AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 20, 2002
REGISTRATION NO. 333-82542-01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
<Table>
ENTERCOM COMMUNICATIONS CORP. ENTERCOM RADIO, LLC ENTERCOM CAPITAL, INC.
(Exact name of registrant as (Exact name of registrant as (Exact name of registrant as
specified specified specified
in its governing instrument) in its governing instrument) in its governing instrument)
</Table>
<Table>
PENNSYLVANIA 23-1701044 DELAWARE 23-3017800 DELAWARE 01-0589645
(State or Other (IRS Employer (State or Other (IRS Employer (State or Other (IRS Employer
Jurisdiction of Identification Jurisdiction of Identification Jurisdiction of Identification
Incorporation or No.) Incorporation or No.) Incorporation or No.)
Organization) Organization Organization
</Table>
---------------------
(FOR ADDITIONAL CO-REGISTRANTS, PLEASE SEE "TABLE OF CO-REGISTRANTS" ON THE
FOLLOWING PAGE)
401 CITY AVENUE, SUITE 409
BALA CYNWYD, PENNSYLVANIA 19004
(610) 660-5610
(Address, including zip code, and telephone number, including area code, of
Registrant's 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:
<Table>
SCOTT C. HERLIHY, ESQ. JOHN C. DONLEVIE, ESQ.
JOSEPH D. SULLIVAN, ESQ. EXECUTIVE VICE PRESIDENT, SECRETARY AND
LATHAM & WATKINS GENERAL COUNSEL
555 ELEVENTH STREET, N.W., SUITE 1000 ENTERCOM COMMUNICATIONS CORP.
WASHINGTON, D.C. 20004 401 CITY AVENUE, SUITE 409
(202) 637-2200 BALA CYNWYD, PENNSYLVANIA 19004
(610) 660-5610
</Table>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement, as determined
by the Registrant.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please 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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CO-REGISTRANTS
<Table>
<Caption>
STATE OR OTHER JURISDICTION OF IRS EMPLOYER IDENTIFICATION
NAME FORMATION NUMBER
- ---- ------------------------------ ---------------------------
Delaware Equipment Holdings, LLC Delaware 23-3027897
Entercom Boston 1 Trust Massachusetts 52-2121927
Entercom Boston, LLC Delaware 23-2975771
Entercom Boston License, LLC Delaware 23-2975661
Entercom Buffalo, LLC Delaware 16-1574853
Entercom Buffalo License, LLC Delaware 16-1573524
Entercom Delaware Holding Corporation Delaware 51-0394052
Entercom Denver, LLC Delaware 80-0617731
Entercom Denver License, LLC Delaware 80-0017728
Entercom Gainesville, LLC Delaware 23-2988465
Entercom Gainesville License, LLC Delaware 23-3008199
Entercom Greensboro, LLC Delaware 23-3017788
Entercom Greensboro License, LLC Delaware 23-3014529
Entercom Greenville, LLC Delaware 23-3017789
Entercom Greenville License, LLC Delaware 23-3014530
Entercom Internet Holding, LLC Delaware 23-3080086
Entercom Kansas City, LLC Delaware 23-2988463
Entercom Kansas City License, LLC Delaware 23-3027894
Entercom Longview, LLC Delaware 23-2988462
Entercom Longview License, LLC Delaware 23-3007877
Entercom Madison, LLC Delaware 23-3051015
Entercom Madison License, LLC Delaware 23-3051018
Entercom Memphis, LLC Delaware 23-3017792
Entercom Memphis License, LLC Delaware 23-3014531
Entercom Milwaukee, LLC Delaware 23-3017793
Entercom Milwaukee License, LLC Delaware 23-3014532
Entercom New Orleans, LLC Delaware 23-3017794
Entercom New Orleans License, LLC Delaware 23-3014533
Entercom New York, Inc. New York 16-1545221
Entercom Norfolk, LLC Delaware 23-3017796
Entercom Norfolk License, LLC Delaware 23-3014534
Entercom Portland, LLC Delaware 23-2955467
Entercom Portland License, LLC Delaware 23-2969295
Entercom Rochester, LLC Delaware 16-1578603
Entercom Rochester License, LLC Delaware 16-1578604
Entercom Sacramento, LLC Delaware 23-2988461
Entercom Sacramento License, LLC Delaware 23-3027892
Entercom Wilkes-Barre Scranton, LLC Delaware 23-3014535
Entercom Seattle, LLC Delaware 23-2988459
Entercom Seattle License, LLC Delaware 23-3007870
Entercom Wichita, LLC Delaware 23-3027895
Entercom Wichita License, LLC Delaware 23-3027896
</Table>
This preliminary prospectus supplement and the accompanying prospectus are not
complete and may be changed. This preliminary prospectus supplement and the
accompanying prospectus are not an offer to sell these securities and are not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 20, 2002
PRELIMINARY PROSPECTUS SUPPLEMENT TO PRELIMINARY PROSPECTUS DATED FEBRUARY 20,
2002
$150,000,000
[ENTERCOM LOGO]
ENTERCOM RADIO, LLC
ENTERCOM CAPITAL, INC.
% Senior Subordinated Notes Due 2014
------------------
Entercom Radio and its wholly-owned subsidiary Entercom Capital are
offering $150,000,000 of % Senior Subordinated Notes due 2014. We will pay
interest on the notes each and , beginning on ,
2002. The notes will mature on , 2014. We may redeem the notes on and
after , 2007 at an initial redemption price of % of their
principal amount plus accrued interest. In addition, before , 2005, we
may redeem up to 35% of the notes at a redemption price of % of their
principal amount plus accrued interest using proceeds of specified equity
offerings.
The notes will be unsecured and will rank junior to our senior
indebtedness, senior to our subordinated indebtedness and equally with our other
senior subordinated indebtedness. Entercom Communications Corp., the sole member
of Entercom Radio, and each of our direct and indirect subsidiaries will
guarantee our obligations under the notes as set forth herein.
Concurrent with this offering, Entercom Communications is offering
3,000,000 shares of its Class A common stock in a separate offering. We estimate
that the net proceeds of that offering will be approximately $150.2 million,
based on an assumed public offering price of $52.74 per share, the last reported
sales price of the Class A common stock on the New York Stock Exchange on
February 15, 2002. The completion of the notes offering is not contingent upon
the completion of the concurrent offering of Class A common stock.
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE S-10.
<Table>
<Caption>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS ISSUERS(1)
--------- ------------- -----------
Per note............................................. % % %
Total................................................ $ $ $
</Table>
- ---------------
(1)Plus accrued and unpaid interest, if any, from March , 2002.
Delivery of the notes in book-entry form only, will be made on or about
, 2002.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the prospectus to which it relates is truthful or
complete. Any representation to the contrary is a criminal offense.
Joint Book-Running Managers
CREDIT SUISSE FIRST BOSTON DEUTSCHE BANC ALEX. BROWN
BANC OF AMERICA SECURITIES LLC MORGAN STANLEY
The date of this prospectus supplement is February , 2002.
[MAP DEPICTING LOCATION AND CALL LETTERS OF RADIO STATION PORTFOLIO]
------------------
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
-----
PROSPECTUS SUPPLEMENT
ABOUT THIS PROSPECTUS SUPPLEMENT..... S-ii
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS................. S-ii
INFORMATION ABOUT STATION AND MARKET
DATA............................... S-iii
SUMMARY.............................. S-1
RISK FACTORS......................... S-10
USE OF PROCEEDS...................... S-18
CAPITALIZATION....................... S-19
SELECTED CONSOLIDATED FINANCIAL
DATA............................... S-20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS...................... S-24
</Table>
<Table>
<Caption>
PAGE
-----
BUSINESS............................. S-37
MANAGEMENT........................... S-47
PRINCIPAL SHAREHOLDERS............... S-53
DESCRIPTION OF CERTAIN
INDEBTEDNESS....................... S-56
DESCRIPTION OF NOTES................. S-60
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS..................... S-99
UNDERWRITING......................... S-104
NOTICE TO CANADIAN RESIDENTS......... S-106
LEGAL MATTERS........................ S-107
EXPERTS.............................. S-107
WHERE YOU CAN FIND MORE
INFORMATION........................ S-108
</Table>
<Table>
<Caption>
PAGE
----
PROSPECTUS
ABOUT THIS PROSPECTUS................. i
WHERE YOU CAN FIND MORE INFORMATION... i
DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS.......................... ii
THE COMPANY........................... 1
USE OF PROCEEDS....................... 1
RATIO OF EARNING TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK
DIVIDENDS........................... 2
</Table>
<Table>
<Caption>
PAGE
----
DESCRIPTION OF CAPITAL STOCK.......... 3
DESCRIPTION OF DEBT SECURITIES........ 7
PLAN OF DISTRIBUTION.................. 14
LEGAL MATTERS......................... 15
EXPERTS............................... 15
</Table>
------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN AND THEREIN. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE
INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS MAY
ONLY BE ACCURATE ON THE DATE OF THIS PROSPECTUS SUPPLEMENT.
S-i
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement is a supplement to the accompanying prospectus
that is also a part of this document. This prospectus supplement and the
accompanying prospectus are part of a registration statement that we filed with
the Securities and Exchange Commission that, in part, utilizes a "shelf"
registration process. Under the shelf registration process, the issuers may sell
any debt securities described in the accompanying prospectus up to a total
dollar amount of gross proceeds of $250,000,000, of which this offering is a
part. In this prospectus supplement, we provide you with specific information
about the terms of this offering and certain other information. Both this
prospectus supplement and the accompanying prospectus include important
information about us, the notes being offered and other information you should
know before investing in the notes.
This prospectus supplement and the accompanying prospectus incorporate by
reference important business and financial information about Entercom
Communications Corp. and its consolidated subsidiaries that is not included in
or delivered with these documents. Entercom Communications is the sole member of
Entercom Radio, and Entercom Radio is the sole stockholder of Entercom Capital.
All of Entercom Communications' operating assets, including all of its radio
station licenses, are held by Entercom Radio's direct and indirect subsidiaries.
Unless specifically stated, or the context otherwise so requires, the terms
"Entercom," "we," "us," or similar terms in this prospectus supplement, the
accompanying prospectus and the documents incorporated by reference herein and
therein refer to Entercom Communications and its consolidated subsidiaries,
excluding Entercom Communications Capital Trust.
You should read both this prospectus supplement and the accompanying
prospectus as well as the additional information described under the heading
"Where You Can Find More Information" beginning on page S- of this prospectus
supplement before investing in the notes. This prospectus supplement adds to,
updates and changes information contained in the accompanying prospectus and the
information incorporated by reference. To the extent that any statement that we
make in this prospectus supplement is inconsistent with the statements made in
the accompanying prospectus or the information incorporated by reference, the
statements made in the accompanying prospectus or the information incorporated
by reference are deemed modified or superseded by the statements made in this
prospectus supplement.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus may contain
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are not statements
of historical facts, but rather reflect our current expectations concerning
future results and events. You can identify these forward-looking statements by
our use of words such as "anticipates," "believes," "continues," "expects,"
"intends," "likely," "may," "opportunity," "plans," "potential," "project,"
"will," and similar expressions to identify forward-looking statements, whether
in the negative or the affirmative. We cannot guarantee that we will actually
achieve these plans, intentions or expectations. These forward-looking
statements are subject to risks, uncertainties and other factors, some of which
are beyond our control, which could cause actual results to differ materially
from those forecast or anticipated in such forward-looking statements. The pro
forma information contained herein reflects adjustments and is presented for
comparative purposes only and does not purport to be indicative of what has
occurred or of future operating results or financial position.
These risks, uncertainties and factors include, but are not limited to:
- the impact of general economic conditions in the United States;
- our substantial indebtedness and debt service needs;
- the highly competitive nature of, and uncertain effect of new
technologies on, the radio broadcasting industry;
- the risks associated with our acquisition strategy generally;
S-ii
- the control of us by Joseph M. Field and members of his immediate family;
- our vulnerability to changes in federal legislation or regulatory policy;
- our dependence on our Seattle radio stations; 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 supplement. Except
as may be required by law, 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 supplement or to
reflect the occurrence of unanticipated events.
We urge you to review carefully "Risk Factors" in this prospectus
supplement for a more complete discussion of the risks of an investment in the
notes.
INFORMATION ABOUT STATION AND MARKET DATA
We have based or derived the station and market data we present in this
prospectus supplement from third-party sources, including primarily:
- 2000 market rank by metro population and by radio revenue from Duncan's
Radio Market Guide (2001 ed.);
- 2000 Entercom market revenue rank from Duncan's Radio Market Guide (2001
ed.);
- 2000 Entercom market revenue rank from market total cash performance
summaries prepared by Miller, Kaplan, Arase & Co. LLP (December 2001);
- Audience share and audience rank in target demographic data from the Fall
2001 Radio Market Report published by the Arbitron Ratings Company; and
- 2000 radio broadcasting industry rank from report of BIA Consulting, Inc.
(January 7, 2002).
While we believe these industry publications are reliable, we have not
independently verified them, and we make no representation as to their accuracy.
S-iii
SUMMARY
This summary highlights selected information contained in greater detail
elsewhere in this prospectus supplement, the accompanying prospectus and the
documents incorporated herein and therein by reference. This summary may not
contain all of the information that you should consider before investing in the
notes. You should carefully read the entire prospectus supplement, the
accompanying prospectus, and the documents we incorporate by reference herein
and therein before making an investment decision. Unless specifically stated or
the context otherwise so requires, the terms "Entercom," "we," "us," or similar
terms in this prospectus supplement, the accompanying prospectus and the
documents incorporated by reference herein and therein refer to Entercom
Communications and its consolidated subsidiaries, excluding Entercom
Communications Capital Trust.
OUR BUSINESS
Entercom Communications is one of the five largest radio broadcasting
companies in the United States based upon 2000 revenues pro forma for completed
and pending acquisitions. We have assembled, after giving effect to completed
and pending acquisitions, a nationwide portfolio of 101 stations in 19 markets,
including 11 of the country's top 50 radio revenue markets. Our station groups
rank among the top three in revenue market share in 18 of the 19 markets in
which we operate. We derive 90% of our revenues from markets where we rank
either first or second in market radio revenues.
We operate a wide range of formats in geographically diverse markets across
the United States. Our largest markets, in order of our 2001 revenues, including
pro forma revenues for completed and pending acquisitions, are Seattle, Boston,
Kansas City, Denver, Sacramento, Portland and New Orleans.
COMPLETED AND PENDING ACQUISITIONS
On November 29, 2001, we entered into an agreement with WCCB-TV, Inc., a
subsidiary of Bahakel Communications, Ltd., to acquire the assets of WKSI-FM and
WPET-AM, serving the Greensboro, North Carolina radio market, for a purchase
price of $20.8 million in cash. On December 5, 2001, we began operating these
stations under a time brokerage agreement. This transaction closed on February
8, 2002 and increased our ownership to six radio stations in the Greensboro,
North Carolina radio market.
On December 24, 2001, we entered into an agreement with Tribune
Broadcasting Company to acquire the assets of KOSI-FM, KKHK-FM and KEZW-AM,
serving the Denver, Colorado radio market, for a purchase price of $180.0
million in cash, of which we paid $18.0 million as a deposit on January 2, 2002.
On February 1, 2002, we began operating these stations under a time brokerage
agreement. The time brokerage agreement may run for a period of up to three
years at Tribune's option. The closing of this transaction may be delayed at the
option of Tribune, not to exceed three years, and also is conditioned on the
approval of the FCC.
On February 12, 2002, we entered into an agreement with subsidiaries of
Emmis Communications Corporation to acquire the assets of KALC-FM, serving the
Denver, Colorado radio market, for a purchase price of $88.0 million in cash, of
which we paid $8.8 million as a deposit on February 15, 2002. We will begin
operating this station under a time brokerage agreement upon the expiration or
termination of all applicable antitrust waiting periods. We expect the closing
of this transaction, which is conditioned on the receipt of all necessary
regulatory approvals, to occur in the second quarter of 2002.
S-1
OUR STATION PORTFOLIO
The following table sets forth selected information about the markets where
we operate and where we expect to operate, pro forma for completed and pending
acquisitions. You should refer to the "Business" section of this prospectus
supplement for further information about our station portfolio.
<Table>
<Caption>
2000 MARKET RANK
-------------------- ENTERCOM STATIONS 2001
METRO RADIO ------------------- ENTERCOM MARKET
MARKET(1) POPULATION REVENUE FM AM REVENUE RANK
- --------- ---------- ------- -------- -------- ---------------
Boston, MA(2).............................. 8 8 2 3 2
Seattle, WA................................ 14 13 5 3 1
Denver, CO(2).............................. 23 15 3 1 2
Portland, OR............................... 25 22 4 3 2
Sacramento, CA............................. 29 27 4 1 2
Kansas City, MO............................ 30 29 5 3 1
Milwaukee, WI.............................. 31 34 2 1 3
Norfolk, VA................................ 36 42 4 -- 1
New Orleans, LA............................ 41 40 4 2 1
Greensboro, NC............................. 42 51 4 2 2
Buffalo, NY(2)............................. 45 45 2 4 2
Memphis, TN................................ 46 41 2 1 4
Rochester, NY.............................. 52 53 3 1 3
Greenville/Spartanburg, SC................. 58 56 4 3 2
Wilkes-Barre/Scranton, PA.................. 64 71 6 3 1
Wichita, KS................................ 84 72 4 3 3
Gainsville/Ocala, FL....................... 90 127 2 -- --
Madison, WI(2)............................. 120 67 3 -- 3
Longview/Kelso, WA......................... -- -- 2 2 --
-- --
All Markets............................ 65 36
</Table>
- ---------------
(1) Our radio stations are in some instances licensed to communities other than
the named principal community for the market.
(2)Entercom market revenue rank for Boston, Buffalo, Denver and Madison is for
2000.
OUR ACQUISITION STRATEGY
Through our disciplined acquisition strategy, we seek to (i) build
top-three station clusters principally in large growth markets and (ii) acquire
underdeveloped properties that offer the potential for significant improvements
in revenues and broadcast cash flow through the application of our operational
expertise. Although we typically focus on radio stations in top 50 markets, we
also acquire stations in top 75 markets that otherwise meet our acquisition
criteria.
OUR OPERATING STRATEGY
The principal components of our operating strategy are to:
- Develop Market Leading Station Clusters. We are among the three largest
clusters in 18 of our 19 markets including pending acquisitions. We
derive 90% of our revenues from markets where we rank either first or
second in market radio revenues. 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.
- 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
S-2
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 compensation packages with performance-based incentives
for our key employees. We utilize best practices to facilitate
development and implementation of advantageous operational tools and
strategies. In addition, we provide employees with opportunities for
personal growth and advancement through training, seminars and other
educational programs.
- 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 station's 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 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
continue to capitalize on this opportunity by developing specialized
teams in many of our markets to work with advertisers to create and
develop marketing programs and solutions across our multi-station market
clusters. We derive 90% of our revenues from markets where we rank either
first or second in market radio revenues. In 2001, as in 2000, we gained
revenue market share in the majority of the markets in which we operate
and for our company as a whole.
- Acquire And Develop Under-Performing Stations. We seek to acquire and
develop under-performing stations, which has often enabled us to achieve
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; improved sales training and techniques; technical upgrades;
programming and marketing enhancements; refocused expenditures; and
facility consolidations.
- 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.
CONCURRENT EQUITY OFFERING
Concurrently with this offering, Entercom Communications is offering
3,000,000 shares of Class A common stock by means of a separate prospectus
supplement to the accompanying prospectus. In addition, the underwriters in that
offering have an over-allotment option to purchase from Entercom Communications
a maximum of 450,000 additional shares of Class A common stock. Entercom
Communications intends to contribute the net proceeds from that offering to
Entercom Radio as a contribution to its equity capital. This offering and the
concurrent Class A common stock offering are not contingent on each other.
S-3
ORGANIZATIONAL STRUCTURE
The following chart sets forth our organizational structure:
(ENTERCOM STRUCTURE CHART)
S-4
THE OFFERING
Issuers....................... Entercom Radio, LLC and Entercom Capital, Inc.,
a wholly-owned subsidiary of Entercom Radio,
LLC.
Securities Offered............ $150.0 million in aggregate principal amount of
% Senior Subordinated Notes due 2014.
Maturity Date................. The notes will mature on , 2014.
Interest Payment Dates........ Interest on the notes will be payable
semi-annually in arrears on and each
year. First payment: , 2002.
Interest...................... Interest on the notes will accrue at a rate of
% per annum.
Optional Redemption........... On or after , 2007, the issuers may
redeem some or all of the notes at any time at
the redemption prices listed under "Description
of Notes -- Optional Redemption" plus accrued
interest to the date of redemption. Prior to
, 2005, the issuers may redeem up to
35% of the notes with the proceeds of one or
more specified equity offerings at the
redemption price listed under "Description of
Notes -- Optional Redemption."
Mandatory Offer to
Repurchase.................... If we experience specific kinds of changes of
control, or under certain circumstances, if we
sell assets, the issuers must offer to
repurchase the notes at the prices listed in
"Description of Notes."
We cannot assure you that the issuers will have
adequate financial resources to effect a
required repurchase of the notes if a change of
control event occurs. The issuers' failure to
make a required repurchase of the notes if such
a change in control occurs would be an event of
default under the indenture.
Guarantees.................... The issuers' obligations under the notes will
be fully and unconditionally guaranteed by
Entercom Communications and each of the
issuers' existing and future domestic
restricted subsidiaries on the terms provided
for in the indenture. See "Description of the
Notes -- Guarantees."
Ranking....................... The notes and subsidiary guarantees will be
unsecured senior subordinated obligations, and
rank:
- junior in right of payment to any existing
and future senior indebtedness of the issuers
and subsidiary guarantors;
- equal in right of payment with any existing
and future senior subordinated indebtedness of
the issuers and subsidiary guarantors; and
- senior in right of payment to any existing
and future subordinated indebtedness of the
issuers and subsidiary guarantors.
The parent guarantee is an unsecured senior
subordinated obligation of the parent guarantor
and shall rank in right of
S-5
payment to other obligations as set forth under
"Description of Notes -- Brief Description of
the Notes and the Guarantee."
Certain Covenants............. The indenture governing the notes restricts our
ability to, among other things:
- incur indebtedness;
- merge and sell assets;
- incur liens;
- pay dividends on, or repurchase capital
stock; and
- make restricted payments and certain
transactions with and investments in
affiliates.
The indenture permits the issuers' subsidiaries
to incur substantial additional indebtedness,
all of which may be secured.
Use of Proceeds............... We intend to use the net proceeds from this
offering to pay down revolving indebtedness
under our credit facility and to finance
pending acquisitions. We intend to use any
remaining proceeds for general corporate
purposes, including repayment of indebtedness
under the credit facility, future acquisitions
and working capital. Pending application of the
net proceeds from this offering, the issuers
may invest in commercial paper or short-term
investment grade interest bearing securities.
Form and Denomination of
Notes......................... The notes will be represented by one or more
global notes in fully registered form, without
coupons, deposited with a custodian for, and
registered in the name of a nominee of, The
Depositary Trust Company (DTC). Beneficial
interests in the global notes will be shown on,
and transfer of the global notes will be
effective only through, records maintained by
DTC and its participants. See "Description of
Notes -- Book Entry, Delivery and Form."
RISK FACTORS
You should read the "Risk Factors" section beginning on page S-10 of this
prospectus supplement, as well as the other cautionary statements throughout the
entire prospectus supplement, the accompanying prospectus and the documents
incorporated by reference herein and therein.
S-6
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table is a summary of financial data of Entercom
Communications and its consolidated subsidiaries for the periods presented.
Entercom Communications will guarantee the issuers' obligations under the notes
on a senior subordinated basis as set forth in "Description of Notes." You
should read this data in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
prospectus supplement and our consolidated financial statements and related
notes in our Annual Report on Form 10-K for the year ended December 31, 2001,
incorporated by reference herein and in the accompanying prospectus, including
the consolidated financial information contained therein. Historical results are
not necessarily indicative of results to be expected for any future period. As
you review the information contained in the following table, you should also
carefully read the financial information in "Selected Consolidated Financial
Data" included in this prospectus supplement.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------------------
1999 2000 2001
---------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
Net revenues............................................ $ 215,001 $ 352,025 $ 332,897
--------- ---------- ----------
Operating expenses (income):
Station operating expenses............................ 135,943 206,608 201,257
Depreciation and amortization......................... 21,564 43,475 46,509
Corporate general and administrative expenses......... 8,100 12,497 12,335
Net expense (income) from time brokerage agreement
fees............................................... 652 11 --
Net (gains) losses on sale of assets.................. (1,986) (41,465) 16
--------- ---------- ----------
Total operating expenses...................... 164,273 221,126 260,117
--------- ---------- ----------
Operating income........................................ 50,728 130,899 72,780
Other expense (income):
Interest expense...................................... 11,182 37,760 27,583
Financing cost of Company-obligated mandatorily
redeemable convertible preferred securities of
subsidiary holding solely convertible debentures of
the Company (TIDES)................................ 1,845 7,813 7,813
Interest income....................................... (3,253) (512) (262)
Equity loss from unconsolidated affiliate............. -- 1,100 4,706
Loss on investments................................... -- 5,688 2,000
Net loss on derivative instruments.................... -- -- 912
--------- ---------- ----------
Total other expense........................... 9,774 51,849 42,752
--------- ---------- ----------
Income before income taxes, extraordinary item and
accounting change..................................... 40,954 79,050 30,028
Income taxes............................................ 100,913 31,796 12,194
--------- ---------- ----------
(Loss) income before extraordinary item and accounting
change................................................ (59,959) 47,254 17,834
Extraordinary item, net of taxes........................ (918) -- --
--------- ---------- ----------
(Loss) income before accounting change.................. (60,877) 47,254 17,834
Cumulative effect of accounting change, net of taxes.... -- -- (566)
--------- ---------- ----------
Net (loss) income....................................... $ (60,877) $ 47,254 $ 17,268
========= ========== ==========
Net (loss) income per share -- basic:
(Loss) income before extraordinary item and accounting
change............................................. $ (1.58) $ 1.05 $ 0.39
Extraordinary item, net of taxes...................... (0.03) -- --
--------- ---------- ----------
(Loss) income before accounting change................ (1.61) 1.05 0.39
Cumulative effect of accounting change, net of
taxes.............................................. -- -- (0.01)
--------- ---------- ----------
Net (loss) income per share -- basic.................... $ (1.61) $ 1.05 $ 0.38
========= ========== ==========
</Table>
S-7
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------------------
1999 2000 2001
---------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net (loss) income per share -- diluted:
(Loss) income before extraordinary item and accounting
change............................................. $ (1.58) $ 1.04 $ 0.39
Extraordinary item, net of taxes...................... (0.03) -- --
--------- ---------- ----------
(Loss) income before accounting change................ (1.61) 1.04 0.39
Cumulative effect of accounting change, net of
taxes.............................................. -- -- (0.01)
--------- ---------- ----------
Net (loss) income per share -- diluted.................. $ (1.61) $ 1.04 $ 0.38
========= ========== ==========
Weighted average shares -- basic........................ 37,922 45,209 45,295
========= ========== ==========
Weighted average shares -- diluted...................... 37,922 45,614 45,994
========= ========== ==========
PRO FORMA DATA(1):
Income before income taxes and extraordinary item....... $ 40,954
Pro forma income taxes.................................. 20,278
---------
Pro forma income before extraordinary item.............. 20,676
Extraordinary item, net of pro forma taxes............ (918)
---------
Pro forma net income.................................... $ 19,758
=========
Pro forma basic income per share before extraordinary
item.................................................. $ 0.55
=========
Pro forma diluted income per share before extraordinary
item.................................................. $ 0.54
=========
Pro forma basic net income.............................. $ 0.52
=========
Pro forma diluted net income............................ $ 0.51
=========
Pro forma weighted average common shares
outstanding -- basic.................................. 37,922
=========
Pro forma weighted average common shares outstanding --
diluted............................................... 38,238
=========
OTHER DATA:
Broadcast cash flow(2)(6)............................... $ 79,058 $ 145,417 $ 131,640
Broadcast cash flow margin(3)(6)........................ 36.8% 41.3% 39.5%
EBITDA before net expense (income) from time brokerage
agreement fees(4)(6).................................. $ 71,749 $ 133,577 $ 119,842
After tax cash flow(5)(6)............................... 52,465 89,721 87,084
Cash flows related to:
Operating activities.................................. 40,700 69,475 85,243
Investing activities.................................. (712,323) (64,684) (17,891)
Financing activities.................................. 676,416 (2,796) (69,858)
</Table>
<Table>
<Caption>
DECEMBER 31, 2001
------------------------
AS
ACTUAL ADJUSTED(7)
---------- -----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents and short-term investments........ $ 10,751 $ 243,706
Intangibles and other assets................................ 1,244,957 1,249,207
Total assets................................................ 1,438,740 1,675,945
Senior debt, including current portion...................... 388,323 325,323
% Senior Subordinated Notes due 2014...................... -- 150,000
TIDES....................................................... 125,000 125,000
Total shareholders' equity.................................. 755,881 906,086
</Table>
S-8
- ---------------
(1) For purposes of our historical financial statement, the term pro forma
refers solely to the adjustments necessary to reflect our status as if we
were a C corporation rather than an S corporation for income tax purposes
for the period presented.
(2) Broadcast cash flow consists of operating income before depreciation and
amortization, net expense (income) from time brokerage agreement fees,
corporate general and administrative expenses and net gains (losses) on sale
of assets.
(3) Broadcast cash flow margin represents broadcast cash flow as a percentage of
net revenues.
(4) EBITDA before net expense (income) from time brokerage agreement fees
consists of operating income plus depreciation and amortization, non-cash
compensation expense (which is otherwise included in corporate general and
administrative expenses) and the elimination of net expense (income) from
time brokerage agreement fees and net gains (losses) on sale of assets.
(5) After tax cash flow consists of income (loss) before extraordinary item and
accounting change, plus the following: depreciation and amortization,
non-cash compensation expense (which is otherwise included in corporate
general and administrative expense), deferred taxes, the elimination, net of
taxes, of equity loss from unconsolidated affiliate, any net gains or losses
on sale of assets, investments and derivative instruments. For the year
ended December 31, 1999, after tax cash flow consists of pro forma income
before extraordinary item, to reflect taxes as if we were a C corporation
during the period presented.
(6) Although broadcast cash flow, EBITDA before net expense (income) from time
brokerage agreement fees and after tax cash flow are not measures of
performance or liquidity calculated in accordance with generally accepted
accounting principles, we believe that these measures are useful to an
investor in evaluating our performance because they are widely used in the
broadcast industry to measure a radio company's operating performance.
However, you should not consider broadcast cash flow, EBITDA before net
expense (income) from time brokerage agreement fees and 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
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.
(7) The as adjusted balance sheet data summarized above reflects the application
of the estimated net proceeds from this offering and the capital
contribution Entercom Communications will make to Entercom Radio of the net
proceeds of its concurrent offering of 3,000,000 shares of its Class A
common stock at the assumed public offering price of $52.74 per share,
assuming the underwriters do not exercise their over-allotment option.
S-9
RISK FACTORS
An investment in the notes involves a high degree of risk. In addition to
the other information contained in or incorporated by reference in this
prospectus supplement and the accompanying prospectus, you should carefully
consider the following risks before making an investment decision.
RISKS RELATED TO THE NOTES
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL POSITION AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We have indebtedness that is substantial in relation to our shareholders'
equity. As of December 31, 2001, we had long-term indebtedness of $388.3
million, including $24.4 million of current indebtedness, and shareholders'
equity of $755.9 million. In addition to our obligations on our long-term
indebtedness, we have quarterly interest obligations on debentures held by
Entercom Communications Capital Trust that fund distributions on the 6 1/4%
Convertible Preferred Securities, Term Income Deferrable Equity Securities
(TIDES). Our ability to meet our interest payment obligations with respect to
the TIDES results from funds provided by Entercom Radio. The data set forth
below assumes completion of this offering, the contribution to Entercom Radio of
the net proceeds of our concurrent Class A common stock offering as of December
31, 2001 and the application of the net proceeds therefrom for repayment of
revolving indebtedness under our credit facility (dollars in millions):
<Table>
<Caption>
AS ADJUSTED
-----------
Senior debt, including current portion...................... $ 325.3
% Senior Subordinated Notes due 2014................... 150.0
--------
Total indebtedness.......................................... 475.3
TIDES....................................................... 125.0
--------
Shareholders' equity........................................ 906.7
--------
Total capitalization...................................... $1,507.0
========
Total indebtedness plus TIDES to total capitalization....... 39.8%
</Table>
As of December 31, 2001, $255.8 million was available under our $650.0
million credit facility. At any time prior to December 31, 2002, we may solicit
incremental loans up to $350.0 million, thereby increasing the credit facility
to $1.0 billion. The banks participating in our credit facility are not
obligated to provide such incremental loans. Moreover, under certain
circumstances, we may need to modify or enter into a new credit facility to
close on any future acquisitions, and we may seek to obtain other funding or
additional financing. Any additional borrowings would further increase the
amount of our indebtedness and the associated risks.
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
the notes;
- require us to dedicate a substantial portion of our cash flow from
operations to debt service, 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;
- increase our vulnerability to economic downturns, limit our ability to
withstand competitive pressures and reduce our flexibility in responding
to changing business, regulatory and economic conditions; and
- limit or prohibit our ability to pay dividends and make other
distributions.
S-10
Any of the above listed factors could materially adversely affect us. See
"Description of Notes -- Repurchase at the Option of Holders -- Change of
Control" and "Description of Certain Indebtedness."
TO SERVICE OUR INDEBTEDNESS, INCLUDING THE NOTES, WE WILL REQUIRE A SIGNIFICANT
AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR
CONTROL.
Our ability to pay the principal of and interest on the notes, to service
our other debt and to finance indebtedness when necessary depends on our
financial and operating performance, each of which is subject to prevailing
economic conditions and to financial, competitive, business, legislative and
regulatory factors and other factors beyond our control.
We cannot assure you that we will generate sufficient cash flow from
operations or that we will be able to obtain sufficient funding to satisfy all
of our obligations, including the notes. If we are unable to pay our debts, we
will be required to pursue one or more alternative strategies, such as selling
assets, refinancing or restructuring our indebtedness or selling additional debt
or equity securities. In addition, the ability to borrow funds under our credit
facility in the future will depend on our meeting the financial covenants in the
agreements governing this facility, including a minimum interest coverage test
and a maximum leverage ratio test. We cannot assure you that our business will
generate cash flow from operations or that future borrowings will be available
to us under our credit facility, in an amount sufficient to enable us to pay our
debt or to fund other liquidity needs. As a result, we may need to refinance all
or a portion of our debt, including the notes, on or before maturity. However,
we cannot assure you that any alternative strategies will be feasible at the
time or prove adequate. Also, some alternative strategies will require the
consent of our lenders before we engage in those strategies. See "Description of
Notes" and "Description of Certain Indebtedness."
BECAUSE OF OUR HOLDING COMPANY STRUCTURE, WE AND ENTERCOM RADIO EACH DEPEND ON
OUR SUBSIDIARIES FOR CASH FLOW, AND OUR ACCESS TO THIS CASH FLOW IS RESTRICTED.
We operate as a holding company. Entercom Communications' ability to meet
our obligations under the 6 1/4% Convertible Subordinated Debentures that fund
distributions on the TIDES, and to pay our corporate expenses and other costs
and expenses of our radio stations, is dependent upon distributions being made
to us by Entercom Radio. The indenture governing the notes will permit Entercom
Radio to make such distributions to us under the circumstances described below
in "Description of Notes -- Certain Covenants -- Restricted Payments."
Entercom Radio also operates as a holding company and currently owns and
operates all of our radio stations through its direct and indirect subsidiaries.
As a holding company, Entercom Radio's only source of cash to pay its
obligations, including corporate overhead and other trade payables, are
distribution from its subsidiaries of their net earnings and cash flow. We
currently expect that Entercom Radios operating subsidiaries will retain and use
their net earnings and cash flow in their operations, including to service their
debt obligations, before making upstream distributions to Entercom Radio.
Moreover, we cannot assure you that applicable state law and contractual
restrictions, including the dividend covenants contained in the credit facility,
would permit dividends or distributions from Entercom Radio's subsidiaries to
it.
Entercom Radio's obligations under the notes are joint and several to those
of Entercom Capital. Entercom Capital is a finance vehicle with minimal assets
and no operations of its own. Entercom Capital will be unable to fulfill the
obligations under the notes in the event that Entercom Radio is unable to do so.
YOUR RIGHT TO RECEIVE PAYMENT ON THE NOTES AND THE GUARANTEES IS JUNIOR TO ALL
OF ENTERCOM RADIO'S AND THE GUARANTORS' SENIOR INDEBTEDNESS.
The notes will be general unsecured obligations of each issuer, junior in
right of payment to all its existing and future senior indebtedness, including
Entercom Radio's obligations under the credit facility. The notes will not be
secured by any of the issuers' assets, and, as such, will be effectively
subordinated to any of their current or future secured debt, including all of
Entercom Radio's borrowings under the credit facility to the extent of the value
of the assets securing that debt.
S-11
Each guarantee is similarly subordinated to the senior indebtedness of the
applicable guarantor, including such guarantor's guarantee of the credit
facility. Entercom Communications' guarantee of the notes, however, will rank
junior to its obligation under the credit facility and to other specific secured
debt and its senior indebtedness, and equal in right of payment with its
obligations under its 6 1/4% Convertible Subordinated Debentures due 2014 and
its guarantee of certain payments in respect of the TIDES and any other senior
subordinated indebtedness.
In the event that either of the issuers or a guarantor is declared
bankrupt, becomes insolvent or is liquidated or reorganized, any debt that ranks
ahead of the notes and the guarantees will be entitled to be paid in full from
our assets or the assets of the guarantors, as applicable, before any payment
may be made with respect to the notes or the affected guarantees. In any of the
foregoing events, we cannot assure you that we, or any guarantor, would have
sufficient assets to pay amounts due on the notes or the guarantors, as
applicable. As a result, holders of the notes may receive less, proportionally,
than the holders of debt senior to the notes and the guarantees. The
subordination provisions of the indenture governing the notes also provide that
we can make no payment to you during the continuance of payment defaults on our
senior debt, and payments to you may be suspended for a period of up to 180 days
if a nonpayment default exists under our senior debt. See "Description of the
Notes -- Subordination." Additionally, if an event of default occurs under our
6 1/4% Convertible Subordinated Debentures due 2014 or Entercom Communications'
guarantee of certain payments in respect of the TIDES or Entercom Communications
elects to defer interest payments on the 6 1/4% Convertible Subordinated
Debentures as permitted under the terms thereof, Entercom Communications will
not be permitted to make up payments with respect to its guarantee of the notes.
Assuming the completion of this offering and the contribution to Entercom
Radio of the net proceeds of the concurrent Class A common stock offering as of
December 31, 2001, the notes and the subsidiary guarantees would have ranked
junior to $401.6 million of senior indebtedness. In addition, the indenture
governing the notes and our credit facility permit, subject to specified
limitations, the incurrence of additional indebtedness, some or all of which may
be senior debt. See "Description of Notes -- Certain Covenants" and "Description
of Certain Indebtedness."
THE INDENTURE FOR THE NOTES AND OUR CREDIT FACILITY CONTAIN VARIOUS COVENANTS
THAT RESTRICT OUR FINANCIAL AND OPERATIONAL FLEXIBILITY.
The indenture governing the notes and our credit facility contain various
provisions that restrict our ability to:
- incur additional debt;
- pay dividends and make other distributions;
- make investments and other restricted payments;
- create liens;
- swap or sell assets; and
- enter into certain transactions with affiliates.
These restrictions on our ability to operate our business could have a
material adverse effect on our business.
In addition, our credit facility requires that we maintain specified
financial ratios. Our ability to meet these financial ratios can be affected by
operating performance or other events beyond our control, and we cannot assure
you that we will meet those ratios.
If we default under any financing agreements, our lenders could:
- elect to declare all amounts borrowed to be immediately due and payable,
together with accrued and unpaid interest; and/or
S-12
- terminate their commitments, if any, to make further extensions of
credit.
If we are unable to pay our obligations to our senior secured lenders, they
could proceed against any or all of the collateral securing our indebtedness to
them. The collateral under our credit facility consists of 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 equity interests in our subsidiaries. In addition, a breach of certain of
these restrictions or covenants, or an acceleration by our senior secured
lenders of our obligations to them, would cause a default under the notes. We
may not have, or be able to obtain, sufficient funds to make accelerated
payments, including payments on the notes, or to repay the notes in full after
we pay our senior secured lenders to the extent of their collateral. See
"Description of Certain Indebtedness" and "Description of Notes." We also may
incur future debt obligations in connection with future acquisitions that might
subject us to restrictive covenants that could affect our financial and
operational flexibility or subject us to other events of default.
FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
GUARANTEES, SUBORDINATE CLAIMS IN RESPECT OF THE NOTES AND REQUIRE THE
NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS.
Under federal bankruptcy law and comparable provisions of state fraudulent
transfer laws, a guarantee could be voided, or claims in respect of the notes or
a guarantee could be subordinated to all of each issuers' debts or all other
debts of any guarantor if, among other things, the issuers or any guarantor was
insolvent or rendered insolvent by reason of such incurrence, or the issuers or
any guarantor were engaged in a business or transaction for which the issuers or
any guarantors' remaining assets constituted unreasonably small capital, or the
issuers or any guarantor intended to incur or believed that the issuer or it
would incur, debts beyond our or its ability to pay those debts as they mature.
In addition, any payment by the issuers or any guarantor in accordance with its
guarantee could be voided and required to be returned to the issuers or any
guarantor, or to a fund for the benefit of our creditors or the creditors of any
guarantors.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if the sum of its debts, including contingent liabilities,
were greater than the fair saleable value of all of its assets, or if the
present fair saleable value of its assets were less than the amount that would
be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature, or it could not pay
its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that the issuers and each guarantor, after giving
effect to its guarantee of the notes, will not be insolvent, will not have
unreasonably small capital for the business in which the issuers and the
guarantors are engaged and will not have incurred debts beyond the issuers' or
the guarantors' ability to pay the debts as they mature. We cannot assure you,
however, as to what standard a court would apply in making these determinations
or that a court would agree with our conclusions.
AN ACTIVE TRADING MARKET FOR THE NOTES MAY NOT DEVELOP, AND YOU MAY NOT BE ABLE
TO RESELL THEM.
There is no established trading market for the notes. Although the
underwriters have informed us that they currently intend to make a market in the
notes, they have no obligation to do so and may discontinue making a market at
any time without notice. We do not intend to apply for listing of the notes. The
liquidity of any market for the notes will depend upon the number of holders of
the notes, our performance, the market for similar securities, the interest of
securities dealers in making a market in the notes and other factors. If a
liquid trading market does not develop for the notes, you may not be able to
resell your notes at their fair market value or at all.
S-13
THE TRADING PRICE OF THE NOTES MAY BE VOLATILE.
The trading price of the notes could be subject to significant fluctuation
in response to, among other factors, variations in operating results,
developments in industries in which we do business, general economic conditions,
changes in securities analysts' recommendations regarding our securities and
changes in the market for noninvestment grade securities generally. This
volatility may adversely affect the market price of the notes.
WE MAY BE UNABLE TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL
OFFER REQUIRED BY THE INDENTURE FOR THE NOTES.
If a change of control occurs, you will have the right to require the
issuers to repurchase any or all of your notes at a price equal to 101.0% of the
principal amount thereof, together with any interest the issuers owe you. Upon a
change of control, the issuers also may be required immediately to repay the
outstanding principal, any accrued interest on and any other amounts owed by us
under the credit facility and any other indebtedness or preferred stock then
outstanding. We cannot assure you that we would be able to repay amounts
outstanding under the senior credit facility or obtain necessary consents under
the facility to repurchase the notes. Any requirement to offer to purchase any
outstanding notes may result in our having to refinance our outstanding
indebtedness, which we may not be able to do. In addition, even if we were able
to refinance this indebtedness, the financing may be on terms unfavorable to us.
If we fail to repurchase the notes tendered for purchase upon the occurrence of
a change of control, the failure will be an event of default under the indenture
governing the notes. In addition, the change of control covenant does not cover
all corporate reorganizations, mergers or similar transactions and may not
provide you with protection in a highly leveraged transaction.
RISKS RELATED TO OUR BUSINESS
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, satellite radio, television stations and other entertainment
and communications media;
- technological changes and innovations;
- 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 an
economic recession or downturn, both nationally and in particular markets. Our
advertising revenue has been adversely affected by the recent downturn in the
United States economy. In particular, the general economic downturn and decrease
in advertising activity following the events of September 11, 2001 adversely
affected, and may continue to hinder the growth of, our advertising revenue.
S-14
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
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.
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
Kansas City acquisition we were required to dispose of three radio stations in
Kansas City. 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.
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 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 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.
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 attractive acquisition opportunities. As a result,
under certain circumstances, all or a partial amount of our deposits of $26.8
million, made in connection with the pending acquisitions, could be forfeited if
we are unable to timely consummate all or
S-15
any of our pending acquisitions. We cannot predict whether we will be successful
in identifying future acquisition opportunities or what the consequences will be
of any acquisitions.
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.
WE MAY BE UNABLE TO EFFECTIVELY INTEGRATE OUR ACQUISITIONS.
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. 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.
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.
As of January 31, 2002, Joseph M. Field, our Chairman of the Board and
Chief Executive Officer, beneficially owns 1,002,586 shares of our Class A
common stock and 9,782,555 shares of our Class B common stock, representing
approximately 70.4% of the total voting power of all of our outstanding common
stock. As of January 31, 2002, David J. Field, our President, Chief Operating
Officer, one of our directors and the son of Joseph M. Field, beneficially owns
2,029,143 shares of our Class A common stock and 749,250 shares of our
outstanding Class B common stock, representing approximately 6.8% of the total
voting power of all of our outstanding common stock. 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. In addition, both Joseph M. Field and David J. Field are members of the
Board of Managers of Entercom Radio.
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 is effectively
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 investors might otherwise receive a premium for your
shares over then current market prices.
S-16
WE DEPEND HEAVILY ON OUR SEATTLE RADIO STATIONS.
The radio stations we own or operate in Seattle generated between 20.0% and
25.0% of our net revenues and broadcast cash flows for 2001. Accordingly, we may
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.
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 digital audio radio service, has resulted in the
introduction of new subscriber based satellite radio services with
numerous niche formats;
- 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 provides multi-channel,
multi-format digital radio services in the same bandwidth currently
occupied by traditional AM and FM radio services; and
- low-power FM radio, which could result in additional FM radio broadcast
outlets.
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 the financial condition and results of operations of our company.
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. We believe that the loss of one
or more of these individuals could have a material adverse effect on our
business.
S-17
USE OF PROCEEDS
We estimate that the net proceeds to the issuers from the sale of the
notes, after deducting underwriting discounts and commissions and other offering
expenses, will be approximately $145.8 million. We expect the aggregate net
proceeds from this offering and the concurrent Class A common stock offering
will be approximately $296.0 million. We intend to use the net proceeds from
this offering, together with the net proceeds from our concurrent offering of
Class A common stock, to pay down revolving indebtedness under our credit
facility and to finance pending acquisitions. We intend to use any remaining
proceeds for general corporate purposes, including repayment of indebtedness
under the credit facility, future acquisitions and working capital. Pending
application of the net proceeds from this offering, we may invest in commercial
paper or short-term investment grade interest bearing securities.
As of December 31, 2001, we had $388.0 million outstanding indebtedness
under our credit facility, which includes $63.0 million of revolving
indebtedness, and our weighted average interest rate on borrowings under our
credit facility was 2.8%, or 4.3% taking into account the impact of our
derivative interest rate swaps and collars. The term and revolving loan portions
of our credit facility mature on September 30, 2007. On January 2, 2002, we
incurred $18.0 million of indebtedness under our credit facility to fund the
deposit for our pending acquisition of three stations in the Denver, Colorado
market. On February 8, 2002, we incurred $14.5 million of indebtedness under our
credit facility to fund a portion of the balance of the purchase price for the
acquisition of two radio stations in the Greensboro, North Carolina market. On
February 15, 2002, we incurred $8.8 million of indebtedness under our credit
facility to fund the deposit for our pending acquisition of an additional
station in the Denver, Colorado market. Other than the amounts set forth above,
all other borrowings under our credit facility since January 1, 2001, have been
used for working capital purposes.
S-18
CAPITALIZATION
The following table sets forth, on a consolidated basis, our cash and cash
equivalents, short-term investments and capitalization as of December 31, 2001,
on an actual basis and an as adjusted basis giving effect to this offering and
our concurrent offering of 3,000,000 shares of Class A common stock, assuming
the underwriters do not exercise their over-allotment option in that offering,
and the application of the aggregate net proceeds to pay down $63.0 million of
revolving indebtedness.
The information in this table should be read in conjunction with our
consolidated financial statements and the related notes in our Annual Report on
Form 10-K for the year ended December 31, 2001, incorporated by reference in
this prospectus supplement and the accompanying prospectus, and "Use of
Proceeds," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus supplement.
<Table>
<Caption>
DECEMBER 31, 2001
------------------------
AS ADJUSTED
FOR THE
ACTUAL OFFERINGS
---------- -----------
(IN THOUSANDS)
Cash and cash equivalents and short-term investments........ $ 10,751 $ 243,706
========== ==========
Senior debt, including current portion...................... $ 388,323 $ 325,323
% Senior Subordinated Notes due 2014...................... -- 150,000
---------- ----------
Total long-term debt................................... 388,323 475,323
TIDES....................................................... 125,000 125,000
Shareholders' equity........................................ 755,881 906,086
---------- ----------
Total capitalization................................... $1,269,204 $1,506,409
========== ==========
</Table>
S-19
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth the selected historical financial data of
Entercom Communications and its consolidated subsidiaries, including the
issuers, for the periods presented. Entercom Communications will guarantee all
of the obligations of the issuers under the notes on a subordinated basis as
described in "Description of Notes -- Summary of Notes and Guarantees."
The selected historical consolidated financial data have been derived from
our consolidated financial statements for the fiscal years ended September 30,
1997 and 1998, the three months ended December 31, 1998, and the fiscal years
ended December 31, 1999 and 2000, which have been audited by Deloitte & Touche
LLP, independent public accountants, and for the fiscal year ended December 31,
2001, which has been audited by Arthur Andersen LLP, independent public
accountants. The selected historical consolidated financial data for the three
months ended December 31, 1997 and the twelve months ended December 31, 1998
have been derived from our unaudited consolidated financial statements. You
should read the selected historical consolidated financial data in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus supplement and our
consolidated financial statements and related notes in our Annual Report on Form
10-K for the year ended December 31, 2001, incorporated by reference herein and
in the accompanying prospectus.
Until December 31, 1998, 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, for comparison purposes, the three months ended December 31, 1997 and
the twelve months ended December 31, 1998.
Immediately prior to our initial public offering in January 1999, Chase
Capital converted a 7% Subordinated Convertible Note due 2003 in the principal
amount of $25 million 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 certain state income tax returns. Immediately before our
initial public offering, we converted to a C corporation, and accordingly, we
were then 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 and the
effect of the adjustment to reflect indexing of the Chase Capital convertible
subordinated note (the amount of this adjustment is not tax deductible), as if
we had been taxed as a C corporation.
As a result of our conversion to 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 if we were a
C corporation rather than an S corporation throughout the periods presented.
Broadcast cash flow consists of operating income before depreciation and
amortization, net expense (income) from time brokerage agreement fees, corporate
general and administrative expenses and gains (losses) on sale of assets.
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 plus depreciation and amortization, non-cash
compensation expense (which is otherwise included
S-20
in corporate general and administrative expenses) and the elimination of net
expense (income) from time brokerage agreement fees and gains (losses) on sale
of assets.
After tax cash flow consists of income (loss) before extraordinary item and
accounting change, plus the following: depreciation and amortization, non-cash
compensation expense (which is otherwise included in corporate general and
administrative expense), deferred taxes, the elimination, net of taxes, of
equity loss from unconsolidated affiliate, any gains or losses on sale of
assets, investments and derivative instruments and the elimination of any
adjustments to reflect the indexing of the convertible subordinated note. For
the years and periods prior to 2000, after tax cash flow consists of pro forma
income (loss) before extraordinary item, to reflect taxes as if we were a C
corporation during the periods presented.
The data is presented in thousands, other than income (loss) per share.
Although broadcast cash flow, EBITDA before net expense (income) from time
brokerage agreement fees and after tax cash flow are not measures of performance
or liquidity calculated in accordance with generally accepted accounting
principles, we believe that these measures are useful to an investor in
evaluating our performance because they are widely used in the broadcast
industry to measure a radio company's operating performance. However, you should
not consider broadcast cash flow, EBITDA before net expense (income) from time
brokerage agreement fees and 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 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.
<Table>
<Caption>
TWELVE
YEAR ENDED THREE MONTHS ENDED MONTHS
SEPTEMBER 30, DECEMBER 31, ENDED YEAR ENDED DECEMBER 31,
--------------------- ---------------------- DECEMBER 31, ------------------------------------
1997 1998 1997 1998 1998 1999 2000 2001
--------- --------- ----------- -------- ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
OPERATING DATA:
Net revenues............... $ 93,862 $ 132,998 $ 28,399 $ 47,363 $ 151,962 $ 215,001 $ 352,025 $ 332,897
--------- --------- -------- -------- --------- ---------- ---------- ----------
Operating expenses
(income):
Station operating
expenses............... 61,280 88,599 18,868 29,990 99,721 135,943 206,608 201,257
Depreciation and
amortization........... 7,685 13,066 2,880 4,358 14,544 21,564 43,475 46,509
Corporate general and
administrative
expenses............... 3,249 4,527 849 1,850 5,528 8,100 12,497 12,335
Net expense (income) from
time brokerage
agreement fees......... (476) 2,399 -- 1,236 3,635 652 11 --
Net (gains) losses on
sale of assets......... (197,097) (8,661) (43) (69,648) (78,266) (1,986) (41,465) 16
--------- --------- -------- -------- --------- ---------- ---------- ----------
Total operating
(income)
expenses......... (125,359) 99,930 22,554 (32,214) 45,162 164,273 221,126 260,117
--------- --------- -------- -------- --------- ---------- ---------- ----------
Operating income........... 219,221 33,068 5,845 79,577 106,800 50,728 130,899 72,780
Other expense (income):
Interest expense......... 11,388 14,663 2,996 5,732 17,399 11,182 37,760 27,583
Financing cost of
Company-obligated
mandatorily redeemable
convertible preferred
securities of
subsidiary holding
solely convertible
debentures of the
Company (TIDES)........ -- -- -- -- -- 1,845 7,813 7,813
Adjustment to reflect
indexing of the
convertible
subordinated note...... 29,070 8,841 14,903 29,503 23,441 -- -- --
Interest income.......... (482) (410) (127) (146) (429) (3,253) (512) (262)
</Table>
S-21
<Table>
<Caption>
TWELVE
YEAR ENDED THREE MONTHS ENDED MONTHS
SEPTEMBER 30, DECEMBER 31, ENDED YEAR ENDED DECEMBER 31,
--------------------- ---------------------- DECEMBER 31, ------------------------------------
1997 1998 1997 1998 1998 1999 2000 2001
--------- --------- ----------- -------- ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
Equity loss from
unconsolidated
affiliate.............. -- -- -- -- -- -- 1,100 4,706
Loss on investments...... -- -- -- -- -- -- 5,688 2,000
Net loss on derivative
instruments............ -- -- -- -- -- -- -- 912
Other non-operating
expenses............... 1,986 82 25 723 780 -- -- --
--------- --------- -------- -------- --------- ---------- ---------- ----------
Total other
expense.......... 41,962 23,176 17,797 35,812 41,191 9,774 51,849 42,752
--------- --------- -------- -------- --------- ---------- ---------- ----------
Income (loss) before income
taxes, extraordinary item
and accounting change.... 177,259 9,892 (11,952) 43,765 65,609 40,954 79,050 30,028
Income taxes............... 489 453 81 310 682 100,913 31,796 12,194
--------- --------- -------- -------- --------- ---------- ---------- ----------
Income (loss) before
extraordinary item and
accounting change........ 176,770 9,439 (12,033) 43,455 64,927 (59,959) 47,254 17,834
Extraordinary item, net of
taxes.................... -- (2,376) -- -- (2,376) (918) -- --
--------- --------- -------- -------- --------- ---------- ---------- ----------
Income (loss) before
accounting change........ 176,770 7,063 (12,033) 43,455 62,551 (60,877) 47,254 17,834
Cumulative effect of
accounting change, net of
taxes.................... -- -- -- -- -- -- -- (566)
--------- --------- -------- -------- --------- ---------- ---------- ----------
Net income (loss).......... $ 176,770 $ 7,063 $(12,033) $ 43,455 $ 62,551 $ (60,877) $ 47,254 $ 17,268
========= ========= ======== ======== ========= ========== ========== ==========
Net income (loss) per
share -- basic:
(Loss) income before
extraordinary item and
accounting change...... $ (1.58) $ 1.05 $ 0.39
Extraordinary item, net
of taxes............... (0.03) -- --
---------- ---------- ----------
(Loss) income before
accounting change...... (1.61) 1.05 0.39
Cumulative effect of
accounting change, net
of taxes............... -- -- (0.01)
---------- ---------- ----------
Net (loss) income per
share -- basic........... $ (1.61) $ 1.05 $ 0.38
========== ========== ==========
Net (loss) income per
share -- diluted:
(Loss) income before
extraordinary item and
accounting change...... $ (1.58) $ 1.04 $ 0.39
Extraordinary item, net
of taxes............... (0.03) -- --
---------- ---------- ----------
(Loss) income before
accounting change...... (1.61) 1.04 0.39
Cumulative effect of
accounting change, net
of taxes............... -- -- (0.01)
---------- ---------- ----------
Net (loss) income per
share -- diluted......... $ (1.61) $ 1.04 $ 0.38
========== ========== ==========
Weighted average
shares -- basic.......... 21,534 22,239 21,534 24,742 24,104 37,922 45,209 45,295
========= ========= ======== ======== ========= ========== ========== ==========
Weighted average shares --
diluted.................. 21,534 22,239 21,534 24,742 24,104 37,922 45,614 45,994
========= ========= ======== ======== ========= ========== ========== ==========
</Table>
S-22
<Table>
<Caption>
TWELVE
YEAR ENDED THREE MONTHS ENDED MONTHS
SEPTEMBER 30, DECEMBER 31, ENDED YEAR ENDED DECEMBER 31,
--------------------- ---------------------- DECEMBER 31, ------------------------------------
1997 1998 1997 1998 1998 1999 2000 2001
--------- --------- ----------- -------- ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
PRO FORMA DATA:
Income (loss) before income
taxes and extraordinary
item..................... $ 177,259 $ 9,892 $(11,952) $ 43,765 $ 65,609 $ 40,954
Pro forma income taxes..... 78,405 7,119 1,121 27,842 33,840 20,278
--------- --------- -------- -------- --------- ----------
Pro forma income (loss)
before extraordinary
item..................... 98,854 2,773 (13,073) 15,923 31,769 20,676
Extraordinary item, net of
pro forma taxes.......... -- (1,488) -- -- (1,488) (918)
--------- --------- -------- -------- --------- ----------
Pro forma net income
(loss)................... $ 98,854 $ 1,285 $(13,073) $ 15,923 $ 30,281 $ 19,758
========= ========= ======== ======== ========= ==========
Pro forma basic income
(loss) per share before
extraordinary item....... $ 4.59 $ 0.12 $ (0.61) $ 0.64 $ 1.32 $ 0.55
========= ========= ======== ======== ========= ==========
Pro forma diluted income
(loss) per share before
extraordinary item....... $ 4.59 $ 0.12 $ (0.61) $ 0.64 $ 1.32 $ 0.54
========= ========= ======== ======== ========= ==========
Pro forma basic net income
(loss)................... $ 4.59 $ 0.06 $ (0.61) $ 0.64 $ 1.26 $ 0.52
========= ========= ======== ======== ========= ==========
Pro forma diluted net
income (loss)............ $ 4.59 $ 0.06 $ (0.61) $ 0.64 $ 1.26 $ 0.51
========= ========= ======== ======== ========= ==========
Pro forma weighted average
common shares
outstanding -- basic..... 21,534 22,239 21,534 24,742 24,104 37,922
Pro forma weighted average
common shares
outstanding -- diluted... 21,534 22,239 21,534 24,742 24,104 38,238
BALANCE SHEET DATA (AT END
OF PERIOD):
Cash and cash
equivalents.............. $ 3,626 $ 6,666 $ 3,497 $ 6,469 $ 6,469 $ 11,262 $ 13,257 $ 10,751
Intangibles and other
assets................... 300,029 428,763 313,889 504,825 504,825 1,225,335 1,277,609 1,244,957
Total assets............... 364,743 522,945 378,138 681,034 681,034 1,396,048 1,473,928 1,438,740
Senior debt, including
current portion.......... 117,000 253,784 127,000 330,281 330,281 465,770 461,260 388,323
Total shareholders'
equity................... 179,019 182,970 166,986 225,467 225,467 686,611 735,701 755,881
OTHER DATA:
Broadcast cash flow........ $ 32,582 $ 44,399 $ 9,531 $ 17,373 $ 52,241 $ 79,058 $ 145,417 $ 131,640
Broadcast cash flow
margin................... 34.7% 33.4% 33.6% 36.7% 34.4% 36.8% 41.3% 39.5%
EBITDA before net expense
(income) from time
brokerage agreement
fee...................... $ 29,333 $ 39,872 $ 8,682 $ 15,523 $ 46,713 $ 71,419 $ 133,577 $ 119,842
After tax cash flow........ 16,590 21,028 5,003 7,985 24,010 52,465 89,721 87,084
Cash flows related to:
Operating activities..... 8,859 23,019 7,341 11,158 26,836 40,700 69,475 85,243
Investing activities..... (13,695) (153,651) (17,470) (86,894) (223,075) (712,323) (64,684) (17,891)
Financing activities..... 3,170 133,672 10,000 75,539 199,211 676,416 (2,796) (69,858)
</Table>
S-23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 2001, we generated 79.8% of our net revenues from local advertising,
which is sold primarily by each individual local radio station's sales staff,
and 17.9% from national spot advertising, which is sold by independent
advertising sales representatives. We generated the balance of our 2001 revenues
principally from network advertising, event revenue and rental income from tower
sites. Our most significant station operating expenses are employees'
compensation, and programming and promotional expenses.
We include revenues recognized under a time brokerage agreement or a
similar sales agreement for stations operated by us prior to acquiring the
stations in net revenues, while we reflect operating expenses associated with
these stations in station operating expenses. Consequently, there is no
difference in the method of revenue and operating expense recognition between a
station operated by us under a time brokerage agreement or similar sales
agreement and a station owned and operated by us.
Several factors may adversely affect a radio broadcasting company's
performance in any given period. In the radio broadcasting industry, seasonal
revenue fluctuations are common and are due primarily to variations in
advertising expenditures by local and national advertisers. Typically, revenues
are lowest in the first calendar quarter of the year. We generally incur
advertising and promotional expenses to increase audiences. However, because
Arbitron reports ratings quarterly, any changed ratings, and therefore its
effect on advertising revenues, tend to lag behind the incurrence of advertising
and promotional spending. As a result of the tragic events of September 11,
2001, radio advertising was severely curtailed for several days and the negative
effects on advertisers and radio broadcasters continued into the next quarter.
We calculate same station results by comparing the performance of stations
operated by us throughout the relevant period to the comparable performance in
the prior year's corresponding period, adjusted for significant changes to
sports contracts.
For purposes of the following discussion, pro forma net income represents
historical income before income taxes, extraordinary item and accounting change
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,
extraordinary item and accounting change and the effect of the adjustment to
reflect indexing of the convertible subordinated note (the amount of this
adjustment is not tax deductible).
RECENT EVENTS
On November 29, 2001, we entered into an agreement with WCCB-TV, Inc., a
subsidiary of Bahakel Communications, Ltd. to acquire the assets of WKSI-FM and
WPET-AM, serving the Greensboro, North Carolina radio market, for a purchase
price of $20.8 million in cash. On December 5, 2001, we began operating these
stations under a time brokerage agreement. This transaction closed on February
8, 2002 and increased our ownership to six radio stations in the Greensboro,
North Carolina radio market.
On December 24, 2001, we entered into an agreement with Tribune
Broadcasting Company to acquire the assets of KOSI-FM, KKHK-FM and KEZW-AM,
serving the Denver, Colorado radio market, for a
S-24
purchase price of $180.0 million in cash, of which we paid $18.0 million as a
deposit on January 2, 2002. On February 1, 2002, we began operating these
stations under a time brokerage agreement. The time brokerage agreement may run
for a period of up to three years at Tribune's option. The closing of this
transaction may be delayed at the option of Tribune, not to exceed three years,
and is conditioned on the approval of the FCC.
On February 1, 2002, we entered into an agreement effective February 28,
2002, to terminate our joint sales agreement for KING-FM in the Seattle,
Washington radio market, that was due to expire on June 30, 2002.
On February 12, 2002, we entered into an agreement with subsidiaries of
Emmis Communications Corporation to acquire the assets of KALC-FM, serving the
Denver, Colorado radio market, for a purchase price of $88.0 million in cash, of
which we paid $8.8 million as a deposit on February 15, 2002. We will begin
operating this station under a time brokerage agreement upon the expiration or
termination of all applicable antitrust waiting periods. We expect the closing
of this transaction, which is conditioned on the receipt of all necessary
regulatory approvals, to occur in the second quarter of 2002.
RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated
financial statements and related notes in our Annual Report on Form 10-K for the
year ended December 31, 2001, incorporated by reference herein and in the
accompanying prospectus. The following results of operations include a
discussion of the year ended December 31, 2001 as compared to the year ended
December 31, 2000 and a discussion of the year ended December 31, 2000 as
compared to the year ended December 31, 1999. Our results of operations
represent the operations of the radio stations owned or operated pursuant to
time brokerage agreements or joint sales agreements during the relevant periods.
Our results of operations for the year ended December 31, 2000 as compared to
the year ended December 31, 1999 were heavily impacted by our acquisition of
radio stations from Sinclair Broadcast Group, Inc. in 2000 and 1999.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
NET REVENUES................................................ $352,025 $332,897
Decrease of $(19,128) or (5.4%)
</Table>
Net revenues decreased 5.4% to $332.9 million for the year ended December
31, 2001 from $352.0 million for the year ended December 31, 2000. On a same
station basis, net revenues decreased 5.9% to $332.2 million from $353.2
million. Net revenues and same station net revenues declined due to a
combination of general weakness in the advertising sector, comparisons to the
prior year in which we experienced 12.7% growth and the effect of the tragic
events of September 11, 2001, when radio advertising was severely curtailed for
several days and its negative effects continued into the next quarter. The
overall decline in net revenues was also affected by acquisitions and
divestitures. For the years ended December 31, 2001 and 2000, we acquired
stations with net revenues of $22.0 million and $10.1 million, respectively. For
the year ended December 31, 2001, we terminated sports contracts under which we
sold advertising with net revenues of $0.5 million; and for the year ended
December 31, 2000, we divested stations with net revenues of $3.2 million, plus
$2.3 million in net revenues from terminated sports contracts under which we
sold advertising.
S-25
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
STATION OPERATING EXPENSES.................................. $206,608 $201,257
Decrease of $(5,351) or (2.6%)
Percentage of Net Revenues.................................. 58.7% 60.5%
</Table>
Station operating expenses decreased 2.6% to $201.3 million for the year
ended December 31, 2001 from $206.6 million for the year ended December 31,
2000. On a same station basis, station operating expenses decreased 2.9% to
$199.3 million from $205.3 million. Station operating expenses and same station
operating expenses declined due to a decrease in sales expense as a result of a
decrease in same station net revenues and cost reduction efforts. The overall
decrease in station operating expenses was also affected by acquisitions and
divestitures. For the years ended December 31, 2001 and 2000, we acquired
stations with operating expenses of $15.1 million and $8.8 million,
respectively. For the year ended December 31, 2001, we terminated sports
contracts under which we sold advertising with operating expenses of $1.2
million; and for the year ended December 31, 2000, we divested stations with
operating expenses of $2.3 million, plus $2.4 million in operating expenses from
terminated sports contracts under which we sold advertising.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
DEPRECIATION AND AMORTIZATION............................... $ 43,475 $ 46,509
Increase of $3,034 or 7.0%
Percentage of Net Revenues.................................. 12.3% 14.0%
</Table>
Depreciation and amortization increased 7.0% to $46.5 million for the year
ended December 31, 2001 from $43.5 million for the year ended December 31, 2000.
The increase was primarily attributable to our acquisitions, net of
divestitures, since January 1, 2000. We expect that the adoption on January 1,
2002 of SFAS No. 142, "Goodwill and Other Intangible Assets", as described more
fully under "Recent Pronouncements," will materially reduce our non-cash
amortization expense for goodwill and broadcasting licenses which will have a
material impact on our financial statements because the amount currently
recorded for the amortization of goodwill and broadcasting licenses is
significant. For the years ended December 31, 2001 and 2000, the amounts of
amortization expense for goodwill and broadcasting licenses were $0.1 million
and $33.1 million and $0.1 million and $32.0 million, respectively. However,
this reduction in our non-cash amortization expense does not include any
adjustments for potential write-downs that could result based on the outcome of
the required impairment tests under the provisions of SFAS No. 142.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES............... $ 12,497 $ 12,335
Decrease of $(162) or (1.3%)
Percentage of Net Revenues.................................. 3.6% 3.7%
</Table>
Corporate general and administrative expenses decreased 1.3% to $12.3
million for the year ended December 31, 2001 from $12.5 million for the year
ended December 31, 2000. The decrease was primarily attributable to cost
reduction efforts, offset by the effect of inflation and the growth in the
number of stations. Also included for the years ended December 31, 2001 and 2000
is $0.5 million and $0.7 million, respectively, in non-cash stock-based
compensation expense.
S-26
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
INTEREST EXPENSE (INCLUDING THE FINANCING COST OF TIDES).... $ 45,573 $35,396
Decrease of $(10,177) or (22.3%)
Percentage of Net Revenues.................................. 12.9% 10.6%
</Table>
Interest expense, including the financing cost on our 6.25% Convertible
Preferred Securities Term Income Deferrable Equity Securities (TIDES), decreased
22.3% to $35.4 million for the year ended December 31, 2001 from $45.6 million
for the year ended December 31, 2000. The decrease in interest expense was
primarily attributable to an overall decrease in outstanding indebtedness under
our credit facility and a decline in interest rates.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND
ACCOUNTING CHANGE......................................... $ 79,050 $30,028
Decrease of $(49,022) or (62.0)%
Percentage of Net Revenues.................................. 22.5% 9.0%
</Table>
Income before income taxes, extraordinary item and accounting change
decreased 62.0% to $30.0 million for the year ended December 31, 2001 from $79.1
million for the year ended December 31, 2000. The decrease in income before
income taxes, extraordinary item and accounting change was primarily
attributable to: (1) the factors described above; (2) the decrease in gain on
sale of assets compared to the prior year's gain of $41.5 million from the
required divestiture of certain of our Kansas City radio stations; (3) the
increase in equity loss from unconsolidated affiliate of $3.6 million because
the initial investment in this affiliate was made during the later part of the
prior year; and (4) the recognition of a net loss on derivative instruments of
$0.9 million due to the application of a new accounting pronouncement.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
NET INCOME.................................................. $ 47,254 $17,268
Decrease of $(29,986)
</Table>
Net income decreased to $17.3 million for the year ended December 31, 2001
from $47.3 million for the year ended December 31, 2000. The decrease in net
income was primarily attributable to: (1) the factors described above, net of
taxes; and (2) the cumulative effect of the accounting change, net of taxes, of
$0.6 million.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
OTHER DATA
BROADCAST CASH FLOW....................................... $145,417 $131,640
Decrease of $(13,777) or (9.5)%
</Table>
Broadcast cash flow decreased 9.5% to $131.6 million for the year ended
December 31, 2001 from $145.4 million for the year ended December 31, 2000. On a
same station basis, broadcast cash flow decreased 10.1% to $132.9 million from
$147.9 million as same station net revenues declined, offset by a decline in
same station operating expenses. The overall decline in broadcast cash flow was
affected by acquisitions and divestitures. For the years ended December 31, 2001
and 2000, we acquired stations with broadcast cash flow of $7.0 million and $1.3
million, respectively. For the year ended December 31, 2001,
S-27
we terminated sports contracts under which we sold advertising and incurred a
broadcast cash flow deficit of $0.7 million and for the year ended December 31,
2000, we divested stations with $0.9 million in broadcast cash flow, plus $0.1
million incurred as a broadcast cash flow deficit from terminated sports
contracts under which we sold advertising.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
BROADCAST CASH FLOW MARGIN.................................. 41.3% 39.5%
Decrease of (1.8)% or (4.3)%
</Table>
Our broadcast cash flow margin decreased to 39.5% for the year ended
December 31, 2001 from 41.3% for the year ended December 31, 2000. On a same
station basis, our broadcast cash flow margin decreased to 40.0% from 41.9%.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
AFTER TAX CASH FLOW......................................... $89,721 $87,084
Decrease of $(2,637) or (2.9)%
</Table>
After tax cash flow decreased 2.9% to $87.1 million for the year ended
December 31, 2001 from $89.7 million for the year ended December 31, 2000. After
tax cash flow was negatively impacted by the 9.5% decrease in broadcast cash
flow, offset by the decrease in interest expense, net of tax, and the tax
benefits from the purchase of radio station assets since January 1, 2000. The
effective tax rate during these periods was positively affected by amortization
of intangibles that were deductible for tax purposes in excess of the amounts
reflected for book purposes.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
NET REVENUES................................................ $215,001 $352,025
Increase of $137,024 or 63.7%
</Table>
Net revenues increased 63.7% to $352.0 million for the year ended December
31, 2000 from $215.0 million for the year ended December 31, 1999. Of the
increase, $101.5 million was attributable to stations that we acquired or that
we were in the process of acquiring since January 1, 1999, offset by $5.2
million for stations that we divested (including $1.8 million in revenues from a
sports contract for which we discontinued selling advertising) during the same
period. On a same station basis, net revenues increased 12.7% to $338.4 million
from $300.4 million. Same station revenue growth was led by increases in
Sacramento, Milwaukee, Norfolk, Greenville and Boston due to improved selling
efforts.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
STATION OPERATING EXPENSES.................................. $135,943 $206,608
Increase of $70,665 or 52.0%
Percentage of Net Revenues.................................. 63.2% 58.7%
</Table>
Station operating expenses increased 52.0% to $206.6 million for the year
ended December 31, 2000 from $135.9 million for the year ended December 31,
1999. Of the increase, $63.6 million is attributable to stations that we
acquired or that we were in the process of acquiring since January 1, 1999,
offset by
S-28
$6.6 million for stations that we divested (including $4.4 million in expenses
from a sports contract for which we discontinued selling advertising) during the
same period. On a same station basis, station operating expenses increased 5.1%
to $195.9 million from $186.3 million.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
DEPRECIATION AND AMORTIZATION............................... $21,564 $43,475
Increase of $21,911 or 101.6%
Percentage of Net Revenues.................................. 10.0% 12.3%
</Table>
Depreciation and amortization increased 101.6% to $43.5 million for the
year ended December 31, 2000 from $21.6 million for the year ended December 31,
1999. The increase was primarily attributable to our acquisitions since January
1, 1999, offset by divestitures during the same period. We expect that the
adoption on January 1, 2002 of SFAS No. 142, "Goodwill and Other Intangible
Assets", as described more fully under "Recent Pronouncements," will materially
reduce our non-cash amortization expense for goodwill and broadcasting licenses
which will have a material impact on our financial statements because the amount
currently recorded for the amortization of goodwill and broadcasting licenses is
significant. For the years ended December 31, 2000 and 1999, the amounts of
amortization expense for goodwill and broadcasting licenses were $0.1 million
and $32.0 million and $0.1 million and $14.8 million, respectively. However,
this reduction in our non-cash amortization expense does not include any
adjustments for potential write-downs that could result based on the outcome of
the required impairment tests under the provisions of SFAS No. 142.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES............... $8,100 $12,497
Increase of $4,397 or 54.3%
Percentage of Net Revenues.................................. 3.8% 3.6%
</Table>
Corporate general and administrative expenses increased 54.3% to $12.5
million for the year ended December 31, 2000 from $8.1 million for the year
ended December 31, 1999. The increase was primarily attributable to higher
administrative expenses associated with supporting our growth. Also included in
the years ended December 31, 2000 and 1999 is $0.7 million and $0.5 million,
respectively, in non-cash stock-based compensation expense.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
INTEREST EXPENSE (INCLUDING THE FINANCING COST OF TIDES).... $13,027 $45,573
Increase of $32,546 or 249.8%
Percentage of Net Revenues.................................. 6.1% 12.9%
</Table>
Interest expense, including the financing cost on our 6.25% Convertible
Preferred Securities Term Income Deferrable Equity Securities (TIDES), increased
249.8% to $45.6 million for the year ended December 31, 2000 from $13.0 million
for the year ended December 31, 1999. The increase in interest expense was
primarily attributable to (1) an overall increase in outstanding indebtedness
used to fund the acquisition of radio station assets, and (2) the financing cost
of the TIDES, offset by (1) a reduction in the outstanding indebtedness due to
the use of the proceeds from our October 1999 Class A Common Stock and TIDES
offerings and (2) a reduction in outstanding indebtedness due to the use of the
proceeds from the disposition of radio station assets.
S-29
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM........... $40,954 $79,050
Increase of $38,096 or 93.0%
Percentage of Net Revenues.................................. 19.0% 22.5%
</Table>
Income before income taxes and extraordinary item increased 93.0% to $79.1
million for the year ended December 31, 2000 from $41.0 million for the year
ended December 31, 1999. The increase was primarily attributable to (1) an
increase in gains on sale of assets of $41.5 million primarily from the gain on
the disposition of two radio stations in the current period; and (2) an increase
in operating income, exclusive of the gains on sale of assets, of $40.7 million
due to increases in revenues from existing and newly acquired stations and
improved expense management from newly acquired stations, offset by: (1) an
increase of $32.5 million in net interest expense and financing costs as a
result of the factors described above under interest expense; (2) an increase in
expense of $6.8 million from the recognition of a loss on investments and an
equity loss from an unconsolidated affiliate; and (3) a decrease in interest
income of $2.7 million as a result of the absence this year of excess cash
available from our October 1999 Class A Common Stock and TIDES offerings during
the period prior to the closing on December 16, 1999, of the acquisition of 42
radio stations from Sinclair, including a radio station under a time brokerage
agreement.
EXTRAORDINARY ITEM, NET OF TAXES
The extraordinary item for the year ended December 31, 1999 resulted from
the write-off of $1.5 million ($0.9 million, net of taxes) of unamortized
finance charges due to the early extinguishment of debt. The early
extinguishment of debt resulted from the refinancing of our previous credit
facility.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
NET INCOME (LOSS)........................................... $(60,877) $47,254
Increase of $108,131
</Table>
Net income increased to $47.3 million for the year ended December 31, 2000
from a net loss of $60.9 million for the year ended December 31, 1999. The
increase was primarily attributable to: (1) the absence this year of an
adjustment made during the prior year to record a one-time non-cash deferred
income tax expense of $79.8 million as a result of the revocation of our S
Corporation election and our conversion to a C Corporation (we recorded this
expense to reflect the cumulative effect of temporary differences between the
tax and financial reporting bases of our assets and liabilities attributable to
our conversion to a C Corporation); (2) a net increase in gain on sale of assets
of $24.9 million, net of tax, primarily from the disposition of two radio
stations in the current period; and (3) an improvement in operating income,
excluding gains on sale of assets, of $24.4 million, net of tax, primarily as a
result of an improvement in revenues of existing and newly acquired stations and
an improvement in expense management of newly acquired stations, offset by : (1)
an increase in interest expense of $19.5 million, net of tax, for the factors
described under interest expense; (2) an increase in expense of $4.0 million,
net of tax, from the recognition of a loss on investments and an equity loss
from an unconsolidated affiliate and (3) a decrease in interest income of $1.6
million, net of tax, as a result of the absence this year of excess cash
available from our October 1999 Class A Common Stock and TIDES offerings during
the period prior to the closing on December 16, 1999, of the acquisition of 42
radio stations from Sinclair, including a radio station under a time brokerage
agreement.
S-30
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
NET INCOME TO PRO FORMA NET INCOME.......................... $19,758 $47,254
Increase of $27,496 or 139.2%
</Table>
Net income increased 139.2% to $47.3 million for the year ended December
31, 2000 from pro forma net income of $19.8 million for the year ended December
31, 1999. The increase was primarily attributable to the factors described under
net income (loss) above, except for the adjustment to record a one-time non-cash
deferred income tax expense of $79.8 million, which is excluded from the
definition of pro forma net income.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
OTHER DATA
BROADCAST CASH FLOW......................................... $79,058 $145,417
Increase of $66,359 or 83.9%
</Table>
Broadcast cash flow increased 83.9% to $145.4 million for the year ended
December 31, 2000 from $79.1 million for the year ended December 31, 1999. Of
the increase, $38.0 million is attributable to stations that we acquired or that
we were in the process of acquiring since January 1, 1999 and $2.6 million was
primarily attributable to the elimination of a broadcast cash flow deficit from
a sports contract for which we discontinued selling advertising, offset by $1.2
million for stations that we divested during the same period. On a same station
basis, broadcast cash flow increased 25.4% to $140.7 million from $112.3
million.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
BROADCAST CASH FLOW MARGIN.................................. 36.8% 41.3%
Increase of 4.5% or 12.3%
</Table>
Our broadcast cash flow margin increased to 41.3% for the year ended
December 31, 2000 from 36.8% for the year ended December 31, 1999. The increase
is attributable to improved revenues and expense management. On a same station
basis, our broadcast cash flow margin increased to 41.6% from 37.4%.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
AFTER TAX CASH FLOW TO PRO FORMA AFTER TAX CASH FLOW........ $52,465 $89,721
Increase of $37,256 or 71.0%
</Table>
After tax cash flow increased 71.0% to $89.7 million for the year ended
December 31, 2000 from pro forma after tax cash flow of $52.5 million for the
year ended December 31, 1999. The increase was primarily 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 prior period. The amount of the deferred
income tax expense was $33.0 million for the year ended December 31, 2000 and
the amount of the pro forma deferred income tax expense was $11.0 million for
the year ended December 31,1999. The amount of the deferred income tax expense
attributable to the gains on sale of assets, loss on investments and equity loss
from an unconsolidated affiliate was $13.9 million for the year ended December
31, 2000 and $27,000 for the year ended December 31, 1999.
S-31
LIQUIDITY AND CAPITAL RESOURCES
We use a significant portion of our capital resources to reduce outstanding
debt and to consummate acquisitions. Acquisitions are funded from one or a
combination of the following sources: (1) our credit facility (described below);
(2) the sale of our securities; (3) the swapping of our radio stations in
transactions which qualify as "like-kind" exchanges under Section 1031 of the
Internal Revenue Code; and (4) internally-generated cash flow. Our results of
operations for the years ended December 31, 2001 and 2000 as compared to the
years ended December 31, 2000 and 1999, respectively, were heavily impacted by
our acquisition of the radio stations from Sinclair in 2000 and 1999.
OPERATING ACTIVITIES
Net cash flows provided by operating activities were $85.2 million for the
year ended December 31, 2001, as compared to $69.5 million and $40.7 million for
the years ended December 31, 2000 and 1999, 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. For the year ended
December 31, 2001, net cash provided by operating activities increased $15.8
million as compared to the year ended December 31, 2000, primarily due to a
reduction in net cash flows utilized for working capital. For the year ended
December 31, 2000, cash flows provided by operating activities were positively
affected primarily by: (1) the acquisition of radio stations from Sinclair,
excluding the station in Kansas City we acquired from Sinclair and immediately
sold, and (2) other radio station acquisitions, offset by the required
divestiture of two radio stations in Kansas City and an increase in accounts
receivable on acquired stations, net of the Kansas City divestiture.
INVESTING AND FINANCING ACTIVITIES
Net cash flows used in investing activities declined to $17.9 million for
the year ended December 31, 2001, as compared to $64.7 million and $712.3
million for the years ended December 31, 2000 and 1999, respectively, primarily
as a result of the net impact of acquisitions, divestitures and capital
expenditures in the prior years. Net cash flows used by financing activities
were $69.9 million for the year ended December 31, 2001, as compared to $2.8
million for the year ended December 31, 2000 and net cash flows provided by
financing activities of $676.4 million for the year ended December 31, 1999. The
cash flows for the year ended December 31, 2001 reflect a net reduction in
outstanding debt of $72.9 million, an increase of $68.4 million as compared to
the prior year, primarily due to the absence this year of any station
acquisitions. The cash flows for the year ended December 31, 2000, reflect (1)
acquisitions and investments consummated and the related borrowings and (2) the
proceeds from the required disposition of certain of the Kansas City stations.
The cash flows for the year ended December 31, 1999, reflect (1) acquisitions
consummated and the related borrowings; (2) net proceeds from our initial public
offering and the related payment of long-term debt; (3) net proceeds from our
October 1999 Class A Common Stock and TIDES offerings and the related payment of
long-term debt; and (4) the distribution to our S corporation shareholders of
$88.1 million primarily from the funds available from the sale of our Tampa
stations.
Our business generally does not require substantial investment of capital.
Our capital expenditures totaled $9.8 million in the year ended December 31,
2001, as compared to $9.5 million and $14.4 million in the years ended December
31, 2000 and 1999, respectively. Despite an increase in the average number of
radio stations owned throughout this year as compared to the average number of
radio stations owned throughout the prior year, primarily from the acquisition
of radio stations in the Wichita and Madison markets during the prior year, and
despite the continued relocation of studio facilities in certain markets, our
capital expenditures increased only marginally for the year ended December 31,
2001 as compared to the prior year.
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
S-32
proceeds to reduce outstanding indebtedness under our former credit facility and
to pay other corporate obligations. Shortly after reducing indebtedness under
our former credit facility, in February 1999 we borrowed approximately $58.0
million to purchase three Boston radio stations from CBS. On October 6, 1999, we
completed our Class A Common Stock and TIDES offerings and received $276.1
million and $120.5 million in proceeds, respectively, after deducting discounts,
commissions, fees and expenses. The proceeds were used to reduce outstanding
indebtedness. We used the net proceeds from our October 1999 Class A Common
Stock offering and the TIDES offering, together with cash on hand and proceeds
from our credit facility, to finance the $700.4 million purchase of radio
stations from Sinclair on December 16, 1999.
As of February 12, 2002, we have transactions pending pursuant to
agreements to purchase four radio stations in the Denver, Colorado radio market
having an aggregate purchase price of $268.0 million. Under these agreements, we
have funded $26.8 into escrow deposits to be applied against the purchase price
upon closing. Closing on one of these transactions can be deferred for up to
three years at the seller's option. We intend to finance the pending
acquisitions primarily from this offering and the concurrent equity offering.
Additionally, we may seek to obtain other funding or additional financing from
time-to-time. Our credit facility requires that at the time of closing on these
transactions, we must be in compliance with the terms of the credit facility. We
believe that we will maintain compliance with the terms of our credit facility.
If we are not in compliance, there can be no assurance that we will be
successful in amending or entering into a new credit facility, obtaining
additional financing or that we will be able to obtain such financing on terms
acceptable to us, which could delay or impair our efforts to consummate the
pending transactions.
In addition to debt service and quarterly distributions under the TIDES,
our principal liquidity requirements will be for working capital and general
corporate purposes, including capital expenditures, and acquisitions of
additional radio stations. For year 2002, we estimate that capital expenditures,
necessary for maintaining our facilities, will be between $9.0 million and $11.0
million. We are also committed to fund an investment focused on minority-owned
businesses in the amount of approximately $0.6 million as of December 31, 2001.
We believe that cash flow from operating activities, together with available
revolving and term credit borrowings under our credit facility, should be
sufficient to permit us to fund our current operations. However, in order to
finance the pending acquisitions and future acquisitions, if any, we may require
additional financing and there can be no assurance that we will be able to
obtain such financing on terms acceptable to us. As of December 31, 2001, we had
approximately $388.0 million of borrowings outstanding under our credit facility
(in addition to an outstanding letter of credit in the amount of $6.2 million),
of which most was incurred in connection with the acquisition of radio stations
from Sinclair.
We entered into our credit facility as of December 16, 1999, with a
syndicate of banks for $650.0 million in senior secured credit consisting of:
(1) $325.0 million in a reducing revolving credit facility; and (2) $325.0
million in a multi-draw term loan that was fully drawn as of September 30, 2000.
Our credit facility was established to: (1) refinance our existing indebtedness;
(2) provide working capital; and (3) fund corporate acquisitions. At our
election, interest on any outstanding principal accrues at a rate based on
either LIBOR plus a spread that ranges from 0.75% to 2.375% or on KeyBank N.A.'s
base rate plus a spread of up to 1.125%, depending on our leverage ratio.
Although we may borrow, repay and re-borrow under the revolving credit facility,
the aggregate maximum amount that we can have outstanding at any one time is
reduced on a quarterly basis beginning on September 30, 2002 in amounts that
vary from $12.2 million to $16.3 million for each loan. Under the credit
facility, the reducing revolving credit facility and multi-draw term loan mature
on September 30, 2007. Our credit facility requires us to comply with certain
financial covenants and leverage ratios that are defined terms within the
agreement. We believe we are in compliance with the covenants and leverage
ratios. We expect to use the credit available under the revolving credit
facility to fund pending and future acquisitions. The amount available under the
credit facility was $255.8 million as of December 31, 2001. Our credit facility
also provides that at any time prior to December 31, 2002 we may solicit
additional incremental loans of up to $350.0 million, thereby
S-33
increasing our credit facility to $1.0 billion, and we will be governed under
the same terms as the existing credit facility. However, there can be no
guarantee that, upon request, we will receive commitments for any of the
incremental loans.
SUMMARY DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following tables reflect a summary of our contractual cash obligations
and other commercial commitments as of December 31, 2001:
<Table>
<Caption>
PAYMENTS DUE BY PERIOD
-----------------------------------------------------
LESS THAN 1 TO 3 4 TO 5 AFTER 5
TOTAL 1 YEAR YEARS YEARS YEARS
-------- --------- -------- -------- --------
(AMOUNTS IN THOUSANDS)
CONTRACTUAL CASH OBLIGATIONS:
Long-term debt(1)................ $388,323 $24,389 $121,906 $144,287 $ 97,741
TIDES(2)......................... 125,000 -- -- -- 125,000
Operating leases................. 57,073 6,473 12,148 10,655 27,797
Sports programming............... 42,978 16,718 17,760 8,500 --
On-air talent.................... 29,046 15,171 13,368 507 --
Television advertising........... 4,599 1,533 3,066 -- --
Other operating contracts........ 11,714 5,379 6,304 31 --
-------- ------- -------- -------- --------
Total Contractual Cash
Obligations.......... $658,733 $69,663 $174,552 $163,980 $250,538
======== ======= ======== ======== ========
</Table>
- ---------------
(1) Under our credit facility, the maturity on our outstanding debt could be
accelerated if we do not maintain certain covenants.
(2) Entercom Communications Capital Trust, our wholly-owned subsidiary, pays
quarterly calendar distributions. The TIDES represent undivided preferred
beneficial ownership interest in the assets of the trust. The trust used the
proceeds from the sale of the TIDES to purchase from us an equal amount of
6 1/4% Convertible Subordinated Debentures due 2014. Under certain
circumstances, the TIDES could be redeemed in cash by us at our option or
converted to equity at the holder's option.
<Table>
<Caption>
AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
-------------------------------------------------
TOTAL
AMOUNTS LESS THAN 1 TO 3 4 TO-5 AFTER 5
COMMITTED 1 YEAR YEARS YEARS YEARS
--------- --------- ------ ------ -------
(AMOUNTS IN THOUSANDS)
OTHER COMMERCIAL COMMITMENTS:
Letter of Credit(1).................... $ 6,200 $ (800) $ (500) $7,500 $ --
Guarantee(2)........................... 2,700 675 675 675 675
Partnership(3)......................... 588 588 -- -- --
Derivatives(4)......................... 7,045 3,529 1,613 -- 1,903
------- ------ ------ ------ ------
Total Other Commercial
Commitments................ $16,533 $3,992 $1,788 $8,175 $2,578
======= ====== ====== ====== ======
</Table>
- ---------------
(1) In connection with a sports contract, we are obligated to provide a letter
of credit during the term of the sports contract.
(2) We have a contingent liability to the national sales representative of the
former owner of one of our markets. This obligation is the responsibility of
our current national sales representative and arose in connection with our
acquisition of the stations involved.
(3) Under a partnership agreement, carried as an investment, we are obligated to
increase our investment.
S-34
(4) At December 31, 2001, we have interest rate transactions outstanding where
we agree with other parties to exchange, at specified intervals, the
difference between fixed rate and floating rate interest amounts calculated
by reference to an agreed notional amount against the variable debt. The
notional amount outstanding at December 31, 2001 was $263.0 million. The
marked to market valuation is determined by using quoted market prices from
the counter-parties to these agreements. Under certain circumstances, the
interest rate transaction liability of $7.0 million at December 31, 2001,
could be due and payable prior to the expiration of the agreements.
RECENTLY ISSUED PRONOUNCEMENTS
In June 2001, the FASB issued SFAS No. 141, "Business Combinations," which
addresses financial accounting and reporting for business combinations and
supersedes Accounting Principle Board ("APB") Opinion No. 16, "Business
Combinations" and FASB Statement No. 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises." Statement No. 141 applies to all
business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interest method of accounting for business combinations except for
qualifying business combinations that were initiated prior to July 1, 2001.
Statement No. 141 also changes the criteria to recognize intangible assets apart
from goodwill. We adopted this statement on July 1, 2001. We have historically
used the purchase method to account for all business combinations, and we do not
believe adoption of this statement will materially impact our financial
position, cash flows or results of operations.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" which requires that goodwill and certain intangibles not be amortized.
Instead, these assets will be reviewed annually for impairment and written down
and charged to results of operations only in the periods in which the recorded
value of goodwill and certain intangibles is more than its fair value. This
Statement applies to goodwill and certain intangible assets acquired prior to
June 30, 2001 and was adopted by us on January 1, 2002. Because the amount
previously recorded for the amortization of goodwill and broadcasting licenses
is significant, we expect that adoption of this accounting standard will have
the impact of reducing our non-cash amortization expense for goodwill and
broadcasting licenses and will have a material impact on our financial
statements. For the years ended December 31, 1999, 2000 and 2001, the amounts of
amortization expense for goodwill and broadcasting licenses were $0.1 million
and $14.8 million, $0.1 million and $32.0 million and $0.1 million and $33.1
million, respectively. The required impairment tests of goodwill and
broadcasting licenses may result in future period write-downs.
In order to complete the transitional assessment of goodwill and
non-amortizing intangible assets impairment, we will need to: (1) identify the
reporting units; (2) determine the carrying value of each reporting unit; and
(3) determine the fair value of each reporting unit. We will have up to six
months from the date of adoption to determine the fair value of each reporting
unit and compare it to the reporting unit's carrying amount. To the extent a
reporting unit's carrying amount exceeds its fair value, the reporting unit's
goodwill and non-amortizing intangible assets may be impaired, and we must
perform the second step of the transitional impairment test. In the second step,
we must compare the implied fair value of the reporting unit's goodwill,
determined by allocating the reporting unit's fair value to all of its assets
and liabilities in a manner similar to a purchase price allocation in accordance
with SFAS No. 141, to its carrying amount, both of which would be measured as of
the date of adoption. This second step is required to be completed as soon as
possible, but no later than the end of the year of adoption. Any transitional
impairment loss will be recognized as the cumulative effect of a change in
accounting principle on our consolidated statement of operations. As of the date
of adoption, we have unamortized goodwill and unamortized broadcasting licenses
in the amounts of $4.2 million and $1,228.4 million, respectively. We have not
yet determined what the effect of these tests will be on our financial position,
cash flows or results of operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" which applies to legal obligations associated with the
retirement of a tangible long-lived asset that results from the acquisition,
construction, or development and/or the normal operation of a long-lived asset.
Under this standard, guidance is provided on measuring and recording the
liability. We intend to adopt this statement
S-35
effective January 1, 2003. We do not believe that adoption of this statement
will materially impact our financial position, results of operations or cash
flows.
In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets" which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. While SFAS No.
144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" it removes goodwill from its scope
and retains the requirements of SFAS No. 121 regarding the recognition of
impairment losses on long-lived assets held for use. SFAS No. 144 also
supercedes the accounting and reporting provisions of APB Opinion No. 30,
"Reporting the Results of Operations -- Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" for the disposal of a segment of a business. However,
it retains the requirement in Opinion 30 to report separately discontinued
operations and extends that reporting to a component of an entity that either
has been disposed of (by sale, abandonment, or in a distribution to owners) or
is classified as held for sale. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001 and interim periods within those fiscal years.
We are in the process of evaluating the impact that adoption of SFAS No. 144 may
have on our financial position, cash flows or results of operations. However,
such impact, if any, is not known or reasonably estimable at this time.
INTANGIBLES
As of December 31, 2001, approximately 85.8% of our total assets consisted
of intangible assets, such as radio broadcast licenses and goodwill, the value
of which depends significantly upon the operational results of our business. We
could not operate the radio stations without the related FCC license for each
station. FCC licenses are renewed every eight years; consequently, we
continually monitor the activities of our stations to ensure they comply with
all regulatory requirements. Historically, all of our licenses have been renewed
at the end of their respective eight-year periods, and we expect that all
licenses will continue to be renewed in the future.
INFLATION
Inflation has affected our performance in terms of higher costs for radio
station operating expenses, including wages, and equipment. The exact impact is
indeterminable.
S-36
BUSINESS
OVERVIEW
We are one of the five largest radio broadcasting companies in the United
States based upon 2000 revenues pro forma for completed and pending
acquisitions. We have assembled, after giving effect to completed and pending
acquisitions, a nationwide portfolio of 101 stations in 19 markets, including 11
of the country's top 50 radio revenue markets. Our station groups rank among the
top three in revenue market share in 18 of the 19 markets in which we operate.
We derive 90% of our revenues from markets where we rank either first or second
in market radio revenues.
We operate a wide range of formats in geographically diverse markets across
the United States. Our largest markets, in order of our 2001 revenues, including
pro forma revenues for completed and pending acquisitions, are Seattle, Boston,
Kansas City, Denver, Sacramento, Portland and New Orleans.
OUR ACQUISITION STRATEGY
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
expertise. Although we typically focus on radio stations in top 50 markets, we
also acquire stations in top 75 markets that meet the above criteria.
OUR OPERATING STRATEGY
The principal components of our operating strategy are to:
- Develop Market Leading Station Clusters. We are among the three largest
clusters in 18 of our 19 markets, including pending acquisitions. We
derive 90% of our revenues from markets where we rank either first or
second in market radio revenues. 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.
- 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
compensation packages with performance-based incentives for our key
employees. We utilize best practices to facilitate development and
implementation of advantageous operational tools and strategies. In
addition, we provide employees with opportunities for personal growth and
advancement through training, seminars and other educational programs.
- 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 station's 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 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
continue to capitalize on this opportunity by developing specialized
teams in many of our markets to work with advertisers to create and
develop
S-37
marketing programs and solutions across our multi-station market
clusters. We derive 90% of our revenues from markets where we rank either
first or second in market radio revenues. In 2001, as in 2000, we gained
revenue market share in the majority of the markets in which we operate
and for the company as a whole.
- Acquire And Develop Under-Performing Stations. We seek to acquire and
develop under-performing stations, which has often enabled us to achieve
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; improved sales training and techniques; technical upgrades;
programming and marketing enhancements; refocused expenditures; and
facility consolidations.
- 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.
OUR CORPORATE HISTORY
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. In the
mid-1980's, with FM at critical mass, we 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 band, 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
acquired multiple stations in markets where we identified opportunities to
improve station operating performance and to develop market leading clusters. We
have taken advantage of the Telecommunications Act of 1996 by capitalizing on
these opportunities, as a significant amount of our growth has occurred during
the past five years.
OUR STATION PORTFOLIO
The following table sets forth selected information about our portfolio of
radio stations and gives effect to our pending acquisitions:
<Table>
<Caption>
2000 MARKET RANK AUDIENCE
-------------------- SHARE
METRO RADIO YEAR TARGET IN TARGET
MARKET/STATION(1) POPULATION REVENUE ACQUIRED FORMAT DEMOGRAPHIC DEMOGRAPHICS
- ----------------- ---------- ------- -------- ------------------------------- ----------- ------------
Boston, MA 8 8
WEEI-AM 1998
} Sports Talk Men 25-54 6.1
WVEI-AM(2) 1999
WRKO-AM 1998 Talk Adults 2.7
25-54
WAAF-FM 1999 Active Rock Men 18-34 10.4
WQSX-FM 1999 Rhythmic Adult Contemporary Women 25-54 5.7
Seattle, WA(3) 14 13
KBSG-AM/FM 1996 Oldies Adults 4.5
25-54
KIRO-AM 1997 News/Talk/Sports Adults 7.7
25-54
KQBZ-FM 1997 Talk Men 25-54 4.7
KISW-FM 1997 Classic Rock Men 25-54 5.8
KMTT-FM 1973 Adult Rock Adults 4.1
25-54
KNWX-AM 1997 News/Business Adults 1.5
35-64
KNDD-FM 1996 Modern Rock Men 18-34 8.0
<Caption>
AUDIENCE
RANK
IN TARGET
MARKET/STATION(1) DEMOGRAPHICS
- ----------------- ------------
Boston, MA
WEEI-AM
4
WVEI-AM(2)
WRKO-AM 13(tie)
WAAF-FM 2
WQSX-FM 4
Seattle, WA(3)
KBSG-AM/FM 5
KIRO-AM 1
KQBZ-FM 5
KISW-FM 3
KMTT-FM 6
KNWX-AM 20
KNDD-FM 3
</Table>
S-38
<Table>
<Caption>
2000 MARKET RANK AUDIENCE
-------------------- SHARE
METRO RADIO YEAR TARGET IN TARGET
MARKET/STATION(1) POPULATION REVENUE ACQUIRED FORMAT DEMOGRAPHIC DEMOGRAPHICS
- ----------------- ---------- ------- -------- ------------------------------- ----------- ------------
Denver, CO 23 15
KOSI-FM pending Adult Contemporary Women 25-54 10.1
KKHK-FM pending Classic Rock Men 25-54 3.7
KEZW-AM pending Nostalgia Adults 1.8
35-64
KALC-FM pending Hot Adult Contemporary Women 18-49 4.1
Portland, OR 25 22
KFXX-AM 1998
} Sports Talk Men 25-54 2.6
KSLM-AM(4) 1998
KGON-FM 1995 Classic Rock Men 25-54 10.0
KKSN-AM 1995 Nostalgia Adults 0.7
35-64
KKSN-FM 1998 Oldies Adults 4.8
25-54
KNRK-FM 1995 Modern Rock Men 18-34 9.9
KRSK-FM 1998 Hot Adult Contemporary Women 25-54 6.1
Sacramento, CA 29 27
KCTC-AM 1998 Nostalgia Adults 1.6
35-64
KRXQ-FM 1997 Active Rock Men 18-34 13.1
KSEG-FM 1997 Classic Rock Men 25-54 6.5
KSSJ-FM 1997 Smooth Jazz Adults 5.9
25-54
KDND-FM 1997 Contemporary Hit Radio Women 18-34 6.7
Kansas City, MO 30 29
KMBZ-AM 1997 News/Talk/ Sports Men 25-54 5.9
KUDL-FM 1998 Adult Contemporary Women 25-54 7.9
KYYS-FM 1997 Album Oriented Rock Men 25-54 8.1
WDAF-AM 1998 Country Adults 5.1
35-64
KWSJ-AM(5) 1999 Spanish Adults nmf(8)
25-54
KXTR-AM(5) 1999 Classical Adults 0.3
25-54
KQRC-FM 2000 Active Rock Men 18-34 23.2
KCIY-FM 2000 Smooth Jazz Adults 3.7
25-54
KRBZ-FM 2000 Hot Adult Contemporary Women 18-34 6.3
Milwaukee, WI 31 34
WEMP-AM 1999 Religious Adults 0.4
35-64
WMYX-FM 1999 Adult Contemporary Women 25-54 10.1
WXSS-FM 1999 Contemporary Hit Radio Women 18-34 10.6
Norfolk, VA 36 42
WPTE-FM 1999 Modern Adult Contemporary Women 25-54 5.7
WWDE-FM 1999 Adult Contemporary Women 25-54 12.5
WVKL-FM 1999 Urban Adult Contemporary Women 25-54 7.2
WNVZ-FM 1999 Contemporary Hit Radio Women 18-34 9.4
New Orleans, LA 41 40
WSMB-AM 1999 Talk Adults 0.7
35-64
WWL-AM 1999 News/Talk/Sports Men 25-54 12.8
WEZB-FM 1999 Contemporary Hit Radio Women 18-34 7.9
WLMG-FM 1999 Adult Contemporary Women 25-54 9.1
WKZN-FM 1999 Hot Adult Contemporary Women 18-49 4.5
WTKL-FM 1999 Oldies Adults 4.8
25-54
Greensboro, NC 42 51
WMQX-FM 1999 Oldies Adults 6.7
25-54
WJMH-FM 1999 Urban Contemporary Adults 16.1
18-34
WEAL-AM 1999 Gospel Adults 1.0
35-64
WQMG-FM 1999 Urban Adult Contemporary Adults 8.0
25-54
WKSI-FM 2002 Hot Adult Contemporary Women 25-54 5.6
WPET-AM 2002 Religious Adults 0.3
35-64
Buffalo, NY 45 45
WBEN-AM 1999 News/Talk Men 25-54 6.8
WTSS-FM 1999 Adult Contemporary Women 25-54 9.9
WWKB-AM 1999 Business News Adults 0.4
35-64
WKSE-FM 1999 Contemporary Hit Radio Women 18-34 21.1
WGR-AM 1999 Sports/Talk Men 25-54 5.6
WWWS-AM 1999 Urban Oldies Adults 1.0
25-54
Memphis, TN 46 41
WMBZ-FM 1999 Modern Adult Contemporary Women 18-34 7.2
WJCE-AM 1999 Nostalgia Adults 1.2
35-64
WRVR-FM 1999 Adult Contemporary Women 25-54 6.8
<Caption>
AUDIENCE
RANK
IN TARGET
MARKET/STATION(1) DEMOGRAPHICS
- ----------------- ------------
Denver, CO
KOSI-FM 2
KKHK-FM 7
KEZW-AM 14
KALC-FM 6(tie)
Portland, OR
KFXX-AM
14
KSLM-AM(4)
KGON-FM 1
KKSN-AM 23
KKSN-FM 6(tie)
KNRK-FM 2(tie)
KRSK-FM 5
Sacramento, CA
KCTC-AM 17
KRXQ-FM 1
KSEG-FM 4
KSSJ-FM 2(tie)
KDND-FM 4(tie)
Kansas City, MO
KMBZ-AM 5
KUDL-FM 2
KYYS-FM 2
WDAF-AM 6
KWSJ-AM(5) nmf(8)
KXTR-AM(5) 23(tie)
KQRC-FM 1
KCIY-FM 15
KRBZ-FM 7
Milwaukee, WI
WEMP-AM nmf(8)
WMYX-FM 2
WXSS-FM 4
Norfolk, VA
WPTE-FM 7
WWDE-FM 1
WVKL-FM 4
WNVZ-FM 4
New Orleans, LA
WSMB-AM 19(tie)
WWL-AM 1
WEZB-FM 3
WLMG-FM 3
WKZN-FM 7
WTKL-FM 8
Greensboro, NC
WMQX-FM 4
WJMH-FM 1
WEAL-AM 17(tie)
WQMG-FM 2
WKSI-FM 6
WPET-AM nmf(8)
Buffalo, NY
WBEN-AM 5
WTSS-FM 3(tie)
WWKB-AM 25
WKSE-FM 1
WGR-AM 6(tie)
WWWS-AM 15
Memphis, TN
WMBZ-FM 3(tie)
WJCE-AM 21(tie)
WRVR-FM 4
</Table>
S-39
<Table>
<Caption>
2000 MARKET RANK AUDIENCE
-------------------- SHARE
METRO RADIO YEAR TARGET IN TARGET
MARKET/STATION(1) POPULATION REVENUE ACQUIRED FORMAT DEMOGRAPHIC DEMOGRAPHICS
- ----------------- ---------- ------- -------- ------------------------------- ----------- ------------
Rochester, NY 52 53
WBZA-FM 1998 80's - based Adult Contemporary Women 25-54 4.8
WBEE-FM 1998 Country Adults 13.5
25-54
WBBF-AM/FM 1998 Oldies Adults 2.4
25-54
Greenville/
Spartanburg, SC 58 56
WFBC-FM 1999 Contemporary Hit Radio Women 18-34 11.4
WSPA-FM 1999 Adult Contemporary Women 25-54 9.7
WYRD-AM(6) 1999
} News/Talk Adults 4.5
25-54
WORD-AM(6) 1999
WSPA-AM 1999 Full Service/Talk Adults 0.7
35-64
WOLI-FM(6) 1999
} 80's - based Adult Contemporary Women 25-54 4.3
WOLT-FM(6) 1999
Wilkes-Barre/
Scranton, PA 64 71
WGBI-AM(7) 1999 Adults 2.6
35-64
WOGY-AM(7) 1999
} News/Talk/Sports
WILK-AM(7) 1999
WGGI-FM(7) 1999 Adults 12.2
25-54
} Country
WGGY-FM(7) 1999
WKRZ-FM(7) 1999
} Contemporary Hit Radio Women 18-49 16.9
WKRF-FM(7) 2000
WBZJ-FM(7) 1999
} 80's - based Adult Contemporary Women 25-54 6.6
WBZH-FM(7) 1999
Wichita, KS 84 72
KEYN-FM 2000 Oldies Adults 5.8
25-54
KFBZ-FM 2000 Hot Adult Contemporary Women 25-54 4.2
KQAM-AM 2000 Sports Men 25-54 2.6
KFH-AM 2000 Talk Men 25-54 6.1
KNSS-AM 2000 News Adults 3.3
25-54
KDGS-FM 2000 Rhythmic Contemporary Hit Radio Adults 9.0
18-34
KWSJ-FM 2000 Smooth Jazz Women 25-54 1.8
Gainesville/
Ocala, FL 90 127
WKTK-FM 1986 Adult Contemporary Women 25-54 14.3
WSKY-FM 1998 News/Talk Adults 7.6
25-54
Madison, WI 120 67
WOLX-FM 2000 Oldies Adults 6.3
25-54
WMMM-FM 2000 Adult Alternative Adults 6.1
25-54
WBZU-FM 2000 80's - based Adult Contemporary Women 25-54 3.0
Longview/
Kelso, WA n/a n/a
KBAM-AM 1998 Country Adults n/a
25-54
KEDO-AM 1997 Oldies Adults n/a
25-54
KLYK-FM 1997 Adult Contemporary Women 25-54 n/a
KRQT-FM 1998 Classic Rock Men 25-54 n/a
<Caption>
AUDIENCE
RANK
IN TARGET
MARKET/STATION(1) DEMOGRAPHICS
- ----------------- ------------
Rochester, NY
WBZA-FM 7
WBEE-FM 1
WBBF-AM/FM 12
Greenville/
Spartanburg, SC
WFBC-FM 1(tie)
WSPA-FM 3(tie)
WYRD-AM(6)
7
WORD-AM(6)
WSPA-AM 23(tie)
WOLI-FM(6)
8
WOLT-FM(6)
Wilkes-Barre/
Scranton, PA
WGBI-AM(7) 7(tie)
WOGY-AM(7)
WILK-AM(7)
WGGI-FM(7) 1
WGGY-FM(7)
WKRZ-FM(7)
1
WKRF-FM(7)
WBZJ-FM(7)
4
WBZH-FM(7)
Wichita, KS
KEYN-FM 5
KFBZ-FM 8(tie)
KQAM-AM 16
KFH-AM 4
KNSS-AM 14
KDGS-FM 2(tie)
KWSJ-FM 18
Gainesville/
Ocala, FL
WKTK-FM 1
WSKY-FM 3(tie)
Madison, WI
WOLX-FM 5
WMMM-FM 6
WBZU-FM 9
Longview/
Kelso, WA
KBAM-AM n/a
KEDO-AM n/a
KLYK-FM n/a
KRQT-FM n/a
</Table>
- ---------------
(1) Our radio stations are in some instances licensed to communities other than
the named principal community for the market.
(2) Station competes in the adjacent community of Worcester, Massachusetts and
simulcasts virtually all of the programming of WEEI-AM.
(3) We also sell substantially all of the advertising time of a sixth FM station
in the Seattle market under a joint sales agreement. On February 1, 2002, we
entered into an agreement to terminate, effective February 28, 2002, the
joint sales agreement that was due to expire on June 30, 2002.
(4) KSLM-AM is licensed to Salem, Oregon, within the Portland market and
simulcasts KFXX-AM programming.
(5) The FCC rules require that by the end of a five-year transition period, that
ends in October 2006, we must elect to operate only one of the two stations
and surrender the other station to the FCC. However, we may be required to
make this election as early as May 2003.
S-40
(6) Each of the following groups of stations simulcast their programming:
WYRD-AM and WORD-AM; and WOLI-FM and WOLT-FM.
(7) Each of the following groups of stations simulcast their programming:
WGBI-AM, WOGY-AM and WILK-AM; WGGI-FM and WGGY-FM; WKRZ-FM and WKRF-FM; and
WBZJ-FM and WBZH-FM.
(8) Fall 2001 ratings data not statistically meaningful.
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.
Radio station operators are subject to the possibility of another station
changing programming formats to compete directly for listeners and advertisers
or launching an aggressive promotional campaign in support of an already
existing competitive format. If a competitor, particularly one with substantial
financial resources, were to attempt to compete in either these fashions, the
broadcast cash flow of our affected station could decrease due to increased
promotional and other expenses and/or lower advertising revenues. There can be
no assurance that any one of our radio stations will be able to maintain or
increase its current audience ratings and radio advertising revenue market
share.
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 or controlled by a single entity. However, the FCC announced on
November 8, 2001 that it is in the process of examining and amending its rules
and policies on ownership and operation of multiple local radio stations. The
FCC has established interim rules for the review of pending applications. The
impact that these new rules will have on our business is uncertain.
Our 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, over-the-air 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-
S-41
delivered digital audio radio service, which has resulted in the near term
introduction of new subscriber based satellite radio services with numerous
niche formats; (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 provides multi-channel, multi-format digital radio services in the
same bandwidth currently occupied by traditional AM and FM radio services. The
FCC adopted a plan in 1999 for the establishment of "microbroadcasting"
stations, low-powered FM stations that will be designed to serve small localized
areas and that in some localized areas may cause interference with regular
broadcasts by existing radio stations. The radio broadcasting 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. There can be no assurances, 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
supplemental terrestrial means of multiple new audio programming formats to
local and/or national audiences. XM Satellite Radio launched its commercial
service on September 25, 2001, and Sirius Satellite Radio is scheduled to launch
service in 2002. 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 signals
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 or for the expanded AM band. Upon the
completion of the migration process, it is expected that some AM stations will
have improved coverage because of reduced interference. We have not yet
evaluated the impact of the migration process on our business but do not believe
that such impact, if any, will be material.
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.
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, operating power, and
other technical parameters of stations;
- issues, renews, revokes and modifies station licenses;
- determines whether to approve changes in ownership or control of station
licenses; 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 short-term licenses, the imposition of a condition on the renewal of
a license and the revocation of operating authority.
S-42
For further information concerning the nature and extent of federal
regulation of radio stations, you should refer to the Communications Act, FCC
rules and FCC public notices and rulings.
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. A
station may continue to operate beyond the expiration date of its license if a
timely filed license renewal application is pending. During the periods when
renewal applications are pending, petitions to deny license renewals can be
filed by interested parties, including members of the public and interest
groups. 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 FCC classifies each AM and FM station. An AM station operates on either
a clear channel, regional channel or local channel. A clear channel is one on
which AM stations are assigned to serve wide areas. Clear channel AM stations
are classified as either: Class A stations, which operate on an unlimited time
basis and are designed to render primary and secondary service over an extended
area; Class B stations, which operate on an unlimited time basis and are
designed to render service only over a primary service area; or Class D
stations, which operate either during daytime hours only, during limited times
only or on an unlimited time basis with low nighttime power. A regional channel
is one on which Class B and Class D AM stations may operate and serve primarily
a principal center of population and the rural areas contiguous to it. A local
channel is one on which AM stations operate on an unlimited time basis and serve
primarily a community and the suburban and rural areas immediately contiguous
thereto. Class C AM stations operate on a local channel and are designed to
render service only over a primary service area that may be reduced as a
consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1, CO and C. The FCC has recently adopted a new
rule that subjects Class C FM stations that do not meet certain antenna-height
parameters to an involuntary downgrade in class to Class CO under certain
circumstances.
S-43
The following table sets forth the metropolitan market served (city of
license may differ), call letters, FCC license classification, antenna height
above average terrain ("HAAT"), power, frequency and FCC license expiration date
of each of the stations that we own or operate and gives effect to our
consummation of our pending acquisitions.
<Table>
<Caption>
FCC HAAT POWER IN EXPIRATION DATE OF
MARKET STATION CLASS (IN METERS) FREQUENCY KILOWATTS(1) FCC LICENSE
- ------ --------- ----- ----------- --------- ------------ ------------------
BOSTON, MA................ WEEI-AM B * 850 kHz 50 April 1, 2006
WRKO-AM B * 680 kHz 50 April 1, 2006
WAAF-FM B 239 107.3 MHz 20 April 1, 2006
WQSX-FM B 179 93.7 MHz 34 April 1, 2006
WVEI-AM B * 1440 kHz 5 April 1, 2006
SEATTLE, WA............... KBSG-AM B * 1210 kHz 27.5-D/10-N February 1, 2006
KBSG-FM C 729 97.3 MHz 55 February 1, 2006
KIRO-AM A * 710 kHz 50 February 1, 2006
KISW-FM C 714 99.9 MHz 58 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/5-N February 1, 2006
KNDD-FM C 714 107.7 MHz 58 February 1, 2006
DENVER, CO................ KOSI-FM C 495 101.1 MHz 100 April 1, 2005
KKHK-FM C 495 99.5 MHz 100 April 1, 2005
KEZW-AM B * 1430 kHz 10-D/5-N April 1, 2005
KALC-FM C 448 105.9 MHz 100 April 1, 2005
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/15-N February 1, 2006
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 576 105.1 MHz 100 February 1, 2006
KSLM-AM B * 1390 kHz 5-D/0.69-N February 1, 2006
SACRAMENTO, CA............ KCTC-AM B * 1320 kHz 5 December 1, 2005
KRXQ-FM B 152 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........... 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
KWSJ-AM(2) B * 1250 kHz 25-D/3.7-N June 1, 2005
KXTR-AM(2) B * 1600 kHz 10-D/1-N June 1, 2005
KQRC-FM C 322 98.9 MHz 100 February 1, 2005
KCIY-FM C1 299 106.5 MHz 100 February 1, 2005
KRBZ-FM C 300 96.5 MHz 100 February 1, 2005
MILWAUKEE, WI............. WEMP-AM B * 1250 kHz 5 December 1, 2003
WMYX-FM B 137 99.1 MHz 50 December 1, 2003
WXSS-FM B 257 103.7 MHz 19.5 December 1, 2003
NORFOLK, VA............... WPTE-FM B 152 94..9 MHz 50 October 1, 2003
WWDE-FM B 152 101.3 MHz 50 October 1, 2003
WVKL-FM B 268 95.7 MHz 40 October 1, 2003
WNVZ-FM B 146 104.5 MHz 50 October 1, 2003
</Table>
S-44
<Table>
<Caption>
FCC HAAT POWER IN EXPIRATION DATE OF
MARKET STATION CLASS (IN METERS) FREQUENCY KILOWATTS(1) FCC LICENSE
- ------ --------- ----- ----------- --------- ------------ ------------------
NEW ORLEANS, LA........... WSMB-AM B * 1350 kHz 5 June 1, 2004
WWL-AM A * 870 kHz 50 June 1, 2004
WEZB-FM C 300 97.1 MHz 100 June 1, 2004
WLMG-FM C 300 101.9 MHz 100 June 1, 2004
WKZN-FM C1 275 105.3 MHz 100 June 1, 2004
WTKL-FM C 300 95.7 MHz 100 June 1, 2004
GREENSBORO, NC............ WMQX-FM C 335 93.1 MHz 100 December 1, 2003
WJMH-FM C 367 102.1 MHz 100 December 1, 2003
WEAL-AM D * 1510 kHz 1-D December 1, 2003
WQMG-FM C 375 97.1 MHz 100 December 1, 2003
WKSI-FM C 316 98.7 MHz 100 December 1, 2003
WPET-AM D * 950 kHz 0.5-D/0.08-N December 1, 2003
BUFFALO, NY............... WBEN-AM B * 930 kHz 5 June 1, 2006
WTSS-FM B 408 102.5 MHz 110 June 1, 2006
WWKB-AM A * 1520 kHz 50 June 1, 2006
WKSE-FM B 128 98.5 MHz 46 June 1, 2006
WGR-AM B * 550 kHz 5 June 1, 2006
WWWS-AM C * 1400 kHz 1 June 1, 2006
MEMPHIS, TN............... WMBZ-FM C2 144 94.1 MHz 50 August 1, 2004
WJCE-AM B * 680 kHz 10-D/5-N August 1, 2004
WRVR-FM C1 229 104.5 MHz 100 August 1, 2004
ROCHESTER, NY............. WBZA-FM B 172 98.9 MHz 37 June 1, 2006
WBEE-FM B 152 92.5 MHz 50 June 1, 2006
WBBF-AM B * 950 kHz 1 June 1, 2006
WBBF-FM A 117 93.3 MHz 4.4 June 1, 2006
GREENVILLE/SPARTANBURG,
SC...................... WFBC-FM C 564 93.7 MHz 100 December 1, 2003
WSPA-FM C 580 98.9 MHz 100 December 1, 2003
WYRD-AM B * 1330 kHz 5 December 1, 2003
WORD-AM B * 910 kHz 3.6-D/0.89-N December 1, 2003
WSPA-AM B * 950 kHz 5 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
WILKES-BARRE/ SCRANTON,
PA...................... WGBI-AM B * 910 kHz 1-D/0.5-N August 1, 2006
WOGY-AM B * 1300 kHz 5-D/0.5-N August 1, 2006
WILK-AM B * 980 kHz 5-D/1-N August 1, 2006
WGGI-FM A 100 95.9 MHz 6 August 1, 2006
WGGY-FM B 338 101.3 MHz 7 August 1, 2006
WKRZ-FM B 357 98.5 MHz 8.7 August 1, 2006
WKRF-FM A 267 107.9 MHz 0.84 August 1, 2006
WBZJ-FM A 22 102.3 MHz 5.8 August 1, 2006
WBZH-FM A 207 103.1 MHz 0.73 August 1, 2006
WICHITA, KS............... KEYN-FM C1 307 103.7 MHz 95 June 1, 2005
KFBZ-FM C 301 105.3 MHz 100 June 1, 2005
KQAM-AM B * 1480 kHz 5-D/1-N June 1, 2005
KFH-AM B * 1330 kHz 5-D/5-N June 1, 2005
KNSS-AM C * 1240 kHz 0.63 June 1, 2005
KDGS-FM C3 100 93.9 MHz 25 June 1, 2005
KWSJ-FM C2 150 98.7 MHz 50 June 1, 2005
GAINESVILLE/OCALA, FL..... WKTK-FM C1 299 98.5 MHz 100 February 1, 2004
WSKY-FM C2 289 97.3 MHz 13.5 February 1, 2004
</Table>
S-45
<Table>
<Caption>
FCC HAAT POWER IN EXPIRATION DATE OF
MARKET STATION CLASS (IN METERS) FREQUENCY KILOWATTS(1) FCC LICENSE
- ------ --------- ----- ----------- --------- ------------ ------------------
MADISON, WI............... WOLX-FM B 396 94.9 MHz 37 December 1, 2004
WMMM-FM A 175 105.5 MHz 2 December 1, 2004
WBZU-FM A 74 105.1 MHz 6 December 1, 2004
LONGVIEW/KELSO, WA........ KBAM-AM D * 1270 kHz 5-D/0.083-N February 1, 2006
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) 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.
(2) The FCC rules require that by the end of a five-year transition period,
which expires in October 2006, we must elect to operate on either the 1250
kHz frequency or the 1660 kHz frequency and surrender the other frequency to
the FCC. However, we may be required to make such election as early as May
2003.
EMPLOYEES
On January 31, 2002, we had a staff of 1,641 full-time employees and 658
part-time employees. We are a party to collective bargaining agreements with the
American Federation of Television and Radio Artists (AFTRA), which apply to some
of our programming personnel, and we are a party to a collective bargaining
agreement with the International Brotherhood of Electrical Workers (IBEW), which
applies to some of our engineering personnel. The Boston AFTRA collective
bargaining agreement, as extended, expired on September 14, 1999, the Kansas
City AFTRA collective bargaining agreement expired on September 29, 2001, and
the Seattle AFTRA collective bargaining agreement expired on January 31, 2002.
We are currently renegotiating these agreements and cannot predict the outcome
of these negotiations. The Boston IBEW collective bargaining agreement will
expire on April 30, 2002. 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.
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.
S-46
MANAGEMENT
The following table provides information concerning our directors and
executive officers as of January 31, 2002.
<Table>
<Caption>
NAME AGE POSITION
- ---- --- --------
Joseph M. Field........................ 70 Chairman and Chief Executive Officer
David J. Field......................... 39 President, Chief Operating Officer and Director
John C. Donlevie....................... 55 Executive Vice President, Secretary, General
Counsel and Director
Stephen F. Fisher...................... 49 Executive Vice President and Chief Financial Officer
Herbert Kean, M.D...................... 71 Director
S. Gordon Elkins....................... 71 Director
Thomas H. Ginley, Jr................... 77 Director
Lee Hague.............................. 55 Director
Marie H. Field......................... 64 Director
David J. Berkman....................... 42 Director
Michael R. Hannon...................... 41 Director
</Table>
Joseph M. Field founded Entercom in 1968, 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 Mary Louise Curtis Bok Foundation, the Settlement Music School, the
American Interfaith Institute, the National Liberty Museum, The Philadelphia
Orchestra, the Curtis Institute of Music, the Jewish Education and Vocational
Service (JEVS) and the Philadelphia Chamber Music Society. Mr. Field has a B.A.
from the University of Pennsylvania and an L.L.B. from Yale Law School. He is
the spouse of Marie H. Field and the father of David J. Field. Mr. Field's term
as a director expires at the 2002 annual meeting of shareholders.
David J. Field has served as our President since 1998, our Chief Operating
Officer since 1996 and one of our directors since 1995. He also served as our
Chief Financial Officer from 1992 to 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, the
Philadelphia Zoo 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. Mr. Field's term as a
director expires at the 2002 annual meeting of shareholders.
John C. Donlevie has served as our Executive Vice President, General
Counsel and one of our directors since 1989, our Secretary since 1998 and was
our Vice President-Legal and Administrative from 1984 when he joined us to 1989.
Prior to joining us, Mr. Donlevie practiced law for 11 years, most recently as
Corporate Counsel of Ecolaire Incorporated in Malvern, Pennsylvania. He has a
B.S. in Engineering from Drexel University and a J.D. from Temple University
School of Law. Mr. Donlevie's term as a director expires at the 2002 annual
meeting of shareholders.
Stephen F. Fisher has served as our Executive Vice President since 2000 and
our Chief Financial Officer since 1998. From 1994 to 1998, he was a Managing
Director with a private equity firm located in Bala Cynwyd, Pennsylvania. From
1978 to 1994, Mr. Fisher held numerous operational and financial management
positions with Westinghouse Broadcasting Company (now part of Viacom Inc.),
including the positions of Executive Vice President, General Manager of their
Los Angeles news radio station and
S-47
Controller of the Radio Group. 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 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. He is a clinical professor at Thomas Jefferson University Medical
College and Chairman of the Public Health Committee of the Philadelphia County
Medical Society. Dr. Kean's term as a director expires at the 2002 annual
meeting of shareholders
S. Gordon Elkins has served as one of our directors since 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, graduating first in his class, and an L.L.B. from
Yale Law School. Mr. Elkins' term as a director expires at the 2002 annual
meeting of shareholders.
Thomas H. Ginley, Jr., M.D. has served as one of our directors since 1971
and previously served as our Secretary from 1984 to 1998. Dr. Ginley is
President and a director of the A & T Development Corporation and Treasurer and
a director of Vanessa Noel Couture, Inc. Dr. Ginley is also a gemologist and
president of Gem 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. Dr. Ginley's term as a director expires at the
2002 annual meeting of shareholders.
Lee Hague has served as one of our directors since 1980. 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. He has served as an
independent consultant to various broadcasting groups and provides financial
advisory and media brokerage services to the industry. 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. Mr. Hague's term as a director expires at the 2002
annual meeting of shareholders.
Marie H. Field has served as one of our directors since 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, the Board of Overseers of the University of
Pennsylvania School of Social Work, the Education Board of the National Liberty
Museum and the Board of Project Forward Leap. She has a B.A. from Barnard
College. Mrs. Field is the spouse of Joseph M. Field and the mother of David J.
Field. Mrs. Field's term as a director expires at the 2002 annual meeting of
shareholders.
David J. Berkman has served as one of our directors since the consummation
of our initial public offering in January 1999. He is the Managing Partner of
Liberty Associated Partners, LP, a venture capital firm primarily engaged in the
telecommunications, media and internet market segments. Liberty Associated
Partners, LP was founded by principals of The Associated Group, Inc., which
prior to its sale in 2000 was a multi-billion dollar publicly-traded owner and
operator of communications related businesses of which Mr. Berkman was Executive
Vice President. He also currently serves on the Boards of Directors of Internet
Capital Group, Inc., Clearwire, Inc., V-Span, Inc., the Philadelphia Regional
Performing Arts Center and the Franklin Institute. Mr. Berkman has a B.S. from
the Wharton School of the University of Pennsylvania. Mr. Berkman's term as a
director expires at the 2002 annual meeting of shareholders.
Michael R. Hannon has served as one of our directors since December 1998.
He is a Partner of J.P. Morgan Partners ("JPMP"), a partnership with over $20
billion under management. JPMP invests in a wide variety of international
private equity opportunities including management buyouts, growth equity, and
venture capital situations. JPMP's principal limited partner is J.P. Morgan
Chase & Co., one of the largest bank holding companies in the United States. Mr.
Hannon worked at Morgan Stanley & Co. Incorporated prior to joining JPMP in
1988. He received his B.A. degree from Yale University and an M.B.A. from
Columbia Business School. He is currently on the board of directors of Telecorp
PCS,
S-48
Telesystem International Wireless and several privately-held media and telecom
firms. Mr. Hannon's term as a director expires at the 2002 annual meeting of
shareholders.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board has adopted certain standing committees including: (1) audit, (2)
compensation and (3) nominating.
Audit Committee. The audit committee consists of Messrs. Berkman, Hague
and Elkins, each of whom is independent as the term independence is defined in
Section 3.03.01 (B)(2)(a) and (3) of the listing standards of the New York Stock
Exchange. The audit committee met five times in 2001. The responsibilities of
the audit committee include:
- recommending to the board of directors the 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 discussing financial statements with management.
Compensation Committee. Our compensation committee consists of Mr. Hannon
and Doctors Ginley and Kean. Our compensation committee met once in 2001. The
compensation committee conducts a general review of our compensation plans to
ensure that they meet corporate objectives, including review and approval of all
compensation paid to our executive officers. The responsibilities of the
compensation committee also include administering and interpreting our Employee
Stock Purchase Plan and the Entercom 1998 Equity Compensation Plan, including
selecting the officers, employees and other qualified recipients that will be
granted awards under the Entercom 1998 Equity Compensation Plan.
Nominating Committee. Our nominating committee consists of David Berkman,
Lee Hague and Michael Hannon and met four times in 2001. The nominating
committee is responsible for the recommendation of criteria for selection of
board members and assisting the board in identifying candidates for the board.
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 years ended
1999, 2000 and 2001 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION NUMBER OF SECURITIES
------------------- OTHER ANNUAL UNDERLYING OPTIONS
NAME AND PRINCIPAL POSITION PERIOD SALARY BONUS(1) COMPENSATION GRANTED
- --------------------------- ------ -------- -------- ------------ --------------------
Joseph M. Field, Chairman of the
Board and Chief Executive
Officer......................... 1999 $563,320 $250,000 (2) 372,223
2000 600,000 400,000 100,000
2001 600,000 267,000 100,000
David J. Field, President and
Chief Operating Officer......... 1999 350,000 200,000 (2) 258,334
2000 450,000 350,000 100,000
2001 450,000 267,000 100,000
</Table>
S-49
<Table>
<Caption>
LONG TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION NUMBER OF SECURITIES
------------------- OTHER ANNUAL UNDERLYING OPTIONS
NAME AND PRINCIPAL POSITION PERIOD SALARY BONUS(1) COMPENSATION GRANTED
- --------------------------- ------ -------- -------- ------------ --------------------
Stephen F. Fisher, Executive Vice
President and Chief Financial
Officer......................... 1999 250,000 150,000 (2) 116,667
2000 300,000 200,000 75,000
2001 300,000 175,000 50,000
John C. Donlevie, Executive Vice
President, Secretary and General
Counsel......................... 1999 225,000 125,000 (2) 115,556
2000 265,000 150,000 25,000
2001 265,000 100,000 25,000
</Table>
- ---------------
(1) Includes amounts accrued during the year presented but paid in the
subsequent year.
(2) 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 Named Executive Officer and, therefore, is not required to be disclosed
pursuant to rules of the Commission.
STOCK OPTION TABLES
Our Named Executive Officers are eligible to receive stock option grants
under the Entercom 1998 Equity Compensation Plan. The following table contains
information concerning the stock option grants made to each of the Named
Executive Officers, discussed above, during the year ended December 31, 2001:
STOCK OPTION GRANTS FOR YEAR ENDED DECEMBER 31, 2001
<Table>
<Caption>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENTAGE OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE MARKET PRICE FOR OPTION TERMS
OPTIONS EMPLOYEES IN OR BASE ON AND EXPIRATION ----------------------------
GRANTED YEAR PRICE GRANT DATE DATE 5% 10%
---------- ------------- -------- ------------ ---------- ------------ ------------
Joseph M. Field.......... 100,000 11.6% $40.00 $40.00 01/09/11 $2,515,579 $6,374,970
David J. Field........... 100,000 11.6 40.00 40.00 01/09/11 2,515,579 6,374,970
Stephen F. Fisher........ 50,000 5.8 40.00 40.00 01/09/11 1,257,789 3,187,485
John C. Donlevie......... 25,000 2.9 40.00 40.00 01/09/11 628,895 1,593,742
</Table>
- ---------------
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Commission. There can be no assurance that
the actual stock price appreciation over the ten-year option term will be at
the assumed 5% and 10% levels or at any other defined level. Unless the
market price of our Class A common stock appreciates over the option term,
no value will be realized from the option grants. The potential realizable
value is calculated by assuming that the fair market value of our Class A
common stock on the date of grant of the options appreciates at the
indicated rate for the entire term of the option and that the option is
exercised at the exercise price and sold on the last day at the appreciated
price.
S-50
The following table sets forth information concerning each option exercised
by the Named Executive Officers during the year ended December 31, 2001 and
option holdings at December 31, 2001 by the Named Executive Officers:
STOCK OPTION EXERCISES AND YEAR-END VALUE
<Table>
<Caption>
SHARES NUMBER OF SHARES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
NAME EXERCISE(#) REALIZED OPTIONS AT YEAR END(#) OPTIONS AT YEAR END(1)
- ---- ----------- -------- --------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Joseph M. Field........ -- $ -- 211,112 361,111 $3,846,205 $5,958,678
David J. Field......... -- -- 154,168 304,166 2,884,939 4,997,375
Stephen F. Fisher...... 5,000 158,450 72,084 164,583 698,716 1,994,001
John C. Donlevie....... -- -- 64,028 101,528 1,121,709 1,649,834
</Table>
- ---------------
(1) Value is determined by subtracting the exercise price from the fair market
value of our Class A common stock multiplied by the number of shares
underlying the options. Fair market value is based on the New York Stock
Exchange closing price of our Class A common stock on December 29, 2001 of
$50.00 per share. Options which are not in the money, of which there were
none, are not considered for purposes of this computation.
EMPLOYEE STOCK PURCHASE PLAN
A total of up to 1,850,000 shares of our Class A common stock may be issued
under the Employee Stock Purchase Plan, subject to adjustment. Under our
Employee Stock Purchase 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 which
together with payroll withholdings does not exceed 10% of the participant's
compensation) will be used to purchase our Class A common stock on the last day
of each purchase period. The purchase price will be the value of the stock on
the last day of the purchase period less a discount not to exceed 15% as
determined by the compensation committee in advance of the purchase period. The
length of each purchase period shall be specified by the compensation committee.
The maximum value of shares that a participant in the Employee Stock Purchase
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 less than 30 days prior to the end of any calendar year. Mr. Field's
salary for the year 2001 was $600,000. The board of directors may approve
additional salary, bonuses, fees, or other compensation. 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.
DAVID J. FIELD EMPLOYMENT AGREEMENT. We have entered into an employment
agreement with David J. Field, pursuant to which Mr. Field serves as our
President and Chief Operating Officer. The employment agreement provides that
Mr. Field's employment 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 this employment agreement, Mr. Field's salary
for the year 2001 was $450,000. The board of directors may approve additional
salary, bonuses, fees, or other compensation.
JOHN C. DONLEVIE EMPLOYMENT AGREEMENT. We have entered into an employment
agreement with John C. Donlevie pursuant to which Mr. Donlevie serves as our
Executive Vice President, Secretary and General Counsel. The employment
agreement provides that Mr. Donlevie's employment may be
S-51
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
this employment agreement, Mr. Donlevie's salary for the year 2001 was $265,000.
The board of directors may approve additional salary, bonuses, fees, or other
compensation.
STEPHEN F. FISHER EMPLOYMENT AGREEMENT. We are in the process of
negotiating a new employment agreement with Stephen F. Fisher to serve as our
Chief Financial Officer and Executive Vice President that will replace the
employment agreement that expired as of December 31, 2001.
DIRECTOR COMPENSATION
All of our non-employee directors receive a fee of $1,000 for each board
meeting that they attend in person, $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, during the first
quarter of 2001, 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 Entercom 1998 Equity Compensation Plan.
S-52
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of January 31, 2002
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 common stock;
- each of our directors and Named Executive Officers; 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.
<Table>
<Caption>
COMMON STOCK
-----------------------------------------------
CLASS A(1) CLASS B(2)
---------------------- ----------------------
NUMBER OF NUMBER OF PERCENT OF PERCENT
SHARES PERCENT SHARES PERCENT TOTAL OF TOTAL
BENEFICIALLY OF BENEFICIALLY OF ECONOMIC VOTING
NAME OF BENEFICIAL OWNER OWNED(3) CLASS OWNED(3) CLASS INTEREST POWER
- ------------------------ ------------ ------- ------------ ------- ---------- --------
Joseph M. Field(4)(5).................... 1,002,586 2.9% 9,782,555 92.9% 23.6% 70.4%
David J. Field(4)(6)..................... 2,029,143 5.8 749,250 7.1 6.1 6.8
John C. Donlevie......................... 91,702 * -- -- * *
Stephen F. Fisher........................ 97,143 * -- -- * *
Herbert Kean, M.D........................ 710,238 2.0 -- -- 1.6 *
S. Gordon Elkins(4)(7)................... 2,519,003 7.2 -- -- 5.6 1.8
Thomas H. Ginley, M.D.(8)................ 711,859 2.0 -- -- 1.6 *
Lee Hague................................ 11,251 * -- -- * *
Marie H. Field(4)(9)..................... 1,002,586 2.9 380,000 3.6 3.1 1.0
Michael R. Hannon(10).................... 7,804 * -- -- * *
David J. Berkman......................... 9,584 * -- -- * *
Putnam Investments, LLC(11)
One Post Office Square
Boston, MA 02109....................... 3,568,856 10.2 -- -- 7.9 2.6
All directors and executive officers as a
group (11 persons)..................... 3,995,981 11.2 10,531,805 100 31.5 77.6
</Table>
- ---------------
* Less than one percent.
(1) For the purpose of calculating the percentage of Class A common stock held
by each shareholder, the total number of shares of Class A common stock
outstanding does not include the shares of Class A common stock issuable
upon conversion of the outstanding shares of Class B common stock. The
number of shares of Class A common stock also includes all issued shares of
restricted 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. Each share of Class B
common stock is entitled to ten votes, except: (a) any share not voted by
either Joseph M. Field or David J. Field is entitled to one vote; (b) the
holders of Class A common stock, voting as a separate class, are entitled
to elect two directors; (c) each share of Class B common stock is entitled
to one vote with respect to any "going private" transactions under the
Exchange Act; and (d) 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.
(3) Shares beneficially owned and percentage ownership are based on 34,829,917
shares of Class A common stock and 10,531,805 shares of Class B common
stock outstanding as of January 31, 2002. The number of shares of Class A
common stock also includes all issued shares of restricted stock.
S-53
(4) The address of these shareholders is 401 City Avenue, Suite 409, Bala
Cynwyd, Pennsylvania 19004.
(5) Includes (a) 558,607 shares of Class A common stock beneficially owned by
Marie H. Field, wife of Joseph M. Field, (b) 380,000 shares of Class B
common stock beneficially owned by Marie H. Field, (c) 38,578 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, (d) 106,549 shares of
Class A common stock beneficially owned by Joseph M. Field as a director
and officer of the Joseph and Marie Field Foundation, (e) 291,668 shares of
Class A common stock which may be acquired through the exercise of options
and (f) 7,084 shares of Class A common stock which may be acquired by Marie
H. Field, wife of Joseph M. Field, through the exercise of options. The
total economic interest and total voting power of Mr. Field includes
380,000 shares of Class B common stock owned by Marie H. Field which Mr.
Field has the power to vote pursuant to a revocable proxy. See Note 2
above.
(6) Includes (a) 306,094 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, (b)
513,876 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 (c) 996,572 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 and (d) 212,501 shares of Class A common
stock which may be acquired through the exercise of options.
(7) Includes (a) 996,572 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 (b) 513,876 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, (c) 613,150 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, (d) 277,994 shares of Class
A common stock held of record by Mr. Elkins as trustee of a trust for the
benefit of Marie H. Field, (e) 106,549 shares of Class A common stock
beneficially owned by Mr. Elkins as a director and officer of the Joseph
and Marie Field Foundation and (f) 7,084 shares of Class A common stock
which may be acquired through the exercise of options.
(8) Includes (a) 556,775 shares of Class A common stock held by Dr. Ginley in
joint tenancy with his spouse, of which 250,000 shares are pledged to Bear
Stearns & Co. pursuant to a pre-paid forward purchase contract, (b) 74,000
shares of Class A common stock owned of record by his spouse, all of which
are pledged to Bear Stearns & Co. pursuant to a pre-paid forward purchase
contract, (c) 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, of
which 37,000 shares are pledged to Bear Stearns & Co. pursuant to a
pre-paid forward purchase contract and (d) 7,084 shares of Class A common
stock which may be acquired through the exercise of options.
(9) Includes (a) 147,368 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, (b)
306,094 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, (c) 38,578 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, (d) 106,549 shares of Class A common stock beneficially owned by
Marie H. Field as a director and officer of the Joseph and Marie Field
Foundation, (e) 7,084 shares of Class A common stock which may be acquired
through the exercise of options and (f) 291,668 shares of Class A common
stock which may be acquired by Joseph M. Field, husband of Marie H. Field,
through the exercise of options. Does not include 9,402,555 shares of Class
B common stock held by Joseph M. Field, Marie H. Field's spouse. See Note 2
above.
(10) Includes 7,084 shares of Class A common stock which may be acquired through
the exercise of options.
S-54
(11) Includes 3,287,176 shares owned by Putnam Investment Management, LLC,
281,680 shares owned by The Putnam Advisory Company, LLC and 1,965,000
shares owned by Putnam New Opportunities Fund, each affiliates of Putnam
Investments, LLC. Putnam Investments LLC, has shared voting power with
respect to 58,200 shares and shared investment power with respect to all
3,568,856 shares. Putnam Investment Management, LLC exercises sole voting
power over none of the shares, but has shared investment power with respect
to 3,287,176 shares. The Putnam Advisory Company, LLC exercises shared
voting power over 58,200 shares and shared investment power over 281,680
shares.
S-55
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of our credit facility does not purport to be
complete and is qualified in its entirety by reference to the agreements
described, including the definitions of certain capitalized terms used in this
section, copies of which are available upon request. Any capitalized terms used
and not defined in "Credit Facility" are defined in the documentation for our
credit facility. See "Where You Can Find More Information."
CREDIT FACILITY
GENERAL
Pursuant to a credit agreement dated as of December 16, 1999, as amended,
among Entercom Radio, LLC, as borrower, Entercom Communications Corp., as
guarantor, Key Corporate Capital Inc., as administrative agent and
co-documentation agent, Banc of America Securities LLC, as sole lead arranger
and book manager, Bank of America, N.A., as syndication agent and
co-documentation agent, and certain other lenders, we received commitments for
up to $650.0 million in financing (subject to increase under certain
circumstances up to $1.0 billion). The credit facility consists of:
- a $325.0 million term loan facility terminating on September 30, 2007;
and
- a $325.0 million automatically reducing revolving loan facility
terminating on September 30, 2007 including a $50.0 million letter of
credit facility.
AMORTIZATION
On each date set forth in the table below, the principal amount of the term
loan shall be repaid in an amount equal to the percentage of the principal
amount of the term loan outstanding as of September 30, 2002 (before giving
effect to the payment required on that date) set forth for such date in such
table:
<Table>
<Caption>
YEAR MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ---- -------- ------- ------------ -----------
2002...................................... --% --% 3.750% 3.750%
2003...................................... 4.375 4.375 4.375 4.375
2004...................................... 5.000 5.000 5.000 5.000
2005...................................... 5.000 5.000 5.000 5.000
2006...................................... 5.000 5.000 5.000 5.000
2007...................................... 5.000 5.000 5.000 --
</Table>
On each date set forth in the table below, the commitment to lend revolving
loans shall automatically reduce by that percentage of the revolving commitment
as in effect on September 30, 2002 (before giving effect to the reduction
required on that date) set forth for such date in such table:
<Table>
<Caption>
YEAR MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ---- -------- ------- ------------ -----------
2002...................................... --% --% 3.750% 3.750%
2003...................................... 4.375 4.375 4.375 4.375
2004...................................... 5.000 5.000 5.000 5.000
2005...................................... 5.000 5.000 5.000 5.000
2006...................................... 5.000 5.000 5.000 5.000
2007...................................... 5.000 5.000 5.000 --
</Table>
S-56
PREPAYMENTS
Loans are required to be prepaid with:
- 100% of the net proceeds of all non-ordinary course asset sales or other
dispositions of the property by us and our subsidiaries or insurance
proceeds which we have not reinvested in our business within one year
after receipt of the proceeds, subject to limited exceptions, if our
Leverage Ratio is greater than 5.5 to 1.0;
- 50% (or, if an Event of Default is continuing, 100%) of annual excess
cash flow if our Leverage Ratio is 5.0 to 1.0 or greater;
- the lesser of (i) 50% of the cash proceeds of equity issuances or sales
and (ii) the amount of such proceeds that would cause our Leverage Ratio
to equal 6.0 to 1.0;
- the amount by which the outstanding amounts under the term facility
exceed the total amount committed under the term facility; and
- the amount by which the outstanding amounts under the revolving facility
exceed the total amount committed under the revolving facility.
INTEREST
The term loan and the revolving loan facilities will bear interest through
maturity: (1) if a Base Rate (as defined below) loan, then at the sum of the
Base Rate plus the Applicable Margin (as defined below), or (2) if a LIBOR loan,
then at the sum of LIBOR plus the Applicable Margin.
The Base Rate is the higher of: (1) the administrative agent's prime rate
or (2) the rate which is 0.5% in excess of the Federal Funds Effective Rate
(defined as a fluctuating interest rate equal for each day during any period to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day by the Federal Reserve Bank of New York, or, if such rate
is not so published, the average of the quotations for such day on such
transactions received by the administrative agent from three Federal funds
brokers of recognized standing selected by the administrative agent).
The Applicable Margin for Base Rate Loans will range, based on the Leverage
Ratio, from 0.000% to 1.125%. The Applicable Margin for LIBOR Loans will range,
based on the Leverage Ratio, from 0.750% to 2.375%.
COLLATERAL
The loans under the credit facility are secured by a lien on substantially
all of our tangible and intangible property, including accounts receivable,
inventory, equipment and intellectual property, and by a pledge of all of the
shares of stock, partnership interests and limited liability company interests
of our direct and indirect domestic subsidiaries, of which we now own or later
acquire more than a 50% interest.
COVENANTS
In addition to certain customary covenants, the credit facility restricts,
among other things, our ability and our subsidiaries' ability to:
- declare dividends or redeem or repurchase capital stock;
- prepay, redeem or purchase debt;
- incur liens and engage in sale-leaseback transactions;
S-57
- make loans and investments;
- incur or guaranty additional indebtedness;
- incur certain conditional sale or rental obligations;
- enter into capital leases;
- sell or discount notes and accounts receivable;
- amend or otherwise alter debt and other material agreements;
- change our name, identity, organizational structure or governing
documents;
- issue or transfer capital stock;
- make capital expenditures;
- enter into management agreements;
- change our fiscal year;
- engage in mergers, acquisitions and asset sales;
- transact with affiliates; and
- alter the business we conduct.
FINANCIAL COVENANTS
The credit facility contains financial covenants including a minimum ratio
of Operating Cash Flow to consolidated interest expense, a maximum ratio of
consolidated total debt to Operating Cash Flow, a minimum ratio of Operating
Cash Flow to pro forma debt service and a minimum ratio of Operating Cash Flow
to fixed charges.
EVENTS OF DEFAULT
Events of default under the credit facility include:
- our failure to pay principal or interest when due;
- our material breach of any representation or warranty contained in the
loan documents;
- covenant defaults;
- events of bankruptcy;
- cross-defaults to other indebtedness;
- termination of licenses or operating agreements or a cessation of
operations; and
- a change of control.
CONVERTIBLE PREFERRED SECURITIES, TERM INCOME DEFERRABLE EQUITY SECURITIES
(TIDES)
On October 6, 1999, Entercom Communications Capital Trust, our wholly owned
subsidiary, sold 2,500,000 6 1/4% Convertible Preferred Securities, Term Income
Deferrable Equity Securities (TIDES), at an offering price of $50.00 per
security. The trust used the proceeds from the TIDES offering to purchase from
Entercom Communications an equal amount of its 6 1/4% Convertible Subordinated
Debentures due 2014. The net proceeds to us after deducting underwriting
discounts and other offering expenses, were $120.5 million.
The trust was created for the sole purpose of issuing the TIDES. The TIDES
represent an undivided preferred beneficial ownership interest in the assets of
the trust. The trust's sole assets consist of the $125.0 million aggregate
principal amount of the debentures, including accrued interest. Subject to
certain deferral provisions, the holders of the TIDES are entitled to quarterly
calendar distributions paid by the
S-58
trust. The first distribution was paid on December 31, 1999. Entercom
Communications has also irrevocably guaranteed payments of distributions and
other amounts due on the TIDES (to the extent the trust has funds available for
the payment of those distributions).
Unless redeemed or repurchased, the debentures mature on September 30,
2014. Under the terms of the indenture governing the debentures, Entercom
Communications has the right to defer the payment of interest on the debentures
at any time prior to maturity for a period not exceeding 20 consecutive
quarters. Upon the expiration of any such deferral period, Entercom
Communications must pay all interest then accrued and unpaid on the debentures,
together with interest on the accrued and unpaid amount. Entercom Communications
may elect after October 3, 2002, to redeem the debentures in accordance with the
terms of the TIDES. Upon the due date of the debentures, Entercom Communications
will pay the outstanding amount due to the trust and the trust will redeem all
of the outstanding TIDES.
Entercom Communications obligations under the debentures and the guarantee
of the payments in respect of the TIDES, are junior in right of payment to all
of its Secured Senior Debt as defined in the indenture for the debentures (which
generally represents all of its obligation under the credit agreement and under
any indebtedness, including guarantees of indebtedness of others, in each case,
where such indebtedness is secured by assets equal the amount of indebtedness so
secured). If there occurs an event of default under the debentures or under our
guarantee of the TIDES payments or if Entercom Communications elects to defer
interest payments under the terms of the debentures, during the pending of any
such default or deferral, Entercom Communications will not be able to make
certain restricted payments, including any guarantee payments under its
guarantee of the notes.
The holders of the TIDES have a preference with respect to each
distribution and amounts payable upon liquidation, redemption or otherwise over
us as holders of the common stock of the trust. Each TIDES is convertible into
shares of our Class A common stock at the rate of 1.1364 shares of Class A
common stock for each TIDES, equaling a conversion price of $44.00 per share.
Entercom Communications has entered into several contractual arrangements for
the purpose of fully, irrevocably and unconditionally guaranteeing the trust's
obligations under the TIDES.
As of December 31, 2001, there were 2,500,000 outstanding TIDES as no
holder of the TIDES had converted its shares into our Class A common stock.
S-59
DESCRIPTION OF NOTES
We will issue the notes under a supplemental indenture to the indenture,
dated as of March , 2002, among Entercom Radio, LLC and Entercom Capital,
Inc., as co-issuers and co-obligors, Entercom Communications Corp., as Parent
Guarantor, the Subsidiary Guarantors named therein and HSBC Bank USA, as
trustee. The terms of the notes include those stated in the indenture, and those
made part of the indenture by reference to the Trust Indenture Act of 1939.
The following summary describes the provisions of the indenture that we
consider material, but does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the provisions of the indenture. We
have filed a copy of the indenture as an exhibit to the registration statement
of which the prospectus is a part. See "Where You Can Find More Information" in
the prospectus to which this prospectus supplement relates.
You can find the definitions of some terms used in this description under
the subheading "-- Certain Definitions." In this description, the terms "the
Issuers," "we," "us" and "our" refer only to Entercom Radio, LLC and Entercom
Capital, Inc. as co-issuers and co-obligors, who are jointly and severally
liable on the notes, and not to any of their respective subsidiaries or to the
Parent Guarantor. Certain defined terms used in this description but not defined
below under "-- Certain Definitions" have the meanings assigned to them in the
indenture.
The registered holder of a note will be treated as the owner of that note
for all purposes. Only registered holders will have rights under the indenture.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
The notes will be:
- our general unsecured obligations;
- subordinated in right of payment to all of our existing and future Senior
Indebtedness, including all Indebtedness under the Credit Agreement;
- equal in right of payment with any of our future senior subordinated
Indebtedness;
- senior in right of payment to all of our future subordinated
Indebtedness; and
- unconditionally guaranteed on a senior subordinated basis by each of the
Guarantors.
Each Subsidiary Guarantee of the notes will be:
- a general unsecured obligation of the Guarantor;
- subordinated in right of payment to all existing and future Senior
Indebtedness of that Guarantor, including all Indebtedness of such
Guarantor under the Credit Agreement;
- equal in right of payment with any future senior subordinated
Indebtedness of that Guarantor; and
- senior in right of payment to all existing and future subordinated
Indebtedness of that Guarantor.
The guarantee of the Parent Guarantor will be:
- a general, unsecured obligations of the Parent Guarantor;
- subordinated in right of payment to the Parent Guarantee's obligations
under the Credit Agreement and any other indebtedness of the Parent
Guarantor that either (a) Constitutes "Secured Senior Debt" under the
Existing Debentures Indenture or (b) is senior indebtedness of the Parent
Guarantor.
- equal in right of payment with (a) the Parent Guarantor's obligation
under the Existing Debentures and its guarantee of certain payments with
respect to the TIDES and (b) any existing and future senior subordinated
indebtedness of the Parent Guarantor; and
S-60
- senior in right of payment to all other existing and future subordinated
indebtedness of the Parent Guarantor.
As of the date of the offering, the guarantee of the Parent Guarantor will
be subordinated in right only to its obligation under the Credit Agreement.
As a result of the foregoing, the notes will be effectively junior to all
liabilities and preferred stock of Unrestricted Subsidiaries and any Restricted
Subsidiary that is not also a Subsidiary Guarantor. In the event the Subsidiary
Guarantees were to be voided by a court for any reason, the notes would rank
effectively junior to all liabilities and preferred stock of the Subsidiary
Guarantors. In any event, the notes and the Guarantees will rank junior to any
secured obligations to the extent of the value of the collateral with respect to
such obligations.
On a pro forma basis as of December 31, 2001, after giving effect to the
receipt of the net proceeds of this offering, the contribution to us of the net
proceeds of the concurrent offering of Class A common stock by the Parent
Guarantor, and the application of those net proceeds as described in this
prospectus supplement:
- the Issuers would have had outstanding Senior Indebtedness of $401.2
million principal amount (consisting entirely of borrowings under the
Credit Agreement, exclusive of unused commitments), all of which would
have been secured Indebtedness; the Issuers would have had no outstanding
senior subordinated Indebtedness other than the notes; and the Issuers
would have had no outstanding subordinated Indebtedness;
- the Parent Guarantor would have had outstanding Senior Indebtedness of
$401.2 million, consisting of a guarantee of the Indebtedness under the
Credit Agreement, which is secured by a lien on the assets of the Parent
Guarantor, and the Existing Debentures; and the Parent Guarantor would
have had no senior subordinated Indebtedness or subordinated Indebtedness
outstanding; and
- the Subsidiary Guarantors would have had outstanding Senior Indebtedness
of $401.5 million, consisting entirely of their guarantees of the
Indebtedness under the Credit Agreement, all of which are secured; and
the Subsidiary Guarantors would have had no senior subordinated
Indebtedness or subordinated Indebtedness outstanding.
Although the indenture will contain limitations on the amount of additional
Indebtedness that we and our Restricted Subsidiaries may incur, the amount of
that Indebtedness could be substantial and, in any case, all of that
Indebtedness may be Senior Indebtedness. The indenture does not limit the amount
of Indebtedness the Parent Guarantor may incur. See "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock."
As of the consummation of this offering, all of our subsidiaries will be
"Restricted Subsidiaries." However, under the circumstances described below
under the subheading "-- Certain Covenants -- Designation of Restricted and
Unrestricted Subsidiaries," we will be permitted to designate our subsidiaries
as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will not be
subject to many of the restrictive covenants in the indenture. Our Unrestricted
Subsidiaries will not guarantee the notes. In addition, if in the future we
create or acquire any foreign Subsidiaries, those Subsidiaries generally will
not be Subsidiary Guarantors even if they are Restricted Subsidiaries. In the
event of a bankruptcy, liquidation or reorganization of any non-Guarantor
Subsidiaries, those non-Guarantor Subsidiaries will pay the holders of their
Indebtedness and trade payables before distributing assets to us.
PRINCIPAL, MATURITY AND INTEREST
We will issue $150.0 million aggregate principal amount of notes in this
offering. We may issue additional notes under the indenture, which does not
limit the amount of notes or other debt securities that may be issued
thereunder. Any offering of additional notes is subject to the covenant
described below under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock." The notes and any additional
notes subsequently issued under the indenture will be treated as a single class
S-61
for all purposes under the indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase.
We will issue notes in denominations of $1,000 and integral multiples of
$1,000. The notes will mature on , 2014. Interest on the notes
will accrue at the rate of % per annum and will be payable semi-annually in
arrears on and , commencing on , 2002. We will make each interest
payment to the holders of record on the immediately preceding and . Interest on
the notes will accrue from , 2002 or, if interest has already been paid,
from the date it was most recently paid. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as paying agent and registrar. We may change
the paying agent or registrar without prior notice to the holders of the notes,
and we or any of our Subsidiaries may act as paying agent or registrar.
TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a holder to furnish appropriate
endorsements and transfer documents in connection with a transfer of notes.
Holders will be required to pay all taxes due on transfer. We are not required
to transfer or exchange any note selected for redemption. Also, we are not
required to transfer or exchange any note for a period of 15 days before a
selection of notes for redemption.
GUARANTEES
Subject to the release provisions in the indenture and as set forth herein,
the Guarantors will jointly and severally, irrevocably and unconditionally,
guarantee the notes. Each Subsidiary Guarantee will be subordinated to the prior
payment in full in cash of all Senior Indebtedness of that Subsidiary Guarantor.
The guarantee of a Parent Guarantor will be subordinated to the prior payment in
full in cash of all Secured Senior Debt of the Parent Guarantor (as that term is
defined in the Existing Debenture Indenture). The obligation of each Guarantor
under its Guarantee will be limited as necessary to prevent that Guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk Factors --
Fraudulent Conveyance Matters."
A Subsidiary Guarantor may not sell or otherwise dispose of all or
substantially all of its assets to, or consolidate with or merge with or into
(whether or not such Subsidiary Guarantor is the surviving Person), another
Person, other than us, the Parent Guarantor or another Subsidiary Guarantor,
unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) either:
(a) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such consolidation
or merger assumes all the obligations of that Subsidiary Guarantor under
the indenture and its Subsidiary Guarantee pursuant to a supplemental
indenture satisfactory to the trustee; or
(b) the Net Proceeds of such sale or other disposition are applied
in accordance with the applicable provisions of the indenture.
A Subsidiary Guarantee will be released and the Subsidiary Guarantor will
be discharged from its obligations under the indenture:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Subsidiary Guarantor (including by
way of merger or consolidation) to a Person that is not (either before or
after giving effect to such transaction) our Subsidiary, and as a result of
which such
S-62
Subsidiary Guarantor ceases to be a Restricted Subsidiary, if the sale or
other disposition complies with the provisions set forth under "Repurchase
at the Option of Holders -- Asset Sales;"
(2) in connection with any sale of all of the Capital Stock of a
Subsidiary Guarantor to a Person that is not (either before or after giving
effect to such transaction) our Subsidiary, and as a result of which such
Subsidiary Guarantor ceases to be a Restricted Subsidiary, if the sale
complies with the provisions set forth under "-- Repurchase at the Option
of Holders -- Asset Sales;"
(3) if we designate any Restricted Subsidiary that is a Subsidiary
Guarantor as an Unrestricted Subsidiary in accordance with the applicable
provisions of the indenture; or
(4) upon the discharge or release of all guarantees by such Subsidiary
Guarantor of, and all pledges of property or assets of such Subsidiary
Guarantor securing, all other Indebtedness of us and our Restricted
Subsidiaries.
SUBORDINATION
The payment of principal, interest, premium on and all other Obligations
arising under the notes or the indenture will be subordinated to the prior
payment in full in cash of all of our Senior Indebtedness, including Senior
Indebtedness that we incur after the date of the indenture. Each Guarantee will
be subordinated on substantially identical terms to the Senior Indebtedness of
the applicable Guarantor.
The holders of Senior Indebtedness will be entitled to receive payment in
full in cash of all Obligations due in respect of Senior Indebtedness (including
interest after the commencement of any bankruptcy proceeding at the rate
specified in the applicable Senior Indebtedness whether or not a claim for such
interest would be allowed in such proceeding) before the holders of notes will
be entitled to receive any payment or distribution of any assets or securities
with respect to the notes or on account of any purchase or redemption or other
acquisition of any note (except that holders of notes may receive and retain
Permitted Junior Securities and payments made from the trust described under
"-- Legal Defeasance and Covenant Defeasance" so long as, on the date or dates
the respective amounts were paid into trust, such payments were made without
violating the subordination provisions described herein), in the event of any
distribution to our creditors:
(1) in a liquidation or dissolution of an Issuer;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to an Issuer or its respective property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of an Issuer's assets and liabilities.
Neither we nor any Guarantor may make any payment or distribution of any
assets or securities in respect of the notes or the applicable Guarantee or on
account of any purchase or redemption or other acquisition of any note (except
in Permitted Junior Securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance" so long as, on the date or dates the
respective amounts were paid into trust, such payments were made without
violating the subordination provisions described herein) if:
(1) a default in the payment of the principal of, or premium, if any,
or interest on, or any fees or other Obligations relating to Designated
Senior Indebtedness (a "payment default") occurs and is continuing; or
(2) any other default (a "non-payment default") occurs and is
continuing on any series of Designated Senior Indebtedness that permits
holders of that series of Designated Senior Indebtedness to accelerate its
maturity and the trustee receives a notice in writing of such default (a
"Payment Blockage Notice") from the holders of any Designated Senior
Indebtedness or a representative on their behalf.
S-63
Payments on the notes (including any missed payments) may and will be
resumed:
(1) in the case of a payment default, upon the date on which such
default is cured or waived in writing by the holders of Designated Senior
Indebtedness or a representative on their behalf; and
(2) in the case of a nonpayment default, upon the earlier of the date
on which such non-payment default is cured or waived in writing by holders
of Designated Senior Indebtedness or a representative on their behalf, 179
days after the date on which the applicable Payment Blockage Notice is
received by the trustee, or the date on which the trustee receives notice
in writing from or on behalf of the holders of Designated Senior
Indebtedness to terminate the applicable Payment Blockage Notice, unless
the maturity of any Designated Senior Indebtedness has been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the delivery of the immediately prior Payment Blockage
Notice.
No non-payment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee will be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default has been
cured or waived for a period of not less than 90 consecutive days.
If the trustee or any holder of the notes receives a payment or
distribution in respect of the notes (except in Permitted Junior Securities or
from the trust described under "-- Legal Defeasance and Covenant Defeasance" so
long as, on the date or dates the respective amounts were paid into trust, such
payments or distributions were made without violating the subordination
provisions described herein) when the payment or distribution is prohibited by
these subordination provisions, the trustee or holder, as the case may be, will
hold the payment or distribution in trust for the benefit of the holders of
Senior Indebtedness. Upon the written request of the holders of Senior
Indebtedness, the trustee or the holder, as the case may be, will deliver the
amounts or assets in trust to the holders of Senior Indebtedness or their
representative.
We must promptly notify holders of our or a Guarantor's Senior Indebtedness
if payment of the notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of our bankruptcy, liquidation or reorganization, holders of notes may recover
less ratably than holders of Senior Indebtedness. See "Risk
Factors -- Subordination."
"Designated Senior Indebtedness" means:
(1) any Indebtedness outstanding under the Credit Agreement, including
any guarantees in respect of such Indebtedness; and
(2) any other Senior Indebtedness permitted under the indenture the
principal amount of which (or which is otherwise available under a
committed facility) at the date of determination is $25.0 million or more
and that has been designated by an Issuer or a Subsidiary Guarantor as
"Designated Senior Indebtedness;" provided, however, that, so long as the
Credit Agreement remains in effect lenders holding a majority of the loan
commitments or outstanding loans thereunder shall have consented, in
writing to such designation by an Issuer or a Subsidiary Guarantor unless
the Credit Agreement expressly provides that such lenders shall not have
such right to consent to such designation.
"Permitted Junior Securities" means:
(1) Equity Interests in us or the Parent Guarantor or, subject to the
provisions of the Credit Agreement, any Subsidiary Guarantor; or
(2) debt securities of an Issuer or any Guarantor that are
subordinated to all Senior Indebtedness of the relevant Issuer or Guarantor
and any debt securities issued in exchange for Senior Indebtedness and
subordinated to substantially the same extent as, or to a greater extent
than, the notes and the Guarantees are subordinated to Senior Indebtedness
under the indenture.
S-64
"Senior Indebtedness" means:
(1) all Indebtedness of us or any Guarantor outstanding under the
Credit Agreement and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of us or any Guarantor permitted to be
incurred under the terms of the indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the notes or any
Guarantee;
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2); and
Notwithstanding anything to the contrary in the preceding, Senior
Indebtedness will not include:
(1) any liability for federal, state, local or other taxes owed or
owing by an Issuer or a Guarantor;
(2) any intercompany Indebtedness of us, the Parent Guarantor or any
Restricted Subsidiary to us or any of our Affiliates;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation of
the indenture;
provided, however, that, notwithstanding the foregoing, solely with respect to
the Parent Guarantor, during the time that any Existing Debentures remain
outstanding, Senior Indebtedness shall mean the Secured Senior Debt of the
Parent Guarantor (as defined in the Existing Debentures Indenture).
OPTIONAL REDEMPTION
At any time prior to , 2005, we may on any one or more occasions
redeem up to 35% of the aggregate principal amount of notes issued under the
indenture at a redemption price of % of their principal amount, plus accrued
and unpaid interest to the redemption date, with the net cash proceeds of one or
more Equity Offerings; provided that:
(1) at least 65% in aggregate principal amount of notes issued under
the indenture remains outstanding immediately after the occurrence of such
redemption (excluding notes held by us and our Subsidiaries); and
(2) the redemption occurs within 180 days of the date of the closing
of such Equity Offering.
Except pursuant to the preceding paragraph, the notes will not be
redeemable at our option prior to , 2007.
On or after , 2007, we may redeem all or a part of the notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest on the notes redeemed, to the applicable redemption date, if
redeemed during the twelve-month period beginning on of the years
indicated below:
<Table>
<Caption>
YEAR PERCENTAGE
- ---- ----------
2007..................................................... %
2008..................................................... %
2009..................................................... %
2010 and thereafter...................................... 100.000%
</Table>
The Credit Agreement currently prohibits us from redeeming or purchasing
any of the notes. Any future credit agreements or other agreements relating to
Senior Indebtedness to which an Issuer or a Guarantor becomes a party may
contain similar restrictions and provisions.
S-65
MANDATORY REDEMPTION
We are not required to make mandatory redemption or sinking fund payments
with respect to the notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each holder of notes will have the right to
require us to repurchase all or any part (equal to $1,000 or an integral
multiple of $1,000) of that holder's notes pursuant to a Change of Control Offer
on the terms set forth in the indenture. In the Change of Control Offer, we will
offer a Change of Control Payment in cash equal to 101% of the aggregate
principal amount of notes repurchased plus accrued and unpaid interest on the
notes repurchased, to the date of purchase. Within 10 days following any Change
of Control, we will mail a notice to each holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
notes on the Change of Control Payment Date specified in the notice, which date
will be no earlier than 30 days and no later than 60 days from the date such
notice is mailed, pursuant to the procedures required by the indenture and
described in such notice. We will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent those laws and regulations are applicable in connection with the
repurchase of the notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the Change of
Control provisions of the indenture, we will comply with the applicable
securities laws and regulations and will not be deemed to have breached our
obligations under the Change of Control provisions of the indenture by virtue of
such conflict.
On the Change of Control Payment Date, we will, to the extent lawful:
(1) accept for payment all notes or portions of notes properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all notes or portions of notes properly
tendered; and
(3) deliver or cause to be delivered to the trustee the notes accepted
together with an officers' certificate stating the aggregate principal
amount of notes or portions of notes being purchased.
The paying agent will promptly mail to each holder of notes properly
tendered and accepted the Change of Control Payment for such notes, and the
trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each holder a new note equal in principal amount to any unpurchased
portion of the notes surrendered, if any; provided that each new note will be in
a principal amount of $1,000 or an integral multiple of $1,000.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but, in any event, within 90 days following a Change of Control, we
will either repay all outstanding Senior Indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Indebtedness
to permit the repurchase of notes required by this covenant. We will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The provisions described above that require us to make a Change of Control
Offer following a Change of Control will be applicable whether or not any other
provisions of the indenture are applicable. Except as described above with
respect to a Change of Control, the indenture does not contain provisions that
permit the holders of the notes to require that we repurchase or redeem the
notes in the event of a takeover, recapitalization or similar transaction.
We will not be required to make a Change of Control Offer if a third party
makes the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in
S-66
the indenture applicable to a Change of Control Offer made by us and purchases
all notes properly tendered and not withdrawn under the Change of Control Offer.
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of us and our
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of notes to require us to repurchase its notes as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of us and our Subsidiaries taken as a whole to another Person or group may be
uncertain.
ASSET SALES
(A) We will not, and will not permit any Restricted Subsidiary to,
consummate an Asset Sale unless:
(1) we, or the Restricted Subsidiary, as the case may be, receive
consideration at the time of the Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or otherwise
disposed of;
(2) the fair market value is determined by the Board of Directors and
evidenced by a resolution of the Board of Directors set forth in an
officers' certificate delivered to the trustee; and
(3) at least 75% of the consideration received in the Asset Sale by us
or such Restricted Subsidiary is in the form of cash or Cash Equivalents
except to the extent we are undertaking a Permitted Asset Swap. For
purposes of this provision and the next paragraph, each of the following
will be deemed to be cash:
(a) any liabilities, as shown on our or the Restricted Subsidiary's
most recent balance sheet, of us or the Restricted Subsidiary (other
than contingent liabilities and liabilities that are by their terms
subordinated to the notes or any Subsidiary Guarantee) that are assumed
by the transferee of any such assets and the lender releases us or the
Restricted Subsidiary from further liability; and
(b) any securities, notes or other obligations received by us or
the Restricted Subsidiary from such transferee that are converted by us
or the Restricted Subsidiary within 90 days into cash or Cash
Equivalents, to the extent of the cash or Cash Equivalents received in
that conversion.
Notwithstanding the foregoing, we or any Restricted Subsidiary will be
permitted to consummate an Asset Sale without complying with the foregoing if:
(x) we or the Restricted Subsidiary receive consideration at the time
of such Asset Sale at least equal to the fair market value of the assets or
other property sold, issued or otherwise disposed of;
(y) the fair market value is determined by our Board of Directors and
evidenced by a resolution of the Board of Directors set forth in an
officers' certificate delivered to the trustee; and
(z) at least 75% of the consideration for such Asset Sale constitutes
a majority of the Voting Stock of a Permitted Business, assets used or
useful in a Permitted Business and/or cash;
provided that any cash (other than any amount deemed cash under clause (3)(a) of
the preceding paragraph) received by us or the Restricted Subsidiary in
connection with any Asset Sale permitted to be consummated under this paragraph
shall constitute Net Proceeds subject to the provisions of the following
paragraph.
(B) Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, provided that such Net Proceeds either singularly or when aggregated with
all other Net Proceeds from all Asset Sales
S-67
consummated since the date of the indenture exceed $10.0 million, we or the
Restricted Subsidiary may apply those Net Proceeds at our option:
(1) to repay Senior Indebtedness and, if the Senior Indebtedness
repaid is revolving credit Indebtedness, to correspondingly reduce
commitments with respect thereto;
(2) to acquire (or enter into a binding agreement to acquire, provided
that such commitment shall be subject only to customary conditions and such
acquisition shall be consummated within 180 days after the end of such
365-day period) all or substantially all of the assets of, or a majority of
the Voting Stock of, another Permitted Business, or the minority interest
in any Restricted Subsidiary other than a Subsidiary Guarantor;
(3) to make capital expenditures; or
(4) to acquire (or enter into a binding agreement to acquire, provided
that such commitment shall be subject only to customary conditions and such
acquisition shall be consummated within 180 days after the end of such
365-day period) other assets that are used or useful in a Permitted
Business.
Pending the final application of any Net Proceeds, we may temporarily
reduce revolving credit borrowings or otherwise invest the Net Proceeds in any
manner that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, we will make an Asset
Sale Offer to all holders of notes and all holders of other Indebtedness that is
pari passu with the notes containing provisions similar to those set forth in
the indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets to purchase the maximum principal amount of notes and such other
pari passu Indebtedness that may be purchased out of the Excess Proceeds. The
offer price in any Asset Sale Offer will be equal to 100% of principal amount
plus accrued and unpaid interest to the date of purchase, and will be payable in
cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer,
we may use those Excess Proceeds for any purpose not otherwise prohibited by the
indenture. If the aggregate principal amount of notes and other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the trustee will select the notes and such other pari passu
Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset
Sale Offer, the amount of Excess Proceeds will be reset at zero.
(C) We will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent those
laws and regulations are applicable in connection with each repurchase of notes
pursuant to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the Asset Sale provisions of the
indenture, we will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under the Asset Sale
provisions of the indenture by virtue of such conflict.
The agreements governing our outstanding Senior Indebtedness currently
prohibit us from purchasing any notes, and also provide that certain change of
control or asset sale events with respect to us would constitute a default under
those agreements. Any future credit agreements or other agreements relating to
Senior Indebtedness to which an Issuer or a Guarantor becomes a party may
contain similar restrictions and provisions. In the event a Change of Control or
Asset Sale occurs at a time when we are prohibited from purchasing notes, we
could seek the consent of the relevant senior lenders to the purchase of notes
or we could attempt to refinance the borrowings that contain the prohibition or
purchase. If we do not obtain that consent or repay those borrowings, we will
remain prohibited from purchasing notes. In that case, our failure to purchase
tendered notes would constitute an Event of Default under the indenture, which
would, in turn, constitute a default under some or all of our Senior
Indebtedness. In those circumstances, the subordination provisions in the
indenture would likely restrict payments to the holders of notes. See "Risk
Factors -- We may be unable to raise the funds necessary to finance the change
of control offer required by the indenture for the notes."
S-68
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the notes are listed; or
(2) if the notes are not listed on any national securities exchange,
on a pro rata basis, by lot or by such method as the trustee deems fair and
appropriate.
No notes of $1,000 or less can be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of notes to be redeemed at its registered
address, except that redemption notices may be mailed more than 60 days prior to
a redemption date if the notice is issued in connection with a defeasance of the
notes or a satisfaction and discharge of the indenture. Notices of redemption
may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note will state the portion of the principal amount of that note
that is to be redeemed. A new note in principal amount equal to the unredeemed
portion of the original note will be issued in the name of the holder of notes
upon cancellation of the original note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on notes or portions of them called for redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
We will not, and will not permit any Restricted Subsidiary to,
directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of our or any Restricted Subsidiary's Equity
Interests (including, without limitation, any payment in connection with
any merger or consolidation involving us or any Restricted Subsidiary) or
to the direct or indirect holders of our or any Restricted Subsidiary's
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock)
of us and other than dividends or distributions payable to us or a
Restricted Subsidiary);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving us) any of our Equity Interests or any Equity
Interests of any of our direct or indirect parents (other than any such
Equity Interests owned by us or a Restricted Subsidiary);
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the notes or the Subsidiary Guarantees, except a payment of
interest or principal at the Stated Maturity thereof (except for payments
into a trust within one year of the stated maturity of any such
Subordinated Indebtedness which payments effect a defeasance or discharge
of such Indebtedness); or
(4) make any Restricted Investment, (all such payments and other
actions set forth in these clauses (1) through (4) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after
giving effect to such Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing
or would occur as a consequence of such Restricted Payment;
(2) we would have been permitted, at the time of such Restricted
Payment, and after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable four-quarter
period, to incur at least $1.00 of additional Indebtedness pursuant to
the
S-69
Leverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock;" and
(3) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by us and our Restricted Subsidiaries
on or after the date of the indenture (excluding Restricted Payments
permitted by clauses (2), (3), (4), (5), (6), and (7) of the next
succeeding paragraph) is less than the sum, without duplication of:
(a) (i) 100% of the aggregate of our Consolidated Cash Flow (or,
in the event such Consolidated Cash Flow shall be a deficit, minus
100% of such deficit) accrued for the period beginning on the first
day of the first calendar month commencing after the date of the
indenture and ending on the last day of the most recently completed
fiscal quarter for which we have filed consolidated financial
statements with the SEC or first provided consolidated financial
statements to holders of the notes, less (ii) 1.4 times Consolidated
Interest Expense for the same period, plus
(b) 100% of the aggregate net proceeds (including the fair
market value of property other than cash or Cash Equivalents)
received by us on or after the date of the indenture from (i) any
parent as a capital contribution or (ii) the issue or sale of our
Equity Interests (other than Disqualified Stock), or of Disqualified
Stock or our debt securities that have been converted into such
Equity Interests (other than Equity Interests (or Disqualified Stock
or convertible debt securities) sold to a Restricted Subsidiary and
other than Disqualified Stock or convertible debt securities that
have been converted into Disqualified Stock), plus
(c) to the extent that any Unrestricted Subsidiary is
redesignated as a Restricted Subsidiary after the date of the
indenture, the fair market value of our Investment in such Subsidiary
as of the date of such redesignation, plus
(d) to the extent that all or any part of a Restricted
Investment is sold for cash or otherwise liquidated, retired or
repaid for cash, the lesser of (i) the net cash proceeds received by
us or any of our Restricted Subsidiaries therefrom (less the cost of
disposition, if any) and (ii) the initial amount of such Restricted
Investment, plus
(e) the aggregate amount returned in cash with respect to
Restricted Investments made after the date of the indenture whether
through interest payments, principal payments, dividends or other
distributions.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of the dividend, if at the date of declaration the dividend
payment would have complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of us or any Restricted
Subsidiary or of any of our Equity Interests in exchange for, or out of the
net cash proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary) of, our Equity Interests (other than Disqualified
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition will be excluded from clause (3)(b) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of us or any Restricted Subsidiary with the net
cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary to the
holders of its common Equity Interests on a pro rata basis;
S-70
(5) payment of dividends on Disqualified Stock the incurrence of which
was permitted by the indenture;
(6) repurchases of Equity Interests deemed to occur upon the cashless
exercise of stock options; and
(7) dividends or distributions by us to Entercom Communications Corp.
for (a) bona fide costs and operating expenses directly related to the
operations of us and our Restricted Subsidiaries (b) other bona fide costs
and expenses not to exceed an aggregate of $15.0 million in any calendar
year, plus (c) so long as no Default or Event of Default has occurred and
is continuing, amounts necessary to fund interest payments and other
required payments on the Existing Debentures, except during any period
during which interest on the Existing Debentures has been deferred in
accordance with their terms.
The amount of all Restricted Payments (other than cash) will be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by us or a Restricted Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
assets or securities that are required to be valued by this covenant will be
determined by the Board of Directors whose resolution with respect thereto will
be delivered to the trustee. The Board of Directors' determination must be based
upon an opinion or appraisal issued by an accounting, appraisal or investment
banking firm of national standing if the fair market value exceeds $10.0
million.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
We will not, and will cause our Restricted Subsidiaries not to, directly,
or indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), Disqualified
Stock or preferred stock; provided, however, that we or any Subsidiary Guarantor
may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock or preferred stock if our Leverage Ratio at the time of incurrence of such
Indebtedness or the issuance of such Disqualified Stock or such preferred stock,
as the case may be, after giving pro forma effect to such incurrence or issuance
as of such date and to the use of the proceeds therefrom as if the same had
occurred at the beginning of the most recently ended four full fiscal quarter
period for which we have filed consolidated financial statements with the SEC or
first provided consolidated financial statements to holders of the notes would
have been no greater than 7.0 to 1.
The first paragraph of this covenant will not prohibit any of the following
(collectively, "Permitted Indebtedness"):
(1) the incurrence by us or any Subsidiary Guarantor of additional
Indebtedness and letters of credit under Credit Facilities in an aggregate
principal amount at any one time outstanding under this clause (1) (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of us and our Restricted Subsidiaries
thereunder) not to exceed $650.0 million less the aggregate amount applied
by us or the Subsidiary Guarantors to permanently reduce the availability
of Indebtedness under the Credit Agreement pursuant to the covenant
described under the caption "-- Repurchase at the Option of
Holders -- Asset Sales";
(2) the incurrence by us and our Restricted Subsidiaries of the
Existing Indebtedness;
(3) the incurrence by us and the Subsidiary Guarantors of Indebtedness
represented by the notes and the related Subsidiary Guarantees to be issued
upon consummation of the offering;
(4) the incurrence by us or any Restricted Subsidiary of Indebtedness
represented by Capital Lease Obligations, mortgage financings or purchase
money obligations, in each case, incurred for the purpose of financing all
or any part of the purchase price or cost of construction or improvement of
property, plant or equipment whether through the direct purchase of assets
or at least a majority of the Voting Stock of any person owning such
assets, in an aggregate principal amount, including all
S-71
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (4), not to exceed $20.0
million at any time outstanding;
(5) the incurrence by us or any Restricted Subsidiary of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are
used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by the indenture to be incurred under the
first paragraph of this covenant, or this clause (5) or clauses (2), (3),
(4), (12) or (13) of this paragraph;
(6) the incurrence by us or any Restricted Subsidiary of intercompany
Indebtedness between or among us and any of our Restricted Subsidiaries;
provided, however, that
(a) if we or a Subsidiary Guarantor is the obligor on intercompany
Indebtedness owed to a Restricted Subsidiary that is not a Subsidiary
Guarantor, such intercompany Indebtedness must be expressly subordinated
to the prior payment in full in cash of all Obligations with respect to
the notes or the relevant Subsidiary Guarantee, as applicable, and
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than
us or a Restricted Subsidiary or (ii) any sale or other transfer of any
such Indebtedness to a Person other than us or a Restricted Subsidiary
will be deemed, in each case, to constitute at the time of such issuance
or transfer an incurrence of such Indebtedness by us or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause
(6);
(7) the incurrence by us or any Restricted Subsidiary of Hedging
Obligations that are incurred for the purpose of fixing or hedging (x)
interest rate risk with respect to any Indebtedness that is permitted by
the terms of the indenture to be outstanding or (y) currency exchange rate
risk in the ordinary course of business;
(8) the guarantee by us of Indebtedness of any Restricted Subsidiary
or by any Restricted Subsidiary of Indebtedness of us or any other
Restricted Subsidiary, in each case that is permitted to be incurred by
another provision of this covenant; provided, however, that such guarantee
may be on a senior basis if the Indebtedness being guaranteed is Senior
Indebtedness, but otherwise shall be pari passu with any Indebtedness being
guaranteed that is pari passu with the notes or the relevant Subsidiary
Guarantee, or shall be on a subordinated basis if the Indebtedness being
guaranteed is subordinated to the notes or the relevant Subsidiary
Guarantee, in which event such guarantee shall be subordinated at least to
the same extent the Indebtedness being guaranteed is subordinated to the
notes or the relevant Subsidiary Guarantee, as the case may be;
(9) the incurrence of Indebtedness by us or any Restricted Subsidiary
constituting reimbursement obligations with respect to letters of credit
issued in the ordinary course of business, including without limitation
letters of credit in respect to workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; provided, however, that
upon the drawing of such letters of credit or the incurrence of such
Indebtedness, such obligations are reimbursed within 30 days following such
drawing or incurrence;
(10) the incurrence of Obligations in respect of performance and
surety bonds and completion guarantees provided by us or any Restricted
Subsidiary in the ordinary course of business;
(11) the incurrence by any Unrestricted Subsidiary of Non-Recourse
Debt; provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event will be deemed
to constitute an incurrence of Indebtedness by a Restricted Subsidiary that
was not permitted by this clause (11);
(12) the incurrence by us or any Restricted Subsidiary of additional
Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (12) not to exceed $20.0 million; and
S-72
(13) Acquisition Debt of us or any Restricted Subsidiary if (w) such
Acquisition Debt is incurred within 270 days after the date on which the
related definitive acquisition agreement or LMA, as the case may be, was
entered into by us or such Restricted Subsidiary, (x) the aggregate
principal amount of such Acquisition Debt is no greater than the aggregate
principal amount of Acquisition Debt set forth in a notice from us to the
Trustee (an "Incurrence Notice") within ten days after the date on which
the related definitive acquisition agreement or LMA, as the case may be,
was entered into by us or such Restricted Subsidiary, which notice shall be
executed on our behalf by our chief financial officer in such capacity and
shall describe in reasonable detail the acquisition or LMA, as the case may
be, which such Acquisition Debt will be incurred to finance, (y) after
giving pro forma effect to the acquisition or LMA, as the case may be,
described in such Incurrence Notice, we or such Restricted Subsidiary could
have incurred such Acquisition Debt under the first paragraph of this
covenant as of the date upon which we deliver such Incurrence Notice to the
Trustee and (z) such Acquisition Debt, when actually incurred, is utilized
solely to finance the acquisition or LMA, as the case may be, described in
such Incurrence Notice (including to repay or refinance indebtedness or
other obligations incurred in connection with such acquisition or LMA, as
the case may be, and to pay related fees and expenses); provided, however,
that we shall be entitled to deliver a subsequent notice or notices to the
trustee that we are reducing the amount of Acquisition Debt specified in
our prior notice of notices to the trustee pursuant to clause (w), in which
case from and after the date of such later notice, only the amount of
Acquisition Debt specified in such later notice shall be given effect
pursuant to this clause (z) or incurred pursuant to this clause (13).
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (1) through (13)
above, or is entitled to be incurred pursuant to the first paragraph of this
covenant, we will be permitted to classify such item of Indebtedness on the date
of its incurrence, or later reclassify all or a portion of such item of
Indebtedness, in any manner that complies with this covenant. Accrual of
interest, accretion or amortization of original issue discount, the payment of
dividends in kind and the accretion of accreted value will not be deemed to be
an incurrence of Indebtedness for purposes of this covenant. Indebtedness under
Credit Facilities outstanding on the date on which notes are first issued and
authenticated under the indenture will be deemed to have been incurred on such
date in reliance on the exception provided by clause (1) of the definition of
Permitted Indebtedness.
NO SENIOR SUBORDINATED DEBT
We will not incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
any of our Senior Indebtedness and senior in any respect in right of payment to
the notes. No Subsidiary Guarantor will incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to the Senior Indebtedness of such Guarantor and senior in any
respect in right of payment to such Guarantor's Subsidiary Guarantee.
LIENS
We will not, and will not permit any Subsidiary Guarantor to, directly or
indirectly, create, incur, assume or suffer to exist any Lien of any kind on any
asset now owned or hereafter acquired of us or such Subsidiary Guarantor
securing Indebtedness ranking pari passu with, or junior to the notes or the
Subsidiary Guarantees, (other than Permitted Liens) unless all Obligations in
respect of the notes, the Subsidiary Guarantees and the indenture are secured on
an equal and ratable basis with (if such secured Indebtedness is pari passu with
the notes or the Subsidiary Guarantee, as the case may be; otherwise, on a
senior basis to) the Indebtedness so secured until such Indebtedness is no
longer secured by a Lien.
S-73
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
We will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, create or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
to Entercom Radio, LLC or any of its Restricted Subsidiaries, or with
respect to any other interest or participation in, or measured by, its
profits, or pay any Indebtedness owed to us or any Restricted Subsidiary;
(2) make loans or advances to us or any Restricted Subsidiary; or
(3) transfer any of its properties or assets to us or any Restricted
Subsidiary.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) agreements governing Existing Indebtedness and Credit Facilities
as in effect at the date of the indenture and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of those agreements, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than
those contained in those agreements as in effect on the date of the
indenture;
(2) the indenture, the notes and the Subsidiary Guarantees;
(3) applicable law, rule, regulation or order;
(4) any instrument governing Indebtedness of a Person acquired by us
or any Restricted Subsidiary as in effect at the time of such acquisition,
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the indenture
to be incurred;
(5) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(6) purchase money obligations (including Capital Lease Obligations)
for property acquired in the ordinary course of business that impose
restrictions only on that property of the nature described in clause (3) of
the preceding paragraph;
(7) contracts for the sale of assets, including without limitation any
agreement for the sale or other disposition of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale or
other disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred
under the provisions of the covenant described above under the caption
"-- Liens" that limit the right of the debtor to dispose of the assets
subject to such Liens;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale agreements,
stock sale agreements and other similar agreements entered into in the
ordinary course of business; and
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
S-74
MERGER, CONSOLIDATION OR SALE OF ASSETS
We may not, directly or indirectly: (1) consolidate or merge with or into
another Person (whether or not we are the surviving corporation); or (2) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of us and Restricted Subsidiaries taken as a whole, in one
or more related transactions, to another Person; unless:
(1) either: (a) we are the surviving entity; or (b) the Person formed
by or surviving any such consolidation or merger (if other than us) or to
which such sale, assignment, transfer, conveyance or other disposition has
been made is an entity organized or existing under the laws of the United
States, any state of the United States or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger
(if other than us) or the Person to which such sale, assignment, transfer,
conveyance or other disposition has been made assumes all of our
obligations under the notes and the indenture pursuant to a supplemental
indenture satisfactory to the trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) we or the Person formed by or surviving any such consolidation or
merger (if other than us), or to which such sale, assignment, transfer,
conveyance or other disposition has been made will, on the date of such
transaction after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Leverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "-- Incurrence
of Indebtedness and Issuance of Preferred Stock," or would have a lower
Leverage Ratio immediately after the transaction, after giving pro forma
effect to the transaction as if the transaction had occurred at the
beginning of the applicable four quarter period, than our Leverage Ratio
immediately prior to the transaction.
The preceding clause (4) will not prohibit: (a) a merger between us and one
of our Wholly Owned Restricted Subsidiaries; or (b) a merger between us and one
of our Affiliates incorporated solely for the purpose of reincorporating in
another state of the United States.
In addition, we may not, directly or indirectly, lease all or substantially
all of our properties or assets in one or more related transactions, to any
other Person.
This "Merger, Consolidation or Sale of Assets" covenant will not apply to a
sale, assignment, transfer, conveyance or other disposition of assets between or
among us and any of our Wholly Owned Restricted Subsidiaries.
TRANSACTIONS WITH AFFILIATES
We will not, and will not permit any Restricted Subsidiary to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each, an
"Affiliate Transaction"), unless:
(1) the Affiliate Transaction is on terms that are no less favorable
to us or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by us or such Restricted Subsidiary
with an unrelated Person; and
(2) we deliver to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$2.0 million, a resolution of the Board of Directors set forth in an
officers' certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of
Directors; and
S-75
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to us of such Affiliate
Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
The following items will not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by us or any Restricted
Subsidiary in the ordinary course of business and consistent with our past
practice or the past practice of such Restricted Subsidiary;
(2) transactions between or among us and/or our Restricted
Subsidiaries;
(3) loans, advances, payment of reasonable fees, indemnification of
directors, or similar arrangements to officers, directors, employees and
consultants who are not otherwise our Affiliates;
(4) sales of Equity Interests (other than Disqualified Stock) to our
Affiliates;
(5) agreements in effect at the date of the indenture or any amendment
thereto so long as such amendment is no less favorable to us and or such
Restricted Subsidiary in any material respect than the original agreement
as in effect on the date of the indenture;
(6) services provided to any Unrestricted Subsidiary by us or any
Restricted Subsidiary in the ordinary course of business, which the Board
of Directors has determined, pursuant to a resolution thereof, are provided
on terms at least as favorable to us and our Restricted Subsidiaries as
those that would have been obtained in a comparable transaction with an
unrelated Person; and
(7) Permitted Investments and Restricted Payments that are permitted
by the provisions of the indenture described above under the caption
"-- Restricted Payments."
ADDITIONAL SUBSIDIARY GUARANTEES
If we or any of our Restricted Subsidiaries acquires or creates another
Domestic Subsidiary after the date of the indenture, excluding all Subsidiaries
that have been properly designated as Unrestricted Subsidiaries in accordance
with the indenture for so long as they continue to constitute Unrestricted
Subsidiaries, then that newly acquired or created Domestic Subsidiary will
become a Subsidiary Guarantor and execute an indenture and deliver an opinion of
counsel satisfactory to the trustee within 10 business days of the date on which
it was acquired or created; provided, however, that if one of our Subsidiaries
that is not a Guarantor guarantees any of our or a Subsidiary Guarantor's
Indebtedness, such guarantee may be on a senior basis if the Indebtedness being
guaranteed is Senior Indebtedness, but otherwise shall be pari passu with any
Indebtedness being guaranteed that is pari passu with the notes, or shall be on
a subordinated basis if the Indebtedness being guaranteed is subordinated to the
notes, in which event such guarantee shall be subordinated at least to the same
extent the Indebtedness being guaranteed is subordinated to the notes.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors may designate any Restricted Subsidiary (or any
Person that upon its acquisition otherwise would become a Restricted Subsidiary)
to be an Unrestricted Subsidiary if that designation would not cause a Default
or Event of Default. If a Restricted Subsidiary is designated as an Unrestricted
Subsidiary, the aggregate fair market value of all outstanding Investments owned
by us and our Restricted Subsidiaries in the Subsidiary properly designated will
be deemed to be an Investment made as of the time of the designation and will
reduce the amount available for Restricted Payments under the first paragraph of
the covenant described above under the caption "-- Restricted Payments" or
Permitted Investments, as determined by us. That designation will only be
permitted if the Investment would be permitted at that time and if the
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary
to be a Restricted Subsidiary if the redesignation would not cause a Default or
Event of Default.
S-76
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN RESTRICTED
SUBSIDIARIES
We will not, and will not permit any of our Restricted Subsidiaries to,
transfer, convey, sell, lease or otherwise dispose of any Equity Interests in
any of our Wholly Owned Restricted Subsidiaries to any Person (other than us or
any of our Wholly Owned Restricted Subsidiaries), unless:
(1) as a result of such transfer, conveyance, sale, lease or other
disposition or issuance such Restricted Subsidiary no longer constitutes a
Subsidiary; and
(2) the cash Net Proceeds from such transfer, conveyance, sale, lease
or other disposition are applied in accordance with the covenant described
above under the caption "-- Repurchase at the Option of Holders -- Asset
Sales."
In addition, we will not permit any of our Restricted Subsidiaries to issue
any of its Equity Interests (other than, if necessary, shares of its Capital
Stock constituting directors' qualifying shares) to any Person other than to us
or any of our Wholly Owned Restricted Subsidiaries.
PAYMENTS FOR CONSENT
We will not, and will not permit any of our Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration to or for the benefit of
any holder of notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of the indenture or the notes unless such
consideration is offered to be paid and is paid to all holders of the notes that
consent, waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
REPORTS
Whether or not required by the SEC, so long as any notes are outstanding,
we will furnish to the holders of notes, within the time periods specified in
the SEC's rules and regulations for a company subject to Section 13 or 15(d)
under the Exchange Act:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
we (or, taking into account Rule 3-10 of Regulation S-X or any successor
rule or regulation, the Parent Guarantor) were required to file such Forms,
including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information
only, a report on the annual financial statements by our (or the Parent
Guarantor's) certified independent accountants; and
(2) all current reports that would be required to be filed with the
SEC on Form 8-K if we (or the Parent Guarantor) were required to file such
reports.
If we or any Subsidiary Guarantor has designated any of our or its
Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual
financial information required by the preceding paragraph will include, either
on the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, a reasonably detailed summary of financial condition and results of
operations of the Unrestricted Subsidiaries containing line items substantially
consistent with those contained in the summary section of this prospectus.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on the
notes whether or not prohibited by the subordination provisions of the
indenture;
(2) default in payment when due of the principal of, or premium, if
any, on the notes, whether or not prohibited by the subordination
provisions of the indenture;
S-77
(3) failure by us or any Restricted Subsidiary to comply with the
provisions described under the captions "-- Repurchase at the Option of
Holders -- Change of Control;"
(4) failure by us or any Restricted Subsidiary for 30 days to comply
with the provisions described under the captions "-- Repurchase at the
Option of Holders -- Asset Sales," "-- Certain Covenants -- Restricted
Payments," "-- Certain Covenants -- Incurrence of Indebtedness and Issuance
of Preferred Stock" or "-- Certain Covenants -- Merger, Consolidation or
Sale of Assets;"
(5) failure by us or any Restricted Subsidiary for 60 days after
notice from the trustee or holders of 25% in principal amount of the notes
to comply with any of the other agreements in the indenture;
(6) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by us or any Restricted Subsidiary (or the
payment of which is guaranteed by us or any Restricted Subsidiary) whether
such Indebtedness or guarantee now exists, or is created after the date of
the indenture, if that default:
(a) is caused by a failure to pay principal of such Indebtedness at
the final stated maturity thereof (a "Payment Default"), or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $15.0 million or more;
(7) failure by us or any Restricted Subsidiary to pay final judgments
aggregating in excess of $10.0 million not covered by insurance, which
judgments are not paid, discharged or stayed for a period of 60 days;
(8) except as permitted by the indenture, any Subsidiary Guarantee of
a Significant Subsidiary shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Significant Subsidiary that is a Guarantor, or any Person
acting on behalf of any such Guarantor, shall deny or disaffirm its
obligations under its Guarantee; and
(9) certain events of bankruptcy or insolvency described in the
indenture with respect to us or any Restricted Subsidiary.
In the event of a declaration of acceleration of the notes because an Event
of Default has occurred and is continuing as a result of the acceleration of any
Indebtedness described in clause (6) of the preceding paragraph, the declaration
of acceleration of the notes shall be automatically annulled if the holders of
any Indebtedness described in clause (6) of the preceding paragraph have
rescinded the declaration of acceleration in respect of the Indebtedness and if:
(1) the annulment of the acceleration of notes would not conflict with
any judgment or decree of a court of competent jurisdiction; and
(2) all existing Events of Default, except nonpayment of principal or
interest on the notes that became due solely because of the acceleration of
the notes, have been cured or waived.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to us, any Restricted Subsidiary that is
a Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding notes will
become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the trustee or the holders of
at least 25% in principal amount of the then outstanding notes may declare all
the notes to be due and payable immediately; provided, however, that until the
Credit Agreement has been paid in full in cash, no principal or accrued interest
under the notes shall become due and payable until the earlier of (i) the date
on which the Indebtedness under the Credit Agreement shall have been declared,
or shall become or be, due and payable or (ii) the day that is
S-78
5 business days after the date on which the agent(s) under the Credit Agreement
is given written notice in accordance with the provisions of the Credit
Agreement of such declaration of acceleration of the notes.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, holders of a majority
in principal amount of the then outstanding notes may direct the trustee in its
exercise of any trust or power. The trustee may withhold from holders of the
notes notice of any continuing Default or Event of Default if it determines that
withholding notice is in their interest, except a Default or Event of Default
relating to the payment of principal, premium, if any, or interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indenture except a continuing Default or Event of Default in the payment of
interest on, or principal of, the notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by us or on our behalf with the intention
of avoiding payment of the premium that we would have been required to pay if we
then had elected to redeem the notes pursuant to the optional redemption
provisions of the indenture, an equivalent premium will also become and be
immediately due and payable to the extent permitted by law upon the acceleration
of the notes. If an Event of Default occurs by reason of any willful action (or
inaction) taken (or not taken) by us or on our behalf with the intention of
avoiding the prohibition on redemption of the notes prior to ,
2007, then the premium specified in the indenture will also become immediately
due and payable to the extent permitted by law upon the acceleration of the
notes.
We are required to deliver to the trustee annually a statement regarding
compliance with the indenture. Upon becoming aware of any Default or Event of
Default, we are required to deliver to the trustee a statement specifying such
Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of us or any
Guarantor, as such, will have any liability for any of our or the Guarantors'
obligations under the notes, the indenture, the Subsidiary Guarantees, the
Parent Guarantee, or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each holder of notes by accepting a note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may, at our option and at any time elect to have all of our obligations
discharged with respect to the outstanding notes and all obligations of the
Subsidiary Guarantors discharged with respect to their Subsidiary Guarantees
("Legal Defeasance") except for:
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium on such notes when such
payments are due from the trust referred to below;
(2) our obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and our and the Guarantors' obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have our and
the Subsidiary Guarantors' obligations released with respect to certain
covenants that are described in the indenture ("Covenant
S-79
Defeasance") and thereafter any omission to comply with those covenants will not
constitute a Default or Event of Default with respect to the notes. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"-- Events of Default and Remedies" will no longer constitute an Event of
Default with respect to the Notes.
We may exercise either Legal Defeasance or Covenant Defeasance only if:
(1) we irrevocably deposit with the trustee, in trust, for the benefit
of the holders of the notes, cash in U.S. dollars, non-callable Government
Securities, or a combination of cash in U.S. dollars and non-callable
Government Securities, in amounts as will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants, to pay the
principal of, or interest and premium on the outstanding notes on the
stated maturity or on the applicable redemption date, as the case may be,
and we must specify whether the notes are being defeased to maturity or to
a particular redemption date;
(2) in the case of Legal Defeasance, we deliver to the trustee an
opinion of counsel reasonably acceptable to the trustee confirming that (a)
we have received from, or there has been published by, the Internal Revenue
Service a ruling or (b) since the date of the indenture, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel will confirm that,
the holders of the outstanding notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, we deliver to the trustee an
opinion of counsel reasonably acceptable to the trustee confirming that the
holders of the outstanding notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the indenture) to which we or any
Restricted Subsidiary is a party or by which we or any Restricted
Subsidiary is bound;
(6) we deliver to the trustee an officers' certificate stating that
the deposit was not made by us with the intent of preferring the holders of
notes over our other creditors with the intent of defeating, hindering,
delaying or defrauding our creditors or others; and
(7) we deliver to the trustee an officers' certificate and an opinion
of counsel, which opinion may be subject to customary assumptions and
exclusions, each stating that all conditions precedent relating to the
Legal Defeasance or the Covenant Defeasance have been complied with.
The Credit Agreement restricts our ability to effect a Legal Defeasance or
a Covenant Defeasance.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the indenture
or the notes may be amended or supplemented with the consent of the holders of
at least a majority in principal amount of the notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes).
S-80
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting holder):
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note
or alter the provisions with respect to the redemption of the notes (other
than provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on
any note;
(4) waive a Default or Event of Default in the payment of principal
of, or interest or premium on the notes (except a rescission of
acceleration of the notes by the holders of at least a majority in
aggregate principal amount of the notes and a waiver of the payment default
that resulted from such acceleration);
(5) make any note payable in money other than that stated in the
notes;
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of notes to receive
payments of principal of, or interest or premium on the notes;
(7) waive a redemption payment with respect to any note (other than a
payment required by one of the covenants described above under the caption
"-- Repurchase at the Option of Holders");
(8) make any change in the preceding amendment and waiver provisions,
(9) amend or waive the provisions of the indenture relating to
subordination in a manner that adversely affects the rights of the holders
of the notes, or
(10) release any Subsidiary Guarantor from any of its obligations
under its Subsidiary Guarantee or the indenture, except in accordance with
the terms of the indenture.
Notwithstanding the foregoing, without the consent of any holder of notes,
we, the Guarantors and the trustee may amend or supplement the indenture or the
notes to:
(1) cure any ambiguity, defect or inconsistency;
(2) provide for uncertificated notes in addition to or in place of
certificated notes;
(3) provide for the assumption of our obligations to holders of notes
in the case of a merger or consolidation or sale of all or substantially
all of our assets;
(4) make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the
legal rights under the indenture of any such holder;
(5) comply with requirements of the SEC in order to effect or maintain
the qualification of the indenture under the Trust Indenture Act;
(6) provide for the issuance of additional notes in accordance with
the limitations set forth in the indenture as of its date; or
(7) allow any Guarantor to execute an indenture and/or a Guarantee
with respect to the notes.
Any amendment to, or modification or waiver of, the provisions of the
indenture relating to subordination that is adverse to the holders of Designated
Senior Indebtedness will require the written consent of the holders of
Designated Senior Indebtedness or their duly authorized representatives.
S-81
SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect as
to all notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated, except lost, stolen or
destroyed notes that have been replaced or paid and notes for whose
payment money has been deposited in trust and thereafter repaid to us,
have been delivered to the trustee for cancellation; or
(b) all notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the mailing of a
notice of redemption or otherwise or will become due and payable within
one year and we or any Guarantor has irrevocably deposited or caused to
be deposited with the trustee as trust funds in trust solely for the
benefit of the Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination of cash in U.S. dollars and non-callable
Government Securities, in amounts as will be sufficient without
consideration of any reinvestment of interest, to pay and discharge the
entire indebtedness on the notes not delivered to the trustee for
cancellation for principal, premium and accrued interest to the date of
maturity or redemption;
(2) no Default or Event of Default has occurred and is continuing on
the date of the deposit or will occur as a result of the deposit and the
deposit will not result in a breach or violation of, or constitute a
default under, any other material instrument to which we or any Guarantor
is a party or by which we or any Guarantor is bound;
(3) we or any Guarantor has paid or caused to be paid all sums payable
by it under the indenture; and
(4) we have delivered irrevocable instructions to the trustee to apply
the deposited money toward the payment of the notes at maturity or the
redemption date, as the case may be.
In addition, we must deliver an officers' certificate and an opinion of counsel,
which may be subject to customary assumptions and exclusions, to the trustee
stating that all conditions precedent to satisfaction and discharge have been
satisfied.
CONCERNING THE TRUSTEE
If the trustee becomes a creditor of us or any Guarantor, its right to
obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise, will be limited
under the indenture. The trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue or
resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
occurs and is continuing, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of notes, unless such holder has offered to the trustee indemnity or
security satisfactory to it against any loss, liability or expense.
S-82
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for the complete definitions of such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Acquisition Debt" means Indebtedness the proceeds of which are
utilized solely to (x) acquire all or substantially all of the assets or a
majority of the Voting Stock of an existing radio broadcasting business or
station or (y) finance an LMA, in each case, including to repay or
refinance indebtedness or other obligations incurred in connection with
such acquisition or LMA, as the case may be, and to pay related fees and
expenses.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
"control," as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management or policies of such Person, whether through the ownership of
voting securities, by agreement or otherwise; provided, however, that
beneficial ownership of 10% or more of the Voting Securities of a Person
shall be deemed to be a controlling interest in such Person. For purposes
of this definition, the terms "controlling," "controlled by" and "under
common control with" have correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than in the ordinary course of business (provided, that, the
sale, lease, conveyance or other disposition of radio stations or all or
substantially all their assets shall be deemed not to be in the ordinary
course of business); provided that the sale, conveyance or other
disposition of all or substantially all of the assets of us and our
Restricted Subsidiaries taken as a whole will be governed by the provisions
of the indenture described above under the caption "-- Repurchase at the
Option of Holders -- Change of Control" and/or the provisions described
above under the caption "-- Certain Covenants -- Merger, Consolidation or
Sale of Assets" and not by the provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests in a Restricted Subsidiary to any
Person other than the Parent Guarantor or a Restricted Subsidiary or the
sale by us or a Restricted Subsidiary of Equity Interests in a Restricted
Subsidiary.
Notwithstanding the foregoing, the following items will not be deemed to be
Asset Sales:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of $5.0 million or less;
(2) a transfer of assets between or among us and our Restricted
Subsidiaries;
(3) an issuance of Equity Interests by a Restricted Subsidiary to us
or to another Restricted Subsidiary;
(4) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business;
(5) the sale and leaseback of any assets within 90 days of the
acquisition thereof;
S-83
(6) the disposition of equipment that we determine in good faith to be
obsolete or no longer used or useful in the business of such entity;
(7) the sale or other disposition of cash or Cash Equivalents;
(8) a Restricted Payment or Permitted Investment that is permitted by
the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments"; and
(9) foreclosure on assets.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act. The terms "Beneficially Owns" and
"Beneficially Owned" have a corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the board of directors of the
general partner of the partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
Unless the context otherwise requires, references to "Board of Directors"
is the board of directors (or equivalent body) or a committee of such board of
directors of the Parent Guarantor.
"Capital Lease Obligation" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality of the United
States government having maturities of not more than one year from the date
of acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight bank
deposits, in each case, with any lender party to Credit Facilities or any
domestic commercial bank having capital and surplus in excess of $500.0
million and a Thomson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
S-84
(5) commercial paper having one of the two highest ratings obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Rating Services
and in each case maturing within one year after the date of acquisition;
and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the
properties or assets of us and our Restricted Subsidiaries, taken as a
whole, to any "person" (as that term is used in Section 13(d)(3) of the
Exchange Act) other than a Principal or a Related Party of a Principal;
(2) the adoption of a plan relating to our liquidation or dissolution;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the Beneficial Owner, directly or indirectly, of more than
50% of our Voting Stock, measured by voting power rather than number of
shares; or
(4) the first day on which a majority of the members of the Board of
Directors are not Continuing Directors.
"Consolidated Cash Flow" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss,
together with any related provision for taxes, realized by such Person or
any of its Restricted Subsidiaries in connection with (a) an Asset Sale
(including any sale and leaseback transaction), or (b) the disposition of
any securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries, to the extent such losses were deducted in computing such
Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;
plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, imputed interest
with respect to obligations with respect to any sale and leaseback
transaction, all fees, including but not limited to agency fees, letter of
credit fees, commitment fees, commissions, discounts and other fees and
charges incurred in respect of Indebtedness and net of the effect of all
payments made or received pursuant to Hedging Obligations), to the extent
that any such expense was deducted in computing such Consolidated Net
Income; plus
(4) depreciation, amortization (including non-cash employee and
officer equity compensation expenses, amortization of goodwill and other
intangibles, amortization of programming costs and barter expenses, but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to
the extent that it represents amortization of a prepaid cash expense that
was paid in a prior period) of such Person and its Restricted Subsidiaries
for such period to the extent that such depreciation, amortization and
other non-cash expenses were deducted in computing such Consolidated Net
Income; plus
S-85
(5) any extraordinary or non-recurring expenses of such Person and the
Restricted Subsidiaries for such period to the extent that such charges
were deducted in computing such Consolidated Net Income; minus
(6) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of
business; minus
(7) cash payments related to non-cash charges that increased
Consolidated Cash Flow in any prior period; minus
(8) barter revenues,
in each case, on a consolidated basis and determined in accordance
with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash expenses
of, a Restricted Subsidiary will be added to Consolidated Net Income to compute
our Consolidated Cash Flow only to the extent that a corresponding amount would
be permitted at the date of determination to be dividended to us by such
Subsidiary without prior governmental approval (that has not been obtained), and
without direct or indirect restriction pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum, without duplication of:
(1) the consolidated interest expense of such Person and the
Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to commissions, discounts
and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to
Hedging Obligations);
(2) the consolidated interest expense of such Person and the
Restricted Subsidiaries that was capitalized during such period;
(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or any of the Restricted Subsidiaries or secured
by a Lien on assets of such Person or any of the Restricted Subsidiaries
(whether or not such guarantee or Lien is called upon); and
(4) the product of:
(a) all cash dividend payments (and non-cash dividend payments in
the case of a Person that is a Restricted Subsidiary) on any series of
preferred stock of such Person or its Restricted Subsidiaries, times
(a) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (to the extent positive) of any Person other than a
Restricted Subsidiary shall be included only to the extent of dividends and
distributions paid in cash to us or a Restricted Subsidiary by such Person;
(2) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that
S-86
has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition will be
excluded; and
(4) the cumulative effect of a change in accounting principles will be
excluded.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Entercom who:
(1) was a member of or nominated to such Board of Directors on the
date of the indenture; or
(2) was nominated for election either (a) by one or more of the
Principals or (b) with the approval of at least a majority of the members
of the Board of Directors then in office who either were members of the
Board of Directors on the date of the indenture or whose election or
nomination for election was previously so approved.
"Credit Agreement" means that certain Credit Agreement, dated as of
December 16, 1999, as amended through the date of the indenture, by and among
Entercom, Entercom Communications Corp., the guarantors party thereto, Banc of
America Securities LLC, as book manager, Key Corporate Capital Inc., as
administrative agent, Bank of America, N.A., as syndication agent and the
lenders party thereto, including any related notes, guarantees, letters of
credit, collateral documents, instruments and agreements executed in connection
therewith, as amended, extended, restated, supplemented, modified, renewed,
refunded, restructured, replaced or refinanced from time to time (including any
increase in principal amount), in whole or in part, whether with the original
agents and lenders or other agents and lenders, and whether provided under the
original credit agreement or one or more other credit agreements or otherwise.
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time (including any increase in principal amount), in whole or
in part.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock), or
upon the happening of any event (other than an optional call for redemption by
the issuer thereof), matures or is mandatorily redeemable, pursuant to a sinking
fund obligation or otherwise, or is redeemable at the option of the holder of
the Capital Stock, in whole or in part, on or prior to the date on which the
notes mature. Notwithstanding the preceding sentence, any Capital Stock that
would constitute Disqualified Stock solely because the holders of the Capital
Stock have the right to require us to repurchase such Capital Stock upon the
occurrence of a change of control or an asset sale will not constitute
Disqualified Stock if the terms of such Capital Stock provide that we may not
repurchase or redeem any such Capital Stock pursuant to such provisions unless
such repurchase or redemption complies with the covenant described above under
the caption "-- Certain Covenants -- Restricted Payments."
"Domestic Subsidiary" means any Restricted Subsidiary that is formed under
the laws of the United States or any state of the United States or the District
of Columbia or that guarantees or otherwise provides direct credit support for
any of our Indebtedness.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
S-87
"Equity Offering" means an offering of our Capital Stock (other than
Disqualified Stock) or an offering by our direct or indirect parent of its
Capital Stock in which the proceeds are contributed to us, in each case which
offering results in at least $25.0 million of net proceeds to us.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of us and our Restricted
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date of the indenture.
"Existing Debentures" means the 6 1/4% Convertible Subordinated Debentures
due 2014 of Entercom Communications Corp.
"Existing Debentures Indenture" means the Indenture dated as of October 6,
1999 by and between Entercom Communications Corp. and Wilmington Trust Company,
as Trustee with respect to the Existing Debentures.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means the Parent Guarantor and the Subsidiary Guarantors.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) currency exchange or interest rate swap agreements, interest rate
cap agreements and currency exchange or interest rate collar agreements;
and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange rates or interest rates.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
(5) representing the balance deferred and unpaid of the purchase price
of any property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing the aggregate net amount of all Hedging Obligations.
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any Indebtedness of any other Person; provided,
however, that Indebtedness shall not include our pledge of the Capital Stock of
an Unrestricted Subsidiary to secure Non-Recourse Debt of that Unrestricted
Subsidiary.
S-88
The amount of any Indebtedness outstanding as of any date will be:
(1) the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount; and
(2) the principal amount of the Indebtedness, together with any
interest on the Indebtedness that is more than 30 days past due, in the
case of any other Indebtedness.
"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If we or any
Restricted Subsidiary sells or otherwise disposes of any Equity Interests of any
of our direct or indirect Restricted Subsidiaries or a Restricted Subsidiary
issues any of its Equity Interests such that, in each case, after giving effect
to any such sale, disposition or issuance, such Person is no longer a Restricted
Subsidiary, we will be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Equity Interests of
such Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "-- Certain Covenants -- Restricted Payments."
"Leverage Ratio" means the ratio of (i) the aggregate outstanding amount of
our Indebtedness and the Indebtedness of the Restricted Subsidiaries as of the
last day of the most recently ended fiscal quarter in which we have filed
consolidated financial statements with the SEC, plus the aggregate liquidation
preference of all our outstanding Disqualified Stock and outstanding preferred
stock of the Restricted Subsidiaries (except preferred stock issued to us or a
Restricted Subsidiary) as of such day to (ii) our aggregate Consolidated Cash
Flow for the last four full fiscal quarters for which we have filed consolidated
financial statements with the SEC or first provided consolidated financial
statements to the holders of notes ending on or prior to the date of
determination (the "Reference Period").
For purposes of this definition, the aggregate outstanding principal amount
of the Indebtedness of us and the Restricted Subsidiaries and the aggregate
liquidation preference of all Disqualified Stock and outstanding preferred stock
of the Restricted Subsidiaries for which such calculation is made shall be
determined on a pro forma basis as if the Indebtedness, Disqualified Stock and
preferred stock, giving rise to the need to perform such calculation had been
incurred and issued and the proceeds therefrom had been applied, and all other
transaction in respect of which such Indebtedness is being incurred or
Disqualified Stock or preferred stock is being issued had occurred, on the first
day of such Reference Period. In addition to the foregoing, for purposes of this
definition, the Leverage Ratio shall be calculated on a pro forma basis, after
giving effect to (i) the incurrence of the Indebtedness of such Person and its
Restricted Subsidiaries and the issuance of the Disqualified Stock or preferred
stock (and the application of the proceeds therefrom) giving rise to the need to
make such calculation and any incurrence (and the application of the proceeds
therefrom) or repayment of other Indebtedness, Disqualified Stock or preferred
stock, at any time subsequent to the beginning of the Reference Period and on or
prior to the date of determination, (including any deemed incurrence or issuance
which is the subject of an Incurrence Notice delivered to the Trustee during
such period pursuant to clause (13) of the definition of Permitted Indebtedness)
as if such incurrence or issuance (and the application of the proceeds thereof),
or the repayment, as the case may be, occurred on the first day of the Reference
Period (except that, in making such computation, the amount of Indebtedness
under any revolving credit facility shall be computed based upon the average
balance of such Indebtedness at the end of each month during such period), and
(ii) any acquisition at any time on or subsequent to the first day of the
Reference Period and on or prior to the date of determination, (including any
deemed acquisition which is the subject of an Incurrence Notice delivered to the
Trustee during such period pursuant to clause (13) of the definition of
Permitted Indebtedness) as if such acquisition or disposition (including the
incurrence, assumption or liability for, or repayment of, any such Indebtedness
and the issuance of such Disqualified Stock or
S-89
preferred stock and also including any Consolidated Cash Flow associated with
such acquisition) and occurred on the first day of the Reference Period giving
pro forma effect to any non-recurring expenses, non-recurring costs and cost
reductions within the first year after such acquisition we reasonably anticipate
in good faith if we deliver to the trustee an officers' certificate executed by
our chief financial officer or accounting officer certifying to and describing
and quantifying in reasonable detail such non-recurring expenses, non-recurring
costs and cost reductions. Furthermore, in calculating Consolidated Interest
Expense for purposes of the calculation of Consolidated Cash Flow, (a) interest
on Indebtedness determined on a fluctuating basis as of the date of
determination (including Indebtedness actually incurred on the date of the
transaction giving rise to the need to calculate the Leverage Ratio) and which
will continue to be so determined thereafter shall be deemed to have accrued at
a fixed rate per annum equal to the rate of interest on such Indebtedness as in
effect on the date of determination and (b) notwithstanding (a) above, interest
determined on a fluctuating basis, to the extent such interest is covered by
Hedging Obligations, shall be deemed to accrue at the rate per annum resulting
after giving effect to the operation of such agreements.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"LMA" means a local marketing arrangement, joint sales agreement, time
brokerage agreement, shared services agreement, management agreement or similar
arrangement pursuant to which a Person, subject to customary preemption rights
and other limitations (i) obtains the right to sell a portion of the advertising
inventory of a radio station of which a third party is the licensee, (ii)
obtains the right to exhibit programming and sell advertising time during a
portion of the air time of a radio station or (iii) manages a portion of the
operations of a radio station.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with: (a) any
Asset Sale; or (b) the disposition of any securities by such Person or any
Restricted Subsidiary or the extinguishment of any Indebtedness of such
Person or any Restricted Subsidiary; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by us or any
Restricted Subsidiary in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of (i) the direct costs relating
to such Asset Sale, including, without limitation, legal, accounting and
investment banking fees, and sales commissions, and any relocation expenses
incurred as a result of the Asset Sale, (ii) taxes paid or payable as a result
of the Asset Sale, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements, (iii) amounts required
to be applied to the repayment of Indebtedness, other than Senior Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and (iv) any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP (but only for so long and to
the extent such reserve is maintained in accordance with GAAP).
S-90
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither we nor any Restricted Subsidiary (a) provides
credit support of any kind (including any undertaking, agreement or
instrument that would constitute Indebtedness), (b) is directly or
indirectly liable as a guarantor or otherwise, or (c) constitutes the
lender; and
(2) no default with respect to which (including any rights that the
holders of the Indebtedness may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or both
any holder of any other Indebtedness (other than the notes) of us or any
Restricted Subsidiary to declare a default on such other Indebtedness or
cause the payment of the Indebtedness to be accelerated or payable prior to
its stated maturity.
"Obligations" means any principal (or accreted amount in the case of any
discount obligation), interest, premium, penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation
governing, creating, evidencing or securing any Indebtedness and in all cases
whether direct or indirect, absolute or contingent, now outstanding or hereafter
created, assumed or incurred and including, without limitation, interest
accruing subsequent to the filing of a petition in bankruptcy or the
commencement of any insolvency, reorganization or similar proceedings at the
rate provided in the relevant documentation, whether or not an allowed claim,
and any obligation to redeem or defease any of the foregoing.
"Parent Guarantor" means Entercom Communications Corp., in its capacity as
guarantor under the indenture.
"Permitted Asset Swap" means, with respect to us and the Restricted
Subsidiaries, the substantially concurrent exchange of assets of us or a
Restricted Subsidiary (including Equity Interests of a Restricted Subsidiary)
for assets of a another Person, which assets are used in or useful to a
Permitted Business.
"Permitted Business" means any business engaged in by us or the Restricted
Subsidiaries as of the Closing Date or any business reasonably related,
ancillary or complementary thereto.
"Permitted Investments" means:
(1) any Investment in us or in a Restricted Subsidiary;
(2) any Investment in Cash Equivalents;
(3) any Investment by us or any Restricted Subsidiary in a Person, if
as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, us or a Restricted Subsidiary;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales;"
(5) any acquisition of assets (including Investments in Unrestricted
Subsidiaries) solely in exchange for the issuance of our Equity Interests
(other than Disqualified Stock);
(6) notes and accounts receivable incurred in the ordinary course of
business and any Investments received in compromise of obligations of such
persons incurred in the ordinary course of trade creditors or customers
that were incurred in the ordinary course of business, including pursuant
to any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of any trade creditor or customer;
(7) Hedging Obligations;
S-91
(8) loans and advances to employees of us or of any Restricted
Subsidiary in the ordinary course of business not in excess of $10.0
million in aggregate principal amount at any time outstanding; or
(9) other Investments in a Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), that, when taken together
with all other Investments made pursuant to this clause (9), do not exceed
$20.0 million at any time outstanding.
"Permitted Liens" means:
(1) Liens securing Senior Indebtedness that was permitted by the terms
of the indenture to be incurred;
(2) Liens in favor of us or a Restricted Subsidiary;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with us or any Restricted Subsidiary;
provided that such Liens were in existence prior to the contemplation of
such merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with us or the Restricted
Subsidiary;
(4) Liens on property existing at the time of acquisition of the
property by us or any Restricted Subsidiary, provided that such Liens were
in existence prior to the contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant entitled
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets acquired with such Indebtedness;
(7) Liens existing on the date of the indenture;
(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as is required in
conformity with GAAP has been made therefor;
(9) Liens incurred in the ordinary course of business of us or any
Restricted Subsidiary with respect to obligations that do not exceed an
aggregate amount of $10.0 million at any one time outstanding;
(10) Liens securing Permitted Refinancing Indebtedness where the Liens
securing the Indebtedness being refinanced were permitted under the
indenture;
(11) easements, rights-of-way, zoning and similar restrictions and
other similar encumbrances or title defects incurred or imposed, as
applicable, in the ordinary course of business and consistent with industry
practices;
(12) any interest or title of a lessor under any Capital Lease
Obligation;
(13) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to letters of credit and products and proceeds thereof;
(14) Liens encumbering deposits made to secure statutory, regulatory,
contractual or warranty obligations, including rights of offset and
set-off;
(15) Liens securing Hedging Obligations which Hedging Obligations
relate to Indebtedness that is otherwise permitted under the indenture;
(16) leases or subleases granted to others;
S-92
(17) Liens under licensing agreements in the ordinary course of
business;
(18) judgment Liens not giving rise to an Event of Default;
(19) Liens encumbering property of us or a Restricted Subsidiary
consisting of carriers, warehousemen, mechanics, materialmen, repairmen,
and landlords, and other Liens arising by operation of law and incurred in
the ordinary course of business for sums which are not overdue or which are
being contested in good faith by appropriate proceedings and (if so
contested) for which appropriate reserves with respect thereto have been
established and maintained on the books of us or a Restricted Subsidiary in
accordance with GAAP;
(20) Liens encumbering property of us or a Restricted Subsidiary
incurred in the ordinary course of business in connection with workers'
compensation, unemployment insurance, or other forms of governmental
insurance or benefits, or to secure performance of bids, tenders, statutory
obligations, leases, and contracts (other than for Indebtedness) entered
into in the ordinary course of business of us or a Restricted Subsidiary;
and
(21) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of us or any
Restricted Subsidiary issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other Indebtedness
of us or any Restricted Subsidiary (other than intercompany Indebtedness);
provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness extended, refinanced,
renewed, replaced, defeased or refunded (plus all accrued interest on the
Indebtedness and the amount of all expenses and premiums incurred in
connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
notes on terms at least as favorable to the holders of notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by us or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Principals" means Joseph M. Field or David J. Field.
"Related Party" means:
(1) any immediate family member (in the case of an individual) of any
Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of any one or
more Principals and/or such other Persons referred to in the immediately
preceding clause (1).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" all of our current and future Subsidiaries, other
than Unrestricted Subsidiaries.
S-93
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees of the corporation, association
or other business entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are that Person or one or more
Subsidiaries of that Person (or any combination thereof).
"Subsidiary Guarantee" means the Guarantee of a Subsidiary Guarantor
with respect to the notes.
"Subsidiary Guarantors" means each of:
(1) the Restricted Subsidiaries on the date of the indenture; and
(2) any other of our Subsidiaries that executes a Subsidiary Guarantee
in accordance with the provisions of the indenture; and their respective
successors and assigns.
"Unrestricted Subsidiary" means any Subsidiary of us that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of
the Board of Directors, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with us or any Restricted Subsidiary unless the terms of any
such agreement, contract, arrangement or understanding are no less
favorable to us or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not our Affiliates;
(3) is a Person with respect to which neither we nor any Restricted
Subsidiary has any direct or indirect obligation to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of us or any Restricted Subsidiary.
Any designation of one of our Subsidiaries as an Unrestricted Subsidiary
will be evidenced to the trustee by filing with the trustee a certified copy of
the Board Resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for
purposes of the indenture and any Indebtedness of such Subsidiary will be deemed
to be incurred by a Restricted Subsidiary as of such date and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
described under the caption "-- Certain Covenants -- Incurrence of Indebtedness
and Issuance of Preferred Stock," we will be in default of such covenant. The
Board of Directors may at any
S-94
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation will be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation will only be permitted if (1) such
Indebtedness is permitted under the covenant described under the caption
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock," calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period; and (2) no Default or Event
of Default would exist following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect of the Indebtedness, by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of
such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any specified Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
will at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the notes will be represented by one or more
permanent global notes (the "Global Notes") in registered, global form in
minimum denominations of $1,000 and integral multiples of $1,000 in excess of
$1,000. The Global Notes will be deposited upon issuance with the trustee as
custodian for the Depositary Trust Company ("DTC") in New York, New York, as
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant as described below.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Book-Entry Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of notes in certificated
form. Transfers of beneficial interests in the Global Notes will be subject to
the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and Clearstream),
which may change from time to time.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC,
Euroclear and Clearstream are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them. We take no responsibility
for these operations and procedures and urge investors to contact the system or
their participants directly to discuss these matters.
DTC has advised us that DTC is a limited-purpose trust company 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
in accounts of its Participants. The Participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or
S-95
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 interests
in, and transfers of ownership interests in, 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 that, pursuant to procedures established by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Underwriters with portions of the principal
amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership of these interests 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 interest in the Global Notes).
Investors in Global Notes who are Participants in DTC's system may hold
their interests therein directly through DTC. Investors in Global Notes who are
not Participants may hold their interests therein indirectly through
organizations (including Euroclear and Clearstream) that are Participants in
such system. All interests in a Global Note, including those held through
Euroclear or Clearstream, may be subject to the procedures and requirements of
DTC. Those interests held through Euroclear or Clearstream may also be subject
to the procedures and requirements of such systems.
The laws of some states require that certain Persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such 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, the ability of a Person having
beneficial interests in a Global Note to pledge such interests to Persons that
do not participate in the DTC system, or otherwise take actions in respect of
such interests, may be affected by the lack of a physical certificate evidencing
such interests.
Except as described below, owners of interest in the Global Notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
"holders" thereof under the indenture for any purpose.
Payments in respect of the principal of, and interest and premium on a
Global Note registered in the name of DTC or its nominee will be payable to DTC
in its capacity as the registered holder under the indenture. Under the terms of
the indenture, we and the trustee will treat the Persons in whose names the
notes, including the Global Notes, are registered as the owners of the notes for
the purpose of receiving payments and for all other purposes. Consequently,
neither we, the trustee nor any agent of us or the 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 interest in the Global Notes 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 Notes; 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 that its current practice, upon receipt of any payment
in respect of securities such as the Notes (including principal and interest),
is to credit the accounts of the relevant Participants with the payment on the
payment date unless DTC has reason to believe it will not receive payment on
such payment date. Each relevant Participant is credited with an amount
proportionate to its beneficial ownership of an interest in the principal amount
of the relevant security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of notes
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 trustee or us. Neither we nor the trustee will
be liable for any delay by DTC or any of its Participants in identifying the
beneficial owners of
S-96
the notes, and we and the trustee may conclusively rely on and will be protected
in relying on instructions from DTC or its nominee for all purposes.
Subject to applicable transfer restrictions, transfers between Participants
in DTC will be effected in accordance with DTC's procedures, and will be settled
in same-day funds, and transfers between participants in Euroclear and
Clearstream will be effected in accordance with their respective rules and
operating procedures.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the Global Notes and only in respect
of such portion of the aggregate principal amount of the notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the notes, DTC reserves the right to exchange the
Global Notes for legended notes in certificated form, and to distribute such
notes to its Participants.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof. DTC is under no obligation to perform
or to continue to perform such procedures, and may discontinue such procedures
at any time. Neither we nor the 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.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies us that it is unwilling or unable to continue as
depositary for the Global notes and we fail to appoint a successor
depositary or (b) has ceased to be a clearing agency registered under the
Exchange Act;
(2) we, at our option, notify the trustee in writing that it elects to
cause the issuance of the Certificated Notes; or
(3) there has occurred and is continuing a Default or Event of Default
with respect to the notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated Notes
delivered in exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures) and will bear the applicable restrictive legend, unless that legend
is not required by applicable law.
EXCHANGE OF CERTIFICATED NOTES FOR GLOBAL NOTES
Certificated Notes may not be exchanged for beneficial interests in any
Global Note unless the transferor first delivers to the trustee a written
certificate (in the form provided in the indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such notes.
SAME DAY SETTLEMENT AND PAYMENT
We will make payments in respect of the notes represented by the Global
Notes (including principal, premium, if any, and interest) by wire transfer of
immediately available funds to the accounts specified by the Global Note Holder.
We will make all payments of principal, interest and premium with respect to
Certificated Notes by wire transfer of immediately available funds to the
accounts specified by the holders of the Certificated Notes or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The notes represented by the Global Notes are expected to trade in
DTC's Same-Day Funds Settlement System, and any permitted secondary market
trading activity in such notes will,
S-97
therefore, be required by DTC to be settled in immediately available funds. We
expect that secondary trading in any Certificated Notes will also be settled in
immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a Global Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. DTC has advised
us that cash received in Euroclear or Clearstream as a result of sales of
interests in a Global Note by or through a Euroclear or Clearstream participant
to a Participant in DTC will be received with value on the settlement date of
DTC but will be available in the relevant Euroclear or Clearstream cash account
only as of the business day for Euroclear or Clearstream following DTC's
settlement date.
S-98
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income tax
consequences of the ownership and disposition of the notes. It applies to you if
you hold the notes as a capital asset, generally for investment, as defined in
section 1221 of the Internal Revenue Code of 1986, as amended. This summary does
not consider federal estate and gift tax laws or state, local or foreign tax
laws. In addition, this summary does not include all of the rules which may
affect the United States tax treatment of your investment in the notes. For
example, special rules not discussed herein may apply to you if you are:
- a broker-dealer or a dealer in securities or currencies;
- a bank, thrift or other financial institution;
- a regulated investment company or a real estate investment trust;
- an insurance company;
- a tax-exempt organization;
- subject to the alternative minimum tax provisions of the Internal Revenue
Code;
- holding the notes as a part of a hedge, straddle, conversion or other
risk reduction transaction;
- holding the notes through a partnership or other pass-through entity;
- a person with a "functional currency" other than the U.S. dollar; or
- a United States expatriate.
The discussion is based on the following materials, all as the date hereof:
- the Internal Revenue Code;
- current, temporary and proposed Treasury Regulations promulgated under
the Internal Revenue Code;
- the legislative history of the Internal Revenue Code;
- current administrative interpretations and practices of the Internal
Revenue Service; and
- judicial decisions.
Legislation, judicial decisions, or administrative changes may be
forthcoming that could effect the accuracy of the statements included in this
summary, possibly on a retroactive basis. We have not requested, and do not plan
to request, any rulings from the Internal Revenue Service concerning the tax
treatment of the notes. The statements in this prospectus supplement are not
binding on the Internal Revenue Service or any court. Thus, we can provide no
assurance that the statements contained in this prospectus supplement will not
be challenged by the Internal Revenue Service, or that they would be sustained
by a court if they were so challenged.
PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE ACQUISITION, OWNERSHIP AND SALE OR OTHER DISPOSITION OF THE
NOTES, INCLUDING THE UNITED STATES FEDERAL, STATE, LOCAL AND OTHER TAX
CONSEQUENCES AND POTENTIAL CHANGES IN THE TAX LAWS.
UNITED STATES HOLDERS
If you are a "United States Holder," as defined below, this section applies
to you. Otherwise, the next section, "Non-United States Holders," applies to
you. You are a "United States Holder" if you hold notes and you are:
- a citizen or resident of the United States,
- a corporation, or other entity taxable as a corporation created or
organized in or under the law of the United States, any state thereof or
the District of Columbia;
S-99
- an estate the income of which is subject to United States federal income
tax regardless of its source; or
- a trust, if either (i) a court within the United States is able to
exercise primary supervision over the administration of the trust, and
one or more United States persons have the authority to control all
substantial decisions of the trust or (ii) the trust was in existence on
August 20, 1996, was treated as a United States person on that date and
has elected to be treated as a United States person at all times
thereafter.
If a partnership or other entity taxable as a partnership holds the notes,
the tax treatment of a partner will generally depend on the status of the
partner and the activities of the partnership. Such partner should consult its
tax advisors as to the tax consequences.
PAYMENTS OF INTEREST
You must generally include the interest on the notes in ordinary income:
- when it accrues, if you use the accrual method of accounting for United
States federal income tax purposes; or
- when you receive it, if you use the cash method of accounting for United
States federal income tax purposes.
CERTAIN REDEMPTIONS
We intend to take the position that the likelihood of a redemption or
repurchase by us of the notes in the event of a change in control or under
specified circumstances, if we sell certain assets, is remote under applicable
Treasury Regulations. We, therefore, do not intend to treat that likelihood as
affecting the yield to maturity on the notes.
We have an option under specified circumstances to redeem a portion of the
notes before the maturity date, and to redeem or repurchase all or a portion of
the notes after a certain date prior to the maturity date. Under applicable
Treasury Regulations, we will be deemed to have exercised that option if the
exercise of that option would lower the yield of the notes. We believe that we
will not be treated as having exercised that option under these Treasury
Regulations.
MARKET DISCOUNT
If a United States Holder (other than a holder who acquires a note at its
original value) acquires a note at a cost that is less than the stated
redemption price of a note at maturity, the amount of such difference is treated
as "market discount" for federal income tax purposes, unless such difference is
less than .0025 multiplied by the stated redemption price at maturity multiplied
by the number of complete years to maturity (from the date of acquisition).
Under the market discount rules of the Internal Revenue Code, you are
required to treat any gain on the sale, exchange, retirement or other
disposition of, a note as ordinary income to the extent of the accrued market
discount that has not previously been included in income. Thus, principal
payments and payments received upon the sale or exchange of a note are treated
as ordinary income to the extent of accrued market discount that has not
previously been included in income. If you dispose of a note with market
discount in certain otherwise nontaxable transactions, you must include accrued
market discount as ordinary income as if you had sold the note at its then fair
market value.
In general, the amount of market discount that has accrued is determined on
a ratable basis. A United States Holder may, however, elect to determine the
amount of accrued market discount on a constant yield to maturity basis. This
election is made on a note-by-note basis and is irrevocable.
With respect to notes with market discount, you may not be allowed to
deduct immediately a portion of the interest expense on any indebtedness
incurred or continued to purchase or to carry the notes. A United States Holder
may elect to include market discount in income currently as it accrues, in which
S-100
case the interest deferral rule set forth in the preceding sentence will not
apply. This election will apply to all debt instruments that a United States
Holder acquires on or after the first day of the first taxable year to which the
election applies and is irrevocable without the consent of the Internal Revenue
Service. A United States Holder's tax basis in a note will be increased by the
amount of market discount included in the holder's income under the election.
AMORTIZABLE BOND PREMIUM
If a United States Holder purchases a note for an amount in excess of the
stated redemption price at maturity, the holder will be considered to have
purchased the note with "amortizable bond premium" equal in amount to the
excess. Generally, a United States Holder may elect to amortize the premium as
an offset to interest income otherwise required to be included in income in
respect of the note during the taxable year, using a constant yield method over
the remaining term of the note. Under Treasury Regulations, the amount of
amortizable bond premium that a United States Holder may deduct in any accrual
period is limited to the amount by which the holder's total interest inclusions
on the note in prior accrual periods exceed the total amount treated by the
holder as a bond premium deduction in prior accrual periods. If any of the
excess bond premium is not deductible, that amount is carried forward to the
next accrual period. A United States Holder who elects to amortize bond premium
must reduce the holder's tax basis in the note by the amount of the premium used
to offset interest income as set forth above. An election to amortize bond
premium applies to all taxable debt obligations then owned and thereafter
acquired by the United States Holder and may be revoked only with the consent of
the Internal Revenue Service.
SALE OR OTHER TAXABLE DISPOSITION OF THE NOTES
You must recognize taxable gain or loss on the sale, exchange, redemption,
retirement or other taxable disposition of a note. The amount of your gain or
loss equals the difference between the amount you receive for the note (in cash
or other property, valued at fair market value), minus the amount, if any,
attributable to accrued but unpaid interest on the note, minus your adjusted tax
basis in the note. Your tax basis in a note will initially equal the price you
paid for the note and will be subsequently increased by market discount
previously included in income in respect of the note and will be reduced by any
amortizable bond premium in respect of the note which has been taken into
account.
Your gain or loss will generally be capital gain or loss except as
described above under the heading "Market Discount." The capital gain or loss
will be long-term capital gain or loss if you have held the note for more than
one-year. Otherwise, it will be short-term capital gain or loss. Payments
attributable to accrued but unpaid interest which you have not yet included in
income will be taxed as ordinary interest income. The deductibility of capital
losses is subject to limitations.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding at a rate of up to 31% may apply when you receive
interest payments on a note or proceeds upon the sale or other disposition of a
note. Certain holders, including among others, corporations, financial
institutions and certain tax-exempt organizations, are generally not subject to
backup withholding. In addition, backup withholding will not apply to you if you
provide your social security number or other taxpayer identification number in
the prescribed manner unless:
- the Internal Revenue Service notifies us or our agent that the taxpayer
identification number provided is incorrect;
- you fail to report interest and dividend payments that you receive on
your tax return and the Internal Revenue Service notifies us or our agent
that backup withholding is required; or
- you fail to certify under penalties of perjury that backup withholding
does not apply to you.
If backup withholding applies to you, you may use the amount withheld as a
refund or credit against your United States federal income tax liability as long
as you provide the required information to the
S-101
Internal Revenue Service. United States Holders should consult their tax
advisors as to their qualification for exemption from backup withholding and the
procedures for obtaining the exemption.
We will be required to furnish annually to the Internal Revenue Service and
to holders of notes information relating to the amount of interest paid on the
notes. Some holders, including corporations, financial institutions and certain
tax-exempt organizations, are generally not subject to information reporting.
NON-UNITED STATES HOLDERS
As used herein, a "Non-United States Holder" is a person or entity that,
for United States federal income tax purposes, is not a United States Holder.
PAYMENTS OF INTEREST
If you are a Non-United States Holder, interest paid to you will not be
subject to United States federal income taxes or withholding taxes if the
interest is not effectively connected with your conduct of a trade or business
within the United States, and you:
- do not actually or constructively own 10% or more of the total voting
power of Entercom Communications' voting stock;
- are not a controlled foreign corporation with respect to which we are a
"related person" within the meaning of section 864(d)(4) of the Internal
Revenue Code;
- are not a bank receiving interest pursuant to a loan agreement entered
into in the ordinary course of your trade or business, and
- you provide appropriate certification.
You can generally meet the certification requirement by providing a
properly executed IRS Form W-8BEN or appropriate substitute form (or the
appropriate successor form) to us, or our paying agent. If you hold the notes
through a financial institution or other agent acting on your behalf, you may be
required to provide appropriate documentation to your agent. Your agent will
then generally be required to provide appropriate certifications to us or our
paying agent, either directly or through other intermediaries. Special
certification rules apply to foreign partnerships, estates and trusts, and in
certain circumstances certifications as to foreign status of partners, trust
owners or beneficiaries may have to be provided to us or our paying agent.
If you do not qualify for an exemption under these rules, interest income
from the notes may be subject to withholding tax at the rate of 30% (or lower
applicable treaty rate) at the time it is paid. The payment of interest
effectively connected with your United States trade or business, however, would
not be subject to a 30% withholding tax so long as you provide us or our agent
an adequate certification (currently on IRS Form W-8ECI), but such interest
would be subject to United States federal income tax on a net basis at the rates
applicable to United States persons generally. In addition, if you are a foreign
corporation and the payment of interest is effectively connected with your
United States trade or business, you may also be subject to a 30% (or lower
applicable treaty rate) branch profits tax.
CERTAIN REDEMPTIONS
See above "Certain Federal Income Tax Considerations -- United States
Holders -- Certain Redemptions."
S-102
SALE OR OTHER TAXABLE DISPOSITION OF NOTES
If you are a Non-United States Holder, you generally will not be subject to
United States federal income tax on any amount which constitutes capital gain
upon retirement or disposition of a note, unless:
- your investment in the note is effectively connected with your conduct of
a United States trade or business; or
- you are a nonresident alien individual and are present in the United
States for 183 or more days in the taxable year within which such sale or
other taxable disposition takes place and certain other requirements are
met.
If you have a United States trade or business and the investment in the notes is
effectively connected with that trade or business, the payment of the sale
proceeds with respect to the notes would be subject to United States federal
income tax on a net income basis at the rate applicable to United States Holders
generally. In addition, foreign corporations may be subject to a 30% (or lower
applicable treaty rate) branch profits tax if the investment in the note is
effectively connected with the foreign corporation's United States trade or
business.
BACKUP WITHHOLDING AND INFORMATION REPORTING
No backup withholding or information reporting will generally be required
with respect to interest paid to Non-United States Holder of notes if the
beneficial owner of the note provides the certification described above in
"Non-United States Holders -- Payments of Interest" or is an exempt recipient
and, in each case, the payor does not have actual knowledge or reason to know
that the beneficial owner is a United States Holder.
Information reporting requirements and backup withholding tax generally
will not apply to any payments of the proceeds of the sale of a note effected
outside the United States by a foreign office of a foreign broker (as defined in
applicable Treasury Regulations). However, unless such broker does not have
actual knowledge or reason to know that the beneficial owner is a United States
Holder and has documentary evidence in its records that the beneficial owner is
a Non-United States Holder and certain other conditions are met, or the
beneficial owner otherwise establishes an exemption, information reporting but
not backup withholding will apply to any payment of the proceeds of the sale of
a note effected outside the United States by such broker if it:
- is a United States person, as defined in the Internal Revenue Code;
- is a foreign person and it derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United
States;
- is a controlled foreign corporation for United States federal income tax
purposes; or
- is a foreign partnership that, at any time during its taxable year, has
more than 50% of its income or capital interests owned by United States
persons or is engaged in the conduct of a United States trade or
business.
Payments of the proceeds of any sale of a note effected by the United
States office of a broker will be subject to information reporting and backup
withholding requirements, unless the beneficial owner of the note provides the
certification described above in "Non-United States Holders -- Payments of
Interest" or otherwise establishes an exemption.
If you are a Non-United States Holder of notes, you should consult your tax
advisor regarding the application of information reporting and backup
withholding in your particular situation, the availability of an exemption
therefrom, and the procedures for obtaining the exemption, if available. Any
amounts withheld from payment to you under the backup withholding rules will be
allowed as a refund or credit against your federal income tax liability,
provided that the required information is furnished to the Internal Revenue
Service.
S-103
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated February , 2002, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation and Deutsche Banc
Alex. Brown Inc. are joint book-running managers, the following principal
amounts of notes:
<Table>
<Caption>
PRINCIPAL
UNDERWRITERS AMOUNT
- ------------ ------------
Credit Suisse First Boston Corporation...................... $
Deutsche Banc Alex. Brown Inc...............................
Banc of America Securities LLC..............................
Morgan Stanley & Co. Incorporated...........................
------------
Total............................................. $150,000,000
============
</Table>
The underwriting agreement provides that the underwriters are obligated to
purchase all of the notes if any are purchased. The underwriting agreement
provides that if an underwriter defaults the purchase commitments of
non-defaulting underwriters may be increased or the offering of notes may be
terminated.
The underwriters propose to offer the notes initially at the public
offering price on the cover page of this prospectus supplement. After the
initial public offering, the joint book-running managers may change the public
offering price. The underwriters have agreed to purchase the notes from us at a
price of % per note.
We estimate that our out of pocket expenses for this offering will be
approximately $500,000.
The notes are a new issue of securities with no established trading market.
One or more of the underwriters intend to make a secondary market for the notes.
However, they are not obligated to do so and may discontinue making a secondary
market for the notes at any time without notice. No assurance can be given as to
how liquid the trading market for the notes will be.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933, as amended, or contribute to payments which the
underwriters may be required to make in respect thereof.
The joint book-running managers, on behalf of the underwriters, may engage
in over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934, as amended (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 notes 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 notes originally sold by such syndicate
member are purchased in a stabilizing transaction or a syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the trading price of the notes to be higher than it would otherwise be
in the absence of such transactions. These transactions, if commenced, may be
discontinued at any time.
In the ordinary course of business, certain of the underwriters and their
affiliates have provided and may in the future provide financial advisory,
investment banking and general financing and banking services for us and our
subsidiaries for customary fees.
S-104
Affiliates of Credit Suisse First Boston Corporation, Deutsche Banc Alex.
Brown Inc. and Banc of America Securities LLC are lenders to us under our
existing credit facility, and an affiliate of Banc of America Securities LLC is
the syndication agent and co-documentation agent under our credit facility. A
portion of the proceeds from this offering will be used to repay our existing
credit facility. In addition, Deutsche Banc Alex. Brown Inc., Credit Suisse
First Boston Corporation and Banc of America Securities LLC are acting as
underwriters for our concurrent Class A common stock offering. In connection
with the Class A common stock offering, each will be paid customary fees and be
reimbursed by us for related expenses.
S-105
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the notes in Canada is being made only on a private
placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of notes are made. Any resale of the notes in Canada must be made under
applicable securities laws, which will vary depending on the relevant
jurisdiction, and which may require resales to be made under available statutory
exemptions or under a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the notes.
REPRESENTATIONS OF PURCHASERS
By purchasing notes in Canada and accepting a purchase confirmation a
purchaser is representing to us and the dealer from whom the purchase
confirmation is received that
- the purchaser is entitled under applicable provincial securities laws to
purchase the notes without the benefit of a prospectus qualified under
those securities laws,
- where required by law, that the purchaser is purchasing as principal and
not as agent, and
- the purchaser has reviewed the text above under Resale Restrictions.
RIGHTS OF ACTION -- ONTARIO PURCHASERS ONLY
Under Ontario securities legislation, a purchaser who purchases a security
offered by this prospectus supplement during the period of distribution will
have a statutory right of action for damages, or while still the owner of the
notes, for rescission against us in the event that this prospectus supplement
contains a misrepresentation. A purchaser will be deemed to have relied on the
misrepresentation. The right of action for damages is exercisable not later than
the earlier of 180 days from the date the purchaser first had knowledge of the
facts giving rise to the cause of action and three years from the date on which
payment is made for the notes. The right of action for rescission is exercisable
not later than 180 days from the date on which payment is made for the notes. If
a purchaser elects to exercise the right of action for rescission, the purchaser
will have no right of action for damages against us. In no case will the amount
recoverable in any action exceed the price at which the notes were offered to
the purchaser and if the purchaser is shown to have purchased the securities
with knowledge of the misrepresentation, we will have no liability. In the case
of an action for damages, we will not be liable for all or any portion of the
damages that are proven to not represent the depreciation in value of the notes
as a result of the misrepresentation relied upon. These rights are in addition
to, and without derogation from, any other rights or remedies available at law
to an Ontario purchaser. The foregoing is a summary of the rights available to
an Ontario purchaser. Ontario purchasers should refer to the complete text of
the relevant statutory provisions.
ENFORCEMENT OF LEGAL RIGHTS
All of our directors and officers as well as the experts named herein 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 or those
persons. All or a substantial portion of our assets and the assets of those
persons may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against us or those persons in Canada or to
enforce a judgment obtained in Canadian courts against us or those persons
outside of Canada.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of notes should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the notes in
their particular circumstances and about the eligibility of the notes for
investment by the purchaser under relevant Canadian legislation.
S-106
RELATIONSHIPS WITH AFFILIATES OF CERTAIN UNDERWRITERS
Affiliates of Credit Suisse First Boston Corporation, Deutsche Banc Alex.
Brown Inc. and Banc of America Securities LLC are lenders to us under our
existing credit facility, and an affiliate of Banc of America Securities LLC is
the syndication agent and co-documentation agent under our credit facility. A
portion of the proceeds from this offering will be used to repay our existing
credit facility. The decision of these underwriters to underwrite this offering
was made independent of their respective affiliates that are lenders under our
existing credit facility, which had no involvement in determining whether or
when to distribute the notes under this offering or the terms of this offering.
In addition, Deutsche Banc Alex. Brown Inc., Credit Suisse First Boston
Corporation and Banc of America Securities LLC are acting as underwriters for
our concurrent Class A common stock offering. In connection with the Class A
common stock offering, each will be paid customary fees and be reimbursed by us
for related expenses. None of Credit Suisse First Boston Corporation, Deutsche
Banc Alex. Brown Inc. or Banc of America Securities LLC will receive any benefit
from this offering or the concurrent Class A common stock offering, other than
its respective portion of the underwriting fee as paid by us. See
"Underwriting."
LEGAL MATTERS
John S. Donlevie, Esq., Executive Vice President, Secretary and General
Counsel of Entercom Communications, will issue an opinion with respect to
certain legal matters relating to the offering. Mr. Donlevie is a full time
employee of Entercom Communications and owns beneficial interests in less than
one percent of its Class A common stock. Latham & Watkins, Washington, D.C.,
will issue an opinion with respect to certain legal matters with respect to the
notes. The underwriters will be advised about various other legal matters
relating to this offering by Weil, Gotshal & Manges LLP, New York, New York.
EXPERTS
The consolidated financial statements and schedule as of December 31, 2001
and for the year then ended incorporated by reference in this prospectus
supplement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report. Reference is made to
said report, which includes an explanatory paragraph with respect to a change in
accounting for derivative instruments and hedging activities pursuant to the
provisions of Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Hedging Activities."
The consolidated financial statements and related consolidated financial
statement schedule as of December 31, 2000, and for each of the two years in the
period ended December 31, 2000 incorporated in this prospectus supplement by
reference from Entercom Communications Corp.'s Annual Report on Form 10-K for
the year ended December 31, 2001 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report which, is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
S-107
WHERE YOU CAN FIND MORE INFORMATION
Entercom Communications Corp. is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and files annual, quarterly
and special reports, proxy statements and other information with the SEC. You
may read and copy any reports, proxy statements and other information we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. You may also access filed documents at the SEC's web site
at www.sec.gov.
We are incorporating by reference some information about us that we file
with the SEC. We are disclosing important information to you by referencing
those filed documents. Any information that we reference this way is considered
part of this prospectus supplement. The information in this prospectus
supplement supercedes information incorporated by reference that we have filed
with the SEC prior to the date of this prospectus supplement, while information
that we file with the SEC after the date of this prospectus supplement that is
incorporated by reference will automatically update and supersede this
information.
We incorporate by reference the following documents we have filed, or may
file, with the SEC:
- Entercom Communications Corp.'s Annual Report on Form 10-K for its fiscal
year ended December 31, 2001;
- all documents filed by Entercom Communications Corp. with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this prospectus supplement and before termination of this offering.
You may request a free copy of any of the documents incorporated by
reference in this prospectus supplement by writing or telephoning us at the
following address:
ENTERCOM COMMUNICATIONS CORP.
401 CITY AVENUE, SUITE 409
BALA CYNWYD, PA 19004
(610) 660-5610
S-108
[ENTERCOM LOGO]
The information in this preliminary prospectus supplement and the accompanying
preliminary prospectus are 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 preliminary prospectus supplement and the
accompanying preliminary prospectus are not an offer to sell these securities
and are not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
PRELIMINARY PROSPECTUS SUPPLEMENT TO PRELIMINARY PROSPECTUS
dated February 20, 2002
[ENTERCOM LOGO]
ENTERCOM COMMUNICATIONS CORP.
- --------------------------------------------------------------------------------
3,000,000 SHARES
CLASS A COMMON STOCK
- --------------------------------------------------------------------------------
This is a public offering of Class A common stock of Entercom Communications
Corp. We are offering 3,000,000 shares of our Class A common stock. Our Class
A common stock is traded on the New York Stock Exchange under the symbol
"ETM". On February 15, 2002, the last reported sale price of our Class A
common stock was $52.74 per share.
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE S-9.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<Table>
<Caption>
PER SHARE TOTAL
Public offering price $ $
Underwriting discounts and commissions $ $
Proceeds, before expenses, to Entercom $ $
</Table>
We have granted the underwriters the right to purchase up to 450,000
additional shares of Class A common stock to cover over-allotments.
Concurrent with this offering, our wholly owned subsidiaries, Entercom Radio,
LLC and Entercom Capital, Inc., are offering $150.0 million in aggregate
principal amount of % Senior Subordinated Notes due 2014 in a separate
offering. We, along with certain of our other direct and indirect
subsidiaries, will guarantee the notes. This offering and the offering of
notes are not contingent on each other.
Joint Book-Running Managers
DEUTSCHE BANC ALEX. BROWN CREDIT SUISSE FIRST BOSTON
---------------------------------------
BANC OF AMERICA SECURITIES LLC
GOLDMAN, SACHS & CO.
JPMORGAN
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS FEBRUARY , 2002.
[MAP DEPICTING LOCATION AND CALL LETTERS OF RADIO STATION PORTFOLIO]
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement is a supplement to the accompanying prospectus
that is also a part of this document. This prospectus supplement and the
accompanying prospectus are part of a registration statement that we filed with
the Securities and Exchange Commission that, in part, utilizes a "shelf"
registration process. Under the shelf registration process, we may sell shares
of our Class A common stock, par value $.01 per share, and shares of our
preferred stock, par value $.01 per share, up to a total dollar amount of gross
proceeds to us of $250,000,000, of which this offering is a part. In this
prospectus supplement, we provide you with specific information about the terms
of this offering and certain other information. Both this prospectus supplement
and the accompanying prospectus include important information about us, the
Class A common stock being offered and other information you should know before
investing in our Class A common stock.
This prospectus supplement and the accompanying prospectus incorporates by
reference important business and financial information about us and our
consolidated subsidiaries that is not included in or delivered with these
documents. Entercom Communications is Entercom Radio's sole member. All of
Entercom Communications' operating assets, including all of its radio station
licenses, are held by direct and indirect subsidiaries of Entercom Radio, LLC.
Entercom Communications is the sole member of Entercom Radio, LLC. Unless
specifically stated, or the context otherwise so requires, the terms "Entercom,"
"we," "us," or similar terms in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference herein and therein refer
to Entercom Communications and its consolidated subsidiaries, excluding Entercom
Communications Capital Trust.
You should read both this prospectus supplement and the accompanying
prospectus as well as the additional information described under the heading
"Where You Can Find More Information" beginning on page S- of this prospectus
supplement before investing in our Class A common stock. This prospectus
supplement adds to, updates and changes information contained in the
accompanying prospectus and the information incorporated by reference. To the
extent that any statement that we make in this prospectus supplement is
inconsistent with the statements made in the accompanying prospectus or the
information incorporated by reference, the statements made in the accompanying
prospectus or the information incorporated by reference are deemed modified or
superseded by the statements made in this prospectus supplement.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus may contain
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are not statements
of historical facts, but rather reflect our current expectations concerning
future results and events. You can identify these forward-looking statements by
our use of words such as "anticipates," "believes," "continues," "expects,"
"intends," "likely," "may," "opportunity," "plans," "potential," "project,"
"will," and similar expressions to identify forward-looking statements, whether
in the negative or the affirmative. We cannot guarantee that we will actually
achieve these plans, intentions or expectations. These forward-looking
statements are subject to risks, uncertainties and other factors, some of which
are beyond our control, which could cause actual results to differ materially
from those forecast or anticipated in such forward-looking statements. The pro
forma information contained herein reflects adjustments and is presented for
comparative purposes only and does not purport to be indicative of what has
occurred or of future operating results or financial position.
S-i
These risks, uncertainties and factors include, but are not limited to:
- the impact of general economic conditions in the United States;
- the highly competitive nature of, and uncertain effect of new
technologies on, the radio broadcasting industry;
- the risks associated with our acquisition strategy generally;
- the control of us by Joseph M. Field and members of his immediate family;
- our vulnerability to changes in federal legislation or regulatory policy;
- our dependence on our Seattle radio stations;
- our substantial indebtedness and debt service needs; 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 supplement. Except
as may be required by law, 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 supplement or to
reflect the occurrence of unanticipated events.
We urge you to review carefully "Risk Factors" in this prospectus
supplement for a more complete discussion of the risks of an investment in our
Class A common stock.
INFORMATION ABOUT STATION AND MARKET DATA
We have based or derived the station and market data we present in this
prospectus supplement from third-party sources, including primarily:
- 2000 market rank by metro population and by radio revenue from Duncan's
Radio Market Guide (2001 ed.);
- 2000 Entercom market revenue rank from Duncan's Radio Market Guide (2001
ed.);
- 2001 Entercom market revenue rank from market total cash performance
summaries prepared by Miller, Kaplan, Arase & Co. LLP (December 2001);
- Audience share and audience rank in target demographic data from the Fall
2001 Radio Market Report published by The Arbitron Ratings Company; and
- 2000 radio broadcasting industry rank from report of BIA Consulting, Inc.
(January 7, 2002).
While we believe these industry publications are reliable, we have not
independently verified them, and we make no representation as to their accuracy.
S-ii
SUMMARY
This summary highlights selected information contained in greater detail
elsewhere in this prospectus supplement, the accompanying prospectus and the
documents incorporated herein and therein by reference. This summary may not
contain all of the information that you should consider before investing in our
Class A common stock. You should carefully read the entire prospectus
supplement, the accompanying prospectus, and the documents we incorporate by
reference herein and therein before making an investment decision. Unless
specifically stated or the context otherwise so requires, the terms "Entercom,"
"we," "us," or similar terms in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference herein and therein refer
to Entercom Communications and its consolidated subsidiaries, excluding Entercom
Communications Capital Trust.
OUR BUSINESS
Entercom Communications is one of the five largest radio broadcasting
companies in the United States based upon 2000 revenues pro forma for completed
and pending acquisitions. We have assembled, after giving effect to completed
and pending acquisitions, a nationwide portfolio of 101 stations in 19 markets,
including 11 of the country's top 50 radio revenue markets. Our station groups
rank among the top three in revenue market share in 18 of the 19 markets in
which we operate. We derive 90% of our revenues from markets where we rank
either first or second in market radio revenues.
We operate a wide range of formats in geographically diverse markets across
the United States. Our largest markets, in order of our 2001 revenues, including
pro forma revenues for completed and pending acquisitions, are Seattle, Boston,
Kansas City, Denver, Sacramento, Portland and New Orleans.
COMPLETED AND PENDING ACQUISITIONS
On November 29, 2001, we entered into an agreement with WCCB-TV, Inc., a
subsidiary of Bahakel Communications, Ltd., to acquire the assets of WKSI-FM and
WPET-AM, serving the Greensboro, North Carolina radio market, for a purchase
price of $20.8 million in cash. On December 5, 2001, we began operating these
stations under a time brokerage agreement. This transaction closed on February
8, 2002 and increased our ownership to six radio stations in the Greensboro,
North Carolina radio market.
On December 24, 2001, we entered into an agreement with Tribune
Broadcasting Company to acquire the assets of KOSI-FM, KKHK-FM and KEZW-AM,
serving the Denver, Colorado radio market, for a purchase price of $180.0
million in cash, of which we paid $18.0 million as a deposit on January 2, 2002.
On February 1, 2002, we began operating these stations under a time brokerage
agreement. The time brokerage agreement may run for a period of up to three
years at Tribune's option. The closing of this transaction may be delayed at the
option of Tribune, not to exceed three years, and also is conditioned on the
approval of the FCC.
On February 12, 2002, we entered into an agreement with subsidiaries of
Emmis Communications Corporation to acquire the assets of KALC-FM, serving the
Denver, Colorado radio market, for a purchase price of $88.0 million in cash, of
which we paid $8.8 million as a deposit on February 15, 2002. We will begin
operating this station under a time brokerage agreement upon the expiration or
termination of all applicable antitrust waiting periods. We expect the closing
of this transaction, which is conditioned on the receipt of all necessary
regulatory approvals, to occur in the second quarter of 2002.
S-1
OUR STATION PORTFOLIO
The following table sets forth selected information about the markets where
we operate and where we expect to operate, pro forma for completed and pending
acquisitions. You should refer to the "Business" section of this prospectus
supplement for further information about our station portfolio.
<Table>
<Caption>
2000 MARKET RANK 2001
-------------------- ENTERCOM STATIONS ENTERCOM MARKET
METRO RADIO ------------------- REVENUE
MARKET(1) POPULATION REVENUE FM AM RANK
- --------- ---------- ------- -------- -------- ---------------
Boston, MA(2)........................... 8 8 2 3 2
Seattle, WA............................. 14 13 5 3 1
Denver, CO.............................. 23 15 3 1 2
Portland, OR............................ 25 22 4 3 2
Sacramento, CA.......................... 29 27 4 1 2
Kansas City, MO......................... 30 29 5 3 1
Milwaukee, WI........................... 31 34 2 1 3
Norfolk, VA............................. 36 42 4 -- 1
New Orleans, LA......................... 41 40 4 2 1
Greensboro, NC.......................... 42 51 4 2 2
Buffalo, NY(2).......................... 45 45 2 4 2
Memphis, TN............................. 46 41 2 1 4
Rochester, NY........................... 52 53 3 1 3
Greenville/Spartanburg, SC.............. 58 56 4 3 2
Wilkes-Barre/Scranton, PA............... 64 71 6 3 1
Wichita, KS............................. 84 72 4 3 3
Gainsville/Ocala, FL.................... 90 127 2 -- --
Madison, WI(2).......................... 120 67 3 -- 3
Longview/Kelso, WA...................... -- -- 2 2 --
-- --
All Markets......................... 65 36
</Table>
- ---------------
(1) Our radio stations are in some instances licensed to communities other than
the named principal community for the market.
(2)Entercom market revenue rank for Boston, Buffalo, Denver and Madison is for
2000.
OUR ACQUISITION STRATEGY
Through our disciplined acquisition strategy, we seek to (i) build
top-three station clusters principally in large growth markets and (ii) acquire
underdeveloped properties that offer the potential for significant improvements
in revenues and broadcast cash flow through the application of our operational
expertise. Although we typically focus on radio stations in top 50 markets, we
also acquire stations in top 75 markets that otherwise meet our acquisition
criteria.
OUR OPERATING STRATEGY
The principal components of our operating strategy are to:
- Develop Market Leading Station Clusters. We are among the three largest
clusters in 18 of our 19 markets, including pending acquisitions. We
derive 90% of our revenues from markets where we rank either first or
second in market radio revenues. 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.
S-2
- 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
compensation packages with performance-based incentives for our key
employees. We utilize best practices to facilitate development and
implementation of advantageous operational tools and strategies. In
addition, we provide employees with opportunities for personal growth and
advancement through training, seminars and other educational programs.
- 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 station's 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 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
continue to capitalize on this opportunity by developing specialized
teams in many of our markets to work with advertisers to create and
develop marketing programs and solutions across our multi-station market
clusters. We derive 90% of our revenues from markets where we rank either
first or second in market radio revenues. In 2001, as in 2000, we gained
revenue market share in the majority of the markets in which we operate
and for our company as a whole.
- Acquire And Develop Under-Performing Stations. We seek to acquire and
develop under-performing stations, which has often enabled us to achieve
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; improved sales training and techniques; technical upgrades;
programming and marketing enhancements; refocused expenditures; and
facility consolidations.
- 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.
CONCURRENT NOTES OFFERING
Concurrently with this offering, our wholly owned subsidiaries, Entercom
Radio, LLC and Entercom Capital, Inc., are offering $150.0 million in aggregate
principal amount of % Senior Subordinated Notes due 2014 by means of a
separate prospectus supplement. We, along with certain of our other direct and
indirect subsidiaries, will guarantee the notes. This offering and the notes
offering are not contingent on each other.
S-3
THE OFFERING
Class A common stock offered
by us......................... 3,000,000 shares
Common stock to be outstanding
after this offering........... 37,845,342 shares of Class A common stock
10,531,805 shares of Class B common stock
-- shares of Class C common stock
-----------------------------------------------
48,377,147 total shares of common stock
-----------------------------------------------
-----------------------------------------------
Voting rights................. Each share of Class A common stock is entitled
to one vote.
We also have Class B common stock and Class C
common stock with different voting rights. The
Class A common stock and the Class B common
stock generally vote together as a single class
on all matters submitted to a vote of
shareholders. Each share of Class B common
stock is entitled to ten votes, except:
- any share of Class B common stock not voted
by either Joseph M. Field or David J. Field
is entitled to one vote;
- the holders of Class A common stock, voting
as a separate class, are entitled to elect
two directors;
- each share of Class B common stock is
entitled to one vote with respect to any
"going private" transaction under the
Exchange Act; and
- as required by law.
The shares of Class C common stock have no
voting rights, except as required by law.
Joseph M. Field and David J. Field beneficially
hold all of our Class B common stock. Following
this offering, the Class B common stock will
represent 73.6% of the combined voting power of
our common stock, assuming the underwriters do
not exercise their over-allotment option.
Dividend policy............... We intend to retain future earnings for use in
our business and do not anticipate declaring or
paying any cash or stock dividends on shares of
our Class A common stock in the foreseeable
future. In addition, our ability to declare
dividends is restricted under our credit
facility and the indenture governing the notes
to be offered concurrently with this offering.
Use of proceeds............... We intend to contribute the net proceeds from
this offering to Entercom Radio to pay down
revolving indebtedness under our credit
facility and to finance pending acquisitions.
We intend to use any remaining proceeds for
general corporate purposes, including repayment
of indebtedness under the credit facility,
future acquisitions and working capital.
Pending application of the net proceeds from
this offering, we may invest in commercial
paper or short-term investment grade interest
bearing securities.
S-4
New York Stock Exchange
Symbol........................ ETM
The number of shares of our Class A common stock outstanding assuming the
completion of the offering is as of February 15, 2002. This number does not
include the following shares of our Class A common stock:
- 450,000 shares that the underwriters have the option to purchase to cover
over-allotments;
- 4,386,216 shares reserved for the exercise of options having a weighted
average exercise price of $38.74 per share;
- 2,787,256 shares eligible for future grants of options;
- 1,794,264 shares reserved for issuance under our employee stock purchase
plan; and
- 2,841,000 shares that are reserved for issuance upon conversion of the
6 1/4% Convertible Preferred Securities, Term Income Deferrable Equity
Securities (TIDES).
RISK FACTORS
You should read the "Risk Factors" section beginning on page S-9 of this
prospectus supplement, as well as the other cautionary statements throughout the
entire prospectus supplement, the accompanying prospectus and the documents
incorporated by reference herein and therein.
S-5
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table is a summary of financial data of Entercom
Communications and its consolidated subsidiaries for the periods presented. You
should read this data in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
prospectus supplement and our consolidated financial statements and related
notes in our Annual Report on Form 10-K for the year ended December 31, 2001,
incorporated by reference herein and in the accompanying prospectus, including
the consolidated financial information contained therein. Historical results are
not necessarily indicative of results to be expected for any future period. As
you review the information contained in the following table, you should also
carefully read the financial information in "Selected Consolidated Financial
Data" included in this prospectus supplement.
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 2000 2001
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
Net revenues......................................... $ 215,001 $ 352,025 $ 332,897
--------- --------- ---------
Operating expenses (income):
Station operating expenses......................... 135,943 206,608 201,257
Depreciation and amortization...................... 21,564 43,475 46,509
Corporate general and administrative expenses...... 8,100 12,497 12,335
Net expense (income) from time brokerage agreement
fees............................................ 652 11 --
Net (gains) losses on sale of assets............... (1,986) (41,465) 16
--------- --------- ---------
Total operating expenses................... 164,273 221,126 260,117
--------- --------- ---------
Operating income..................................... 50,728 130,899 72,780
Other expense (income):
Interest expense................................... 11,182 37,760 27,583
Financing cost of Company-obligated mandatorily
redeemable convertible preferred securities of
subsidiary holding solely convertible debentures
of the Company (TIDES).......................... 1,845 7,813 7,813
Interest income.................................... (3,253) (512) (262)
Equity loss from unconsolidated affiliate.......... -- 1,100 4,706
Loss on investments................................ -- 5,688 2,000
Net loss on derivative instruments................. -- -- 912
--------- --------- ---------
Total other expense........................ 9,774 51,849 42,752
--------- --------- ---------
Income before income taxes, extraordinary item and
accounting change.................................. 40,954 79,050 30,028
Income taxes......................................... 100,913 31,796 12,194
--------- --------- ---------
(Loss) income before extraordinary item and
accounting change.................................. (59,959) 47,254 17,834
Extraordinary item, net of taxes..................... (918) -- --
--------- --------- ---------
(Loss) income before accounting change............... (60,877) 47,254 17,834
Cumulative effect of accounting change, net of
taxes.............................................. -- -- (566)
--------- --------- ---------
Net (loss) income.................................... $ (60,877) $ 47,254 $ 17,268
========= ========= =========
</Table>
S-6
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 2000 2001
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net (loss) income per share -- basic:
(Loss) income before extraordinary item and
accounting change............................... $ (1.58) $ 1.05 $ 0.39
Extraordinary item, net of taxes................... (0.03) -- --
--------- --------- ---------
(Loss) income before accounting change............. (1.61) 1.05 0.39
Cumulative effect of accounting change, net of
taxes........................................... -- -- (0.01)
--------- --------- ---------
Net (loss) income per share -- basic................. $ (1.61) $ 1.05 $ 0.38
========= ========= =========
Net (loss) income per share -- diluted:
(Loss) income before extraordinary item and
accounting change............................... $ (1.58) $ 1.04 $ 0.39
Extraordinary item, net of taxes................... (0.03) -- --
--------- --------- ---------
(Loss) income before accounting change............. (1.61) 1.04 0.39
Cumulative effect of accounting change, net of
taxes........................................... -- -- (0.01)
--------- --------- ---------
Net (loss) income per share -- diluted............... $ (1.61) $ 1.04 $ 0.38
========= ========= =========
Weighted average shares -- basic..................... 37,922 45,209 45,295
========= ========= =========
Weighted average shares -- diluted................... 37,922 45,614 45,994
========= ========= =========
PRO FORMA DATA(1):
Income before income taxes and extraordinary item.... $ 40,954
Pro forma income taxes............................... 20,278
---------
Pro forma income before extraordinary item........... 20,676
Extraordinary item, net of pro forma taxes......... (918)
---------
Pro forma net income................................. $ 19,758
=========
Pro forma basic income per share before extraordinary
item............................................... $ 0.55
=========
Pro forma diluted income per share before
extraordinary item................................. $ 0.54
=========
Pro forma basic net income........................... $ 0.52
=========
Pro forma diluted net income......................... $ 0.51
=========
Pro forma weighted average common shares
outstanding -- basic............................... 37,922
=========
Pro forma weighted average common shares
outstanding -- diluted............................. 38,238
=========
OTHER DATA:
Broadcast cash flow(2)(6)............................ $ 79,058 $ 145,417 $ 131,640
Broadcast cash flow margin(3)(6)..................... 36.8% 41.3% 39.5%
EBITDA before net expense (income) from time
brokerage agreement fees(4)(6)..................... $ 71,749 $ 133,577 $ 119,842
After tax cash flow(5)(6)............................ 52,465 89,721 87,084
Cash flows related to:
Operating activities............................... 40,700 69,475 85,243
Investing activities............................... (712,323) (64,684) (17,891)
Financing activities............................... 676,416 (2,796) (69,858)
</Table>
S-7
<Table>
<Caption>
DECEMBER 31, 2001
------------------------
AS
ACTUAL ADJUSTED(7)
---------- -----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents and short-term investments........ $ 10,751 $ 243,706
Intangibles and other assets................................ 1,244,957 1,249,207
Total assets................................................ 1,438,740 1,675,945
Senior debt, including current portion...................... 388,323 325,323
% Senior Subordinated Notes due 2014...................... -- 150,000
TIDES....................................................... 125,000 125,000
Total shareholders' equity.................................. 755,881 906,086
</Table>
- ---------------
(1) For purposes of our historical financial statement, the term pro forma
refers solely to the adjustments necessary to reflect our status as if we
were a C corporation rather than an S corporation for income tax purposes
for the period presented.
(2) Broadcast cash flow consists of operating income before depreciation and
amortization, net expense (income) from time brokerage agreement fees,
corporate general and administrative expenses and net gains (losses) on sale
of assets.
(3) Broadcast cash flow margin represents broadcast cash flow as a percentage of
net revenues.
(4) EBITDA before net expense (income) from time brokerage agreement fees
consists of operating income plus depreciation and amortization, non-cash
compensation expense (which is otherwise included in corporate general and
administrative expenses) and the elimination of net expense (income) from
time brokerage agreement fees and net gains (losses) on sale of assets.
(5) After tax cash flow consists of income (loss) before extraordinary item and
accounting change, plus the following: depreciation and amortization,
non-cash compensation expense (which is otherwise included in corporate
general and administrative expense), deferred taxes, the elimination, net of
taxes, of equity loss from unconsolidated affiliate, any net gains or losses
on sale of assets, investments and derivative instruments. For the year
ended December 31, 1999, after tax cash flow consists of pro forma income
before extraordinary item, to reflect taxes as if we were a C corporation
during the period presented.
(6) Although broadcast cash flow, EBITDA before net expense (income) from time
brokerage agreement fees and after tax cash flow are not measures of
performance or liquidity calculated in accordance with generally accepted
accounting principles, we believe that these measures are useful to an
investor in evaluating our performance because they are widely used in the
broadcast industry to measure a radio company's operating performance.
However, you should not consider broadcast cash flow, EBITDA before net
expense (income) from time brokerage agreement fees and 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
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.
(7) The as adjusted balance sheet data summarized above reflects the application
of the estimated net proceeds from this offering at the assumed public
offering price of $52.74 per share, assuming the underwriters do not
exercise their over-allotment option, and the estimated net proceeds from
the concurrent offering of $150.0 million in aggregate principal amount of
% Senior Subordinated Notes due 2014 by our subsidiaries, Entercom Radio
and Entercom Capital.
S-8
RISK FACTORS
Investing in our Class A common stock involves a high degree of risk. You
should carefully consider the following risk factors and all other information
contained in this prospectus supplement and the accompanying prospectus before
purchasing our Class A common stock. The risks and uncertainties described below
are not the only ones facing us. Additional risks and uncertainties that we are
unaware of, or that we currently deem immaterial, also may become important
factors that affect us.
If any of the following risks occur, our business, financial condition or
results of operations could be materially and adversely affected. In that case,
the trading price of our Class A common stock could decline, and you may lose
some or all of your investment.
RISKS RELATED TO OUR BUSINESS
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, satellite radio, television stations and other entertainment
and communications media;
- technological changes and innovations;
- 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 an
economic recession or downturn, both nationally and in particular markets. Our
advertising revenue has been adversely affected by the recent downturn in the
United States economy. In particular, the general economic downturn and decrease
in advertising activity following the events of September 11, 2001 adversely
affected, and may continue to hinder the growth of, our advertising revenue.
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
format to a format similar to one of our stations, if a
S-9
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.
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
Kansas City acquisition we were required to dispose of three radio stations in
Kansas City. 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.
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 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 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.
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 attractive acquisition opportunities. As a result,
under certain circumstances, all or a partial amount of our deposits of $26.8
million, made in connection with the pending acquisitions, could be forfeited if
we are unable to timely consummate all or any of our pending acquisitions. We
cannot predict whether we will be successful in identifying future acquisition
opportunities or what the consequences will be of any acquisitions.
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
S-10
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.
WE MAY BE UNABLE TO EFFECTIVELY INTEGRATE OUR ACQUISITIONS.
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. 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.
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.
As of January 31, 2002, Joseph M. Field, our Chairman of the Board and
Chief Executive Officer, beneficially owns 1,002,586 shares of our Class A
common stock and 9,782,555 shares of our Class B common stock, representing
approximately 70.4% of the total voting power of all of our outstanding common
stock. As of January 31, 2002, David J. Field, our President, Chief Operating
Officer, one of our directors and the son of Joseph M. Field, beneficially owns
2,029,143 shares of our Class A common stock and 749,250 shares of our
outstanding Class B common stock, representing approximately 6.8% of the total
voting power of all of our outstanding common stock. 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. In addition, both Joseph M. Field and David J. Field are members of the
Board of Managers of Entercom Radio.
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 effectively 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 investors might otherwise receive a premium for your
shares over then current market prices.
WE DEPEND HEAVILY ON OUR SEATTLE RADIO STATIONS.
The radio stations we own or operate in Seattle generated between 20% and
25% of our net revenues and broadcast cash flows for 2001. Accordingly, we may
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.
S-11
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 digital audio radio service, has resulted in the
introduction of new subscriber based satellite radio services with
numerous niche formats;
- 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 provides multi-channel,
multi-format digital radio services in the same bandwidth currently
occupied by traditional AM and FM radio services; and
- low-power FM radio, which could result in additional FM radio broadcast
outlets.
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 the financial condition and results of operations of our company.
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. We believe that the loss of one
or more of these individuals could have a material adverse effect on our
business.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE AND COULD DECLINE SUBSTANTIALLY.
The stock market has, from time to time, experienced extreme price and
volume fluctuations that are unrelated to the operating performance of
particular companies. Over the course of the last 12 months, the price of our
common stock has ranged from $30.00 per share to $55.00 per share. The market
price of our Class A common stock may fluctuate in response to many factors
including:
- our operating results failing to meet the expectations of securities
analysts or investors in any quarter;
- downward revisions in securities analysts' estimates;
- material announcements by us or our competitors;
- governmental regulatory action;
- investor perceptions of our industry or prospects or those of our
customers;
- adverse changes in general market conditions or economic trends; and
- public sales of a substantial number of shares of our Class A common
stock following this offering.
In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. If
we become involved in a securities
S-12
class action litigation in the future, it could result in substantial costs and
diversion of management's attention and resources, which could have a material
adverse affect on our business.
PROVISIONS IN OUR CHARTER DOCUMENTS MIGHT DETER ACQUISITION BIDS FOR US.
Certain provisions of Pennsylvania law and our amended and restated
articles of incorporation and amended and restated bylaws could make it
difficult for a potential acquirer to acquire us, whether through merger, tender
offer or proxy contest, even if an acquisition could be beneficial to the
interests of our shareholders. Such provisions could also limit the price that
certain investors might be willing to pay in the future for shares of our Class
A common stock. See "Description of Capital Stock -- Certain Provisions of the
Amended and Restated Articles of Incorporation and Amended and Restated Bylaws"
in the accompanying prospectus.
THE CONVERSION OF TIDES INTO SHARES OF OUR CLASS A COMMON STOCK WOULD BE
DILUTIVE TO HOLDERS OF CLASS A COMMON STOCK.
Holders of TIDES have the right, at any time, to convert their TIDES into
an aggregate of 2,841,000 shares of Class A common stock, at a conversion price
equivalent to $44.00 per share of Class A common stock. To the extent that
holders of TIDES elect to convert their TIDES into shares of our Class A common
stock, other holders of our Class A common stock will be diluted.
In addition, at any time after October 3, 2002, we have the right to redeem
any or all of the TIDES for a cash redemption price equal to $51.563 per TIDES.
This redemption price will step down to $51.042 on September 30, 2003; to
$50.521 on September 30, 2004; and to $50.00 on September 30, 2005. Holders of
TIDES have the right to convert their TIDES into shares of our Class A common
stock rather than receive the cash redemption price, which is likely to occur if
we elect to redeem the TIDES at a time when the market price for our Class A
common stock is higher than the applicable TIDES redemption price and would have
the effect of diluting other holders of our Class A common stock. As of February
15, 2002, the closing price of our Class A common stock was $52.74.
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 direct and indirect subsidiaries. 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 our subsidiaries will
retain and use their net earnings and cash flow in their operations, including
to service their debt obligations, before making distributions to us. Moreover,
we cannot assure you that applicable state law and contractual restrictions,
including the dividend covenants contained in the credit facility and the
indenture governing the notes to be offered concurrently with this offering,
would permit dividends or distributions from our subsidiaries to us.
OUR ABILITY TO INCUR SUBSTANTIAL INDEBTEDNESS COULD HAVE IMPORTANT CONSEQUENCES
TO YOU.
We have the ability to incur indebtedness that is substantial in relation
to our shareholders' equity. As of December 31, 2001, we had $388.0 million
outstanding indebtedness under our credit facility, and shareholders' equity of
approximately $755.9 million. As of December 31, 2001 up to an additional $255.8
million was available under our credit facility, subject to compliance with
certain financial ratios and covenants. See "Capitalization," and "Management's
Discussion and Analysis of Financial Condition and Results of Operation --
Liquidity and Capital Resources."
S-13
If we were to incur a substantial amount of indebtedness under the credit
facility, it could have several important consequences to the holders of our
Class A common stock, including, but not limited to, the following:
- a substantial portion of our cash flow from operations could be dedicated
to debt service and would not be available for other purposes, including
for funding future expansion and ongoing capital expenditures;
- our ability to obtain additional financing for working capital, capital
expenditures, acquisitions and general corporate or other purposes could
be impaired;
- our leveraged position and the covenants contained in the credit facility
could limit our ability to compete, expand and make capital improvements;
- our level of indebtedness could make us more vulnerable to economic
downturns, limit our ability to withstand competitive pressures and reduce
our flexibility in responding to changing business, regulatory and
economic conditions; and
- certain restrictive covenants contained in the credit facility could
limit our ability to pay dividends and make other distributions to our
shareholders.
THE INDENTURE FOR THE NOTES AND OUR CREDIT FACILITY CONTAIN VARIOUS COVENANTS
THAT RESTRICT OUR FINANCIAL AND OPERATIONAL FLEXIBILITY.
The indenture governing the notes to be issued concurrently with this
offering and our credit facility contain various provisions that restrict our
ability to:
- incur additional debt;
- pay dividends and make other distributions;
- make investments and other restricted payments;
- create liens;
- swap or sell assets; and
- enter into certain transactions with affiliates.
These restrictions on our ability to operate our business could have a
material adverse effect on our business.
In addition, our credit facility requires that we maintain specified
financial ratios. Our ability to meet these financial ratios can be affected by
operating performance or other events beyond our control, and we cannot assure
you that we will meet those ratios.
If we default under any financing agreements, our lenders could:
- elect to declare all amounts borrowed to be immediately due and payable,
together with accrued and unpaid interest; and/or
- terminate their commitments, if any, to make further extensions of
credit.
If we are unable to pay our obligations to our senior secured lenders, they
could proceed against any or all of the collateral securing our indebtedness to
them. The collateral under our credit facility consists of 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 equity interests in our subsidiaries. In addition, a breach of certain of
these restrictions or covenants, or an acceleration by our senior secured
lenders of our obligations to them, would cause a default under the indenture
governing the notes, which could have an adverse effect on our financial
condition and the trading price of our Class A common stock.
S-14
USE OF PROCEEDS
Our net proceeds from the sale of shares of our Class A common stock
offered hereby will be approximately $150.2 million, based on an assumed public
offering price of $52.74 per share and after deducting underwriting discounts
and commissions and estimated offering expenses payable by us, assuming the
underwriters do not exercise their over-allotment option. We expect the
aggregate net proceeds from this offering (which we intend to contribute to
Entercom Radio) and the concurrent notes offering by Entercom Radio and Entercom
Capital will be approximately $296.0 million. Entercom Radio will use these
aggregate proceeds to pay down revolving indebtedness under our credit facility
and to finance pending acquisitions. We intend to use any remaining proceeds for
general corporate purposes, including repayment of indebtedness under the credit
facility, future acquisitions and working capital. Pending application of the
net proceeds from this offering, we may invest in commercial paper or short-
term investment grade interest bearing securities.
As of December 31, 2001, we had $388.0 million outstanding indebtedness
under our credit facility, which includes $63.0 million of revolving
indebtedness, and our weighted average interest rate on borrowings under our
credit facility was 2.8% or 4.3% taking into account the impact of our
derivative interest rate swaps and collars. The term and revolving loan portions
of our credit facility mature on September 30, 2007. On January 2, 2002, we
incurred $18.0 million of indebtedness under our credit facility to fund the
deposit for our pending acquisition of three stations in the Denver, Colorado
market. On February 8, 2002, we incurred $14.5 million of indebtedness under our
credit facility to fund a portion of the balance of the purchase price for the
acquisition of two radio stations in the Greensboro, North Carolina market. On
February 15, 2002, we incurred $8.8 million of indebtedness under our credit
facility to fund the deposit for our pending acquisition of an additional
station in the Denver, Colorado market. Other than the amounts set forth above,
all other borrowings under our credit facility since January 1, 2001, have been
used for working capital and certain investing and financing purposes.
S-15
PRICE RANGE OF OUR CLASS A COMMON STOCK
Our Class A common stock is traded on the NYSE under the symbol "ETM." The
following table sets forth, for the periods indicated, the high and low sales
prices per share of our Class A common stock as reported on the NYSE:
<Table>
<Caption>
PRICE RANGE OF OUR
CLASS A COMMON STOCK
--------------------
HIGH LOW
------- -------
Year Ended December 31, 2000:
First Quarter............................................. $68.69 $38.13
Second Quarter............................................ 50.75 35.81
Third Quarter............................................. 50.56 25.31
Fourth Quarter............................................ 39.81 25.31
Year Ended December 31, 2001:
First Quarter............................................. $50.50 $31.63
Second Quarter............................................ 54.40 35.75
Third Quarter............................................. 54.25 30.00
Fourth Quarter............................................ 50.92 32.75
Year Ended December 31, 2002:
First Quarter (through February 15)....................... $55.00 $46.28
</Table>
On February 15, 2002, the last reported sale price of our Class A common
stock on the NYSE was $52.74 per share. As of January 31, 2002, there were
approximately 75 stockholders of record of our Class A common stock.
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 6 1/4%
Convertible Preferred Securities Term Income Deferrable Equity Securities
(TIDES) of our subsidiary trust, and other considerations that the board of
directors deems relevant. In addition, both the terms of the indenture governing
the notes to be issued concurrently with this offering and our credit facility
restrict our ability to pay cash dividends.
S-16
CAPITALIZATION
The following table sets forth, on a consolidated basis, our cash and cash
equivalents, short-term investments and capitalization as of December 31, 2001,
on an actual basis and an as adjusted basis giving effect to this offering,
assuming the underwriters do not exercise their over-allotment option, and the
concurrent offering by Entercom Radio and Entercom Capital of $150.0 million in
aggregate principal amount of % Senior Subordinated Notes due 2014, and the
application of the net proceeds herefrom and therefrom to pay down $63.0 million
of revolving indebtedness.
The information in this table should be read in conjunction with our
consolidated financial statements and the related notes in our Annual Report on
Form 10-K for the year ended December 31, 2001, incorporated by reference in
this prospectus supplement and the accompanying prospectus, and "Use of
Proceeds," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus supplement.
<Table>
<Caption>
DECEMBER 31, 2001
------------------------
AS ADJUSTED
FOR THE
ACTUAL OFFERINGS
---------- -----------
(IN THOUSANDS)
Cash and cash equivalents and short-term investments........ $ 10,751 $ 243,706
========== ==========
Senior debt, including current portion...................... $ 388,323 $ 325,323
% Senior Subordinated Notes due 2014...................... -- 150,000
---------- ----------
Total long-term debt................................... 388,323 475,323
TIDES....................................................... 125,000 125,000
Shareholders' equity........................................ 755,881 906,086
---------- ----------
Total capitalization................................... $1,269,204 $1,506,409
========== ==========
</Table>
S-17
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth the selected historical financial data of
Entercom Communications and its consolidated subsidiaries for the periods
presented. The selected historical consolidated financial data have been derived
from our consolidated financial statements for the fiscal years ended September
30, 1997 and 1998, the three months ended December 31, 1998, and the fiscal
years ended December 31, 1999 and 2000, which have been audited by Deloitte &
Touche LLP, independent public accountants, and for the fiscal year ended
December 31, 2001, which has been audited by Arthur Andersen LLP, independent
public accountants. The selected historical consolidated financial data for the
three months ended December 31, 1997 and the twelve months ended December 31,
1998 have been derived from our unaudited consolidated financial statements. You
should read the selected historical consolidated financial data in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus supplement and our
consolidated financial statements and related notes in our Annual Report on Form
10-K for the year ended December 31, 2001, incorporated by reference herein and
in the accompanying prospectus.
Until December 31, 1998, 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, for comparison purposes, the three months ended December 31, 1997 and
the twelve months ended December 31, 1998.
Immediately prior to our initial public offering in January 1999, Chase
Capital converted a 7% Subordinated Convertible Note due 2003 in the principal
amount of $25 million 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 certain state income tax returns. Immediately before our
initial public offering, we converted to a C corporation, and accordingly, we
were then 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 and the
effect of the adjustment to reflect indexing of the Chase Capital convertible
subordinated note (the amount of this adjustment is not tax deductible), as if
we had been taxed as a C corporation.
As a result of our conversion to 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 if we were a
C corporation rather than an S corporation throughout the periods presented.
Broadcast cash flow consists of operating income before depreciation and
amortization, net expense (income) from time brokerage agreement fees, corporate
general and administrative expenses and gains (losses) on sale of assets.
Broadcast cash flow margin represents broadcast cash flow as a percentage
of net revenues.
S-18
EBITDA before net expense (income) from time brokerage agreement fees
consists of operating income plus depreciation and amortization, non-cash
compensation expense (which is otherwise included in corporate general and
administrative expenses) and the elimination of net expense (income) from time
brokerage agreement fees and gains (losses) on sale of assets.
After tax cash flow consists of income (loss) before extraordinary item and
accounting change, plus the following: depreciation and amortization, non-cash
compensation expense (which is otherwise included in corporate general and
administrative expense), deferred taxes, the elimination, net of taxes, of
equity loss from unconsolidated affiliate, any gains or losses on sale of
assets, investments and derivative instruments and the elimination of any
adjustments to reflect the indexing of the convertible subordinated note. For
the years and periods prior to 2000, after tax cash flow consists of pro forma
income (loss) before extraordinary item, to reflect taxes as if we were a C
corporation during the periods presented.
The data is presented in thousands, other than income (loss) per share.
Although broadcast cash flow, EBITDA before net expense (income) from time
brokerage agreement fees and after tax cash flow are not measures of performance
or liquidity calculated in accordance with generally accepted accounting
principles, we believe that these measures are useful to an investor in
evaluating our performance because they are widely used in the broadcast
industry to measure a radio company's operating performance. However, you should
not consider broadcast cash flow, EBITDA before net expense (income) from time
brokerage agreement fees and 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 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.
<Table>
<Caption>
TWELVE
YEAR ENDED THREE MONTHS ENDED MONTHS
SEPTEMBER 30, DECEMBER 31, ENDED YEAR ENDED DECEMBER 31,
--------------------- ---------------------- DECEMBER 31, ------------------------------------
1997 1998 1997 1998 1998 1999 2000 2001
--------- --------- ----------- -------- ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
OPERATING DATA:
Net revenues.............. $ 93,862 $ 132,998 $ 28,399 $ 47,363 $ 151,962 $ 215,001 $ 352,025 $ 332,897
--------- --------- -------- -------- --------- ---------- ---------- ----------
Operating expenses
(income):
Station operating
expenses............... 61,280 88,599 18,868 29,990 99,721 135,943 206,608 201,257
Depreciation and
amortization........... 7,685 13,066 2,880 4,358 14,544 21,564 43,475 46,509
Corporate general and
administrative
expenses............... 3,249 4,527 849 1,850 5,528 8,100 12,497 12,335
Net expense (income) from
time brokerage
agreement fees......... (476) 2,399 -- 1,236 3,635 652 11 --
Net (gains) losses on
sale of assets......... (197,097) (8,661) (43) (69,648) (78,266) (1,986) (41,465) 16
--------- --------- -------- -------- --------- ---------- ---------- ----------
Total operating
(income)
expenses.......... (125,359) 99,930 22,554 (32,214) 45,162 164,273 221,126 260,117
--------- --------- -------- -------- --------- ---------- ---------- ----------
Operating income.......... 219,221 33,068 5,845 79,577 106,800 50,728 130,899 72,780
Other expense (income):
Interest expense......... 11,388 14,663 2,996 5,732 17,399 11,182 37,760 27,583
</Table>
S-19
<Table>
<Caption>
TWELVE
YEAR ENDED THREE MONTHS ENDED MONTHS
SEPTEMBER 30, DECEMBER 31, ENDED YEAR ENDED DECEMBER 31,
--------------------- ---------------------- DECEMBER 31, ------------------------------------
1997 1998 1997 1998 1998 1999 2000 2001
--------- --------- ----------- -------- ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
Financing cost of
Company-obligated
mandatorily redeemable
convertible preferred
securities of
subsidiary holding
solely convertible
debentures of the
Company (TIDES)........ -- -- -- -- -- 1,845 7,813 7,813
Adjustment to reflect
indexing of the
convertible
subordinated note...... 29,070 8,841 14,903 29,503 23,441 -- -- --
Interest income.......... (482) (410) (127) (146) (429) (3,253) (512) (262)
Equity loss from
unconsolidated
affiliate.............. -- -- -- -- -- -- 1,100 4,706
Loss on investments...... -- -- -- -- -- -- 5,688 2,000
Net loss on derivative
instruments............ -- -- -- -- -- -- -- 912
Other non-operating
expenses............... 1,986 82 25 723 780 -- -- --
--------- --------- -------- -------- --------- ---------- ---------- ----------
Total other
expense........... 41,962 23,176 17,797 35,812 41,191 9,774 51,849 42,752
--------- --------- -------- -------- --------- ---------- ---------- ----------
Income (loss) before
income taxes,
extraordinary item and
accounting change........ 177,259 9,892 (11,952) 43,765 65,609 40,954 79,050 30,028
Income taxes.............. 489 453 81 310 682 100,913 31,796 12,194
--------- --------- -------- -------- --------- ---------- ---------- ----------
Income (loss) before
extraordinary item and
accounting change........ 176,770 9,439 (12,033) 43,455 64,927 (59,959) 47,254 17,834
Extraordinary item, net of
taxes.................... -- (2,376) -- -- (2,376) (918) -- --
--------- --------- -------- -------- --------- ---------- ---------- ----------
Income (loss) before
accounting change........ 176,770 7,063 (12,033) 43,455 62,551 (60,877) 47,254 17,834
Cumulative effect of
accounting change, net of
taxes.................... -- -- -- -- -- -- -- (566)
--------- --------- -------- -------- --------- ---------- ---------- ----------
Net income (loss)......... $ 176,770 $ 7,063 $(12,033) $ 43,455 $ 62,551 $ (60,877) $ 47,254 $ 17,268
========= ========= ======== ======== ========= ========== ========== ==========
Net income (loss) per
share -- basic:
(Loss) income before
extraordinary item and
accounting change...... $ (1.58) $ 1.05 $ 0.39
Extraordinary item, net
of taxes............... (0.03) -- --
---------- ---------- ----------
(Loss) income before
accounting change...... (1.61) 1.05 0.39
Cumulative effect of
accounting change, net
of taxes............... -- -- (0.01)
---------- ---------- ----------
Net (loss) income per
share -- basic........... $ (1.61) $ 1.05 $ 0.38
========== ========== ==========
</Table>
S-20
<Table>
<Caption>
TWELVE
YEAR ENDED THREE MONTHS ENDED MONTHS
SEPTEMBER 30, DECEMBER 31, ENDED YEAR ENDED DECEMBER 31,
--------------------- ---------------------- DECEMBER 31, ------------------------------------
1997 1998 1997 1998 1998 1999 2000 2001
--------- --------- ----------- -------- ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
Net (loss) income per
share -- diluted:
(Loss) income before
extraordinary item and
accounting change...... $ (1.58) $ 1.04 $ 0.39
Extraordinary item, net
of taxes............... (0.03) -- --
---------- ---------- ----------
(Loss) income before
accounting change...... (1.61) 1.04 0.39
Cumulative effect of
accounting change, net
of taxes............... -- -- (0.01)
---------- ---------- ----------
Net (loss) income per
share -- diluted......... $ (1.61) $ 1.04 $ 0.38
========== ========== ==========
Weighted average
shares -- basic.......... 21,534 22,239 21,534 24,742 24,104 37,922 45,209 45,295
========= ========= ======== ======== ========= ========== ========== ==========
Weighted average
shares -- diluted........ 21,534 22,239 21,534 24,742 24,104 37,922 45,614 45,994
========= ========= ======== ======== ========= ========== ========== ==========
PRO FORMA DATA:
Income (loss) before
income taxes and
extraordinary item....... $ 177,259 $ 9,892 $(11,952) $ 43,765 $ 65,609 $ 40,954
Pro forma income taxes.... 78,405 7,119 1,121 27,842 33,840 20,278
--------- --------- -------- -------- --------- ----------
Pro forma income (loss)
before extraordinary
item..................... 98,854 2,773 (13,073) 15,923 31,769 20,676
Extraordinary item, net of
pro forma taxes.......... -- (1,488) -- -- (1,488) (918)
--------- --------- -------- -------- --------- ----------
Pro forma net income
(loss)................... $ 98,854 $ 1,285 $(13,073) $ 15,923 $ 30,281 $ 19,758
========= ========= ======== ======== ========= ==========
Pro forma basic income
(loss) per share before
extraordinary item....... $ 4.59 $ 0.12 $ (0.61) $ 0.64 $ 1.32 $ 0.55
========= ========= ======== ======== ========= ==========
Pro forma diluted income
(loss) per share before
extraordinary item....... $ 4.59 $ 0.12 $ (0.61) $ 0.64 $ 1.32 $ 0.54
========= ========= ======== ======== ========= ==========
Pro forma basic net income
(loss)................... $ 4.59 $ 0.06 $ (0.61) $ 0.64 $ 1.26 $ 0.52
========= ========= ======== ======== ========= ==========
Pro forma diluted net
income (loss)............ $ 4.59 $ 0.06 $ (0.61) $ 0.64 $ 1.26 $ 0.51
========= ========= ======== ======== ========= ==========
Pro forma weighted average
common shares
outstanding -- basic..... 21,534 22,239 21,534 24,742 24,104 37,922
Pro forma weighted average
common shares
outstanding -- diluted... 21,534 22,239 21,534 24,742 24,104 38,238
BALANCE SHEET DATA (AT END
OF PERIOD):
Cash and cash
equivalents.............. $ 3,626 $ 6,666 $ 3,497 $ 6,469 $ 6,469 $ 11,262 $ 13,257 $ 10,751
Intangibles and other
assets................... 300,029 428,763 313,889 504,825 504,825 1,225,335 1,277,609 1,244,957
Total assets.............. 364,743 522,945 378,138 681,034 681,034 1,396,048 1,473,928 1,438,740
Senior debt, including
current portion.......... 117,000 253,784 127,000 330,281 330,281 465,770 461,260 388,323
Total shareholders'
equity................... 179,019 182,970 166,986 225,467 225,467 686,611 735,701 755,881
</Table>
S-21
<Table>
<Caption>
TWELVE
YEAR ENDED THREE MONTHS ENDED MONTHS
SEPTEMBER 30, DECEMBER 31, ENDED YEAR ENDED DECEMBER 31,
--------------------- ---------------------- DECEMBER 31, ------------------------------------
1997 1998 1997 1998 1998 1999 2000 2001
--------- --------- ----------- -------- ------------ ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
OTHER DATA:
Broadcast cash flow....... $ 32,582 $ 44,399 $ 9,531 $ 17,373 $ 52,241 $ 79,058 $ 145,417 $ 131,640
Broadcast cash flow
margin................... 34.7% 33.4% 33.6% 36.7% 34.4% 36.8% 41.3% 39.5%
EBITDA before net expense
(income) from time
brokerage agreement
fee...................... $ 29,333 $ 39,872 $ 8,682 $ 15,523 $ 46,713 $ 71,419 $ 133,577 $ 119,842
After tax cash flow....... 16,590 21,028 5,003 7,985 24,010 52,465 89,721 87,084
Cash flows related to:
Operating activities..... 8,859 23,019 7,341 11,158 26,836 40,700 69,475 85,243
Investing activities..... (13,695) (153,651) (17,470) (86,894) (223,075) (712,323) (64,684) (17,891)
Financing activities..... 3,170 133,672 10,000 75,539 199,211 676,416 (2,796) (69,858)
</Table>
S-22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 2001, we generated 79.8% of our net revenues from local advertising,
which is sold primarily by each individual local radio station's sales staff,
and 17.9% from national spot advertising, which is sold by independent
advertising sales representatives. We generated the balance of our 2001 revenues
principally from network advertising, event revenue and rental income from tower
sites. Our most significant station operating expenses are employees'
compensation, and programming and promotional expenses.
We include revenues recognized under a time brokerage agreement or a
similar sales agreement for stations operated by us prior to acquiring the
stations in net revenues, while we reflect operating expenses associated with
these stations in station operating expenses. Consequently, there is no
difference in the method of revenue and operating expense recognition between a
station operated by us under a time brokerage agreement or similar sales
agreement and a station owned and operated by us.
Several factors may adversely affect a radio broadcasting company's
performance in any given period. In the radio broadcasting industry, seasonal
revenue fluctuations are common and are due primarily to variations in
advertising expenditures by local and national advertisers. Typically, revenues
are lowest in the first calendar quarter of the year. We generally incur
advertising and promotional expenses to increase audiences. However, because
Arbitron reports ratings quarterly, any changed ratings, and therefore its
effect on advertising revenues, tend to lag behind the incurrence of advertising
and promotional spending. As a result of the tragic events of September 11,
2001, radio advertising was severely curtailed for several days and the negative
effects on advertisers and radio broadcasters continued into the next quarter.
We calculate same station results by comparing the performance of stations
operated by us throughout the relevant period to the comparable performance in
the prior year's corresponding period, adjusted for significant changes to
sports contracts.
For purposes of the following discussion, pro forma net income represents
historical income before income taxes, extraordinary item and accounting change
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,
extraordinary item and accounting change and the effect of the adjustment to
reflect indexing of the convertible subordinated note (the amount of this
adjustment is not tax deductible).
RECENT EVENTS
On November 29, 2001, we entered into an agreement with WCCB-TV, Inc., a
subsidiary of Bahakel Communications, Ltd. to acquire the assets of WKSI-FM and
WPET-AM, serving the Greensboro, North Carolina radio market, for a purchase
price of $20.8 million in cash. On
S-23
December 5, 2001, we began operating these stations under a time brokerage
agreement. This transaction closed on February 8, 2002 and increased our
ownership to six radio stations in the Greensboro, North Carolina radio market.
On December 24, 2001, we entered into an agreement with Tribune
Broadcasting Company to acquire the assets of KOSI-FM, KKHK-FM and KEZW-AM,
serving the Denver, Colorado radio market, for a purchase price of $180.0
million in cash, of which we paid $18.0 million as a deposit on January 2, 2002.
On February 1, 2002, we began operating these stations under a time brokerage
agreement. The time brokerage agreement may run for a period of up to three
years at Tribune's option. The closing of this transaction may be delayed at the
option of Tribune, not to exceed three years, and is conditioned on the approval
of the FCC.
On February 1, 2002, we entered into an agreement effective February 28,
2002, to terminate our joint sales agreement for KING-FM in the Seattle,
Washington radio market, that was due to expire on June 30, 2002.
On February 12, 2002, we entered into an agreement with subsidiaries of
Emmis Communications Corporation to acquire the assets of KALC-FM, serving the
Denver, Colorado radio market, for a purchase price of $88.0 million in cash, of
which we paid $8.8 million as a deposit on February 15, 2002. We will begin
operating this station under a time brokerage agreement upon the expiration or
termination of all applicable antitrust waiting periods. We expect the closing
of this transaction, which is conditioned on the receipt of all necessary
regulatory approvals, to occur in the second quarter of 2002.
RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated
financial statements and related notes in our Annual Report on Form 10-K for the
year ended December 31, 2001, incorporated by reference herein and in the
accompanying prospectus. The following results of operations include a
discussion of the year ended December 31, 2001 as compared to the year ended
December 31, 2000 and a discussion of the year ended December 31, 2000 as
compared to the year ended December 31, 1999. Our results of operations
represent the operations of the radio stations owned or operated pursuant to
time brokerage agreements or joint sales agreements during the relevant periods.
Our results of operations for the year ended December 31, 2000 as compared to
the year ended December 31, 1999 were heavily impacted by our acquisition of
radio stations from Sinclair Broadcast Group, Inc. in 2000 and 1999.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
NET REVENUES................................................ $352,025 $332,897
Decrease of $(19,128) or (5.4%)
</Table>
Net revenues decreased 5.4% to $332.9 million for the year ended December
31, 2001 from $352.0 million for the year ended December 31, 2000. On a same
station basis, net revenues decreased 5.9% to $332.2 million from $353.2
million. Net revenues and same station net revenues declined due to a
combination of general weakness in the advertising sector, comparisons to the
prior year in which we experienced 12.7% growth and the effect of the tragic
events of September 11, 2001, when radio advertising was severely curtailed for
several days and its negative effects continued into the next quarter. The
overall decline in net revenues was also affected by acquisitions and
divestitures. For the years ended December 31, 2001 and 2000, we acquired
stations with net revenues of $22.0 million and $10.1 million,
S-24
respectively. For the year ended December 31, 2001, we terminated sports
contracts under which we sold advertising with net revenues of $0.5 million; and
for the year ended December 31, 2000, we divested stations with net revenues of
$3.2 million, plus $2.3 million in net revenues from terminated sports contracts
under which we sold advertising.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
STATION OPERATING EXPENSES.................................. $206,608 $201,257
Decrease of $(5,351) or (2.6%)
Percentage of Net Revenues.................................. 58.7% 60.5%
</Table>
Station operating expenses decreased 2.6% to $201.3 million for the year
ended December 31, 2001 from $206.6 million for the year ended December 31,
2000. On a same station basis, station operating expenses decreased 2.9% to
$199.3 million from $205.3 million. Station operating expenses and same station
operating expenses declined due to a decrease in sales expense as a result of a
decrease in same station net revenues and cost reduction efforts. The overall
decrease in station operating expenses was also affected by acquisitions and
divestitures. For the years ended December 31, 2001 and 2000, we acquired
stations with operating expenses of $15.1 million and $8.8 million,
respectively. For the year ended December 31, 2001, we terminated sports
contracts under which we sold advertising with operating expenses of $1.2
million; and for the year ended December 31, 2000, we divested stations with
operating expenses of $2.3 million, plus $2.4 million in operating expenses from
terminated sports contracts under which we sold advertising.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
DEPRECIATION AND AMORTIZATION............................... $ 43,475 $ 46,509
Increase of $3,034 or 7.0%
Percentage of Net Revenues.................................. 12.3% 14.0%
</Table>
Depreciation and amortization increased 7.0% to $46.5 million for the year
ended December 31, 2001 from $43.5 million for the year ended December 31, 2000.
The increase was primarily attributable to our acquisitions, net of
divestitures, since January 1, 2000. We expect that the adoption on January 1,
2002 of SFAS No. 142, "Goodwill and Other Intangible Assets", as described more
fully under "Recent Pronouncements," will materially reduce our non-cash
amortization expense for goodwill and broadcasting licenses which will have a
material impact on our financial statements because the amount currently
recorded for the amortization of goodwill and broadcasting licenses is
significant. For the years ended December 31, 2001 and 2000, the amounts of
amortization expense for goodwill and broadcasting licenses were $0.1 million
and $33.1 million and $0.1 million and $32.0 million, respectively. However,
this reduction in our non-cash amortization expense does not include any
adjustments for potential write-downs that could result based on the outcome of
the required impairment tests under the provisions of SFAS No. 142.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES............... $ 12,497 $ 12,335
Decrease of $(162) or (1.3%)
Percentage of Net Revenues.................................. 3.6% 3.7%
</Table>
S-25
Corporate general and administrative expenses decreased 1.3% to $12.3
million for the year ended December 31, 2001 from $12.5 million for the year
ended December 31, 2000. The decrease was primarily attributable to cost
reduction efforts, offset by the effect of inflation and the growth in the
number of stations. Also included for the years ended December 31, 2001 and 2000
is $0.5 million and $0.7 million, respectively, in non-cash stock-based
compensation expense.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
INTEREST EXPENSE (INCLUDING THE FINANCING COST OF TIDES).... $ 45,573 $35,396
Decrease of $(10,177) or (22.3%)
Percentage of Net Revenues.................................. 12.9% 10.6%
</Table>
Interest expense, including the financing cost on our 6.25% Convertible
Preferred Securities Term Income Deferrable Equity Securities (TIDES), decreased
22.3% to $35.4 million for the year ended December 31, 2001 from $45.6 million
for the year ended December 31, 2000. The decrease in interest expense was
primarily attributable to an overall decrease in outstanding indebtedness under
our credit facility and a decline in interest rates.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND
ACCOUNTING CHANGE......................................... $ 79,050 $30,028
Decrease of $(49,022) or (62.0)%
Percentage of Net Revenues.................................. 22.5% 9.0%
</Table>
Income before income taxes, extraordinary item and accounting change
decreased 62.0% to $30.0 million for the year ended December 31, 2001 from $79.1
million for the year ended December 31, 2000. The decrease in income before
income taxes, extraordinary item and accounting change was primarily
attributable to: (1) the factors described above; (2) the decrease in gain on
sale of assets compared to the prior year's gain of $41.5 million from the
required divestiture of certain of our Kansas City radio stations; (3) the
increase in equity loss from unconsolidated affiliate of $3.6 million because
the initial investment in this affiliate was made during the later part of the
prior year; and (4) the recognition of a net loss on derivative instruments of
$0.9 million due to the application of a new accounting pronouncement.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
NET INCOME.................................................. $ 47,254 $17,268
Decrease of $(29,986)
</Table>
Net income decreased to $17.3 million for the year ended December 31, 2001
from $47.3 million for the year ended December 31, 2000. The decrease in net
income was primarily attributable to: (1) the factors described above, net of
taxes; and (2) the cumulative effect of the accounting change, net of taxes, of
$0.6 million.
S-26
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
OTHER DATA
BROADCAST CASH FLOW....................................... $145,417 $131,640
Decrease of $(13,777) or (9.5)%
</Table>
Broadcast cash flow decreased 9.5% to $131.6 million for the year ended
December 31, 2001 from $145.4 million for the year ended December 31, 2000. On a
same station basis, broadcast cash flow decreased 10.1% to $132.9 million from
$147.9 million as same station net revenues declined, offset by a decline in
same station operating expenses. The overall decline in broadcast cash flow was
affected by acquisitions and divestitures. For the years ended December 31, 2001
and 2000, we acquired stations with broadcast cash flow of $7.0 million and $1.3
million, respectively. For the year ended December 31, 2001, we terminated
sports contracts under which we sold advertising and incurred a broadcast cash
flow deficit of $0.7 million and for the year ended December 31, 2000, we
divested stations with $0.9 million in broadcast cash flow, plus $0.1 million
incurred as a broadcast cash flow deficit from terminated sports contracts under
which we sold advertising.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
BROADCAST CASH FLOW MARGIN.................................. 41.3% 39.5%
Decrease of (1.8)% or (4.3)%
</Table>
Our broadcast cash flow margin decreased to 39.5% for the year ended
December 31, 2001 from 41.3% for the year ended December 31, 2000. On a same
station basis, our broadcast cash flow margin decreased to 40.0% from 41.9%.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
2000 2001
------------ ------------
(AMOUNTS IN THOUSANDS)
AFTER TAX CASH FLOW......................................... $89,721 $87,084
Decrease of $(2,637) or (2.9)%
</Table>
After tax cash flow decreased 2.9% to $87.1 million for the year ended
December 31, 2001 from $89.7 million for the year ended December 31, 2000. After
tax cash flow was negatively impacted by the 9.5% decrease in broadcast cash
flow, offset by the decrease in interest expense, net of tax, and the tax
benefits from the purchase of radio station assets since January 1, 2000. The
effective tax rate during these periods was positively affected by amortization
of intangibles that were deductible for tax purposes in excess of the amounts
reflected for book purposes.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
NET REVENUES................................................ $215,001 $352,025
Increase of $137,024 or 63.7%
</Table>
Net revenues increased 63.7% to $352.0 million for the year ended December
31, 2000 from $215.0 million for the year ended December 31, 1999. Of the
increase, $101.5 million was attributable to stations that we acquired or that
we were in the process of acquiring since
S-27
January 1, 1999, offset by $5.2 million for stations that we divested (including
$1.8 million in revenues from a sports contract for which we discontinued
selling advertising) during the same period. On a same station basis, net
revenues increased 12.7% to $338.4 million from $300.4 million. Same station
revenue growth was led by increases in Sacramento, Milwaukee, Norfolk,
Greenville and Boston due to improved selling efforts.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
STATION OPERATING EXPENSES.................................. $135,943 $206,608
Increase of $70,665 or 52.0%
Percentage of Net Revenues.................................. 63.2% 58.7%
</Table>
Station operating expenses increased 52.0% to $206.6 million for the year
ended December 31, 2000 from $135.9 million for the year ended December 31,
1999. Of the increase, $63.6 million is attributable to stations that we
acquired or that we were in the process of acquiring since January 1, 1999,
offset by $6.6 million for stations that we divested (including $4.4 million in
expenses from a sports contract for which we discontinued selling advertising)
during the same period. On a same station basis, station operating expenses
increased 5.1% to $195.9 million from $186.3 million.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
DEPRECIATION AND AMORTIZATION............................... $21,564 $43,475
Increase of $21,911 or 101.6%
Percentage of Net Revenues.................................. 10.0% 12.3%
</Table>
Depreciation and amortization increased 101.6% to $43.5 million for the
year ended December 31, 2000 from $21.6 million for the year ended December 31,
1999. The increase was primarily attributable to our acquisitions since January
1, 1999, offset by divestitures during the same period. We expect that the
adoption on January 1, 2002 of SFAS No. 142, "Goodwill and Other Intangible
Assets", as described more fully under "Recent Pronouncements," will materially
reduce our non-cash amortization expense for goodwill and broadcasting licenses
which will have a material impact on our financial statements because the amount
currently recorded for the amortization of goodwill and broadcasting licenses is
significant. For the years ended December 31, 2000 and 1999, the amounts of
amortization expense for goodwill and broadcasting licenses were $0.1 million
and $32.0 million and $0.1 million and $14.8 million, respectively. However,
this reduction in our non-cash amortization expense does not include any
adjustments for potential write-downs that could result based on the outcome of
the required impairment tests under the provisions of SFAS No. 142.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES............... $8,100 $12,497
Increase of $4,397 or 54.3%
Percentage of Net Revenues.................................. 3.8% 3.6%
</Table>
Corporate general and administrative expenses increased 54.3% to $12.5
million for the year ended December 31, 2000 from $8.1 million for the year
ended December 31, 1999. The increase was primarily attributable to higher
administrative expenses associated with supporting
S-28
our growth. Also included in the years ended December 31, 2000 and 1999 is $0.7
million and $0.5 million, respectively, in non-cash stock-based compensation
expense.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
INTEREST EXPENSE (INCLUDING THE FINANCING COST OF TIDES).... $13,027 $45,573
Increase of $32,546 or 249.8%
Percentage of Net Revenues.................................. 6.1% 12.9%
</Table>
Interest expense, including the financing cost on our 6.25% Convertible
Preferred Securities Term Income Deferrable Equity Securities (TIDES), increased
249.8% to $45.6 million for the year ended December 31, 2000 from $13.0 million
for the year ended December 31, 1999. The increase in interest expense was
primarily attributable to (1) an overall increase in outstanding indebtedness
used to fund the acquisition of radio station assets, and (2) the financing cost
of the TIDES, offset by (1) a reduction in the outstanding indebtedness due to
the use of the proceeds from our October 1999 Class A Common Stock and TIDES
offerings and (2) a reduction in outstanding indebtedness due to the use of the
proceeds from the disposition of radio station assets.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM........... $40,954 $79,050
Increase of $38,096 or 93.0%
Percentage of Net Revenues.................................. 19.0% 22.5%
</Table>
Income before income taxes and extraordinary item increased 93.0% to $79.1
million for the year ended December 31, 2000 from $41.0 million for the year
ended December 31, 1999. The increase was primarily attributable to (1) an
increase in gains on sale of assets of $41.5 million primarily from the gain on
the disposition of two radio stations in the current period; and (2) an increase
in operating income, exclusive of the gains on sale of assets, of $40.7 million
due to increases in revenues from existing and newly acquired stations and
improved expense management from newly acquired stations, offset by: (1) an
increase of $32.5 million in net interest expense and financing costs as a
result of the factors described above under interest expense; (2) an increase in
expense of $6.8 million from the recognition of a loss on investments and an
equity loss from an unconsolidated affiliate; and (3) a decrease in interest
income of $2.7 million as a result of the absence this year of excess cash
available from our October 1999 Class A Common Stock and TIDES offerings during
the period prior to the closing on December 16, 1999, of the acquisition of 42
radio stations from Sinclair, including a radio station under a time brokerage
agreement.
EXTRAORDINARY ITEM, NET OF TAXES
The extraordinary item for the year ended December 31, 1999 resulted from
the write-off of $1.5 million ($0.9 million, net of taxes) of unamortized
finance charges due to the early extinguishment of debt. The early
extinguishment of debt resulted from the refinancing of our previous credit
facility.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
NET INCOME (LOSS)........................................... $(60,877) $47,254
Increase of $108,131
</Table>
S-29
Net income increased to $47.3 million for the year ended December 31, 2000
from a net loss of $60.9 million for the year ended December 31, 1999. The
increase was primarily attributable to: (1) the absence this year of an
adjustment made during the prior year to record a one-time non-cash deferred
income tax expense of $79.8 million as a result of the revocation of our S
Corporation election and our conversion to a C Corporation (we recorded this
expense to reflect the cumulative effect of temporary differences between the
tax and financial reporting bases of our assets and liabilities attributable to
our conversion to a C Corporation); (2) a net increase in gain on sale of assets
of $24.9 million, net of tax, primarily from the disposition of two radio
stations in the current period; and (3) an improvement in operating income,
excluding gains on sale of assets, of $24.4 million, net of tax, primarily as a
result of an improvement in revenues of existing and newly acquired stations and
an improvement in expense management of newly acquired stations, offset by : (1)
an increase in interest expense of $19.5 million, net of tax, for the factors
described under interest expense; (2) an increase in expense of $4.0 million,
net of tax, from the recognition of a loss on investments and an equity loss
from an unconsolidated affiliate and (3) a decrease in interest income of $1.6
million, net of tax, as a result of the absence this year of excess cash
available from our October 1999 Class A Common Stock and TIDES offerings during
the period prior to the closing on December 16, 1999, of the acquisition of 42
radio stations from Sinclair, including a radio station under a time brokerage
agreement.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
NET INCOME TO PRO FORMA NET INCOME.......................... $19,758 $47,254
Increase of $27,496 or 139.2%
</Table>
Net income increased 139.2% to $47.3 million for the year ended December
31, 2000 from pro forma net income of $19.8 million for the year ended December
31, 1999. The increase was primarily attributable to the factors described under
net income (loss) above, except for the adjustment to record a one-time non-cash
deferred income tax expense of $79.8 million, which is excluded from the
definition of pro forma net income.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
OTHER DATA
BROADCAST CASH FLOW......................................... $79,058 $145,417
Increase of $66,359 or 83.9%
</Table>
Broadcast cash flow increased 83.9% to $145.4 million for the year ended
December 31, 2000 from $79.1 million for the year ended December 31, 1999. Of
the increase, $38.0 million is attributable to stations that we acquired or that
we were in the process of acquiring since January 1, 1999 and $2.6 million was
primarily attributable to the elimination of a broadcast cash flow deficit from
a sports contract for which we discontinued selling advertising, offset by $1.2
million for stations that we divested during the same period. On a same station
basis, broadcast cash flow increased 25.4% to $140.7 million from $112.3
million.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
BROADCAST CASH FLOW MARGIN.................................. 36.8% 41.3%
Increase of 4.5% or 12.3%
</Table>
S-30
Our broadcast cash flow margin increased to 41.3% for the year ended
December 31, 2000 from 36.8% for the year ended December 31, 1999. The increase
is attributable to improved revenues and expense management. On a same station
basis, our broadcast cash flow margin increased to 41.6% from 37.4%.
<Table>
<Caption>
YEAR ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1999 2000
------------ ------------
(AMOUNTS IN THOUSANDS)
AFTER TAX CASH FLOW TO PRO FORMA AFTER TAX CASH FLOW........ $52,465 $89,721
Increase of $37,256 or 71.0%
</Table>
After tax cash flow increased 71.0% to $89.7 million for the year ended
December 31, 2000 from pro forma after tax cash flow of $52.5 million for the
year ended December 31, 1999. The increase was primarily 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 prior period. The amount of the deferred
income tax expense was $33.0 million for the year ended December 31, 2000 and
the amount of the pro forma deferred income tax expense was $11.0 million for
the year ended December 31,1999. The amount of the deferred income tax expense
attributable to the gains on sale of assets, loss on investments and equity loss
from an unconsolidated affiliate was $13.9 million for the year ended December
31, 2000 and $27,000 for the year ended December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We use a significant portion of our capital resources to reduce outstanding
debt and to consummate acquisitions. Acquisitions are funded from one or a
combination of the following sources: (1) our credit facility (described below);
(2) the sale of our securities; (3) the swapping of our radio stations in
transactions which qualify as "like-kind" exchanges under Section 1031 of the
Internal Revenue Code; and (4) internally-generated cash flow. Our results of
operations for the years ended December 31, 2001 and 2000 as compared to the
years ended December 31, 2000 and 1999, respectively, were heavily impacted by
our acquisition of the radio stations from Sinclair in 2000 and 1999.
OPERATING ACTIVITIES
Net cash flows provided by operating activities were $85.2 million for the
year ended December 31, 2001, as compared to $69.5 million and $40.7 million for
the years ended December 31, 2000 and 1999, 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. For the year ended
December 31, 2001, net cash provided by operating activities increased $15.8
million as compared to the year ended December 31, 2000, primarily due to a
reduction in net cash flows utilized for working capital. For the year ended
December 31, 2000, cash flows provided by operating activities were positively
affected primarily by: (1) the acquisition of radio stations from Sinclair,
excluding the station in Kansas City we acquired from Sinclair and immediately
sold, and (2) other radio station acquisitions, offset by the required
divestiture of two radio stations in Kansas City, and an increase in accounts
receivable on acquired stations, net of the Kansas City divestiture.
INVESTING AND FINANCING ACTIVITIES
Net cash flows used in investing activities declined to $17.9 million for
the year ended December 31, 2001, as compared to $64.7 million and $712.3
million for the years ended December 31, 2000 and 1999, respectively, primarily
as a result of the net impact of
S-31
acquisitions, divestitures and capital expenditures in the prior years. Net cash
flows used by financing activities were $69.9 million for the year ended
December 31, 2001, as compared to $2.8 million for the year ended December 31,
2000 and net cash flows provided by financing activities of $676.4 million for
the year ended December 31, 1999. The cash flows for the year ended December 31,
2001 reflect a net reduction in outstanding debt of $72.9 million, an increase
of $68.4 million as compared to the prior year, primarily due to the absence
this year of any station acquisitions. The cash flows for the year ended
December 31, 2000, reflect (1) acquisitions and investments consummated and the
related borrowings and (2) the proceeds from the required disposition of certain
of the Kansas City stations. The cash flows for the year ended December 31,
1999, reflect (1) acquisitions consummated and the related borrowings; (2) net
proceeds from our initial public offering and the related payment of long-term
debt; (3) net proceeds from our October 1999 Class A Common Stock and TIDES
offerings and the related payment of long-term debt; and (4) the distribution to
our S corporation shareholders of $88.1 million primarily from the funds
available from the sale of our Tampa stations.
Our business generally does not require substantial investment of capital.
Our capital expenditures totaled $9.8 million in the year ended December 31,
2001, as compared to $9.5 million and $14.4 million in the years ended December
31, 2000 and 1999, respectively. Despite an increase in the average number of
radio stations owned throughout this year as compared to the average number of
radio stations owned throughout the prior year, primarily from the acquisition
of radio stations in the Wichita and Madison markets during the prior year, and
despite the continued relocation of studio facilities in certain markets, our
capital expenditures increased only marginally for the year ended December 31,
2001 as compared to the prior year.
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 former credit facility and to pay other
corporate obligations. Shortly after reducing indebtedness under our former
credit facility, in February 1999 we borrowed approximately $58.0 million to
purchase three Boston radio stations from CBS. On October 6, 1999, we completed
our Class A Common Stock and TIDES offerings and received $276.1 million and
$120.5 million in proceeds, respectively, after deducting discounts,
commissions, fees and expenses. The proceeds were used to reduce outstanding
indebtedness. We used the net proceeds from our October 1999 Class A Common
Stock offering and the TIDES offering, together with cash on hand and proceeds
from our credit facility, to finance the $700.4 million purchase of radio
stations from Sinclair on December 16, 1999.
As of February 12, 2002, we have transactions pending pursuant to
agreements to purchase four radio stations in the Denver, Colorado radio market
having an aggregate purchase price of $268.0 million. Under these agreements, we
have funded $26.8 into escrow deposits to be applied against the purchase price
upon closing. Closing on one of these transactions can be deferred for up to
three years at the seller's option. We intend to finance the pending
acquisitions primarily from this offering and the concurrent notes offering.
Additionally, we may seek to obtain other funding or additional financing from
time-to-time. Our credit facility requires that at the time of closing on these
transactions, we must be in compliance with the terms of the credit facility. We
believe that we will maintain compliance with the terms of our credit facility.
If we are not in compliance, there can be no assurance that we will be
successful in amending or entering into a new credit facility, obtaining
additional financing or that we will be able to obtain such financing on terms
acceptable to us, which could delay or impair our efforts to consummate the
pending transactions.
In addition to debt service and quarterly distributions under the TIDES,
our principal liquidity requirements will be for working capital and general
corporate purposes, including capital
S-32
expenditures, and acquisitions of additional radio stations. For year 2002, we
estimate that capital expenditures, necessary for maintaining our facilities,
will be between $9.0 million and $11.0 million. We are also committed to fund an
investment focused on minority-owned businesses in the amount of approximately
$0.6 million as of December 31, 2001. We believe that cash flow from operating
activities, together with available revolving and term credit borrowings under
our credit facility, should be sufficient to permit us to fund our current
operations. However, in order to finance the pending acquisitions and future
acquisitions, if any, we may require additional financing and there can be no
assurance that we will be able to obtain such financing on terms acceptable to
us. As of December 31, 2001, we had approximately $388.0 million of borrowings
outstanding under our credit facility (in addition to an outstanding letter of
credit in the amount of $6.2 million), of which most was incurred in connection
with the acquisition of radio stations from Sinclair.
We entered into our credit facility as of December 16, 1999, with a
syndicate of banks for $650.0 million in senior secured credit consisting of:
(1) $325.0 million in a reducing revolving credit facility; and (2) $325.0
million in a multi-draw term loan that was fully drawn as of September 30, 2000.
Our credit facility was established to: (1) refinance our existing indebtedness;
(2) provide working capital; and (3) fund corporate acquisitions. At our
election, interest on any outstanding principal accrues at a rate based on
either LIBOR plus a spread that ranges from 0.75% to 2.375% or on KeyBank N.A.'s
base rate plus a spread of up to 1.125%, depending on our leverage ratio.
Although we may borrow, repay and re-borrow under the revolving credit facility,
the aggregate maximum amount that we can have outstanding at any one time is
reduced on a quarterly basis beginning on September 30, 2002 in amounts that
vary from $12.2 million to $16.3 million for each loan. Under the credit
facility, the reducing revolving credit facility and multi-draw term loan mature
on September 30, 2007. Our credit facility requires us to comply with certain
financial covenants and leverage ratios that are defined terms within the
agreement. We believe we are in compliance with the covenants and leverage
ratios. We expect to use the credit available under the revolving credit
facility to fund pending and future acquisitions. The amount available under the
credit facility was $255.8 million as of December 31, 2001. Our credit facility
also provides that at any time prior to December 31, 2002 we may solicit
additional incremental loans of up to $350.0 million, thereby increasing our
credit facility to $1.0 billion, and we will be governed under the same terms as
the existing credit facility. However, there can be no guarantee that, upon
request, we will receive commitments for any of the incremental loans.
S-33
SUMMARY DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following tables reflect a summary of our contractual cash obligations
and other commercial commitments as of December 31, 2001:
<Table>
<Caption>
PAYMENTS DUE BY PERIOD
-----------------------------------------------------
LESS THAN 1 TO 3 4 TO 5 AFTER 5
TOTAL 1 YEAR YEARS YEARS YEARS
-------- --------- -------- -------- --------
(AMOUNTS IN THOUSANDS)
CONTRACTUAL CASH
OBLIGATIONS:
Long-term debt(1)....... $388,323 $24,389 $121,906 $144,287 $ 97,741
TIDES(2)................ 125,000 -- -- -- 125,000
Operating leases........ 57,073 6,473 12,148 10,655 27,797
Sports programming...... 42,978 16,718 17,760 8,500 --
On-air talent........... 29,046 15,171 13,368 507 --
Television
advertising........... 4,599 1,533 3,066 -- --
Other operating
contracts............. 11,714 5,379 6,304 31 --
-------- ------- -------- -------- --------
Total Contractual
Cash
Obligations...... $658,733 $69,663 $174,552 $163,980 $250,538
======== ======= ======== ======== ========
</Table>
- ---------------
(1) Under our credit facility, the maturity on our outstanding debt could be
accelerated if we do not maintain certain covenants.
(2) Entercom Communications Capital Trust, our wholly-owned subsidiary, pays
quarterly calendar distributions. The TIDES represent undivided preferred
beneficial ownership interest in the assets of the trust. The trust used the
proceeds from the sale of the TIDES to purchase from us an equal amount of
6 1/4% Convertible Subordinated Debentures due 2014. Under certain
circumstances, the TIDES could be redeemed in cash by us at our option or
converted to equity at the holder's option.
<Table>
<Caption>
AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
-------------------------------------------------
TOTAL
AMOUNTS LESS THAN 1 TO 3 4 TO-5 AFTER 5
COMMITTED 1 YEAR YEARS YEARS YEARS
--------- --------- ------ ------ -------
(AMOUNTS IN THOUSANDS)
OTHER COMMERCIAL COMMITMENTS:
Letter of Credit(1)............. $ 6,200 $ (800) $ (500) $7,500 $ --
Guarantee(2).................... 2,700 675 675 675 675
Partnership(3).................. 588 588 -- -- --
Derivatives(4).................. 7,045 3,529 1,613 -- 1,903
------- ------ ------ ------ ------
Total Other Commercial
Commitments.............. $16,533 $3,992 $1,788 $8,175 $2,578
======= ====== ====== ====== ======
</Table>
- ---------------
(1) In connection with a sports contract, we are obligated to provide a letter
of credit during the term of the sports contract.
(2) We have a contingent liability to the national sales representative of the
former owner of one of our markets. This obligation is the responsibility of
our current national sales representative and arose in connection with our
acquisition of the stations involved.
(3) Under a partnership agreement, carried as an investment, we are obligated to
increase our investment.
S-34
(4) At December 31, 2001, we have interest rate transactions outstanding where
we agree with other parties to exchange, at specified intervals, the
difference between fixed rate and floating rate interest amounts calculated
by reference to an agreed notional amount against the variable debt. The
notional amount outstanding at December 31, 2001 was $263.0 million. The
marked to market valuation is determined by using quoted market prices from
the counter-parties to these agreements. Under certain circumstances, the
interest rate transaction liability of $7.0 million at December 31, 2001,
could be due and payable prior to the expiration of the agreements.
RECENTLY ISSUED PRONOUNCEMENTS
In June 2001, the FASB issued SFAS No. 141, "Business Combinations," which
addresses financial accounting and reporting for business combinations and
supersedes Accounting Principle Board ("APB") Opinion No. 16, "Business
Combinations" and FASB Statement No. 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises." Statement No. 141 applies to all
business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interest method of accounting for business combinations except for
qualifying business combinations that were initiated prior to July 1, 2001.
Statement No. 141 also changes the criteria to recognize intangible assets apart
from goodwill. We adopted this statement on July 1, 2001. We have historically
used the purchase method to account for all business combinations, and we do not
believe adoption of this statement will materially impact our financial
position, cash flows or results of operations.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" which requires that goodwill and certain intangibles not be amortized.
Instead, these assets will be reviewed annually for impairment and written down
and charged to results of operations only in the periods in which the recorded
value of goodwill and certain intangibles is more than its fair value. This
Statement applies to goodwill and certain intangible assets acquired prior to
June 30, 2001 and was adopted by us on January 1, 2002. Because the amount
previously recorded for the amortization of goodwill and broadcasting licenses
is significant, we expect that adoption of this accounting standard will have
the impact of reducing our non-cash amortization expense for goodwill and
broadcasting licenses and will have a material impact on our financial
statements. For the years ended December 31, 1999, 2000 and 2001, the amounts of
amortization expense for goodwill and broadcasting licenses were $0.1 million
and $14.8 million, $0.1 million and $32.0 million and $0.1 million and $33.1
million, respectively. The required impairment tests of goodwill and
broadcasting licenses may result in future period write-downs.
In order to complete the transitional assessment of goodwill and
non-amortizing intangible assets impairment, we will need to: (1) identify the
reporting units; (2) determine the carrying value of each reporting unit; and
(3) determine the fair value of each reporting unit. We will have up to six
months from the date of adoption to determine the fair value of each reporting
unit and compare it to the reporting unit's carrying amount. To the extent a
reporting unit's carrying amount exceeds its fair value, the reporting unit's
goodwill and non-amortizing intangible assets may be impaired, and we must
perform the second step of the transitional impairment test. In the second step,
we must compare the implied fair value of the reporting unit's goodwill,
determined by allocating the reporting unit's fair value to all of its assets
and liabilities in a manner similar to a purchase price allocation in accordance
with SFAS No. 141, to its carrying amount, both of which would be measured as of
the date of adoption. This second step is required to be completed as soon as
possible, but no later than the end of the year of adoption. Any transitional
impairment loss will be recognized as the cumulative effect of a change in
accounting principle on our consolidated statement of operations. As of the date
of adoption, we have unamortized goodwill and unamortized broadcasting licenses
in the amounts
S-35
of $4.2 million and $1,228.4 million, respectively. We have not yet determined
what the effect of these tests will be on our financial position, cash flows or
results of operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" which applies to legal obligations associated with the
retirement of a tangible long-lived asset that results from the acquisition,
construction, or development and/or the normal operation of a long-lived asset.
Under this standard, guidance is provided on measuring and recording the
liability. We intend to adopt this statement effective January 1, 2003. We do
not believe that adoption of this statement will materially impact our financial
position, results of operations or cash flows.
In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets" which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. While SFAS No.
144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" it removes goodwill from its scope
and retains the requirements of SFAS No. 121 regarding the recognition of
impairment losses on long-lived assets held for use. SFAS No. 144 also
supercedes the accounting and reporting provisions of APB Opinion No. 30,
"Reporting the Results of Operations -- Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" for the disposal of a segment of a business. However,
it retains the requirement in Opinion 30 to report separately discontinued
operations and extends that reporting to a component of an entity that either
has been disposed of (by sale, abandonment, or in a distribution to owners) or
is classified as held for sale. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001 and interim periods within those fiscal years.
We are in the process of evaluating the impact that adoption of SFAS No. 144 may
have on our financial position, cash flows or results of operations. However,
such impact, if any, is not known or reasonably estimable at this time.
INTANGIBLES
As of December 31, 2001, approximately 85.8% of our total assets consisted
of intangible assets, such as radio broadcast licenses and goodwill, the value
of which depends significantly upon the operational results of our business. We
could not operate the radio stations without the related FCC license for each
station. FCC licenses are renewed every eight years; consequently, we
continually monitor the activities of our stations to ensure they comply with
all regulatory requirements. Historically, all of our licenses have been renewed
at the end of their respective eight-year periods, and we expect that all
licenses will continue to be renewed in the future.
INFLATION
Inflation has affected our performance in terms of higher costs for radio
station operating expenses, including wages, and equipment. The exact impact is
indeterminable.
S-36
BUSINESS
OVERVIEW
We are one of the five largest radio broadcasting companies in the United
States based upon 2000 revenues pro forma for completed and pending
acquisitions. We have assembled, after giving effect to completed and pending
acquisitions, a nationwide portfolio of 101 stations in 19 markets, including 11
of the country's top 50 radio revenue markets. Our station groups rank among the
top three in revenue market share in 18 of the 19 markets in which we operate.
We derive 90% of our revenues from markets where we rank either first or second
in market radio revenues.
We operate a wide range of formats in geographically diverse markets across
the United States. Our largest markets, in order of our 2001 revenues, including
pro forma revenues for completed and pending acquisitions, are Seattle, Boston,
Kansas City, Denver, Sacramento, Portland and New Orleans.
OUR ACQUISITION STRATEGY
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
expertise. Although we typically focus on radio stations in top 50 markets, we
also acquire stations in top 75 markets that meet the above criteria.
OUR OPERATING STRATEGY
The principal components of our operating strategy are to:
- Develop Market Leading Station Clusters. We are among the three largest
clusters in 18 of our 19 markets, including pending acquisitions. We
derive 90% of our revenues from markets where we rank either first or
second in market radio revenues. 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.
- 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
compensation packages with performance-based incentives for our key
employees. We utilize best practices to facilitate development and
implementation of advantageous operational tools and strategies. In
addition, we provide employees with opportunities for personal growth and
advancement through training, seminars and other educational programs.
- 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 station's 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.
S-37
- 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 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
continue to capitalize on this opportunity by developing specialized
teams in many of our markets to work with advertisers to create and
develop marketing programs and solutions across our multi-station market
clusters. We derive 90% of our revenues from markets where we rank either
first or second in market radio revenues. In 2001, as in 2000, we gained
revenue market share in the majority of the markets in which we operate
and for the company as a whole.
- Acquire And Develop Under-Performing Stations. We seek to acquire and
develop under-performing stations, which has often enabled us to achieve
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; improved sales training and techniques; technical upgrades;
programming and marketing enhancements; refocused expenditures; and
facility consolidations.
- 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.
OUR CORPORATE HISTORY
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. In the
mid-1980's, with FM at critical mass, we 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 band, 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
acquired multiple stations in markets where we identified opportunities to
improve station operating performance and to develop market leading clusters. We
have taken advantage of the Telecommunications Act of 1996 by capitalizing on
these opportunities, as a significant amount of our growth has occurred during
the past five years.
S-38
OUR STATION PORTFOLIO
The following table sets forth selected information about our portfolio of
radio stations and gives effect to our pending acquisitions:
<Table>
<Caption>
2000 MARKET RANK AUDIENCE
-------------------- SHARE
METRO RADIO YEAR TARGET IN TARGET
MARKET/STATION(1) POPULATION REVENUE ACQUIRED FORMAT DEMOGRAPHIC DEMOGRAPHICS
- ----------------- ---------- ------- -------- ------------------------------- ----------- ------------
Boston, MA 8 8
WEEI-AM 1998
} Sports Talk Men 25-54 6.1
WVEI-AM(2) 1999
WRKO-AM 1998 Talk Adults 2.7
25-54
WAAF-FM 1999 Active Rock Men 18-34 10.4
WQSX-FM 1999 Rhythmic Adult Contemporary Women 25-54 5.7
Seattle, WA(3) 14 13
KBSG-AM/FM 1996 Oldies Adults 4.5
25-54
KIRO-AM 1997 News/Talk/Sports Adults 7.7
25-54
KQBZ-FM 1997 Talk Men 25-54 4.7
KISW-FM 1997 Classic Rock Men 25-54 5.8
KMTT-FM 1973 Adult Rock Adults 4.1
25-54
KNWX-AM 1997 News/Business Adults 1.5
35-64
KNDD-FM 1996 Modern Rock Men 18-34 8.0
Denver, CO 23 15
KOSI-FM pending Adult Contemporary Women 25-54 10.1
KKHK-FM pending Classic Rock Men 25-54 3.7
KEZW-AM pending Nostalgia Adults 1.8
35-64
KALC-FM pending Hot Adult Contemporary Women 18-49 4.1
Portland, OR 25 22
KFXX-AM 1998
} Sports Talk Men 25-54 2.6
KSLM-AM(4) 1998
KGON-FM 1995 Classic Rock Men 25-54 10.0
KKSN-AM 1995 Nostalgia Adults 0.7
35-64
KKSN-FM 1998 Oldies Adults 4.8
25-54
KNRK-FM 1995 Modern Rock Men 18-34 9.9
KRSK-FM 1998 Hot Adult Contemporary Women 25-54 6.1
Sacramento, CA 29 27
KCTC-AM 1998 Nostalgia Adults 1.6
35-64
KRXQ-FM 1997 Active Rock Men 18-34 13.1
KSEG-FM 1997 Classic Rock Men 25-54 6.5
KSSJ-FM 1997 Smooth Jazz Adults 5.9
25-54
KDND-FM 1997 Contemporary Hit Radio Women 18-34 6.7
Kansas City, MO 30 29
KMBZ-AM 1997 News/Talk/ Sports Men 25-54 5.9
KUDL-FM 1998 Adult Contemporary Women 25-54 7.9
KYYS-FM 1997 Album Oriented Rock Men 25-54 8.1
WDAF-AM 1998 Country Adults 5.1
35-64
KWSJ-AM(5) 1999 Spanish Adults nmf(8)
25-54
KXTR-AM(5) 1999 Classical Adults 0.3
25-54
KQRC-FM 2000 Active Rock Men 18-34 23.2
KCIY-FM 2000 Smooth Jazz Adults 3.7
25-54
KRBZ-FM 2000 Hot Adult Contemporary Women 18-34 6.3
Milwaukee, WI 31 34
WEMP-AM 1999 Religious Adults 0.4
35-64
WMYX-FM 1999 Adult Contemporary Women 25-54 10.1
WXSS-FM 1999 Contemporary Hit Radio Women 18-34 10.6
Norfolk, VA 36 42
WPTE-FM 1999 Modern Adult Contemporary Women 25-54 5.7
WWDE-FM 1999 Adult Contemporary Women 25-54 12.5
WVKL-FM 1999 Urban Adult Contemporary Women 25-54 7.2
WNVZ-FM 1999 Contemporary Hit Radio Women 18-34 9.4
New Orleans, LA 41 40
WSMB-AM 1999 Talk Adults 0.7
35-64
WWL-AM 1999 News/Talk/Sports Men 25-54 12.8
WEZB-FM 1999 Contemporary Hit Radio Women 18-34 7.9
WLMG-FM 1999 Adult Contemporary Women 25-54 9.1
WKZN-FM 1999 Hot Adult Contemporary Women 18-49 4.5
WTKL-FM 1999 Oldies Adults 4.8
25-54
<Caption>
AUDIENCE
RANK
IN TARGET
MARKET/STATION(1) DEMOGRAPHICS
- ----------------- ------------
Boston, MA
WEEI-AM
4
WVEI-AM(2)
WRKO-AM 13(tie)
WAAF-FM 2
WQSX-FM 4
Seattle, WA(3)
KBSG-AM/FM 5
KIRO-AM 1
KQBZ-FM 5
KISW-FM 3
KMTT-FM 6
KNWX-AM 20
KNDD-FM 3
Denver, CO
KOSI-FM 2
KKHK-FM 7
KEZW-AM 14
KALC-FM 6(tie)
Portland, OR
KFXX-AM
14
KSLM-AM(4)
KGON-FM 1
KKSN-AM 23
KKSN-FM 6(tie)
KNRK-FM 2(tie)
KRSK-FM 5
Sacramento, CA
KCTC-AM 17
KRXQ-FM 1
KSEG-FM 4
KSSJ-FM 2(tie)
KDND-FM 4(tie)
Kansas City, MO
KMBZ-AM 5
KUDL-FM 2
KYYS-FM 2
WDAF-AM 6
KWSJ-AM(5) nmf(8)
KXTR-AM(5) 23(tie)
KQRC-FM 1
KCIY-FM 15
KRBZ-FM 7
Milwaukee, WI
WEMP-AM nmf(8)
WMYX-FM 2
WXSS-FM 4
Norfolk, VA
WPTE-FM 7
WWDE-FM 1
WVKL-FM 4
WNVZ-FM 4
New Orleans, LA
WSMB-AM 19(tie)
WWL-AM 1
WEZB-FM 3
WLMG-FM 3
WKZN-FM 7
WTKL-FM 8
</Table>
S-39
<Table>
<Caption>
2000 MARKET RANK AUDIENCE
-------------------- SHARE
METRO RADIO YEAR TARGET IN TARGET
MARKET/STATION(1) POPULATION REVENUE ACQUIRED FORMAT DEMOGRAPHIC DEMOGRAPHICS
- ----------------- ---------- ------- -------- ------------------------------- ----------- ------------
Greensboro, NC 42 51
WMQX-FM 1999 Oldies Adults 6.7
25-54
WJMH-FM 1999 Urban Contemporary Adults 16.1
18-34
WEAL-AM 1999 Gospel Adults 1.0
35-64
WQMG-FM 1999 Urban Adult Contemporary Adults 8.0
25-54
WKSI-FM 2002 Hot Adult Contemporary Women 25-54 5.6
WPET-AM 2002 Religious Adults 0.3
35-64
Buffalo, NY 45 45
WBEN-AM 1999 News/Talk Men 25-54 6.8
WTSS-FM 1999 Adult Contemporary Women 25-54 9.9
WWKB-AM 1999 Business News Adults 0.4
35-64
WKSE-FM 1999 Contemporary Hit Radio Women 18-34 21.1
WGR-AM 1999 Sports/Talk Men 25-54 5.6
WWWS-AM 1999 Urban Oldies Adults 1.0
25-54
Memphis, TN 46 41
WMBZ-FM 1999 Modern Adult Contemporary Women 18-34 7.2
WJCE-AM 1999 Nostalgia Adults 1.2
35-64
WRVR-FM 1999 Adult Contemporary Women 25-54 6.8
Rochester, NY 52 53
WBZA-FM 1998 80's - based Adult Contemporary Women 25-54 4.8
WBEE-FM 1998 Country Adults 13.5
25-54
WBBF-AM/FM 1998 Oldies Adults 2.4
25-54
Greenville/Spartanburg,
SC 58 56
WFBC-FM 1999 Contemporary Hit Radio Women 18-34 11.4
WSPA-FM 1999 Adult Contemporary Women 25-54 9.7
WYRD-AM(6) 1999
} News/Talk Adults 4.5
25-54
WORD-AM(6) 1999
WSPA-AM 1999 Full Service/Talk Adults 0.7
35-64
WOLI-FM(6) 1999
} 80's - based Adult Contemporary Women 25-54 4.3
WOLT-FM(6) 1999
Wilkes-Barre/Scranton, PA 64 71
WGBI-AM(7) 1999 Adults 2.6
35-64
WOGY-AM(7) 1999
} News/Talk/Sports
WILK-AM(7) 1999
WGGI-FM(7) 1999 Adults 12.2
25-54
} Country
WGGY-FM(7) 1999
WKRZ-FM(7) 1999
} Contemporary Hit Radio Women 18-49 16.9
WKRF-FM(7) 2000
WBZJ-FM(7) 1999
} 80's - based Adult Contemporary Women 25-54 6.6
WBZH-FM(7) 1999
Wichita, KS 84 72
KEYN-FM 2000 Oldies Adults 5.8
25-54
KFBZ-FM 2000 Hot Adult Contemporary Women 25-54 4.2
KQAM-AM 2000 Sports Men 25-54 2.6
KFH-AM 2000 Talk Men 25-54 6.1
KNSS-AM 2000 News Adults 3.3
25-54
KDGS-FM 2000 Rhythmic Contemporary Hit Radio Adults 9.0
18-34
KWSJ-FM 2000 Smooth Jazz Women 25-54 1.8
Gainesville/ Ocala, FL 90 127
WKTK-FM 1986 Adult Contemporary Women 25-54 14.3
WSKY-FM 1998 News/Talk Adults 7.6
25-54
Madison, WI 120 67
WOLX-FM 2000 Oldies Adults 6.3
25-54
WMMM-FM 2000 Adult Alternative Adults 6.1
25-54
WBZU-FM 2000 80's - based Adult Contemporary Women 25-54 3.0
Longview/
Kelso, WA n/a n/a
KBAM-AM 1998 Country Adults n/a
25-54
KEDO-AM 1997 Oldies Adults n/a
25-54
KLYK-FM 1997 Adult Contemporary Women 25-54 n/a
KRQT-FM 1998 Classic Rock Men 25-54 n/a
<Caption>
AUDIENCE
RANK
IN TARGET
MARKET/STATION(1) DEMOGRAPHICS
- ----------------- ------------
Greensboro, NC
WMQX-FM 4
WJMH-FM 1
WEAL-AM 17(tie)
WQMG-FM 2
WKSI-FM 6
WPET-AM nmf(8)
Buffalo, NY
WBEN-AM 5
WTSS-FM 3(tie)
WWKB-AM 25
WKSE-FM 1
WGR-AM 6(tie)
WWWS-AM 15
Memphis, TN
WMBZ-FM 3(tie)
WJCE-AM 21(tie)
WRVR-FM 4
Rochester, NY
WBZA-FM 7
WBEE-FM 1
WBBF-AM/FM 12
Greenville/Spartanburg,
SC
WFBC-FM 1(tie)
WSPA-FM 3(tie)
WYRD-AM(6)
7
WORD-AM(6)
WSPA-AM 23(tie)
WOLI-FM(6)
8
WOLT-FM(6)
Wilkes-Barre/Scranton, PA
WGBI-AM(7) 7(tie)
WOGY-AM(7)
WILK-AM(7)
WGGI-FM(7) 1
WGGY-FM(7)
WKRZ-FM(7)
1
WKRF-FM(7)
WBZJ-FM(7)
4
WBZH-FM(7)
Wichita, KS
KEYN-FM 5
KFBZ-FM 8(tie)
KQAM-AM 16
KFH-AM 4
KNSS-AM 14
KDGS-FM 2(tie)
KWSJ-FM 18
Gainesville/ Ocala, FL
WKTK-FM 1
WSKY-FM 3(tie)
Madison, WI
WOLX-FM 5
WMMM-FM 6
WBZU-FM 9
Longview/
Kelso, WA
KBAM-AM n/a
KEDO-AM n/a
KLYK-FM n/a
KRQT-FM n/a
</Table>
S-40
- ---------------
(1) Our radio stations are in some instances licensed to communities other than
the named principal community for the market.
(2) Station competes in the adjacent community of Worcester, Massachusetts and
simulcasts virtually all of the programming of WEEI-AM.
(3) We also sell substantially all of the advertising time of a sixth FM station
in the Seattle market under a joint sales agreement. On February 1, 2002, we
entered into an agreement to terminate, effective February 28, 2002, the
joint sales agreement that was due to expire on June 30, 2002.
(4) KSLM-AM is licensed to Salem, Oregon, within the Portland market and
simulcasts KFXX-AM programming.
(5) The FCC rules require that by the end of a five-year transition period, that
ends in October 2006, we must elect to operate only one of the two stations
and surrender the other station to the FCC. However, we may be required to
make this election as early as May 2003.
(6) Each of the following groups of stations simulcast their programming:
WYRD-AM and WORD-AM; and WOLI-FM and WOLT-FM.
(7) Each of the following groups of stations simulcast their programming:
WGBI-AM, WOGY-AM and WILK-AM; WGGI-FM and WGGY-FM; WKRZ-FM and WKRF-FM; and
WBZJ-FM and WBZH-FM.
(8) Fall 2001 ratings data not statistically meaningful.
S-41
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.
Radio station operators are subject to the possibility of another station
changing programming formats to compete directly for listeners and advertisers
or launching an aggressive promotional campaign in support of an already
existing competitive format. If a competitor, particularly one with substantial
financial resources, were to attempt to compete in either these fashions, the
broadcast cash flow of our affected station could decrease due to increased
promotional and other expenses and/or lower advertising revenues. There can be
no assurance that any one of our radio stations will be able to maintain or
increase its current audience ratings and radio advertising revenue market
share.
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 or controlled by a single entity. However, the FCC announced on
November 8, 2001 that it is in the process of examining and amending its rules
and policies on ownership and operation of multiple local radio stations. The
FCC has established interim rules for the review of pending applications. The
impact that these new rules will have on our business is uncertain.
Our 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, over-the-air 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 digital audio radio service, which
has resulted in the near term introduction of new subscriber based satellite
radio services with numerous niche formats; (2) audio programming by cable
systems, direct broadcast satellite systems, Internet content providers,
personal communications services and other digital audio
S-42
broadcast formats; and (3) in-band on-channel digital radio, which provides
multi-channel, multi-format digital radio services in the same bandwidth
currently occupied by traditional AM and FM radio services. The FCC adopted a
plan in 1999 for the establishment of "microbroadcasting" stations, low-powered
FM stations that will be designed to serve small localized areas and that in
some localized areas may cause interference with regular broadcasts by existing
radio stations. The radio broadcasting 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. There can
be no assurances, 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
supplemental terrestrial means of multiple new audio programming formats to
local and/or national audiences. XM Satellite Radio launched its commercial
service on September 25, 2001, and Sirius Satellite Radio is scheduled to launch
service in 2002. 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 signals
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 or for the expanded AM band. Upon the
completion of the migration process, it is expected that some AM stations will
have improved coverage because of reduced interference. We have not yet
evaluated the impact of the migration process on our business but do not believe
that such impact, if any, will be material.
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.
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, operating power, and
other technical parameters of stations;
- issues, renews, revokes and modifies station licenses;
- determines whether to approve changes in ownership or control of station
licenses; 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 short-term licenses, the imposition of a condition on the renewal of
a license and the revocation of operating authority.
S-43
For further information concerning the nature and extent of federal
regulation of radio stations, you should refer to the Communications Act, FCC
rules and FCC public notices and rulings.
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. A
station may continue to operate beyond the expiration date of its license if a
timely filed license renewal application is pending. During the periods when
renewal applications are pending, petitions to deny license renewals can be
filed by interested parties, including members of the public and interest
groups. 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 FCC classifies each AM and FM station. An AM station operates on either
a clear channel, regional channel or local channel. A clear channel is one on
which AM stations are assigned to serve wide areas. Clear channel AM stations
are classified as either: Class A stations, which operate on an unlimited time
basis and are designed to render primary and secondary service over an extended
area; Class B stations, which operate on an unlimited time basis and are
designed to render service only over a primary service area; or Class D
stations, which operate either during daytime hours only, during limited times
only or on an unlimited time basis with low nighttime power. A regional channel
is one on which Class B and Class D AM stations may operate and serve primarily
a principal center of population and the rural areas contiguous to it. A local
channel is one on which AM stations operate on an unlimited time basis and serve
primarily a community and the suburban and rural areas immediately contiguous
thereto. Class C AM stations operate on a local channel and are designed to
render service only over a primary service area that may be reduced as a
consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1, CO and C. The FCC has recently adopted a new
rule that subjects Class C FM stations that do not meet certain antenna-height
parameters to an involuntary downgrade in class to Class CO under certain
circumstances.
S-44
The following table sets forth the metropolitan market served (city of
license may differ), call letters, FCC license classification, antenna height
above average terrain ("HAAT"), power, frequency and FCC license expiration date
of each of the stations that we own or operate and gives effect to our
consummation of our pending acquisitions.
<Table>
<Caption>
FCC HAAT POWER IN EXPIRATION DATE OF
MARKET STATION CLASS (IN METERS) FREQUENCY KILOWATTS(1) FCC LICENSE
- ------ --------- ----- ----------- --------- ------------ ------------------
BOSTON, MA........... WEEI-AM B * 850 kHz 50 April 1, 2006
WRKO-AM B * 680 kHz 50 April 1, 2006
WAAF-FM B 239 107.3 MHz 20 April 1, 2006
WQSX-FM B 179 93.7 MHz 34 April 1, 2006
WVEI-AM B * 1440 kHz 5 April 1, 2006
SEATTLE, WA.......... KBSG-AM B * 1210 kHz 27.5-D/10-N February 1, 2006
KBSG-FM C 729 97.3 MHz 55 February 1, 2006
KIRO-AM A * 710 kHz 50 February 1, 2006
KISW-FM C 714 99.9 MHz 58 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/5-N February 1, 2006
KNDD-FM C 714 107.7 MHz 58 February 1, 2006
DENVER, CO........... KOSI-FM C 495 101.1 MHz 100 April 1, 2005
KKHK-FM C 495 99.5 MHz 100 April 1, 2005
KEZW-AM B * 1430 kHz 10-D/5-N April 1, 2005
KALC-FM C 448 105.9 MHz 100 April 1, 2005
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/15-N February 1, 2006
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 576 105.1 MHz 100 February 1, 2006
KSLM-AM B * 1390 kHz 5-D/0.69-N February 1, 2006
SACRAMENTO, CA....... KCTC-AM B * 1320 kHz 5 December 1, 2005
KRXQ-FM B 152 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...... 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
KWSJ-AM(2) B * 1250 kHz 25-D/3.7-N June 1, 2005
KXTR-AM(2) B * 1600 kHz 10-D/1-N June 1, 2005
KQRC-FM C 322 98.9 MHz 100 February 1, 2005
KCIY-FM C1 299 106.5 MHz 100 February 1, 2005
KRBZ-FM C 300 96.5 MHz 100 February 1, 2005
MILWAUKEE, WI........ WEMP-AM B * 1250 kHz 5 December 1, 2003
WMYX-FM B 137 99.1 MHz 50 December 1, 2003
WXSS-FM B 257 103.7 MHz 19.5 December 1, 2003
NORFOLK, VA.......... WPTE-FM B 152 94..9 MHz 50 October 1, 2003
WWDE-FM B 152 101.3 MHz 50 October 1, 2003
WVKL-FM B 268 95.7 MHz 40 October 1, 2003
WNVZ-FM B 146 104.5 MHz 50 October 1, 2003
</Table>
S-45
<Table>
<Caption>
FCC HAAT POWER IN EXPIRATION DATE OF
MARKET STATION CLASS (IN METERS) FREQUENCY KILOWATTS(1) FCC LICENSE
- ------ --------- ----- ----------- --------- ------------ ------------------
NEW ORLEANS, LA...... WSMB-AM B * 1350 kHz 5 June 1, 2004
WWL-AM A * 870 kHz 50 June 1, 2004
WEZB-FM C 300 97.1 MHz 100 June 1, 2004
WLMG-FM C 300 101.9 MHz 100 June 1, 2004
WKZN-FM C1 275 105.3 MHz 100 June 1, 2004
WTKL-FM C 300 95.7 MHz 100 June 1, 2004
GREENSBORO, NC....... WMQX-FM C 335 93.1 MHz 100 December 1, 2003
WJMH-FM C 367 102.1 MHz 100 December 1, 2003
WEAL-AM D * 1510 kHz 1-D December 1, 2003
WQMG-FM C 375 97.1 MHz 100 December 1, 2003
WKSI-FM C 316 98.7 MHz 100 December 1, 2003
WPET-AM D * 950 kHz 0.5-D/0.08-N December 1, 2003
BUFFALO, NY.......... WBEN-AM B * 930 kHz 5 June 1, 2006
WTSS-FM B 408 102.5 MHz 110 June 1, 2006
WWKB-AM A * 1520 kHz 50 June 1, 2006
WKSE-FM B 128 98.5 MHz 46 June 1, 2006
WGR-AM B * 550 kHz 5 June 1, 2006
WWWS-AM C * 1400 kHz 1 June 1, 2006
MEMPHIS, TN.......... WMBZ-FM C2 144 94.1 MHz 50 August 1, 2004
WJCE-AM B * 680 kHz 10-D/5-N August 1, 2004
WRVR-FM C1 229 104.5 MHz 100 August 1, 2004
ROCHESTER, NY........ WBZA-FM B 172 98.9 MHz 37 June 1, 2006
WBEE-FM B 152 92.5 MHz 50 June 1, 2006
WBBF-AM B * 950 kHz 1 June 1, 2006
WBBF-FM A 117 93.3 MHz 4.4 June 1, 2006
GREENVILLE/
SPARTANBURG, SC.... WFBC-FM C 564 93.7 MHz 100 December 1, 2003
WSPA-FM C 580 98.9 MHz 100 December 1, 2003
WYRD-AM B * 1330 kHz 5 December 1, 2003
WORD-AM B * 910 kHz 3.6-D/0.89-N December 1, 2003
WSPA-AM B * 950 kHz 5 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
WILKES-BARRE/
SCRANTON, PA....... WGBI-AM B * 910 kHz 1-D/0.5-N August 1, 2006
WOGY-AM B * 1300 kHz 5-D/0.5-N August 1, 2006
WILK-AM B * 980 kHz 5-D/1-N August 1, 2006
WGGI-FM A 100 95.9 MHz 6 August 1, 2006
WGGY-FM B 338 101.3 MHz 7 August 1, 2006
WKRZ-FM B 357 98.5 MHz 8.7 August 1, 2006
WKRF-FM A 267 107.9 MHz 0.84 August 1, 2006
WBZJ-FM A 22 102.3 MHz 5.8 August 1, 2006
WBZH-FM A 207 103.1 MHz 0.73 August 1, 2006
WICHITA, KS.......... KEYN-FM C1 307 103.7 MHz 95 June 1, 2005
KFBZ-FM C 301 105.3 MHz 100 June 1, 2005
KQAM-AM B * 1480 kHz 5-D/1-N June 1, 2005
KFH-AM B * 1330 kHz 5-D/5-N June 1, 2005
KNSS-AM C * 1240 kHz 0.63 June 1, 2005
KDGS-FM C3 100 93.9 MHz 25 June 1, 2005
KWSJ-FM C2 150 98.7 MHz 50 June 1, 2005
</Table>
S-46
<Table>
<Caption>
FCC HAAT POWER IN EXPIRATION DATE OF
MARKET STATION CLASS (IN METERS) FREQUENCY KILOWATTS(1) FCC LICENSE
- ------ --------- ----- ----------- --------- ------------ ------------------
GAINESVILLE/ OCALA,
FL................. WKTK-FM C1 299 98.5 MHz 100 February 1, 2004
WSKY-FM C2 289 97.3 MHz 13.5 February 1, 2004
MADISON, WI.......... WOLX-FM B 396 94.9 MHz 37 December 1, 2004
WMMM-FM A 175 105.5 MHz 2 December 1, 2004
WBZU-FM A 74 105.1 MHz 6 December 1, 2004
LONGVIEW/KELSO, WA... KBAM-AM D * 1270 kHz 5-D/0.083-N February 1, 2006
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) 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.
(2) The FCC rules require that by the end of a five-year transition period,
which expires in October 2006, we must elect to operate on either the 1250
kHz frequency or the 1660 kHz frequency and surrender the other frequency to
the FCC. However, we may be required to make such election as early as May
2003.
EMPLOYEES
On January 31, 2002, we had a staff of 1,641 full-time employees and 658
part-time employees. We are a party to collective bargaining agreements with the
American Federation of Television and Radio Artists (AFTRA), which apply to some
of our programming personnel, and we are a party to a collective bargaining
agreement with the International Brotherhood of Electrical Workers (IBEW), which
applies to some of our engineering personnel. The Boston AFTRA collective
bargaining agreement, as extended, expired on September 14, 1999, the Kansas
City AFTRA collective bargaining agreement expired on September 29, 2001, and
the Seattle AFTRA collective bargaining agreement expired on January 31, 2002.
We are currently renegotiating these agreements and cannot predict the outcome
of these negotiations. The Boston IBEW collective bargaining agreement will
expire on April 30, 2002. 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.
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.
S-47
MANAGEMENT
The following table provides information concerning our directors and
executive officers as of January 31, 2002.
<Table>
<Caption>
NAME AGE POSITION
- ---- --- --------
Joseph M. Field..................... 70 Chairman and Chief Executive Officer
David J. Field...................... 39 President, Chief Operating Officer and Director
John C. Donlevie.................... 55 Executive Vice President, Secretary, General
Counsel and Director
Stephen F. Fisher................... 49 Executive Vice President and Chief Financial Officer
Herbert Kean, M.D................... 71 Director
S. Gordon Elkins.................... 71 Director
Thomas H. Ginley, Jr................ 77 Director
Lee Hague........................... 55 Director
Marie H. Field...................... 64 Director
David J. Berkman.................... 42 Director
Michael R. Hannon................... 41 Director
</Table>
Joseph M. Field founded Entercom in 1968, 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 Mary Louise Curtis Bok Foundation, the Settlement Music School, the
American Interfaith Institute, the National Liberty Museum, The Philadelphia
Orchestra, the Curtis Institute of Music, the Jewish Education and Vocational
Service (JEVS) and the Philadelphia Chamber Music Society. Mr. Field has a B.A.
from the University of Pennsylvania and an L.L.B. from Yale Law School. He is
the spouse of Marie H. Field and the father of David J. Field. Mr. Field's term
as a director expires at the 2002 annual meeting of shareholders.
David J. Field has served as our President since 1998, our Chief Operating
Officer since 1996 and one of our directors since 1995. He also served as our
Chief Financial Officer from 1992 to 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, the
Philadelphia Zoo 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. Mr. Field's term as a
director expires at the 2002 annual meeting of shareholders.
John C. Donlevie has served as our Executive Vice President, General
Counsel and one of our directors since 1989, our Secretary since 1998 and was
our Vice President-Legal and Administrative from 1984 when he joined us to 1989.
Prior to joining us, Mr. Donlevie practiced law for 11 years, most recently as
Corporate Counsel of Ecolaire Incorporated in Malvern, Pennsylvania. He has a
B.S. in Engineering from Drexel University and a J.D. from Temple University
School of Law. Mr. Donlevie's term as a director expires at the 2002 annual
meeting of shareholders.
Stephen F. Fisher has served as our Executive Vice President since 2000 and
our Chief Financial Officer since 1998. From 1994 to 1998, he was a Managing
Director with a private
S-48
equity firm located in Bala Cynwyd, Pennsylvania. From 1978 to 1994, Mr. Fisher
held numerous operational and financial management positions with Westinghouse
Broadcasting Company (now part of Viacom Inc.), including the positions of
Executive Vice President, General Manager of their Los Angeles news radio
station and Controller of the Radio Group. 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 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. He is a clinical professor at Thomas Jefferson University Medical
College and Chairman of the Public Health Committee of the Philadelphia County
Medical Society. Dr. Kean's term as a director expires at the 2002 annual
meeting of shareholders
S. Gordon Elkins has served as one of our directors since 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, graduating first in his class, and an L.L.B. from
Yale Law School. Mr. Elkins' term as a director expires at the 2002 annual
meeting of shareholders.
Thomas H. Ginley, Jr., M.D. has served as one of our directors since 1971
and previously served as our Secretary from 1984 to 1998. Dr. Ginley is
President and a director of the A & T Development Corporation and Treasurer and
a director of Vanessa Noel Couture, Inc. Dr. Ginley is also a gemologist and
president of Gem 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. Dr. Ginley's term as a director expires at the
2002 annual meeting of shareholders.
Lee Hague has served as one of our directors since 1980. 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. He has served as an
independent consultant to various broadcasting groups and provides financial
advisory and media brokerage services to the industry. 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. Mr. Hague's term as a director expires at the 2002
annual meeting of shareholders.
Marie H. Field has served as one of our directors since 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, the Board of Overseers of the University of
Pennsylvania School of Social Work, the Education Board of the National Liberty
Museum and the Board of Project Forward Leap. She has a B.A. from Barnard
College. Mrs. Field is the spouse of Joseph M. Field and the mother of David J.
Field. Mrs. Field's term as a director expires at the 2002 annual meeting of
shareholders.
David J. Berkman has served as one of our directors since the consummation
of our initial public offering in January 1999. He is the Managing Partner of
Liberty Associated Partners, LP, a venture capital firm primarily engaged in the
telecommunications, media and internet market segments. Liberty Associated
Partners, LP was founded by principals of The Associated Group, Inc., which
prior to its sale in 2000 was a multi-billion dollar publicly-traded owner and
operator of communications related businesses of which Mr. Berkman was Executive
Vice President. He also currently serves on the Boards of Directors of Internet
Capital Group, Inc., Clearwire, Inc., V-Span, Inc., the Philadelphia Regional
Performing Arts Center and the Franklin Institute. Mr. Berkman has a B.S. from
the Wharton School of the University of Pennsylvania. Mr. Berkman's term as a
director expires at the 2002 annual meeting of shareholders.
S-49
Michael R. Hannon has served as one of our directors since December 1998.
He is a Partner of J.P. Morgan Partners ("JPMP"), a partnership with over $20
billion under management. JPMP invests in a wide variety of international
private equity opportunities including management buyouts, growth equity, and
venture capital situations. JPMP's principal limited partner is J.P. Morgan
Chase & Co., one of the largest bank holding companies in the United States. Mr.
Hannon worked at Morgan Stanley & Co. Incorporated prior to joining JPMP in
1988. He received his B.A. degree from Yale University and an M.B.A. from
Columbia Business School. He is currently on the board of directors of Telecorp
PCS, Telesystem International Wireless and several privately-held media and
telecom firms. Mr. Hannon's term as a director expires at the 2002 annual
meeting of shareholders.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board has adopted certain standing committees including: (1) audit, (2)
compensation and (3) nominating.
Audit Committee. The audit committee consists of Messrs. Berkman, Hague
and Elkins, each of whom is independent as the term independence is defined in
Section 3.03.01 (B)(2)(a) and (3) of the listing standards of the New York Stock
Exchange. The audit committee met five times in 2001. The responsibilities of
the audit committee include:
- recommending to the board of directors the 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 discussing financial statements with management.
Compensation Committee. Our compensation committee consists of Mr. Hannon
and Doctors Ginley and Kean. Our compensation committee met once in 2001. The
compensation committee conducts a general review of our compensation plans to
ensure that they meet corporate objectives, including review and approval of all
compensation paid to our executive officers. The responsibilities of the
compensation committee also include administering and interpreting our Employee
Stock Purchase Plan and the Entercom 1998 Equity Compensation Plan, including
selecting the officers, employees and other qualified recipients that will be
granted awards under the Entercom 1998 Equity Compensation Plan.
Nominating Committee. Our nominating committee consists of David Berkman,
Lee Hague and Michael Hannon and met four times in 2001. The nominating
committee is responsible for the recommendation of criteria for selection of
board members and assisting the board in identifying candidates for the board.
S-50
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 years ended
1999, 2000 and 2001 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION NUMBER OF SECURITIES
------------------- OTHER ANNUAL UNDERLYING OPTIONS
NAME AND PRINCIPAL POSITION PERIOD SALARY BONUS(1) COMPENSATION GRANTED
- --------------------------- ------ -------- -------- ------------ --------------------
Joseph M. Field, Chairman
of the Board and Chief
Executive Officer....... 1999 $563,320 $250,000 (2) 372,223
2000 600,000 400,000 100,000
2001 600,000 267,000 100,000
David J. Field, President
and Chief Operating
Officer................. 1999 350,000 200,000 (2) 258,334
2000 450,000 350,000 100,000
2001 450,000 267,000 100,000
Stephen F. Fisher,
Executive Vice President
and Chief Financial
Officer................. 1999 250,000 150,000 (2) 116,667
2000 300,000 200,000 75,000
2001 300,000 175,000 50,000
John C. Donlevie, Executive
Vice President, Secretary
and General Counsel..... 1999 225,000 125,000 (2) 115,556
2000 265,000 150,000 25,000
2001 265,000 100,000 25,000
</Table>
- ---------------
(1) Includes amounts accrued during the year presented but paid in the
subsequent year.
(2) 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 Named Executive Officer and, therefore, is not required to be disclosed
pursuant to rules of the Commission.
S-51
STOCK OPTION TABLES
Our Named Executive Officers are eligible to receive stock option grants
under the Entercom 1998 Equity Compensation Plan. The following table contains
information concerning the stock option grants made to each of the Named
Executive Officers, discussed above, during the year ended December 31, 2001:
STOCK OPTION GRANTS FOR YEAR ENDED DECEMBER 31, 2001
<Table>
<Caption>
PERCENTAGE POTENTIAL REALIZABLE VALUE
NUMBER OF OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE MARKET PRICE FOR OPTION TERMS
OPTIONS EMPLOYEES IN OR BASE ON AND EXPIRATION ----------------------------
GRANTED YEAR PRICE GRANT DATE DATE 5% 10%
---------- ------------- -------- ------------ ---------- ------------ ------------
Joseph M. Field...... 100,000 11.6% $40.00 $40.00 01/09/11 $2,515,579 $6,374,970
David J. Field....... 100,000 11.6 40.00 40.00 01/09/11 2,515,579 6,374,970
Stephen F. Fisher.... 50,000 5.8 40.00 40.00 01/09/11 1,257,789 3,187,485
John C. Donlevie..... 25,000 2.9 40.00 40.00 01/09/11 628,895 1,593,742
</Table>
- ---------------
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Commission. There can be no assurance that
the actual stock price appreciation over the ten-year option term will be at
the assumed 5% and 10% levels or at any other defined level. Unless the
market price of our Class A common stock appreciates over the option term,
no value will be realized from the option grants. The potential realizable
value is calculated by assuming that the fair market value of our Class A
common stock on the date of grant of the options appreciates at the
indicated rate for the entire term of the option and that the option is
exercised at the exercise price and sold on the last day at the appreciated
price.
The following table sets forth information concerning each option exercised
by the Named Executive Officers during the year ended December 31, 2001 and
option holdings at December 31, 2001 by the Named Executive Officers:
STOCK OPTION EXERCISES AND YEAR-END VALUE
<Table>
<Caption>
SHARES NUMBER OF SHARES VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
NAME EXERCISE(#) REALIZED OPTIONS AT YEAR END(#) OPTIONS AT YEAR END(1)
- ---- ----------- -------- --------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Joseph M. Field........ -- $ -- 211,112 361,111 $3,846,205 $5,958,678
David J. Field......... -- -- 154,168 304,166 2,884,939 4,997,375
Stephen F. Fisher...... 5,000 158,450 72,084 164,583 698,716 1,994,001
John C. Donlevie....... -- -- 64,028 101,528 1,121,709 1,649,834
</Table>
- ---------------
(1) Value is determined by subtracting the exercise price from the fair market
value of our Class A common stock multiplied by the number of shares
underlying the options. Fair market value is based on the New York Stock
Exchange closing price of our Class A common stock on December 29, 2001 of
$50.00 per share. Options which are not in the money, of which there were
none, are not considered for purposes of this computation.
EMPLOYEE STOCK PURCHASE PLAN
A total of up to 1,850,000 shares of our Class A common stock may be issued
under the Employee Stock Purchase Plan, subject to adjustment. Under our
Employee Stock Purchase Plan, we will withhold a specified percentage (not to
exceed 10%) of the compensation paid
S-52
to each participant, and the amount withheld (and any additional amount
contributed by the participant which together with payroll withholdings does not
exceed 10% of the participant's compensation) will be used to purchase our Class
A common stock on the last day of each purchase period. The purchase price will
be the value of the stock on the last day of the purchase period less a discount
not to exceed 15% as determined by the compensation committee in advance of the
purchase period. The length of each purchase period shall be specified by the
compensation committee. The maximum value of shares that a participant in the
Employee Stock Purchase 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 less than 30 days prior to the end of any calendar year. Mr. Field's
salary for the year 2001 was $600,000. The board of directors may approve
additional salary, bonuses, fees, or other compensation. 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.
DAVID J. FIELD EMPLOYMENT AGREEMENT. We have entered into an employment
agreement with David J. Field, pursuant to which Mr. Field serves as our
President and Chief Operating Officer. The employment agreement provides that
Mr. Field's employment 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 this employment agreement, Mr. Field's salary
for the year 2001 was $450,000. The board of directors may approve additional
salary, bonuses, fees, or other compensation.
JOHN C. DONLEVIE EMPLOYMENT AGREEMENT. We have entered into an employment
agreement with John C. Donlevie pursuant to which Mr. Donlevie serves as our
Executive Vice President, Secretary and General Counsel. The employment
agreement provides that Mr. Donlevie's employment 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 this employment
agreement, Mr. Donlevie's salary for the year 2001 was $265,000. The board of
directors may approve additional salary, bonuses, fees, or other compensation.
STEPHEN F. FISHER EMPLOYMENT AGREEMENT. We are in the process of
negotiating a new employment agreement with Stephen F. Fisher, to serve as our
Chief Financial Officer and Executive Vice President, that will replace the
employment agreement that expired as of December 31, 2001.
DIRECTOR COMPENSATION
All of our non-employee directors receive a fee of $1,000 for each board
meeting that they attend in person, $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, during the first
quarter of 2001, 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 Entercom 1998 Equity Compensation Plan.
S-53
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of January 31, 2002
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 common stock;
- each of our directors and Named Executive Officers; 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.
<Table>
<Caption>
COMMON STOCK
-----------------------------------------------
CLASS A(1) CLASS B(2)
---------------------- ----------------------
NUMBER OF NUMBER OF PERCENT OF PERCENT
SHARES PERCENT SHARES PERCENT TOTAL OF TOTAL
BENEFICIALLY OF BENEFICIALLY OF ECONOMIC VOTING
NAME OF BENEFICIAL OWNER OWNED(3) CLASS OWNED(3) CLASS INTEREST POWER
- ------------------------ ------------ ------- ------------ ------- ---------- --------
Joseph M. Field(4)(5)........... 1,002,586 2.9% 9,782,555 92.9% 23.6% 70.4%
David J. Field(4)(6)............ 2,029,143 5.8 749,250 7.1 6.1 6.8
John C. Donlevie................ 91,702 * -- -- * *
Stephen F. Fisher............... 97,143 * -- -- * *
Herbert Kean, M.D............... 710,238 2.0 -- -- 1.6 *
S. Gordon Elkins(4)(7).......... 2,519,003 7.2 -- -- 5.6 1.8
Thomas H. Ginley, M.D.(8)....... 711,859 2.0 -- -- 1.6 *
Lee Hague....................... 11,251 * -- -- * *
Marie H. Field(4)(9)............ 1,002,586 2.9 380,000 3.6 3.1 1.0
Michael R. Hannon(10)........... 7,804 * -- -- * *
David J. Berkman................ 9,584 * -- -- * *
Putnam Investments, LLC(11)
One Post Office Square
Boston, MA 02109.............. 3,568,856 10.2 -- -- 7.9 2.6
All directors and executive
officers as a group (11
persons)...................... 3,995,981 11.2 10,531,805 100 31.5 77.6
</Table>
- ---------------
* Less than one percent.
(1) For the purpose of calculating the percentage of Class A common stock held
by each shareholder, the total number of shares of Class A common stock
outstanding does not include the shares of Class A common stock issuable
upon conversion of the outstanding shares of Class B common stock. The
number of shares of Class A common stock also includes all issued shares of
restricted 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. Each share of Class B
common stock is entitled to ten votes, except: (a) any share not voted by
either Joseph M. Field or David J. Field is entitled to one vote; (b) the
holders of Class A common stock, voting as a separate class, are entitled
to elect two directors; (c) each share of Class B common stock is entitled
to one vote with respect to any "going private" transactions under the
Exchange Act; and (d) 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.
S-54
(3) Shares beneficially owned and percentage ownership are based on 34,829,917
shares of Class A common stock and 10,531,805 shares of Class B common
stock outstanding as of January 31, 2002. The number of shares of Class A
common stock also includes all issued shares of restricted stock.
(4) The address of these shareholders is 401 City Avenue, Suite 409, Bala
Cynwyd, Pennsylvania 19004.
(5) Includes (a) 558,607 shares of Class A common stock beneficially owned by
Marie H. Field, wife of Joseph M. Field, (b) 380,000 shares of Class B
common stock beneficially owned by Marie H. Field, (c) 38,578 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, (d) 106,549 shares of
Class A common stock beneficially owned by Joseph M. Field as a director
and officer of the Joseph and Marie Field Foundation, (e) 291,668 shares of
Class A common stock which may be acquired through the exercise of options
and (f) 7,084 shares of Class A common stock which may be acquired by Marie
H. Field, wife of Joseph M. Field, through the exercise of options. The
total economic interest and total voting power of Mr. Field includes
380,000 shares of Class B common stock owned by Marie H. Field which Mr.
Field has the power to vote pursuant to a revocable proxy. See Note 2
above.
(6) Includes (a) 306,094 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, (b)
513,876 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 (c) 996,572 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 and (d) 212,501 shares of Class A common
stock which may be acquired through the exercise of options.
(7) Includes (a) 996,572 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 (b) 513,876 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, (c) 613,150 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, (d) 277,994 shares of Class
A common stock held of record by Mr. Elkins as trustee of a trust for the
benefit of Marie H. Field, (e) 106,549 shares of Class A common stock
beneficially owned by Mr. Elkins as a director and officer of the Joseph
and Marie Field Foundation and (f) 7,084 shares of Class A common stock
which may be acquired through the exercise of options.
(8) Includes (a) 556,775 shares of Class A common stock held by Dr. Ginley in
joint tenancy with his spouse, of which 250,000 shares are pledged to Bear
Stearns & Co. pursuant to a pre-paid forward purchase contract, (b) 74,000
shares of Class A common stock owned of record by his spouse, all of which
are pledged to Bear Stearns & Co. pursuant to a pre-paid forward purchase
contract, (c) 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, of
which 37,000 shares are pledged to Bear Stearns & Co. pursuant to a
pre-paid forward purchase contract and (d) 7,084 shares of Class A common
stock which may be acquired through the exercise of options.
(9) Includes (a) 147,368 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, (b)
306,094 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, (c) 38,578 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, (d) 106,549 shares of Class A common stock beneficially owned by
S-55
Marie H. Field as a director and officer of the Joseph and Marie Field
Foundation, (e) 7,084 shares of Class A common stock which may be acquired
through the exercise of options and (f) 291,668 shares of Class A common
stock which may be acquired by Joseph M. Field, husband of Marie H. Field,
through the exercise of options. Does not include 9,402,555 shares of Class
B common stock held by Joseph M. Field, Marie H. Field's spouse. See Note 2
above.
(10) Includes 7,084 shares of Class A common stock which may be acquired through
the exercise of options.
(11) Includes 3,287,176 shares owned by Putnam Investment Management, LLC,
281,680 shares owned by The Putnam Advisory Company, LLC and 1,965,000
shares owned by Putnam New Opportunities Fund, each affiliates of Putnam
Investments, LLC. Putnam Investments LLC, has shared voting power with
respect to 58,200 shares and shared investment power with respect to all
3,568,856 shares. Putnam Investment Management, LLC exercises sole voting
power over none of the shares, but has shared investment power with respect
to 3,287,176 shares. The Putnam Advisory Company, LLC exercises shared
voting power over 58,200 shares and shared investment power over 281,680
shares.
S-56
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of our credit facility does not purport to be
complete and is qualified in its entirety by reference to the agreements
described, including the definitions of certain capitalized terms used in this
section, copies of which are available upon request. Any capitalized terms not
defined in "Credit Facility" are defined in the documentation for our credit
facility. See "Where You Can Find More Information."
CREDIT FACILITY
GENERAL
Pursuant to a credit agreement dated as of December 16, 1999, as amended,
among Entercom Radio, LLC, as borrower, Entercom Communications Corp., as
guarantor, Key Corporate Capital Inc., as administrative agent and
co-documentation agent, Banc of America Securities LLC, as sole lead arranger
and book manager, Bank of America, N.A., as syndication agent and
co-documentation agent, and certain other lenders, we received commitments for
up to $650.0 million in financing (subject to increase under certain
circumstances up to $1.0 billion). The credit facility consists of:
- a $325.0 million term loan facility terminating on September 30, 2007;
and
- a $325.0 million automatically reducing revolving loan facility
terminating on September 30, 2007 including a $50.0 million letter of
credit facility.
AMORTIZATION
On each date set forth in the table below, the principal amount of the term
loan shall be repaid in an amount equal to the percentage of the principal
amount of the term loan outstanding as of September 30, 2002 (before giving
effect to the payment required on that date) set forth for such date in such
table:
<Table>
<Caption>
YEAR MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ---- -------- ------- ------------ -----------
2002............................... --% --% 3.750% 3.750%
2003............................... 4.375 4.375 4.375 4.375
2004............................... 5.000 5.000 5.000 5.000
2005............................... 5.000 5.000 5.000 5.000
2006............................... 5.000 5.000 5.000 5.000
2007............................... 5.000 5.000 5.000 --
</Table>
On each date set forth in the table below, the commitment to lend revolving
loans shall automatically reduce by that percentage of the revolving commitment
as in effect on September 30, 2002 (before giving effect to the reduction
required on that date) set forth for such date in such table:
<Table>
<Caption>
YEAR MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- ---- -------- ------- ------------ -----------
2002............................... --% --% 3.750% 3.750%
2003............................... 4.375 4.375 4.375 4.375
2004............................... 5.000 5.000 5.000 5.000
2005............................... 5.000 5.000 5.000 5.000
2006............................... 5.000 5.000 5.000 5.000
2007............................... 5.000 5.000 5.000 --
</Table>
S-57
PREPAYMENTS
Loans are required to be prepaid with:
- 100% of the net proceeds of all non-ordinary course asset sales or other
dispositions of the property by us and our subsidiaries or insurance
proceeds which we have not reinvested in our business within one year
after receipt of the proceeds, subject to limited exceptions, if our
Leverage Ratio is greater than 5.5 to 1.0;
- 50% (or, if an Event of Default is continuing, 100%) of annual excess
cash flow if our Leverage Ratio is 5.0 to 1.0 or greater;
- the lesser of (i) 50% of the cash proceeds of equity issuances or sales
and (ii) the amount of such proceeds that would cause our Leverage Ratio
to equal 6.0 to 1.0;
- the amount by which the outstanding amounts under the term facility
exceed the total amount committed under the term facility; and
- the amount by which the outstanding amounts under the revolving facility
exceed the total amount committed under the revolving facility.
INTEREST
The term loan and the revolving loan facilities will bear interest through
maturity: (1) if a Base Rate (as defined below) loan, then at the sum of the
Base Rate plus the Applicable Margin (as defined below), or (2) if a LIBOR loan,
then at the sum of LIBOR plus the Applicable Margin.
The Base Rate is the higher of: (1) the administrative agent's prime rate
or (2) the rate which is 0.5% in excess of the Federal Funds Effective Rate
(defined as a fluctuating interest rate equal for each day during any period to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day by the Federal Reserve Bank of New York, or, if such rate
is not so published, the average of the quotations for such day on such
transactions received by the administrative agent from three Federal funds
brokers of recognized standing selected by the administrative agent).
The Applicable Margin for Base Rate Loans will range, based on the Leverage
Ratio, from 0.000% to 1.125%. The Applicable Margin for LIBOR Loans will range,
based on the Leverage Ratio, from 0.750% to 2.375%.
COLLATERAL
The loans under the credit facility are secured by a lien on substantially
all of our tangible and intangible property, including accounts receivable,
inventory, equipment and intellectual property, and by a pledge of all of the
shares of stock, partnership interests and limited liability company interests
of our direct and indirect domestic subsidiaries, of which we now own or later
acquire more than a 50% interest.
COVENANTS
In addition to certain customary covenants, the credit facility restricts,
among other things, our ability and our subsidiaries' ability to:
- declare dividends or redeem or repurchase capital stock;
S-58
- prepay, redeem or purchase debt;
- incur liens and engage in sale-leaseback transactions;
- make loans and investments;
- incur or guaranty additional indebtedness;
- incur certain conditional sale or rental obligations;
- enter into capital leases;
- sell or discount notes and accounts receivable;
- amend or otherwise alter debt and other material agreements;
- change our name, identity, organizational structure or governing
documents;
- issue or transfer capital stock;
- make capital expenditures;
- enter into management agreements;
- change our fiscal year;
- engage in mergers, acquisitions and asset sales;
- transact with affiliates; and
- alter the business we conduct.
FINANCIAL COVENANTS
The credit facility contains financial covenants including a minimum ratio
of Operating Cash Flow to consolidated interest expense, a maximum ratio of
consolidated total debt to Operating Cash Flow, a minimum ratio of Operating
Cash Flow to pro forma debt service and a minimum ratio of Operating Cash Flow
to fixed charges.
EVENTS OF DEFAULT
Events of default under the credit facility include:
- our failure to pay principal or interest when due;
- our material breach of any representation or warranty contained in the
loan documents;
- covenant defaults;
- events of bankruptcy;
- cross-defaults to other indebtedness;
- termination of licenses or operating agreements or a cessation of
operations; and
- a change of control.
CONVERTIBLE PREFERRED SECURITIES, TERM INCOME DEFERRABLE EQUITY SECURITIES
(TIDES)
On October 6, 1999, Entercom Communications Capital Trust, our wholly owned
subsidiary, sold 2,500,000 6 1/4% Convertible Preferred Securities, Term Income
Deferrable Equity Securities (TIDES), at an offering price of $50.00 per
security. The trust used the proceeds from the TIDES offering to purchase from
us an equal amount of our 6 1/4% Convertible Subordinated Debentures due 2014.
The net proceeds to us after deducting underwriting discounts and other offering
expenses, were $120.5 million.
S-59
We created the trust for the sole purpose of issuing the TIDES. The TIDES
represent an undivided preferred beneficial ownership interest in the assets of
the trust. The trust's sole assets consist of the $125.0 million aggregate
principal amount of the debentures, including accrued interest. Subject to
certain deferral provisions, the holders of the TIDES are entitled to quarterly
calendar distributions paid by the trust. The first distribution was paid on
December 31, 1999. We have also irrevocably guaranteed payments of distributions
and other amounts due under the TIDES (to the extent the trust has funds
available for the payment of those distributions).
Unless redeemed or repurchased, the debentures mature on September 30,
2014. Under the terms of the indenture governing the debentures, we have the
right to defer the payment of interest on the debentures at any time prior to
maturity for a period not exceeding 20 consecutive quarters. Upon the expiration
of any such deferral period, we must pay all interest then accrued and unpaid on
the debentures, together with interest on the accrued and unpaid amount. We may
elect after October 3, 2002, to redeem the debentures in accordance with the
terms of the TIDES. Upon the due date of the debentures, we will pay the
outstanding amount due to the trust and the trust will redeem all of the
outstanding TIDES.
The holders of the TIDES have a preference with respect to each
distribution and amounts payable upon liquidation, redemption or otherwise over
us as holders of the common stock of the trust. Each TIDES is convertible into
shares of our Class A common stock at the rate of 1.1364 shares of Class A
common stock for each TIDES, equaling a conversion price of $44.00 per share. We
have entered into several contractual arrangements for the purpose of fully,
irrevocably and unconditionally guaranteeing the trust's obligations under the
TIDES.
As of December 31, 2001, there were 2,500,000 outstanding TIDES as no
holder of the TIDES had converted its shares into our Class A common stock.
% SENIOR SUBORDINATED NOTES DUE 2014
Concurrently with this offering, our wholly owned subsidiaries, Entercom
Radio and Entercom Capital are offering $150.0 million in aggregate principal
amount of % Senior Subordinated Notes due 2014. We, along with certain of
our direct and indirect subsidiaries, are guaranteeing the issuers' obligations
under the notes on a senior subordinated basis.
The notes are unsecured senior subordinated obligations of Entercom Radio
and each guarantor, ranking pari passu with any existing and future senior
subordinated obligations and senior in right of payment to any existing and
future subordinated indebtedness. The notes will not be secured by any of the
issuers' or the guarantors' assets, and as such will be effectively subordinated
to any secured debt that the issuers or the guarantors have now, including all
of the borrowings under our credit facility, or may incur in the future to the
extent of the value of the assets securing that debt.
Interest on the notes will be payable semi-annually in arrears on
and each year. The first payment of interest on the notes
will be on , 2002. Interest on the notes will accrue at a rate of
% per annum. Prior to , 2005, the issuers may redeem up to 35% of
the notes with the proceeds of one or more specified equity offerings. On or
after , 2007, the issuers may redeem some or all of the notes at any
time.
The indenture governing the notes will contain certain covenants,
restricting our ability to, among other things, incur debt, merge or sell
assets, incur liens, make restricted payments and enter into transactions with
affiliates.
S-60
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the material federal income and
estate tax consequences of the ownership and disposition of our Class A common
stock applicable to Non-United States Holders. A "Non-United States Holder" is a
beneficial owner of our Class A common stock that holds our Class A common stock
as a capital asset and who is generally an individual, corporation, estate or
trust other than:
- an individual who is a citizen or resident of the United States for
federal income tax purposes;
- a corporation (or entity treated as a corporation for federal income tax
purposes) created or organized in or under the laws of the United States,
any state thereof or the District of Columbia;
- an estate the income of which is subject to United States federal income
tax regardless of its source; and
- a trust, if either (i) a court within the United States is able to
exercise primary supervision over the administration of the trust, and
one or more United States persons have the authority to control all
substantial decisions of the trust or (ii) the trust was in existence on
August 20, 1996, was treated as a United States person on that date and
has elected to be treated as a United States person at all times
thereafter.
If a partnership or other entity taxable as a partnership holds our Class A
common stock, the tax treatment of a partner will generally depend on the status
of the partner and the activities of the partnership. Such partner should
consult its tax advisors as to the tax consequences.
The following discussion does not consider specific facts and circumstances
that may be relevant to a particular Non-United States Holder's tax position and
does not consider state and local or non-United States tax laws. Further, it
does not include all of the rules which may affect Non-United States Holders.
For example, special rules not discussed herein may apply to you if you are:
- a broker-dealer or a dealer in securities or currencies;
- a bank, thrift or other financial institution;
- an insurance company;
- holding our Class A common stock as a part of a hedge, straddle,
conversion or other risk reduction transaction; or
- holding our Class A common stock through a partnership or other
pass-through entity.
The discussion is based on the following materials, all as the date hereof:
- the Internal Revenue Code;
- current, temporary and proposed Treasury Regulations promulgated under
the Internal Revenue Code;
- the legislative history of the Internal Revenue Code;
- current administrative interpretations and practices of the Internal
Revenue Service; and
- judicial decisions.
S-61
Legislation, judicial decisions, or administrative changes may be
forthcoming that could effect the accuracy of the statements included in this
summary, possibly on a retroactive basis. We have not requested, and do not plan
to request, any rulings from the Internal Revenue Service concerning the tax
treatment of the Class A common stock. The statements in this prospectus
supplement are not binding on the Internal Revenue Service or any court. Thus,
we can provide no assurance that the statements contained in this prospectus
supplement will not be challenged by the Internal Revenue Service, or that they
would be sustained by a court if they were so challenged.
THIS FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION. ACCORDINGLY,
EACH PROSPECTIVE NON-UNITED STATES HOLDER IS URGED TO CONSULT A TAX ADVISOR WITH
RESPECT TO THE FEDERAL, STATE, LOCAL OR NON-UNITED STATES TAX CONSEQUENCES OF
HOLDING AND DISPOSING OF THE CLASS A COMMON STOCK.
UNITED STATES TRADE OR BUSINESS INCOME
For purposes of the following discussion, dividends and gains on the sale,
exchange or other disposition of our common stock will be considered to be
"United States trade or business income" if such income or gain is (i)
effectively connected with the conduct of a United States trade or business or
(ii) in the case of a treaty resident, attributable to a permanent establishment
(or, in the case of an individual, a fixed base) in the United States.
Generally, United States trade or business income is subject to federal income
tax on a net income basis at regular graduated tax rates. Any United States
trade or business income received by a Non-United States Holder that is a
corporation may, under specific circumstances, be subject to an additional
"branch profits tax" at a 30% rate or a lower rate that an applicable income tax
treaty may specify.
DIVIDENDS
Dividends paid to a Non-United States Holder of Class A common stock
generally will be subject to withholding of United States federal income tax at
a 30% rate unless the dividends are United States trade or business income and
the Non-United States Holder files a properly executed IRS Form W-8ECI (or in
certain cases, a properly executed IRS Form 8BEN) with the withholding agent.
The 30% withholding rate may be reduced if the Non-United States Holder is
eligible for the benefits of an income tax treaty that provides for a lower
rate. Generally, to claim the benefits of an income tax treaty, a Non-United
States Holder of Class A common stock will be required to provide a properly
executed IRS Form W-8BEN and satisfy applicable certification and other
requirements. A Non-United States Holder of Class A common stock that is
eligible for a reduced rate of withholding under an income tax treaty may obtain
a refund or credit of any excess amounts withheld by filing an appropriate claim
for a refund with the Internal Revenue Service. A Non-United States Holder
should consult its tax advisor on its entitlement to benefits under a relevant
income tax treaty.
S-62
DISPOSITION OF CLASS A COMMON STOCK
A Non-United States Holder generally will not be subject to federal income
tax in respect of gain recognized on a disposition of Class A common stock
unless:
- the gain is United States trade or business income;
- the Non-United States Holder is an individual who is present in the
United States for 183 or more days in the taxable year of the disposition
and meets other requirements;
- the Non-United States Holder is subject to United States tax under
provisions applicable to certain United States expatriates (including
certain former citizens or residents of the United States); or
- we are or have been a "U.S. real property holding corporation" for
federal income tax purposes at any time during the shorter of the
five-year period ending on the date of disposition and the Non-United
States Holder's holding period for the Class A common stock.
The tax relating to stock in a U.S. real property holding corporation does
not apply to a Non-United States Holder whose holdings, actual and constructive,
at all times during the applicable period, amount to 5% or less of our Class A
common stock, provided that the common stock is regularly traded on an
established securities market. Generally, a corporation is a U.S. real property
holding corporation if the fair market value of its "U.S. real property
interests" equals or exceeds 50% of the sum of the fair market value of its
worldwide real property interests and its other assets used or held for use in a
trade or business. We believe that we have not been and are not currently a U.S.
real property holding corporation and we do not anticipate becoming a U.S. real
property holding corporation in the future.
FEDERAL ESTATE TAXES
Class A common stock owned or treated as owned by an individual who is a
Non-United States Holder at the time of death will be included in the
individual's gross estate for federal estate tax purposes and may be subject to
federal estate tax, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
DIVIDENDS
We must report annually to the Internal Revenue Service and to each
Non-United States Holder any dividend income that is subject to withholding or
that is exempt from withholding tax pursuant to an income tax treaty. Copies of
these information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of the country in which the
Non-United States Holder resides. Dividends paid to Non-United States Holders of
Class A common stock generally will be exempt from backup withholding if the
Non-United States Holder provides a properly executed IRS Form W-8BEN or
otherwise establishes an exemption.
DISPOSITION OF CLASS A COMMON STOCK
The payment of the proceeds from the disposition of Class A common stock to
or through the United States office of any broker will be subject to information
reporting and possible backup withholding unless the owner properly certifies
that it is a Non-United States Holder under penalties of perjury or otherwise
establishes an exemption, provided that the broker does not have actual
knowledge (or reason to know) that the holder is a United States person. The
S-63
payment of the proceeds from the disposition of Class A common stock to or
through a non-United States office of a non-United States broker will not be
subject to information reporting or backup withholding unless the non-United
States broker has certain types of relationships with the United States (a "U.S.
related person"). In the case of the payment of the proceeds from the
disposition of common stock to or through a non-United States office of a broker
that is either a United States person or a U.S. related person, the Treasury
regulations require information reporting (but not backup withholding) on the
payment unless the broker has documentary evidence in its files that the owner
is a Non-United States Holder and the broker has no knowledge (or reason to
know) to the contrary. Non-United States Holders should consult their own tax
advisors on the application of information withholding and backup withholding to
them in their particular circumstances (including upon their disposition of the
Class A common stock).
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-United States Holder will be
refunded or credited against the holder's federal income tax liability, if any,
if the holder provides the required information to the Internal Revenue Service.
S-64
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Banc Alex.
Brown Inc. and Credit Suisse First Boston Corporation have severally agreed to
purchase from us the following respective number of shares of Class A common
stock at a public offering price less the underwriting discounts and commissions
set forth on the cover page of this prospectus supplement:
<Table>
<Caption>
NUMBER
UNDERWRITERS OF SHARES
- ------------ -----------
Deutsche Banc Alex. Brown Inc. .............................
Credit Suisse First Boston Corporation......................
Banc of America Securities LLC..............................
Goldman, Sachs & Co. .......................................
J.P. Morgan Securities Inc. ................................
-----------
Total..................................................... 3,000,000
===========
</Table>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of Class A common stock offered hereby are
subject to certain conditions precedent and that the underwriters will purchase
all of the shares of Class A common stock offered by this prospectus supplement,
other than those covered by the over-allotment option described below, if any of
these shares are purchased.
We have been advised by the representatives of the underwriters that the
underwriters propose to offer the shares of Class A common stock to the public
at the public offering price set forth on the cover of this prospectus
supplement and to dealers at a price that represents a concession not in excess
of $ per share under the public offering price. The underwriters may allow,
and these dealers may re-allow, a concession of not more than $ per share to
other dealers. After the public offering, representatives of the underwriters
may change the offering price and other selling terms.
We have granted to the underwriters an option, exercisable not later than
30 days after the date of this prospectus, to purchase up to 450,000 additional
shares of Class A common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus supplement. The underwriters may exercise this option only to cover
over-allotments made in connection with the sale of the Class A common stock
offered by this prospectus supplement. To the extent that the underwriters
exercise this option, each of the underwriters will become obligated, subject to
conditions, to purchase approximately the same percentage of these additional
shares of Class A common stock as the number of shares of Class A common stock
to be purchased by it in the above table bears to the total number of shares of
Class A common stock offered by this prospectus. We will be obligated, pursuant
to the option, to sell these additional shares of Class A common stock to the
underwriters to the extent the option is exercised. If any additional shares of
Class A common stock are purchased, the underwriters will offer the additional
shares on the same terms as those on which the initial shares are being offered.
The underwriting discounts and commissions per share are equal to the
public offering price per share of Class A common stock less the amount paid by
the underwriters to us per share of Class A common stock. The underwriting
discounts and commissions are % of the public offering price. We have
agreed to pay the underwriters the following discounts and
S-65
commissions, assuming either no exercise or full exercise by the underwriters of
the underwriters' over-allotment option:
<Table>
<Caption>
TOTAL FEES
--------------------------------------
WITHOUT EXERCISE WITH FULL EXERCISE
OF OVER-ALLOTMENT OF OVER-ALLOTMENT
FEE PER SHARE OPTION OPTION
------------- ----------------- ------------------
Discounts and commissions paid by
us............................... $ $ $
</Table>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $500,000.
We, for a period of 90 days, and certain of our directors, officers,
members of senior management and stockholders, each for a period of 60 days,
have agreed that we will not offer, sell, contract to sell or otherwise dispose
of, directly or indirectly, or file with the Commission a registration statement
under the Securities Act of 1933, as amended, (the "Securities Act") relating
to, any additional shares of our Class A common stock or securities convertible
into or exchangeable or exercisable for any shares of our capital stock or
publicly disclose the intention to make an offer, sale, pledge, disposition or
filing without the prior written consent of Deutsche Banc Alex. Brown Inc. and
Credit Suisse First Boston Corporation, except (1) with respect to us, pursuant
to or in connection with employee stock option or employee stock purchase plans
or other employee or non-employee director or key advisor compensation
arrangements or agreements, in effect on the date of this prospectus supplement,
(2) in connection with the conversion of shares of Class A common stock, Class B
common stock or Class C common stock solely into another class of common stock
or (3) shares sold in this offering pursuant to the over-allotment option.
We have agreed to indemnify the underwriters against some specified types
of liabilities, including liabilities under the Securities Act and to contribute
to payments the underwriters may be required to make in respect of any of these
liabilities.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
Our Class A common stock is traded on the New York Stock Exchange under the
symbol ETM.
In connection with the offering, the underwriters may purchase and sell
shares of our Class A common stock in the open market. These transactions may
include short sales, purchases to cover positions created by short sales and
stabilizing transactions.
Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in the offering. Covered short sales
are sales made in an amount not greater than the underwriters' option to
purchase additional shares of Class A common stock from us in the offering. The
underwriters may close out any covered short position by either exercising their
option to purchase additional shares or purchasing shares in the open market. In
determining the source of shares to close out the covered short position, the
underwriters will consider, among other things, the price of shares available
for purchase in the open market as compared to the price at which they may
purchase shares through the over-allotment option.
Naked short sales are any sales in excess of the over-allotment option. The
underwriters must close out any naked short position by purchasing shares in the
open market. A naked short position is more likely to be created if underwriters
are concerned that there may be downward pressure on the price of the shares in
the open market prior to the completion of the offering.
S-66
Stabilizing transactions consist of various bids for or purchases of our
Class A common stock made by the underwriters in the open market prior to the
completion of the offering.
The underwriters may impose a penalty bid. This occurs when a particular
underwriter repays to the other underwriters a portion of the underwriting
discount received by it because the representatives of the underwriters have
repurchased shares sold by or for the account of that underwriter in stabilizing
or short covering transactions.
Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or slowing a decline in the market price of our Class A
common stock. Additionally, these purchases, along with the imposition of the
penalty bid, may stabilize, maintain or otherwise affect the market price of our
Class A common stock. As a result, the price of our Class A common stock may be
higher than the price that might otherwise exist in the open market. These
transactions may be affected on the New York Stock Exchange, in the over-the-
counter market or otherwise.
A copy of this prospectus supplement and the underlying prospectus in
electronic format may be made available on Internet web sites maintained by one
or more of the lead underwriters of this offering. Other than the prospectus
supplement and prospectus in electronic format, the information on any
underwriter's web site and any information contained in any other web site
maintained by an underwriter is not part of the prospectus or the registration
statement of which the prospectus forms a part.
Some of the underwriters or their affiliates have provided investment
services to us in the past and may do so in the future. They receive customary
fees and commissions for these services.
Affiliates of Deutsche Banc Alex. Brown Inc., Credit Suisse First Boston
Corporation, Banc of America Securities LLC and J.P. Morgan Securities Inc. are
lenders to us under our existing credit facility, and an affiliate of Banc of
America Securities LLC is the syndication agent and co-documentation agent under
our credit facility. A portion of the proceeds from this offering will be used
to repay our existing credit facility. In addition, Credit Suisse First Boston
Corporation, Deutsche Banc Alex. Brown Inc. and Banc of America Securities LLC
are acting as underwriters for our concurrent notes offering. In connection with
the notes offering, each will be paid customary fees and be reimbursed by us for
related expenses.
S-67
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Class A common stock in Canada is being made only
on a private placement basis exempt from the requirement that we prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of Class A common stock are made. Any resale of the Class A common
stock in Canada must be made under applicable securities laws, which will vary
depending on the relevant jurisdiction, and which may require resales to be made
under available statutory exemptions or under a discretionary exemption granted
by the applicable Canadian securities regulatory authority. Purchasers are
advised to seek legal advice prior to any resale of the Class A common stock.
REPRESENTATIONS OF PURCHASERS
By purchasing Class A common stock in Canada and accepting a purchase
confirmation a purchaser is representing to us and the dealer from whom the
purchase confirmation is received that:
- the purchaser is entitled under applicable provincial securities laws to
purchase the Class A common stock without the benefit of a prospectus
qualified under those securities laws,
- where required by law, that the purchaser is purchasing as principal and
not as agent, and
- the purchaser has reviewed the text above under Resale Restrictions.
RIGHTS OF ACTION -- ONTARIO PURCHASERS ONLY
Under Ontario securities legislation, a purchaser who purchases a security
offered by this prospectus supplement during the period of distribution will
have a statutory right of action for damages, or while still the owner of the
Class A common stock, for rescission against us in the event that this
prospectus supplement contains a misrepresentation. A purchaser will be deemed
to have relied on the misrepresentation. The right of action for damages is
exercisable not later than the earlier of 180 days from the date the purchaser
first had knowledge of the facts giving rise to the cause of action and three
years from the date on which payment is made for the Class A common stock. The
right of action for rescission is exercisable not later than 180 days from the
date on which payment is made for the Class A common stock. If a purchaser
elects to exercise the right of action for rescission, the purchaser will have
no right of action for damages against us. In no case will the amount
recoverable in any action exceed the price at which the Class A common stock was
offered to the purchaser and if the purchaser is shown to have purchased the
securities with knowledge of the misrepresentation, we will have no liability.
In the case of an action for damages, we will not be liable for all or any
portion of the damages that are proven to not represent the depreciation in
value of the Class A common stock as a result of the misrepresentation relied
upon. These rights are in addition to, and without derogation from, any other
rights or remedies available at law to an Ontario purchaser. The foregoing is a
summary of the rights available to an Ontario purchaser. Ontario purchasers
should refer to the complete text of the relevant statutory provisions.
ENFORCEMENT OF LEGAL RIGHTS
All of our directors and officers as well as the experts named herein 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 or those
persons. All or a substantial portion of our assets and the assets of those
persons may be located outside of Canada and, as a result, it may not be
S-68
possible to satisfy a judgment against us or those persons in Canada or to
enforce a judgment obtained in Canadian courts against us or those persons
outside of Canada.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Class A common stock should consult their own legal
and tax advisors with respect to the tax consequences of an investment in the
Class A common stock in their particular circumstances and about the eligibility
of the Class A common stock for investment by the purchaser under relevant
Canadian legislation.
RELATIONSHIPS WITH AFFILIATES OF CERTAIN UNDERWRITERS
Affiliates of Deutsche Banc Alex. Brown Inc., Credit Suisse First Boston
Corporation, Banc of America Securities LLC and J.P. Morgan Securities Inc. are
lenders to us under our existing credit facility, and an affiliate of Banc of
America Securities LLC is the syndication agent and co-documentation agent under
our credit facility. A portion of the proceeds from this offering will be used
to repay our existing credit facility. The decision of these underwriters to
underwrite this offering was made independent of their respective affiliates
that are lenders under our existing credit facility, which had no involvement in
determining whether or when to distribute the Class A common stock under this
offering or the terms of this offering. In addition, Credit Suisse First Boston
Corporation, Deutsche Banc Alex. Brown Inc. and Banc of America Securities LLC
are acting as underwriters for our concurrent notes offering. In connection with
the notes offering, each will be paid customary fees and be reimbursed by us for
related expenses. None of Deutsche Banc Alex. Brown Inc., Credit Suisse First
Boston Corporation, Banc of America Securities LLC or J.P. Morgan Securities
Inc. will receive any benefit from this offering or the concurrent notes
offering, other than its respective portion of the underwriting fee as paid by
us. See "Underwriting."
S-69
LEGAL MATTERS
John S. Donlevie, Esq., Executive Vice President, Secretary and General
Counsel, will issue an opinion with respect to certain legal matters with
respect to the validity of the shares of the Class A common stock. Mr. Donlevie
is a full time employee of Entercom and owns beneficial interests in less than
one percent of our Class A common stock. Latham & Watkins, Washington D.C., will
opine as to certain other matters. The underwriters will be advised about
various other legal matters relating to this offering by Weil, Gotshal & Manges
LLP, New York, New York.
EXPERTS
The consolidated financial statements and schedule as of December 31, 2001
and for the year then ended incorporated by reference in this prospectus
supplement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report. Reference is made to
said report, which includes an explanatory paragraph with respect to a change in
accounting for derivative instruments and hedging activities pursuant to the
provisions of Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Hedging Activities."
The consolidated financial statements and related consolidated financial
statement schedule as of December 31, 2000, and for each of the two years in the
period ended December 31, 2000 incorporated in this prospectus supplement by
reference from Entercom Communications Corp.'s Annual Report on Form 10-K for
the year ended December 31, 2001 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
S-70
WHERE YOU CAN FIND MORE INFORMATION
Entercom Communications Corp. is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and files annual, quarterly
and special reports, proxy statements and other information with the SEC. You
may read and copy any reports, proxy statements and other information we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. You may also access filed documents at the SEC's web site
at www.sec.gov.
We are incorporating by reference some information about us that we file
with the SEC. We are disclosing important information to you by referencing
those filed documents. Any information that we reference this way is considered
part of this prospectus supplement. The information in this prospectus
supplement supercedes information incorporated by reference that we have filed
with the SEC prior to the date of this prospectus supplement, while information
that we file with the SEC after the date of this prospectus supplement that is
incorporated by reference will automatically update and supersede this
information.
We incorporate by reference the following documents we have filed, or may
file, with the SEC:
- Entercom Communications Corp.'s Annual Report on Form 10-K for its fiscal
year ended December 31, 2001;
- all documents filed by Entercom Communications Corp. with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this prospectus supplement and before termination of this offering.
You may request a free copy of any of the documents incorporated by
reference in this prospectus supplement by writing or telephoning us at the
following address:
ENTERCOM COMMUNICATIONS CORP.
401 CITY AVENUE, SUITE 409
BALA CYNWYD, PA 19004
(610) 660-5610
S-71
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PRELIMINARY
PROSPECTUS THAT IS ALSO PART OF THIS DOCUMENT. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED OR INCORPORATED IN THIS
PRELIMINARY PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PRELIMINARY PROSPECTUS.
WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF CLASS A COMMON
STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED OR INCORPORATED IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PRELIMINARY PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF
SUCH INFORMATION, REGARDLESS OF THE TIME OF DELIVERY OF THIS PRELIMINARY
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PRELIMINARY PROSPECTUS OR OF ANY SALE
OF OUR CLASS A COMMON STOCK.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
PROSPECTUS SUPPLEMENT
About this Prospectus Supplement............. S-i
Special Note Regarding Forward-Looking
Statements................................. S-ii
Information About Station and Market Data.... S-ii
Summary...................................... S-1
Risk Factors................................. S-9
Use of Proceeds.............................. S-15
Price Range of Our Class A Common Stock...... S-16
Dividend Policy.............................. S-16
Capitalization............................... S-17
Selected Consolidated Financial Data......... S-18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. S-23
Business..................................... S-37
Management................................... S-48
Principal Shareholders....................... S-54
Description of Certain Indebtedness.......... S-57
Certain Federal Income Tax Considerations.... S-61
Underwriting................................. S-65
Notice to Canadian Residents................. S-68
Legal Matters................................ S-70
Experts...................................... S-70
Where You Can Find More Information.......... S-71
PROSPECTUS
About this Prospectus........................ i
Where You Can Find More Information.......... i
Disclosure Regarding Forward-Looking
Statements................................. ii
The Company.................................. 1
Use of Proceeds.............................. 1
Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.................. 2
Description of Capital Stock................. 3
Description of Debt Securities............... 7
Plan of Distribution......................... 14
Legal Matters................................ 15
Experts...................................... 15
</Table>
[ENTERCOM LOGO]
3,000,000 Shares
Class A Common Stock
Deutsche Banc Alex. Brown
Credit Suisse First Boston
Banc of America Securities LLC
Goldman, Sachs & Co.
JPMorgan
Preliminary Prospectus Supplement
February 20, 2002
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 FEBRUARY 20, 2002
$250,000,000
ENTERCOM COMMUNICATIONS CORP.
Class A Common Stock and Preferred Stock
---------------------
$250,000,000
ENTERCOM RADIO, LLC
ENTERCOM CAPITAL, INC.
Debt Securities
---------------------
Entercom Communications may from time to time offer up to $250,000,000 in
aggregate offering price of its Class A common stock, par value $.01 per share,
and its preferred stock, par value $.01 per share, or any combination of its
Class A common stock and preferred stock.
Entercom Communication's Class A common stock is traded on the New York
Stock Exchange under the symbol "ETM." On February 15, 2002, the last reported
sale price for Entercom Communication's Class A common stock on the New York
Stock Exchange was $52.74 per share.
Entercom Radio may from time to time offer up to $250,000,000 in aggregate
principal amount or initial accreted value of its debt securities. The debt
securities that Entercom Radio may issue may consist of debentures, notes or
other types of debt. Any debt securities issued by Entercom Radio will be
co-issued by Entercom Capital, Inc. Entercom Radio's payment obligations under
any series of debt securities will be guaranteed by Entercom Communications and
may be guaranteed by one or more of the Co-Registrants.
This prospectus provides a general description of the securities we may
offer. The specific terms of the securities offered by this prospectus will be
set forth in a supplement to this prospectus and will include:
- in the case of Class A common stock, the number of shares, purchase price
and terms of the offering and sale thereof;
- in the case of preferred stock, the specific designation, number of
shares, liquidation preference, purchase price, dividend, voting,
redemption and conversion provisions, and any other specific terms of the
preferred stock; and
- in the case of debt securities, the specific designation, aggregate
principal amount, purchase price, maturity, interest rate, time of
payment of interest, terms (if any) for the subordination or redemption
thereof, and any other specific terms of the debt securities;
You should read this prospectus and any prospectus supplement carefully
before you invest in any securities we offer. This prospectus may not be used to
consummate a sale of securities unless accompanied by the applicable prospectus
supplement.
---------------------
These securities have not been approved by the Securities and Exchange
Commission or any state securities commission, nor have these organizations
determined that this prospectus is accurate or complete. Any representation to
the contrary is a criminal offense.
---------------------
The date of this prospectus is February , 2002
WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO
THIS PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT. THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO THIS
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH THEY RELATE,
NOR DOES THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO THIS PROSPECTUS
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. THE INFORMATION CONTAINED IN THIS PROSPECTUS
AND THE SUPPLEMENT TO THIS PROSPECTUS IS ACCURATE AS OF THE DATES ON THEIR
COVERS. WHEN WE DELIVER THIS PROSPECTUS OR A SUPPLEMENT OR MAKE A SALE PURSUANT
TO THIS PROSPECTUS OR A SUPPLEMENT, WE ARE NOT IMPLYING THAT THE INFORMATION IS
CURRENT AS OF THE DATE OF THE DELIVERY OR SALE.
---------------------
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
About This Prospectus................. i
Where You Can Find More Information... i
Disclosure Regarding Forward Looking
Statements.......................... ii
The Company........................... 1
Use of Proceeds....................... 1
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends........................... 2
</Table>
<Table>
<Caption>
PAGE
----
Description of Capital Stock.......... 3
Description of Debt Securities........ 7
Plan of Distribution.................. 14
Legal Matters......................... 15
Experts............................... 15
</Table>
---------------------
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement filed with the
Securities and Exchange Commission by Entercom Communications, Entercom Radio,
Entercom Capital and the co-registrant subsidiaries of Entercom Radio (the
"Registrants") utilizing a "shelf" registration process. This prospectus
provides you with a general description of the securities that the Registrants
may offer. Each time the Registrants sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with additional information described
under the next heading "Where You Can Find More Information."
Unless the context requires otherwise, "Entercom," "We," "Us" or similar
terms refer to Entercom Communications Corp., Entercom Radio, LLC, a wholly
owned subsidiary of Entercom Communications, Entercom Capital, Inc., a wholly
owned subsidiary of Entercom Radio, and Entercom Communication's consolidated
subsidiaries, excluding Entercom Communications Capital Trust. The direct and
indirect subsidiaries of Entercom Radio hold all of our radio station licenses
and related assets.
WHERE YOU CAN FIND MORE INFORMATION
Entercom Communications files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You can inspect and copy these reports, proxy statements and other information
at the public reference facility of the Commission, in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Please call the
Commission at 1-800-SEC-0330 for further information on the public reference
room. The Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission (http://www.sec.gov). You can inspect reports
and other information Entercom Communications files at the office of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Registrants have filed a registration statement and related exhibits
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). The registration statement contains additional information
about us, Entercom Communication's Class A common stock and preferred stock and
Entercom
i
Radio's debt securities. You may inspect the registration statement and exhibits
without charge at the office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and you may obtain copies from the Commission at
prescribed rates.
The Commission allows us to "incorporate by reference" the information
Entercom Communications files with it, which means that we can disclose
important information to you by referring to those documents. The information
incorporated by reference is an important part of this prospectus, and
information that Entercom Communications files subsequent to the date of this
prospectus with the Commission will automatically update and supersede this
information. We incorporate by reference the following documents Entercom
Communications filed with the Commission pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"):
- Annual Report on Form 10-K for the fiscal year ended December 31, 2001;
and
- Description of our Class A common stock contained in our registration
statement on Form 8-A that was filed with the Commission on September 15,
1998.
We are also incorporating by reference into this prospectus all documents
filed by the Registrants with the Commission pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this prospectus and before we
cease offering the securities under this prospectus (other than those portions
of such documents described in paragraphs (i), (k), and (l) of Item 402 of
Regulation S-K promulgated by the Commission).
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Corporate Secretary
Entercom Communications Corp.
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
(610) 660-5610
You should rely only on the information incorporated by reference or
provided in this prospectus and any supplement. We have not authorized anyone
else to provide you with different information.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents that we incorporate by reference
herein, contains, in addition to historical information, statements by us with
regard to our expectations as to financial results and other aspects of our
business that involve risks and uncertainties and may constitute forward looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. These statements reflect our current views and are
based on certain assumptions. Actual results could differ materially from those
currently anticipated as a result of a number of factors, including, but not
limited to, the following: (1) the highly competitive nature of, and new
technologies in, the radio broadcasting industry; (2) our dependence upon our
Seattle radio stations; (3) the risks associated with our acquisition strategy
generally; (4) the control of us by Joseph M. Field and members of his immediate
family; (5) our vulnerability to changes in federal legislation or regulatory
policies; and (6) the risks disclosed in Entercom's reports previously filed
with the Commission.
These important factors are discussed in more detail under "Risk Factors"
in Entercom Communication's Annual Report on Form 10-K for the year ended
December 31, 2001 and in any accompanying prospectus supplements and in other
documents the Registrants may file with the Commission and which will be
incorporated by reference herein. You may obtain copies of these documents as
described under "Where You Can Find More Information" in this prospectus.
We assume no obligation to update any forward-looking statements as a
result of new information or future events or developments, except as required
under federal securities laws. Investors are cautioned not to place undue
reliance on any forward-looking statements, which speak only as of the date of
this prospectus or, in the case of any document we incorporate by reference, the
date of such document.
Investors also should understand that it is not possible to predict or
identify all factors and should not consider the risks set forth above to be a
complete statement of all potential risks and uncertainties. If the expectations
or assumptions underlying our forward-looking statements prove inaccurate or if
risks or uncertainties arise, actual results could differ materially from those
predicted in any forward-looking statement.
ii
THE COMPANY
We are one of the five largest radio broadcasting companies in the United
States based upon pro forma 2000 revenues for pending acquisitions, as derived
from the January 7, 2002 edition of BIA Consulting, Inc. We have assembled,
after giving effect to the pending acquisitions of three stations in the Denver
market and two stations in the Greensboro market, a nationwide portfolio of 100
stations in 19 markets, including 11 of the country's top 50 radio revenue
markets. Based upon Duncan's Radio Market Guide (2001 ed.), our station groups,
including pending acquisitions, rank among the top three in revenue market share
in 18 of the 19 markets in which we operate. Over 85% of our revenues are
derived from markets where we ranked as either first or second in market radio
revenues.
We operate a wide range of formats in geographically diverse markets across
the United States. Our largest markets, in order of our revenues, including pro
forma for pending acquisitions, are Seattle, Boston, Kansas City, Sacramento,
Portland, New Orleans and Denver.
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
expertise. Although our focus has been on radio stations in top 50 markets, we
also acquire stations in top 75 markets which meet these criteria.
Our principal executive offices are located at 401 City Avenue, Suite 409,
Bala Cynwyd, Pennsylvania 19004, and our telephone number is (610) 660-5610.
USE OF PROCEEDS
Unless we indicate otherwise in the applicable prospectus supplement, we
anticipate that we will use any net proceeds from the sale of securities offered
by this prospectus and the applicable prospectus supplement for general
corporate purposes, including repaying or refinancing our senior bank facility,
or redeeming or repurchasing our Convertible Preferred Securities, Term Income
Deferrable Equity Securities (TIDES), and for acquisitions, working capital, and
other capital expenditures or any other purpose permitted under our senior bank
facility. The factors which we will consider in any refinancing will include the
amount and characteristics of any debt securities issued and may include, among
others, the impact of such refinancing on our interest coverage, debt-to-capital
ratio, liquidity and earnings per share. We may temporarily invest funds not
required immediately for such purposes in short term investment grade
securities.
1
RATIO OF EARNINGS TO FIXED CHARGES
AND
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
Entercom Communication's ratio of earnings to fixed charges and the ratio
of earnings to combined fixed charges and preferred stock dividends for each of
the two fiscal years ending September 30, 1997 and 1998 and for each of the
three fiscal years ending December 31, 1999, 2000 and 2001, respectively, are
set forth below. Any debt securities issued by Entercom Radio will be guaranteed
by Entercom Communications. The ratio of earnings to fixed charges and ratio of
earnings to combined fixed charges and preferred stock dividends are identical
for all periods because Entercom Communications had no outstanding preferred
stock during such periods. The information set forth below should be read in
conjunction with the financial information incorporated by reference herein. For
purposes of these calculations, "earnings" represents pretax income from
continuing operations before loss on equity investments and fixed charges and
"fixed charges" consist of interest expense, amortization of debt financing
costs and an amount equivalent to interest included in rental charges. We have
assumed that one-third of rental expense is representative of the interest
factor.
<Table>
<Caption>
FISCAL YEAR
ENDED FISCAL YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
-------------- ------------------
1997 1998 1999 2000 2001
------ ----- ---- ---- ----
Ratio of earnings to fixed charges................. 15.02 1.62 3.81 2.65 1.90
Ratio of earnings to combined fixed charges and
preferred stock dividends........................ 15.02 1.62 3.81 2.65 1.90
</Table>
2
DESCRIPTION OF CAPITAL STOCK
Authorized capital stock of Entercom Communications as of January 31, 2002
consisted of:
- 200,000,000 shares of Class A common stock, of which 34,829,917 shares
were issued and outstanding;
- 75,000,000 shares of Class B common stock, of which 10,531,805 shares
were issued and outstanding;
- 50,000,000 shares of Class C common stock, none of which were issued and
outstanding; and
- 25,000,000 shares of preferred stock, none of which were issued or
outstanding.
We have reserved for issuance under our 1998 Equity Compensation Plan, as
amended, shares of Class A common stock equal to the sum of 2,500,000 and 10% of
the number of total outstanding shares of common stock of all classes. As of
January 31, 2002, 3,617,645 shares of Class A common stock were available for
future grants under this plan. We also have reserved 1,850,000 shares of Class A
common stock for issuance under our Employee Stock Purchase Plan, of which
1,794,264 shares were available for purchase as of January 31, 2002.
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 of the outstanding shares of Class A common stock
and Class B 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 our 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:
- any share of Class B common stock not voted by either Joseph M. Field or
David J. Field, in his own right or pursuant to a proxy, is entitled to
one vote;
- the holders of Class A common stock, voting as a separate class, are
entitled to elect two Class A directors;
- 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
- as required by law.
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.
3
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 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, if any, for
the series;
- 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;
4
- the redemption prices and terms, if any, applicable to the series; 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.
When we offer to sell a particular class or series of preferred securities,
we will describe the specific terms and conditions of such class or series in a
supplement to this prospectus.
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will, with respect to rights to the payment of dividends and
distribution of our assets and rights upon our liquidation, dissolution or
winding up, rank:
- senior to all classes or series of our common stock and to all of our
equity securities the terms of which provide that those equity securities
are subordinated to the preferred stock;
- junior to all of our equity securities which the terms of that preferred
stock provide will rank senior to it; and
- on a parity with all of our equity securities other than those referred
to in the clauses above.
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.
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 an unsolicited proposal from a third party that 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 of our amended and restated
articles of incorporation that we consider material, but does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of our amended and restated articles of incorporation. 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, 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.
5
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.
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.
6
TRANSFER AGENT AND REGISTRAR
Transfer Agent and Registrar for our common stock is First Union National
Bank.
DESCRIPTION OF DEBT SECURITIES
This prospectus describes certain general terms and provisions of our debt
securities. When we offer to sell a particular series of debt securities, we
will describe the specific terms of the series in a supplement to this
prospectus. We will also indicate in the applicable prospectus supplement
whether the general terms and provisions described in this prospectus apply to a
particular series of debt securities.
Entercom Radio may offer under this prospectus up to $250,000,000 aggregate
principal amount of debt securities, or if debt securities are issued at a
discount, or in a foreign currency or composite currency, such principal amount
as may be sold for an aggregate public offering price of up to $250,000,000.
Unless otherwise specified in a supplement to this prospectus, the debt
securities will be the direct, unsecured obligations of Entercom Radio and will
rank equally with all of its other unsecured and unsubordinated indebtedness.
Any debt securities issued by Entercom Radio will be co-issued by Entercom
Capital, the wholly owned subsidiary of Entercom Radio. Entercom Radio's payment
obligations under any series of debt securities will be guaranteed by Entercom
Communications and may be guaranteed by one or more Co-Registrants.
The debt securities will be issued under an indenture between us and a
trustee, as trustee. We have summarized select portions of the indenture below.
The summary is not complete. The form of the indenture has been filed as an
exhibit to the registration statement and you should read the indenture for
provisions that may be important to you. Capitalized terms used in the summary
have the meaning specified in the indenture.
When we refer to "we," "our" and "us" in this section, we mean Entercom
Radio, LLC and Entercom Capital, Inc., as co-issuers, unless the context
otherwise requires or as otherwise expressly stated.
GENERAL
The terms of each series of debt securities will be established by or
pursuant to a resolution of our Board of Directors and set forth or determined
in the manner provided in an officers' certificate or by a supplemental
indenture. The particular terms of each series of debt securities will be
described in a prospectus supplement relating to such series, including any
pricing supplement.
We may issue an unlimited amount of debt securities under the indenture
that may be in one or more series with the same or various maturities, at par,
at a premium, or at a discount. We will set forth in a prospectus supplement,
including any pricing supplement, relating to any series of debt securities
being offered, the aggregate principal amount and the following terms of the
debt securities:
- the title of the debt securities;
- the price or prices (expressed as a percentage of the principal amount)
at which we will sell the debt securities;
- any limit on the aggregate principal amount of the debt securities;
- the date or dates on which we will pay the principal on the debt
securities;
- the rate or rates (which may be fixed or variable) per annum or the
method used to determine the rate or rates (including any commodity,
commodity index, stock exchange index or financial index) at which the
debt securities will bear interest, the date or dates from which interest
will accrue, the date or dates on which interest will commence and be
payable and any regular record date for the interest payable on any
interest payment date;
- whether the debt securities rank as senior subordinated debt securities
or subordinated debt securities, or any combination thereof;
- the form and terms of any guarantee of any debt securities;
- any depositories, interest rate calculation agents or other agents with
respect to the debt securities;
7
- whether, the ratio at which and the terms and conditions upon which, if
any, the debt securities will be convertible into or exchangeable for our
common stock or our other securities or securities of another person;
- the place or places where principal of, premium, if any, and interest, if
any, on the debt securities will be payable or the method of such
payment, if by wire transfer, mail or by other means;
- the terms and conditions upon which we may redeem the debt securities;
- any obligation we have to redeem or purchase the debt securities pursuant
to any sinking fund or analogous provisions or at the option of a holder
of debt securities;
- the dates on which and the price or prices at which we will repurchase
debt securities at the option of the holders of debt securities and other
detailed terms and provisions of these repurchase obligations;
- the dates, if any, on which, and the price or prices at which, the debt
securities will be repurchased at the option of the holders thereof and
other detailed terms and provisions of such repurchase obligations;
- the denominations in which the debt securities will be issued, if other
than denominations of $1,000 and any integral multiple thereof;
- whether the debt securities will be issued in bearer or fully registered
form (and if in fully registered form, whether the debt securities will
be issuable, in whole or in part, as global debt securities);
- the portion of principal amount of the debt securities payable upon
declaration of acceleration of the maturity date, if other than the
principal amount;
- the currency of denomination of the debt securities;
- the designation of the currency, currencies or currency units in which
payment of principal of, premium and interest on the debt securities will
be made;
- if payments of principal of, premium or interest on the debt securities
will be made in one or more currencies or currency units other than that
or those in which the debt securities are denominated, the manner in
which the exchange rate with respect to these payments will be
determined;
- the manner in which the amounts of payment of principal of, or premium or
interest on the debt securities will be determined, if these amounts may
be determined by reference to an index based on a currency or currencies
other than that in which the debt securities are denominated or
designated to be payable or by reference to a commodity, commodity index,
stock exchange index or financial index;
- any provisions relating to any security provided for the debt securities;
- any addition to or change in the events of default described in this
prospectus or in the indenture with respect to the debt securities and
any change in the acceleration provisions described in this prospectus or
in the indenture with respect to the debt securities;
- any addition to, change in or deletion from, the covenants described in
this prospectus or in the indenture with respect to the debt securities;
- any other terms of the debt securities, which may modify, supplement or
delete any provision of the indenture as it applies to that series; and
- any depositaries, interest rate calculation agents, exchange rate
calculation agents or other agents with respect to the debt securities.
In addition, the indenture does not limit our ability to issue subordinated
debt securities. Any subordination provisions of a particular series of debt
securities will be set forth in the officer's certificate or supplemental
indenture related to that series of debt securities and will be described in the
relevant prospectus supplement.
8
We may issue debt securities that provide for an amount less than their
stated principal amount to be due and payable upon declaration of acceleration
of their maturity pursuant to the terms of the indenture. We will provide you
with information on the federal income tax considerations and other special
considerations applicable to any of these debt securities in the applicable
prospectus supplement.
If we denominate the purchase price of any of the debt securities in a
foreign currency or currencies or a foreign currency unit or units, or if the
principal of and any premium and interest on any series of debt securities is
payable in a foreign currency or currencies or a foreign currency unit or units,
we will provide you with information on the restrictions, elections, general tax
considerations, specific terms and other information with respect to that issue
of debt securities and such foreign currency or currencies or foreign currency
unit or units in the applicable prospectus supplement.
TRANSFER AND EXCHANGE
Each debt security will be represented by either one or more global
securities registered in the name of The Depository Trust Company, as
depositary, or a nominee (we will refer to any debt security represented by a
global debt security as a "book-entry debt security"), or a certificate issued
in definitive registered form (we will refer to any debt security represented by
a certificated security as a "certificated debt security") as set forth in the
applicable prospectus supplement. Except as set forth under the heading "Global
Debt Securities and Book-Entry System" below, book-entry debt securities will
not be issuable in certificated form.
CERTIFICATED DEBT SECURITIES. You may transfer or exchange certificated
debt securities at any office we maintain for this purpose in accordance with
the terms of the indenture. No service charge will be made for any transfer or
exchange of certificated debt securities, but we may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
with a transfer or exchange.
You may effect the transfer of certificated debt securities and the right
to receive the principal of, premium and interest on certificated debt
securities only by surrendering the certificate representing those certificated
debt securities and either reissuance by us or the trustee of the certificate to
the new holder or the issuance by us or the trustee of a new certificate to the
new holder.
GLOBAL DEBT SECURITIES AND BOOK-ENTRY SYSTEM. Each global debt security
representing book-entry debt securities will be deposited with, or on behalf of,
the depositary, and registered in the name of the depositary or a nominee of the
depositary.
The depositary has indicated it intends to follow the following procedures
with respect to book-entry debt securities.
Ownership of beneficial interests in book-entry debt securities will be
limited to persons that have accounts with the depositary for the related global
debt security, which we refer to as participants, or persons that may hold
interests through participants. Upon the issuance of a global debt security, the
depositary will credit, on its book-entry registration and transfer system, the
participants' accounts with the respective principal amounts of the book-entry
debt securities represented by such global debt security beneficially owned by
such participants. The accounts to be credited will be designated by any
dealers, underwriters or agents participating in the distribution of the
book-entry debt securities. Ownership of book-entry debt securities will be
shown on, and the transfer of such ownership interests will be effected only
through, records maintained by the depositary for the related global debt
security (with respect to interests of participants) and on the records of
participants (with respect to interests of persons holding through
participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. These
laws may impair the ability to own, transfer or pledge beneficial interests in
book-entry debt securities.
So long as the depositary for a global debt security, or its nominee, is
the registered owner of that global debt security, the depositary or its
nominee, as the case may be, will be considered the sole owner or holder of the
book-entry debt securities represented by such global debt security for all
purposes under the indenture. Except as described below, beneficial owners of
book-entry debt securities will not be entitled to have securities registered in
their names, will not receive or be entitled to receive physical delivery of a
certificate in
9
definitive form representing securities and will not be considered the owners or
holders of those securities under the indenture. Accordingly, each person
beneficially owning book-entry debt securities must rely on the procedures of
the depositary for the related global debt security and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder under the indenture.
We understand, however, that under existing industry practice, the
depositary will authorize the persons on whose behalf it holds a global debt
security to exercise certain rights of holders of debt securities, and the
indenture provides that we, the trustee and our respective agents will treat as
the holder of a debt security the persons specified in a written statement of
the depositary with respect to that global debt security for purposes of
obtaining any consents or directions required to be given by holders of the debt
securities pursuant to the indenture.
We will make payments of principal of, and premium and interest on
book-entry debt securities to the depositary or its nominee, as the case may be,
as the registered holder of the related global debt security. We, the trustee
and any other agent of ours or agent of the trustee will not have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a global debt
security or for maintaining, supervising or reviewing any records relating to
beneficial ownership interests.
We expect that the depositary, upon receipt of any payment of principal of,
premium or interest on a global debt security, will immediately credit
participants' accounts with payments in amounts proportionate to the respective
amounts of book-entry debt securities held by each participant as shown on the
records of such depositary. We also expect that payments by participants to
owners of beneficial interests in book-entry debt securities held through those
participants will be governed by standing customer instructions and customary
practices, as is now the case with the securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of those participants.
We will issue certificated debt securities in exchange for each global debt
security if the depositary is at any time unwilling or unable to continue as
depositary or ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended, or Exchange Act, and a successor depositary
registered as a clearing agency under the Exchange Act is not appointed by us
within 90 days. In addition, we may at any time and in our sole discretion
determine not to have the book-entry debt securities of any series represented
by one or more global debt securities and, in that event, will issue
certificated debt securities in exchange for the global debt securities of that
series. Global debt securities will also be exchangeable by the holders for
certificated debt securities if an event of default with respect to the
book-entry debt securities represented by those global debt securities has
occurred and is continuing. Any certificated debt securities issued in exchange
for a global debt security will be registered in such name or names as the
depositary shall instruct the trustee. We expect that such instructions will be
based upon directions received by the depositary from participants with respect
to ownership of book-entry debt securities relating to such global debt
security.
We have obtained the foregoing information concerning the depositary and
the depositary's book-entry system from sources we believe to be reliable, but
we take no responsibility for the accuracy of this information.
CHANGE OF CONTROL
Unless we state otherwise in the applicable prospectus supplement, the debt
securities will not contain any provisions which may afford holders of the debt
securities protection in the event we undergo a change in control or in the
event of a highly leveraged transaction (whether or not such transaction results
in a change in control) which could adversely affect holders of debt securities.
COVENANTS
We will set forth in the applicable prospectus supplement any restrictive
covenants applicable to any issue of debt securities.
10
CONSOLIDATION, MERGER AND SALE OF ASSETS
Unless otherwise stated in the applicable prospectus supplement, we may not
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all of our properties and assets to, any person, which we refer to
as a successor person, unless:
- we are the surviving corporation or the successor person (if other than
Entercom Radio or Entercom Capital, as applicable) is a corporation
organized and validly existing under the laws of any U.S. domestic
jurisdiction and expressly assumes our obligations on the debt securities
and under the indenture;
- immediately after giving effect to the 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 occurred and be continuing under the
indenture; and
- certain other conditions that may be set forth in the applicable
prospectus supplement are met.
EVENTS OF DEFAULT
Unless otherwise stated in the applicable prospectus supplement, event of
default means, with respect to any series of debt securities, any of the
following:
- default in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of that default
for a period of 30 days (unless the entire amount of the payment is
deposited by us with the trustee or with a paying agent prior to the
expiration of the 30-day period);
- default in the payment of principal of or premium on any debt security of
that series when due and payable at maturity, upon redemption or
otherwise;
- default in the deposit of any sinking fund payment, when and as due in
respect of any debt security of that series;
- default in the performance or breach of any other covenant or warranty by
us in the indenture (other than a covenant or warranty that has been
included in the indenture solely for the benefit of a series of debt
securities other than that series), which default continues uncured for a
period of 60 days after we receive written notice from the trustee or we
and the trustee receive written notice from the holders of not less than
a majority in principal amount of the outstanding debt securities of that
series as provided in the indenture;
- certain events of bankruptcy, insolvency or reorganization; and
- any other event of default provided with respect to debt securities of
that series that is described in the applicable prospectus supplement
accompanying this prospectus.
No event of default with respect to a particular series of debt securities
(except as to certain events of bankruptcy, insolvency or reorganization)
necessarily constitutes an event of default with respect to any other series of
debt securities. The occurrence of an event of default may constitute an event
of default under our bank credit agreements in existence from time to time. In
addition, the occurrence of certain events of default or an acceleration under
the indenture may constitute an event of default under certain of our other
indebtedness outstanding from time to time.
If an event of default with respect to debt securities of any series at the
time outstanding occurs and is continuing, then the trustee or the holders of
not less than a majority in principal amount of the outstanding debt securities
of that series may, by a notice in writing to us (and to the trustee if given by
the holders), declare to be due and payable immediately the principal (or, if
the debt securities of that series are discount securities, that portion of the
principal amount as may be specified in the terms of that series) of and accrued
and unpaid interest, if any, on all debt securities of that series. In the case
of an event of default resulting from certain events of bankruptcy, insolvency
or reorganization, the principal (or such specified amount) of and accrued and
unpaid interest, if any, on all outstanding debt securities will become and be
immediately due and payable without any declaration or other act on the part of
the trustee or any holder of outstanding debt
11
securities. At any time after a declaration of acceleration with respect to debt
securities of any series has been made, but before a judgment or decree for
payment of the money due has been obtained by the trustee, the holders of a
majority in principal amount of the outstanding debt securities of that series
may rescind and annul the acceleration if all events of default, other than the
non-payment of accelerated principal and interest, if any, with respect to debt
securities of that series, have been cured or waived as provided in the
indenture. We refer you to the prospectus supplement relating to any series of
debt securities that are discount securities for the particular provisions
relating to acceleration of a portion of the principal amount of such discount
securities upon the occurrence of an event of default.
The indenture provides that the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of outstanding debt securities, unless the trustee receives indemnity
satisfactory to it against any loss, liability or expense. Subject to certain
rights of the trustee, the holders of a majority in principal amount of the
outstanding debt securities of any series will 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 with
respect to the debt securities of that series.
Unless stated otherwise in the applicable prospectus supplement, no holder
of any debt security of any series will have any right to institute any
proceeding, judicial or otherwise, with respect to the indenture or for the
appointment of a receiver or trustee, or for any remedy under the indenture,
unless:
- that holder has previously given to the trustee written notice of a
continuing event of default with respect to debt securities of that
series; and
- the holders of at least a majority in principal amount of the outstanding
debt securities of that series have made written request, and offered
reasonable indemnity, to the trustee to institute the proceeding as
trustee, and the trustee has not received from the holders of a majority
in principal amount of the outstanding debt securities of that series a
direction inconsistent with that request and has failed to institute the
proceeding within 60 days.
Notwithstanding the foregoing, the holder of any debt security will have an
absolute and unconditional right to receive payment of the principal of, premium
and any interest on that debt security on or after the due dates expressed in
that debt security and to institute suit for the enforcement of payment.
The indenture requires us, within 120 days after the end of our fiscal
year, to furnish to the trustee a statement as to compliance with the indenture.
The indenture provides that the trustee may withhold notice to the holders of
debt securities of any series of any default or event of default (except in
payment on any debt securities of that series) with respect to debt securities
of that series if it in good faith determines that withholding notice is in the
interest of the holders of those debt securities.
MODIFICATION AND WAIVER
We may modify and amend the indenture with the consent of the holders of at
least a majority in principal amount of the outstanding debt securities of each
series affected by the modifications or amendments. We may not make any
modification or amendment without the consent of the holders of each affected
debt security then outstanding if that amendment will:
- reduce the amount of debt securities whose holders must consent to an
amendment or waiver;
- reduce the rate of or extend the time for payment of interest (including
default interest) on any debt security;
- reduce the principal of or premium on or change the fixed maturity of any
debt security or reduce the amount of, or postpone the date fixed for,
the payment of any sinking fund or analogous obligation with respect to
any series of debt securities;
- reduce the principal amount of discount securities payable upon
acceleration of maturity;
- waive a default in the payment of the principal of, premium or interest
on any debt security (except a rescission of acceleration of the debt
securities of any series by the holders of at least a majority in
12
aggregate principal amount of the then outstanding debt securities of
that series and a waiver of the payment default that resulted from such
acceleration);
- make the principal of or premium or interest on any debt security payable
in currency other than that stated in the debt security;
- make any change to certain provisions of the indenture relating to, among
other things, the right of holders of debt securities to receive payment
of the principal of, premium and interest on those debt securities and to
institute suit for the enforcement of any such payment and to waivers or
amendments; or
- waive a redemption payment with respect to any debt security.
Except for certain specified provisions, the holders of at least a majority
in principal amount of the outstanding debt securities of any series may on
behalf of the holders of all debt securities of that series waive our compliance
with provisions of the indenture. The holders of a majority in principal amount
of the outstanding debt securities of any series may on behalf of the holders of
all the debt securities of such series waive any past default under the
indenture with respect to that series and its consequences, except a default in
the payment of the principal of, premium or any interest on any debt security of
that series or in respect of a covenant or provision which cannot be modified or
amended without the consent of the holder of each outstanding debt security of
the series affected; provided, however, that the holders of a majority in
principal amount of the outstanding debt securities of any series may rescind an
acceleration and its consequences, including any related payment default that
resulted from the acceleration.
DEFEASANCE OF DEBT SECURITIES AND CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
LEGAL DEFEASANCE. The indenture provides that, unless otherwise provided
by the terms of the applicable series of debt securities, we may be discharged
from any and all obligations in respect of the debt securities of any series
(except for certain obligations to register the transfer or exchange of debt
securities of such series, to replace stolen, lost or mutilated debt securities
of such series, and to maintain paying agencies and certain provisions relating
to the treatment of funds held by paying agents). We will be so discharged upon
the deposit with the trustee, in trust, of money and/or U.S. government
obligations or, in the case of debt securities denominated in a single currency
other than U.S. dollars, foreign government obligations, that, through the
payment of interest and principal in accordance with their terms, will provide
money in an amount sufficient in the opinion of a nationally recognized firm of
independent public accountants to pay and discharge each installment of
principal, premium and interest on and any mandatory sinking fund payments in
respect of the debt securities of that series on the stated maturity of those
payments in accordance with the terms of the indenture and those debt
securities.
This discharge may occur only if, among other things, we have delivered to
the trustee an opinion of counsel stating that we have received from, or there
has been published by, the United States Internal Revenue Service a ruling or,
since the date of execution of the indenture, there has been a change in the
applicable United States federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the holders of the debt
securities of that series will not recognize income, gain or loss for United
States federal income tax purposes as a result of the deposit, defeasance and
discharge and will be subject to United States federal income tax on the same
amounts and in the same manner and at the same times as would have been the case
if the deposit, defeasance and discharge had not occurred.
DEFEASANCE OF CERTAIN COVENANTS. The indenture provides that, unless
otherwise provided by the terms of the applicable series of debt securities,
upon compliance with certain conditions:
- we may omit to comply with the covenant described under the heading
"Consolidation, Merger and Sale of Assets" and certain other covenants
set forth in the indenture, as well as any additional covenants which may
be set forth in the applicable prospectus supplement; and
- any omission to comply with those covenants will not constitute a default
or an event of default with respect to the debt securities of that
series, or covenant defeasance.
13
The conditions include:
- depositing with the trustee money and/or U.S. government obligations or,
in the case of debt securities denominated in a single currency other
than U.S. dollars, foreign government obligations, that, through the
payment of interest and principal in accordance with their terms, will
provide money in an amount sufficient in the opinion of a nationally
recognized firm of independent public accountants to pay and discharge
each installment of principal of, premium and interest on and any
mandatory sinking fund payments in respect of the debt securities of that
series on the stated maturity of those payments in accordance with the
terms of the indenture and those debt securities; and
- delivering to the trustee an opinion of counsel to the effect that the
holders of the debt securities of that series will not recognize income,
gain or loss for United States federal income tax purposes as a result of
the deposit and related covenant defeasance and will be subject to United
States federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if the deposit and related
covenant defeasance had not occurred.
COVENANT DEFEASANCE AND EVENTS OF DEFAULT. In the event we exercise our
option to effect covenant defeasance with respect to any series of debt
securities and the debt securities of that series are declared due and payable
because of the occurrence of any event of default, the amount of money and/or
U.S. government obligations or foreign government obligations on deposit with
the trustee will be sufficient to pay amounts due on the debt securities of that
series at the time of their stated maturity but may not be sufficient to pay
amounts due on the debt securities of that series at the time of the
acceleration resulting from the event of default. However, we shall remain
liable for those payments.
GUARANTEES
Our payment obligations under any series of debt securities will be
guaranteed by Entercom Communications, and may be guaranteed by one or more of
the Co-Registrants. The terms of any such guarantee will be set forth in the
applicable prospectus supplement.
PLAN OF DISTRIBUTION
We may sell the securities to one or more underwriters for public offering
and sale by them and may also sell the securities to investors directly or
through agents. We will name any underwriter or agent involved in the offer and
sale of securities in the applicable prospectus supplement. We have reserved the
right to sell or exchange securities directly to investors on our own behalf in
those jurisdictions where we are authorized to do so.
We may distribute the securities from time to time in one or more
transactions:
- at a fixed price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to such prevailing market prices; or
- at negotiated prices.
We may also, from time to time, authorize dealers, acting as our agents, to
offer and sell securities upon the terms and conditions set forth in the
applicable prospectus supplement. In connection with the sale of securities, we,
or the purchasers of securities for whom the underwriters may act as agents, may
compensate underwriters in the form of underwriting discounts or commissions.
Underwriters may sell the securities to or through dealers, and those dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agent. Unless otherwise indicated in a prospectus supplement, an agent
will be acting on a best efforts basis and a dealer will purchase securities as
a principal, and may then resell the securities at varying prices to be
determined by the dealer.
14
We will describe in the applicable prospectus supplement any compensation
we pay to underwriters or agents in connection with the offering of securities,
and any discounts, concessions or commissions allowed by underwriters to
participating dealers. Dealers and agents participating in the distribution of
securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the securities may
be deemed to be underwriting discounts and commissions. We may enter into
agreements to indemnify underwriters, dealers and agents against certain civil
liabilities, including liabilities under the Securities Act, and to reimburse
these persons for certain expenses.
To facilitate the offering of securities, certain persons participating in
the offering may engage in transactions that stabilize, maintain, or otherwise
affect the price of the securities. This may include over-allotments or short
sales of the securities, which involve the sale by persons participating in the
offering of more securities than we sold to them. In these circumstances, these
persons would cover such over-allotments or short positions by making purchases
in the open market or by exercising their over-allotment option, if any. In
addition, these persons may stabilize or maintain the price of the securities by
bidding for or purchasing securities in the open market or by imposing penalty
bids, whereby selling concessions allowed to dealers participating in the
offering may be reclaimed if securities sold by them are repurchased in
connection with stabilization transactions. The effect of these transactions may
be to stabilize or maintain the market price of the securities at a level above
that which might otherwise prevail in the open market. These transactions may be
discontinued at any time.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with and perform services for us in the ordinary course
of our business.
LEGAL MATTERS
John C. Donlevie, Esq., Executive Vice President, Secretary and General
Counsel of Entercom, and Executive Vice President, Secretary and General Counsel
of Entercom Radio, will issue an opinion with respect to certain legal matters
with respect to the validity of the shares of Entercom's Class A common stock
and preferred stock. Latham & Watkins, Washington, D.C. will issue an opinion
with respect to certain legal matters with respect to Entercom Radio's debt
securities. Any underwriters will be advised about the other issues relating to
any offering by their own legal counsel. Mr. Donlevie is a full time employee of
Entercom and owns beneficial interests in less than one percent of our Class A
common stock.
EXPERTS
The consolidated financial statements and schedule as of December 31, 2001
and for the year then ended incorporated by reference in this prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report. Reference is made to said report,
which includes an explanatory paragraph with respect to a change in accounting
for derivative instruments and hedging activities pursuant to the provisions of
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Hedging Activities."
The consolidated financial statements and related consolidated financial
statement schedule as of December 31, 2000, and for each of the two years in the
period ended December 31, 2000 incorporated in this Prospectus by reference from
Entercom Communications Corp.'s Annual Report on Form 10-K for the year ended
December 31, 2001 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which, is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
15
$250,000,000
ENTERCOM COMMUNICATIONS CORP.
Class A Common Stock and Preferred Stock
------------------------------------
$250,000,000
ENTERCOM RADIO, LLC
ENTERCOM CAPITAL, INC.
Debt Securities
------------------------------------
PROSPECTUS
FEBRUARY , 2002
------------------------------------
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by us in connection with the distribution of the
securities being registered are as set forth in the following table. All amounts
shown are estimates except for the Securities and Exchange Commission
registration fee:
<Table>
SEC Registration Fee........................................ $ 46,000
Rating Agency Fees.......................................... 150,000
Legal Fees and Expenses..................................... 400,000
Accounting Fees and Expenses................................ 150,000
Printing Expenses........................................... 80,000
Trustee/Issuing & Paying Agent Fees and Expenses............ 50,000
Miscellaneous............................................... 124,000
----------
Total.................................................. $1,000,000
==========
</Table>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Entercom Communication's Amended and Restated Articles of Incorporation
provide that Entercom Communication's directors shall not be personally liable
to Entercom Communications 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
Communication's Amended and Restated Bylaws provide that Entercom Communications
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 Entercom Communications shall be
indemnified by Entercom Communications 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 Communications, if the officer or director acted in good faith
and in the manner believed to be in, or not opposed to, Entercom Communication'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.
Any indemnification under the previous paragraph (unless ordered by a
court) shall be made by Entercom Communications 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 Communications 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 Communications.
II-1
Expenses incurred by a director or officer of Entercom Communications in
defending a civil or criminal action, suit or proceeding shall be paid by
Entercom Communications 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 Communications 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 Communications 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 Communications, 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 Communications to
indemnify a director or officer under Article VIII of the Bylaws is a contract
between Entercom Communications 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.
Entercom Communications maintains 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 charter documents or operating agreements of Entercom Radio, Entercom
Capital and the other Co-Registrants contain provisions similar to those
detailed above.
ITEM 16. EXHIBITS
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
1.1* Form of Underwriting Agreement.
1.2* Form of Placement Agreement.
3.1 Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.01 of the Company's
Registration Statement on Form S-1, File No. 333-61381).
3.2 Amended and Restated Bylaws (incorporated by reference to
Exhibit 3.02 of the Company's Registration Statement on Form
S-1, File No. 333-61381).
3.3** Amended Certificate of Formation of Entercom Radio, LLC.
3.4** Restated Limited Liability Company Agreement of Entercom
Radio, LLC.
3.5** Certificate of Incorporation of Entercom Capital, Inc.
3.6** Bylaws of Entercom Capital, Inc.
4.1** Form of Class A Common Stock Certificate.
4.2* Form of Preferred Stock Certificate
4.3* Form of Debt Security.
4.4** Form of Indenture.
5.1** Opinion of John C. Donlevie, Esq.
5.2** Opinion of Latham & Watkins.
12.1** Statement regarding Computation of Ratios.
23.1 Consent of Arthur Andersen LLP, independent public
accountants.
23.2 Consent of Deloitte & Touche LLP, independent auditors.
23.3** Consent of John C. Donlevie, Esq. (included in Exhibit 5.1).
23.4** Consent of Latham & Watkins (included in Exhibit 5.2).
24.1** Powers of Attorney (included on the signature page hereto).
25.1* Statement of Eligibility of Trustee on Form T-1.
</Table>
II-2
- ---------------
* To be filed by amendment or by a report on Form 8-K pursuant to Regulation
S-K, Item 601(b).
**Previously filed.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise,
(a) We hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that information required to be included in a post-effective
amendment by paragraphs (a)(1)(i) and (a)(1)(ii) above may be contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Exchange Act that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) We hereby undertake that, for purposes of determining any liability
under the Securities Act, each filing of our annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the provisions described in this registration statement
above, or otherwise, we have been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by a director, officer or controlling person of us in
the successful defense of any action, suit or proceeding) is asserted against us
by such director, officer or controlling person in connection
II-3
with the securities being registered, we will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(d) We hereby undertake to file an application for the purpose of
determining the eligibility of the trustee to act under subsection (a) of
Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
(e) We hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF BALA CYNWYD, PENNSYLVANIA, ON FEBRUARY
20, 2002.
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 EACH OF THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON FEBRUARY 20, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ JOSEPH M. FIELD Chairman of the Board and Chief Executive Officer
- ------------------------------------------------ (Principal Executive Officer)
Joseph M. Field
* President, Chief Operating Officer and Director
- ------------------------------------------------
David J. Field
* Executive Vice President, Secretary,
- ------------------------------------------------ General Counsel and Director
John C. Donlevie
* Executive Vice President and Chief Financial
- ------------------------------------------------ Officer (Principal Financial and Accounting
Stephen F. Fisher Officer)
* Director
- ------------------------------------------------
Marie H. Field
* Director
- ------------------------------------------------
Herbert Kean, M.D.
* Director
- ------------------------------------------------
Lee Hague
* Director
- ------------------------------------------------
Thomas H. Ginley, Jr., M.D.
* Director
- ------------------------------------------------
S. Gordon Elkins
* Director
- ------------------------------------------------
Michael R. Hannon
* Director
- ------------------------------------------------
David J. Berkman
By: /s/ JOSEPH M. FIELD
-------------------------------------------
Joseph M. Field
Attorney-in-fact
</Table>
II-5
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF BALA CYNWYD, PENNSYLVANIA, ON FEBRUARY
20, 2002.
ENTERCOM RADIO, LLC
By: /s/ JOHN C. DONLEVIE
------------------------------------
John C. Donlevie
Executive Vice President, Secretary,
General Counsel and a Manager
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY EACH OF THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON FEBRUARY 20, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* Chief Executive Officer (Principal Executive
- ------------------------------------------------ Officer) and member of the Board of Managers
Joseph M. Field
* President, Chief Operating Officer and member of
- ------------------------------------------------ the Board of Managers
David J. Field
/s/ JOHN C. DONLEVIE Executive Vice President, Secretary, General
- ------------------------------------------------ Counsel and member of the Board of Managers
John C. Donlevie
* Executive Vice President, Chief Financial Officer
- ------------------------------------------------ (Principal Financial and Accounting Officer)
Stephen F. Fisher and member of the Board of Managers
* By: /s/ JOHN C. DONLEVIE
-------------------------------------------
John C. Donlevie
Attorney-in-fact
</Table>
II-6
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF BALA CYNWYD, PENNSYLVANIA, ON FEBRUARY
20, 2002.
ENTERCOM DELAWARE HOLDING CORPORATION
By: /s/ JOHN C. DONLEVIE
------------------------------------
John C. Donlevie
President, Secretary, General
Counsel
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY EACH OF THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON FEBRUARY 20, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ JOHN C. DONLEVIE President (Principal Executive Officer),
- ------------------------------------------------ Secretary, General Counsel and Director
John C. Donlevie
* Vice President and Treasurer
- ------------------------------------------------ (Principal Financial and Accounting Officer)
Stephen F. Fisher
* Director
- ------------------------------------------------
Barry Crozier
*By: /s/ JOHN C. DONLEVIE
------------------------------------------
John C. Donlevie
Attorney-in-fact
</Table>
II-7
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF BALA CYNWYD, PENNSYLVANIA, ON FEBRUARY
20, 2002.
ENTERCOM BOSTON I TRUST
By: /s/ JOHN C. DONLEVIE
------------------------------------
John C. Donlevie
Executive Vice President,
Secretary and General Counsel
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY EACH OF THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON FEBRUARY 20, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* Chief Executive Officer (Principal
- ------------------------------------------------ Executive Officer) and Sole Trustee
Joseph M. Field
* President and Chief Operating Officer
- ------------------------------------------------
David J. Field
/s/ JOHN C. DONLEVIE Executive Vice President, Secretary and General
- ------------------------------------------------ Counsel
John C. Donlevie
* Executive Vice President and Chief Financial
- ------------------------------------------------ Officer (Principal Financial and Accounting
Stephen F. Fisher Officer)
* By: /s/ JOHN C. DONLEVIE
-----------------------------------------
John C. Donlevie
Attorney-in-fact
</Table>
II-8
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF BALA CYNWYD, PENNSYLVANIA, ON FEBRUARY
20, 2002.
ENTERCOM NEW YORK, INC.
By: /s/ JOHN C. DONLEVIE
------------------------------------
John C. Donlevie
Executive Vice President,
Secretary and General Counsel
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY EACH OF THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON FEBRUARY 20, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* Chairman of the Board and Chief Executive Officer
- ------------------------------------------------ (Principal Executive Officer)
Joseph M. Field
* President, Chief Operating Officer and Director
- ------------------------------------------------
David J. Field
/s/ JOHN C. DONLEVIE Executive Vice President, Secretary,
- ------------------------------------------------ General Counsel and Director
John C. Donlevie
* Executive Vice President and Chief Financial
- ------------------------------------------------ Officer
Stephen F. Fisher (Principal Financial and Accounting Officer)
*By: /s/ JOHN C. DONLEVIE
-----------------------------------------
John C. Donlevie
Attorney-in-fact
</Table>
II-9
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF BALA CYNWYD, PENNSYLVANIA, ON FEBRUARY
20, 2002.
ENTERCOM CAPITAL, INC.
By: /s/ JOHN C. DONLEVIE
------------------------------------
John C. Donlevie
Executive Vice President,
Secretary and General Counsel
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY EACH OF THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON FEBRUARY 20, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* Chairman of the Board and Chief Executive Officer
- ------------------------------------------------ (Principal Executive Officer)
Joseph M. Field
* President, Chief Operating Officer and Director
- ------------------------------------------------
David J. Field
/s/ JOHN C. DONLEVIE Executive Vice President, Secretary,
- ------------------------------------------------ General Counsel and Director
John C. Donlevie
* Executive Vice President and Chief Financial
- ------------------------------------------------ Officer (Principal Financial and Accounting
Stephen F. Fisher Officer)
*By: /s/ JOHN C. DONLEVIE
-----------------------------------------
John C. Donlevie
Attorney-in-fact
</Table>
II-10
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF BALA CYNWYD, PENNSYLVANIA, ON FEBRUARY
20, 2002.
ENTERCOM DENVER, LLC
ENTERCOM DENVER LICENSE, LLC
DELAWARE EQUIPMENT HOLDINGS, LLC
ENTERCOM GAINESVILLE, LLC
ENTERCOM GAINESVILLE LICENSE, LLC
ENTERCOM GREENSBORO, LLC
ENTERCOM GREENSBORO LICENSE, LLC
ENTERCOM GREENVILLE, LLC
ENTERCOM GREENVILLE LICENSE, LLC
ENTERCOM INTERNET HOLDING, LLC
ENTERCOM KANSAS CITY, LLC
ENTERCOM KANSAS CITY LICENSE, LLC
ENTERCOM LONGVIEW, LLC
ENTERCOM LONGVIEW LICENSE, LLC
ENTERCOM MADISON, LLC
ENTERCOM MADISON LICENSE, LLC
ENTERCOM MEMPHIS, LLC
ENTERCOM MEMPHIS LICENSE, LLC
ENTERCOM MILWAUKEE, LLC
ENTERCOM MILWAUKEE LICENSE, LLC
ENTERCOM NEW ORLEANS, LLC
ENTERCOM NEW ORLEANS LICENSE, LLC
ENTERCOM NORFOLK, LLC
ENTERCOM NORFOLK LICENSE, LLC
ENTERCOM PORTLAND, LLC
ENTERCOM PORTLAND LICENSE, LLC
ENTERCOM SACRAMENTO, LLC
ENTERCOM SACRAMENTO LICENSE, LLC
ENTERCOM SEATTLE, LLC
ENTERCOM SEATTLE LICENSE, LLC
ENTERCOM WICHITA, LLC
ENTERCOM WICHITA LICENSE, LLC
ENTERCOM WILKES-BARRE SCRANTON, LLC
BY: /s/ JOHN C. DONLEVIE
-----------------------------------
JOHN C. DONLEVIE
Executive Vice President,
Secretary and General Counsel
II-11
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY EACH OF THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON FEBRUARY 20, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* Chief Executive Officer (Principal Executive
- ------------------------------------------------ Officer) and
Joseph M. Field a member of the Board of Managers of
Entercom Radio, LLC, the sole member of each
registrant listed above
* President, Chief Operation Officer
- ------------------------------------------------ and as a member of the Board of Managers of
David J. Field Entercom Radio, LLC, the sole member of each
registrant listed above
/s/ JOHN C. DONLEVIE Executive Vice President, Secretary, General
- ------------------------------------------------ Counsel
John C. Donlevie and as a member of the Board of Managers of
Entercom Radio, LLC, the sole member of each
registrant listed above
* Executive Vice President, Chief Financial Officer
- ------------------------------------------------ (Principal Financial and Accounting Officer)
Stephen F. Fisher and as a member of the Board of Managers of
Entercom Radio, LLC, the sole member of each
registrant listed above
*By: /s/ JOHN C. DONLEVIE
-----------------------------------------
John C. Donlevie
Attorney-in-fact
</Table>
II-12
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF BALA CYNWYD, PENNSYLVANIA, ON FEBRUARY
20, 2002.
ENTERCOM BOSTON, LLC
ENTERCOM BOSTON LICENSE, LLC
By: /s/ JOHN C. DONLEVIE
------------------------------------
John C. Donlevie
Executive Vice President,
Secretary and General Counsel
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY EACH OF THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON FEBRUARY 20, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* Chief Executive Officer (Principal Executive
- ------------------------------------------------ Officer)
Joseph M. Field and as Sole Trustee of Entercom Boston I Trust,
the sole member of each registrant listed above
* President and Chief Operating Officer
- ------------------------------------------------
David J. Field
/s/ JOHN C. DONLEVIE Executive Vice President, Secretary and General
- ------------------------------------------------ Counsel
John C. Donlevie
* Executive Vice President and Chief Financial
- ------------------------------------------------ Officer (Principal Financial and Accounting
Stephen F. Fisher Officer)
*By: /s/ JOHN C. DONLEVIE
-----------------------------------------
John C. Donlevie
Attorney-in-fact
</Table>
II-13
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO THE
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF BALA CYNWYD, PENNSYLVANIA, ON FEBRUARY 20, 2002.
ENTERCOM BUFFALO, LLC
ENTERCOM BUFFALO LICENSE, LLC
ENTERCOM ROCHESTER, LLC
ENTERCOM ROCHESTER LICENSE, LLC
By: /s/ JOHN C. DONLEVIE
------------------------------------
John C. Donlevie
Executive Vice President,
Secretary and General Counsel
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY EACH OF THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED ON FEBRUARY 20, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* Chief Executive Officer (Principal Executive
- ------------------------------------------------ Officer)
Joseph M. Field and as Chairman of the Board of
Entercom New York, Inc., the sole member of each
registrant listed above
* President, Chief Operating Officer and as Director
- ------------------------------------------------ of
David J. Field Entercom New York, Inc., the sole member of each
registrant listed above
/s/ JOHN C. DONLEVIE Executive Vice President, Secretary, General
- ------------------------------------------------ Counsel and as Director of Entercom New York,
John C. Donlevie Inc., the sole member of each registrant listed
above
* Executive Vice President, Chief Financial Officer
- ------------------------------------------------ (Principal Financial and Accounting Officer) and
Stephen F. Fisher as Director of Entercom New York, Inc., the sole
member of each registrant listed above
*By:/s/ JOHN C. DONLEVIE
-------------------------------------------
John C. Donlevie
Attorney-in-fact
</Table>
II-14