, 1997 from $7.3 million
for the year ended September 30, 1996. The increase is attributable to improved
operations of existing stations and the net effect of newly acquired properties,
taking into consideration pro forma income taxes as though we had reported as a
C corporation.
LIQUIDITY AND CAPITAL RESOURCES
We use a significant portion of our capital resources to consummate
acquisitions. Historically, these acquisitions were funded from one or a
combination of the following sources: (1) our credit facility, (2) the swapping
of our radio stations in transactions which qualify as "like-kind" exchanges
under sec.1031 of the Internal Revenue Code and (3) internally-generated cash
flow. For the Sinclair acquisition, we expect to use net proceeds from this
offering and the Class A common stock offering, together with cash on hand and
proceeds from an amended or replacement credit facility, to finance the purchase
price for the Sinclair acquisition.
Net cash flows provided by operating activities were $8.2 million and $5.8
million for the six months ended June 30, 1999 and 1998, respectively. Changes
in our net cash flows provided by operating activities are primarily a result of
changes in advertising revenues and station operating expenses, which are
affected by the acquisition and disposition of stations during those periods.
Net cash flows provided by investing activities were $10.0 million for the
six months ended June 30, 1999 and net cash flows used by investing activities
were $125.6 million for the six months ended June 30, 1998. Net cash flows used
by financing activities were $16.0 million for the six months ended June 30,
1999 and net cash flows provided by financing activities were $122.4 million for
the six months ended June 30, 1998. The cash flows for the six months ended June
30, 1999 reflect (1) completed transactions consummated in the period and the
related borrowings and (2) proceeds from our initial public offering and the
related payment of long-term debt and corporate obligations. The cash flows for
the six months ended June 30, 1998 reflect refinancing of our credit facility
and acquisitions consummated in the period together with the related borrowings.
Net cash flows provided by operating activities were $11.2 million and $7.3
million for the three months ended December 31, 1998 and 1997, respectively.
Changes in our net cash flows from operating activities are primarily a result
of changes in advertising revenues and station operating expenses which are
affected by the acquisition and disposition of stations during those periods.
Net cash flows used in investing activities were $86.9 million and $17.5
million for the three months ended December 31, 1998 and 1997, respectively. Net
cash flows provided by financing activities were $75.5 million and $10.0 million
for the three months ended December 31, 1998 and 1997, respectively. These cash
flows reflect the acquisitions that we consummated in the relevant periods and
the related borrowings.
Net cash flows provided by operating activities were $23.0 million, $8.9
million and $12.8 million for the years ended September 30, 1998, 1997 and 1996,
respectively. Changes in our net cash flow from operating activities are
primarily a result of changes in
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advertising revenues and station operating expenses which are affected by the
acquisition and disposition of stations during those periods.
Net cash flows used in investing activities were $153.7 million, $13.7
million and $96.5 million for the years ended September 30, 1998, 1997 and 1996,
respectively. Net cash flows provided by financing activities were $133.7
million, $3.2 million and $87.5 million for the years ended September 30, 1998,
1997 and 1996, respectively. These cash flows reflect the acquisitions
consummated in the relevant periods and the related borrowings.
On February 3, 1999, upon the consummation of our initial public offering,
we received net proceeds of $236.2 million, after deducting expenses,
underwriting discounts and commissions. We used these proceeds to reduce
outstanding indebtedness under our credit facility and to pay other corporate
obligations. Shortly after reducing indebtedness under the credit facility, in
February 1999 we reborrowed approximately $58.0 million to purchase three Boston
radio stations from CBS.
In addition to debt service and quarterly distributions under the TIDES,
which could be substantial in amount, our principal liquidity requirements will
be for working capital and general corporate purposes, including capital
expenditures, and acquisitions of additional radio stations, including the
Sinclair acquisition. For calendar 1999, we estimate that maintenance capital
expenditures will be approximately $1.5 million and that total capital
expenditures will be between $10.0 million and $11.5 million. These estimates do
not include the incremental capital expenditures that may be incurred in
connection with the Sinclair acquisition. These estimates include studio
consolidations in many of our markets, providing us with operational
improvements from which we will receive long-term benefits. We believe that cash
flow from operating activities, together with revolving borrowings under our
existing credit facility, should be sufficient to permit us to fund our capital
expenditures and on-going operations, exclusive of the Sinclair acquisition.
In order to fund the $824.5 million in cash required to consummate the
Sinclair acquisition, we expect to pay approximately $145.0 million from the net
proceeds of this offering, and approximately $306.9 million from the net
proceeds of the Class A common stock offering, assuming a public offering price
of $40.00 per share. However, even assuming the closing of both offerings, we
will be required to raise an additional $372.6 million through borrowing to fund
the balance of the Sinclair purchase price. Our existing credit facility would
provide approximately $179.1 million of this amount, but we will need to amend
or replace the facility to increase funds available under it by approximately
$193.5 million. Accordingly, we are engaged in discussions with various
potential lenders about amending or replacing our present credit facility in
order to obtain the additional financing. Moreover, if this offering closes, but
the Class A common stock offering does not, the financing that we would need
from an amended or replacement credit facility or other potential sources would
correspondingly increase.
We entered into a loan agreement, dated as of February 13, 1998, as amended
on October 8, 1998 and as further amended on July 20, 1999, with several banks,
including Key Corporate Capital Inc. and Bank of America NT&SA, for a $350.0
million revolving credit facility. The credit facility was established to
refinance our existing indebtedness, provide working capital and fund
acquisitions. As discussed above, we must amend or replace this credit facility
to fund the purchase price for the Sinclair acquisition.
Under our current credit facility, at our election, interest on any
outstanding principal accrues at a rate based on either LIBOR plus a spread
which ranges from 0.5% to 2.125%
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or on KeyBank N.A.'s base rate plus a spread of up to 0.875%, depending on our
leverage ratio. Although we may borrow, repay and reborrow under our current
credit facility, the aggregate maximum amount that we can have outstanding at
any one time is reduced on a quarterly basis beginning on June 30, 2000. The
final maturity date for our credit facility is February 13, 2006. As of June 30,
1999, we had approximately $166.0 million of borrowings and a $4.9 million
letter of credit outstanding under our credit facility.
We are prohibited under our current credit facility from maintaining a
total leverage ratio (defined as the ratio of our total debt to operating cash
flow) greater than 6.5 to 1.0, at any time through March 31, 2000, which reduces
over subsequent periods. In addition, we are prohibited under our current credit
facility from maintaining a senior leverage ratio (defined as the ratio of the
principal amount outstanding under our current credit facility to operating cash
flow) greater than 6.0 to 1.0, at any time through March 31, 2000, which reduces
over subsequent periods. Currently, we are in compliance with each of these
total and senior leverage ratio obligations.
We are also required by our current credit facility to (1) maintain a fixed
charge coverage ratio (defined as the ratio of operating cash flow to the sum of
our debt service, capital expenditures, taxes and capital distributions, over
any four quarter period) greater than 1.05 to 1.00 and (2) maintain an interest
coverage ratio (defined as the ratio of operating cash flow to interest expense
over any four quarter period) greater than 2.0 to 1.0. Currently, we are in
compliance with each of these financial ratio obligations.
As part of the consent we received from our lenders to consummate this
offering, we and the lenders have agreed that we will include the financing cost
of the TIDES as part of interest expense for purposes of the fixed charge
coverage ratio and the interest coverage ratio and that we will exclude the
principal amount of the debentures from the calculation of our total debt.
However, the amount of any deferred interest on the debentures will be included
in the total debt calculation.
Our current credit facility requires us to protect ourselves from interest
rate fluctuations through the use of derivative rate hedging instruments. As a
result, we have entered into various convertible rate cap and interest rate swap
transactions with various banks designed to mitigate our exposure to
significantly higher floating interest rates. A rate cap agreement establishes
an upper limit or "cap" for the base LIBOR rate. Swap agreements require that we
pay a fixed rate of interest on the notional amount to a bank and the bank pay
to us a variable rate equal to three-month LIBOR. Some of the swap agreements
grant the bank the option to terminate the transaction prior to its respective
expiration date in certain limited circumstances.
In the future, we expect to continue executing rate hedging transactions
only to the extent required by our lenders and do not anticipate holding
derivative securities for speculative or investment purposes. The following
table sets forth certain information regarding the rate hedging transactions
which we had entered into as of September 30, 1996, 1997 and 1998.
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<PAGE> 65
<TABLE>
<CAPTION>
UNRECOGNIZED GAINS (LOSSES) AS OF
CONVERTIBLE SWAP SEPTEMBER 30,
CAP INTEREST INTEREST EXPIRATION -----------------------------------
NOTIONAL AMOUNT RATE RATE DATE 1996 1997 1998
- --------------- ------------ -------- ----------------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
$20,000,000........... -- 6.77% May 16, 2000 $(208,000) $(351,000) $ (652,000)
25,000,000(1)........ -- 5.89 July 29, 2003 (117,000) (212,000) (1,057,000)
25,000,000........... 7.50% 6.05 August 8, 2000 15,000 (103,000) (1,069,000)
15,000,000........... -- 5.61 January 10, 2005 -- -- (525,000)
14,000,000........... -- 5.86 January 10, 2005 -- -- (705,000)
30,000,000........... -- 5.77 February 27, 2008 -- -- (1,793,000)
</TABLE>
- -------------------------
(1) This cap was converted by the bank into an interest rate swap effective
October 29, 1998.
No gains or losses have been recognized by us during the periods indicated.
RECENT PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133 entitled "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
"derivatives"), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The accounting for changes
in the fair value of a derivative depends on the intended use of the derivative
and the resulting designation. In June 1999, the FASB issued SFAS No. 137 which
extends the effective date of SFAS No. 133 to fiscal quarters of fiscal years
beginning after June 15, 2000 and should not be applied retroactively to
financial statements of prior periods. Management has not yet determined what
effect, if any, this statement will have on us.
IMPACT OF YEAR 2000 ISSUES
We rely, directly and indirectly, on information technology systems to
operate our radio stations, provide our radio stations with programming,
up-to-date news and other information and perform a variety of administrative
services including accounting, financial reporting, advertiser spot scheduling,
payroll and invoicing. Most of these information technology systems, such as
Marketron, Columbine, Ultipro, Solomon, NT and Novell, are standard commercial
software products used both throughout the radio broadcasting industry and in
other industries. We also use non-information technology systems, such as
microchips for dating and other automated functions. All of these technology
systems could potentially be affected by year 2000 issues.
In order to minimize the risk of year 2000 related losses, we are
conducting a comprehensive assessment of our year 2000 issues. This assessment
consists of (1) an analysis of all of the information and non-information
technology systems that we use, including the circulation of year 2000
compliance questionnaires to the chief engineers of each of our stations,
requiring them to evaluate their respective station's preparedness for year 2000
issues and (2) an inquiry as to the year 2000 status of third parties material
to our operations, including the transmission of letters to all key service
providers requesting written confirmation of their year 2000 readiness.
Although we are still in the process of assessment, we have determined that
the bulk of the technology systems we use internally are year 2000 compliant. We
have received
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<PAGE> 66
confirmation from each supplier that provided or manufactured a material
information or non-information technology system used by us that the system is
either year 2000 compliant or that the supplier will, within a short period of
time, provide software aides, supplements or replacements that will make the
system year 2000 compliant.
Due to:
- the preventive measures being taken in response to our assessment;
- the relatively small degree to which the radio broadcasting industry, as
compared to other industries, depends on older large computer systems or
interfaces with third party computer systems;
- the fact that most of our automated administrative services can, if
needed, be performed manually; and
- the fact that most of our radio stations are equipped with emergency
power systems,
we believe that, while difficult to fully assess, year 2000 issues should not
have a material adverse effect on our broadcast operations.
We believe that it is difficult to fully assess the risks of the year 2000
problem due to the numerous uncertainties surrounding the issue. We believe that
the primary risks are external to us and relate to the year 2000 readiness of
our third party suppliers. The inability of third party suppliers to adequately
address the year 2000 issues on a timely basis could result in a material
financial risk, including loss of revenue, substantial unanticipated costs and
service interruptions. We plan to continue our efforts to survey all work with
third party suppliers to address all significant year 2000 issues in a timely
manner.
We are currently completing our year 2000 remediation efforts and we are
developing a contingency plan for dealing with year 2000 issues caused by
systems external to us. Since most of the year 2000 compliance achieved by us to
date has been done through the normal upgrading process, separate costs have not
been allocated to the year 2000 issue. Based on our experience to date, we
estimate that the remaining costs to respond to the year 2000 issues will not
exceed $250,000. All of these costs will be expensed as incurred.
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<PAGE> 67
INFORMATION ABOUT STATION AND MARKET DATA
For this prospectus:
- We obtained the following data from Duncan's Radio Market Guide (1999
ed.):
- 1998 market rank by metro population;
- 1998 market rank by radio revenue;
- 1998 Entercom market revenue share; and
- 1998 Entercom market revenue rank.
- Our market revenue rank in the radio broadcasting industry is derived
from Duncan's, as adjusted to reflect our completed transactions and our
expected consummation of the Sinclair acquisition in the fourth quarter
of 1999.
- We derived audience share and audience rank in target demographic data
from surveys of persons, listening Monday through Sunday, 6 a.m. to 12
midnight, in the indicated demographic, as set forth in the Spring 1999
Radio Market Report published by The Arbitron Ratings Company.
- We present radio station data assuming the completion of the Sinclair
acquisition.
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<PAGE> 68
BUSINESS
OVERVIEW
We are the fifth largest radio broadcasting company in the United States
based on pro forma 1998 gross revenues. We have assembled, after giving effect
to our pending acquisition of 46 stations from various subsidiaries of Sinclair
Broadcast Group, Inc., a nationwide portfolio of 88 owned or operated stations.
This portfolio consists of 56 FM and 32 AM stations in 16 markets, including 12
of the country's top 50 markets. Our station groups rank among the three largest
clusters in 15 of our 16 markets. On a pro forma basis, we would have had net
revenues of $301.9 million, operating income of $51.2 million and a pro forma
income before extraordinary item of $1.2 million for the twelve months ended
June 30, 1999. In addition, pro forma broadcast cash flow during the same period
would have been $107.7 million.
Our net revenues and broadcast cash flow have grown significantly on both a
total and same station basis. Net revenues grew at a compound annual rate of
96.8% from an actual $35.9 million in fiscal 1995 to a pro forma $273.8 million
in fiscal 1998. Broadcast cash flow grew at a compound annual rate of 98.0% from
an actual $11.8 million in fiscal 1995 to a pro forma $91.6 million in fiscal
1998. During this same period, our same station net revenues and broadcast cash
flow grew at average annual rates of 15.0% and 36.4%, respectively. In addition,
our pro forma after-tax cash flow grew at a compound annual rate of 127.2% from
an actual $4.5 million in fiscal 1995 to a pro forma $52.8 million in fiscal
1998.
OUR CORPORATE HISTORY
Throughout our more than 30 year history of operations, we have experienced
sustained growth by adapting our acquisition and operating strategies to
capitalize on changes occurring in the radio broadcasting industry. Our Chairman
of the Board and Chief Executive Officer, Joseph M. Field, founded Entercom in
1968 on the conviction that FM broadcasting, then in its infancy, would surpass
AM broadcasting as the leading aural medium. Our strategy from inception through
the 1970s was to acquire FM stations in the top 20 markets at a fraction of
prevailing prices for AM stations and to operate those stations economically and
profitably by utilizing niche formats not being offered by major AM stations. We
continued this strategy until FM's technical superiority and the availability of
inexpensive AM/FM receivers drove FM's penetration of the radio market to
critical mass and FM stations began to compete successfully with the dominant AM
stations of the time for control of mass market audiences. As part of our
strategy, we also purchased technically underdeveloped FM stations and upgraded
them so that they could become competitive stations in their markets.
In the mid-1980's, with FM at critical mass, we adjusted our strategic plan
and began a deliberate multi-year effort to enhance our operations at both the
corporate and station levels by changing or adjusting program formats to appeal
to mainstream audiences in order to compete for greater shares of audience and
advertising dollars in our markets. With the advent of the duopoly rules in
1992, which permitted expansion of ownership in a market from one to two
stations in each radio medium, we began to "double up" in our markets. Since the
passage of the Telecommunications Act of 1996, which permitted ownership of up
to eight radio stations in most major markets, we have pursued a creative
acquisition and development strategy by which we have swapped developed
stand-alone
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<PAGE> 69
FM stations in various markets in exchange for clusters of underdeveloped
stations in other large growth markets where there was greater opportunity to
develop market leading clusters.
OUR ACQUISITION STRATEGY
Since October 1, 1996, in over 20 transactions including the Sinclair
acquisition, which we expect to consummate in the last quarter of 1999, we have
acquired or agreed to acquire 83 radio stations and have divested or will
divest, for strategic or regulatory reasons, 14 radio stations. Through our
disciplined acquisition strategy, we seek to (1) build top-three station
clusters principally in large growth markets and (2) acquire underdeveloped
properties that offer the potential for significant improvements in revenues and
broadcast cash flow through the application of our operational, administrative
and engineering expertise. Although our focus has been on radio stations in top
50 markets, we also consider acquiring stations in top 75 markets to the extent
we believe we can apply our acquisition strategy in those markets.
OUR OPERATING STRATEGY
The principal components of our operating strategy are to:
- DEVELOP MARKET LEADING STATION CLUSTERS. We are among the three largest
clusters, based on gross revenues, in 15 of our 16 markets, after giving
effect to the Sinclair acquisition. To enhance our competitive position,
we strategically align our stations' formats and sales efforts within
each market to optimize their performance, both individually and
collectively. We seek to maximize the ratings, revenue and broadcast cash
flow of our radio stations by tailoring their programming to optimize
aggregate audience delivery.
- ACQUIRE AND DEVELOP, UNDERPERFORMING STATIONS. We seek to acquire and
develop underperforming stations, which has enabled us to build a
long-term track record of achieving superior same station revenue and
broadcast cash flow growth. We utilize a variety of techniques to develop
underachieving properties. These techniques include: strategic market
research and analysis; management enhancements; expenditure reductions;
improved sales training and techniques; technical upgrades; programming
and marketing enhancements; and facility consolidations.
- BUILD STRONGLY-BRANDED FRANCHISES. We analyze market research and
competitive factors to identify the format opportunity, music selection
and rotation, presentation and other key programming attributes that we
believe will best position each station to develop a distinctive identity
and to strengthen the stations' local "brand" or "franchise" value. We
believe that this will enable us to maximize our audience share and
consequently, our revenues and broadcast cash flow.
- LEVERAGE STATION CLUSTERS TO CAPTURE GREATER SHARE OF ADVERTISING
REVENUE. We believe radio will continue to gain revenue share from other
media as a result of deregulation in the broadcasting industry, which
allows broadcasters to create larger clusters in their markets and offers
advertisers a means to cost-effectively reach larger audiences. As a
result of deregulation in the radio broadcasting industry, operators can
now create radio station clusters that have the critical mass of audience
reach and marketing resources necessary to pursue incremental advertising
and promotional revenues more aggressively. We have begun to capitalize
on this opportunity by developing specialized teams in many of our
markets to work with
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<PAGE> 70
non-traditional radio advertisers to create and develop marketing programs and
solutions.
- MAXIMIZE TECHNICAL CAPABILITIES. We seek to operate stations with the
strongest signals in their respective markets. In addition, on various
occasions we have identified opportunities to acquire and upgrade
low-powered or out-of-market stations and transform them into competitive
signals, thus increasing their value significantly. For example, in 1998
we sold our two Tampa FM stations, which we had purchased for an
aggregate of $4.9 million, for $75.0 million after upgrading their
license classes.
- RECRUIT, DEVELOP, MOTIVATE AND RETAIN SUPERIOR EMPLOYEES. We believe
that station operators differentiate themselves from their peers
primarily through their ability to recruit, develop, motivate and retain
superior management, programming and sales talent. Accordingly, we strive
to establish a compelling corporate culture that is attractive to
superior performers. We encourage our stations to build strong community
bonds through local and company-wide community service programs, which
facilitate strong local business relationships and provide employees with
opportunities for enhanced job fulfillment. We offer competitive pay
packages with performance-based incentives for our key employees. In
addition, we provide employees with opportunities for personal growth and
advancement through extensive training, seminars and other educational
programs.
OUR STATION PORTFOLIO
We have built a highly consolidated portfolio of radio stations
concentrated primarily in top 50 markets with above average growth
characteristics. Upon consummation of the Sinclair acquisition, and prior to our
required divestiture of three stations in Kansas City, 66 of our 88 radio
stations will be in 12 of the top 50 markets. We generated 92.9% of our pro
forma 1998 net revenues from the 12 top 50 markets in which we operate. Radio
advertising revenues in these 12 markets have grown at a revenue weighted
compound annual growth rate of 11.2% from 1993 to 1998, which exceeded both the
revenue weighted compound annual growth rate of the top 50 markets and the
average annual growth rate of the aggregate radio industry.
Our current portfolio of stations includes a significant number of recently
acquired stations that we believe are underdeveloped. We believe that the
underdeveloped stations offer the opportunity for substantial broadcast cash
flow growth. In the aggregate, the 33 stations which we commenced operating on
or after January 1, 1997 operated at a broadcast cash flow margin of 27.4%
during the twelve months ended June 30, 1999. By comparison, in the aggregate,
the nine stations which we commenced operating prior to 1997 operated at a
broadcast cash flow margin of 48.2% during the twelve months ended June 30,
1999.
Our portfolio of radio stations is geographically diverse and offers a wide
variety of programming formats. We believe that geographic diversity will reduce
the effect of economic downturn in specific markets, while our wide range of
programming formats lessens the impact of changes in listening preferences.
Furthermore, because of the size of our station portfolio, we are not overly
dependent on the performance of any one station. The following table sets forth
selected information about our portfolio of radio stations and gives effect to
the consummation of the Sinclair acquisition. It does not give effect to the
required disposition of three stations in Kansas City, which we are seeking to
swap for stations in other markets. If we cannot arrange suitable swaps, we will
sell these stations for cash.
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<TABLE>
<CAPTION>
1998 MARKET RANK AUDIENCE AUDIENCE
-------------------- SHARE IN RANK IN
TARGET TARGET TARGET
METRO RADIO YEAR DEMO- DEMO- DEMO-
MARKET(1)/STATION POPULATION REVENUE ACQUIRED FORMAT GRAPHIC GRAPHIC GRAPHIC
- ----------------- ---------- ------- --------- ------------------ ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BOSTON, MA.............. 8 10
WEEI-AM 1998 Sports Talk Men 25-54 7.2 2(tie)
WRKO-AM 1998 Talk Adults 2.6 16
25-54
WAAF-FM 1999 Active Rock Men 18-34 11.2 2
WQSX-FM 1999 Rhythmic AC Women 25-54 4.5 5
WWTM-AM(4) 1999 Sports Talk Men 25-54 n/a n/a
SEATTLE, WA............. 14 13
KBSG-AM/FM 1996 Oldies Adults 4.1 9
25-54
KIRO-AM 1997 News/Talk/Sports Men 25-54 6.4 1(tie)
KQBZ-FM 1997 Talk Adults 2.4 19
25-54
KISW-FM 1997 Active Rock Men 18-34 10.0 1
KMTT-FM 1973 Adult Rock Adults 4.2 8
25-54
KNWX-AM 1997 Business Adults 1.9 21
35-64
KNDD-FM 1996 Modern Rock Men 18-34 12.3 1
PORTLAND, OR............ 25 20
KFXX-AM 1998 Sports Talk Men 25-54 2.4 16
KGON-FM 1995 Classic Rock Men 25-54 9.7 1
KKSN-AM 1995 Nostalgia Adults 1.1 19
35-64
KKSN-FM 1998 Oldies Adults 5.6 6
25-54
KNRK-FM 1995 Modern Rock Men 18-34 6.0 5
KRSK-FM 1998 Hot Adult Women 18-34 5.6 6(tie)
Contemporary
KSLM-AM 1998 Sports Talk Men 25-54 n/a(6) n/a(6)
SACRAMENTO, CA.......... 28 28
KCTC-AM 1998 Nostalgia Adults 3.2 9
35-64
KRXQ-FM 1997 Active Rock Men 18-34 14.8 1
KSEG-FM 1997 Classic Rock Men 24-54 9.0 1
KSSJ-FM 1997 Smooth Jazz Adults 6.0 2
25-54
KDND-FM 1997 Contemporary Hit Women 18-34 7.6 4
Radio
KANSAS CITY, MO......... 30 29
KCMO-AM 1997 Talk Adults 2.2 16
25-54
KCMO-FM 1997 Oldies Adults 5.7 6
25-54
KMBZ-AM 1997 News/Talk/Sports Men 25-54 7.2 4
KUDL-FM 1998 Adult Contemporary Women 25-54 8.8 2
KYYS-FM 1997 Album Oriented Men 25-54 8.1 2
Rock
WDAF-AM 1998 Country Adults 5.5 5
35-64
KKGM-AM 1999 Sports Talk Men 25-54 n/a n/a
KCFX-FM(8) (pending) Classic Hits Adults 6.5 3
25-54
KQRC-FM(8) (pending) Active Rock Men 18-34 24.5 1
KCIY-FM(8) (pending) Smooth Jazz Adults 3.8 12
25-54
KXTR-FM(8) (pending) Classical Adults 2.7 15
25-54
MILWAUKEE, WI(9)........ 31 33
WEMP-AM (pending) Religious Adults n/a n/a
35-64
WMYX-FM (pending) Adult Contemporary Women 25-54 8.8 1
WXSS-FM (pending) Contemporary Hit Women 18-34 12.1 2
Radio
<CAPTION>
1998 ENTERCOM
MARKET REVENUE
-------------------
MARKET(1)/STATION SHARE(2) RANK(3)
- ----------------- -------- --------
<S> <C> <C>
BOSTON, MA.............. 17.3% 3
WEEI-AM
WRKO-AM
WAAF-FM
WQSX-FM
WWTM-AM(4)
SEATTLE, WA............. 37.8%(5) 1
KBSG-AM/FM
KIRO-AM
KQBZ-FM
KISW-FM
KMTT-FM
KNWX-AM
KNDD-FM
PORTLAND, OR............ 26.5% 3
KFXX-AM
KGON-FM
KKSN-AM
KKSN-FM
KNRK-FM
KRSK-FM
KSLM-AM
SACRAMENTO, CA.......... 18.1% 3
KCTC-AM
KRXQ-FM
KSEG-FM
KSSJ-FM
KDND-FM
KANSAS CITY, MO......... 1(7)
KCMO-AM
KCMO-FM
KMBZ-AM
KUDL-FM
KYYS-FM
WDAF-AM
KKGM-AM
KCFX-FM(8)
KQRC-FM(8)
KCIY-FM(8)
KXTR-FM(8)
MILWAUKEE, WI(9)........ 8.7% 5
WEMP-AM
WMYX-FM
WXSS-FM
</TABLE>
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<TABLE>
<CAPTION>
1998 MARKET RANK AUDIENCE AUDIENCE
-------------------- SHARE IN RANK IN
TARGET TARGET TARGET
METRO RADIO YEAR DEMO- DEMO- DEMO-
MARKET(1)/STATION POPULATION REVENUE ACQUIRED FORMAT GRAPHIC GRAPHIC GRAPHIC
- ----------------- ---------- ------- --------- ------------------ ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NORFOLK, VA(9).......... 36 44
WPTE-FM (pending) Modern Adult Adults 7.8 4
Contemporary 18-34
WWDE-FM (pending) Adult Contemporary Women 25-54 8.3 2
WVKL-FM (pending) Oldies Adults 5.3 7
25-54
WNVZ-FM (pending) Contemporary Hit Women 18-34 9.1 2
Radio
NEW ORLEANS, LA(9)...... 41 39
WSMB-AM (pending) Talk/Sports Men 25-54 .9 16(tie)
WWL-AM (pending) News/Talk/Sports Men 25-54 6.7 6(tie)
WEZB-FM (pending) Contemporary Hit Women 18-34 6.2 6
Radio
WLMG-FM (pending) Adult Contemporary Women 25-54 6.1 7
WLTS-FM(10) (pending) Adult Contemporary Women 25-54 7.9 3
WTKL-FM(10) (pending) Oldies Adults 5.9 6
25-54
GREENSBORO, NC(9)....... 42 50
WMQX-FM (pending) Oldies Adults 6.9 5
25-54
WJMH-FM (pending) Urban Adults 14.0 1
18-34
WEAL-AM (pending) Gospel Adults 2.5 11
35-64
WQMG-FM (pending) Urban Adult Adults 7.1 4
Contemporary 25-54
BUFFALO, NY(9).......... 43 41
WBEN-AM (pending) News/Talk/Sports Men 25-54 5.3 6
WMJQ-FM (pending) Adult Contemporary Women 25-54 7.8 6
WWKB-AM (pending) Sports Adults .8 17(tie)
35-64
WKSE-FM (pending) Contemporary Hit Women 18-34 18.9 1
Radio
WGR-AM (pending) News/Talk Adults 3.8 10
25-54
WWWS-AM (pending) Urban Oldies Adults 2.4 12
25-54
MEMPHIS, TN(9).......... 46 40
WOGY-FM (pending) Country Adults 3.8 9(tie)
25-54
WJCE-AM (pending) Urban Oldies Women 25-54 .6 19(tie)
WRVR-FM (pending) Soft Adult Women 25-54 8.0 4
Contemporary
ROCHESTER, NY........... 50 55
WBBF-FM 1998 Oldies Adults 6.9 5
25-54
WBEE-FM 1998 Country Adults 8.6 2
25-54
WEZO-AM 1998 Nostalgia Adults 2.4 10
35-64
WQRV-FM 1998 Classic Hits Adults 3.1 11
25-54
GREENVILLE/SPARTANBURG,
SC(9)................. 58 61
WFBC-FM (pending) Contemporary Hit Women 18-49 14.2 1
Radio
WSPA-FM (pending) Soft Adult Women 25-54 8.1 5(tie)
Contemporary
WYRD-AM(11) (pending) News/Talk Adults 1.1 14
25-54
WORD-AM(11) (pending) News/Talk Adults .8 15
25-54
WSPA-AM (pending) Full Service/Talk Adults 6.4 7
25-54
WOLI-FM(12) (pending) Oldies Adults 2.4 9
25-54
WOLT-FM(12) (pending) Oldies Adults 2.2 11
25-54
<CAPTION>
1998 ENTERCOM
MARKET REVENUE
-------------------
MARKET(1)/STATION SHARE(2) RANK(3)
- ----------------- -------- --------
<S> <C> <C>
NORFOLK, VA(9).......... 26.8% 1
WPTE-FM
WWDE-FM
WVKL-FM
WNVZ-FM
NEW ORLEANS, LA(9)...... 41.9% 1
WSMB-AM
WWL-AM
WEZB-FM
WLMG-FM
WLTS-FM(10)
WTKL-FM(10)
GREENSBORO, NC(9)....... 24.2% 2
WMQX-FM
WJMH-FM
WEAL-AM
WQMG-FM
BUFFALO, NY(9).......... 38.8% 1
WBEN-AM
WMJQ-FM
WWKB-AM
WKSE-FM
WGR-AM
WWWS-AM
MEMPHIS, TN(9).......... 20.1% 2
WOGY-FM
WJCE-AM
WRVR-FM
ROCHESTER, NY........... 21.4% 3
WBBF-FM
WBEE-FM
WEZO-AM
WQRV-FM
GREENVILLE/SPARTANBURG,
SC(9)................. 23.8% 3
WFBC-FM
WSPA-FM
WYRD-AM(11)
WORD-AM(11)
WSPA-AM
WOLI-FM(12)
WOLT-FM(12)
</TABLE>
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<PAGE> 73
<TABLE>
<CAPTION>
1998 MARKET RANK AUDIENCE AUDIENCE
-------------------- SHARE IN RANK IN
TARGET TARGET TARGET
METRO RADIO YEAR DEMO- DEMO- DEMO-
MARKET(1)/STATION POPULATION REVENUE ACQUIRED FORMAT GRAPHIC GRAPHIC GRAPHIC
- ----------------- ---------- ------- --------- ------------------ ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WILKES-BARRE/ SCRANTON,
PA(9)................. 64 69
WGBI-AM (pending) News/Talk/Sports Adults .2 25
35-64
WGGI-FM (pending) Country Adults .2 24(tie)
25-54
WKRZ-FM (pending) Contemporary Hit Adults 14.1 1
Radio 18-49
WWFH-FM (pending) Soft Hits Women 25-54 .8 16(tie)
WILP-AM (pending) News/Talk/Sports Adults n/a n/a
35-64
WKRF-FM (pending) Contemporary Hit Adults .5 18(tie)
Radio 18-49
WSHG-FM (pending) Soft Hits Women 25-54 1.6 11(tie)
WILK-AM (pending) News/Talk/Sports Adults 2.5 8(tie)
35-64
WGGY-FM (pending) Country Adults 10.2 3
25-54
GAINESVILLE/OCALA, FL... 98 124
WKTK-FM 1986 Adult Contemporary Women 25-54 11.8 1
WSKY-FM 1998 News Talk Adults 2.9 9
25-54
LONGVIEW/KELSO, WA...... N/A N/A
KBAM-AM 1998 Country Adults n/a n/a
25-54
KEDO-AM 1997 Oldies Adults n/a n/a
25-54
KLYK-FM 1997 Adult Contemporary Women 25-54 n/a n/a
KRQT-FM 1998 Classic Rock Men 25-54 n/a n/a
<CAPTION>
1998 ENTERCOM
MARKET REVENUE
-------------------
MARKET(1)/STATION SHARE(2) RANK(3)
- ----------------- -------- --------
<S> <C> <C>
WILKES-BARRE/ SCRANTON,
PA(9)................. 38.6% 1
WGBI-AM
WGGI-FM
WKRZ-FM
WWFH-FM
WILP-AM
WKRF-FM
WSHG-FM
WILK-AM
WGGY-FM
GAINESVILLE/OCALA, FL... 20.8% 2
WKTK-FM
WSKY-FM
LONGVIEW/KELSO, WA...... N/A N/A
KBAM-AM
KEDO-AM
KLYK-FM
KRQT-FM
</TABLE>
- ------------------
(1) Our stations are in some instances licensed to communities other than the
named principal community for the market.
(2) We derived the 1998 Entercom Market Revenue Share for each market by adding
the 1998 market revenue share of each of our stations in that market.
(3) 1998 Entercom Market Revenue Rank for each market is the ranking, by 1998
market revenue, of our group of radio stations in that market among all
other groups of radio stations in that market.
(4) Station competes in the adjacent community of Worcester, Massachusetts and
simulcasts virtually all of the programming of WEEI-AM.
(5) We also sell substantially all of the advertising time of a sixth FM
station in the Seattle market under a joint sales agreement. The revenues
from these sales are included in 1998 Entercom Market Revenue Share.
(6) KLSM-AM is licensed to Salem, Oregon, within the Portland market and
simulcasts KFXX-AM programming.
(7) 1998 Entercom Market Revenue Share for the Kansas City market is a
combination of Entercom's existing cluster and the Sinclair cluster that we
expect to acquire. Because we must divest three stations in the Kansas City
market, 1998 Market Revenue Share in Kansas City will decline, although we
believe that 1998 Entercom Market Revenue Rank will remain unchanged.
(8) Station to be acquired upon consummation of Sinclair acquisition.
(9) All stations in this market to be acquired upon consummation of the
Sinclair acquisition.
(10) Time brokerage agreement commenced in 1997. Sinclair has exercised an
option to acquire this station. We expect to either acquire this station
directly in the Sinclair acquisition or assume Sinclair's option to acquire
it.
(11) WYRD-AM and WORD-AM simulcast their programming.
(12) Operated under joint sales agreement. In April 1996, Sinclair exercised an
option to acquire this station. We expect to either acquire this station
directly in the Sinclair acquisition or assume Sinclair's option to acquire
it.
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COMPETITION; CHANGES IN BROADCASTING INDUSTRY
The radio broadcasting industry is highly competitive. The success of each
of our stations depends largely upon its audience ratings and its share of the
overall advertising revenue within its market. Our stations compete for
listeners and advertising revenue directly with other radio stations within
their respective markets. Radio stations compete for listeners primarily on the
basis of program content that appeals to a particular demographic group. By
building a strong listener base consisting of a specific demographic group in
each of our markets, we are able to attract advertisers seeking to reach those
listeners.
The following are some of the factors that are important to a radio
station's competitive position:
- management experience;
- the station's local audience rank in its market;
- transmitter power;
- assigned frequency;
- audience characteristics;
- local program acceptance; and
- the number and characteristics of other radio stations and other
advertising media in the market area.
In addition, we attempt to improve our competitive position with
promotional campaigns aimed at the demographic groups targeted by our stations
and by sales efforts designed to attract advertisers. Recent changes in the
Communications Act and the FCC's policies and rules permit increased ownership
and operation of multiple local radio stations.
Despite the competitiveness within the radio broadcasting industry, some
barriers to entry exist. The operation of a radio broadcast station requires a
license from the FCC. The number of radio stations that can operate in a given
market is limited by strict AM interference criteria and the availability of FM
radio frequencies allotted by the FCC to communities in that market. The number
of stations that a single entity may operate in a market is further limited by
the FCC's multiple ownership rules that regulate the number of stations serving
the same area that may be owned and controlled by a single entity.
Our stations also compete for audiences and advertising revenues within
their respective markets directly with other radio stations, as well as with
other media such as newspapers, magazines, network and cable television, outdoor
advertising and direct mail. In addition, the radio broadcasting industry is
subject to competition from new media technologies that are being developed or
introduced such as (1) satellite delivered audio radio service, which could
result in the introduction of new satellite radio services with sound quality
equivalent to that of compact discs; (2) audio programming by cable systems,
direct broadcast satellite systems, Internet content providers, personal
communications services and other digital audio broadcast formats; and (3)
in-band on-channel digital radio, which could provide multi-channel,
multi-format digital radio services in the same bandwidth currently occupied by
traditional AM and FM radio services. The FCC is also considering proposals for
the establishment of "microbroadcasting" stations, low-powered FM stations that
would be designed to serve small localized areas. The radio broadcasting
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industry historically has grown despite the introduction of new technologies for
the delivery of entertainment and information, such as television broadcasting,
cable television, audio tapes and compact discs. A growing population and
greater availability of radios, particularly car and portable radios, have
contributed to this growth. We cannot assure you, however, that this historical
growth will continue or that the development or introduction in the future of
any new media technology will not have an adverse effect on the radio
broadcasting industry.
The FCC has adopted licensing and operating rules for satellite delivered
audio and in April 1997 awarded two licenses for this service. Satellite
delivered audio may provide a medium for the delivery by satellite or
terrestrial means of multiple new audio programming formats to local and/or
national audiences. Digital technology also may be used in the future by
terrestrial radio broadcast stations either on existing or alternate
broadcasting frequencies, and the FCC has stated that it will consider making
changes to its rules to permit AM and FM radio stations to offer digital sound
following industry analysis of technical standards. In addition, the FCC has
authorized an additional 100 kHz of bandwidth for the AM band and has allotted
frequencies in this new band to certain existing AM station licensees that
applied for migration to the expanded AM band, subject to the requirement that
at the end of a transition period, those licensees return to the FCC either the
license for their existing AM band station or the license for the expanded AM
band station.
We cannot predict what other matters might be considered in the future by
the FCC, nor can we assess in advance what impact, if any, the implementation of
any of these proposals or changes might have on our business.
We employ a number of on-air personalities and generally enter into
employment agreements with these personalities to protect our interests in those
relationships that we believe to be valuable. The loss of some of these
personalities could result in a short-term loss of audience share, but we do not
believe that the loss would have a material adverse effect on our business.
FEDERAL REGULATION OF RADIO BROADCASTING
The radio broadcasting industry is subject to extensive and changing
regulation of, among other things, program content, advertising content,
technical operations and business and employment practices. The ownership,
operation and sale of radio stations are subject to the jurisdiction of the FCC.
Among other things, the FCC:
- assigns frequency bands for broadcasting;
- determines the particular frequencies, locations and operating power of
stations;
- issues, renews, revokes and modifies station licenses;
- determines whether to approve changes in ownership or control of station
licenses;
- regulates equipment used by stations; and
- adopts and implements regulations and policies that directly affect the
ownership, operation and employment practices of stations.
The FCC has the power to impose penalties for violations of its rules or
the Communications Act, including the imposition of monetary forfeitures, the
issuance of
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short-term licenses, the imposition of a condition on the renewal of a license,
and the revocation of operating authority.
The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. The summary is
not a comprehensive listing of all of the regulations and policies affecting
radio stations. Reference should be made to the Communications Act, FCC rules,
and the public notices and rulings of the FCC for further information concerning
the nature and extent of federal regulation of radio stations.
FCC LICENSES. Radio stations operate pursuant to renewable broadcasting
licenses that are ordinarily granted by the FCC for maximum terms of eight
years. The FCC licenses for our stations are held by some of our subsidiaries.
During the periods when renewal applications are pending, petitions to deny
license renewals can be filed by interested parties, including members of the
public. The FCC is required to hold hearings on a station's renewal application
if a substantial or material question of fact exists as to whether the station
has served the public interest, convenience and necessity. If, as a result of an
evidentiary hearing, the FCC determines that the licensee has failed to meet
certain requirements and that no mitigating factors justify the imposition of a
lesser sanction, then the FCC may deny a license renewal application.
Historically, FCC licenses have generally been renewed. We have no reason to
believe that our licenses will not be renewed in the ordinary course, although
there can be no assurance to that effect. The non-renewal of one or more of our
licenses could have a material adverse effect on our business.
The following table sets forth the market, call letters, FCC license
classification, antenna height above average terrain ("HAAT"), power, frequency
and FCC license expiration date (a station may continue to operate beyond the
expiration date if a timely filed license renewal application is pending) of
each of the stations that we will own or operate upon the consummation of the
Sinclair acquisition. The table does not give effect to the required divestiture
of three Kansas City stations.
<TABLE>
<CAPTION>
FCC HAAT POWER IN EXPIRATION DATE
MARKET(1) STATION CLASS (IN METERS) FREQUENCY KILOWATTS(2) OF FCC LICENSE
- --------- ---------- ----- ----------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Boston, MA.................. WEEI-AM B * 850 kHz 50 April 1, 2006
WRKO-AM B * 680 kHz 50 April 1, 2006
WAAF-FM B 239 107.3 MHz 20 April 1, 2006
WQSX-FM B 179 93.7 MHz 34 April 1, 2006
WWTM-AM B * 1440 kHz 5 April 1, 2006
Seattle, WA................. KBSG-AM B * 1210 kHz 27.5-D February 1, 2006
10.0-N
KBSG-FM C 729 97.3 MHz 55 February 1, 2006
KIRO-AM A * 710 kHz 50 February 1, 2006
KISW-FM C 350 99.9 MHz 100 February 1, 2006
KMTT-FM C 714 103.7 MHz 58 February 1, 2006
KQBZ-FM C 714 100.7 MHz 58 February 1, 2006
KNWX-AM B * 770 kHz 50-D February 1, 2006
5-N
KNDD-FM C 714 107.7 MHz 58 February 1, 2006
Portland, OR................ KFXX-AM B * 910 kHz 5 February 1, 2006
KGON-FM C 386 92.3 MHz 100 February 1, 2006
KKSN-AM B * 1520 kHz 50-D February 1, 2006
15-N
KKSN- FM C 386 97.1 MHz 100 February 1, 2006
KNRK-FM C2 259 94.7 MHz 17 February 1, 2006
KRSK-FM C 561 105.1 MHz 100 February 1, 2006
KSLM-AM B * 1390 kHz 5-D February 1, 2006
0.69-N
</TABLE>
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<PAGE> 77
<TABLE>
<CAPTION>
FCC HAAT POWER IN EXPIRATION DATE
MARKET(1) STATION CLASS (IN METERS) FREQUENCY KILOWATTS(2) OF FCC LICENSE
- --------- ---------- ----- ----------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sacramento, CA.............. KCTC-AM B * 1320 kHz 5 December 1, 2005
KRXQ-FM B 151 98.5 MHz 50 December 1, 2005
KSEG-FM B 152 96.9 MHz 50 December 1, 2005
KSSJ-FM B1 99 94.7 MHz 25 December 1, 2005
KDND-FM B 123 107.9 MHz 50 December 1, 2005
Kansas City, MO............. KCMO-AM B * 710 kHz 10-D February 1, 2005
5-N
KCMO-FM C 322 94.9 MHz 100 February 1, 2005
KMBZ-AM B * 980 kHz 5 February 1, 2005
KUDL-FM C 303 98.1 MHz 100 June 1, 2005
KYYS-FM C 308 99.7 MHz 100 February 1, 2005
WDAF-AM B * 610 kHz 5 February 1, 2005
KKGM-AM(3) B * 1250 kHz 25-D June 1, 2005
3.7-N
KCFX-FM(4) C1 303 101.1 MHz 87.0 February 1, 2005
KQRC-FM(4) C 322 98.9 MHz 100.0 February 1, 2005
KCIY-FM(4) C1 299 101 MHz 100.0 February 1, 2005
KXTR-FM(4) C 300 96.5 MHz 99.0 February 1, 2005
Milwaukee, WI(5)............ WEMP-AM B * 1250 kHz 5.0 December 1, 2003
WMYX-FM B 137 99.1 MHz 50.0 December 1, 2003
WXSS-FM B 256 103.7 MHz 19.5 December 1, 2003
Norfolk, VA(5).............. WPTE-FM B 152 94.9 MHz 50.0 October 1, 2003
WWDE-FM B 152 101.3 MHz 50.0 October 1, 2003
WVKL-FM B 268 95.7 MHz 40.0 October 1, 2003
WNVZ-FM B 146 104.5 MHz 49.0 December 1, 2003
New Orleans, LA(5).......... WSMB-AM B * 1350 kHz 5.0 June 1, 2004
WWL-AM A * 870 kHz 50.0 June 1, 2004
WEZB-FM C 300 97.1 MHz 100.0 June 1, 2004
WLMG-FM C 300 101.9 MHz 100.0 June 1, 2004
WLTS-FM C1 275 105.3 MHz 100.0 June 1, 2004
WTKL-FM C 300 95.7 MHz 100.0 June 1, 2004
Greensboro, NC(5)........... WMQX-FM C 335 93.1 MHz 99.0 December 1, 2003
WJMH-FM C 483 101.9 MHz 99.0 December 1, 2003
WEAL-AM D * 1500 kHz 1.0 December 1, 2003
WQMG-FM C 376 97.1 MHz 99.0 December 1, 2003
Buffalo, NY(5).............. WBEN-AM B * 930 kHz 5.0 June 1, 2006
WMJQ-FM B 408 102.5 MHz 110.0 June 1, 2006
WWKB-AM A * 1520 kHz 50.0 June 1, 2006
WKSE-FM B 128 98.8 MHz 46.0 June 1, 2006
WGR-AM B * 550 kHz 5.0 June 1, 2006
WWWS-AM C * 1400 kHz 1.0 June 1, 2006
Memphis, TN(5).............. WOGY-FM C2 141 94.1 MHz 50.0 August 1, 2004
WJCE-AM B * 680 kHz 10.0 August 1, 2004
WRVR-FM C1 229 104.5 MHz 100.0 August 1, 2004
Rochester, NY............... WBBF-FM B 172 98.9 MHz 37 June 1, 2006
WBEE-FM B 152 92.5 MHz 50 June 1, 2006
WEZO-AM B * 950 kHz 1 June 1, 2006
WQRV-FM A 119 93.3 MHz 4 June 1, 2006
Greenville/Spartanburg,
SC(5)..................... WFBC-FM C 564 93.7 MHz 100.0 December 1, 2003
WSPA-FM C 580 98.9 MHz 100.0 December 1, 2003
WYRD-AM B 184 1330 kHz 5.0 December 1, 2003
WORD-AM B * 910 kHz 3.6 December 1, 2003
WSPA-AM B * 950 kHz 5.0 December 1, 2003
WOLI-FM A 100 103.9 MHz 6 December 1, 2003
WOLT-FM A 151 103.3 MHz 2.7 December 1, 2003
</TABLE>
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<TABLE>
<CAPTION>
FCC HAAT POWER IN EXPIRATION DATE
MARKET(1) STATION CLASS (IN METERS) FREQUENCY KILOWATTS(2) OF FCC LICENSE
- --------- ---------- ----- ----------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Wilkes-Barre/Scranton,
PA(5)..................... WGBI-AM B * 910 kHz 1.0-D .5-N August 1, 2006
WGGI-FM A 100 95.9 MHz 6.0 August 1, 2006
WKRZ-FM B 357 98.5 MHz 8.7 August 1, 2006
WWFH-FM A 207 103.1 MHz .73 August 1, 2006
WILP-AM B * 1300 kHz 5.0 August 1, 2006
WKRF-FM A 267 107.9 MHz .84 August 1, 2006
WSHG-FM A 22 102.3 MHz 5.8 August 1, 2006
WILK-AM B * 980 kHz 5.0 August 1, 2006
WGGY-FM B 338 101.3 MHz 7.0 August 1, 2006
Gainesville/Ocala, FL....... WKTK-FM C1 299 98.5 MHz 100 February 1, 2004
WSKY-FM(6) C2 289 97.3 MHz 13.5 February 1, 2004
Longview/Kelso, OR.......... KBAM-AM D * 1270 kHz 5-D February 1, 2006
0.083-N
KEDO-AM C * 1400 kHz 1 February 1, 2006
KLYK-FM A 262 105.5 MHz 0.7 February 1, 2006
KRQT-FM C3 528 107.1 MHz 0.74 February 1, 2006
</TABLE>
- ------------------
* Not applicable for AM transmission facilities.
(1) Metropolitan market served; city of license may differ.
(2) Pursuant to FCC rules and regulations, many AM radio stations are licensed
to operate at a reduced power during the nighttime broadcasting hours, which
results in reducing the radio station's coverage during the nighttime hours
of operation. Both power ratings are shown, where applicable. For FM
stations, the maximum effective radiated power in the main lobe is given.
(3) KKGM-AM also has a construction permit to broadcast with call letters
KBJC-AM at 1660 kHz in the expanded AM band with 10 kw-D and 1 kw-N. The FCC
rules require that at the end of a five year transition period we must elect
to operate on either the 1250 kHz frequency or the 1660 kHz frequency and
surrender the other frequency to the FCC.
(4) Station to be acquired upon consummation of the Sinclair acquisition.
(5) All stations in this market to be acquired upon consummation of the Sinclair
acquisition.
(6) WSKY-FM has operated since June 1998 with the facilities shown. A license
application for these facilities has been filed with the FCC.
TRANSFERS OR ASSIGNMENT OF LICENSES. The Communications Act prohibits the
assignment of broadcast licenses or the transfer of control of broadcast
licensee without the prior approval of the FCC. In determining whether to grant
such approval, the FCC considers a number of factors pertaining to the licensee
(and proposed licensee), including:
- compliance with the various rules limiting common ownership of media
properties in a given market;
- the "character" of the licensee and those persons holding "attributable"
interests in the licensee; and
- compliance with the Communications Act's limitations on alien ownership
as well as compliance with other FCC regulations and policies.
To obtain FCC consent to assign or transfer control of a broadcast license,
appropriate applications must be filed with the FCC. If the application involves
a "substantial change" in ownership or control, the application must be placed
on public notice for not less than 30 days during which time petitions to deny
or other objections against the application may be filed by interested parties,
including members of the public. If the application does not involve a
"substantial change" in ownership or control, it is a "pro forma" application.
The "pro forma" application is nevertheless subject to having informal
objections filed against it. When passing on an assignment or transfer
application, the FCC is prohibited from considering whether the public interest
might be served by an assignment or transfer of the
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broadcast license to any party other than the assignee or transferee specified
in the application.
MULTIPLE OWNERSHIP RULES. The Communications Act and FCC rules impose
specific limits on the number of commercial radio stations an entity can own in
a single market. These rules preclude us from acquiring certain stations we
might otherwise seek to acquire, including the acquisition of more than one
additional radio station in Kansas City, where we already own seven stations.
The rules also effectively prevent us from selling stations in a market to a
buyer that has reached its ownership limit in the market. The local radio
ownership rules are as follows:
- in markets with 45 or more commercial radio stations, ownership is
limited to eight commercial stations, no more than five of which can be
either AM or FM;
- in markets with 30 to 44 commercial radio stations, ownership is limited
to seven commercial stations, no more than four of which can be either AM
or FM;
- in markets with 15 to 29 commercial radio stations, ownership is limited
to six commercial stations, no more than four of which can be either AM
or FM; and
- in markets with 14 or fewer commercial radio stations, ownership is
limited to five commercial stations or no more than 50% of the market's
total, whichever is lower, and no more than three of which can be either
AM or FM.
The FCC is also reportedly considering proposing a policy that would give
special review to a proposed transaction if it would enable a single owner to
attain a high degree of revenue concentration in a market.
In addition to the limits on the number of radio stations that a single
owner may own, the FCC's radio/television cross-ownership rule prohibits, absent
a waiver, the same owner from owning a radio broadcast station and a television
broadcast station in the same geographic market, and the FCC's
broadcast/newspaper cross-ownership rule prohibits the same owner from owning a
broadcast station and a daily newspaper in the same geographic market. The FCC
recently revised its radio/television cross-ownership rule to allow for greater
common ownership of television and radio stations. The revised rule is not yet
in effect. When it is effective, the revised radio/television cross-ownership
rule will permit a single owner to own up to two television stations, consistent
with the FCC's rules on common ownership of television stations, together with
one radio station in all markets. In addition, an owner will be permitted to own
additional radio stations, not to exceed the local ownership limits for the
market, as follows:
- in markets where 20 media voices will remain, an owner may own an
additional 5 radio stations, or, if the owner only has one television
station, an additional 6 radio stations; and
- in markets where 10 media voices will remain, an owner may own an
additional 3 radio stations.
A "media voice" includes each independently-owned, full power television and
radio station and each daily newspaper, plus one voice for all cable television
systems operating in the market.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. In the
case of corporations directly
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or indirectly controlling broadcast licenses, the interests of officers,
directors and those who, directly or indirectly, have the right to vote 5% or
more of the corporation's voting stock are generally attributable. In addition,
certain passive investors are attributable if they hold 10% or more of the
corporation's voting stock, although recent FCC rule changes, when they go into
effect, will increase the threshold for these passive investors to 20%. If a
single individual or entity controls more than 50% of a corporation's voting
stock, however, the interests of other shareholders are generally not
attributable unless the shareholders are also officers or directors of the
corporation. David J. Berkman, one of our directors, is an officer and director
of a corporation that owns five radio stations which serve markets in Ohio and
West Virginia, and his interest in these radio stations constitutes an
attributable interest under the FCC rules.
The FCC recently adopted a new rule, known as the equity-debt-plus or EDP
rule that causes certain creditors or investors to be attributable owners of a
station, regardless of whether there is a single majority shareholder. Under
this new rule, a major programming supplier or a same-market owner will be an
attributable owner of a station if the supplier or owner holds debt or equity,
or both, in the station that is greater than 33% of the value of the station's
total debt plus equity. A major programming supplier includes any programming
supplier that provides more than 15% of the station's weekly programming hours.
A same-market owner includes any attributable owner of a media company,
including broadcast stations, cable television and newspapers, located in the
same market as the station, but only if the owner is attributable under an FCC
attribution rule other than the EDP rule. Both the current and the revised
attribution rules limit the number of radio stations we may acquire or own in
any market.
The Communications Act prohibits the issuance or holding of broadcast
licenses by aliens, including any corporation if more than 20% of its capital
stock is owned or voted by aliens. In addition, the FCC may prohibit any
corporation from holding a broadcast license if the corporation is directly or
indirectly controlled by any other corporation of which more than 25% of the
capital stock is owned of record or voted by aliens, if the FCC finds that the
prohibition is in the public interest. Our articles of incorporation prohibit
the ownership, voting and transfer of our capital stock in violation of the FCC
restrictions, and prohibit the issuance of capital stock or the voting rights
such capital stock represents to or for the account of aliens or corporations
otherwise subject to domination or control by aliens in excess of the FCC
limits. The articles of incorporation authorize our board of directors to
enforce these prohibitions. In addition, the articles of incorporation provide
that shares of our capital stock determined by our board of directors to be
owned beneficially by an alien or an entity directly or indirectly owned by
aliens in whole or in part shall be subject to redemption by us by action of the
board of directors to the extent necessary, in the judgment of the board of
directors, to comply with these alien ownership restrictions.
TIME BROKERAGE AGREEMENTS. Over the past few years, a number of radio
stations have entered into what have commonly been referred to as time brokerage
agreements. While these agreements may take varying forms, under a typical time
brokerage agreement, separately owned and licensed radio stations agree to enter
into cooperative arrangements of varying sorts, subject to compliance with the
requirements of antitrust laws and with FCC's rules and policies. Under these
arrangements, separately-owned stations could agree to function cooperatively in
programming, advertising sales and similar matters, subject to the requirement
that the licensee of each station maintain independent control over the
programming and operations of its own station. One typical type of time
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brokerage agreement is a programming agreement between two separately-owned
radio stations serving a common service area, whereby the licensee of one
station provides substantial portions of the broadcast programming for airing on
the other licensee's station, subject to ultimate editorial and other controls
being exercised by the latter licensee, and sells advertising time during those
program segments.
The FCC's rules provide that a radio station that brokers more than 15% of
the weekly broadcast time on another station serving the same market will be
considered to have an attributable ownership interest in the brokered station
for purposes of FCC's local radio ownership limits. As a result, in a market
where we own a radio station, we would not be permitted to enter into a time
brokerage agreement with another radio station in the same market if we could
not own the brokered station under the local ownership rules, unless our
programming on the brokered station constituted 15% or less of the brokered
station's programming time on a weekly basis. The FCC has recently revised this
rule so that, when the revised rule takes effect, the attribution for radio time
brokerage agreements will apply for all of the FCC's multiple ownership rules,
as well as its local radio ownership rules. FCC rules also prohibit a broadcast
station from duplicating more than 25% of its programming on another station in
the same broadcast service (i.e., AM-AM or FM-FM) through a time brokerage
agreement where the brokered and brokering stations which it owns or programs
serve substantially the same area.
PROGRAMMING AND OPERATION. The Communications Act requires broadcasters to
serve the "public interest." The FCC gradually has relaxed or eliminated many of
the more formalized procedures it had developed in the past to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. A licensee continues to be required, however, to present
programming that is responsive to issues of the station's community of license
and to maintain records demonstrating this responsiveness. Complaints from
listeners concerning a station's programming often will be considered by the FCC
when it evaluates renewal applications of a licensee, although listener
complaints may be filed at any time, are required to be maintained in the
station's public file and generally may be considered by the FCC at any time.
Stations also must pay regulatory and application fees and follow various rules
promulgated under the Communications Act that regulate, among other things,
political advertising, sponsorship identifications, the advertisement of
contests and lotteries, obscene and indecent broadcasts, and technical
operations, including limits on human exposure to radio frequency radiation. In
addition, the FCC rules formerly required that licensees develop and implement
programs designed to promote equal employment opportunities and submit reports
to the FCC with respect to these matters on an annual basis and in connection
with a renewal application. The U.S. Court of Appeals for the District of
Columbia has declared some of these employment rules unconstitutional. The FCC
recently initiated a rulemaking proceeding to reestablish its employment
regulations.
PROPOSED AND RECENT CHANGES. Congress and the FCC may in the future
consider and adopt new laws, regulations and policies regarding a wide variety
of matters that could (1) affect, directly or indirectly, the operation,
ownership and profitability of our radio stations, (2) result in the loss of
audience share and advertising revenues for our radio stations, and (3) affect
our ability to acquire additional radio stations or to finance those
acquisitions. Such matters may include:
- regulatory fees, spectrum use fees, or other fees on FCC licenses;
- foreign ownership of broadcast licenses;
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- restatement in revised form of FCC's equal employment opportunity rules
and revisions to the FCC's rules relating to political broadcasting;
- technical and frequency allocation matters;
- proposals to restrict or prohibit the advertising of beer, wine and other
alcoholic beverages on radio; and
- changes in the FCC's cross-interest, multiple ownership and attribution
policies.
The FCC currently is considering authorizing the use of In-Band
On-Channel(TM) technology for FM radio stations. In-Band On-Channel technology
would permit an FM station to transmit radio programming in both analog and
digital formats, or in digital only formats, using the bandwidth that the radio
station is currently licensed to use. It is unclear what regulations the FCC
will adopt regarding In-Band On-Channel technology and what effect such
regulations would have on our business or the operations of its radio stations.
The FCC is considering a proposal to authorize the operation of low power
radio and "microradio" within the existing FM band. Low power radio and
microradio would operate at power levels below that of full power FM radio
stations, such as those we own. The FCC has proposed that low power radio and
microradio stations not be subject to the same level of regulation to which full
power radio stations are subject. We cannot predict the outcome of this FCC
proceeding or what effect, including interference effect, that low power radio
and microradio would have on the operations of our radio stations or on our
ability to engage in digital transmission of our radio programming.
Finally, the FCC has adopted procedures for the auction of broadcast
spectrum in circumstances where two or more parties have filed for new or major
change applications which are mutually exclusive. Such procedures may limit our
efforts to modify or expand the broadcast signals of our stations.
We cannot predict what other matters might be considered in the future by
the FCC or Congress, nor can we judge in advance what impact, if any, the
implementation of any of these proposals or changes might have on our business.
FEDERAL ANTITRUST LAWS. The agencies responsible for enforcing the federal
antitrust laws, the Federal Trade Commission or the Department of Justice, may
investigate certain acquisitions. We cannot predict the outcome of any specific
Department of Justice or Federal Trade Commission investigation. Any decision by
the Federal Trade Commission or the Department of Justice to challenge a
proposed acquisition could affect our ability to consummate the acquisition or
to consummate it on the proposed terms.
For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino
Act requires the parties to file Notification and Report Forms with the Federal
Trade Commission and the Department of Justice and to observe specified waiting
period requirements before consummating the acquisition. If the investigating
agency raises substantive issues in connection with a proposed transaction, then
the parties frequently engage in lengthy discussions or negotiations with the
investigating agency concerning possible means of addressing those issues,
including restructuring the proposed acquisition or divesting assets. In
addition, the investigating agency could file suit in federal court to enjoin
the acquisition or to require the divestiture of assets, among other remedies.
Acquisitions that are not required to be reported under the Hart-Scott-Rodino
Act may be investigated by the Federal Trade Commission or the Department of
Justice under the antitrust laws before or
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after consummation. In addition, private parties may under certain circumstances
bring legal action to challenge an acquisition under the antitrust laws.
The consummation of the Sinclair acquisition is subject to the notification
filing requirements and applicable waiting periods of the Department of Justice
and the Federal Trade Commission, and we have filed the applicable
Hart-Scott-Rodino notices. On September 27, 1999, the applicable waiting period
for the multi-market agreement expired. However, on September 24, 1999, we
received a "second request" from the Department of Justice with respect to the
Sinclair Kansas City agreement and therefore the Department of Justice is
currently conducting a more detailed investigation of our acquisition of the
four stations from Sinclair in the Kansas City market. Although we believe that
the concerns of the Department of Justice will be resolved by our disposition of
three stations in the Kansas City market that we are required to make in order
to comply with FCC rules, we cannot assure you that this will be the case.
As part of its increased scrutiny of radio station acquisitions, the
Department of Justice has stated publicly that it believes that local marketing
agreements, joint sales agreements, time brokerage agreements and other similar
agreements customarily entered into in connection with radio station transfers
could violate the Hart-Scott-Rodino Act if such agreements take effect prior to
the expiration of the waiting period under the Hart-Scott-Rodino Act.
Furthermore, the Department of Justice has noted that joint sales agreements may
raise antitrust concerns under Section 1 of the Sherman Act and has challenged
joint sales agreements in certain locations. The Department of Justice also has
stated publicly that it has established certain revenue and audience share
concentration benchmarks with respect to radio station acquisitions, above which
a transaction may receive additional antitrust scrutiny. However, to date, the
Department of Justice has also investigated transactions that do not meet or
exceed these benchmarks, and has cleared transactions that do exceed these
benchmarks. There can be no assurance of what action the Department of Justice
may take with respect to our acquisition of four stations from Sinclair in the
Kansas City market.
EMPLOYEES
On August 31, 1999, we had a staff of 838 full-time employees and 370
part-time employees. We are a party to collective bargaining agreements with the
American Federation of Television and Radio Artists, which we call AFTRA, which
apply to some of our programming personnel and with the International
Brotherhood of Electrical Workers which applies to some of our engineering
personnel. These collective bargaining agreements expire at various times over
the next three years. Our Boston AFTRA collective bargaining agreement, as
extended, expired on September 14, 1999. We are currently renegotiating this
agreement. However, we cannot predict the outcome of these negotiations. We
believe that our relations with our employees are good.
ENVIRONMENTAL
As the owner, lessee or operator of various real properties and facilities,
we are subject to various federal, state and local environmental laws and
regulations. Historically, compliance with these laws and regulations has not
had a material adverse effect on our business. There can be no assurance,
however, that compliance with existing or new environmental laws and regulations
will not require us to make significant expenditures of funds.
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SEASONALITY
Seasonal revenue fluctuations are common in the radio broadcasting industry
and are due primarily to fluctuations in advertising expenditures by retailers.
Our revenues and broadcast cash flows are typically lowest in the first calendar
quarter.
PROPERTIES AND FACILITIES
The types of properties required to support each of our radio stations
include offices, studios and transmitter/antenna sites. We typically lease our
studio and office space with lease terms that expire in five to ten years,
although we do own some of our facilities. A station's studios are generally
housed with its offices in downtown or business districts. We generally consider
our facilities to be suitable and of adequate size for our current and intended
purposes. We own a majority of our main transmitter and antenna sites and lease
the remainder of our transmitter/antenna sites with lease terms that expire,
including renewal options, in periods generally ranging up to twenty years. The
transmitter/antenna site for each station is generally located so as to provide
maximum market coverage, consistent with the station's FCC license. In general,
we do not anticipate difficulties in renewing facility or transmitter/antenna
site leases or in leasing additional space or sites if required.
We own substantially all of our other equipment, consisting principally of
transmitting antennae, transmitters, studio equipment and general office
equipment. The towers, antennae and other transmission equipment used by our
stations are generally in good condition, although opportunities to upgrade
facilities are continuously reviewed. Substantially all of the property that we
own secures our borrowings under our credit facility.
LEGAL PROCEEDINGS
We currently and from time to time are involved in litigation incidental to
the conduct of our business, but we are not a party to any lawsuit or proceeding
which, in the opinion of management, is likely to have a material adverse effect
on us.
We entered into a preliminary agreement on February 6, 1996, to acquire the
assets of radio station KWOD-FM, Sacramento, California, from Royce
International Broadcasting Corporation, subject to approval by the FCC, for a
purchase price of $25.0 million. Notwithstanding our efforts to pursue this
transaction, the seller was nonresponsive. On July 28, 1999, we commenced a
legal action seeking to enforce this agreement, and subsequently the seller
filed a cross-complaint against us asking for damages and filed a separate
action against our president asking for treble damages, an injunction,
attorney's fees and costs. Our by-laws provide for us to indemnify our president
for this claim. We intend to pursue our legal action against the seller and seek
dismissal of the claims filed by the seller. Accordingly, we cannot determine if
and when the transaction might occur.
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THE SINCLAIR ACQUISITION
OVERVIEW
In August 1999, we agreed to purchase 46 radio stations from various
subsidiaries of Sinclair Broadcast Group, Inc. for a total purchase price of
$824.5 million. Our arrangement with Sinclair consists of two separate asset
purchase agreements -- one for Sinclair's four Kansas City stations, for which
the purchase price is $122.0 million, and one for the remaining 42 stations in
eight other markets and other assets that we are acquiring, for which the
purchase price is $702.5 million. The asset purchase agreements contain various
representations and warranties of the parties, including representations and
warranties regarding FCC and other government licenses or consents. We have
placed a $50.0 million letter of credit in favor of Sinclair in escrow with
First Union National Bank to secure our obligations under these agreements.
However, in the event of our default, our total exposure under both agreements
is limited to the $50.0 million letter of credit, approximately $7.0 million of
which is allocated to the Kansas City agreement.
In conjunction with the Sinclair acquisition, federal regulations require
us to divest three stations in the Kansas City market, where we already own
seven stations and Sinclair owns four stations. We are seeking to swap three
Kansas City stations for stations in other markets, or if we are unable to
consummate a swap, we may sell these stations for cash or pursue a combination
of swaps and sales. We have not yet determined which Kansas City stations we
will divest. In order to comply with federal regulations, we may put these
stations into a trust for our benefit with an independent trustee until the
stations are conveyed to a third party.
As part of the multi-market agreement, we are acquiring 300,000 shares of
common stock, at $5.00 per share, in USA Digital Radio, Inc., a developer of
digital audio broadcasting technology, which will increase our total holdings in
this company to 500,000 shares of common stock.
CLOSING CONDITIONS
Completion of the acquisitions is subject to various conditions including
(1) the receipt of FCC consent to the assignment of the station licenses to
Entercom, (2) the expiration or termination of the applicable waiting periods
under the Hart-Scott-Rodino Act and (3) the receipt of consents to the
assignment of certain contracts relating to the stations to Entercom. An
application seeking FCC approval was filed on August 27, 1999, and we filed the
applicable Hart-Scott-Rodino notices with the Federal Trade Commission and the
Department of Justice on August 27, 1999. On September 27, 1999, the applicable
waiting period for the multi-market agreement expired. However, on September 24,
1999, we received a "second request" from the Department of Justice with respect
to the Kansas City agreement and therefore the Department of Justice is
currently conducting a more detailed investigation of our acquisition of the
four stations from Sinclair in the Kansas City market. Although we believe that
the concerns of the Department of Justice will be resolved by our disposition of
three stations in the Kansas City market that we are required to make in order
to comply with FCC rules, we cannot assure you that this will be the case.
The multi-market agreement allocates the purchase price on a market by
market basis and provides that a closing with respect to one market may occur,
regardless of whether the closing conditions for one or more other markets have
been met. Therefore, it is possible that one or more markets may close in a
series of separate transactions,
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although we do not expect that this will be the case for any market other than
Kansas City.
INDEMNIFICATION
The agreements provide for standard provisions regarding indemnification of
the parties to the agreement, including a threshold of $1.0 million that must be
satisfied before Sinclair is obligated to make indemnification payments to us
for our losses in excess of $500,000. Sinclair's indemnity obligations under the
agreements are capped at $50.0 million. Sinclair's representations and
warranties generally survive for a period of 12 months after closing, and we
must make a claim for a breach of a representation or warranty during this
survival period.
PURCHASE PRICE ADJUSTMENTS
Sinclair operates two New Orleans stations, WLTS-FM and WTKL-FM, pursuant
to a time brokerage agreement with Phase II Broadcasting, Inc., which commenced
in November 1997. Sinclair has entered into an agreement with Phase II to
acquire the assets of these stations for $29.0 million plus an amount determined
by a formula not to exceed $500,000. If Sinclair has not acquired the Phase II
stations prior to the closing of the New Orleans market, the purchase price of
the Sinclair acquisition will be decreased by the purchase price that we would
be required to pay to acquire the Phase II stations, subject to adjustment, and
we will assume Sinclair's rights and obligations under the acquisition agreement
with Phase II.
Sinclair provides sales and marketing services to two
Greenville/Spartanburg stations, WOLI-FM and WOLT-FM, pursuant to a joint
services agreement with Palm Broadcasting, Inc. Sinclair has exercised an option
to acquire these stations in exchange for an amount equal to the outstanding
amount of principal and interest due under a loan agreement between Palm
Broadcasting and River City Broadcasting Company, L.P. As of June 30, 1999, the
principal amount of the loan was $3.0 million plus accrued interest. If Sinclair
has not acquired the Palm stations prior to the closing of the Greenville
market, the purchase price of the Sinclair acquisition will be decreased by the
purchase price that we would be required to pay to acquire the Palm stations,
subject to adjustment, and we will assume Sinclair's rights and obligations
under the acquisition agreement with Palm.
We have agreed to spend a maximum of $2.0 million in addition to the
purchase price on capital expenditures that Sinclair incurs in connection with
the build-out of certain studio/office space in Buffalo. We have also agreed to
purchase $5.0 million of advertising time on television stations owned and/or
programmed by Sinclair and its affiliates at prevailing rates over the next five
years.
EMPLOYMENT MATTERS
Generally, we have agreed to offer employment to the employees of the
Sinclair stations. Sinclair has agreed generally not to hire any of its former
employees for a period of 12 months after they are hired by us.
FINANCIAL PENALTIES
Pursuant to the multi-market agreement, if the closing on all stations has
not occurred within 135 days after public notice that the applications for
consent to assignment of the Sinclair licenses have been accepted for filing by
the FCC, the purchase price with respect
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to the stations which have not closed shall increase 0.75% if the closing has
not occurred due to the failure to receive any required regulatory consent based
on facts relating to us or our affiliates. The purchase price for each such
market will continue to increase 0.75% at the end of each 30 day period
thereafter until the later of its closing or the termination of the agreement.
Pursuant to the Kansas City agreement, if closing on all stations has not
occurred within 150 days after public notice that the applications for consent
to assignment of the Sinclair licenses have been accepted for filing by the FCC,
the purchase price shall increase 0.75% if the closing has not occurred due to
the failure to receive any required regulatory consent based on facts relating
to us or our affiliates. The purchase price will continue to increase 0.75% each
30 day period thereafter until the later of the closing or the termination of
the agreement.
TERMINATION
As long as Sinclair is not in material default of the multi-market
agreement, Sinclair may terminate the multi-market agreement with respect to
markets not then closed (1) on the date that would otherwise be the date for
closing all the markets not then closed, if we breach our representations or
warranties, fail to perform our covenants or fail to make required deliveries
under the contract(s), (2) one year after the date that the agreement is signed,
if all of the stations under that agreement have not closed due to the failure
to receive any required regulatory approval and such failure results from facts
relating to us or our affiliates, (3) on or after two years after the date that
the agreement is signed, if all of the stations under that agreement have not
closed due to the failure to receive any necessary regulatory approval and such
failure is due to facts relating to Sinclair or its affiliates or (4) on or
after eighteen months after the date that the agreement is signed, with respect
to the stations under that agreement that have not closed for any reason other
than as provided in clause (3). In addition, Sinclair may terminate the
multi-market agreement if we are in default in any material respect and the
default is not cured within 30 days. Sinclair's sole remedy upon rightful
termination of the multi-market agreement for a breach of the agreement by us or
a failure to receive any necessary regulatory approval by August 18, 2000, based
on facts relating to us or our affiliates with respect to the markets that have
not already closed at the time of such termination, is their receipt, as
liquidated damages of approximately $43.0 million of the $50.0 million letter of
credit, less any amount of the letter of credit released to us upon the earlier
closing of any other market (see below). Upon each closing of a market, a pro
rata portion of the $50.0 million allocable to that market shall be released to
us; provided that 45% of the value of all of Sinclair stations has closed. The
Kansas City agreement has substantially the same termination provisions as the
multi-market agreement, except that approximately $7.0 million of the $50.0
million letter of credit is allocated to the Kansas City Agreement.
We have the right to terminate either agreement with respect to any market
not then closed (1) if certain conditions to closing that agreement are not met;
(2) if Sinclair is in default in any material respect with regard to the
agreement being terminated and such default is not cured within 30 days; (3)
fifteen months after the date the agreement is signed if all of the markets
under that agreement have not closed due to the failure to receive regulatory
approval due to facts relating to Sinclair or its affiliates; or (4) upon the
occurrence of the conditions set forth in clause (4) above, in each case without
further obligation to Sinclair. In such an event we will obtain the release of
any remaining balance of the letter of credit allocable to such agreement. In
the event of a default by Sinclair, we are entitled to specific performance
and/or damages.
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MANAGEMENT
The following table provides information concerning our directors and
executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Joseph M. Field............. 67 Chairman of the Board and Chief Executive
Officer
David J. Field.............. 37 President, Chief Operating Officer and
Director
John C. Donlevie............ 52 Executive Vice President, Secretary, General
Counsel and Director
Stephen F. Fisher........... 47 Senior Vice President and Chief Financial
Officer
Herbert Kean, M.D. ......... 67 Director
S. Gordon Elkins............ 68 Director
Thomas H. Ginley, Jr., 75 Director
M.D. .....................
Lee Hague................... 53 Director
Marie H. Field.............. 61 Director
Michael R. Hannon........... 39 Director
David J. Berkman............ 38 Director
</TABLE>
Joseph M. Field founded Entercom in 1968 and has served since our inception
as our Chairman of the Board and Chief Executive Officer and was our President
until September 1998. Before entering the broadcasting business, he practiced
law for 14 years in New York (including service as an Assistant United States
Attorney) and Philadelphia. Mr. Field served on the Board of Directors of the
National Association of Broadcasters for four years as a representative of the
major radio group broadcasters. He currently serves on the Boards of Directors
of The Curtis Institute of Music, the Settlement Music School, the American
Interfaith Institute, the Liberty Museum, the Jewish Educational and Vocational
Service (JEVS) and the Philadelphia Chamber Music Society. Mr. Field has a B.A.
from the University of Pennsylvania and a L.L.B. from Yale Law School. He is the
spouse of Marie H. Field and the father of David J. Field.
David J. Field has served as our President since September 1998, our Chief
Operating Officer since April 1996 and one of our directors since November 1995.
He also served as our Chief Financial Officer from 1992 to November 1998. Mr.
Field joined us in 1987 and served as our Director of Finance and Corporate
Development from 1987 to 1988, Vice President-Finance and Corporate Development
from 1988 to 1992, Vice President-Operations and Chief Financial Officer from
1992 to 1995 and Senior Vice President-Operations and Chief Financial Officer
from 1995 to 1996. Prior to joining us, he was an investment banker with
Goldman, Sachs & Co. Mr. Field currently serves on the Boards of Directors of
The Radio Advertising Bureau and The Wilderness Society. He has a B.A. from
Amherst College and an M.B.A. from the Wharton School of the University of
Pennsylvania. Mr. Field is the son of Joseph M. Field and Marie H. Field.
John C. Donlevie has served as our Executive Vice President, General
Counsel and one of our directors since October 1989, our Secretary since
December 1998 and was our Vice President-Legal and Administrative from July 1984
when he joined us to October 1989. Prior to joining us, Mr. Donlevie practiced
law for 11 years, most recently
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as Corporate Counsel of Ecolaire Incorporated in Malvern, Pennsylvania. He has a
B.S. from Drexel University and a J.D. from Temple University School of Law.
Stephen F. Fisher has served as our Senior Vice President and Chief
Financial Officer since November 1998. From 1994 to 1998, he was a Managing
Director with Bachow & Associates, a private equity firm located in Bala Cynwyd,
Pennsylvania. Prior to joining Bachow & Associates, Mr. Fisher held numerous
operational and financial management positions over a period of 15 years, most
recently as Executive Vice President with Westinghouse Broadcasting Company,
Inc. (now CBS). He has an M.A. from Bob Jones University and an M.B.A. from the
University of South Carolina.
Herbert Kean, M.D. has served as one of our directors since our inception.
In addition, he served as our Secretary from our inception until February 1984.
Dr. Kean is currently a medical physician in private practice in the
Philadelphia area. He has a B.S. from the University of Pennsylvania and an M.D.
from Hahnemann University.
S. Gordon Elkins has served as one of our directors since February 1978. He
was a partner in the law firm of Stradley, Ronon, Stevens & Young from September
1962 through January 1999 and currently is affiliated with the firm. Mr. Elkins
has a B.S. from Temple University and an L.L.B. from Yale Law School.
Thomas H. Ginley, Jr., M.D. has served as one of our directors since
January 1971 and previously served as our Secretary from February 1984 to
December 1998. Dr. Ginley is President and a director of the A & T Development
Corporation, Treasurer and a director of Vanessa Noel Couture, Inc. and
President of Gemologist Treasury International Inc. He is a diplomat of the
National Board as well as a fellow of the American College of Surgeons. Dr.
Ginley has an M.D. from Georgetown University.
Lee Hague has served as one of our directors since March 1980. He has
served as an independent consultant to various broadcasting groups and provides
financial advisory and media brokering services to the industry. Mr. Hague is
currently the Chairman of the Board and Chief Executive Officer of Aspect
Holdings Inc. Prior to joining Aspect Holdings Inc. in 1998, he served as
President of Hague & Company over a period of 20 years. Mr. Hague has over 20
years' experience in the radio industry. He has a B.S. from Northwestern
University and an M.M. from the J.L. Kellogg Graduate School of Management,
Northwestern University.
Marie H. Field has served as one of our directors since October 1989. She
served for over 25 years as a teacher in public and private schools in New York
and Philadelphia. Mrs. Field serves on the Board of Directors of the Ovarian
Cancer Research Fund in New York and the Board of Overseers of the University of
Pennsylvania School of Social Work. She has a B.A. from Barnard College. Mrs.
Field is the spouse of Joseph M. Field and the mother of David J. Field.
Michael R. Hannon has served as one of our directors since December 1998.
He is a general partner of Chase Capital, a general partnership which invests in
international private equity opportunities with a significant concentration in
the media and telecommunications industries. Prior to joining Chase Capital in
1988, Mr. Hannon held various positions at Morgan Stanley & Co. Incorporated. He
currently serves on the Boards of Directors of TeleCorp PCS, Formus
Communications and Financial Equity Partners. Mr. Hannon has a B.A. from Yale
University and an M.B.A. from Columbia Business School.
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David J. Berkman has served as one of our directors since the consummation
of our initial public offering in January 1999. He has served as Executive Vice
President and is on the Board of Directors of The Associated Group, Inc., a
company involved in selected aspects of the telecommunications business, since
1994. As part of his duties for The Associated Group, Inc., Mr. Berkman serves
as Chief Executive Officer and is on the Board of Directors of True Position,
Inc., a company engaged in the provision of wireless location products and
services. He also currently serves on the Boards of Directors of Teligent, Inc.,
V-Span, Inc. and Portatel del Sureste, S.A. de C.V. Mr. Berkman has a B.S. from
the Wharton School of the University of Pennsylvania.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors has established an audit committee and a
compensation committee.
AUDIT COMMITTEE. The audit committee consists of Messrs. Berkman and
Hague. The responsibilities of the audit committee include:
- recommending to the board of directors independent public accountants to
conduct the annual audit of our financial statements;
- reviewing the proposed scope of the audit and approving the audit fees to
be paid;
- reviewing our accounting and financial controls with the independent
public accountants and our financial and accounting staff; and
- reviewing and approving transactions, other than compensation matters,
between us and our directors, officers and affiliates.
COMPENSATION COMMITTEE. Our compensation committee consists of Messrs.
Ginley, Kean and Hannon. The compensation committee provides a general review of
our compensation plans to ensure that they meet corporate objectives. The
responsibilities of the compensation committee also include administering and
interpreting our Employee Stock Purchase Plan and the 1998 Equity Compensation
Plan, including selecting the officers, salaried employees and other qualified
recipients that will be granted awards under the 1998 Equity Compensation Plan.
DIRECTOR COMPENSATION
During the last calendar year, all of our directors were compensated $200
for each board meeting that they attended in person. Following the consummation
of our initial public offering, all of our non-employee directors became
entitled to receive a fee of $1,000 for each board meeting and $500 for each
committee meeting that they attend in person and $250 for each telephonic
meeting of the board or a committee. Employee directors are not entitled to
receive additional compensation for their services as directors. In addition,
upon the completion of our initial public offering, Marie H. Field, S. Gordon
Elkins, Lee Hague, Thomas H. Ginley, Jr., M.D., Herbert Kean, M.D., Michael R.
Hannon and David J. Berkman received stock options under the 1998 Equity
Compensation Plan, and Lee Hague and S. Gordon Elkins also received restricted
stock grants under the 1998 Equity Compensation Plan.
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EXECUTIVE OFFICER COMPENSATION
The following table provides summary information concerning compensation
paid to or earned by our Chief Executive Officer and our other most highly
compensated executive officers for services rendered during the year ended
September 30, 1998 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION OTHER
-------------------- ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION
- --------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Joseph M. Field, Chairman of the
Board and Chief Executive
Officer.......................... 1998 $554,992 -- *
David J. Field, President and Chief
Operating Officer................ 1998 262,973 $116,000 *
John C. Donlevie, Executive Vice
President, Secretary and General
Counsel.......................... 1998 181,947 116,000 *
</TABLE>
- -------------------------
* Value of perquisites and other personal benefits paid does not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported for
the executive officer and, therefore, is not required to be disclosed
pursuant to rules of the Commission.
(1) Includes amounts accrued during year presented but paid in the subsequent
year.
1998 EQUITY COMPENSATION PLAN
We have adopted the 1998 Equity Compensation Plan, effective as of June 24,
1998. The 1998 Equity Compensation Plan provides for grants to employees of ours
and our subsidiaries (including employees who are officers or directors), our
non-employee directors and certain advisors and consultants who perform services
for us and our subsidiaries of:
- incentive stock options;
- "nonqualified stock options" that are not intended to qualify as
incentive stock options;
- restricted stock; and
- stock appreciation rights.
Only shares of Class A common stock may be issued under the 1998 Equity
Compensation Plan.
GENERAL. Subject to adjustment, we may issue shares of Class A common
stock up to an amount equal to 10% of our outstanding Class A, Class B and Class
C common stock under the Plan. As of September 10, 1999, we have granted and
have currently outstanding 11,112 shares of restricted stock and nonqualified
stock options to purchase 838,842 shares of Class A common stock having a
weighted average exercise price of
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$21.58 per share. We have not issued any incentive stock options or stock
appreciation rights. The number of shares for which incentive stock options may
be issued under the Plan may not exceed 1,850,000 shares, subject to adjustment,
and the number of shares of restricted stock that may be issued under the Plan
may not exceed 925,000 shares, subject to adjustment.
ADMINISTRATION OF THE 1998 EQUITY COMPENSATION PLAN. The Plan is
administered and interpreted by our compensation committee. Subject to the
ratification or approval by the board of directors, if the board retains the
right, the committee has the sole authority to:
- determine the individuals that shall be given awards;
- determine the terms of the awards;
- delegate to our Chief Executive Officer, Joseph M. Field, the authority
to make grants to employees; and
- deal with any other matters arising under the Plan.
OPTIONS. The exercise price of any incentive stock option will not be less
than the fair market value of our Class A common stock on the date of grant, or
not less than 110% of the fair market value of the common stock in the case of
an employee who owns more than 10% of our Class A, Class B and Class C common
stock. The exercise price of a nonqualified stock option may be greater than,
equal to or less than the fair market value of our Class A common stock on the
date of grant. The exercise period of an option may not exceed ten years from
the date of grant, and the exercise period of an incentive stock option granted
to an employee who owns more than 10% of the Class A, Class B and Class C common
stock may not exceed five years from the date of grant. The participant may pay
the exercise price in cash or, with the approval of the committee, by delivering
shares of common stock owned by the participant and having a fair market value
on the date of exercise equal to the exercise price or by any other method that
the committee approves.
EMPLOYEE STOCK PURCHASE PLAN
We have adopted the Employee Stock Purchase Plan, effective as of January
28, 1999. A total of up to 1,850,000 shares of our Class A common stock may be
issued under the employee plan, subject to adjustment. Under the employee plan,
we will withhold a specified percentage (not to exceed 10%) of the compensation
paid to each participant, and the amount withheld (and any additional amount
contributed by the participant) will be used to purchase our Class A common
stock on the last day of each purchase period. The purchase price will be
determined by the employee plan committee and shall not be less than 85% of the
value of the stock on the last day of the purchase period. The length of each
purchase period shall be specified by the employee plan committee. The first
purchase period began on April 1, 1999. The maximum value of shares that a
participant in the employee plan may purchase during any calendar year is
$25,000.
EMPLOYMENT AGREEMENTS
JOSEPH M. FIELD EMPLOYMENT AGREEMENT. We have entered into an employment
agreement with Joseph M. Field pursuant to which Mr. Field serves as our Chief
Executive Officer. The employment agreement may be terminated upon written
notice no
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less than 30 days prior to the end of any calendar year. Absent such written
notice, the employment agreement is automatically renewed for a period of one
year. In the event of Mr. Field's death during the term of the employment
agreement, we will pay his survivors Mr. Field's compensation for one year at
the then current rate. In the event of the total disability of Mr. Field, we
will pay Mr. Field compensation for the lesser of the period of his disability
or one year at the then applicable rate. Mr. Field's current base salary is
$558,000 and is increased or decreased annually by a percentage equal to the
percentage of inflation or deflation over the immediately preceding twelve month
period, provided that the base salary shall never be less than $500,000. The
board of directors may approve additional salary, bonuses, fees, or other
compensation for Mr. Field. Mr. Field is entitled to participate in any bonus,
profit sharing, retirement, insurance or other plan or program that we adopt.
Absent our express prior written consent, Mr. Field is prohibited, in the event
of his termination by resignation or for cause, for a period of two years
following the termination of the employment agreement, from engaging in any
broadcast business that we compete with in any standard metropolitan statistical
area in which we are then operating a broadcast property.
EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS. We have entered into employment
agreements with David J. Field and John C. Donlevie. Each of these employment
agreements provides that the employee may be terminated at will by either party
(1) immediately if good cause for termination exists, or (2) upon thirty days
notice in the absence of good cause. Pursuant to these employment agreements,
the current annual salaries of Mr. Field and Mr. Donlevie are $350,000 and
$225,000, respectively. Each of the employment agreements provides for yearly
salary adjustments for inflation and an annual discretionary bonus.
STEPHEN F. FISHER EMPLOYMENT AGREEMENT. We have entered into an employment
agreement with Stephen F. Fisher for a term ending December 31, 2000 and year to
year thereafter unless terminated by either party at least 120 days prior to the
end of the then current term. In the event of a change of control, the 120 days
is increased by 60 days or in lieu of additional notice we may pay 60 days
salary. We may terminate the agreement at any time for cause. Mr. Fisher's
salary is $250,000 annually and is increased each year for inflation. In
addition, Mr. Fisher is eligible for an annual discretionary bonus.
Mr. Fisher is prohibited, so long as he is our employee and for a period of
one year thereafter, from serving, directly or indirectly in any enterprise
which we compete with; provided, however, if Mr. Fisher is terminated without
cause or if his employment agreement is terminated due to the parties inability
to renegotiate certain compensation terms, then Mr. Fisher will be restricted
from serving in a competitive business for a period of three months plus any
time for which he receives a cash payment.
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CERTAIN TRANSACTIONS
S. Gordon Elkins, one of our directors, is affiliated with the law firm of
Stradley, Ronon, Stevens & Young. This firm has served as our outside counsel on
various matters.
Michael R. Hannon, one of our directors, is a general partner of Chase
Capital Partners. In May 1996, Chase Capital acquired a convertible subordinated
promissory note from us for $25 million. The convertible subordinated note was
converted into 2,327,500 shares of our Class A common stock and 1,995,669 shares
of our Class C common stock. Chase Capital was a selling shareholder in our
initial public offering in January 1999 and received net proceeds of $49.2
million from the sale of all of its Class A common stock.
On May 21, 1996, we entered into a registration rights agreement, dated as
of May 21, 1996, with Chase Equity Associates, L.P., an affiliate of Chase
Capital Partners. The agreement grants Chase Equity Associates and Chase Capital
the right to require us, subject to certain limitations, to effect one "demand"
registration statement under the Securities Act for the sale of their shares of
our common stock. Chase Equity Associates is the beneficial owner of all of our
outstanding Class C common stock.
On May 6, 1999, Chase Equity Associates entered into an agreement with the
underwriters of the initial public offering in which (1) the underwriters
released Chase Equity Associates from their 180 day lock-up agreement with
respect to the sale of 300,000 shares of Class A common stock and (2) Chase
Equity Associates agreed that all further sales or dispositions of Class A
common stock, except sales pursuant to the registration rights agreement, shall
be made through a nationally recognized underwriter that we designate.
Some of our FCC licenses are currently owned by ECI License Company, LP, a
limited partnership in which we have been the general partner, owning a 99%
interest. On January 22, 1999, one of our wholly owned subsidiaries purchased
the remaining 1% interest from ECI Investors Corporation, a company that was
owned by our shareholders prior to our initial public offering, excluding Chase
Capital, in the same percentage as their ownership in our company, for $3.4
million. Of the $3.4 million, Joseph M. Field, our Chairman of the Board and
Chief Executive Officer received approximately $1.4 million. Other shareholders
prior to the initial public offering that received a portion of the $3.4 million
include Marie H. Field, one of our directors and wife of Joseph M. Field, David
J. Field, our President, Chief Operating Officer and one of our directors and
son of Joseph M. Field, Nancy E. Field, daughter of Joseph M. Field and Marie H.
Field, Thomas H. Ginley, Jr, M.D., one of our directors, and his wife Emma
Ginley, and Herbert Kean, M.D., one of our directors.
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<PAGE> 95
PRINCIPAL AND SELLING SHAREHOLDERS
The following tables set forth certain information as of September 29, 1999
regarding the beneficial ownership of our common stock by:
- each person known by us to beneficially own more than 5% percent of any
class of our common stock;
- each of our directors and Named Executive Officers;
- the selling shareholders in the concurrent Class A common stock offering;
and
- all of our directors and executive officers as a group.
Each shareholder possesses sole voting and investment power with respect to
the shares listed, unless otherwise noted. For purposes of these tables, we have
assumed that the Class A common stock offering is consummated concurrently with
this offering. However, neither offering is contingent on the other.
PRINCIPAL SHAREHOLDERS
<TABLE>
<CAPTION>
CLASS A COMMON STOCK(1)
-------------------------------------------------------------------
NUMBER OF
NUMBER BENEFICIALLY
OF SHARES PERCENT OF OWNED PERCENT OF
BENEFICIALLY CLASS BEFORE SHARES OFFERED CLASS AFTER
NAME OWNED(3) THE OFFERING(3) IN THIS OFFERING THE OFFERING(4)
- ---- ------------ --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Joseph M. Field(5)(6)............... 2,988,305 12.0% 1,200,000(7) 5.4%
David J. Field(5)(8)................ 2,574,994 10.3 200,000(9) 7.2
John C. Donlevie.................... 6,155 * -- *
Stephen F. Fisher................... 5,000 * -- *
Herbert Kean, M.D................... 1,071,590 4.3 -- 3.3
S. Gordon Elkins(5)(10)............. 3,603,044 14.4 450,000(11) 9.6
Thomas H. Ginley, Jr. M.D.(12)...... 879,120 3.5 -- 2.7
Lee Hague........................... 1,000 * -- *
Marie H. Field(5)(13)............... 2,988,305 12.0 1,200,000(7) 5.4
Nancy E. Field(5)(14)............... 2,153,400 8.6 500,000(15) 5.0
Michael R. Hannon(16)............... -- -- -- --
David J. Berkman.................... 2,500 * -- *
Chase Equity Associates, L.P.(16)
380 Madison Avenue
New York, NY 10017................. -- -- -- --
Putnam Investments, Inc.(17)
One Post Office Square
Boston, MA 02109................... 3,357,125 13.5 -- 10.2
All directors and executive officers
as a group (12 persons)............ 8,252,214 33.1 1,500,000 20.5
<CAPTION>
CLASS B COMMON PERCENT OF TOTAL PERCENT OF TOTAL
STOCK(2) ECONOMIC INTEREST VOTING POWER
------------------------- ---------------------- ----------------------
NUMBER
OF SHARES
BENEFICIALLY PERCENT OF BEFORE THE AFTER THE BEFORE THE AFTER THE
NAME OWNED(3) CLASS(3) OFFERING OFFERING OFFERING OFFERING
- ---- ------------ ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Field(5)(6)............... 9,782,555 92.9% 34.4% 25.6 77.4% 72.0%
David J. Field(5)(8)................ 749,250 7.1 8.9 6.9 7.7 7.1
John C. Donlevie.................... -- -- * * * *
Stephen F. Fisher................... -- -- * * * *
Herbert Kean, M.D................... -- -- 2.9 2.4 * *
S. Gordon Elkins(5)(10)............. -- -- 9.7 7.0 2.8 2.3
Thomas H. Ginley, Jr. M.D.(12)...... -- -- 2.4 1.9 * *
Lee Hague........................... -- -- * * * *
Marie H. Field(5)(13)............... -- -- 8.0 4.0 2.3 1.3
Nancy E. Field(5)(14)............... -- -- 5.8 3.7 1.7 1.2
Michael R. Hannon(16)............... -- -- 4.6 3.8 -- --
David J. Berkman.................... -- -- * * * *
Chase Equity Associates, L.P.(16)
380 Madison Avenue
New York, NY 10017................. -- -- 4.6 3.8 -- --
Putnam Investments, Inc.(17)
One Post Office Square
Boston, MA 02109................... -- -- 9.0 7.4 2.6 2.4
All directors and executive officers
as a group (12 persons)............ 10,531,805 100.0 50.5 38.3 87.2 81.1
</TABLE>
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<PAGE> 96
SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
CLASS A COMMON STOCK(1)
-------------------------------------------------------------------
NUMBER
OF SHARES PERCENT OF NUMBER OF PERCENT OF
BENEFICIALLY CLASS BEFORE SHARES OFFERED CLASS AFTER
NAME OWNED(3) THE OFFERING(3) IN THIS OFFERING THE OFFERING(4)
- ---- ------------ --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Marie H. Field..................... 2,988,305 12.0% 500,000 5.4%
Joseph and Marie Field
Foundation........................ 300,000 1.2 250,000 --
Marie H. Field and Nancy E. Field,
Trustees UDT 12/23/76
FBO David J. Field................ 666,000 2.7 300,000(18) 1.1
S. Gordon Elkins & David J. Field,
Trustees UDT Joseph M. Field
9/30/92 FBO David J. Field........ 738,150 3.0 100,000(18) 1.9
S. Gordon Elkins & Nancy E. Field,
Trustees UDT Joseph M. Field
9/30/92 FBO Nancy E. Field........ 625,422 2.5 100,000(18) 1.6
Marie H. Field and David J. Field,
Trustees UDT 12/23/76
FBO Nancy E. Field................ 666,000 2.7 100,000(18) 1.7
Nancy E. Field..................... 2,153,400 8.6 100,000 5.0
Joseph M. Field, Trustee UDT
of D. Kraus 7/21/98
FBO Sidonie Kazenel............... 157,805 * 50,000(18) *
---------
Total....................... 1,500,000
=========
<CAPTION>
CLASS B PERCENT OF TOTAL PERCENT OF TOTAL
COMMON STOCK(2) ECONOMIC INTEREST VOTING POWER
------------------------- ---------------------- ----------------------
NUMBER
OF SHARES
BENEFICIALLY PERCENT OF BEFORE THE AFTER THE BEFORE THE AFTER THE
NAME OWNED(3) CLASS(3) OFFERING OFFERING OFFERING OFFERING
- ---- ------------ ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Marie H. Field..................... -- -- 8.0% 4.0% 2.3% 1.3%
Joseph and Marie Field
Foundation........................ -- -- -- --
Marie H. Field and Nancy E. Field,
Trustees UDT 12/23/76
FBO David J. Field................ -- -- 1.8 * * *
S. Gordon Elkins & David J. Field,
Trustees UDT Joseph M. Field
9/30/92 FBO David J. Field........ -- -- 2.0 1.4 * *
S. Gordon Elkins & Nancy E. Field,
Trustees UDT Joseph M. Field
9/30/92 FBO Nancy E. Field........ -- -- 1.7 1.2 * *
Marie H. Field and David J. Field,
Trustees UDT 12/23/76
FBO Nancy E. Field................ -- -- 1.8 1.3 * *
Nancy E. Field..................... -- -- 5.8 3.7 1.7 1.2
Joseph M. Field, Trustee UDT
of D. Kraus 7/21/98
FBO Sidonie Kazenel............... -- -- * * * *
Total.......................
</TABLE>
- ------------
* Less than one percent.
(1) The number of shares of Class A common stock does not include the shares of
Class A common stock issuable upon conversion of the outstanding shares of
Class B common stock.
(2) The Class A common stock and the Class B common stock vote together as a
single class on all matters submitted to a vote of shareholders. Each share
of Class A common stock is entitled to one vote and each share of Class B
common stock is entitled to ten votes, except: (1) any share not voted by
either Joseph M. Field or David J. Field is entitled to one vote; (2) the
holders of Class A common stock, voting as a separate class, are entitled
to elect two directors; (3) each share of Class B common stock is entitled
to one vote with respect to any "going private" transactions under the
Exchange Act; and (4) as required by law. The shares of Class B common
stock are convertible in whole or in part, at the option of the holder,
subject to certain conditions, into the same number of shares of Class A
common stock. See "Description of Capital Stock."
(3) Shares beneficially owned and percentage ownership are based on 24,944,267
shares of Class A common stock, 10,531,805 shares of Class B common stock
and 1,695,669 shares of Class C common stock outstanding as of September
10, 1999.
(4) Assumes no exercise of the underwriters' over-allotment option.
(5) The address of these shareholders is 401 City Avenue, Suite 409, Bala
Cynwyd, Pennsylvania 19004.
(6) Includes (1) 2,830,500 shares of Class A common stock beneficially owned by
Marie H. Field, wife of Joseph M. Field, (2) 157,805 shares of Class A
common stock held of record by Joseph M. Field as trustee of a trust for
the benefit of a sister of Marie H. Field and (3) 300,000 shares of Class A
common stock held of record by Joseph M. Field as a director and officer of
the Joseph and Marie Field Foundation.
(7) Represents (1) 250,000 shares to be sold by the Joseph and Marie Field
Foundation, (2) 500,000 shares to be sold by Marie H. Field, (3) 400,000
shares to be sold by two trusts listed in the Selling Shareholders table of
which Marie H. Field is a trustee and (4) 50,000 shares to be sold by one
trust listed in the Selling Shareholders table of which Joseph M. Field is
a trustee.
(8) Includes (1) 666,000 shares of Class A common stock held of record by David
J. Field as co-trustee of a trust for the benefit of Nancy E. Field, (2)
738,150 shares of Class A common stock held of record by David J. Field as
co-trustee of a trust for the benefit of David J. Field and his children
and (3) 1,170,844 shares of Class A common stock held of record by David J.
Field as co-trustee of two trusts for the benefit of the descendants of
David J. Field and Nancy E. Field.
(9) Represents shares to be sold by two trusts listed in the Selling
Shareholders table of which David J. Field is a trustee.
(10) Includes (1) 1,170,844 shares of Class A common stock held of record by Mr.
Elkins as co-trustee of two trusts for the benefit of the descendants of
David J. Field and Nancy E. Field, respectively (2) 738,150 shares of Class
A common stock held of record by Mr. Elkins as co-trustee of a trust for
the benefit of David J. Field and his children, (3) 738,150 shares of Class
A common stock held of record by Mr. Elkins as co-trustee of a trust for
the benefit of Nancy E. Field and her children and (4) 654,900 shares of
Class A common stock held of record by Mr. Elkins as trustee of a trust for
the benefit of Marie H. Field.
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<PAGE> 97
(11) Represents shares to be sold by (1) two trusts listed in the Selling
Shareholders table and of which S. Gordon Elkins is a co-trustee and (2)
the Joseph and Marie Field Foundation of which S. Gordon Elkins is a
director and officer.
(12) Includes (1) 731,120 shares of Class A common stock held by Mr. Ginley in
joint tenancy with his spouse, (2) 74,000 shares of Class A common stock
owned of record by his spouse and (3) 74,000 shares of Class A common stock
held of record by his spouse as co-trustee of two trusts for the benefit of
their children.
(13) Includes (1) 666,000 shares of Class A common stock held of record by Marie
H. Field as co-trustee of a trust for the benefit of David J. Field, (2)
666,000 shares of Class A common stock held of record by Marie H. Field as
co-trustee of a trust for the benefit of Nancy E. Field, (3) 157,805 shares
of Class A common stock held of record by Joseph M. Field, husband of Marie
H. Field, as trustee of a trust for the benefit of a sister of Marie H.
Field and (4) 300,000 Shares of Class A common stock held of record by
Marie H. Field as a director and officer of the Joseph and Marie Field
Foundation. Does not include 9,782,555 shares of Class B common stock held
by Joseph M. Field, Marie H. Field's spouse. See Note 2 above.
(14) Includes (1) 666,000 shares of Class A common stock held of record by Nancy
E. Field as co-trustee of a trust for the benefit of David J. Field and (2)
738,150 shares of Class A common stock held of record by Nancy E. Field as
co-trustee of a trust for the benefit of Nancy E. Field and her children.
(15) Represents (1) 400,000 shares to be sold by Nancy E. Field and (2) 400,000
shares to be sold by two trusts listed in the Selling Shareholder table of
which Nancy E. Field is a trustee.
(16) Includes 1,695,669 shares of Class C common stock owned by Chase Equity
Associates, an affiliate of Chase Capital, which represents 100% of the
class. The shares of Class C common stock have no voting rights except as
otherwise required by law. Michael R. Hannon, one of our directors, is a
general partner of Chase Capital. Mr. Hannon exercises shared investment
and voting power with respect to the shares, but disclaims beneficial
ownership. The address for Mr. Hannon is 380 Madison Avenue, New York, New
York 10017. Chase has granted the underwriters an option to purchase a
maximum of 200,000 additional shares to cover over-allotments. If the
underwriters exercise any of this over-allotment option, Chase will convert
the corresponding number of shares of its Class C common stock into the
same number of shares of Class A common stock.
(17) Includes 2,999,700 shares owned by Putnam Investment Management, Inc. and
357,425 shares owned by The Putnam Advisory Company, Inc., both affiliates
of Putnam Investments, Inc. The beneficial ownership for Putnam is as of
June 30, 1999, the date of the last Form 13-F under the Exchange Act that
Putnam filed.
(18) If the underwriters fully exercise the over-allotment option that we and
some of the selling shareholders have granted, the five trusts listed in
the Selling Shareholders table will sell in the aggregate an additional
225,000 shares of Class A common stock.
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<PAGE> 98
ENTERCOM COMMUNICATIONS CAPITAL TRUST
Entercom Communications Capital Trust is a statutory business trust formed
under Delaware law on September 8, 1999 pursuant to a declaration of trust among
the initial trustees and Entercom and a certificate of trust filed with the
Delaware Secretary of State. The declaration of trust will be amended and
restated in its entirety as of the date the trust initially issues the TIDES.
The declaration of trust will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended, upon the effectiveness of the registration
statement of which this prospectus is a part. Unless the context requires
otherwise, "Entercom," "We," "Us," "Our" or similar terms in this section refer
solely to Entercom Communications Corp. and not the trust or any of our other
consolidated subsidiaries.
The trust's assets consist principally of the debentures, and payments
under the debentures are its sole revenue. The trust exists for the exclusive
purposes of:
- issuing the common securities and the TIDES representing undivided
beneficial ownership interests in the trust's assets;
- investing the gross proceeds of those securities in the debentures; and
- engaging in only those other activities necessary or incidental to those
purposes.
Entercom will directly or indirectly acquire common securities of the trust
in an aggregate liquidation amount equal to approximately 3% of the total
capital of the trust. The trust will generally make payments on the common
securities pro rata with the TIDES. However, if an event of default under the
declaration of trust occurs and is continuing, Entercom's right to payment in
respect of distributions and payments upon liquidation, redemption and otherwise
will be subordinated to your rights.
Pursuant to the declaration of trust, the trust will have four trustees:
- three of the trustees, referred to as administrative trustees, will be
officers of Entercom; and
- the fourth trustee will be Wilmington Trust Company, which will act as
property trustee and the Delaware statutory trustee.
In limited circumstances, the holders of a majority of the TIDES will be
entitled to appoint one additional trustee, referred to as the special trustee.
The special trustee need not be an officer or employee of or otherwise
affiliated with Entercom. The special trustee will have the same rights, powers
and privileges as the administrative trustees. See "Description of TIDES --
Voting Rights; Amendment of the Declaration."
The property trustee holds title to the debentures for your benefit and the
benefit of the holders of the trust's common securities. As the holder of the
debenture, the property trustee has the power to exercise all the holder's
rights, powers and privileges under the Indenture between Entercom and
Wilmington Trust Company, as trustee (the "Indenture"). In addition, the
property trustee maintains exclusive control of a segregated non-interest
bearing bank account to hold all payments made in respect of the debentures for
your benefit and the benefit of the holders of the trust's common securities.
Subject to your right to appoint a special trustee, we, as the direct or
indirect holder of all of the trust's common securities, have the right to
appoint, remove or replace any of the trustees and to increase or decrease the
number of trustees. However, the number of trustees must always be at least
three, a majority of which must be administrative trustees, and, unless
otherwise required by applicable law, there must always be a Delaware statutory
trustee. See "Description of Convertible Subordinated Debentures."
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<PAGE> 99
DESCRIPTION OF TIDES
Under the terms of the declaration of trust, the trustees on behalf of the
trust will issue the TIDES and the common securities in fully registered form
without interest coupons. The TIDES will represent preferred undivided
beneficial ownership interests in the assets of the trust, and the holders of
the TIDES will be entitled to a preference over us, as the holder of the trust's
common securities, in limited circumstances with respect to distributions and
amounts payable on redemption of the TIDES and the trust's common securities or
liquidation of the trust, as well as other benefits as described in the
declaration of trust. See "-- Subordination of Common Securities." The
declaration of trust will be qualified under and will be subject to and governed
by the Trust Indenture Act of 1939 upon effectiveness of the registration
statement of which this prospectus is a part. This summary of the provisions of
the TIDES, the trust's common securities and the declaration of trust does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the declaration of trust, including the
definitions of certain terms. A copy of the declaration of trust has been filed
as an exhibit to the registration statement of which this prospectus is a part.
Unless the context requires otherwise, "Entercom," "We," "Us," "Our" or similar
terms in this section refer solely to Entercom Communications Corp. and not the
trust or any of our other consolidated subsidiaries.
GENERAL
The trust will make payments on the TIDES pro rata with its common
securities except as described under "-- Subordination of Common Securities."
The guarantee executed by us for your benefit (the "Guarantee") will provide for
a guarantee on a subordinated basis with respect to the TIDES but will not
guarantee payment of distributions or amounts payable on redemption of the TIDES
or on liquidation of the trust when the trust does not have funds on hand
available to make those payments. See "Description of Guarantee."
DISTRIBUTIONS
Distributions will accrue on the TIDES from the date of their original
issuance at the annual rate of % of the stated liquidation amount of $50
per TIDES. Subject to the deferral rights described below, the trust will pay
the distributions quarterly in arrears on each March 31, June 30, September 30
and December 31, each referred to as a distribution date, commencing December
31, 1999, to the person in whose name each TIDES is registered at the close of
business on the fifteenth day of the month of the applicable distribution date.
The amount of distributions payable for any period will be computed based
on the number of days elapsed in a 360-day year of twelve 30-day months. If any
distribution date is not a Business Day, the trust will pay distributions
payable on that date on the next succeeding day that is a Business Day (and
without any additional distributions or other payments in respect of any such
delay) with the same force and effect as if made on the date the payment was
originally payable. Distributions that the trust does not pay on the applicable
distribution date will accrue additional distributions on the amount of the
accrued distributions (to the extent permitted by law), compounded quarterly
from the relevant distribution date. See "Description of Convertible
Subordinated Debentures -- Additional Sums." A "Business Day" will mean any day
other than a Saturday or a Sunday, or a day on which banking institutions in The
City of New York or Wilmington,
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<PAGE> 100
Delaware are authorized or required by law or executive order to remain closed,
or a day on which the corporate trust office of the property trustee or the
trustee under the debentures is closed for business.
So long as no event of default under the debentures has occurred and is
continuing, we have the right to defer the payment of interest on the debentures
at any time or from time to time for a period not exceeding 20 consecutive
quarters. However, no deferral period may extend beyond the final stated
maturity of the debentures, which is September 30, 2014. See "Description of
Convertible Subordinated Debentures -- Option to Extend Interest Payment Date."
As a consequence of any deferral election, the trust will defer quarterly
distributions on the TIDES during the deferral period. Deferred distributions to
which you are entitled will accrue additional distributions, compounded
quarterly from the relevant payment date for distributions during any deferral
period, to the extent permitted by applicable law.
The trust's revenue available for distribution to you will be limited to
payments under the debentures. See "Description of Convertible Subordinated
Debentures -- General." If we do not make interest payments on the debentures,
the property trustee will not have funds available to pay distributions on the
TIDES. We have guaranteed the payment of distributions, if and to the extent the
trust has funds legally available for the payment of those distributions and
cash sufficient to make those payments, on a limited basis as set forth under
"Description of Guarantee."
CONVERSION RIGHTS
General. You may convert your TIDES at any time prior to 5:00 p.m., New
York City time, on September 30, 2014 (except that you may convert TIDES called
for redemption by us at any time prior to 5:00 p.m., New York City time, on the
day preceding the relevant redemption date), at your option and in the manner
described below, into shares of our Class A common stock. You may convert each
TIDES initially into shares of our Class A common stock
(equivalent to an initial conversion price of $ per share of Class A common
stock). The conversion ratio and the equivalent conversion price in effect at
any given time are referred to as the Applicable Conversion Ratio and the
Applicable Conversion Price, respectively, and will be subject to adjustment as
described under " -- Conversion Price Adjustments" below. The trust will
covenant in the declaration of trust not to convert debentures held by it except
pursuant to a notice of conversion delivered to the property trustee, as
conversion agent, by you.
If you wish to exercise your conversion right, you must deliver an
irrevocable conversion notice, together, if the TIDES are in certificated form,
with the certificated security, to the conversion agent who will, on your
behalf, exchange the TIDES for a Like Amount of debentures and immediately
convert the debentures into shares of our Class A common stock. You may obtain
copies of the required form of the conversion notice from the conversion agent.
At the close of business on a distribution record date, you will be
entitled to receive the distribution payable on your TIDES on the corresponding
distribution date even if you convert your TIDES after the distribution record
date but prior to the distribution date. Except as provided in the immediately
preceding sentence, neither we nor the trust will make, or be required to make,
any payment, allowance or adjustment for accrued and unpaid distributions,
whether or not in arrears, on converted TIDES, even if you convert your TIDES
during a deferral period. We will make no payment or allowance for distributions
on our shares of Class A common stock issued upon conversion, except to the
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<PAGE> 101
extent that those shares of Class A common stock are held of record on the
record date for any distributions. We will deem each conversion to have been
effected immediately prior to the close of business on the day on which the
trust received the related conversion notice.
We will not issue any fractional shares of our Class A common stock as a
result of conversion. In lieu of fractional shares, we will pay fractional
interest in cash based on the Closing Price of our Class A common stock.
Conversion Price Adjustments -- General. The Applicable Conversion Price
will be subject to adjustment in certain events including, without duplication:
(A) the payment of dividends (and other distributions) payable in our
common stock on our common stock;
(B) the issuance to all holders of our common stock of rights or
warrants;
(C) subdivisions and combinations of our common stock;
(D) the payment of dividends (and other distributions) to all holders
of our common stock consisting of evidences of indebtedness of Entercom,
securities or capital stock, cash or assets (including securities, but
excluding those rights, warrants, dividends and distributions referred to
in clauses (A) and (B) and dividends and distributions paid exclusively in
cash);
(E) the payment of dividends (and other distributions) on our common
stock paid exclusively in cash, excluding (a) cash dividends that do not
exceed the per share amount of the smallest of the immediately four
preceding quarterly cash dividends (as adjusted to reflect any of the
events referred to in clauses (A) through (F) of this sentence) and (b)
cash dividends the per share amount of which, together with the aggregate
per share amount of any other cash dividends paid within the 12 months
preceding the date of payment of such cash dividends, does not exceed
12 1/2% of the current market price of our common stock as of the trading
day immediately preceding the date of declaration of the dividend; and
(F) payment to holders of our common stock in respect of a tender or
exchange offer (other than an odd-lot offer) by us or any of our
subsidiaries for our common stock at a price in excess of 110% of the
current market price of our common stock as of the trading day next
succeeding the last date tenders or exchanges may be made pursuant to the
tender or exchange offer.
We may, at our option, make reductions in the Applicable Conversion Price
as our Board of Directors deems advisable to avoid or diminish any income tax to
holders of our common stock resulting from any dividend or distribution of stock
(or rights to acquire stock) or from any event treated as such for income tax
purposes. See "United States Federal Income Tax Consequences -- Adjustment of
Conversion Price."
No adjustment of the Applicable Conversion Price will be made:
- upon the issuance of any shares of our common stock pursuant to any
present or future plan providing for the reinvestment of dividends or
interest payable on securities of Entercom and the investment of
additional optional amounts in shares of our common stock under any plan;
- upon the issuance of any shares of our common stock or options or rights
to purchase those shares pursuant to any present or future employee,
director or consultant benefit plan or program of Entercom; or
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- upon the issuance of any shares of our common stock pursuant to any
option, warrant, right, or exercisable, exchangeable or convertible
security outstanding as of the date the TIDES were first issued.
If any action would require adjustment of the Applicable Conversion Price
pursuant to more than one of the conversion price adjustment provisions, only
one adjustment will be made; provided that the adjustment made will be the one
that has the highest absolute value to you. No adjustment in the Applicable
Conversion Price will be required unless the adjustment would require an
increase or decrease of at least 1% of the Applicable Conversion Price, but any
adjustment that would otherwise be required to be made will be carried forward
and taken into account in any subsequent adjustment. Except as specifically
described above, the Applicable Conversion Price will not be subject to
adjustment in the case of the issuance of any Entercom Class A common stock (or
securities convertible into or exchangeable for Entercom Class A common stock).
Conversion Price Adjustments -- Merger, Consolidation or Sale of Assets of
Entercom. If we are a party to any transaction (including, without limitation, a
merger, consolidation, sale of all or substantially all of our assets,
recapitalization or reclassification of our common stock or any compulsory share
exchange (each of the foregoing being referred to as a "Company Transaction")),
in each case, as a result of which shares of our common stock will be converted
into the right to receive other securities, cash or other property, we will
ensure that lawful provision is made as part of the terms of the Company
Transaction so that the holder of each TIDES then outstanding will have the
right thereafter to convert the TIDES only into:
- in the case of any Company Transaction other than a Company Transaction
involving a Common Stock Fundamental Change, the kind and amount of
securities, cash and other property receivable upon the consummation of
the Company Transaction by a holder of that number of shares of our Class
A common stock into which a TIDES was convertible immediately prior to
the Company Transaction; or
- in the case of a Company Transaction involving a Common Stock Fundamental
Change, common stock of the kind received by holders of our Class A
common stock;
but in each case after giving effect to any adjustment discussed below relating
to a Fundamental Change if the Company Transaction constitutes a Fundamental
Change.
The holders of TIDES will have no voting rights with respect to any Company
Transaction.
In the case of any Company Transaction involving a Fundamental Change, the
Applicable Conversion Price will be adjusted immediately before the Fundamental
Change as follows:
- in the case of a Non-Stock Fundamental Change, the Applicable Conversion
Price of the TIDES will become the lower of:
- the Applicable Conversion Price immediately prior to the Non-Stock
Fundamental Change, but after giving effect to any other prior
adjustments, and
- the result obtained by multiplying the greater of the Relevant Price
or the then applicable Reference Market Price by the Optional
Redemption Ratio (the product is referred to as the "Adjusted Relevant
Price" or the "Adjusted Reference Market Price," as the case may be);
and
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- in the case of a Common Stock Fundamental Change, the Applicable
Conversion Price of the TIDES immediately prior to the Common Stock
Fundamental Change, but after giving effect to any other prior
adjustments, will be adjusted by multiplying the Applicable Conversion
Price by a fraction of which the numerator will be the Purchaser Stock
Price and the denominator will be the Relevant Price.
However, in the event of a Common Stock Fundamental Change in which:
- 100% of the value of the consideration received by a holder of our Class
A common stock is common stock of the successor, acquiror or other third
party (and cash, if any, is paid only with respect to any fractional
interests in the common stock resulting from the Common Stock Fundamental
Change); and
- all our Class A common stock will have been exchanged for, converted
into, or acquired for common stock (and cash with respect to fractional
interests) of the successor, acquiror or other third party;
the Applicable Conversion Price of the TIDES immediately prior to the Common
Stock Fundamental Change will be adjusted by multiplying the Applicable
Conversion Price by a fraction of which the numerator will be one and the
denominator will be the number of shares of common stock of the successor,
acquiror or other third party received by a holder of one share of our Class A
common stock as a result of the Common Stock Fundamental Change.
In the absence of the adjustments to the Applicable Conversion Price in the
event of a Company Transaction involving a Fundamental Change, in the case of a
Company Transaction each TIDES would become convertible into the securities,
cash, or other property receivable by a holder of the number of shares of our
Class A common stock into which each TIDES was convertible immediately prior to
the Company Transaction. Thus, in the absence of the Fundamental Change
provisions, a Company Transaction could substantially lessen or eliminate the
value of the conversion privilege associated with the TIDES. For example, if a
company were to acquire Entercom in a cash merger, each TIDES would become
convertible solely into cash and would no longer be convertible into securities
whose value would vary depending on the future prospects of Entercom and other
factors.
In Non-Stock Fundamental Change transactions, the foregoing conversion
price adjustments are designed to increase the amount of securities, cash or
other property into which you may convert each TIDES. In a Non-Stock Fundamental
Change transaction in which the initial value received per share of our Class A
common stock (measured as described in the definition of Relevant Price) is
lower than the then Applicable Conversion Price of a TIDES but greater than or
equal to the Reference Market Price, the Applicable Conversion Price will be
adjusted with the effect that you will be able to convert each TIDES into
securities, cash or other property of the same type received by the holders of
our Class A common stock in the transaction with the Applicable Conversion Price
adjusted as though the initial value had been the Adjusted Relevant Price. In a
Non-Stock Fundamental Change transaction in which the initial value received per
share of our Class A common stock (measured as described in the definition of
Relevant Price) is lower than both the Applicable Conversion Price of a TIDES
and the Reference Market Price, the Applicable Conversion Price will be adjusted
as described above but calculated as though the initial value had been the
Adjusted Reference Market Price.
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In Common Stock Fundamental Change transactions, the foregoing adjustments
are designed to provide in effect that:
- where our Class A common stock is converted partly into common stock and
partly into other securities, cash or property, you will be able to
convert each TIDES solely into a number of shares of common stock
determined so that the initial value of those shares (measured as
described in the definition of Purchaser Stock Price) equals the value of
the shares of our Class A common stock into which each TIDES was
convertible immediately before the transaction (measured as aforesaid);
and
- where our Class A common stock is converted solely into common stock, you
will be able to convert each TIDES into the same number of shares of
common stock receivable by a holder of the number of shares of our Class
A common stock into which each TIDES was convertible immediately before
the transaction.
The term "Closing Price" of any security on any day means the last reported
sale price of the security on that day, or in case no sale takes place on that
day, the average of the closing bid and asked prices in each case on the
principal national securities exchange on which the securities are listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, on the National Market System of the National Association
of Securities Dealers, Inc. or any successor national automated interdealer
quotation system (the "NNM") or, if the securities are not listed or admitted to
trading on any national securities exchange or quoted on the NNM, the average of
the closing bid and asked prices of the security in the over-the-counter market
as furnished by any New York Stock Exchange member firm selected by Entercom for
that purpose.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by our Board of
Directors) of the consideration received by holders of our Class A common stock
consists of common stock that for each of the ten consecutive trading days
immediately prior to and including the Entitlement Date has been admitted for
listing or admitted for listing subject to notice of issuance on a national
securities exchange or quoted on the NNM; provided, however, that a Fundamental
Change will not be a Common Stock Fundamental Change unless either:
- we continue to exist after the occurrence of the Fundamental Change and
the outstanding TIDES continue to exist as outstanding TIDES; or
- not later than the occurrence of the Fundamental Change, the outstanding
debentures are converted into or exchanged for debentures of a
corporation succeeding to our business, which debentures have terms
substantially similar to those of our debentures.
The term "Entitlement Date" means the record date for determination of the
holders of our common stock entitled to receive securities, cash or other
property in connection with a Non-Stock Fundamental Change or a Common Stock
Fundamental Change or, if there is no record date, the date upon which holders
of our Class A common stock will have the right to receive those securities,
cash or other property.
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with a Company Transaction pursuant to which all or
substantially all of our common stock will be exchanged for, converted into,
acquired for or constitute solely the right to receive securities, cash or other
property (whether by means of an exchange offer,
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liquidation, tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise). However, in the case of a Company Transaction
involving more than one transaction or event, for purposes of adjustment of the
Applicable Conversion Price, the Fundamental Change will be deemed to have
occurred when substantially all of our common stock is exchanged for, converted
into, or acquired for or constitute solely the right to receive securities,
cash, or other property, but the adjustment will be based upon the highest
weighted average per share consideration that a holder of our common stock could
have received in the transactions or events as a result of which more than 50%
of all outstanding shares of our common stock will have been exchanged for,
converted into, or acquired for or constitute solely the right to receive
securities, cash or other property.
The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
The term "Optional Redemption Ratio" means a fraction of which the
numerator will be $50 and the denominator will be the then current Optional
Redemption Price or, on or prior to October 3, 2002, an amount per TIDES
determined by us in our sole discretion, after consultation with a nationally
recognized investment banking firm, to be the equivalent of the hypothetical
redemption price that would have been applicable if the TIDES had been
redeemable during that period.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for the common stock
received in the Common Stock Fundamental Change for the ten consecutive trading
days prior to and including the Entitlement Date, as adjusted in good faith by
us to appropriately reflect any of the events referred to in clauses (A) through
(F) of the first paragraph under " -- Conversion Price Adjustments -- General."
The term "Reference Market Price" will initially mean on the date the trust
originally issues the TIDES, $ (which is an amount equal to 66 2/3% of
the last reported sale price for our Class A common stock on the New York Stock
Exchange Composite Tape on , 1999). In the event of any adjustment
to the Applicable Conversion Price, other than as a result of a Non-Stock
Fundamental Change, the trust will also adjust the Reference Market Price so
that the ratio of the Reference Market Price to the Applicable Conversion Price
after giving effect to any adjustment will be the same as the ratio of
$ to the initial conversion price.
The term "Relevant Price" means:
- in the case of a Non-Stock Fundamental Change in which the holder of our
common stock receives only cash, the amount of cash received by the
holder of one share of our common stock; and
- in the event of any other Non-Stock Fundamental Change or any Common
Stock Fundamental Change, the average of the daily Closing Prices for our
Class A common stock during the ten consecutive trading days prior to and
including the Entitlement Date, in each case as adjusted in good faith by
us to appropriately reflect any of the events referred to in clauses (A)
through (F) of the first paragraph under "-- Conversion Price
Adjustments -- General."
MANDATORY REDEMPTION
Upon the repayment in full of the debentures at their stated maturity or a
redemption in whole or in part of the debentures (other than following any
distribution of the debentures to you and the holders of the trust's common
securities), the property trustee
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will apply the proceeds from the repayment or redemption to redeem, on a pro
rata basis, a Like Amount of TIDES and the trust's common securities, on the
Redemption Date, in an amount per TIDES or common security, as applicable, equal
to the applicable Redemption Price, which Redemption Price will be equal to:
- the liquidation amount of each TIDES plus any accrued and unpaid
distributions in the case of (A) the repayment of the debentures at their
stated maturity or (B) the redemption of the debentures in certain
limited circumstances upon the occurrence of a Tax Event (as hereinafter
defined); or
- in the case of an optional redemption on or after October 3, 2002, the
Optional Redemption Price (as defined under "Description of Convertible
Subordinated Debentures -- Redemption -- Optional Redemption").
REDEMPTION PROCEDURES
The trust will redeem its TIDES and common securities at the applicable
Redemption Price with the proceeds from the contemporaneous repayment or
redemption of the debentures. The trust will redeem its TIDES and common
securities and will pay the applicable Redemption Price on each Redemption Date
only to the extent that it has funds on hand available for the payment of the
Redemption Price. See also "-- Subordination of Common Securities."
If the trust gives a notice of redemption in respect of the TIDES, then, by
10:00 a.m., New York City time, on the date fixed for redemption (the
"Redemption Date"), to the extent funds are available, with respect to the TIDES
held in global form, the property trustee will deposit irrevocably with DTC
funds sufficient to pay the applicable Redemption Price and will give DTC
irrevocable instructions and authority to pay the applicable Redemption Price to
you. See "-- Form, Book-Entry Procedures and Transfer." With respect to the
TIDES held in certificated form, the property trustee, to the extent funds are
available, will irrevocably deposit with the paying agent for the TIDES funds
sufficient to pay the applicable Redemption Price and will give the paying agent
irrevocable instructions and authority to pay the Redemption Price to the
holders of the TIDES upon surrender of their certificates evidencing the TIDES.
See "-- Payment and Paying Agency." DTC or the paying agent, as applicable, will
pay those distributions payable on or prior to the Redemption Date to you if you
were a holder of TIDES on the relevant record dates for the related
distribution. If the trust has given notice of redemption and deposited funds as
required, then upon the date of the deposit, all of your rights will cease,
except your right to receive the applicable Redemption Price, but without
interest on the Redemption Price, and the TIDES will cease to be outstanding. If
any Redemption Date is not a Business Day, then payment of the applicable
Redemption Price payable on that date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect of
any delay), except that, if that Business Day falls in the next calendar year,
the payment will be made on the immediately preceding Business Day. If we or the
trust improperly withhold or refuse to make payment of the applicable Redemption
Price pursuant to the Guarantee as described under "Description of Guarantee,"
distributions on TIDES will continue to accrue from the Redemption Date
originally established by the trust to the date the Redemption Price is actually
paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the Redemption Price.
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Subject to applicable law (including, without limitation, United States
federal securities law), we or our subsidiaries may at any time and from time to
time purchase outstanding TIDES by tender in the open market or by private
agreement.
If we desire to consummate an optional redemption, we must send a notice to
each holder of TIDES and the trust's common securities at its registered address
in accordance with the notice procedures set forth under "Description of
Convertible Subordinated Debentures -- Redemption -- Optional Redemption." We
must mail any notice of a Tax Event Redemption at least 30 days but not more
than 60 days before the Redemption Date to you. We need not provide notice of
repayment at the stated maturity of the debentures.
TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION
If a Tax Event occurs and is continuing, we will cause the trustees to
dissolve and liquidate the trust and, after satisfaction of liabilities of
creditors of the trust, cause debentures to be distributed to you in liquidation
of the trust within 90 days following the occurrence of the Tax Event. However,
the liquidation and distribution will be conditioned on:
- the trustees' receipt of an opinion of a nationally recognized
independent tax counsel (reasonably acceptable to the trustees)
experienced in such matters (a "No Recognition Opinion"), which opinion
may rely on published revenue rulings of the Internal Revenue Service, to
the effect that you will not recognize any income, gain or loss for
United States federal income tax purposes as a result of such liquidation
and distribution of debentures; and
- Entercom being unable to avoid such Tax Event within such 90-day period
by taking some ministerial action or pursuing some other reasonable
measure that, in our sole judgment, will have no adverse effect on us,
the trust or you and will involve no material cost.
Furthermore, if (1) a nationally recognized independent tax counsel
(reasonably acceptable to the trustees) experienced in such matters provides an
opinion (the "Redemption Tax Opinion") to us that, as a result of a Tax Event,
there is more than an insubstantial risk that we would be precluded from
deducting the interest on the debentures for United States federal income tax
purposes, even after the debentures were distributed to you upon liquidation of
the trust as described above, or (2) such tax counsel informs the trustees that
it cannot deliver a No Recognition Opinion, we will have the right, upon not
less than 30 nor more than 60 days' notice and within 90 days following the
occurrence and continuation of the Tax Event, to redeem the debentures, in
whole, but not in part, for cash, for the principal amount plus accrued and
unpaid interest and, following such redemption, the trust will redeem all the
TIDES at the aggregate liquidation amount of the TIDES plus accrued and unpaid
distributions. However, if at the time there is available to us or the trust the
opportunity to eliminate, within such 90-day period, the Tax Event by taking
some ministerial action or pursuing some other reasonable measure that, in our
sole judgment, will have no adverse effect on us, the trust or you and will
involve no material cost, we or the trust will pursue that measure in lieu of
redemption. See "-- Mandatory Redemption." In addition to the foregoing options,
we will also have the option of causing the TIDES to remain outstanding and pay
Additional Sums on the debentures. See "Description of Convertible Subordinated
Debentures -- Additional Sums."
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The term "Tax Event" means the receipt by the property trustee of an
opinion of a nationally recognized independent tax counsel to us (reasonably
acceptable to the trustees) experienced in such matters (a "Dissolution Tax
Opinion") to the effect that, as a result of:
(A) any amendment to or change (including any announced prospective
change (which will not include a proposed change), provided that a Tax
Event will not occur more than 90 days before the effective date of any
prospective change) in the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority of the
United States or any political subdivision; or
(B) any judicial decision or official administrative pronouncement,
ruling, regulatory procedure, notice or announcement, including any notice
or announcement of intent to adopt such procedures or regulations (an
"Administrative Action");
there is more than an insubstantial risk that:
(a) if the debentures are held by the property trustee, (1) the trust
is, or will be within 90 days of the date of such opinion, subject to
United States federal income tax with respect to interest accrued or
received on the debentures or subject to more than a de minimis amount of
other taxes, duties or other governmental charges as determined by counsel,
or (2) any portion of interest payable by us to the trust (or original
issue discount accruing) on the debentures is not, or within 90 days of the
date of such opinion will not be, deductible by us in whole or in part for
United States federal income tax purposes; or
(b) with respect to debentures which are no longer held by the
property trustee, any portion of interest payable by us (or original issue
discount accruing) on the debentures is not, or within 90 days of the date
of such opinion will not be, deductible by us in whole or in part for
United States Federal income tax purposes.
If an Investment Company Event occurs and is continuing, we will cause the
trustees to dissolve and liquidate the trust and, after satisfaction of
liabilities of creditors of the trust, cause the debentures to be distributed to
you in liquidation of the trust within 90 days following the occurrence of the
Investment Company Event.
The term "Investment Company Event" means the occurrence of a change in law
or regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority to the effect that the trust is or will be considered an "investment
company" required to be registered under the Investment Company Act of 1940, as
amended, which change in law becomes effective on or after the date of this
prospectus.
The distribution by us of the debentures will effectively result in the
cancellation of the TIDES.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF CONVERTIBLE SUBORDINATED DEBENTURES
We, as the holder of the trust's outstanding common securities, will have
the right at any time (including, without limitation, upon the occurrence of a
Tax Event or an Investment Company Event) to dissolve the trust and, after
satisfaction of liabilities of creditors of the trust as provided by applicable
law, cause a Like Amount of the debentures to be distributed to you and the
holders of the trust's common securities upon liquidation of the trust.
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The trust will automatically dissolve upon the first to occur of:
(A) bankruptcy, dissolution or liquidation of us;
(B) our written direction to the property trustee to dissolve the
trust (which direction is optional and, except as described above, wholly
within our discretion, as depositor);
(C) redemption of all the TIDES and the trust's common securities as
described under "-- Mandatory Redemption" above;
(D) conversion of all outstanding TIDES and the trust's common
securities as described under "-- Conversion Rights" above;
(E) expiration of the term of the trust; or
(F) entry of an order for the dissolution of the trust by a court of
competent jurisdiction.
If an early dissolution occurs as described in clause (A), (B), (E) or (F)
above, the trustees will liquidate the trust as expeditiously as the trustees
determine to be possible by distributing, after satisfaction of liabilities to
the creditors of the trust as provided by applicable law, to you and the holders
of the trust's common securities a Like Amount of the debentures, unless the
distribution would not be practical. In that event, you and the holders of the
trust's common securities will be entitled to receive out of the trust's assets
available for distribution to holders, after satisfaction of liabilities to the
trust's creditors as provided by applicable law, an amount equal to, in the case
of holders of TIDES, the aggregate liquidation amount of the TIDES plus accrued
and unpaid distributions, to the date of payment (that amount being the
"Liquidation Distribution"). If the Liquidation Distribution can be paid only in
part because the trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the trust will pay the amounts directly
payable by it on the TIDES on a pro rata basis. We, as the holder of the trust's
common securities, will be entitled to receive distributions upon any
liquidation pro rata with you, except that if an event of default under the
debentures (or an event that, with notice or passage of time, would become an
event of default under the debentures) has occurred and is continuing, the TIDES
will have a priority over the trust's common securities with respect to any of
those distributions. See "-- Subordination of Common Securities."
The term "Like Amount" means:
- with respect to a redemption of TIDES, TIDES having an aggregate
liquidation amount equal to that portion of the principal amount of
debentures to be contemporaneously redeemed allocated to the trust's
common securities and to the TIDES based upon the relative liquidation
amounts of the classes and the proceeds of which will be used to pay the
applicable Redemption Price (each of the "Stated Maturity Price,"
"Optional Redemption Price" and "Tax Event Redemption Price" being
referred to herein as a "Redemption Price") of the TIDES; and
- with respect to a distribution of debentures to holders of TIDES in
connection with a dissolution or liquidation of the trust, debentures
having an aggregate principal amount equal to the aggregate liquidation
amount of the TIDES and/or common securities of the holder to whom the
trust distributes the debentures.
If we do not redeem the debentures prior to maturity, the trust is not
liquidated and the debentures are not distributed to you and the holders of the
trust's common securities,
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the TIDES will remain outstanding until the repayment of the debentures at their
final stated maturity and the distribution of the Liquidation Distribution to
you.
On and after the liquidation date fixed for any distribution of debentures
to you and the holders of the trust's common securities:
- the trust will no longer deem the TIDES to be outstanding;
- DTC or its nominee, as the record holder of the TIDES, will receive a
registered global certificate or certificates representing the debentures
to be delivered upon the distribution with respect to TIDES held by DTC
or its nominee; and
- the trust will deem any certificates representing TIDES not held by DTC
or its nominee to represent debentures having a principal amount equal to
the liquidation amount of the TIDES and bearing accrued and unpaid
interest in an amount equal to the accumulated and unpaid distributions
on the TIDES until those certificates are presented to the administrative
trustees or their agent for cancellation, whereupon we will issue to the
holder, and the trustee under the Indenture will authenticate, a
certificate representing the debentures.
We cannot assure you as to the market prices for the TIDES or the
debentures that you may receive in exchange for the TIDES and/or the trust's
common securities if a dissolution and liquidation of the trust were to occur.
Accordingly, the TIDES that you may purchase, or the debentures that you may
receive on dissolution and liquidation of the trust, may trade at a discount to
the price that you originally paid to purchase the TIDES.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the Redemption Price of, the TIDES and the
trust's common securities, as applicable, will be made pro rata to the holders
of TIDES and the trust's common securities. The trust will base those payments
on the liquidation amount of the TIDES and the trust's common securities. If on
any distribution date or Redemption Date any event of default under the
debentures (or an event that, with notice or passage of time, would become an
event of default under the debentures) or an event of default under the
declaration of trust has occurred and is continuing, no payment of any
distribution on, or applicable Redemption Price of, any of the trust's common
securities, and no other payment on account of the redemption, liquidation or
other acquisition of the trust's common securities, will be made unless payment
in full in cash of all accrued and unpaid distributions on all of the
outstanding TIDES for all distribution periods terminating on or prior thereto,
or, in the case of payment of the applicable Redemption Price, the full amount
of the Redemption Price on all of the outstanding TIDES, has been made or
provided for, and all funds available to the property trustee will first be
applied to the payment in full in cash of all distributions on, or the
applicable Redemption Price of, the TIDES then due and payable.
In the case of any event of default under the declaration of trust
resulting from an event of default under the debentures, the trust will deem us,
as holder of the trust's common securities, to have waived any right to act with
respect to any event of default under the declaration of trust until the effect
of all events of default have been cured, waived or otherwise eliminated. Until
all events of default under the declaration of trust have been so cured, waived
or otherwise eliminated, the property trustee will act solely on your behalf and
not our behalf as holder of the trust's common securities, and only you will
have the right to direct the property trustee to act on your behalf.
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EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "event of default" under the
declaration of trust (whatever the reason for the event of default and whether
it is voluntary or involuntary or is effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
- the occurrence of a event of default under the debentures (see
"Description of Convertible Subordinated Debentures -- Debenture Events
of Default");
- the trust's default in the payment of any distribution when it becomes
due and payable, and continuation of the default for a period of 30 days
(subject to the deferral of any due date in the case of a Deferral
Period);
- the trust's default in the payment of any Redemption Price of any TIDES
or common security of the trust when it becomes due and payable;
- default in the performance, or breach, in any material respect, of any
covenant or warranty of the trustees in the declaration of trust (other
than a covenant or warranty, a default in the performance of which or the
breach of which is addressed in the second or third bullet points above),
and continuation of the default or breach for a period of 90 days after
the holders of at least 25% in aggregate liquidation amount of the
outstanding TIDES have given, by registered or certified mail, to the
defaulting trustee or trustees a written notice specifying the default or
breach and requiring it to be remedied and stating that the notice is a
"Notice of Default" under the declaration of trust; or
- the occurrence of a bankruptcy or insolvency with respect to the property
trustee and the failure by us to appoint a successor property trustee
within 60 days of those events.
Within ten Business Days after the occurrence of any event of default
actually known to the property trustee, the property trustee will transmit
notice of the event of default to you, the administrative trustees and us, as
depositor, unless the event of default has been cured or waived. Entercom, as
depositor, and the administrative trustees are required to file annually with
the property trustee a certificate as to whether or not we and they are in
compliance with all the conditions and covenants applicable to us and them under
the declaration of trust.
If an event of default under the debentures (or an event that with notice
or the passage of time, would become an event of default under the debentures)
or an event of default under the declaration of trust has occurred and is
continuing, the TIDES will have a preference over the trust's common securities.
See " -- Liquidation of the Trust and Distribution of Convertible Subordinated
Debentures" and " -- Subordination of Common Securities."
REMOVAL OF TRUSTEES
Unless an event of default under the debentures has occurred and is
continuing, we may remove any trustee at any time. If an event of default under
the debentures has occurred and is continuing, the holders of a majority in
liquidation amount of the outstanding TIDES may remove the property trustee and
the Delaware statutory trustee. In no event will you have the right to vote to
appoint, remove or replace the administrative trustees, which voting rights are
vested exclusively in us as the holder of the trust's
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common securities. No resignation or removal of the Delaware statutory trustee
or the property trustee and no appointment of a successor trustee will be
effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the declaration of trust.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default has occurred and is continuing, at any time or
times, for the purpose of meeting the legal requirements of the Trust Indenture
Act or of any jurisdiction in which any part of the trust's property may at the
time be located, we, as the holder of the trust's common securities, and the
administrative trustees will have power to appoint one or more persons either to
act as a co-trustee, jointly with the property trustee, of all or any part of
the trust's property, or to act as separate trustee of any such property. In
either case, the newly appointed trustee will have the powers provided in the
instrument of appointment. In case an event of default under the debentures has
occurred and is continuing, the property trustee alone will have power to make
the appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any person into which the property trustee, the Delaware trustee or any
administrative trustee that is not a natural person may be merged or with which
it may be consolidated, or any person resulting from any merger or consolidation
to which the trustee is a party, or any person succeeding to all or
substantially all the corporate trust business of the trustee, will be the
successor of that trustee under the declaration of trust as long as that person
is otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The trust may not merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below or as otherwise set forth in the declaration of trust. The trust
may, at our request, as depositor, with the consent of the administrative
trustees but without your consent and the consent of the property trustee or the
Delaware statutory trustee, merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, a trust organized as such under the laws of any
state; provided, however, that:
- the successor entity either (a) expressly assumes all of the trust's
obligations with respect to the TIDES or (b) substitutes for the TIDES
other securities having substantially the same terms as the TIDES (the
"Successor Securities") so long as the Successor Securities rank the same
as the TIDES rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise;
- we expressly appoint a trustee of the successor entity possessing the
same powers and duties as the property trustee as the holder of the
debentures;
- the Successor Securities are listed or traded, or any Successor
Securities will be listed or traded upon notification of issuance, on any
national securities exchange, national automated quotation system or
other organization on which the TIDES are then listed or traded, if any;
- the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the TIDES (including any Successor
Securities) in any material respect;
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- the successor entity has a purpose substantially identical and limited to
the purpose of the trust;
- prior to the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, we have received an opinion from
independent counsel to the trust experienced in such matters to the
effect that (a) the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the limited
liability of the holders of the TIDES (including any Successor
Securities) in any material respect, and (b) following the merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the trust nor the successor entity will be required to register
as an investment company under the Investment Company Act;
- we or any permitted successor or assignee owns all of the common
securities of the successor entity and guarantees the obligations of the
successor entity under the Successor Securities at least to the extent
provided by the Guarantee; and
- the merger, consolidation, amalgamation, replacement or lease is not a
taxable event for you.
Notwithstanding the foregoing, the trust will not, except with the consent
of holders of 100% in aggregate liquidation amount of the TIDES and the trust's
common securities, consolidate, amalgamate, merge with or into, or be replaced
by or convey, transfer or lease its properties and assets substantially as an
entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if the consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
trust or the successor entity to be classified as an association taxable as a
corporation (or to substantially increase the likelihood that the trust or the
successor entity would be classified as other than a grantor trust) for United
States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE DECLARATION
Except as provided below and under "Description of Guarantee -- Amendments
and Assignment" and as otherwise required by law and the declaration of trust,
you will have no voting rights.
In addition to your rights with respect to the enforcement of payment to
the trust of principal of or interest on the debentures as described under
"Description of Convertible Subordinated Debentures -- Debenture Events of
Default," if:
- an event of default under the debentures occurs and is continuing; or
- we default under the Guarantee with respect to the TIDES (each an
"Appointment Event");
then the holders of the TIDES, acting as a single class, will be entitled by a
vote of a majority in aggregate stated liquidation amount of the outstanding
TIDES to appoint a special trustee. Any holder of TIDES (other than Entercom or
any of our affiliates) will be entitled to nominate any person to be appointed
as special trustee. Not later than 30 days after the right to appoint a special
trustee arises, the trustees will convene a meeting of the holders of TIDES for
the purpose of appointing a special trustee. If the trustees fail to convene
that meeting within the 30-day period, the holders of not less than 10% of the
aggregate stated liquidation amount of the outstanding TIDES will be entitled to
convene the meeting. The provisions of the declaration of trust relating to the
convening and conduct of the meetings of the holders will apply with respect to
the meeting. Any
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special trustee so appointed will cease to be a special trustee if the
Appointment Event pursuant to which the special trustee was appointed and all
other Appointment Events cease to be continuing. Notwithstanding the appointment
of any special trustee, we will retain all rights under the Indenture, including
the right to defer payments of interest by extending the interest payment period
as described under "Description of Convertible Subordinated Debentures -- Option
to Extend Interest Payment Date."
Entercom, the property trustee and the administrative trustees may amend
the declaration of trust from time to time without your consent:
- to cure any ambiguity;
- to correct or supplement any provision in the declaration of trust that
may be inconsistent with any other provision;
- to make any other provisions with respect to ministerial matters or
questions arising under the declaration of trust, which will not be
inconsistent with the other provisions of the declaration of trust; or
- to modify, eliminate or add to any provisions of the declaration of trust
to the extent as is necessary to ensure that the trust will not be
classified for United States federal income tax purposes as a corporation
or will be classified for United States federal income tax purposes as a
grantor trust at all times that any TIDES or the trust's common
securities are outstanding or to ensure that the trust will not be
required to register as an investment company under the Investment
Company Act of 1940, as amended.
However, in the case of the first clause above, the action must not adversely
affect in any material respect the interests of any holder of TIDES or the
trust's common securities, and any amendments of the declaration of trust will
become effective when notice of the amendment is given to you and the holders of
the trust's common securities.
Entercom, the property trustee and the administrative trustees may amend
the declaration of trust with:
- the consent of holders representing not less than a majority (based upon
liquidation amounts) of the outstanding TIDES; and
- receipt by the trustees of an opinion of counsel to the effect that the
amendment or the exercise of any power granted to the trustees in
accordance with the amendment will not affect the trust's status as a
grantor trust for United States federal income tax purposes or the
trust's exemption from status as an investment company under the
Investment Company Act.
In addition, without the consent of each holder of TIDES and the trust's
common securities, the declaration of trust may not be amended to (A) change the
amount or timing of any distribution on the TIDES or the trust's common
securities or otherwise adversely affect the amount of any distribution required
to be made in respect of the TIDES or the trust's common securities as of a
specified date or (B) restrict the right of a holder of TIDES or the trust's
common securities to institute suit for the enforcement of any payment on or
after such date.
So long as any debentures are held by the trust, the trustees will not:
- direct the time, method and place of conducting any proceeding for any
remedy available to the trustee under the debentures, or executing any
trust or power conferred on the property trustee with respect to the
debentures;
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- waive any past default that is waivable under the Indenture;
- exercise any right to rescind or annul a declaration that the principal
of all the debentures is due and payable; or
- consent to any amendment, modification or termination of the Indenture or
the debentures, when that consent will be required;
without, in each case, obtaining the prior approval of the holders of a majority
in aggregate liquidation amount of all outstanding TIDES; provided, however,
that when a consent under the Indenture does require the consent of each holder
of debentures affected thereby, the property trustee cannot give its consent
without the prior consent of each holder of the TIDES.
The trustees cannot revoke any action previously authorized or approved by
a vote of the holders of the TIDES except by subsequent vote of those holders.
The property trustee will notify each holder of TIDES of any notice of default
with respect to the debentures. In addition to obtaining the foregoing approvals
of the holders of the TIDES, prior to taking any of the foregoing actions, the
trustees will obtain an opinion of counsel experienced in those matters to the
effect that the action will not affect the trust's status as a grantor trust for
United States federal income tax purposes on account of the action.
Any required approval of holders of TIDES may be given at a meeting of
those holders convened for such purpose or pursuant to written consent. The
property trustee will cause a notice of any meeting at which holders of TIDES
are entitled to vote to be given to each holder of record of TIDES in the manner
set forth in the declaration of trust.
Neither your vote nor your consent is required for the trust to redeem and
cancel the TIDES in accordance with the declaration of trust.
Notwithstanding that you are entitled to vote or consent under any of the
circumstances described above, any of the TIDES that are owned by us, the
trustees or any affiliate of Entercom or any trustees, will, for purposes of
such vote or consent, be treated as if they were not outstanding.
EXPENSES AND TAXES
In the Indenture, we, as issuer of the debentures, have agreed to pay all
debts and other obligations (other than with respect to payments of
distributions, amounts payable upon redemption and the liquidation amount of the
TIDES and the trust's common securities) and all of the trust's costs and
expenses (including costs and expenses relating to the trust's organization, the
fees and expenses of the trustees and the costs and expenses relating to the
trust's operations) including those incurred in connection with the offering of
the TIDES, and to pay any and all taxes and all costs and expenses with respect
to the foregoing (other than United States withholding taxes) to which the trust
might become subject. Our obligations under the Indenture are for the benefit
of, and will be enforceable by, any creditor to whom any such debts,
obligations, costs, expenses and taxes are owed, whether or not the creditor has
received notice of those obligations. Any creditor may enforce our obligations
directly against us, and we have irrevocably waived any right or remedy to
require that any creditor take any action against the trust or any other person
before proceeding against us. We have also agreed in the Indenture to execute
any additional agreement(s) as may be necessary or desirable to give full effect
to the foregoing.
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FORM, BOOK-ENTRY PROCEDURES AND TRANSFER
The TIDES will be issued in the form of one fully registered global TIDES
certificate (the "Global TIDES"), except as described below. The Global TIDES
will be deposited upon issuance with the property trustee as custodian for DTC,
in New York, New York, and registered in the name of DTC or its nominee, in each
case for credit to an account of a direct or indirect participant in DTC as
described below.
Except as set forth below, the Global TIDES may be transferred, in whole
but not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global TIDES may not be exchanged for TIDES
in certificated form except in the limited circumstances described below. See
"-- Certificated TIDES." In addition, a transfer of beneficial interests in the
Global TIDES will be subject to the applicable rules and procedures of DTC and
its direct or indirect participants which may change from time to time.
DEPOSITARY PROCEDURES
DTC has advised us that it is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations (collectively, the "Participants") and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes to accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Indirect access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interest and transfer of ownership interest of each actual purchaser
of each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised us and the trust that, pursuant to procedures
established by it:
- upon deposit of the Global TIDES, DTC will credit the accounts of
Participants designated by Credit Suisse First Boston with portions of
the principal amount of the Global TIDES; and
- ownership of such interests in the Global TIDES will be shown on, and the
transfer of ownership of those Global TIDES will be effected only
through, records maintained by DTC (with respect to the Participants) or
by the Participants and the Indirect Participants (with respect to other
owners of beneficial interests in the Global TIDES).
Investors in the Global TIDES may hold their interests in the Global TIDES
directly through DTC, if they are Participants in DTC, or indirectly through
organizations which are Participants in DTC's system. All interests in a Global
TIDES will be subject to the procedures and requirements of DTC. The laws of
some states require that certain persons take physical delivery in certificated
form of certain securities, including the TIDES that they own. Consequently, the
ability to transfer beneficial interests in a Global TIDES to
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those persons will be limited to that extent. Because DTC can act only on behalf
of Participants, which in turn act on behalf of Indirect Participants and
certain banks, the ability of a person having beneficial interests in a Global
TIDES to pledge those interests to persons or entities that do not participate
in the DTC system, or otherwise take actions in respect of those interests, may
be affected by the lack of a physical certificate evidencing those interests.
For certain other restrictions on the transferability of the TIDES, see
"-- Certificated TIDES."
EXCEPT AS DESCRIBED BELOW, OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL
TIDES ARE NOT ENTITLED TO HAVE TIDES REGISTERED IN THEIR NAMES, AND THEY WILL
NOT RECEIVE OR BE ENTITLED TO RECEIVE PHYSICAL DELIVERY OF TIDES IN CERTIFICATED
FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS OF TIDES UNDER
THE DECLARATION OF TRUST FOR ANY PURPOSE.
Payments in respect of the Global TIDES registered in the name of DTC or
its nominee will be payable by the property trustee to DTC or its nominee as the
registered holder under the declaration of trust by wire transfer in immediately
available funds on each distribution date. Under the terms of the declaration of
trust, the property trustee will treat the persons in whose names the TIDES,
including the Global TIDES, are registered as the owners of the Global TIDES for
the purpose of receiving payments and for any and all other purposes.
Consequently, neither the property trustee nor any agent of the property trustee
has or will have any responsibility or liability for (1) any aspect of DTC's
records or any Participant's or Indirect Participant's records relating to, or
payments made on account of, beneficial ownership interests in the Global TIDES,
or for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global TIDES or (2) any other matter relating to the
actions and practices of DTC or any of its Participants or Indirect
Participants. DTC has advised us and the trust that its current practice, upon
receipt of any payment in respect of securities such as the TIDES, is to credit
the accounts of the relevant Participants with the payment on the payment date,
in amounts proportionate to their respective holdings in liquidation amount of
beneficial interests in the Global TIDES, as shown on the records of DTC, unless
DTC has reason to believe it will not receive payment on the payment date.
Payments by the Participants and the Indirect Participants to the beneficial
owners of TIDES represented by Global TIDES held through the Participants will
be governed by standing instructions and customary practices and will be the
responsibility of the Participants or the Indirect Participants and will not be
the responsibility of DTC, the property trustee or us. Neither the trust nor the
property trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the TIDES, and the trust and the
property trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Interests in the Global TIDES will trade and settle according to the rules
and procedures of DTC and its Participants. Transfers and settlements between
Participants in DTC will be effected in accordance with DTC's procedures.
DTC has advised us and the trust that it will take any action permitted to
be taken by you (including, without limitation, the presentation of TIDES for
exchange as described below) only at the direction of one or more Participants
to whose account with DTC interests in the Global TIDES are credited and only in
respect of the portion of the aggregate liquidation amount of the TIDES
represented by the Global TIDES as to which the Participant or Participants has
or have given such direction. However, if there is an Event of Default under the
declaration of trust, DTC reserves the right to exchange the
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Global TIDES for TIDES in certificated form and to distribute those TIDES to its
Participants.
So long as DTC or its nominee is the registered owner of the Global TIDES,
DTC or the nominee, as the case may be, will be considered the sole owner or
holder of the TIDES represented by the Global TIDES for all purposes under the
declaration of trust.
Neither DTC nor its nominee will consent or vote with respect to the TIDES.
Under its usual procedures, DTC would mail an omnibus proxy to the trust as soon
as possible after the record date. The omnibus proxy assigns the consenting or
voting rights of DTC or its nominee to those Participants to whose accounts the
TIDES are credited on the record date (identified in a listing attached to the
omnibus proxy).
The information in this section concerning DTC and its book-entry system
has been obtained from sources that we and the trust believe to be reliable, but
neither we nor the trust takes responsibility for the accuracy of the
information.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global TIDES among Participants in DTC, it is under no
obligation to perform or to continue to perform those procedures, and those
procedures may be discontinued at any time. Neither the trust nor the property
trustee will have any responsibility for the performance by DTC or its
Participants or Indirect Participants of their respective obligations under the
rules and procedures governing their operations.
CERTIFICATED TIDES
The TIDES represented by the Global TIDES will be exchangeable for
certificated TIDES in definitive form of like tenor as the TIDES ("Certificated
TIDES") in denominations of U.S. $1,000.00 and integral multiples of $1,000.00
if:
- DTC notifies us or the trust that it is unwilling or unable to continue
as depositary for the Global TIDES, or if at any time DTC ceases to be a
clearing agency registered under the Exchange Act;
- Entercom on behalf of the trust in its sole discretion at any time
determines not to have all of the TIDES evidenced by Global TIDES; or
- a default entitling you to accelerate the maturity of the TIDES has
occurred and is continuing.
Any of the TIDES that are exchangeable pursuant to the preceding sentence are
exchangeable for Certificated TIDES issuable in authorized denominations and
registered in the names as DTC directs. Subject to the foregoing, the Global
TIDES are not exchangeable, except for Global TIDES of the same aggregate
denomination to be registered in the name of DTC or its nominee.
PAYMENT AND PAYING AGENCY
Payments in respect of the TIDES held in global form will be made to DTC,
which will credit the relevant accounts at DTC on the applicable distribution
dates, or, in respect of the TIDES that are not held by DTC, the payments will
be made by check mailed to the address of the holder entitled thereto as the
address appears on the register. The paying agent will initially be the property
trustee and any co-paying agent chosen by the property trustee and acceptable to
the administrative trustees and us. The paying agent may resign as paying agent
upon 30 days' written notice to the property trustee, the administrative
trustees and us. If the property trustee is no longer the paying agent, the
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administrative trustees will appoint a successor (which will be a bank or trust
company acceptable to the administrative trustees and us) to act as paying
agent.
The property trustee has informed the trust that so long as it serves as
paying agent for the TIDES, it anticipates that information regarding
distributions on the TIDES, including payment date, record date and redemption
information, will be made available through Wilmington Trust Company.
REGISTRAR, CONVERSION AGENT AND TRANSFER AGENT
The property trustee acts as registrar, conversion agent and transfer agent
for the TIDES.
The property trustee will act as initial paying agent and transfer agent
for Certificated TIDES and may designate additional or substitute paying agents
and transfer agents at any time. Registration of transfers of Certificated TIDES
will be effected without charge by or on behalf of the trust, but upon payment
(with the giving of such indemnity as the administrative trustees, the property
trustee or we may require) in respect of any tax or other government charges
that may be imposed in connection with any transfer or exchange. The trust will
not be required to register the transfer or exchange of Certificated TIDES
during the period beginning at the opening of business 15 days before any
selection of Certificated TIDES to be redeemed and ending at the close of
business on the day of that selection or register the transfer or exchange of
any Certificated TIDES, or portion thereof, called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The property trustee, other than during the occurrence and continuance of
an event of default, will undertake to perform only those duties as are
specifically set forth in the declaration of trust and, during the existence of
an event of default, must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the property trustee is under no obligation to
exercise any of the powers vested in it by the declaration of trust at the
request of any holder of TIDES or the trust's common securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. If no event of default has occurred and is continuing
and the property trustee is required to decide between alternative causes of
action, construe ambiguous provisions in the declaration of trust or is unsure
of the application of any provision of the declaration of trust, and the matter
is not one on which holders of the TIDES or the trust's common securities are
entitled under the declaration of trust to vote, then the property trustee will
take the action as is directed by us. If the property trustee receives no
directions, it will take the action as it deems advisable and in the best
interests of the holders of the TIDES and the trust's common securities and will
have no liability except for its own bad faith, negligence or willful
misconduct.
MISCELLANEOUS
The administrative trustees are authorized and directed to:
- conduct the affairs of and to operate the trust in a way that the trust
will not be deemed to be an investment company required to be registered
under the Investment Company Act;
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- take any action to cause the trust to be classified for United States
federal income tax purposes as a grantor trust; and
- take any action to ensure that the debentures will be treated as our
indebtedness for United States federal income tax purposes.
In this connection, we and the administrative trustees are authorized to
take any action, not inconsistent with applicable law, the trust's certificate
of trust or the declaration of trust, that we and the administrative trustees
determine in our and their discretion to be necessary or desirable for those
purposes, as long as their actions do not materially adversely affect the
interests of the holders of the TIDES or the trust's common securities.
You and the holders of the trust's common securities have no preemptive or
similar rights.
The trust may not borrow money or issue debt or mortgage or pledge any of
its assets.
GOVERNING LAW
The declaration of trust and the TIDES will be governed by and construed in
accordance with the laws of the State of Delaware.
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DESCRIPTION OF
CONVERTIBLE SUBORDINATED DEBENTURES
We will issue the debentures under the Indenture. The Indenture will be
qualified under and will be subject to and governed by the Trust Indenture Act
upon effectiveness of the registration statement of which this prospectus is a
part. This summary of certain terms and provisions of the debentures and the
Indenture is not complete. For a complete description of the debentures, we
encourage you to read the Indenture. The form of Indenture has been filed as an
exhibit to the registration statement of which this prospectus is a part. Unless
the context requires otherwise, "Entercom," "We," "Us," "Our" or similar terms
in this section refer solely to Entercom Communications Corp. and not the trust
or any of our other consolidated subsidiaries.
GENERAL
Concurrently with the issuance of the TIDES and the trust's common
securities, the trust will invest the proceeds in our % Convertible
Subordinated Debentures due 2014. Interest will accrue on the debentures from
the date of their original issuance, at the annual rate of % of the
principal amount thereof, subject to the deferral rights described below. The
trust will make those payments quarterly in arrears on March 31, June 30,
September 30 and December 31 (each, an "Interest Payment Date"), commencing
December 31, 1999, to the person in whose name each debenture is registered, at
the close of business on the fifteenth of the month in which the applicable
Interest Payment Date falls.
We anticipate that, until the liquidation of the trust, each debenture will
be registered in the name of the trust and held by the property trustee for the
benefit of the holders of the TIDES and the trust's common securities. The
amount of interest payable for any period will be computed on the basis of the
number of days elapsed in a 360-day year of twelve 30-day months. If any
Interest Payment Date is not a Business Day, then payment of the interest
payable on that date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any the delay),
with the same force and effect as if made on the applicable Interest Payment
Date. Accrued interest that is not paid on the applicable Interest Payment Date
will bear additional interest on the amount of interest (to the extent permitted
by law), compounded quarterly from the relevant Interest Payment Date. The term
"interest" as used herein will include quarterly interest payments, interest on
quarterly interest payments not paid on the applicable Interest Payment Date and
Additional Sums, as applicable. See "-- Additional Sums."
If the trust distributes the debentures to you, the description of your
conversion rights in this prospectus will apply, with such changes as are
necessary, to the conversion of the debentures. See "Description of
TIDES -- Conversion Rights."
Unless we previously redeem or repurchase the debentures in accordance with
the Indenture, they will mature on September 30, 2014.
See"-- Redemption -- Repayment at Maturity; Redemption of Convertible
Subordinated Debentures."
The debentures will be unsecured and will rank junior and subordinate in
right of payment to all of our Secured Senior Debt. Because we are principally a
holding company, our right to participate in any distribution of assets of any
subsidiary upon the subsidiary's liquidation or reorganization or otherwise (and
thus the ability of holders of the TIDES to benefit indirectly from the
distribution) is subject to the prior claims of creditors of the
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subsidiary, except to the extent that we may ourselves be recognized as a
creditor of the subsidiary. Accordingly, the debentures will be subordinated to
all of our Secured Senior Debt and effectively subordinated to all existing and
future liabilities of our subsidiaries. Our subsidiaries are separate legal
entities and have no obligations to pay, or make funds available for the payment
of, any amounts due on the debentures, the TIDES or the guarantee. Therefore,
holders of debentures should look only to our assets for payments on the
debentures. The Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of Entercom, whether under our current credit
agreement or any other debt instrument or agreement that we may enter into in
the future or otherwise. See "Risk Factors -- Risks Relating to the TIDES" and
"-- Subordination."
OPTION TO EXTEND INTEREST PAYMENT DATE
As long as no event of default under the debentures has occurred and is
continuing, we have the right under the Indenture to defer the payment of
interest on the debentures at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each deferral period;
provided, that no deferral period may extend beyond the stated maturity of the
debentures. At the end of a deferral period, we must pay all interest, then
accrued and unpaid on the debentures (together with interest thereon compounded
quarterly from the relevant Interest Payment Date, to the extent permitted by
applicable law). During a deferral period and for so long as the debentures
remain outstanding, interest will continue to accrue and holders of debentures
(and holders of the TIDES while TIDES are outstanding) will be required to
accrue interest income (in the form of original issue discount) for United
States federal income tax purposes.
During any deferral period, we may not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock (which includes common and preferred stock) other than stock
dividends paid by us which consist of stock of the same class as that on
which the dividend is being paid;
- make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any of our debt securities that rank pari passu with
or junior in interest to the debentures; or
- make any guarantee payments with respect to any guarantee by Entercom of
the debt securities of any of our subsidiaries if the guarantee ranks
pari passu with or junior in interest to the debentures, in each case
other than:
- dividends or distributions in shares of our capital stock;
- any declaration of a dividend in connection with the implementation of
a stockholders' rights plan, or the issuance of stock under plan in
the future, or the redemption or repurchase of any rights pursuant
thereto;
- payments under the Guarantee;
- purchases or acquisitions of shares of our common stock in connection
with the satisfaction by us of our obligations under any employee
benefit plan or any other contractual obligation (other than a
contractual obligation ranking expressly by its terms pari passu with
or junior to the debentures);
- as a result of a reclassification of our capital stock or the exchange
or conversion of one class or series of our capital stock for another
class or series of our capital stock; or
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- the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital stock
or the security being converted or exchanged.
The lenders under our Senior Credit Agreement have required, and we expect
that the lenders under the amended or replacement credit facility we are seeking
to obtain will require, that we exercise our right to defer interest on the
debentures in the event a default occurs under the Senior Credit Agreement or
other credit facility. Subject to the 20-quarter limitation, the lenders would
require this deferral to remain in effect until the default is cured or waived
and for a period of two complete consecutive quarters after any and all defaults
have been cured or waived.
A deferral period will terminate upon the payment by us of all interest
then accrued and unpaid on the debentures (together with interest accrued
thereon, compounded quarterly, to the extent permitted by applicable law). Prior
to the termination of any deferral period, we may further extend the deferral
period. However, the further deferral cannot cause the deferral period to exceed
20 consecutive quarters or to extend beyond the stated maturity of the
debentures. Upon the termination of any deferral period, and subject to the
foregoing limitations, we may elect to begin a new deferral period. We need not
pay any interest during a deferral period, except at the end of the deferral
period. We must give the property trustee, the administrative trustees and the
debenture trustee notice of our election of any deferral period at least ten
days prior to the record date for the distributions on the TIDES that would have
been payable except for the election to begin or extend the deferral period. The
debenture trustee will give notice of our election to begin or extend a new
deferral period to the holders of the debentures. There is no limitation on the
number of times that we may elect to begin a deferral period.
REDEMPTION
REPAYMENT AT MATURITY; REDEMPTION OF CONVERTIBLE SUBORDINATED DEBENTURES
We must repay the debentures at their stated maturity on September 30,
2014, unless earlier redeemed. The circumstances in which we may, or we are
required to, redeem the debentures prior to their stated maturity are described
below. Upon the repayment in full at maturity or redemption, in whole or in
part, of the debentures (other than following the distribution of the debentures
to the holders of the TIDES and the trust's common securities), the trust will
concurrently apply the proceeds from the repayment or redemption to redeem, at
the applicable Redemption Price, a Like Amount of TIDES and its common
securities. See "Description of TIDES -- Mandatory Redemption."
OPTIONAL REDEMPTION
We will have the right to redeem the debentures in whole or in part, at any
time after October 3, 2002, upon not less than 20 nor more than 60 day's notice,
at a redemption price (the "Optional Redemption Price") equal to the following
prices per $50 principal
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amount of debentures, plus accrued and unpaid interest thereon, if redeemed
during the 12-month period ending September 30:
<TABLE>
<CAPTION>
PRICE PER
YEAR $50 PRINCIPAL AMOUNT
- ---- --------------------
<S> <C>
2003...................... $
2004...................... $
2005...................... $
2006...................... $
</TABLE>
In the event of any redemption in part, we will not be required:
- to issue, register the transfer of or exchange any debenture during a
period beginning at the opening of business 15 days before any selection
for redemption of debentures and ending at the close of business on the
earliest date on which the relevant notice of redemption is deemed to
have been given to all holders of debentures to be so redeemed; and
- to register the transfer of or exchange any debentures so selected for
redemption, in whole or in part, except the unredeemed portion of any
debenture being redeemed in part.
In no event will we optionally redeem the debentures during a deferral
period. Accordingly, prior to optionally redeeming the debentures, all interest
accrued and unpaid (together, in the case of a deferral period, with interest
thereon, to the extent permitted by law) to the Interest Payment Date
immediately preceding the Optional Redemption Date will be paid in full.
TAX EVENT REDEMPTION
We may also, under limited circumstances within 90 days of the occurrence
and continuation of a Tax Event, redeem (a "Tax Event Redemption") the
debentures in whole, but not in part, at the aggregate principal amount of the
debentures plus accrued and unpaid interest thereon to the date of redemption
(the "Tax Event Redemption Price"). See "Description of TIDES -- Tax Event or
Investment Company Event Redemption or Distribution."
If we are permitted to consummate a Tax Event Redemption and we desire to
do so, we must cause a notice to be mailed to each holder of TIDES and each
holder of debentures at least 30 days but not more than 60 days before the
Redemption Date. In the event of a Tax Event Redemption, you may convert your
TIDES (or debentures, if applicable) called for redemption into our Class A
common stock at the Applicable Conversion Ratio prior to 5:00 p.m., New York
City time, on the applicable Redemption Date.
ADDITIONAL SUMS
If (A) the property trustee is the sole holder of all the debentures and
(B) the trust is required to pay any additional taxes, duties, assessments or
other governmental charges (other than withholding taxes) as a result of a Tax
Event ("Additional Sums"), we will pay as additional amounts on the debentures
those amounts as required so that the distributions payable by the trust in
respect of the TIDES and its common securities will not be reduced as a result
of any of those Additional Sums.
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RESTRICTIONS ON PAYMENTS
If (A) there has occurred an event of default under the debentures, (B) we
are in default with respect to our payment of any obligations under the
Guarantee or (C) we have given notice of our election of a deferral period as
provided in the Indenture and have not rescinded that notice, or the deferral
period is continuing, we will not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock (which includes common and preferred stock) other than stock
dividends paid by us which consist of stock of the same class as that on
which the dividend is being paid;
- make any payment of principal, interest or premium, if any, on or repay
or repurchase or redeem any of our debt securities that rank pari passu
with or junior in interest to the debentures; or
- make any guarantee payments with respect to any guarantee by Entercom of
the debt securities of any of our subsidiaries if the guarantee ranks
pari passu with or junior in interest to the debentures in each case
other than:
- dividends or distributions in shares of our capital stock;
- any declaration of a dividend in connection with the implementation of
a stockholders' rights plan, or the issuance of stock under any plan
in the future, or the redemption or repurchase of any rights pursuant
thereto;
- payments under the Guarantee;
- purchases or acquisitions of shares of our common stock in connection
with the satisfaction by us of our obligations under any employee
benefit plan or any other contractual obligation (other than a
contractual obligation ranking expressly by its terms pari passu with
or junior in interest to the debentures);
- as a result of a reclassification of our capital stock or the exchange
or conversion of one class or series of our capital stock for another
class or series of our capital stock; or
- the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital stock
or the security being converted or exchanged.
MODIFICATION OF INDENTURE
From time to time we and the debenture trustee may, without the consent of
the holders of debentures, amend, waive or supplement the Indenture for
specified purposes, including, among other things, curing ambiguities, defects
or inconsistencies (provided that any action does not materially adversely
affect the interest of the holders of debentures or the holders of the TIDES so
long as they remain outstanding) and qualifying, or maintaining the
qualification of, the Indenture under the Trust Indenture Act. The Indenture
contains provisions permitting us and the debenture trustee, with the consent of
the holders of not less than a majority in principal amount of debentures, to
modify the Indenture in a manner affecting the rights of the holders of
debentures. However, no modification may, without the consent of the holder of
each outstanding debenture so affected,
- change the stated maturity of the debentures;
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- reduce the principal amount of the debentures;
- reduce the rate or extend the time of payment of interest on the
debentures;
- reduce the percentage of principal amount of debentures the consent of
whose holders is required to amend, waive or supplement the Indenture; or
- have certain other effects as set forth in the Indenture.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the debentures that has occurred and is continuing
constitutes an event of default under the debentures:
(1) failure for 30 days to pay any interest on the debentures when due
(subject to the deferral of any due date in the case of a deferral period);
(2) failure to pay any principal or premium, if any, on the debentures
when due, whether at maturity, upon redemption, by declaration of
acceleration or otherwise;
(3) failure to observe or perform certain other covenants contained in
the Indenture for 90 days after written notice to us from the debenture
trustee or the holders of at least 25% in aggregate outstanding principal
amount of the debentures;
(4) failure by us to issue and deliver shares of our Class A common
stock upon an election by a holder of TIDES to convert its TIDES;
(5) bankruptcy, insolvency or reorganization of Entercom or any of its
significant subsidiaries; or
(6) the voluntary or involuntary dissolution, winding-up or
termination of the trust, except in connection with the distribution of the
debentures to the holders of TIDES and the trust's common securities in
liquidation of the trust, the redemption of all of the TIDES and the
trust's common securities or certain mergers, consolidations or
amalgamations, each as permitted by the declaration of trust.
The holders of a majority in aggregate outstanding principal amount of the
debentures have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the debenture trustee. The debenture
trustee or the holders of not less than 25% in aggregate outstanding principal
amount of the debentures may declare the principal due and payable immediately
upon an event of default under the debentures and, should the debenture trustee
or the holders of debentures fail to make such declaration, the holders of at
least 25% in aggregate liquidation amount of the TIDES will have the right to
make the declaration; provided that any declaration will not be effective until
the earlier to occur of (1) five business days after receipt by us and the
administrative agent under the Senior Credit Agreement of written notice of the
declaration and (2) acceleration of obligations under the Senior Credit
Agreement. The holders of a majority in aggregate outstanding principal amount
of the debentures may annul the declaration and waive the default if the default
(other than the non-payment of the principal of the debentures which has become
due solely by the acceleration) has been cured and a sum sufficient to pay all
matured installments of interest and principal due otherwise than by
acceleration has been deposited with the debenture trustee. Should the holders
of debentures fail to annul the declaration and waive the default, the holders
of a majority in aggregate liquidation amount of the TIDES will have the right
to make a declaration and waive the default.
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The holders of a majority in aggregate outstanding principal amount of the
debentures affected thereby may, on behalf of the holders of all the debentures,
waive any past default, except a default in the payment of principal of (or
premium, if any) or interest (unless the default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the debenture trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
debenture. Should the holders of the debentures fail to annul the declaration
and waive the default, the holders of a majority in aggregate liquidation amount
of the TIDES will have the right. We are required to file annually with the
debenture trustee a certificate as to whether or not we are in compliance with
all the conditions and covenants applicable to us under the Indenture.
In case an event of default under the debentures occurs and is continuing,
the property trustee will have the right to declare the principal of and the
interest on the debentures, and any other amounts payable under the Indenture,
to be forthwith due and payable and to enforce its other rights as a creditor
with respect to the debentures; provided that any declaration will not be
effective until the earlier to occur of (1) five business days after receipt by
us and the administrative agent under the Senior Credit Agreement of written
notice of the declaration and (2) acceleration of obligations under the Senior
Credit Agreement.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TIDES
If an event of default under the debentures has occurred and is continuing
and the event is attributable to our failure to pay interest or principal on the
debentures on the date the interest or principal is otherwise payable, you may
institute an action directly against us. We may not amend the Indenture to
remove the foregoing right to bring a direct action against us without the prior
written consent of the holders of all of the TIDES. If the right to bring a
direct action against us is removed, the trust may become subject to the
reporting obligations under the Exchange Act. Notwithstanding any payments made
to a holder of TIDES by us in connection with a direct action against us, we
will remain obligated to pay the principal of and interest on the debentures,
and we will be subrogated to the rights of the holder of the TIDES with respect
to payments on the TIDES to the extent of any payments made by us to the holder
in any direct action against us.
You will not be able to exercise directly any remedies, other than those
set forth in the preceding paragraph, available to the holders of the debentures
unless there was an event of default under the declaration of trust. See
"Description of TIDES--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that we will not consolidate with or merge with or
into any other person or convey, transfer or lease our properties and assets
substantially as an entirety to any person other than a wholly owned subsidiary,
and no person will consolidate with or merge with or into us or convey, transfer
or lease its properties and assets substantially as an entirety to us, unless:
- in case we consolidate with or merge with or into another person or
convey, transfer or lease our properties and assets substantially as an
entirety to any person other than a wholly owned subsidiary, the
successor person is organized under the laws of
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the United States or any State of the United States or the District of Columbia,
and the successor person expressly assumes our obligations on the debentures
issued under the Indenture and provides for conversion rights in accordance with
the Indenture;
- immediately after giving effect thereto, no event of default under the
debentures and no event which, after notice or lapse of time or both,
would become an event of default under the debentures, has occurred and
is continuing;
- if at the time any TIDES are outstanding, the transaction is permitted
under the declaration of trust and the Guarantee and does not give rise
to any breach or violation of the declaration or trust or the Guarantee;
and
- certain other conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the
debentures protection in the event of a highly leveraged or other transaction
involving us that may adversely affect holders of the debentures.
SUBORDINATION
In the Indenture, we have covenanted and agreed that any debentures issued
thereunder will be subordinate and junior in right of payment to all of our
Secured Senior Debt to the extent provided in the Indenture. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution,
winding-up, assignment for the benefit of creditors, marshaling of assets or any
bankruptcy, insolvency or similar proceedings relating to Entercom, the holders
of Secured Senior Debt will first be entitled to receive payment in full in cash
of principal of (and premium, if any), interest, and all other obligations with
respect to the Secured Senior Debt before the holders of debentures, or the
property trustee (or any other person or entity) on behalf of the holders, will
be entitled to receive or retain any payment or distribution in respect of the
debentures.
In the event of the acceleration of the maturity of the debentures, the
holders of all Secured Senior Debt outstanding at the time of the acceleration
will first be entitled to receive payment in full in cash of all amounts due
thereon (including any amounts due upon acceleration) before the holders of the
debentures will be entitled to receive or retain any payment or distribution in
respect of the debentures.
In the event that
- we default in the payment of any principal of, premium (if any), interest
on, or any other amount with respect to, any Secured Senior Debt when the
same becomes due and payable (a "payment default"), whether at maturity
or at a date fixed for prepayment or by declaration of acceleration or
otherwise; and, in the case of Secured Senior Debt other than Designated
Secured Senior Debt,
- the default continues beyond the period of grace, if any, specified in
the instrument evidencing the Secured Senior Debt,
then, unless and until the default is cured or waived or ceases to exist or all
Secured Senior Debt is paid in full in cash, no direct or indirect payment or
distribution (in cash, property, securities, by set-off or otherwise) will be
made or agreed to be made for or in respect of the debentures, or in respect of
any redemption, repayment, retirement, purchase or other acquisition of any of
the debentures.
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Furthermore, in the event that
- we suffer a default (other than a payment default) under any Designated
Secured Senior Debt; and
- the default continues beyond the period of grace, if any, specified in
the instrument evidencing the Designated Secured Senior Debt,
then, commencing upon the receipt by the debenture trustee (with a copy to us)
of written notice of the default from the representative of the holders of the
Designated Secured Senior Debt and until the default is cured or waived or
ceases to exist or all the Designated Secured Senior Debt is paid in full in
cash, no direct or indirect payment or distribution (in cash, property,
securities, by set-off or otherwise) will be made or agreed to be made for or in
respect of the debentures, or in respect of any redemption, repayment,
retirement, purchase or other acquisition of any of the debentures. We must
promptly notify the holders of Designated Secured Senior Debt of the occurrence
of any default under the Indenture or the debentures.
The term "Designated Secured Senior Debt" means (1) any obligation under
the Senior Credit Agreement and (2) any other Secured Senior Debt the principal
amount of which is $10.0 million or more and that has been designated by us as
"Designated Secured Senior Debt."
The term "Senior Credit Agreement" means (A) that certain Loan Agreement,
dated February 13, 1998, as amended on October 8, 1998 and as further amended on
July 20, 1999, by and among Entercom, as the borrower, Key Corporate Capital
Inc., as administrative agent and document agent, Bank of America National Trust
& Savings Association, as syndication agent, and the financial institutions
listed therein, as amended, including, without limitation, any related notes,
letters of credit, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and, in each case, as amended, amended and
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time, and (B) any other debt or credit facility or commercial
paper facility providing for revolving credit loans, term loans, accounts
receivable financing (including through the sale of accounts receivable to such
lenders or to special purpose entities formed to borrow from such lenders
against such accounts receivable), letters of credit or other form of financing,
in each case, as amended, restated, supplemented, extended, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time,
including, in the case of clause (A) and clause (B), any such amendment,
restatement, supplement, extension, modification, renewal, refunding,
replacement or refinancing, (1) extending or shortening the maturity of any
obligation incurred thereunder or contemplated thereby, (2) adding or deleting
borrowers or guarantors thereunder and (3) increasing the amount of credit
extended, or available to be extended, thereunder.
The term "Senior Debt" means:
(A) all of our obligations under the Senior Credit Agreement, whether
as an obligor, guarantor or otherwise, including, without limitation,
principal (including, without limitation, reimbursement obligations in
respect of letters of credit (whether or not drawn) and obligations to cash
collateralize letters of credit), premium (if any), interest (including,
without limitation, interest accruing subsequent to the filing of, or which
would have accrued but for the filing of, a petition for bankruptcy,
whether or not the interest is an allowable claim in the bankruptcy
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proceeding), fees, indemnifications, expenses and other amounts payable
pursuant thereto;
(B) the principal of, and premium and interest, if any, on all of our
indebtedness for money borrowed, whether outstanding on the date of
execution of the Indenture or thereafter created, assumed or incurred;
(C) all obligations to make payment pursuant to the terms of financial
instruments, such as (1) securities contracts and foreign currency exchange
contracts, (2) derivative instruments, such as swap agreements (including
interest rate and foreign exchange rate swap agreements), cap agreements,
floor agreements, collar agreements, interest rate agreements, foreign
exchange agreements, options, commodity futures contracts and commodity
options contracts, and (3) similar financial instruments; except, in the
case of both (A) and (B) above, the indebtedness and obligations that are
expressly stated to rank junior in right of payment to, or pari passu in
right of payment with, the debentures;
(D) indebtedness or obligations of others of the kind described in
(A), (B) and (C) above for the payment of which we are responsible or
liable as guarantor or otherwise; and
(E) any deferrals, renewals or extensions of any Senior Debt that is
secured, in whole or in part by our assets.
However, Senior Debt will not be deemed to include:
- any of our Debt which, when incurred and without respect to any election
under Section 1111(b) of the United States Bankruptcy Code of 1978, was
without recourse to us;
- trade accounts payable in the ordinary course of business;
- any of our Debt to any of our subsidiaries; or
- Debt to any of our employees.
The term "Secured Senior Debt" means Senior Debt that by its terms is
secured by any lien, pledge, charge, encumbrance, mortgage, deed of trust,
hypothecation, assignment or security interest with respect to assets having a
fair market value at the time of the grant thereof (in the judgment of the Board
of Directors, our Chief Financial Officer or other responsible officer of
Entercom) equal to not less than the amount of such Senior Debt, including,
without limitation, Senior Debt under the Senior Credit Agreement.
The term "Debt" means:
- the principal of, and premium and interest, if any, on indebtedness for
money borrowed;
- purchase money and similar obligations;
- obligations under capital leases;
- guarantees, assumptions or purchase commitments relating to, or other
transactions as a result of which we are responsible for the payment of
the indebtedness of others;
- renewals, extensions and refunding of any indebtedness;
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- interest or obligations in respect of any indebtedness accruing after the
commencement of any insolvency or bankruptcy proceedings; and
- obligations associated with derivative products such as interest rate and
currency exchange contracts, foreign exchange contracts, commodity
contracts and similar arrangements.
The Indenture places no limitation on the amount of Secured Senior Debt
that may be incurred by us. We expect from time to time to incur additional
indebtedness constituting Secured Senior Debt. At June 30, 1999, our aggregate
outstanding Secured Senior Debt was approximately $166.3 million plus a $4.9
million letter of credit, and, on a pro forma basis, we would have had
consolidated Secured Senior Debt of $538.9 million plus a $4.9 million letter of
credit. The Indenture also places no limitation on the Debt of our subsidiaries,
which effectively ranks senior in right of payment to the debentures.
REGISTRATION AND TRANSFER
The debentures will be represented by one or more global certificates
registered in the name of Cede & Co. as the nominee of DTC if, and only if,
distributed to the holders of the TIDES and the trust's common securities. Until
that time, the debentures will remain registered in the name of and held by the
property trustee. Should the debentures be distributed to holders of the TIDES
and the trust's common securities, beneficial interests in the debentures will
be shown on, and transfers of debentures will be effected only through, records
maintained by Participants in DTC. Except as described below, debentures in
certificated form will not be issued in exchange for the global certificates.
A global security will be exchangeable for debentures in certificated form
registered in the names of persons other than Cede & Co. only if:
- DTC notifies us that it is unwilling or unable to continue as a
depositary for the global security and no successor depositary has been
appointed, or it at any time DTC ceases to be a "clearing agency"
registered under the Exchange Act, at a time when DTC is required to be
so registered to act as the depositary;
- we in our sole discretion determines that the global security will be so
exchangeable; or
- there has occurred and is continuing an event of default under the
debentures.
Any global security that is exchangeable pursuant to the preceding sentence
will be exchangeable for certificates registered in those names as DTC directs.
It is expected that the instructions will be based upon directions received by
DTC from its Participants with respect to ownership of beneficial interests in
the global security.
Payments on debentures held in global form will be made to DTC, as the
depositary for the debentures. In the case of debentures issued in certificated
form, principal and interest will be payable, the transfer of the debentures
will be registrable, and debentures will be exchangeable for debentures of other
denominations of a like aggregate principal amount, at the corporate office of
the debenture trustee in New York, New York, or at the offices of any paying
agent or transfer agent appointed by us, provided that payment of interest may
be made at our option of by check mailed to the address of the persons entitled
thereto or by wire transfer.
For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Description of TIDES -- Form, Book-Entry Procedures and
Transfer." If the debentures
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are distributed to the holders of the TIDES and the trust's common securities
upon the trust's termination, the form, book-entry and transfer procedures with
respect to the TIDES as described under "Description of TIDES -- Form,
Book-Entry Procedures and Transfer," will apply to the debentures with such
changes to the details of the procedures as are necessary.
PAYMENT AND PAYING AGENTS
Payment of the principal of and interest on the debentures will be made at
the office or agency we maintain for that purpose in New York, New York, in the
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. However, at our option,
payment of interest may be made (except in the case of debentures that are held
in global form) by check mailed to each registered holder or by wire transfer.
Payment of any interest on any debentures will be made to the person in whose
name the debentures is registered at the close of business on the record date
for that interest payment date, except in the case of defaulted interest.
GOVERNING LAW
The Indenture and the debentures will be governed by and construed in
accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The debenture trustee will be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to those provisions, the debenture trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of debentures, unless offered reasonable indemnity by the
holder against the costs, expenses and liabilities which might be incurred
thereby. The debenture trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its duties
if the debenture trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
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DESCRIPTION OF GUARANTEE
We will execute and deliver the Guarantee for your benefit concurrently
with the issuance by the trust of the TIDES. Wilmington Trust Company will act
as guarantee trustee under the Guarantee. The Guarantee will be qualified under
the Trust Indenture Act upon the effectiveness of the registration statement of
which this prospectus is a part. This summary of certain provisions of the
Guarantee is not complete. For a complete description of the Guarantee, we
encourage you to read the Guarantee. The guarantee trustee holds the Guarantee
for the benefit of the holders of the TIDES. We have filed the form of Guarantee
as an exhibit to the registration statement of which this prospectus is a part.
Unless the context requires otherwise, "Entercom," "We," "Us," "Our" or similar
terms in this section refer solely to Entercom Communications Corp. and not the
trust or any of our other consolidated subsidiaries.
GENERAL
Pursuant to the Guarantee, we will irrevocably agree to pay in full on a
subordinated basis, as set forth herein, the Guarantee Payments to you, as and
when due, regardless of any defense, right of set-off or counterclaim that the
trust may have or assert other than the defense of payment. The following
payments with respect to the TIDES, to the extent not paid by or on behalf of
the trust (the "Guarantee Payments"), will be subject to the Guarantee:
- any accrued and unpaid distributions required to be paid on the TIDES, to
the extent that the trust has funds on hand available at that time;
- the applicable Redemption Price with respect to TIDES called for
redemption, to the extent that the trust has funds on hand available at
that time; and
- upon a voluntary or involuntary dissolution, winding up or liquidation of
the trust (other than in connection with the distribution of debentures
to you or the redemption of all of the TIDES), the lesser of (a) the
Liquidation Distribution, to the extent the trust has funds available and
(b) the amount of assets of the trust remaining available for
distribution to you upon liquidation of the trust after satisfaction of
liabilities to the trust's creditors as required by applicable law.
Our obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by us to you or by causing the trust to pay
those amounts to you.
The Guarantee will be an irrevocable guarantee on a subordinated basis of
the trust's obligations under the TIDES, although it will apply only to the
extent that the trust has funds sufficient to make those payments, and is not a
guarantee of collection. If we do not make interest payments on the debentures
held by the trust, the trust will not be able to pay distributions on the TIDES
and will not have funds legally available for the distributions.
The Guarantee will rank subordinate and junior in right of payment to all
Secured Senior Debt. See "-- Status of the Guarantee." Because we are
principally a holding company, our right to participate in any distribution of
assets of any subsidiary, upon the subsidiary's liquidation or reorganization or
otherwise (and thus the ability of the holders of TIDES to benefit indirectly
from any such distribution), is subject to the prior claims of creditors of the
subsidiary, except to the extent we may ourselves be recognized as a creditor of
that subsidiary. Accordingly, our obligations under the Guarantee will be
effectively subordinated to all existing and future liabilities of our
subsidiaries, and
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claimants should look only to our assets for payments thereunder. The Guarantee
does not limit our incurrence or issuance of other secured or unsecured debt,
including Secured Senior Debt.
STATUS OF THE GUARANTEE
The Guarantee will constitute our unsecured obligation and will rank
subordinate and junior in right of payment to all Secured Senior Debt in the
same manner as the debentures.
The Guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against us
to enforce its rights under the Guarantee without first instituting a legal
proceeding against any other person or entity). The Guarantee will be held for
your benefit. The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the trust or upon
distribution to the holders of the TIDES or the debentures. The Guarantee does
not place a limitation on the amount of additional Secured Senior Debt that may
be incurred by us. We expect from time to time to incur additional indebtedness
constituting Secured Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
your rights (in which case no vote will be required), the Guarantee may not be
amended without the prior approval of the holders of not less than a majority of
the aggregate liquidation amount of the outstanding TIDES. The manner of
obtaining any the approval will be as set forth under "Description of
TIDES -- Voting Rights; Amendment of the Declaration." All guarantees and
agreements contained in the Guarantee will bind our successors, assigns,
receivers, trustees and representatives and will inure to the benefit of the
holders of the TIDES then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon our failure to
perform any of our payment or other obligations under the Guarantee; provided,
however, that except with respect to a default in payment of any Guarantee
Payment, we must have received notice of default and not have cured the default
within 60 days after receipt of the notice. The holders of not less than a
majority in aggregate liquidation amount of the TIDES have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the guarantee trustee in respect of the Guarantee or to direct the exercise
of any trust or power conferred upon the guarantee trustee under the Guarantee.
You may institute a legal proceeding directly against us to enforce your
rights under the Guarantee without first instituting a legal proceeding against
the trust, the guarantee trustee or any other person or entity.
We, as guarantor, are required to file annually with the guarantee trustee
a certificate as to whether or not we are in compliance with all the conditions
and covenants applicable to us under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee, other than during the occurrence and continuance of
our default in performance of the Guarantee, undertakes to perform only those
duties as are
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specifically set forth in the Guarantee and, after default with respect to the
Guarantee, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the guarantee trustee is under no obligation to exercise any of the
powers vested in it by the Guarantee at the request of any holder of the TIDES
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to each holder of TIDES upon:
- full payment of the Redemption Price of the TIDES and any accrued and
unpaid distributions;
- distribution of the debentures held by the trust to you;
- liquidation of the trust; or
- distribution of Class A common stock of Entercom to holders in respect of
conversion of the holder's TIDES into Class A common stock.
The Guarantee will terminate completely upon full payment of the amounts
payable in accordance with the declaration of trust. The Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
holder of the TIDES must restore payment of any sums paid under the TIDES or the
Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
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RELATIONSHIP AMONG THE TIDES, THE CONVERTIBLE
SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
We will irrevocably guarantee payments of distributions and other amounts
due on the TIDES (to the extent the trust has funds available for the payment of
those distributions) as and to the extent set forth under "Description of
Guarantee." Taken together, our obligations under the debentures, the Indenture,
the declaration of trust and the Guarantee, including our obligation to pay the
trust's costs, expenses and other liabilities (other than the trust's
obligations to the holders of the TIDES and its common securities pursuant to
the terms of those securities) provide in the aggregate, a full, irrevocable and
unconditional guarantee of all of the trust's obligations under the TIDES. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes the full, irrevocable and unconditional
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
trust's obligations under the TIDES and its common securities. If and to the
extent that we do not make payments on the debentures, the trust will not pay
distributions or other amounts due on the TIDES. The Guarantee does not cover
payment of distributions when the trust does not have sufficient funds to pay
those distributions. In that event, your remedy is to institute a direct action
against us. Our obligations under the Guarantee are subordinate and junior in
right of payment to all Secured Senior Debt. Unless the context requires
otherwise, "Entercom," "We," "Us," "Our" or similar terms in this section refer
solely to Entercom Communications Corp. and not the trust or any of our other
consolidated subsidiaries.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
debentures, the payments will be sufficient to cover distributions and other
payments due on the TIDES, primarily because:
- the aggregate principal amount or applicable Redemption Price of the
debentures will be equal to the sum of the aggregate liquidation amount
or applicable Redemption Price, as applicable, of the TIDES and the
trust's common securities;
- the interest rate payable on the debentures and interest and other
payment dates on the debentures will match the distribution rate and
distributions and other payment dates for the TIDES;
- we will pay for all of the trust's costs, expenses and liabilities except
the trust's obligations to holders of TIDES and its common securities
pursuant to the terms of those securities; and
- the declaration of trust further provides that the trust will not engage
in any activity that is not consistent with the limited purposes of the
declaration of trust.
Notwithstanding anything to the contrary in the Indenture, we have the
right to set off any payment we are otherwise required to make under the
Indenture with and to the extent we have already made, or are concurrently on
the date of that payment making, any payment under the Guarantee used to satisfy
the related payment of indebtedness under the Indenture.
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ENFORCEMENT RIGHTS OF HOLDERS OF TIDES
You may institute a legal proceeding directly against us to enforce your
rights under the Guarantee without first instituting a legal proceeding against
the guarantee trustee, the trust or any other person or entity.
A default or event of default under any Secured Senior Debt would not
constitute a default or event of default under the declaration of trust.
However, in the event of payment and certain other defaults under, or
acceleration of, Secured Senior Debt, the subordination provisions of the
Indenture provide that no payments may be made in respect of the debentures
until the Secured Senior Debt has been paid in full or the payment or other
default under any Secured Senior Debt has been cured or waived. Failure to make
required payments on debentures would constitute an Event of Default under the
declaration of trust.
LIMITED PURPOSE OF THE TRUST
The TIDES evidence an undivided beneficial ownership interest in the trust,
and the trust exists for the sole purpose of issuing the TIDES and the trust's
common securities and investing the proceeds of the TIDES and the trust's common
securities in the debentures.
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution, winding-up or liquidation of
the trust involving the liquidation of the debentures, after satisfaction of the
liabilities of the creditors of the trust as required by applicable law, you and
the holders of the trust's common securities will be entitled to receive, out of
the trust's assets held, the Liquidation Distribution in cash. See "Description
of TIDES -- Liquidation of the Trust and Distribution of Convertible
Subordinated Debentures." Upon any voluntary or involuntary liquidation or
bankruptcy of Entercom, the property trustee, as holder of the debentures, would
be a subordinated creditor of Entercom, subordinated in right of payment to all
Secured Senior Debt as set forth in the Indenture, but entitled to receive
payment in full of principal and interest, before any of our stockholders
receive payments or distributions. Since we are the guarantor under the
Guarantee and have agreed to pay for all of the trust's costs, expenses and
liabilities (other than the trust's obligations to the holders of its TIDES and
common securities), the positions of a holder of TIDES and a holder of
debentures relative to our other creditors and stockholders in the event of our
liquidation or bankruptcy are expected to be substantially the same.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Latham & Watkins, counsel to Entercom, the following are
the material United States federal income tax consequences of the ownership and
disposition of the TIDES. Unless otherwise stated, this summary deals only with
the TIDES held as capital assets (e.g., generally as an investment) by holders
who acquire the TIDES on their original issue date at their initial offering
price.
The treatment of a holder may vary depending on its particular situation.
This summary does not deal with all aspects of taxation that may be relevant to
a holder in light of its personal investments or tax circumstances, or to
holders who receive special treatment under the federal income tax laws,
including, without limitation:
- banks and other financial institutions;
- insurance companies;
- regulated investment companies and real estate investment trusts;
- tax-exempt entities;
- brokers-dealers;
- persons that hold the TIDES as a part of a position in a "straddle" or as
part of a "hedging," "conversion" or other integrated investment
transaction for federal income tax purposes;
- persons whose "functional currency" is not the U.S. dollar; or
- foreign persons.
Further, it does not include any description of alternative minimum tax
consequences or the tax laws of any state, local or foreign government that may
be applicable to the TIDES.
This summary is based on the Internal Revenue Code, Treasury Regulations
issued thereunder and administrative and judicial interpretations thereof as of
the date hereof, all of which are subject to change, possibly on a retroactive
basis. The authorities on which this summary is based are subject to various
interpretations, and it is therefore possible that the Federal income tax
treatment of the ownership and disposition of TIDES may differ from the
treatment described below.
INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE TAX
CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF THE TIDES, IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES, UNDER FEDERAL INCOME TAX LAWS AND ANY APPLICABLE
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, INCLUDING THE EFFECTS OF POSSIBLE
FUTURE CHANGES IN SUCH LAWS.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the TIDES, Latham & Watkins, counsel to
Entercom, will render its opinion generally to the effect that, assuming full
compliance with the terms of the declaration of trust, the Indenture and certain
other documents, the trust will be classified for federal income tax purposes as
a grantor trust and not as an association taxable as a corporation. Accordingly,
for federal income tax purposes each holder of TIDES will be considered the
owner of an undivided interest in the debentures
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held by the trust and will be required to include in gross income its pro rata
share of income on the debentures, including original issue discount, whether or
not cash is actually distributed to the holder.
CLASSIFICATION OF THE DEBENTURES
Entercom intends to take the position that the debentures will be
classified for federal income tax purposes as indebtedness of Entercom under
current law. By acceptance of the TIDES, each holder covenants to treat the
debentures as indebtedness and the TIDES as evidence of an indirect beneficial
ownership interest in the debentures. The Internal Revenue Service, however, has
announced in Notice 94-47 that it will scrutinize and may challenge the debt
classification of instruments that have some features similar to the debentures.
Thus, no assurance can be given that the classification of the debentures as
indebtedness will not be challenged by the Internal Revenue Service or, if
challenged, that such a challenge will not be successful. The remainder of this
discussion assumes that the debentures will be classified for federal income tax
purposes as indebtedness of Entercom.
ORIGINAL ISSUE DISCOUNT
Because Entercom has the option, under the terms of the debentures, to
defer payments of interest by extending the interest payment periods for up to
20 quarters, all of the stated interest payments on the debentures will be
treated as original issue discount. Under these rules, the original issue
discount on the debentures would accrue, and be includible in income, on a daily
basis under a constant yield method, including during any interest deferral
period, regardless of the holder's method of accounting for federal income tax
purposes. Consequently, holders of the TIDES would be required to include
original issue discount in gross income even if Entercom did not make any actual
distributions during the extension period. Actual distributions of stated
interest on the debentures generally would not be separately taxable. A holder
that disposes of its TIDES between record dates for payments of distributions on
the debentures will be subject to tax on original issue discount accrued through
the date of disposition (and not previously included in income), but will not
receive cash from the trust with respect to such original issue discount.
Because the income underlying the TIDES will not be characterized as
dividends for Federal income tax purposes, corporate holders of the TIDES will
not be entitled to a dividends-received deduction for any income recognized with
respect to the TIDES.
RECEIPT OF CONVERTIBLE SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE
TRUST
Under some circumstances, the debentures may be distributed to holders in
exchange for the TIDES and in liquidation of the trust. Under current law, a
distribution of the debentures to holders in exchange for the TIDES or in
liquidation of the trust would be a nontaxable event to each holder. In this
case, each holder would receive an aggregate tax basis in the debentures equal
to the holder's aggregate tax basis in the TIDES. A holder's holding period in
the debentures received in liquidation of the trust would include the period
during which the TIDES were held by the holder.
The debentures also may, under certain circumstances, be redeemed for cash
and the proceeds of such redemption distributed to holders in redemption of
their TIDES. Under current law, a redemption of the TIDES for cash would
constitute a taxable disposition of
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the redeemed TIDES. In this case, a holder would recognize gain or loss as if it
sold the redeemed TIDES for cash. See "-- Sale of TIDES."
If, however, the liquidation of the trust were to occur because of a Tax
Event which results in the trust being subject to Federal income tax with
respect to income accrued or received on the TIDES, the distribution of the
debentures to a holder of TIDES would be a taxable event to the trust and to
each holder of TIDES. In this case, each holder of TIDES would recognize gain or
loss as if the holder had exchanged its TIDES for the debentures upon
liquidation of the trust.
SALE OF TIDES
A holder that sells the TIDES will be considered to have disposed of all or
part of its pro rata share of the debentures and will recognize gain or loss
equal to the difference between the amount realized on the sale of the TIDES and
the holder's adjusted tax basis in the TIDES. A holder's adjusted tax basis in
the TIDES generally will be its initial purchase price, increased by original
issue discount previously includible in income and decreased by payments
received on the TIDES. Any gain or loss recognized on the sale or exchange of
the TIDES generally will be a capital gain or loss, except to the extent of any
accrued interest with respect to the holder's pro rata share of the debentures
required to be included in income as ordinary income. Any gain or loss will be
long term capital gain or loss if the TIDES have been held by the holder for
more than one year.
A holder who disposes of its TIDES between record dates for payments of
distributions thereon will be required to include original issue discount on the
debentures through the date of disposition in income as ordinary income, and to
add this amount to its adjusted tax basis in the TIDES. To the extent the amount
recognized on the sale is less than the holder's adjusted tax basis, which basis
will include all accrued but unpaid original issue discount, a holder will
recognize a capital loss. Subject to limited exceptions set forth in the
Internal Revenue Code, capital losses cannot be applied to offset ordinary
income for federal income tax purposes.
MARKET DISCOUNT AND BOND PREMIUM
Holders that purchase the TIDES at a price that is greater than or less
than the adjusted issue price of the holder's proportionate share of the
debentures, which generally should approximate the face amount plus accrued but
unpaid interest on the debentures, may be considered to have acquired their
undivided interest in the debentures with "market discount" or "acquisition
premium" as these terms are defined for federal income tax purposes. Such
holders are advised to consult their tax advisors as to the federal income tax
consequences of the acquisition, ownership and disposition of the TIDES.
CONVERSION OF TIDES INTO CLASS A COMMON STOCK
Except possibly to the extent attributable to accrued but unpaid interest
on the debentures, a holder of TIDES will not recognize income, gain or loss
upon the conversion, through the conversion agent, of debentures into Class A
common stock. A holder of TIDES will, however, recognize gain upon the receipt
of cash in lieu of a fractional share of Class A common stock equal to the
amount of cash so received less the holder's tax basis in the fractional share.
A holder's tax basis in Class A common stock received upon conversion should
generally be equal to the holder's tax basis in the TIDES
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delivered to the conversion agent for exchange, less the basis allocated to any
fractional share for which cash is received. A holder's holding period in Class
A common stock received upon conversion should generally begin on the date the
holder acquired the TIDES delivered to the conversion agent for exchange.
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Internal Revenue
Code will treat holders of TIDES as having received a constructive distribution
from Entercom in the event the conversion ratio of the debentures were adjusted
if (i) as a result of the adjustment, the proportionate interest (measured by
the quantum of Class A common stock into or for which the debentures are
convertible or exchangeable) of the holders of the TIDES in the assets or
earnings and profits of Entercom were increased, and (ii) the adjustment was not
made pursuant to a bona fide, reasonable antidilution formula. An adjustment in
the conversion ratio will not be considered made pursuant to a bona fide,
reasonable antidilution formula if the adjustment is made to compensate for
certain taxable distributions with respect to the Class A common stock. Thus,
under some circumstances, a reduction in the conversion price of the debentures
may result in deemed dividend income to holders of TIDES to the extent of the
current and accumulated earnings and profits of Entercom. In this case, holders
of the TIDES would be required to include their allocable share of the amount of
the deemed dividend income in gross income but would not receive any cash
related thereto; instead, holders would increase their tax basis in their TIDES
by the amount includible in income.
INFORMATION REPORTING TO HOLDERS
The trust will report the interest paid or accrued, including original
issue discount, during the year with respect to the debentures and any gross
proceeds received by the trust from the retirement or redemption of the
debentures, annually to the holders of record of the TIDES and to the Internal
Revenue Service. The trust currently intends to deliver reports to holders of
record no later than January 31 following each calendar year. It is anticipated
that persons who hold TIDES as nominees for beneficial owners will report the
required tax information to beneficial owners on Form 1099.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of the TIDES and any
debentures distributed by the trust may be subject to 31% federal income tax
backup withholding unless the holder complies with specific identification
requirements or otherwise qualifies for an exemption. Backup withholding is not
an additional tax. Any withheld amounts will generally be refunded or credited
against the holder's federal income tax liability, provided the required
information is timely filed with the Internal Revenue Service.
POSSIBLE TAX LAW CHANGES
Holders of TIDES should be aware that legislation has been proposed by the
Clinton Administration in the past that, if enacted, would have denied an
interest expense deduction to issuers of instruments such as the TIDES. While
legislation of this kind is not currently pending, there is no assurance that
similar legislation will not be ultimately enacted into law, or that other
developments will not occur on or after the date of this prospectus that would
adversely affect the tax treatment of the TIDES or the trust. Changes of this
kind could give rise to a Tax Event.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock as of September 10, 1999 consisted of:
(1) 200,000,000 shares of Class A common stock, of which 24,944,267 shares
are issued and outstanding;
(2) 75,000,000 shares of Class B common stock, of which 10,531,805 shares
are issued and outstanding;
(3) 50,000,000 shares of Class C common stock, of which 1,695,669 shares
are issued and outstanding; and
(4) 25,000,000 shares of preferred stock, none of which are issued or
outstanding.
We have reserved for issuance under our 1998 Equity Compensation Plan shares of
Class A common stock equal to 10% of the number of total outstanding shares of
common stock of all classes. We also have 1,850,000 shares of Class A common
stock reserved for issuance under our Employee Stock Purchase Plan.
The following summary describes the material terms of our capital stock.
However, you should refer to the actual terms of our capital stock contained in
our amended and restated articles of incorporation and amended and restated
bylaws and to the applicable provisions of the Pennsylvania Business Corporation
Law of 1988.
COMMON STOCK
The rights of holders of the common stock are identical in all respects,
except as discussed below. All the outstanding shares of Class A common stock,
Class B common stock and Class C common stock are, and the shares of Class A
common stock sold in the Class A common stock offering will be, upon issuance
and payment of the purchase price therefor, validly issued, fully paid and
nonassessable.
DIVIDENDS. Subject to the right of the holders of any class of preferred
stock, holders of shares of common stock are entitled to receive dividends that
may be declared by our board of directors out of legally available funds. No
dividend may be declared or paid in cash or property on any share of any class
of common stock unless simultaneously the same dividend is declared or paid on
each share of that and every other class of common stock; provided, that, in the
event of stock dividends, holders of a specific class of common stock shall be
entitled to receive only additional shares of that class.
VOTING RIGHTS. The Class A common stock and the Class B common stock vote
together as a single class on all matters submitted to a vote of shareholders.
Each share of Class A common stock is entitled to one vote and each share of
Class B common stock is entitled to ten votes, except:
(1) any share of Class B common stock not voted by either Joseph M. Field
or David J. Field, in their own right or pursuant to a proxy, is
entitled to one vote;
(2) the holders of Class A common stock, voting as a separate class, are
entitled to elect two Class A directors;
(3) each share of Class B common stock is entitled to one vote with respect
to any Going Private Transaction (defined as a "Rule 13e-3 transaction"
under the Exchange Act); and
(4) as required by law.
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David J. Berkman and Michael R. Hannon were designated Class A directors by
our board of directors and will serve until our next annual meeting of
shareholders, when the holders of the Class A common stock will elect the Class
A directors. The Class A directors serve one-year terms and must be "independent
directors." For this purpose, an "independent director" means a person who is
not an officer or employee of us or any of our subsidiaries, and who does not
have a relationship which, in the opinion of the board of directors, would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. Holders of common stock are not entitled to
cumulate votes in the election of directors.
LIQUIDATION RIGHTS. Upon our liquidation, dissolution or winding-up, the
holders of our common stock are entitled to share ratably in all assets
available for distribution after payment in full to creditors and holders of our
preferred stock, if any.
CONVERSION OF CLASS A COMMON STOCK. Shares of Class A common stock owned
by a Regulated Entity (defined as either an entity that is a "bank holding
company" under the Bank Holding Company Act of 1956 or a non-bank subsidiary of
such an entity, or an entity that, pursuant to Section 8(a) of the International
Banking Act of 1978 is subject to the provisions of the Bank Holding Company
Act, or any non-bank subsidiary of such an entity), are convertible at any time,
at the option of the holder, into an equal number of fully paid and
non-assessable shares of Class C common stock. All conversion rights of Class A
common stock are subject to any necessary FCC approval.
CONVERSION, TRANSFERABILITY OF CLASS B COMMON STOCK. Shares of Class B
common stock are convertible at any time, at the option of the holder, into an
equal number of fully paid and non-assessable shares of Class A common stock.
All conversion rights of Class B common stock are subject to any necessary FCC
approval. Shares of Class B common stock transferred to a party other than
Joseph M. Field, David J. Field, a spouse or lineal descendant of either Joseph
M. Field or David J. Field or any spouse of such lineal descendant, a trustee of
a trust established for the benefit of any such persons or the estate of any
such persons are automatically converted into an equal number of fully paid and
non-assessable shares of Class A common stock.
CONVERSION, TRANSFERABILITY OF CLASS C COMMON STOCK. Shares of Class C
common stock are convertible at any time subject to certain restrictions, at the
option of the holder thereof, into an equal number of fully paid and
non-assessable shares of Class A common stock. A Regulated Entity may not
convert shares of Class C common stock into Class A common stock if, as a result
of such conversion it would own more than 4.99% of the Class A common stock
unless such conversion is permitted under our amended and restated articles of
incorporation or otherwise under the Banking Holding Company Act. All conversion
rights of Class C common stock are subject to any necessary FCC approval. In
general, shares of Class C common stock transferred to a party other than a
Regulated Entity are automatically converted into an equal number of fully paid
and non-assessable shares of Class A common stock. Shares of Class C common
stock may be transferred by a Regulated Entity under a limited set of
circumstances.
OTHER PROVISIONS. The holders of common stock are not entitled to
preemptive or similar rights.
PREFERRED STOCK
We are authorized to issue 25,000,000 shares of preferred stock, par value
$.01 per share. Our board of directors, in its sole discretion, may designate
and issue one or more
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series of preferred stock from the authorized and unissued shares of preferred
stock. Subject to limitations imposed by law or our amended and restated
articles of incorporation, the board of directors is empowered to determine:
- the designation of and the number of shares constituting a series of
preferred stock;
- the dividend rate, if any, for the series;
- the terms and conditions of any voting and conversion rights for the
series, if any;
- the number of directors, if any, which the series shall be entitled to
elect;
- the amounts payable on the series upon our liquidation, dissolution or
winding-up;
- the redemption prices and terms applicable to the series, if any; and
- the preferences and relative rights among the series of preferred stock.
Such rights, preferences, privileges and limitations of preferred stock
could adversely affect the rights of holders of common stock. There are
currently no shares of preferred stock outstanding.
FOREIGN OWNERSHIP
Our amended and restated articles of incorporation restrict the ownership,
voting and transfer of our capital stock, including our common stock, in
accordance with the Communications Act and the rules of the FCC, which currently
prohibit the issuance of more than 25% of our outstanding capital stock (or more
than 25% of the voting rights it represents) to or for the account of aliens or
corporations otherwise subject to domination or control by aliens. In addition,
the amended and restated articles authorize our board of directors to take
action to enforce these prohibitions, including requiring redemptions of common
stock and placing a legend regarding restrictions on foreign ownership on the
certificates representing the common stock. See "Business -- Federal Regulation
of Radio Broadcasting -- Ownership Matters."
CERTAIN PROVISIONS OF OUR AMENDED AND RESTATED ARTICLES OF INCORPORATION AND
AMENDED AND RESTATED BYLAWS
Our amended and restated articles of incorporation and amended and restated
bylaws include provisions that could have an anti-takeover effect. These
provisions are intended to preserve the continuity and stability of our board of
directors and the policies formulated by our board of directors. These
provisions are also intended to help ensure that the board of directors, if
confronted by a surprise proposal from a third party which has acquired a block
of our stock, will have sufficient time to review the proposal, to consider
appropriate alternatives to the proposal and to act in what it believes to be
the best interests of the shareholders.
The following is a summary of the provisions included in our amended and
restated articles of incorporation. However, you should refer to the actual
document. The board of directors has no current plans to formulate or effect
additional measures that could have an anti-takeover effect.
EXCULPATION. Directors and officers shall not be personally liable for
monetary damages (including, without limitation, any judgment, amount paid in
settlement, penalty,
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punitive damages or expense of any nature (including, without limitation,
attorneys' fees and disbursements)) for any action taken, or any failure to take
any action, unless (1) the director has breached or failed to perform the duties
of his or her office and (2) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.
INDEMNIFICATION. To the fullest extent permitted by the Pennsylvania
Business Corporation Law, we will indemnify any person who was, is, or is
threatened to be made, a party to a proceeding by reason of the fact that he or
she (1) is or was our director or officer or (2) while our director or officer,
is or was serving at our request as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise.
BLANK CHECK PREFERRED STOCK. Our board of directors may authorize the
issuance of up to 25,000,000 shares of preferred stock in one or more classes or
series and may designate the dividend rate, voting rights and other rights,
preferences and restrictions of each such class or series. Our board of
directors has no present intention to issue any preferred stock; however, our
board of directors has the authority, without further shareholder approval, to
issue one or more series of preferred stock that could, depending on the terms
of such series, either impede or facilitate the completion of a merger, tender
offer or other takeover attempt. Although our board of directors is required to
make any determination to issue such stock based on its judgment as to the best
interests of our shareholders, our board of directors could act in a manner that
would discourage an acquisition attempt or other transaction that some, or a
majority, of the shareholders might believe to be in their best interests or in
which shareholders might receive a premium for their stock over the then market
price of such stock. Our board of directors does not intend to seek shareholder
approval prior to any issuance of such stock, unless otherwise required by law.
PENNSYLVANIA CONTROL-SHARE ACQUISITIONS LAW
We are subject to the Pennsylvania Business Corporation Law. Generally,
subchapters 25E, F, G, H, I and J of the Pennsylvania Business Corporation Law
place procedural requirements and establish restrictions upon the acquisition of
voting shares of a corporation which would entitle the acquiring person to cast
or direct the casting of a certain percentage of votes in an election of
directors. Subchapter 25E of the PBCL provides generally that, if we were
involved in a "control transaction," our shareholders would have the right to
demand from a "controlling person or group" payment of the fair value of their
shares. For purposes of subchapter 25E, a "controlling person or group" is a
person or group of persons acting in concert that, through voting shares, has
voting power over at least 20% of the votes which our shareholders would be
entitled to cast in the election of directors. A control transaction arises, in
general, when a person or group acquires the status of a controlling person or
group.
In general, Subchapter 25F of the Pennsylvania Business Corporation Law
delays for five years and imposes conditions upon "business combinations"
between an "interested shareholder" and us. The term "business combination" is
defined broadly to include various merger, consolidation, division, exchange or
sale transactions, including transactions utilizing our assets for purchase
price amortization or refinancing purposes. An "interested shareholder," in
general, would be a beneficial owner of at least 20% of our voting shares.
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In general, Subchapter 25G of the Pennsylvania Business Corporation Law
suspends the voting rights of the "control shares" of a shareholder that
acquires for the first time 20% or more, 33 1/3% or more or 50% or more of our
shares entitled to be voted in an election of directors. The voting rights of
the control shares generally remain suspended until such time as our
"disinterested" shareholders vote to restore the voting power of the acquiring
shareholder.
Subchapter 25H of the Pennsylvania Business Corporation Law provides
circumstances for our recovery of profits made upon the sale of our common stock
by a "controlling person or group" if the sale occurs within 18 months after the
controlling person or group became such and the common stock was acquired during
such 18 month period or within 24 months prior thereto. In general, for purposes
of Subchapter 25H, a "controlling person or group" is a person or group that (1)
has acquired, (2) offered to acquire or (3) publicly disclosed or caused to be
disclosed an intention to acquire voting power over shares that would entitle
such person or group to cast at least 20% of the votes that our shareholders
would be entitled to cast in the election of directors.
If our disinterested shareholders vote to restore the voting power of a
shareholder who acquires control shares subject to Subchapter 25G, we would then
be subject to subchapters 25I and J of the Pennsylvania Business Corporation
Law. Subchapter 25I generally provides for a minimum severance payment to
certain employees terminated within two years of such approval. Subchapter 25J,
in general, prohibits the abrogation of certain labor contracts prior to their
stated date of expiration.
The foregoing summary describes some of the material terms of certain
subchapters of the Pennsylvania Business Corporation Law. However, you should
refer to the actual statute.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is First Union
National Bank.
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CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan") should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an investment
in the TIDES. Accordingly, among other factors, the fiduciary should consider
whether the investment would satisfy the prudence and diversification
requirements of ERISA, whether the investment could result in an improper
delegation of fiduciary authority and whether the investment would be consistent
with the documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well
as individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or "disqualified
persons" under the Code ("Parties in Interest") with respect to such Plans. A
violation of these "prohibited transaction" rules may result in an excise tax or
other liabilities under ERISA and/or Section 4975 of the Code for such persons,
unless exemptive relief is available under an applicable statutory or
administrative exemption. Employee benefit plans that are governmental plans (as
defined in Section 3(32) of ERISA), certain church plans (as defined in Section
3(33) of ERISA) and foreign plans (as described in Section 4(b)(4) of ERISA) not
subject to Section 401 of the Code are not subject to the requirements of ERISA
or Section 4975 of the Code.
Under a regulation (the "Plan Assets Regulation") issued by the United
States Department of Labor (the "DOL"), the assets of the trust would be deemed
to be "plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code
if "plan assets" of the Plan were used to acquire an equity interest in the
trust and no exception were applicable under the Plan Assets Regulation. An
"equity interest" is defined under the Plan Assets Regulation as any interest in
an entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features and
specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the
assets of the trust would not be deemed to be "plan assets" of investing Plans
if, immediately after the most recent acquisition of any equity interest in the
trust, less than 25% of the value of each class of equity interests in the trust
were held by Plans, other employee benefit plans not subject to ERISA or Section
4975 of the Code (such as governmental, church and foreign plans), and entities
holding assets deemed to be "plan assets" of any Plan (collectively, "Benefit
Plan Investors"). No assurance can be given that the value of the TIDES held by
Benefit Plan Investors will be less than 25% of the total value of such TIDES at
the completion of the initial offering or otherwise. All of the Common
Securities will be purchased and held by us. If assets of the trust are treated
as "plan assets," the trustees of the trust could be treated as fiduciaries to
Plans that acquired the TIDES.
Certain transactions involving the trust could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the TIDES were acquired with "plan assets" of
such Plan and assets of the trust were deemed to be "plan assets" of Plans
investing in the trust. For example, if we are a Party in Interest with respect
to an investing Plan (either directly or by reason of its ownership of its
subsidiaries), extensions of credit between Entercom and the trust (as
represented by the debentures and the Guarantee) would likely be prohibited by
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Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code, unless
exemptive relief were available under an applicable administrative exemption
(see below). In that regard, it is noted that we are a Party in Interest with
respect to certain employee benefit plans covering employees of Entercom and our
subsidiaries ("Entercom Plans"). However, we do not currently provide services
to Plans, or serve as a fiduciary of Plans, other than the Entercom Plans and
accordingly might not be treated as a Party in Interest with respect to any
Plans other than Entercom Plans. If we are not a Party in Interest with respect
to a Plan which is not an Entercom Plan, then a direct or indirect loan between
us and such Plan would not appear to constitute a prohibited transaction.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief for direct or indirect prohibited transactions
resulting from the purchase or holding of the TIDES, assuming that assets of the
trust were deemed to be "plan assets" of Plans investing in the trust (see
above). Those class exemptions are PTCE 96-23 (for certain transactions
determined by in-house asset managers), PTCE 95-60 (for certain transactions
involving insurance company general accounts), PTCE 91-38 (for certain
transactions involving bank collective investment funds), PTCE 90-1 (for certain
transactions involving insurance company separate accounts) and PTCE 84-14 (for
certain transactions determined by qualified professional asset managers).
Because the TIDES may be deemed to be equity interests in the trust for
purposes of applying ERISA and Section 4975 of the Code, the TIDES may not be
purchased or held by any Plan, any entity whose underlying assets include "plan
assets" by reason of any Plan's investment in an entity (a "Plan Asset Entity")
or any person investing "plan assets" of any Plan, unless such purchaser or
holder is eligible for the exemptive relief available under PTCE 96-23, 95-60,
91-38, 90-1 or 84-14. Any purchaser or holder of the TIDES or any interest
therein will be deemed to have represented by its purchase and holding thereof
that it either (a) is not a Plan or a Plan Asset Entity and is not purchasing
such securities on behalf of or with "plan assets" of any Plan or (b) is
eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1
or 84-14. See "Transfer Restrictions." Further, the fiduciaries of any Plan or
Plan Asset Entity which may purchase or hold TIDES will be deemed as a result of
such acquisition or holding to have (a) directed the trust to invest in the
TIDES, (b) authorized and directed any of the actions taken or which may be
taken with respect to the trust and the TIDES by any of Entercom, the trustees,
the debenture trustee, or the Guarantee trustee as contemplated by the
Indenture, the debentures or the Guarantee and (c) to have appointed any of the
trustees.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the TIDES on
behalf of or with "plan assets" of any Plan consult with their counsel regarding
the potential consequences if the assets of the trust were deemed to be "plan
assets" and whether we are a Party in Interest with respect to such plan and if
so, the availability of exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or
84-14 with respect to the acquisition or holding of TIDES.
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SHARES ELIGIBLE FOR FUTURE SALE
The market price of our stock could decline due to the large number of
shares eligible for public sale upon consummation of the Class A common stock
offering.
Upon completion of the Class A common stock offering, we will have
32,944,267 shares of Class A common stock, 10,531,805 shares of Class B common
stock and 1,695,669 shares of Class C common stock issued and outstanding,
assuming no exercise of the underwriter's over-allotment option. Of these
shares, 9,500,000 shares of Class A common stock sold in the Class A common
stock offering (plus any shares issued upon exercise of the underwriters'
over-allotment option), the 13,627,500 shares sold in our initial public
offering in January 1999, approximately 300,000 shares of Class A common stock
sold into the public market since the initial public offering and approximately
100,000 shares of unrestricted Class A common stock will be freely transferable
without restriction in the public market, except to the extent that these shares
have been acquired by our affiliates; resales of shares acquired by affiliates
are subject to restrictions under Rule 144 of the Securities Act. In addition,
upon conversion of the TIDES, the shares of Class A common stock into
which the TIDES are convertible will be freely transferable without restriction
in the public market, except to the extent that those shares are acquired by our
affiliates and are therefore subject to restrictions under Rule 144. The
remaining shares of Class A common stock and all shares of Class B common stock
and Class C common stock were issued in reliance on exemptions from the
registration requirements of the Securities Act, and these shares are
"restricted" securities under Rule 144. The number of "restricted" shares
available for sale in the public market is limited by the restrictions under
Rule 144, although as to shares held by persons who are not our affiliates, many
of those restrictions do not apply.
In connection with the Class A common stock offering, our directors,
members of senior management, Chase Capital and the selling shareholders have
agreed pursuant to lock-up agreements not to sell or otherwise dispose of shares
representing approximately 10,500,000 shares of Class A common stock, 10,531,805
shares of Class B common stock and 1,695,669 shares of Class C common stock,
other than shares sold in the Class A common stock offering, for a period of 90
days after the date of the Class A common stock offering prospectus without the
prior written consent of Credit Suisse First Boston Corporation. The restricted
securities will generally be available for sale in the open market, subject to
the lock-up agreements and the applicable requirements of Rule 144.
In general, under Rule 144, as currently in effect, a shareholder (or
shareholders whose shares are aggregated) who has beneficially owned restricted
securities for at least one year (including persons who may be deemed
"affiliates" under Rule 144) is entitled to sell a number of shares within any
three-month period that does not exceed the greater of 1% of the then
outstanding shares of the class of common stock or the average weekly trading
volume of such stock during the four calendar weeks preceding such sale, subject
to certain manner of sale limitations. A shareholder who is deemed not to have
been an affiliate for at least three months prior to the date of sale and who
has beneficially owned restricted securities for at least two years would be
entitled to sell such shares under Rule 144 without regard to the volume or
manner of sale limitations described above.
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated September , 1999, we and the trust have agreed that the trust
shall sell to the underwriters named below, for whom Credit Suisse First Boston
Corporation, Banc of America Securities LLC and Deutsche Bank Securities Inc.
are acting as representatives, the following respective numbers of TIDES:
<TABLE>
<CAPTION>
Number
of TIDES
Underwriter ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Banc of America Securities LLC .............................
Deutsche Bank Securities Inc. ..............................
Total................................................ 3,000,000
=========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all of the TIDES in the offering if any are purchased, other than those
TIDES covered by the over-allotment option described below. The underwriting
agreement also provides that if an underwriter defaults, the purchase
commitments of non-defaulting underwriters may be increased or the offering of
the TIDES may be terminated.
Since the proceeds of the sale of the TIDES will be used by the trust to
purchase the debentures, the underwriting agreement provides that we will pay as
compensation to the underwriters a commission of $ per TIDES or $ .
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 450,000 additional TIDES from us at the public offering price,
plus accrued distributions. The option may be exercised only to cover any
over-allotments of TIDES.
The underwriters propose to offer the TIDES initially at the public
offering price on the cover page of this prospectus and to selling group members
at a discount of up to $ per TIDES. The underwriters and selling group
members may allow a discount of $ per TIDES on sales to other
broker/dealers. After the initial public offering, the public offering price and
other selling terms may be changed by the representatives.
We estimate that our out of pocket expenses of the offering, excluding
commissions, will be approximately $ .
In connection with the Class A common stock offering, our directors,
members of senior management and selling and other shareholders, including Chase
Equity Associates, L.P., have agreed pursuant to lock-up agreements not to sell
or otherwise dispose of shares representing approximately 10,500,000 shares of
Class A common stock, 10,531,805 shares of Class B common stock and 1,695,669
shares of Class C common stock, other than shares sold in the Class A common
stock offering, for a period of 90 days after the date of the Class A common
stock offering prospectus without the prior written consent of Credit Suisse
First Boston Corporation.
We and the trust have agreed to indemnify the underwriters against
liabilities under the Securities Act or contribute to payments which the
underwriters may be required to make in that respect.
The TIDES are new securities for which there currently is no market. We do
not intend to list the TIDES on a national securities exchange or automated
interdealer
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quotation system. One or more of the underwriters intend to make a secondary
market for the TIDES. However, they are not obligated to do so and may
discontinue making a secondary market for the TIDES at any time without notice.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the TIDES in the
open market after the distribution has been completed in order to cover
syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the TIDES originally sold by such syndicate
member are purchased in a syndicate covering transaction to cover
syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the TIDES to be higher than it would otherwise be in the
absence of such transactions. These transactions, if commenced, may be
discontinued at any time.
The underwriters and their affiliates have provided financial services to
us in the past for which they received customary compensation. In addition,
Credit Suisse First Boston Corporation and Deutsche Bank Securities Inc. are
acting as underwriters in our concurrent offering of Class A common stock and an
affiliate of Banc of America Securities LLC is a lender under our current credit
facility. A portion of the proceeds from the concurrent Class A common stock
offering will be used to repay debt under our current credit facility. The
decision of Banc of America Securities LLC to distribute the TIDES was made
independent of its affiliated lender under our current credit facility. The
affiliated lender has no involvement in determining whether or when to
distribute the TIDES under this offering or the terms of this offering. Banc of
America Securities LLC will not receive any benefit from this offering other
than its portion of the underwriting fee as paid by us.
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NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the TIDES in Canada is being made only on a private
placement basis exempt from the requirement that we and the trust prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of the TIDES are effected. Accordingly, any resale of the TIDES in
Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the TIDES.
REPRESENTATIONS OF PURCHASERS
Each purchaser of TIDES in Canada who receives a purchase confirmation will
be deemed to represent to us, the trust and the dealer from whom such purchase
confirmation is received that (1) the purchaser is entitled under applicable
provincial securities laws to purchase such TIDES without the benefit of a
prospectus qualified under such securities laws, (2) where required by law, that
the purchaser is purchasing as principal and not as agent and (3) the purchaser
has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of our directors and officers as well as the experts named herein and
the trust may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada upon
us, the trust or these persons. All or a substantial portion of our assets, the
assets of the trust and the assets of these persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
us, the trust or these persons in Canada or to enforce a judgment obtained in
Canadian courts against us, the trust or these persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of TIDES to whom the Securities Act (British Columbia) applies
is advised that the purchaser is required to file with the British Columbia
Securities Commission a report within ten days of the sale of any TIDES acquired
by the purchaser pursuant to this offering. The report must be in the form
attached to British Columbia Securities Commission Blanket Order (BOR) #95/17, a
copy of which may be obtained from the Company. Only one report must be filed in
respect of TIDES acquired on the same date and under the same prospectus
exemption.
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TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of TIDES should consult their own legal and tax
advisers with respect to the tax consequences of an investment in the shares of
TIDES in their particular circumstances and with respect to the eligibility of
the shares of TIDES for investment by the purchaser under relevant Canadian
legislation.
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LEGAL MATTERS
Morris, Nichols, Arsht & Tunnell, special Delaware counsel to the trust and
Entercom, will pass on certain matters of Delaware law relating to the validity
of the TIDES. Latham & Watkins, Washington, D.C., will pass upon the validity of
the debentures and the Guarantee. John C. Donlevie, Esq. will pass upon the
validity of the Class A common stock issuable upon conversion of the TIDES.
Weil, Gotshal & Manges LLP, New York, New York, will pass upon certain matters
on behalf of the underwriters.
EXPERTS
Our financial statements as of September 30, 1997 and 1998 and for each of
the three years in the period ended September 30, 1998 included in this
prospectus and the related financial statement schedule included elsewhere in
the registration statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing in this prospectus
and elsewhere in the registration statement (which reports expressed an
unqualified opinion and include an explanatory paragraph referring to the
restatement of our 1997 and 1998 consolidated financial statements), and have
been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The combined financial statements of the Portland, Oregon and Rochester,
New York Radio Groups of Heritage Media Services, Inc. -- Broadcasting Segment
as of December 31, 1997 and for the eight month period ended August 31, 1997 and
the four month period ended December 31, 1997 included in this prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as stated
in their report appearing herein and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The combined financial statements of the Boston Radio Market of CBS Radio,
Inc. as of, and for the year ended December 31, 1997 included in this prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing in this prospectus, and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The combined financial statements of Sinclair Broadcast Group, Inc. and
Subsidiaries-Radio Division for each of the two years in the period ended
December 31, 1998 and the seven month period ended December 31, 1996 and the
three month period ended March 31, 1999 included in this prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as stated in
their report appearing herein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The combined statements of Heritage Media Services, Inc. -- Radio
Broadcasting Segment -- a Division of Heritage Media Corporation as of December
31, 1996 and 1997 for the year ended December 31, 1996 and for each of the eight
month period ended August 31, 1997 and four month period ended December 31, 1997
included in this prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as stated in their report appearing in this
prospectus, and have been so included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We and the trust have filed with the Commission a Registration Statement on
Form S-1 regarding this offering. This prospectus, which is part of the
registration statement, does not contain all of the information included in the
registration statement, and you should refer to the registration statement and
its exhibits to read that information. References in this prospectus to any of
our contracts or other documents are not necessarily complete, and you should
refer to the exhibits attached to the registration statement for copies of the
actual contract or document. You may read and copy the registration statement,
the related exhibits and the other material we file with the Commission at the
Commission's public reference room in Washington, D.C. and at the Commission's
regional offices in Chicago, Illinois and New York, New York. You can also
request copies of those documents, upon payment of a duplicating fee, by writing
to the Commission. Please call the Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. The Commission also
maintains an Internet site that contains reports, proxy and information
statements and other information regarding issuers that file with the
Commission. The site's address is www.sec.gov. You may also request a copy of
these filings, at no cost, by writing or telephoning us as follows: Corporate
Secretary, Entercom Communications Corp., 401 City Avenue, Suite 409, Bala
Cynwyd, Pennsylvania 19004, (610) 660-5610.
150
<PAGE> 156
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report........................... F-4
Balance Sheets as of September 30, 1997 and 1998....... F-5
Statements of Income for the Years Ended September 30,
1996, 1997 and 1998................................... F-7
Statement of Shareholders' Equity for the Years Ended
September 30, 1996, 1997 and 1998..................... F-9
Statements of Cash Flows for the Years Ended September
30, 1996, 1997 and 1998............................... F-10
Notes to the Consolidated Financial Statements for the
Years Ended September 30, 1996, 1997 and 1998......... F-11
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet as of December 31, 1998.................. F-31
Statements of Operations for the Three Months Ended
December 31, 1997 and 1998............................ F-32
Statements of Cash Flows for the Three Months Ended
December 31, 1997 and 1998............................ F-33
Notes to Condensed Consolidated Financial Statements... F-34
Balance Sheet as of June 30, 1999...................... F-38
Statement of Operations for the Six Months Ended June
30, 1999 and 1998..................................... F-40
Statements of Cash Flows for the Six Months Ended June
30, 1998 and 1999..................................... F-42
Notes to Condensed Consolidated Financial Statements... F-44
THE JUNE 1998 SEVEN-STATION SINCLAIR TRANSACTION
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING
SEGMENT
Report of Independent Public Accountants............... F-48
Combined Balance Sheet as of December 31, 1997......... F-49
Combined Statements of Operations for the Eight Months
Ended August 31, 1997 (Predecessor) and for the Four
Months Ended December 31, 1997........................ F-50
Combined Statements of Stockholders' Equity for the
Eight Months Ended August 31, 1997 (Predecessor) and
for the Four Months Ended December 31, 1997........... F-51
Combined Statements of Cash Flows for the Eight Months
Ended August 31, 1997 (Predecessor) and for the Four
Months Ended December 31, 1997........................ F-52
Notes to Combined Financial Statements................. F-53
</TABLE>
F-1
<PAGE> 157
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Unaudited Financial Statements:
Combined Balance Sheets as of December 31, 1997
(Predecessor) and March 31, 1998 (unaudited).......... F-60
Combined Statements of Operations for the Three Months
Ended March 31, 1997 (Predecessor), the Two Months
Ended February 28, 1998 (Predecessor) and the One
Month Ended March 31, 1998 (unaudited)................ F-61
Combined Statements of Cash Flows for the Three Months
Ended March 31, 1997 (Predecessor), the Two Months
Ended February 28, 1998 (Predecessor) and the One
Month Ended March 31, 1998 (unaudited)................ F-62
Notes to Unaudited Combined Financial Statements....... F-63
THE CBS -- BOSTON TRANSACTION
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
Independent Auditors' Report........................... F-65
Combined Balance Sheets as of December 31, 1997 and
September 30, 1998 (Unaudited)........................ F-66
Combined Statements of Operations and Equity for the
Year Ended December 31, 1997 and for the Nine-Month
Periods Ended September 30, 1997 and 1998
(Unaudited)........................................... F-67
Combined Statements of Cash Flows for the Year Ended
December 31, 1997 and for the Nine-Month Periods Ended
September 30, 1997 and 1998 (Unaudited)............... F-68
Notes to Combined Financial Statements................. F-69
THE SINCLAIR ACQUISITION
THE SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES --
RADIO DIVISION
Report of Independent Public Accountants............... F-75
Consolidated Balance Sheets as of December 31, 1997 and
1998 and March 31, 1999............................... F-76
Consolidated Statements of Operations for the Seven
Months Ended December 31, 1996, and the Years Ended
December 31, 1997 and 1998, and the Three Months Ended
March 31, 1999........................................ F-77
Consolidated Statements of Stockholders' Equity for the
Seven Months Ended December 31, 1996, and the Year
Ended December 31, 1997 and 1998 and the Three Months
Ended March 31, 1999.................................. F-78
Consolidated Statements of Cash Flows for the Seven
Months Ended December 31, 1996, and the Years Ended
December 31, 1997 and 1998 and the Three Months Ended
March 31, 1999........................................ F-79
Notes to Consolidated Financial Statements............. F-80
</TABLE>
F-2
<PAGE> 158
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Unaudited Financial Statements
Unaudited Consolidated Balance Sheets as of December
31, 1998 and June 30, 1999............................ F-92
Unaudited Consolidated Statements of Operations for the
Six Months Ended June 30, 1998 and 1999............... F-93
Unaudited Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1999............... F-94
Notes to Unaudited Consolidated Financial Statements... F-95
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING
SEGMENT -- A DIVISION OF HERITAGE MEDIA CORPORATION
Report of Independent Public Accountants............... F-98
Combined Balance Sheets as of December 31, 1997 and
1996 (Predecessor).................................... F-99
Combined Statements of Operations for the Four Months
Ended December 31, 1997, the Eight Months Ended August
31, 1997 (Predecessor) and the year Ended December 31,
1996 (Predecessor).................................... F-100
Combined Statements of Stockholders' Equity for the
Year Ended December 31, 1996 (Predecessor), the Eight
Months Ended August 31, 1997 (Predecessor) and the
Four Months Ended December 31, 1997................... F-101
Combined Statements of Cash Flows for the Four Months
Ended December 31, 1997, the Eight Months Ended August
31, 1997 (Predecessor) and the Year Ended December 31,
1996 (Predecessor).................................... F-102
Notes to Combined Financial Statements................. F-103
</TABLE>
F-3
<PAGE> 159
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Entercom Communications Corp.:
We have audited the accompanying consolidated balance sheets of Entercom
Communications Corp. (formerly Entertainment Communications, Inc.) and
subsidiaries (the "Company") as of September 30, 1997 and 1998, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended September 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Entercom Communications Corp.
and subsidiaries at September 30, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1998 in conformity with generally accepted accounting principles.
As discussed in Note 14 to the consolidated financial statements, the
accompanying consolidated financial statements for the years ended September 30,
1997 and 1998 have been restated.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
December 31, 1998
(January 26, 1999 as to Notes 10 and 13)
F-4
<PAGE> 160
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(AS RESTATED,
SEE NOTE 14)
SEPTEMBER 30,
--------------------
1997 1998
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 2)..................... $ 3,626 $ 6,666
Accounts receivable (net of allowance for doubtful
accounts of $292 in 1997 and $367 in 1998).......... 24,796 32,524
Prepaid expenses and deposits.......................... 1,691 5,303
Station acquisition deposits........................... 4,957 344
Income tax deposit..................................... 490 978
Assets held for sale (Note 9).......................... 5,310
-------- --------
Total current assets................................ 35,560 51,125
-------- --------
PROPERTY AND EQUIPMENT -- At cost (Note 2):
Land, land easements and land improvements............. 4,584 5,954
Building............................................... 2,454 3,939
Equipment.............................................. 22,784 31,979
Furniture and fixtures................................. 5,064 7,115
Leasehold improvements................................. 1,047 3,362
-------- --------
35,933 52,349
Accumulated depreciation............................... (8,158) (9,679)
-------- --------
27,775 42,670
Capital improvements in progress....................... 1,379 387
-------- --------
Net property and equipment.......................... 29,154 43,057
-------- --------
RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES:
Net of accumulated amortization of $6,307 in 1997 and
$14,265 in 1998 (Notes 2, 3, and 4)................. 295,419 424,716
DEFERRED CHARGES AND OTHER ASSETS -- Net (Notes 2, 3 and
5)..................................................... 4,610 4,047
-------- --------
TOTAL.................................................... $364,743 $522,945
======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 161
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(AS RESTATED,
SEE NOTE 14)
SEPTEMBER 30,
------------------- SEPTEMBER 30,
1997 1998 PRO FORMA
-------- -------- -------------
(NOTE 1)
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 7,128 $ 10,919 $ 10,919
Accrued liabilities:
Salaries............................................... 2,422 4,052 4,052
Interest............................................... 109 1,114 1,114
Taxes other than income................................ 69 189 189
Barter (Note 2)........................................ 5 18 18
Corporate state income taxes (Note 2)..................... 323 459 459
Senior debt -- current.................................... 10 10
-------- -------- --------
Total current liabilities............................ 10,056 16,761 16,761
SENIOR DEBT -- Noncurrent (Note 6A)......................... 117,000 253,774 270,918
CONVERTIBLE SUBORDINATED NOTE (Note 6D) Note payable........ 25,000 25,000 25,000
Accrued interest.......................................... 2,427 4,352 4,352
Cumulative adjustment to reflect indexing of convertible
subordinated note...................................... 29,070 37,911 37,911
-------- -------- --------
Total convertible subordinated note.................. 56,497 67,263 67,263
DEFERRED TAX LIABILITY...................................... 82,138
MINORITY INTEREST IN EQUITY OF PARTNERSHIP (Notes 2 and
8)........................................................ 2,171 2,177 2,177
-------- -------- --------
Total liabilities.................................... 185,724 339,975 439,257
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Note 9)
SHAREHOLDERS' EQUITY (Note 10):
Preferred stock $.01 par value; authorized 25,000,000
shares; none issued Class A common stock $.01 par
value; voting; authorized 200,000,000 shares; issued
and outstanding 11,002,194 shares...................... 110 110 110
Class B common stock $.01 par value; voting; authorized
75,000,000 shares; issued and outstanding 10,531,805
shares................................................. 105 105 105
Class C common stock $.01 par value; nonvoting; authorized
25,000,000 shares; none issued
Additional paid-in capital................................ 86,655
Retained earnings......................................... 178,804 182,755
-------- -------- --------
Total shareholders' equity........................ 179,019 182,970 86,870
-------- -------- --------
TOTAL............................................. $364,743 $522,945 $526,127
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 162
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
(AS RESTATED, SEE NOTE 14)
1996 1997 1998
------- ------------ -----------
<S> <C> <C> <C>
NET REVENUES........................................... $48,675 $ 93,862 $132,998
OPERATING EXPENSES:
Station operating expenses........................... 31,659 61,280 88,599
Depreciation and amortization........................ 2,960 7,685 13,066
Corporate general and administrative expenses........ 2,872 3,249 4,527
Net expense (income) from time brokerage
agreement fees.................................... (879) (476) 2,399
------- --------- --------
Total operating expenses............................. 36,612 71,738 108,591
------- --------- --------
OPERATING INCOME....................................... 12,063 22,124 24,407
OTHER EXPENSE (INCOME):
Interest expense (Note 6)............................ 5,196 11,388 14,663
Adjustment to reflect indexing of the convertible
subordinated note (Note 6D)....................... 29,070 8,841
Interest income...................................... (95) (482) (410)
Other nonoperating expense........................... 28 1,986 82
Gains on sale of assets and other.................... (119) (197,097) (8,661)
------- --------- --------
Total other expense (income)......................... 5,010 (155,135) 14,515
------- --------- --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM...... 7,053 177,259 9,892
INCOME TAXES........................................... 274 489 453
------- --------- --------
INCOME BEFORE EXTRAORDINARY ITEM....................... 6,779 176,770 9,439
EXTRAORDINARY ITEM:
Debt extinguishment (net of taxes of $23, and $25 in
1996 and 1998, respectively) (Note 6)................ 539 2,376
------- --------- --------
NET INCOME............................................. $ 6,240 $ 176,770 $ 7,063
======= ========= ========
PRO FORMA DATA (UNAUDITED)
PRO FORMA NET INCOME DATA:
Income before income taxes and extraordinary item.... $ 7,053 $ 177,259 $ 9,892
Pro forma income taxes (Note 1)...................... 2,680 78,405 7,119
------- --------- --------
Pro forma income before extraordinary item........... 4,373 98,854 2,773
Extraordinary item, net of pro forma taxes........... 348 1,488
------- --------- --------
PRO FORMA NET INCOME................................... $ 4,025 $ 98,854 $ 1,285
======= ========= ========
</TABLE>
F-7
<PAGE> 163
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
(AS RESTATED, SEE NOTE 14)
1996 1997 1998
------- ------------ -----------
<S> <C> <C> <C>
PRO FORMA EARNINGS PER SHARE (Note 1):
Basic:
Pro forma earnings before extraordinary item...... $ 0.20 $ 4.59 $ 0.12
Extraordinary item, net of pro forma taxes........ 0.01 0.06
------- --------- --------
Pro forma earnings per share...................... $ 0.19 $ 4.59 $ 0.06
======= ========= ========
Diluted:
Pro forma earnings before extraordinary items..... $ 0.20 $ 4.59 $ 0.12
Extraordinary item, net of pro forma taxes........ 0.01 0.06
------- --------- --------
Pro forma earnings per share...................... $ 0.19 $ 4.59 $ 0.06
======= ========= ========
WEIGHTED AVERAGE SHARES:
Basic................................................ 21,534 21,534 22,239
Diluted.............................................. 21,534 21,534 22,239
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 164
ENTERCOM COMMUNICATIONS CORP.
STATEMENT OF SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------------------------------------------
NONVOTING VOTING CLASS A CLASS B ADDITIONAL
---------------- ---------------- -------------------- ------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
------- ------ ------- ------ ----------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 1, 1995, as
originally reported......... 46,260 $ 2 80,580 $ 4 $ 710
Adjustment for the change in
capitalization (Note 13).... (46,260) (2) (80,580) (4) 12,935,594 129 10,531,805 105 (228)
------- --- ------- --- ----------- ---- ---------- ---- -----
Balance, October 1, 1995, as
adjusted.................... 12,935,594 129 10,531,805 105 482
Net income for the year.......
Dividends.....................
------- --- ------- --- ----------- ---- ---------- ---- -----
Balance, September 30, 1996
(as restated)............... 12,935,594 129 10,531,805 105 482
Retirement of treasury
stock....................... (1,933,400) (19) (482)
Net income for the year (as
restated)...................
Dividends.....................
------- --- ------- --- ----------- ---- ---------- ---- -----
Balance, September 30, 1997
(as restated)............... 11,002,194 110 10,531,805 105
Net income for the year (as
restated)...................
Dividends.....................
------- --- ------- --- ----------- ---- ---------- ---- -----
Balance, September 30, 1998
(as restated)............... $ $ 11,002,194 $110 10,531,805 $105 $
======= === ======= === =========== ==== ========== ==== =====
<CAPTION>
TREASURY STOCK AT COST
----------------------------------------------------
RETAINED NONVOTING VOTING CLASS A
EARNINGS SHARES SHARES SHARES AMOUNT TOTAL
-------- --------- ------ ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 1, 1995, as
originally reported......... $ 1,155 2,610 7,830 $(1,044) $ 827
Adjustment for the change in
capitalization (Note 13).... (2,610) (7,830) 1,931,400
-------- ------ ------ ---------- ------- --------
Balance, October 1, 1995, as
adjusted.................... 1,155 1,931,400 (1,044) 827
Net income for the year....... 6,240 6,240
Dividends..................... (1,988) (1,988)
-------- ------ ------ ---------- ------- --------
Balance, September 30, 1996
(as restated)............... 5,407 1,931,400 (1,044) 5,079
Retirement of treasury
stock....................... (543) (1,931,400) 1,044
Net income for the year (as
restated)................... 176,770 176,770
Dividends..................... (2,830) (2,830)
-------- ------ ------ ---------- ------- --------
Balance, September 30, 1997
(as restated)............... 178,804 179,019
Net income for the year (as
restated)................... 7,063 7,063
Dividends..................... (3,112) (3,112)
-------- ------ ------ ---------- ------- --------
Balance, September 30, 1998
(as restated)............... $182,755 $ $182,970
======== ====== ====== ========== ======= ========
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE> 165
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
(AS RESTATED, SEE NOTE 14)
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 6,240 $ 176,770 $ 7,063
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 2,960 7,685 13,066
Extraordinary items..................................... 562 2,401
Gains on dispositions and exchanges of assets........... (119) (197,097) (8,661)
Interest accrued........................................ 643 1,785 1,925
Adjustment to reflect indexing of the convertible
subordinated note (Note 6D)........................... 29,070 8,841
Changes in assets and liabilities which provided (used)
cash: Accounts receivable............................. (3,336) (11,798) (7,728)
Prepaid expenses........................................ (150) (956) (101)
Accounts payable, accrued liabilities and corporate
state income taxes.................................... 4,048 1,463 6,695
Minority interest....................................... (21) 1,910 6
Income tax deposit...................................... 1,946 27 (488)
-------- --------- ---------
Net cash provided by operating activities............ 12,773 8,859 23,019
-------- --------- ---------
INVESTING ACTIVITIES:
Additions to property and equipment....................... (1,493) (4,373) (11,183)
Proceeds from sale of property and equipment, intangibles
and other assets........................................ 560 3,750 9,724
Proceeds from exchanges of radio stations................. 72,200 3,132
Payments for exchanges of radio stations.................. (5,304) (306)
Purchases of radio station assets (Note 3)................ (91,519) (74,498) (152,791)
Deferred charges and other assets......................... (4,050) (644) (3,329)
Station acquisition deposits.............................. (4,826) 1,102
-------- --------- ---------
Net cash used in investing activities................ (96,502) (13,695) (153,651)
-------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.................. 137,500 20,000 277,286
Payments of long-term debt................................ (48,055) (14,000) (140,502)
Dividends paid............................................ (1,988) (2,830) (3,112)
-------- --------- ---------
Net cash provided by financing activities............ 87,457 3,170 133,672
-------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 3,728 (1,666) 3,040
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 1,564 5,292 3,626
-------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 5,292 $ 3,626 $ 6,666
======== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Cash paid during the period for:
Interest................................................ $ 3,688 $ 10,203 $ 11,541
======== ========= =========
Income taxes............................................ $ 148 $ 211 $ 293
======== ========= =========
</TABLE>
Supplemental Disclosures of Noncash Investing and Financing Activities --
In connection with the radio station exchange transactions completed by the
Company, the noncash portion of assets recorded was $127,000 for the year ended
September 30, 1997 and $22,500 for the year ended September 30, 1998.
See notes to consolidated financial statements.
F-10
<PAGE> 166
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
1. BASIS OF PRESENTATION AND ORGANIZATION
OPERATIONS -- Entercom Communications Corp. (formerly Entertainment
Communications, Inc.) (the "Company") is principally engaged in the management
and operation of radio broadcast stations throughout the United States. The
Company owns or operates three or more radio stations in the following markets:
Boston, Seattle, Portland, Sacramento, Kansas City and Rochester.
UNAUDITED PRO FORMA ADJUSTMENTS -- The Company intends to offer shares of
its Class A Common Stock to the public during 1999 (the "Offering"). Just prior
to the effective date of the Offering, the Company will terminate its status as
an S Corporation. At that time, the Company will be required to provide deferred
income taxes for cumulative temporary differences between financial statement
and income tax bases of the Company's assets and liabilities. At September 30,
1998, a deferred tax liability of $82.1 million has been reflected in the pro
forma balance sheet presented. In addition, a deferred tax asset of $3.2 million
would have been established.
In addition, the S Corporation shareholders will receive distributions of
approximately $1.0 million prior to, and approximately $88.1 million subsequent
to the effective date of the Offering. Of these amounts, $1.0 million relates to
income tax liabilities attributable to the S Corporation shareholders' share of
the Company's taxable income for the year ended September 30, 1998, $16.1
million relates to taxed but undistributed income as of September 30, 1998,
$70.2 million relates to taxable gains from transactions occurring subsequent to
September 30, 1998 and $1.6 million relates to the estimated taxable income from
operations for the period from October 1, 1998 to January 31, 1999. Only those
distributions (totaling approximately $17.1 million) related to transactions
occurring prior to October 1, 1998 have been reflected for purposes of the
unaudited pro forma balance sheet presented with the accompanying consolidated
financial statements. Of the $88.1 million to be distributed subsequent to the
effective date of the Offering, $0.2 million will be paid to the S Corporation
shareholders for their estimated income taxes on the income of the Company for
its 1999 fiscal year; payment of the balance is conditional on the successful
completion of the Offering.
The unaudited pro forma net income data reflect adjustments for income
taxes as if the Company had been subject to federal and state income taxes based
upon a pro forma effective tax rate of 38% applied to income before income taxes
excluding the effect of adjustment to reflect indexing of convertible
subordinated note (as such adjustment is not tax deductible) of $29.1 million
and $8.8 million for the years ending September 30, 1997 and 1998, respectively.
(See Note 6(D)).
PRO FORMA EARNINGS PER SHARE -- Pro forma earnings per share is calculated
in accordance with Statement of Financial Accounting Standards No. 128 and, as
such, is based on the weighted average number of shares of Common Stock
outstanding and dilutive common equivalent shares from convertible debt (using
the if-converted method). For the years ended September 30, 1996, 1997 and 1998,
the effect of the conversion of the convertible subordinated note was
antidilutive.
F-11
<PAGE> 167
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES
INCOME TAX STATUS -- The shareholders of the Company elected to change the
tax status of the Company from a C Corporation to an S Corporation beginning
October 1, 1987 for federal and certain state income tax purposes. For certain
other states for which an S Corporation election has not been made, the Company
incurs state income taxes.
The shareholders' election to be taxed as an S Corporation relieves the
Company of the obligation to pay federal and certain state corporate income
taxes but results in shareholders being directly liable for payment of such
income taxes on their pro rata share of the Company's taxable income, including
taxable income which has been deferred as a result of the Company's use of
different accounting methods for financial reporting and income tax reporting.
PRINCIPLES OF CONSOLIDATION -- The accompanying consolidated financial
statements include the accounts of the Company, its limited partnership interest
and its subsidiaries, all of which are wholly-owned. All intercompany
transactions and balances have been eliminated in consolidation.
MANAGEMENT'S USE OF ESTIMATES -- The preparation of consolidated financial
statements, in accordance with generally accepted accounting principles,
requires the Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and the disclosure of contingent assets and
liabilities, as of the date of the consolidated financial statements, and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
DEPRECIATION -- Depreciation is determined on a straight-line basis. The
estimated useful lives for depreciation are as follows:
<TABLE>
<S> <C>
Land improvements........................................... 10 years
Building.................................................... 20 years
Equipment................................................... 5-20 years
Furniture and fixtures...................................... 5-10 years
Leasehold improvements...................................... Various
</TABLE>
REVENUE RECOGNITION -- Revenue from the sale of commercial broadcast time
to advertisers is recognized when the commercials are broadcast. Promotional
fees are recognized as services are rendered.
CONCENTRATION OF CREDIT RISK -- The Company's revenues and accounts
receivable relate primarily to the sale of advertising within the radio
stations' broadcast areas. Credit is extended based on an evaluation of the
customers' financial condition, and generally, collateral is not required.
Credit losses are provided for in the financial statements and consistently have
been within management's expectations. The Company also maintains deposit
accounts with financial institutions. At times, such deposits may exceed FDIC
insurance limits.
F-12
<PAGE> 168
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ADVERTISING COSTS -- Advertising costs are expensed as incurred and
approximated $4.3 million, $6.0 million and $6.6 million for the fiscal years
ended September 30, 1996, 1997 and 1998, respectively.
RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES -- Broadcasting licenses
and other intangibles are being amortized on a straight-line basis over 40
years.
LONG-LIVED ASSETS -- In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
the Company evaluates the recoverability of its long-lived assets which include
broadcasting licenses, other intangibles, deferred charges, and other assets
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. If indications are that the carrying amount of the asset
is not recoverable, the Company will estimate the future cash flows expected to
result from use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, the Company recognizes an impairment
loss. The impairment loss recognized is measured as the amount by which the
carrying amount of the asset exceeds its fair value.
DEFERRED CHARGES -- The Company defers and amortizes debt issuance costs
and leasehold premiums over the term of the debt and life of the lease,
respectively.
NET EXPENSE (INCOME) FROM TIME BROKERAGE AGREEMENT ("TBA") FEES -- Net
expense (income) from TBA fees consist of fees paid by or earned by the Company
under agreements which permit an acquirer to program and market stations prior
to acquisition. The Company sometimes enters into such agreements prior to the
consummation of station acquisitions or dispositions. Under the TBAs relating to
the Company's acquisitions, the expense from TBA fees was approximately $0.4
million, $2.2 million and $2.5 million for the years ended September 30, 1996,
1997 and 1998, respectively. Under the TBAs relating to the Company's
dispositions, the income from TBA fees was approximately $1.2 million, $2.7
million and $0.1 million for the years ended September 30, 1996, 1997 and 1998,
respectively. Amounts reflected in net revenues and station operating expenses
from operations under TBAs, excluding expense (income) from TBA fees, were
approximately $2.4 million and $1.3 million, $12.3 million and $9.0 million, and
$7.8 million and $5.0 million for the years ended September 30, 1996, 1997 and
1998, respectively.
BARTER TRANSACTIONS -- The Company provides advertising broadcast time in
exchange for certain products, supplies and services. The terms of the exchanges
generally permit the Company to preempt such broadcast time in favor of
advertisers who purchase time on regular terms. The Company includes the value
of such exchanges in both broadcasting revenues and operating costs and
expenses. Barter valuation is based upon management's estimate of the fair value
of the products, supplies and services received. For the years ended September
30, 1996, 1997 and 1998, barter transactions amounted to approximately $632,000,
$822,000 and $1,043,000, respectively. The Company accrues as a liability the
amount by which the value of broadcasting time to be provided exceeds the value
of products, supplies and services to be received. At September 30, 1996, 1997
and 1998, such amounts were approximately $120,000, $5,000 and $19,000,
respectively.
F-13
<PAGE> 169
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents consist primarily of
amounts held on deposit with financial institutions in immediately available
money market accounts.
DERIVATIVE FINANCIAL INSTRUMENTS -- The Company uses derivative financial
instruments, including interest rate exchange agreements ("Swaps") and interest
rate cap agreements ("Caps"), to manage its exposure to fluctuations in interest
rates. Swaps and Caps are matched with debt and periodic cash payments and are
accrued on a net basis as an adjustment to interest expense. Any fees associated
with these instruments are amortized over their term.
RECENT ACCOUNTING PRONOUNCEMENTS -- In February 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standard ("SFAS") No. 128, "Earnings per Share", which was effective for the
Company beginning October 1, 1997. SFAS No. 128 establishes standards for
computing and presenting earnings per share ("EPS") and applies to entities with
publicly held common stock or potential common stock. It replaces the
presentation of primary EPS with a presentation of basic EPS and requires the
dual presentation of basic and diluted EPS on the face of the income statement.
This statement requires restatement of all prior period EPS data presented. For
the years ended September 30, 1996, 1997 and 1998 the effect of the conversion
of convertible debt was antidilutive. The Board of Directors has declared,
contingent upon the successful completion of the Company's initial public
offering of its common stock, certain dividends to be payable to the S
Corporation shareholders. Of these dividends, approximately $17.1 million is
attributable to the undistributed taxable income of the Company prior to October
1, 1998. This amount exceeds the Company's earnings for the year ended September
30, 1998 by approximately $15.9 million. The weighted average outstanding shares
have been increased by 705,000 shares, which represent the number of shares
which, when multiplied by an offering price of $22.50 per share, would be
sufficient to replace the capital in excess of the current years earnings which
is proposed to be distributed to the S Corporation shareholders.
In June 1998, the FASB issued SFAS No. 133 entitled "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
"derivatives") and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management has not yet determined what effect, if any, this statement will have
on the Company.
RECLASSIFICATIONS -- Certain reclassifications have been made to the
consolidated financial statements for the years ended September 30, 1996 and
1997 in order to conform to the current year presentation.
3. ACQUISITIONS AND OTHER SIGNIFICANT TRANSACTIONS
During each of the periods presented the Company consummated acquisitions
of radio stations. All of these acquisitions were accounted for under the
purchase method of accounting (unless otherwise noted below), and the purchase
prices, including transaction
F-14
<PAGE> 170
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
costs, were allocated to the assets based upon their respective fair values as
determined by independent appraisal as of the purchase dates. Gains on exchange
transactions are determined based on the excess of the fair value of the station
assets acquired, as determined by an independent appraisal, plus any cash
received, over the Company's carrying basis in the station assets exchanged,
plus cash paid by the Company, all less transaction costs.
1996 ACQUISITIONS
The Company completed a three party Asset Purchase Agreement on August 1,
1996, whereby the Company acquired WAXQ-FM, New York City, from GAF Corporation
for a cash purchase price of $90 million and simultaneously exchanged WAXQ-FM
and $1.2 million in cash to Viacom, Inc. for all of Viacom's broadcast assets of
three radio stations, KBSG-FM, KBSG-AM and KNDD-FM, and two tower facilities,
all serving the Seattle, Washington radio market. The Company incurred
approximately $319,000 in transaction costs related to the acquisition.
Broadcasting licenses and other intangibles totaling approximately $87.5 million
were recorded in connection with this transaction.
1997 ACQUISITIONS
On March 27, 1997, the Company acquired the assets of KMBZ-AM, KYYS-FM
(formerly KLTH-FM), KCMO-AM and KCMO-FM, serving the Kansas City, Kansas/
Missouri radio market, from Bonneville International Corporation and Bonneville
Holding Corporation (collectively referred to hereafter as "Bonneville") for a
purchase price of $35.0 million. The Company also acquired the assets of
KIRO-AM, KIRO-FM and KNWX-AM, serving the Seattle, Washington radio market, from
KIRO, Inc., a wholly owned subsidiary of Bonneville International Corporation
("KIRO") for a purchase price of $60.0 million. As consideration for the assets
received, the Company transferred the assets of KLDE-FM serving the Houston,
Texas radio market, plus $5.0 million, to Bonneville and KIRO resulting in a
gain of $88.7 million. The Company incurred transaction costs of $246,000
related to these acquisitions. Broadcasting licenses and other intangibles in
the amount of $85.8 million were recorded in connection with these transactions.
On April 28, 1997, the Company acquired the assets of KEDO-AM and KLYK-FM,
serving the Longview/Kelso, Washington radio market, for $1.8 million from
Longview Broadcasting Company and Premier Development Company. The Company
incurred transaction costs of $38,000 related to these acquisitions.
Broadcasting licenses and other intangibles in the amount of $733,000 were
recorded in connection with this transaction.
On May 30, 1997, the Company completed an Asset Exchange Agreement with
Nationwide Communications, Inc. ("Nationwide") and Secret Communications, LP
("Secret"). In this three party agreement, in exchange for the transfer to
Secret of the Company's two FM radio stations in Pittsburgh, WDSY and WNRQ, the
Company received Nationwide's FM radio station in Seattle, KISW, plus $32.5
million, resulting in a gain of $43.9 million. Broadcasting licenses and other
intangibles in the amount of $12.1 million were recorded in connection with this
transaction. The total purchase price of this transaction was $47.0 million.
F-15
<PAGE> 171
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On May 30, 1997, the Company acquired the assets of KLOU-FM, serving the
St. Louis, Missouri radio market, from Group W Broadcasting, Inc., plus $39.7
million, in exchange for the assets of KITS-FM, resulting in a gain of $61.2
million. The Company incurred transaction costs of $58,000 related to this
acquisition. Broadcasting licenses and other intangibles in the amount of $21.6
million were recorded in connection with this transaction. The total purchase
price of this transaction was $62.2 million.
On June 3, 1997, the Company acquired the assets of KDND-FM (formerly
KXOA-FM), serving the Sacramento, California radio market, from American Radio
Systems Corporation for $27.2 million. The Company incurred transaction costs of
$192,000 related to this acquisition. Broadcasting licenses and other
intangibles in the amount of $26.9 million were recorded in connection with this
transaction.
On June 4, 1997, the Company acquired the assets of KRXQ-FM and KSEG-FM,
serving the Sacramento, California radio market, from Citicasters Co. for $45.0
million. The Company incurred transaction costs of $268,000 related to these
acquisitions. Broadcasting licenses and other intangibles in the amount of $40.7
million were recorded in connection with this transaction.
1998 ACQUISITIONS
On November 26, 1997, the Company acquired the assets of KSSJ-FM (formerly
KBYA-FM), serving the Sacramento, California radio market, from Susquehanna
Radio Corp., KTHX License Investment Co. and KTHX Radio Inc. for $15.9 million.
The Company incurred transaction costs of $87,000 related to this acquisition.
Broadcasting licenses and other intangibles in the amount of $15.8 million were
recorded in connection with this transaction.
On January 1, 1998, the Company acquired the assets of KCTC-AM, serving the
Sacramento, California radio market, from ARS for $4.0 million. The Company
incurred transaction costs of $13,000 related to this acquisition. Broadcasting
licenses and other intangibles in the amount of $2.7 million were recorded in
connection with this transaction.
On January 1, 1998, the Company acquired the assets of KUDL-FM and WDAF-AM,
serving the Kansas City, Kansas/Missouri radio market from ARS. As consideration
for the assets received, which included the receipt of $7.1 million in cash from
ARS, the Company transferred the assets of KLOU-FM, serving the St. Louis radio
market, to ARS resulting in a gain of $300,000. The Company incurred transaction
costs of $294,000 related to this acquisition. Broadcasting licenses and other
intangibles in the amount of $12.8 million were recorded in connection with this
transaction. The total purchase price of this transaction was $15.4 million.
On May 7, 1998, the Company acquired the assets of WSKY-FM (formerly
WRRX-FM), serving the Gainesville/Ocala, Florida radio market, from Gator
Broadcasting Co. for $2.0 million. The Company incurred transaction costs of
$66,000 related to this acquisition. Broadcasting licenses and other intangibles
in the amount of $1.7 million were recorded in connection with this transaction.
F-16
<PAGE> 172
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On May 15, 1998, the Company acquired the assets of KBAM-AM and KRQT-FM,
serving the Longview, Washington radio market, from Armak Broadcasters Inc. for
$1.0 million. The Company incurred transaction costs of $43,000 related to this
acquisition. Broadcasting licenses and other intangibles in the amount of
$350,000 were recorded in connection with this transaction.
On June 19, 1998, the Company acquired from Sinclair Broadcast Group the
assets of KKSN-AM, KKSN-FM, and KKRH-FM, all serving the Portland, Oregon radio
market, and WBEE-FM, WBBF-FM (formerly WKLX-FM), WQRV-FM and WEZO-AM (formerly
WBBF-AM) all serving the Rochester, New York radio market. The purchase price
for the stations was $126.5 million. The Company began operations at these
stations on March 1, 1998 under a TBA. The Company incurred transaction costs of
$494,000 related to this acquisition. Broadcasting licenses and other
intangibles in the amount of $121.3 million were recorded in connection with
this transaction.
On August 13, 1998 the Company acquired from Capital Broadcasting, Inc. the
assets and rental leases used in connection with the operation of a tower
facility serving the Kansas City, Kansas/Missouri radio market for a purchase
price of $2.0 million.
On September 16, 1998, the Company completed an agreement with American
Radio Systems, Inc. and American Radio Systems License Corp. (collectively
referred to as "ARS") to exchange certain assets used in the operation of radio
stations serving the Sacramento radio market. ARS provided KRAK-FM's license and
transmission facility to the Company in exchange for KRXQ's license and
transmission facility and $4.5 million. Each of the stations retained its own
call letters, programming format and studio and office property and equipment,
and the parties provided each other with reciprocal covenants against
programming competition on the respective frequencies for a period of two years.
ARS also transferred the intellectual property comprising program format for use
by the Company on its recently acquired KBYA-FM in that market. The transaction
was accounted for as a nonmonetary exchange of similar productive assets and no
gain or loss was recognized. The assets received were recorded at the historical
cost of the assets surrendered plus the $3.8 million paid to ARS. In a related
transaction the Company sold the KRXQ-FM transmitter site, including broadcast
tower facilities, to ARS for $750,000, resulting in a loss of $34,000.
OTHER TRANSACTIONS
On March 6, 1996, the Company sold all of the assets of KMTT-AM, Tacoma,
Washington, including assignment of the FCC license, to Southwave Wireless
Communications, Inc. LLC for a cash purchase price of $500,000, resulting in a
gain of approximately $140,000.
On December 6, 1996, the Company sold certain assets of KEGE-AM, Richfield,
Minnesota, including assignment of the FCC license, to Salem Media of Minnesota,
Inc. for $3.0 million, resulting in a gain of approximately $2.6 million.
On February 6, 1997, the Company sold all of the assets of WDSY-AM,
Pittsburgh, Pennsylvania, including assignment of the FCC license, to Mortenson
Broadcasting
F-17
<PAGE> 173
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company for a cash purchase price of $750,000, resulting in a gain of
approximately $700,000.
On May 7, 1998, the Company sold certain rights in a license for the
Vancouver, Washington radio market to Jacor Communications and Smith
Broadcasting, Inc. for $10.0 million. The Company acquired an interest in these
rights at a cost of $1.3 million through an agreement with Q Prime Inc.,
Clifford Burnstein and Peter D. Mensch. The sale resulted in a gain of $8.5
million.
On June 25, 1998, the Company completed its transaction with McKenzie River
Broadcasting Company ("McKenzie") whereby McKenzie received FCC approval to
reclassify the broadcast license of its KMGE-FM station, serving the Eugene,
Oregon radio market, from a Class C to a Class C-1. Such a reclassification of
that station allowed the Company to seek approval from the FCC for construction
and operation of an enhanced transmission facility for its KNRK-FM station
serving the Portland, Oregon radio market. In consideration for its agreement,
McKenzie was paid approximately $1.2 million and the Company recorded this
amount as broadcast licenses.
Effective July 1, 1997, the Company entered into a Joint Sales Agreement
("JSA") with Classic Radio, Inc. ("Classic"), whereby the Company serves as the
exclusive sales agent for the Classic-owned KING-FM radio station, located in
Seattle, Washington. This agreement is a continuation of a relationship under a
prior JSA which expired on June 30, 1997. Under the new JSA, which continues
through June 30, 2002, the Company will be entitled to all revenues from the
sale of advertising time broadcast on KING-FM, but will be required to pay a
monthly fee to Classic based upon calculations as defined in the agreement.
Under the terms of the JSA, the Company will be responsible for all costs
incurred in selling the advertising time. Classic will be responsible for all
costs incurred in operating the station. Gross revenues and expenses incurred by
the Company under this contract during the years ended September 30, 1997 and
1998 were $2.6 million and $1.3 million and $3.6 million and $2.3 million,
respectively.
On October 7, 1997, the Company, in a transaction with Kanza Inc.,
exchanged the broadcasting frequency and the transmitter related assets of
KCMO-AM, Kansas City, Missouri for the broadcasting frequency and transmitter
related assets of WHB-AM, Kansas City, Missouri. The Company incurred
transaction costs of $233,000. The transaction was accounted for as a
nonmonetary exchange of similar productive assets and no gain or loss was
recognized. The assets received were recorded at the historical cost of the
assets surrendered.
The following unaudited pro forma summary presents the consolidated results
of operations as if the transactions which occurred within either the 1997 or
1998 fiscal years had all occurred at the beginning of the 1997 fiscal year,
after giving effect to certain adjustments, including depreciation and
amortization of assets and interest expense on any debt incurred to fund the
acquisitions which would have been incurred had such acquisitions and other
transactions occurred at the beginning of the 1997 fiscal year. These unaudited
pro forma results have been prepared for comparative purposes only and do not
purport to be indicative of what would have occurred had the acquisitions and
other transactions been made as of that date or results which may occur in the
future.
F-18
<PAGE> 174
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------
1997 1998
---------- ----------
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Net revenues........................................... $122,711 $140,544
======== ========
Income (loss) before extraordinary items and gains on
sale of assets....................................... $(21,795) $ 3,126
======== ========
Income before extraordinary items...................... $183,313 $ 3,126
======== ========
Net income............................................. $183,313 $ 750
======== ========
</TABLE>
4. RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES
Radio Broadcasting Licenses and other intangibles consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1997 1998
--------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
FCC Licenses............................................. $300,022 $436,407
Other Intangibles........................................ 1,704 2,574
-------- --------
Subtotal................................................. 301,726 438,981
Less accumulated amortization............................ (6,307) (14,265)
-------- --------
Total radio broadcasting licenses and other
intangibles............................................ $295,419 $424,716
======== ========
</TABLE>
5. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1997 1998
------ ------
(AMOUNTS IN
THOUSANDS)
<S> <C> <C>
Debt issuance costs, less accumulated amortization of
$715,000 and $566,000 in 1997 and 1998, respectively...... $3,629 $2,163
Leasehold premium, less accumulated amortization of $125,000
and $228,000 in 1997 and 1998, respectively............... 862 1,644
Other deferred charges, less accumulated amortization of
$77,000 and $124,000 in 1997 and 1998, respectively....... 119 240
------ ------
$4,610 $4,047
====== ======
</TABLE>
F-19
<PAGE> 175
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT
(A) Senior debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1997 1998
--------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Notes payable, due June 30, 2003(A)(1)(a)................ $ 92,000
Notes payable, due June 30, 2003 (A)(1)(b)............... 25,000
Notes payable due February 13, 2006 (A)(2)............... $253,500
Other.................................................... 284
-------- --------
Total............................................... 117,000 253,784
Amounts due within one year.............................. 10
-------- --------
$117,000 $253,774
======== ========
</TABLE>
- -------------------------
(1) On March 25, 1997, the Company expanded its existing credit facility with a
group of banks to $165.0 million. The credit facility consisted of a $140.0
million reducing revolving credit and a $25.0 million amortizing term loan.
At September 30, 1997, outstanding balances against these credit facilities
were $92.0 million and $25.0 million, respectively. Under the loan
agreement, the Company provided the banks with a pledge of its 99% interest
in ECI License Company LP, a pledge of all of the outstanding stock of the
Company, and a pledge of all the Company's other assets. The agreement
included certain restrictive covenants, including a limitation on dividends.
These debt facilities were replaced with the debt facility described in
paragraph (A)(2) below.
(a) The availability under the reducing revolving credit agreement, which
was to mature on June 30, 2003, reduced on a quarterly basis beginning
September 30, 1997 in amounts which vary from $3.5 million to $12.4
million. The Company had the option under this agreement to elect to
pay interest at a rate equal to LIBOR (in increments with durations of
1, 2, 3 or 6 months) plus 1.25% or the prime rate. Under certain
events, the Company's borrowing costs could have increased to a maximum
of LIBOR plus 3.25% or prime plus 2%. The interest payable on LIBOR
rates was payable at the end of the selected duration but not less
frequently than every three months and on prime rates was payable at
the end of each calendar quarter. The weighted average interest rate
under this agreement at September 30, 1997 was 7.46%. The Company was
required to maintain a minimum of $1.0 million in cash, cash
equivalents, or cash available under this facility.
(b) The $25.0 million amortizing term loan, which was to mature on June 30,
2003, reduced in ten equal quarterly payments of $625,000, beginning
December 31, 2000 with a final payment of $18.75 million due June 30,
2003. The Company had the option to pay interest at a rate of LIBOR
plus 3.25% or prime plus 2%.
F-20
<PAGE> 176
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The interest payment was due in the same manner as described in
(A)(1)(a) above. The interest rate under this agreement at September
30, 1997 was 8.91%.
(2) The Company's term and revolving credit facilities were refinanced on
February 13, 1998, under a new bank credit agreement (the "New Credit
Agreement") with Key Corporate Capital Inc., as administrative agent. The
New Credit Agreement provides for a $300.0 million Senior Secured Revolving
Credit Facility (the "New Bank Facility"). See Note 12, Subsequent Events,
for further discussion.
The New Bank Facility is secured by (i) a pledge of the Company's 99%
interest in ECI License Company, LP ("ECI"), (ii) a security interest in
substantially all of the assets of ECI, (iii) a pledge of 100% of the
outstanding stock of the Company; provided, however, that this pledge will
be released if the Company restructures by forming subsidiaries to hold the
station assets and licenses (in such a restructuring, the Company will
pledge the stock of all such subsidiaries which will become Guarantors, and
ECI will be dissolved, further, upon such restructuring and pledge of
stock, the pledges under (i) and (ii) above will be terminated and
released), (iv) a security interest in all major tangible and intangible
personal property assets of the Company and any future subsidiaries as well
as a negative pledge on all real property, and (v) an assignment of all
major leases, rights, etc. as appropriate.
The availability under the reducing revolving credit agreement, which
matures on February 13, 2006, reduces on a quarterly basis beginning June
30, 2000 in amounts which vary from $3.75 million to $15.0 million. The
Company has the option under this agreement to elect to pay interest at a
rate equal to LIBOR (in increments with durations of 1, 2, 3 or 6 months)
plus .50% or the prime rate. Under certain events, the Company's borrowing
costs can increase to a maximum of LIBOR plus 2.125% or prime plus .875%.
The interest payable on LIBOR rates is payable at the end of the selected
duration but not less frequently than every three months and on prime rates
is payable at the end of each calendar quarter. The weighted average
interest rates under this agreement at September 30, 1998 was 7.53%. The
Company also pays a commitment fee of 0.375% per annum on the average
unused balance of the New Bank Facility.
(B) The Company has entered into several interest rate transactions as
hedges against the variable rate debt discussed in 6(A) above:
(1) In June 1987, the Company entered into an interest rate agreement or
"swap" for a notional amount of $6.0 million which concluded in June
1996. The Company paid a fixed rate of 9.55% on the notional amount to
a bank and the bank paid to the Company a variable rate equal to
three-month LIBOR as determined from time to time on a quarterly basis
through June 30, 1996. The net amount the Company paid under this
agreement was $175,000 for the year ended September 30, 1996 and has
been accounted for as interest expense.
(2) In May 1995, the Company entered into an interest rate swap agreement
for a notional amount of $20.0 million through May 16, 2000. Under this
agreement, the Company pays a fixed rate of 6.77% on the notional
amount to a bank and the bank pays to the Company a variable rate equal
to three-month LIBOR as
F-21
<PAGE> 177
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
determined from time to time on a quarterly basis through May 16, 2000.
The variable rate was 5.5%, 5.7% and 5.7% at September 30, 1996, 1997
and 1998, respectively. The net amount the Company paid under this
agreement was $240,000, $235,000 and $211,000 for the years ended
September 30, 1996, 1997 and 1998, respectively. These amounts have
been accounted for as interest expense.
(3) In July 1996, the Company entered into a convertible rate cap
transaction in the amount of $25.0 million to hedge a portion of its
variable rate debt. Pursuant to this transaction, the bank elected,
effective October 29, 1998, to convert the transaction to a swap for a
notional amount of $25.0 million in which the Company pays a fixed rate
of 5.89% on the notional amount to the bank and the bank pays to the
Company a variable rate equal to three-month LIBOR through July 29,
2003. No amounts were paid relating to this transaction during the
years ended September 30, 1996, 1997 and 1998.
(4) In August 1996, the Company simultaneously entered into a rate cap
transaction and a swap option transaction in the amount of $25.0
million to hedge a portion of its variable rate debt. Under the rate
cap transaction, which expires August 8, 2000, the Company's base LIBOR
rate cannot exceed 7.5% at the time of any quarterly reset date. Under
the swap option transaction, the bank may make an election prior to
August 8, 2000 to enter into a swap in which the Company pays a fixed
rate of 6.05% on the notional amount to a bank and the bank pays to the
Company a variable rate equal to three-month LIBOR. If the bank
exercises its election, then the swap will terminate on August 8, 2002.
Any election by the bank will not terminate the rate cap transaction
described above. No amounts were paid related to these transactions
during the years ended September 30, 1996, 1997 and 1998.
(5) On January 6, 1998, the Company entered into an interest rate swap
agreement with a bank in the amount of $15.0 million to hedge a portion
of its variable rate debt. Under the swap transaction, which expires
January 10, 2005, unless terminated by the bank by January 6, 2003, the
Company pays a fixed rate of 5.61% on the notional amount to the bank
and the bank pays to the Company a variable rate equal to three month
LIBOR as determined from time to time on a quarterly basis through the
end of the transaction period. The variable rate was 5.7% as of
September 30, 1998. The net amount paid to the Company under this
agreement was $9,000 for the year ended September 30, 1998.
(6) On January 6, 1998, the Company entered into an interest rate swap
agreement with a bank in the amount of $14.0 million to hedge a portion
of its variable rate debt. Under the swap transaction, which expires
January 10, 2005, the Company pays a fixed rate of 5.86% on the
notional amount to the bank and the bank pays to the Company a variable
rate equal to three months LIBOR as determined from time to time on a
quarterly basis through the end of the transaction period. The variable
rate was 5.7% as of September 30, 1998. The net amount paid by the
Company under this agreement was $17,000 for the year ended September
30, 1998.
F-22
<PAGE> 178
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) On February 26, 1998, the Company entered into an interest rate swap
agreement with a bank in the amount of $30.0 million to hedge a portion
of its variable rate debt. Under the swap transaction, which expires
February 27, 2008, unless terminated by the bank on February 28, 2005,
the Company pays a fixed rate of 5.77% on the notional amount to the
bank and the bank pays to the Company a variable rate equal to three
month LIBOR as determined from time to time on a quarterly basis
through the end of the transaction period. The variable rate was 5.7%
as of September 30, 1998. The net amount paid by the Company under this
agreement was $16,000 for the year ended September 30, 1998.
(C) Aggregate principal maturities on Senior debt are as follows (amounts
in thousands):
Fiscal years ending September 30:
<TABLE>
<S> <C>
1999...................................................... $ 10
2000...................................................... 10
2001...................................................... 10
2002...................................................... 43,510
2003...................................................... 35,010
Thereafter................................................ 175,234
--------
Total.................................................. $253,784
========
</TABLE>
The extraordinary charges for 1996 and 1998 are the result of the
write-offs ($539,000 and $2,376,000 respectively, net of tax benefits) of
unamortized finance charges resulting from the early extinguishment of long-term
debt.
(D) On May 21, 1996, the Company entered into a convertible subordinated
note purchase agreement with an investment partnership in the principal amount
of $25.0 million. Interest on the note accrues at the rate of 7% per annum. Such
interest compounds annually and is deferred and payable with principal in one
installment on May 21, 2003. The payment due date can be deferred by one year
under certain circumstances. The obligations of the Company under the note are
subordinate to the obligations of the notes payable to the banks as noted in
(A)(2) above.
The convertible subordinated note is convertible by the holder under
certain events and circumstances such as a public offering of the Company's
capital stock, a change of control of the Company, a sale of substantially all
of the Company's assets, a merger or consolidation into a publicly traded
company or the Company's ceasing to be an S Corporation. In the event of
conversion, the holders would receive shares of the common stock of the Company
representing an ownership interest of approximately 15% of the Company prior to
such event in lieu of all outstanding principal and interest. Under certain
events and circumstances, the holder of the note has the option to put ("Put
Option") the convertible subordinated note to the Company and receive, at the
option of the Company, either cash or a new note ("Put Note"). The Put Option is
exercisable on or after May 21, 2001. The amount of cash or principal of the Put
Note will equal the fair market
F-23
<PAGE> 179
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
value of the shares of common stock into which the convertible subordinated note
is convertible. The Put Note would accrue interest at prime plus 2% and would be
due May 21, 2004.
In the event that the note is not converted or put to the Company by May
21, 2003, then the Company can redeem the convertible subordinated note by
either paying cash or issuing a new note (Redemption Note). The amount of cash
or principal of the Redemption Note will equal the original principal amount of
the convertible subordinated note ($25.0 million) plus interest accrued through
the Date of Redemption at an interest rate of 7% per annum. The Redemption Note
would also accrue interest at 7% per annum and would be due on May 21, 2004.
Due to the existence of the Put Option described above, the Company
accounts for this instrument as indexed debt. Accordingly, the Company's balance
sheets as of September 30, 1997 and 1998 and statements of income for the years
then ended reflect an "adjustment to reflect indexing of the convertible
subordinated note." No adjustment was required for fiscal 1996.
The adjustment to reflect indexing of the convertible subordinated note has
been determined by reference to the difference between the estimated market
value of the shares of Common Stock into which the note is convertible pursuant
to the terms of the Put Option and the sum of the principal outstanding of $25.0
million plus interest accrued at 7% per annum. Such estimated market value is
calculated using comparable publicly held radio broadcast companies' multiples
of broadcast cash flow.
The holder of the convertible subordinated note has stated that in
connection with the initial public offering of the Company's Common Stock, it
will exercise its conversion option. Up to the date of the conversion, the
Company may recognize further adjustments to the indexing of the convertible
subordinated note. Upon conversion, the amount of the liability recorded will
convert to equity and there will be no further obligation by the Company.
F-24
<PAGE> 180
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial instruments, which
consist of cash and cash equivalents, accounts receivable, station acquisition
deposits, income tax deposit, accounts payable, accrued liabilities, debt and
interest rate instruments, have been determined by the Company using available
market information and appropriate valuation methodologies. At September 30,
1997 and 1998, the fair value of cash and cash equivalents, accounts receivable,
station acquisition deposits, income tax deposit, accounts payable, accrued
liabilities and debt approximate their carrying value. At September 30, 1997 and
1998, respectively, unrealized losses on interest rate hedges described under
Note 6(B) (2), (3), (4), (5), (6) and (7) are as follows (amounts in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1997 1998
----- -------
<S> <C> <C>
6(B) (2)............................................. $(351) $ (652)
(3)............................................ (212) (1,057)
(4)............................................ (103) (1,069)
(5)............................................ (525)
(6)............................................ (705)
(7)............................................ (1,793)
</TABLE>
8. MINORITY INTEREST
On December 2, 1992, in connection with a financing transaction, the
Company created a wholly owned subsidiary, ECI Investors Corporation
("Investors"), with a capital of $50,000. Upon creation, the Company immediately
distributed the stock of Investors to the Company's shareholders. On December
23, 1992, the Company formed a limited partnership, ECI License Company, LP
("Partnership") with Investors. The Company is the sole general partner of the
Partnership. The Company contributed its FCC (FCC) licenses and authorizations
to the Partnership in exchange for a 99% interest in the Partnership, and
Investors acquired its 1% interest in the Partnership for cash.
On all subsequent occasions when the Company acquired FCC licenses and
authorizations it has contributed them to the Partnership for its 99% interest
and Investors has contributed its matching 1% interest. On each such occasion,
as well as on the dispositions of FCC licenses and authorizations, excluding
those FCC licenses and authorizations used to acquire new FCC licenses and
authorizations which qualify under IRC Section 1031, commonly known as "SWAPS,"
the book value of the Partnership has been adjusted to reflect such transaction.
The book value of the Partnership was approximately $114.2 million (net of
accumulated amortization of approximately $4.5 million) and $132.2 million (net
of accumulated amortization of approximately $7.3 million) at September 30, 1997
and 1998. The Company's 99% interest in the Partnership is pledged as collateral
for the debt described in Note 6A(2). The Company pays a licensing fee to the
Partnership in exchange for the right to utilize the Partnership's licenses and
authorizations in connection with the operation of the stations.
F-25
<PAGE> 181
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As discussed in Note 2, the financial impact of such transactions is
substantially eliminated in consolidation. The minority interest at September
30, 1997 and 1998 included in the accompanying consolidated balance sheets
represents the 1% interest of Investors in the Partnership, net of two notes
receivable by the Partnership from Investors. These notes were in the amounts of
approximately $875,000 and $7,000 at September 30, 1997 and $839,000 plus
various other notes which total approximately $200,000 at September 30, 1998.
These notes bear interest at rates ranging from 6% to 8% per annum, and were
issued to the Partnership by Investors for Investors' share of the FCC licenses
and authorizations acquired by the Company during 1997 and 1998. These notes are
due in ten equal annual installments, plus accrued interest.
9. COMMITMENTS AND CONTINGENCIES
ACQUISITIONS
The Company entered into a preliminary agreement on February 6, 1996 for
the Company to acquire the assets of radio station KWOD-FM, Sacramento,
California, from Royce International Broadcasting Corporation subject to
approval by the FCC for a purchase price of $25.0 million. Notwithstanding
efforts by the Company to pursue this transaction, the seller has been
nonresponsive. Accordingly, the Company cannot determine if and when the
transaction might occur.
On August 13, 1998, the Company entered into three agreements with CBS
Radio, Inc. pursuant to which it will (i) purchase WRKO-AM and WEEI-AM in Boston
for $82.0 million in cash (the "First Boston Transaction"), (ii) sell WLLD-FM
and WYUU-FM in Tampa for $75.0 million in cash (the "Tampa Transaction") and
(iii) purchase WAAF-AM and WEGQ-FM in Boston and WWTM-AM in Worchester for $58.0
million (the "Second Boston Transaction"). The assets that will be sold in the
Tampa Transaction have been segregated on the Consolidated Balance Sheet as
assets held for sale. These assets consist of $2.8 million in property and
equipment, net of accumulated depreciation, and $2.5 million in radio
broadcasting licenses and other intangibles, net of accumulated amortization.
See Notes 12(D) and 12(G).
OTHER
The Company's employment agreement with its Chairman and Chief Executive
Officer renews automatically each calendar year unless terminated by either
party in accordance with the contract. Under the terms of the agreement,
compensation is calculated annually by utilizing the gross national product
implicit price deflator issued by the Bureau of Economic Analysis to determine
the equivalent of 1993 base compensation of $500,000. Total compensation for the
years ended September 30, 1996, 1997 and 1998 was approximately $540,000,
$554,000, and $567,000, respectively.
Rental expense is incurred principally for office and broadcasting
facilities. Rental expense during the years ended September 30, 1996, 1997 and
1998 was approximately $1.2 million, $2.2 million and $2.8 million,
respectively.
The Company also has various contracts for sports programming and on-air
personalities with terms ranging from one to five years.
F-26
<PAGE> 182
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate minimum annual commitments as of September 30, 1998 for
operating leases, sports programming and on-air personalities are as follows:
<TABLE>
<CAPTION>
OPERATING SPORTS ON-AIR
LEASES PROGRAMMING PERSONALITIES
--------- ----------- -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Fiscal years ending September 30:
1999...................................... $ 3,160 $16,625 $ 5,880
2000...................................... 3,066 18,110 3,690
2001...................................... 2,893 8,802 1,420
2002...................................... 2,964 6,718 713
2003...................................... 2,458 181
Thereafter................................ 11,138
------- ------- -------
$25,679 $50,255 $11,884
======= ======= =======
</TABLE>
The Company is subject to various outstanding claims which arose in the
ordinary course of business and to other legal proceedings. In the opinion of
management, any liability of the Company which may arise out of or with respect
to these matters will not materially affect the financial position, results of
operations or cash flows of the Company.
10. SHAREHOLDERS' EQUITY
During 1997, the Company retired treasury stock consisting of 1,931,400
shares of Class A common stock.
For the fiscal years ended September 30, 1996, 1997 and 1998, the Company
paid total dividends of $2.0, $2.8, and $3.1 million, respectively. These
amounts include special dividends paid to the Company's shareholders to
compensate them for federal and state income tax obligations attributable to
pass-through taxable income generated by the Company.
On June 24, 1998, the Board of Directors and the shareholders of the
Company approved the Company's amended and restated Articles of Incorporation to
provide for, among other things, an increase in the aggregate number of shares
which the Company has authority to issue to 350,000,000 shares, par value $.01
per share, consisting of the following: (i) 200,000,000 shares of Class A Common
Stock; (ii) 75,000,000 shares of Class B Common Stock; (iii) 50,000,000 shares
of Class C Common Stock; and (iv) 25,000,000 shares of Preferred Stock. Such
change occurred just prior to the effective date of the Company's initial public
offering.
11. EMPLOYEE SAVINGS AND BENEFIT PLANS
The Company sponsors a 401(k) savings plan which includes a provision under
which the Company contributes 50% of the amount of any eligible employee's
contribution to the plan up to a maximum employer contribution of 3% of an
employee's compensation. The
F-27
<PAGE> 183
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
maximum eligible employee contribution under the plan was $9,500, $9,500 and
$10,000 for the plan years ended December 31, 1996, 1997 and 1998. The Company
may at its discretion suspend future matching contributions. The Company
contributed approximately $232,000, $485,000, and $588,000, under the 401(k)
plan for the years ended September 30, 1996, 1997, and 1998, respectively.
On June 24, 1998, the Company adopted an Equity Compensation Plan (the
"Compensation Plan"). The Compensation Plan will allow officers (including those
also serving as directors) and other employees, non-employee directors and key
advisors or consultants, selected by a Committee of the Board of Directors, to
receive incentive stock options, nonqualified stock options, restricted stock
and stock appreciation rights in the Common Stock of the Company. There are
5,000,000 shares of Common Stock reserved for issuance under the Compensation
Plan. On December 29, 1998, the Board of Directors granted 11,112 shares of
restricted stock and 838,965 in options of which 563,403 options have an
exercise price equal to the initial public offering price per share and 275,562
have an exercise price of 80% of the initial public offering price. All of the
options and restricted stock vest over a four year period. For options granted
at prices below fair market value, the Company will recognize $1.2 million in
non-cash compensation expense ratably over the four year period. For restricted
stock, the Company will recognize $250,000 in non-cash compensation expense
ratably over the four year period.
On June 24, 1998, the Company adopted an Employee Stock Purchase Plan (the
"Purchase Plan"). The Purchase Plan will allow the participants to purchase
shares of the Company's Common Stock at a purchase price equal to 85% of the
Market Value of such shares on the Purchase Date. There are 1,850,000 shares of
Common Stock reserved for issuance under the Purchase Plan. No awards have been
issued under this plan.
12. SUBSEQUENT EVENTS
(A) On October 8, 1998, the Company amended their New Credit Agreement with Key
Corporation Capital Inc. to increase their Senior Secured Revolving Credit
Facility to $350.0 million. Availability under this credit agreement reduces
on a quarterly basis beginning June 30, 2000 in amounts which vary from $4.4
million to $17.5 million.
(B) In July 1996, the Company entered into a convertible rate cap transaction in
the amount of $25.0 million to hedge a portion of its variable rate debt.
Pursuant to this transaction, the bank elected, effective October 29, 1998,
to convert the transaction to a swap for a notional amount of $25.0 million
in which the Company pays a fixed rate of 5.89% on the notional amount to
the bank and the bank pays to the Company a variable rate equal to the
three-month LIBOR through July 29, 2003.
(C) On December 9, 1998, the Company entered into an agreement to acquire
KKGM-AM, a radio station serving Kansas City, Kansas, from Mortenson
Broadcasting Company of Canton, LLC for the sum of $2.8 million.
(D) On December 11, 1998, the Company acquired the assets of WRKO-AM and
WEEI-AM, serving the Boston radio market, from CBS for $82.0 million (the
"First Boston Transaction"). The Company incurred transaction costs of
$284,023 related to
F-28
<PAGE> 184
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
this acquisition. Broadcasting licenses and other intangibles in the amount
of $77.8 million will be recorded in connection with this transaction.
(E) On December 14, 1998, the Company acquired the assets of KSLM-AM, serving
the Salem, Oregon radio market, from Willamette Broadcasting Co. for
$605,000. The Company incurred transaction costs of $13,812 related to this
acquisition. Broadcasting licenses and other intangibles in the amount of
$506,100 will be recorded in connection with this transaction.
(F) The Company is required to maintain a $4.9 million letter of credit, which
increases to $5.0 million on May 15, 2000 in connection with contracts
assumed in the First Boston Transaction. The contracts expire on November
15, 2000.
(G) On December 22, 1998, the Company sold the assets of WLLD-FM and WYUU-FM,
serving the Tampa, Florida radio market to CBS for $75.0 million.
(H) In December 1998, the Board approved the purchase of the 1% minority
interest in ECI License Company, L.P. for an amount of $3.4 million.
(I) In December 1998, the Company invested $1.0 million by purchasing 200,000
shares at $5.00 per share in USA Digital Radio, Inc. The Company's
investment represents a minority share in a privately held company formed
to develop in-band on channel digital radio for AM and FM broadcast
stations.
13. CHANGES IN CAPITALIZATION
In connection with the adoption of the Company's amended and restated
Articles of Incorporation (See Note 10), the Company declared a 185 for 1 stock
split payable to shareholders at the time the Amended and Restated Articles of
Incorporation become effective. The accompanying consolidated financial
statements give effect to these transactions as if they had occurred on October
1, 1995.
14. RESTATEMENT
Subsequent to the issuance of the Company's fiscal 1998 consolidated
financial statements, the Company determined that its fiscal 1997 and 1998
consolidated financial statements should be restated to reflect the 7%
convertible subordinated note (see Note 6(D)) as an indexed debt instrument and
to record the change in the put option value as a charge to operations.
F-29
<PAGE> 185
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effect of this item on the accompanying consolidated financial
statements is summarized as follows:
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1997 1998
PREVIOUSLY 1997 PREVIOUSLY 1998
REPORTED AS RESTATED REPORTED AS RESTATED
---------- ----------- ---------- -----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Adjustment to reflect indexing of
convertible subordinated note....... $ 29,070 $ 8,841
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS................. $206,329 177,259 $ 18,733 9,892
NET INCOME............................ 205,840 176,770 15,904 7,063
PRO FORMA DATA (UNAUDITED) PRO FORMA
NET INCOME DATA:
Income before income taxes and
extraordinary items.............. 206,329 177,259 18,733 9,892
PRO FORMA NET INCOME.................. 127,924 98,854 10,126 1,285
PRO FORMA EARNINGS PER SHARE (Note 1):
Basic:
Pro forma earnings before
extraordinary items............ 5.94 4.59 0.46 0.12
Pro forma earnings per share..... 5.94 4.59 0.40 0.06
Diluted:
Pro forma earnings before
extraordinary items............ 5.05 4.59 0.46 0.12
Pro forma earnings per share..... 5.05 4.59 0.40 0.06
</TABLE>
BALANCE SHEETS
<TABLE>
<S> <C> <C> <C> <C>
Cumulative adjustment to reflect
indexing of convertible subordinated
note................................ 29,070 37,911
Total convertible subordinated note... 27,427 56,497 29,352 67,263
Total shareholders' equity............ 208,089 179,019 220,881 182,970
</TABLE>
F-30
<PAGE> 186
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 6,469
Accounts receivable, net of allowance for doubtful
accounts............................................... 38,511
Prepaid expenses and deposits............................. 6,259
Proceeds held in escrow from sale of Tampa stations....... 75,000
Station acquisition deposits.............................. 327
--------
Total current assets...................................... 126,566
--------
PROPERTY AND EQUIPMENT -- At cost
Land and land easements and land improvements............. 6,927
Building.................................................. 4,596
Equipment................................................. 35,804
Furniture and fixtures.................................... 7,662
Leasehold improvements.................................... 3,899
--------
58,888
Accumulated depreciation.................................. (10,874)
--------
48,014
Capital improvements in progress............................ 629
--------
Net property and equipment.................................. 48,643
--------
RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES -- NET.... 500,545
DEFERRED CHARGES AND OTHER ASSETS -- NET.................... 5,280
--------
TOTAL....................................................... $681,034
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 18,224
Accrued liabilities:
Salaries............................................... 4,322
Interest............................................... 1,492
Other.................................................. 1,094
Long-term debt due within one year........................ 10
--------
Total current liabilities................................. 25,142
--------
SENIOR DEBT................................................. 330,271
CONVERTIBLE SUBORDINATED NOTE
Note payable.............................................. 25,000
Accrued interest.......................................... 4,858
Cumulative adjustment to reflect indexing of convertible
subordinated note...................................... 67,414
--------
Total convertible subordinated note....................... 97,272
MINORITY INTEREST IN EQUITY OF PARTNERSHIP.................. 2,882
--------
Total liabilities......................................... 455,567
--------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock...................................... 110
Class B common stock...................................... 105
Retained earnings......................................... 225,252
--------
Total shareholders' equity................................ 225,467
--------
TOTAL..................................................... $681,034
========
</TABLE>
See notes to condensed consolidated financial statements.
F-31
<PAGE> 187
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1998
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
NET REVENUES................................................ $ 28,399 $ 47,363
OPERATING EXPENSES:
Station operating expenses................................ 18,868 29,990
Depreciation and amortization............................. 2,880 4,358
Corporate general and administrative expenses............. 849 1,850
Net expense from time brokerage agreement fees............ 1,236
-------- --------
22,597 37,434
-------- --------
OPERATING INCOME............................................ 5,802 9,929
-------- --------
OTHER EXPENSE (INCOME) ITEMS:
Interest expense.......................................... 2,996 5,732
Adjustment to reflect indexing of convertible subordinated
note................................................... 14,903 29,503
Interest income........................................... (127) (146)
Other non-operating expenses.............................. 25 723
Gains on sale of assets and other......................... (43) (69,648)
-------- --------
Total other expense (income).............................. 17,754 (33,836)
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES........................... (11,952) 43,765
INCOME TAXES................................................ 81 310
-------- --------
NET INCOME (LOSS)........................................... $(12,033) $ 43,455
======== ========
PRO FORMA DATA
PRO FORMA NET INCOME DATA:
Income (loss) before income taxes......................... $(11,952) $ 43,765
Pro forma income taxes.................................... 1,121 27,842
-------- --------
PRO FORMA NET INCOME (LOSS)................................. $(13,073) $ 15,923
======== ========
PRO FORMA EARNINGS PER SHARE:
Basic:
Pro forma earnings (losses)............................ $ (0.61) $ 0.64
Diluted:
Pro forma earnings (losses)............................ $ (0.61) $ 0.64
WEIGHTED AVERAGE SHARES:
Basic..................................................... 21,534 24,742
Diluted................................................... 21,534 24,742
</TABLE>
See notes to condensed consolidated financial statements.
F-32
<PAGE> 188
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1998
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)......................................... $(12,033) $ 43,455
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation.............................................. 764 1,223
Amortization of radio broadcasting licenses, other
intangibles and deferred charges....................... 2,116 3,135
Gains on dispositions and exchanges of assets............. (43) (69,648)
Interest on the convertible subordinated note............. 477 506
Adjustment to reflect indexing of convertible subordinated
note................................................... 14,903 29,503
Changes in assets and liabilities which provided (used)
cash:
Accounts receivable.................................... 135 (5,987)
Prepaid expenses....................................... 981 (115)
Accounts payable, accrued liabilities and corporate
state income taxes.................................... 16 8,381
Minority interest in equity of partnership............. 25 705
-------- --------
Net cash provided by operating activities.............. 7,341 11,158
-------- --------
INVESTING ACTIVITIES:
Additions to property and equipment....................... (5,012) (2,400)
Proceeds from sale of property and equipment, intangibles
and other assets....................................... 68 75,016
Purchases of radio station assets......................... (15,987) (82,903)
Purchase of investment.................................... (1,000)
Deferred charges and other assets......................... (50) (622)
Proceeds held in escrow from sale of Tampa stations....... (75,000)
Stations acquisition deposits............................. 3,511 15
-------- --------
Net cash used in investing activities.................. (17,470) (86,894)
-------- --------
FINANCING ACTIVITIES:
Payments of long-term debt................................ (3,000) (3,003)
Proceeds from issuance of long-term debt.................. 13,000 79,500
Dividends paid............................................ (958)
-------- --------
Net cash provided by financing activities.............. 10,000 75,539
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (129) (197)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 3,626 6,666
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 3,497 $ 6,469
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Cash paid during the period for:
Interest............................................... $ 2,980 $ 5,698
======== ========
Income taxes........................................... $ 31 $ 60
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-33
<PAGE> 189
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1998
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements for Entercom Communications
Corp. (the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (including normal recurring accruals) considered
necessary for a fair presentation have been included.
For the three months ended December 31, 1998, the weighted average
outstanding shares have been increased by 3,208,000 shares, which represent the
number of shares which, when multiplied by an offering price of $22.50 per
share, would be sufficient to replace the capital in excess of the current
period's earnings which was authorized for subsequent distribution to the
shareholders of the Company while the Company was an S Corporation (the "S
Corporation Shareholders"), prior to the initial public offering of 13,627,500
shares of the Company's Class A Common Stock at an offering price of $22.50 (the
"IPO").
2. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS
COMPLETED ACQUISITIONS, DIVESTITURES AND INVESTMENTS
On December 11, 1998, the Company acquired the assets of WRKO-AM and
WEEI-AM, serving the Boston radio market, from CBS Radio, Inc. for $82.0
million. The Company incurred transaction costs of approximately $284,000
related to this acquisition. Broadcasting licenses and other intangibles in the
amount of $77.8 million were recorded in connection with this transaction.
On December 14, 1998, the Company acquired the assets of KSLM-AM, serving
the Salem, Oregon radio market, from Willamette Broadcasting Co. for $605,000.
The Company incurred transaction costs of approximately $14,000 related to this
acquisition. Broadcasting licenses and other intangibles in the amount of
$506,100 were recorded in connection with this transactions.
On December 21, 1998, the Company purchased 200,000 shares of the common
stock of USA Digital Radio, Inc. at a per share price of $5.00 for an aggregate
investment of $1.0 million. USA Digital Radio, Inc. is a developer of in-band AM
and FM digital audio broadcasting technology.
On December 22, 1998, the Company sold the assets of WLLD-FM and WYUU-FM,
serving the Tampa, Florida radio market to CBS for $75.0 million resulting in a
gain of approximately $69.6 million.
PENDING ACQUISITIONS
In August 1998, the Company entered into an agreement with CBS pursuant to
which it agreed to purchase WAAF-FM and WEGQ-FM in Boston and WWTM-AM in
Worchester for $58.0 million in cash. In September, 1998, the Company began
operating
F-34
<PAGE> 190
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
these stations under a time brokerage agreement. On February 22, 1999, the
Company consummated the Transaction.
On December 9, 1998, the Company entered into an agreement to acquire
WREN-AM, a radio station serving Kansas City, Kansas, from Mortenson
Broadcasting Company of Canton, LLC and Mortenson Broadcasting Company for the
sum of $2.8 million. It is anticipated that this transaction will close in the
first half of the calendar year 1999.
The following unaudited pro forma summary presents the consolidated results
of operations as if the transactions which occurred during the period of October
1, 1997 through December 31, 1998 had all occurred as of October 1, 1997, after
giving effect to certain adjustments, including depreciation and amortization of
assets and interest expense on any debt incurred to find the acquisitions which
would have been incurred had such acquisitions and other transactions occurred
as of October 1, 1997. These unaudited pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of what would have
occurred had the acquisitions and other transactions been made as of that date
or results which may occur in the future.
<TABLE>
<CAPTION>
PERIODS ENDED
DECEMBER 31,
--------------------
1997 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Net revenues............................................. $ 37,725 $ 47,363
Loss before gains on sale of assets...................... $(15,185) $(26,078)
Net income (loss)........................................ $ 54,506 $(26,078)
</TABLE>
3. DEBT
The Company has a senior secured Credit Facility (the "Credit Facility")
with a syndicate of banks which allows the Company to borrow up to $350.0
million on a reducing, revolving basis. Availability under the Credit Facility
reduces quarterly beginning June 30, 2000, in amounts which vary from $4.4
million to $17.5 million. As of December 31, 1998, the Company had approximately
$330.0 million of borrowings outstanding under the Credit Facility. The current
outstanding indebtedness under the Credit Facility was not reduced by the $75.0
million proceeds from the Tampa Transaction as these funds were being held in
escrow in a qualified intermediary account.
In connection with the Company's IPO which was completed on February 3,
1999, the Company received approximately $236.1 million in net proceeds which
was used to repay revolving indebtedness outstanding under the Credit Facility.
As of March 5, 1999, the Company had revolving indebtedness outstanding under
the Credit Facility of approximately $147.5 million, which included $58.0
million in connection with the consummation of the acquisition of WAAF-FM and
WEGQ-FM in Boston and WWTM-AM in Worchester. See Note 5, Subsequent Events.
F-35
<PAGE> 191
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. COMMITMENTS AND CONTINGENCIES
ACQUISITIONS
The Company entered into a preliminary agreement on February 6, 1996, to
acquire the assets of radio station KWOD-FM, Sacramento, California, from Royce
International Broadcasting Corporation, subject to approval by the FCC, for a
purchase price of $25.0 million. Notwithstanding efforts by the Company to
pursue this Transaction, the seller has been nonresponsive. Accordingly, the
Company cannot determine if and when the transaction might occur.
CONTINGENCIES
The Company is subject to various outstanding claims which arose in the
ordinary course of business and to other legal proceedings. In the opinion of
management, any liability of the Company which may arise out of or with respect
to these matters will not materially affect the financial position, results of
operations or cash flows of the Company.
5. SUBSEQUENT EVENTS
On February 3, 1999, the Company completed the IPO, pursuant to which
13,627,500 shares of Class A Common Stock were sold to the public at a price of
$22.50 per share. Of the 13,627,500 shares sold, the Company sold 11,300,000 and
Chase Capital Partners ("Chase Capital"), the sole selling shareholder, sold
2,327,500 shares. The net proceeds to the Company, after deducting underwriting
discounts and other offering expenses was approximately $236.1 million. In
connection with the IPO, the following events occurred:
Effective January 28, 1999 (the "Revocation Date"), the Company revoked its
S Corporation status with the Internal Revenue Service and therefore the last
day the Company was taxed as an S Corporation was January 27, 1999. As a result,
all of the Company's net income after January 27, 1999 will be taxed to the
Company rather than taxed to the Company's shareholders.
Prior to the revocation of its S Corporation status, the Company declared a
dividend (the "S Distribution"), conditioned upon consummation of the IPO,
payable to its former S Corporation Shareholders in the amount of $88.1 million,
which the Company estimated would be the undistributed balance of the income of
the Company which has been taxed, or is taxable to its S Corporation
Shareholders as of the revocation date. On March 2, 1999 the company distributed
$75 million to its S Corporation shareholders as partial payment of the S
Distribution. The Company anticipates paying the remaining $13.1 million in
April, 1999.
As a result of the revocation of its S Corporation status and its resulting
treatment as a C Corporation, the Company will record a non-cash deferred tax
expense of approximately $81.7 million in the quarter ending March 31, 1999,
resulting from the recording of a deferred income tax asset of $4.3 million and
a deferred income tax liability of $86.0 million.
F-36
<PAGE> 192
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Prior to the IPO, Chase Capital, which held a Convertible Subordinated
Promissory Note of the Company (the "Convertible Subordinated Note") with
principal in the amount of $25.0 million, converted the Convertible Subordinated
Note into 2,327,500 shares of Class A Common Stock and 1,995,669 shares of Class
C Common Stock (the "Chase Conversion"). At the time of the Chase Conversion,
the market value of the shares into which the Convertible Subordinated Note was
convertible, was approximately $97.3 million (the principal amount of the
Convertible Subordinated Note plus accrued interest amounted to approximately
$29.9 million, and the cumulative adjustment to reflect indexing of the
Convertible Subordinated Note was approximately $67.4 million). The Convertible
Subordinated Note has been retired and there is no further obligation due.
On January 22, 1999, in a related party transaction, the Company purchased
a 1% minority interest in ECI License Company, L.P. for an amount of $3.4
million. ECI License Company, L.P. is a limited partnership in which the Company
is the general partner and owns a 99% interest. ECI License Company, L.P. owns
certain of the Company's FCC licenses.
In August 1998, the Company entered into an agreement with CBS pursuant to
which it agreed to purchase WAAF-FM and WEGQ-FM in Boston and WWTM-AM in
Worchester for $58.0 million in cash (the "Second Boston Transaction"). In
September, 1998, the Company began operating these stations under a TBA. On
February 22, 1999, the Company consummated the Transaction.
F-37
<PAGE> 193
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 8,713
Accounts receivable, net of allowance for doubtful
accounts.............................................. 45,160
Prepaid expenses and deposits.......................... 6,402
Deferred tax assets.................................... 1,949
Station acquisition deposits........................... 142
--------
Total current assets.............................. 62,366
--------
PROPERTY AND EQUIPMENT -- At cost
Land and land easements and land improvements............. 6,737
Building.................................................. 4,509
Equipment................................................. 39,947
Furniture and fixtures.................................... 9,049
Leasehold improvements.................................... 4,000
--------
64,242
Accumulated depreciation.................................. (13,568)
--------
50,674
Capital improvements in progress............................ 2,086
--------
Net property and equipment.................................. 52,760
--------
RADIO BROADCASTING LICENSES AND OTHER INTANGIBLES -- NET.... 552,282
DEFERRED CHARGES AND OTHER ASSETS -- NET.................... 4,219
--------
TOTAL............................................. $671,627
========
</TABLE>
See notes to condensed consolidated financial statements
F-38
<PAGE> 194
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 16,568
Accrued liabilities:
Salaries............................................... 4,852
Interest............................................... 432
Other.................................................. 299
Income tax payable........................................ 2,798
Long-term debt due within one year........................ 10
--------
Total current liabilities................................. 24,959
--------
SENIOR DEBT................................................. 166,266
Deferred tax liability...................................... 83,516
Total liabilities......................................... 274,741
--------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock
Class A common stock...................................... 249
Class B common stock...................................... 105
Class C common stock...................................... 17
Additional paid-in capital................................ 468,239
Retained earnings......................................... (71,501)
Unearned compensation..................................... (223)
--------
Total shareholders' equity................................ 396,886
--------
TOTAL............................................. $671,627
========
</TABLE>
See notes to condensed consolidated financial statements
F-39
<PAGE> 195
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1998 1999
----------- --------------
<S> <C> <C>
NET REVENUES.......................................... $ 63,687 $ 95,545
OPERATING EXPENSES:
Station operating expenses.......................... 42,749 64,296
Depreciation and amortization....................... 6,079 10,019
Corporate general and administrative expenses....... 2,193 3,454
Net time brokerage agreement expenses............... 2,273 652
----------- --------------
OPERATING INCOME...................................... 10,393 17,124
----------- --------------
OTHER EXPENSE (INCOME) ITEMS:
Interest expense.................................... 6,179 6,246
Adjustment to reflect indexing of Convertible
Subordinated Note................................ 5,693
Interest income..................................... (180) (599)
Other non-operating expenses........................ 57
Gains on sale of assets............................. (8,748) (467)
----------- --------------
Total other expense (income)........................ 3,001 5,180
----------- --------------
INCOME FROM OPERATIONS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM.................................. 7,392 11,944
INCOME TAXES
Income taxes -- C Corporation....................... 5,249
Income taxes -- S Corporation....................... 71 125
Deferred income taxes for conversion from an S to a
C Corporation.................................... 79,845
----------- --------------
Total income taxes.................................. 71 85,219
----------- --------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM........... 7,321 (73,275)
EXTRAORDINARY ITEM (NET OF TAX BENEFIT)............... 2,397
----------- --------------
NET INCOME (LOSS)..................................... $ 4,924 $ (73,275)
=========== ==============
</TABLE>
F-40
<PAGE> 196
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1998 1999
----------- --------------
<S> <C> <C>
NET LOSS PER SHARE
Basic:
Loss before extraordinary item................... $ (2.10)
Extraordinary item, net of taxes.................
--------------
NET LOSS PER SHARE.................................... $ (2.10)
==============
Diluted:
Loss before extraordinary item................... $ (2.10)
Extraordinary item, net of taxes.................
--------------
NET LOSS PER SHARE.................................... $ (2.10)
==============
PRO FORMA DATA
PRO FORMA NET INCOME DATA:
Income before income taxes and extraordinary item... $ 7,392 $ 11,944
Pro forma income taxes.............................. 4,972 4,539
----------- --------------
Pro forma income before extraordinary item.......... 2,420 7,405
Extraordinary item, net of pro forma taxes.......... 1,489
----------- --------------
PRO FORMA NET INCOME.................................. $ 931 $ 7,405
=========== ==============
PRO FORMA EARNINGS PER SHARE:
Basic:
Pro forma earnings before extraordinary item..... $ 0.11 $ 0.21
Extraordinary item, net of pro forma taxes....... 0.07
----------- --------------
Pro forma earnings per share..................... $ 0.04 $ 0.21
=========== ==============
Diluted:
Pro forma earnings before extraordinary item..... $ 0.11 $ 0.21
Extraordinary item, net of pro forma taxes....... 0.07
----------- --------------
Pro forma earnings per share..................... $ 0.04 $ 0.21
=========== ==============
WEIGHTED AVERAGE SHARES:
Basic............................................... 21,534 34,836
Diluted............................................. 21,534 35,251
</TABLE>
See notes to condensed consolidated financial statements
F-41
<PAGE> 197
ENTERCOM COMMUNICATIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1999
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1998 1999
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).................................... $ 4,924 $ (73,275)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation......................................... 1,872 2,726
Amortization of radio broadcasting licenses, other
intangibles and deferred charges.................. 4,207 7,293
Extraordinary items.................................. 2,401
Deferred taxes....................................... 81,567
Gain on dispositions and exchanges of assets......... (8,748) (467)
Non-cash stock-based compensation expense............ 219
Interest on the Convertible Subordinated Note........ 944
Adjustment to reflect indexing of convertible
subordinated note................................. 5693
Changes in assets and liabilities which provided
(used) cash:
Accounts receivable............................... (5,808) (6,649)
Prepaid expenses.................................. (1,076) (145)
Accounts payable, accrued liabilities and
corporate state income taxes.................... 1,371 (183)
Minority interest in equity of partnership........ (2) (2,882)
--------- ---------
Net cash provided by operating activities......... 5,778 8,204
--------- ---------
INVESTING ACTIVITIES:
Additions to property and equipment.................. (4,955) (4,901)
Proceeds from sale of assets......................... 8,906 1,162
Proceeds from exchanges of radio stations............ 3,132
Payment for exchanges of radio stations.............. (306)
Purchases of radio station assets.................... (130,103) (60,968)
Deferred charges and other assets.................... (3,163) (479)
Station acquisition deposits......................... 924 75,187
--------- ---------
Net cash (used) provided by investing
activities...................................... (125,565) 10,001
--------- ---------
</TABLE>
F-42
<PAGE> 198
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1998 1999
--------- ---------
<S> <C> <C>
FINANCING ACTIVITIES:
Net proceeds from Initial Public Offering............ 236,157
Proceeds from issuance of long-term debt............. 257,793 82,500
Payment of long-term debt............................ (133,008) (246,505)
Dividends paid to S corporation shareholders......... (2,401) (88,113)
--------- ---------
Net cash provided (used) by financing
activities...................................... 122,384 (15,961)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS.............. 2,597 2,244
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD......... 3,497 6,469
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD............... $ 6,094 $ 8,713
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Cash paid during the period for:
Interest.......................................... $ 4,378 $ 6,301
========= =========
Income taxes...................................... $ 198 $ 1,652
========= =========
</TABLE>
Supplemental Disclosures of Non-Cash Investing and Financing Activities --
In connection with the radio station exchange transactions completed by the
Company during the six months ended June 30, 1998, the non-cash portion of
assets recorded was $22,500.
In connection with the Company's Initial Public Offering completed during
the six months ended June 30, 1999, the Convertible Subordinated Note, net of
deferred finance charges of $96,400 was converted into equity.
See notes to condensed consolidated financial statements
F-43
<PAGE> 199
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998 AND 1999
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements for Entercom Communications
Corp. (the "Company") have been prepared in accordance with generally accepted
accounting principals for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments, including normal recurring accruals, considered
necessary for a fair presentation have been included.
Effective January 28, 1999 (the "Revocation Date"), in connection with the
initial public offering (the "IPO") of 13,627,500 shares of Class A Common Stock
of the Company at a price of $22.50 per share, the Company revoked its S
Corporation status with the Internal Revenue Service and therefore the last day
the Company was taxed as an S Corporation was January 27, 1999. As a result, all
of the Company's effective tax rate for state and federal income taxes for the
period subsequent to January 27, 1999 is at a combined rate of 38%, applied to
taxable income before income taxes, which is adjusted for permanent differences
between tax and book income.
On January 29, 1999, the Company's Class A Common Stock began trading on
the New York Stock Exchange. On February 3, 1999, the Company completed the IPO
pursuant to which 13,627,500 shares of Class A Common Stock were sold to the
public at a price of $22.50 per share. Of the 13,627,500 shares sold, the
Company sold 11,300,000 and Chase Capital Partners ("Chase Capital"), the sole
selling shareholder, sold 2,327,500 shares. The net proceeds to the Company,
after deducting underwriting discounts and other offering expenses was
approximately $236.2 million.
As a result of the revocation of its S Corporation status and its
conversion to a C Corporation, the Company recorded a non-cash deferred income
tax expense of approximately $79.8 million to reflect the cumulative effect of
temporary differences between the tax and financial reporting bases of the
Company's assets and liabilities attributable to the period prior to its
conversion to a C Corporation.
The unaudited pro forma net income data reflect adjustments for income
taxes as if the Company had been subject to federal and state income taxes based
upon a pro forma effective tax rate of 38% applied to income before income taxes
and extraordinary item, excluding the effect of an expense adjustment to reflect
indexing of the Convertible Subordinated Note (as such adjustment is not tax
deductible) of $5.7 million for the six-month period ended June 30, 1998.
The net income (loss) per share and pro forma earnings per share are
calculated in accordance with Statement of Financial Accounting Standards No.
128 and, are based on the weighted average number of shares of Common Stock
outstanding and dilutive common equivalent shares which include stock options
and restricted stock (using the treasury stock method). For the six-month period
ended June 30, 1998, the effect of the conversion of the Convertible
Subordinated Note for the calculation of the pro forma income per share was
antidilutive.
F-44
<PAGE> 200
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998 AND 1999 -- (CONTINUED)
2. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS
COMPLETED ACQUISITIONS AND DIVESTITURES FOR THE SIX MONTHS ENDED JUNE 30, 1999
On January 22, 1999, in a related party transaction, a wholly owned
subsidiary of the Company purchased a 1% limited partnership interest in ECI
License Company, L.P. for $3.4 million. ECI License Company, L.P. is a limited
partnership in which the Company is the general partner, owning a 99% general
partnership interest. ECI License Company, L.P. owns certain of the Company's
FCC licenses. The acquisition effectively gives the Company 100% interest in its
FCC licenses.
On February 22, 1999, the Company purchased the assets of radio stations
WAAF-FM and WEGQ-FM in Boston and WWTM-AM in Worchester from CBS for $58.0
million in cash. The Company incurred transaction costs of approximately $0.2
million related to this transaction. Broadcasting licenses and other intangibles
in the amount of $55.7 million were recorded in connection with this
transaction. The Company had operated these stations under a TBA since September
1998 and for the three months ended March 31, 1999, the Company incurred TBA
fees in the amount of $0.7 million.
On April 22, 1999, the Company sold a building located in Seattle,
Washington for a cash purchase price of $1.3 million, resulting in a gain of
approximately $0.5 million.
On June 11, 1999, the Company acquired the assets of radio station WREN-AM,
serving the Kansas City, Kansas/Missouri radio market, from Mortenson
Broadcasting Company of Canton, LLC and Mortenson Broadcasting Company for the
sum of $2.8 million in cash. Broadcasting licenses in the amount of $2.5 million
were recorded in connection with this transaction.
OTHER SIGNIFICANT EVENTS
Prior to the revocation of its S Corporation status, the Company declared a
dividend (the "S Distribution"), conditioned upon consummation of the IPO,
payable to its former S Corporation shareholders in the amount of $88.1 million,
which the Company estimated would be the undistributed balance of the income of
the Company which has been taxed or is taxable to its S Corporation shareholders
as of the Revocation Date. The S Distribution of $88.1 million has been paid as
of June 30, 1999.
Prior to the IPO, Chase Capital, which held a Convertible Subordinated
Promissory Note of the Company (the "Convertible Subordinated Note") in the
principal amount of $25.0 million, converted the Convertible Subordinated Note
into 2,327,500 shares of Class A Common Stock and 1,995,669 shares of Class C
Common Stock (the "Chase Conversion"). At the time of the Chase Conversion, the
market value of the shares into which the Convertible Subordinated Note was
convertible, was approximately $97.3 million (the principal amount of the
Convertible Subordinated Note plus accrued interest amounted to approximately
$29.9 million, and the cumulative adjustment to reflect indexing of the
Convertible Subordinated Note was approximately $67.4 million). The Convertible
Subordinated Note has been retired and there is no further obligation due.
F-45
<PAGE> 201
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998 AND 1999 -- (CONTINUED)
UNAUDITED PRO FORMA INFORMATION FOR ACQUISITIONS AND DIVESTITURES
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisition and divestiture transactions which occurred
during the period of January 1, 1998 through June 30, 1999 had all occurred as
of January 1, 1998, after giving effect to certain adjustments, including
depreciation and amortization of assets and interest expense on any debt
incurred to fund the acquisitions which would have been incurred had such
acquisitions and other transactions occurred as of January 1, 1998. These
unaudited pro forma results have been prepared for comparative purposes only and
do not purport to be indicative of (i) what would have occurred had the
acquisitions and other transactions been made as of the date or (ii) results
which may occur in the future.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1998 1999
------- --------
(UNAUDITED)
<S> <C> <C>
Net revenues................................................ $82,143 $ 95,545
Loss before extraordinary item and gains on sale of
assets.................................................... (9,023) (73,938)
Loss before extraordinary item (net of tax benefits)........ (2,448) (73,938)
Net loss.................................................... (4,845) (73,938)
</TABLE>
3. DEBT
The Company has a senior secured Credit Facility (the "Credit Facility")
with a syndicate of banks which allows the Company to borrow up to $350.0
million on a reducing, revolving basis. Availability under the Credit Facility
reduces quarterly beginning June 30, 2000, in amounts which vary from $4.4
million to $17.5 million. As of June 30, 1999, the Company had $166.0 million of
borrowings outstanding under the Credit Facility, in addition to an outstanding
Letter of Credit in the amount of $4.9 million.
4. COMMITMENTS AND CONTINGENCIES
ACQUISITIONS
The Company entered into a preliminary agreement on February 6, 1996, to
acquire the assets of radio station KWOD-FM, Sacramento, California, from Royce
International Broadcasting Corporation, subject to approval by the FCC, for a
purchase price of $25.0 million. Notwithstanding efforts by the Company to
pursue this Transaction, the seller has been nonresponsive. Accordingly, the
Company cannot determine if and when the transaction might occur. On July 28,
1999, the Company commenced an action seeking to enforce this Agreement.
CONTINGENCIES
The Company is subject to various outstanding claims which arose in the
ordinary course of business and to other legal proceedings. In the opinion of
management, any
F-46
<PAGE> 202
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998 AND 1999 -- (CONTINUED)
liability of the Company which may arise out of or with respect to these matters
will not materially affect the financial position, results of operations or cash
flows of the Company.
5. SHAREHOLDERS' EQUITY
During the six months ended June 30, 1999, the Company issued options to
purchase 823,609 shares of its Class A Common Stock at prices ranging from
$18.00 to $34.00 per share. All of the options become exercisable over a
four-year period. In connection with the grant of options with exercise prices
below fair market value at the time of grant, the Company recognized
compensation expense in the amount of approximately $170,000 for the six-months
ended June 30, 1999.
On January 28, 1999, the Company issued certain Restricted Stock awards,
consisting of rights to 11,112 shares of Class A Common Stock, to two directors.
Such shares vest ratably on each of the next four anniversary dates of the
grant. In connection with three awards, the Company recognized compensation
expense in the amount of approximately $26,000 for the six-months ended June 30,
1999, .
On May 1, 1999, Chase Capital converted 300,000 shares of Class C Common
Stock to 300,000 shares of Class A Common Stock.
6. SUBSEQUENT EVENTS
On July 28, 1999, the Company entered into agreements to purchase from
Sinclair Broadcast Group ("Sinclair") all of Sinclair's radio properties (with
the exception of its St. Louis cluster) and to purchase 300,000 shares of USA
Digital Radio Inc. for a purchase price of $824.5 million in cash (the "Sinclair
Transaction"). As part of the Sinclair Transaction, the Company will agree to
spend $5.0 million in television advertising time for the promotion of the
Company's radio stations, on Sinclair's TV stations over a five year period, and
will be responsible for certain capital expenditures not to exceed $2.0 million.
The Sinclair Transaction covers 46 stations (15 AM and 31 FM) in nine markets
including Kansas City, Milwaukee, New Orleans, Memphis, Buffalo, Norfolk,
Greensboro/ Winston-Salem/High Point, Greenville/Spartanburg and
Scranton/Wilkes-Barre. The Company will be required to sell or exchange certain
radio stations in the Kansas City market in order to meet regulatory
requirements limiting the number of stations the Company may own in this market
to eight (the Company currently owns seven). Completion of the Sinclair
Transaction is subject to several factors including approval by the Boards of
Directors of both companies, FCC approval, Department of Justice approval, the
Company's due diligence and completion of definitive documentation. The Company
expects to close on this transaction in the last quarter of 1999.
F-47
<PAGE> 203
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Entertainment Communications, Inc. and Subsidiaries:
We have audited the accompanying combined balance sheet of the Portland,
Oregon and Rochester, New York Radio Groups of Heritage Media Services,
Inc. -- Broadcasting Segment (the Company) as of December 31, 1997, and the
related combined statements of operations, stockholders' equity and cash flows
of the Portland, Oregon and Rochester, New York Radio Groups of Heritage Media
Services, Inc. -- Broadcasting Segment (the Predecessor) for the eight months
ended August 31, 1997 and of the Company for the four months ended December 31,
1997. These financial statements are the responsibility of the Company's and the
Predecessor's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1997, and the results of operations and cash flows of the
Predecessor for the eight months ended August 31, 1997, and of the Company for
the four months ended December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Baltimore, Maryland,
May 29, 1998
F-48
<PAGE> 204
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997
--------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 594
Accounts receivable, net of allowance for doubtful
accounts of $166....................................... 3,474
Prepaid expenses and other current assets................. 41
Deferred barter costs..................................... 113
Deferred tax asset........................................ 64
--------
Total current assets................................... 4,286
PROPERTY, PLANT AND EQUIPMENT, net.......................... 4,497
DUE FROM AFFILIATE.......................................... 1,719
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net................ 116,171
--------
Total Assets........................................... $126,673
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 520
Deferred revenue.......................................... 11
Deferred barter revenue................................... 108
--------
Total current liabilities.............................. 639
DEFERRED TAX LIABILITY...................................... 98
OTHER LONG-TERM LIABILITIES................................. 292
--------
Total Liabilities...................................... 1,029
--------
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value, 10,000 shares authorized
and 10,000 shares issued and outstanding............... 10
Additional paid-in capital................................ 127,035
Accumulated deficit....................................... (1,401)
--------
Total Stockholders' Equity............................. 125,644
--------
Total Liabilities and Stockholders' Equity............. $126,673
========
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
F-49
<PAGE> 205
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ------------
EIGHT MONTHS FOUR MONTHS
ENDED ENDED
AUGUST 31, DECEMBER 31,
1997 1997
------------ ------------
<S> <C> <C>
NET REVENUES:
Station broadcasting revenues, net of agency
commissions of $1,060 and $1,845,
respectively................................... $10,449 $ 5,635
Revenues realized from station barter
arrangements................................... 847 464
------- -------
Total net revenues............................. 11,296 6,099
------- -------
OPERATING EXPENSES:
Programming and production........................ 4,024 2,059
Selling, general and administrative............... 1,618 830
Corporate overhead allocation..................... 814 478
Expenses realized from station barter
arrangements................................... 922 411
Depreciation of property and equipment............ 395 251
Amortization of acquired intangible broadcasting
assets and other assets........................ 775 2,623
------- -------
Total operating expenses....................... 8,548 6,652
------- -------
Broadcast operating income (loss).............. 2,748 (553)
------- -------
OTHER INCOME (EXPENSE):
Interest expense.................................. 651 265
Other expense, net................................ -- 21
------- -------
Income (loss) before provision for income
taxes........................................ 2,097 (839)
PROVISION FOR INCOME TAXES.......................... 1,339 562
------- -------
Net income (loss)................................. $ 758 $(1,401)
======= =======
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-50
<PAGE> 206
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS/
--------------- PAID-IN (ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT) EQUITY
------ ------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
PREDECESSOR:
BALANCE, January 1, 1997.......... 10 $10 $ -- $ 7,041 $ 7,051
HMC noncash capital
contributions................ -- -- 1,209 -- 1,209
Net income...................... -- -- -- 758 758
Acquisition by News
Corporation.................. -- -- 125,291 (7,799) 117,492
-- --- -------- ------- --------
BALANCE, August 31, 1997.......... 10 $10 $126,500 $ -- $126,510
== === ======== ======= ========
COMPANY:
BALANCE, September 1, 1997........ 10 $10 $126,500 $ -- $126,510
News Corporation noncash capital
contributions................ -- -- 535 -- 535
Net loss........................ -- -- -- (1,401) (1,401)
-- --- -------- ------- --------
BALANCE, December 31, 1997........ 10 $10 $127,035 $(1,401) $125,644
== === ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-51
<PAGE> 207
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ------------
EIGHT MONTHS FOUR MONTHS
ENDED ENDED
AUGUST 31, DECEMBER 31,
1997 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 758 $(1,401)
Adjustments to reconcile net income (loss) to net cash
flows from operating activities-........................
Depreciation of property and equipment.................... 395 251
Amortization of acquired intangible broadcasting assets
and other assets........................................ 775 2,623
Changes in assets and liabilities, net of effects of
acquisitions-...........................................
(Increase) decrease in accounts receivable, net........... 121 (225)
Net effect of change in deferred barter revenue and
deferred barter costs................................... 76 (49)
Increase in prepaid expenses and other current assets..... (15) (15)
Increase in deferred tax asset............................ (50) (15)
Increase (decrease) in accounts payable and accrued
expenses................................................ (826) 150
Increase (decrease) in deferred revenue................... (75) 11
(Decrease) increase in deferred tax liability............. 99 (1)
Decrease in other long-term liabilities................... (12) (25)
------- -------
Net cash flows from operating activities................ 1,246 1,304
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment..................... (157) (11)
Acquisitions, net of cash acquired........................ (1,859) --
------- -------
Net cash flows from investing activities................ (2,016) (11)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due to affiliates............................. (512) --
Increase in due from affiliates........................... -- (1,719)
Capital contributions made by Parent...................... 1,209 535
------- -------
Net cash flows from financing activities................ 697 (1,184)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (73) 109
CASH, beginning of period................................... 558 485
------- -------
CASH, end of period......................................... $ 485 $ 594
======= =======
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest.................................... $ -- $ 21
======= =======
Cash paid for income taxes................................ $ 152 $ 29
======= =======
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-52
<PAGE> 208
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
Heritage Media Services, Inc. ("HMSI") operates in two segments --
Marketing Services and Broadcasting. Heritage Media Corporation is the parent
company of HMSI, (collectively referred to hereafter as either "HMC" or the
"Parent"). The Broadcasting Segment was wholly-owned and operated by HMSI, which
was owned by HMC through August 31, 1997 (the "Predecessor"). In July 1997, HMC
entered into an asset sale agreement with Sinclair Broadcast Group, Inc. ("SBG")
whereby SBG would acquire 100% of the Broadcasting Segment (which consisted of
six television stations in three markets and 24 radio stations in seven markets)
for $630 million in cash. Effective September 1, 1997, The News Corporation
Limited ("News Corporation") acquired all of the license and nonlicense assets
of HMC. Due to certain regulatory requirements, News Corporation has established
a trust to hold all of the license and nonlicense assets of the Broadcasting
Segment until the sale to SBG has closed. The acquisition was accounted for
under the purchase method of accounting whereby the purchase price was allocated
to property and programming assets and acquired intangible broadcasting assets
of $51.4 million and $578.6 million, respectively.
During January 1998, Entertainment Communications, Inc. ("Entercom")
entered into an Asset Purchase Agreement with Tuscaloosa Broadcasting Inc.,
Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester
Licensee, Inc. (collectively referred to hereafter as "Sinclair") to acquire
KKSN-AM, KKSN-FM and KKRH-FM, all serving the Portland, Oregon radio market and
WBBF-AM, WBBF-FM, WKLX-FM and WQRV-FM, all serving the Rochester, New York radio
market for a purchase price of $126.5 million. Simultaneously with the above
agreement, Entercom entered into a Time Brokerage Agreement ("TBA") with
Sinclair whereby, effective March 1, 1998, Entercom programs these stations for
the period prior to consummation of the purchase agreement and Sinclair receives
a monthly TBA fee of $631,500. Closing on this transaction is expected in June
1998. The accompanying combined financial statements include the accounts of the
Portland, Oregon and Rochester, New York Radio Group, which are collectively
referred to hereafter as "the Company."
The accompanying December 31, 1997, balance sheet and related statements of
operations and cash flows for the four-month period ended December 31, 1997, are
presented on a new basis of accounting, reflecting the impact of the News
Corporation acquisition. The accompanying financial statements for the
eight-month period ended August 31, 1997, are presented as "Predecessor"
financial statements.
DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-53
<PAGE> 209
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company's revenues and accounts receivable relate primarily to the sale
of advertising within the radio stations' broadcast areas. Credit is extended
based on an evaluation of the customers' financial condition. Credit losses are
provided for in the financial statements.
In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers and the geographic
diversification of the Company's customer base. The Company performs ongoing
credit evaluations of its customers and believes that adequate allowances for
any uncollectible trade receivables are maintained. At December 31, 1997, no
receivable from any customer exceeded 5% of stockholders' equity, and no
customer accounted for more than 10% of net revenues for the eight months ended
August 31, 1997 or for the four months ended December 31, 1997.
ACQUIRED INTANGIBLE BROADCASTING ASSETS
Acquired intangible broadcasting assets are being amortized over periods of
4 to 40 years. These amounts result from the acquisition of certain radio
station license and nonlicense assets by The News Corporation (see Note 1). The
Company monitors the individual financial performance of each of the stations
and continually evaluates the realizability of intangible and tangible assets
and the existence of any impairment to its recoverability based on the projected
undiscounted cash flows of the respective stations.
Intangible assets consist of the following as of December 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD 1997
------------ --------
<S> <C> <C>
Goodwill............................................... 40 years $ 1,897
FCC licenses........................................... 15-25 years 52,092
Other.................................................. 4-25 years 65,172
--------
119,161
Less: Accumulated amortization......................... 2,626
--------
$116,535
========
</TABLE>
F-54
<PAGE> 210
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is recorded on the straight-line basis over the estimated useful
lives of the assets. Property and equipment at December 31, 1997, are summarized
as follows (in thousands):
<TABLE>
<CAPTION>
USEFUL LIFE 1997
----------- ------
<S> <C> <C>
Land..................................................... -- $ 442
Broadcasting equipment................................... 5-25 years 366
Buildings and improvements............................... 12-30 years 3,684
Other equipment.......................................... 4-8 years 256
------
4,748
Less: Accumulated depreciation........................... 251
------
$4,497
======
</TABLE>
BARTER TRANSACTIONS
Certain program contracts provide for the exchange of advertising air time
in lieu of cash payments for the rights to such programming. These contracts are
recorded as the programs are aired at the estimated fair value of the
advertising air time given in exchange for the program rights. Network
programming is excluded from these calculations.
The Company broadcasts certain customers' advertising in exchange for
equipment, merchandise and services. The estimated fair value of the equipment,
merchandise or services received is recorded as deferred barter costs and the
corresponding obligation to broadcast advertising is recorded as deferred barter
revenues. The deferred barter costs are expensed or capitalized as they are
used, consumed or received. Deferred barter revenues are recognized as the
related advertising is aired.
REVENUES
Revenue from the sale of commercial broadcast time to advertisers is
recognized when the commercials are broadcast. Promotional fees are recognized
as services are rendered.
2. ACCRUED EXPENSES:
Accrued expenses consist of the following at December 31, 1997, (in
thousands):
<TABLE>
<CAPTION>
1997
----
<S> <C>
Commissions................................................. $193
Payroll and employee benefits............................... 137
Other....................................................... 187
----
$517
====
</TABLE>
F-55
<PAGE> 211
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. DUE TO AFFILIATE:
The Predecessor had an arrangement with HMSI whereby HMSI would provide
certain management and other services to the Predecessor. The services provided
included consultation and direct management assistance with respect to
operations and strategic planning. The Predecessor was allocated approximately
$814,000 of corporate overhead expenses for these services for the eight months
ended August 31, 1997.
In order to fund acquisitions and provide operating funds, HMSI entered into a
Bank Credit Agreement. The debt used to finance acquisitions and fund daily
operations of the Predecessor was recorded by the Predecessor as due to
affiliate in the year ending December 31, 1996. HMSI allocated interest at a
rate of approximately 10.0%, which approximated the average rate paid on the
borrowings. Associated with the HMSI debt, the Predecessor was allocated
approximately $0.6 million of deferred financing costs in 1996. The deferred
financing costs were fully amortized in accordance with the acquisition by News
Corporation on September 1, 1997.
4. INCOME TAXES:
The Parent files a consolidated federal tax return and separate state tax
returns for each of its subsidiaries in certain filing jurisdictions. It is the
Parent's policy to pay the federal income tax provision of the Company. The
accompanying financial statements have been prepared in accordance with the
separate return method of FASB 109, whereby the allocation of the federal tax
provision due to the Parent is based on what the Company's current and deferred
federal tax provision would have been had the Company filed a federal income tax
return outside of its consolidated group. The Company is not required to
reimburse the Parent for its federal tax provision. Accordingly, this amount is
recorded as a capital contribution in the accompanying consolidated financial
statements. No federal deferred tax assets or liabilities are recorded because
those amounts are considered currently paid to or received by the Parent. The
federal and state tax provision was calculated based on pretax income, plus or
minus permanent book-to-tax differences, times the statutory tax rate of 40%.
The Company had no alternative minimum tax credit carryforwards as of December
31, 1997. The effective tax rate in the current year exceeds the statutory tax
rate of 40% due to the effects of nondeductible goodwill.
F-56
<PAGE> 212
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ------------
EIGHT MONTHS FOUR MONTHS
ENDED ENDED
AUGUST 31, DECEMBER 31,
1997 1997
------------ ------------
<S> <C> <C>
Current:
Federal..................................... $1,267 $523
State....................................... 81 33
------ ----
1,348 556
------ ----
Deferred:
Federal..................................... -- --
State....................................... (9) 6
------ ----
(9) 6
------ ----
Provision for income taxes.................. $1,339 $562
====== ====
</TABLE>
The following is a reconciliation of federal income taxes at the applicable
statutory rate to the recorded provision (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ------------
EIGHT MONTHS FOUR MONTHS
ENDED ENDED
AUGUST 31, DECEMBER 31,
1997 1997
------------ ------------
<S> <C> <C>
Statutory federal income taxes.............. $ 703 $(504)
Adjustments:
State income taxes, net of federal
effect................................. 82 (59)
Non-deductible goodwill amortization...... 276 1,125
Other..................................... 278 --
------ -----
Provision for income taxes.................. $1,339 $ 562
====== =====
</TABLE>
F-57
<PAGE> 213
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the state tax effects of the significant
types of temporary differences between financial reporting basis and tax basis
which were generated during the years ended December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
1997
----
<S> <C>
Deferred Tax Assets:
Bad debt reserve.......................................... $14
Accruals.................................................. 27
Other intangibles......................................... 23
---
$64
===
Deferred Tax Liability:
Depreciation.............................................. $98
===
</TABLE>
5. EMPLOYEE BENEFIT PLAN:
Company employees were covered by HMC's Retirement Savings Plan (the Plan)
through December 31, 1997, whereby participants contributed portions of their
annual compensation to the Plan and certain contributions were made at the
discretion of the Company based on criteria set forth in the Plan Agreement.
Participants are generally 100% vested in Company contributions after five years
of employment with the Company. Company expenses under the Plan were not
material for the year ended December 31, 1997.
6. RELATED PARTY TRANSACTIONS:
The Company received certain advances from HMC during the eight months
ended August 31, 1997, which were evidenced by a subordination agreement. All
advances from HMC were repaid on August 31, 1997.
7. CONTINGENCIES AND OTHER COMMITMENTS:
LEASES AND CONTRACTS
The Company and its subsidiaries lease certain real property and
transportation and other equipment under noncancellable operating leases
expiring at various dates through 2015. The Company also has long-term
contractual obligations with two major broadcast ratings firms that provide
monthly ratings services and guaranteed store contracts. Rent expense under
these leases for the eight months ended August 31, 1997, and for the four months
ended December 31, 1997, was approximately $210,000 and $105,000, respectively.
F-58
<PAGE> 214
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum payments under the leases are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 392
1999........................................................ 386
2000........................................................ 386
2001........................................................ 371
2002........................................................ 357
2003 and thereafter......................................... 814
------
$2,706
======
</TABLE>
LITIGATION
Lawsuits and claims are filed against the Company from time to time in the
ordinary course of business which are generally incidental to its business.
Management of the Company does not believe the resolution of such matters will
have a significant effect on its liquidity, financial position or results of
operations.
F-59
<PAGE> 215
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ------------
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................... $ 594 $ --
Accounts receivable, net of allowance for doubtful
accounts of $166................................ 3,474 --
Prepaid expenses and other current assets.......... 41 --
Deferred barter costs.............................. 113 --
Deferred tax asset................................. 64 --
-------- --------
Total current assets............................ 4,286 --
PROPERTY, PLANT AND EQUIPMENT, net................... 4,497 5,152
DUE FROM AFFILIATE................................... 1,719 --
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net......... 116,171 116,934
-------- --------
Total Assets.................................... $126,673 $122,086
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.............. $ 520 $ --
Deferred revenue................................... 11 --
Deferred barter revenue............................ 108 --
Due to parent...................................... -- 70
-------- --------
Total current liabilities....................... 639 70
DEFERRED TAX LIABILITY............................... 98 --
OTHER LONG-TERM LIABILITIES.......................... 292 --
-------- --------
Total Liabilities............................... 1,029 70
-------- --------
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value, 10,000 shares
authorized and 10,000 and 0 shares issued and
outstanding..................................... 10 --
Additional paid-in capital......................... 127,035 122,827
Accumulated deficit................................ (1,401) (811)
-------- --------
Total Stockholders' Equity...................... 125,644 122,016
-------- --------
Total Liabilities and Stockholders' Equity...... $126,673 $122,086
======== ========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-60
<PAGE> 216
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
PREDECESSOR ------------ COMPANY
------------ TWO -----------
THREE MONTHS MONTHS ONE MONTH
ENDED ENDED ENDED
MARCH 31, FEBRUARY 28, MARCH 31,
1997 1998 1998
------------ ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
NET REVENUES:
Station broadcasting revenue, net of agency
commissions of $611 and $387,
respectively.............................. $3,349 $ 2,169 $ --
Revenues realized from station barter
arrangements.............................. 249 187 --
Time brokerage agreement revenues........... -- -- 635
------ ------- -----
Total net revenues..................... 3,598 2,356 635
OPERATING EXPENSES:
Programming and production.................. 1,303 824 3
Selling, general and administrative......... 885 603 --
Expenses realized from station barter
arrangements.............................. 245 280 --
Depreciation of property and equipment...... 147 126 78
Amortization of acquired intangible
broadcasting assets and other assets...... 287 1,503 663
------ ------- -----
Total operating expenses............... 2,867 3,336 744
------ ------- -----
Broadcast operating income (loss)...... 731 (980) (109)
------ ------- -----
OTHER EXPENSE:
Interest expense.......................... 261 -- 702
------ ------- -----
Income (loss) before provision for income
taxes..................................... 470 (980) (811)
PROVISION FOR INCOME TAXES.................. 52 40 --
------ ------- -----
Net income (loss)......................... $ 418 $(1,020) $(811)
====== ======= =====
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-61
<PAGE> 217
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
PREDECESSOR ------------ COMPANY
------------ TWO -----------
THREE MONTHS MONTHS ONE MONTH
ENDED ENDED ENDED
MARCH 31, FEBRUARY 28, MARCH 31,
1997 1998 1998
------------ ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 418 $(1,020) $(811)
Adjustments to reconcile net income (loss) to net cash
flows from operating activities:
Depreciation of property and equipment.................. 147 126 78
Amortization of acquired intangible broadcasting assets
and other assets..................................... 287 1,503 663
Changes in certain assets and liabilities, net of effects
of acquisitions:
Decrease in accounts receivable, net.................... 644 415 --
Net effect of change in deferred barter revenue and
deferred barter costs................................ (6) 96 --
Increase in prepaid expenses and other assets........... (9) (3) --
(Decrease) increase in accounts payable and accrued
expenses............................................. (535) 76 --
Decrease in deferred revenue............................ (3) -- --
Decrease in other long-term liabilities................. (1) (70) --
------- ------- -----
Net cash flows from operating activities............. 942 1,123 (70)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment..................... (82) (7) --
Acquisitions, net of cash acquired........................ (1,894) -- --
------- ------- -----
Net cash flows from investing activities............. (1,976) (7) --
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in due to affiliates.................. 995 (1,111) 70
------- ------- -----
Net cash flows from financing activities............. 995 (1,111) 70
------- ------- -----
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS...... (39) 5 --
CASH, beginning of period................................. 558 594 --
------- ------- -----
CASH, end of period....................................... $ 519 $ 599 $ --
======= ======= =====
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-62
<PAGE> 218
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
Heritage Media Services, Inc. ("HMSI") operates in two segments --
Marketing Services and Broadcasting. Heritage Media Corporation is the parent
company of HMSI, (collectively referred to hereafter as either "HMC" or the
"Parent"). The Broadcasting Segment was wholly-owned and operated by HMSI, which
was owned by HMC through August 31, 1997 (the "Predecessor"). In July 1997, HMC
entered into an asset sale agreement with Sinclair Broadcast Group, Inc. ("SBG")
whereby SBG would acquire 100% of the Broadcasting Segment (which consisted of
six television stations in three markets and 24 radio stations in seven markets)
for $630 million in cash. Effective September 1, 1997, The News Corporation
Limited ("News Corporation") acquired all of the license and nonlicense assets
of HMC. Due to certain regulatory requirements, News Corporation established a
trust to hold all of the license and nonlicense assets of the Broadcasting
Segment until the sale to SBG had closed. The acquisition was accounted for
under the purchase method of accounting whereby the purchase price was allocated
to property and programming assets and acquired intangible broadcasting assets
of $51.4 million and $578.6 million, respectively.
During January 1998, Entertainment Communications, Inc. ("Entercom")
entered into an Asset Purchase Agreement with Tuscaloosa Broadcasting Inc.,
Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester
Licensee, Inc. (collectively referred to hereafter as "Sinclair") to acquire
KKSN-AM, KKSN-FM and KKRH-FM, all serving the Portland, Oregon radio market and
WBBF-AM, WBBF-FM, WKLX-FM and WQRV-FM, all serving the Rochester, New York radio
market for a purchase price of $126.5 million. Simultaneously with the above
agreement, Entercom entered into a Time Brokerage Agreement ("TBA") with
Sinclair whereby, effective March 1, 1998, Entercom programs these stations for
the period prior to consummation of the purchase agreement and Sinclair receives
a monthly TBA fee of $631,500. Effective March 1, 1998, SBG completed its
acquisition of the Portland, Oregon and Rochester, New York Radio Groups from
News Corporation. The acquisition was accounted for under the purchase method of
accounting whereby the purchase price was allocated to the assets to be sold. In
June 1998, Entercom closed its transaction with Sinclair. The accompanying
combined financial statements include the accounts of the Portland, Oregon and
Rochester, New York Radio Group, which are collectively referred to hereafter as
"the Company."
The accompanying March 31, 1998, balance sheet and the related statements
of operations and cash flows for the one-month period ended March 31, 1998, are
presented on a new basis of accounting, reflecting the impact of the acquisition
by SBG. The accompanying financial statements for the three months ended March
31, 1997, and the two months ended February 28, 1998, are presented as
"Predecessor" financial statements.
INTERIM FINANCIAL STATEMENTS
The combined financial statements for the period ended March 31, 1997, the
two months ended February 28, 1998, and the one month ended March 31, 1998, are
F-63
<PAGE> 219
THE PORTLAND, OREGON AND ROCHESTER, NEW YORK RADIO GROUPS
OF HERITAGE MEDIA SERVICES, INC. -- BROADCASTING SEGMENT
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
unaudited, but in the opinion of management, such financial statements have been
presented on the same basis as the audited combined financial statements and
include all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of the financial position and results of
operations, and cash flows for these periods. The results of operations
presented in the accompanying financial statements are not necessarily
representative of operations for an entire year.
F-64
<PAGE> 220
INDEPENDENT AUDITORS' REPORT
Entercom Communications Corp.:
We have audited the accompanying combined balance sheet of the Boston Radio
Market of CBS Radio, Inc. (the "Boston Radio Market") (formerly American Radio
Systems Corporation ("ARS") prior to the sale of ARS to CBS on June 4, 1998),
which is comprised of radio properties owned by CBS Radio, Inc., a wholly owned
subsidiary of CBS Corporation ("CBS") as of December 31, 1997, and the related
combined statements of operations and equity and cash flows for the year ended
December 31, 1997. These financial statements are the responsibility of the
management of the Boston Radio Market. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of the Boston Radio Market as of
December 31, 1997, and the results of their combined operations and their
combined cash flows for the year then ended in conformity with generally
accepted accounting principles.
The accompanying combined financial statements have been prepared from the
separate accounting records maintained by the Boston Radio Market while owned by
ARS and may not be indicative of the conditions that would have existed or the
results of operations had the assets to be sold been operated as an unaffiliated
company. As discussed in Note 1, certain of the operating expenses represent
allocations made by ARS in the accompanying financial statements.
In August 1998, CBS Radio, Inc. entered into an agreement to sell the net
assets of the Boston Radio Market to Entercom Communications Corp. On December
11, 1998, CBS Radio Inc. sold the net assets of WRKO-AM and WEEI-AM, which
comprise a portion of the Boston Radio Market, to Entercom Communications Corp.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 18, 1998
(December 11, 1998 as to Note 7)
F-65
<PAGE> 221
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1997 AND SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PREDECESSOR CURRENT
OWNER OWNER
------------ -------------
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
(NOTE 1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Accounts and notes receivable (less allowances
for doubtful accounts of $2,140,000 in 1997
and $848,539 (unaudited) in 1998)............. $ 8,246,194 $ 7,853,713
Prepaid expenses and other assets................ 486,976 841,911
Deposits and other current assets -- related
parties....................................... 6,695 --
----------- ------------
Total......................................... 8,739,865 8,695,624
----------- ------------
PROPERTY AND EQUIPMENT -- Net...................... 11,799,363 6,224,161
----------- ------------
OTHER ASSETS:
Intangible assets -- net......................... 33,006,828 132,358,075
Other assets..................................... 94,758 89,861
----------- ------------
Total......................................... 33,101,586 132,447,936
----------- ------------
TOTAL.............................................. $53,640,814 $147,367,721
=========== ============
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable................................. $ 994,252 $ 676,317
Accrued compensation............................. 303,104 440,290
Accrued expenses................................. 794,867 2,915,381
Capitalized lease obligation..................... 137,762 47,212
----------- ------------
Total......................................... 2,229,985 4,079,200
COMMITMENTS AND CONTINGENCIES (Note 6)
EQUITY............................................. 51,410,829 143,288,521
----------- ------------
TOTAL.............................................. $53,640,814 $147,367,721
=========== ============
</TABLE>
See notes to combined financial statements.
F-66
<PAGE> 222
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
COMBINED STATEMENTS OF OPERATIONS AND EQUITY
YEAR ENDED DECEMBER 31, 1997, NINE MONTHS ENDED SEPTEMBER 30, 1997,
FIVE MONTHS ENDED MAY 31, 1998, AND FOUR MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PREDECESSOR OWNER CURRENT OWNER
NINE MONTHS FOUR MONTHS
YEAR ENDED ENDED FIVE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, ENDED MAY 31, SEPTEMBER 30,
1997 1997 1998 1998
------------ ----------------- ------------- -------------
(UNAUDITED)
(UNAUDITED) (UNAUDITED) (NOTE 1)
<S> <C> <C> <C> <C>
NET REVENUES.............................. $37,331,314 $28,764,056 $14,994,176 $ 12,103,681
----------- ----------- ----------- ------------
OPERATING EXPENSES:
Operating expenses, excluding
depreciation, amortization, general
and administrative expenses........... 27,747,140 21,205,835 12,205,334 9,823,762
Depreciation and amortization........... 2,852,025 2,428,522 1,245,587 1,417,764
General and administrative.............. 5,092,850 3,828,835 2,630,801 1,428,257
----------- ----------- ----------- ------------
Total operating expenses.............. 35,692,015 27,463,192 16,081,722 12,669,783
----------- ----------- ----------- ------------
OPERATING INCOME (LOSS) BEFORE INCOME
TAXES................................... 1,639,299 1,300,864 (1,087,546) (566,102)
INCOME TAX EXPENSE (BENEFIT).............. 660,600 524,248 (438,300) (228,139)
----------- ----------- ----------- ------------
NET INCOME (LOSS)......................... 978,699 776,616 (649,246) (337,963)
EQUITY, BEGINNING OF PERIOD............... 27,760,648 27,760,648 51,410,829 50,916,914
NET CONTRIBUTION.......................... 22,671,482 23,701,248 155,331 92,709,570
----------- ----------- ----------- ------------
EQUITY, ENDING THE PERIOD................. $51,410,829 $52,238,512 $50,916,914 $143,288,521
=========== =========== =========== ============
</TABLE>
See notes to combined financial statements.
F-67
<PAGE> 223
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997, NINE MONTHS ENDED SEPTEMBER 30, 1997,
FIVE MONTHS ENDED MAY 31, 1998, AND FOUR MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PREDECESSOR OWNER CURRENT OWNER
NINE MONTHS FOUR MONTHS
YEAR ENDED ENDED FIVE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, ENDED MAY 31, SEPTEMBER 30,
1997 1997 1998 1998
------------ ----------------- ------------- -------------
(UNAUDITED)
(UNAUDITED) (UNAUDITED) (NOTE 1)
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss)......................... $ 978,699 $ 776,616 $ (649,246) $ (337,963)
Reconciliation of net income to cash
provided by operating activities:
Depreciation and amortization............. 2,852,025 2,428,522 1,245,585 1,417,764
Loss on disposal of property and
equipment.............................. 28,021 19,560 -- --
Change in assets and liabilities:
Accounts receivable.................... 405,299 (605,537) (834,450) 1,226,961
Prepaid expenses....................... (324,285) (410,999) (803,662) 448,727
Other assets........................... 709,979 703,850 7,480 4,112
Accounts payable and accrued
expenses............................. (975,450) (448,358) 1,627,167 222,047
Net cash provided by operating activities
(Note 1).................................. $ 3,674,288 $ 2,463,654 $ 592,874 $ 2,981,648
=========== =========== ========== ===========
CASH FLOWS USED FOR INVESTING
ACTIVITIES:
Purchase of property and equipment........ (1,396,694) (1,074,510) (365,543) (74,824)
Proceeds from sale of property............ 60,654 35,577 -- --
----------- ----------- ---------- -----------
Net cash used for investing activities...... (1,336,040) (1,038,933) (365,543) (74,824)
----------- ----------- ---------- -----------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Repayments of long-term debt................ (189,840) (155,639) (85,000) (72,865)
Net transfer to Owner....................... (2,148,408) (1,269,082) (142,331) (2,833,959)
----------- ----------- ---------- -----------
Net cash used for financing activities...... (2,338,248) (1,424,721) (227,331) (2,906,824)
----------- ----------- ---------- -----------
CASH, BEGINNING AND END OF PERIOD........... $ -- $ -- $ -- $ --
=========== =========== ========== ===========
NONCASH ACTIVITIES:
</TABLE>
In 1997, the Predecessor Owner acquired $24.8 million in assets,
principally intangible assets, which were financed by the Owners.
In 1997, the Predecessor Owner transferred assets to an affiliate of the
Stations totaling approximately $1 million.
In 1998, the Current Owner applied the CBS purchase price to increase
intangible assets by $98.3 million and decrease property and equipment by $5.6
million.
See notes to combined financial statements.
F-68
<PAGE> 224
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997,
NINE MONTHS ENDED SEPTEMBER 30, 1997,
FIVE MONTHS ENDED MAY 31, 1998,
AND FOUR MONTHS ENDED SEPTEMBER 30, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND BASIS OF PRESENTATION -- The accompanying financial statements
present the combined assets, liabilities and operations of the Boston Radio
Market of CBS Radio, Inc. (the "Boston Radio Market"), which is comprised of
radio stations WRKO-AM, WEEI-AM, WEGQ-FM, WAAF-FM, serving the Boston,
Massachusetts, radio market, and WWTM-AM, serving the Worcester, Massachusetts,
radio market (the "Stations"). Through June 4, 1998, the Stations were owned by
American Radio Systems Corporation (the "Predecessor Owner" or "ARS"), an
operator of radio stations throughout the United States. On June 4, 1998, ARS
was acquired by CBS Radio, Inc., a wholly owned subsidiary of CBS Corporation
(collectively with CBS Radio, Inc., "CBS" or the "Current Owner"). In connection
with the acquisition of ARS by CBS (the "ARS/CBS merger"), CBS was required to
sell the Boston Radio Market to comply with certain regulations of the FCC.
During August 1998, CBS entered into purchase and sale agreements with Entercom
Communications Corp. ("Entercom") to sell the net assets of the Boston Radio
Market for approximately $140.0 million, subject to receipt of regulatory
approval which is expected to be received during 1998 (See note 7 for further
discussion). CBS and ARS are referred to as the Stations' "Owners" for purposes
of these notes to combined financial statements. All significant intercompany
transactions have been eliminated in combination.
INTERIM FINANCIAL INFORMATION -- The financial statements for the nine
months ended September 30, 1997, the five months ended May 31, 1998, and the
four months ended September 30, 1998 are unaudited. Except for the application
of Accounting Principle Board Opinion No. 16, "Business Combination," to the
Station's financial statements while owned by the Current Owner, the
accompanying unaudited interim financial statements have been prepared on a
basis substantially consistent with that of the audited Predecessor Owner's
financial statements included herein. For purposes of preparing the Current
Owner's unaudited financial statements, the ARS/CBS merger is assumed to have
occurred on May 31, 1998. In the opinion of management, such unaudited financial
statements include all adjustments, which are only of a normal and recurring
nature, considered necessary for a fair presentation. Operating results for the
unaudited periods presented are not necessarily indicative of the results that
may be expected for a full year.
REVENUE RECOGNITION -- Revenues are recognized when advertisements are
broadcast.
PROPERTY AND EQUIPMENT -- Property and equipment at December 31, 1997 are
recorded at cost, and depreciation is computed using straight-line and
accelerated methods over estimated useful lives ranging from three to twenty
years. Property and equipment at September 30, 1998, reflects the allocation of
the CBS purchase price to the Stations' assets, net of depreciation computed
using straight-line methods over estimated useful lives ranging from three to
thirty-nine years.
INTANGIBLE ASSETS -- Intangible assets consist primarily of goodwill, FCC
licenses, and call letters acquired in connection with the acquisition of the
Stations and are being
F-69
<PAGE> 225
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
amortized over their respective estimated useful lives (ranging from one to
forty years) using the straight-line method.
On an ongoing basis, management evaluates the recoverability of the net
carrying value of property and equipment and intangible assets by reference to
the Stations' anticipated undiscounted future cash flows generated by said
assets and comparison of carrying value to management's estimates of fair value,
generally determined by using certain accepted industry measures of value
(principally, cash flow multiple methods).
Intangible assets at September 30, 1998 reflect the allocation of the CBS
purchase price to the Stations' assets, net of amortization computed using the
straight-line method over an estimated useful life of forty years.
INCOME TAXES -- The results of the Stations' operations are included in the
federal and state income tax returns filed by the Stations' Owners. The
Stations' portion of the income tax provision (benefit) is allocated at a
federal and state computed statutory rate of 40.3%. The Stations' federal and
state income taxes are generally paid to, or refunded from, the Owners. Deferred
tax assets and liabilities are maintained at the Owners' ownership levels.
BARTER TRANSACTIONS -- Revenues from the Stations' exchanges of advertising
time for goods or services are recognized at the fair market value of the items
received or to be received. The value of the goods and services received is
recognized in both net revenues and operating expenses. Net unearned barter
balances are included in accounts receivable.
Barter transactions are reported on a net basis within operating expenses
and balances as of and for the year ended December 31, 1997 were approximately
as follows:
<TABLE>
<S> <C>
Barter revenues............................................ $2,273,689
Barter expenses............................................ 1,978,702
Net barter receivable...................................... 120,852
</TABLE>
USE OF ESTIMATES -- The preparation of combined financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes to the financial statements. Management bases
its estimates on certain assumptions which they believe are reasonable in the
circumstances, and while actual results could differ from those estimates,
management does not believe that any change in those assumptions in the near
term would have a material effect on its financial position, results of
operations or liquidity.
ALLOCATION OF CERTAIN OPERATING EXPENSES -- The operations, as presented
herein, include allocations and estimates of certain expenses, principally
corporate accounting and tax, rent, administrative salaries, and legal,
historically provided to the Stations by the Owners. The amounts of such
allocated expenses in these combined financial statements have been allocated by
management based on a variety of factors, including, for example, personnel,
labor costs and square footage. Management believes these allocations have been
made on a reasonable basis. However, the financial position and results of
operations, as presented herein, may not be the same as would have occurred had
the Stations been operated as a stand-alone entity.
F-70
<PAGE> 226
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Interest expense incurred by the Owners under various long-term debt
arrangements has not historically been allocated to the Stations and,
accordingly, the accompanying combined financial statements do not include
interest expense. See Note 4 for interest expense associated with a capitalized
lease obligation.
CONCENTRATION OF CREDIT RISK -- The Stations extend credit to customers on
an unsecured basis in the normal course of business. No individual industry or
industry segment is significant to the Stations' customer base. The Stations
have policies governing the extension of credit and collection of amounts due
from customers.
SUPPLEMENTAL CASH FLOW INFORMATION -- The Stations participate in a
centralized cash management system maintained by the Owners. Accordingly, cash
balances are not maintained at the Stations. The Stations' assets are pledged as
collateral for the Owners' long-term debt agreements.
Cash paid for interest aggregated $44,900 during 1997.
NEW ACCOUNTING PRONOUNCEMENTS -- In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which the Stations will adopt during fiscal year 2000. The
adoption of SFAS No. 133 is not expected to have a material impact on the
Stations' combined financial statements.
2. ACQUISITIONS
In January 1997, ARS completed the acquisition of WAAF-FM and WWTM-AM for
an aggregate purchase price of approximately $24.8 million (the "1997
Acquisition"). The purchase price related to the 1997 Acquisition was allocated
to the assets acquired, principally intangible assets, based on their estimated
fair value at the date of acquisition. Since the acquisition, the 1997
Acquisition has been included as a component of the Boston Radio Market. The
Predecessor Owner began programming and marketing the Stations pursuant to a
Local Marketing Agreement ("LMA") in August 1996 and, as a result, proforma
financial information has not been presented as such information would not be
materially different from the amounts presented in the historical 1997 combined
statements of operations.
F-71
<PAGE> 227
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS
<TABLE>
<S> <C>
Property and equipment consisted of the following at
December 31, 1997:
Land and improvements..................................... $ 1,426,552
Buildings and improvements................................ 3,133,400
Broadcast equipment(1).................................... 8,847,524
Office and other equipment, furniture and fixtures........ 2,382,158
Other..................................................... 7,430
-----------
Total..................................................... 15,797,064
Less accumulated depreciation............................. (3,997,701)
-----------
Property and equipment -- net............................. $11,799,363
===========
</TABLE>
- -------------------------
(1) Includes approximately $570,000 of assets recorded under a capital
lease (see Note 4).
<TABLE>
<S> <C>
Intangible assets consisted of the following at December
31, 1997:
FCC licenses (estimated life 25 years).................... $30,786,241
Goodwill (estimated life 40 years)........................ 4,246,985
Other intangibles (estimated life 1-25 years)............. 2,044,207
-----------
Total..................................................... 37,077,433
Less accumulated amortization............................. (4,070,605)
-----------
Intangible assets -- net.................................. $33,006,828
===========
</TABLE>
4. CAPITALIZED LEASE OBLIGATION
In September of 1996, an equipment lease agreement with Fleet Capital
Corporation dated May 17, 1990 was extended for an additional twenty-four
months. Upon the lease's final payment in August 1998, ownership of the property
was transferred to the Stations. Interest expense, reported within general and
administrative expense in the accompanying combined statement of operations,
aggregated $32,400 during 1997.
5. EMPLOYEE BENEFIT PLAN
Through December 31, 1997, employees of the Stations participated in a
retirement savings plan (the "Plan") sponsored by the Predecessor Owner. The
Plan is a defined contribution plan that covers eligible salaried employees who
have at least one year of service. Participants may make pre-tax contributions
to the Plan up to 10% of their compensation, not to exceed the annual limit
prescribed by the Internal Revenue Service. The Owners matched contributions to
the Plan in an amount equal to 100% of the first 5%
F-72
<PAGE> 228
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
of base compensation that a participant contributes to the Plan, unless
otherwise determined by annual resolution. The Stations were charged $90,000 by
the Predecessor Owner for the year ended December 31, 1997.
6. COMMITMENTS AND CONTINGENCIES
BROADCAST RIGHTS -- At December 31, 1997, the Stations were committed to
the purchase of broadcast rights for various sports events and other
programming, including on-air talent, aggregating approximately $21,134,000.
This programming is not yet available for broadcast. As of December 31, 1997,
aggregate payments related to these commitments during the next five years are
as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 8,042
1999........................................................ 7,266
2000........................................................ 5,408
2001........................................................ 358
2002........................................................ 60
-------
$21,134
=======
</TABLE>
LEASES -- The Stations lease various offices, studios, and broadcast and
other equipment under operating leases that expire over various terms. Most
leases contain renewal options with specified increases in lease payments in the
event of renewal by the Stations.
Future minimum rental payments required under noncancellable operating
leases in effect at December 31, 1997 are approximately as follows (in
thousands):
<TABLE>
<S> <C>
Year Ending December 31
1998........................................................ $ 620
1999........................................................ 473
2000........................................................ 295
2001........................................................ 286
2002........................................................ 187
Thereafter.................................................. 1,378
------
Total....................................................... $3,239
======
</TABLE>
Aggregate rent expense under operating leases for the year ended December
31, 1997 approximated $438,000.
AUDIENCE RATING AND OTHER SERVICE EMPLOYMENT CONTRACTS -- The Stations have
entered into various noncancellable audience rating and other service and
employment contracts that expire over the next five years. Most of these
audience rating and other service agreements are subject to escalation clauses
and may be renewed for successive
F-73
<PAGE> 229
THE BOSTON RADIO MARKET OF CBS RADIO, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
periods ranging from one to five years on terms similar to current agreements,
except for specified increases in payments. Certain of these contracts will not
be assumed by Entercom.
Future minimum payments required under these contracts at December 31, 1997
are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $2,481
1999........................................................ 2,573
2000........................................................ 1,725
2001........................................................ 699
2002........................................................ 648
------
Total....................................................... $8,126
======
</TABLE>
Total expense under these contracts for the year ended December 31, 1997
approximated $2,574,000.
LITIGATION -- CBS has agreed to indemnify Entercom for any litigation
expenses associated with the Stations prior to the acquisition by Entercom.
* * * * * *
7. SUBSEQUENT EVENT
In relation to the agreement of sale between CBS Radio Inc. and Entercom
Communications Corp., Entercom Communications Corp. began operating WEEI-AM and
WRKO-AM on September 21, 1998 and WEGQ-FM, WAAF-FM, and WWTM-AM on September 23,
1998 under a time brokerage agreement. Under the time brokerage agreement, CBS
Radio Inc. will permit Entercom Communications Corp. to program and market the
Boston Radio Market for a fee of $590,000 per month.
On December 11, 1998 CBS Radio Inc. sold the net assets of WRKO-AM and
WEEI-AM, which comprise a portion of the Boston Radio Market, to Entercom
Communications Corp. for a purchase price of $82.0 million.
F-74
<PAGE> 230
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Sinclair Broadcast Group, Inc.:
We have audited the accompanying consolidated balance sheets of the
Sinclair Broadcast Group, Inc. (a Maryland corporation) and
subsidiaries -- Radio Division (the "Company") as of December 31, 1997 and 1998,
and March 31, 1999, and the related consolidated statements of operations,
stockholders' equity and cash flows for the seven months ended December 31,
1996, the years ended December 31, 1997 and 1998, and the three months ended
March 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Sinclair Broadcast
Group, Inc. and subsidiaries -- Radio Division, as of December 31, 1997 and
1998, and March 31, 1999, and the results of its operations and its cash flows
for the seven months ended December 31, 1996, the years ended December 31, 1997
and 1998, and the three months ended March 31, 1999, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Baltimore, Maryland,
July 26, 1999, except for Note 10,
as to which the date is August 5, 1999
F-75
<PAGE> 231
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------- MARCH 31,
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 598 $ 878 $ 940
Accounts receivable, net of allowance for doubtful
accounts of $623, $1,100 and $1,144, respectively....... 11,612 21,731 16,254
Prepaid expenses and other current assets................. 398 551 687
Deferred barter costs..................................... 1,187 2,043 2,548
Deferred tax asset........................................ 226 -- --
-------- -------- --------
Total current assets...................................... 14,021 25,203 20,429
PROPERTY AND EQUIPMENT, net................................. 23,586 31,653 31,502
OTHER ASSETS................................................ 20,664 9,662 10,277
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net of accumulated
amortization of $11,609, $23,454 and $26,967,
respectively.............................................. 227,036 363,190 359,677
-------- -------- --------
Total Assets............................................ $285,307 $429,708 $421,885
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 393 $ 258 $ 566
Accrued liabilities....................................... 1,952 5,084 4,218
Sports rights contracts................................... 860 650 --
Deferred barter revenue................................... 1,315 1,848 2,289
Deferred tax liabilities.................................. -- 35 47
-------- -------- --------
Total current liabilities................................. 4,520 7,875 7,120
LONG-TERM LIABILITIES:
Parent company indebtedness............................... 172,405 329,060 323,787
Other long-term liabilities............................... -- 176 162
Deferred tax liabilities, less current portion............ 5,759 6,867 7,197
-------- -------- --------
Total liabilities....................................... 182,684 343,978 338,266
-------- -------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Contributed Capital....................................... 110,000 90,000 90,000
Accumulated deficit....................................... (7,377) (4,270) (6,381)
-------- -------- --------
Total stockholders' equity.............................. 102,623 85,730 83,619
-------- -------- --------
Total Liabilities and Stockholders' Equity.............. $285,307 $429,708 $421,885
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-76
<PAGE> 232
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE
SEVEN MONTHS YEARS ENDED MONTHS
ENDED DECEMBER 31, ENDED
DECEMBER 31, ------------------- MARCH 31,
1996 1997 1998 1999
------------ -------- -------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency
commissions of $3,945, $6,529, $10,707 and
$2,784, respectively............................. $33,725 $ 55,778 $ 87,771 $21,796
Revenues realized from station barter
arrangements..................................... 2,269 2,610 3,810 927
------- -------- -------- -------
Total revenues................................ 35,994 58,388 91,581 22,723
------- -------- -------- -------
OPERATING EXPENSES:
Program and production............................. 9,521 15,445 23,994 6,754
Sport rights....................................... 2,425 2,500 2,950 --
Selling, general and administrative................ 12,338 21,943 29,719 8,955
Corporate expenses................................. 1,720 2,893 3,465 847
Depreciation and amortization...................... 4,516 11,350 16,117 4,424
------- -------- -------- -------
Total operating expenses...................... 30,520 54,131 76,245 20,980
------- -------- -------- -------
Broadcast operating income......................... 5,474 4,257 15,336 1,743
------- -------- -------- -------
OTHER INCOME (EXPENSE):
Interest on parent company indebtedness............ (7,308) (12,137) (16,659) (4,938)
Gain on sale of broadcast asset.................... -- -- 13,640 --
Loss on sale of broadcast asset.................... -- -- (2,860) --
Other income (expense)............................. -- (2) (1) 107
------- -------- -------- -------
Income (loss) before (provision) benefit for income
taxes and extraordinary item..................... (1,834) (7,882) 9,456 (3,088)
INCOME TAX (PROVISION) BENEFIT..................... 78 2,261 (4,200) 977
------- -------- -------- -------
Net income (loss) before extraordinary loss........ (1,756) (5,621) 5,256 (2,111)
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of
related income tax benefit of $1,432............. -- -- (2,149) --
------- -------- -------- -------
NET INCOME (LOSS).................................. $(1,756) $ (5,621) $ 3,107 $(2,111)
======= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-77
<PAGE> 233
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
CONTRIBUTED ACCUMULATED STOCKHOLDERS'
CAPITAL DEFICIT EQUITY
----------- ----------- -------------
<S> <C> <C> <C>
BALANCE, June 1, 1996................... $110,000 $ -- $110,000
Net loss.............................. -- (1,756) (1,756)
-------- ------- --------
BALANCE, December 31, 1996.............. 110,000 (1,756) 108,244
Net loss.............................. -- (5,621) (5,621)
-------- ------- --------
BALANCE, December 31, 1997.............. 110,000 (7,377) 102,623
Distribution of capital............... (20,000) -- (20,000)
Net income............................ -- 3,107 3,107
-------- ------- --------
BALANCE, December 31, 1998.............. 90,000 (4,270) 85,730
Net loss.............................. -- (2,111) (2,111)
-------- ------- --------
BALANCE, March 31, 1999................. $ 90,000 $(6,381) $ 83,619
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-78
<PAGE> 234
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEVEN MONTHS YEARS ENDED THREE MONTHS
ENDED DECEMBER 31, ENDED
DECEMBER 31, ------------------- MARCH 31,
1996 1997 1998 1999
------------ ------- --------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................................... $ (1,756) $(5,621) $ 3,107 $(2,111)
Adjustments to reconcile net income (loss) to net cash
flows from operating activities --
Gain on sales of assets............................... -- -- (13,640) --
Loss on sale of assets................................ -- -- 2,860 --
Loss on early extinguishment of debt.................. -- -- 3,581 --
Depreciation and amortization......................... 4,516 11,350 16,117 4,424
Sports rights......................................... 2,425 2,500 2,950 --
Deferred tax provision (benefit)...................... 1,050 4,483 1,369 342
Changes in assets and liabilities, net of effects of
acquisitions and dispositions --
(Increase) decrease in accounts receivable, net....... (12,053) (328) (9,378) 5,477
(Increase) decrease in prepaid expenses and other
current assets..................................... (58) (182) 280 (136)
Increase (decrease) in accounts payable and accrued
liabilities........................................ 3,440 (1,628) (444) (558)
Net effect of change in deferred barter revenue and
deferred barter costs.............................. (491) 626 (185) (64)
Increase (decrease) in other long-term liabilities.... -- -- 176 (14)
Payments on sports rights contracts................... (1,615) (2,450) (3,160) (650)
--------- ------- --------- -------
Net cash flows from operating activities.............. (4,542) 8,750 3,633 6,710
--------- ------- --------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................. (206) (2,717) (3,419) (760)
Acquisition of radio stations......................... (169,371) (3,143) (204,940) --
Proceeds from sale of broadcast assets................ -- -- 72,114 --
--------- ------- --------- -------
Net cash flows from investing activities.............. (169,577) (5,860) (136,245) (760)
--------- ------- --------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in parent company indebtedness............. 5,128 (5,815) (52,048) (5,888)
Borrowings from parent company related to
acquisitions....................................... 169,371 3,143 204,940 --
Distribution of capital to parent company............. -- -- (20,000) --
--------- ------- --------- -------
Net cash flows from financing activities.............. 174,499 (2,672) 132,892 (5,888)
--------- ------- --------- -------
NET INCREASE IN CASH.................................... 380 218 280 62
CASH, beginning of period............................. -- 380 598 878
--------- ------- --------- -------
CASH, end of period................................... $ 380 $ 598 $ 878 $ 940
========= ======= ========= =======
SUPPLEMENTAL INFORMATION:
Parent company capital contribution related to
acquisitions....................................... $ 110,000 $ -- $ -- $ --
========= ======= ========= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-79
<PAGE> 235
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998, AND MARCH 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The Sinclair Broadcast Group, Inc. and subsidiaries -- Radio Division ("the
Company") was formed through acquisition. Sinclair Broadcast Group, Inc. ("SBG")
entered into the radio business in May 1996 when it acquired radio stations from
River City Broadcasting LLP ("River City"). As a result of the River City
acquisition, the Company now owns radio stations serving the Memphis, Buffalo
and Wilkes-Barre/ Scranton markets. In addition, SBG purchased from River City
the right to acquire certain radio stations serving the Greenville/Spartansburg/
Asheville market and exercised the right to acquire these stations in July 1998.
In March and July 1998, SBG acquired radio stations from Heritage Media
Services, Inc. ("Heritage") serving the Kansas City, Milwaukee and New Orleans
markets. In July 1998, SBG acquired radio stations from Max Media Properties,
LLC ("Max Media") serving the Greensboro/Winston Salem/ High-Point and Norfolk
markets. These acquisitions and other less significant acquisitions and
dispositions have been recorded under the purchase method of accounting.
The divisional financial statements include operating results of SBG's
radio assets acquired from their respective dates of acquisition (see Note 8),
excluding the radio stations operating in the St. Louis market (See Note 10).
These consolidated financial statements have been prepared from SBG's historical
accounting records and present the operations of the Radio Division as if the
Company had been a separate entity for all periods presented. During these
periods, SBG provided various services to the Company (see Note 4). Furthermore,
acquisitions consummated by SBG have been presented as if they were made by the
Company and the consideration to effect these acquisitions was both loaned and
contributed by SBG. All significant intercompany transactions and account
balances have been eliminated in consolidation.
The financial information included herein may not necessarily reflect the
consolidated results of operations, financial position, changes in stockholders'
equity and cash flows of the Company in the future or what they would have been
had it been a separate, stand-alone entity during the periods presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. On an
ongoing basis, management reviews its estimates, including those related to
intangible assets, sports rights contracts, allowances for doubtful accounts,
income taxes and litigation based on currently available information. Changes in
facts and circumstances may result in revised estimates.
F-80
<PAGE> 236
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments is determined by the
Company using the best available market information and appropriate valuation
methodologies. However, considerable judgment is necessary in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates
are not necessarily indicative of the amounts that the Company could realize in
a current market exchange or the value that ultimately will be realized by the
Company upon maturity or disposition. The use of different market assumptions or
estimation methodologies may have a material effect on the estimated fair value
amounts.
Most of the Company's financial instruments, including cash, accounts
receivable and payable and accruals are short-term in nature. Accordingly, the
carrying amount of the Company's financial instruments approximates their fair
value.
Interest rates on the Company's intercompany debt are based upon SBG's
floating interest rate. Management believes that these rates are at fair market
value; however, these rates may not be reflective of rates available to the
Company as a stand-alone entity.
BARTER ARRANGEMENTS
The Company broadcasts certain customers' advertising in exchange for
equipment, merchandise and services. The estimated fair value of the equipment,
merchandise or services received is recorded as deferred barter costs and the
corresponding obligation to broadcast advertising is recorded as deferred barter
revenue. The deferred barter costs are expensed or capitalized as they are used,
consumed or received. Deferred barter revenue is recognized as the related
advertising is aired.
SPORTS RIGHTS
The Company has agreements for the rights to air sports programming over
contract periods which generally run from one to three years. Contract payments
are made in installments over terms that are generally shorter than the contract
period. The aggregate amount of programming rights for each season is recorded
as an asset and a liability during the season in which the sports programming
become available to be aired. The portion of the sport rights contract payable
within one year is reflected as a current liability in the accompanying
consolidated balance sheets. Amortization of sports rights is recognized on a
straight-line basis over the period which the sports programming is aired.
Additionally, the Company has entered into noncancellable commitments for sports
programming rights over the next four years, aggregating $10.5 million as of
March 31, 1999.
The Company has estimated the fair value of these noncancellable
commitments at approximately $9.0 million at March 31, 1999. These estimates are
based on future cash flows discounted at the Company's current borrowing rate.
F-81
<PAGE> 237
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER ASSETS
Other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1997 1998 1999
------- ------ ---------
<S> <C> <C> <C>
Deferred debt acquisition costs.................. $ 4,387 $ -- $ --
Equity investments............................... -- 1,500 1,500
Deposits and other costs related to future
acquisitions................................... 11,377 6,162 6,777
Purchase options................................. 4,900 2,000 2,000
------- ------ -------
$20,664 $9,662 $10,277
======= ====== =======
</TABLE>
ACQUIRED INTANGIBLE BROADCASTING ASSETS
Acquired intangible broadcasting assets are being amortized on a
straight-line basis over periods of 15 to 40 years. These amounts result from
the acquisition of radio station broadcasting assets. The Company monitors and
continually evaluates the realizability of intangible and tangible assets and
the existence of any impairment to its recoverability based on the projected
undiscounted cash flows of the respective stations. Management believes that the
carrying amounts of the Company's tangible and intangible assets have not been
impaired.
Intangible broadcasting assets, at cost, as of December 31, 1997 and 1998,
and March 31, 1999, consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
AMORTIZATION -------------------- MARCH 31,
PERIOD 1997 1998 1999
------------ -------- -------- ---------
<S> <C> <C> <C> <C>
Goodwill........................ 40 years $ 79,462 $114,690 $114,690
Decaying advertiser base........ 15 years 9,730 10,757 10,757
FCC licenses.................... 25 years 149,453 255,285 255,285
Network affiliations............ 25 years -- 2,061 2,061
Other........................... 15 years -- 3,851 3,851
-------- -------- --------
238,645 386,644 386,644
Less: Accumulated
amortization.................. (11,609) (23,454) (26,967)
-------- -------- --------
$227,036 $363,190 $359,677
======== ======== ========
</TABLE>
F-82
<PAGE> 238
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED LIABILITIES
Accrued liabilities consist of the following as of December 31, 1997 and
1998, and as of March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
Compensation...................................... $1,600 $3,092 $2,788
Other............................................. 352 1,992 1,430
------ ------ ------
$1,952 $5,084 $4,218
====== ====== ======
</TABLE>
REVENUE RECOGNITION
Broadcasting revenues are derived principally from the sale of radio
advertising spots to local, regional and national advertisers. Advertising
revenue is recognized in the period during which the program time and spot
announcements are broadcast.
NEW PRONOUNCEMENTS
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued.
SFAS No. 130 requires that an enterprise report by major component and as a
single total the change in its net assets from nonowner sources during the
period. This statement is effective for fiscal years beginning after December
15, 1997, and was adopted during 1998. Adoption of this statement did not impact
the Company's combined financial position, results of operations or cash flows.
2. PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed under the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements............................... 10 - 35 years
Station equipment........................................ 5 - 10 years
Office furniture and equipment........................... 5 - 10 years
Leasehold improvements................................... 10 - 31 years
Automotive equipment..................................... 3 - 5 years
</TABLE>
F-83
<PAGE> 239
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and equipment consists of the following as of December 31, 1997
and 1998, and as of March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Land and improvements........................... $ 2,994 $ 1,558 $ 1,558
Buildings and improvements...................... 5,535 5,247 5,247
Station equipment............................... 16,073 24,292 24,564
Office furniture and equipment.................. 1,507 3,073 3,438
Leasehold improvements.......................... 136 1,541 1,679
Automotive equipment............................ 684 1,398 1,378
------- ------- -------
26,929 37,109 37,864
Less: Accumulated depreciation and
amortization.................................. (3,343) (5,456) (6,362)
------- ------- -------
$23,586 $31,653 $31,502
======= ======= =======
</TABLE>
3. PARENT COMPANY INDEBTEDNESS:
In connection with the acquisitions discussed in Note 8, SBG made loans to
the Company. The Company has been charged interest on these loans at a rate of
interest equal to SBG's annual weighted average borrowing rate on its
outstanding indebtedness. The weighted average interest rates on parent company
indebtedness for the seven months ended December 31, 1996, the years ended
December 31, 1997 and 1998, and the three months ended March 31, 1999, were
9.0%, 7.9%, 6.6% and 6.3%, respectively.
Substantially all of the Company's assets have been pledged as security for
SBG's notes payable and commercial bank financing. Additionally, the operations
of the Company have been utilized to service the debt principal and interest
payments of SBG.
As part of the River City Acquisition (see Note 8), a portion of the
deferred financing costs incurred by SBG as a result of obtaining a Bank Credit
Agreement were allocated to the Radio Division. In 1998, SBG entered into a new
Bank Credit Agreement resulting in an extraordinary loss of $2.1 million, net of
a tax benefit of $1.4 million allocable to the Radio Division. The extraordinary
loss represents the write-off of debt acquisition costs associated with
indebtedness replaced by a new facility.
4. RELATED PARTY TRANSACTIONS:
The Company has utilized various services provided by SBG or its
subsidiaires. These services included, among others, certain investor relations,
executive, human resources, legal, investment, finance, real estate, information
management, internal audit, tax, transportation and treasury. The costs of such
services have been allocated according to established methodologies and are
determined on an annual basis by SBG. Such methodologies depend on the specific
service provided and include allocating costs that directly relate to the
Company or allocating costs that represent a pro rata portion of the
F-84
<PAGE> 240
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
total costs for the services provided. Management of the Company believes these
allocations to be a fair and reasonable share of such costs. For the seven
months ended December 31, 1996, for the years ended December 31, 1997 and 1998,
and for the three months ended March 31, 1999, allocated expenses of
approximately $1.7 million, $2.9 million, $3.5 million, and $0.8 million,
respectively, were included in the consolidated statements of operations of the
Company. Substantially all costs relating to direct intercompany services have
been reflected in the accompanying combined financial statements.
The Company's radio stations and SBG's television stations have
historically provided broadcast time to each other. The revenues or costs
associated with these intercompany transactions were not significant in the
periods presented.
The Company and SBG have entered into joint advertising arrangements.
Revenues are distributed to the parties providing the services based upon the
contract terms. The revenues associated with such sales were not significant in
the periods presented.
5. INCOME TAXES:
Income taxes are provided using the asset and liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes." Deferred tax assets
and liabilities are recognized based on differences between book and tax basis
of assets and liabilities using presently enacted tax rates. The provision for
income taxes is the sum of the amount of income tax paid or payable for the year
as determined by applying the provisions of enacted tax laws to taxable income
for that year and the net changes during the year in the Company's deferred tax
assets and liabilities other than changes arising from acquisitions and
dispositions.
SBG files a consolidated federal tax return and separate state tax returns
for each of its subsidiaries. It is SBG's policy to reimburse the Company for
its federal net operating losses when generated through intercompany charges.
The Company is responsible for its current state tax liabilities. The
accompanying financial statements have been prepared in accordance with the
separate return method of FASB 109, whereby the allocation of federal tax
provision due to the parent is based on what the subsidiary's current and
deferred federal tax provision would have been had the subsidiary filed a
federal income tax return outside its consolidated group. Given that SBG is
required to reimburse the Company for its federal net operating losses when
generated, the value of the tax effected federal net operating losses is
recorded as an intercompany charge and included as a reduction of the due to
parent amount in the accompanying balance sheets.
F-85
<PAGE> 241
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The (provision) benefit for income taxes consists of the following as of
the seven months ended December 31, 1996, the years ended December 31, 1997 and
1998, and the three months ended March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1996 1997 1998 1999
----- ------ ------- ---------
<S> <C> <C> <C> <C>
(Provision) benefit for income taxes
before extraordinary items............ $ 78 $2,261 $(4,200) $ 977
Income tax effect of extraordinary
items................................. -- -- 1,432 --
----- ------ ------- ------
$ 78 $2,261 $(2,768) $ 977
===== ====== ======= ======
Current:
Federal................................. $ -- $ -- $ (61) $ --
State................................... (667) (802) (806) (185)
----- ------ ------- ------
(667) (802) (867) (185)
----- ------ ------- ------
Deferred:
Federal................................. 705 2,737 (1,922) 1,005
State................................... 40 326 21 157
----- ------ ------- ------
745 3,063 (1,901) 1,162
----- ------ ------- ------
$ 78 $2,261 $(2,768) $ 977
===== ====== ======= ======
</TABLE>
The following is a reconciliation of federal income taxes at the applicable
statutory rate to the recorded (provision) benefit (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- MARCH 31,
1996 1997 1998 1999
----- ---- ----- ---------
<S> <C> <C> <C> <C>
Statutory federal income taxes.............. 35.0% 35.0% (35.0)% 35.0%
Adjustments --
State income and franchise taxes, net
of federal effect.................... (22.6) (4.0) (8.8) (0.6)
Nondeductible expense items............ (9.2) (3.1) (5.1) (4.0)
Other.................................. 1.1 0.8 1.8 1.2
----- ---- ----- ----
(Provision) benefit for income taxes........ 4.3% 28.7% (47.1)% 31.6%
===== ==== ===== ====
</TABLE>
Temporary differences between the financial reporting carrying amounts and
the tax basis of assets and liabilities give rise to deferred taxes. The Company
has a net deferred tax liability of $5.5 million, $6.9 million and $7.2 million
as of December 31, 1997 and 1998, and as of March 31, 1999, respectively. The
realization of deferred tax assets is contingent upon the Company's ability to
generate sufficient future taxable income to
F-86
<PAGE> 242
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
realize the future tax benefits associated with the deferred tax assets.
Management believes that deferred assets will be realized through future
operating results.
Total deferred tax assets and deferred tax liabilities as of December 31,
1997 and 1998, and as of March 31, 1999, including the effects of the source of
differences between financial accounting and tax bases of the Company's assets
and liabilities which give rise to the deferred tax assets and deferred tax
liabilities and the tax effect of each are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1997 1998 1999
------ ------- ---------
<S> <C> <C> <C>
Deferred Tax Assets:
Accruals and reserves.......................... $ 417 $ 413 $ 435
Loss on disposal of fixed assets............... -- 1,829 2,336
State net operating losses..................... 1,244 1,735 1,965
Tax credits.................................... -- 61 61
Other.......................................... 2 -- --
------ ------- -------
$1,663 $ 4,038 $ 4,797
====== ======= =======
Deferred Tax Liabilities:
FCC license.................................... $1,837 $ 4,534 $ 5,062
Fixed assets and intangibles................... 5,359 6,406 6,979
------ ------- -------
$7,196 $10,940 $12,041
====== ======= =======
</TABLE>
6. EMPLOYEE BENEFITS:
Employees of the Company participate in the Sinclair Broadcast Group, Inc.
401(k) Profit Sharing Plan and Trust (the "SBG Plan") which covers eligible
employees of the Company. Contributions made to the SBG Plan include an employee
elected salary reduction amount, company matching contributions and a
discretionary amount determined each year by SBG's Board of Directors. During
December 1997, SBG registered 800,000 shares of its Class "A" Common Stock with
the Securities and Exchange Commission (the "Commission") to be issued as a
matching contribution for the 1997 plan year and subsequent plan years. The
Company's 401(k) expense for the periods ended December 31, 1996, 1997 and 1998,
and the three months ended March 31, 1999, was $91,000, $177,000, $299,000 and
$89,000, respectively.
7. COMMITMENTS AND CONTINGENCIES:
LITIGATION
The Company is involved in certain litigation matters arising in the normal
course of business. In the opinion of management, these matters are not
significant and will not have a material adverse effect on the Company's
financial position.
F-87
<PAGE> 243
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OPERATING LEASES
The Company leases certain property and equipment under noncancellable
operating lease agreements. Future minimum lease payments under noncancellable
operating leases beginning April 1, 1999, are approximately (in thousands):
<TABLE>
<S> <C>
April 1, 1999 to December 31, 1999.......................... $ 1,985
2000........................................................ 2,445
2001........................................................ 2,169
2002........................................................ 1,944
2003........................................................ 1,481
2004 and thereafter......................................... 17,050
-------
$27,074
=======
</TABLE>
8. ACQUISITIONS:
The acquisitions consummated by SBG have been presented as if they were
made by the Company and the consideration to effect these acquisitions was
either contributed or loaned by SBG.
RIVER CITY ACQUISITION
In May 1996, the Company entered into the radio business when it acquired
radio stations from River City Broadcasting LLP ("River City"). As a result of
the River City acquisition, the Company currently owns stations serving the
Memphis, Buffalo, Wilkes-Barre/Scranton and New Orleans radio markets. In
addition, the Company acquired radio stations in the Nashville and Los Angeles
markets which were sold during 1998 (see 1998 Acquisitions and Dispositions
discussed below). The Company also purchased options to acquire additional radio
stations in the Buffalo, Wilkes-Barre/Scranton and Greenville/Spartansburg/
Asheville markets which have all since been exercised. In order to complete the
acquisition, SBG made loans and contributed capital to the Company totaling
$169.4 million and $110.0 million, respectively.
The acquisition was accounted for under the purchase method of accounting
whereby the purchase price was allocated to property and programming assets,
acquired intangible broadcasting assets and other intangible assets for $22.0
million, $225.9 million and $31.5 million, respectively, based upon an
independent appraisal.
1997 ACQUISITIONS
During 1997, the Company exercised its options to acquire radio stations in
the Wilkes-Barre/Scranton and Buffalo markets. These options were purchased in
connection with the River City Acquisition. The total option exercise price of
$3.1 million was allocated to acquired intangible broadcasting assets.
F-88
<PAGE> 244
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1998 ACQUISITIONS AND DISPOSITIONS
HERITAGE ACQUISITION. In March 1998, the Company completed the purchase of
certain radio broadcast assets of Heritage Media Services, Inc. ("Heritage").
Pursuant to this acquisition, the Company now owns radio stations serving the
Kansas City and Milwaukee markets. In July 1998, the Company acquired three
radio stations in the New Orleans, Louisiana, market and simultaneously disposed
of two of those stations (see Centennial Disposition below). In order to
complete the acquisition, SBG made loans to the Company totaling $121.1 million.
The acquisition was accounted for under the purchase method of accounting
whereby the net purchase price for stations was allocated to property and
programming assets, acquired intangible broadcasting assets and other intangible
assets for $5.1 million, $104.1 million and $11.9 million, respectively, based
on an independent appraisal.
SFX DISPOSITION. In May 1998, the Company completed the sale of its radio
stations located in the Nashville, Tennessee, market to SFX Broadcasting, Inc.
for aggregate consideration of approximately $35.0 million (the "SFX
Disposition"). The disposal included the sale of property and programming assets
and intangible assets. In connection with the disposition, the Company
recognized a $5.2 million gain on the sale and utilized the proceeds to reduce
parent company indebtedness.
MAX MEDIA ACQUISITION. In July 1998, the Company directly or indirectly
acquired all of the equity interests of Max Media Properties LLC ("Max Media").
As a result of this acquisition, the Company now owns radio stations serving the
Greensboro and Norfolk markets. In order to complete the acquisition, SBG made
loans to the Company totaling $78.3 million. The acquisition was accounted for
under the purchase method of accounting whereby the purchase price was allocated
to property and programming assets and acquired intangible broadcasting assets
for $4.8 million and $73.5 million, respectively, based on an independent
appraisal.
CENTENNIAL DISPOSITION. In July 1998, the Company completed the sale of the
assets of radio stations WRNO-FM, KMEZ-FM and WBYU-AM in New Orleans, Louisiana,
to Centennial Broadcasting for $16.1 million in cash and recognized a loss on
the sale of $2.9 million. The Company acquired KMEZ-FM in connection with the
River City Acquisition in May of 1996 and acquired WRNO-FM and WBYU-AM in New
Orleans from Heritage in July 1998. The Company was required to divest WRNO-FM,
KMEZ-FM and WBYU-AM to meet certain regulatory ownership guidelines. The Company
utilized the proceeds to reduce parent company indebtedness.
GREENVILLE ACQUISITION. In July 1998, the Company acquired three radio
stations in the Greenville/Spartansburg market from Keymarket Radio of South
Carolina, Inc. for purchase price consideration involving the forgiveness of
approximately $8.0 million of indebtedness. Concurrently with the acquisition,
the Company acquired an additional two radio stations in the same market from
Spartan Broadcasting for a purchase price of approximately $5.2 million. The
acquisition was accounted for under the purchase method of accounting whereby
the purchase price was allocated to property and acquired intangible
broadcasting assets for $5.0 million and $10.1 million, respectively, based on
an independent appraisal.
F-89
<PAGE> 245
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RADIO UNICA DISPOSITION. In July 1998, the Company completed the sale of
KBLA-AM in Los Angeles, California, to Radio Unica Corp. for approximately $21.0
million in cash. In connection with the disposition, the Company recognized a
$8.4 million gain. The disposal included the sale of property and programming
assets and intangible assets. The Company utilized the proceeds from the sale to
reduce parent company indebtedness.
9. UNAUDITED PRO FORMA SUMMARY RESULTS OF OPERATIONS:
The following unaudited pro forma summary presents the consolidated results
of operations for the years ended December 31, 1997 and 1998, as if significant
acquisitions and dispositions completed through December 31, 1998, had occurred
at the beginning of 1997. These pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of what would have
occurred had significant acquisitions and dispositions been made as of that date
or of results which may occur in the future:
<TABLE>
<CAPTION>
(UNAUDITED)
-------------------
1997 1998
------- --------
<S> <C> <C>
Net revenues.............................................. $93,148 $102,340
======= ========
Net income before extraordinary item...................... $(4,970) $ 4,127
======= ========
Net income (loss)......................................... $(4,970) $ 2,189
======= ========
</TABLE>
10. SUBSEQUENT EVENT:
ST. LOUIS PURCHASE OPTION. In connection with the acquisition of River
City, the Company entered into a five year agreement (the "Baker Agreement")
with Barry Baker (the Chief Executive Officer of River City) pursuant to which
Mr. Baker served as a consultant to the Company until terminating such services
effective March 8, 1999 (the "Termination Date"). As of February 8, 1999, the
conditions to Mr. Baker becoming an officer of the Company had not been
satisfied, and on that date Mr. Baker and the Company entered into a termination
agreement, effective on March 8, 1999. Mr. Baker had certain rights as a
consequence of the termination of the Baker Agreement. These rights included Mr.
Baker's right to purchase, at fair market value, the radio stations owned by the
Company serving the St. Louis, Missouri market.
In June 1999, the Company received a letter from Mr. Baker in which Mr.
Baker elected to exercise his option to purchase the radio properties of the
Company in the St. Louis market for their fair market value. In his letter, Mr.
Baker names Emmis Communications Corporation ("Emmis") as his designee. Sinclair
is evaluating the validity of Mr. Baker's designation of Emmis. In light of the
foregoing, the fact that negotiations of a definitive purchase agreement are yet
to commence, that a fair market value has not been determined, and that
approvals would be required from both the Department of Justice and the Federal
Communications Commission, there can be no assurance that the transactions
contemplated by the option will be consummated.
F-90
<PAGE> 246
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ENTERCOM DISPOSITION. In July 1999, the Company entered into an agreement
to sell 46 radio stations in nine markets to Entercom Communications Corporation
("Entercom") for $824.5 million in cash (the "Entercom Disposition"). After the
completion of this transaction, the Company will have divested of all of its
stations with the exception of those serving the St. Louis market. The St. Louis
market is subject to a purchase option and may be acquired by another third
party as discussed above. The Entercom Disposition is subject to FCC and
Department of Justice approval.
KXOK-FM ACQUISITION. In August 1999, the Company completed the purchase of
radio station KXOK-FM in St. Louis, Missouri for a purchase price of $14.1
million in cash. KXOK is also subject to the St. Louis Purchase Option described
above.
F-91
<PAGE> 247
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
UNAUDITED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................... $ 878 $ 1,133
Accounts receivable, net............................... 21,731 21,501
Prepaid expenses and other current assets.............. 551 899
Deferred barter costs.................................. 2,043 2,784
-------- --------
Total current assets........................... 25,203 26,317
PROPERTY AND EQUIPMENT, net.............................. 31,653 31,971
OTHER ASSETS............................................. 9,662 10,919
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net............. 363,190 363,953
-------- --------
Total Assets................................... $429,708 $433,160
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable....................................... $ 258 $ 1,107
Accrued liabilities.................................... 5,084 4,604
Sports rights contracts................................ 650 --
Deferred barter revenues............................... 1,848 2,447
Deferred tax liabilities............................... 35 61
-------- --------
Total current liabilities...................... 7,875 8,219
LONG-TERM LIABILITIES:
Parent company indebtedness............................ 329,060 331,325
Other long term liabilities............................ 176 139
Deferred tax liabilities, less current portion......... 6,867 8,881
-------- --------
Total liabilities.............................. 343,978 348,564
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Contributed capital.................................... 90,000 90,000
Accumulated deficit.................................... (4,270) (5,404)
-------- --------
Total stockholder's equity..................... 85,730 84,596
-------- --------
Total Liabilities and Stockholder's Equity..... $429,708 $433,160
======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited balance sheets.
F-92
<PAGE> 248
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1998 1999
------- -------
<S> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions.... $31,813 $50,710
Revenues realized from station barter arrangements....... 1,658 1,927
------- -------
Total revenues................................... 33,471 52,637
------- -------
OPERATING EXPENSES:
Program and production................................... 9,067 14,834
Selling, general and administrative...................... 12,037 18,784
Corporate expenses....................................... 1,511 1,626
Depreciation and amortization............................ 7,022 8,896
------- -------
Total operating expenses......................... 29,637 44,140
------- -------
Broadcast operating income....................... 3,834 8,497
------- -------
OTHER INCOME (EXPENSE):
Interest on parent company indebtedness.................. (8,256) (9,738)
Net gain (loss) on sale of broadcast assets.............. 5,225 (30)
Other income............................................. 22 61
------- -------
Income (loss) before (provision) benefit for
income taxes and extraordinary item........... 825 (1,210)
INCOME TAX (PROVISION) BENEFIT............................. (370) 76
------- -------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM................ 455 (1,134)
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of related
income tax benefit of $1,432.......................... (2,149) --
------- -------
NET LOSS................................................... $(1,694) $(1,134)
======= =======
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
statements.
F-93
<PAGE> 249
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1998 1999
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (1,694) $(1,134)
Adjustments to reconcile net loss to net cash flows from
operating activities-
Extraordinary loss on early extinguishment of debt..... 3,581 --
Gain on sale of broadcast assets....................... (5,225) --
Depreciation and amortization.......................... 7,022 8,896
Deferred tax (benefit) provision....................... (1,326) 2,040
Changes in assets and liabilities, net of effects of
acquisitions and dispositions-
(Increase) decrease in accounts receivable, net........ (2,328) 230
Decrease (increase) in prepaid expenses and other
current assets....................................... 260 (348)
Increase in accounts payable and accrued liabilities... 731 365
Net effect of change in deferred barter revenues and
deferred barter costs................................ (91) (142)
Decrease in other long-term liabilities................ -- (37)
Payments on program contracts payable.................. (860) (650)
-------- -------
Net cash flows from operating activities............. 70 9,220
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment..................... (2,024) (1,314)
Acquisition of radio stations............................. (95,511) --
Proceed from sale of broadcast assets..................... 35,000 --
-------- -------
Net cash flows used in investing activities.......... (62,535) (1,314)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in parent company indebtedness................. (12,639) (7,651)
Borrowings from parent company related to acquisitions.... 95,511 --
Distribution of capital to parent company................. (20,000) --
-------- -------
Net cash flows from financing activities............. 62,872 (7,651)
-------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 407 255
CASH AND CASH EQUIVALENTS, beginning of period.............. 598 878
-------- -------
CASH AND CASH EQUIVALENTS, end of period.................... $ 1,005 $ 1,133
======== =======
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
statements.
F-94
<PAGE> 250
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The Sinclair Broadcast Group, Inc. and subsidiaries -- Radio Division ("the
Company") was formed through acquisition. Sinclair Broadcast Group, Inc. ("SBG")
entered into the radio business in May 1996 when it acquired radio stations from
River City Broadcasting LLP ("River City"). As a result of the River City
acquisition, the Company now owns radio stations serving the Memphis, Buffalo
and Wilkes-Barre/ Scranton markets. In addition, SBG purchased from River City
the right to acquire certain radio stations serving the
Greenville/Spartansburg/Asheville market and exercised the right to acquire
these stations in July 1998. In March and July 1998, SBG acquired radio stations
from Heritage Media Services, Inc. ("Heritage") serving the Kansas City,
Milwaukee and New Orleans markets. In July 1998, SBG acquired radio stations
from Max Media Properties, LLC ("Max Media") serving the Greensboro/Winston
Salem/ High-Point and Norfolk markets. These acquisitions and other less
significant acquisitions and dispositions have been recorded under the purchase
method of accounting.
The divisional financial statements include operating results of SBG's
radio assets acquired from their respective dates of acquisition, excluding the
radio stations operating in the St. Louis market (see Note 3). These
consolidated financial statements have been prepared from SBG's historical
accounting records and present the operations of the Radio Divison as if the
Company had been a separate entity for all periods presented. During these
periods, SBG provided various services to the Company (see Note 2). Furthermore,
acquisitions consummated by SBG have been presented as if they were made by the
Company and the consideration to effect these acquisitions was both loaned and
contributed by SBG. All significant intercompany transactions and account
balances have been eliminated in consolidation.
The financial information included herein may not necessarily reflect the
consolidated results of operations, financial position, changes in equity and
cash flows of the Company in the future or what they would have been had it been
a separate, stand-alone entity during the periods presented.
INTERIM FINANCIAL STATEMENTS
The consolidated financial statements for the six months ended June 30,
1998 and 1999 are unaudited, but in the opinion of management, such financial
statements have been presented on the same basis as the audited consolidated
financial statements and include all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the financial
position and results of operations, and cash flows for these periods.
As permitted under the applicable rules and regulations of the Securities
and Exchange Commission, these financial statements do not include all
disclosures normally included with audited consolidated financial statements,
and, accordingly, should be read in conjunction with the consolidated financial
statements and notes thereto as of December 31, 1997, and 1998 and March 31,
1999 and for the periods then ended. The
F-95
<PAGE> 251
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
results of operations presented in the accompanying financial statements are not
necessarily representative of operations for an entire year.
2. RELATED PARTY TRANSACTIONS:
The Company has utilized various services provided by SBG or its
subsidiaries. These services included, among others, certain investor relations,
executive, human resources, legal, investment, finance, real estate, information
management, internal audit, tax, transportation and treasury. The costs of such
services have been allocated according to established methodologies and are
determined on an annual basis by SBG. Such methodologies depend on the specific
service provided and include allocating costs that directly relate to the
Company or allocating costs that represent a pro rata portion of the total costs
for the services provided. Management of the Company believes these allocations
to be a fair and reasonable share of such costs. For the six months ended June
30, 1998 and 1999, allocated expenses of approximately $1.5 million (unaudited)
and $1.6 million (unaudited), respectively, were included in the consolidated
statements of operations of the Company. Substantially all costs relating to
direct intercompany services have been reflected in the accompanying combined
financial statements.
The Company's radio stations and SBG's television stations have
historically provided broadcast time to each other. The revenues or costs
associated with these intercompany transactions were not significant in the
periods presented.
The Company and SBG have entered into joint advertising arrangements.
Revenues are distributed to the parties providing the services based upon the
contract terms. The revenues associated with such sales were not significant in
the periods presented.
3. ST. LOUIS PURCHASE OPTION:
ST. LOUIS PURCHASE OPTION. In connection with the acquisition of River
City, the Company entered into a five year agreement (the "Baker Agreement")
with Barry Baker (the Chief Executive Officer of River City) pursuant to which
Mr. Baker served as a consultant to the Company until terminating such services
effective March 8, 1999 (the "Termination Date"). As of February 8, 1999, the
conditions to Mr. Baker becoming an officer of the Company had not been
satisfied, and on that date Mr. Baker and the Company entered into a termination
agreement, effective on March 8, 1999. Mr. Baker had certain rights as a
consequence of the termination of the Baker Agreement. These rights included Mr.
Baker's right to purchase, at fair market value, the radio stations owned by the
Company serving the St. Louis, Missouri market.
In June 1999, the Company received a letter from Mr. Baker in which Mr.
Baker elected to exercise his option to purchase the radio properties of the
Company in the St. Louis market for their fair market value. In his letter, Mr.
Baker names Emmis Communications Corporation ("Emmis") as his designee. Sinclair
is evaluating the validity of Mr. Baker's designation of Emmis. In light of the
foregoing, the fact that negotiations of a definitive purchase agreement are yet
to commence, that a fair market value has not been determined, and that
approvals would be required from both the
F-96
<PAGE> 252
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -- RADIO DIVISION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Department of Justice and the Federal Communications Commission, there can be no
assurance that the transactions contemplated by the option will be consummated.
4. SUBSEQUENT EVENTS:
ENTERCOM DISPOSITION. In July 1999, the Company entered into an agreement
to sell 46 radio stations in nine markets to Entercom Communications Corporation
("Entercom") for $824.5 million in cash (the "Entercom Disposition"). After the
completion of this transaction, the Company will have divested of all of its
stations with the exception of those serving the St. Louis market. The St. Louis
market is subject to a purchase option and may be acquired by another third
party as discussed above. The Entercom Disposition is subject to FCC and
Department of Justice approval.
KXOK-FM ACQUISITION. In August 1999, the Company completed the purchase of
radio station KXOK-FM in St. Louis, Missouri for a purchase price of $14.1
million in cash. KXOK is also subject to the St. Louis Purchase Option described
above.
F-97
<PAGE> 253
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Sinclair Broadcast Group, Inc.:
We have audited the accompanying combined balance sheets of Heritage Media
Services, Inc. -- Radio Broadcasting Segment -- a Division of Heritage Media
Corporation (the Company) as of December 31, 1997, and Heritage Media Services,
Inc. -- Radio Broadcasting Segment -- a Division of Heritage Media Corporation
(the Predecessor) as of December 31, 1996, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows of the
Company for the four months ended December 31, 1997, and of the Predecessor for
the eight months ended August 31, 1997, and the year ended December 31, 1996.
These financial statements are the responsibility of the Company's and the
Predecessor's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1997, and the Predecessor as of December 31, 1996, and the results
of operations and cash flows of the Company for the four months ended December
31, 1997, and of the Predecessor for the eight months ended August 31, 1997, and
for the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Baltimore, Maryland,
July 2, 1999
F-98
<PAGE> 254
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT
A DIVISION OF HERITAGE MEDIA CORPORATION
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
1997 1996
-------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.................................................... $ 1,379 $ 1,213
Accounts receivable, net of allowance for doubtful
accounts of $1,100 and $1,034, respectively........... 12,311 10,914
Prepaid expenses and other current assets............... 500 43
Deferred barter costs................................... 549 1,328
Deferred tax asset...................................... 159 162
-------- -------
Total current assets.................................... 14,898 13,660
PROPERTY AND EQUIPMENT, net............................. 17,205 13,585
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net............ 311,910 56,678
OTHER ASSETS............................................ 33 183
-------- -------
Total Assets....................................... $344,046 $84,106
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses................. $ 3,814 $ 3,670
Deferred revenue...................................... 280 428
Deferred barter revenues.............................. 570 1,249
-------- -------
Total current liabilities.......................... 4,664 5,347
DUE TO AFFILIATE........................................ -- 63,005
DEFERRED TAX LIABILITY.................................. 353 197
OTHER LONG-TERM LIABILITIES............................. 391 115
-------- -------
Total Liabilities.................................. 5,408 68,664
-------- -------
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value, 15,000 shares
authorized, issued and outstanding................. 15 15
Additional paid-in capital............................ 341,902 20,368
Accumulated deficit................................... (3,279) (4,941)
-------- -------
Total Stockholders' Equity............................ 338,638 15,442
-------- -------
Total Liabilities and Stockholders' Equity............ $344,046 $84,106
======== =======
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-99
<PAGE> 255
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT
A DIVISION OF HERITAGE MEDIA CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
------------ ---------------------------
FOUR MONTHS EIGHT MONTHS YEAR
ENDED ENDED ENDED
DECEMBER 31, AUGUST 31, DECEMBER 31,
1997 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
NET REVENUES:
Station broadcasting revenues, net of
agency commissions of $3,681, $5,989
and $8,539, respectively............. $21,328 $34,979 $50,303
Revenues realized from station barter
arrangements......................... 1,394 2,451 2,975
------- ------- -------
Total net revenues...................... 22,722 37,430 53,278
------- ------- -------
OPERATING EXPENSES:
Programming and production.............. 10,168 14,929 11,146
Selling, general and administrative..... 4,093 8,669 21,404
Expenses realized from station barter
arrangements......................... 1,392 2,567 2,804
Depreciation of property and
equipment............................ 1,055 1,267 1,729
Amortization of acquired intangible
broadcasting assets and other
assets............................... 6,847 2,908 4,515
------- ------- -------
Total operating expenses............. 23,555 30,340 41,598
------- ------- -------
Broadcast operating income (loss).... (833) 7,090 11,680
OTHER INCOME (EXPENSE):
Interest expense........................ (645) (1,604) (6,170)
Gain on exchange of assets.............. -- 9,401 --
Other expense, net...................... (342) (27) --
------- ------- -------
Income (loss) before provision for
income taxes....................... (1,820) 14,860 5,510
PROVISION FOR INCOME TAXES................ 1,459 7,055 2,930
------- ------- -------
Net income (loss)....................... $(3,279) $ 7,805 $ 2,580
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-100
<PAGE> 256
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT
A DIVISION OF HERITAGE MEDIA CORPORATION
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL STOCKHOLDERS'
--------------- PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT (DEFICIT)
------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
PREDECESSOR:
BALANCE, December 31, 1995..... 15 $15 $ 99 $ (721) $ (607)
HMC capital contributions...... -- -- 20,269 -- 20,269
Dividends to HMC............ -- -- -- (6,800) (6,800)
Net income.................. -- -- -- 2,580 2,580
-- --- -------- ------- --------
BALANCE, December 31, 1996..... 15 15 20,368 (4,941) 15,442
HMC noncash capital
contributions............. -- -- 6,439 -- 6,439
Net income................ -- -- -- 7,805 7,805
-- --- -------- ------- --------
BALANCE, August 31, 1997....... 15 $15 $ 26,807 $ 2,864 $ 29,686
== === ======== ======= ========
COMPANY:
BALANCE, September 1, 1997..... 15 $15 $339,985 $ -- $340,000
News Corporation noncash
capital contributions..... -- -- 1,917 -- 1,917
Net loss.................... -- -- -- (3,279) (3,279)
-- --- -------- ------- --------
BALANCE, December 31, 1997..... 15 $15 $341,902 $(3,279) $338,638
== === ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-101
<PAGE> 257
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT
A DIVISION OF HERITAGE MEDIA CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
----------------- ---------------------------------
FOUR MONTHS ENDED EIGHT MONTHS ENDED YEAR ENDED
DECEMBER 31, AUGUST 31, DECEMBER 31,
1997 1997 1996
----------------- ------------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................... $(3,279) $ 7,805 $ 2,580
Adjustments to reconcile net income (loss)
to net cash flows from operating
activities --
Gain on exchange of assets............... -- (9,401) --
Depreciation of property and equipment... 1,055 1,267 1,729
Amortization of acquired intangible
broadcasting assets and other assets... 6,847 2,908 4,515
Amortization of deferred financing
costs.................................. 251 84 97
Deferred tax provision (benefit)......... 24 (33) (70)
Changes in assets and liabilities, net of
effects of acquisitions --
(Increase) in accounts receivable, net... (715) (897) (1,501)
Net effect of change in deferred barter
revenues and deferred barter costs..... 4 95 (77)
(Increase) decrease in prepaid expenses
and other current assets............... (483) (1,723) 745
(Increase) decrease in other assets...... -- 176 (7)
Increase (decrease) in accounts payable
and accrued expenses................... 143 230 (1,112)
Increase (decrease) in deferred
revenue................................ 1 (149) 152
Increase (decrease) in other long-term
liabilities............................ (15) 291 47
------- -------- --------
Net cash flows from operating
activities.......................... 3,833 653 7,098
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment....... (317) (853) (1,316)
Receipts from exchange of stations.......... -- 11,309 4,723
Payments for acquisition of stations........ -- (12,445) (6,584)
------- -------- --------
Net cash flows from investing
activities.......................... (317) (1,989) (3,177)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to Parent......................... -- -- (6,800)
Decrease in due to affiliate................ (5,341) (5,029) (17,257)
Capital contributions made by Parent........ 1,917 6,439 20,269
------- -------- --------
Net cash flows from financing
activities.......................... (3,424) 1,410 (3,788)
------- -------- --------
NET INCREASE IN CASH.......................... 92 74 133
CASH, beginning of period..................... 1,287 1,213 1,080
------- -------- --------
CASH, end of period........................... $ 1,379 $ 1,287 $ 1,213
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-102
<PAGE> 258
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT
A DIVISION OF HERITAGE MEDIA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
Heritage Media Services, Inc. ("HMSI") operates in three
segments -- Marketing Services, Television Broadcasting and Radio Broadcasting
is a division of Heritage Media Corporation ("HMC"). The accompanying
consolidated financial statements include the accounts of the radio operations,
which are collectively referred to hereafter as "the Company, the Companies or
the Radio Broadcasting Segment." The Radio Broadcasting Segment was wholly-owned
and operated by HMSI, which was owned by HMC through August 31, 1997 (the
Predecessor). In July 1997, HMC entered into an asset sale agreement with
Sinclair Broadcast Group, Inc. ("SBG") whereby SBG would acquire 100% of the
Television and Radio Broadcasting Segment for $630 million. Effective September
1, 1997, The News Corporation Limited ("News Corporation") acquired all of the
license and nonlicense assets of HMC. Due to certain regulatory requirements,
News Corporation established a trust to hold all of the license and nonlicense
assets of the Radio Broadcasting Segment until the sale to SBG closed. The
acquisition was accounted for under the purchase method of accounting whereby
the purchase price of $340 million for the Radio Broadcasting Segment was
allocated to property and programming assets and acquired intangible
broadcasting assets of approximately $18 million and $322 million, respectively.
During March 1998, the sale to SBG was completed.
The accompanying December 31, 1997, combined balance sheet and related
combined statements of operations and cash flows for the four-month period ended
December 31, 1997, are presented on a new basis of accounting to reflect the
News Corporation acquisition. The accompanying combined financial statements for
the eight-month period ended August 31, 1997, and for the year ended December
31, 1996, are presented as "Predecessor" financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. On an
ongoing basis, management reviews its estimates, including those related to
intangible assets, contracts, allowances for doubtful accounts, income taxes and
litigation based on currently available information. Changes in facts and
circumstances may result in revised estimates.
F-103
<PAGE> 259
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT
A DIVISION OF HERITAGE MEDIA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is recorded on the straight-line basis over the estimated useful
lives of the assets. Property and equipment at December 31, 1997 and 1996, are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
USEFUL LIFE 1997 1996
----------- ------- -----------
<S> <C> <C> <C>
Land....................................... -- $ 858 $ 1,368
Broadcasting equipment..................... 5-25 years 13,805 12,402
Buildings and improvements................. 12-30 years 2,288 3,199
Other equipment............................ 4-8 years 1,309 5,123
------- -------
18,260 22,092
Less: Accumulated depreciation............. (1,055) (8,507)
------- -------
Property and equipment, net................ $17,205 $13,585
======= =======
</TABLE>
ACQUIRED INTANGIBLE BROADCASTING ASSETS
Acquired intangible broadcasting assets are being amortized over periods of
four to 40 years. These amounts result from the acquisition of certain radio
station license and nonlicense assets (see Notes 1 and 8). The Company monitors
the individual financial performance of each of the stations and continually
evaluates the realizability of intangible and tangible assets and the existence
of any impairment to its recoverability based on the projected undiscounted cash
flows of the respective stations. Management believes that the carrying amounts
of the Company's tangible and intangible assets have not been impaired.
Intangible assets consist of the following as of December 31, 1997 and 1996
(in thousands):
<TABLE>
<CAPTION>
AMORTIZATION COMPANY PREDECESSOR
PERIOD 1997 1996
------------ -------- -----------
<S> <C> <C> <C>
Goodwill.................................. 40 years $104,377 $ 10,604
FCC licenses.............................. 15-25 years 213,364 61,745
Other..................................... 4-25 years 1,016 531
-------- --------
318,757 72,880
Less: Accumulated amortization............ (6,847) (16,202)
-------- --------
Intangible assets, net.................... $311,910 $ 56,678
======== ========
</TABLE>
F-104
<PAGE> 260
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT
A DIVISION OF HERITAGE MEDIA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
BARTER TRANSACTIONS
The Company broadcasts certain customers' advertising in exchange for
equipment, merchandise and services. The estimated fair value of the equipment,
merchandise or services received is recorded as deferred barter costs and the
corresponding obligation to broadcast advertising is recorded as deferred barter
revenues. The deferred barter costs are expensed or capitalized as they are
used, consumed or received. Deferred barter revenues are recognized as the
related advertising is aired.
OTHER ASSETS
Debt issuance costs are amortized to interest expense using the effective
interest method over the period of the related debt agreement.
REVENUES
Revenues are primarily derived from the sale of radio advertising spots and
are recognized when the spots are broadcast. Advertising revenues are presented
net of advertising agency and national sales representative commissions.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments is determined by the
Company using the best available market information and appropriate valuation
methodologies. However, considerable judgement is necessary in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates
are not necessarily indicative of the amounts that the Company could realize in
current market exchange or the value that ultimately will be realized by the
Company upon maturity or disposition. The use of different market or estimation
methodologies may have a material effect on the estimated fair value amounts.
Most of the Company's financial instruments, including cash, trade
receivables and payables and accruals, are short-term in nature. Accordingly,
the carrying amount of the Company's financial instruments approximate their
fair value.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform with the current year presentation.
F-105
<PAGE> 261
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT
A DIVISION OF HERITAGE MEDIA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACCRUED EXPENSES:
Accrued expenses consist of the following at December 31, 1997 and 1996,
(in thousands):
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
1997 1996
------- -----------
<S> <C> <C>
Commissions.............................................. $2,600 $ 919
Payroll and employee benefits............................ 352 128
Other.................................................... 784 2,480
------ ------
$3,736 $3,527
====== ======
</TABLE>
3. DUE TO AFFILIATE:
The Predecessor had an arrangement with HMSI whereby HMSI would provide
certain management and other services to the Predecessor. The services provided
included consultation and direct management assistance with respect to
operations and strategic planning. The Predecessor was allocated approximately
$2,548,000 and $1,150,000 of corporate overhead expenses for these services for
the eight months ended August 31, 1997, and for the year ended December 31,
1996, respectively.
In order to fund acquisitions and provide operating funds, HMSI entered
into a Bank Credit Agreement. The debt used to finance acquisitions and fund
daily operations of the Predecessor was recorded by the Predecessor as due to
affiliate in the accompanying consolidated balance sheets as of December 31,
1996. HMSI allocated interest at a rate of approximately 10.0%, which
approximated the average rate paid on the borrowings. Associated with the HMSI
debt, the Predecessor was allocated approximately $183,000 of deferred financing
costs in 1996. The deferred financing costs were fully amortized in conjunction
with the acquisition by News Corporation on September 1, 1997.
4. INCOME TAXES:
HMC files a consolidated federal tax return and separate state tax returns
for each of its subsidiaries in certain filing jurisdictions. It is HMC's policy
to pay the federal income tax provision of the Company. The accompanying
financial statements have been prepared in accordance with the separate return
method of FASB 109, whereby the allocation of the federal tax provision due to
HMC is based on what the Company's current and deferred federal tax provision
would have been had the Company filed a federal income tax return outside of its
consolidated group. The Company is not required to reimburse HMC for its federal
tax provision. Accordingly, this amount is recorded as a capital contribution in
the accompanying combined financial statements. The federal and state tax
provision was calculated based on pretax income, plus or minus permanent
book-to-tax differences, at the statutory tax rate of 40%.
F-106
<PAGE> 262
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT
A DIVISION OF HERITAGE MEDIA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
----------------- --------------------------------
FOUR MONTHS ENDED EIGHT MONTHS YEAR ENDED
DECEMBER 31, ENDED AUGUST 31, DECEMBER 31,
1997 1997 1996
----------------- ---------------- ------------
<S> <C> <C> <C>
Current:
Federal...................... $1,220 $6,025 $2,550
State........................ 215 1,063 450
------ ------ ------
1,435 7,088 3,000
------ ------ ------
Deferred:
Federal...................... -- -- --
State........................ 24 (33) (70)
------ ------ ------
24 (33) (70)
------ ------ ------
Provision for income taxes..... $1,459 $7,055 $2,930
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
----------------- --------------------------------
FOUR MONTHS ENDED EIGHT MONTHS YEAR ENDED
DECEMBER 31, ENDED AUGUST 31, DECEMBER 31,
1997 1997 1996
----------------- ---------------- ------------
<S> <C> <C> <C>
Statutory federal income
taxes........................ $ (619) $5,052 $1,873
Adjustments:
State income taxes, net of
federal effect.......... (109) 892 331
Non-deductible goodwill
amortization............ 2,157 973 568
Non-deductible expense
items................... 6 11 26
Other..................... 24 127 132
------ ------ ------
Provision for income taxes..... $1,459 $7,055 $2,930
====== ====== ======
</TABLE>
F-107
<PAGE> 263
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT
A DIVISION OF HERITAGE MEDIA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the state tax effects of the significant
types of temporary differences between financial reporting basis and tax basis
which were generated during the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
1997 1996
------- -----------
<S> <C> <C>
Deferred Tax Assets:
Bad debt reserve....................................... $ 352 $ 62
Accruals............................................... 92 113
Other intangibles...................................... (285) (13)
----- -----
$ 159 $ 162
===== =====
Deferred Tax Liability:
Accumulated depreciation............................... $(353) $(197)
===== =====
</TABLE>
5. EMPLOYEE BENEFIT PLAN:
Company employees were covered by HMC's Retirement Savings Plan (the Plan)
through the date the company was acquired by SBG, whereby participants
contributed portions of their annual compensation to the Plan and certain
contributions were made at the discretion of HMC based on criteria set forth in
the Plan Agreement. Participants are generally 100% vested in Company
contributions after five years of employment with the Company. Company expenses
under the Plan were not material for the year ended December 31, 1997.
6. RELATED PARTY TRANSACTIONS:
The Company received certain advances from HMC during the eight months
ended August 31, 1997, which were evidenced by a subordination agreement. All
advances from HMC were repaid on August 31, 1997.
7. CONTINGENCIES AND OTHER COMMITMENTS:
LEASES AND CONTRACTS
The Company leases certain real property and transportation and other
equipment under noncancellable operating leases expiring at various dates
through 2010. The Company also has long-term contractual obligations with two
major broadcast ratings firms that provide monthly ratings services and
guaranteed store contracts. Rent expense under the leases for the four months
ended December 31, 1997, the eight months ended August 31, 1997, and the year
ended December 31, 1996, was approximately $499,000, $791,000 and $985,000,
respectively.
F-108
<PAGE> 264
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT
A DIVISION OF HERITAGE MEDIA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum payments under the leases are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 908
1999........................................................ 911
2000........................................................ 912
2001........................................................ 899
2002........................................................ 917
2003 and thereafter......................................... 2,416
------
$6,963
======
</TABLE>
LITIGATION
Lawsuits and claims are filed against the Company from time to time in the
ordinary course of business which are generally incidental to its business.
Management does not believe the resolution of such matters will have a
significant effect on the Company's liquidity, financial position or results of
operations.
8. ACQUISITIONS, EXCHANGES AND DISPOSITIONS:
On January 7, 1997, the Company acquired all of the license and nonlicense
assets of radio station WHRR (FM), serving the Rochester, New York market for
approximately $2.0 million. The acquisition was accounted for under the purchase
method of accounting whereby the purchase price was allocated to property and
programming assets and acquired intangible broadcasting assets of $.1 million
and $1.9 million, respectively.
On January 20, 1997, the Company entered into a like-kind exchange with
Journal Broadcast Group ("JBG") whereby the Company transferred radio stations
WMYU (FM) and WWST (FM) in exchange for radio station KQRC (FM). The assets
exchanged were used in the same line of business, no monetary consideration was
received and the fair value of the assets exchanged were greater than their
carrying cost and, as such, no gain was recognized in the accompanying combined
statement of operations.
On January 24, 1997, the Company acquired all of the license and nonlicense
assets of radio stations KXTR (FM) and KCAZ (FM), serving the Kansas City,
Missouri market for approximately $10.5 million. The acquisition was accounted
for under the purchase method of accounting whereby the purchase price was
allocated to property and programming assets and acquired intangible
broadcasting assets of $.9 million and $9.6 million, respectively.
On February 17, 1997, the Company entered into a like-kind exchange with
Susquehanna Radio Corporation ("SRC") whereby the Company transferred radio
station WVAE (FM) to SRC and received radio stations WGH (AM), WGH (FM) and WVCL
(FM), along with $5.0 million in cash. In connection with the exchange, a gain
of
F-109
<PAGE> 265
HERITAGE MEDIA SERVICES, INC. -- RADIO BROADCASTING SEGMENT
A DIVISION OF HERITAGE MEDIA CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $4.6 million was recorded in the accompanying combined statement
of operations.
On April 11, 1997, the Company entered into a like-kind exchange with
American Radio System Corporation ("ARSC") whereby the Company transferred radio
stations KCIN (FM) and KRPM (AM) to ARSC and received radio stations WRNO (FM),
WEZB (FM) and WBYU (AM), along with approximately $6.2 million in cash. In
connection with the exchange, a gain of approximately $4.8 million was recorded
in the accompanying combined statement of operations.
On June 19, 1998, SBG completed the sale of seven radio stations serving
the Portland, Oregon and Rochester, New York, radio markets to Entercom
Communcations Corporation for the aggregate consideration of approximately
$126.9 million.
On April 7, 1999, SBG agreed to sell to Barnstable Broadcasting, Inc.,
radio stations WFOG (FM) and WGLT (AM/FM), serving the Norfolk, Virginia, radio
market.
F-110
<PAGE> 266
ENTERCOM COMMUNICATIONS CAPITAL TRUST
[ENTERCOM LOGO]
ENTERCOM COMMUNICATIONS CORP.
<PAGE> 267
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth fees payable to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc., and other
estimated expenses expected to be incurred in connection with the issuance and
distribution of securities being registered. All such fees and expenses shall be
paid by the Entercom.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee........ $ 47,955
NASD Fee................................................... 17,750
New York Stock Exchange Listing Fee........................ 10,000
Printing and Engraving Expenses............................ 350,000
Accounting Fees and Expenses............................... 300,000
Legal Fees and Expenses.................................... 150,000
Trustee Fees and Expenses.................................. 10,000
Miscellaneous.............................................. 114,295
----------
Total................................................. $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Entercom's Amended and Restated Articles of Incorporation provide that the
Entercom's directors shall not be personally liable to the Entercom and its
shareholders for monetary damages for any action taken, or any failure to take
any action, unless: (i) the director has breached or failed to perform the
duties of his or her office under applicable provisions of Pennsylvania law, and
(ii) the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness. This provision does not eliminate the duty of care,
and, in appropriate circumstances, equitable remedies such as an injunction or
other forms of non-monetary relief would remain available under Pennsylvania
law. The provision does not affect a director's responsibilities under any other
law, such as federal securities laws, criminal laws or state or federal
environmental laws. Entercom's Amended and Restated Bylaws provide that the
Entercom shall indemnify its officers and directors to the fullest extent
permitted by Pennsylvania law, including some instances in which indemnification
is otherwise discretionary under Pennsylvania law.
In general, any officer or director of the Entercom shall be indemnified by
Entercom against expenses including attorneys' fees, judgments, fines and
settlements actually and reasonably incurred by that person in connection with a
legal proceeding as a result of such relationship, whether or not the
indemnified liability arises from an action by or in the right of Entercom, if
the officer or director acted in good faith and in the manner believed to be in,
or not opposed to, Entercom's best interest, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe the conduct was
unlawful. Such indemnity is limited to the extent that (i) such person is not
otherwise indemnified and (ii) such indemnifications are not prohibited by
Pennsylvania law or any other applicable law.
II-1
<PAGE> 268
Any indemnification under the previous paragraph (unless ordered by a
court) shall be made by Entercom only as authorized in the specific case upon
the determination that indemnification of the director or officer is proper in
the circumstances because that person has met the applicable standard of conduct
set forth above. Such determination shall be made (i) by the Board of Directors
by a majority vote of a quorum of disinterested directors who are not parties to
such action or (ii) if such quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion. To the extent that a director or officer of Entercom shall be
successful in prosecuting an indemnity claim, the reasonable expenses of any
such person and the fees and expenses of any special legal counsel engaged to
determine the possibility of indemnification shall be borne by Entercom.
Expenses incurred by a director or officer of Entercom in defending a civil
or criminal action, suit or proceeding shall be paid by Entercom in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that person is not entitled to be indemnified
by Entercom under the Bylaws or applicable provisions of Pennsylvania law.
The indemnification and advancement of expenses provided by, or granted
pursuant to Article VIII of the Bylaws is not deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled, both as to action in that person's official capacity and as to action
in another capacity while holding such office.
To satisfy its indemnification obligations, Entercom may maintain
insurance, obtain a letter of credit, act as self-insurer, create a reserve,
trust, escrow, cash collateral or other fund or account, enter into
indemnification agreements, pledge or grant a security interest in any assets or
properties of Entercom, or use any other mechanism or arrangement whatsoever in
such amounts, costs, terms and conditions as the Board of Directors shall deem
appropriate. The obligations of Entercom to indemnify a director or officer
under Article VIII of the Bylaws is a contract between Entercom and such
director or officer and no modification or repeal of the Bylaws shall
detrimentally affect such officer or director with regard to that person's acts
or omissions prior to such amendment or repeal.
Upon consummation of Entercom's initial public offering, Entercom purchased
insurance for its directors and officers for certain losses arising from claims
or charges made against them in their capacities as directors and officers of
Entercom.
The Declaration of Trust (the "Declaration") provides that no Trustee,
affiliate of any Trustee, or any officers, directors, shareholders, members,
partners, employees, representatives or agents of any Trustee, or any employee
or agent of the Trust or its affiliates (each an "Indemnified Person") shall be
liable, responsible or accountable in damages or otherwise to any officer,
director, shareholder, partner, member, representative or agent of the Trust,
any affiliate of the Trust or any holder of Trust securities for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith on behalf of the Trust and in a manner
such Indemnified Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by the Declaration, except that no
Indemnified Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Indemnified Person by reason of gross
negligence (or, in the case of the Property Trustee, negligence) or willful
misconduct with respect to such acts or omissions. The directors and officers of
II-2
<PAGE> 269
Entercom and the Regular Trustees are covered by insurance policies indemnifying
them against certain liabilities, including certain liabilities arising under
the Securities Act of 1933, as amended (the "Securities Act"), which might be
incurred by them in such capacities and against which they cannot be indemnified
by Entercom or the Trust.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In January 1999, Entercom effected a 185 for one stock split of its
outstanding shares of voting and non-voting common stock. Each share of prior
common stock held by Joseph M. Field, the registrant's Chairman of the Board and
Chief Executive Officer, and David J. Field, the registrant's President and
Chief Operating Officer, was exchanged for one share of Class B Common Stock and
each share of prior common stock held by all other shareholders was exchanged
for one share of Class A Common Stock.
On January 28, 1999, Entercom converted a 7% Subordinated Convertible Note
due 2003 in the principal amount of $25 million held by Chase Equity Associates,
L.P., an affiliate of Chase Capital Partners, into 2,327,500 shares of Class A
Common Stock and 1,995,669 shares of Class C Common Stock.
Both transactions were intended to be exempt from the registration
requirements of the Securities Act by virtue of Section 3(a)(9) thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.01 Amended and Restated Articles of Incorporation of the
Registrant(3)
3.02 Form of Amended and Restated Bylaws of the Registrant(3)
4.01 Certificate of Trust of Entercom Communications Capital
Trust(1)
4.02 Form of Amended and Restated Declaration of Trust of
Entercom Communications Capital Trust among Entercom
Communications Corp. as Sponsor, Wilmington Trust Company as
Property Trustee and Delaware Trustee and Joseph M. Field,
David J. Field and John C. Donlevie as Administrative
Trustees(1)
4.03 Form of Indenture for the Convertible Subordinated
Debentures due 2014 among Entercom Communications Corp. as
Issuer and Wilmington Trust Company as Indenture Trustee(1)
4.04 Form of Entercom Communications Capital Trust %
Convertible Preferred Securities (included in Exhibit
4.02)(1)
4.05 Form of Entercom Communications Corp. Convertible Junior
Subordinated Debentures due 2014 (included in Exhibit
4.03)(1)
4.06 Form of Preferred Securities Guarantee between Entercom
Communications Corp. as Guarantor, and Wilmington Trust
Company as Guarantee Trustee(1)
4.07 Form of Common Securities Guarantee by Entercom
Communications Corp. as Guarantor(1)
</TABLE>
II-3
<PAGE> 270
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
5.01 Opinion of Latham & Watkins as to the legality of the
Convertible Junior Subordinated Debentures and the Preferred
Securities Guarantee(1)
5.02 Opinion of Morris, Nichols, Arsht & Tunnell as to the
legality of the Convertible Preferred Securities and as to
other matters of Delaware law(1)
5.03 Opinion of John C. Donlevie, Esq. as to the legality of the
Class A common stock issuable upon conversion of the
TIDES(1)
8.01 Opinion of Latham & Watkins as to certain tax matters(1)
10.01 Registration Rights Agreement, dated as of May 21, 1996,
between the Registrant and Chase Equity Associates, L.P.(3)
10.02 Employment Agreement, dated June 25, 1993, between the
Registrant and Joseph M. Field, as amended(3)
10.03 Employment Agreement, dated December 17, 1998, between the
Registrant and David J. Field, as amended(3)
10.04 Employment Agreement, dated December 17, 1998, between the
Registrant and John C. Donlevie, as amended(3)
10.05 Employment Agreement, dated November 13, 1998, between the
Registrant and Stephen F. Fisher(3)
10.06 Entercom 1998 Equity Compensation Plan(3)
10.07 Loan Agreement, dated as of February 13, 1998, among the
Registrant, Key Corporate Capital Inc., as administrative
agent, Bank of America, National Trust and Savings
Association, as syndication agent, and certain banks listed
therein, as amended by the First Amendment to Loan Agreement
dated October 8, 1998(3)
10.08 Amended and Restated Asset Purchase Agreement, dated as of
August 20, 1999, among the Registrant, Sinclair
Communications, Inc., WCGV, Inc., Sinclair Radio of
Milwaukee Licensee, LLC, Sinclair Radio of New Orleans
Licensee, LLC, Sinclair Radio of Memphis, Inc., Sinclair
Radio of Memphis Licensee, Inc., Sinclair Properties, LLC,
Sinclair Radio of Norfolk/Greensboro Licensee, L.P.,
Sinclair Radio of Buffalo, Inc., Sinclair Radio of Buffalo
Licensee, LLC, WLFL, Inc., Sinclair Radio of Greenville
Licensee, Inc., Sinclair Radio of Wilkes-Barre, Inc. and
Sinclair Radio of Willkes-Barre Licensee, LLC(5)
10.09 Asset Purchase Agreement, dated as of August 20, 1999, among
the Registrant, Sinclair Communications, Inc., Sinclair
Media III, Inc. and Sinclair Radio of Kansas City Licensee,
LLC(5)
10.10 Asset Purchase Agreement, dated as of January 26, 1998,
among the Registrant, Tuscaloosa Broadcasting, Inc.,
Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio
of Rochester Licensee, Inc.(3)
10.11 Time Brokerage Agreement, dated as of January 26, 1998,
among the Registrant, Tuscaloosa Broadcasting, Inc.,
Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio
of Rochester Licensee, Inc.(3)
10.12 Asset Purchase Agreement, dated as of August 13, 1998, among
the Registrant, CBS Radio, Inc. and CBS Radio License,
Inc.(3)
10.13 Time Brokerage Agreement, dated as of August 13, 1998, among
the Registrant, CBS Radio, Inc. and CBS Radio License,
Inc.(3)
</TABLE>
II-4
<PAGE> 271
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.14 Asset Purchase Agreement, dated as of August 13, 1998, among
CBS Radio, Inc. CBS Radio License, Inc., ARS Acquisition II,
Inc. and the Registrant(3)
10.15 Time Brokerage Agreement, dated as of August 13, 1998, among
CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition
II, Inc. and the Registrant(3)
12.01 Statement Regarding Computation of Ratios(1)
21.01 Information Regarding Subsidiaries of the Registrant(1)
23.01 Consent of Deloitte & Touche LLP, Philadelphia, PA(1)
23.02 Consent of Deloitte & Touche LLP, Boston, MA(1)
23.03 Consent of Arthur Andersen LLP, Baltimore, MD(1)
*24.01 Power of Attorney (included on signature page of this
Registration Statement)
25.1 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company, as
Indenture Trustee under the Convertible Subordinated
Debentures Indenture due 2014(1)
25.2 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company, as
Property Trustee under the Amended and Restated Declaration
of Trust(1)
25.3 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company, as
Preferred Guarantee Trustee under the Preferred Securities
Guarantee(1)
</TABLE>
- -------------------------
* Previously filed.
(1) Filed herewith.
(2) To be filed by amendment.
(3) Incorporated by reference to Entercom's Registration Statement on Form S-1.
(File No. 333-61381)
(4) Incorporated by reference to Entercom's Quarterly Report on Form 10-Q. (File
No. 001-14461)
(5) Incorporated by reference to Entercom's Registration Statement on Form S-1.
(File No. 333-86397)
(b) FINANCIAL STATEMENT SCHEDULE
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
II-5
<PAGE> 272
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Bala Cynwyd, Pennsylvania, on
September 30, 1999.
ENTERCOM COMMUNICATIONS CORP.
By: /s/ JOSEPH M. FIELD
------------------------------------
Joseph M. Field
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
/s/ JOSEPH M. FIELD Chairman of the Board and Chief September 30, 1999
- --------------------------------------------- Executive Officer (Principal
Joseph M. Field Executive Officer)
/s/ DAVID J. FIELD President, Chief Operating September 30, 1999
- --------------------------------------------- Officer
David J. Field and a Director
* Executive Vice President, September 30, 1999
- --------------------------------------------- Secretary, General Counsel and
John C. Donlevie a Director
* Senior Vice President and Chief September 30, 1999
- --------------------------------------------- Financial Officer (Principal
Stephen F. Fisher Financial and Accounting
Officer)
* Director September 30, 1999
- ---------------------------------------------
Marie H. Field
* Director September 30, 1999
- ---------------------------------------------
Herbert Kean, M.D.
* Director September 30, 1999
- ---------------------------------------------
Lee Hague
* Director September 30, 1999
- ---------------------------------------------
Thomas H. Ginley, Jr., M.D.
</TABLE>
II-6
<PAGE> 273
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
* Director September 30, 1999
- ---------------------------------------------
S. Gordon Elkins
* Director September 30, 1999
- ---------------------------------------------
Michael R. Hannon
* Director September 30, 1999
- ---------------------------------------------
David J. Berkman
*By /s/ JOSEPH M. FIELD
---------------------------------------
Joseph M. Field
Attorney-in-fact
</TABLE>
II-7
<PAGE> 274
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Bala Cynwyd, Pennsylvania, on
September 30, 1999.
ENTERCOM COMMUNICATIONS CAPITAL TRUST
By: /s/ JOSEPH M. FIELD
------------------------------------
Joseph M. Field
As Administrative Trustee
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
/s/ JOSEPH M. FIELD Administrative Trustee September 30, 1999
- ---------------------------------------------
Joseph M. Field
/s/ DAVID J. FIELD Administrative Trustee September 30, 1999
- ---------------------------------------------
David J. Field
/s/ JOHN C. DONLEVIE Administrative Trustee September 30, 1999
- ---------------------------------------------
John C. Donlevie
</TABLE>
II-8
<PAGE> 275
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Entercom Communications Corp.:
We have audited the accompanying consolidated financial statements of
Entercom Communications Corp. and subsidiaries (the "Company") as of September
30, 1997 and 1998, and for each of the three years in the period ended September
30, 1998, and have issued our report thereon dated December 31, 1998 (January
26, 1999 as to Notes 10 and 13) (which expresses an unqualified opinion and
includes an explanatory paragraph relating to the restatement described in Note
14) (included elsewhere in this Registration Statement). Our audits also
included the financial statement schedule listed in Item 16(b) of this
Registration Statement. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
December 31, 1998
(January 26, 1999 as to Notes 10 and 13)
<PAGE> 276
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ENTERCOM COMMUNICATIONS CORP.
YEARS ENDED SEPTEMBER 30, 1996, 1997, AND 1998
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS
BEGINNING COSTS AND FROM BALANCE AT
ALLOWANCE FOR DOUBTFUL ACCOUNTS OF PERIOD EXPENSES RESERVES(A) END OF PERIOD
- ------------------------------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
1996.......................... $ 63,524 $318,599 $265,283 $116,840
1997.......................... 116,840 548,726 373,566 292,000
1998.......................... 292,000 920,381 845,381 367,000
</TABLE>
- ---------------
(A) Uncollectible accounts written off.
<PAGE> 277
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
<C> <S> <C>
1.01 Form of Underwriting Agreement(1)
3.01 Amended and Restated Articles of Incorporation of the
Registrant(3)
3.02 Form of Amended and Restated Bylaws of the Registrant(3)
4.01 Certificate of Trust of Entercom Communications Capital
Trust(1)
4.02 Form of Amended and Restated Declaration of Trust of
Entercom Communications Capital Trust among Entercom
Communications Corp. as Sponsor, Wilmington Trust Company as
Property Trustee and Delaware Trustee and Joseph M. Field,
David J. Field and John C. Donlevie as Administrative
Trustees(1)
4.03 Form of Indenture for the Convertible Subordinated
Debentures due 2014 among Entercom Communications Corp. as
Issuer and Wilmington Trust Company as Indenture Trustee(1)
4.04 Form of Entercom Communications Capital Trust %
Convertible Preferred Securities (included in Exhibit
4.02)(1)
4.05 Form of Entercom Communications Corp. Convertible
Subordinated Debentures due 2014 (included in Exhibit
4.03)(1)
4.06 Form of Preferred Securities Guarantee between Entercom
Communications Corp. as Guarantor, and Wilmington Trust
Company as Guarantee Trustee(1)
4.07 Form of Common Securities Guarantee by Entercom
Communications Corp. as Guarantor(1)
5.01 Opinion of Latham & Watkins as to the legality of the
Convertible Subordinated Debentures and the Preferred
Securities Guarantee(1)
5.02 Opinion of Morris, Nichols, Arsht & Tunnell as to the
legality of the Convertible Preferred Securities and as to
other matters of Delaware law(1)
5.03 Opinion of John C. Donlevie, Esq. as to the legality of the
Class A common stock issuable upon conversion of the
TIDES(1)
8.01 Opinion of Latham & Watkins as to certain tax matters(1)
10.01 Registration Rights Agreement, dated as of May 21, 1996,
between the Registrant and Chase Equity Associates, L.P.(3)
10.02 Employment Agreement, dated June 25, 1993, between the
Registrant and Joseph M. Field, as amended(3)
10.03 Employment Agreement, dated December 17, 1998, between the
Registrant and David J. Field, as amended(3)
10.04 Employment Agreement, dated December 17, 1998, between the
Registrant and John C. Donlevie, as amended(3)
10.05 Employment Agreement, dated November 13, 1998, between the
Registrant and Stephen F. Fisher(3)
10.06 Entercom 1998 Equity Compensation Plan(3)
</TABLE>
<PAGE> 278
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
<C> <S> <C>
10.07 Loan Agreement, dated as of February 13, 1998, among the
Registrant, Key Corporate Capital Inc., as administrative
agent, Bank of America, National Trust and Savings
Association, as syndication agent, and certain banks listed
therein, as amended by the First Amendment to Loan Agreement
dated October 8, 1998(3)
10.08 Amended and Restated Asset Purchase Agreement, dated as of
August 20, 1999, among the Registrant, Sinclair
Communications, Inc., WCGV, Inc., Sinclair Radio of
Milwaukee Licensee, LLC, Sinclair Radio of New Orleans
Licensee, LLC, Sinclair Radio of Memphis, Inc., Sinclair
Radio of Memphis Licensee, Inc., Sinclair Properties, LLC,
Sinclair Radio of Norfolk/Greensboro Licensee, L.P.,
Sinclair Radio of Buffalo, Inc., Sinclair Radio of Buffalo
Licensee, LLC, WLFL, Inc., Sinclair Radio of Greenville
Licensee, Inc., Sinclair Radio of Wilkes-Barre, Inc. and
Sinclair Radio of Willkes-Barre Licensee, LLC.(5)
10.09 Asset Purchase Agreement, dated as of August 20, 1999, among
the Registrant, Sinclair Communications, Inc., Sinclair
Media III, Inc. and Sinclair Radio of Kansas City Licensee,
LLC.(5)
10.10 Asset Purchase Agreement, dated as of January 26, 1998,
among the Registrant, Tuscaloosa Broadcasting, Inc.,
Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio
of Rochester Licensee, Inc.(3)
10.11 Time Brokerage Agreement, dated as of January 26, 1998,
among the Registrant, Tuscaloosa Broadcasting, Inc.,
Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio
of Rochester Licensee, Inc.(3)
10.12 Asset Purchase Agreement, dated as of August 13, 1998, among
the Registrant, CBS Radio, Inc. and CBS Radio License,
Inc.(3)
10.13 Time Brokerage Agreement, dated as of August 13, 1998, among
the Registrant, CBS Radio, Inc., and CBS Radio License,
Inc.(3)
10.14 Asset Purchase Agreement, dated as of August 13, 1998, among
CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition
II, Inc. and the Registrant(3)
10.15 Time Brokerage Agreement, dated as of August 13, 1998, among
CBS Radio, Inc., CBS Radio License, Inc., ARS Acquisition
II, Inc. and the Registrant(3)
12.01 Statement Regarding Computation of Ratios(1)
21.01 Information Regarding Subsidiaries of the Registrant(1)
23.01 Consent of Deloitte & Touche LLP, Philadelphia, PA(1)
23.02 Consent of Deloitte & Touche LLP, Boston, MA(1)
23.03 Consent of Arthur Andersen LLP, Baltimore, MD(1)
*24.01 Power of Attorney (included on signature page of this
Registration Statement)
25.1 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company, as
Indenture Trustee under the Convertible Subordinated
Debentures Indenture due 2014(1)
</TABLE>
<PAGE> 279
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
<C> <S> <C>
25.2 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company, as
Property Trustee under the Amended and Restated Declaration
of Trust(1)
25.3 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company, as
Preferred Guarantee Trustee under the Preferred Securities
Guarantee(1)
</TABLE>
- -------------------------
* Previously filed.
(1) Filed herewith.
(2) To be filed by amendment.
(3) Incorporated by reference to Entercom's Registration Statement on Form S-1.
(File No. 333-61381)
(4) Incorporated by reference to Entercom's Quarterly Report on Form 10-Q. (File
No. 001-14461)
(5) Incorporated by reference to Entercom's Registration Statement on Form S-1.
(File No. 333-86397)
<PAGE> 1
EXHIBIT 1.01
3,000,000 TIDES(SM)
ENTERCOM COMMUNICATIONS CAPITAL TRUST
___% CONVERTIBLE PREFERRED SECURITIES,
TERM INCOME DEFERRABLE EQUITY SECURITIES (TIDES)SM
(LIQUIDATION AMOUNT $50 PER
EACH OF THE TIDES)
GUARANTEED TO THE EXTENT SET FORTH
IN THE GUARANTEE AGREEMENT BY, AND
CONVERTIBLE INTO CLASS A COMMON STOCK OF,
ENTERCOM COMMUNICATIONS CORP.
UNDERWRITING AGREEMENT
Dated: September __, 1999
CREDIT SUISSE FIRST BOSTON CORPORATION
BANC OF AMERICA SECURITIES LLC
DEUTSCHE BANK SECURITIES INC.
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Ladies and Gentlemen:
1. Introductory. Entercom Communications Capital Trust, a statutory
business trust formed under the laws of the State of Delaware (the "Trust"), and
Entercom Communications Corp., a Pennsylvania corporation, as sponsor of the
Trust and as guarantor (the "Company"), propose, subject to the terms and
conditions stated herein, that the Trust issue and sell an aggregate of
3,000,000 ___% Convertible Preferred Securities, Term Income Deferrable Equity
Securities, or TIDES (the "Firm Securities"). The Company and the Trust also
propose that the Trust sell to the several Underwriters named in Schedule A
hereto (the "Underwriters"), at the option of the Underwriters, an aggregate of
not more than 450,000 additional TIDES, as set forth below (such additional
shares being hereinafter referred to as the "Optional Securities"). The Firm
Securities and the Optional Securities are herein collectively called the
"Offered Securities."
1
<PAGE> 2
The TIDES represent undivided beneficial ownership interests in the
assets of the Trust, guaranteed by the Company as to the payment of
distributions, and as to payments on liquidation or redemption, to the extent
set forth in a guarantee agreement (the "Guarantee") between the Company and
Wilmington Trust Company, as trustee (the "Guarantee Trustee"). The proceeds of
the sale by the Trust of the Offered Securities and its common securities (the
"Common Securities") are to be used to purchase the Convertible Subordinated
Debentures due 2014 (the "Debentures") of the Company, which will be issued
pursuant to an Indenture (the "Indenture") between the Company and Wilmington
Trust Company, as trustee (the "Debenture Trustee"). The TIDES are convertible
into shares of Class A Common Stock, par value $.01 per share (the "Company
Common Stock"), of the Company.
Each of the Trust and the Company hereby agrees with the several
Underwriters as follows:
2. Representations and Warranties of the Trust and the Company. (a)
Each of the Trust and the Company jointly and severally represents and warrants
to, and agrees with, the several Underwriters that:
(i) A registration statement (No. 333-86843) relating to the
Offered Securities, including a form of prospectus, has been filed with
the Securities and Exchange Commission (the "Commission") and either
(A) has been declared effective under the Securities Act of 1933, as
amended (the "Act") and is not proposed to be amended or (B) is
proposed to be amended by amendment or post-effective amendment. If
such registration statement (an "initial registration statement") has
been declared effective, either (A) an additional registration
statement (an "additional registration statement") relating to the
Offered Securities may have been filed with the Commission pursuant to
Rule 462(b) ("Rule 462(b)") under the Act and, if so filed, has become
effective upon filing pursuant to such Rule and all the Offered
Securities have been duly registered under the Act pursuant to the
initial registration statement and, if applicable, the additional
registration statement or (B) such an additional registration statement
is proposed to be filed with the Commission pursuant to Rule 462(b) and
will become effective upon filing pursuant to such Rule and upon such
filing all the Offered Securities will have been duly registered under
the Act pursuant to the initial registration statement and such
additional registration statement. If the Company and the Trust do not
propose to amend the initial registration statement or if an additional
registration statement has been filed and the Company and the Trust do
not propose to amend it, and if any post-effective amendment to either
registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent amendment (if
any) to each registration statement has been declared effective by the
Commission or has become effective upon filing pursuant to Rule 462(c)
("Rule 462(c)") under the Act or, in the case of the additional
registration statement, Rule 462(b). For purposes of this Agreement,
"Effective Time" with respect to the initial registration statement or,
if filed prior to the execution and delivery of this Agreement, the
additional registration statement means (A) if the Company and the
Trust have advised the Representatives that they do not propose to
amend such registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment
2
<PAGE> 3
thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c), or (B) if the Company
and the Trust have advised the Representatives that they propose to
file an amendment or post-effective amendment to such registration
statement, the date and time as of which such registration statement,
as amended by such amendment or post-effective amendment, as the case
may be, is declared effective by the Commission. If an additional
registration statement has not been filed prior to the execution and
delivery of this Agreement but the Company and the Trust have advised
the Representatives that they propose to file one, "Effective Time"
with respect to such additional registration statement means the date
and time as of which such registration statement is filed and becomes
effective pursuant to Rule 462(b). "Effective Date" with respect to the
initial registration statement or the additional registration statement
(if any) means the date of the Effective Time thereof. The initial
registration statement, as amended at its Effective Time, including all
information contained in the additional registration statement (if any)
and deemed to be a part of the initial registration statement as of the
Effective Time of the additional registration statement pursuant to the
General Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("Rule
430A(b)") under the Act, is hereinafter referred to as the "Initial
Registration Statement." The additional registration statement, as
amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and including
all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "Additional Registration
Statement." The Initial Registration Statement and the Additional
Registration Statement are hereinafter referred to collectively as the
"Registration Statements" and individually as a "Registration
Statement." The form of prospectus relating to the Offered Securities,
as first filed with the Commission pursuant to and in accordance with
Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is
required) as included in a Registration Statement, is hereinafter
referred to as the "Prospectus." No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement: (A) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
("Rules and Regulations") and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, (B)
on the Effective Date of the Additional Registration Statement (if
any), each Registration Statement conformed or will conform, in all
material respects to the requirements of the Act and the Rules and
Regulations and did not include, or will not include, any untrue
statement of a material fact and did not omit, or will not omit, to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading and (C) on the date of this
Agreement, the Initial Registration Statement and, if the Effective
Time of the Additional Registration Statement is prior to the execution
and
3
<PAGE> 4
delivery of this Agreement, the Additional Registration Statement each
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b) or (if no such filing is required) at the Effective Date of the
Additional Registration Statement in which the Prospectus is included,
and on each Closing Date (as hereinafter defined) each Registration
Statement and the Prospectus will conform, in all material respects to
the requirements of the Act and the Rules and Regulations, and neither
of such documents includes, or will include, any untrue statement of a
material fact or omits, or will omit, to state any material fact
required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances
under which such statements were made) not misleading. If the Effective
Time of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement: on the Effective Date of the
Initial Registration Statement, the Initial Registration Statement and
the Prospectus will conform in all material respects to the
requirements of the Act and the Rules and Regulations, neither of such
documents will include any untrue statement of a material fact or will
omit to state any material fact required to be stated therein or
necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which such statements
were made) not misleading, and no Additional Registration Statement has
been or will be filed. The two preceding sentences do not apply to
statements in or omissions from a Registration Statement or the
Prospectus based upon written information furnished to the Company and
the Trust by any Underwriter through the Representatives specifically
for use therein, it being understood and agreed that the only such
information is that described as such in Section 7(b) hereof.
(iii) The Trust has been duly created and is validly existing as a
statutory business trust in good standing under the Delaware Business
Trust Act (the "Trust Act") with the power and authority to own
property and conduct its business as described in the Prospectus, and
has conducted and will conduct no business other than the transactions
contemplated by this Agreement and as described in the Prospectus; the
Trust is not a party to or bound by any agreement or instrument other
than this Agreement, the Amended and Restated Declaration of Trust (the
"Declaration") between the Company and the trustees named therein (the
"Issuer Trustees" and, collectively with the Guarantee Trustee and the
Debenture Trustee, the "Trustees") and the agreements and instruments
contemplated by the Declaration and the Prospectus; the Trust has no
liabilities or obligations other than those arising out of the
transactions contemplated by this Agreement and the Declaration and as
described in the Prospectus; and the Trust is not a party to or subject
to any action, suit or proceeding of any nature.
(iv) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of the
Commonwealth of Pennsylvania, with power and authority (corporate and
other) to own, lease or operate its properties and conduct its business
as described in the Prospectus; and the Company is duly qualified to do
business as a foreign corporation and is in good standing in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on
the
4
<PAGE> 5
condition (financial or other), business, properties, prospects or
results of operations ("Material Adverse Effect") of the Company and
its subsidiaries taken as a whole.
(v) Each subsidiary of the Company has been duly incorporated or
organized, as the case may be, and is validly existing and in good
standing under the laws of the jurisdiction of its organization, with
power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus; and each
subsidiary of the Company is duly qualified to do business as a foreign
corporation, limited liability company or business trust, as
applicable, and is in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business
requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect on the Company and
its subsidiaries taken as a whole; all of the issued and outstanding
capital stock of each subsidiary of the Company has been duly
authorized and validly issued, is fully paid and nonassessable and is
owned of record and beneficially by the Company or by a subsidiary of
the Company; and the capital stock or other equity interest of each
subsidiary owned by the Company, directly or through subsidiaries, is
owned free from liens, encumbrances and defects, except as disclosed in
the Prospectus.
(vi) The Offered Securities have been duly authorized by the
Trust, and when the Offered Securities have been delivered and paid for
in accordance with this Agreement on each Closing Date (as defined
below), such Offered Securities will have been validly issued, fully
paid and nonassessable preferred undivided beneficial interests in the
assets of the Trust and will conform to the description thereof
contained in the Prospectus; the issuance of the Offered Securities is
not subject to preemptive or other similar rights; the Offered
Securities will have the rights set forth in the Declaration, and the
Offered Securities when issued and delivered against payment therefor
as provided herein will be, and the Declaration, when duly executed and
delivered, will be, valid and binding obligations of the Trust.
(vii) The Common Securities have been duly and validly authorized
by the Trust and upon delivery by the Trust to the Company against
payment therefor as described in the Prospectus, will be duly and
validly issued and fully paid undivided beneficial interests in the
assets of the Trust and will conform to the description thereof
contained in the Prospectus; the issuance of the Common Securities is
not subject to preemptive or other similar rights; and all of the
issued and outstanding Common Securities of the Trust will be directly
owned by the Company free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity.
(viii) The Guarantee, the Debentures, the Declaration, the
Indenture, the Common Securities Purchase Agreement between the Trust
and the Company (the "Common Securities Purchase Agreement") and the
Common Securities Guarantee Agreement by the Company for the benefit of
the holders of the Common Securities (the Guarantee, the Debentures,
the Declaration, the Indenture, the Common Securities Purchase
Agreement and the Common Securities Guarantee Agreement being
collectively referred to as the
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<PAGE> 6
"Company Agreements") have each been duly authorized and when validly
executed and delivered by the Company and, in the case of the
Guarantee, by the Guarantee Trustee, in the case of the Declaration, by
the Issuer Trustees, in the case of the Indenture, by the Debenture
Trustee, in the case of the Common Securities Purchase Agreement, by
the Trust and, in the case of the Debentures, when validly issued by
the Company and validly authenticated and delivered by the Debenture
Trustee and paid for by the Trust, will constitute valid and legally
binding obligations of the Company, enforceable in accordance with
their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; the Debentures are entitled to the benefits of the
Indenture; and the Company Agreements will conform in all material
respects to the descriptions thereof in the Prospectus.
(ix) When the Offered Securities are delivered and paid for
pursuant to this Agreement on each Closing Date (as defined below),
such Offered Securities will be exchangeable for Debentures which will
be convertible into shares of Company Common Stock ("Underlying
Shares") in accordance with the Declaration; the Underlying Shares
initially issuable upon conversion of such Offered Securities have been
duly authorized and reserved for issuance upon such conversion and,
when issued upon such conversion, will be validly issued, fully paid
and nonassessable; the outstanding shares of Company Common Stock
conform to the description thereof contained in the Prospectus; and the
stockholders of the Company have no preemptive rights with respect to
the Offered Securities, the Debentures or the Underlying Shares.
(x) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Trust or the Company and any
person that would give rise to a valid claim against the Trust or the
Company or any Underwriter for a brokerage commission, finder's fee or
other like payment in connection with this offering.
(xi) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Trust or the
Company and any person granting such person the right to require the
Company to file a registration statement under the Act with respect to
any securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities
registered pursuant to a Registration Statement or in any securities
being registered pursuant to any other registration statement filed by
the Company under the Act.
(xii) The Underlying Shares will be approved for listing on The
New York Stock Exchange prior to the Closing Date subject to official
notice of issuance.
(xiii) Except as disclosed in the Prospectus, no consent,
approval, authorization, or order of, or filing with, any governmental
agency or body (including, without limitation, the Federal
Communications Commission (the "FCC")) or any court is required to be
obtained or made by the Trust or the Company for the consummation by
the Trust or the Company of
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<PAGE> 7
the transactions contemplated by this Agreement and the Company
Agreements in connection with the issuance and sale of the Offered
Securities by the Trust, the distribution of the Debentures pursuant to
or upon liquidation of the Trust, the conversion of Debentures into
Company Common Stock, the issuance by the Company of the Guarantee or
the purchase of the Debentures by the Trust, except such as have been
obtained and made under the Act and such as may be required under state
securities laws and except that a copy of this Agreement is to be filed
with the FCC within 30 days of its execution.
(xiv) The execution, delivery and performance of this Agreement by
the Trust, the issue and sale of Offered Securities and compliance with
the terms thereof, the distribution of the Debentures pursuant to or
upon liquidation of the Trust, the purchase of the Debentures by the
Trust and the consummation by the Trust of the transactions
contemplated herein will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any
statute, any rule, regulation or order of any governmental agency or
body or any court, domestic or foreign, having jurisdiction over the
Trust or any of its properties, or any agreement or instrument to which
the Trust is a party or by which the Trust is bound or to which any of
the properties of the Trust is subject, or the Declaration, and the
Trust has full power and authority to authorize, issue and sell the
Offered Securities as contemplated by this Agreement.
(xv) The execution, delivery and performance by the Company of
this Agreement and the Company Agreements, the consummation by the
Company of the transactions contemplated herein and therein, the
issuance by the Company of the Guarantee, the distribution of the
Debentures pursuant to or upon liquidation of the Trust, the conversion
of Debentures into Company Common Stock and the sale of the Debentures
to the Trust will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any statute,
any rule, regulation or order of any governmental agency or body or any
court, domestic or foreign, having jurisdiction over the Company or any
subsidiary of the Company or any of their properties, or any agreement
or instrument to which the Company or any such subsidiary is a party or
by which the Company or any such subsidiary is bound or to which any of
the properties of the Company or any such subsidiary is subject,
assuming that in connection with the consummation of such transactions,
(i) Joseph M. Field continues to hold in his own name and exercise
voting control of the securities of the Company representing majority
voting control of the Company; (ii) each purchaser of the Offered
Securities is qualified under the Communications Laws to hold such
interest; and (iii) not more than 25% of the capital stock of the
Company in the aggregate is owned by foreign governments, alien
individuals or entities or representatives thereof, except where the
breach or violation would not have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole; or the charter or
by-laws of the Company or any such subsidiary, and the Company has full
power and authority to authorize, issue and sell the Debentures and to
authorize and issue the Guarantee as contemplated by this Agreement.
(xvi) This Agreement has been duly authorized, executed and
delivered by the Trust and the Company.
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<PAGE> 8
(xvii) Except as disclosed in the Prospectus, the Trust will on
the Closing Date have good and valid title to all the Debentures, free
from liens, encumbrances and defects that would materially affect the
value thereof or materially interfere with the use made or to be made
thereof by the Trust.
(xviii) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and
all other properties and assets owned by them, in each case free from
liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or to be made thereof
by them; and except as disclosed in the Prospectus, the Company and its
subsidiaries hold any leased real or personal property under valid and
enforceable leases or subleases with no exceptions that, individually,
would materially interfere with the aggregate use of such properties in
any one radio market.
(xix) The Company and its subsidiaries possess adequate
certificates, authorities or permits and hold all necessary licenses
(including, without limitation, licenses issued by the FCC) issued by
appropriate governmental agencies or bodies necessary to conduct the
business now operated by them and have not received any notice of
proceedings relating to the revocation or modification of any such
certificate, license, authority or permit that, if determined adversely
to the Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole.
(xx) Except as disclosed in the Prospectus, no labor dispute with
the employees of the Company or any subsidiary exists or, to the
knowledge of the Company, is imminent that might have a Material
Adverse Effect on the Company and its subsidiaries taken as a whole.
(xxi) The Company and its subsidiaries own, possess or can acquire
on reasonable terms, adequate trademarks, trade names and other rights
to inventions, know-how, patents, copyrights, confidential information
and other intellectual property (collectively, "Intellectual Property
Rights") necessary to conduct the business now operated by them, or
presently employed by them, and have not received any notice of
infringement of or conflict with asserted rights of others with respect
to any Intellectual Property Rights that, if determined adversely to
the Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole.
(xxii) The Company and its subsidiaries have filed all necessary
federal, state, local and foreign income and franchise tax returns,
except where the failure to file such returns would not have a Material
Adverse Effect on the Company and its subsidiaries taken as a whole and
the Company and its subsidiaries have paid all taxes shown as due
thereon; and other than tax deficiencies that the Company or its
subsidiaries are contesting in good faith and for which adequate
reserves have been provided, there is no tax deficiency that has been
8
<PAGE> 9
asserted against the Company or its subsidiaries that would,
individually or in the aggregate, have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole.
(xxiii) Neither the Company nor any of its subsidiaries is in
violation of any statute, any rule, regulation, decision or order of
any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the
environment or human exposure to hazardous or toxic substances
(collectively, "Environmental Laws"), owns or operates any real
property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or
contamination pursuant to any Environmental Laws, or is subject to any
claim relating to any Environmental Laws, which violation,
contamination, liability or claim would individually or in the
aggregate reasonably be expected to have a Material Adverse Effect on
the Company and its subsidiaries taken as a whole; and the Company is
not aware of any pending investigation which might reasonably be
expected to lead to such a claim.
(xxiv) Except as disclosed in the Prospectus, there are no pending
actions, suits, proceedings, inquiries or investigations before or
brought by any court or governmental agency or body (including, without
limitation, the FCC) against or, to the knowledge of the Company,
affecting the Company, any of its subsidiaries or any of their
respective properties that, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a
Material Adverse Effect on the Company and its subsidiaries taken as a
whole, or would materially and adversely affect the ability of the
Company to perform its obligations under this Agreement, or which are
otherwise material in the context of the offer and sale of the Offered
Securities by the Company; and no such actions, suits or proceedings
are threatened or, to the Company's knowledge, contemplated.
(xxv) The financial statements included in each Registration
Statement and the Prospectus (other than the Sinclair Financials, 1998
Heritage Financials, the 1997 Heritage Financials and the CBS
Financials defined in paragraph (xxvi) below) present fairly the
financial position of the Company, its consolidated subsidiaries as of
the dates shown and their results of operations and cash flows for the
periods shown, and except as otherwise disclosed in the Prospectus,
such financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States applied
on a consistent basis; and the schedules included in each Registration
Statement present fairly the information required to be stated therein;
and the assumptions used in preparing the pro forma financial
statements included in each Registration Statement and the Prospectus
provide a reasonable basis for presenting the significant effects
directly attributable to the transactions or events described therein,
the related pro forma adjustments give appropriate effect to those
assumptions, and the pro forma columns therein reflect the proper
application of those adjustments to the corresponding historical
financial statement amounts.
(xxvi) After due inquiry, the Company has no reason to believe
that (a) the financial statements and related schedules and notes of
Sinclair Broadcast Group and Subsidiaries -
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<PAGE> 10
Radio Division (the "Sinclair Financials") included in the Registration
Statement and Prospectus do not present fairly the consolidated
financial position, results of operations and cash flows for the
periods shown and changes in financial position of Sinclair Broadcast
Group and Subsidiaries - Radio Division on the basis stated in the
Registration Statement at the respective dates or for the respective
periods to which they apply; (b) the financial statements and related
schedules and notes of the Portland, Oregon and Rochester, New York
Radio Groups of Heritage Media Services, Inc. - Broadcasting Segment
(the "1998 Heritage Financials") included in the Registration Statement
and Prospectus do not present fairly the consolidated financial
position, results of operations and cash flows for the periods shown
and changes in financial position of Portland, Oregon and Rochester,
New York Radio Groups of Heritage Media Services, Inc. - Broadcasting
Segment on the basis stated in the Registration Statement at the
respective dates or for the respective periods to which they apply; (c)
the financial statements and related schedules and notes of Heritage
Media Services, Inc. - Broadcasting Segment - a Division of Heritage
Media Corporation (the "1997 Heritage Financials") included in the
Registration Statement and Prospectus do not present fairly the
consolidated financial position, results of operations and cash flows
for the periods shown and changes in financial position of Heritage
Media Services, Inc. - Broadcasting Segment - a Division of Heritage
Media Corporation on the basis stated in the Registration Statement at
the respective dates or for the respective periods to which they apply;
(d) the financial statements and related schedules and notes of the
Boston Radio Market of CBS Radio, Inc. (the "CBS Financials") included
in the Registration Statement and Prospectus do not present fairly the
consolidated financial position, results of operations and cash flows
for the periods shown and changes in financial position of the Boston
Radio Market of CBS Radio, Inc. on the basis stated in the Registration
Statement at the respective dates or for the respective periods to
which they apply; or (e) the Sinclair Financials, 1998 Heritage
Financials, the 1997 Heritage Financials and the CBS Financials have
not been prepared in accordance with generally accepted accounting
principles consistently applied except as disclosed therein.
(xxvii) Since the date of the latest audited financial statements
included in the Prospectus there has been no material adverse change,
nor any development or event involving a prospective material adverse
change, in the condition (financial or other), business, properties,
prospects or results of operations of the Company and its subsidiaries
taken as a whole, and, except as disclosed in or contemplated by the
Prospectus, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock.
(xxviii) The statistical and market-related data included in the
Prospectus are based on or derived from sources that the Company
believes to be accurate and reliable.
(xxix) Each of the Company and its subsidiaries (i) make and keep
accurate books and records and (ii) maintain internal accounting
controls that provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its
financial statements and
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<PAGE> 11
to maintain profitability for its assets, (C) access to its assets is
permitted only in accordance with management's authorization and (D)
the reported accountability for its assets is compared with existing
assets at reasonable intervals.
(xxx) Neither the Trust nor the Company is and, after giving
effect to the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the Prospectus,
will not be an "investment company" as defined in the Investment
Company Act of 1940, as amended.
(xxxi) To the knowledge of the Trust and the Company, each of
Deloitte & Touche LLP and Arthur Andersen LLP, which firms have
examined the consolidated financial statements as set forth in their
reports included in the Prospectus, is an independent public accounting
firm within the meaning of the Act and the rules and regulations
thereunder.
(xxxii) The Amended and Restated Asset Purchase Agreement, dated
August 20, 1999, by and among various subsidiaries of Sinclair and the
Company and the Asset Purchase Agreement dated August 20, 1999, by and
among various subsidiaries of Sinclair and the Company, have each been
duly authorized, executed and delivered by the Company and each
constitutes a validly and legally binding obligation of the Company,
each enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles, and each
remains in full force and effect.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Trust and the Company agree that
the Trust shall sell to each Underwriter, and each Underwriter agrees, severally
and not jointly, to purchase from the Trust, at a purchase price of $50.00 per
TIDES, plus accrued and unpaid distributions from the First Closing Date (as
hereinafter defined) the number of Firm Securities set forth opposite the name
of such Underwriter in Schedule A hereto.
The Trust will deliver against payment of the purchase price the Firm
Securities in the form of one or more permanent global Securities in definitive
form (the "Form Global Securities") deposited with the Trustee as custodian for
The Depository Trust Company ("DTC") and registered in the name of Cede & Co.,
as nominee for DTC. Interests in any permanent global Securities will be held
only in book-entry form through DTC, except in the limited circumstances
described in the Prospectus. Payment for the Firm Securities shall be made by
the Underwriters in Federal (same day) funds by official bank check or checks or
wire transfer to an account at a bank acceptable to Credit Suisse First Boston
Corporation ("CSFBC") drawn to the order of Entercom Communications Corp. at the
office of CSFBC, Eleven Madison Avenue, New York, New York, at 10:00 A.M., New
York time, on _______ __, 1999, or at such other time not later than seven full
business days thereafter as CSFBC, the Company and the Trust determine, such
time being herein referred to as the "First Closing Date," against delivery to
the Trustee as custodian for DTC of the
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<PAGE> 12
Firm Global Securities representing all the Firm Securities. The Firm Global
Securities will be made available for checking at the above office of CSFBC at
least 24 hours prior to the First Closing.
In addition, upon written notice from CSFBC given to the Trust and
the Company from time to time not more than 30 days subsequent to the date of
the Prospectus, the Underwriters may purchase all or less than all of the
Optional Securities at the purchase price per Offered Security (plus accrued and
unpaid distributions thereon at the rate borne by the Offered Securities to the
related Option Closing Date (as defined below)) to be paid for the Firm
Securities. The Trust and the Company agree that the Trust shall sell to the
Underwriters the number of Optional Securities specified in such notice and the
Underwriters agree, severally and not jointly, to purchase such Optional
Securities. Such Optional Securities shall be purchased for the account of each
Underwriter in the same proportion as the number of Firm Securities set forth
opposite such Underwriter's name bears to the total number of Firm Securities
(subject to adjustment by CSFBC to eliminate fractions) and may be purchased by
the Underwriters only for the purpose of covering over-allotments made in
connection with the sale of the Firm Securities. No Optional Securities shall be
sold or delivered unless the Firm Securities previously have been, or
simultaneously are, sold and delivered. The right to purchase the Optional
Securities or any portion thereof may be exercised from time to time, and to the
extent not previously exercised may be surrendered and terminated at any time
upon notice by CSFBC to the Trust and the Company.
Each time for the delivery of and payment for the Optional
Securities, being herein referred to as an "Optional Closing Date," which may be
the First Closing Date (the First Closing Date and each Optional Closing Date,
if any, being sometimes referred to as a "Closing Date"), shall be determined by
CSFBC but shall be not later than five full business days after written notice
of election to purchase Optional Securities is given.
On the applicable Closing Date, the Trust will deliver against
payment of the purchase price the optional Securities being purchased on each
Optional Closing Date in the form of one or more permanent global securities in
definitive form (each, an "Optional Global Security") deposited with the Trustee
as custodian for DTC and registered in the name of Cede & Co., as nominee for
DTC. Payment for such Optional Securities shall be made by the Underwriters in
Federal (same day) funds by official bank check or checks or wire transfer to an
account at a bank acceptable to CSFBC drawn to the order of Entercom
Communications Corp. at the office of CSFBC, Eleven Madison Avenue, New York,
New York, against delivery to the Trustee as custodian for DTC of the Optional
Global Securities representing all of the Optional Securities being purchased on
such Optional Closing Date.
As compensation for the Underwriters' commitments, the Company will pay
to CSFBC the sum of $1.50 per TIDES times the total number of Offered Securities
purchased by the Underwriters on each Closing Date as commissions for the sale
of the Offered Securities under this Agreement. Such payment will be made on
each Closing Date with respect to the Offered Securities purchased on such
Closing Date.
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<PAGE> 13
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Trust and the Company. Each of the Trust
and the Company, jointly and severally, agrees with the several Underwriters
that:
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Trust and
the Company will file the Prospectus with the Commission pursuant to
and in accordance with subparagraph (1) (or, if applicable and if
consented to by CSFBC, subparagraph (4)) of Rule 424(b) not later than
the earlier of (A) the second business day following the execution and
delivery of this Agreement or (B) the fifteenth business day after the
Effective Date of the Initial Registration Statement.
The Trust and the Company will advise CSFBC promptly of any such filing
pursuant to Rule 424(b). If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement and an additional registration statement is necessary to
register a portion of the Offered Securities under the Act but the
Effective Time thereof has not occurred as of such execution and
delivery, the Trust and the Company will file the additional
registration statement or, if filed, will file a post-effective
amendment thereto with the Commission pursuant to and in accordance
with Rule 462(b) on or prior to 10:00 P.M., New York time, on the date
of this Agreement or, if earlier, on or prior to the time the
Prospectus is printed and distributed to any Underwriter, or will make
such filing at such later date as shall have been consented to by
CSFBC.
(b) The Trust and the Company will advise CSFBC promptly of any
proposal to amend or supplement the initial or any additional
registration statement as filed or the related prospectus or the
Initial Registration Statement, the Additional Registration Statement
(if any) or the Prospectus and will not effect such amendment or
supplementation without CSFBC's consent; and the Trust and the Company
will also advise CSFBC promptly of the effectiveness of each
Registration Statement (if its Effective Time is subsequent to the
execution and delivery of this Agreement) and of any amendment or
supplementation of a Registration Statement or the Prospectus and of
the institution by the Commission of any stop order proceedings in
respect of a Registration Statement and will use its best efforts to
prevent the issuance of any such stop order and to obtain as soon as
possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Trust and the Company will promptly notify CSFBC of such event and
will promptly prepare and file with the Commission, at their own
expense, an amendment or supplement
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<PAGE> 14
which will correct such statement or omission or an amendment which
will effect such compliance. Neither CSFBC's consent to, nor the
Underwriters' delivery of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 6
hereof.
(d) As soon as practicable, but not later than the Availability
Date (as defined below), the Company will make generally available to
its securityholders an earnings statement covering a period of at least
12 months beginning after the Effective Date of the Initial
Registration Statement (or, if later, the Effective Date of the
Additional Registration Statement) which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the preceding sentence,
"Availability Date" means the 45th day after the end of the fourth
fiscal quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "Availability Date" means the
90th day after the end of such fourth fiscal quarter.
(e) The Trust and the Company will furnish to the Representatives
copies of each Registration Statement (five of which will be signed and
will include all exhibits), each related preliminary prospectus, and,
so long as a prospectus relating to the Offered Securities is required
to be delivered under the Act in connection with sales by any
Underwriter or dealer, the Prospectus and all amendments and
supplements to such documents, in each case in such quantities as CSFBC
requests. The Prospectus shall be so furnished on or prior to 3:00
P.M., New York time, on the business day following the later of the
execution and delivery of this Agreement or the Effective Time of the
Initial Registration Statement. All other such documents shall be so
furnished as soon as available. The Trust and the Company will pay the
expenses of printing and distributing to the Underwriters all such
documents.
(f) The Trust and the Company will arrange for the qualification
of the Offered Securities for sale under the laws of such jurisdictions
as CSFBC designates and will continue such qualifications in effect so
long as required for the distribution of the Offered Securities.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year,
a copy of its annual report to shareholders for such year; and the
Company will furnish to the Representatives (i) as soon as available, a
copy of each report and any definitive proxy statement of the Company
filed with the Commission under the Securities Exchange Act of 1934, as
amended, or mailed to shareholders, and (ii) from time to time, such
other information concerning the Company as CSFBC may reasonably
request, subject to the limitations under the Act and the Securities
Exchange Act of 1934, as amended.
(h) For a period of 90 days after the date of the public offering
of the Offered Securities, the Trust and the Company will not offer,
sell, contract to sell, pledge or
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<PAGE> 15
otherwise dispose of, directly or indirectly, or file with the
Commission a registration statement under the Act relating to, any
additional Offered Securities or securities convertible into or
exchangeable or exercisable for any Offered Securities, or publicly
disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of CSFBC.
(i) The Company agrees with the several Underwriters that the
Company will pay all expenses incident to the performance of the
obligations of the Company and the Trust under this Agreement and the
Company Agreements, including, without limitation, (i) the fees and
expenses of the Trustees and the Issuer Trustees and their professional
advisers; (ii) all expenses in connection with the execution, issue,
authentication, packaging and delivery of the Offered Securities, the
preparation and printing of this Agreement, the Company Agreements, the
Offered Securities and the Prospectus and amendments and supplements
thereto, and any other document relating to the issuance, offer, sale
and delivery of the Offered Securities; (iii) any filing fees and other
expenses (including reasonable fees and disbursements of counsel)
incurred in connection with qualification of the Offered Securities for
sale under the laws of such jurisdictions as CSFBC designates and the
printing of memoranda relating thereto; (iv) the filing fee incident
to, and the reasonable fees and disbursements of counsel to the
Underwriters in connection with, the review by the National Association
of Securities Dealers, Inc. of the terms of the offering; (v) any
travel expenses of the Company's officers and employees and any other
expenses of the Company in connection with attending or hosting
meetings with prospective purchasers of the Offered Securities, and for
expenses incurred in distributing preliminary prospectuses and the
Prospectus (including any amendments and supplements thereto) to the
Underwriters.
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Trust and the Company herein, to the accuracy of
the statements of officers of the Trust and the Company made pursuant to the
provisions hereof, to the performance by the Trust and the Company of their
respective obligations hereunder and to the following additional conditions
precedent:
(a) The Representatives shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if
the Effective Time of the Initial Registration Statement is subsequent
to the execution and delivery of this Agreement, shall be prior to the
filing of the amendment or post-effective amendment to the registration
statement to be filed shortly prior to such Effective Time), of
Deloitte & Touche LLP and Arthur Andersen LLP confirming that they are
independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating to
the effect that:
(i) in their opinion the financial statements and
schedules examined by them
15
<PAGE> 16
and included in the Registration Statements comply as to form
in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations;
(ii) they have performed the procedures specified by
the American Institute of Certified Public Accountants for a
review of interim financial information as described in the
Statement of Auditing Standards No. 71, Interim Financial
Information, on the unaudited financial statements included in
the Registration Statements;
(iii) with respect to Deloitte & Touche LLP only, on
the basis of a reading of the latest available interim
financial statements of the Company, inquiries of officials of
the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing
came to their attention that caused them to believe that:
(A) the unaudited financial statements
included in the Registration Statements do not comply
as to form in all material respects with the
applicable accounting requirements of the Act and the
related published Rules and Regulations or any
material modifications should be made to such
unaudited financial statements for them to be in
conformity with generally accepted accounting
principles;
(B) at the date of the latest available
balance sheet read by such accountants, or at a
subsequent specified date not more than three
business days prior to the date of this Agreement,
there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt
of the Company and its consolidated subsidiaries or,
at the date of the latest available balance sheet
read by such accountants, there was any decrease in
consolidated net assets, as compared with amounts
shown on the latest balance sheet included in the
Prospectus; or
(C) for the period from the closing date of
the latest income statement included in the
Prospectus to the closing date of the latest
available income statement read by such accountants
there were any decreases, as compared with the
corresponding period of the previous year, in
consolidated net broadcast revenue, net income (loss)
or in the total or per share amounts of consolidated
income (loss) before extraordinary items;
except in all cases set forth in clauses (A) and (B) above for
changes, increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such
letter; and
(iii) they have compared specified dollar amounts (or
percentages derived
16
<PAGE> 17
from such dollar amounts) and other financial information
contained in the Registration Statements (in each case to the
extent that such dollar amounts, percentages and other
financial information are derived from the general accounting
records of the Company and its subsidiaries subject to the
internal controls of the Company's accounting system or are
derived directly from such records by analysis or computation)
with the results obtained from inquiries, a reading of such
general accounting records and other procedures specified in
such letter and have found such dollar amounts, percentages
and other financial information to be in agreement with such
results, except as otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statements is subsequent to the execution and
delivery of this Agreement, "Registration Statements" shall mean the
initial registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement but
the Effective Time of the Additional Registration Statement is
subsequent to such execution and delivery, "Registration Statements"
shall mean the Initial Registration Statement and the additional
registration statement as proposed to be filed or as proposed to be
amended by the post-effective amendment to be filed shortly prior to
its Effective Time, and (iii) "Prospectus" shall mean the prospectus
included in the Registration Statements.
(b) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this Agreement,
such Effective Time shall have occurred not later than 10:00 P.M., New
York time, on the date of this Agreement or such later date as shall
have been consented to by CSFBC. If the Effective Time of the
Additional Registration Statement (if any) is not prior to the
execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of
this Agreement or, if earlier, the time the Prospectus is printed and
distributed to any Underwriter, or shall have occurred at such later
date as shall have been consented to by CSFBC. If the Effective Time of
the Initial Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with
the Commission in accordance with the Rules and Regulations and Section
5(a) of this Agreement. Prior to such Closing Date, no stop order
suspending the effectiveness of a Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Trust, the Company or the
Representatives, shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition
(financial or other), business, properties or results of operations of
the Trust, the Company or its subsidiaries which, in the judgment of a
majority in interest of the Underwriters including the Representatives,
is material and adverse and makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of
17
<PAGE> 18
and payment for the Offered Securities; (ii) any downgrading in the
rating of any debt securities or preferred stock of the Trust or the
Company by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Act), or any public
announcement that any such organization has under surveillance or
review its rating of any debt securities or preferred stock of the
Trust or the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) any suspension or limitation of
trading in securities generally on The New York Stock Exchange, or any
setting of minimum prices for trading on such exchange, or any
suspension of trading of any securities of the Company on any exchange
or in the over-the-counter market; (iv) any banking moratorium declared
by U.S. Federal, New York or Pennsylvania authorities; or (v) any
outbreak or escalation of major hostilities in which the United States
is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the
judgment of a majority in interest of the Underwriters including the
Representatives, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable
to proceed with completion of the public offering or the sale of and
payment for the Offered Securities.
(d) The Representatives shall have received an opinion, dated
such Closing Date, of Latham & Watkins, counsel for the Company, to the
effect that:
(i) Based solely on certificates from public
officials, such counsel confirms that the Company is qualified
to do business in those jurisdictions set forth on Schedule A
hereto.
(ii) Except as described in the Prospectus, to such
counsel's knowledge, there are no outstanding options,
warrants or other rights calling for the issuance of, or any
commitment, plan or arrangement to issue, any shares of
capital stock of the Company or any security convertible into
or exchangeable or exercisable for any capital stock of the
Company.
(iii) Except as described in the Prospectus, to such
counsel's knowledge, there are no contracts, agreements or
understandings between the Company and any person granting
such person the right to require the Company to file a
registration statement under the Act with respect to any
securities of the Company owned or to be owned by such person
or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement
or in any securities being registered pursuant to any other
registration statement filed by the Company under the Act.
(iv) No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court
is required to be obtained or made by the Company for the
consummation of the transactions contemplated by this
Agreement or the Company Agreements in connection with the
sale of the Offered Securities by
18
<PAGE> 19
the Company, except such as have been obtained and made under
the Act and such as may be required under state securities
laws; provided, however, that such counsel need not express an
opinion as to any consents, approvals, authorizations or
filings that may be required by the FCC or under the
Communications Act of 1934.
(v) The issuance and sale of the Offered Securities,
the Common Securities and the Debentures and the conversion of
the Debentures into Common Stock of the Company pursuant to
this Agreement and the Company Agreements have been duly
authorized and will not result in any violation by the Company
of any federal or New York statute, rule or regulation
applicable to the Company (other than federal or state
securities laws, which are specifically addressed elsewhere
therein), or in the breach of or a default under any of the
agreements filed as an exhibit to the Registration Statement
to which the Company or any of its subsidiaries is a party;
provided, however, that such counsel need not express an
opinion with respect to any requirements of the FCC or under
the Communications Act of 1934;
(vi) Upon due authorization, execution and delivery
by the Company, and the Trustee, the Indenture will be a
legally valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms;
(vii) The Debentures, when executed and authenticated
in accordance with the terms of the Indenture and delivered
to, and paid for by, the Trust will be the legally valid and
binding obligations of the Company, enforceable against the
Company in accordance with its terms and will be entitled to
the benefits provided by the Indenture;
(viii) Upon due authorization, execution and delivery
in accordance with its terms by the Company and the Guarantee
Trustee, and upon due execution, authentication and delivery
of the Debentures and upon payment therefor, the Guarantee
will be a legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms;
(ix) The Initial Registration Statement and the
Additional Registration Statement, if any, have become
effective under the Act, and, to the best of the knowledge of
such counsel, no stop order suspending the effectiveness of
the Registration Statement has been issued under the Act and
no proceedings for that purpose have been initiated or, to the
best of such counsel's knowledge, pending, contemplated or
threatened by the Commission; and any required filing of the
Prospectus pursuant to Rule 424(b) under the Act has been made
in accordance with Rule 430A under the Act;
(x) The Registration Statement and the Prospectus
comply as to form in all material respects with the
requirements for registration statements on Form S-1
19
<PAGE> 20
under the Act and the rules and regulations thereunder, it
being understood that such counsel need express no opinion as
to (A) the financial statements or other financial data
contained in the Registration Statements or the Prospectus or
(B) any requirements of the FCC or the Communications Act of
1934; and
(xi) The descriptions in the Registration Statements
and Prospectus of statutes, legal and governmental proceedings
and contracts and other documents are accurate and fairly
present the information required to be shown, other than the
description of the Pennsylvania Business Corporation Code, as
to which such counsel need not express an opinion, and, to the
best of such counsel's knowledge, there are no legal or
governmental proceedings required to be described in the
Registration Statement or the Prospectus which are not
described as required or of any contracts or documents of a
character required to be described in a Registration Statement
or the Prospectus or to be filed as exhibits to a Registration
Statement which are not described and filed as required.
(xii) Neither the Trust nor the Company is and, after
giving effect to the offering and sale of the Offered
Securities and the Debentures delivered on such Closing Date
and the application of the proceeds thereof as described in
the Registration Statement, will not be subject to
registration as an investment company under the Investment
Company Act.
Such counsel shall also indicate that no facts came to its
attention that caused it to believe that the Registration
Statement, at the time it became effective or on the Closing
Date, contained an untrue statement of fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they
were made) not misleading, or that the Prospectus, as of its
date and the Closing Date contained an untrue statement of
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading.
The foregoing opinion may be limited to the federal securities
laws of the United States of America, the laws of the State of New
York, and counsel rendering the foregoing opinion may rely as to
questions of fact upon the representations of the Company set forth in
this Agreement and upon certificates of officers of the Company and of
government officials. In addition, counsel may state that it has made
no special inquiry or investigation in respect of opinions that are
rendered to the knowledge of such counsel.
(e) The Representatives shall have received an opinion, dated
such Closing Date, of Morris, Nichols, Arsht & Tunnell, special
Delaware counsel to the Trust and the Company, to the effect that:
20
<PAGE> 21
(i) The Trust has been duly created and is validly
existing as a business trust in good standing under the laws
of the State of Delaware. All filings required under the
Business Trust Act with respect to the creation and valid
existence of the Trust as a Delaware business trust have been
made. Under the Business Trust Act and the Declaration, the
Trust has all requisite business trust power and authority to
own its property and conduct its business as described in the
Prospectus.
(ii) Under the Business Trust Act and the
Declaration, the Trust has requisite business trust power and
authority to authorize, issue and sell the Offered Securities
and the Common Securities as contemplated by this Agreement,
the Common Securities Purchase Agreement, the Prospectus and
the Declaration and to execute, deliver and perform its
obligations under this Agreement and the Common Securities
Purchase Agreement.
(iii) The Offered Securities have been duly
authorized for issuance by the Declaration and, when issued,
executed, authenticated, delivered and paid for in accordance
with the terms of the Declaration and the terms of this
Agreement, will be fully paid and, subject to the limitation
set forth in paragraph (v) below, non-assessable undivided
beneficial interests in the assets of the Trust and will
entitle the holders thereof to the benefits of the Declaration
except to the extent that enforcement of the Declaration may
be limited by (a) bankruptcy, insolvency, receivership,
liquidation, fraudulent conveyance, reorganization, moratorium
and similar laws of general applicability relating to or
affecting creditors' rights and remedies, (b) general
principles of equity (regardless of whether considered and
applied in a proceeding in equity or at law), and (c)
considerations of public policy and the effect of applicable
law relating to fiduciary duties. Under the Declaration and
the Business Trust Act, the issuance of the Offered Securities
and the Common Securities is not subject to preemptive rights.
(iv) The Declaration is a legal, valid and binding
obligation of the Company, and is enforceable against the
Company in accordance with its terms, subject to the effect
upon the Declaration of (a) bankruptcy, insolvency,
receivership, liquidation, fraudulent conveyance,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and
remedies, (b) general principles of equity (regardless of
whether considered and applied in a proceeding in equity or at
law), and (c) considerations of public policy and the effect
of applicable law relating to fiduciary duties.
(v) Each holder of Offered Securities, in such
capacity, will be entitled to the same limitation of personal
liability as that extended to stockholders of private
corporations for profit organized under the General
Corporation Law of the State of Delaware, provided, however,
we express no opinion with respect to the liability of any
holder of Offered Securities who is, was or may become a named
Trustee of the Trust. We note, however, that the holders of
the Offered Securities
21
<PAGE> 22
may be required to make payment or provide indemnity or
security as set forth in the Declaration.
(vi) Under the Declaration and the Business Trust
Act, the execution and delivery by the Trust of this Agreement
and the Common Securities Purchase Agreement, and the
performance of its obligations thereunder, have been duly
authorized by all necessary trust action on the part of the
Trust.
(vii) No consent, approval, authorization or order
of, or filing with, any governmental agency or body, or any
court, of the State of Delaware is required for the
performance of this Agreement, the Guarantee, the Declaration,
the Indenture, the Common Securities Purchase Agreement and
the Common Securities Guarantee Agreement, the issuance and
sale of the Offered Securities, the Common Securities and the
Debentures, the distribution of the Debentures pursuant to or
upon dissolution of the Trust in accordance with the
Declaration (other than dissolution pursuant to judicial order
or supervision) and the conversion of Debentures into Common
Stock of the Company.
(viii) The execution, delivery and performance of
this Agreement, the Guarantee, the Declaration, the Indenture,
the Common Securities Purchase Agreement and the Common
Securities Guarantee Agreement, the issuance and sale of the
Offered Securities, the Common Securities and the Debentures,
the distribution of the Debentures pursuant to or upon
dissolution of the Trust in accordance with the Declaration
(other than dissolution pursuant to judicial order or
supervision) and the conversion of Debentures into Common
Stock of the Company will not violate any statute or any rule,
regulation or, after due inquiry on the day immediately
preceding closing, limited to, and solely to the extent
disclosed thereupon, the court dockets for active cases in the
Court of Chancery of the State of Delaware in and for New
Castle County, Delaware, the Superior Court of the State of
Delaware in and for New Castle County, Delaware, and the
United States District Court sitting in the State of Delaware
(a "Court"), order of any governmental agency or body, or any
Court, of the State of Delaware having jurisdiction over the
Trust or any of its properties.
(ix) No Governmental Approval of the State of
Delaware that has not been obtained is required for the
execution, delivery and performance by the Trust of this
Agreement or the Common Securities Purchase Agreement, the
issuance and sale of the Offered Securities or the Common
Securities by the Trust, the exchange of the Debentures for
Offered Securities in accordance with the Declaration or the
purchase of the Debentures by the Trust.
(x) Neither the execution, delivery and performance
by the Trust of this Agreement and the Common Securities
Purchase Agreement, the issuance and sale of the Offered
Securities or the Common Securities by the Trust, the exchange
of the Debentures for Offered Securities in accordance with
the
22
<PAGE> 23
Declaration nor the purchase of the Debentures by the Trust
will (a) violate any of the provisions of the Declaration or
(b) result in a violation of the Business Trust Act or any
applicable law of the State of Delaware.
(f) The Representatives shall have received an opinion, dated
such Closing Date, of Morris, Nichols, Arsht & Tunnell, special
Delaware counsel to the Guarantee Trustee and Indenture Trustee and
Property Trustee, to the effect that:
(i) The Trustee is a banking corporation duly
incorporated and validly existing under the laws of the State
of Delaware.
(ii) The execution, delivery and performance by the
Property Trustee of the Amended and Restated Declaration of
Trust, the execution, delivery of performance by the Guarantee
Trustee of the Guarantee Agreement and the execution, delivery
and performance by the Indenture Trustee of the Indenture have
been duly authorized by all necessary corporate action on the
part of the Property Trustee, the Guarantee Trustee and the
Indenture Trustee, respectively. The Amended and Restated
Declaration of Trust, the Guarantee Agreement and the
Indenture have been duly executed and delivered by the
Property Trustee, the Guarantee Trustee and the Indenture
Trustee, respectively, and the Declaration constitutes the
legal, valid and binding obligation of the Property Trustee,
enforceable against the Property Trustee in accordance with
its terms, except as enforcement thereof may be limited by (a)
bankruptcy, insolvency, receivership, liquidation, fraudulent
conveyance, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors'
rights and remedies, (b) general principles of equity
(regardless of whether considered and applied in a proceeding
in equity or at law), and (c) considerations of public policy
and the effect of applicable law relating to fiduciary duties.
(iii) The execution, delivery and performance of the
Amended and Restated Declaration of Trust, the Guarantee
Agreement and the Indenture by the Property Trustee, the
Guarantee Trustee and the Indenture Trustee, respectively, do
not violate or constitute a breach of the Articles of
Organization or Bylaws of the Property Trustee, the Guarantee
Trustee or the Indenture Trustee, respectively, or the terms
of any indenture or other agreement or instrument actually
known to such counsel and to which the Property Trustee, the
Guarantee Trustee or the Indenture Trustee, respectively, is a
party or is bound or any judgment, order or decree actually
known to such counsel to be applicable to the Property
Trustee, the Guarantee Trustee or the Indenture Trustee,
respectively, of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction
over the Property Trustee, the Guarantee Trustee or the
Indenture Trustee, respectively.
(iv) No consent, approval or authorization of, or
registration with or notice to any federal or Delaware state
banking authority is required for the
23
<PAGE> 24
execution, delivery or performance by the Property Trustee,
the Guarantee Trustee or the Indenture Trustee of the Amended
and Restated Declaration of Trust, the Guarantee Agreement and
the Indenture, respectively.
(g) The Representatives shall have received an opinion, dated
such Closing Date, of John C. Donlevie, General Counsel to the Company,
or such other counsel reasonably acceptable to the Underwriters, to the
effect that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the
Commonwealth of Pennsylvania, with corporate power and
authority to own its properties and conduct its business as
described in the Prospectus.
(ii) The Company Common Stock to be issued upon
conversion of the Debentures have been duly authorized and
reserved for issuance upon such conversion, and when issued
upon such conversion in accordance with the terms and
conditions of the Indenture, will be validly issued, fully
paid and nonassessable and will conform to the description
thereof contained in the Prospectus; and the shareholders of
the Company have no preemptive rights with respect to the
Securities the Common Securities, the Debentures or the
Company Common Stock.
(iii) This Agreement, the Guarantee, the Declaration,
the Indenture, the Common Securities Purchase Agreement and
the Common Securities Guarantee Agreement have been duly
authorized, executed and delivered by the Company and are
enforceable against the Company in accordance with their
terms; the issuance and sale of the Offered Securities
pursuant to this Agreement will not result in the violation by
the Company of its Certificate of Incorporation or Bylaws, or
in a breach of or a default under any of the agreements filed
as an exhibit to the Registration Statement to which the
Company or any subsidiary is a party or by which the Company
or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject.
(iv) Each of the Company's subsidiaries has been duly
organized and is an entity validly existing and in good
standing under the laws of the state of its organization, with
full power and authority (corporate and other) to own its
properties and conduct its business as described in the
Prospectus; and each subsidiary is duly qualified to do
business as a foreign corporation, limited liability company
or business trust, as applicable, and in good standing in all
other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such
qualification, except where the failure to be so qualified
would not have a Material Adverse Effect on the Company and
its subsidiaries taken as a whole.
(v) Except as set forth in the Prospectus, all of the
outstanding shares of capital stock of, or other ownership
interests in, each of the subsidiaries of the
24
<PAGE> 25
Company have been duly authorized and validly issued, are
fully paid and nonassessable and are owned of record and
beneficially by the Company or by a subsidiary of the Company,
and were not issued in violation of any preemptive rights,
rights of first refusal or other similar rights (in each case
created by statute or under any subsidiary's certificate of
incorporation or bylaws or any agreement to which any
subsidiary is a party of which we have knowledge); to such
counsel's knowledge, all such shares are owned by the Company,
free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature, except liens
set forth in the Prospectus.
(vi) Except as described in the Prospectus, to such
counsel's knowledge, there are no outstanding options,
warrants or other rights calling for the issuance of, or any
commitment, plan or arrangement to issue, any shares of
capital stock of any subsidiary of the Company or any security
convertible into or exchangeable or exercisable for any
capital stock of any subsidiary of the Company.
(vii) The description in the Registration Statements
and Prospectus of the Pennsylvania Business Corporation Code
is accurate and fairly presents the information required to be
shown.
(viii) The Amended and Restated Asset Purchase
Agreement, dated August 20, 1999, by and among various
subsidiaries of Sinclair and the Company and the Asset
Purchase Agreement, dated August 20, 1999, by and among
various subsidiaries of Sinclair and the Company, have each
been duly authorized, executed and delivered by the Company
and each constitutes a validly and legally binding obligation
of the Company, each enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and
to general equity principles.
With respect to the information contained in opinions (iv), (v) and
(vi), such counsel may state that he has relied upon legal opinions
rendered to him in connection with the Offering by counsel familiar
with the capital structure of the Company's subsidiaries or with the
agreements in question, as the case may be. The foregoing opinion may
be limited to the laws of the Commonwealth of Pennsylvania and the
Pennsylvania Business Corporation Law of 1988, as amended, and, in the
case of opinion (viii), counsel may assume that the laws of Maryland,
which purports to be the governing law of the agreements discussed in
opinion (viii), are consistent with the laws of the Commonwealth of
Pennsylvania, and counsel rendering the foregoing opinion may rely as
to questions of fact upon the representations of the Company set forth
in this Agreement and upon certificates of officers of the Company and
of government officials. In addition, counsel may state that he has
made no special inquiry or investigation in respect of opinions that
are rendered to the knowledge of such counsel.
25
<PAGE> 26
(h) The Representatives shall have received an opinion, dated such
Closing Date, of Leventhal, Senter & Lerman PLLC, FCC counsel for the Company,
to the effect that:
(i) The issuance and sale of the Offered Securities
by the Company in accordance with this Agreement does not
require FCC approval assuming that, in connection therewith,
(i) Joseph M. Field continues to hold in his own name and
exercise voting control of the voting securities of the
Company representing majority voting control of the Company;
(ii) each purchaser of the Offered Securities is qualified
under the Communications Laws to hold such interest; and (iii)
not more than 25% of the capital stock of the Company in the
aggregate will be owned by foreign governments, alien
individuals or entities, or representatives thereof.
(ii) The execution and delivery by the Company of
this Agreement and the issuance and sale of the Offered
Securities by the Company in accordance with this Agreement
does not constitute a violation by the Company of the
Communications Act of 1934, as amended, and the regulations
promulgated thereunder (the "Communications Laws") assuming
that, in connection therewith: (i) Joseph M. Field continues
to hold in his own name and exercise voting control of the
voting securities of the Company representing majority voting
control of the Company; (ii) each purchaser of the Offered
Securities is qualified under the Communications Laws to hold
such interest; and (iii) not more than 25% of the capital
stock of the Company in the aggregate will be owned by foreign
governments, alien individuals or entities, or representatives
thereof.
(iii) The entities listed on Exhibit A attached to
such opinion (the "Licensees") hold the respective FCC
Licenses listed thereon. Such FCC Licenses are in full force
and effect, except as noted on Exhibit A. As used herein,
"full force and effect" means that, to the knowledge of such
counsel, the orders issuing the FCC Licenses have become
effective, no stay of the effectiveness of such orders has
been issued by the FCC, and the FCC Licenses have not been
invalidated by any subsequent published FCC action.
(iv) To the knowledge of such counsel, except for
those disclosed in this Agreement, the Registration Statement
or on Exhibit B attached to such opinion, and except for
proceedings affecting the radio broadcasting industry
generally, there are no proceedings pending or threatened in
writing under the Communications Laws against the Company, the
Licensees or the stations by or before the FCC or before any
court having jurisdiction of matters under the Communications
Laws which seek the revocation, non-renewal, or material
adverse modification of any of the FCC Licenses.
(v) The FCC Statements (which include the statements
of the Company in the Registration Statements under the
captions "Risk Factors -- We must respond to
26
<PAGE> 27
rapid changes in technology, services and standards that
characterize our industry in order to remain competitive,"
"Risk Factors -- We are dependent on federally-issued licenses
to operate our radio stations and are subject to extensive
federal regulation," Business -- Federal Regulation of Radio
Broadcasting," "Business -- Competition; Changes in
Broadcasting Industry" and "Description of Capital Stock -
Foreign Ownership"), insofar as they constitute summaries of
the Communications Laws and material proceedings thereunder
are accurate, and fairly present the information set forth
therein in all material respects.
(vi) Such counsel has no reason to believe that the
Registration Statement and the Prospectus or any amendment or
supplement thereto, as of its issue date or as of the date
hereof, solely with respect to statements relating to federal
broadcast communications law or legal conclusions with respect
to federal broadcast communications law, contains any untrue
statement of a material fact or omits to state any material
fact necessary in order to make such statements or
conclusions, in light of the circumstances under which they
were made, not misleading.
(i) The Representatives shall have received from Weil, Gotshal
& Manges LLP, counsel for the Underwriters, such opinion or opinions,
dated such Closing Date, with respect to the Registration Statements,
the Prospectus and other related matters as the Representatives may
reasonably require, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling them
to pass upon such matters.
(j) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company and an
Administrative Trustee of the Trust in which such officers and trustee,
to the best of their knowledge after reasonable investigation, shall
state that: the representations and warranties of the Company and the
Trust in this Agreement are true and correct as though made on such
Closing Date; the Company and the Trust have complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to such Closing Date; no stop order
suspending the effectiveness of any Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
contemplated by the Commission; the Additional Registration Statement
(if any) satisfying the requirements of subparagraphs (1) and (3) of
Rule 462(b) was filed pursuant to Rule 462(b), including payment of the
applicable filing fee in accordance with Rule 111(a) or (b) under the
Act, prior to the time the Prospectus was printed and distributed to
any Underwriter; and, subsequent to the date of the most recent
financial statements in the Prospectus, there has been no material
adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole or of the Trust except as set forth in or
contemplated by the Prospectus or as described in such certificate.
27
<PAGE> 28
(k) The Representatives shall have received letters, dated
such Closing Date, of Deloitte & Touche LLP and Arthur Andersen LLP
which meet the requirements of subsection (a) of this Section, except
that the specified date referred to in such subsection will be a date
not more than three business days prior to such Closing Date for the
purposes of this subsection.
The Company will furnish the Representatives with such conformed copies of such
opinions, certificates, letters and documents as the Representatives reasonably
request. CSFBC may in its sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters hereunder.
7. Indemnification and Contribution. (a) The Trust and the
Company will indemnify and hold harmless each Underwriter, its partners,
directors and officers and each person, if any, who controls such Underwriter
within the meaning of Section 15 of the Act against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein (in the case of
the Prospectus, in light of the circumstances under which they were made) not
misleading, and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Trust and the Company will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
in or omission or alleged omission from any of such documents in reliance upon
and in conformity with written information furnished to the Trust and the
Company by any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information furnished
by any Underwriter consists of the information described as such in subsection
(b) below, and provided, further, that with respect to any untrue statement or
alleged untrue statement in or omission or alleged omission from any preliminary
prospectus, the indemnity agreement contained in this subsection (a) shall not
inure to the benefit of any Underwriter from whom the person asserting any such
losses, claims, damages or liabilities purchased the Offered Securities
concerned, to the extent that a prospectus relating to such Offered Securities
was required to be delivered by such Underwriter under the Act in connection
with such purchase and any such loss, claim, damage or liability of such
Underwriter results from the fact that there was not sent or given to such
person, at or prior to the written confirmation of the sale of such Offered
Securities to such person, a copy of the Prospectus if the Company has
previously furnished such quantity of copies thereof to such Underwriter.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless the Trust and the Company, its directors and officers and each person,
if any, who controls the Company within the meaning of Section 15 of the Act
against any losses, claims, damages or liabilities to
28
<PAGE> 29
which the Company may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement, the Prospectus, or
any amendment or supplement thereto, or any related preliminary prospectus, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Trust and the Company by such Underwriter through
the Representatives specifically for use therein, and will reimburse any legal
or other expenses reasonably incurred by the Trust and the Company in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed that the
only such information furnished by any Underwriter consists of the following
information in the Prospectus furnished on behalf of each Underwriter: the
over-allotment and stabilization information contained in the last paragraph
under the caption "Underwriting" and the concession and reallowance figures
appearing in the fourth paragraph under the caption "Underwriting."
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement (i) includes an unconditional release
of such indemnified party from all liability on any claims that are the subject
matter of such action and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act by or on behalf of an
indemnified party.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is
29
<PAGE> 30
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other from the offering of the Offered
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Trust and the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Trust and the Company on
the one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Trust and the Company bear to the total underwriting
discounts and commissions received by the Underwriters. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Trust and the Company or
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim which is the subject of this subsection (d). Notwithstanding
the provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Offered Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Trust and the Company under this Section
shall be in addition to any liability which the Trust and the Company may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each director of the Company, to
each officer of the Company who has signed a Registration Statement and to each
person, if any, who controls the Trust and the Company within the meaning of the
Act.
8. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate principal amount of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total principal amount of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Trust and the Company for the purchase of
such Offered Securities by other persons, including any of the Underwriters, but
if no such arrangements are made by such
30
<PAGE> 31
Closing Date, the non-defaulting Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Offered
Securities that such defaulting Underwriters agreed but failed to purchase on
such Closing Date. If any Underwriter or Underwriters so default and the
aggregate principal amount of Offered Securities with respect to which such
default or defaults occur exceeds 10% of the total principal amount of Offered
Securities that the Underwriters are obligated to purchase on such Closing Date
and arrangements satisfactory to CSFBC, the Trust and the Company for the
purchase of such Offered Securities by other persons are not made within 36
hours after such default, this Agreement will terminate without liability on the
part of any non-defaulting Underwriter and the Company, except as provided in
Section 9. As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. Nothing herein will relieve a
defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Trust and the Company or their officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the Trust, the Company or any of their
respective representatives, officers or directors or any controlling person, and
will survive delivery of and payment for the Offered Securities. If this
Agreement is terminated pursuant to Section 8 or if for any reason the purchase
of the Offered Securities by the Underwriters is not consummated, the Company
shall remain responsible for the expenses to be paid or reimbursed by it
pursuant to Section 5(j) and the respective obligations of the Trust and the
Company and the Underwriters pursuant to Section 7 shall remain in effect, and
if any Offered Securities have been purchased hereunder the representations and
warranties in Section 2 and all obligations under Section 5 shall also remain in
effect. If the purchase of the Offered Securities by the Underwriters is not
consummated for any reason other than solely because of the termination of this
Agreement pursuant to Section 8 or the occurrence of any event specified in
clause (iii), (iv) or (v) of Section 6(c), the Trust and the Company will
reimburse the Underwriters for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department - Transactions Advisory Group, or, if sent to the Trust or the
Company, will be mailed, delivered or telegraphed and confirmed to it at 401
City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004, Attention: John C.
Donlevie, Esq.; provided, however, that any notice to an Underwriter pursuant to
Section 7 will be mailed, delivered or telegraphed and confirmed to such
Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
31
<PAGE> 32
12. Representation. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this Agreement,
and any action under this Agreement taken by the Representatives jointly or by
CSFBC will be binding upon all the Underwriters.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
Each of the Trust and the Company hereby submits to the non-exclusive
jurisdiction of the Federal and state courts in the Borough of Manhattan in The
City of New York in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
32
<PAGE> 33
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement between the
Trust, the Company and the several Underwriters in accordance with its terms.
Very truly yours,
ENTERCOM COMMUNICATIONS CAPITAL TRUST
By: ______________________________________
Name: ____________________________________
solely in his capacity as trustee and
not in his individual capacity
ENTERCOM COMMUNICATIONS CORP.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date and effective time first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
BANC OF AMERICA SECURITIES LLC
DEUTSCHE BANK SECURITIES INC.
Acting on behalf of themselves and as
the Representatives of the several
Underwriters.
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By: _________________________________
Name: _______________________________
Title: ______________________________
33
<PAGE> 34
SCHEDULE A
<TABLE>
<CAPTION>
UNDERWRITER TOTAL NUMBER OF
FIRM SECURITIES TO
BE
PURCHASED
---------
<S> <C>
Credit Suisse First Boston Corporation.....................
Banc of America Securities LLC.............................
Deutsche Bank Securities Inc...............................
---------
Total....................................................................... 3,000,000
</TABLE>
34
<PAGE> 1
EXHIBIT 4.01
DECLARATION OF TRUST
DECLARATION OF TRUST, dated as of September 8, 1999, between
Entercom Communications Corp., a Pennsylvania corporation, as Sponsor,
Wilmington Trust Company, a Delaware banking corporation, as Delaware Trustee,
and Joseph M. Field, David J. Field and John C. Donlevie, as Administrative
Trustees (collectively with the Delaware Trustee, the "Trustees"). The Sponsor
and the Trustees hereby agree as follows:
1. The trust created hereby (the "Trust") shall be known as
"Entercom Communications Capital Trust", in which name the Trustees, or the
Sponsor to the extent provided herein, may conduct the business of the Trust,
make and execute contracts, and sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets
over to the Trust the sum of $10. The Trustees hereby acknowledge receipt of
such amount from the Sponsor, which amount shall constitute the initial trust
estate. The Trustees hereby declare that they will hold the trust estate for the
Sponsor. It is the intention of the parties hereto that the Trust created hereby
constitute a business trust under Chapter 38 of Title 12 of the Delaware Code,
12 Del. C. Sections 3801 et seq. (the "Business Trust Act"), and that this
document constitute the governing instrument of the Trust. The Trustees are
hereby authorized and directed to execute and file a certificate of trust in the
office of the Secretary of State of the State of Delaware in the form attached
hereto. The Trust is hereby established by the Sponsor and the Trustees for the
purposes of (i) issuing preferred securities ("Preferred Securities")
representing undivided beneficial interests in the assets of the Trust in
exchange for cash and investing the proceeds thereof in debt securities of the
Sponsor, (ii) issuing and selling common securities ("Common Securities" and,
together with the Preferred Securities, "Trust Securities") representing
undivided beneficial interests in the assets of the Trust to the Sponsor in
exchange for cash and investing the proceeds thereof in additional debt
securities of the Sponsor and (iii) engaging in such other activities as are
necessary, convenient or incidental thereto.
3. Concurrent with the first issuance of any Trust Securities
by the Trust, the Sponsor and the Trustees intend to enter into an amended and
restated Declaration of Trust, satisfactory to each such party and substantially
in the form to be included as an exhibit to the 1933 Act Registration Statement
referred to below at the time such registration statement becomes effective
under the Securities Act of 1933, as amended (the "Securities Act"), to provide
for the contemplated operation of the Trust created hereby and the issuance of
the Preferred Securities and the Common Securities referred to therein. Prior to
the execution and delivery of such amended and restated Declaration of Trust,
the Trustees shall not have any duty or obligation hereunder or with respect to
the trust estate, except as otherwise required by applicable law or as may be
necessary to obtain, prior to such execution and delivery, any licenses,
consents or approvals required by applicable law or otherwise.
4. The Sponsor and the Trustees hereby authorize and direct
the Sponsor, as
<PAGE> 2
the sponsor of the Trust, as applicable, (i) to prepare and file with the
Securities and Exchange Commission (the "Commission") and execute, in each case
on behalf of the Trust, (a) a Registration Statement on Form S-1 (the "1933 Act
Registration Statement"), including any pre-effective or post-effective
amendments to such Registration Statement, relating to the registration of the
Preferred Securities under the Securities Act and (b) a Registration Statement
on Form 8-A (the "1934 Act Registration Statement") (including any pre-effective
or post-effective amendments thereto) relating to the registration of the
Preferred Securities under Section 12(b) of the Securities Exchange Act of 1934,
as amended; (ii) to prepare and file with the New York Stock Exchange and
execute a listing application and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred Securities to be listed and continue to be
listed on the New York Stock Exchange; (iii) to prepare and file and execute, in
each case on behalf of the Trust, such applications, reports, surety bonds,
irrevocable consents, appointments of attorney for service of process and other
papers and documents as shall be necessary or desirable to register the
Preferred Securities under the securities or "blue sky" laws of such
jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or
desirable; and (iv) to negotiate the terms of, and execute on behalf of the
Trust, an underwriting agreement among the Trust, the Sponsor and any
underwriter, dealer or agent relating to the Preferred Securities, substantially
in the form to be included as an exhibit to, or incorporated by reference in,
the 1933 Act Registration Statement. It is hereby acknowledged and agreed that
in connection with any execution, filing or document referred to in clauses
(i)-(iii) above, (A) any Administrative Trustee (or his attorneys-in-fact and
agents or the Sponsor as permitted herein) is authorized on behalf of the Trust
to file and execute such document on behalf of the Trust and (B) the Delaware
Trustee shall not be required to join in any such filing or execute on behalf of
the Trust any such document unless required by the rules and regulations of the
Commission or the New York Stock Exchange or state securities or blue sky laws,
and in such case only to the extent so required. In connection with all of the
foregoing, the Sponsor and each Administrative Trustee, solely in its capacity
as Trustee of the Trust, hereby constitutes and appoints Joseph M. Field, David
J. Field and John C. Donlevie, and each of them, his, her or its, as the case
may be, true and lawful attorneys-in-fact, and agents, with full power of
substitution and resubstitution, for the Sponsor or such Trustee and in the
Sponsor's or such Trustee's name, place and stead, in any and all capacities, to
sign and file (i) the 1933 Act Registration Statement and the 1934 Act
Registration Statement and any and all amendments (including post-effective
amendments) or supplements thereto, with all exhibits thereto, and other
documents in connection therewith, and (ii) a registration statement and any and
all amendments thereto filed pursuant to Rule 462(b) under the Securities Act
with the Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as the Sponsor or
such Trustee might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their or his or her
substitute or substitutes, shall do or cause to be done by virtue hereof.
5. This Declaration of Trust may be executed in one or more
counterparts.
6. The number of Trustees initially shall be four (4) and
thereafter the number
- 2 -
<PAGE> 3
of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Sponsor which may increase or decrease the
number of Trustees; provided, however, that the number of Trustees shall in no
event be less than four (4); and provided, further, however, that to the extent
required by the Business Trust Act, one Trustee shall either be a natural person
who is a resident of the State of Delaware or, if not a natural person, an
entity that has its principal place of business in the State of Delaware and
meets any other requirements imposed by applicable law. Subject to the
foregoing, the Sponsor is entitled to appoint or remove without cause any
Trustee at any time. Any Trustee may resign upon thirty days prior notice to the
Sponsor; provided, however, that the Delaware Trustee may resign immediately
upon notice to the Sponsor if the Delaware Trustee is required to join in any
filing or execute on behalf of the Trust any document pursuant to the provisions
of paragraph 4 hereof and, upon giving such notice, the Delaware Trustee shall
not be required to join in any such filing or execute on behalf of the Trust any
such document; provided, further, however, that no resignation of the Delaware
Trustee shall be effective until a successor Delaware Trustee has been appointed
and has accepted such appointment by instrument executed by such successor
Delaware Trustee and delivered to the Trust, the Sponsor and the resigning
Delaware Trustee.
7. To the fullest extent permitted by applicable law, the
Sponsor agrees to indemnify (i) the Delaware Trustee, (ii) any affiliate of the
Delaware Trustee, and (iii) any officers, directors, shareholders, members,
partners, employees, representatives, nominees, custodians or agents of the
Delaware Trustee (each of the persons or entities in (i) through (iii) being
referred to as an "Indemnified Person") for, and to hold each Indemnified Person
harmless against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against, or investigating, any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The obligation
to indemnify as set forth in this paragraph 7 shall survive the termination of
this Declaration. The Delaware Trustee shall not have any of the powers or
duties of the trustees set forth herein, except as required under the Business
Trust Act. The Delaware Trustee shall be a trustee hereunder for the sole and
limited purpose of fulfilling the requirements of Section 3807(a) of the
Business Trust Act.
8. The Trust may terminate without issuing any Trust
Securities at the election of the Sponsor.
9. This Declaration shall be governed by the laws of the State
of Delaware, without regard to conflict of laws principles.
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Declaration of Trust to be duly executed as of the day and year first above
written.
ENTERCOM COMMUNICATIONS CORP.,
as Sponsor
By: ____________________
Name: David J. Field
Title: President and
Chief Operating Officer
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By: ____________________
Name:
Title:
____________________________
Joseph M. Field, as Trustee
____________________________
David J. Field, as Trustee
____________________________
John C. Donlevie, as Trustee
- 4 -
<PAGE> 1
EXHIBIT 4.02
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
ENTERCOM COMMUNICATIONS CAPITAL TRUST
Dated as of October __, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I INTERPRETATION AND DEFINITIONS................................................... 1
Section 1.01 Definitions............................................................... 1
ARTICLE II TRUST INDENTURE ACT.............................................................. 9
Section 2.01 Trust Indenture Act; Application.......................................... 9
Section 2.02 Lists of Holders of Securities............................................ 9
Section 2.03 Reports by the Property Trustee........................................... 10
Section 2.04 Periodic Reports to Property Trustee...................................... 10
Section 2.05 Evidence of Compliance with Conditions Precedent.......................... 10
Section 2.06 Events of Default; Waiver................................................. 10
Section 2.07 Event of Default; Notice.................................................. 12
ARTICLE III ORGANIZATION..................................................................... 13
Section 3.01 Name...................................................................... 13
Section 3.02 Office.................................................................... 13
Section 3.03 Purpose................................................................... 13
Section 3.04 Authority................................................................. 13
Section 3.05 Title to Property of the Trust............................................ 14
Section 3.06 Powers and Duties of the Administrative Trustees.......................... 14
Section 3.07 Prohibition of Actions by the Trust and the Trustees...................... 17
Section 3.08 Powers and Duties of the Property Trustee................................. 18
Section 3.09 Certain Duties and Responsibilities of the Property Trustee............... 20
Section 3.10 Certain Rights of Property Trustee........................................ 22
Section 3.11 Delaware Trustee.......................................................... 24
Section 3.12 Execution of Documents.................................................... 24
Section 3.13 Not Responsible for Recitals or Issuance of Securities.................... 24
Section 3.14 Duration of Trust......................................................... 24
Section 3.15 Mergers................................................................... 24
ARTICLE IV SPONSOR.......................................................................... 26
Section 4.01 Sponsor's Purchase of Common Securities................................... 26
Section 4.02 Responsibilities of the Sponsor........................................... 26
Section 4.03 Guarantee of Payment of Trust Obligations................................. 27
ARTICLE V TRUSTEES......................................................................... 28
Section 5.01 Number of Trustees........................................................ 28
Section 5.02 Delaware Trustee.......................................................... 28
Section 5.03 Property Trustee; Eligibility............................................. 28
Section 5.04 Qualifications of Administrative Trustees and Delaware Trustee Generally.. 29
Section 5.05 Initial Trustees.......................................................... 29
Section 5.06 Appointment, Removal and Resignation of Trustees.......................... 30
Section 5.07 Vacancies Among Trustees.................................................. 33
Section 5.08 Effect of Vacancies....................................................... 33
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 5.09 Meetings.................................................................. 33
Section 5.10 Delegation of Power....................................................... 34
Section 5.11 Merger, Conversion, Consolidation or Succession to Business............... 34
ARTICLE VI DISTRIBUTIONS.................................................................... 34
Section 6.01 Distributions............................................................. 34
ARTICLE VII ISSUANCE OF SECURITIES........................................................... 35
Section 7.01 General Provisions Regarding Securities................................... 35
Section 7.02 Execution and Authentication.............................................. 35
Section 7.03 Form and Dating........................................................... 36
Section 7.04 Registrar, Paying Agent and Conversion Agent.............................. 38
Section 7.05 Paying Agent to Hold Money in Trust....................................... 39
Section 7.06 Replacement Securities.................................................... 39
Section 7.07 Outstanding Preferred Securities.......................................... 39
Section 7.08 Preferred Securities in Treasury.......................................... 40
Section 7.09 Temporary Securities...................................................... 40
Section 7.10 Cancellation.............................................................. 40
ARTICLE VIII DISSOLUTION AND TERMINATION OF TRUST............................................. 41
Section 8.01 Dissolution and Termination of Trust...................................... 41
ARTICLE IX TRANSFER AND EXCHANGE............................................................ 42
Section 9.01 General................................................................... 42
Section 9.02 Transfer Procedures and Restrictions...................................... 43
Section 9.03 Deemed Security Holders................................................... 45
Section 9.04 Notices to Clearing Agency................................................ 45
Section 9.05 Appointment of Successor Clearing Agency.................................. 45
ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS............ 46
Section 10.01 Liability................................................................. 46
Section 10.02 Exculpation............................................................... 46
Section 10.03 Fiduciary Duty............................................................ 47
Section 10.04 Indemnification........................................................... 48
Section 10.05 Outside Businesses........................................................ 48
ARTICLE XI ACCOUNTING....................................................................... 49
Section 11.01 Fiscal Year............................................................... 49
Section 11.02 Certain Accounting Matters................................................ 49
Section 11.03 Banking................................................................... 49
Section 11.04 Withholding............................................................... 50
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE XII AMENDMENTS AND MEETINGS.......................................................... 50
Section 12.01 Amendments................................................................ 50
Section 12.02 Meetings of the Holders of Securities; Action by Written Consent.......... 51
ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE........................ 52
Section 13.01 Representations and Warranties of Property Trustee........................ 52
Section 13.02 Representations and Warranties of Delaware Trustee........................ 53
ARTICLE XIV MISCELLANEOUS.................................................................... 54
Section 14.01 Notices................................................................... 54
Section 14.02 Governing Law............................................................. 55
Section 14.03 Intention of the Parties.................................................. 55
Section 14.04 Headings.................................................................. 56
Section 14.05 Successors and Assigns.................................................... 56
Section 14.06 Partial Enforceability.................................................... 56
Section 14.07 Counterparts.............................................................. 56
Annex I - Terms of __% Convertible Preferred Securities
and __% Convertible Common Securities........................................................ I-1
Exhibit A-1 - Form of Preferred Security..................................................... A-1-1
Exhibit A-2 - Form of Common Security........................................................ A-2-1
</TABLE>
iii
<PAGE> 5
AMENDED AND RESTATED DECLARATION OF TRUST
OF
ENTERCOM COMMUNICATIONS CAPITAL TRUST
October __, 1999
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration")
dated and effective as of October __, 1999, by the undersigned trustees
(together with all other Persons from time to time duly appointed and serving as
trustees in accordance with the provisions of this Declaration, the "Trustees"),
Entercom Communications Corp., a Pennsylvania corporation, as trust sponsor (the
"Sponsor"), and by the holders, from time to time, of undivided beneficial
interests in the assets of the Trust (as defined below) issued pursuant to this
Declaration;
WHEREAS, certain of the Trustees and the Sponsor established
Entercom Communications Capital Trust (the "Trust") under the Business Trust Act
(as hereinafter defined) pursuant to a Declaration of Trust dated as of
September 8, 1999 (the "Original Declaration"), and a Certificate of Trust filed
with the Secretary of State of the State of Delaware on September 8, 1999, for
the sole purpose of issuing and selling certain securities representing
undivided beneficial interests in the assets of the Trust and investing the
proceeds thereof in certain Debentures of the Debenture Issuer (as hereinafter
defined); and
WHEREAS, as of the date hereof, no interests in the Trust have
been issued;
WHEREAS, all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
ARTICLE I
INTERPRETATION AND DEFINITIONS
Section 1.01 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined
in the preamble above have the respective meanings assigned to them in this
Declaration, and
<PAGE> 6
any capitalized term not defined in this Declaration shall have the meaning
assigned thereto in the Indenture;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this Declaration"
are to this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles, Sections,
Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to
this Declaration unless otherwise specified;
(e) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
(f) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Administrative Action" has the meaning set forth in the
definition of "Tax Event."
"Administrative Trustee" means any Trustee other than the
Property Trustee and the Delaware Trustee.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"Appointment Event" means an event defined in the terms of the
Preferred Securities, as set forth in Annex I, which entitles the Holders of a
Majority in Liquidation Amount of the Preferred Securities to appoint a Special
Trustee.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person.
"Beneficiaries" has the meaning set forth in Section 4.03(a).
2
<PAGE> 7
"Book Entry Interest" means a beneficial interest in a global
certificate, ownership and transfers of which shall be maintained and made
through book entries by a Depositary as described in Section 7.03.
"Business Day" means any day other than a Saturday or a
Sunday, a day on which banking institutions in New York, New York or Wilmington,
Delaware are authorized or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time
to time, or any successor legislation.
"Certificate" means a certificate in global or definitive form
representing a Common Security or a Preferred Security.
"Closing Date" means October __, 1999.
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Common Securities" has the meaning specified in Section
7.01(a).
"Common Securities Guarantee" means the guarantee agreement to
be dated as of October __, 1999 of the Sponsor in respect of the Common
Securities.
"Conversion Agent" has the meaning set forth in Section 7.04.
"Covered Person" means: (a) any officer, director,
shareholder, partner, member, representative, employee or agent of (i) the Trust
or (ii) the Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Event of Default" in respect of the Securities
means an Event of Default (as defined in the Indenture) has occurred and is
continuing in respect of the Debentures.
"Debenture Issuer" means the Sponsor in its capacity as issuer
of the Debentures.
"Debenture Trustee" means Wilmington Trust Company, a Delaware
banking corporation, as trustee under the Indenture until a successor is
appointed thereunder, and thereafter means such successor trustee.
"Debentures" means the series of Debentures to be issued by
the Debenture Issuer under the Indenture to be held by the Property Trustee, in
the form attached to the Indenture as Exhibit A.
3
<PAGE> 8
"Delaware Trustee" has the meaning set forth in Section 5.02.
"Deferral Period" has the meaning set forth in the Indenture.
"Definitive Preferred Securities" means any Preferred
Securities in definitive form issued by the Trust.
"Depositary" means The Depository Trust Company, the initial
clearing agency, until a successor shall be appointed pursuant to Section 9.05,
and thereafter means such successor Depositary.
"Distribution" means a distribution payable to Holders of
Securities in accordance with Section 6.01.
"Event of Default" means:
(i) a Debenture Event of Default; or
(ii) default by the Trust in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days (subject to the deferral of any due
date in the case of a Deferral Period); or
(iii) default by the Trust in the payment of any
Redemption Price of any Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any
material respect, of any covenant or warranty of the Trustees in the
Declaration (other than a covenant or warranty, a default in the
performance of which or the breach of which is addressed in clause (ii)
or (iii) above), and continuation of such default or breach for a
period of 90 days after there has been given, by registered or
certified mail, to the defaulting Issuer Trustee or Issuer Trustees by
the holders of at least 25% in aggregate liquidation amount of the
outstanding Preferred Securities, a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" under the Declaration; or
(v) the failure of the Sponsor to appoint a successor
Property Trustee in the manner required by Section 5.06(c).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Global Preferred Security" has the meaning set forth in
Section 7.03(a).
4
<PAGE> 9
"Holder" means a Person in whose name a Certificate
representing a Security is registered, such Person being a beneficial owner
within the meaning of the Business Trust Act.
"Indemnified Person" means (a) any Trustee; (b) any Affiliate
of any Trustee; (c) any officers, directors, shareholders, members, partners,
employees, representatives or agents of any Trustee; or (d) any employee or
agent of the Trust or its Affiliates.
"Indenture" means the Indenture dated as of October __, 1999,
between the Debenture Issuer and the Debenture Trustee, as it may be amended
from time to time.
"Investment Company" means an investment company as defined in
the Investment Company Act.
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time, or any successor legislation.
"Legal Action" has the meaning set forth in Section 3.06(g).
"Like Amount" means (i) with respect to a redemption of
Preferred Securities, Preferred Securities having an aggregate liquidation
amount equal to that portion of the principal amount of Debentures to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Preferred Securities based upon the relative
liquidation amounts of such classes and the proceeds of which will be used to
pay the applicable Redemption Price of the Preferred Securities and (ii) with
respect to a distribution of Debentures to holders of Preferred Securities in
connection with a dissolution or liquidation of the Trust, Debentures having a
principal amount equal to the aggregate liquidation amount of the Securities of
the Holder to whom such Debentures are distributed.
"List of Holders" has the meaning set forth in Section
2.02(a).
"Majority in Liquidation Amount of the Securities" means,
except as provided in the terms of the Preferred Securities and by the Trust
Indenture Act, Holder(s) of outstanding Securities voting together as a single
class or, as the context may require, Holders of outstanding Preferred
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of more than 50% of the aggregate liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise) of all outstanding Securities of the relevant class.
"Ministerial Action" has the meaning set forth in the terms of
the Securities as set forth in Annex I.
5
<PAGE> 10
"Obligations" means any costs, expenses or liabilities of the
Trust, other than obligations of the Trust to pay to Holders of any Securities
or other similar interests in the Trust the amounts due such Holders pursuant to
the terms of the Securities or such other similar interests, as the case may be.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(i) a statement that each officer signing the
Certificate has read the covenant or condition and the definition
relating thereto;
(ii) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Certificate;
(iii) a statement that each such officer has made
such examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of
each such officer, such condition or covenant has been complied with.
"Optional Closing Date" has the meaning assigned to such term
in the Underwriting Agreement.
"Participants" has the meaning set forth in Section 7.03(b).
"Paying Agent" has the meaning specified in Section 7.04.
"Person" means a legal person, including any individual,
corporation, estate, company, partnership, joint venture, association, joint
stock company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Securities" has the meaning specified in Section
7.01(a).
"Preferred Securities Guarantee" means the guarantee agreement
to be dated as of October __, 1999, of the Sponsor in respect of the Preferred
Securities.
"Preferred Security Beneficial Owner" means, with respect to a
Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Depositary, or on the books of a
Person maintaining an account with such Depositary (directly as a Participant or
as an indirect participant, in each case in accordance with the rules of such
Depositary).
6
<PAGE> 11
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.03.
"Property Trustee Account" has the meaning set forth in
Section 3.08(c).
"Prospectus" means the prospectus, dated as of September __,
1999, relating to the issuance by the Trust of Preferred Securities.
"Quorum" means a majority of the Administrative Trustees or,
if there are only two Administrative Trustees, both of them.
"Redemption Price" has the meaning set forth in Annex I.
"Registrar" has the meaning set forth in Section 7.04.
"Registration Statement" means the registration statement
filed by the Trust and the Sponsor with the Commission relating to the issuance
by the Trust of Preferred Securities.
"Related Party" means, with respect to the Sponsor, any direct
or indirect wholly owned subsidiary of the Sponsor or any other Person that
owns, directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means, with respect to the Property
Trustee, any vice-president, any assistant vice-president, the treasurer, any
assistant treasurer, any trust officer or assistant trust officer or any other
officer in the Corporate Trust Department of the Property Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"Securities" means the Common Securities and the Preferred
Securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor legislation.
"Securities Custodian" means the custodian with respect to any
Preferred Security in global form.
"Securities Guarantees" means the Preferred Securities
Guarantee and the Common Securities Guarantee.
"Special Trustee" means a trustee appointed by the Holders of
a Majority in Liquidation Amount of the Preferred Securities in accordance with
Section 5.06(a)(ii)(B).
7
<PAGE> 12
"Sponsor" means Entercom Communications Corp., a Pennsylvania
corporation, or any successor entity in a merger, consolidation or amalgamation,
in its capacity as sponsor of the Trust.
"Successor Delaware Trustee" has the meaning set forth in
Section 5.06.
"Successor Property Trustee" has the meaning set forth in
Section 5.06.
"Super Majority" has the meaning set forth in Section
2.06(a)(ii).
"Tax Event" means the Property Trustee shall have received an
opinion of nationally recognized independent tax counsel to the Sponsor
(reasonably acceptable to the Trustees) experienced in such matters (a
"Dissolution Tax Opinion") to the effect that, as a result of (i) any amendment
to or change (including any announced prospective change (which shall not
include a proposed change), provided that a Tax Event shall not occur more than
90 days before the effective date of any such prospective change) in the laws
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (ii) any judicial decision
or official administrative pronouncement, ruling, regulatory procedure, notice
or announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action"), in each case, on or
after the date of original issuance of the Debentures or the issue date of the
Preferred Securities issued by the Trust, there is more than an insubstantial
risk that (a) if the Debentures are held by the Property Trustee, (I) the Trust
is, or will be within 90 days of the date of such opinion, subject to United
States Federal income tax with respect to interest accrued or received on the
Debentures or subject to more than a de minimis amount of other taxes, duties or
other governmental charges as determined by such counsel, or (II) any portion of
interest payable by the Sponsor to the Trust on the Debentures is not, or within
90 days of the date of such opinion will not be, deductible by the Sponsor in
whole or in part for United States Federal income tax purposes or (b) with
respect to Debentures which are no longer held by the Property Trustee, any
portion of interest payable by the Sponsor on the Debentures is not, or within
90 days of the date of such opinion will not be, deductible by the Sponsor in
whole or in part for United States Federal income tax purposes.
"10% in Liquidation Amount of the Securities" means, except as
provided in the terms of the Preferred Securities or by the Trust Indenture Act,
Holders of outstanding Securities voting together as a single class or, as the
context may require, Holders of outstanding Preferred Securities or Holders of
outstanding Common Securities, voting separately as a class, representing 10% of
the aggregate liquidation amount (including the stated amount that would be paid
on redemption, liquidation or otherwise) of all outstanding Securities of the
relevant class.
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
8
<PAGE> 13
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended from time to time, or any successor legislation.
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Underwriting Agreement" has the meaning set forth in Section
7.03.
ARTICLE II
TRUST INDENTURE ACT
Section 2.01 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration, which are
incorporated by reference in and made part of this Declaration and shall, to the
extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a
Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by Sections
310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
Section 2.02 Lists of Holders of Securities.
(a) Each of the Sponsor and the Administrative Trustees on
behalf of the Trust shall provide the Property Trustee (i) within 14 days after
each record date for payment of Distributions, a list, in such form as the
Property Trustee may reasonably require, of the names and addresses of the
Holders of the Securities ("List of Holders") as of such record date, provided
that neither the Sponsor nor the Administrative Trustees on behalf of the Trust
shall be obligated to provide such List of Holders at any time the List of
Holders does not differ from the most recent List of Holders given to the
Property Trustee by the Sponsor and the Administrative Trustees on behalf of the
Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a
written request for a List of Holders as of a date no more than 14 days before
such List of Holders is given to the
9
<PAGE> 14
Property Trustee. The Property Trustee shall preserve, in as current a form as
is reasonably practicable, all information contained in Lists of Holders given
to it or which it receives in its capacity as Paying Agent (if acting in such
capacity), provided that the Property Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations
under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.
Section 2.03 Reports by the Property Trustee.
Within 60 days after ________ __ of each year, commencing
________ __, _______, the Property Trustee shall provide to the Holders of the
Preferred Securities such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313 of
the Trust Indenture Act. The Property Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
Section 2.04 Periodic Reports to Property Trustee.
Each of the Sponsor and the Administrative Trustees on behalf
of the Trust shall provide to the Property Trustee such documents, reports and
information as required by Section 314 of the Trust Indenture Act (if any) and
the compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
Section 2.05 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Administrative Trustees on behalf
of the Trust shall provide to the Property Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Declaration that
relate to any of the matters set forth in Section 314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) may be given in the form of an Officers' Certificate.
Section 2.06 Events of Default; Waiver.
(a) The Holders of a Majority in Liquidation Amount of
Preferred Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Event of Default in respect of the
Preferred Securities and its consequences, provided that if the Event of
Default:
(i) is caused by a Debenture Event of Default that is
not waivable under the Indenture, the Event of Default under the
Declaration shall also not be waivable;
10
<PAGE> 15
(ii) is caused by a Debenture Event of Default that
requires the consent or vote of greater than a majority in principal
amount of the holders of the Debentures (a "Super Majority") to be
waived under the Indenture, the Event of Default under the Declaration
may only be waived by the vote of the Holders of at least the
proportion in liquidation amount of the Preferred Securities that the
relevant Super Majority represents of the aggregate principal amount of
the Debentures outstanding;
(iii) is the result of a default by the Trust in the
payment of any Distribution when it becomes due and payable, which
default has continued for 30 days (subject to the deferral of any due
date in the case of a Default Period), the Event of Default shall not
be waivable; or
(iv) is the result of a default by the Trust in the
payment of any Redemption Price of any Preferred Security when it
becomes due and payable, the Event of Default shall not be waivable.
The foregoing provisions of this Section 2.06(a) shall be in
lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section
316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this
Declaration and the Securities, as permitted by the Trust Indenture Act.
Upon such waiver, any such default shall cease to exist, and
any Event of Default with respect to the Preferred Securities arising therefrom
shall be deemed to have been cured for every purpose of this Declaration, but no
such waiver shall extend to any subsequent or other default or an Event of
Default with respect to the Preferred Securities or impair any right consequent
thereon. Any waiver by the Holders of the Preferred Securities of an Event of
Default with respect to the Preferred Securities shall also be deemed to
constitute a waiver by the Holders of the Common Securities of any such Event of
Default with respect to the Common Securities for all purposes of this
Declaration without any further act, vote, or consent of the Holders of the
Common Securities.
(b) The Holders of a Majority in Liquidation Amount of the
Common Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that if the Event of Default is caused
by a Debenture Event of Default that:
(i) is not waivable under the Indenture, except where
the Holders of the Common Securities are deemed to have waived such
Event of Default under the Declaration as provided below in this
Section 2.06(b), the Event of Default under the Declaration shall also
not be waivable; or
(ii) requires the consent or vote of a Super Majority
to be waived, except where the Holders of the Common Securities are
deemed to have waived such Event of Default under the Declaration as
provided below in this
11
<PAGE> 16
Section 2.06(b), the Event of Default under the Declaration may only be
waived by the vote of the Holders of at least the proportion in
liquidation amount of the Common Securities that the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding;
provided, further, each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Securities and its consequences until the effects of all Events of
Default with respect to the Preferred Securities have been cured, waived or
otherwise eliminated, and until such Events of Default have been so cured,
waived or otherwise eliminated, the Property Trustee will be deemed to be acting
solely on behalf of the Holders of the Preferred Securities and only the Holders
of the Preferred Securities will have the right to direct the Property Trustee
in accordance with the terms of the Securities. The foregoing provisions of this
Section 2.06(b) shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of
the Trust Indenture Act and such Section 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Subject to the foregoing
provisions of this Section 2.06(b), upon such waiver, any such default shall
cease to exist and any Event of Default with respect to the Common Securities
arising therefrom shall be deemed to have been cured for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default with respect to the Common Securities or impair any right
consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Property Trustee at the direction of the Holders of the Preferred Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.06(c) shall be in lieu
of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B)
of the Trust Indenture Act is hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act.
Section 2.07 Event of Default; Notice.
(a) The Property Trustee shall, within ten Business Days after
the occurrence of an Event of Default actually known to the Trustee, (i)
transmit by mail, first-class postage prepaid, to the Holders of the Securities,
and (ii) transmit by any means provided for in this Declaration to the
Administrative Trustees and the Sponsor, notices of all defaults actually known
to the Property Trustee, unless such defaults have been cured before the giving
of such notice (the term "defaults" for the purposes of this Section 2.07(a)
being hereby defined to be an Event of Default, not including any periods of
grace and irrespective of the giving of any notice); provided that except for a
default in the payment of principal of (or premium, if any) or interest on any
of the Debentures or in the payment of any sinking fund installment established
for the Debentures, the Property Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee, or a
trust committee of directors and/or Responsible
12
<PAGE> 17
Officers of the Property Trustee in good faith determines that the withholding
of such notice is in the interests of the Holders of the Securities.
(b) The Property Trustee shall not be deemed to have knowledge
of any default except:
(i) a default under Sections 5.01(1) and 5.01(2) of
the Indenture; or
(ii) any default as to which the Property Trustee
shall have received written notice.
ARTICLE III
ORGANIZATION
Section 3.01 Name.
The Trust is named "Entercom Communications Capital Trust," as
such name may be modified from time to time by the Administrative Trustees
following written notice to the Holders of Securities. The Trust's activities
may be conducted under the name of the Trust or any other name deemed advisable
by the Administrative Trustees.
Section 3.02 Office.
The address of the principal office of the Trust is c/o
Entercom Communications Corp., 409 City Avenue, Suite 401, Bala Cynwyd,
Pennsylvania 19004, Attention: John C. Donlevie. On ten Business Days written
notice to the Holders of Securities, the Administrative Trustees may designate
another principal office.
Section 3.03 Purpose.
The exclusive purposes and functions of the Trust are (a) to
issue and sell Securities and use the proceeds from such sale to acquire the
Debentures, and (b) except as otherwise limited herein, to engage in only those
other activities necessary or incidental thereto. The Trust shall not borrow
money, issue debt or reinvest proceeds derived from investments, pledge any of
its assets, or otherwise undertake (or permit to be undertaken) any activity
that would cause the Trust not to be classified for United States Federal income
tax purposes as a grantor trust.
Section 3.04 Authority.
(a) Subject to the limitations provided in this Declaration
and to the specific duties of the Property Trustee, the Administrative Trustees
shall have exclusive and complete authority to carry out the purposes of the
Trust. An action taken by the Administrative Trustees in accordance with their
powers shall constitute the act of and serve to bind the Trust and an action
taken by the Property Trustee in accordance with its powers shall constitute the
act of and
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serve to bind the Trust. In dealing with the Trustees acting on behalf of the
Trust, no person shall be required to inquire into the authority of the Trustees
to bind the Trust. Persons dealing with the Trust are entitled to rely
conclusively on the power and authority of the Trustees as set forth in this
Declaration.
(b) Except as expressly set forth in this Declaration and
except if a meeting of the Administrative Trustees is called with respect to any
matter over which the Administrative Trustees have power to act, any power of
the Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.
(c) An Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purposes of signing any documents which the
Administrative Trustees have power and authority to cause the Trust to execute
pursuant to Section 3.06.
Section 3.05 Title to Property of the Trust.
Except as provided in Section 3.08 with respect to the
Debentures and the Property Trustee Account or as otherwise provided in this
Declaration, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of the
Trust, but shall have an undivided beneficial interest in the assets of the
Trust.
Section 3.06 Powers and Duties of the Administrative Trustees.
The Administrative Trustees shall have, together (except in
the case of paragraphs (a), (b) and (c) of this Section 3.06) with any Special
Trustee holding office pursuant to Section 5.06, if any, the exclusive power,
duty and authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities in accordance with this Declaration; provided, however, that the
Trust may issue no more than one series of Preferred Securities and no more than
one series of Common Securities, and, provided, further, that there shall be no
interests in the Trust other than the Securities, and the issuance of Securities
shall be limited to simultaneous issuances of both Preferred Securities and
Common Securities on the Closing Date and any Optional Closing Date;
(b) in connection with the issue and sale of the Preferred
Securities, at the direction of the Sponsor, to:
(i) assist in the preparation of the Prospectus and a
preliminary prospectus, in each case prepared by the Sponsor, in
relation to the offering and sale of Preferred Securities to execute
and file with the Commission, at such time as determined by the
Sponsor, a registration statement filed on Form S-1 prepared
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by the Sponsor, including any amendments thereto, in relation to the
Preferred Securities;
(ii) execute and file any documents prepared by the
Sponsor, or take any acts as determined by the Sponsor to be necessary
in order to qualify or register all or part of the Preferred Securities
in any State or foreign jurisdiction in which the Sponsor has
determined to qualify or register such Preferred Securities for sale;
(iii) execute and file an application, prepared by
the Sponsor, at such time, if any, as determined by the Sponsor, to the
New York Stock Exchange or any other national stock exchange or the
Nasdaq National Market for listing or quotation of the Preferred
Securities;
(iv) execute and deliver letters, documents, or
instruments with The Depository Trust Company relating to the Preferred
Securities;
(v) execute and file with the Commission, at such
time as determined by the Sponsor, a registration statement on Form
8-A, including any amendments thereto, prepared by the Sponsor relating
to the registration of the Preferred Securities under Section 12 of the
Exchange Act; and
(vi) execute and enter into the Underwriting
Agreement and other related agreements providing for the sale of the
Preferred Securities and to provide any certificates or other documents
in connection with such agreements;
(c) to acquire the Debentures with the proceeds of the sale of
the Preferred Securities and the Common Securities; provided, however, that the
Administrative Trustees shall cause legal title to the Debentures to be held of
record in the name of the Property Trustee for the benefit of the Holders of the
Preferred Securities and the Holders of Common Securities;
(d) to give the Sponsor and the Property Trustee prompt
written notice of the occurrence of a Tax Event; provided that the
Administrative Trustees (and Special Trustee, if any) shall consult with the
Sponsor and the Property Trustee before taking or refraining from taking any
Ministerial Action in relation to a Tax Event;
(e) to establish a record date with respect to all actions to
be taken hereunder that require a record date be established, including and with
respect to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Preferred Securities and Holders of Common Securities
as to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be
required of the Administrative Trustees pursuant to the terms of the Securities
and this Declaration;
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(g) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action, or otherwise adjust claims or demands of or against the
Trust ("Legal Action"), unless pursuant to Section 3.08(e), the Property Trustee
has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who
may be designated as officers with titles) and managers, contractors, advisors,
and consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations
under the Trust Indenture Act;
(j) to give the certificate required by Section 314(a)(4) of
the Trust Indenture Act to the Property Trustee, which certificate may be
executed by any Administrative Trustee;
(k) to incur expenses that are necessary or incidental to
carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar
and transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the
Securities of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;
(n) to execute all documents or instruments, perform all
duties and powers, and do all things for and on behalf of the Trust in all
matters necessary or incidental to the foregoing;
(o) to take all action that may be necessary or appropriate
for the preservation and the continuation of the Trust's valid existence,
rights, franchises and privileges as a statutory business trust under the laws
of the State of Delaware and of each other jurisdiction in which such existence
is necessary to protect the limited liability of the Holders of the Preferred
Securities or to enable the Trust to effect the purposes for which the Trust was
created;
(p) to take any action, not inconsistent with this Declaration
or with applicable law, that the Administrative Trustees determine in their
discretion to be necessary or desirable in carrying out the activities of the
Trust as set out in this Section 3.06, including, but not limited to:
(i) causing the Trust not to be deemed to be an
Investment Company required to be registered under the Investment
Company Act;
(ii) causing the Trust to be classified for United
States federal income tax purposes as a grantor trust; and
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(iii) cooperating with the Debenture Issuer to ensure
that the Debentures will be treated as indebtedness of the Debenture
Issuer for United States federal income tax purposes,
provided that such action does not materially adversely affect the interests of
Holders; and
(q) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with respect
to the Trust to be duly prepared and filed by the Administrative Trustees, on
behalf of the Trust.
The Administrative Trustees must exercise the powers set forth
in this Section 3.06 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.03, and the Administrative Trustees
shall not take any action that is inconsistent with the purposes and functions
of the Trust set forth in Section 3.03.
Subject to this Section 3.06, the Administrative Trustees
shall have none of the powers or the authority of the Property Trustee set forth
in Section 3.08.
Any expenses incurred by the Administrative Trustees (or the
Special Trustee, if any) pursuant to this Section 3.06 shall be reimbursed by
the Debenture Issuer.
Section 3.07 Prohibition of Actions by the Trust and the
Trustees.
(a) The Trust shall not, and the Trustees (including the
Property Trustee) on behalf of the Trust shall not, engage in any activity other
than as required or authorized by this Declaration. In particular, the Trust
shall not and the Trustees (including the Property Trustee) shall cause the
Trust not to:
(i) invest any proceeds received by the Trust from
holding the Debentures, but shall distribute all such proceeds to
Holders of Securities pursuant to the terms of this Declaration and of
the Securities;
(ii) acquire any assets other than as expressly
provided herein;
(iii) possess Trust property for other than a Trust
purpose;
(iv) make any loans or incur any indebtedness other
than loans represented by the Debentures;
(v) possess any power or otherwise act in such a way
as to vary the Trust assets or the terms of the Securities in any way
whatsoever;
(vi) issue any securities or other evidences of
beneficial ownership of, or beneficial interest in, the Trust other
than the Securities; or
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(vii) other than as provided in the Declaration or
Annex I hereto, (A) direct the time, method and place of exercising any
trust or power conferred upon the Debenture Trustee with respect to the
Debentures, (B) waive any past default that is waivable under Section
5.13 of the Indenture, (C) exercise any right to rescind or annul any
declaration that the principal of all the Debentures shall be due and
payable, or (D) consent to any amendment, modification or termination
of the Indenture or the Debentures where such consent shall be required
unless, in the case of each action described in clause (A), (B), (C) or
(D), the Trust shall have received an opinion of counsel to the effect
that such modification will not affect the Trust's status as a grantor
trust for United States federal income tax purposes.
Section 3.08 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and
held of record in the name of the Property Trustee in trust for the benefit of
the Holders of the Securities. The right, title and interest of the Property
Trustee to the Debentures shall vest automatically in each Person who may
hereafter be appointed as Property Trustee in accordance with Section 5.06. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents with regard to the Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title
and interest in the Debentures to the Administrative Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest
bearing trust account (the "Property Trustee Account") in the name of
and under the exclusive control of the Property Trustee on behalf of
the Holders of the Securities and, upon the receipt of payments of
funds made in respect of the Debentures held by the Property Trustee,
deposit such funds into the Property Trustee Account and make payments
to the Holders of the Preferred Securities and Holders of the Common
Securities from the Property Trustee Account in accordance with Section
6.01. Funds in the Property Trustee Account shall be held uninvested
until disbursed in accordance with this Declaration.
(ii) engage in such ministerial activities as so
directed and as shall be necessary or appropriate to effect the
redemption of the Preferred Securities and the Common Securities to the
extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by
the Administrative Trustees in accordance with the terms of the
Securities, engage in such ministerial activities as so directed as
shall be necessary or appropriate to
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effect the distribution of the Debentures to Holders of Securities upon
the occurrence of certain special events (as may be defined in the
terms of the Securities) arising from a change in law or a change in
legal interpretation or other specified circumstances pursuant to the
terms of the Securities.
(d) The Property Trustee shall take all actions and perform
such duties as may be specifically required of the Property Trustee pursuant to
the terms of the Securities.
(e) The Property Trustee shall take any Legal Action which
arises out of or in connection with an Event of Default or the Property
Trustee's duties and obligations under this Declaration or the Trust Indenture
Act; provided, however, that if a Debenture Event of Default has occurred and is
continuing and such event is attributable to the failure of the Sponsor to pay
interest or principal on the Debentures on the date such interest or principal
is otherwise payable (or in the case of redemption, on the redemption date),
then a Holder of Preferred Securities may institute a legal proceeding directly
for enforcement of payment to such Holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such Holder (a "Direct Action") on or after the
respective due date specified in the Securities. In connection with such Direct
Action, the Debenture Issuer will be subrogated to the rights of such Holder of
Preferred Securities to the extent of any payment made by the Sponsor to such
Holder of Preferred Securities in such Direct Action. In addition, if the
Property Trustee fails to enforce its rights under the Debentures (other than
rights arising from an Event of Default described in the immediately preceding
sentence) after any Holder of Preferred Securities shall have made a written
request to the Property Trustee to enforce such rights, such Holder of Preferred
Securities may, to the fullest extent permitted by law, institute a Direct
Action to enforce such rights. Except as provided in the preceding sentences,
the Holders of Preferred Securities will not be able to exercise directly any
other remedy available to the holders of the Debentures.
(f) The Property Trustee shall not resign as a Trustee unless
either:
(i) the Trust has been completely liquidated and the
proceeds of the liquidation distributed to the Holders of Securities
pursuant to the terms of the Securities; or
(ii) a Successor Property Trustee has been appointed
and has accepted that appointment in accordance with Section 5.06.
(g) The Property Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of Debentures
under the Indenture and, if an Event of Default occurs and is continuing, the
Property Trustee shall, for the benefit of Holders of the Securities, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to the terms of such Securities.
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(h) The Property Trustee will act as Paying Agent and
Registrar in New York to pay Distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to all securities and any such
Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any
Paying Agent may be removed by the Property Trustee at any time and a successor
Paying Agent or additional Paying Agents may be appointed at any time by the
Property Trustee.
(i) Subject to this Section 3.08, the Property Trustee shall
have none of the duties, liabilities, powers or the authority of the
Administrative Trustees set forth in Section 3.06.
(j) The Property Trustee must exercise the powers set forth in
this Section 3.08 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.03, and the Property Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 3.03.
Section 3.09 Certain Duties and Responsibilities of the
Property Trustee.
(a) The Property Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Declaration and no implied covenants shall be read into this Declaration
against the Property Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 2.06), the Property Trustee shall
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) No provision of this Declaration shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default
and after the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the
Property Trustee shall be determined solely by the express provisions
of this Declaration and the Property Trustee shall not be liable except
for the performance of such duties and obligations as are specifically
set forth in this Declaration, and no implied covenants or obligations
shall be read into this Declaration against the Property Trustee; and
(B) in the absence of bad faith on the part
of the Property Trustee, the Property Trustee may conclusively rely, as
to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to the
Property Trustee and conforming to the
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requirements of this Declaration; but in the case of any such
certificates or opinions that by any provision hereof are specifically
required to be furnished to the Property Trustee, the Property Trustee
shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Declaration;
(ii) the Property Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the
Property Trustee, unless it shall be proved that the Property Trustee
was negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a
Majority in Liquidation Amount of the Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee under this Declaration; (iv) no provision of
this Declaration shall require the Property Trustee to expend or risk
its own funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers;
(v) the Property Trustee's sole duty with respect to
the custody, safe keeping and physical preservation of the Debentures
and the Property Trustee Account shall be to deal with such property in
a similar manner as the Property Trustee deals with similar property
for its own account, subject to the protections and limitations on
liability afforded to the Property Trustee under this Declaration and
the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or
liability for or with respect to the value, genuineness, existence or
sufficiency of the Debentures or the payment of any taxes or
assessments levied thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for
any interest on any money received by it except as it may otherwise
agree with the Sponsor. Money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the
Property Trustee Account maintained by the Property Trustee pursuant to
Section 3.08(c)(i) and except to the extent otherwise required by law;
and
(viii) the Property Trustee shall not be responsible
for monitoring the compliance by the Administrative Trustees or the
Sponsor with their respective duties under this Declaration, nor shall
the Property Trustee be liable for the default or misconduct of the
Administrative Trustees or the Sponsor.
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Section 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.09:
(i) the Property Trustee may rely conclusively and
shall be fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) any direction or act of the Sponsor or the
Administrative Trustees contemplated by this Declaration shall be
sufficiently evidenced by an Officers' Certificate;
(iii) whenever in the administration of this
Declaration, the Property Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting any
action hereunder, the Property Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and rely upon an Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by the Sponsor or the
Administrative Trustees;
(iv) the Property Trustee shall have no duty to see
to any recording, filing or registration of any instrument (including
any financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or registration thereof;
(v) the Property Trustee may consult with counsel of
its choice or other experts and the advice or opinion of such counsel
and experts with respect to legal matters or advice within the scope of
such experts' area of expertise shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such
advice or opinion. Such counsel may be counsel to the Sponsor or any of
its Affiliates, and may include any of its employees. The Property
Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of
competent jurisdiction;
(vi) the Property Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Declaration at the request or direction of any Holder, unless such
Holder shall have provided to the Property Trustee security
satisfactory to the Property Trustee, against the costs, expenses
(including its attorneys' fees and expenses) and liabilities that might
be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested in writing by
the Property Trustee, provided, that, nothing contained in this Section
3.10(a)(vi) shall be taken to relieve the Property
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Trustee, upon the occurrence of an Event of Default, of its obligation
to exercise the rights and powers vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, security, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Property
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit;
(viii) the Property Trustee may execute any of its
powers hereunder or perform any of its duties hereunder either directly
or by or through agents or attorneys and the Property Trustee shall not
be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder;
(ix) any action taken by the Property Trustee or its
agents hereunder shall bind the Trust and the Holders of the
Securities, and the signature of the Property Trustee or its agents
alone shall be sufficient and effective to perform any such action and
no third party shall be required to inquire as to the authority of the
Property Trustee to so act or as to its compliance with any of the
terms and provisions of this Declaration, both of which shall be
conclusively evidenced by the Property Trustee's or its agent's taking
such action;
(x) whenever in the administration of this
Declaration the Property Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder the Property Trustee (i) may request
instructions from the Holders of the Securities which instructions may
only be given by the Holders of the same proportion in liquidation
amount of the Securities as would be entitled to direct the Property
Trustee under the terms of the Securities in respect of such remedy,
right or action, (ii) may refrain from enforcing such remedy or right
or taking such other action until such instructions are received, and
(iii) shall be protected in acting in accordance with such
instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any obligation to
take any action that is discretionary under the provisions of this
Declaration; and
(xii) the Property Trustee shall not be liable for
any action taken, suffered, or omitted to be taken by it in good faith
and reasonably believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose
any duty or obligation on the Property Trustee to perform any act or acts or
exercise any
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right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
Section 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other
than Section 5.02, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Administrative Trustees or the Property Trustee
described in this Declaration. Except as set forth in Section 5.02, the Delaware
Trustee shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of Section 3807 of the Business Trust Act.
Section 3.12 Execution of Documents.
Except as otherwise required by the Business Trust Act, any
Administrative Trustee is authorized to execute on behalf of the Trust any
documents that the Administrative Trustees have the power and authority to
execute pursuant to Section 3.06; provided that the registration statement
referred to in Section 3.06(b)(i), including any amendments thereto, shall be
signed by a majority of the Administrative Trustees.
Section 3.13 Not Responsible for Recitals or Issuance of
Securities.
The recitals contained in this Declaration and the Securities
shall be taken as the statements of the Sponsor, and the Trustees do not assume
any responsibility for their correctness. The Trustees make no representations
as to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
Section 3.14 Duration of Trust.
The Trust, unless dissolved pursuant to the provisions of
Article VIII hereof, shall exist until September 30, 2014.
Section 3.15 Mergers.
(a) The Trust may not consolidate, amalgamate, merge with or
into, or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, except as described in Section
3.15(b) and (c) of this Declaration and Section 3 and Section 4 of the terms of
the Securities as set forth in Annex I attached hereto.
(b) The Trust may, with the consent of a majority of the
Administrative Trustees and without the consent of the Holders of the
Securities, the Delaware Trustee or the Property Trustee, consolidate,
amalgamate, merge with or into,
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or be replaced by a trust organized as such under the laws of any State or the
District of Columbia; provided that:
(i) if the Trust is not the surviving entity, the
successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations
of the Trust under the Securities; or
(B) substitutes for the Securities other
securities having substantially the same terms as the Preferred
Securities (the "Successor Securities") as long as the Successor
Securities rank, with respect to participation in the profits and
distributions and payments upon liquidation, redemption and otherwise
at least as high as the Preferred Securities rank with respect to
distributions and payments upon liquidation redemption and otherwise;
(ii) the Debenture Issuer appoints a Trustee of such
Successor Entity possessing the same powers and duties of the Property
Trustee as the Holder of the Debentures;
(iii) the Preferred Securities or any Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or with
any other organization on which the Preferred Securities are then
listed or quoted;
(iv) such merger, consolidation, amalgamation or
replacement does not adversely affect the powers, preferences and other
special rights of the Holders of the Preferred Securities (including
any Successor Securities) in any material respect;
(v) such Successor Entity has a purpose substantially
identical to that of the Trust;
(vi) prior to such merger, consolidation,
amalgamation or replacement, the Sponsor has received an opinion of a
nationally recognized independent counsel (reasonably acceptable to the
Property Trustee) to the Trust experienced in such matters to the
effect that:
(A) such merger, consolidation, amalgamation
or replacement will not adversely affect the limited liability of the
Holders of the Securities (including any Successor Securities); and
(B) following such merger, consolidation,
amalgamation or replacement, neither the Sponsor nor the Successor
Entity will be required to register as an Investment Company.
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(vii) the Sponsor provides a guarantee to the Holders of the
Successor Securities with respect to the Successor Entity having
substantially the same terms as the Preferred Securities Guarantee; and
(viii) such merger, consolidation, amalgamation, replacement or
lease is not a taxable event for holders of the Preferred Securities.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of Holders of 100% in liquidation amount of the Preferred Securities
and Common Securities, consolidate, amalgamate, merge with or into, or be
replaced by any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger or replacement would cause the Trust or Successor Entity to
be classified as an association taxable as a corporation (or substantially
increase the likelihood that the Trust or Successor Entity would be classified
as other than a grantor trust) for United States federal income tax purposes.
Article IV
SPONSOR
Section 4.01 Sponsor's Purchase of Common Securities.
On the Closing Date and any Optional Closing Date the Sponsor will
purchase an amount of Common Securities issued by the Trust such that the
aggregate liquidation amount of such Common Securities purchased by the Sponsor
shall at such date equal 3% of the total capital of the Trust.
Section 4.02 Responsibilities of the Sponsor.
In connection with the issue and sale of the Preferred Securities, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities:
(a) to prepare the Prospectus and to prepare for filing by the Trust
with the Commission the Registration Statement, including any amendments
thereto;
(b) to determine the States and foreign jurisdictions in which to take
appropriate action to qualify or register for sale all or part of the Preferred
Securities and to do any and all such acts, other than actions which must be
taken by the Trust, and advise the Trust of actions it must take, and prepare
for execution and filing any documents to be executed and filed by the Trust, as
the Sponsor deems necessary or advisable in order to comply with the applicable
laws of any such States and foreign jurisdictions;
(c) if deemed necessary or advisable by the Sponsor, to prepare for filing by
the Trust an application to the New York Stock Exchange or any other national
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stock exchange or the Nasdaq National Market for listing or quotation of the
Preferred Securities;
(d) if deemed necessary or advisable by the Sponsor, to prepare for
filing by the Trust with the Commission a registration statement on Form 8-A
relating to the registration of the Preferred Securities under Section 12 of the
Exchange Act, including any amendments thereto; and
(e) to negotiate the terms of the Underwriting Agreement and other
related agreements providing for the sale of the Preferred Securities.
Section 4.03 Guarantee of Payment of Trust Obligations.
(a) Subject to the terms and conditions of this Section 4.03, the
Sponsor hereby irrevocably and unconditionally guarantees to each Person to whom
the Trust is now or hereafter becomes indebted or liable (the "Beneficiaries")
the full payment, when and as due, of any and all Obligations to such
Beneficiaries.
(b) The agreement of the Sponsor in Section 4.03(a) is intended to be
for the benefit of, and to be enforceable by, all such Beneficiaries, whether or
not such Beneficiaries have received notice hereof.
(c) The agreement of the Sponsor set forth in Section 4.03(a) shall
terminate and be of no further force and effect upon the later of (a) the date
on which full payment has been made of all amounts payable to all Holders of all
the Preferred Securities (whether upon redemption, liquidation, exchange or
otherwise) and (b) the date on which there are no Beneficiaries remaining;
provided, however, that such agreement shall continue to be effective or shall
be reinstated, as the case may be, if at any time any Holder of Preferred
Securities or any Beneficiary must restore payment of any sums paid under the
Preferred Securities, under any Obligation, under the Preferred Securities
Guarantee or under this Agreement for any reason whatsoever. Such agreement is
continuing, irrevocable, unconditional and absolute.
Article V
TRUSTEES
Section 5.01 Number of Trustees.
The number of Trustees shall initially be five (5), consisting of three
(3) Administrative Trustees, the Delaware Trustee and the Property Trustee, and:
(a) at any time before the issuance of any Securities, the Sponsor may,
by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities:
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(i) the number of Trustees may be increased or decreased,
except as provided in Sections 5.01(b)(ii) and 5.06(a)(ii)(B) with
respect to the Special Trustee, by vote of the Holders of a Majority in
Liquidation Amount of the Common Securities voting as a class at a
meeting of the Holders of the Common Securities or by written consent;
and
(ii) the number of Trustees shall be increased automatically
by one (1) if an Appointment Event has occurred and is continuing and
the Holders of a Majority in Liquidation Amount of the Preferred
Securities appoint a Special Trustee in accordance with Section
5.06(a)(ii).
Section 5.02 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall either be (1) a natural person who is at least 21 years of age
and a resident of the State of Delaware, or (ii) an entity which has its
principal place of business in the State of Delaware, and otherwise meets the
requirements of applicable law, provided that if the Property Trustee has its
principal place of business in the State of Delaware and otherwise meets the
requirements of applicable law, then the Property Trustee shall also be the
Delaware Trustee and Section 3.11 shall have no application.
Section 5.03 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee which shall act as Property
Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person permitted by
the Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least 50 million
U.S. dollars ($50,000,000), and subject to supervision or examination
by Federal, State, Territorial or District of Columbia authority. If
such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or examining
authority referred to above, then for the purposes of this Section
5.03(a)(ii), the combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published.
(b) If at any time the Property Trustee shall cease to be eligible to
so act under Section 5.03(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 5.06(e).
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(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
(d) The Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
Section 5.04 Qualifications of Administrative Trustees and Delaware
Trustee Generally.
Each Administrative Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more Authorized Officers.
Section 5.05 Initial Trustees.
The initial Administrative Trustees shall be:
Joseph M. Field
c/o Entercom Communications Corp.
409 City Avenue, Suite 401
Bala Cynwyd, Pennsylvania 19004
David J. Field
c/o Entercom Communications Corp.
409 City Avenue, Suite 401
Bala Cynwyd, Pennsylvania 19004
John C. Donlevie
c/o Entercom Communications Corp.
409 City Avenue, Suite 401
Bala Cynwyd, Pennsylvania 19004
The initial Delaware Trustee shall be:
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
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The initial Property Trustee shall be:
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Section 5.06 Appointment, Removal and Resignation of Trustees.
(a) Except as provided otherwise in this Section 5.06(b) and 5.06(d),
Trustees may be appointed or removed without cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor; and
(ii) after the issuance of any Securities:
(A) other than in respect to a Special Trustee, by
vote of the Holders of a Majority in Liquidation Amount of the Common
Securities voting as a class at a meeting of the Holders of the Common
Securities or by written consent, unless a Debenture Event of Default
shall have occurred and be continuing, in which event the Property
Trustee and the Delaware Trustee may only be removed by the Holders of
a Majority in Liquidation Amount of the Preferred Securities, voting as
a class at a meeting of the Holders of the Preferred Securities or by
written consent; and
(B) if an Appointment Event has occurred and is
continuing, one (1) additional trustee (the "Special Trustee"), who
shall have the same rights, powers and privileges as an Administrative
Trustee, may be appointed by vote of the Holders of a Majority in
Liquidation Amount of the Preferred Securities, voting as a class at a
meeting of the Holders of the Preferred Securities and such Special
Trustee may only be removed (otherwise than by the operation of Section
5.06(e)), by vote of the Holders of a Majority in Liquidation Amount of
the Preferred Securities voting as a class at a meeting of the Holders
of the Preferred Securities.
(b) The Trustee that acts as Property Trustee shall not be removed in
accordance with Section 5.06(a) until a successor Property Trustee meeting the
requirements of Section 5.03 (a "Successor Property Trustee") has been appointed
and has accepted such appointment by written instrument executed by such
Successor Property Trustee and delivered to the Administrative Trustees and the
Sponsor.
(c) The Holders of a Majority in Liquidation Amount of the Common
Securities shall remove the Property Trustee by written instrument upon:
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(i) the entry or a decree or order by a court having
jurisdiction in the premises adjudging the Property Trustee as bankrupt
or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Property Trustee under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Property Trustee or of any substantial
part of its property or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order unstayed and
in effect for a period of 60 consecutive days; or
(ii) the institution by the Property Trustee of proceedings to
be adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by it to the filing
of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Property Trustee or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally
as they become due and its willingness to be adjudicated a bankrupt, or
the taking of corporate action by the Property Trustee in furtherance
of any such action.
The Sponsor shall appoint a Successor Property Trustee within 60 days of such an
event.
(d) The Trustee that acts as Delaware Trustee shall not be removed in
accordance with Section 5.06(a) until a successor Trustee possessing the
qualifications to act as Delaware Trustee under Sections 5.02 and 5.04 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware Trustee
and delivered to the Trustees and the Sponsor.
(e) A Trustee appointed to office shall hold office until his successor
shall have been appointed or until his death, removal or resignation, provided
that a Special Trustee shall only hold office while an Appointment Event is
continuing and shall cease to hold office immediately after the Appointment
Event pursuant to which the Special Trustee was appointed and all other
Appointment Events cease to be continuing. Any Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in writing
signed by the Trustee and delivered to the Sponsor and the Trust, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that:
(i) No such resignation of the Trustee that acts as the
Property Trustee shall be effective:
(A) until a Successor Property Trustee has been
appointed and has accepted such appointment by instrument executed by
such
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Successor Property Trustee and delivered to the Trust, the Sponsor and
the resigning Property Trustee; or
(B) until the assets of the Trust have been completely liquidated and the
proceeds thereof distributed to the holders of the Securities;
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the Trust,
the Sponsor and the resigning Delaware Trustee; and
(iii) no such resignation of a Special Trustee shall be
effective until the 60th day following delivery of the instrument of
resignation of the Special Trustee to the Sponsor and the Trust or such
later date specified in such instrument during which period the Holders
of the Preferred Securities shall have the right to appoint a successor
Special Trustee as provided in this Section 5.06.
(f) The Holders of the Common Securities shall use their best efforts
to promptly appoint a Successor Property Trustee or Successor Delaware Trustee,
as the case may be, if the Property Trustee or the Delaware Trustee delivers an
instrument of resignation in accordance with this Section 5.06.
(g) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.06 within 60 days after delivery to the Sponsor and the Trust of an instrument
of resignation or removal, at the cost of the Sponsor the resigning Property
Trustee or Delaware Trustee, resigning or being removed as applicable, may
petition any court of competent jurisdiction for appointment of a Successor
Property Trustee or Successor Delaware Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper and prescribe, appoint a
Successor Property Trustee or Successor Delaware Trustee, as the case may be.
(h) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
Section 5.07 Vacancies Among Trustees.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.01, or if the number of Trustees
is increased pursuant to Section 5.01, a vacancy shall occur. A resolution
certifying the existence of such vacancy by a majority of the Administrative
Trustees shall be conclusive evidence of the existence of such vacancy. The
vacancy shall be filled with a Trustee appointed in accordance with Section
5.06.
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Section 5.08 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to annul, dissolve or terminate the Trust.
Whenever a vacancy in the number of Administrative Trustees shall
occur, until such vacancy is filled by the appointment of a Administrative
Trustee in accordance with Section 5.06, the Administrative Trustees in office,
regardless of their number, shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Declaration.
Section 5.09 Meetings.
Meetings of the Administrative Trustees shall be held from time to time
upon the call of any Administrative Trustee. Regular meetings of the
Administrative Trustees may be held at a time and place fixed by resolution of
the Administrative Trustees. Notice of any meetings of the Administrative
Trustees shall be hand delivered or otherwise delivered in writing (including by
facsimile or overnight courier) not less than 24 hours before such meeting.
Notices shall contain a brief statement of the time, place and anticipated
purposes of the meeting. The presence (whether in person or by telephone) of a
Administrative Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Administrative Trustee attends a meeting for the express
purpose of objecting to the transaction of any activity on the ground that the
meeting has not been lawfully called or convened. Unless provided otherwise in
this Declaration, any action of the Administrative Trustees may be taken at a
meeting by vote of a majority of the Administrative Trustees present (whether in
person or by telephone) and eligible to vote with respect to such matter,
provided that a Quorum is present, or without a meeting and without prior notice
by the unanimous written consent of the Administrative Trustees.
In the event there is only one Administrative Trustee, any and all
action of such Administrative Trustee shall be evidenced by a written consent of
such Administrative Trustee. In the event a Special Trustee is holding office
pursuant to Section 5.06, such Special Trustee shall have the same rights as an
Administrative Trustee with respect to participation in a meeting of the
Administrative Trustees.
Section 5.10 Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
3.06, including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and
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(b) the Administrative Trustees shall have power to delegate from time
to time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.
Section 5.11 Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which the Property Trustee or the Delaware Trustee, as
the case may be, may be merged or converted or with which either may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Property Trustee or the Delaware Trustee, as the case
may be, shall be a party, or any Person succeeding to all or substantially all
the corporate trust business of the Property Trustee or the Delaware Trustee, as
the case may be, shall be the successor of the Property Trustee or the Delaware
Trustee, as the case may be, hereunder, provided such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
Article VI
DISTRIBUTIONS
Section 6.01 Distributions.
Holders shall receive Distributions (as defined herein) in accordance
with the applicable terms of the relevant Holder's Securities. Distributions
shall be made on the Preferred Securities and the Common Securities in
accordance with the preferences set forth in their respective terms. If and to
the extent that the Debenture Issuer makes a payment of interest (including
Compounded Interest (as defined in the Indenture), Additional Sums (as defined
in the Indenture), premium or principal on the Debentures held by the Property
Trustee (the amount of any such payment being a "Payment Amount"), the Property
Trustee shall and is directed, to the extent funds are available for that
purpose, to make a distribution (a "Distribution") of the Payment Amount to
Holders.
Article VII
ISSUANCE OF SECURITIES
Section 7.01 General Provisions Regarding Securities.
(a) The Administrative Trustees shall on behalf of the Trust issue one
class of convertible preferred securities, designated as ___% Convertible
Preferred Securities, Term Income Deferrable Equity Securities (TIDES)sm,
representing undivided
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beneficial interests in the assets of the Trust (the "Preferred Securities"),
having such terms as are set forth in Annex I and one class of convertible
common securities, liquidation amount $50, representing undivided beneficial
interests in the assets of the Trust (the "Common Securities"), having such
terms as are set forth in Annex I. The Trust shall have no securities or other
interests in the assets of the Trust other than the Preferred Securities and the
Common Securities. The Trust shall issue no Securities in bearer form.
(b) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(c) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable, subject to Section 10.01 with respect to the Common Securities.
(d) Every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Declaration.
(e) Every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have covenanted to treat the Debentures as indebtedness and
the Securities as evidence of an indirect beneficial ownership interest in the
Debentures.
Section 7.02 Execution and Authentication.
(a) The Securities shall be signed on behalf of the Trust by one
Administrative Trustee. In case any Administrative Trustee of the Trust who
shall have signed any of the Securities shall cease to be such Administrative
Trustee before the Securities so signed shall be delivered by the Trust, such
Securities nevertheless may be delivered as though the person who signed such
Securities had not ceased to be such Administrative Trustee; and any Securities
may be signed on behalf of the Trust by such persons who, at the actual date of
execution of such Security, shall be the Administrative Trustees of the Trust,
although at the date of delivery of the Declaration any such person was not such
a Administrative Trustee.
(b) One Administrative Trustee shall sign the Preferred Securities for
the Trust by manual or facsimile signature. Unless otherwise determined by the
Trust, such signature shall, in the case of Common Securities, be a manual
signature.
A Preferred Security shall not be valid until authenticated by the
manual signature of an authorized signatory of the Property Trustee. The
signature shall be conclusive evidence that the Preferred Security has been
authenticated under this Declaration.
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Upon a written order of the Trust signed by one Administrative Trustee,
the Property Trustee shall authenticate the Preferred Securities for original
issue by executing the Property Trustee's certificate of authentication
contained in the form of Preferred Securities attached hereto as Exhibit A-1.
The aggregate number of Preferred Securities outstanding at any time shall not
exceed the number set forth in the terms in Annex I hereto except as provided in
Section 7.06.
The Property Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Preferred Securities. An authenticating agent may
authenticate Preferred Securities whenever the Property Trustee may do so. Each
reference in this Declaration to authentication by the Property Trustee includes
authentication by such agent. An authenticating agent has the same rights as the
Property Trustee to deal with the Company or an Affiliate.
Section 7.03 Form and Dating.
The Preferred Securities and the Property Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 and the Common
Securities shall be substantially in the form of Exhibit A-2, each of which is
hereby incorporated in and expressly made a part of this Declaration.
Certificates may be printed, lithographed or engraved or may be produced in any
other manner as is reasonably acceptable to the Administrative Trustees, as
evidenced by their execution thereof. The Securities may have letters, numbers,
notations or other marks of identification or designation and such legends or
endorsements required by law, stock exchange rule, agreements to which the Trust
is subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Trust). The Trust at the direction of
the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the
Property Trustee in writing. Each Preferred Security shall be dated the date of
its authentication. The terms and provisions of the Securities set forth in
Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part
of the terms of this Declaration and to the extent applicable, the Property
Trustee and the Sponsor, by their execution and delivery of this Declaration,
expressly agree to such terms and provisions and to be bound thereby.
The Preferred Securities are being offered and sold by the Trust
pursuant to a Underwriting Agreement relating to the Preferred Securities, dated
September __, 1999, among the Trust, the Sponsor and the Underwriters named
therein (the "Underwriting Agreement").
(a) Global securities. Preferred Securities offered and sold as
provided in the Underwriting Agreement shall be issued in the form of one or
more permanent global Securities in definitive, fully registered form without
distribution coupons with the appropriate global legends set forth in Exhibit
A-1 hereto (each, a "Global Preferred Security"), which shall be deposited on
behalf of the purchasers of the Preferred Securities represented thereby with
the Property Trustee, at its Wilmington, Delaware office as custodian for the
Depositary, and registered in the name of the
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Depositary or a nominee of the Depositary, duly executed by an Administrative
Trustee on behalf of the Trust and authenticated by the Property Trustee as
provided herein.
(b) Book-entry provisions. This Section 7.03(b) shall apply only to the
Global Preferred Securities as may be authorized by the Trust to be deposited
with or on behalf of the Depositary.
An Administrative Trustee on behalf of the Trust shall execute and the
Property Trustee shall, in accordance with this Section 7.03, authenticate and
deliver initially one or more Global Preferred Securities that (a) shall be
registered in the name of Cede & Co. or other nominee of such Depositary and (b)
shall be delivered by the Trustee to such Depositary or pursuant to such
Depositary's written instructions or held by the Trustee as custodian for the
Depositary.
Members of, or participants in, the Depositary ("Participants") shall
have no rights under this Declaration with respect to any Global Preferred
Security held on their behalf by the Depositary or by the Property Trustee as
the custodian of the Depositary or under such Global Preferred Security, and the
Depositary may be treated by the Trust, the Property Trustee and any agent of
the Trust or the Property Trustee as the absolute owner of such Global Preferred
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Trust, the Property Trustee or any agent of the Trust
or the Property Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or impair, as between the
Depositary and its Participants, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Preferred Security.
(c) Certificated securities. Except as provided in Section 7.03(d),
owners of beneficial interests in the Global Preferred Security will not be
entitled to receive physical delivery of certificated Preferred Securities.
(d) A Global Preferred Security deposited with the Depositary or with
the Property Trustee as custodian for the Depositary pursuant to this Section
7.03 shall be transferred to the beneficial owners thereof in the form of
certificated Preferred Securities only if such transfer complies with Section
9.02 and (i) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global Preferred Security or if at any time
such Depositary ceases to be a "clearing agency" registered under the Exchange
Act, at a time when the Depositary is required to be so registered to act as
such depositary, (ii) the Sponsor on behalf of the Trust in its sole discretion
determines that such Global Preferred Security shall be so exchangeable, or
(iii) an Event of Default has occurred and is continuing.
(e) Any Global Preferred Security that is transferable to the
beneficial owners thereof in the form of certificated Preferred Securities
pursuant to this Section 7.03 shall be surrendered by the Depositary to the
Property Trustee located in Wilmington, Delaware, to be so transferred, in whole
or from time to time in part,
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without charge, and the Property Trustee shall authenticate and deliver, upon
such transfer of each portion of such Global Preferred Security, an equal
aggregate liquidation amount of Preferred Securities of authorized denominations
in the form of certificated Preferred Securities. Any portion of a Global
Preferred Security transferred pursuant to this Section shall be registered in
such names as the Depositary shall direct.
(f) Subject to the provisions of Section 7.03(e), the registered holder
of a Global Preferred Security may grant proxies and otherwise authorize any
person, including Participants and persons that may hold interests through
Participants, to take any action which a holder is entitled to take under this
Declaration or the Securities.
(g) In the event of the occurrence of any of the events specified in
Section 7.03(d), the Trust will promptly make available to the Property Trustee
a reasonable supply of certificated Securities in definitive, fully registered
form without distribution coupons.
Section 7.04 Registrar, Paying Agent and Conversion Agent.
The Trust shall maintain in Wilmington, Delaware (i) an office or
agency where Preferred Securities may be presented for registration of transfer
or for exchange ("Registrar"), (ii) an office or agency where Preferred
Securities may be presented for payment ("Paying Agent") and (iii) an office or
agency where Securities may be presented for conversion ("Conversion Agent").
The Registrar shall keep a register of the Preferred Securities and of their
transfer and exchange. The Trust may appoint the Registrar, the Paying Agent and
the Conversion Agent and may appoint one or more co-registrars, one or more
additional paying agents and one or more additional conversion agents in such
other locations as it shall determine. The term "Paying Agent" includes any
additional paying agent and the term "Conversion Agent" includes any additional
conversion agent. The Trust may change any Paying Agent, Registrar, co-registrar
or Conversion Agent without prior notice to any Holder. The Trust shall notify
the Property Trustee of the name and address of any Agent not a party to this
Declaration. If the Trust fails to appoint or maintain another entity as
Registrar, Paying Agent or Conversion Agent, the Property Trustee shall act as
such. The Trust or any of its Affiliates may act as Paying Agent, Registrar, or
Conversion Agent. The Trust shall act as Paying Agent, Registrar, co-registrar,
and Conversion Agent for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar, Paying
Agent, and Conversion Agent for the Preferred Securities.
Section 7.05 Paying Agent to Hold Money in Trust.
The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of principal or distribution on the Securities, and will notify
the Property Trustee if there are insufficient funds. While any such
insufficiency continues, the Property Trustee may require a
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Paying Agent to pay all money held by it to the Property Trustee. The Trust at
any time may require a Paying Agent to pay all money held by it to the Property
Trustee and to account for any money disbursed by it. Upon payment over to the
Property Trustee, the Paying Agent (if other than the Trust or an Affiliate of
the Trust) shall have no further liability for the money. If the Trust or the
Sponsor or an Affiliate of the Trust or the Sponsor acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent.
Section 7.06 Replacement Securities.
If the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Preferred Securities to the
Property Trustee, an Administrative Trustee on behalf of the Trust shall issue
and, with respect to the Preferred Securities, the Property Trustee shall
authenticate a replacement Security if the Property Trustee's and the Trust's
requirements, as the case may be, are met. If required by the Property Trustee
or the Trust, an indemnity bond must be sufficient in the judgment of both to
protect the Trustees, the Sponsor or any authenticating agent from any loss
which any of them may suffer if a Security is replaced. The Sponsor may charge
for its expenses in replacing a Security.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be purchased by the
Sponsor pursuant to Article III hereof, the Sponsor in its discretion may,
instead of issuing a new Security, pay or purchase such Security, as the case
may be.
Section 7.07 Outstanding Preferred Securities.
The Preferred Securities outstanding at any time are all the Preferred
Securities authenticated by the Property Trustee except for those canceled by
it, those delivered to it for cancellation, and those described in this Section
as not outstanding.
If a Preferred Security is replaced, paid or purchased pursuant to
Section 7.06 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Preferred
Security is held by a protected purchaser.
If Preferred Securities are considered paid in accordance with the
terms of this Declaration, they cease to be outstanding and Distributions on
them cease to accumulate.
A Preferred Security does not cease to be outstanding because one of
the Trustees, the Trust, the Sponsor or an Affiliate of the Sponsor or Trustees
holds the Security.
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Section 7.08 Preferred Securities in Treasury.
In determining whether the Holders of the required amount of Securities
have concurred in any direction, waiver or consent, Preferred Securities owned
by the Trust, the Sponsor or an Affiliate of the Sponsor, as the case may be,
shall be disregarded and deemed not to be outstanding, except that for the
purposes of determining whether the Property Trustee shall be fully protected in
relying on any such direction, waiver or consent, only Securities which the
Property Trustee actually knows are so owned shall be so disregarded.
Section 7.09 Temporary Securities.
Until definitive Securities are ready for delivery, an Administrative
Trustee may prepare and, in the case of the Preferred Securities, the Property
Trustee shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations that
an Administrative Trustee considers appropriate for temporary Securities.
Without unreasonable delay, an Administrative Trustee shall prepare and deliver
to the Property Trustee Preferred Securities in certificated form (other than in
the case of Preferred Securities in global form) and thereupon any or all
temporary Preferred Securities (other than any such Preferred Securities in
global form) may be surrendered in exchange therefor, at the office of the
Registrar, and the Property Trustee shall authenticate and deliver an equal
aggregate liquidation amount of Definitive Preferred Securities in certificated
form in exchange for temporary Preferred Securities (other than any such
Preferred Securities in global form).
Section 7.10 Cancellation.
The Trust at any time may deliver Preferred Securities to the Property
Trustee for cancellation. The Registrar, Paying Agent and Conversion Agent shall
forward to the Property Trustee any Preferred Securities surrendered to them for
registration of transfer, redemption, conversion, exchange or payment. The
Property Trustee shall promptly cancel all Preferred Securities surrendered for
registration of transfer, redemption, conversion, exchange, payment, replacement
or cancellation and shall return such canceled Preferred Securities to the
Administrative Trustees. The Trust may not issue new Preferred Securities to
replace Preferred Securities that it has paid or that have been delivered to the
Property Trustee for cancellation or that any holder has converted.
Article VIII
DISSOLUTION AND TERMINATION OF TRUST
Section 8.01 Dissolution and Termination of Trust.
(a) The Trust shall dissolve upon the earliest to occur of the
following:
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(i) the bankruptcy of the Holder of the Common Securities or
the Sponsor;
(ii) the filing of a certificate of dissolution or its
equivalent with respect to the Holder of the Common Securities or the
Sponsor; or the revocation of the charter of the Holder of the Common
Securities or the Sponsor and the expiration of 90 days after the date
of revocation without a reinstatement thereof;
(iii) the written direction of the Sponsor, as the Holder of
the outstanding Common Securities, to the Property Trustee to dissolve
the Trust and distribute a Like Amount of Debentures to Holders of the
Securities in accordance with the terms of the Securities;
(iv) all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have
been paid to the Holders in accordance with the terms of the
Securities;
(v) upon the distribution of the Class A Common Stock (as
defined in the Indenture) of the Sponsor to Holders of all outstanding
Securities upon conversion of all such Securities;
(vi) the expiration of the term of the Trust as set forth in
Section 3.14 hereof;
(vii) the entry of a decree of judicial dissolution of the
Trust; or
(viii) before the issuance of any Securities, with the consent
of all the Administrative Trustees and the Sponsor.
(b) As soon as is practicable after the occurrence of an event referred
to in Section 8.01(a) and after satisfaction of liabilities of creditors of the
Trust as provided by applicable law, any one of the Trustees (each of whom is
hereby authorized to take such action) shall file a certificate of cancellation
with the Secretary of State of the State of Delaware terminating the Trust and,
upon such filing, the respective obligations and responsibilities of the
Trustees, and the Trust created and continued hereby, shall terminate.
(c) The provisions of Sections 3.09, 4.03, 10.01(b), 10.04, the last
sentence of Section 3.06 and Article X shall survive the termination of the
Trust.
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Article IX
TRANSFER AND EXCHANGE
Section 9.01 General.
(a) Where Preferred Securities are presented to the Registrar or a
co-registrar with a request to register a transfer or to exchange them for an
equal number of Preferred Securities represented by different certificates, the
Registrar shall register the transfer or make the exchange if its requirements
for such transactions are met. To permit registrations of transfers and
exchanges, the Administrative Trustee in accordance with this Declaration shall
execute and deliver and the Property Trustee shall authenticate Preferred
Securities at the Registrar's request.
(b) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. To the fullest extent permitted by law, any
transfer or purported transfer of any Security not made in accordance with this
Declaration shall be null and void.
Subject to this Article IX, the Sponsor and any Related Party may only
transfer Common Securities to the Sponsor or a Related Party of the Sponsor or
as otherwise permitted by Article VIII of the Indenture; provided that any such
transfer is subject to the condition precedent that the transferor obtain the
written opinion of nationally recognized independent counsel experienced in such
matters that such transfer would not cause:
(i) the Trust to be classified for United States federal
income tax purposes as a grantor trust; and
(ii) more than an insubstantial risk that the Trust would be
an Investment Company or the transferee would become an Investment
Company.
(c) The Administrative Trustees shall provide for the registration of
Securities and of transfers of Securities, which will be effected without charge
but only upon payment (with such indemnity as the Administrative Trustees or
Property Trustee may require) in respect of any tax or other governmental
charges that may be imposed in relation to it. Upon surrender for registration
of transfer of any Securities, the Administrative Trustees shall cause one or
more new Securities to be issued in the name of the designated transferee or
transferees. Every Security surrendered for registration of transfer shall be
accompanied by a written instrument of transfer in form satisfactory to the
Administrative Trustees duly executed by the Holder or such Holder's attorney
duly authorized in writing. Each Security surrendered for registration of
transfer shall be cancelled in accordance with Section 7.10. A transferee of a
Security shall be entitled to the rights and subject to the obligations of a
Holder hereunder upon the receipt by such transferee of a Security. By
acceptance of a Security, each transferee shall be deemed to have agreed to be
bound by this Declaration.
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(d) The Trust shall not be required (i) to issue, register the transfer
of, or exchange, certificated Preferred Securities during a period beginning at
the opening of business 15 days before the day of any selection of Preferred
Securities for redemption set forth in the terms of the Securities as set forth
in Annex I hereto and ending at the close of business on the day of selection,
or (ii) to register the transfer or exchange of any certificated Preferred
Security so selected for redemption in whole or in part, except the unredeemed
portion of any certificated Preferred Security being redeemed in part.
(e) All Preferred Securities issued upon any transfer or exchange
pursuant to the terms of this Declaration shall evidence the same security and
shall be entitled to the same benefits under this Declaration as the Preferred
Securities surrendered upon such transfer or exchange.
Section 9.02 Transfer Procedures and Restrictions.
(a) Transfer and exchange of Definitive Preferred Securities. When
Definitive Preferred Securities are presented to the Registrar or co-Registrar
(i) to register the transfer of such Definitive Preferred
Securities, or
(ii) to exchange such Definitive Preferred Securities for an
equal number of Definitive Preferred Securities of another
denomination,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Preferred Securities surrendered for
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to an Administrative
Trustee on behalf of the Trust and the Registrar or co-registrar, duly executed
by the Holder thereof or his attorney duly authorized in writing.
(b) Restrictions on transfer of a Definitive Preferred Security for a
beneficial interest in a Global Preferred Security. A Definitive Preferred
Security may not be exchanged for a beneficial interest in a Global Preferred
Security except upon satisfaction of the requirements set forth below. Upon
receipt by the Property Trustee of a Definitive Preferred Security, duly
endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Property Trustee, together with written instructions
directing the Property Trustee to make, or to direct the Depositary to make, an
adjustment on its books and records with respect to such Global Preferred
Security to reflect an increase in the number of the Preferred Securities
represented by the Global Preferred Securities, then the Property Trustee shall
cancel such Definitive Preferred Security and cause, or direct by the Depositary
to cause, the aggregate number of Preferred Securities represented by the Global
Preferred Security to be increased accordingly. If no Global Preferred
Securities are then outstanding, the Administrative Trustee shall execute and
deliver and the Property Trustee shall authenticate, upon
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written order or any Administrative Trustee, an appropriate number of Preferred
Securities in global form.
(c) Transfer and exchange of Global Preferred Securities. The transfer
and exchange of Global Preferred Securities or beneficial interests therein
shall be effected through the Depositary, in accordance with this Declaration
(including applicable restrictions on transfer set forth herein, if any) and the
procedures of the Depositary therefor.
(d) Transfer of a beneficial interest in a Global Preferred Security
for a Definitive Preferred Security. Definitive Preferred Securities issued in
exchange for a beneficial interest in a Global Preferred Security pursuant to
this Section 9.02(d) shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its Participants
or indirect participants or otherwise, shall instruct the Property Trustee. The
Property Trustee shall deliver such Preferred Securities to the Persons in whose
names such Preferred Securities are so registered in accordance with the
instructions of the Depositary.
(e) Restrictions on transfer and exchange of Global Preferred
Securities. Notwithstanding any other provisions of this Declaration (other than
the provisions set forth in Section 7.03), a Global Preferred Security may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary or another nominee of the Depositary or by the Depositary or any such
nominee to a successor Depositary or a nominee of such successor Depositary.
(f) Cancellation or adjustment of Global Preferred Security. At such
time as all beneficial interests in a Global Preferred Security have either been
exchanged for Definitive Preferred Securities to the extent permitted by the
Declaration or redeemed, repurchased or cancelled in accordance with the terms
of this Declaration, such Global Preferred Security shall be returned to the
Depositary for cancellation or retained and cancelled by the Property Trustee.
At any time prior to such cancellation, if any beneficial interest in a Global
Preferred Security is exchanged for Definitive Preferred Securities, Preferred
Securities represented by such Global Preferred Security in global form shall be
reduced and an adjustment shall be made on the books and records of the Property
Trustee (if it is then the Securities Custodian for such Global Preferred
Security) with respect to such Global Preferred Security, by the Property
Trustee or the Securities Custodian, to reflect such reduction.
(g) No obligation of the Property Trustee.
(i) The Property Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Preferred Security, a
Participant in the Depositary or other Person with respect to the
accuracy of the records of the Depositary or its nominee or of any
Participant thereof, with respect to any ownership interest in the
Preferred Securities or with respect to the delivery to any
Participant, beneficial owner or other Person (other than the
Depositary) of any
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notice (including any notice of redemption) or the payment of any
amount, under or with respect to such Preferred Securities. All notices
and communications to be given to the Holders and all payments to be
made to Holders under the Preferred Securities shall be given or made
only to or upon the order of the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Preferred Security).
The rights of beneficial owners in any Global Preferred Security shall
be exercised only through the Depositary subject to the applicable
rules and procedures of the Depositary. The Property Trustee may
conclusively rely and shall be fully protected in relying upon
information furnished by the Depositary or agent thereof with respect
to its Participants and any beneficial owners.
(ii) The Property Trustee and Registrar shall have no
obligation or duty to monitor, determine or inquire as to compliance
with any restrictions on transfer imposed under this Declaration or
under applicable law with respect to any transfer of any interest in
any Preferred Security (including any transfers between or among
Depositary Participants or beneficial owners in any Global Preferred
Security) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if
and when expressly required by, the terms of this Declaration, and to
examine the same to determine substantial compliance as to form with
the express requirements hereof.
Section 9.03 Deemed Security Holders.
The Trustees may treat the Person in whose name any Certificate shall
be registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trust, the Trustees,
the Registrar or a co-registrar shall have actual or other notice thereof.
Section 9.04 Notices to Clearing Agency.
Whenever a notice or other communication to the Preferred Security
Holders is required under this Declaration, the Trustees shall, in the case of
any Global Preferred Security, give all such notices and communications
specified herein to be given to the Preferred Security Holders to the
Depositary, and shall have no notice obligations to the Preferred Security
Beneficial Owners.
Section 9.05 Appointment of Successor Clearing Agency.
If the Depository elects to discontinue its services as securities
depositary with respect to the Preferred Securities, the Administrative Trustees
may, in their sole discretion, appoint a successor Clearing Agency with respect
to such Preferred Securities.
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Article X
LIMITATION OF LIABILITY OF HOLDERS OF
SECURITIES, TRUSTEES OR OTHERS
Section 10.01 Liability.
(a) Except as expressly set forth in this Declaration, the Securities
Guarantees and the terms of the Securities the Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the
Securities which shall be made solely from assets of the Trust; or
(ii) required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Securities)
to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders
of the Preferred Securities shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
Section 10.02 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence (or, in the
case of the Property Trustee, negligence) or willful misconduct with respect to
such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Securities might properly be paid.
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Section 10.03 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Property Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between
an Indemnified Person and any Covered Person; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and
factors as it desires, including its own interests, and shall have no
duty or obligation to give any consideration to any interest of or
factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard,
the Indemnified Person shall act under such express standard and shall
not be subject to any other or different standard imposed by this
Declaration or by applicable law.
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Section 10.04 Indemnification.
(a) To the fullest extent permitted by applicable law, the
Debenture Issuer shall indemnify and hold harmless each Indemnified Person from
and against any loss, damage, liability, tax, penalty, expense or claim of any
kind or nature whatsoever incurred by such Indemnified Person by reason of the
creation, operation or termination of the Trust or any act or omission performed
or omitted by such Indemnified Person in good faith on behalf of the Trust and
in a manner such Indemnified Person reasonably believed to be within the scope
of authority conferred on such Indemnified Person by this Declaration, except
that no Indemnified Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such Indemnified Person by reason of gross
negligence (or, in the case of the Property Trustee, negligence) or willful
misconduct with respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law,
expenses (including legal fees and expenses) incurred by an Indemnified Person
in defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Debenture Issuer prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Debenture Issuer
of an undertaking by or on behalf of the Indemnified Person to repay such amount
if it shall be determined that the Indemnified Person is not entitled to be
indemnified as authorized in Section 10.4(a). The indemnification shall survive
the termination of this Declaration or the resignation or removal of the
Property Trustee or the Delaware Trustee, as the case may be.
Section 10.05 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Property Trustee (subject to Section 5.03(c)) may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, similar or dissimilar to the business of the Trust, and the
Trust and the Holders of Securities shall have no rights by virtue of this
Declaration in and to such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. None of the
Sponsor, any Covered Person, the Delaware Trustee, or the Property Trustee shall
be obligated to present any particular investment or other opportunity to the
Trust even if such opportunity is of a character that, if presented to the
Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the
Delaware Trustee and the Property Trustee shall have the right to take for its
own account (individually or as a partner or fiduciary) or to recommend to
others any such particular investment or other opportunity. Any Covered Person,
the Delaware Trustee and the Property Trustee may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate of the Sponsor,
or may act as depositary for, trustee or agent for, or act on any committee or
body of holders of, securities or other obligations of the Sponsor or its
Affiliates.
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ARTICLE XI
ACCOUNTING
Section 11.01 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the
calendar year, or such other year as is required by the Code.
Section 11.02 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the
Administrative Trustees shall keep, or cause to be kept, full books of account,
records and supporting documents, which shall reflect in reasonable detail, each
transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The books of account and the records of the
Trust shall be examined by and reported upon as of the end of each Fiscal Year
by a firm of independent certified public accountants selected by the
Administrative Trustees.
(b) The Administrative Trustees shall cause to be prepared and
delivered to each of the Holders of Securities, within 90 days after the end of
each Fiscal Year of the Trust, annual financial statements of the Trust,
including a balance sheet of the Trust as of the end of such Fiscal Year, and
the related statements of income or loss;
(c) The Administrative Trustees shall cause to be duly
prepared and delivered to each of the Holders of Securities, any annual United
States federal income tax information statement, required by the Code,
containing such information with regard to the Securities held by each Holder as
is required by the Code and the Treasury Regulations. Notwithstanding any right
under the Code to deliver any such statement at a later date, the Administrative
Trustees shall endeavor to deliver all such statements within 30 days after the
end of each Fiscal Year of the Trust.
(d) The Administrative Trustees shall cause to be duly
prepared and filed with the appropriate taxing authority, an annual United
States federal income tax return, on a Form 1041 or such other form required by
United States federal income tax law, and any other annual income tax returns
required to be filed by the Administrative Trustees on behalf of the Trust with
any state or local taxing authority.
Section 11.03 Banking.
The Trust shall maintain one or more bank accounts in the name
and for the sole benefit of the Trust; provided, however, that all payments of
funds in respect of the Debentures held by the Property Trustee shall be made
directly to the Property Trustee Account and no other funds of the Trust shall
be deposited in the Property Trustee Account. The sole signatories for such
accounts shall be designated by the
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Administrative Trustees; provided, however, that the Property Trustee shall
designate the signatories for the Property Trustee Account.
Section 11.04 Withholding.
The Administrative Trustees on behalf of the Trust shall
comply with all withholding requirements under United States federal, state and
local law. The Administrative Trustees on behalf of the Trust shall request, and
the Holders shall provide to the Trust, such forms or certificates as are
necessary to establish an exemption from withholding with respect to each
Holder, and any representations and forms as shall reasonably be requested by
the Administrative Trustees on behalf of the Trust to assist it in determining
the extent of, and in fulfilling, its withholding obligations. The
Administrative Trustees shall file required forms with applicable jurisdictions
and, unless an exemption from withholding is properly established by a Holder,
shall remit amounts withheld with respect to the Holder to applicable
jurisdictions. To the extent that the Trust is required to withhold and pay over
any amounts to any authority with respect to distributions or allocations to any
Holder, the amount withheld shall be deemed to be a distribution in the amount
of the withholding to the Holder. In the event of any claimed overwithholding,
Holders shall be limited to an action against the applicable jurisdiction. If
the amount required to be withheld was not withheld from actual Distributions
made, the Trust (at the written direction of one of the Administrative Trustees
of the Trust) may reduce subsequent Distributions by the amount of such
withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
Section 12.01 Amendments.
(a) This Declaration may be amended from time to time by the
Sponsor, the Property Trustee and the Administrative Trustees, without the
consent of the Holders of the Securities, (i) to cure any ambiguity, correct or
supplement any provision in the Declaration that may be inconsistent with any
other provision, or to make any other provisions with respect to ministerial
matters or questions arising under the Declaration, which shall not be
inconsistent with the other provisions of the Declaration, or (ii) to modify,
eliminate or add to any provisions of the Declaration to such extent as shall be
necessary to ensure that the Trust will not be classified for United States
federal income tax purposes as a corporation or will be classified for United
States federal income tax purposes as a grantor trust at all times that any
Securities are outstanding or to ensure that the Trust will not be required to
register as an "investment company" under the Investment Company Act; provided,
however, that in the case of clause (i), such action shall not adversely affect
in any material respect the interests of any Holder of Securities, and any such
amendments of the Declaration shall become effective when notice thereof is
given to the Holders of the Securities.
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(b) Except as provided in (c) below, this Declaration may be
amended by the Trustees and the Sponsor with (i) the consent of Holders
representing not less than a Majority in Liquidation Amount of the outstanding
Preferred Securities, and (ii) receipt by the Trustees of an opinion of counsel
to the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment will not affect the Trust's status as
a grantor trust for United States federal income tax purposes or the Trust's
exemption from status as an "investment company" under the Investment Company
Act.
(c) Without the consent of each holder of Securities, the
Declaration may not be amended to (i) change the amount or timing of any
Distribution on the Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Securities of a specified
date or (ii) restrict the right of a Holder of Securities to institute suit for
the enforcement of any such payment on or after such date.
Section 12.02 Meetings of the Holders of Securities; Action by
Written Consent.
(a) Meetings of the Holders of any class of Securities may be
called at any time by the Administrative Trustees (or as provided in the terms
of the Securities) to consider and act on any matter on which Holders of such
class of Securities are entitled to act under the terms of this Declaration, the
terms of the Securities or the rules of any stock exchange on which the
Preferred Securities are listed or admitted for trading. The Administrative
Trustees shall call a meeting of the Holders of such class if directed to do so
by the Holders of at least 25% in liquidation amount of such class of
Securities. Such direction shall be given by delivering to the Administrative
Trustees one or more requests in a writing stating that the signing Holders of
Securities wish to call a meeting and indicating the general or specific purpose
for which the meeting is to be called. Any Holders of Securities calling a
meeting shall specify in writing the Certificates held by the Holders of
Securities exercising the right to call a meeting and only those Securities
represented by the Certificates so specified shall be counted for purposes of
determining whether the required percentage set forth in the second sentence of
this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of
the Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all
the Holders of Securities having a right to vote thereat at least 7
days and not more than 60 days before the date of such meeting.
Whenever a vote, consent or approval of the Holders of Securities is
permitted or required under this Declaration or the rules of any stock
exchange on which the Preferred Securities are listed or admitted for
trading, such vote, consent or approval may be given at a meeting of
the Holders of Securities. Any action that may be taken at a meeting of
the Holders of Securities may be taken without a meeting and without
prior notice if a consent in writing setting forth the action so taken
is signed by the Holders of
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Securities owning not less than the minimum aggregate liquidation
amount of Securities that would be necessary to authorize or take such
action at a meeting at which all Holders of Securities having a right
to vote thereon were present and voting. Prompt notice of the taking of
action without a meeting shall be given to the Holders of Securities
entitled to vote who have not consented in writing. The Administrative
Trustees may specify that any written ballot submitted to the Holders
for the purpose of taking any action without a meeting shall be
returned to the Trust within the time specified by the Administrative
Trustees;
(ii) each Holder of a Security may authorize any
Person to act for it by proxy on all matters in which a Holder of
Securities is entitled to participate, including waiving notice of any
meeting, or voting or participating at a meeting. No proxy shall be
valid after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the Holder of Securities executing it. Except as otherwise
provided herein, all matters relating to the giving, voting or validity
of proxies shall be governed by the General Corporation Law of the
State of Delaware relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corporation and the Holders
of the Securities were stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Securities
shall be conducted by the Administrative Trustees or by such other
Person that the Administrative Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration,
the terms of the Securities, the Trust Indenture Act or the listing
rules of any stock exchange on which the Preferred Securities are then
listed or trading, provide otherwise, the Administrative Trustees, in
their sole discretion, shall establish all other provisions relating to
meetings of Holders of Securities, including notice of the time, place
or purpose of any meeting at which any matter is to be voted on by any
Holders of Securities, waiver of any such notice, action by consent
without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
Section 13.01 Representations and Warranties of Property
Trustee.
The Trustee that acts as initial Property Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration, at
the Closing Date and at each Optional Closing Date, if any, and each Successor
Property Trustee represents and
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warrants to the Trust and the Sponsor at the time of the Successor Property
Trustee's acceptance of its appointment as Property Trustee that:
(a) The Property Trustee is a banking corporation with trust
powers, duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, with corporate power and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, the Declaration.
(b) The execution, delivery and performance by the Property
Trustee of the Declaration has been duly authorized by all necessary corporate
action on the part of the Property Trustee. The Declaration has been duly
executed and delivered by the Property Trustee, and constitutes a legal, valid
and binding obligation of the Property Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law).
(c) The execution, delivery and performance of the Declaration
by the Property Trustee does not conflict with or constitute a breach of the
certificate of incorporation or by-laws of the Property Trustee.
(d) No consent, approval or authorization of, or registration
with or notice to, any Delaware or Federal banking authority is required for the
execution, delivery or performance by the Property Trustee, of the Declaration.
(e) The Property Trustee, pursuant to this Declaration, shall
hold legal title to, and an ownership interest on behalf of the Holders of the
Securities, in the Debentures and agrees that, except as expressly provided or
contemplated by this Declaration, it will not create, incur or assume, or suffer
to exist any mortgage, pledge, hypothecation, encumbrance, lien or other charge
or security interest upon the Debentures.
Section 13.02 Representations and Warranties of Delaware
Trustee.
The Trustee that acts as initial Delaware Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration, at
the Closing Date and at each Optional Closing Date, if any, and each Successor
Delaware Trustee represents and warrants to the Trust and the Sponsor at the
time of the Successor Property Trustee's acceptance of its appointment as
Delaware Trustee that:
(a) The Delaware Trustee is a banking corporation with trust
powers, duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, with corporate power and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, the Declaration.
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(b) The execution, delivery and performance by the Delaware
Trustee of the Declaration has been duly authorized by all necessary corporate
action on the part of the Delaware Trustee. The Declaration has been duly
executed and delivered by the Delaware Trustee, and constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law).
(c) The execution, delivery and performance of the Declaration
by the Delaware Trustee does not conflict with or constitute a breach of the
certificate of incorporation or by-laws of the Delaware Trustee.
(d) No consent, approval or authorization of, or registration
with or notice to, any Delaware or Federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee, of the Declaration.
(e) The Delaware Trustee is an entity which has its principal
place of business in the State of Delaware.
ARTICLE XIV
MISCELLANEOUS
Section 14.01 Notices.
All notices provided for in this Declaration shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Trust, in care of the Administrative
Trustees at the Trust's mailing address set forth below (or such other address
as the Trust may give notice of to the Holders of the Securities):
c/o Entercom Communications Corp.
409 City Avenue, Suite 401
Bala Cynwyd, Pennsylvania 19004
Attention: John C. Donlevie
(b) if given to the Property Trustee, at the mailing address
set forth below (or such other address as the Property Trustee may give notice
of to the Holders of the Securities):
Wilmington Trust Company
1100 North Market Street
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Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
(c) if given to the Delaware Trustee, at the mailing address
set forth below (or such other address as the Delaware Trustee may give notice
of to the Holders of the Securities):
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice to the Trust):
c/o Entercom Communications Corp.
409 City Avenue, Suite 401
Bala Cynwyd, Pennsylvania 19004
Attention: John C. Donlevie
(e) if given to any other Holder, at the address set forth on
the books and records of the Trust or the Registrar, as applicable.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
Section 14.02 Governing Law.
THIS DECLARATION AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL
BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE AND ALL RIGHTS AND REMEDIES SHALL BE
GOVERNED BY SUCH LAWS WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICT OF LAWS OF THE STATE OF DELAWARE OR ANY OTHER
JURISDICTION THAT WOULD CALL FOR THE APPLICATION OF THE LAW OF
ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE; PROVIDED,
HOWEVER, THAT THERE SHALL NOT BE APPLICABLE TO THE PARTIES
HEREUNDER OR
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THIS DECLARATION ANY PROVISION OF THE LAWS (STATUTORY OR
COMMON) OF THE STATE OF DELAWARE PERTAINING TO TRUSTS THAT
RELATED TO OR REGULATE, IN A MANNER INCONSISTENT WITH THE
TERMS HEREOF (A) THE FILING WITH ANY COURT OR GOVERNMENTAL
BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE
FEES AND CHARGES, (B) AFFIRMATIVE REQUIREMENTS TO POST BONDS
FOR TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (C)
THE NECESSITY FOR OBTAINING COURT OR OTHER GOVERNMENTAL
APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF
REAL OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO
TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (E) THE
ALLOCATION OF RECEIPTS AND EXPENDITURES TO INCOME OR
PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE
NATURE, AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR
REQUIREMENTS RELATING TO THE TITLING, STORAGE OR OTHER MANNER
OF HOLDING OR INVESTING TRUST ASSETS OR (G) THE ESTABLISHMENT
OF FIDUCIARY OR OTHER STANDARDS OF RESPONSIBILITY OR
LIMITATIONS ON THE ACTS OR POWERS OF TRUSTEES THAT ARE
INCONSISTENT WITH THE LIMITATIONS OR LIABILITIES OR
AUTHORITIES AND POWERS OF THE TRUSTEES HEREUNDER AS SET FORTH
OR REFERENCED IN THIS DECLARATION. SECTION 3540 OF TITLE 12 OF
THE DELAWARE CODE SHALL NOT APPLY TO THE TRUST.
Section 14.03 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust. The
provisions of this Declaration shall be interpreted to further this intention of
the parties.
Section 14.04 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
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Section 14.05 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is
named or referred to, the successors and assigns of such party shall be deemed
to be included, and all covenants and agreements in this Declaration by the
Sponsor and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
Section 14.06 Partial Enforceability.
If any provision of this Declaration, or the application of
such provision to any Person or circumstance, shall be held invalid, the
remainder of this Declaration, or the application of such provision to persons
or circumstances other than those to which it is held invalid, shall not be
affected thereby.
Section 14.07 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
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IN WITNESS WHEREOF, the undersigned has caused these presents
to be executed as of the day and year first above written.
______________________________________
Joseph M. Field,
as Administrative Trustee
______________________________________
David J. Field,
as Administrative Trustee
______________________________________
John C. Donlevie
as Administrative Trustee
WILMINGTON TRUST COMPANY, as
Delaware Trustee
By:___________________________________
Name:______________________________
Title:_____________________________
WILMINGTON TRUST COMPANY, as
Property Trustee
By:___________________________________
Name:______________________________
Title:_____________________________
ENTERCOM COMMUNICATIONS
CORP., as Sponsor and Debenture Issuer
By:___________________________________
Name:______________________________
Title:_____________________________
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ANNEX I
TERMS OF ___% CONVERTIBLE PREFERRED SECURITIES
TERM INCOME DEFERRABLE EQUITY SECURITIES (TIDES)(SM)
___% CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.01 of the Amended and Restated
Declaration of Trust, dated as of October __, 1999 (as amended from time to
time, the "Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities and the
Common Securities are set out below (each capitalized term used but not defined
herein has the meaning set forth in the Declaration or the Indenture (as defined
in the Declaration) or, if not defined in the Declaration or Indenture, as
defined in the Prospectus (as defined in the Declaration):
1. Designation and Number.
(a) "Preferred Securities." _____________ Preferred Securities
of the Trust with an aggregate liquidation preference with respect to the assets
of the Trust of _______________________________________ ($_____________) (or up
to ________ Preferred Securities of the Trust with an aggregate liquidation
preference of ______________ ($_____________), depending on the exercise of the
Underwriter's overallotment option), and a liquidation amount with respect to
the assets of the Trust of $50 per Preferred Security, are hereby designated for
the purposes of identification only as "__% Convertible Preferred Securities,
Term Income Deferrable Equity Securities (TIDES)" (the "Preferred Securities").
The Preferred Security Certificates evidencing the Preferred Securities shall be
substantially in the form attached hereto as Exhibit A-1, with such changes and
additions thereto or deletions therefrom as may be required by ordinary usage,
custom or practice or to conform to the rules of any stock exchange or other
organization on which the Preferred Securities are listed.
(b) "Common Securities." ___________ Common Securities of the
Trust with an aggregate liquidation amount with respect to the assets of the
Trust of ___________________________________________ Dollars ($________________)
(or up to ___________ Common Securities of the Trust with an aggregate
liquidation preference of ___________ ($__________), depending on the exercise
of the Underwriter's overallotment option), and a liquidation amount with
respect to the assets of the Trust of $50 per Common Security, are hereby
designated for the purposes of identification only as "__% Convertible Common
Securities" (the "Common Securities"). The Common Security Certificates
evidencing the Common Securities shall be substantially in the form attached
hereto as Exhibit A-2, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or practice.
2. Distributions.
(a) Distributions payable on each Security will be fixed at a
rate per annum of __% (the "Coupon Rate") of the stated liquidation amount of
$50 per Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
quarter will bear interest thereon
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compounded quarterly at the Coupon Rate (to the extent permitted by applicable
law), as described in the Declaration. The term "Distributions" as used herein
includes such quarterly distributions, additional distributions on quarterly
distributions not paid on the applicable Distribution Date, Special
Distributions and Additional Sums, as applicable. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Property Trustee and to the extent the Property Trustee has funds available
therefor. The amount of Distributions payable for any period will be computed
for any full quarterly Distribution period on the basis of a 360-day year of
twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 30-day month.
(b) Distributions on the Securities will be cumulative, will
accrue from the date of their original issuance and will be payable quarterly in
arrears, on the following dates, which dates correspond to the interest payment
dates on the Debentures: March 31, June 30, September 30 and December 31 of each
year, commencing on December 31, 1999, except as otherwise described below. The
Sponsor has the right under the Indenture to defer payments of interest by
extending the interest payment period from time to time on the Debentures for a
period not exceeding 20 consecutive quarters (each a "Deferral Period") and, as
a consequence of such deferral, Distributions will also be deferred. Despite
such deferral, quarterly Distributions will continue to accrue with interest
thereon (to the extent permitted by applicable law) at the Coupon Rate
compounded quarterly during any such Deferral Period. Prior to three Business
Days before a Regular Record Date fixed for a Payment Resumption Date (as
defined in the Indenture), the Sponsor may further extend such Deferral Period;
provided that such Deferral Period together with all such previous and further
extensions thereof may not exceed 20 consecutive quarters or extend beyond the
maturity (whether at the stated maturity or by declaration of acceleration, call
for redemption or otherwise) of the Debentures under the Indenture. Payments of
accrued Distributions will be payable to Holders as they appear on the books and
records of the Trust on the Regular Record Date for the relevant Payment
Resumption Date. Upon the termination of any Deferral Period and the payment of
all amounts then due, the Sponsor may commence a new Deferral Period, subject to
the above requirements.
(c) Distributions on the Securities will be payable to the
Holders thereof as they appear on the books and records of the Trust at the
close of business on the relevant record dates. The relevant record dates shall
be on the 15th of the month of the relevant payment dates, except as otherwise
described in this Annex I to the Declaration. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such payment in respect
of Preferred Securities being held in book-entry form through The Depository
Trust Company (the "Depositary") will be made as described under the heading
"Description of TIDES--Form, Book-Entry Procedures and Transfer" in the
Prospectus. The relevant record dates for the Common Securities shall be the
same record dates as for the Preferred Securities. Distributions payable on any
Securities that are not punctually paid on any Distribution payment date, as a
result of the
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Sponsor having failed to make a payment under the Debentures, will cease to be
payable to the Person in whose name such Securities are registered on the
relevant record date, and such defaulted Distribution will instead be payable to
the Person in whose name such Securities are registered on the special record
date or other specified date determined in accordance with the Indenture. If any
date on which Distributions are payable on the Securities is not a Business Day,
then payment of the Distribution payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay) except that, with respect to any Redemption Date,
if such Business Day is in the next succeeding calendar year, such Redemption
Date shall be the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
(d) In the event of an election by the Holder to convert its
Securities through the Conversion Agent into Class A Common Stock pursuant to
the terms of the Securities as forth in this Annex I to the Declaration, no
payment, allowance or adjustment shall be made with respect to accumulated and
unpaid Distributions on such Securities, or be required to be made; provided
that Holders of Securities at the close of business on any record date for the
payment of Distributions will be entitled to receive the Distributions payable
on such Securities on the corresponding payment date notwithstanding the
conversion of such Securities into Class A Common Stock following such record
date.
(e) In the event that there is any money or other property
held by or for the Trust that is not accounted for hereunder, such property
shall be distributed Pro Rata (as defined herein) among the Holders of the
Securities.
3. Liquidation Distribution Upon Dissolution.
In the event of any voluntary or involuntary dissolution of
the Trust, the Trust shall be liquidated by the Trustees as expeditiously as the
Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law (including,
without limitation, by paying or making reasonable provision to pay all claims
and obligations of the Trust in accordance with Section 3808(e) of the Business
Trust Act), to the Holders of the Securities a Like Amount of Debentures, unless
such distribution would not be practical as determined by the Administrative
Trustees, in which event such Holders will be entitled to receive out of the
assets of the Trust available for distribution to holders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law (including,
without limitation, by paying or making reasonable provision to pay all claims
and obligations of the Trust in accordance with Section 3808(e) of the Business
Trust Act), an amount equal to, in the case of Holders of Preferred Securities,
the aggregate liquidation amount thereof plus accrued and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Trust on the
Preferred Securities shall be paid on a Pro Rata (as defined below) basis in
accordance
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with paragraph 9. The Holder of the Common Securities will be entitled to
receive distributions upon any such liquidation Pro Rata with the Holders of the
Preferred Securities, except as provided in paragraph 10.
4. Redemption and Distribution.
(a) Upon the repayment or payment of the Debentures in whole
or in part, whether at maturity or upon redemption or otherwise (other than
following any distribution of the Debentures to the Holders), the proceeds from
such repayment or redemption (the "Proceeds") shall be simultaneously applied to
redeem, on a Pro Rata basis, a Like Amount of Securities, on the redemption
date, in an amount per Security equal to the applicable redemption price, which
redemption price will be equal to (i) the liquidation amount of each of the
Securities plus any accrued and unpaid Distributions thereon (A) in the case of
the repayment of the Debentures at stated maturity, or (B) in the case of a
redemption of the Debentures in certain limited circumstances set forth in the
Indenture upon the occurrence of a Tax Event or (ii) in the case of an Optional
Redemption on or after October 3, 2002 the Optional Redemption Price (as defined
in the Indenture), payable in cash (as applicable, the "Redemption Price").
Notwithstanding the foregoing, if the Proceeds are less than the aggregate
Redemption Price, then the Proceeds shall be applied to redeem the Securities on
a pro rata basis in accordance with paragraph 9. Holders will be given not less
than 30 (or, in the case of a redemption pursuant to subparagraph (d) below, 20)
nor more than 60 days' notice of such redemption. Upon the repayment of the
Debentures at maturity or upon any acceleration, earlier redemption or
otherwise, the proceeds from such repayment will be applied to redeem the
Securities, in whole, upon not less than 30 nor more than 60 days' notice.
(b) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Preferred Securities will be redeemed
Pro Rata and the Preferred Securities to be redeemed will be as described in
Paragraph 4(f)(ii) below.
(c) The Sponsor, as the Holder of the outstanding Common
Securities, shall have the right at any time (including, without limitation,
upon the occurrence of a Tax Event or Investment Company Act Event) to dissolve
the Trust and, after satisfaction of the creditors of the Trust, cause a Like
Amount of the Debentures to be distributed to the Holders of the Securities upon
liquidation of the Trust, provided that, other than in the case of an Investment
Company Event, the Administrative Trustees shall have received a No Recognition
Opinion (as defined below) prior to the dissolution of the Trust.
(d) If, at any time, a Tax Event shall occur and be continuing
the Sponsor shall cause the Administrative Trustees to dissolve the Trust and,
after satisfaction of creditors of the Trust (including, without limitation, by
paying or making reasonable provision to pay all claims and obligations of the
Trust in accordance with Section 3808(e) of the Business Trust Act), cause
Debentures to be distributed to the Holders of the Securities in liquidation of
the Trust within 90 days following the occurrence of such Tax Event (the "90 Day
Period"); provided, however, that such dissolution and distribution shall be
conditioned on (i) the Trustees' receipt of an opinion
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of a nationally recognized independent tax counsel (reasonably acceptable to the
Trustees) experienced in such matters (a "No Recognition Opinion"), which
opinion may rely on published revenue rulings of the Internal Revenue Service,
to the effect that the Holders of the Securities will not recognize any income,
gain or loss for United States federal income tax purposes as a result of such
liquidation and distribution of Debentures, and (ii) the Sponsor being unable to
avoid such Tax Event within the 90 Day Period by taking some ministerial action
or pursuing some other reasonable measure that, in the sole judgment of the
Sponsor, will have no adverse effect on the Trust, the Sponsor or the Holders of
the Securities and will involve no material cost ("Ministerial Action").
If (i) the Sponsor has received an opinion (a "Redemption Tax
Opinion") of a nationally recognized independent tax counsel (reasonably
acceptable to the Trustees) experienced in such matters that, as a result of a
Tax Event, there is more than an insubstantial risk that the Sponsor would be
precluded from deducting the interest on the Debentures for United States
federal income tax purposes, even after the Debentures were distributed to the
Holders of Securities upon liquidation of the Trust as described in this
paragraph 4(d), or (ii) the Trustees shall have been informed by such tax
counsel that it cannot deliver a No Recognition Opinion, the Sponsor shall have
the right, upon not less than 20 nor more than 60 days' notice, and within 90
days following the occurrence of such Tax Event, to redeem the Debentures in
whole (but not in part) for cash, for the principal amount plus accrued and
unpaid interest thereon and, following such redemption, all the Securities will
be redeemed by the Trust at the liquidation amount of $50 per Security plus
accrued and unpaid Distributions thereon; provided, however, that, if at the
time there is available to the Sponsor or the Trust the opportunity to
eliminate, within the 90 Day Period, the Tax Event by taking some Ministerial
Action, the Trust or the Sponsor will pursue such Ministerial Action in lieu of
redemption.
In lieu of the foregoing options, the Company shall also have
the option of causing the Securities to remain outstanding and pay Additional
Sums on the Debentures.
"Tax Event" means that the Property Trustee shall have
received an opinion of a nationally recognized independent tax counsel to the
Sponsor (reasonably acceptable to the Trustees) experienced in such matters (a
"Dissolution Tax Opinion") to the effect that, as a result of (a) any amendment
to, or change (including any announced prospective change (which shall not
include a proposed change), provided that a Tax Event shall not occur more than
90 days before the effective date of any such prospective change) in the laws
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority therefor or therein or (ii) any judicial
decision or official administrative pronouncement, ruling, regulatory procedure,
notice or announcement, including any notice or announcement of intent to adopt
such procedures or regulations (an "Administrative Action"), there is more than
an insubstantial risk that (a) if the Debentures are held by the Property
Trustee, (I) the Trust is, or will be within 90 days of the date of such
opinion, subject to United States federal income tax with respect to interest
accrued or received on the Debentures or subject to more than a de minimis
amount of other taxes, duties or other governmental charges as determined by
such counsel, or (II) any portion of interest payable by the Sponsor to the
Trust on the
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Debentures is not, or within 90 days of the date of such opinion will not be,
deductible by the Sponsor in whole or in part for United States federal income
tax purposes or (b) with respect to Debentures which are no longer held by the
Property Trustee, any portion of interest payable by the Sponsor on the
Debentures is not, or within 90 days of the date of such opinion will not be,
deductible by the Sponsor in whole or in part for United States federal income
tax purposes.
If an Investment Company Event (as hereinafter defined) shall
occur and be continuing, the Sponsor shall cause the Trustees to dissolve the
Trust and, after satisfaction of liabilities of the creditors of the Trust as
provided by applicable law (including, without limitation, by paying or making
reasonable provision to pay all claims and obligations of the Trust in
accordance with Section 3808(e) of the Business Trust Act), cause the Debentures
to be distributed to the Holders of the Securities in liquidation of the Trust
within 90 days following the occurrence of such Investment Company Event.
"Investment Company Event" means the occurrence of a change in
law or regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), to the effect that the Trust is or will
be considered an Investment Company which is required to be registered under the
Investment Company Act, which Change in 1940 Act Law becomes effective on or
after the date of the Prospectus.
After the date fixed for any distribution of Debentures: (i)
the Securities will no longer be deemed to be outstanding, (ii) the Depositary
or its nominee (or any successor Depositary or its nominee), as record Holder of
Preferred Securities represented by global certificates, will receive a
registered global certificate or certificates representing the Debentures to be
delivered upon such distribution and (iii) any certificates representing
Securities, except for certificates representing Preferred Securities held by
the Depositary or its nominee (or any successor Depositary or its nominee), will
be deemed to represent Debentures having an aggregate principal amount equal to
the aggregate stated liquidation amount of such Securities, with accrued and
unpaid interest equal to accrued and unpaid Distributions on such Securities
until such certificates are presented to the Sponsor or its agent for transfer
or reissuance.
(e) The Securities will not be redeemed unless all accrued and
unpaid Distributions have been paid on all Securities for all quarterly
Distribution periods terminating on or before the date of redemption.
(f) Redemption or distribution procedures.
(i) Notice of any redemption of, or notice of
distribution of Debentures in exchange for the Securities (a
"Redemption/Distribution Notice") will be given by an Administrative
Trustee on behalf of the Trust by mail to each Holder of Securities to
be redeemed or exchanged not fewer than 30 (or 20, in the case of
redemption or distribution upon the occurrence of a Tax Event) nor more
than 60 days before the date fixed for redemption or exchange thereof
which, in
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the case of a redemption, will be the date fixed for redemption of the
Debentures. For purposes of the calculation of the date of redemption
or exchange and the dates on which notices are given pursuant to this
paragraph 4(f)(i), a Redemption/Distribution Notice shall be deemed to
be given on the day such notice is first mailed by first-class mail,
postage prepaid, to Holders of Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Securities at the address
of each such Holder appearing in the books and records of the Trust. No
defect in the Redemption/Distribution Notice or in the mailing of
either thereof with respect to any Holder shall affect the validity of
the redemption or exchange proceedings with respect to any other
Holder.
(ii) In the event that fewer than all the outstanding
Securities are to be redeemed, the Securities to be redeemed shall be
redeemed Pro Rata from each Holder of Preferred Securities, it being
understood that, in respect of Preferred Securities registered in the
name of and held of record by the Depositary (or any successor
Depositary) or any nominee, the distribution of the proceeds of such
redemption will be made to each Participant (or Person on whose behalf
such nominee holds such securities) in accordance with the procedures
applied by such agency or nominee.
(iii) If Securities are to be redeemed and an
Administrative Trustee on behalf of the Trust gives a
Redemption/Distribution Notice, which notice may only be issued if the
Debentures are redeemed as set out in this paragraph 4 (which notice
will be irrevocable), then (A) with respect to Preferred Securities
held in book-entry form, by 12:00 noon, New York City time, on the
redemption date, to the extent funds are available, with respect to
Preferred Securities held in global form, the Property Trustee will
deposit irrevocably with the Depositary (or successor Depositary) funds
sufficient to pay the amount payable on redemption with respect to such
Preferred Securities and will give the Depositary irrevocable
instructions and authority to pay the amount payable on redemption to
the Holders of such Preferred Securities, and (B) with respect to
Preferred Securities issued in certificated form and Common Securities,
to the extent funds are available, the Property Trustee will
irrevocably deposit with the Paying Agent funds sufficient to pay the
amount payable on redemption to the Holders of such Securities and will
give the Paying Agent irrevocable instructions and authority to pay the
amount payable on redemption to the Holders thereof upon surrender of
their certificates. If a Redemption/Distribution Notice shall have been
given and funds deposited as required, then on the date of such
deposit, all rights of Holders of such Securities so called for
redemption will cease, except the right of the Holders of such
Securities to receive the redemption price, but without interest on
such redemption price, and such Securities will cease to be
outstanding. Neither the Administrative Trustees nor the Property
Trustee shall be required to register or cause to be registered the
transfer of any Securities that have been so called for redemption. If
any date fixed for redemption of Securities is not a Business Day, then
payment of the amount payable on such date will be
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<PAGE> 70
made on the next succeeding day that is a Business Day (without any
interest or other payment in respect of any such delay) except that, if
such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day, in each case with the
same force and effect as if made on such date fixed for redemption. If
payment of the redemption price in respect of any Securities is
improperly withheld or refused and not paid either by the Trust or by
the Sponsor as guarantor pursuant to the relevant Securities Guarantee,
Distributions on such Securities will continue to accrue at the then
applicable rate, from the original redemption date to the date of
payment, in which case the actual payment date will be considered the
date fixed for redemption for purposes of calculating the amount
payable upon redemption (other than for purposes of calculating any
premium).
(iv) Redemption/Distribution Notices shall be sent by
the Administrative Trustees on behalf of the Trust to (A) in the case
of Preferred Securities held in book-entry form, the Depositary and, in
the case of Securities held in certificated form, the Holders of such
certificates and (B) in respect of the Common Securities, the Holder
thereof.
(v) Subject to the foregoing and applicable law
(including, without limitation, United States federal securities laws),
the Sponsor or any of its subsidiaries may at any time and from time to
time purchase outstanding Preferred Securities by tender, in the open
market or by private agreement.
5. Conversion Rights.
The Holders of Securities shall have the right at any time, at
their option, to cause the Conversion Agent to convert Securities, on behalf of
the converting Holders, into shares of Class A Common Stock, par value $.01 per
share, of the Sponsor (the "Class A Common Stock") in the manner described
herein on and subject to the following terms and conditions:
(a) The Securities will be convertible at the office of the
Conversion Agent into fully paid and nonassessable shares of Class A Common
Stock pursuant to the Holder's direction to the Conversion Agent to exchange
such Securities for a portion of the Debentures theretofore held by the Trust on
the basis of one Security per $50 principal amount of Debentures, and
immediately convert such amount of Debentures into fully paid and nonassessable
shares of Class A Common Stock at an initial rate of __________ shares of Class
A Common Stock per $50 principal amount of Debentures (which is equivalent to a
conversion price of $__________ per share of Class A Common Stock, subject to
certain adjustments set forth in the Indenture).
(b) In order to convert Securities into Class A Common Stock
the Holder shall submit to the Conversion Agent at the office referred to above
an irrevocable request to convert Securities on behalf of such Holder (the
"Conversion Request"), together, if the Securities are in certificated form,
with such certificates. The Conversion
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<PAGE> 71
Request shall (i) set forth the number of Securities to be converted and the
name or names, if other than the Holder, in which the shares of Class A Common
Stock should be issued and (ii) direct the Conversion Agent (a) to exchange such
Securities for a portion of the Debentures held by the Trust (at the rate of
exchange specified in the preceding paragraph) and (b) to immediately convert
such Debentures on behalf of such Holder, into Class A Common Stock (at the
conversion rate specified in the preceding paragraph). The Conversion Agent
shall notify the Trust of the Holder's election to exchange Securities for a
portion of the Debentures held by the Trust and the Trust shall, upon receipt of
such notice, deliver to the Conversion Agent the appropriate principal amount of
Debentures for exchange in accordance with this Section. The Conversion Agent
shall thereupon notify the Sponsor of the Holder's election to convert such
Debentures into shares of Class A Common Stock. Holders of Securities at the
close of business on a Distribution record date will be entitled to receive the
Distribution payable on such Securities on the corresponding Distribution
payment date notwithstanding the conversion of such Securities following such
record date but prior to such distribution payment date. Except as provided
above, neither the Trust nor the Sponsor will make, or be required to make, any
payment, allowance or adjustment upon any conversion on account of any
accumulated and unpaid Distributions accrued on the Securities, whether or not
in arrears, (including any Additional Amounts accrued thereon) surrendered for
conversion, or on account of any accumulated and unpaid dividends on the shares
of Class A Common Stock issued upon such conversion, except to the extent that
such shares are held of record on the record date for any such distributions.
Securities shall be deemed to have been converted immediately prior to the close
of business on the day on which a Notice of Conversion relating to such
Securities is received by the Trust in accordance with the foregoing provision
(the "Conversion Date"). The Person or Persons entitled to receive the Class A
Common Stock issuable upon conversion of the Debentures shall be treated for all
purposes as the record holder or holders of such Class A Common Stock at such
time. As promptly as practicable on or after the Conversion Date, the Sponsor
shall issue and deliver at the office of the Conversion Agent a certificate or
certificates for the number of full shares of Class A Common Stock issuable upon
such conversion, together with the cash payment, if any, in lieu of any fraction
of any share to the Person or Persons entitled to receive the same, unless
otherwise directed by the Holder in the notice of conversion and the Conversion
Agent shall distribute such certificate or certificates to such Person or
Persons.
(c) Each Holder of a Security by his acceptance thereof
appoints Wilmington Trust Company "Conversion Agent" for the purpose of
effecting the conversion of Securities in accordance with this Section. In
effecting the conversion and transactions described in this Section, the
Conversion Agent shall be acting as agent of the Holders of Securities directing
it to effect such conversion transactions. The Conversion Agent is hereby
authorized (i) to exchange Securities from time to time for Debentures held by
the Trust in connection with the conversion of such Securities in accordance
with this Section and (ii) to convert all or a portion of the Debentures into
Class A Common Stock and thereupon to deliver such shares of Class A Common
Stock
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in accordance with the provisions of this Section and to deliver to the Trust a
new Debenture or Debentures for any resulting unconverted principal amount.
(d) No fractional shares of Class A Common Stock will be
issued as a result of conversion, but in lieu thereof, such fractional interest
will be paid in cash by the Sponsor to the Trust, which in turn will make such
payment to the Holder or Holders of Securities so converted.
(e) The Sponsor shall at all times reserve and keep available
out of its authorized and unissued Class A Common Stock, solely for issuance
upon the conversion of the Debentures, free from any preemptive or other similar
rights, such number of shares of Class A Common Stock as shall from time to time
be issuable upon the conversion of all the Debentures then outstanding.
Notwithstanding the foregoing, the Sponsor shall be entitled to deliver upon
conversion of Debentures, shares of Class A Common Stock reacquired and held in
the treasury of the Sponsor (in lieu of the issuance of authorized and unissued
shares of Class A Common Stock), so long as any such treasury shares are free
and clear of all liens, charges, security interests or encumbrances. Any shares
of Class A Common Stock issued upon conversion of the Debentures shall be duly
authorized, validly issued and fully paid and nonassessable. The Trust shall
deliver the shares of Class A Common Stock received upon conversion of the
Debentures to the converting Holder free and clear of all liens, charges,
security interests and encumbrances, except for United States withholding taxes.
Each of the Sponsor and the Trust shall prepare and shall use its best efforts
to obtain and keep in force such governmental or regulatory permits or other
authorizations as may be required by law, and shall comply with all applicable
requirements as to registration or qualification of the Class A Common Stock
(and all requirements to list the Class A Common Stock issuable upon conversion
of Debentures that are at the time applicable), in order to enable the Sponsor
to lawfully issue Class A Common Stock upon conversion of the Debentures and to
lawfully deliver the Class A Common Stock to each Holder upon conversion of the
Securities.
(f) The Sponsor will pay any and all taxes that may be payable
in respect of the issue or delivery of shares of Class A Common Stock on
conversion of Debentures and the delivery of the shares of Class A Common Stock
upon conversion of the Securities. The Sponsor shall not, however, be required
to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Class A Common Stock in a name other than that
in which the Securities so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Sponsor the amount of any such tax, or has established to the
satisfaction of the Sponsor that such tax has been paid.
(g) Nothing in the preceding Paragraph (f) shall limit the
requirement of the Trust to withhold taxes pursuant to the terms of the
Securities set forth in this Annex I to the Declaration or in the Declaration
itself or otherwise require the Property Trustee or the Trust to pay any amounts
on account of such withholdings.
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6. Voting Rights; Preferred Securities.
(a) Except as provided under paragraphs 6(b) and 8, in the
Business Trust Act and as otherwise required by law, the Declaration and the
Indenture, the Holders of the Preferred Securities will have no voting rights.
(b) In addition to the rights of the Holders of the Preferred
Securities with respect to the enforcement of payment of principal and interest
on the Debentures set forth herein, in the Declaration or in the Indenture, if
(i) a Debenture Event of Default occurs and is continuing or (ii) the Company
defaults under the Guarantee (each of (i) and (ii) being an "Appointment
Event"), then the Holders of the Preferred Securities, acting as a single class,
will be entitled by the vote of a Majority in Liquidation Amount of the
Preferred Securities to appoint a Special Trustee in accordance with Section
5.06(a)(ii)(B) of the Declaration. Any Holder of Preferred Securities (other
than the Sponsor, or any entity directly or indirectly controlling or controlled
by or under direct or indirect common control with the Sponsor) will be entitled
to nominate any Person to be appointed as Special Trustee. Not later than 30
days after such right to appoint a Special Trustee arises, the Trustees will
convene a meeting for the purpose of appointing a Special Trustee. If the
Trustees fail to convene such meeting within such 30-day period, the Holders of
not less than 10% in aggregate liquidation amount of the Preferred Securities
will be entitled to convene such meeting in accordance with Section 12.02 of the
Declaration. The record date for such meeting will be the close of business on
the Business Day that is one Business Day before the day on which notice of the
meeting is sent to the Holders. The provisions of the Declaration relating to
the convening and conduct of the meetings of the Holders will apply with respect
to any such meeting.
Any Special Trustee so appointed shall cease to be a Special
Trustee if the Appointment Event pursuant to which the Special Trustee was
appointed and all other Appointment Events cease to be continuing. A Special
Trustee may be removed without cause at any time by vote of the Holders of a
Majority in Liquidation Amount of the Preferred Securities at a meeting of the
Holders of the Preferred Securities or by written consent in accordance with
Section 5.06(a)(ii)(B) of the Declaration. The Holders of 10% in liquidation
amount of the Preferred Securities will be entitled to convene such a meeting in
accordance with Section 12.02 of the Declaration. The record date for such
meeting will be the close of business on the Business Day which is one Business
Day before the day on which the notice of meeting is sent to Holders.
Notwithstanding the appointment of a Special Trustee, the Sponsor shall retain
all rights under the Indenture, including the right to defer payments of
interest by extending the interest payment period on the Debentures.
Subject to the requirements set forth in this paragraph, the
Holders of a Majority in Liquidation Amount of the Preferred Securities, voting
separately as a class may, and the Trustees shall not, without obtaining the
prior approval of the Holders of a Majority in Liquidation Amount of all
outstanding Preferred Securities (i) direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee under the
Indenture, or executing any trust or power conferred upon the Property Trustee
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with respect to the Debentures, (ii) waive any past default and its consequences
that is waivable under Section 5.13 of the Indenture or otherwise, (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Debentures, where such
consent shall be required, provided, however, that, where a consent under the
Indenture would require the consent or act of the Holders of greater than a
majority of the Holders in principal amount of Debentures affected thereby (a
"Super Majority"), the Property Trustee may only give such consent or take such
action at the direction of the Holders of at least the proportion in liquidation
preference of the Preferred Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding. The
Property Trustee shall not, and none of the other Trustees shall in any event,
revoke any action previously authorized or approved by a vote of the Holders of
the Preferred Securities, except by a subsequent vote of the Holders of the
Preferred Securities. Other than with respect to directing the time, method and
place of conducting any remedy available to the Property Trustee or the
Debenture Trustee as set forth above, the Property Trustee shall not take any
action in accordance with the directions of the Holders of the Preferred
Securities under this paragraph unless the Property Trustee has obtained an
opinion of tax counsel to the effect that, as a result of such action, the Trust
will not fail to be classified as a grantor trust for United States federal
income tax purposes.
If a Declaration Event of Default has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay interest or principal on the Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption on the redemption
date), then a Holder of Preferred Securities may directly institute a proceeding
for enforcement of payment to such Holder (a "Direct Action") of the principal
of or interest on the Debentures having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such Holder on or
after the respective due date specified in the Debentures. Except as provided in
the preceding sentence, the Holders of Preferred Securities will not be able to
exercise directly any other remedy available to the Holders of the Debentures.
In connection with any Direct Action, the Debenture Issuer will be subrogated to
the rights of such Holder of Preferred Securities under the Declaration to the
extent of any payment made by the Debenture Issuer to such Holder of Preferred
Securities in such Direct Action.
Any approval or direction of Holders of Preferred Securities
may be given at a separate meeting of Holders of Preferred Securities convened
for such purpose, at a meeting of all of the Holders of Securities in the Trust
or without notice pursuant to written consent. The Administrative Trustees will
cause a notice of any meeting at which Holders of Preferred Securities are
entitled to vote, to be mailed to each Holder of record of Preferred Securities.
Each such notice will include a statement setting forth the following
information (i) the date of such meeting, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
and (iii) instructions for the delivery of proxies.
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No vote or consent of the Holders of the Preferred Securities
will be required for the Trust to redeem and cancel Preferred Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
Notwithstanding that Holders of Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Preferred Securities that are owned by the Sponsor or any Affiliate of
the Sponsor shall not be entitled to vote or consent and shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
7. Voting Rights--Common Securities.
(a) Except as provided under paragraphs 7(b), (c) and 8, in
the Business Trust Act and as otherwise required by law and the Declaration, the
Holders of the Common Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in
accordance with Article V of the Declaration, to vote to appoint, remove or
replace any Trustee, subject to the exclusive right of the Holders of the
Preferred Securities to appoint, remove or replace a Special Trustee.
(c) Subject to Section 2.06 of the Declaration and only after
the Event of Default with respect to the Preferred Securities has been cured,
waived, or otherwise eliminated and subject to the requirements of the second to
last sentence of this paragraph, the Holders of a Majority in Liquidation Amount
of the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power conferred upon the Property
Trustee under the Declaration, including (i) directing the time, method, place
of conducting any proceeding for any remedy available to the Debenture Trustee,
or exercising any trust or power conferred on the Debenture Trustee with respect
to the Debentures, (ii) waive any past default and its consequences that is
waivable under Section 5.13 of the Indenture, or (iii) exercise any right to
rescind or annul a declaration that the principal of all the Debentures shall be
due and payable, provided that where a consent or action under the Indenture
would require the consent or act of the Holders of greater than a majority in
principal amount of Debentures affected thereby (a "Super Majority"), the
Property Trustee may only give such consent or take such action at the direction
of the Holders of at least the proportion in liquidation amount of the Common
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding. Pursuant to this paragraph 7(c),
the Property Trustee shall not revoke any action previously authorized or
approved by a vote of the Holders of the Preferred Securities, except by a
subsequent vote of the Holders of the Preferred Securities. Other than with
respect to directing the time, method and place of conducting any remedy
available to the Property Trustee or the Debenture Trustee as set forth above,
the Property Trustee shall not take any action in accordance with the directions
of the Holders of the Common Securities under this paragraph unless the Property
Trustee has obtained an opinion of tax counsel to the effect that, as a result
of
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such action the Trust will not fail to be classified as a grantor trust for
United States federal income tax purposes. If the Property Trustee fails to
enforce its rights, as holder of the Debentures, under the Indenture, any Holder
of Common Securities may, to the fullest extent permitted by law and after a
period of 30 days has elapsed from such Holder's written request to the Property
Trustee to enforce such rights, institute a legal proceeding directly against
the Sponsor, to enforce the Property Trustee's rights, as holder of the
Debentures, under the Indenture, without first instituting any legal proceeding
against the Property Trustee or any other Person.
Any approval or direction of Holders of Common Securities may
be given at a separate meeting of Holders of Common Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
without notice pursuant to written consent. The Administrative Trustees will
cause a notice of any meeting at which Holders of Common Securities are entitled
to vote, to be mailed to each Holder of record of Common Securities. Each such
notice will include a statement setting forth (i) the date of such meeting, (ii)
a description of any resolution proposed for adoption at such meeting on which
such Holders are entitled to vote and (iii) instructions for the delivery of
proxies.
No vote or consent of the Holders of the Common Securities
will be required for the Trust to redeem and cancel Common Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
8. Amendments to Declaration and Indenture.
(a) In addition to any requirements under Section 12.01 of the
Declaration, if any proposed amendment to the Declaration provides for, or the
Administrative Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or rights of the Securities, whether by
way of amendment to the Declaration or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust, other than as described in Section 8.01
of the Declaration, then the Holders of outstanding Securities will be entitled
to vote on such amendment or proposal (but not on any other amendment or
proposal) and such amendment or proposal shall not be effective except with the
approval of the Holders of at least a Majority in Liquidation Amount of the
Securities, voting together as a single class, provided, however, that, the
rights of Holders of Preferred Securities under Article V of the Declaration to
appoint, remove or replace a Special Trustee shall not be amended without the
consent of each Holder of Preferred Securities; and provided, further, that if
any amendment or proposal referred to in clause (i) above would adversely affect
only the Preferred Securities or only the Common Securities, then only the
affected class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a Majority in Liquidation Amount of such class of Securities.
(b) In the event the consent of the Property Trustee as the
holder of the Debentures is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Debentures, the
Property Trustee shall request the
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<PAGE> 77
direction of the Holders of the Securities with respect to such amendment,
modification or termination and shall vote with respect to such amendment,
modification or termination as directed by at least the same proportion in
aggregate stated liquidation preference of the Securities; provided, however,
that the Property Trustee shall not take any action in accordance with the
directions of the Holders of the Securities under this paragraph 8(b) unless the
Property Trustee has obtained an opinion of tax counsel to the effect that for
the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such action.
9. Pro Rata.
A reference in these terms of the Securities to any payment,
Distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
of Securities according to the aggregate liquidation amount of the Securities
held by the relevant Holder in relation to the aggregate liquidation amount of
all Securities outstanding unless, on any Distribution Date or redemption date
an Event of Default under the Declaration has occurred and is continuing, in
which case no payment of any Distribution on, or amount payable upon redemption
of, any Common Security, and no other payment on account of the redemption,
liquidation or other acquisition of Common Securities, shall be made unless
payment in full in cash of all accumulated and unpaid Distributions on all
outstanding Preferred Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the amount payable upon redemption
of the Preferred Securities, the full amount of such amount in respect of all
outstanding Preferred Securities shall have been made or provided for, and all
funds available to the Property Trustee shall first be applied to the payment in
full in cash of all Distributions on, or the amount payable upon redemption of
Preferred Securities then due and payable.
10. Ranking.
The Preferred Securities rank pari passu and payment thereon
shall be made Pro Rata with the Common Securities except that, where an Event of
Default occurs and is continuing under the Indenture in respect of the
Debentures held by the Property Trustee, the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights to payment of the
Holders of the Preferred Securities.
11. Acceptance of Securities Guarantees and Indenture.
Each Holder of Preferred Securities and Common Securities, by
the acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee and the Common Securities Guarantee, respectively, including the
subordination provisions therein and to the provisions of the Indenture which
are incorporated by reference herein and which include, among other things,
provisions relating to certain rights of the Holders of the Preferred Securities
all as set forth therein.
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12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive or
similar rights to subscribe for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the
Preferred Securities Guarantee or the Common Securities Guarantee (as may be
appropriate), and the Indenture to a Holder without charge on written request to
the Sponsor at its principal place of business.
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EXHIBIT A-1
FORM OF PREFERRED SECURITY
[FORM OF FACE OF SECURITY]
[Include if Preferred Security is in global form and the
Depository Trust Company is the Depository--
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.,
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
[Include if Preferred Security is in global form--
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO
A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS
OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN THE DECLARATION REFERRED TO BELOW.]
Certificate Number
Number of Preferred Securities
CUSIP NO. 29363P 10 4
Preferred Securities of
Entercom Communications Capital Trust
A-1-1
<PAGE> 80
__% Convertible Preferred Securities
Term Income Deferrable Equity Securities (TIDES)(SM)*
(liquidation amount $50 per Convertible Preferred Security)
Entercom Communications Capital Trust, a statutory business
trust created under the laws of the State of Delaware (the "Trust"), hereby
certifies that__________________________________________________________
(the "Holder") is the registered owner of preferred securities of the Trust
representing undivided beneficial interests in the assets of the Trust
designated the ___% Convertible Preferred Securities, Term Income Deferrable
Equity Securities (TIDES)(SM)* (liquidation amount $50 per Convertible Preferred
Security) (the "Preferred Securities"). Subject to the terms of the Declaration
(as defined below), the Preferred Securities are transferable on the books and
records of the Trust, in person or by a duly authorized attorney, upon surrender
of this certificate duly endorsed and in proper form for transfer. The
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Preferred Securities represented hereby are issued and shall
in all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of October __, 1999, as the same may
be amended from time to time (the "Declaration"), including the designation of
the terms of the Preferred Securities as set forth in Annex I to the
Declaration. Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Preferred Securities Guarantee to the extent provided therein. The Sponsor
will provide a copy of the Declaration, the Preferred Securities Guarantee and
the Indenture to a Holder without charge upon written request to the Trust at
its principal place of business.
Reference is hereby made to select provisions of the Preferred
Securities set forth on the reverse hereof, which select provisions shall for
all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Preferred
Securities as evidence of indirect beneficial ownership in the Debentures.
Unless the Property Trustee's Certificate of Authentication
hereon has been properly executed, these Preferred Securities shall not be
entitled to any benefit under the Declaration or be valid or obligatory for any
purpose.
- -------------------------
* The terms Term Income Deferrable Equity Securities (TIDES)(SM) and TIDES (SM)
are registered servicemarks of Credit Suisse First Boston Corporation.
A-1-2
<PAGE> 81
IN WITNESS WHEREOF, the Trust has executed this certificate
this ___ day of _________, ____.
Entercom Communications Capital Trust
By:__________________________________
Name:
Title: Administrative Trustee
A-1-3
<PAGE> 82
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in the
within-mentioned Declaration.
Dated:
WILMINGTON TRUST COMPANY,
as Property Trustee
By:_____________________________
Authorized Signature
A-1-4
<PAGE> 83
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Security will be fixed at a
rate per annum of __% (the "Coupon Rate") of the stated liquidation amount of
$50 per Preferred Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one quarter will bear interest thereon compounded quarterly at the Coupon
Rate (to the extent permitted by applicable law). The term "Distributions" as
used herein includes such quarterly distributions, additional distributions on
quarterly distributions not paid on the applicable Distribution Date, Special
Distributions and Additional Sums, as applicable. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Property Trustee and to the extent the Property Trustee has funds available
therefor. The amount of Distributions payable for any period will be computed
for any full quarterly Distribution period on the basis of a 360-day year of
twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 30-day month.
Except as otherwise described below, Distributions on the Preferred
Securities will be cumulative, will accrue from the date of their original
issuance and will be payable quarterly in arrears, on March 31, June 30,
September 30 and December 31 of each year, commencing on December 31, 1999 to
Holders of record at the close of business on the 15th of the month next
preceding the applicable payment date, which payment dates shall correspond to
the interest payment dates (each an "Interest Payment Date") on the Debentures.
The Debenture Issuer has the right under the Indenture to defer payments of
interest by extending the interest payment period from time to time on the
Debentures for a period not exceeding 20 consecutive quarters (each a "Deferral
Period") and, as a consequence of such deferral, Distributions will also be
deferred. Despite such deferral, quarterly Distributions will continue to accrue
with interest thereon (to the extent permitted by applicable law) at the Coupon
Rate compounded quarterly during any such Deferral Period. Prior to the
termination of any such Deferral Period, the Debenture Issuer may further extend
such Deferral Period; provided that such Deferral Period together with all such
previous and further deferrals thereof may not exceed 20 consecutive quarters or
extend beyond the maturity (whether at the stated maturity or by declaration of
acceleration, call for redemption or otherwise) of the Debentures under the
Indenture. Payments of accrued Distributions will be payable on an Interest
Payment Date elected by the Company to Holders as they appear on the books and
records of the Trust on the record date fixed for such Interest Payment Date.
Upon the termination of any Deferral Period and the payment of all amounts then
due, the Debenture Issuer may commence a new Deferral Period, subject to the
above requirements.
The Preferred Securities shall be redeemable as provided in the
Declaration.
The Preferred Securities shall be convertible into shares of Class A
Common Stock, through (i) the exchange of Preferred Securities for a portion of
the
A-1-5
<PAGE> 84
Debentures and (ii) the immediate conversion of such Debentures into Class A
Common Stock, in the manner and according to the terms set forth in the
Declaration.
A-1-6
<PAGE> 85
CONVERSION REQUEST
To: Wilmington Trust Company
as Property Trustee of
Entercom Communications Capital Trust
The undersigned owner of these Preferred Securities hereby
irrevocably exercises the option to convert these Preferred Securities, or the
portion below designated, into Class A Common Stock of Entercom Communications
Corp. (the "Class A Common Stock") in accordance with the terms of the Amended
and Restated Declaration of Trust (the "Declaration"), dated as of October __,
1999, by Joseph M. Field, David J. Field and John C. Donlevie, as Administrative
Trustees, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust
Company, as Property Trustee, Entercom Communications Corp., as Sponsor, and by
the Holders, from time to time, of undivided beneficial interests in the Trust
to be issued pursuant to the Declaration. Pursuant to the aforementioned
exercise of the option to convert these Preferred Securities, the undersigned
hereby directs the Conversion Agent (as that term is defined in the Declaration)
to (i) exchange such Preferred Securities for a portion of the Debentures (as
that term is defined in the Declaration) held by the Trust (at the rate of
exchange specified in the terms of the Preferred Securities set forth as Annex I
to the Declaration) and (ii) immediately convert such Debentures on behalf of
the undersigned, into Class A Common Stock (at the conversion rate specified in
the terms of the Preferred Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that
the shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Date:
in whole |___| in part |___|
Number of Preferred Securities to be converted: ___________________
A-1-7
<PAGE> 86
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Class A Common Stock are to be
issued, along with the address or addresses of such person or persons:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
___________________________________
Signature (for conversion only)
Please Print or Typewrite Name and Address, Including Zip Code, and Social
Security or Other Identifying Number:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
___________________________________
Signature Guarantee:*
________
* (Signature must be guaranteed by an "eligible guarantor institution" that is,
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A-1-8
<PAGE> 87
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Security to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
agent to transfer this Preferred Security on the books of the Trust. The agent
may substitute another to act for him or her.
Date:
Signature:__________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
Signature Guarantee:*
________
* (Signature must be guaranteed by an "eligible guarantor institution" that is,
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A-1-9
<PAGE> 88
EXHIBIT A-2
FORM OF COMMON SECURITY
[FORM OF FACE OF SECURITY]
Certificate Number Number of Common Securities
Common Securities
of
Entercom Communications Capital Trust
__% Convertible Common Securities
(liquidation amount $50 per Convertible Common Security)
Entercom Communications Trust, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that
________________________________________________________________________________
(the "Holder") is the registered owner of common securities of the Trust
representing undivided beneficial interests in the assets of the Trust
designated the __% Convertible Common Securities (liquidation amount $50 per
Convertible Common Security) (the "Common Securities"). Subject to the terms of
the Declaration (as defined below), the Common Securities are transferable on
the books and records of the Trust, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for
transfer. The designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Common Securities represented hereby are
issued and shall in all respects be subject to the provisions of the Amended and
Restated Declaration of Trust of the Trust dated as of October __, 1999, as the
same may be amended from time to time (the "Declaration"), including the
designation of the terms of the Common Securities as set forth in Annex I to the
Declaration. Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Common Securities Guarantee to the extent provided therein. The Sponsor will
provide a copy of the Declaration, the Common Securities Guarantee and the
Indenture to a Holder without charge upon written request to the Sponsor at its
principal place of business.
Reference is hereby made to select provisions of the Common
Securities set forth on the reverse hereof, which select provisions shall for
all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat for United States federal
income tax purposes the Debentures as indebtedness and the Common Securities as
evidence of indirect beneficial ownership in the Debentures.
A-2-1
<PAGE> 89
IN WITNESS WHEREOF, the Trust has executed this certificate this ___
day of _________, ____.
Entercom Communications Capital Trust
By:______________________________
Name:
Title: Administrative Trustee
A-2-2
<PAGE> 90
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a
rate per annum of __% (the "Coupon Rate") of the stated liquidation amount of
$50 per Common Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one quarter will bear interest thereon compounded quarterly at the Coupon
Rate (to the extent permitted by applicable law). The term "Distributions" as
used herein includes quarterly distributions, additional distributions on
quarterly distributions not paid on the applicable Distribution Date, Special
Distributions and Additional Sums, as applicable. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Property Trustee and to the extent the Property Trustee has funds available
therefor. The amount of Distributions payable for any period will be computed
for any full quarterly Distribution period on the basis of a 360-day year of
twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 30-day month.
Except as otherwise described below, Distributions on the Common
Securities will be cumulative, will accrue from the date of their original
issuance and will be payable quarterly in arrears, on March 31, June 30,
September 30 and December 31 of each year, commencing on December 31, 1999 to
Holders of record one (1) day prior to such payment dates, which payment dates
shall correspond to the interest payment dates (each, an "Interest Payment
Date") on the Debentures. The Debenture Issuer has the right under the Indenture
to defer payments of interest by extending the interest payment period from time
to time on the Debentures for a period not exceeding 20 consecutive quarters
(each a "Deferral Period") and, as a consequence of such deferral, Distributions
will also be deferred. Despite such deferral, quarterly Distributions will
continue to accrue with interest thereon (to the extent permitted by applicable
law) at the Coupon Rate compounded quarterly during any such Deferral Period.
Prior to the termination of any such Deferral Period, the Debenture Issuer may
further extend such Deferral Period; provided that such Deferral Period together
with all such previous and further deferrals thereof may not exceed 20
consecutive quarters or extend beyond the maturity (whether at the stated
maturity or by declaration of acceleration, call for redemption or otherwise) of
the Debentures under the Indenture. Payments of accrued Distributions will be
payable on an Interest Payment Date elected by the Company to Holders as they
appear on the books and records of the Trust on the record date fixed for such
Interest Payment Date. Upon the termination of any Deferral Period and the
payment of all amounts then due, the Debenture Issuer may commence a new
Deferral Period, subject to the above requirements.
The Common Securities shall be redeemable as provided in the
Declaration.
A-2-3
<PAGE> 91
The Common Securities shall be convertible into shares of Class A
Common Stock, through (i) the exchange of Common Securities for a portion of the
Debentures and (ii) the immediate conversion of such Debentures into Class A
Common Stock, in the manner and according to the terms set forth in the
Declaration.
A-2-4
<PAGE> 92
CONVERSION REQUEST
To: Wilmington Trust Company,
as Property Trustee of
Entercom Communications Capital Trust
The undersigned owner of these Common Securities hereby irrevocably
exercises the option to convert these Common Securities, or the portion below
designated, into Class A Common Stock of Entercom Communications Corp. (the
"Class A Common Stock") in accordance with the terms of the Amended and Restated
Declaration of Trust (the "Declaration"), dated as of October ___, 1999, by
Joseph M. Field, David J. Field and John C. Donlevie, as Administrative
Trustees, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust
Company, as Property Trustee, Entercom Communications Corp., as Sponsor, and by
the Holders, from time to time, of undivided beneficial interests in the Trust
to be issued pursuant to the Declaration. Pursuant to the aforementioned
exercise of the option to convert these Common Securities, the undersigned
hereby directs the Conversion Agent (as that term is defined in the Declaration)
to (i) exchange such Common Securities for a portion of the Debentures (as that
term is defined in the Declaration) held by the Trust (at the rate of exchange
specified in the terms of the Common Securities set forth as Annex I to the
Declaration) and (ii) immediately convert such Debentures on behalf of the
undersigned, into Class A Common Stock (at the conversion rate specified in the
terms of the Common Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that
the shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Date:
in whole _________in part_________
Number of Common Securities to be converted: _____________________
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Class A Common Stock are to be
issued, along with the address or addresses of such person or persons
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
A-2-5
<PAGE> 93
________________________________________________________________________________
Signature (for conversion only)
Please Print or Typewrite Name and Address, Including Zip Code, and Social
Security or Other Identifying Number
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Signature Guarantee:*______
___________________________
________
* (Signature must be guaranteed by an "eligible guarantor institution" that is,
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A-2-6
<PAGE> 94
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Common Security Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
agent to transfer this Common Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
Signature:____________________________________________________
(Sign exactly as your name appears on the other side of this
Common Security Certificate)
Signature Guarantee:*_________________________________________
________
* (Signature must be guaranteed by an "eligible guarantor institution" that is,
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
A-2-7
<PAGE> 1
EXHIBIT 4.03
- --------------------------------------------------------------------------------
ENTERCOM COMMUNICATIONS CORP.
TO
WILMINGTON TRUST COMPANY
TRUSTEE
-----------------------
INDENTURE
-----------------------
DATED AS OF OCTOBER __, 1999
$
------------
CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2014
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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----
<S> <C>
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.............................2
Section 1.01 Definitions..................................................................2
Section 1.02 Compliance Certificates and Opinions........................................12
Section 1.03 Form of Documents Delivered to Trustee......................................13
Section 1.04 Acts of Holders; Record Dates...............................................13
Section 1.05 Notices, etc., to Trustee and the Company...................................15
Section 1.06 Notice to Holders; Waiver...................................................15
Section 1.07 Conflict with Trust Indenture Act...........................................16
Section 1.08 Effect of Headings and Table of Contents....................................16
Section 1.09 Successors and Assigns......................................................16
Section 1.10 Separability Clause.........................................................16
Section 1.11 Benefits of Indenture.......................................................16
Section 1.12 Governing Law...............................................................16
Section 1.13 Legal Holidays..............................................................16
ARTICLE II SECURITY FORMS.....................................................................17
Section 2.01 Forms Generally.............................................................17
Section 2.02 Initial Issuance to Property Trustee........................................17
Section 2.03 Additional Provisions Required in Global Security...........................17
Section 2.04 Issuance of Global Securities to Holders....................................18
ARTICLE III THE SECURITIES.....................................................................18
Section 3.01 Title and Terms.............................................................18
Section 3.02 Denominations...............................................................20
Section 3.03 Execution, Authentication, Delivery and Dating..............................20
Section 3.04 Temporary Securities........................................................20
Section 3.05 Global Securities...........................................................21
Section 3.06 Registration, Transfer and Exchange Generally; Certain
Transfers and Exchanges...................................................22
Section 3.07 Mutilated, Destroyed, Lost and Stolen Securities............................24
Section 3.08 Payment of Interest; Interest Rights Preserved..............................25
Section 3.09 Persons Deemed Owners.......................................................26
Section 3.10 Cancellation................................................................27
Section 3.11 Right of Set Off............................................................27
Section 3.12 CUSIP Numbers...............................................................27
Section 3.13 Extension of Interest Payment Period; Notice of Extension...................27
Section 3.14 Paying Agent, Security Registrar and Conversion Agent.......................28
ARTICLE IV SATISFACTION AND DISCHARGE.........................................................28
Section 4.01 Satisfaction and Discharge of Indenture.....................................28
Section 4.02 Application of Trust Money..................................................30
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE V REMEDIES...........................................................................30
Section 5.01 Events of Default...........................................................30
Section 5.02 Acceleration of Maturity; Rescission and Annulment..........................31
Section 5.03 Collection of Indebtedness and Suits for Enforcement by Trustee.............32
Section 5.04 Trustee May File Proofs of Claim............................................33
Section 5.05 Trustee May Enforce Claims Without Possession of Securities.................33
Section 5.06 Application of Money Collected..............................................33
Section 5.07 Limitation on Suits.........................................................34
Section 5.08 Unconditional Right of Holders to Receive Principal and
Interest and to Convert.....................................................35
Section 5.09 Restoration of Rights and Remedies..........................................35
Section 5.10 Rights and Remedies Cumulative..............................................35
Section 5.11 Delay or Omission not Waiver................................................35
Section 5.12 Control by Holders..........................................................35
Section 5.13 Waiver of Past Defaults.....................................................36
Section 5.14 Undertaking for Costs.......................................................36
Section 5.15 Waiver of Stay or Extension Laws............................................36
Section 5.16 Enforcement by Holders of Preferred Securities..............................37
ARTICLE VI THE TRUSTEE........................................................................37
Section 6.01 Certain Duties and Responsibilities.........................................37
Section 6.02 Notice of Defaults..........................................................38
Section 6.03 Certain Rights of Trustee...................................................38
Section 6.04 Not Responsible for Recitals or Issuance of Securities......................39
Section 6.05 May Hold Securities.........................................................39
Section 6.06 Money Held in Trust.........................................................39
Section 6.07 Compensation and Reimbursement..............................................39
Section 6.08 Disqualification; Conflicting Interests.....................................40
Section 6.09 Corporate Trustee Required; Eligibility.....................................40
Section 6.10 Resignation and Removal; Appointment of Successor...........................41
Section 6.11 Acceptance of Appointment by Successor......................................42
Section 6.12 Merger, Conversion, Consolidation or Succession to Business.................42
Section 6.13 Preferential Collection of Claims Against Company...........................42
Section 6.14 Co-trustees and Separate Trustees...........................................43
ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY..................................44
Section 7.01 Company to Furnish Trustee Names and Addresses of Holders...................44
Section 7.02 Preservation of Information; Communications to Holders......................44
Section 7.03 Reports by Trustee..........................................................45
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
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<S> <C>
Section 7.04 Reports by Company..........................................................45
Section 7.05 Tax Reporting...............................................................45
ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE...............................45
Section 8.01 Company May Consolidate, etc., only on Certain Terms........................45
Section 8.02 Successor Substituted.......................................................46
ARTICLE IX SUPPLEMENTAL INDENTURES............................................................47
Section 9.01 Supplemental Indentures Without Consent of Holders..........................47
Section 9.02 Supplemental Indentures with Consent of Holders.............................47
Section 9.03 Execution of Supplemental Indentures........................................49
Section 9.04 Effect of Supplemental Indentures...........................................49
Section 9.05 Conformity with Trust Indenture Act.........................................49
Section 9.06 Reference in Securities to Supplemental Indentures..........................49
ARTICLE X COVENANTS; REPRESENTATIONS AND WARRANTIES..........................................50
Section 10.01 Payment of Principal and Interest...........................................50
Section 10.02 Maintenance of Office or Agency.............................................50
Section 10.03 Money for Security Payments to be Held in Trust.............................50
Section 10.04 Statement by Officers as to Default.........................................51
Section 10.05 Limitation on Dividends; Transactions with Affiliates;
Covenants as to the Trust...................................................51
Section 10.06 Payment of Expenses of the Trust............................................52
Section 10.07 Prospectus Amendment or Supplement..........................................53
ARTICLE XI REDEMPTION OF SECURITIES...........................................................53
Section 11.01 Optional Redemption.........................................................53
Section 11.02 Tax Event Redemption........................................................54
Section 11.03 Selection by Trustee of Securities to be Redeemed...........................54
Section 11.04 Notice of Redemption........................................................55
Section 11.05 Deposit of Redemption Price.................................................56
Section 11.06 Securities Payable on Redemption Date.......................................56
Section 11.07 Securities Redeemed in Part.................................................56
ARTICLE XII SUBORDINATION OF SECURITIES........................................................57
Section 12.01 Agreement to Subordinate....................................................57
Section 12.02 Default on Secured Senior Debt..............................................57
Section 12.03 Liquidation; Dissolution; Bankruptcy........................................58
Section 12.04 Subrogation.................................................................59
Section 12.05 Trustee to Effectuate Subordination.........................................60
Section 12.06 Notice by the Company.......................................................60
Section 12.07 Rights of the Trustee; Holders of Secured Senior Debt.......................61
Section 12.08 Subordination May not be Impaired...........................................61
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
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<S> <C>
ARTICLE XIII CONVERSION OF SECURITIES...........................................................62
Section 13.01 Conversion Rights...........................................................62
Section 13.02 Conversion Procedures.......................................................62
Section 13.03 Conversion Price Adjustments................................................64
Section 13.04 Reclassification, Consolidation, Merger or Sale of Assets...................69
Section 13.05 Notice of Adjustments of Conversion Price...................................70
Section 13.06 Prior Notice of Certain Events..............................................70
Section 13.07 Adjustments in case of Fundamental Changes..................................71
Section 13.08 Dividend or Interest Reinvestment Plans.....................................74
Section 13.09 Certain Additional Rights...................................................74
Section 13.10 Trustee not Responsible for Determining Conversion Price or Adjustments.....75
ARTICLE XIV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS...................75
Section 14.01 No Recourse.................................................................75
EXHIBIT A FORM OF SECURITY...........................................................................A-1
</TABLE>
iv
<PAGE> 6
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH
318 OF THE TRUST INDENTURE ACT OF 1939:
<TABLE>
<CAPTION>
TRUST INDENTURE ACT INDENTURE
SECTION SECTION
------- -------
<S> <C> <C>
Section 310 (a) (1)............................................................ 6.09
(a) (2)............................................................ 6.09
(a) (3)............................................................ Not Applicable
(a) (4)............................................................ Not Applicable
(b)................................................................ 6.08, 6.10
Section 311 (a)................................................................ 6.13
(b)................................................................ 6.13
Section 312 (a)................................................................ 7.01, 7.02(a)
(b)................................................................ 7.02(b)
(c)................................................................ 7.02(c)
Section 313 (a)................................................................ 7.03(a)
(a) (4)............................................................ 7.03(a)
(b)................................................................ 7.03(a)
(c)................................................................ 7.03(a)
(d)................................................................ 7.03(b)
Section 314 (a)................................................................ 7.04
(b)................................................................ Not Applicable
(c) (1)............................................................ 1.02
(c) (2)............................................................ 1.02
(c) (3)............................................................ Not Applicable
(d)................................................................ Not Applicable
(e)................................................................ 1.02
Section 315 (a)................................................................ 6.01, 6.03
(b)................................................................ 6.02
(c)................................................................ 6.01
(d)................................................................ 6.01
(e)................................................................ 5.14
Section 316 (a) (1) (A)........................................................ 5.02, 5.12
(a) (1) (B)........................................................ 5.13
(a) (2)............................................................ Not Applicable
(b)................................................................ 5.08
(c)................................................................ 1.04(c)
Section 317 (a) (1)............................................................ 5.03
(a) (2)............................................................ 5.04
(b)................................................................ 1.003
Section 318 (a)................................................................ 1.07
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
v
<PAGE> 7
INDENTURE, dated as of October __, 1999, between Entercom
Communications Corp., a corporation duly organized and existing under the laws
of the State of Pennsylvania (herein called the "Company"), and Wilmington Trust
Company, a Delaware banking corporation, as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
WHEREAS Entercom Communications Capital Trust, a Delaware
business trust (the "Trust"), formed under the Amended and Restated Declaration
of Trust among the Company, as Sponsor, Wilmington Trust Company, as property
trustee (the "Property Trustee"), and Wilmington Trust Company, as Delaware
trustee (the "Delaware Trustee"), and Joseph M. Field, David J. Field and John
C. Donlevie, as trustees (together with the Property Trustee and the Delaware
Trustee, the "Issuer Trustees"), dated as of October __, 1999, (the
"Declaration"), pursuant to the Underwriting Agreement (the "Underwriting
Agreement") dated September __, 1999, among the Company, the Trust and the
Underwriters named therein, will issue and sell up to 3,000,000 of its ____%
Convertible Preferred Securities, Term Income Deferrable Equity Securities
(TIDES)SM ("Preferred Securities") (or up to 3,450,000 of its Preferred
Securities to the extent the over-allotment option is exercised in full) with a
liquidation amount of $50 per Preferred Security, having an aggregate
liquidation amount with respect to the assets of the Trust of up to $150,000,000
(or up to $172,500,000 to the extent the over-allotment option is exercised in
full);
WHEREAS the trustees of the Trust, on behalf of the Trust,
will execute and deliver to the Company Common Securities evidencing an
ownership interest in the Trust, registered in the name of the Company, in an
aggregate amount equal to approximately three percent of the capitalization of
the Trust, equivalent to up to 92,800 ____% Common Securities (the "Common
Securities" and, together with the Preferred Securities, the "Trust Securities")
(or up to 106,720 ___% Common Securities to the extent the over-allotment option
is exercised in full), with a liquidation amount of $50 per Common Security,
having an aggregate liquidation amount with respect to the assets of the Trust
of up to $4,640,000 (or up to $5,336,000 to the extent the over-allotment option
is exercised in full);
WHEREAS the Trust will use the proceeds from the sale of the
Preferred Securities and the Common Securities to purchase from the Company the
Convertible Subordinated Debentures Due 2014 (the "Securities") in an aggregate
principal amount of up to $150,000,000 (or up to $172,500,000 to the extent the
over-allotment option is exercised in full);
WHEREAS the Company is guaranteeing the payment of
distributions on the Trust Securities and payment of the Redemption Price (as
defined herein) and payments on liquidation with respect to the Trust
Securities, to the extent provided in the Common Securities Guarantee Agreement,
dated October __, 1999, delivered by the Company, and the Preferred Securities
Guarantee Agreement, dated October __, 1999, between the Company and Wilmington
Trust Company, as Guarantee Trustee, for the
<PAGE> 8
benefit of the holders of the Trust Securities from time to time (together, the
"Guarantee");
WHEREAS the Company has duly authorized the creation of an
issue of the Securities of substantially the tenor and amount hereinafter set
forth and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture;
WHEREAS, so long as the Trust is a Holder of Securities and
any Preferred Securities are outstanding, the Declaration provides that the
holders of Preferred Securities may cause the Conversion Agent (as defined
herein) to (i) exchange such Preferred Securities for Securities held by the
Trust and (ii) immediately convert such Securities into Common Stock (as defined
herein); and
WHEREAS all things necessary to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders (as defined herein) thereof, it is mutually
agreed, for the equal and proportionate benefit of all Holders of the
Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION
Section 1.01 Definitions. For all purposes of this Indenture,
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles; and
(4) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
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<PAGE> 9
"Act," when used with respect to any Holder, has the meaning
specified in Section 1.04.
"Additional Payments" means Compounded Interest and Additional
Sums, if any.
"Additional Sums" has the meaning specified in Section 3.01.
"Adjusted Reference Market Price" has the meaning specified in
Section 13.07(a)(i).
"Adjusted Relevant Price" has the meaning specified in Section
13.07(a)(i).
"Administrative Action" has the meaning specified in the
definition of Tax Event in this Section 1.01.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"Agent Member" means any member of, or participant in, the
Depositary.
"Applicable Conversion Price" has the meaning specified in
Section 13.01.
"Applicable Conversion Ratio" has the meaning specified in
Section 13.01.
"Applicable Rate" means __%, the rate at which the Securities
accrue interest and the corresponding Trust Securities accrue distributions.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
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<PAGE> 10
"Business Day" means any day other than a Saturday or a
Sunday, or a day on which banking institutions in New York, New York or
Wilmington, Delaware are authorized or required by law or executive order to
remain closed, or a day on which the corporate trust office of the Property
Trustee or the Trustee is closed for business.
"Class A Common Stock" has the meaning specified in Section
13.01.
"Closing Price" has the meaning specified in Section 13.07(b).
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created, or, if at any time after the execution
of this instrument such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.
"Common Securities" has the meaning specified in the Second
Recital to this instrument.
"Common Stock" includes any stock of any class of the Company
which has no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which is not subject to redemption by the Company. However,
subject to the provisions of Article XIII, shares issuable on conversion of
Securities shall include only shares of the class designated as Class A Common
Stock of the Company at the date of this instrument or shares of any class or
classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company; provided,
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable on conversion shall be substantially
in the proportion which the total number of shares of such class resulting from
all such reclassifications bears to the total number of shares of all such
classes resulting from all such reclassifications.
"Common Stock Fundamental Change" has the meaning specified in
Section 13.07(b).
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the Board, its
Vice Chairman of the Board, its President or a Vice President, and by its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
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<PAGE> 11
"Company Transaction" has the meaning specified in Section
13.04.
"Compounded Interest" has the meaning specified in Section
3.13.
"Conversion Agent" means the Person appointed to act on behalf
of the holders of Preferred Securities in effecting the conversion of Preferred
Securities as and in the manner set forth in the Declaration and Section 13.02
hereof.
"Conversion Date" has the meaning specified in Section 13.02.
"Corporate Trust Office" means the principal office of the
Trustee in Wilmington, Delaware, at which at any particular time its corporate
trust business shall be administered and which at the date of this Indenture is
1100 North Market Street, Wilmington, Delaware 19890-0001.
"Declaration" has the meaning specified in the Recitals to
this instrument.
"Debt" means (i) the principal of and premium and interest, if
any, on indebtedness for money borrowed, (ii) purchase money and similar
obligations, (iii) obligations under capital leases, (iv) guarantees,
assumptions or purchase commitments relating to, or other transactions as a
result of which the Company is responsible for the payment of, such indebtedness
of others, (v) renewals, extensions and refunding of any such indebtedness, (vi)
interest or obligations in respect of any such indebtedness accruing after the
commencement of any insolvency or bankruptcy proceedings and (vii) obligations
associated with derivative products such as interest rate and currency exchange
contracts, foreign exchange contracts, commodity contracts and similar
arrangements.
"Defaulted Interest" has the meaning specified in Section
3.08.
"Deferral Period" has the meaning specified in Section 3.13.
"Deferral Notice" has the meaning specified in Section 3.13.
"Delaware Trustee" has the meaning given it in the first
recital of this instrument.
"Depositary" means The Depository Trust Company, or any
successor thereto.
"Designated Secured Senior Debt" means (i) any obligation
under the Senior Credit Agreement and (2) any other Secured Senior Debt the
principal amount of which is $10.0 million or more and that has been designated
by the Company as "Designated Secured Senior Debt."
"Dissolution Tax Opinion" has the meaning specified in the
definition of Tax Event in this Section 1.01.
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<PAGE> 12
"Entitlement Date" has the meaning specified in Section
13.07(b).
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Expiration Date" has the meaning specified in Section
1.04(d).
"Expiration Time" has the meaning specified in Section
13.03(vi).
"Fundamental Change" has the meaning specified in Section
13.07(b).
"Global Security" means a Security issued in the form
prescribed in Section 2.03, issued to the Depositary or its nominee, and
registered in the name of the Depositary or its nominee.
"Guarantee" has the meaning specified in the Fourth Recital to
this instrument.
"Holder" means a Person in whose name a Security is registered
in the Security Register.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Conversion Price" has the meaning specified in
Section 13.01.
"Initial Conversion Ratio" has the meaning specified in
Section 13.01.
"Interest Payment Date" has the meaning specified in Section
3.01.
"Issuer Trustees" has the meaning specified in the First
Recital of this Indenture.
"Maturity," when used with respect to any Security, means the
date on which the principal of such Security becomes due and payable as therein
or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"90 Day Period" has the meaning specified in Section 11.02.
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<PAGE> 13
"NNM" means the National Market System of the National
Association of Securities Dealers, Inc., or any successor national automated
interdealer quotation system.
"Non-Stock Fundamental Change" has the meaning specified in
Section 13.07(b).
"No Recognition Opinion" means an opinion of a nationally
recognized independent tax counsel (reasonably acceptable to the Issuer
Trustees) experienced in such matters, which opinion may rely on published
revenue rulings of the Internal Revenue Service, to the effect that the Holders
of the Securities will not recognize any income, gain or loss for United States
Federal income tax purposes as a result of the liquidation of the Trust and the
distribution of the Securities to the holders of the Preferred Securities.
"Notice Of Conversion" means the notice to be given by a
Holder of Preferred Securities to the Conversion Agent directing the Conversion
Agent to exchange such Preferred Securities for Securities and to convert such
Securities into Common Stock on behalf of such holder.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the Vice Chairman of the Board, the President or a Vice
President, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Company, and delivered to the Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 10.04 shall
be the principal executive, financial or accounting officer of the Company.
"Opinion Of Counsel" means a written opinion of counsel, who
may be counsel for the Company, and who shall be reasonably acceptable to the
Trustee.
"Optional Redemption" has the meaning specified in Section
11.01.
"Optional Redemption Price" has the meaning specified in
Section 11.01.
"Optional Redemption Ratio" has the meaning specified in
Section 13.07(b).
"Outstanding," when used with respect to Securities, means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except: (i) Securities theretofore canceled by
the Trustee or delivered to the Trustee for cancellation; (ii) Securities for
whose payment or redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company shall act as
its own Paying Agent) for the Holders of such Securities; provided, that if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee has
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<PAGE> 14
been made; and (iii) Securities which have been paid pursuant to Section 3.08,
converted into Common Stock pursuant to Section 13.01, or in exchange for or in
lieu of which other Securities have been authenticated and delivered pursuant to
this Indenture, other than any such Securities in respect of which there shall
have been presented to the Trustee proof satisfactory to it that such Securities
are held by a bona fide purchaser in whose hands such Securities are valid
obligations of the Company.
"Paying Agent" means any Person authorized by the Company to
pay the principal of or interest on any Securities on behalf of the Company.
"Payment Resumption Date" has the meaning set forth in Section
3.13.
"Person" means any individual, corporation, estate company,
partnership, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.07 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Securities" has the meaning specified in the first
recital to this instrument.
"Property Trustee" has the meaning specified in the Recitals
to this instrument.
"Purchased Shares" has the meaning specified in Section
13.03(vi).
"Purchaser Stock Price" has the meaning specified in Section
13.07(b).
"Redemption Date," when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Redemption Tax Opinion" means an opinion of a nationally
recognized independent tax counsel (reasonably acceptable to the Issuer
Trustees) experienced in such matters that, as a result of a Tax Event, there is
more than an insubstantial risk that the Company would be precluded from
deducting the interest on the Securities for United States Federal income tax
purposes, even after the Trust was liquidated and the Securities were
distributed to the holders of the Preferred Securities.
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<PAGE> 15
"Reference Date" has the meaning specified in Section
13.03(iv).
"Reference Market Price" has the meaning specified in Section
13.07(b).
"Regular Record Date" has the meaning specified in Section
3.01.
"Relevant Price" has the meaning specified in Section
13.07(b).
"Responsible Officer," when used with respect to the Trustee,
means the chairman or any Vice-chairman of the board of directors, the chairman
or any Vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any Vice president, any
assistant vice president, the treasurer, any assistant treasurer, any trust
officer or assistant trust officer, the controller or any assistant controller
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Secured Senior Debt" means Senior Debt that is secured by any
lien, pledge, charge, encumbrance, mortgage, deed of trust, hypothecation,
assignment or security interest with respect to or assets having a fair market
value at the time of the grant thereof (in the judgment of the Board of
Directors, the Chief Financial Officer or other responsible officer of the
Company) equal to not less than the amount of such Senior Debt, including,
without limitation, Secured Senior Debt under the Senior Credit Agreement.
"Securities" has the meaning specified in the Third Recital to
this instrument.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, or any successor legislation.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 3.06.
"Senior Credit Agreement" means (A) that certain Loan
Agreement, dated February 13, 1998, as amended on October 8, 1998 and as further
amended on July 20, 1999, by and among Entercom, as the borrower, Key Corporate
Capital Inc., as administrative agent and document agent, Bank of America
National Trust & Savings Association, as syndication agent, and the financial
institutions listed therein, as amended, including, without limitation, any
related notes, letters of credit, guarantees, collateral documents, instruments
and agreements executed in connection therewith, and, in each case, as amended,
amended and restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time, and (B) any other debt or credit facility or
commercial paper facility providing for revolving credit loans, term loans,
accounts receivable financing (including through the sale of accounts receivable
to such lenders or to special purpose entities formed to borrow from such
lenders against such
9
<PAGE> 16
accounts receivable), letters of credit or other form of financing, in each
case, as amended, restated, supplemented, extended, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time, including, in the
case of clause (A) and clause (B), any such amendment, restatement, supplement,
extension, modification, renewal, refunding, replacement or refinancing, (1)
extending or shortening the maturity of any obligation incurred thereunder or
contemplated thereby, (2) adding or deleting borrowers or guarantors thereunder
and (3) increasing the amount of credit extended, or available to be extended,
thereunder.
"Senior Debt" means (i) all of the Company's obligations under
the Senior Credit Agreement, including whether as an obligor, guarantor or
otherwise, without limitation, principal (including, without limitation,
reimbursement obligations in respect of letters of credit (whether or not drawn)
and obligations to cash collateralize letters of credit), premium (if any),
interest (including, without limitation, interest accruing subsequent to the
filing of, or which would have accrued but for the filing of, a petition for
bankruptcy, whether or not the interest is an allowable claim in the bankruptcy
proceeding), fees, indemnifications, expenses and other amounts payable pursuant
thereto; (ii) the principal of, and premium and interest, if any, on all
indebtedness of the Company for money borrowed, whether outstanding on the date
of execution of the Indenture or thereafter created, assumed or incurred, (iii)
all obligations to make payment pursuant to the terms of financial instruments,
such as (a) securities contracts and foreign currency exchange contracts, (b)
derivative instruments, such as swap agreements (including interest rate and
foreign exchange rate swap agreements), cap agreements, floor agreements, collar
agreements, interest rate agreements, foreign exchange agreements, options,
commodity futures contracts and commodity options contracts, and (c) similar
financial instruments; except, in the case of (i) and (ii) above, such
indebtedness and obligations that are expressly stated to rank junior in right
of payment to, or pari passu in right of payment with, the Securities, (iv)
indebtedness or obligations of others of the kind described in (i), (ii) and
(iii) above for the payment of which the Company is responsible or liable as
guarantor or otherwise, and (v) any deferrals, renewals or extensions of any
Senior Debt that is secured, in whole or in part by the Company's assets;
provided, however that Senior Debt shall not be deemed to include (a) any Debt
of the Company which, when incurred and without respect to any election under
Section 1111(b) of the United States Bankruptcy Code of 1978, was without
recourse to the Company, (b) trade accounts payable in the ordinary course of
business, (c) any Debt of the Company to any of its subsidiaries or (d) Debt to
any employee of the Company.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 3.08.
"Stated Maturity," when used with respect to any Security or
any installment of principal thereof or interest thereon, means the date
specified in such Security as the fixed date on which the principal, together
with any accrued and unpaid interest (including Compounded Interest), of such
Security or such installment of interest is due and payable.
10
<PAGE> 17
"Subsidiary" of any Person means (i) a corporation more than
50% of the outstanding Voting Stock of which is owned, directly or indirectly,
by such Person or by one or more other Subsidiaries of such Person or by such
Person and one or more Subsidiaries thereof or (ii) any other Person (other than
a corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.
"Tax Event" means the receipt by the Property Trustee of an
opinion of a nationally recognized independent tax counsel to the Company
experienced in such matters (a "Dissolution Tax Opinion") to the effect that, as
a result of (a) any amendment to or change (including any announced prospective
change (which shall not include a proposed change), provided that a Tax Event
shall not occur more than 90 days before the effective date of any such
prospective change) in the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein or
(b) any judicial decision or official administrative pronouncement, ruling,
regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"Administrative Action"), there is more than an insubstantial risk that (x) if
the Securities are held by the Property Trustee, (i) the Trust is, or will be
within 90 days of the date of such opinion, subject to United States Federal
income tax with respect to interest accrued or received on the Securities or
subject to more than a de minimis amount of other taxes, duties or other
governmental charges as determined by such counsel, or (ii) any portion of
interest payable by the Company to the Trust on the Securities is not, or within
90 days of the date of such opinion will not be, deductible by the Company in
whole or in part for United States Federal income tax purposes or (y) with
respect to Securities which are no longer held by the Property Trustee, any
portion of interest payable by the Company on the Securities is not, or within
90 days of the date of such opinion will not be, deductible by the Company in
whole or in part for United States Federal income tax purposes.
"Trading Day" has the meaning specified in Section 13.07(b).
"Trust" has the meaning specified in the first recital to this
instrument.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
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<PAGE> 18
"Trust Securities" has the meaning specified in the second
recital to this instrument.
"Underwriters," with respect to the Preferred Securities,
means Credit Suisse First Boston Corporation, Banc of America Securities LLC and
Deutsche Bank Securities Inc.
"Underwriting Agreement" has the meaning specified in the
Recitals to this instruments.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Voting Stock" of any Person means capital stock of such
Person which ordinarily has voting power for the election of directors (or
Persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
Section 1.02 Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee such
certificates and opinions as may be required under the Trust Indenture Act or
reasonably requested by the Trustee in connection with such application or
request. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
applicable requirements of the Trust Indenture Act and any other applicable
requirement set forth in this Indenture. Every certificate or opinion with
respect to compliance with a condition or covenant provided for in this
Indenture shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made or caused to be made such examination or investigation as
is necessary to enable him to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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<PAGE> 19
Section 1.03 Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Section 1.04 Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to be given
to or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
is or are delivered to the Trustee and, where it is hereby expressly required,
to the Company. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.01) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of
any such instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the Person executing the same,
may also be
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<PAGE> 20
proved in any other manner which the Trustee or the Company, as the case may be,
deems sufficient.
(c) The Company may, in the circumstances permitted by
the Trust Indenture Act, fix any day as the record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action, or to vote on any action, authorized or permitted to be given or taken
by Holders. If not set by the Company prior to the first solicitation of a
Holder made by any Person in respect of any such action, or, in the case of any
such vote, prior to such vote, the record date for any such action or vote shall
be the 30th day (or, if later, the date of the most recent list of Holders
required to be provided pursuant to Section 7.01) prior to such first
solicitation or vote, as the case may be. With regard to any record date, only
the Holders on such date (or their duly designated proxies) shall be entitled to
give or take, or vote on, the relevant action.
(d) The Trustee may set any day as a record date for the
purpose of determining the Holders of Outstanding Securities entitled to join in
the giving or making of (i) any notice of default, (ii) any declaration of
acceleration referred to in Section 5.02, (iii) any request to institute
proceedings referred to in Section 5.07(2) or (iv) any direction referred to in
Section 5.12. If any record date is set pursuant to this paragraph, the Holders
of Outstanding Securities on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the date set by
the Trustee by which any such determination shall be made (the "Expiration
Date") by Holders of the requisite principal amount of Outstanding Securities on
such record date. Nothing in this paragraph shall be construed to prevent the
Trustee from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be canceled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite principal amount of
Outstanding Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Trustee, at the Company's
expense, shall cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Company in writing and to
each Holder of Securities in the manner set forth in Section 1.06.
(e) The ownership of Securities shall be proved by the
Security Register.
(f) Any request, demand, authorization, direction,
notice, consent, waiver or other Act of the Holder of any Security shall bind
every future Holder of the same Security and the Holder of every Security issued
upon the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
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(g) Without limiting the foregoing, a Holder entitled
hereunder to give or take any such action with regard to any particular Security
may do so with regard to all or any part of the principal amount of such
Security or by one or more duly appointed agents each of which who may do so
pursuant to such appointment with regard to all or any different part of such
principal amount.
Section 1.05 Notices, etc., to Trustee and the Company. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to:
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to:
Entercom Communications Corp.
409 City Avenue, Suite 401
Bala Cynwyd, Pennsylvania 19004
Attention: John C. Donlevie, Esq.
Section 1.06 Notice to Holders; Waiver. Where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at such
Holder's address as it appears in the Security Register, not later than the
latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Any notice when mailed to a Holder in the
aforesaid manner shall be conclusively deemed to have been received by such
Holder whether or not actually received by such Holder. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
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In case, by reason of the suspension of regular mail service
or by reason of any other cause, it shall be impracticable to give such notice
by mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose hereunder.
Section 1.07 Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with a provision of the Trust
Indenture Act that is required under such Act to be a part of and govern this
Indenture, the required provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act that may
be so modified or excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or to be excluded, as the case may be.
Section 1.08 Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 1.09 Successors and Assigns. All covenants and
agreements in this Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.
Section 1.10 Separability Clause. In case any provision in
this Indenture or in the Securities shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
Section 1.11 Benefits of Indenture. Nothing in this Indenture
or in the Securities, express or implied, shall give to any Person, other than
the parties hereto and their successors hereunder, the holders of Secured Senior
Debt, the holders of Preferred Securities (to the extent provided herein) and
the Holders of Securities, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
Section 1.12 Governing Law. THIS INDENTURE AND THE SECURITIES
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 1.13 Legal Holidays. In any case where any Interest
Payment Date, Redemption Date or Stated Maturity of any Security or the last
date on which a Holder has the right to convert his Securities shall not be a
Business Day, then (notwithstanding any other provision of this Indenture or of
the Securities) payment of interest or principal or conversion of the Securities
need not be made on such date, but may be made on the next succeeding Business
Day (except that, with respect to any Redemption Date, if such Business Day is
in the next succeeding calendar year, such Redemption Date shall be the
immediately preceding Business Day) with the same force and effect as if made on
the Interest Payment Date or Redemption Date, or at the Stated Maturity or on
such last day for conversion, provided that no interest shall accrue for the
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period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be.
ARTICLE II
SECURITY FORMS
Section 2.01 Forms Generally. The Securities and the Trustee's
certificates of authentication shall be substantially in the form of Exhibit A
which is hereby incorporated in and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). The Company shall furnish any such legend not contained in
Exhibit A to the Trustee in writing. Each Security shall be dated the date of
its authentication. The terms and provisions of the Securities set forth in
Exhibit A are part of the terms of this Indenture and to the extent applicable,
the Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
The definitive Securities shall be typewritten or printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
Section 2.02 Initial Issuance to Property Trustee. The
Securities initially issued to the Property Trustee of the Trust shall be in the
form of one or more individual certificates in definitive, fully registered
form.
Section 2.03 Additional Provisions Required in Global
Security. Any Global Security issued hereunder shall, in addition to the
provisions incorporated in Section 2.01, bear a legend in substantially the
following form:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A
NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR
SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF
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THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE
REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER
STREET, NEW YORK, NEW YORK) TO ENTERCOM COMMUNICATIONS CORP.
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN."
Section 2.04 Issuance of Global Securities to Holders. The
Securities may be represented by one or more Global Securities registered in the
name of the Depositary or its nominee if, and only if, the Securities are
distributed to the Holders of the Trust Securities. Until such time, the
Securities shall be registered in the name of and held by the Property Trustee.
Securities distributed to Holders of book-entry Trust Securities shall be
distributed in the form of one or more Global Securities registered in the name
of the Depositary or its nominee, and deposited with the Security Registrar, as
custodian for such Depositary, or held by such Depositary for credit by the
Depositary to the respective accounts of the beneficial owners of the Securities
represented thereby (or such other accounts as they may direct). Securities
distributed to Holders of Trust Securities other than book-entry Trust
Securities shall not be issued in the form of a Global Security or any other
form intended to facilitate book-entry trading in beneficial interests in such
Securities.
ARTICLE III
THE SECURITIES
Section 3.01 Title and Terms. The aggregate principal amount
of Securities that may be authenticated and delivered under this Indenture is
limited to the sum of $_______________ except for Securities authenticated and
delivered upon
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registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 3.04, 3.05, 3.06, 3.07, 9.06, 11.07 or 13.02.
The Securities shall be known and designated as the "___%
Convertible Subordinated Debentures Due 2014" of the Company. Their Stated
Maturity shall be September 30, 2014, and they shall bear interest at the
Applicable Rate, from October __, 1999, or from the most recent Interest Payment
Date (as defined below) to which interest has been paid or duly provided for, as
the case may be, payable quarterly (subject to deferral as set forth herein), in
arrears, on March 31, June 30, September 30 and December 31 (each an "Interest
Payment Date") of each year, commencing December 31, 1999, until the principal
thereof is paid or made available for payment, and they shall be paid to the
Person in whose name the Security is registered at the close of business on the
regular record date for such interest installment, which shall be the close of
business on the fifteenth day of the month of the applicable Interest Payment
Date (the "Regular Record Date"). Interest will compound quarterly and will
accrue at the Applicable Rate on any interest installment in arrears for more
than one quarter or during an extension of an interest payment period as set
forth in Section 3.13 hereof.
The amount of interest payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. Except as provided in
the following sentence, the amount of interest payable for any period shorter
than a full quarterly period for which interest is computed, will be computed on
the basis of the actual number of days elapsed in such a 30-day month. In the
event that any date on which interest is payable on the Securities is not a
Business Day, then payment of interest payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), with the same force and effect as if made
on such date.
If at any time while the Property Trustee is the Holder of all
the Securities, the Trust is required to pay any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States, or any other taxing authority, as a result of a Tax Event,
then, in any case, the Company will pay as additional amounts ("Additional
Sums") on the Securities held by the Property Trustee, such additional amounts
on the Securities as shall be required so that the distributions payable by the
Trust in respect of the Preferred Securities and the Common Securities will not
be reduced as a result of any of those Additional Sums.
The principal of and interest on the Securities shall be
payable at the office or agency of the Company in Bala Cynwyd, Pennsylvania
maintained for such purpose and at any other office or agency maintained by the
Company for such purpose in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at any time that the Property Trustee is
not the sole holder of the Securities, payment of interest may, at the option of
the Company, be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register or by wire
transfer.
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The Securities shall be redeemable as provided in Article XI
hereof.
The Securities shall be subordinated in right of payment to
Secured Senior Debt as provided in Article XII hereof.
The Securities shall be convertible as provided in Article
XIII hereof.
Section 3.02 Denominations. The Securities shall be issuable
only in registered form without coupons and only in denominations of $1,000 and
integral multiples thereof.
Section 3.03 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman of the
Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall manually authenticate and make available for
delivery such Securities as in this Indenture provided and not otherwise.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein executed by the Trustee by manual signature, and such certificate upon
any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.
Section 3.04 Temporary Securities. Pending the preparation of
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and make available for delivery, temporary Securities
which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution of such
Securities.
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If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section
10.02, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Company shall execute and the Trustee shall
authenticate and make available for delivery in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged the temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities.
Section 3.05 Global Securities.
(a) Each Global Security issued under this Indenture
shall be registered in the name of the Depositary designated by the Company for
such Global Security or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this
Indenture, no Global Security may be exchanged in whole or in part for
Securities registered, and no transfer of a Global Security in whole or in part
may be registered, in the name of any Person other than the Depositary for such
Global Security or a nominee thereof unless (i) such Depositary advises the
Trustee in writing that such Depositary is no longer willing or able to continue
as a Depositary with respect to such Global Security, and no successor
depositary shall have been appointed, or if at any time the Depositary ceases to
be a "clearing agency" registered under the Exchange Act, at a time when the
Depositary is required to be so registered to act as such depositary, (ii) the
Company in its sole discretion determines that such Global Security shall be so
exchangeable or (iii) there shall have occurred and be continuing an Event of
Default.
(c) If any Global Security is to be exchanged for other
Securities or canceled in whole, it shall be surrendered by or on behalf of the
Depositary or its nominee to the Security Registrar for exchange or cancellation
as provided in this Article III. If any Global Security is to be exchanged for
other Securities or canceled in part, or if another Security is to be exchanged
in whole or in part for a beneficial interest in any Global Security, then
either (i) such Global Security shall be so surrendered for exchange or
cancellation as provided in this Article III or (ii) the principal amount
thereof shall be reduced or increased by an amount equal to the portion thereof
to be so exchanged or canceled, or equal to the principal amount of such other
Security to be so exchanged for a beneficial interest therein, as the case may
be, by means of an appropriate adjustment made on the records of the Security
Registrar, whereupon the Trustee shall instruct the Depositary or its authorized
representative to make a corresponding adjustment to its records. Upon any such
surrender or adjustment of a Global Security by the Depositary, accompanied by
registration instructions, the Trustee shall, subject to Section 3.05(b) and as
otherwise provided in this Article III, authenticate
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and make available for delivery any Securities issuable in exchange for such
Global Security (or any portion thereof) in accordance with the instructions of
the Depositary. The Trustee shall not be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be fully protected in
relying on, such instructions.
(d) The Depositary or its nominee, as registered owner
of a Global Security, shall be the Holder of such Global Security for all
purposes under this Indenture and the Securities, and owners of beneficial
interests in a Global Security shall hold such interest pursuant to the rules
and procedures of the Depositary. Accordingly, any such owner's beneficial
interests in a Global Security shall be shown only on, and the transfer of such
interest shall be effected only through, records maintained by the Depositary or
its nominee or its Agent Members. Neither the Trustee nor the Security Registrar
shall have any liability in respect of any transfers effected by the Depositary.
(e) The rights of the beneficial interests in a Global
Security shall be exercised only through the Depositary and shall be limited to
those established by law and agreements between such owners and the Depositary
and/or its Agent Members.
Section 3.06 Registration, Transfer and Exchange Generally;
Certain Transfers and Exchanges.
(a) The Company shall cause to be kept at the Corporate
Trust Office of the Trustee a register (the register maintained in such office
and in any other office or agency designated pursuant to Section 10.02 being
herein sometimes collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and of transfers of Securities. The
Trustee is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at
an office or agency of the Company designated pursuant to Section 10.02 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount and bearing such restrictive legends as may be required by this
Indenture.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like aggregate
principal amount and bearing such restrictive legends as may be required by this
Indenture, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery, the Securities which the Holder making the exchange is entitled to
receive.
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All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 3.04, 3.05, 9.06, 11.09 or 13.01 not
involving any transfer.
Neither the Company nor the Trustee shall be required (i) in
the case of a partial redemption of the Securities, to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption under Section 11.04 and ending at the close
of business on the day of such mailing or (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
(b) Transfer and exchange procedures and restrictions.
Upon any distribution of the Securities to the holders of the Trust Securities
in accordance with the Declaration, the Company and the Trustee shall enter into
a supplemental indenture pursuant to Section 9.01(6) to provide for transfer
procedures and restrictions with respect to the Securities substantially similar
to those contained in the Declaration to the extent applicable in the
circumstances existing at the time of such distribution. Notwithstanding any
other provision of the Indenture, transfers and exchanges of Securities and
beneficial interests in a Global Security of the kinds specified in this Section
3.06(b) shall be made only in accordance with this Section 3.06(b).
(1) Non-Global Security to Global Security. If the
Holder of a Security (other than a Global Security) wishes at any time
to transfer all or any portion of such Security to a Person who wishes
to take delivery thereof in the form of a beneficial interest in a
Global Security, such transfer may be effected only in accordance with
the provisions of this clause (b)(1) and subject to the rules and
procedures of the Depositary. Upon receipt by the Security Registrar of
(A) such Security as provided in Section 3.06(a) and instructions
satisfactory to the Security Registrar directing that a beneficial
interest in the Global Security in a specified principal amount not
greater than the principal amount of such Security be credited to a
specified Agent Member's account and (B) a Securities Certificate duly
executed by such Holder or such Holder's attorney duly
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authorized in writing, then the Security Registrar shall cancel such
Security (and issue a new Security in respect of the untransferred
portion thereof) as provided in Section 3.06(a) and increase the
aggregate principal amount of the Global Security by the specified
principal amount as provided in Section 3.05(c).
(2) Non-Global Security to Non-Global Security. A
Security that is not a Global Security may be transferred, in whole or
in part, to a Person who takes delivery in the form of another Security
that is not a Global Security as provided in Section 3.06(a).
(3) Exchanges between Global Security and Non-Global
Security. A beneficial interest in a Global Security may be exchanged
for a Security that is not a Global Security as provided in Section
3.05.
Section 3.07 Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and make available for delivery in
exchange therefor a new Security of like tenor and principal amount and bearing
a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
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The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.08 Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Securities (or
their respective Predecessor Securities) are registered at the close of
business on a Special Record Date (as defined below) for the payment of
such Defaulted Interest, which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of
the proposed payment (which date shall be sufficiently in advance of
such notice to permit the Trustee timely to take the actions
contemplated by this Section 3.08), and at the same time the Company
shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this clause provided. Thereupon the
Trustee shall fix a special record date (the "Special Record Date") for
the payment of such Defaulted Interest which shall be not more than 15
days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder at his address as
it appears in the Security Register, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Securities (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
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(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and, if so listed, upon such notice as may be required by such
exchange (or by the Trustee if the Securities are not listed), if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee provided that any such payment will be made
in coin or currency of the United States of America which at the time
of payment is a legal tender for payment of public and private debt.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue interest (including in each such case
Compounded Interest), which were carried by such other Security.
In the case of any Security which is converted after any
Regular Record Date and on or prior to the next succeeding Interest Payment Date
interest whose Stated Maturity is on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on such Regular Record Date. Except as
otherwise expressly provided in the immediately preceding sentence, in the case
of any Security that is converted prior to any Regular Record Date, interest
whose Stated Maturity is after the date of conversion of such Security shall not
be payable, and the Company shall not make nor be required to make any other
payment, adjustment or allowance with respect to accrued but unpaid interest
(including Additional Payments) on the Securities being converted, which shall
be deemed to be paid in full.
Section 3.09 Persons Deemed Owners. The Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
any Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and (subject to Section 3.08) interest on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary. No holder of any
beneficial interest in any Global Security held on its behalf by a Depositary
shall have any rights under this Indenture with respect to such Global Security,
and such Depositary may be treated by the Company, the Trustee and any agent of
the Company or the Trustee as the owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company or the Trustee from giving effect to any written certification, proxy,
or other authorization furnished by a Depositary or impair, as between the
Depositary and such holders of beneficial interests, the operation of customary
practices governing the exercise of the rights of the Depositary (or its
nominee) as Holder of any Security.
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Section 3.10 Cancellation. All Securities surrendered for
payment, redemption, registration of transfer or exchange or conversion shall,
if surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for cancellation any Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Securities so delivered shall be promptly canceled by the Trustee. No Securities
shall be authenticated in lieu of or in exchange for any Securities canceled as
provided in this Section, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee shall be disposed of as directed by a
Company Order; provided, however, that the Trustee shall not be required to
destroy the certificates representing such canceled Securities.
Section 3.11 Right of Set Off. Notwithstanding anything to the
contrary in this Indenture, the Company shall have the right to set off any
payment it is otherwise required to make hereunder to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee.
Section 3.12 CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use), and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
Section 3.13 Extension of Interest Payment Period; Notice of
Extension.
(a) So long as no Event of Default has occurred and is
continuing, the Company shall have the right, at any time during the term of
this Security, from time to time to defer payments of interest by extending for
successive periods not exceeding 20 consecutive quarters for each such period (a
"Deferral Period"); provided that no Deferral Period may extend beyond September
30, 2014. To the extent permitted by applicable law, interest, the payment of
which has been deferred because of the extension of the interest payment period
pursuant to this Section 3.13, will bear interest thereon at the Applicable Rate
compounded quarterly for each quarter of the Deferral Period ("Compounded
Interest"). On the applicable Payment Resumption Date, the Company shall pay all
interest then accrued and unpaid on the Securities, including any Compounded
Interest that shall be payable to the Holders of the Securities in whose names
the Securities are registered in the Security Register on the Regular Record
Date fixed for such Payment Resumption Date. A Deferral Period shall terminate
upon the payment by the Company of all interest then accrued and unpaid on the
Securities (together with interest thereon accrued at an annual rate equal to
the Applicable Rate, compounded quarterly, to the extent permitted by applicable
law). Before the termination of any Deferral Period, the Company may further
extend such period as provided in paragraph (b) of this Section 3.13, provided
that such period together with all such further
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extensions thereof shall not exceed 20 consecutive quarters or extend beyond the
Stated Maturity of the Securities. Upon the termination of any Deferral Period,
and subject to the foregoing requirements, the Company may elect to begin a new
Deferral Period. No interest shall be due and payable during a Deferral Period
except on the Payment Resumption Date as determined pursuant to paragraph (b) of
this Section 3.13. There is no limitation on the number of times that the
Company may elect to begin a Deferral Period.
(b) The Company shall give the Holder of the Security
and the Trustee written notice (a "Deferral Notice") of its selection of a
Deferral Period at least ten days prior to the record date for any distributions
that would have been payable on the Trust Securities except for the decision to
begin or extend a Deferral Period. On or prior to the Regular Record Date
immediately preceding the Interest Payment Date on which the Company elects to
pay all interest then accrued and unpaid on the Securities, including Compound
Interest (the "Payment Resumption Date"), the Company shall give the Holder of
the Security and the Trustee written notice that the Deferral Period will end on
such Payment Resumption Date. Notwithstanding the provision of such notice, the
Company may elect to further extend the Deferral Period, subject to the
limitations set forth in Section 3.13(a), by providing the Holder of the
Security and the Trustee with a new Deferral Notice not less than three Business
Days prior to the Regular Record Date immediately preceding the previously
scheduled Payment Resumption Date. The Company may elect to pay all interest
then accrued and unpaid on the Securities, including Compound Interest, on an
Interest Payment Date prior to its most recently established Payment Resumption
Date provided that the Company gives the Holder of the Security and the Trustee
a new Deferral Notice setting forth the revised Payment Resumption Date at least
three Business Days prior to the Regular Record Date for such revised Payment
Resumption Date.
(c) The quarter in which any Deferral Notice is given
pursuant to paragraph (b) hereof shall be counted as one of the 20 quarters
permitted in the maximum Deferral Period permitted under paragraph (a) hereof.
Section 3.14 Paying Agent, Security Registrar and Conversion
Agent. The Trustee will initially act as Paying Agent, Security Registrar and
Conversion Agent. The Company may change any Paying Agent, Security Registrar,
co-registrar or Conversion Agent without prior notice. The Company or any of its
Affiliates may act in any such capacity.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01 Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect (except as to any surviving rights
of conversion, registration of transfer or exchange of Securities herein
expressly provided for), and the
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Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 3.06 and (ii) Securities for whose
payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as
provided in Section 10.03) have been delivered to the Trustee
for cancellation; or
(B) all such Securities not theretofore
delivered to the Trustee for cancellation
1) have become due and payable, or
2) will become due and payable at their
Stated Maturity within one year, or
3) are to be called for redemption within
one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee in
the name, and at the expense, of the Company
and the Company, in the case of (1), (2) or (3) above,
has deposited or caused to be deposited with the Trustee as trust funds
in trust for the purpose an amount sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal and interest (including
Compounded Interest) to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated Maturity
or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other
sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07 and, if money shall
have been deposited with
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the Trustee pursuant to subclause (B) of clause (1) of this Section, the
obligations of the Trustee under Section 4.02 and the last paragraph of Section
10.03 shall survive.
Section 4.02 Application of Trust Money. Subject to the
provisions of the last paragraph of Section 10.03, all money deposited with the
Trustee pursuant to Section 4.01 shall be held in trust and applied by it, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal and interest for whose payment such money has
been deposited with the Trustee. All moneys deposited with the Trustee pursuant
to Section 4.01 (and held by it or any Paying Agent) for the payment of
Securities subsequently converted shall be returned to the Company upon Company
Request.
ARTICLE V
REMEDIES
Section 5.01 Events of Default. "Event of Default," wherever
used herein, means any one of the following events that has occurred and is
continuing (whatever the reason for such Event of Default and whether it shall
be occasioned by the provisions of Article XI or be voluntary or involuntary or
be effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of any interest upon any
Security, including any Additional Payments, when it becomes due and
payable, and continuance of such default for a period of 30 days
(subject to the deferral of any due date in the case of a Deferral
Period); or
(2) default in the payment of the principal of any
Security when due, whether at its Maturity, upon redemption, by
declaration of acceleration or otherwise; or
(3) default in the observation or performance, in any
material respect, of any covenant of the Company in this Indenture
(other than a covenant a default in the performance of which or the
breach of which is elsewhere in this Section specifically dealt with),
and continuance of such default for a period of 90 days after there has
been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least
25% in aggregate outstanding principal amount of the Securities a
written notice specifying such default and requiring it to be remedied;
or
(4) failure by the Company to issue and deliver Class A
Common Stock upon an election to convert the Securities into Class A
Common Stock; or
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(5) the entry or a decree or order by a court having
jurisdiction in the premises adjudging the Company as bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or
(6) the institution by the Company of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by it to the filing
of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they become
due and its willingness to be adjudicated a bankrupt, or the taking of
corporate action by the Company in furtherance of any such action; or
(7) the voluntary or involuntary dissolution, winding up
or termination of the Trust, except in connection with (i) the
distribution of Securities to holders of Preferred Securities in
liquidation or redemption of their interests in the Trust, (ii) the
redemption of all of the outstanding Preferred Securities of the Trust
or (iii) certain mergers, consolidations or amalgamations, each as
permitted by the Declaration.
Section 5.02 Acceleration of Maturity; Rescission and
Annulment. If an Event of Default occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities may declare the principal of all the Outstanding
Securities and any other amounts payable hereunder (including any Additional
Payments) to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders); provided that, if the Property
Trustee is the sole Holder of the Securities and if upon an Event of Default,
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities fail to declare the principal of all the Securities to be
immediately due and payable, the holders of at least 25% in aggregate
liquidation amount of Preferred Securities then outstanding shall have such
right by a notice in writing to the Company and the Trustee; and upon any such
declaration such principal and all accrued interest shall become immediately due
and payable. Upon any such declaration such principal amount (or specified
amount) of and the accrued interest (including any Additional Payments) on all
the Securities shall then become immediately due and payable; provided
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that the payment of principal and interest on such Securities (including
Additional Payments) shall remain subordinated to the extent provided in Article
XII.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as provided in this Article hereinafter, the Holders of
a majority in aggregate principal amount of the Outstanding Securities or of a
majority in liquidation amount of Preferred Securities, as the case may be, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a
sum sufficient to pay
(A) all overdue interest (including any
Compounded Interest) on all Securities,
(B) the principal of any Securities which have
become due otherwise than by such declaration of acceleration
and interest thereon at the rate borne by the Securities, and
(C) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(2) all Events of Default, other than the non-payment of
the principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 5.13.
The Company is required to file annually with the Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under this Indenture.
No such rescission shall affect any subsequent default or
impair any right consequent thereon.
Section 5.03 Collection of Indebtedness and Suits for
Enforcement by Trustee. The Company covenants that if
(1) default is made in the payment of any interest
(including any Compounded Interest) on any Security when such interest
becomes due and payable and such default continues for a period of 30
days, or
(2) default is made in the payment of the principal of
any Security at the Stated Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal
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and interest (including any Additional Payments) and, to the extent that payment
thereof shall be legally enforceable, interest on any overdue principal and on
any overdue interest (including any Additional Sums), at the rate borne by the
Securities, and, in addition thereto, all amounts owing to the Trustee under
Section 6.07.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
Section 5.04 Trustee May File Proofs of Claim. In case of any
judicial proceeding relative to the Company (or any other obligor upon the
Securities), its property or its creditors, the Trustee shall be entitled and
empowered, by intervention in such proceeding or otherwise, to take any and all
actions authorized under the Trust Indenture Act in order to have claims of the
Holders and the Trustee allowed in any such proceeding. In particular, the
Trustee shall be authorized to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due it and any predecessor Trustee under Section 6.07.
No provision of this Indenture shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 5.05 Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of all the amounts owing to the Trustee and any
predecessor Trustee under Section 6.07, be for the ratable benefit of the
Holders of the Securities in respect of which such judgment has been recovered.
Section 5.06 Application of Money Collected. Subject to
Article XII, any money collected by the Trustee pursuant to this Article shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal or
interest (including any Additional Payments),
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upon presentation of the Securities and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and
any predecessor Trustee under Section 6.07;
SECOND: To the payment of the amounts then due and
unpaid for principal of and interest (including any Additional
Payments) on the Securities in respect of which or for the benefit of
which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal and interest (including any Compounded
Interest), respectively; and
THIRD: The balance, if any, to the Company.
Section 5.07 Limitation on Suits. Subject to Section 5.08, no
Holder of any Security shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default, in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the Holders
of a majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
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Section 5.08 Unconditional Right of Holders to Receive
Principal and Interest and to Convert. Notwithstanding any other provision in
this Indenture, the Holder of any Security shall have the right, which is
absolute and unconditional, to receive payment of the principal of and (subject
to Section 3.08) interest (including any Additional Payments) on such Security
on the respective Stated Maturities expressed in such Security (or, in the case
of redemption, on the Redemption Date) and to convert such Security in
accordance with Article XIII and to institute suit for the enforcement of any
such payment and right to convert, and such rights shall not be impaired without
the consent of such Holder. If the Property Trustee is the sole Holder of the
Securities, any holder of the Preferred Securities shall have the right to
institute suit on behalf of the Trust for the enforcement of any such payment
and right to convert.
Section 5.09 Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
Section 5.10 Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities in the last paragraph of Section 3.07, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.11 Delay or Omission not Waiver. No delay or
omission of the Trustee or of any Holder of any Security to exercise any right
or remedy accruing upon any Event of Default shall impair any such right or
remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.
Section 5.12 Control by Holders. The Holders of a majority in
principal amount of the Outstanding Securities shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee;
provided that
(1) such direction shall not be in conflict with any
rule of law or with this Indenture;
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(2) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction; and
(3) subject to Section 6.01, the Trustee need not take
any action that might involve the Trustee in personal liability or be
unduly prejudicial to the Holders not joining therein.
Section 5.13 Waiver of Past Defaults. Subject to Section 9.02
hereof, the Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of, premium, if any,
or interest (including any Additional Payments) on any Security (unless
such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by
acceleration has been deposited with the Trustee); or
(2) in respect of a covenant or provision hereof which
under Article IX cannot be modified or amended without the consent of
the Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Section 5.14 Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken, suffered or omitted by it as Trustee, a court
may require any party litigant in such suit to file an undertaking to pay the
costs of such suit, and may assess costs against any such party litigant, in the
manner and to the extent provided in the Trust Indenture Act; provided, that
neither this Section nor the Trust Indenture Act shall be deemed to authorize
any court to require such an undertaking or to make such an assessment in any
suit instituted by the Company or the Trustee or in any suit for the enforcement
of the right to receive the principal of and interest (including any Additional
Payments) on any Security or to convert any Security in accordance with Article
XIII.
Section 5.15 Waiver of Stay or Extension Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law and covenants
that it will not hinder, delay or impede the execution of any power
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herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
Section 5.16 Enforcement by Holders of Preferred Securities.
Notwithstanding anything to the contrary contained herein, if an Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Securities on the
date such interest or principal is otherwise payable, the Company acknowledges
that, in such event, a holder of Preferred Securities may institute a legal
proceeding directly for enforcement of payment to such Holder of the principal
of or interest on the Debentures having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such Holder (a
"Direct Action") on or after the respective due date specified in the
Securities. The Company may not amend this Indenture to remove the foregoing
right to bring a Direct Action without the prior written consent of all the
holders of Preferred Securities. Notwithstanding any payment made to such holder
of Preferred Securities by the Company in connection with a Direct Action, the
Company shall remain obligated to pay the principal of and interest on the
Securities (including Additional Payments, if any) held by the Trust or the
Property Trustee and the Company shall be subrogated to the rights of the holder
of such Preferred Securities with respect to payments on the Preferred
Securities to the extent of any payments made by the Company to such holder in
any Direct Action. The holders of Preferred Securities will not be able to
exercise directly any other remedy available to the Holders of the Securities.
ARTICLE VI
THE TRUSTEE
Section 6.01 Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of
Default, the Trustee undertakes to perform such duties and only such duties as
are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(b) In case an Event of Default has occurred and is
continuing, and is known to the Trustee, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his own affairs.
(c) Notwithstanding the foregoing, (i) the duties and
responsibilities of the Trustee shall be as provided by the Trust Indenture Act
and (ii) no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or
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liability is not reasonably assured to it. Whether or not therein expressly so
provided, every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section.
Section 6.02 Notice of Defaults. The Trustee shall give the
Holders notice of any default hereunder known to the Trustee as and to the
extent provided by the Trust Indenture Act; provided, however, that in the case
of any default of the character specified in Section 5.01(3), no such notice to
Holders shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default.
Section 6.03 Certain Rights of Trustee. Subject to the
provisions of Section 6.01:
(a) the Trustee may conclusively rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company Order and
any resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its choice
and the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion,
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may make such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to reasonable examination of the books,
records and premises of the Company, personally or by agent or attorney; the
reasonable expense of every such investigation shall be paid by the Company or,
if paid by the Trustee, shall be repaid by the Company upon demand;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) the Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith, without negligence
or willful misconduct, and reasonably believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture; and
(i) the Trustee shall not be charged with knowledge of
any default or Event of Default hereunder unless a Responsible Officer of the
Trustee shall have knowledge of the default or Event of Default.
Section 6.04 Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the use
or application by the Company of the Securities or the proceeds thereof.
Section 6.05 May Hold Securities. The Trustee, any Paying
Agent, any Security Registrar or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to Sections 6.08 and 6.13, may otherwise deal with the Company with
the same rights it would have if it were not Trustee, Paying Agent, Security
Registrar, or such other agent.
Section 6.06 Money Held in Trust. Money held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Company.
Section 6.07 Compensation and Reimbursement. The Company
agrees:
(1) to pay to the Trustee from time to time such
reasonable compensation as the Company and the Trustee shall from time
to time agree in writing for all services rendered by it hereunder
(which compensation shall not be
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limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
fees, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and any predecessor Trustee
for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
To secure the Company's payment obligations in this Section
6.07, the Company and the Holders agree that the Trustee shall have a lien prior
to the Securities on all money or property held or collected by the Trustee.
Such lien shall survive the satisfaction or discharge of this Indenture.
The provisions of this Section 6.07 shall survive the
termination of this Indenture.
Section 6.08 Disqualification; Conflicting Interests. If the
Trustee has or shall acquire a conflicting interest within the meaning of the
Trust Indenture Act, the Trustee shall either eliminate such interest or resign,
to the extent and in the manner provided by, and subject to the provisions of,
the Trust Indenture Act and this Indenture.
Section 6.09 Corporate Trustee Required; Eligibility. There
shall at all times be a Trustee hereunder which shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000 and has its Corporate Trust Office
in Wilmington, Delaware. If such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such Person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
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Section 6.10 Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 6.11.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.08
after written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Security for at least six months; or
(2) the Trustee shall cease to be eligible under Section
6.09 and shall fail to resign after written request therefor by the
Company or by any such Holder; or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Trustee
or of its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation;
then, in any such case, (i) the Company may remove the Trustee, or (ii) subject
to Section 5.14, any Holder who has been a bona fide Holder of a Security for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
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appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give written notice of each
resignation and each removal of the Trustee and each appointment of a successor
Trustee to all Holders in the manner provided in Section 1.06. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.
Section 6.11 Acceptance of Appointment by Successor. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; provided that on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments required to more fully and
certainly vest in and confirm to such successor Trustee all such rights, powers
and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
Section 6.12 Merger, Conversion, Consolidation or Succession
to Business. Any Person into which the Trustee may be merged or converted or
with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder; provided that such
Person shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto. In case any Securities shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.
Section 6.13 Preferential Collection of Claims Against
Company. If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
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Section 6.14 Co-trustees and Separate Trustees. At any time or
times, for the purpose of meeting the legal requirements of any applicable
jurisdiction, the Company and the Trustee shall have power to appoint, and, upon
the written request of the Trustee or of the Holders of at least 25% in
principal amount of the Securities then outstanding, the Company shall for such
purpose join with the Trustee in the execution and delivery of all instruments
and agreements necessary or proper to appoint one or more Persons approved by
the Trustee either to act as co-trustee, jointly with the Trustee, or to act as
separate trustee, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons, in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section. If the Company does
not joint in such appointment within 15 days after the receipt by it of a
request so to do, or if an Event of Default shall have occurred and be
continuing, the Trustee alone shall have power to make such appointment.
Should any written instrument or instruments from the Company
be required by any co-trustee or separate trustee so appointed to more fully
confirm to such co-trustee or separate trustee such property, title, right or
power, any and all such instruments shall, on request, be executed, acknowledged
and delivered by the Company.
Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the following
conditions:
(a) the Securities shall be authenticated and delivered,
and all rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or required to
be deposited or pledged with, the Trustee hereunder, shall be exercised solely,
by the Trustee;
(b) the rights, powers, duties and obligations hereby
conferred or imposed upon the Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed either
by the Trustee or by the Trustee and such co-trustee or separate trustee
jointly, as shall be provided in the instrument appointing such co-trustee or
separate trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers, duties and
obligations shall be exercised and performed by such co-trustee or separate
trustee;
(c) the Trustee at any time, by an instrument in writing
executed by it, with the concurrence of the Company, may accept the resignation
of or remove any co-trustee or separate trustee appointed under this Section,
and, if an Event of Default shall have occurred and be continuing, the Trustee
shall have power to accept the resignation of, or remove, any such co-trustee or
separate trustee without the concurrence of the Company. Upon the written
request of the Trustee, the Company shall join with the Trustee in the execution
and delivery of all instruments and agreements, necessary or proper to
effectuate such resignation or removal. A successor to any co-trustee or
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separate trustee so resigned or removed may be appointed in the manner provided
in this Section;
(d) no co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Trustee, or any other
such trustee hereunder; and
(e) any notice from the Holders of Securities delivered
to the Trustee shall be deemed to have been delivered to each such co-trustee
and separate trustee.
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.01 Company to Furnish Trustee Names and Addresses of
Holders. The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not later than January 15 and July 15
in each year, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of a date not more than 15 days prior to
the delivery thereof; and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
Section 7.02 Preservation of Information; Communications to
Holders.
(a) The Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 7.01 and the
names and addresses of Holders received by the Trustee in its capacity as
Security Registrar. The Trustee may destroy any list furnished to it as provided
in Section 7.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other
Holders with respect to their rights under this Indenture or under the
Securities, and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company nor
the Trustee nor any agent of either of them shall be held accountable by reason
of any disclosure of
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information as to names and addresses of Holders made pursuant to the Trust
Indenture Act.
Section 7.03 Reports by Trustee.
(a) Within 60 days after May 15 of each year, commencing
May 15, 2000, the Trustee shall transmit by first-class mail to Holders such
reports concerning the Trustee and its actions under this Indenture as may be
required pursuant to the Trust Indenture Act in the manner provided pursuant
thereto.
(b) A copy of each such report shall, at the time of
such transmission to Holders, be filed by the Trustee with each stock exchange
upon which the Securities are listed, with the Commission and with the Company.
The Company will notify the Trustee when the Securities are listed on any stock
exchange.
Section 7.04 Reports by Company. The Company shall file with
the Trustee and the Commission, and transmit to Holders, such information,
documents and other reports, and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant to such Act; provided, that any such information, documents or reports
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act shall be filed with the Trustee within 15 days after the same is so
required to be filed with the Commission.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
Section 7.05 Tax Reporting. The Company shall provide to the
Trustee on a timely basis such information as the Trustee requires to enable the
Trustee to prepare and file any form required to be submitted by the Company
with the Internal Revenue Service and the Holders relating to original issue
discount, including, without limitation, Form 1099-0ID or any successor form.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
Section 8.01 Company May Consolidate, etc., only on Certain
Terms. The Company shall not consolidate with or merge with or into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person other than a wholly owned subsidiary, and no Person
shall consolidate with or
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merge with or into the Company or convey, transfer or lease its properties and
assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge
with or into another Person or convey, transfer or lease all or
substantially all of its properties and assets on a consolidated basis
to any Person other than a wholly owned subsidiary, the Person formed
by such consolidation or into which the Company is merged or the Person
which acquires by conveyance, transfer or lease, all or substantially
all of the properties and assets of the Company on a consolidated basis
shall be a corporation, limited liability company, partnership or
trust, shall be organized and validly existing under the laws of the
United States of America, any State thereof or the District of Columbia
and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form reasonably satisfactory
to the Trustee, the due and punctual payment of the principal of and
interest (including any Additional Payments) on all the Securities and
the performance or observance of every covenant of this Indenture on
the part of the Company to be performed or observed and shall have
provided for conversion rights in accordance with Article XIII;
(2) immediately after giving effect to such transaction
and treating any indebtedness which becomes an obligation of the
Company or a Subsidiary as a result of such transaction as having been
incurred by the Company or such Subsidiary at the time of such
transaction, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have
happened and be continuing;
(3) if at the time any Preferred Securities are
outstanding, such consolidation or merger or conveyance, transfer or
lease of assets of the Company is permitted under, and does not give
rise to any breach or violation of, the Declaration or the Guarantee;
and
(4) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture, comply with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
Section 8.02 Successor Substituted. Upon any consolidation of
the Company with, or merger of the Company into, any other Person or any
conveyance, transfer or lease of all or substantially all the properties and
assets of the Company on a consolidated basis in accordance with Section 8.01,
the successor Person formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer or lease is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein, and thereafter, except in the
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case of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01 Supplemental Indentures Without Consent of
Holders. Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the
benefit of the Holders, or to surrender any right or power herein
conferred upon the Company; or
(3) to make provision with respect to the conversion
rights of Holders pursuant to the requirements of Article XIII; or
(4) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provisions of this Indenture; provided, that such action
pursuant to this clause (4) shall not adversely affect the interests of
the Holders of the Securities or, so long as any of the Preferred
Securities shall remain outstanding, the holders of the Preferred
Securities; or
(5) to comply with the requirements of the Commission in
order to effect or maintain the qualification of this Indenture under
the Trust Indenture Act; or
(6) to make provision for transfer procedures,
certification, book-entry provisions, the form of restricted securities
legends, if any, to be placed on Securities, and all other matters
required pursuant to Section 3.06(b) or otherwise necessary, desirable
or appropriate in connection with the issuance of Securities to holders
of Preferred Securities in the event of a distribution of Securities by
the Trust if a Tax Event or Investment Company Event occurs and is
continuing.
Section 9.02 Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal amount
of the
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Outstanding Securities, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby,
(1) extend the Stated Maturity of the principal of, or
any installment of interest (including any Additional Payments) on,
such Security, or reduce the principal amount thereof, or reduce the
rate or extend the time for payment of interest thereon, or reduce any
premium payable upon the redemption thereof, or change the place of
payment where, or the coin or currency in which, such Security or
interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption
Date), or adversely affect the right to convert such Security as
provided in Article XIII (except as permitted by Section 9.01(3)), or
modify the provisions of this Indenture with respect to the
subordination of the Securities in a manner adverse to the Holders,
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture, or
(3) modify any of the provisions of this Section or
Section 5.13, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby.
Notwithstanding anything to the contrary in this Indenture or
the Declaration, if the Property Trustee is the sole holder of the Securities,
so long as any of the Preferred Securities remains outstanding, no amendment
shall be made that adversely affects the holders of such Preferred Securities,
and no termination of this Indenture shall occur, and no waiver of any Event of
Default or compliance with any covenant under this Indenture shall be effective,
without the prior consent of the holders of the percentage of the aggregate
liquidation amount of such Preferred Securities then outstanding which is at
least equal to the percentage of aggregate stated principal amount of the
Outstanding Securities as shall be required under this Indenture to effect any
such amendment, termination or waiver.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
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The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Persons entitled to consent to any
indenture supplemental hereto. If a record date is fixed, the Holders on such
record date, or their duly designated proxies, and only such Persons, shall be
entitled to consent to such supplemental indenture, whether or not such Holders
remain Holders after such record date; provided, that unless such consent shall
have become effective by virtue of the requisite percentage having been obtained
prior to the date which is 90 days after such record date, any such consent
previously given shall automatically and without further action by any Holder be
canceled and of no further effect.
Section 9.03 Execution of Supplemental Indentures. In
executing or accepting the additional trusts created by any supplemental
indenture permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 6.01) shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 9.04 Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article, this Indenture shall
be modified in accordance therewith, and such supplemental indenture shall form
a part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby. No such supplemental indenture shall directly or indirectly modify the
provisions of Article XII in any manner which might terminate or impair the
rights of the Secured Senior Debt pursuant to such subordination provisions.
Section 9.05 Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act.
Section 9.06 Reference in Securities to Supplemental
Indentures. Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture, may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
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ARTICLE X
COVENANTS; REPRESENTATIONS AND WARRANTIES
Section 10.01 Payment of Principal and Interest. The Company
will duly and punctually pay the principal of and interest on the Securities in
accordance with the terms of the Securities and this Indenture.
Section 10.02 Maintenance of Office or Agency. The Company
will maintain in the United States an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer, exchange or conversion, and where notices and demands
to or upon the Company in respect of the Securities and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in the United States) where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the United States for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
Section 10.03 Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will, on or
before each due date of the principal of or interest on any of the Securities,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided and
will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay the principal or interest so
becoming due, such sum to be held as provided by the Trust Indenture Act, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will (i) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent
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and (ii) during the continuance of any default by the Company (or any other
obligor upon the Securities) in the making of any payment in respect of the
Securities, upon the written request of the Trustee, forthwith pay to the
Trustee all sums held in trust by such Paying Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of or
interest on any Security and remaining unclaimed for two years after such
principal or interest has become due and payable, shall be paid to the Company
on Company Request, or (if then held by the Company) shall be discharged from
such trust; and the Holder of any such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease.
Section 10.04 Statement by Officers as to Default. The Company
will deliver to the Trustee, within 120 days after the end of each fiscal year
of the Company ending after the date hereof, an Officers' Certificate, stating
whether or not to the best knowledge of the signers thereof the Company is in
default in the performance and observance of any of the material terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
Section 10.05 Limitation on Dividends; Transactions with
Affiliates; Covenants as to the Trust.
(a) If at such time (x) there shall have occurred an
Event of Default, (y) the Company shall be in default with respect to its
payment of any obligations under the Guarantee or (z) the Company shall have
given notice of its election to begin a Deferral Period as provided herein and
shall not have rescinded such notice, or such Deferral Period shall be
continuing, the Company covenants that the Company shall not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) other than stock dividends which consist of
stock of the same class as that on which the dividends are being paid, (ii) make
any payment of principal, interest or premium, if any, on or repay or repurchase
or redeem any debt securities of the Company that rank pari passu with or junior
in interest to the Securities or (iii) make any guarantee payments with respect
to any guarantee by the Company of
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the debt securities of any subsidiary of the Company if such guarantee ranks
pari passu with or junior in interest to the Securities (in each case, other
than (A) dividends or distributions in Common Stock, (B) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (C) payments under the
Guarantee, (D) purchases or acquisitions of shares of the Common Stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plan or any other contractual obligation of the Company (other
than a contractual obligation ranking expressly by its terms pari passu with or
junior in interest to the Securities), (E) as a result of a reclassification of
the Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock or (F) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged).
(b) The Company also covenants and agrees (i) for so
long as the Preferred Securities remain outstanding, (a) to maintain directly or
indirectly 100% ownership of the Common Securities, provided that certain
successor Persons in transactions which are permitted by Article VIII may
succeed to the Company's ownership of the Common Securities, (b) not to
voluntarily terminate, wind-up or liquidate the Trust, except in connection with
(I) a distribution of the Securities to the holders of the Trust Securities in
liquidation of the Trust, (II) the redemption of all Trust Securities or (iii)
certain mergers, consolidations or amalgamations permitted by the Declaration,
and (c) not to convert Securities except pursuant to a notice of conversion
delivered to the Conversion Agent by a Holder or by a holder of Common
Securities, (ii) to use its reasonable efforts, consistent with the terms and
provisions of the Declaration, to cause the Trust to remain classified as a
grantor trust and not taxable as a corporation for United States federal income
tax purposes, (iii) to maintain the reservation for issuance of the number of
shares of Class A Common Stock that would be required from time to time upon the
conversation of al the Securities then outstanding, (iv) to deliver shares of
Class A Common Stock upon an election by a Holder to convert such Preferred
Securities into or for Class A Common Stock, and (v) to honor all obligations
relating to the conversion or exchange of Preferred Securities into or for Class
A Common Stock or Securities.
Section 10.06 Payment of Expenses of the Trust. In connection
with the offering, sale and issuance of the Securities to the Property Trustee
in connection with the sale of the Trust Securities by the Trust, the Company
shall:
(a) pay for all costs, fees and expenses relating to the
offering, sale and issuance of the Securities, including commissions to the
Underwriters payable pursuant to the Underwriting Agreement and compensation of
the Trustee under the Indenture in accordance with the provisions of Section
6.07 of the Indenture;
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(b) be responsible for and pay for all debts and
obligations (other than with respect to the Trust Securities) of the Trust, pay
for all costs and expenses of the Trust (including, but not limited to, costs
and expenses relating to the organization of the Trust, the offering, sale and
issuance of the Trust Securities (including commissions to the Underwriters in
connection therewith), the fees and expenses of the Property Trustee and the
Delaware Trustee, the costs and expenses relating to the operation of the Trust,
including without limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, paying agent(s), registrar(s), transfer
agent(s), duplicating, travel and telephone and other telecommunications
expenses and costs and expenses incurred in connection with the acquisition,
financing, and disposition of Trust assets); and
(c) pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of the Trust.
Section 10.07 Prospectus Amendment or Supplement. The Trust
and the Company will advise the Underwriters promptly of any proposal to amend
or supplement the final prospectus dated September __, 1999 (the "Prospectus"),
and will not effect such amendment or supplementation without the Underwriters'
consent. If, at any time, any event occurs as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any such time to amend or
supplement the Prospectus to comply with any applicable law, the Trust and the
Company promptly will notify the Underwriters of such event and promptly will
prepare, at their own expense, an amendment or supplement which will correct
such statement or omission or effect such compliance. Neither the Underwriters'
consent to nor the Underwriters' delivery to offerees or investors of, any such
amendment or supplement shall constitute a waiver of any of the conditions set
forth in Section 6 of the Underwriting Agreement.
ARTICLE XI
REDEMPTION OF SECURITIES
Section 11.01 Optional Redemption. The Company shall have the
right to redeem the Securities (an "Optional Redemption") in whole or in part,
at any time or from time to time on or after October 3, 2002, at a Redemption
Price (the "Optional Redemption Price") equal the prices per $50 principal
amount of Securities set forth in the following table, plus accrued and unpaid
interest, including Additional Payments, if any, to the Redemption Date, if
redeemed during the 12-month period ending on September 30:
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<PAGE> 60
<TABLE>
<CAPTION>
PRICE PER $50
YEAR PRINCIPAL AMOUNT
--------------------------- ----------------
<S> <C>
2003....................... $
-----------
2004....................... $
-----------
2005....................... $
-----------
2006....................... $
-----------
</TABLE>
and thereafter at $50 per $50 principal amount of the Securities plus, in each
case, any accrued and unpaid interest, including Additional Payments, if any, to
the Redemption Date.
Section 11.02 Tax Event Redemption. If a Tax Event has
occurred and is continuing and:
(1) the Company has received a Redemption Tax Opinion;
or
(2) the Issuer Trustees shall have been informed by
nationally recognized independent tax counsel (reasonably acceptable to
the Issuer Trustees) experienced in such matters that a No Recognition
Opinion cannot be delivered,
then the Company shall have the right upon not less than 20 days, nor more than
60 days, notice to the Holders of the Securities to redeem the Securities in
whole, but not in part, for cash at $50 per $50 principal amount of the
Securities plus accrued and unpaid interest, including Additional Payments, if
any, to the Redemption Date, within 90 days following the occurrence of such Tax
Event (the "90 Day Period"); provided, however, that if, at the time there is
available to the Company or the Trust the opportunity to eliminate, within the
90 Day Period, the Tax Event by taking some ministerial action, including, but
not limited to, filing a form or making an election, or pursuing some other
similar reasonable measure which, in the sole judgment of the Company, will have
no adverse effect on the Company, the Trust or the Holders of the Preferred
Securities and will involve no material cost, then the Company or the Trust
shall pursue such ministerial action or other measure in lieu of redemption; and
provided further that the Company shall have no right to redeem the Securities
while the Trust is pursuing any ministerial action or other similar measure
pursuant to its obligations under the Declaration.
If the Company opts not to redeem the Securities pursuant to
this Section 11.02, the Company shall be required to pay Additional Sums in
respect of the Securities pursuant to Section 3.01 for so long as (i) a Tax
Event has occurred and is continuing and (ii) the Property Trustee is the sole
Holder of the Securities.
Section 11.03 Selection by Trustee of Securities to be
Redeemed. If less than all the Securities are to be redeemed (unless such
redemption affects only a single Security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee by such method as the Trustee shall deem
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fair and appropriate, from the Outstanding Securities not previously called for
redemption. Such selection method may provide for the selection for redemption
of portions (equal to $50 or any integral multiple thereof) of the principal
amount of the Securities.
The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption as aforesaid and, in case of any
Securities selected for partial redemption as aforesaid, the principal amount
thereof to be redeemed.
The provisions of the two preceding paragraphs shall not apply
with respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Securities which has been
or is to be redeemed.
Section 11.04 Notice of Redemption. Notice of redemption shall
be given by first-class mail, postage prepaid, mailed not less than 30 (or, in
the case of a redemption pursuant to Section 11.02 hereof, 20) nor more than 60
days prior to the Redemption Date, to each Holder of Securities to be redeemed,
at such Holder's address appearing in the Security Register.
All notices of redemption given pursuant to this Article XI
shall identify the Securities to be redeemed (including, if relevant, CUSIP
number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price
will become due and payable upon each such Security to be redeemed and
that interest thereon will cease to accrue on and after said date,
(4) the place or places where such Securities are to be
surrendered for payment of the Redemption Price, and
(5) the date on which the right to convert the
Securities to be redeemed will terminate and the places where such
Securities may be surrendered for conversion.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
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Section 11.05 Deposit of Redemption Price. Prior to 12:00 noon
on any Redemption Date, the Company shall deposit with the Trustee or with a
Paying Agent (or, if the Company is acting as its own Paying Agent, segregate
and hold in trust as provided in Section 10.03) an amount of money sufficient to
pay the Redemption Price of, and (except if the Redemption Date shall be an
Interest Payment Date) accrued interest on, all the Securities which are to be
redeemed on that date.
If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held in
trust for the redemption of such Security shall (subject to any right of the
Holder of such Security or any Predecessor Security to receive interest as
provided in the last paragraph of Section 3.08) be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.
Section 11.06 Securities Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to the terms and the provisions of Section 3.08.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal shall, until paid, bear
interest from the Redemption Date at the rate borne by the Security.
Section 11.07 Securities Redeemed in Part.
(a) In the event of any redemption in part, the Company
shall not be required (i) to issue, register the transfer of or
exchange any Security during a period beginning at the opening of
business 15 days before the date of the mailing of a notice of
redemption of Securities selected for redemption and ending at the
close of business on the day of such mailing and (ii) to register the
transfer of or exchange any Securities so selected for redemption, in
whole or in part, except for the unredeemed portion of any Securities
being redeemed in part.
(b) If a partial redemption of the Securities would
result in the delisting of the Preferred Securities issued by the Trust
from any national securities exchange or other organization on which
the Preferred Securities are listed, the Company shall not be permitted
to effect such partial redemption and may only redeem the Securities in
whole.
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(c) Any Security which is to be redeemed only in part
shall be surrendered at a place of payment therefor (with, if the
Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of
such Security without service charge, a new Security or Securities, of
any authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unredeemed portion of
the principal of the Security so surrendered. If a Global Security is
surrendered, such new Security will (subject to Section 3.06) also be a
new Global Security.
ARTICLE XII
SUBORDINATION OF SECURITIES
Section 12.01 Agreement to Subordinate. The Company covenants
and agrees, and each Holder of Securities by such Holder's acceptance thereof
likewise covenants and agrees, that all Securities shall be issued subject to
the provisions of this Article XII; and each Holder of a Security, whether upon
original issue or upon transfer or assignment thereof, accepts and agrees to be
bound by such provisions. The payment by the Company of the principal of,
premium, if any, and interest (including Additional Payments) on all Securities
issued hereunder shall, to the extent and in the manner hereinafter set forth,
be subordinated and junior in right of payment to the prior payment in full of
all Secured Senior Debt, whether outstanding at the date of this Indenture or
thereafter incurred; provided, however, that no provision of this Article XII
shall prevent the occurrence of any default or Event of Default hereunder.
Section 12.02 Default on Secured Senior Debt. In the event and
during the continuation of any default by the Company in the payment of
principal, premium, interest or any other payment due on any Secured Senior Debt
(other than Designated Secured Senior Debt) continuing beyond the period of
grace, if any, specified in the instrument evidencing such Secured Senior Debt,
unless and until such default shall have been cured or waived or shall have
ceased to exist, and in the event that the maturity of any Secured Senior Debt
has been accelerated because of a default, then no payment shall be made by the
Company with respect to the principal of (including redemption payments),
premium, if any, or interest on the Securities.
Furthermore, in the event and during the continuation of any
default (other than a payment default) by the Company under any Designated
Secured Senior Debt continuing beyond the period of grace, if any, specified in
the instrument evidencing such Designated Secured Senior Debt, upon notice of
the default from representatives of the holders of the Designated Secured Senior
Debt and until such default shall have been cured or waived or shall have ceased
to exist or all the Designated Secured Senior Debt is paid in full in cash, then
no payment shall be made by the Company with respect to the principal of
(including redemption payments), premium, if any, or interest on the Securities.
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In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee when such payment is prohibited by the
preceding paragraphs of this Section 12.02, subject to Section 12.06, such
payment shall be held in trust for the benefit of, and shall be paid over or
delivered to, the holders of Secured Senior Debt or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Secured Senior Debt may have been issued, as their respective
interests may appear, but only to the extent that the holders of the Secured
Senior Debt (or their representative or representatives or a trustee) notify the
Trustee in writing within 90 days of such payment of the amounts then due and
owing on the Secured Senior Debt and only the amounts specified in such notice
to the Trustee shall be paid to the holders of Secured Senior Debt.
Section 12.03 Liquidation; Dissolution; Bankruptcy. Upon any
payment by the Company or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution or winding up or liquidation or reorganization of the Company,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all amounts (including principal, premium, if any, and
interest) due or to become due upon all Secured Senior Debt (including any
interest accruing subsequent to the filing of a petition for bankruptcy
regardless of whether such interest is an allowed claim in the bankruptcy
proceeding) shall first be paid in full in cash, or payment thereof provided for
in money in accordance with and to the extent permitted by the terms of such
Secured Senior Debt, before any payment is made on account of the principal (and
premium, if any) or interest on the Securities; and upon any such dissolution or
winding up or liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the Holders of the Securities or the Trustee
would be entitled, except for the provisions of this Article XII, shall be paid
by the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the Holders of
the Securities or by the Trustee under this Indenture if received by them or it,
directly to the holders of Secured Senior Debt (pro rata to such holders on the
basis of the respective amounts of Secured Senior Debt held by such holders, as
calculated by the Company) or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing such Secured Senior Debt may have been issued, as their respective
interests may appear, to the extent necessary to pay such Secured Senior Debt in
full, in cash or in money's worth in accordance with and to the extent permitted
by the terms of such Secured Senior Debt, after giving effect to any concurrent
payment or distribution to or for the holders of such Secured Senior Debt,
before any payment or distribution is made to the Holders of Securities or to
the Trustee.
In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing shall be received by
the Trustee or the Holders of the Securities before all Secured Senior Debt is
paid in full in cash, or provision is made for such payment in money in
accordance and to the extent permitted by the terms
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of such Secured Senior Debt, subject to Section 12.06, such payment or
distribution shall be held in trust for the benefit of and shall be paid over or
delivered to the holders of Secured Senior Debt or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Secured Senior Debt may have been issued,
and their respective interests may appear, as calculated by the Company, for
application to the payment of all Secured Senior Debt remaining unpaid to the
extent necessary to pay such Secured Senior Debt in full in cash or in money's
worth in accordance with and to the extent permitted by the terms of such
Secured Senior Debt, after giving effect to any concurrent payment or
distribution to or for the holders of such Secured Senior Debt.
For purposes of this Article XII, the words, "cash, property
or securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XII with respect
to the Securities to the payment of all Secured Senior Debt which may at the
time be outstanding; provided that (i) such Secured Senior Debt is assumed by
the new corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of such Secured Senior Debt are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company with or into, another Person or the liquidation or dissolution of the
Company following the conveyance, transfer or lease of all or substantially all
its properties and assets on a consolidated basis to another Person upon the
terms and conditions provided for in Article VIII hereof shall not be deemed a
dissolution, winding up, liquidation or reorganization for the purposes of this
Section 12.03 if such other Person shall, as a part of such consolidation,
merger, conveyance, transfer or lease, comply with the conditions stated in
Article VIII hereof. Nothing in Section 12.02 or in this Section 12.03 shall
apply to claims of, or payments to, the Trustee under or pursuant to Section
6.07 hereof.
Section 12.04 Subrogation. Subject to the prior payment in
full of all Secured Senior Debt in cash or in money's worth in accordance with
and to the extent permitted by the terms of such Secured Senior Debt, the rights
of the Holders of the Securities shall be subrogated to the rights of the
holders of such Secured Senior Debt to receive payments or distributions of
cash, property or securities of the Company, as the case may be, applicable to
such Secured Senior Debt until the principal of (and premium, if any) and
interest on the Securities shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Secured Senior
Debt of any cash, property or securities to which the Holders of the Securities
or the Trustee would be entitled except for the provisions of this Article XII,
and no payment pursuant to the provisions of this Article XII, to or for the
benefit of the holders of such Secured Senior Debt by Holders of the Securities
or the Trustee, shall, as between the Company, its creditors other than holders
of Secured Senior Debt, and the Holders of the Securities, be deemed to be a
payment by the Company to or on account of such Secured Senior Debt. It is
understood that the provisions of this Article XII are and are intended solely
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for the purposes of defining the relative rights of the Holders of the
Securities, on the one hand, and the holders of such Secured Senior Debt on the
other hand.
Nothing contained in this Article XII or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company, its creditors other than the holders of Secured Senior Debt, and the
Holders of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest on the Securities as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders of the Securities and creditors
of the Company, as the case may be, other than the holders of Secured Senior
Debt, nor shall anything herein or therein prevent the Trustee or the Holder of
any Security from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article XII of the holders of such Secured Senior Debt in respect of cash,
property or securities of the Company, as the case may be, received upon the
exercise of any such remedy.
Upon any payment or distribution of assets of the Company
referred to in this Article XII, the Trustee, subject to the provisions of
Section 6.03, and the Holders of the Securities shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Holders of the Securities, for the purposes of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Secured Senior Debt and other indebtedness of the Company, as the case may be,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article XII.
Section 12.05 Trustee to Effectuate Subordination. Each Holder
of Securities by such Holder's acceptance thereof authorizes and directs the
Trustee on such Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article XII and
appoints the Trustee as such Holder's attorney-in-fact for any and all such
purposes.
Section 12.06 Notice by the Company. The Company shall give
prompt written notice to a Responsible Officer of the Trustee of any fact known
to the Company which would prohibit the making of any payment of monies to or by
the Trustee in respect of the Securities pursuant to the provisions of this
Article XII. Notwithstanding the provisions of this Article XII or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment of
monies to or by the Trustee in respect of the Securities pursuant to the
provisions of this Article XII unless and until a Responsible Officer of the
Trustee shall have received written notice thereof at the Corporate Trust Office
of the Trustee from the Company or a holder or holders of Secured Senior Debt or
from any trustee therefor; and before the receipt of any such written notice,
the Trustee, subject to
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the provisions of Section 6.03 hereof, shall be entitled in all respects to
assume that no such facts exist; provided, however, that if the Trustee shall
not have received the notice provided for in this Section 12.06 at least five
Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest on any Security), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
purposes for which it was received, and shall not be affected by any notice to
the contrary which may be received by it within five Business Days prior to such
date.
The Trustee, subject to the provisions of Section 6.03, shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Secured Senior Debt (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of such Secured Senior Debt or a trustee on behalf of any such holder or
holders. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Secured Senior Debt to participate in any payment or distribution pursuant to
this Article XII, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Secured Senior Debt
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the right of
such Person under this Article XII, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Section 12.07 Rights of the Trustee; Holders of Secured Senior
Debt. The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article XII in respect of any Secured Senior Debt at any time
held by it, to the same extent as any other holder of Secured Senior Debt, and
nothing in this Indenture shall deprive the Trustee of any of its rights as such
holder.
With respect to the holders of Secured Senior Debt of the
Company, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are set forth in this Article XII, and no implied
covenants or obligations with respect to the holders of such Secured Senior Debt
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of such Secured Senior Debt and,
subject to the provisions of Section 6.03, the Trustee shall not be liable to
any holder of such Secured Senior Debt if it shall pay over or deliver to
Holders of Securities, the Company or any other Person money or assets to which
any holder of such Secured Senior Debt shall be entitled by virtue of this
Article XII or otherwise.
Section 12.08 Subordination May not be Impaired. No right of
any present or future holder of any Secured Senior Debt to enforce subordination
as herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and
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covenants of this Indenture, regardless of any knowledge thereof which any such
holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Secured Senior Debt may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
XII or the obligations hereunder of the Holders of the Securities to the holders
of Secured Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, such Secured Senior Debt, or otherwise amend or supplement in any manner
such Secured Senior Debt or any instrument evidencing the same or any agreement
under which such Secured Senior Debt is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing such Secured Senior Debt; (iii) release any Person liable in any manner
for the collection of such Secured Senior Debt; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
ARTICLE XIII
CONVERSION OF SECURITIES
Section 13.01 Conversion Rights. Subject to and upon
compliance with the provisions of this Article, the Securities are convertible,
at the option of the Holder, at any time prior to 5:00 p.m., New York City time,
on September 30, 2014 into fully paid and nonassessable shares of Class A Common
Stock of the Company, par value $.01 per share ("Class A Common Stock"), at an
initial conversion rate of ______ shares of Class A Common Stock for each $50 in
aggregate principal amount of Securities (the "Initial Conversion Ratio") (equal
to a conversion price of $______ principal amount of Securities per share of
Class A Common Stock (the "Initial Conversion Price")). The conversion ratio and
the equivalent conversion price in effect at any given time are known as the
"Applicable Conversion Ratio" and the "Applicable Conversion Price,"
respectively, and are subject to adjustment as described in this Article XIII. A
Holder of Securities may convert any portion of the principal amount of the
Securities into that number of fully paid and nonassessable shares of Class A
Common Stock (calculated as to each conversion to the nearest 1/100th of a
share) obtained by dividing the principal amount of the Securities to be
converted by the Applicable Conversion Ratio. In case a Security or portion
thereof is called for redemption, such conversion right in respect of the
Security or portion so called shall expire at the close of the Business Day
immediately preceding the corresponding Redemption Date, unless the Company
defaults in making the payment due upon redemption.
Section 13.02 Conversion Procedures.
(a) In order to convert all or a portion of the
Securities, the Holder thereof shall deliver to the Conversion Agent an
irrevocable Notice of Conversion
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setting forth the principal amount of Securities to be converted, together with
the name or names, if other than the Holder, in which the shares of Class A
Common Stock should be issued upon conversion and, if such Securities are
definitive Securities, surrender to the Conversion Agent the Securities to be
converted, duly endorsed or assigned to the Company or in blank. In addition, a
holder of Preferred Securities may exercise its right under the Declaration to
convert such Preferred Securities into Class A Common Stock by delivering to the
Conversion Agent an irrevocable Notice of Conversion setting forth the
information called for by the preceding sentence and directing the Conversion
Agent (i) to exchange such Preferred Security for a portion of the Securities
held by the Trust (at an exchange rate of $50 principal amount of Securities for
each Preferred Security) and (ii) to immediately convert such Securities, on
behalf of such holder, into Class A Common Stock of the Company pursuant to this
Article XIII and, if such Preferred Securities are in definitive form,
surrendering such Preferred Securities, duly endorsed or assigned to the Company
or in blank. So long as any Preferred Securities are outstanding, the Trust
shall not convert any Securities except pursuant to a Notice of Conversion duly
executed and delivered to the Conversion Agent by a holder of Preferred
Securities.
If a Notice of Conversion is delivered on or after the Regular
Record Date and prior to the subsequent Interest Payment Date, the Holder will
be entitled to receive the interest payable on the subsequent Interest Payment
Date on the portion of Securities to be converted notwithstanding the conversion
thereof prior to such Interest Payment Date. Except as otherwise provided in the
immediately preceding sentence, in the case of any Security which is converted,
interest whose Stated Maturity is after the date of conversion of such Security
shall not be payable, and the Company shall not make nor be required to make any
other payment, adjustment or allowance with respect to accrued but unpaid
interest on the Securities being converted, which shall be deemed to be paid in
full. Each conversion shall be deemed to have been effected immediately prior to
the close of business on the day on which the Notice of Conversion was received
(the "Conversion Date") by the Conversion Agent from the Holder or from a holder
of the Preferred Securities effecting a conversion thereof pursuant to its
conversion rights under the Declaration, as the case may be. The Person or
Persons entitled to receive the Class A Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such Class A Common Stock as of the Conversion Date. As promptly as practicable
on or after the Conversion Date, the Company shall issue and deliver at the
office of the Conversion Agent, unless otherwise directed by the Holder in the
Notice of Conversion, a certificate or certificates for the number of full
shares of Class A Common Stock issuable upon such conversion, together with the
cash payment, if any, in lieu of any fraction of any share to the Person or
Persons entitled to receive the same. The Conversion Agent shall deliver such
certificate or certificates to such Person or Persons.
(b) Subject to any right of the Holder of such Security
or any Predecessor Security to receive interest as provided in the last
paragraph of Section 3.08 and the second paragraph of clause (a) of Section
13.02, the Company's delivery upon
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conversion of the whole number of shares of Class A Common Stock into which the
Securities are convertible (together with the cash payment, if any, in lieu of
fractional shares) shall be deemed to satisfy the Company's obligation to pay
the principal amount at Maturity of the portion of Securities so converted and
any unpaid interest (including Compounded Interest and Additional Sums) accrued
on such Securities at the time of such conversion.
(c) No fractional shares of Class A Common Stock will be
issued as a result of conversion, but in lieu thereof, the Company shall pay to
the Conversion Agent a cash adjustment in an amount equal to the same fraction
of the Closing Price of such fractional interest on the date on which the
Securities or Preferred Securities, as the case may be, were duly surrendered to
the Conversion Agent for conversion, or, if such day is not a Trading Day, on
the next Trading Day, and the Conversion Agent in turn will make such payment,
if any, to the Holder of the Securities or the holder of the Preferred
Securities so converted.
(d) In the event of the conversion of any Security in
part only, a new Security or Securities for the unconverted portion thereof will
be issued in the name of the Holder thereof upon the cancellation thereof in
accordance with Section 3.06.
(e) In effecting the conversion transactions described
in this Section, the Conversion Agent is acting as agent of the holders of
Preferred Securities (in the exchange of Preferred Securities for Securities)
and as agent of the Holders of Securities (in the conversion of Securities into
Class A Common Stock), as the case may be, directing it to effect such
conversion transactions. The Conversion Agent is hereby authorized (x) if the
Trust exists, (i) to exchange Securities held by or on behalf of the Trust from
time to time for Preferred Securities in connection with the conversion of such
Preferred Securities in accordance with this Article XIII and (ii) to convert
all or a portion of the Securities into Class A Common Stock and thereupon to
deliver such shares of Class A Common Stock in accordance with the provisions of
this Article XIII and to deliver to the Trust a new Security or Securities for
any resulting unconverted to exchange Securities held by the Holders in
connection with the conversion of such Securities in accordance with this
Article XIII and (y) if the Trust has been dissolved and the Securities have
been distributed to the holders of the Preferred Securities, to convert all or a
portion of the Securities into Class A Common Stock and thereupon to deliver
such shares of Class A Common Stock in accordance with the provisions of this
Article XIII and to deliver to such Holders a new Security or Securities for any
resulting unconverted principal amount.
Section 13.03 Conversion Price Adjustments. The Applicable
Conversion Price shall be subject to adjustment (without duplication) from time
to time as follows:
(i) In case the Company shall pay a dividend or make a
distribution on the Common Stock exclusively in Common Stock, the
Applicable
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Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of stockholders entitled
to receive such dividend or other distribution shall be reduced by
multiplying such Applicable Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business
on the day following the date fixed for such determination. For the
purposes of this subparagraph (i), the number of shares of Common Stock
at any time outstanding shall not include shares held in the treasury
of the Company.
In the event that such dividend or distribution is not so paid
or made, the Applicable Conversion Price shall again be adjusted to be the
Applicable Conversion Price which would then be in effect if such dividend or
distribution had not occurred.
(ii) In case the Company shall pay or make a dividend or
ther distribution on its Common Stock consisting exclusively of, or
shall otherwise issue to all holders of its Common Stock, rights or
warrants, in each case entitling the holders thereof to subscribe for
or purchase shares of Common Stock at a price per share less than the
current market price per share (determined as provided in subparagraph
(vii)) of the Common Stock on the date fixed for the determination of
stockholders entitled to receive such rights or warrants, the
Applicable Conversion Price in effect at the opening of business on the
day following the date fixed for such determination shall be reduced by
multiplying such Applicable Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination plus the
number of shares of Common Stock which the aggregate of the offering
price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current market price
and the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective
immediately prior to the opening of business on the day following the
date fixed for such determination. To the extent that rights are not so
issued or shares of Common Stock are not so delivered after the
expiration of such rights or warrants, the Applicable Conversion Price
shall be readjusted to the Applicable Conversion Price which would then
be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. For the
purposes of this subparagraph (ii), the number of shares of Common
Stock at any time outstanding shall not include shares held in the
treasury of the Company.
(iii) In case outstanding shares of Class A Common Stock
shall be subdivided into a greater number of shares of Class A Common
Stock, the Applicable Conversion Price in effect at the opening of
business on the day
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following the day upon which such subdivision becomes effective shall
be proportionately reduced and, conversely, in case outstanding shares
of Class A Common Stock shall each be combined into a smaller number of
shares of Class A Common Stock, the Applicable Conversion Price in
effect at the opening of business on the day following the day upon
which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become
effective immediately prior to the opening of business on the day
following the day upon which such subdivision or combination becomes
effective.
(iv) Subject to the last sentence of this subparagraph
(iv), in case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock evidences of its indebtedness,
shares of any class or series of capital stock, cash or assets
(including securities, but excluding any rights or warrants referred to
in subparagraph (ii) of this Section 13.03, any dividend or
distribution paid exclusively in cash and any dividend or distribution
referred to in subparagraph (i) of this Section 13.03), the Applicable
Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Applicable Conversion Price in
effect immediately prior to the effectiveness of the Applicable
Conversion Price reduction contemplated by this subparagraph (iv) by a
fraction of which the numerator shall be the current market price per
share (determined as provided in subparagraph (vii) of this Section
13.03) of the Common Stock on the date fixed for the determination of
stockholders entitled to receive such distribution (the "Reference
Date") less the fair market value (as determined in good faith by the
Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors), on the Reference
Date, of the portion of the evidences of indebtedness, shares of
capital stock, cash and assets so distributed applicable to one share
of Common Stock and the denominator shall be such current market price
per share of the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following the
Reference Date. In the event that such dividend or distribution is not
so paid or made, the Applicable Conversion Price shall again be
adjusted to be the Applicable Conversion Price which would then be in
effect if such dividend or distribution had not occurred. For purposes
of this subparagraph (iv), any dividend or distribution that includes
shares of Common Stock or rights or warrants to subscribe for or
purchase shares of Common Stock shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, shares of
capital stock, cash or assets other than such shares of Common Stock or
such rights or warrants (making any Applicable Conversion Price
reduction required by this subparagraph (iv)) immediately followed by
(2) a dividend or distribution of such shares of Common Stock or such
rights or warrants (making any further Applicable Conversion Price
reduction required by subparagraph (i) or (ii) of this Section 13.03),
except any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding
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at the close of business on the date fixed for such determination"
within the meaning of subparagraph (i) of this Section 13.03.
(v) In case the Company shall pay or make a dividend or
other distribution on its Common Stock exclusively in cash (excluding
(x) cash dividends to the extent that they do not exceed the per share
amount of the smallest of the immediately four preceding quarterly cash
dividends (as adjusted to appropriately reflect any of the events
referred to in subparagraphs (i), (ii), (iii), (iv), (v) and (vi)), and
(y) cash dividends to the extent that the annualized per share amount
thereof does not exceed 12.5% of the current market price per share of
the Common Stock on the Trading Day next preceding the date of
declaration of such dividend, the Applicable Conversion Price shall be
reduced so that the same shall equal the price determined by
multiplying the Applicable Conversion Price in effect immediately prior
to the effectiveness of the Applicable Conversion Price reduction
contemplated by this subparagraph (v) by a fraction of which the
numerator shall be the current market price per share (determined as
provided in subparagraph (vii) of this Section 13.03) of the Common
Stock on the date fixed for the payment of such distribution less the
amount of cash so distributed and not excluded as provided applicable
to one share of Common Stock and the denominator shall be such current
market price per share of the Common Stock, such reduction to become
effective immediately prior to the opening of business on the day
following the date fixed for the payment of such distribution;
provided, however, that in the event the portion of the cash so
distributed applicable to one share of Common Stock is equal to or
greater than the current market price per share (as defined in
subparagraph (vii) of this Section 13.03) of the Common Stock on the
record date mentioned above, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder of Securities
shall have the right to receive upon conversion the amount of cash such
Holder would have received had such Holder converted each Security
immediately prior to the record date for the distribution of the cash.
In the event that such dividend or distribution is not so paid or made,
the Applicable Conversion Price shall again be adjusted to be the
Applicable Conversion Price which would then be in effect if such
record date had not been fixed.
(vi) In case a tender or exchange offer (other than an
odd-lot offer) made by the Company or any Subsidiary of the Company for
all or any portion of the Company's Common Stock shall expire and such
tender or exchange offer shall involve the payment by the Company or
such Subsidiary of consideration per share of Common Stock having a
fair market value (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) at the last time (the "Expiration
Time") tenders or exchanges may be made pursuant to such tender or
exchange offer (as it shall have been amended) that exceeds 110% of the
current market price per share (determined as provided in subparagraph
(vii) of this Section 13.03) of the Common Stock on the Trading Day
next succeeding the
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Expiration Time, the Applicable Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the
Applicable Conversion Price in effect immediately prior to the
effectiveness of the Applicable Conversion Price reduction contemplated
by this subparagraph (vi) by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding (including any
tendered or exchanged shares) at the Expiration Time multiplied by the
current market price per share (determined as provided in subparagraph
(vii) of this Section 13.03) of the Common Stock on the Trading Day
next succeeding the Expiration Time and the denominator shall be the
sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the acceptance
(up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as
of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any
Purchased Shares) at the Expiration Time and the current market price
per share (determined as provided in subparagraph (vii) of this Section
13.03) of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction to become effective immediately prior
to the opening of business on the day following the Expiration Time.
(vii) For the purpose of any computation under
subparagraphs (ii), (iv), (v) and (vi) of this Section 13.03, the
current market price per share of Common Stock on any date in question
shall be deemed to be the average of the daily Closing Prices of the
Class A Common Stock for the ten consecutive Trading Days prior to the
earlier of the day in question and, if applicable, the day before the
"ex" date with respect to the issuance or distribution requiring such
computation; provided, however, that if another event occurs that would
require an adjustment pursuant to subparagraphs (i) through (vi) of
this Section 13.03, inclusive, the Board of Directors may make such
adjustments to the Closing Prices during such five Trading Day period
as it deems appropriate to effectuate the intent of the adjustments in
this Section 13.03, in which case any such determination by the Board
of Directors shall be set forth in a Board Resolution and shall be
conclusive. For purposes of this paragraph, the term "ex" date, (1)
when used with respect to any issuance or distribution, means the first
date on which the Class A Common Stock is quoted regular way on the New
York Stock Exchange Composite Tape or on such successor securities
exchange on which the Class A Common Stock may be quoted or listed or
in the relevant market from which the Closing Prices were obtained
without the right to receive such issuance or distribution, and (2)
when used with respect to any tender or exchange offer means the first
date on which the Class A Common Stock is quoted regular way on such
securities exchange or in such market after the Expiration Time of such
offer.
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(viii) The Company may make such reductions in the
Applicable Conversion Price, in addition to those required by
subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of this Section
13.03, as it considers to be advisable to avoid or diminish any income
tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax
purposes.
(ix) There shall also be no adjustment of the Applicable
Conversion Price in case of the issuance of any Common Stock (or
securities convertible into or exchangeable for Common Stock), except
as specifically described above. If any action would require adjustment
of the Applicable Conversion Price, pursuant to more than one of the
anti-dilution provisions set forth in this Article XIII, only one
adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to Holders. Furthermore,
no adjustment in the Applicable Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in the Applicable Conversion Price; provided, however,
that any adjustments which by reason of this sentence are not required
to be made shall be carried forward and taken into account in
determining whether any subsequent adjustment shall be required.
Section 13.04 Reclassification, Consolidation, Merger or Sale
of Assets. In the event that the Company shall be a party to any transaction
(including without limitation (a) any recapitalization or reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination of the Common Stock), (b) any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), (c) any sale or transfer of all or substantially all of the assets
of the Company or (d) any compulsory share exchange) (each of the events in the
preceding clauses (a) through (d) being referred to as a "Company Transaction"),
in each case, as a result of which shares of Common Stock shall be converted
into the right to receive other securities, cash or other property, then lawful
provision shall be made as part of the terms of such Company Transaction whereby
the Holder of each Security then outstanding shall have the right thereafter to
convert such Security only into (i) in the case of any Company Transaction other
than a Common Stock Fundamental Change, the kind and amount of securities, cash
and other property receivable upon the consummation of the Company Transaction
by a holder of that number of shares of Common Stock into which such Security
was convertible immediately prior to such transaction, after giving effect to
any adjustment in the Applicable Conversion Price required by the provisions of
Section 13.07(a)(i), and (ii) in the case of a Company Transaction involving a
Common Stock Fundamental Change, common stock of the kind received by holders of
Common Stock as a result of such Common Stock Fundamental Change in an amount
determined
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pursuant to the provisions of Section 13.07(a)(ii). Holders of the Securities
shall have no voting rights with respect to any Company Transaction described in
this Section 13.04.
The Company or the Person formed by such consolidation or
resulting from such merger or which acquired such assets or which acquires the
Company's shares, as the case may be, shall make provision in its certificate or
articles of incorporation or other constituent document to establish such right.
Such certificate or articles of incorporation or other constituent document
shall provide for adjustments which, for events subsequent to the effective date
of such certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article XIII. The above provisions shall similarly apply to
successive transactions of the foregoing type.
Section 13.05 Notice of Adjustments of Conversion Price.
Whenever the Applicable Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Applicable
Conversion Price and shall prepare a certificate signed by the Chief Financial
Officer or the Treasurer of the Company setting forth the adjusted Applicable
Conversion Price and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be filed with the
Trustee, the Conversion Agent, the Property Trustee and the transfer agent for
the Preferred Securities and the Securities; and
(b) a notice stating the Applicable Conversion Price has
been adjusted and setting forth the adjusted Applicable Conversion Price shall
as soon as practicable be mailed by the Company to all record holders of
Preferred Securities and the Securities at their last addresses as they appear
upon the stock transfer books of the Company and the books and records of the
Trust, respectively.
Section 13.06 Prior Notice of Certain Events. In case:
(i) the Company shall (1) declare any dividend (or any
other distribution) on its Common Stock, other than (A) a dividend
payable in shares of Common Stock or (B) a dividend payable in cash
that would not require an adjustment pursuant to Section 13.03(iv) or
(v) or (2) authorize a tender or exchange offer that would require an
adjustment pursuant to Section 13.03(vi);
(ii) the Company shall authorize the granting to all
holders of Common Stock of rights or warrants to subscribe for or
purchase any shares of stock of any class or series or of any other
rights or warrants;
(iii) of any reclassification of Common Stock (other
than a subdivision or combination of the outstanding Common Stock, or a
change in par value, or from par value to no par value, or from no par
value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the
Company shall be required, or of the sale or
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transfer of all or substantially all of the assets of the Company or of
any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall (a) if any Preferred Securities are outstanding, cause to
be filed with the transfer agent for the Preferred Securities, and shall cause
to be mailed to the holders of record of the Preferred Securities, at their last
addresses as they shall appear upon the books and records of the Trust, or (b)
shall cause to be mailed to all Holders at their last addresses as they shall
appear in the Security Register, at least fifteen days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record (if any) is to be taken for the purpose of such dividend,
distribution, rights or warrants or, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up (but no failure
to mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice).
Section 13.07 Adjustments in case of Fundamental Changes.
(a) Notwithstanding any other provision in this Article
XIII to the contrary, in the case of any Company Transaction involving a
Fundamental Change, the Applicable Conversion Price will be adjusted immediately
after such Fundamental Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the
Applicable Conversion Price of the Securities shall thereupon become
the lower of (A) the Applicable Conversion Price in effect immediately
prior to such Non-Stock Fundamental Change, but after giving effect to
any other prior adjustments effected pursuant to this Article XIII, and
(B) the result obtained by multiplying the greater of the Relevant
Price or the then applicable Reference Market Price by the Optional
Redemption Ratio (such product shall hereinafter be referred to as the
"Adjusted Relevant Price" or the "Adjusted Reference Market Price," as
the case may be); and
(ii) in the case of a Common Stock Fundamental Change,
the Applicable Conversion Price of the Securities in effect immediately
prior to such Common Stock Fundamental Change, but after giving effect
to any other prior adjustments effected pursuant to this Article XIII,
shall thereupon be adjusted by
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multiplying such Applicable Conversion Price by a fraction of which the
numerator shall be the Purchaser Stock Price and the denominator shall
be the Relevant Price; provided, however, that in the event of a Common
Stock Fundamental Change in which (A) 100% of the value of the
consideration received by a holder of Class A Common Stock is common
stock of the successor, acquiror or other third party (and cash, if
any, is paid only with respect to any fractional interests in such
common stock resulting from such Common Stock Fundamental Change) and
(B) all of the Class A Common Stock shall have been exchanged for,
converted into or acquired for common stock (and cash with respect to
fractional interests) of the successor, acquiror or other third party,
the Applicable Conversion Price of the Securities in effect immediately
prior to such Common Stock Fundamental Change shall thereupon be
adjusted by multiplying such Applicable Conversion Price by a fraction
of which the numerator shall be one and the denominator shall be the
number of shares of common stock of the successor, acquiror, or other
third party received by a stockholder for one share of Class A Common
Stock as a result of such Common Stock Fundamental Change.
(b) Definitions. The following definitions shall apply
to terms used in this Article XIII:
(1) "Closing Price" of any security on any day shall
mean on any day the last reported sale price of such security on such
day, or in case no sale takes place on such day, the average of the
closing bid and asked prices in each case on the principal national
securities exchange on which such securities are listed or admitted to
trading or, if not listed or admitted to trading on any national
securities exchange, on the NNM or, if such securities are not listed
or admitted to trading on any national securities exchange or quoted on
the NNM, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange
member firm selected by the Company for such purpose.
(2) "Common Stock Fundamental Change" shall mean any
Fundamental Change in which more than 50% of the value (as determined
in good faith by the Board of Directors) of the consideration received
by holders of Class A Common Stock consists of common stock that for
each of the ten consecutive Trading Days immediately prior to the
Entitlement Date has been admitted for listing or admitted for listing
subject to notice of issuance on a national securities exchange or
quoted on the NNM; provided, however, that a Fundamental Change shall
not be a Common Stock Fundamental Change unless either (i) the Company
continues to exist after the occurrence of such Fundamental Change and
the outstanding Preferred Securities continue to exist as outstanding
Preferred Securities, or (ii) not later than the occurrence of such
Fundamental Change, the outstanding Securities are converted into or
exchanged for debentures of a corporation succeeding to the business of
the Company, which debentures have terms substantially similar to those
of the Securities.
72
<PAGE> 79
(3) "Entitlement Date" shall mean the record date for
determination of the holders of Common Stock entitled to receive
securities, cash or other property in connection with a Non-Stock
Fundamental Change or a Common Stock Fundamental Change or, if there is
no such record date, the date upon which holders of Class A Common
Stock shall have the right to receive such securities, cash or other
property.
(4) "Fundamental Change" shall mean the occurrence of
any transaction or event in connection with a plan pursuant to which
all or substantially all of the Class A Common Stock shall be exchanged
for, converted into, acquired for or constitute solely the right to
receive securities, cash or other property (whether by means of an
exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise);
provided, however, in the case of a plan involving more than one such
transaction or event, for purposes of adjustment of the Applicable
Conversion Price, such Fundamental Change shall be deemed to have
occurred when substantially all of the Class A Common Stock of the
Company shall be exchanged for, converted into, or acquired for or
constitute solely the right to receive securities, cash or other
property, but the adjustment shall be based upon the highest weighted
average per share consideration that a holder of Class A Common Stock
could have received in such transactions or events as a result of which
more than 50% of the Class A Common Stock of the Company shall have
been exchanged for, converted into, or acquired for or constitute
solely the right to receive securities, cash or other property.
(5) "Non-Stock Fundamental Change" shall mean any
Fundamental Change other than a Common Stock Fundamental Change.
(6) "Optional Redemption Ratio" means a fraction of
which the numerator shall be $50 and the denominator will be the then
current Optional Redemption Price or, prior to October 3, 2002, an
amount per Security determined by the Company in its sole discretion,
after consultation with an investment banking firm, to be the
equivalent of the hypothetical redemption price that would have been
applicable if the Securities had been redeemable during such period.
(7) "Purchaser Stock Price" shall mean, with respect to
any Common Stock Fundamental Change, the average of the daily Closing
Prices of the common stock received in such Common Stock Fundamental
Change for the ten (10) consecutive Trading Days prior to and including
the Entitlement Date, as adjusted in good faith by the Board of
Directors to appropriately reflect any of the events referred to in
subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of Section 13.03.
(8) "Reference Market Price" shall initially mean on the
date of original issuance of the Securities, $_____ (which is an amount
equal to 66-2/3%
73
<PAGE> 80
of the last reported sale price for the Class A Common Stock on the New
York Stock Exchange Composite Tape on ________ __, 1999 and, in the
event of any adjustment to the Applicable Conversion Price, other than
as a result of a Non-Stock Fundamental Change, the Reference Market
Price shall also be adjusted so that the ratio of the Reference Market
Price to the Applicable Conversion Price after giving effect to any
such adjustment shall always be the same as the ratio of $______ to the
Initial Conversion Price.
(9) "Relevant Price" shall mean (i) in the event of a
Non-Stock Fundamental Change in which the holders of the Class A Common
Stock receive only cash, the amount of cash received by a stockholder
for one share of Class A Common Stock and (ii) in the event of any
other Non-Stock Fundamental Change or any Common Stock Fundamental
Change, the average of the daily Closing Prices of the Class A Common
Stock for the ten (10) consecutive Trading Days prior to and including
the Entitlement Date, in each case, as adjusted in good faith by the
Company to appropriately reflect any of the events referred to in
subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of Section 13.03.
(10) "Trading Day" shall mean a day on which securities
are traded on the national securities exchange or quotation system used
to determine the Closing Price.
Section 13.08 Dividend or Interest Reinvestment Plans.
(a) Notwithstanding the foregoing provisions, the
issuance of any shares of Common Stock pursuant to any present or future plan
providing for the reinvestment of dividends or interest payable on securities of
the Company and the investment of additional optional amounts in shares of
Common Stock under any such plan, and the issuance of any shares of Common Stock
or options or rights to purchase such shares pursuant to any employee benefit
plan or program of the Company or pursuant to any option issued, shall not be
deemed to constitute an issuance of Common Stock or exercisable, exchangeable or
convertible securities by the Company to which any of the adjustment provisions
described above applies.
(b) There shall also be no adjustment of the Applicable
Conversion Price in case of the issuance of any stock (or securities convertible
into or exchangeable for stock) of the Company except as specifically described
in this Article XIII.
Section 13.09 Certain Additional Rights. Notwithstanding any
other provision of this Article XIII to the contrary, rights, warrants,
evidences of indebtedness, other securities, cash or other assets (including,
without limitation, any rights distributed pursuant to any stockholder rights
plan) shall be deemed not to have been distributed for purposes of this Article
XIII if the Company makes proper provision so that each Holder who converts a
Security (or any portion thereof) after the date fixed for determination of
stockholders entitled to receive such distribution shall be entitled to receive
upon such
74
<PAGE> 81
conversion, in addition to the shares of Common Stock issuable upon such
conversion, the amount and kind of such distributions that such Holder would
have been entitled to receive if such Holder had, immediately prior to such
determination date, converted such Security into Common Stock.
Section 13.10 Trustee not Responsible for Determining
Conversion Price or Adjustments. Neither the Trustee nor any Conversion Agent
shall at any time be under any duty or responsibility to any Holder of any
Security to determine whether any facts exist which may require any adjustment
of the Applicable Conversion Price, or with respect to the nature or extent of
any such adjustment when made, or with respect to the method employed, or
whether any supplemental indenture needs to be entered into. Neither the Trustee
nor any Conversion Agent shall be accountable with respect to the validity or
value (or the kind or amount) of any shares of Common Stock or of any securities
or property, which may at any time be issued or delivered upon the conversion of
any Security; and neither the Trustee nor any Conversion Agent makes any
representation with respect thereto. Neither the Trustee nor any Conversion
Agent shall be responsible for any failure of the Company to make any cash
payment or to issue, transfer or deliver any shares of Common Stock or stock
certificates or other securities or property upon the surrender of any Security
for the purpose of conversion, or, except as expressly herein provided, to
comply with any of the covenants of the Company contained in Article X or this
Article XIII.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
Section 14.01 No Recourse. No recourse under or upon any
obligation, covenant or agreement of this Indenture, or of any Security, or for
any claim based thereon or otherwise in respect thereof, shall be had against
any incorporator, stockholder, officer or director, past, present or future as
such, of the Company or of any predecessor or successor corporation, either
directly or through the Company or any such predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, the incorporators, stockholders, officers or
directors as such, of the Company or of any predecessor or successor
corporation, or any of them, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or in any of the Securities or implied therefrom;
and that any and all such personal liability of every name and nature, either at
common law or in equity or by constitution or statute, of, and any and all such
rights and claims against, every such incorporator, stockholder, officer or
director as such, because of the creation of the indebtedness hereby authorized,
or under or by reason of the obligations, covenants or agreements contained in
this Indenture or in any of the Securities or implied therefrom, are hereby
expressly waived and released as a condition
75
<PAGE> 82
of, and as a consideration for, the execution of this Indenture and the issuance
of such Securities.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
76
<PAGE> 83
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
Dated: October __, 1999
ENTERCOM COMMUNICATIONS CORP.
By:
-----------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
as Trustee
By:
-----------------------------------------
Name:
Title:
77
<PAGE> 84
EXHIBIT A
FORM OF SECURITY
[FORM OF FACE OF SECURITY]
[Include if a Global Security: THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A
NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR A SECURITY
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO
A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) TO ENTERCOM COMMUNICATIONS CORP. OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
A-1
<PAGE> 85
ENTERCOM COMMUNICATIONS CORP.
CONVERTIBLE SUBORDINATED DEBENTURE DUE 2014
No. _________ $_______
CUSIP No. 293639 AA 8
ENTERCOM COMMUNICATIONS CORP., a corporation duly organized
and existing under the laws of the State of Pennsylvania (herein called the
"Company," which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
____________________, or registered assigns, the principal sum [indicated on
Schedule A hereof](1) [of Dollars](2) ($) on ________ __, ____.
Interest Payment Dates: March 31, June 30, September 30 and
December 31, commencing December 31, 1999.
Regular Record Dates: the close of business on the fifteenth
day immediately preceding each Interest Payment Date, commencing December 15,
1999.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be signed manually or by facsimile by its duly authorized officers and a
facsimile of its corporate seal to be affixed hereto or imprinted hereon.
Dated: _____________ __, 1999
ENTERCOM COMMUNICATIONS CORP.
By:
-----------------------------------------
Name:
Title:
- -----------------
(1) Applicable to Global Securities only.
(2) Applicable to certificated Securities only.
A-2
<PAGE> 86
[Seal]
Attest:
- ----------------------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned indenture.
Dated: __________ __, 1999
WILMINGTON TRUST COMPANY,
as Trustee
By:
---------------------------------------
Authorized Signatory
A-3
<PAGE> 87
[FORM OF REVERSE OF SECURITY]
ENTERCOM COMMUNICATIONS CORP.
CONVERTIBLE SUBORDINATED DEBENTURE DUE 2014
1. Interest. Entercom Communications Corp.,(3) a Pennsylvania
corporation (the "Company"), is the issuer of this Convertible Subordinated
Debenture Due 2014 (the "Security") limited in aggregate principal amount to
$__________, issued under the Indenture hereinafter referred to. The Company
promises to pay interest on the Securities in cash from ________ __, ____ or
from the most recent interest payment date to which interest has been paid or
duly provided for, quarterly (subject to deferral for up to 20 consecutive
quarters as described in Section 3 hereof) in arrears on March 31, June 30,
September 30, and December 31 of each year (each such date, an "Interest Payment
Date"), commencing December 31, 1999, at the Applicable Rate, plus Additional
Sums, if any, until the principal hereof shall have become due and payable.
The amount of interest payable for any period will be computed
on the basis of twelve 30-day months and a 360-day year. To the extent lawful,
the Company shall pay interest on overdue installments of interest (without
regard to any applicable grace period) at the rate borne by the Securities,
compounded quarterly. Any interest paid on this Security shall be increased to
the extent necessary to pay Additional Sums as set forth in this Security.
2. Additional Sums. The Company shall pay to Entercom
Communications Capital Trust (and its permitted successors or assigns under the
Declaration) (the "Trust") such additional amounts as may be necessary in order
that the amount of dividends or other distributions then due and payable by the
Trust on the Preferred Securities that at any time remain outstanding in
accordance with the terms thereof shall not be reduced as a result of any
additional taxes, duties and other governmental charges of whatever nature
(other than withholding taxes) imposed by the United States or any other taxing
authority.
3. Extension Of Interest Payment Period. So long as no Event
of Default has occurred and is continuing, the Company shall have the right, at
any time during the term of this Security, from time to time to defer payments
of interest by extending the interest payment period of such Security for up to
20 consecutive quarters (a "Deferral Period"); provided that no Deferral Period
may extend beyond September 30, 2014. To the extent permitted by applicable law,
interest, the payment of which has been deferred because of the extension of the
interest payment period pursuant to Section 3.13 of the Indenture, will bear
interest thereon at the Applicable Rate compounded
- -----------------
(3) All terms used in this Security which are defined in the Indenture or in the
Declaration referred to herein shall have the meanings assigned to them in the
Indenture or the Declaration, as the case may be.
1
<PAGE> 88
quarterly for each quarter of the Deferral Period ("Compounded Interest"). On
the applicable Payment Resumption Date, the Company shall pay all interest then
accrued and unpaid on the Securities, including any Compounded Interest that
shall be payable to the Holders of the Securities in whose names the Securities
are registered in the Security Register on the record date fixed for such
Payment Resumption Date. Before the termination of any Deferral Period, the
Company may further extend such period as provided in the Indenture, provided
that such period together with all such further extensions thereof shall not
exceed 20 consecutive quarters or extend beyond the Stated Maturity of the
Security. Upon the termination of any Deferral Period and upon the payment of
all Compounded Interest and Additional Sums (together, "Additional Payments"),
if any, then due, the Company may commence a new Deferral Period, subject to the
foregoing requirements. No interest shall be due and payable during a Deferral
Period except on the applicable Payment Resumption Date.
The Company shall give the Holder of the Security and the
Trustee written notice (a "Deferral Notice") of its selection of a Deferral
Period at least ten days prior to the record date for any distributions that
would have been payable on the Trust Securities except for the decision to begin
or extend such Deferral Period. The Company may elect to pay all interest then
accrued and unpaid on the Securities, including Compound Interest, on an
Interest Payment Date prior to its most recently established Payment Resumption
Date, provided that the Company gives the Holder of the Security and the Trustee
a new Deferral Notice setting forth the revised Payment Resumption Date at least
three Business Days prior to the Regular Record Date for such revised Payment
Resumption Date.
The quarter in which any Deferral Notice is given pursuant to
the second paragraph of this Section 3 shall be counted as one of the 20
quarters permitted in the maximum Deferral Period permitted under the first
paragraph of this Section 3.
4. Method of Payment. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the regular
record date for such interest installment, which shall be the close of business
on the fifteenth day of the month in which the applicable Interest Payment Date
falls (the "Regular Record Date"), commencing ________ __, ____. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities not less than ten days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture, provided that any such payment will be made in
such coin or currency of the United States of America which at the time of
payment is a legal tender for payment of public and private debts.
2
<PAGE> 89
Payment of the principal of and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
New York, New York, in coin or currency of the United States of America which at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at any time that the Property Trustee is not the sole
holder of the Securities, payment of interest may, at the option of the Company,
be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or by wire transfer.
5. Paying Agent and Security Registrar. The Trustee will act
as Paying Agent, Security Registrar and Conversion Agent. The Company may change
any Paying Agent, Security Registrar, co-registrar or Conversion Agent without
prior notice. The Company or any of its Affiliates may act in any such capacity.
6. Indenture. The Company issued the Securities under an
indenture, dated as of October __, ____ (the "Indenture"), between the Company
and Wilmington Trust Company, as Trustee (herein called the "Trustee," which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Trustee, the Company and the Holders of the Securities, and of the terms
upon which the Securities are, and are to be, authenticated and delivered. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) ("Trust Indenture Act") as in effect on the date of the Indenture.
The Securities are subject to, and qualified by, all such terms, certain of
which are summarized herein, and Holders are referred to the Indenture and the
Trust Indenture Act for a statement of such terms. The Securities are unsecured
general obligations of the Company limited to up to $____________ and
subordinated in right of payment to all existing and future Secured Senior Debt
of the Company. No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
7. Optional Redemption. The Securities are redeemable at the
Company's option (an "Optional Redemption") in whole or in part, at any time or
from time to time, on or after October 3, 2002, at a Redemption Price equal to
the prices per $50 principal amount of Securities set forth in the table below,
plus any accrued and unpaid interest, including Additional Payments, if any, to
the Redemption Date, if redeemed during the 12-month period ending September 30:
3
<PAGE> 90
<TABLE>
<CAPTION>
PRICE PER $50
YEAR PRINCIPAL AMOUNT
--------------------------- ----------------
<S> <C>
2003....................... $
------------
2004....................... $
------------
2005....................... $
------------
2006....................... $
------------
</TABLE>
and thereafter at $50 per $50 principal amount of the Securities plus, in each
case, any accrued and unpaid interest, including Additional Payments, if any, to
the Redemption Date.
8. Optional Redemption Upon Tax Event. Subject to the
conditions set forth in the Indenture, the Securities are subject to redemption
in whole, but not in part, if a Tax Event shall occur and be continuing, at any
time within 90 days following the occurrence of such Tax Event, at a Redemption
Price equal to $50 per $50 principal amount thereof, plus accrued but unpaid
interest, including Additional Payments, if any, to the Redemption Date.
In lieu of the foregoing, the Company also shall have the
option of causing the Securities to remain outstanding and pay Additional Sums
on the Securities.
9. Notice of Redemption. Notice of redemption will be mailed
by first-class mail, postage prepaid, at least 30 days (or 20 days, in the case
of a redemption upon the occurrence of a Tax Event), but not more than 60 days
before the Redemption Date to each Holder of the Securities to be redeemed at
such Holder's address appearing in the Security Register.
10. No Sinking Fund. There are no sinking fund payments with
respect to the Securities.
11. Payment to Registered Holders; Cessation of Interest
Accrual Upon Redemption. If this Security is redeemed subsequent to a Regular
Record Date with respect to any Interest Payment Date specified above and on or
prior to such Interest Payment Date, then any accrued interest will be paid to
the person in whose name this Security is registered at the close of business on
such record date. On or after the Redemption Date, interest will cease to accrue
on the Securities, or portion thereof, called for redemption.
12. Subordination. The payment of the principal of, interest
on or any other amounts due on the Securities is subordinated in right of
payment to all existing and future Secured Senior Debt (as defined below) of the
Company, as described in the Indenture. Each Holder, by accepting a Security,
agrees to such subordination and authorizes and directs the Trustee on its
behalf to take such action as may be necessary or appropriate to effectuate the
subordination so provided and appoints the Trustee as its attorney-in-fact for
such purpose.
4
<PAGE> 91
"Secured Senior Debt" means Senior Debt that is secured by any
lien, pledge, charge, encumbrance, mortgage, deed of trust, hypothecation,
assignment or security interest with respect to our assets having a fair market
value at the time of the grant thereof (in the judgment of the Board of
Directors) equal to not less than the amount of such Senior Debt, including,
without limitation, Secured Senior Debt under the Senior Credit Agreement.
"Senior Debt" means (i) all of the Company's obligations under
the Senior Credit Agreement, including whether as an obligor, guarantor or
otherwise, without limitation, principal (including, without limitation,
reimbursement obligations in respect of letters of credit (whether or not drawn)
and obligations to cash collateralize letters of credit), premium (if any),
interest (including, without limitation, interest accruing subsequent to the
filing of, or which would have accrued but for the filing of, a petition for
bankruptcy, whether or not the interest is an allowable claim in the bankruptcy
proceeding), fees, indemnifications, expenses and other amounts payable pursuant
thereto; (ii) the principal of, and premium and interest, if any, on all
indebtedness of the Company for money borrowed, whether outstanding on the date
of execution of the Indenture or thereafter created, assumed or incurred, (iii)
all obligations to make payment pursuant to the terms of financial instruments,
such as (a) securities contracts and foreign currency exchange contracts, (b)
derivative instruments, such as swap agreements (including interest rate and
foreign exchange rate swap agreements), cap agreements, floor agreements, collar
agreements, interest rate agreements, foreign exchange agreements, options,
commodity futures contracts and commodity options contracts, and (c) similar
financial instruments; except, in the case of (i) and (ii) above, such
indebtedness and obligations that are expressly stated to rank junior in right
of payment to, or pari passu in right of payment with, the Securities, (iv)
indebtedness or obligations of others of the kind described in (i), (ii) and
(iii) above for the payment of which the Company is responsible or liable as
guarantor or otherwise, and (v) any deferrals, renewals or extensions of any
Senior Debt that is secured, in whole or in part by the Company's assets;
provided, however that Senior Debt shall not be deemed to include (a) any Debt
of the Company which, when incurred and without respect to any election under
Section 1111(b) of the United States Bankruptcy Code of 1978, was without
recourse to the Company, (b) trade accounts payable in the ordinary course of
business, (c) any Debt of the Company to any of its subsidiaries or (d) Debt to
any employee of the Company.
"Senior Credit Agreement" means (A) that certain Loan
Agreement, dated February 13, 1998, as amended on October 8, 1998 and as further
amended on July 20, 1999, by and among Entercom, as the borrower, Key Corporate
Capital Inc., as administrative agent and document agent, Bank of America
National Trust & Savings Association, as syndication agent, and the financial
institutions listed therein, as amended, including, without limitation, any
related notes, letters of credit, guarantees, collateral documents, instruments
and agreements executed in connection therewith, and, in each case, as amended,
amended and restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time, and (B) any other debt or credit
5
<PAGE> 92
facility or commercial paper facility providing for revolving credit loans, term
loans, accounts receivable financing (including through the sale of accounts
receivable to such lenders or to special purpose entities formed to borrow from
such lenders against such accounts receivable), letters of credit or other form
of financing, in each case, as amended, restated, supplemented, extended,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time, including, in the case of clause (A) and clause (B), any such
amendment, restatement, supplement, extension, modification, renewal, refunding,
replacement or refinancing, (1) extending or shortening the maturity of any
obligation incurred thereunder or contemplated thereby, (2) adding or deleting
borrowers or guarantors thereunder and (3) increasing the amount of credit
extended, or available to be extended, thereunder.
13. Conversion. The Holder of any Security has the right,
exercisable at any time prior to 5:00 p.m., New York City time, on September 30,
2014, to convert the principal amount thereof (or any portion thereof that is an
integral multiple of $50) into shares of Common Stock at the initial
conversation rate of ______ shares of Class A Common Stock for each $50 in
aggregate principal amount of Securities (equivalent to a conversion price of
$________ per share of Class A Common Stock of the Company). The conversion
ratio and equivalent conversion price in effect at any time are known as the
"Applicable Conversion Price" and the "Applicable Conversion Ratio,"
respectively, and are subject to adjustment under certain circumstances. If a
Security is called for redemption, the conversion right will terminate at the
close of business on the Business Day immediately preceding the corresponding
Redemption Date, unless the Company defaults in making the payment due upon
redemption.
To convert a Security, a Holder must (1) complete and sign a
conversion notice substantially in the form attached hereto, (2) surrender the
Security to a Conversion Agent, (3) furnish appropriate endorsements or transfer
documents if required by the Security Registrar or Conversion Agent and (4) pay
any transfer or similar tax, if required. Upon conversion, no adjustment or
payment will be made for interest or dividends, but if any Holder surrenders a
Security for conversion after the close of business on the Regular Record Date
for the payment of an installment of interest and prior to the opening of
business on the next Interest Payment Date, then, notwithstanding such
conversion, the interest payable on such Interest Payment Date will be paid to
the registered Holder of such Security on such Regular Record Date. In such
event, such Security, when surrendered for conversion, need not be accompanied
by payment of an amount equal to the interest payable on such Interest Payment
Date on the portion so converted. The number of shares issuable upon conversion
of a Security is determined by dividing the principal amount of the Security
converted by the Applicable Conversion Price in effect on the Conversion Date.
No fractional shares will be issued upon conversion but a cash adjustment will
be made for any fractional interest. The outstanding principal amount of any
Security shall be reduced by the portion of the principal amount thereof
converted into shares of Class A Common Stock.
14. Registration, Transfer, Exchange And Denominations. As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer
6
<PAGE> 93
of this Security is registrable in the Security Register, upon surrender of this
Security for registration of transfer at the office or agency of the Company in
Bala Cynwyd, Pennsylvania, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
The Securities are issuable only in registered form without
coupons in denominations of $50 and integral multiples thereof. No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Prior to due presentment of
this Security for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not this
Security be overdue, and neither the Company, the Trustee nor any such agent
shall be affected by notice to the contrary. In the event of redemption or
conversion of this Security in part only, a new Security or Securities for the
unredeemed or unconverted portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
15. Persons Deemed Owners. Except as provided in Section 3
hereof, the registered Holder of a Security may be treated as its owner for all
purposes.
16. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company at its written request. After that, Holders of
Securities entitled to the money must look to the Company for payment unless an
abandoned property law designates another Person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
17. Events of Default and Remedies. The Securities shall have
the Events of Default as set forth in Section 5.01 of the Indenture. Subject to
certain limitations in the Indenture, if an Event of Default occurs and is
continuing, the Trustee by notice to the Company or the Holders of at least 25%
in aggregate principal amount of the Outstanding Securities by notice to the
Company and the Trustee may declare all amounts payable on the Securities
(including any Additional Payments) to be due and payable immediately; provided
that, if the Property Trustee is the sole Holder of the Security and if upon an
Event of Default, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the then outstanding Securities fail to declare the
principal of all the Securities to be immediately due and payable, the holders
of at least 25% in aggregate liquidation amount of Preferred Securities then
outstanding shall have such right by a notice in writing to the Company and the
Trustee; and upon any such declaration such principal and all accrued interest
shall become immediately due and payable; and provided further that the payment
of principal and interest on such Securities shall remain subordinated to the
extent provided in the Indenture.
7
<PAGE> 94
In the case of an Event of Default, the Holders of a majority
in principal amount of the Outstanding Securities by written notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration.
Holders may not enforce the Indenture or the Securities except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Securities issued under the
Indenture may direct the Trustee in its exercise of any trust or power. The
Company must furnish annually compliance certificates to the Trustee. The above
description of Events of Default and remedies is qualified by reference to, and
subject in its entirety by, the more complete description thereof contained in
the Indenture.
18. Amendments, Supplements and Waivers. The Indenture
permits, subject to the rights of the holders of Preferred Securities set forth
therein and in the Declaration and with certain other exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company, and the rights of the Holders of the Securities
under the Indenture, at any time, by the Company and the Trustee with the
consent of the Holders of a majority in aggregate principal amount of the
Securities at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Securities at the time Outstanding, on behalf of the Holders of all the
Securities, subject to the rights of the holders of the Preferred Securities set
forth therein and in the Declaration, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange therefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security. The above
description of amendments, supplements and waivers is qualified by reference to,
and subject in its entirety, by the more complete description thereof contained
in the Indenture.
19. Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of the
Securities and may otherwise deal with the Company or an Affiliate with the same
rights it would have, as if it were not a Trustee, subject to certain
limitations provided for in the Indenture and in the Trust Indenture Act. Any
Agent may do the same with like rights.
20. No Recourse Against Others. A director, officer, employee
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of, or by reason of such obligations or their
creation. Each Holder of the Securities by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
8
<PAGE> 95
21. Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
22. Authentication. The Securities shall not be valid until
authenticated by the manual signature of an authorized officer of the Trustee or
an authenticating agent.
23. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
24. The Company will furnish to any Holder of the Securities
upon written request and without charge a copy of the Indenture. Request may be
made to:
Entercom Communications Corp.
409 City Avenue, Suite 401
Bala Cynwyd, Pennsylvania 19004
Attention: John C. Donlevie, Esq.
9
<PAGE> 96
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we)
assign and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ____________________________________________________ to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
- --------------------------------------------------------------------------------
Date:
Your Signature:
-----------------------------------------------------------------
(Sign exactly as your name appears on the face of this Note)
SIGNATURE GUARANTEE(4)
- --------------------------------------------------------------------------------
- -------------------
(4) (Signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
10
<PAGE> 97
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount of this Global Security shall be
$_______. The following increases or decreases in the principal amount of this
Global Security have been made:
<TABLE>
<CAPTION>
Amount Of Decrease In Signature Of
Principal Amount Of This Authorized
Global Security Amount Of Increase Principal Amount Of Signatory Of
Including Increase Upon In Principal This Global Security Trustee Or
Exercise Of Amount Of This Following Such Securities
Date Made Over-Allotment Option Global Security Decrease (Or Increase) Custodian
- ----------- ------------------------ ------------------ ---------------------- ------------
<S> <C> <C> <C> <C>
</TABLE>
11
<PAGE> 98
ELECTION TO CONVERT
To: Entercom Communications Corp.
The undersigned owner of this Security hereby irrevocably
exercises the option to convert this Security, or the portion below designated,
into Class A Common Stock of ENTERCOM COMMUNICATIONS CORP. in accordance with
the terms of the Indenture referred to in this Security, and directs that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Date:
in whole __
Portions of Security to be converted ($50 or integral multiples thereof):
$
-----------------------------------
Signature (for conversion only)
- ------------------------------------
Please Print or Typewrite Name and Address, Including Zip Code, and Social
Security or Other Identifying Number
-------------------------------------------
- --------------------------------------------------------------------------------
Signature Guarantee:(5)
- ------------------------------------
- ----------------
(5) (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
12
<PAGE> 1
Exhibit 4.06
================================================================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
BETWEEN
ENTERCOM COMMUNICATIONS CORP.
AND
WILMINGTON TRUST COMPANY
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE(1)
<TABLE>
<CAPTION>
SECTION OF SECTION OF
TRUST INDENTURE ACT GUARANTEE
OF 1939. AS AMENDED AGREEMENT
- ------------------- -----------------
<S> <C>
310(a)...................................................... 4.01(a)
310(b)...................................................... 4.01(c), 2.08
310(c)...................................................... Inapplicable
311(a)...................................................... 2.02(b)
311(b)...................................................... 2.02(b)
311(c)...................................................... Inapplicable
312(a)...................................................... 2.02(a)
312(b)...................................................... 2.02(b)
313......................................................... 2.03
314(a)...................................................... 2.04
314(b)...................................................... Inapplicable
314(c)...................................................... 2.05
314(d)...................................................... Inapplicable
314(e)...................................................... 1.01, 2.05, 3.02
314(f)...................................................... 2.01, 3.02
315(a)...................................................... 3.01(d)
315(b)...................................................... 2.07
315(c)...................................................... 3.01
315(d)...................................................... 3.01(d)
316(a)...................................................... 1.01, 2.06, 5.04
316(b)...................................................... 5.03
316(c)...................................................... 8.02
317(a)...................................................... Inapplicable
317(b)...................................................... Inapplicable
318(a)...................................................... 2.01(b)
318(b)...................................................... 2.01
318(c)...................................................... 2.01(a)
</TABLE>
- --------
(1) This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE> 3
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INTERPRETATION
<TABLE>
<S> <C>
SECTION 1.01 Definitions and Interpretation................................ 1
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01 Trust Indenture Act; Application.............................. 5
SECTION 2.02 Lists of Holders of Securities................................ 5
SECTION 2.03 Reports by the Guarantee Trustee.............................. 5
SECTION 2.04 Periodic Reports to Guarantee Trustee......................... 5
SECTION 2.05 Evidence of Compliance with Conditions Precedent.............. 6
SECTION 2.06 Events of Default; Waiver..................................... 6
SECTION 2.07 Event of Default; Notice...................................... 6
SECTION 2.08 Conflicting Interests......................................... 6
ARTICLE III
POWERS, DUTIES AND RIGHTS OF GUARANTEE Thus
SECTION 3.01 Powers and Duties of the Guarantee Trustee.................... 7
SECTION 3.02 Certain Rights of Guarantee Trustee .......................... 8
SECTION 3.03 Not Responsible for Recitals or Issuance of Guarantee......... 10
SECTION 3.04 Compensation; Reimbursement; Indemnity........................ 10
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01 Guarantee Trustee; Eligibility................................ 10
SECTION 4.02 Appointment, Removal and Resignation of Guarantee Trustee..... 11
ARTICLE V
GUARANTEE
SECTION 5.01 Guarantee..................................................... 12
SECTION 5.02 Subordination................................................. 12
SECTION 5.03 Waiver of Notice and Demand................................... 12
SECTION 5.04 Obligations Not Affected...................................... 12
SECTION 5.05 Rights of Holders............................................. 13
SECTION 5.06 Guarantee of Payment.......................................... 14
SECTION 5.07 Subrogation................................................... 14
SECTION 5.08 Independent Obligations....................................... 14
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
SECTION 5.09 Conversion.................................................... 14
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01 Limitation of Transactions.................................... 14
SECTION 6.02 Ranking....................................................... 15
ARTICLE VII
TERMINATION
SECTION 7.01 Termination................................................... 15
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01 Exculpation................................................... 16
SECTION 8.02 Indemnification............................................... 16
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Successors and Assigns........................................ 17
SECTION 9.02 Amendments.................................................... 17
SECTION 9.03 Notices....................................................... 17
SECTION 9.04 Benefit....................................................... 18
SECTION 9.05 Governing Law................................................. 18
</TABLE>
<PAGE> 5
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT ("Guarantee"),
dated as of October __, 1999, is executed and delivered by ENTERCOM
COMMUNICATIONS CORP., a Pennsylvania corporation (the "Guarantor"), and
Wilmington Trust Company, a Delaware banking corporation, as trustee (the
"Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of ENTERCOM
COMMUNICATIONS CAPITAL TRUST, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of October __, 1999, among the trustees of
the Issuer named therein, the Guarantor, as sponsor, and the holders from time
to time of undivided beneficial interests in the assets of the Issuer, the
Issuer is issuing on the date hereof 3,000,000 TIDES, having an aggregate stated
liquidation amount of $150,000,000, designated the __% Convertible Preferred
Securities, Term Income Deferrable Equity Securities (TIDES)(SM) (liquidation
amount $50 per Preferred Security) (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the
TIDES(SM), the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Guarantee, to pay on a subordinated basis to the
Holders the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein; and
WHEREAS, the Guarantor is also executing and delivering a
guarantee agreement (the "Common Securities Guarantee") in substantially
identical terms to this Guarantee for the benefit of the holders of the Common
Securities (as defined herein), except that if a Debenture Event of Default or a
Declaration Event of Default (each as defined herein) (or an event that, with
the passage of time, would become such a Debenture Event of Default or
Declaration Event of Default) shall have occurred and be continuing, the rights
of holders of the Common Securities to receive Guarantee Payments under the
Common Securities Guarantee are subordinated to the rights of Holders to receive
Guarantee Payments under this Guarantee.
NOW, THEREFORE, in consideration of the purchase by each
Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Guarantee for
the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01 Definitions and Interpretation.
In this Guarantee, unless the context otherwise requires:
<PAGE> 6
(a) capitalized terms used in this Guarantee but not defined
in the preamble above have the respective meanings assigned to them in this
Section 1.01; terms defined in the Declaration as at the date of execution of
this Guarantee have the same meaning when used in this Guarantee unless
otherwise defined in this Guarantee;
(b) a term defined anywhere in this Guarantee has the same
meaning throughout;
(c) all references to "the Guarantee" or "this Guarantee" are
to this Guarantee as modified, supplemented or amended from time to time;
(d) all references in this Guarantee to Articles and Sections
are to Articles and Sections of this Guarantee unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee unless otherwise defined in this Guarantee
or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice
versa.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Common Securities" means the convertible common securities
(liquidation amount $50 per common security) representing common undivided
beneficial interests in the assets of the Issuer.
"Covered Person" means any Holder or beneficial owner of
Preferred Securities.
"Debenture Event of Default" means an Event of Default as
defined in the Indenture.
"Debentures" means the series of convertible junior
subordinated debt securities of the Guarantor designated the Convertible Junior
Subordinated Debentures Due 2014 held by the Property Trustee (as defined in the
Indenture) of the Issuer,
"Declaration Event of Default" means an Event of Default as
defined in the Declaration.
"Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Guarantee; provided, however, that
except with respect to
2
<PAGE> 7
a default in payment of any Guarantee Payment, the Guarantor shall have received
notice of default and shall not have cured such default within 60 days after
receipt of such notice.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by or on behalf of the Issuer: (i) any accrued and
unpaid Distributions (as defined in the Declaration) that are required to be
paid on the Preferred Securities, to the extent that the Issuer shall have funds
on hand available therefor at such time, (ii) the applicable Redemption Price
(as defined in the Indenture) with respect to Preferred Securities called for
redemption by the Issuer, to the extent that the Issuer has funds on hand
available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding up or liquidation of the Issuer (other than in connection
with the distribution of Debentures to the Holders or the redemption of all the
Preferred Securities), the lesser of (a) the aggregate liquidation amount
thereof plus accrued and unpaid Distributions thereon to the date of payment
(such amount being the "Liquidation Distribution") to the extent the Issuer has
funds available therefor and (b) the amount of assets of the Issuer remaining
available for distribution to Holders upon liquidation of the Issuer after
satisfaction of liabilities to creditors of the Issuer as required by applicable
law.
"Guarantee Trustee" means Wilmington Trust Company until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee and thereafter means each such Successor
Guarantee Trustee.
"Holder" means any holder, as registered on the books and
records of the Issuer of any outstanding Preferred Securities; provided,
however, that, in determining whether the holders of the requisite percentage in
liquidation amount of the Preferred Securities have given any request, notice,
consent or waiver hereunder, "Holder" shall not include the Guarantor or any
Affiliate of the Guarantor.
"Indemnified Person" means the Guarantee Trustee, any
Affiliate of the Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives or agents of the Guarantee
Trustee.
"Indenture" means the Indenture, dated as of October __, 1999,
among the Guarantor and Wilmington Trust Company, as trustee, and any indenture
supplemental thereto, pursuant to which the Debentures are to be issued to the
Property Trustee of the Issuer.
"Majority in Liquidation Amount of the Preferred Securities"
means, except as provided by the Trust Indenture Act, Holder(s), voting
separately as a class, representing more than 50% of the stated aggregate
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise) of all Preferred Securities then
outstanding.
3
<PAGE> 8
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman of the Board, President or a Vice President,
and by the Treasurer, an Assistant Treasurer, the Controller, the Secretary or
an Assistant Secretary of such Person, and delivered to the Guarantee Trustee.
Any Officers' Certificate delivered with respect to compliance with a condition
or covenant provided for in this Guarantee shall include:
(g) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions relating
thereto;
(h) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering the
Officers' Certificate;
(i) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(j) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Responsible Officer" means, with respect to the Guarantee
Trustee, the chairman of the board of directors, the president, any
vice-president, any assistant vice-president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
"Secured Senior Debt" shall have the meaning set forth in the
Indenture.
"Successor Guarantee Trustee" means a successor Guarantee
Trustee possessing the qualifications to act as Guarantee Trustee under Section
4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
4
<PAGE> 9
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01 Trust Indenture Act; Application.
(a) This Guarantee is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee, which are
incorporated by reference hereto, and shall, to the extent applicable, be
governed by such provisions; and
(b) If and to the extent that any provision of this Guarantee
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
Section 2.02 Lists of Holders of Securities.
(a) The Guarantor shall provide the Guarantee Trustee (i)
within 14 days after May 15 and November 15 of each year, commencing ________
__, 1999, a list, in such form as the Guarantee Trustee may reasonably require,
of the names and addresses of the Holders ("List of Holders") as of such date;
provided that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Guarantee Trustee by the Guarantor, and (ii) at any
other time, within 30 days of receipt by the Guarantor of a written request for
a List of Holders as of a date no more than 14 days before such List of Holders
is given to the Guarantee Trustee. The Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.
Section 2.03 Reports by the Guarantee Trustee.
Within 60 days after May 15 of each year, commencing ______
__, 2000, the Guarantee Trustee shall provide to the Holders of the Securities
such reports as are required by Section 313 of the Trust Indenture Act, if any,
in the form and in the manner provided by Section 313 of the Trust Indenture
Act. The Guarantee Trustee shall also comply with the requirements of Section
313(d) of the Trust Indenture Act.
SECTION 2.04 Periodic Reports to Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee, the
Securities and Exchange Commission and the Holders such documents, reports and
information as required by Section 314 of the Trust Indenture Act (if any) and
the compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
5
<PAGE> 10
SECTION 2.05 Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Guarantee which relate to any of the matters set forth in Section 314(c) of
the Trust Indenture Act. Any certificate or opinion required to be given by an
officer pursuant to Section 314(c)(l) may be given in the form of an Officers'
Certificate.
SECTION 2.06 Events of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the
Preferred Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Event of Default and its consequences. Upon
such waiver, any such Event of Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Guarantee, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent therefrom.
SECTION 2.07 Event of Default; Notice.
(a) The Guarantee Trustee shall, within 30 days after the
occurrence of an Event of Default actually known to the Guarantee Trustee,
transmit by mail, first-class postage prepaid, to the Holders, notices of all
Events of Default known to the Guarantee Trustee, unless such defaults have been
cured before the giving of such notice; provided that, except in the case of a
default in the payment of a Guarantee Payment, the Guarantee Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors and/or Responsible
Officers of the Guarantee Trustee in good faith determines that the withholding
of such notice is in the interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default except any Event of Default as to which the
Guarantee Trustee shall have received written notice or a Responsible Officer
charged with the administration of the Declaration shall have obtained written
notice.
SECTION 2.08 Conflicting Interests.
The Declaration shall be deemed to be specifically described
in this Guarantee for the purposes of clause (i) of the first proviso contained
in Section 310(b) of the Trust Indenture Act.
6
<PAGE> 11
ARTICLE III
POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE
SECTION 3.01 Powers and Duties of the Guarantee Trustee.
(a) This Guarantee shall be held by the Guarantee Trustee for
the benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee to any Person except a Holder exercising his or her rights pursuant to
Section 5.05(d) or to a Successor Guarantee Trustee on acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee, and no implied covenants shall be read into this Guarantee
against the Guarantee Trustee. In case an Event of Default has occurred (that
has not been cured or waived pursuant to Section 2.06), and is known to the
Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Guarantee, and use the same degree of care and skill
in its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee shall
be determined solely by the express provisions of this Guarantee, and the
Guarantee Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Guarantee, and no implied
covenants or obligations shall be read into this Guarantee against the Guarantee
Trustee; and
(B) in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Guarantee Trustee and conforming to
the requirements of this Guarantee; but in the
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case of any such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Guarantee Trustee, the Guarantee
Trustee shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Guarantee;
(ii) the Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a Majority in Liquidation
Amount of the Preferred Securities, relating to the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee Trustee under this
Guarantee; and
(iv) no provision of this Guarantee shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers.
Section 3.02 Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.01:
(i) the Guarantee Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by
this Guarantee shall be sufficiently evidenced by an Officers' Certificate;
(iii) whenever, in the administration of this Guarantee, the
Guarantee Trustee shall deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the Guarantee Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and rely upon an Officers' Certificate which,
upon receipt of such request, shall be promptly delivered by the Guarantor;
(iv) the Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any re-recording,
refiling or reregistration thereof);
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(v) the Guarantee Trustee may consult with legal counsel of
its selection, and the written advice or opinion of such legal counsel with
respect to legal matters shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted to be taken by it hereunder
in good faith and in accordance with such advice or opinion. Such legal counsel
may be legal counsel to the Guarantor or any of its Affiliates and may include
any of the Guarantor's employees. The Guarantee Trustee shall have the right at
any time to seek instructions concerning the administration of this Guarantee
from any court of competent jurisdiction;
(vi) the Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee at the
request or direction of any Holder, unless such Holder shall have provided to
the Guarantee Trustee security and indemnity satisfactory to the Guarantee
Trustee against the costs, expenses (including attorneys' fees and expenses) and
liabilities that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by the
Guarantee Trustee; provided that nothing contained in this Section 3.02(a)(vi)
shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event
of Default known to the Guarantee Trustee, of its obligation to exercise the
rights and powers vested in it by this Guarantee;
(vii) the Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit; the
reasonable expense of every such investigation shall be paid by the Guarantor
or, if paid by the Guarantee Trustee, shall be repaid by the Company upon
demand;
(viii) the Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys, and the Guarantee Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder;
(ix) any action taken by the Guarantee Trustee or its agents
hereunder shall bind the Holders, and the signature of the Guarantee Trustee or
its agents alone shall be sufficient and effective to perform any such action;
it being understood that no third party shall be required to inquire as to the
authority of the Guarantee Trustee to so act or as to its compliance with any of
the terms and provisions of this Guarantee, both of which shall be conclusively
evidenced by the Guarantee Trustee's or its agent's taking such action;
(x) whenever in the administration of this Guarantee, the
Guarantee Trustee shall deem it desirable to receive instructions with respect
to enforcing any remedy or right or taking any other action hereunder, the
Guarantee Trustee (i) may request written instructions from the Holders or,
other than with respect to enforcing any
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remedy or right or taking any action related thereto, the Guarantor, (ii) may
refrain from enforcing such remedy or right or taking such other action until
such written instructions are received, and (iii) shall be protected in acting
in accordance with such written instructions; and
(xi) the Guarantee Trustee shall not be charged with knowledge
of any default or Event of Default hereunder unless a Responsible Officer of the
Guarantee Trustee shall have knowledge of the default or Event of Default.
(b) No provision of this Guarantee shall be deemed to impose
any duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty.
SECTION 3.03 Not Responsible for Recitals or Issuance of Guarantee.
The recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representations as to the validity or sufficiency of this Guarantee.
SECTION 3.04 Compensation; Reimbursement; Indemnity.
The Guarantor agrees:
(a) to pay the Guarantee Trustee from time to time such
reasonable compensation as the Guarantor and the Guarantee Trustee shall from
time to time agree in writing for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust); and
(b) except as otherwise expressly provided herein, to
reimburse the Guarantee Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Guarantee Trustee in
accordance with the provisions of this Guarantee Agreement (including the
reasonable compensation and expenses of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its negligence or bad
faith.
As security for the performance of the obligations of the
Guarantor under this Section 3.04, the Guarantee Trustee shall have a lien prior
to the Preferred Securities upon all property and funds held or collected by the
Guarantee Trustee as such, except funds held in trust for the payment of
principal of, and premium (if any) or interest on, particular obligations of the
Guarantor under this Guarantee.
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The provisions of this Section 3.04 shall survive the termination of this
Guarantee Agreement.
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01 Guarantee Trustee, Eligibility.
(a) There shall at all times be a Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing
business under the laws of the United States
of America or any State or Territory thereof
or of the District of Columbia, or a
corporation or Person permitted by the
Securities and Exchange Commission to act as
an institutional trustee under the Trust
Indenture Act, authorized under such laws to
exercise corporate trust powers, having a
combined capital and surplus of at least 50
million U.S. dollars ($50,000,000), and
subject to supervision or examination by
federal, state, territorial or District of
Columbia authority. If such corporation
publishes reports of condition at least
annually, pursuant to law or to the
requirements of the supervising or examining
authority referred to above, then, for the
purposes of this Section 4.0l(a)(ii), the
combined capital and surplus of such
corporation shall be deemed to be its
combined capital and surplus as set forth in
its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to
be eligible to so act under Section 4.0l(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02(c).
(c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 3.10(b) of the Trust
Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply
with the provisions of Section 3.10(b) of the Trust Indenture Act.
SECTION 4.02 Appointment, Removal and Resignation of Guarantee Trustee.
(a) Subject to Section 4.02(b), the Guarantee Trustee may
be appointed or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed in
accordance with Section 4.02(a) until a Successor Guarantee Trustee has been
appointed and has accepted
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such appointment by written instrument executed by such Successor Guarantee
Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold
office until a Successor Guarantee Trustee shall have been appointed or until
its removal or resignation. The Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in writing
executed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Guarantee Trustee has been
appointed and has accepted such appointment by instrument in writing executed by
such Successor Guarantee Trustee and delivered to the Guarantor and the
resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.02 within 60
days after delivery to the Guarantor of an instrument of removal or resignation,
the Guarantee Trustee resigning or being removed may petition any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Guarantee Trustee.
(e) No Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Guarantee Trustee.
(f) Upon termination of this Guarantee or removal or
resignation of the Guarantee Trustee pursuant to this Section 4.02, the
Guarantor shall pay to the Guarantee Trustee all amounts accrued to the date of
such termination, removal or resignation.
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ARTICLE V
GUARANTEE
SECTION 5.01 Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in
full on a subordinated basis to the Holders the Guarantee Payments (without
duplication of amounts theretofore paid by or on behalf of the Issuer), as and
when due, in coin or currency of the United States of America which at the time
of payment is legal tender for payment of public and private debt regardless of
any defense, right of setoff or counterclaim that the Issuer may have or assert
other than the defense of payment. The Guarantor's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
the Guarantor to the Holders or by causing the Issuer to pay such amounts to the
Holders.
SECTION 5.02 Subordination.
If a Debenture Event of Default or a Declaration Event of
Default (or an event that, with passage of time, would become a Debenture Event
of Default or a Declaration Event of Default) shall have occurred and be
continuing, the rights of holders of the Common Securities to receive Guarantee
Payments under the Common Securities Guarantee are subordinated to the rights of
Holders to receive Guarantee Payments under this Guarantee.
SECTION 5.03 Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Issuer
or any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
SECTION 5.04 Obligations Not Affected.
The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Preferred Securities to
be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions, the amount payable upon redemption or the
amount payable upon liquidation of the Issuer or any other sums payable under
the terms of the Preferred
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Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Preferred Securities (other
than an extension of time for payment of Distributions that results from the
extension of any interest payment period on the Debentures permitted by the
Indenture);
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the TIDES, or any
action on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;
(e) any invalidity of, or defect or deficiency in the
Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.04 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders or any other
Person to give notice to, or obtain consent of, the Guarantor with respect to
the happening of any of the foregoing.
SECTION 5.05 Rights of Holders.
The Guarantor expressly acknowledges that:
(a) This Guarantee will be deposited with the Guarantee
Trustee to be held for the benefit of the Holders.
(b) The Guarantee Trustee has the right to enforce this
Guarantee on behalf of the Holders.
(c) The Holders of a Majority in Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of this Guarantee or exercising any trust or power conferred upon the
Guarantee Trustee under this Guarantee.
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(d) Any Holder may institute a legal proceeding directly
against the Guarantor to enforce its rights under this Guarantee, without first
instituting a legal proceeding against the Issuer, the Guarantee Trustee or any
other Person.
SECTION 5.06 Guarantee of Payment.
This Guarantee creates a guarantee of payment and not of
collection. This Guarantee will not be discharged except by payment of the
Guarantee Payments in full (without duplication of amounts theretofore paid by
the Issuer) or upon distribution of Debentures to Holders as provided in the
Declaration.
SECTION 5.07 Subrogation.
The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Issuer in respect of any amounts paid to such Holders by
the Guarantor under this Guarantee and shall have the right to waive payment by
the Issuer pursuant to Section 5.01; provided, however, that the Guarantor shall
not (except to the extent required by mandatory provisions of law) be entitled
to enforce or exercise any right that it may acquire by way of subrogation or
any indemnity, reimbursement or other agreement, in all cases as a result of
payment under this Guarantee, if, at the time of any such payment, any amounts
are due and unpaid under this Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.08 Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.04 hereof,
SECTION 5.09 Conversion.
The Guarantor acknowledges its obligation to issue and deliver
Class A common stock upon the conversion of the Preferred Securities.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01 Limitation of Transactions.
So long as any Preferred Securities remain outstanding, if
there shall have occurred and be continuing a Debenture Event of Default, a
Declaration Event of Default or an event that, with the giving of notice or the
lapse of time or both, would constitute a Debenture Event of Default or a
Declaration Event of Default, or a selection by the
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Guarantor of a Deferral Period as provided in the Indenture and such period, or
any extension thereof, shall be continuing, then (a) the Guarantor shall not
declare or pay any dividend on, or make any distribution with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock (other than stock dividends paid by the Guarantor which stock
dividends consist of the Stock of the same class as that on which the dividend
is being paid), (b) the Guarantor shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by the Guarantor which rank pari passu with or junior in
interest to the Debentures and (c) the Guarantor shall not make any guarantee
payments with respect to any guarantee by the Guarantor of the debt securities
of any subsidiary of the Guarantor if such guarantee ranks pari passu with or
junior in interest to the Debentures (in each case, other than (A) dividends or
distributions on the Guarantor's common stock, (B) any declaration of a dividend
in connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (C) payments under this
Guarantee, (D) purchases or acquisitions of shares of the Class A common stock
in connection with the satisfaction by the Guarantor of its obligations under
any employee benefit plan or any other contractual obligation of the Guarantor
(other than a contractual obligation ranking expressly by its terms pari passu
with or junior in interest to the Debentures), (E) as a result of a
reclassification of the Guarantor's capital stock or the exchange or conversion
of one class or series of the Guarantor's capital stock for another class or
series of the Guarantor's capital stock or (F) the purchase of fractional
interests in shares of the Guarantor's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged).
SECTION 6.02 Ranking.
This Guarantee will constitute an unsecured obligation of the
Guarantor and will rank subordinate to all Secured Senior Debt of the Guarantor
to the same extent that the Debentures are subordinated pursuant to the
Indenture.
ARTICLE VII
TERMINATION
SECTION 7.01 Termination.
This Guarantee shall terminate upon (i) full payment of the
amount payable upon redemption of all Preferred Securities, (ii) the
distribution of the Guarantor's Class A common stock to the Holders in respect
of the conversion of the Preferred Securities into the Guarantor's Class A
common stock, (iii) the distribution of the Debentures to the Holders of all of
the Preferred Securities or (iv) full payment of the amounts payable in
accordance with the Declaration upon liquidation of the Issuer. Notwithstanding
the foregoing, this Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder must restore payment
of any sums paid under the Preferred Securities or under this Guarantee.
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ARTICLE VIII
INDEMNIFICATION
SECTION 8.01 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this
Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Guarantee or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or Omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders might properly be paid.
SECTION 8.02 Indemnification.
(a) The Guarantor agrees to indemnify each indemnified Person
for, and to hold each Indemnified Person harmless against, any and all loss,
liability or expense, including taxes (other than taxes based on the income of
such Indemnified Person) incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or investigating
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder. The obligation to indemnify as set forth in this
Section 8.02 shall survive the termination of this Guarantee.
(b) To the fullest extent permitted by applicable law,
expenses (including legal fees and expenses) incurred by an Indemnified Person
in defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Guarantor prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Guarantor of an
undertaking by or on behalf of the Indemnified Person to repay such amount if it
shall be determined that the Indemnified Person is not entitled to be
indemnified as authorized in Section 8.02(a).
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(c) No Indemnified Person shall claim or exact any lien or
charge on any Guarantee Payments as a result of any amount due to it under this
Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Successors and Assigns.
All guarantees and agreements contained in this Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders.
SECTION 9.02 Amendments.
Except with respect to any changes that do not materially
adversely affect the rights of Holders (in which case no consent of Holders will
be required), this Guarantee may only be amended with the prior approval of the
Holders of a Majority in Liquidation Amount of the Preferred Securities then
outstanding; provided, that no amendment that affects the rights, powers,
duties, obligations or immunities of the Guarantee Trustee shall be effective
unless approved in writing by the Guarantee Trustee. The provisions of Section
12.02 of the Declaration with respect to meetings of holders of the Securities
(as defined in the Declaration) apply to the giving of such approval.
SECTION 9.03 Notices.
All notices provided for in this Guarantee shall be in writing
duly signed by the party giving such notice, and shall be delivered, telecopied
or mailed by first-class mail, as follows:
(a) if given to the Issuer, in care of the Regular Trustees at
the Issuer's mailing address set forth below (or such other address as the
Issuer may give notice):
Joseph M. Field
David J. Field
John C. Donlevie
Entercom Communications Capital Trust
c/o Entercom Communications Corp.
409 City Avenue, Suite 401
Bala Cynwyd, Pennsylvania 19004
(b) If given to the Guarantee Trustee, at the Guarantee
Trustee's mailing address set forth below (or such other address as the
Guarantee Trustee may give notice of to the Holders):
Wilmington Trust Company
1100 North Market Street
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Wilmington, Delaware 19890
Attention: Corporate Trust Administration
(c) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Holders):
Entercom Communications Capital Trust
c/o Entercom Communications Corp.
409 City Avenue, Suite 401
Bala Cynwyd, Pennsylvania 19004
Attention: John C. Donlevie
(d) if given to any Holder, at the address set forth on the
books and records of the Issuer.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 9.04 Benefit.
This Guarantee is solely for the benefit of the Holders and,
subject to Section 3.01(a), is not separately transferable from the Preferred
Securities.
SECTION 9.05 Governing Law.
THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICT OF LAWS.
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THIS GUARANTEE is executed as of the day and year first above
written.
ENTERCOM COMMUNICATIONS CORP.,
as Guarantor
By: ________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Guarantor Trustee
By: ________________________________
Name:
Title:
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Exhibit 4.07
================================================================================
COMMON SECURITIES GUARANTEE AGREEMENT
DELIVERED BY
ENTERCOM COMMUNICATIONS CORP.
FOR THE BENEFIT OF THE HOLDERS OF COMMON SECURITIES OF
ENTERCOM COMMUNICATIONS
CAPITAL TRUST
================================================================================
<PAGE> 2
This COMMON SECURITIES GUARANTEE AGREEMENT (the "Common
Securities Guarantee"), dated as of October __, 1999, is executed and delivered
by Entercom Communications Corp., a Pennsylvania corporation (the "Guarantor"),
for the benefit of the Holders (as defined herein) from time to time of the
Common Securities (as defined in the Declaration (as defined herein)) of
Entercom Communications Capital Trust, a Delaware business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of October __, 1999, among the trustees of
the Issuer named therein, the Guarantor, as sponsor, and the holders from time
to time of undivided beneficial interests in the assets of the Issuer; the
Issuer is issuing on the date hereof 3,000,000 __% Preferred Securities (as
defined in the Declaration), having an aggregate liquidation amount of
$150,000,000; and
WHEREAS, pursuant to the Declaration, the Issuer is issuing on
the date hereof 92,800 Common Securities, having an aggregate stated liquidation
amount of $4,640,000 designated the __% Convertible Common Securities
(liquidation amount $50 per each of the Convertible Common Securities);
WHEREAS, as incentive for the Holders to purchase the Common
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Common Securities Guarantee, to pay on a
subordinated basis to the Holders of the Common Securities the Guarantee
Payments (as defined herein) and to make certain other payments on the terms and
conditions set forth herein; and
WHEREAS, the Guarantor is also executing and delivering a
guarantee agreement in substantially identical terms to this Common Securities
Guarantee for the benefit of the holders of the Preferred Securities (the
"Guarantee") except that if a Debenture Event of Default or a Declaration Event
of Default (each as defined herein) (or an event that, with passage of time,
would become a Debenture Event of Default or a Declaration Event of Default)
shall have occurred and be continuing, the rights of Holders of the Common
Securities to receive Guarantee Payments under this Common Securities Guarantee
are subordinated to the rights of holders of Preferred Securities to receive
Guarantee Payments under the Guarantee.
NOW, THEREFORE, in consideration of the purchase by each
Holder of Common Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Common
Securities Guarantee for the benefit of the Holders.
ARTICLE I
SECTION 1.01 In this Common Securities Guarantee, unless the
context otherwise requires, the terms set forth below shall have the following
meanings.
<PAGE> 3
(a) capitalized terms used in this Common Securities Guarantee
but not defined in the preamble above have the respective meanings assigned to
them in this Section 1.01 or the Guarantee;
(b) terms defined in the Declaration as of the date of
execution of this Common Securities Guarantee have the same meaning when used in
this Common Securities Guarantee unless otherwise defined in this Common
Securities Guarantee or in the Guarantee;
(c) a term defined anywhere in this Common Securities
Guarantee has the same meaning throughout;
(d) all references to "the Common Securities Guarantee" or
"this Common Securities Guarantee" are to this Common Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Common Securities Guarantee to
Articles and Sections are to Articles and Sections of this Common Securities
Guarantee unless otherwise specified; and
(f) a reference to the singular includes the plural and vice
versa.
"Debenture Event of Default" means an Event of Default under
the Indenture,
"Declaration Event of Default" means an Event of Default under
the Declaration.
"Guarantee Event of Default" means a default by the Guarantor
on any of its payment or other obligations under the Common Securities
Guarantee.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Common Securities, to
the extent not paid or made by or on behalf of the Issuer: (i) any accrued and
unpaid Distributions which are required to be paid on such Common Securities, to
the extent that the Issuer shall have funds on hand available therefor at such
time, (ii) the applicable Redemption Price (as defined in the Indenture) with
respect to any Common Securities called for redemption by the Issuer, to the
extent that the Issuer has funds on hand available therefor at such time and
(iii) upon a voluntary or involuntary dissolution, winding up or liquidation of
the Issuer (other than in connection with the distribution of Debentures to the
Holders or the redemption of all the Common Securities), the lesser of (a) the
aggregate liquidation amount thereof plus accrued and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution") to the extent the Issuer has funds available therefor and (b) the
amount of assets of the Issuer remaining available for distribution to Holders
upon liquidation of the Issuer after satisfaction of liabilities to creditors of
the Issuer as required by applicable law.
2
<PAGE> 4
"Holder" means any holder, as registered on the books and
records of the Issuer, of any outstanding Common Securities.
"Secured Senior Debt" shall have the meaning set forth in the
Indenture.
ARTICLE II
SECTION 2.01 The Guarantor irrevocably and unconditionally
agrees to pay in full on a subordinated basis to the Holders the Guarantee
Payments (without duplication of amounts theretofore paid by or on behalf of the
Issuer), as and when due, in coin or currency of the United States of America
which at the time of payment is legal tender for payment of public and private
debt regardless of any defense, right of set-off or counterclaim which the
Issuer may have or assert other than the defense of payment. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer to pay
such amounts to the Holder.
SECTION 2.02 If a Debenture Event of Default or a Declaration
Event of Default (or an event that, with passage of time, would become a
Debenture Event of Default) shall have occurred and be continuing, the rights of
Holders of the Common Securities to receive Guarantee Payments under this Common
Securities Guarantee are subordinated to the rights of holders of Preferred
Securities to receive Guarantee Payments under the Guarantee.
SECTION 2.03 The Guarantor hereby waives notice of acceptance
of this Common Securities Guarantee and of any liability to which it applies or
may apply, presentment, demand for payment, any right to require a proceeding
first against the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 2.04 The obligations, covenants, agreements and duties
of the Guarantor under this Common Securities Guarantee shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Common Securities to be
performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions, the amount payable upon redemption, or the
amount payable upon liquidation of the Issuer or any other sums payable under
the terms of the Common Securities or the extension of time for the performance
of any other obligation under, arising out of, or in connection with, the Common
Securities (other than an extension of time for payment of Distributions, that
results from the extension of any interest payment period on the Debentures
permitted by the Indenture);
3
<PAGE> 5
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the Common
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;
(e) any invalidity of, or defect or deficiency in the Common
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 2.04 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders or any other
Person to give notice to, or obtain consent of, the Guarantor with respect to
the happening of any of the foregoing.
SECTION 2.05 The Guarantor expressly acknowledges that any
Holder may institute a legal proceeding directly against the Guarantor to
enforce its rights under this Common Securities Guarantee, without first
instituting a legal proceeding against the Issuer or any other Person.
SECTION 2.06 This Common Securities Guarantee creates a
guarantee of payment and not of collection. This Common Securities Guarantee
will not be discharged except by payment of the Guarantee Payments in full
(without duplication of amounts theretofore paid by the Issuer) or upon
distribution of Debentures to Holders as provided in the Declaration.
SECTION 2.07 The Guarantor shall be subrogated to all (if any)
rights of the Holders against the Issuer in respect of any amounts paid to such
Holders by the Guarantor under this Common Securities Guarantee and shall have
the right to waive payment by the Issuer pursuant to Section 2.01; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights which
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Common Securities
Guarantee, if, at the time of any such payment, any amounts are due and unpaid
under this Common Securities Guarantee. If any amount shall be paid to
4
<PAGE> 6
the Guarantor in violation of the preceding sentence, the Guarantor agrees to
hold such amount in trust for the Holders and to pay over such amount to the
Holders.
SECTION 2.08 The Guarantor acknowledges that its obligations
hereunder are independent of the obligations of the Issuer with respect to the
Common Securities and that the Guarantor shall be liable as principal and as
debtor hereunder to make Guarantee Payments pursuant to the terms of this Common
Securities Guarantee, notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 2.04 hereof.
SECTION 2.09 The Guarantor acknowledges its obligation to
issue and deliver Class A common stock upon the conversion of the Common
Securities.
SECTION 2.10 The Holders of a majority in liquidation amount
of Common Securities may by vote, on behalf of the Holders of all of the Common
Securities, waive any past Guarantee Event of Default and its consequences. Upon
such waiver, any such Guarantee Event of Default shall cease to exist, and any
Guarantee Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Common Securities Guarantee, but no such waiver shall
extend to any subsequent or other default or Guarantee Event of Default or
impair any right consequent thereon.
ARTICLE III
SECTION 3.01 So long as any Common Securities remain
outstanding, if (i) there shall have occurred and be continuing a Debenture
Event of Default, a Declaration Event of Default or an event that, with the
giving of notice or the lapse of time or both, would constitute a Debenture
Event of Default or a Declaration Event of Default or (ii) a selection by the
Guarantor of a Deferral Period as provided in the Indenture and such period, or
any extension thereof, shall be continuing, then (a) the Guarantor shall not
declare or pay any dividend on, or make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock (other than stock dividends paid by the Guarantor which
consist of the stock of the same class as that on which the dividend is being
paid), (b) the Guarantor shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued by
the Guarantor which rank pari passu with or junior in interest to the Debentures
and (c) shall not make any guarantee payments with respect to any guarantee by
the Guarantor of the debt securities of any subsidiary of the Guarantor if such
guarantee ranks pari passu with or junior in interest to the Debentures (in each
case, other than (A) dividends or distributions in the Guarantor's common stock,
(B) any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (C)
payments under the Guarantee, (D) purchases or acquisitions of shares of the
Guarantor's common stock in connection with the satisfaction by the Guarantor of
its obligations under any employee benefit plan or any other contractual
obligation of the Guarantor (other than a contractual obligation ranking
expressly by its terms pari passu with or junior in interest
5
<PAGE> 7
to the Debentures), (E) as a result of a reclassification of the Guarantor's
capital stock or the exchange or conversion of one class or series of the
Guarantor's capital stock for another class or series of the Guarantor's capital
stock or (F) the purchase of fractional interests in shares of the Guarantor's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged).
SECTION 3.02 This Common Securities Guarantee will constitute
an unsecured obligation of the Guarantor and will rank subordinate to all
Secured Senior Debt of the Guarantor to the same extent that the Debentures (as
defined in the Indenture) are subordinated pursuant to the Indenture.
ARTICLE IV
SECTION 4.01 This Common Securities Guarantee shall terminate
upon (i) full payment of the amount payable upon redemption of the Common
Securities, (ii) the distribution of the Guarantor's Class A common stock to the
Holders in respect of the conversion of the Common Securities into the
Guarantor's Class A common stock, (iii) the distribution of the Debentures to
the Holders in exchange for all of the Common Securities or (iv) full payment of
the amounts payable in accordance with the Declaration upon liquidation of the
Issuer. Notwithstanding the foregoing, this Common Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any Holder of Common Securities must restore payment of any sums paid under
the Common Securities or under this Common Securities Guarantee.
ARTICLE V
SECTION 5.01 All guarantees and agreements contained in this
Common Securities Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to the benefit of
the Holders.
SECTION 5.02 Except with respect to any changes which do not
adversely affect the rights of Holders (in which case no consent of Holders will
be required), this Common Securities Guarantee may only be amended with the
prior approval of the Holders of a majority in liquidation amount of the
outstanding Common Securities. The provisions of Section 12.02 of the
Declaration with respect to meetings of Holders of the Securities apply to the
giving of such approval.
SECTION 5.03 All notices provided for in this Common
Securities Guarantee shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by registered or certified
mail, as follows:
(a) if given to the Issuer, in care of the Regular Trustees at
the Issuer's mailing address set forth below (or such other address as the
Issuer may give notice of to the Holders of the Common Securities):
6
<PAGE> 8
Joseph M. Field
David J. Field
John C. Donlevie
Entercom Communications Capital Trust
c/o Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
(b) if given to the Guarantor, at the Guarantor's mailing
address set forth be low (or such other address as the Guarantor may give notice
of to the Holders of the Common Securities):
Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
Attention: John C. Donlevie, Esq.
(c) if given to any Holder of Common Securities, at the
address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 5.04 This Common Securities Guarantee is solely for
the benefit of the Holders and is not separately transferable from the Common
Securities.
SECTION 5.05 THIS COMMON SECURITIES GUARANTEE SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
7
<PAGE> 9
THIS COMMON SECURITIES GUARANTEE is executed as of the day and
year first above Written.
ENTERCOM COMMUNICATIONS CORP., as Guarantor
By: _______________________________________
Name:
Title:
8
<PAGE> 1
EXHIBIT 5.01
[LATHAM & WATKINS LETTERHEAD]
September 30, 1999
Entercom Communications Corp.
Entercom Communications Capital Trust Registration
401 City Avenue
Bala Cynwyd, Pennsylvania 19004
Re: Entercom Communications Corp. and Entercom Communications Capital Trust
Registration Statement on Form S-1; File No. 333-86843
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-1
(File No. 333-86843) of Entercom Communications Capital Trust, a statutory
business trust formed under Delaware law (the "Trust"), and Entercom
Communications Corp., a Pennsylvania corporation (the "Company") filed by the
Trust and the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), on
September 10, 1999, as amended by Amendment No. 1 filed with the Commission on
September 14, 1999 and as amended by Amendment No. 2 filed with the Commission
on September 30, 1999 (collectively, the "Registration Statement"), you have
requested our opinion with respect to the matters set forth below. The
Registration Statement relates to the registration of (i) 3,450,000 __%
Convertible Preferred Securities, Term Income Deferrable Equity Securities of
the Trust (TIDES) (including 450,000 TIDES to cover over-allotments of TIDES),
(ii) $172,500,000 in aggregate principal amount of the __% Convertible
Subordinated Debentures due 2014 of the Company (the "Convertible Subordinated
Debentures"), (iii) the shares of Class A common stock, par value $.01 per
share, of the Company (the "Class A Common Stock") issuable upon the conversion
of the TIDES and the Convertible Subordinated Debentures and (iv) the Preferred
Securities Guarantee of the Company (the "Guarantee").
The TIDES will be issued pursuant to the Amended and Restated
Declaration of Trust of Entercom Communications Capital Trust (the "Trust
Agreement") among the Company, as sponsor, Wilmington Trust Company, as property
trustee and Delaware trustee and Joseph M. Field, David J. Field and John C.
Donlevie, as administrative trustees. The proceeds from the sale by the Trust of
the TIDES will be invested in the Convertible Subordinated Debentures, which
will be issued pursuant to an Indenture among the Company, as issuer, and
Wilmington Trust Company, as indenture trustee (the "Indenture Trustee").
<PAGE> 2
Entercom Communications Corp.
September 30, 1999
In our capacity as your counsel in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization and issuance of the
Convertible Subordinated Debentures and the Guarantee, respectively and for the
purposes of this opinion, have assumed such proceedings will be timely completed
in the manner presently proposed. In addition, we have made such legal and
factual examinations and inquiries, including an examination of originals or
copies certified or otherwise identified to my satisfaction of such documents,
corporate records and instruments, as we have deemed necessary or appropriate
for purposes of this opinion. With your consent we have assumed that each of the
Convertible Subordinated Debentures, the Indenture and the Guarantee has been
authorized by all necessary corporate action of the of the Company.
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity to authentic original documents of all documents submitted to us
as copies.
We are opining herein as to the effect on the subject
transaction only of the internal laws of the State of New York, and we express
no opinion with respect to the applicability thereto, or the effect thereon, of
the laws of any other jurisdiction or as to any matters of municipal law or the
laws of any local agencies within any state.
Subject to the foregoing, it is our opinion that:
(i) upon due execution, authentication and delivery of the
Convertible Subordinated Debentures and the Indenture by or on behalf
of the Company against payment therefor in accordance with the terms of
the Indenture, each of the Convertible Subordinated Debentures and the
Indenture will constitute the valid and binding obligations of the
Company, enforceable against the Company in accordance with their
respective terms; and
(ii) upon due execution, authentication and delivery of the
Guarantee by or on behalf of the Company, the Guarantee will be the
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
The opinions rendered above relating to the enforceability of
the Convertible Subordinated Debentures and the Guarantee are subject to the
following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors; (ii) the effect of general principles of equity, whether enforcement
is considered in a proceeding in equity or law, and the discretion of the court
before which any proceeding therefor may be brought and (iii) we express no
opinion with respect to whether acceleration of the Convertible Subordinated
Debentures may affect the collectibility of that portion of the principal amount
thereof which might be determined to constitute unearned interest thereon.
<PAGE> 3
Entercom Communications Corp.
September 30, 1999
To the extent that the obligations of the Company under the
Indenture may be dependent upon such matters, we assume for purposes of this
opinion that the Indenture Trustee is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization; that the
Indenture Trustee is duly qualified to engage in the activities contemplated by
the Indenture; that the Indenture has been duly authorized, executed and
delivered by the Indenture Trustee and constitutes the legally valid, binding
and enforceable obligation of the Indenture Trustee enforceable against the
Indenture Trustee in accordance with its terms; that the Indenture Trustee is in
compliance, generally and with respect to acting as a trustee under the
Indenture, with all applicable laws and regulations; and that the Indenture
Trustee has the requisite organizational and legal power and authority to
perform its obligations under the Indenture.
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our name contained under the
heading "Legal Matters."
Very truly yours,
Latham & Watkins
<PAGE> 1
Exhibit 5.02
[Letterhead of Morris, Nichols, Arsht & Tunnell Letterhead]
September 30, 1999
Entercom Communications Capital Trust
c/o Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
Re: Entercom Communications Capital Trust
Ladies and Gentlemen:
We have acted as special Delaware counsel to Entercom
Communications Capital Trust, a Delaware statutory business trust (the "Trust"),
and Entercom Communications Corp., a Pennsylvania corporation ("Entercom
Communications"), in connection with certain matters relating to (i) the
creation of the Trust and (ii) the proposed issuance by the Trust of Preferred
Securities to beneficial owners pursuant to and as described in Registration
Statement No. 333-86843 (and the Prospectus forming a part thereof) on Form S-1
filed with the Securities and Exchange Commission on September 10, 1999, as
amended by Amendment No. 1 and Amendment No. 2 thereto (as so amended, the
"Registration Statement"). Capitalized terms used herein and not otherwise
herein defined are used as defined in the Amended and Restated Declaration of
Trust of the Trust in the form attached as an exhibit to the Registration
Statement (the "Governing Instrument").
In rendering this opinion, we have examined and relied upon
copies of the following documents in the forms provided to us: the Certificate
of Trust of the Trust as filed in the Office of the Secretary of State of the
State of Delaware (the "State Office") on September 8, 1999 (the "Certificate of
Trust"); a Declaration of Trust of the Trust dated as of September 8, 1999 (the
"Original Governing Instrument"); the Governing Instrument; the Indenture to be
entered into between Entercom Communications and Wilmington Trust Company, as
Trustee; the Preferred Securities Guarantee Agreement to be entered into between
Entercom Communications and Wilmington Trust Company, as Trustee; the form of
Underwriting Agreement relating to the Preferred Securities among Entercom
Communications, the Trust and Credit Suisse First Boston Corporation, Banc of
America Securities LLC and Deutsche Bank Securities Inc., as representatives of
the several underwriters named therein (the "Underwriting
<PAGE> 2
Entercom Communications Corp.
September 30, 1999
Page 2
Agreement"); the Registration Statement; and a certification of good standing of
the Trust obtained as of a recent date from the State Office. In such
examinations, we have assumed the genuineness of all signatures, the conformity
to original documents of all documents submitted to us as drafts or copies or
forms of documents to be executed and the legal capacity of natural persons to
complete the execution of documents. We have further assumed for purposes of
this opinion: (i) the due formation or organization, valid existence and good
standing of each entity (other than the Trust) that is a party to any of the
documents reviewed by us under the laws of the jurisdiction of its respective
formation or organization; (ii) the due authorization, execution and delivery
by, or on behalf of, each of the parties thereto of the above-referenced
documents (including, without limitation, the due authorization, execution and
delivery of the Governing Instrument and the Underwriting Agreement prior to the
first issuance of Preferred Securities); (iii) that no event has occurred
subsequent to the filing of the Certificate of Trust, or will occur prior to the
first issuance of Preferred Securities, that would cause a dissolution or
liquidation of the Trust under the Original Governing Instrument or the
Governing Instrument, as applicable; (iv) that the activities of the Trust have
been and will be conducted in accordance with the Original Governing Instrument
or the Governing Instrument, as applicable, and the Delaware Business Trust Act,
12 Del. C. Sections 3801 et seq. (the "Delaware Act"); (v) that payment of
the required consideration for the Preferred Securities has, or prior to the
first issuance of Preferred Securities will have, been made in accordance with
the terms and conditions of the Governing Instrument, the Registration Statement
and the Underwriting Agreement and that the Preferred Securities are otherwise
issued and sold to the Preferred Security Holders in accordance with the terms,
conditions, requirements and procedures set forth in the Governing Instrument,
the Registration Statement and the Underwriting Agreement; and (vi) that the
documents examined by us are in full force and effect, express the entire
understanding of the parties thereto with respect to the subject matter thereof
and have not been amended, supplemented or otherwise modified, except as herein
referenced. We have not reviewed any documents other than those identified above
in connection with this opinion, and we have assumed that there are no other
documents that are contrary to or inconsistent with the opinions expressed
herein. Further, we express no opinion with respect to, and assume no
responsibility for the contents of, the Registration Statement or any other
offering material relating to the Preferred Securities. No opinion is expressed
herein with respect to the requirements of, or compliance with, federal or state
securities or blue sky laws. As to any fact material to our opinion, other than
those assumed, we have relied without independent investigation on the
above-referenced documents and on the accuracy, as of the date hereof, of the
matters therein contained.
Based on and subject to the foregoing, and limited in all
respects to matters of Delaware law, it is our opinion that:
1. The Trust is a duly created and validly existing business
trust in good standing under the laws of the State of Delaware.
<PAGE> 3
Entercom Communications Corp.
September 30, 1999
Page 3
2. Upon issuance, the Preferred Securities will constitute
validly issued and, subject to the qualifications set forth in paragraph 3
below, fully paid and nonassessable beneficial interests in the assets of the
Trust.
3, Under the Delaware Act and the terms of the Governing
Instrument, each Preferred Security Holder of the Trust, in such capacity, will
be entitled to the same limitation of personal liability as that extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware; provided, however, we express no
opinion with respect to the liability of any Preferred Security Holder who is,
was or may become a named Trustee of the Trust. Notwithstanding the foregoing,
we note pursuant to Section 11.04 of the Governing Instrument, the Trust may
withhold amounts otherwise distributable to a Preferred Security Holder and pay
over such amounts to the applicable jurisdictions in accordance with federal,
state and local law and any amount withheld will be deemed to have been
distributed to such Holder and that, pursuant to the Governing Instrument,
Preferred Security Holders may be obligated to make payments or provide
indemnity or security under the circumstances set forth therein.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the use of our name and reference to our
opinion under the heading "LEGAL MATTERS" in the Prospectus forming a part
thereof. In giving this consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder. This opinion speaks only as of the date hereof
and is based on our understandings and assumptions as to present facts, and on
our review of the above-referenced documents and the application of Delaware law
as the same exist as of the date hereof, and we undertake no obligation to
update or supplement this opinion after the date hereof for the benefit of any
person or entity with respect to any facts or circumstances that may hereafter
come to our attention or any changes in facts or law that may hereafter occur or
take effect. This opinion is intended solely for the benefit of the addressee
hereof in connection with the matters contemplated hereby and may not be relied
on by any other person or entity or for any other purpose without our prior
written consent.
Very truly yours,
MORRIS, NICHOLS, ARSHT & TUNNELL
<PAGE> 1
EXHIBIT 5.03
[ENTERCOM COMMUNICATIONS CORP. LETTERHEAD]
September 30, 1999
Entercom Communications Corp.
Entercom Communications Capital Trust
401 City Avenue
Bala Cynwyd, Pennsylvania 19004
Re: Entercom Communications Corp. and Entercom Communications Capital Trust
Registration Statement on Form S-1; File No. 333-86843
Ladies and Gentlemen:
I am the Executive Vice President, Secretary and General
Counsel of Entercom Communications Corp., a Pennsylvania corporation (the
"Company"), and in connection with the Registration Statement on Form S-1 (File
No. 333-86843) of Entercom Communications Capital Trust, a statutory business
trust formed under Delaware law (the "Trust"), and the Company filed by the
Trust and the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), on
September 10, 1999, as amended by Amendment No. 1 filed with the Commission on
September 14, 1999 and as amended by Amendment No. 2 filed with the Commission
on September 30, 1999 (collectively, the "Registration Statement"), you have
requested my opinion with respect to the matters set forth below. The
Registration Statement relates to the registration of (i) 3,450,000 __%
Convertible Preferred Securities, Term Income Deferrable Equity Securities of
the Trust (TIDES) (including 450,000 TIDES to cover over-allotments of TIDES),
(ii) $172,500,000 in aggregate principal amount of the __% Convertible
Subordinated Debentures due 2014 of the Company (the "Convertible Subordinated
Debentures"), (iii) the shares of Class A common stock, par value $.01 per
share, of the Company (the "Class A Common Stock") issuable upon the conversion
of the TIDES and the Convertible Subordinated Debentures and (iv) the Preferred
Securities Guarantee of the Company (the "Guarantee").
The TIDES will be issued pursuant to the Amended and Restated
Declaration of Trust of Entercom Communications Capital Trust (the "Trust
Agreement") among the Company,
<PAGE> 2
Entercom Communications Corp.
September 30, 1999
as sponsor, Wilmington Trust Company, as property trustee and Delaware trustee
and Joseph M. Field, David J. Field and John C. Donlevie, as administrative
trustees. The proceeds from the sale by the Trust of the TIDES will be invested
in the Convertible Subordinated Debentures, which will be issued pursuant to an
Indenture among the Company, as issuer, and Wilmington Trust Company, as
indenture trustee (the "Indenture Trustee").
In my capacity as your counsel in connection with such
registration, I am familiar with the proceedings taken and proposed to be taken
by the Company in connection with the authorization and issuance of the
Convertible Subordinated Debentures and the Guarantee, respectively, and the
authorization of the Class A Common Stock issuable upon the conversion of the
TIDES and the Convertible Subordinated Debentures and for the purposes of this
opinion, have assumed such proceedings will be timely completed in the manner
presently proposed. In addition, I have made such legal and factual examinations
and inquiries, including an examination of originals or copies certified or
otherwise identified to my satisfaction of such documents, corporate records and
instruments, as I have deemed necessary or appropriate for purposes of this
opinion.
In my examination, I have assumed the genuineness of all
signatures, the authenticity of all documents submitted to me as originals, and
the conformity to authentic original documents of all documents submitted to me
as copies.
I am opining herein as to the effect on the subject
transaction only of the internal laws of the Commonwealth of Pennsylvania, and I
express no opinion with respect to the applicability thereto, or the effect
thereon, of the laws of any other jurisdiction or as to any matters of municipal
law or the laws of any local agencies within any state.
Subject to the foregoing, it is my opinion that:
(i) the shares of Class A Common Stock issuable upon
conversion of the TIDES and the Convertible Subordinated Debentures
have been duly authorized, and when issued upon conversion of the TIDES
and the Convertible Subordinated Debentures in accordance with the
terms of the Indenture, will be validly issued, fully paid and
nonassessable;
(ii) the Convertible Subordinated Debentures and the Indenture
have been duly authorized by all necessary corporate action of the
Company; and
(iii) the Guarantee has been duly authorized by all necessary
corporate action of the Company.
<PAGE> 3
Entercom Communications Corp.
September 30, 1999
To the extent that the obligations of the Company under the
Indenture may be dependent upon such matters, we assume for purposes of this
opinion that the Indenture Trustee is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization; that the
Indenture Trustee is duly qualified to engage in the activities contemplated by
the Indenture; that the Indenture has been duly authorized, executed and
delivered by the Indenture Trustee and constitutes the legally valid, binding
and enforceable obligation of the Indenture Trustee enforceable against the
Indenture Trustee in accordance with its terms; that the Indenture Trustee is in
compliance, generally and with respect to acting as a trustee under the
Indenture, with all applicable laws and regulations; and that the Indenture
Trustee has the requisite organizational and legal power and authority to
perform its obligations under the Indenture.
I consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to my name contained under the
heading "Legal Matters."
Very truly yours,
/s/ John C. Donlevie
----------------------------------------------
John C. Donlevie, Esq.
Executive Vice President, Secretary and
General Counsel of Entercom
Communications Corp.
<PAGE> 1
Exhibit 8.01
<TABLE>
<S> <C> <C>
September 30, 1999
LATHAM & WATKINS
ATTORNEYS AT LAW
PAUL R. WATKINS (1899 - 1973) 1001 PENNSYLVANIA AVE., N.W.
DANA LATHAM (1898 - 1974) SUITE 1300 NEW YORK OFFICE
WASHINGTON, D.C. 20004-2505 885 THIRD AVENUE,
TELEPHONE (202) 637-2200 SUITE 1000
CHICAGO OFFICE FAX (202) 637-2201 NEW YORK, NEW YORK
SEARS TOWER, SUITE 5800 10022-4802
CHICAGO, ILLINOIS 60606 __________ PHONE (212) 906-1200,
PHONE (312) 876-7700, FAX 993-9767 FAX 751-4864
HONG KONG OFFICE ORANGE COUNTY OFFICE
SUITE 2205A, 22ND FLOOR 650 TOWN CENTER DRIVE,
NO. 9 QUEEN'S ROAD CENTRAL SUITE 2000
HONG KONG COSTA MESA, CALIFORNIA
PHONE + 852-2522-7886, FAX 2522-7006 92626-1925
PHONE (714) 540-1235,
LONDON OFFICE FAX 755-8290
ONE ANGEL COURT
LONDON EC2R 7HJ ENGLAND SAN DIEGO OFFICE
PHONE + 44-171-374 4444, FAX 374 4460 701 "B" STREET,
SUITE 2100
September 30, 1999 SAN DIEGO, CALIFORNIA
LOS ANGELES OFFICE 92101-8197
633 WEST FIFTH STREET, SUITE 4000 PHONE (619) 236-1234,
LOS ANGELES, CALIFORNIA 90071-2007 FAX 696-7419
PHONE (213) 485-1234, FAX 891-8763
MOSCOW OFFICE SAN FRANCISCO OFFICE
ULITSA GASHEKA, 7, 9th Floor 505 MONTGOMERY STREET,
MOSCOW 123056, RUSSIA SUITE 1900
PHONE + 7-095 785-1234, FAX 785-1235 SAN FRANCISCO,
CALIFORNIA 94111-2562
NEW JERSEY OFFICE PHONE (415) 391-0600,
ONE NEWARK CENTER, 16th FLOOR FAX 395-8095
NEWARK, NEW JERSEY 07101-3174
PHONE (973) 639-1234, FAX 639-7298 SILICON VALLEY OFFICE
135 COMMONWEALTH DRIVE
MENLO PARK, CALIFORNIA
94025
PHONE (650) 328-4600,
FAX 463-2600
SINGAPORE OFFICE
20 CECIL STREET,
SUITE 25-02
THE EXCHANGE, SINGAPORE
049705
PHONE + 65-536-1161,
FAX 536-1171
TOKYO OFFICE
INFINI AKASAKA, 8-7-15,
AKASAKA, MINATO-KU
TOKYO 107-0052, JAPAN
PHONE + 813-3423-3970,
FAX 3423-3971
</TABLE>
Entercom Communications Corp.
Entercom Communications Capital Trust
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
Re: Entercom Communications Capital Trust
Ladies and Gentlemen:
We have acted as tax counsel to Entercom Communications Corp.,
a Pennsylvania corporation ("Entercom"), and Entercom Communications Capital
Trust, a statutory business trust organized under the Business Trust Act of the
State of Delaware (Chapter 38, Title 12 of the Delaware Code, 12 Del. C. Sec.
3801 et set.) (the "Issuer"), in connection with the issuance by the Issuer of
up to 3,450,000 _% convertible preferred securities, term income deferrable
equity securities (liquidation amount $50 per preferred security) (the
"Securities"), representing undivided beneficial interest in the assets of the
Issuer, pursuant to a registration statement on Form S-1 (File No. 333-86843) of
Entercom and the Issuer filed by the Issuer and Entercom with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), on September 10, 1999, as amended by Amendment
No. 1 filed with the Commission on September 14, 1999 and as amended by
Amendment No. 2 filed with the Commission on September 30, 1999 (collectively,
the "Registration Statement").
You have requested our opinion concerning the statements in
the Registration Statement set forth under the caption "United States Federal
Income Tax Consequences." The facts as we understand them and upon which with
your permission we rely in rendering the opinion expressed herein, are set forth
in the Registration Statement. In addition, we have relied, with your
permission, exclusively upon the opinion of Morris, Nichols, Arsht and Tunnell,
<PAGE> 2
LATHAM & WATKINS
Entercom Communications Corp.
Entercom Communications Capital Trust
September 30, 1999
Page 2
Delaware counsel for Entercom and the Issuer, dated September 30, 1999, with
respect to certain matters of Delaware law.
In our capacity as tax counsel to Entercom and the Issuer, we
have made such legal and factual examinations and inquiries, including an
examination of originals or copies certified or otherwise identified to our
satisfaction of such documents, corporate records and other instruments as we
have deemed necessary or appropriate for purposes of this opinion. In our
examination, we have assumed the authenticity of all documents submitted to us
as originals, the genuineness of all signatures thereon, the legal capacity of
natural persons executing such documents and the conformity to authentic
original documents of all documents submitted to us as copies. We have reviewed
and relied upon the Amended and Restated Declaration of Trust of the Issuer
among Entercom, as sponsor, Wilmington Trust Company, as property trustee and
Delaware trustee, and Joseph M. Field, David J. Field and John C. Donlevie, as
administrative trustees, the Indenture (as defined in the Registration
Statement) and such other documents as in our judgment were necessary or
appropriate to enable us to render the opinion contained herein.
We are opining herein as to the effect on the subject
transaction only of the Federal income tax laws of the United States and we
express no opinion with respect to the applicability thereto, or the effect
thereon, of other Federal laws, the laws of any state or other jurisdiction or
as to any matters of municipal law or the laws of any other location agencies
within any state.
Based upon such facts, assumptions and representations, it is
our opinion that:
(1) The Issuer will be classified for Federal income tax
purposes as a grantor trust and not as an association taxable as a corporation.
(2) The statements in the Registration Statement set forth
under the caption "Federal Income Tax Consequences" to the extent such
statements constitute matters of law, summaries of legal matters or legal
conclusions, have been reviewed by us and are accurate in all material respects.
No opinion is expressed as to any matter not discussed herein.
This opinion is rendered to you as of the date hereof of this
letter, and we undertake no obligation to update this opinion subsequent to the
date hereof. This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts, representations or assumptions recited or referred to
hereinabove, could affect the conclusions stated herein.
<PAGE> 3
LATHAM & WATKINS
Entercom Communications Corp.
Entercom Communications Capital Trust
September 30, 1999
Page 3
This opinion is furnished to you, and is for your use in
connection with the transactions set forth in the Registration Statement. This
opinion may not be relied upon by you for any other purposes, or furnished to,
quoted to, or relied upon by any other person, firm or corporation, for any
purpose, without our prior written consent. We hereby consent to the filing of
this opinion as an exhibit to the Registration Statement and to the use of our
name under the caption "Legal Matters" in the Registration Statement.
Very truly yours,
Latham & Watkins
<PAGE> 1
Exhibit 12.01
ENTERCOM COMMUNICATIONS CORP.
Supporting Schedule of Ratio of Earnings to Fixed Charges
(in thousands)
<TABLE>
<CAPTION>
Six Months
Year Ended September 30, Ended
1994 1995 1996 1997 1998 June 30, 1999
------ ----- ------ ------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes and extraordinary item 21,914 4,805 7,053 177,259 9,892 11,944
====== ===== ====== ======= ====== ======
Fixed Charges
Interest expense 1,648 1,992 5,196 11,388 14,663 6,246
Amortization of debt expense 46 59 133 592 453 143
Rental expense interest factor 240 247 360 660 840 539
------ ----- ------ ------- ------ ------
Total 1,934 2,298 5,689 12,640 15,956 6,928
====== ===== ====== ======= ====== ======
Earnings
Income before income taxes and extraordinary item 21,914 4,805 7,053 177,259 9,892 11,944
Fixed charges 1,934 2,298 5,689 12,640 15,956 6,928
------ ----- ------ ------- ------ ------
23,848 7,103 12,742 189,899 25,848 18,872
====== ===== ====== ======= ====== ======
Ratio of Earnings to Fixed Charges
Earnings 23,848 7,103 12,742 189,899 25,848 18,872
Fixed charges 1,934 2,298 5,689 12,640 15,956 6,928
Ratio 12.33 3.09 2.24 15.02 1.62 2.72
</TABLE>
<PAGE> 1
Exhibit 21.01
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME UNDER WHICH
NAME JURISDICTION OF ORGANIZATION SUBSIDIARY DOES BUSINESS
- ---- ---------------------------- ------------------------
<S> <C> <C>
ECI License Company, LP Pennsylvania ECI License Company, LP
Entercom Investors Corp. Pennsylvania Entercom Investors Corp.
Entercom Portland, LLC Oregon Entercom Portland, LLC
Entercom Portland License, LLC Oregon Entercom Portland License, LLC
Entercom Rochester, Inc. New York Entercom Rochester, Inc.
Entercom Buffalo License, LLC Delaware Entercom Buffalo License, LLC
Entercom Boston 1 Trust Massachusetts Entercom Boston License, LLC
Entercom Boston, LLC Delaware Entercom Boston License, LLC
Entercom Boston License, LLC Delaware Entercom Boston License, LLC
Entercom Seattle, LLC Delaware Entercom Seattle, LLC
Entercom Seattle License, LLC Delaware Entercom Seattle License, LLC
Entercom Seattle News License, LLC Delaware Entercom Seattle News License, LLC
Entercom Sacramento, LLC Delaware Entercom Sacramento, LLC
Entercom Longview, LLC Delaware Entercom Longview, LLC
Entercom Longview License, LLC Delaware Entercom Longview License, LLC
Entercom Gainesville, LLC Delaware Entercom Gainesville, LLC
Entercom Gainesville License, LLC Delaware Entercom Gainesville License, LLC
Entercom Kansas City, LLC Delaware Entercom Kansas City, LLC
Entercom Kansas City News License, LLC Delaware Entercom Kansas City News, LLC
Entercom Micanopy License, LLC Delaware Entercom Micanopy License, LLC
Entercom Greensboro License, LLC Delaware Entercom Greensboro License, LLC
Entercom Greenville License, LLC Delaware Entercom Greenville License, LLC
Entercom Memphis License, LLC Delaware Entercom Memphis License, LLC
Entercom Milwaukee License, LLC Delaware Entercom Milwaukee License, LLC
Entercom New Orleans License, LLC Delaware Entercom New Orleans License, LLC
Entercom Norfolk License, LLC Delaware Entercom Norfolk License, LLC
Entercom Scranton Wilkes-Barre Delaware Entercom Scranton Wilkes-Barre
License, LLC License, LLC
Entercom Communications Capital Delaware Entercom Communications Capital Trust
Trust
Entercom Radio, LLC Delaware Entercom Radio, LLC
Entercom Buffalo, LLC Delaware Entercom Buffalo, LLC
Entercom Greensboro, LLC Delaware Entercom Greensboro, LLC
Entercom Greenville, LLC Delaware Entercom Greenville, LLC
Entercom Memphis, LLC Delaware Entercom Memphis, LLC
Entercom Milwaukee, LLC Delaware Entercom Milwaukee, LLC
Entercom New Orleans, LLC Delaware Entercom New Orleans, LLC
Entercom Scranton Wilkes-Barre, LLC Delaware Entercom Scranton Wilkes-Barre, LLC
Entercom Norfolk, LLC Delaware Entercom Norfolk, LLC
</TABLE>
<PAGE> 1
Exhibit 23.01
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors of
Entercom Communications Corp.
Bala Cynwyd, Pennsylvania
We consent to the use in this Amendment No. 2 to Registration Statement No.
333-86843 of Entercom Communications Corp. of our report dated December 31, 1998
(January 26, 1999 as to Notes 10 and 13) (which expresses an unqualified opinion
and includes an explanatory paragraph relating to the restatement described in
Note 14), appearing in the Prospectus, which is a part of this Registration
Statement, and of our report dated December 31, 1998 (January 26, 1999 as to
Notes 10 and 13) related to the financial statement schedule included elsewhere
in this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
September 28, 1999
<PAGE> 1
EXHIBIT 23.02
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors of
Entercom Communications Corp.
Bala Cynwyd, Pennsylvania
We consent to the use in this Amendment No. 2 to Registration Statement No.
333-86843 of Entercom Communications Corp. of our report dated September 18,
1998 (December 11, 1998 as to Note 7), appearing in the Prospectus, which is a
part of this Registration Statement, and to the reference to us under the
heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 28, 1999
<PAGE> 1
[ARTHUR ANDERSEN LLP LETTERHEAD]
Exhibit 23.03
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this Amendment
No. 2 to Form S-1 Registration Statement.
/S/ Arthur Andersen LLP
Baltimore, Maryland,
September 28, 1999
<PAGE> 1
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
ENTERCOM COMMUNICATIONS CORP.
(Exact name of obligor as specified in its charter)
Pennsylvania 23-1701044
(State of incorporation) (I.R.S. employer identification no.)
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
(Address of principal executive offices) (Zip Code)
% Convertible Subordinated Debentures due 2014 of Entercom Communications Corp.
(Title of the indenture securities)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to
exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 22nd day
of September, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Donald G. MacKelcan By: /s/ Norma P. Closs
---------------------------- ---------------------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware
is at Rodney Square North, in the City of Wilmington, County of New
Castle; the name of its resident agent is WILMINGTON TRUST COMPANY whose
address is Rodney Square North, in said City. In addition to such
principal office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware, the Town of
Newport, New Castle County, Delaware, at Claymont, New Castle County,
Delaware, at Greenville, New Castle County Delaware, and at Milford
Cross Roads, New Castle County, Delaware, and shall be empowered to
open, maintain and operate branch offices at Ninth and Shipley Streets,
418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in
the City of Wilmington, New Castle County, Delaware, and such other
branch offices or places of business as may be authorized from time to
time by the agency or agencies of the government of the State of
Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to the
same extent as natural persons might or could do and in any part of the
world, viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold,
<PAGE> 5
purchase, convey, mortgage or otherwise deal in real and personal
estate and property, and to appoint such officers and agents as the
business of the Corporation shall require, to make by-laws not
inconsistent with the Constitution or laws of the United States or
of this State, to discount bills, notes or other evidences of debt,
to receive deposits of money, or securities for money, to buy gold
and silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the powers,
rights, privileges and franchises incident to a corporation which
are proper or necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any estate
or interests therein, and to guarantee the holder of such property,
real or personal, against any claim or claims, adverse to his
interest therein, and to prepare and give certificates of title for
any lands or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in all
its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort
and kind, from executors, administrators, guardians, public
officers, courts, receivers, assignees, trustees, and from all
fiduciaries, and from all other persons and individuals, and from
all corporations whether state, municipal, corporate or private,
and to rent boxes, safes, vaults and other receptacles for such
property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or
underwriting the stock, bonds or other obligations of any
corporation, association, state or municipality, and may receive
and manage any sinking fund therefor on such terms as may be agreed
upon between the two parties, and in like manner may act as
Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other
2
<PAGE> 6
instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding places
of responsibility or trust; to become surety for any person, or
persons, for the faithful performance of any trust, office, duty,
contract or agreement, either by itself or in conjunction with any
other person, or persons, corporation, or corporations, or in like
manner become surety upon any bond, recognizance, obligation,
judgment, suit, order, or decree to be entered in any court of
record within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court in the
State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity in the receiving, holding, managing, and disposing of any
and all estates and property, real, personal or mixed, and to be
appointed as such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator, guardian
or bailee by any persons, corporations, court, officer, or
authority, in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation, court,
officer or authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not be
required to give bond with surety, but its capital stock shall be
taken and held as security for the performance of the duties
devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of
the duties which it may undertake or be called upon to perform, or
for the assumption of any responsibility the said Corporation may
be entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or of
any state, territory, colony, or possession thereof, or of any
foreign government or country; to receive, collect, receipt for,
and dispose of
3
<PAGE> 7
interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property held and owned by it, and to exercise in respect of all
such bonds, mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness and
other property, any and all the rights, powers and privileges of
individual owners thereof, including the right to vote thereon; to
invest and deal in and with any of the moneys of the Corporation
upon such securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such investments;
to issue bonds and secure the same by pledges or deeds of trust or
mortgages of or upon the whole or any part of the property held or
owned by the Corporation, and to sell and pledge such bonds, as and
when the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the extent
authorized by law, to lease, purchase, hold, sell, assign,
transfer, pledge, mortgage and convey real and personal property of
any name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that
the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and
to undertake the whole or any part of the assets and liabilities of
any person, firm, association or corporation, and to pay for the
same in cash, stock of this Corporation, bonds or otherwise; to
hold or in any manner to dispose of the whole or any part of the
property so purchased; to conduct in any lawful manner the whole or
any part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose
of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and,
without limit as to amount, to draw, make, accept, endorse,
discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other negotiable or
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transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent
as natural persons might or could do, to purchase or otherwise
acquire, to hold, own, to mortgage, sell, convey or otherwise
dispose of, real and personal property, of every class and
description, in any State, District, Territory or Colony of the
United States, and in any foreign country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited or
restricted by reference to or inference from the terms of any other
clause of this or any other paragraph in this charter, but that the
objects, purposes and powers specified in each of the clauses of
this paragraph shall be regarded as independent objects, purposes
and powers.
FOURTH: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock");
and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and
the preferences and relative, participating, optional and other special
rights of each such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other
series at any time outstanding; and, subject to the provisions of
subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of
Directors of the Corporation is hereby expressly granted authority to
fix by resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers and
the designations, preferences and relative, optional and other special
rights, and the qualifications, limitations and restrictions of such
series, including, but without limiting the generality of the
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<PAGE> 9
foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall
be paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes,
or series of the same or other class of stock and whether such
dividends shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any
other class or classes of stock of the Corporation and the terms
and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject
to redemption, and the redemption price or prices and the time or
times at which, and the terms and conditions on which, Preferred
Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under
such circumstances and on such conditions as the Board of Directors
may determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section
(b) of this Article
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<PAGE> 10
FOURTH), if any, shall have been met and after the Corporation shall
have complied with all the requirements, if any, with respect to the
setting aside of sums as sinking funds or redemption or purchase
accounts (fixed in accordance with the provisions of section (b) of this
Article FOURTH), and subject further to any conditions which may be
fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time
by the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred
Stock in the event of voluntary or involuntary liquidation,
distribution or sale of assets, dissolution or winding-up, of the
Corporation, the holders of the Common Stock shall be entitled to
receive all of the remaining assets of the Corporation, tangible
and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each
holder of Common Stock shall have one vote in respect of each share
of Common Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any class
or series of stock or securities convertible into or exchangeable for
stock, or carrying any right to purchase stock, may be issued and
disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of
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<PAGE> 11
Directors in the resolution or resolutions adopted pursuant to authority
granted in section (b) of this Article FOURTH and the consent, by class
or series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other series
of Preferred Stock whether or not the powers, preferences and rights of
such other series shall be fixed by the Board of Directors as senior to,
or on a parity with, the powers, preferences and rights of such
outstanding series, or any of them; provided, however, that the Board of
Directors may provide in the resolution or resolutions as to any series
of Preferred Stock adopted pursuant to section (b) of this Article
FOURTH that the consent of the holders of a majority (or such greater
proportion as shall be therein fixed) of the outstanding shares of such
series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the
whole Board, provided, however, that the number of directors shall not
be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting
the whole Board shall be twenty-four until otherwise fixed by a majority
of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in 1982,
directors of the first class shall be elected to hold office for a term
expiring at the next succeeding annual meeting, directors of the second
class
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<PAGE> 12
shall be elected to hold office for a term expiring at the second
succeeding annual meeting and directors of the third class shall be
elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any reason,
and any newly created directorships resulting from any increase in the
directors, may be filled by the Board of Directors, acting by a majority
of the directors then in office, although less than a quorum, and any
directors so chosen shall hold office until the next annual election of
directors. At such election, the stockholders shall elect a successor to
such director to hold office until the next election of the class for
which such director shall have been chosen and until his successor shall
be elected and qualified. No decrease in the number of directors shall
shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter
or Act of Incorporation or the ByLaws of the Corporation), any director
or the entire Board of Directors of the Corporation may be removed at
any time without cause, but only by the affirmative vote of the holders
of two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing,
delivered or mailed by first class United States mail, postage prepaid,
to the Secretary of the Corporation not less than 14 days nor more than
50 days prior to any meeting of the stockholders called for the election
of directors; provided, however, that if less than 21 days' notice of
the meeting is given to stockholders, such written notice shall be
delivered or mailed, as prescribed, to the Secretary of the Corporation
not later than the close of the seventh day following the day on which
notice of the meeting was mailed to stockholders. Notice of nominations
which are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of
such nominee and (iii) the number of shares of stock of the Corporation
which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to
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<PAGE> 13
the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agents and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General Corporation
Law", approved March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power to
authorize the seal of the Corporation to be affixed to all papers which
may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or
more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for
this purpose as
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one class).
FOURTEENTH: - Meetings of the Directors may be held outside of the State
of Delaware at such places as may be from time to time designated by the
Board, and the Directors may keep the books of the Company outside of
the State of Delaware at such places as may be from time to time
designated by them.
FIFTEENTH: - (a) (1) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and (c)
of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any Interested
Stockholder (as hereinafter defined) or (ii) any other corporation
(whether or not itself an Interested Stockholder), which, after
such merger or consolidation, would be an Affiliate (as hereinafter
defined) of an Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market value
of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of related transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate fair market value of $1,000,000 or
more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or
any similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which is directly or
indirectly owned by any Interested Stockholder, or any Affiliate of
any Interested Stockholder,
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shall require the affirmative vote of the holders of at least
two-thirds of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of
directors, considered for the purpose of this Article FIFTEENTH as
one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or
that some lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to in any
one or more of clauses (A) through (E) of paragraph 1 of the
section (a).
(b) The provisions of section (a) of this Article FIFTEENTH shall
not be applicable to any particular business combination and such
business combination shall require only such affirmative vote as is
required by law and any other provisions of the Charter or Act of
Incorporation or By-Laws if such business combination has been
approved by a majority of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual, firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary)
who or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have occurred
in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities
Act of 1933.
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(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement, or
upon exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect
on December 31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition
of Investment Stockholder set forth in paragraph (2) of this section
(c), the term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly or
indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis
of information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an
Affiliate or Associate of another, (3) whether a person has an
agreement, arrangement or understanding with another as to the
matters referred to in paragraph (3) of section (c), or (4) whether
the assets subject to any business combination or the consideration
received for the issuance or
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transfer of securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH
or SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 19
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each share of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
<PAGE> 20
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or divisions of the Company as it may deem
advisable.
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ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be
kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time
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for that purpose, and any provisions of these By-Laws (other than this Section)
and any resolutions which are contrary to the provisions of this Section or to
the provisions of any such implementary Resolutions shall be suspended during
such a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
4
<PAGE> 23
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than five (5) members who shall be selected by the Board of Directors from its
own members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any
time by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member.
5
<PAGE> 24
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors. In the absence of the Chairman of the Board
the President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
6
<PAGE> 25
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for all
monies, funds and valuables of the Company and for the keeping of proper records
of the evidence of property or indebtedness and of all the transactions of the
Company. He shall have general supervision of the expenditures of the Company
and shall report to the Board of Directors at each regular meeting of the
condition of the Company, and perform such other duties as may be assigned to
him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from time
to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a
7
<PAGE> 26
transfer book shall be kept in which all transfers of stock shall be recorded.
Section 2. Certificates of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington,Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
8
<PAGE> 27
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was
9
<PAGE> 28
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person in
connection with a proceeding initiated by such person only if the proceeding was
authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director or officer in his capacity
as a Director or officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the Director or officer to
repay all amounts advanced if it should be ultimately determined that the
Director or officer is not entitled to be indemnified under this Article or
otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification of payment of expenses under
applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the members
of the Board of Directors then in office.
10
<PAGE> 29
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: September 22, 1999 By: /s/ Norma P. Closs
---------------------------------
Name: Norma P. Closs
Title: Vice President
<PAGE> 30
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ------------------------------------ ---------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1999.
--------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins .................. 207,947
Interest-bearing balances ............................................ 0
Held-to-maturity securities ............................................... 37,680
Available-for-sale securities ............................................. 1,598,933
Federal funds sold and securities purchased under agreements to resell .... 180,366
Loans and lease financing receivables:
Loans and leases, net of unearned income ............................. 4,237,557
LESS: Allowance for loan and lease losses ........................... 70,233
LESS: Allocated transfer risk reserve ............................... 0
Loans and leases, net of unearned income, allowance, and reserve .......... 4,167,324
Assets held in trading accounts ........................................... 0
Premises and fixed assets (including capitalized leases) .................. 141,415
Other real estate owned ................................................... 922
Investments in unconsolidated subsidiaries and associated companies ....... 1,227
Customers' liability to this bank on acceptances outstanding .............. 0
Intangible assets ......................................................... 5,179
Other assets .............................................................. 104,101
Total assets .............................................................. 6,445 ,094
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 31
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices ...................................................... 4,574,509
Noninterest-bearing ................................................. 992,436
Interest-bearing .................................................... 3,582,073
Federal funds purchased and Securities sold under agreements to repurchase 344,719
Demand notes issued to the U.S. Treasury ................................. 83,802
Trading liabilities (from Schedule RC-D) ................................. 0
Other borrowed money: .................................................... ///////
With original maturity of one year or less .......................... 860,000
With original maturity of more than one year ........................ 43,000
Bank's liability on acceptances executed and outstanding ................. 0
Subordinated notes and debentures ........................................ 0
Other liabilities (from Schedule RC-G) ................................... 80,279
Total liabilities ........................................................ 5,986,309
EQUITY CAPITAL
Perpetual preferred stock and related surplus ............................ 0
Common Stock ............................................................. 500
Surplus (exclude all surplus related to preferred stock) ................. 62,118
Undivided profits and capital reserves ................................... 412,409
Net unrealized holding gains (losses) on available-for-sale securities ... (16,242)
Total equity capital ..................................................... 458,785
Total liabilities, limited-life preferred stock, and equity capital ...... 6,445,094
</TABLE>
2
<PAGE> 1
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
ENTERCOM COMMUNICATIONS CORP.
ENTERCOM COMMUNICATIONS CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Pennsylvania 23-1701044
Delaware To be applied For
(State of incorporation) (I.R.S. employer identification no.)
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
(Address of principal executive offices) (Zip Code)
% Convertible Preferred Securities, Term Income Deferrable Equity Securities
(TIDES)
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 22nd day
of September, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Donald G. MacKelcan By: /s/ Norma P. Closs
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
3
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington,
County of New Castle; the name of its resident agent is WILMINGTON
TRUST COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains
and operates branch offices in the City of Newark, New Castle
County, Delaware, the Town of Newport, New Castle County, Delaware,
at Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate
branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of
Wilmington, New Castle County, Delaware, and such other branch
offices or places of business as may be authorized from time to time
by the agency or agencies of the government of the State of Delaware
empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this
Corporation are to do any or all of the things herein mentioned as
fully and to the same extent as natural persons might or could do
and in any part of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter
the seal at pleasure, to hold,
<PAGE> 5
purchase, convey, mortgage or otherwise deal in real and
personal estate and property, and to appoint such officers
and agents as the business of the Corporation shall require,
to make by-laws not inconsistent with the Constitution or
laws of the United States or of this State, to discount
bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver
bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the
powers, rights, privileges and franchises incident to a
corporation which are proper or necessary for the
transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or
claims, adverse to his interest therein, and to prepare and
give certificates of title for any lands or premises in the
State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers of
every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property
of every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other
persons and individuals, and from all corporations whether
state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond
or other
2
<PAGE> 6
instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any
trust, office, duty, contract or agreement, either by itself
or in conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment,
suit, order, or decree to be entered in any court of record
within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court
in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian, bailee, or
in any other trust capacity in the receiving, holding,
managing, and disposing of any and all estates and property,
real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee
in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority,
in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other
trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as
security for the performance of the duties devolving upon it
by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or
be called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to
receive, collect, receipt for, and dispose of
3
<PAGE> 7
interest, dividends and income upon and from any of the
bonds, mortgages, debentures, notes, shares of capital
stock, securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other
property, any and all the rights, powers and privileges of
individual owners thereof, including the right to vote
thereon; to invest and deal in and with any of the moneys of
the Corporation upon such securities and in such manner as
it may think fit and proper, and from time to time to vary
or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon
the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when
the Board of Directors shall determine, and in the promotion
of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell,
assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have the
following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of the
assets and liabilities of any person, firm, association or
corporation, and to pay for the same in cash, stock of this
Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any
part of any business so acquired, and to exercise all the
powers necessary or convenient in and about the conduct and
management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or
corporation, and, without limit as to amount, to draw, make,
accept, endorse, discount, execute and issue promissory
notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or
4
<PAGE> 8
transferable instruments.
(5) To have one or more offices, to carry on all or any of
its operations and businesses, without restriction to the
same extent as natural persons might or could do, to
purchase or otherwise acquire, to hold, own, to mortgage,
sell, convey or otherwise dispose of, real and personal
property, of every class and description, in any State,
District, Territory or Colony of the United States, and in
any foreign country or place.
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this paragraph
shall (except where otherwise expressed in said paragraph)
be nowise limited or restricted by reference to or inference
from the terms of any other clause of this or any other
paragraph in this charter, but that the objects, purposes
and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes
and powers.
FOURTH: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board
of Directors each of said series to be distinctly designated. All
shares of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article FOURTH, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions
of such series, including, but without limiting the generality of
the
5
<PAGE> 9
foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time
by like action of the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred Stock
of such series shall be paid, the extent of the preference
or relation, if any, of such dividends to the dividends
payable on any other class or classes, or series of the same
or other class of stock and whether such dividends shall be
cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same
for, shares of any other class or classes or of any series
of the same or any other class or classes of stock of the
Corporation and the terms and conditions of such conversion
or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices
and the time or times at which, and the terms and conditions
on which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the
generality of the foregoing include the right, voting as a
series or by itself or together with other series of
Preferred Stock or all series of Preferred Stock as a class,
to elect one or more directors of the Corporation if there
shall have been a default in the payment of dividends on any
one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential
dividends on the Preferred Stock (fixed in accordance with the
provisions of section (b) of this Article
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<PAGE> 10
FOURTH), if any, shall have been met and after the Corporation shall
have complied with all the requirements, if any, with respect to the
setting aside of sums as sinking funds or redemption or purchase
accounts (fixed in accordance with the provisions of section (b) of
this Article FOURTH), and subject further to any conditions which
may be fixed in accordance with the provisions of section (b) of
this Article FOURTH, then and not otherwise the holders of Common
Stock shall be entitled to receive such dividends as may be declared
from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares
of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any
class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series,
or bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock of the
Corporation of any class or series, or carrying any right to
purchase stock of any class or series, but any such unissued stock,
additional authorized issue of shares of any class or series of
stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, whether such holders or others,
and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case,
be as fixed from time to time by the Board of
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<PAGE> 11
Directors in the resolution or resolutions adopted pursuant to
authority granted in section (b) of this Article FOURTH and the
consent, by class or series vote or otherwise, of the holders of
such of the series of Preferred Stock as are from time to time
outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the
powers, preferences and rights of such other series shall be fixed
by the Board of Directors as senior to, or on a parity with, the
powers, preferences and rights of such outstanding series, or any of
them; provided, however, that the Board of Directors may provide in
the resolution or resolutions as to any series of Preferred Stock
adopted pursuant to section (b) of this Article FOURTH that the
consent of the holders of a majority (or such greater proportion as
shall be therein fixed) of the outstanding shares of such series
voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class
8
<PAGE> 12
shall be elected to hold office for a term expiring at the second
succeeding annual meeting and directors of the third class shall be
elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any
reason, and any newly created directorships resulting from any
increase in the directors, may be filled by the Board of Directors,
acting by a majority of the directors then in office, although less
than a quorum, and any directors so chosen shall hold office until
the next annual election of directors. At such election, the
stockholders shall elect a successor to such director to hold office
until the next election of the class for which such director shall
have been chosen and until his successor shall be elected and
qualified. No decrease in the number of directors shall shorten the
term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to
9
<PAGE> 13
the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be
disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agents and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as
10
<PAGE> 14
one class).
FOURTEENTH: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) (1) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
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<PAGE> 15
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to in any one or more of clauses (A) through (E)
of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation or By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual, firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
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<PAGE> 16
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect on December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or
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<PAGE> 17
transfer of securities by the Corporation, or any Subsidiary
has an aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
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<PAGE> 18
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 19
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each share of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
<PAGE> 20
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or divisions of the Company as it may deem
advisable.
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<PAGE> 21
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not
more than nine members who shall be selected by the Board of Directors from its
own members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time
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<PAGE> 22
for that purpose, and any provisions of these By-Laws (other than this Section)
and any resolutions which are contrary to the provisions of this Section or to
the provisions of any such implementary Resolutions shall be suspended during
such a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more
than thirteen members who shall be selected by the Board of Directors, a
majority of whom shall be members of the Board of Directors and who shall hold
office during the pleasure of the Board.
(B) The Trust Committee shall have general supervision
over the Trust Department and the investment of trust funds, in all matters,
however, being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members or at the call of its chairman. A
majority of its members shall be necessary to constitute a quorum for the
transaction of business.
(D) Minutes of each meeting of the Trust Committee shall
be kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five
members who shall be selected by the Board of Directors from its own members,
none of whom shall be an officer of the Company, and shall hold office at the
pleasure of the Board.
(B) The Audit Committee shall have general supervision
over the Audit Division in all matters however subject to the approval of the
Board of Directors; it shall consider all matters brought to its attention by
the officer in charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such independent auditor
employed for that purpose, and make such recommendations to the Board of
Directors with respect thereto or with respect to any other matters pertaining
to auditing the
4
<PAGE> 23
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than five (5) members who shall be selected by the Board of Directors from
its own members who are not officers of the Company and who shall hold office
during the pleasure of the Board.
(B) The Compensation Committee shall in general advise
upon all matters of policy concerning the Company brought to its attention by
the management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called
at any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be
elected by the Board of Directors as an associate director, to serve during the
pleasure of the Board.
(B) An associate director shall be entitled to attend
all directors meetings and participate in the discussion of all matters brought
to the Board, with the exception that he would have no right to vote. An
associate director will be eligible for appointment to Committees of the
Company, with the exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of
any Committee created under Article III of the By-Laws of this Company, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
5
<PAGE> 24
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors. In the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
6
<PAGE> 25
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a
7
<PAGE> 26
transfer book shall be kept in which all transfers of stock shall be recorded.
Section 2. Certificates of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
8
<PAGE> 27
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was
9
<PAGE> 28
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person in
connection with a proceeding initiated by such person only if the proceeding was
authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director or officer in his capacity
as a Director or officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the Director or officer to
repay all amounts advanced if it should be ultimately determined that the
Director or officer is not entitled to be indemnified under this Article or
otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE> 29
EXHIBIT C
SECTION 321(B) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: September 22, 1999 By: /s/ Norma P. Closs
------------------------------
Name: Norma P. Closs
Title: Vice President
11
<PAGE> 30
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1999.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins ...................................................207,947
Interest-bearing balances....................................................................................0
Held-to-maturity securities................................................................................. 37,680
Available-for-sale securities.............................................................................1,598,933
Federal funds sold and securities purchased under agreements to resell......................................180,366
Loans and lease financing receivables:
Loans and leases, net of unearned income ............................................................4,237,557
LESS: Allowance for loan and lease losses .............................................................70,233
LESS: Allocated transfer risk reserve ......................................................................0
Loans and leases, net of unearned income, allowance, and reserve.....................................4,167,324
Assets held in trading accounts...................................................................................0
Premises and fixed assets (including capitalized leases)....................................................141,415
Other real estate owned...................................................................................... 922
Investments in unconsolidated subsidiaries and associated companies...........................................1,227
Customers' liability to this bank on acceptances outstanding......................................................0
Intangible assets............................................................................................ 5,179
Other assets................................................................................................104,101
Total assets..............................................................................................6,445,094
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 31
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices.......................................................................................4,574,509
Noninterest-bearing ...................................................................................992,436
Interest-bearing ....................................................................................3,582,073
Federal funds purchased and Securities sold under agreements to repurchase................................. 344,719
Demand notes issued to the U.S. Treasury.....................................................................83,802
Trading liabilities (from Schedule RC-D)..........................................................................0
Other borrowed money:.......................................................................................///////
With original maturity of one year or less ............................................................860,000
With original maturity of more than one year ...........................................................43,000
Bank's liability on acceptances executed and outstanding..........................................................0
Subordinated notes and debentures.................................................................................0
Other liabilities (from Schedule RC-G).................................................................... 80,279
Total liabilities.........................................................................................5,986,309
EQUITY CAPITAL
Perpetual preferred stock and related surplus.....................................................................0
Common Stock....................................................................................................500
Surplus (exclude all surplus related to preferred stock).....................................................62,118
Undivided profits and capital reserves......................................................................412,409
Net unrealized holding gains (losses) on available-for-sale securities.....................................(16,242)
Total equity capital........................................................................................458,785
Total liabilities, limited-life preferred stock, and equity capital.......................................6,445,094
</TABLE>
2
<PAGE> 1
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
ENTERCOM COMMUNICATIONS CORP.
(Exact name of obligor as specified in its charter)
Pennsylvania 23-1701044
(State of incorporation) (I.R.S. employer identification no.)
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
(Address of principal executive offices) (Zip Code)
Preferred Securities Guarantee issued by Entercom Communications Corp.
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor is
not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of
1939, as amended, the trustee, Wilmington Trust Company, a corporation organized
and existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 22nd day
of September, 1999.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Donald G. MacKelcan By: /s/ Norma P. Closs
------------------------ ------------------------
Assistant Secretary Name: Norma P. Closs
Title: Vice President
2
<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware
is at Rodney Square North, in the City of Wilmington, County of New
Castle; the name of its resident agent is WILMINGTON TRUST COMPANY
whose address is Rodney Square North, in said City. In addition to such
principal office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware, the Town of
Newport, New Castle County, Delaware, at Claymont, New Castle County,
Delaware, at Greenville, New Castle County Delaware, and at Milford
Cross Roads, New Castle County, Delaware, and shall be empowered to
open, maintain and operate branch offices at Ninth and Shipley Streets,
418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in
the City of Wilmington, New Castle County, Delaware, and such other
branch offices or places of business as may be authorized from time to
time by the agency or agencies of the government of the State of
Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to the
same extent as natural persons might or could do and in any part of the
world, viz.:
(1) To sue and be sued, complain and defend in any Court of
law or equity and to make and use a common seal, and alter the
seal at pleasure, to hold,
<PAGE> 5
purchase, convey, mortgage or otherwise deal in real and
personal estate and property, and to appoint such officers and
agents as the business of the Corporation shall require, to
make by-laws not inconsistent with the Constitution or laws of
the United States or of this State, to discount bills, notes
or other evidences of debt, to receive deposits of money, or
securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and
generally to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation which are
proper or necessary for the transaction of the business of the
Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of
such property, real or personal, against any claim or claims,
adverse to his interest therein, and to prepare and give
certificates of title for any lands or premises in the State
of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management of
funds, and the purchase, sale, management and disposal of
property of all descriptions, and to prepare and execute all
papers which may be necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in
all its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators,
guardians, public officers, courts, receivers, assignees,
trustees, and from all fiduciaries, and from all other persons
and individuals, and from all corporations whether state,
municipal, corporate or private, and to rent boxes, safes,
vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking fund
therefor on such terms as may be agreed upon between the two
parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond
or other
2
<PAGE> 6
instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any trust,
office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to
be entered in any court of record within the State of Delaware
or elsewhere, or which may now or hereafter be required by any
law, judge, officer or court in the State of Delaware or
elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in
any other trust capacity in the receiving, holding, managing,
and disposing of any and all estates and property, real,
personal or mixed, and to be appointed as such trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any
persons, corporations, court, officer, or authority, in the
State of Delaware or elsewhere; and whenever this Corporation
is so appointed by any person, corporation, court, officer or
authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not
be required to give bond with surety, but its capital stock
shall be taken and held as security for the performance of the
duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake or be
called upon to perform, or for the assumption of any
responsibility the said Corporation may be entitled to receive
a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without
the State of Delaware, or of the Government of the United
States, or of any state, territory, colony, or possession
thereof, or of any foreign government or country; to receive,
collect, receipt for, and dispose of
3
<PAGE> 7
interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness
and other property held and owned by it, and to exercise in
respect of all such bonds, mortgages, debentures, notes,
shares of capital stock, securities, obligations, contracts,
evidences of indebtedness and other property, any and all the
rights, powers and privileges of individual owners thereof,
including the right to vote thereon; to invest and deal in and
with any of the moneys of the Corporation upon such securities
and in such manner as it may think fit and proper, and from
time to time to vary or realize such investments; to issue
bonds and secure the same by pledges or deeds of trust or
mortgages of or upon the whole or any part of the property
held or owned by the Corporation, and to sell and pledge such
bonds, as and when the Board of Directors shall determine, and
in the promotion of its said corporate business of investment
and to the extent authorized by law, to lease, purchase, hold,
sell, assign, transfer, pledge, mortgage and convey real and
personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred
by the laws of the State of Delaware, it is hereby expressly provided
that the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the
same extent as natural persons might or could do, and in any
part of the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation,
and to pay for the same in cash, stock of this Corporation,
bonds or otherwise; to hold or in any manner to dispose of the
whole or any part of the property so purchased; to conduct in
any lawful manner the whole or any part of any business so
acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such
business.
(3) To take, hold, own, deal in, mortgage or otherwise lien,
and to lease, sell, exchange, transfer, or in any manner
whatever dispose of property, real, personal or mixed,
wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept,
endorse, discount, execute and issue promissory notes, drafts,
bills of exchange, warrants, bonds, debentures, and other
negotiable or
4
<PAGE> 8
transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same
extent as natural persons might or could do, to purchase or
otherwise acquire, to hold, own, to mortgage, sell, convey or
otherwise dispose of, real and personal property, of every
class and description, in any State, District, Territory or
Colony of the United States, and in any foreign country or
place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall
(except where otherwise expressed in said paragraph) be nowise
limited or restricted by reference to or inference from the
terms of any other clause of this or any other paragraph in
this charter, but that the objects, purposes and powers
specified in each of the clauses of this paragraph shall be
regarded as independent objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par
value $10.00 per share (hereinafter referred to as "Preferred
Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par
value $1.00 per share (hereinafter referred to as "Common
Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares
of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative. The
voting powers and the preferences and relative, participating, optional
and other special rights of each such series, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of
any and all other series at any time outstanding; and, subject to the
provisions of subparagraph 1 of Paragraph (c) of this Article FOURTH,
the Board of Directors of the Corporation is hereby expressly granted
authority to fix by resolution or resolutions adopted prior to the
issuance of any shares of a particular series of Preferred Stock, the
voting powers and the designations, preferences and relative, optional
and other special rights, and the qualifications, limitations and
restrictions of such series, including, but without limiting the
generality of the
5
<PAGE> 9
foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased (except where otherwise provided by
the Board of Directors) or decreased (but not below the number
of shares thereof then outstanding) from time to time by like
action of the Board of Directors;
(2) The rate and times at which, and the terms and conditions
on which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if
any, of such dividends to the dividends payable on any other
class or classes, or series of the same or other class of
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same for,
shares of any other class or classes or of any series of the
same or any other class or classes of stock of the Corporation
and the terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock which may, without limiting the generality
of the foregoing include the right, voting as a series or by
itself or together with other series of Preferred Stock or all
series of Preferred Stock as a class, to elect one or more
directors of the Corporation if there shall have been a
default in the payment of dividends on any one or more series
of Preferred Stock or under such circumstances and on such
conditions as the Board of Directors may determine.
(c) (1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
section (b) of this Article
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<PAGE> 10
FOURTH), if any, shall have been met and after the Corporation shall
have complied with all the requirements, if any, with respect to the
setting aside of sums as sinking funds or redemption or purchase
accounts (fixed in accordance with the provisions of section (b) of
this Article FOURTH), and subject further to any conditions which may
be fixed in accordance with the provisions of section (b) of this
Article FOURTH, then and not otherwise the holders of Common Stock
shall be entitled to receive such dividends as may be declared from
time to time by the Board of Directors.
(2) After distribution in full of the preferential amount,
if any, (fixed in accordance with the provisions of section
(b) of this Article FOURTH), to be distributed to the
holders of Preferred Stock in the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation, the holders
of the Common Stock shall be entitled to receive all of the
remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares
of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be
adopted by the Board of Directors pursuant to section (b) of
this Article FOURTH, each holder of Common Stock shall have
one vote in respect of each share of Common Stock held on
all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or
of options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have
any preemptive right to purchase or subscribe for any unissued stock of
any class or series or any additional shares of any class or series to
be issued by reason of any increase of the authorized capital stock of
the Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any class
or series of stock or securities convertible into or exchangeable for
stock, or carrying any right to purchase stock, may be issued and
disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of
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<PAGE> 11
Directors in the resolution or resolutions adopted pursuant to
authority granted in section (b) of this Article FOURTH and the
consent, by class or series vote or otherwise, of the holders of
such of the series of Preferred Stock as are from time to time
outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the
powers, preferences and rights of such other series shall be fixed
by the Board of Directors as senior to, or on a parity with, the
powers, preferences and rights of such outstanding series, or any of
them; provided, however, that the Board of Directors may provide in
the resolution or resolutions as to any series of Preferred Stock
adopted pursuant to section (b) of this Article FOURTH that the
consent of the holders of a majority (or such greater proportion as
shall be therein fixed) of the outstanding shares of such series
voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series
of Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of
directors constituting the entire Board shall be not less than five
nor more than twenty-five as fixed from time to time by vote of a
majority of the whole Board, provided, however, that the number of
directors shall not be reduced so as to shorten the term of any
director at the time in office, and provided further, that the
number of directors constituting the whole Board shall be
twenty-four until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors
of the second class
8
<PAGE> 12
shall be elected to hold office for a term expiring at the second
succeeding annual meeting and directors of the third class shall be
elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any
reason, and any newly created directorships resulting from any
increase in the directors, may be filled by the Board of Directors,
acting by a majority of the directors then in office, although less
than a quorum, and any directors so chosen shall hold office until
the next annual election of directors. At such election, the
stockholders shall elect a successor to such director to hold office
until the next election of the class for which such director shall
have been chosen and until his successor shall be elected and
qualified. No decrease in the number of directors shall shorten the
term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative
vote of the holders of two-thirds or more of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class)
cast at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote for the
election of directors. Such nominations shall be made by notice in
writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than
14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than 21 days' notice of the meeting is given
to stockholders, such written notice shall be delivered or mailed,
as prescribed, to the Secretary of the Corporation not later than
the close of the seventh day following the day on which notice of
the meeting was mailed to stockholders. Notice of nominations which
are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of such nominee and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such
nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to
9
<PAGE> 13
the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be
disregarded.
(g) No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agents and
servants as may be provided in the By-Laws as they may from time to
time find necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority
of the whole Board, may designate any of their number to constitute
an Executive Committee, which Committee, to the extent provided in
said resolution, or in the By-Laws of the Company, shall have and
may exercise all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and shall
have power to authorize the seal of the Corporation to be affixed to
all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation
by a vote of the majority of the entire Board. The stockholders may
make, alter or repeal any By-Law whether or not adopted by them,
provided however, that any such additional By-Laws, alterations or
repeal may be adopted only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as
10
<PAGE> 14
one class).
FOURTEENTH: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be
from time to time designated by them.
FIFTEENTH: - (a) (1) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation,
would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair
market value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities
or other property (or a combination thereof) having an
aggregate fair market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested
Stockholder, or any Affiliate of any Interested Stockholder,
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<PAGE> 15
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to in any one or more of clauses (A) through (E)
of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business
combination and such business combination shall require only
such affirmative vote as is required by law and any other
provisions of the Charter or Act of Incorporation or By-Laws
if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual, firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any
Subsidiary) who or which as of the record date for the determination
of stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial owner,
directly or indirectly, of not less than 10% of the then
outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any
share of capital stock of the Corporation which were at any
time within two years prior thereto beneficially owned by
any Interested Stockholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
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<PAGE> 16
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own, directly
or indirectly, or
(B) which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of capital stock
of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of
any class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect on December 31, 1981) is owned, directly or
indirectly, by the Corporation; provided, however, that for the
purposes of the definition of Investment Stockholder set forth in
paragraph (2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty
to determine for the purposes of this Article FIFTEENTH on
the basis of information known to them, (1) the number of
Voting Shares beneficially owned by any person (2) whether a
person is an Affiliate or Associate of another, (3) whether
a person has an agreement, arrangement or understanding with
another as to the matters referred to in paragraph (3) of
section (c), or (4) whether the assets subject to any
business combination or the consideration received for the
issuance or
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<PAGE> 17
transfer of securities by the Corporation, or any Subsidiary
has an aggregate fair market value of $1,000,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and in
addition to any other vote that may be required by law, this Charter
or Act of Incorporation by the By-Laws), the affirmative vote of the
holders of at least two-thirds of the outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles FIFTH, THIRTEENTH, FIFTEENTH or SIXTEENTH of this Charter
or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except to the extent such
exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Laws as the same exists or
may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a
Director of the Corporation existing hereunder with respect
to any act or omission occurring prior to the time of such
repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 19
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each share of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
<PAGE> 20
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall
be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board of Directors,
although less than a quorum, shall have the right to elect the successor who
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred, and until such director's successor shall have
been duly elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or divisions of the Company as it may deem
advisable.
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<PAGE> 21
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time
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for that purpose, and any provisions of these By-Laws (other than this Section)
and any resolutions which are contrary to the provisions of this Section or to
the provisions of any such implementary Resolutions shall be suspended during
such a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
4
<PAGE> 23
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than five (5) members who shall be selected by the Board of Directors from its
own members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member.
5
<PAGE> 24
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors. In the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
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<PAGE> 25
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of
the Company and a
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<PAGE> 26
transfer book shall be kept in which all transfers of stock shall be recorded.
Section 2. Certificates of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar
year.
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<PAGE> 27
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was
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<PAGE> 28
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person in
connection with a proceeding initiated by such person only if the proceeding was
authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director or officer in his capacity
as a Director or officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the Director or officer to
repay all amounts advanced if it should be ultimately determined that the
Director or officer is not entitled to be indemnified under this Article or
otherwise.
(C) If a claim for indemnification or payment of
expenses, under this Article X is not paid in full within ninety days after a
written claim therefor has been received by the Corporation the claimant may
file suit to recover the unpaid amount of such claim and, if successful in whole
or in part, shall be entitled to be paid the expense of prosecuting such claim.
In any such action the Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification of payment of
expenses under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right or protection
hereunder of any person in respect of any act or omission occurring prior to the
time of such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
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EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: September 22, 1999 By: /s/ Norma P. Closs
--------------------------
Name: Norma P. Closs
Title: Vice President
<PAGE> 30
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1999.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins ................. 207,947
Interest-bearing balances ........................................... 0
Held-to-maturity securities .............................................. 37,680
Available-for-sale securities ............................................ 1,598,933
Federal funds sold and securities purchased under agreements to resell ... 180,366
Loans and lease financing receivables:
Loans and leases, net of unearned income ............................ 4,237,557
LESS: Allowance for loan and lease losses .......................... 70,233
LESS: Allocated transfer risk reserve .............................. 0
Loans and leases, net of unearned income, allowance,
and reserve .................................................... 4,167,324
Assets held in trading accounts .......................................... 0
Premises and fixed assets (including capitalized leases) ................. 141,415
Other real estate owned .................................................. 922
Investments in unconsolidated subsidiaries and associated companies ...... 1,227
Customers' liability to this bank on acceptances outstanding ............. 0
Intangible assets ........................................................ 5,179
Other assets ............................................................. 104,101
Total assets ............................................................. 6,445,094
</TABLE>
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<PAGE> 31
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices .......................................................... 4,574,509
Noninterest-bearing ..................................................... 992,436
Interest-bearing ........................................................ 3,582,073
Federal funds purchased and Securities sold under agreements to repurchase ... 344,719
Demand notes issued to the U.S. Treasury ..................................... 83,802
Trading liabilities (from Schedule RC-D) ..................................... 0
Other borrowed money: ........................................................ ///////
With original maturity of one year or less .............................. 860,000
With original maturity of more than one year ............................ 43,000
Bank's liability on acceptances executed and outstanding ..................... 0
Subordinated notes and debentures ............................................ 0
Other liabilities (from Schedule RC-G) ....................................... 80,279
Total liabilities ............................................................ 5,986,309
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................................ 0
Common Stock ................................................................. 500
Surplus (exclude all surplus related to preferred stock) ..................... 62,118
Undivided profits and capital reserves ....................................... 412,409
Net unrealized holding gains (losses) on available-for-sale securities ....... (16,242)
Total equity capital ......................................................... 458,785
Total liabilities, limited-life preferred stock, and equity capital .......... 6,445,094
</TABLE>
2
