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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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Entercom Communications Corp.
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(Name of Registrant as Specified In Its Charter)
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ENTERCOM COMMUNICATIONS CORP.
401 City Avenue, Suite 409
Bala Cynwyd, Pennsylvania 19004
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
The Annual Meeting of Shareholders of Entercom Communications Corp.
(the "Company") will be held at the Radnor Hotel, 591 East Lancaster Ave., St.
Davids, Pennsylvania, 19087 on Friday May 4, 2001 at 10:00 a.m. At the meeting,
shareholders will be asked to consider and vote on the following proposals:
Proposal 1: The election of David J. Berkman and Michael R. Hannon
as Class A directors for one-year terms expiring at
the 2002 annual meeting;
Proposal 2: The election of Joseph M. Field, David J. Field,
Marie H. Field, John C. Donlevie, Herbert Kean,
S. Gordon Elkins, Thomas H. Ginley, Jr. and Lee Hague
as directors for one-year terms expiring at the 2002
annual meeting;
Proposal 3: The ratification of the appointment of
Arthur Andersen LLP as independent auditors; and
Proposal 4: The approval of the First Amendment to the Entercom
1998 Equity Compensation Plan to increase the number
of shares issuable under such plan by 2,500,000 shares.
The shareholders will also transact other business if any is properly
brought before the 2001 annual meeting.
If you were a shareholder of record of our Class A common stock, par
value $.01 per share, or Class B common stock, par value $.01 per share, at the
close of business on March 23, 2001, you may vote at the annual meeting as set
forth in this proxy statement.
By order of the Board of Directors,
/s/ John C. Donlevie
John C. Donlevie
Secretary
Bala Cynwyd, Pennsylvania
March 30, 2001
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING.
FOR INFORMATION ON ACCOMMODATIONS FOR AND DIRECTIONS TO THE MEETING, PLEASE
REFER TO OUTSIDE BACK COVER OF THIS PROXY STATEMENT.
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ENTERCOM COMMUNICATIONS CORP.
401 CITY AVENUE, SUITE 409
BALA CYNWYD, PENNSYLVANIA 19004
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 4, 2001
The Annual Meeting of Shareholders of Entercom Communications Corp.
will be held at the Radnor Hotel, 591 East Lancaster Ave., St. Davids,
Pennsylvania, 19087 on Friday May 4, 2001 at 10:00 a.m.
ABOUT THIS PROXY STATEMENT
Our board of directors has sent you this proxy statement to solicit
your vote at the annual meeting (including any adjournment or postponement of
the annual meeting). We will pay all expenses incurred in connection with this
proxy solicitation. In addition to mailing this proxy statement to you, we have
hired Corporate Investor Communications, Inc. to be our proxy solicitation agent
for a fee of approximately $6,500 plus expenses. We also may make additional
solicitations by telephone, facsimile or other forms of communication. Brokers,
banks and other nominees who hold our stock for other beneficial owners will be
reimbursed by us for their expenses related to forwarding our proxy materials to
the beneficial owners. In this proxy statement we summarize information that we
are required to provide to you under the Securities and Exchange Commission
rules. This proxy statement is designed to assist you in voting your shares. On
March 30, 2001, we began mailing the proxy materials to all shareholders of
record of our Class A and Class B common stock, par value $.01 per share, at the
close of business as of March 23, 2001.
Unless the context requires otherwise, all references in this proxy
statement to Entercom Communications Corp., "Entercom", "we," "us", "our" and
similar terms, refer to Entercom Communications Corp. and its consolidated
subsidiaries, excluding Entercom Communications Capital Trust.
INFORMATION ABOUT VOTING
If you are a shareholder of record of our Class A common stock as of
the close of business on March 23, 2001, you may vote your shares:
- By Proxy: You can vote by completing, signing and dating the
enclosed proxy card and returning it to us by mail in the
envelope provided. The instructions for voting are contained
on the enclosed proxy card. The individuals named on the card
are your proxies. They will vote your shares as you indicate.
If you sign your card without indicating how you wish to vote,
all of your shares will be voted:
- FOR all of the nominees for Class A Director;
- FOR all remaining nominees for Director other than
Class A Directors;
- FOR ratification of the appointment of Arthur
Andersen LLP as our independent auditors to serve for
the 2001 calendar year;
- FOR approval of the First Amendment to the Entercom
1998 Equity Compensation Plan to increase the number
of shares issuable under such plan by 2,500,000
shares; and
- at the discretion of your proxies on any other matter
that may be properly brought before the annual
meeting; or
- In Person: You may attend the annual meeting and vote in
person.
If you are a shareholder of record of our Class B common stock as of
the close of business on March 23, 2001, you may vote your shares:
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By Proxy: You can vote by completing, signing and dating the enclosed
proxy card and returning it to us by mail in the envelope provided. The
instructions for voting are contained on the enclosed proxy card. The
individuals named on the card are your proxies. They will vote your shares as
you indicate. If you sign your card without indicating how you wish to vote, all
of your shares will be voted:
- FOR all of the nominees for Director other than Class
A Directors;
- FOR ratification of the appointment of Arthur
Andersen LLP as our independent auditors to serve for
the 2001 fiscal year;
- FOR approval of the First Amendment to the Entercom
1998 Equity Compensation Plan to increase the number
of shares issuable under such plan by 2,500,000
shares; and
- at the discretion of your proxies on any other matter
that may be properly brought before the annual
meeting; or
- In Person: You may attend the annual meeting and vote in
person.
You may revoke your proxy before it is voted at the meeting if you:
- send a written notice of revocation dated after the proxy date
to our Corporate Secretary;
- send our Corporate Secretary a later dated proxy for the same
shares of common stock; or
- attend the annual meeting AND vote in person there.
The address for our Corporate Secretary is Entercom Communications
Corp., 401 City Avenue, Suite 409, Bala Cynwyd, Pennsylvania, 19004, Attention:
John C. Donlevie, Secretary.
VOTING SECURITIES
Our Certificate of Incorporation provides that each share of Class A
common stock is entitled to one vote and that each share of Class B common stock
is entitled to ten votes, except (1) any share of Class B common stock not voted
by either Joseph M. Field or David J. Field, in their own right or pursuant to a
proxy, is entitled to one vote; (2) the holders of Class A common stock, voting
as a single class, are entitled to elect two Class A directors; (3) each share
of Class B common stock is entitled to one vote with respect to any Going
Private Transaction; and (4) as required by law. Therefore, only shareholders of
our Class A common stock at the close of business on March 23, 2001, will be
entitled to vote on Proposal 1, while shareholders of our Class A common stock
and our Class B common stock at the close of business on March 23, 2001 will be
entitled to vote on Proposals 2, 3 and 4. At the close of business on March 23,
2001, there were 34,527,685 outstanding shares of our Class A common stock and
10,531,805 outstanding shares of our Class B common stock. Joseph M. Field and
David J. Field have the power to vote all of our outstanding shares of Class B
common stock. Joseph M. Field's voting power includes the power to vote,
pursuant to a revocable proxy, 180,000 shares owned by Marie H. Field. Each
share of Class B common stock voted by Joseph M. Field and David J. Field with
respect to Proposals 2, 3 and 4 is entitled to ten votes. Shareholders of our
Class C common stock, par value $.01 per share, are not entitled to vote on
these proposals.
INFORMATION ABOUT QUORUM AND REQUIRED VOTES
The presence in person or by proxy of shareholders entitled to cast at
least a majority of the votes that all shareholders are entitled to cast on a
particular matter or proposal to be acted upon at the meeting shall constitute a
quorum for the purposes of consideration and action on the matter or proposal.
Votes on the proposals will be tallied as follows:
- Proposal 1: Election of Class A Directors - The two persons
nominated for Class A director receiving the most votes from
shares of Class A common stock will be elected.
- Proposal 2: Election of Other Directors - The eight persons
nominated as directors other than Class A directors receiving
the most votes from all shares of Class A common stock and
Class B common stock will be elected.
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- Proposal 3: Ratification of Independent Auditors - The
ratification of Arthur Andersen LLP as our independent
auditors must receive an affirmative vote from a majority of
the votes of all shares of Class A common stock and Class B
common stock that are present in person or by proxy and are
voting on such proposal.
- Proposal 4: Approval of the First Amendment to the Entercom
1998 Equity Compensation Plan - The approval of the First
Amendment to the Entercom 1998 Equity Compensation Plan to
increase the number of shares issuable under such plan by
2,500,000, must receive an affirmative vote from a majority of
the votes of all shares of Class A common stock and Class B
common stock that are present in person or by proxy and are
voting on such proposal.
Unless otherwise required by our bylaws or by applicable Pennsylvania
law, any other matter properly presented for a vote at the meeting will require
an affirmative vote from a majority of the votes of all shares of Class A common
stock and Class B common stock that are present in person or by proxy and are
voting on such proposal.
Shares of our common stock represented by proxies that are marked
"withhold authority" or are marked "abstain," or which constitute broker
non-votes will be counted as present at the meeting for the purpose of
determining a quorum. Broker non-votes occur when a nominee holding shares of
our common stock for a beneficial owner has not received voting instructions
from the beneficial owner and such nominee does not possess or choose to
exercise discretionary authority with respect thereto. With respect to any
matter to be decided by a plurality (such as the election of directors) or a
majority of the votes cast at the meeting, proxies marked "withhold authority"
or marked "abstain," or which constitute broker non-votes will not be counted
for the purpose of determining the number of votes cast at the meeting.
INFORMATION TO RELY UPON WHEN CASTING YOUR VOTE
You should rely only on the information contained in this proxy
statement. We have not authorized anyone to give any information or to make any
representations in connection with this proxy solicitation other than those
contained in this proxy statement. You should not rely on any information or
representation not contained in this proxy statement as having been authorized
by us. You should not infer under any circumstances that because of the delivery
to you of this proxy statement there has not been a change in the facts set
forth in this proxy statement or in our affairs since the date on this proxy
statement. This proxy statement does not constitute a solicitation by anyone in
any jurisdiction in which the solicitation is not authorized or in which the
person making the solicitation is not qualified to do so or to anyone to whom it
is unlawful to make a solicitation.
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THE PROPOSALS
PROPOSAL 1
ELECTION OF CLASS A DIRECTORS
Two Class A directors will be elected at the 2001 annual meeting to
serve until the 2002 annual meeting. The two nominees are David J. Berkman and
Michael R. Hannon. Each of them is an incumbent Class A director. These nominees
have consented to serve if elected, but should any nominee be unavailable to
serve, your proxy will vote for the substitute nominee recommended by the board
of directors. The two persons nominated for director receiving the most votes
will be elected.
The tables below contain certain biographical information about them as
well as our other directors and executive officers.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE PERSONS
NOMINATED FOR DIRECTOR IN PROPOSAL 1.
NOMINEES FOR CLASS A DIRECTOR
David J. Berkman David J. Berkman has served as one of our directors since the consummation of our
Director since 1999 initial public offering in January 1999. He is the Managing Partner of The
Age: 39 Associated Group, LLC, a venture capital firm primarily engaged in the
telecommunications, media and internet market segments. The Associated Group, LLC
was founded by principals of The Associated Group, Inc., a recently sold
multi-billion dollar publicly-traded owner and operator of communications related
business and associations of which Mr. Berkman was Executive Vice President. He
also currently serves on the Boards of Directors of Internet Capital Group, Inc.,
True Position, 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 May 4,
2001 annual meeting of shareholders.
Michael R. Hannon Michael R. Hannon has served as one of our directors since December 1998. He is a
Director since 1998 Partner of J.P. Morgan Partners (JPMP), a partnership with over $20 billion under
Age: 40 management. JPMP invests in a wide variety of international private equity
opportunities including management buyouts, growth equity, and venture capital
situations. JPMP's chief 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 May 4, 2001 annual meeting of shareholders.
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PROPOSAL 2
ELECTION OF OTHER DIRECTORS
Eight other directors will be elected at the 2001 annual meeting to
serve until the 2002 annual meeting. The eight nominees are Joseph M. Field,
David J. Field, Marie H. Field, John C. Donlevie, Herbert Kean, S. Gordon
Elkins, Thomas J. Ginley, Jr. and Lee Hague. Each of them is an incumbent
director. These nominees have consented to serve if elected, but should any
nominee be unavailable to serve, your proxy will vote for the substitute nominee
recommended by the board of directors. The eight persons nominated as director
receiving the most votes will be elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE PERSONS
NOMINATED AS DIRECTOR IN PROPOSAL 2.
NOMINEES FOR OTHER DIRECTORS
Joseph M. Field Joseph M. Field founded Entercom in 1968 and has served since our inception as our
Chairman of the Board and Chairman of the Board and Chief Executive Officer and was our President until
Chief Executive Officer September 1998. Before entering the broadcasting business, he practiced law for 14
Director since 1968 years in New York (including service as an Assistant United States Attorney) and
Age: 69 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 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 May 4, 2001 annual meeting of shareholders.
David J. Field David J. Field has served as our President since 1998, our Chief Operating Officer
President and Chief since 1996 and one of our directors since 1995. He also served as our Chief
Operating Officer Financial Officer from 1992 to 1998. Mr. Field joined us in 1987 and served as our
Director since 1995 Director of Finance and Corporate Development from 1987 to 1988, Vice
Age: 39 President-Finance and Corporate Development from 1988 to 1992, Vice
President-Operations and Chief Financial Officer from 1992 to 1995 and Senior
Vice-President-Operations and Chief Financial Officer from 1995 to 1996. Prior to
joining us, he was an investment banker with Goldman, Sachs & Co. Mr. Field
currently serves on the Boards of Directors of the Radio Advertising Bureau and The
Wilderness Society. He has a B.A. from Amherst College and an M.B.A. from the
Wharton School of the University of Pennsylvania. Mr. Field is the son of Joseph
M. Field and Marie H. Field. Mr. Field's term as a director expires at the May 4,
2001 annual meeting of shareholders.
John C. Donlevie John C. Donlevie has served as our Executive Vice President, General Counsel and
Executive Vice President, one of our directors since 1989, our Secretary since 1998 and was our Vice
Secretary, and General Counsel President-Legal and Administrative from 1984 when he joined us to 1989. Prior to
Director since 1989 joining us, Mr. Donlevie practiced law for 11 years, most recently as Corporate
Age: 54 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 May 4, 2001 annual meeting
of shareholders.
Herbert Kean, M.D. Herbert Kean, M.D. has served as one of our directors since our inception. In
Director since 1968 addition, he served as our Secretary from our inception until 1984. Dr. Kean is
Age: 69 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. Dr.
Kean's term as a director expires at the May 4, 2001 annual meeting of shareholders.
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S. Gordon Elkins S. Gordon Elkins has served as one of our directors since 1978. He was a partner in
Director since 1978 the law firm of Stradley, Ronon, Stevens & Young from September 1962 through
Age: 70 January 1999 and currently is affiliated with the firm. Mr. Elkins has a B.S. from
Temple University and an L.L.B. from Yale Law School. Mr. Elkins' term as a
director expires at the May 4, 2001 annual meeting of shareholders.
Thomas H. Ginley, Jr., Thomas H. Ginley, Jr., M.D. has served as one of our directors since 1971 and
M.D. previously served as our Secretary from 1984 to 1998. Dr. Ginley is President and a
Director since 1971 director of the A & T Development Corporation and Treasurer and a director of
Age: 75 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 May 4, 2001 annual
meeting of shareholders.
Lee Hague Lee Hague has served as one of our directors since 1980. He has served as an
Director since 1980 independent consultant to various broadcasting groups and provides financial
Age: 55 advisory and media brokerage services to the industry. Mr. Hague is currently the
Chairman of the Board and Chief Executive Officer of Aspect Holdings Inc. Prior to
joining Aspect Holdings Inc. in 1998, he served as President of Hague & Company
over a period of 20 years. Mr. Hague has over 20 years' experience in the radio
industry. He has a B.S. from Northwestern University and an M.M. from the J.L.
Kellogg Graduate School of Management, Northwestern University. Mr. Hague's term
as a director expires at the May 4, 2001 annual meeting of shareholders.
Marie H. Field Marie H. Field has served as one of our directors since 1989. She served for over
Director since 1989 25 years as a teacher in public and private schools in New York and Philadelphia.
Age: 63 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 May 4, 2001 annual meeting of shareholders.
EXECUTIVE OFFICERS
In the table below we set forth certain information on those persons
currently serving as our Executive Officers. Biographical information on Joseph
M. Field, Chairman of the Board and Chief Executive Officer, David J. Field,
President and Chief Operating Officer, and John C. Donlevie, Executive Vice
President, Secretary and General Counsel, is included above in the section
entitled "Nominees for Other Directors."
NAME AND TITLE AGE PRIOR BUSINESS EXPERIENCE
Joseph M. Field 69 See "Nominees for Other Directors" above.
Chairman of the Board and Chief
Executive Officer
David J. Field 39 See " Nominees for Other Directors " above.
President and Chief Operating
Officer
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NAME AND TITLE AGE PRIOR BUSINESS EXPERIENCE
John C. Donlevie 54 See " Nominees for Other Directors " above.
Executive Vice President, Secretary
and General Counsel
Stephen F. Fisher 48 Stephen F. Fisher has served as our Senior Vice President and
Executive Vice President and Chief Chief Financial Officer from 1998 to 2000. In 2000 he became
Financial Officer Executive Vice President and Chief Financial Officer. From 1994
to 1998, he was a Managing Director with Bachow & Associates, a
private equity firm located in Bala Cynwyd, Pennsylvania. Prior
to joining Bachow & Associates, Mr. Fisher held numerous
operational and financial management positions over a period of
15 years, most recently as Executive Vice President with
Westinghouse Broadcasting Company, Inc. (now CBS). He has an
M.A. from Bob Jones University and an M.B.A. from the University
of South Carolina.
LEGAL PROCEEDINGS
We entered into a preliminary agreement on February 6, 1996, to acquire
the assets of radio station KWOD-FM, Sacramento, California, from Royce
International Broadcasting Corporation, subject to approval by the FCC, for a
purchase price of $25.0 million. Notwithstanding our efforts to pursue this
transaction, the seller was nonresponsive. On July 28, 1999, we commenced a
legal action seeking to enforce this agreement, and subsequently the seller
filed a cross-complaint against us asking for damages, an injunction and costs
and filed a separate action against our president. This separate action against
our president was dismissed without leave to amend in February 2000. We are
pursuing our legal action against the seller and seeking dismissal of the
cross-complaint. We estimate that the impact of an unfavorable outcome will not
materially impact our financial position, results of operations or cash flows.
We cannot determine if and when the transaction might occur.
In October 1999, The Radio Music License Committee, of which we are a
participant, filed a motion in the New York courts against Broadcast Music, Inc.
commencing a rate-making proceeding, on behalf of the radio industry, seeking a
determination of fair and reasonable industry-wide license fees. We are
currently operating under interim license agreements for the period commencing
January 1, 1997 at the rates and terms reflected in prior agreements. We
estimate that the impact of an unfavorable outcome of the motion will not
materially impact our financial position, results of operations or cash flows.
In December 2000, the U.S. Copyright Office, under the Digital
Millennium Copyright Act, issued a final rule which provides that AM and FM
radio broadcast signals transmitted simultaneously over a digital communications
network are subject to the sound recording copyright owner's exclusive right of
performance. This would result in the imposition of license fees for Internet
streaming and other digital media. As a result of this decision, we must now
participate in an arbitration proceeding at the U.S. Copyright Office to
determine the amount of fees that are due from the use of sound recordings in
Internet streaming. We, along with other radio broadcasters and the National
Association of Broadcasters, previously commenced a legal action in New York
challenging the imposition of these license fees. In addition, we, along with
other radio broadcasters, have commenced a legal action seeking declaratory
relief from the impact of the final rule of the Copyright Office. We intend to
pursue these actions. However, we cannot determine the likelihood of success. We
estimate that the impact of an unfavorable determination will not materially
impact our financial position, results of operations or cash flows.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Presently, there are ten members on our board of directors, seven of
whom are neither officers nor employees of our company. The board met five times
in 2000.
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Our board has adopted certain standing committees including: (1) audit,
(2) compensation, and (3) executive.
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 four times in 2000. 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.
The board of directors has adopted a written audit committee charter, a copy of
which is attached as Appendix A.
Audit Committee Report.
To the Board of Directors:
The audit committee has reviewed and discussed with management our
audited financial statements as of and for the year ended December 31, 2000.
The audit committee has discussed with the independent auditors,
Deloitte & Touche LLP, the matters required to be discussed by Statement on
Auditing Standards No. 61, Communication with Audit Committees, as amended, by
the Auditing Standards Board of the American Institute of Certified Public
Accountants.
The audit committee has received and reviewed the written disclosures
and the letter from Deloitte & Touche LLP required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees, as
amended, by the Independence Standards Board, and has discussed with Deloitte &
Touche LLP their independence.
Based on the reviews and discussions referred to above, the audit
committee recommends to the Board of Directors that the financial statements
referred to above be included in the company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000 for filing with the Securities Exchange
Commission.
David J. Berkman
S. Gordon Elkins
Lee Hague
Audit Fees. The aggregate fees billed to us by Deloitte & Touche LLP
for professional services rendered for the audit of our annual financial
statements for the fiscal year ended December 31, 2000, and for the reviews of
the financial statements included in our Quarterly Reports on Form 10-Q for that
fiscal year, were $205,000.
Financial Information Systems Design and Implementation Fees. The
aggregate fees billed to us by Deloitte &Touche LLP for professional services
rendered for information technology services relating to financial information
systems design and implementation for the fiscal year ended December 31, 2000,
were $516,522.
All Other Fees. The aggregate fees billed to us by Deloitte & Touche
LLP for services rendered to us, other than the services described above under
"Audit Fees" and "Financial Information Systems Design and Implementation Fees",
for the fiscal year ended December 31, 2000, were $55,156.
The audit committee has considered whether the provision of non-audit
services provided by Deloitte & Touche LLP is compatible with maintaining the
principal accountant's independence.
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Compensation Committee. Our compensation committee consists of Mr.
Hannon and Doctors Ginley and Kean. Our compensation committee met two times in
2000. 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.
Executive Committee. Our executive committee consists of Joseph M.
Field, David J. Field and S. Gordon Elkins. Our executive committee met two
times in 2000. The executive committee is responsible for the approval of
certain acquisitions and capital projects as well as other duties assigned by
our board of directors.
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 and
fourth quarters of fiscal 2000, 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.
EXECUTIVE OFFICER COMPENSATION
The following table provides summary information concerning
compensation paid to or earned by our Chief Executive Officer and our other most
highly compensated executive officers for services rendered during the twelve
months ended December 31, 1998, and the fiscal years ended 1999 and 2000 (the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------- OTHER ANNUAL
NAME AND PRINCIPAL POSITION PERIOD SALARY BONUS(1) COMPENSATION
--------------------------- ------ -------- -------- ------------
Joseph M. Field, Chairman of the Board and 1998 $558,384 -- *
Chief Executive Officer.......................... 1999 $563,320 $250,000
2000 $600,000 $400,000
David J. Field, President and Chief 1998 $284,730 $108,085 *
Operating Officer................................ 1999 $350,000 $200,000
2000 $450,000 $350,000
Stephen F. Fisher, Executive Vice President 1998(2) $ 41,667 -- *
and Chief Financial Officer...................... 1999 $250,000 $150,000
2000 $300,000 $200,000
John C. Donlevie, Executive Vice President, 1998 $193,326 $108,085 *
Secretary and General Counsel.................... 1999 $225,000 $125,000
2000 $265,000 $150,000
* Value of perquisites and other personal benefits paid does not exceed
the lesser of $50,000 or 10% of the total annual salary and bonus
reported for the executive officer and, therefore, is not required to
be disclosed pursuant to rules of the Commission.
(1) Includes amounts accrued during the year presented but paid in the
subsequent year.
(2) Reflects the period from the date of hire, November 18, 1998, through
December 1998.
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STOCK OPTION TABLES
Our Named Executive Officers are eligible to receive stock option
grants under the Entercom 1998 Equity Compensation Plan, described in Proposal
4. The following table contains information concerning the stock option grants
made to each of the Named Executive Officers, discussed above, during the fiscal
year ended December 31, 2000:
STOCK OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENTAGE OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE MARKET PRICE FOR OPTIONS TERMS ($)(1)
OPTIONS EMPLOYEES IN OR BASE ON GRANT EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR(%) PRICE ($) DATE($) DATE 5% 10%
---- ---------- -------------- --------- ------------ ---------- --------- ----------
Joseph M. Field..... 100,000 7.0% $ 27.75 $ 27.75 11/21/10 1,745,183 4,422,635
David J. Field...... 100,000 7.0% $ 27.75 $ 27.75 11/21/10 1,745,183 4,422,635
Stephen F. Fisher .. 25,000 1.7% $ 41.875 $ 41.875 5/26/10 658,374 1,668,449
50,000 3.5% $ 27.75 $ 27.75 11/21/10 872,591 2,211,318
John C. Donlevie.... 25,000 1.7% $ 27.75 $ 27.75 11/21/10 436,296 1,105,659
-----------------------
(1) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by the rules of the Securities and Exchange
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 in fiscal 2000 and option holdings
through December 31, 2000 by the Named Executive Officers who held options at
the end of fiscal 2000:
STOCK OPTION EXERCISES AND YEAR-END VALUE
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1)
ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Joseph M. Field ............. -- -- 93,056 379,167 663,200 2,658,337
David J. Field............... -- -- 64,584 293,750 547,928 2,312,500
Stephen F. Fisher............ -- -- 29,167 162,500 79,587 573,125
John C. Donlevie............. -- -- 28,889 111,667 228,300 852,089
------------------
(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, 2000 of $34.4375 per share. Options which are not in the
money are not considered for purposes of this computation.
The Entercom 1998 Equity Compensation Plan and the proposed First
Amendment to the Entercom 1998 Equity Compensation Plan to increase the number
of shares issuable under such plan by 2,500,000 shares are discussed in more
detail under the heading "Proposal 4".
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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.
Absent such written notice, the employment agreement is automatically renewed
for a period of one year. In the event of Mr. Field's death during the term of
the employment agreement, we will pay Mr. Field's compensation to his
beneficiaries for one year at the then current rate. In the event of the total
disability of Mr. Field, we will pay Mr. Field compensation for the lesser of
the period of his disability or one year at the then applicable rate. Mr.
Field's current salary for the calendar year 2001 is $600,000 and is increased
or decreased annually by a percentage equal to the percentage of inflation or
deflation over the immediately preceding twelve month period, provided that the
base salary shall never be less than $500,000. The board of directors may
approve additional salary, bonuses, fees, or other compensation for Mr. Field.
Mr. Field is entitled to participate in any bonus, profit sharing, retirement,
insurance or other plan or program that we adopt. Absent our express prior
written consent, Mr. Field is prohibited, in the event of his termination by
resignation or for cause, for a period of two years following the termination of
the employment agreement, from engaging in any broadcast business that we
compete with in any standard metropolitan statistical area in which we are then
operating a broadcast property.
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
current salary for the calendar year 2001 is $450,000. The employment agreement
provides for yearly salary adjustments for inflation and an annual discretionary
bonus.
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 current salary for the calendar year 2001 is $265,000.
The employment agreement provides for yearly salary adjustments for inflation
and an annual discretionary bonus.
STEPHEN F. FISHER EMPLOYMENT AGREEMENT. We have entered into an
employment agreement with Stephen F. Fisher, pursuant to which Mr. Fisher serves
as our Chief Financial Officer and Executive Vice President for a term ending
December 31, 2000 and year to year thereafter unless terminated by either party
at least 120 days prior to the end of the then current term. In the event of a
change of control, the 120 days is increased by 60 days or in lieu of additional
notice we may pay 60 days salary. We may terminate the agreement at any time for
cause. Mr. Fisher's salary for the calendar year 2001 is $300,000 and is
increased each year for inflation. In addition, Mr. Fisher is eligible for an
annual discretionary bonus. Mr. Fisher is prohibited, so long as he is our
employee and for a period of one year thereafter, from serving, directly or
indirectly in any enterprise with which we compete; provided, however, if Mr.
Fisher is terminated without cause or if his employment agreement is terminated
due to the parties' inability to renegotiate certain compensation terms, then
Mr. Fisher will be restricted from serving in a competitive business for a
period of three months plus any time for which he receives a cash payment.
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PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
cumulative total shareholder return on our common stock against the cumulative
total return of the NYSE Stock Market (US Companies) and a peer group index. The
companies that make up our peer group are listed below, and they consist of
radio and television companies.
[LINE GRAPH]
COMPARISON OF 23 MONTH CUMULATIVE TOTAL RETURN*
AMONG ENTERCOM COMMUNICATIONS CORP.,
THE NYSE COMPOSITE INDEX AND A PEER GROUP(1)
1/99 3/99 6/99 9/99 12/99 3/00 6/00 9/00 12/00
------ ------ ------ ------ ------- ------ ------ ------ -------
Entercom Communications Corp. 100 115.04 139.02 117.07 215.45 165.85 158.54 97.36 111.99
NYSE Composite 100 100.52 107.94 98.73 108.30 107.87 107.08 110.43 109.40
Peer Group 100 104.31 112.24 122.25 147.10 125.80 129.94 102.86 90.40
(1) The peer group index consists of Ackerley Group, Inc., Citadel
Communications Corp., Clear Channel Communications, Cox Radio, Inc., EZ EM,
Inc., Emmis Communications Corp., Fox Entertainment Group, Inc., Gaylord
Entertainment Co., Gay Communications Systems Inc., Hearst-Argyle Television
Inc., Infinity Broadcasting Corp., Salem Communications Corp. and Univision
Communications Inc.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee is responsible, subject to the approval of
the board of directors, for establishing our compensation program. The
compensation committee reviews and recommends the compensation arrangements for
all executive officers and certain management employees, and takes such other
actions as may be required in connection with our compensation plans.
COMPENSATION PHILOSOPHY AND POLICY. Our compensation philosophy is to
motivate our executive officers and management employees to attain financial,
operational and strategic objectives through a competitive compensation program
while also aligning the financial goals of our executives and management with
those of our shareholders. In administering the program, the compensation
committee assesses the performance of our business and our employees relative to
those objectives. The compensation committee also considers the performance of
our business as compared to the performance of our competitors. Our compensation
program generally provides incentives to achieve both annual and longer term
objectives. The principal elements of the compensation plan include base salary,
cash bonus awards and stock awards in the form of grants of stock options,
restricted common stock and other stock-related benefits (including
participation in the Employee Stock Purchase Plan). These elements generally are
blended in order to implement our compensation philosophy.
BASE SALARY. During 2000, we had employment agreements with each of
Joseph M. Field, David J. Field, John C. Donlevie and Stephen F. Fisher. In
setting base salaries for officers and employees, we consider the experience of
the individual, the scope and complexity of the position, our size and growth
rate and the compensation paid by our competitors. Due to the increasingly
competitive nature of our industry segment, compensation amounts paid by our
competitors are expected to continue to grow in importance as we assess our
future compensation structure to ensure our ability to continue to attract and
retain highly qualified executives.
BONUSES. All of our executive officers (to the extent they are not
already entitled to receive a bonus under their respective employment
agreements), are eligible to receive bonuses subject to satisfaction of
specified performance criteria. For 2000, Joseph M. Field, David J. Field,
Stephen F. Fisher and John C. Donlevie received discretionary bonuses determined
by the compensation committee.
STOCK AWARDS. To promote our long-term objectives, stock awards are
made to our employees and employees of our subsidiaries (including employees who
are officers or directors), our non-employee directors and certain advisors and
consultants who are in a position to make a significant contribution to our
long-term success. The stock awards are made pursuant to the Entercom 1998
Equity Compensation Plan, in the form of nonqualified stock options and
incentive stock options, as defined in our Equity Plan, stock appreciation
rights and restricted stock awards. Subject to the approval of the board of
directors, if the board retains the right, the compensation committee has the
sole authority to determine the individuals that shall be given awards and the
terms of the awards.
CHIEF EXECUTIVE OFFICER COMPENSATION. Joseph M. Field received $600,000
in annual salary in fiscal 2000 pursuant to his employment agreement. Mr.
Field's compensation was determined based upon the same factors used in setting
other executive officer salaries, as well as the salaries paid to chief
executive officers of comparable companies and his leadership in setting and
pursuing our financial, operational and strategic objectives. Mr. Field also
received a bonus of $400,000 and stock options to purchase 100,000 shares of
Class A common stock. These awards reflect Mr. Field's success in the pursuit of
various strategic objectives, including acquisitions, foresight in avoiding
over-priced acquisitions and the significant growth in same station revenue
growth and broadcast cash flow achieved by the company. In determining the level
of bonus paid to Joseph M. Field in 2000, the compensation committee, in
addition to consideration of Joseph M. Field's individual performance, took
particular note of our overall increased revenues and successful completion and
integration of our acquisition of 45 stations from Sinclair Broadcasting Group,
Inc. and its subsidiaries in December 1999 and July 2000.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), imposes
limitations upon the federal income tax deductibility of compensation paid to
our chief executive officer and to each of our other four most highly
compensated executive officers. Under these limitations, we may deduct such
compensation only to the extent that during any fiscal year the compensation
paid to any such officer does not exceed $1,000,000 or meets certain specified
conditions (such as
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certain performance-based compensation that has been approved by our
shareholders). Based on our current compensation plans and policies and proposed
regulations interpreting the Internal Revenue Code, we believe that, for the
near future, there is not a significant risk that we will lose any significant
tax deduction for executive compensation. Our compensation plans and policies
may be modified if we and our compensation committee determine that such an
action is in the best interests of our shareholders.
The committee is currently comprised of Mr. Hannon and Doctors Ginley
and Kean, each a non-employee director.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 14, 2001
regarding the beneficial ownership of our common stock by:
- each person known by us to beneficially own more than 5%
percent of any class of our common stock;
- each of our directors and Named Executive Officers; 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.
CLASS A COMMON STOCK(1) CLASS B COMMON STOCK(2)
---------------------------- ----------------------------
NUMBER OF NUMBER OF PERCENT OF PERCENT OF
SHARES SHARES TOTAL TOTAL
BENEFICIALLY PERCENT OF BENEFICIALLY PERCENT OF ECONOMIC VOTING
NAME OWNED(3) CLASS OWNED(3) CLASS INTEREST POWER
---- ------------ ---------- ------------ ----------- ---------- ----------
Joseph M. Field(4)(5) .......... 1,734,075 5.0% 9,782,555 92.9% 25.4% 71.1%
David J. Field(4)(6) ........... 2,167,191 6.2 749,250 7.1 6.4 6.9
John C. Donlevie ............... 57,096 * -- -- * *
Stephen F. Fisher .............. 33,745 * -- -- * *
Herbert Kean, M.D. ............. 809,107 2.3 -- -- 1.8 *
S. Gordon Elkins(4)(7) ......... 2,924,339 8.4 -- -- 6.5 2.1
Thomas H. Ginley, M.D.(8) ...... 729,493 2.1 -- -- 1.6 *
Lee Hague ...................... 6,251 * -- -- *
Marie H. Field(4)(9) ........... 1,734,075 5.0 180,000 1.7 4.2 1.4
Michael R. Hannon(10) .......... 9,193 -- -- -- --
*
David J. Berkman ............... 13,473 * -- -- * *
Putnam Investments, LLC(11)
One Post Office Square
Boston, MA 02109 ............... 3,568,856 10.3 -- -- 7.9 2.5
Janus Capital Corporation(12)
100 Fillmore Street
Denver, CO 80206 ............... 3,231,315 9.3 7.1 2.3
Mellon Financial
Corporation(13)
One Mellon Center
Pittsburgh, PA 15258 ........... 2,765,119 8.0 6.1 2.0
All directors and executive
officers as a group (12
persons) ..................... 5,158,147 14.9 11.4 78.9
--------------------------
* 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 includes the number of shares of Class A common stock
issuable upon conversion of the outstanding shares of Class C common
stock but does not include the shares of Class A common stock
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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
34,527,685 shares of Class A common stock, 10,531,805 shares of Class B
common stock and 195,669 shares of Class C common stock outstanding as
of March 1, 2001. 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) 1,404,791 shares of Class A common stock beneficially
owned by Marie H. Field, wife of Joseph M. Field, (b) 64,235 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, (c) 112,864 shares
of Class A common stock beneficially owned by Joseph M. Field as a
director and officer of the Joseph and Marie Field Foundation, (d)
148,612 shares of Class A common stock which may be acquired through
the exercise of options and (e) 3,473 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 180,000 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) 408,726 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) 548,286 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) 1,112,162 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)
97,917 shares of Class A common stock which may be acquired through the
exercise of options.
(7) Includes (a) 1,096,572 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)
563,876 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) 663,150 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) 480,626 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) 112,864 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) 3,473 shares of Class A common stock which may be
acquired through the exercise of options.
(8) Includes (a) 578,020 shares of Class A common stock held by Dr. Ginley
in joint tenancy with his spouse, (b) 74,000 shares of Class A common
stock owned of record by his spouse, (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 and (d) 3,473 shares of Class A
common stock which may be acquired through the exercise of options.
(9) Includes (a) 250,000 shares of Class A common stock held of record by
Marie H. Field as co-trustee of a trust for the benefit of David J.
Field, (b) 408,726 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) 64,235 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) 112,864 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) 3,473 shares of
Class A common stock which may be acquired through the exercise of
options and (f) 148,612 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 9,602,555 shares of Class B
common stock held by Joseph M. Field, Marie H. Field's spouse. See Note
2 above.
(10) Includes 3,473 shares of Class A common stock which may be acquired
through the exercise of options. Does not include 195,669 shares of
Class C common stock which represents 100% of the class, held by J.P.
Morgan Partners, L.P. The shares of Class C common stock have no voting
rights except as otherwise required by law. Michael R. Hannon, one of
our directors, is a partner of J.P. Morgan Partners LLC and exercises
shared investment and voting power with respect to
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the shares owned by J.P. Morgan Partners (BHCA), L.P., but disclaims
beneficial ownership. The address for Mr. Hannon is J.P. Morgan
Partners, LLC, 1221 Avenue of the Americas, 39th Floor, New York, New
York 10020-1080.
(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.
(12) Janus Capital Corporation exercises sole voting and sole investment
power over all 3,231,315 shares.
(13) Mellon Financial Corporation exercises sole voting power over 2,259,069
shares, shared voting power with respect to 175,300 shares, sole
dispositive power with respect to 2,652,880 shares and shared
dispositive power with respect to 87,900 shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
Executive Officers and directors, and persons who own more than ten percent of a
registered class of our equity securities ("Reporting Persons"), to file reports
of beneficial ownership (Forms 3, 4 and 5) of our equity securities with the
Commission and the New York Stock Exchange. Based solely on our review of Forms
3, 4 and 5 and amendments thereto furnished to us, we believe the Reporting
Persons of Entercom were in compliance with these requirements for fiscal 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
S. Gordon Elkins, one of our directors, is affiliated with the law firm
of Stradley, Ronon, Stevens & Young. This firm has served as our outside counsel
on various matters.
Michael R. Hannon, one of our directors, is a general partner of J.P.
Morgan Partners (formerly Chase Capital). In May 1996, J.P. Morgan Partners
(BHCA) (formerly Chase Equity Associates) acquired a convertible subordinated
promissory note from us for $25 million. The convertible subordinated note was
converted into 2,327,500 shares of our Class A common stock and 1,995,669 shares
of our Class C common stock immediately prior to our initial public offering.
J.P. Morgan Partners (BHCA) was a selling shareholder in our initial public
offering in January 1999 and received net proceeds of $49.2 million from the
sale of all of its Class A common stock.
On May 21, 1996, we entered into a registration rights agreement, dated
as of May 21, 1996, with J.P. Morgan Partners (BHCA), L.P., an affiliate of J.P.
Morgan Partners. The agreement grants J.P. Morgan Partners (BHCA), L.P., and
J.P. Morgan Partners the right to require us, subject to certain limitations, to
effect one "demand" registration statement under the Securities Act for the sale
of their shares of our common stock. J.P. Morgan Partners (BHCA), L.P., is the
beneficial owner of all of our outstanding Class C common stock.
On May 6, 1999, J.P. Morgan Partners (BHCA), L.P., entered into an
agreement with the underwriters of the initial public offering in which (1) the
underwriters released J.P. Morgan Partners (BHCA), L.P., from their 180 day
lock-up agreement with respect to the sale of 300,000 shares of Class A common
stock and (2) J.P. Morgan Partners (BHCA), L.P., agreed that all further sales
or dispositions of Class A common stock, except sales pursuant to the
registration rights agreement, shall be made through a nationally recognized
underwriter that we designate.
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PROPOSAL 3
RATIFICATION OF AUDITORS
Deloitte & Touche LLP has served as our independent accountant. We
dismissed Deloitte & Touche LLP as our independent accountant on March 23, 2001,
and engaged Arthur Andersen LLP as our new independent accountant as of such
date. The decision to change accountants was recommended by the audit committee
to the board of directors and was approved by the board of directors. Deloitte &
Touche LLP's reports on our financial statements for the fiscal years ended
December 31, 2000 and 1999 did not contain an adverse opinion or a disclaimer of
opinion, nor were such reports qualified or modified as to uncertainty, audit
scope or accounting principles. During the fiscal years ended December 31, 1999
and December 31, 2000, and the subsequent interim period through March 23, 2001,
there were no disagreements with Deloitte & Touche LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to Deloitte & Touche
LLP's satisfaction, would have caused Deloitte & Touche LLP to make reference to
the subject matter of the disagreements in connection with its report. There
were no reportable events (as defined in Regulation S-K, Item 304(a)(1)(v))
during the fiscal years ended December 31, 1999 and 2000 and the subsequent
interim period through March 23, 2001.
We have provided each of Deloitte & Touche LLP and Arthur Andersen LLP
with a copy of the above disclosure.
During the fiscal years ended December 31, 1999 and 2000 and during the
subsequent interim period through March 23, 2001, preceding the engagement of
Arthur Andersen LLP, neither us nor anyone on our behalf consulted with Arthur
Andersen LLP regarding the application of accounting principles to any
transactions, either completed or proposed; or the type of audit opinion that
might be rendered on our financial statements, in each case with respect to
which either a written report or oral advice was provided that Arthur Andersen
LLP concluded was an important factor considered by us in reaching a decision as
to the issue. In June 1998, Sinclair Broadcast Group, Inc. ("Sinclair") acquired
certain radio broadcast stations from Heritage Media Services, Inc. and
immediately sold seven of these stations to us. As a result of this acquisition,
we were required to include certain audited financial statements pertaining to
the seven stations in our filings with the Securities and Exchange Commission.
Arthur Andersen LLP was the independent accountant for Sinclair at the time of
this acquisition and was doing the audit work for Sinclair in connection with
the acquisition. We engaged Arthur Andersen LLP to prepare the audit for the
seven stations that we acquired due to Arthur Andersen LLP's association with
the transaction. In addition, in December 1999 and July 2000, we acquired
additional radio broadcast stations from Sinclair. As a result of these
acquisitions, we were required to include certain audited financial statements
pertaining to these stations in our filings with the Securities and Exchange
Commission. Arthur Andersen LLP had audited certain financial statements
pertaining to these stations for Sinclair and provided us with consents to use
these audited financial statements in certain of our filings with the
Commission.
Our board of directors, upon the recommendation of the audit committee,
has appointed Arthur Andersen LLP to serve as our independent auditors for the
2001 fiscal year. This appointment is subject to your ratification. Our
management considers Arthur Andersen LLP to be well qualified.
Representatives of Arthur Andersen LLP are expected to be present at
the annual meeting. They will have an opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions. Representatives of Deloitte & Touche LLP are not expected to be
present at the annual meeting.
The favorable vote of at least a majority of the votes of the shares of
Class A and Class B common stock present in person or by proxy and voting at a
meeting at which a quorum is present is required for ratification of the
appointment of independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR SUCH RATIFICATION OF
THE INDEPENDENT AUDITORS.
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PROPOSAL 4
APPROVAL OF THE FIRST AMENDMENT TO THE ENTERCOM 1998 EQUITY COMPENSATION PLAN
Effective as of June 24, 1998, we adopted the Entercom 1998 Equity
Compensation Plan in order to attract and retain our employees, employees of our
subsidiaries (including employees who are officers or directors) and executive
officers, and to provide incentives to our non-employee directors and certain
advisors and consultants who perform services for us and our subsidiaries. The
aggregate number of shares of our Class A common stock that may be currently
awarded under the Entercom 1998 Equity Compensation Plan cannot exceed 10% of
the number of outstanding shares of all classes of our common stock. Due to our
continued growth and expansion, the number of shares issuable pursuant to
options and the number of shares of restricted stock, in the aggregate, granted
under the Entercom 1998 Equity Compensation Plan is approaching the current
share limit of 4,525,515. The board of directors believes that it is in our best
interest and in the best interest of our shareholders to increase the number of
shares that may be issued under the Entercom 1998 Equity Compensation Plan to
2,500,000 shares plus 10% of the number of outstanding shares of all classes of
our common stock. The board of directors has approved the First Amendment to the
Entercom 1998 Equity Compensation Plan, subject to shareholder approval. The
proposed First Amendment to the Entercom 1998 Equity Compensation Plan and the
complete text of the Entercom 1998 Equity Compensation Plan, are attached as
Appendix B and Appendix C, respectively, to this proxy statement.
THE ENTERCOM 1998 EQUITY COMPENSATION PLAN. The Entercom 1998 Equity
Compensation Plan provides for grants to our employees and employees of our
subsidiaries (including employees who are officers or directors), our
non-employee directors and certain advisors and consultants who perform services
for us and our subsidiaries, of:
- incentive stock options;
- "nonqualified stock options" that are not intended to qualify
as incentive stock options;
- restricted stock; and
- stock appreciation rights.
Only shares of Class A common stock may be issued under the 1998 Equity
Compensation Plan.
GENERAL. Subject to adjustment, we may issue shares of Class A common
stock up to an amount equal to 10% of our outstanding Class A, Class B and Class
C common stock under the Plan. As of March 23, 2001, we have currently
outstanding 9,306 shares of restricted stock and nonqualified stock options to
purchase 3,455,500 shares of Class A common stock having a weighted average
exercise price of $35.21 per share. We have not issued any incentive stock
options or stock appreciation rights. The number of shares for which incentive
stock options may be issued under the Plan may not exceed 1,850,000 shares,
subject to adjustment, and the number of shares of restricted stock that may be
issued under the Plan may not exceed 925,000 shares, subject to adjustment.
ADMINISTRATION OF THE ENTERCOM 1998 EQUITY COMPENSATION PLAN. The Plan
is administered and interpreted by our compensation committee. Subject to the
ratification or approval by the board of directors, if the board retains the
right, the committee has the sole authority to:
- determine the individuals that shall be given awards;
- determine the terms of the awards;
- delegate to our Chief Executive Officer, Joseph M. Field, the
authority to make grants to certain non-executive officer
employees; and
- deal with any other matters arising under the Plan.
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OPTIONS. The exercise price of any incentive stock option will not be
less than the fair market value of our Class A common stock on the date of the
grant, or not less than 110% of the fair market value of the common stock in the
case of an employee who owns more than 10% of our Class A, Class B and Class C
common stock. The exercise price of any nonqualified stock option may be greater
than, equal to or less than the fair market value of our Class A common stock on
the date of the grant. The exercise period of an option may not exceed ten years
from the date of the grant, and the exercise period of an incentive stock option
granted to an employee who owns more than 10% of the Class A, Class B and Class
C common stock may not exceed five years from the date of the grant. The
participant may pay the exercise price in cash or, with approval of the
committee, by delivering shares of common stock owned by the participant and
having a fair market value on the date of exercise equal to the exercise price
or by any other method that the committee approves.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR SUCH APPROVAL OF
THE FIRST AMENDMENT TO THE ENTERCOM 1998 EQUITY COMPENSATION PLAN.
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OTHER MATTERS
We do not know of any other matters to be presented at the annual
meeting other than those discussed in this proxy statement. If however, other
matters are properly brought before the annual meeting, your proxies will be
able to vote those matters at their discretion.
SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
In order for shareholder proposals to be included in the proxy
statement for the 2002 annual meeting, we must receive them no later than
November 30, 2001. To be considered for inclusion in our proxy statement for
that meeting, shareholder proposals must be in compliance with Rule 14a-8 under
the Exchange Act and with our bylaws. They must also be submitted in writing by
notice delivered to the Corporate Secretary, Entercom Communications Corp., 401
City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004.
Our bylaws require that for director nominations to be properly brought
before an annual meeting by a shareholder, the shareholder must have given
notice no later than March 5, 2002. This notice requirement is a separate
requirement from the requirement above relating to the inclusion of shareholder
proposals in a proxy statement. For such nomination to be included in the proxy
materials, it must set forth:
- the shareholder's name and address;
- the number of shares of our common stock the shareholder held
of record, owned beneficially or represented by proxy as of
the date of the notice;
- such information regarding each nominee as would have been
required to be included in a proxy statement filed pursuant to
Regulation 14A of the Exchange Act had proxies been solicited
with respect to such nominee by management or our board of
directors;
- a description of all arrangements or understandings among the
shareholder and each nominee and any other person or persons
pursuant to which such nomination or nominations are to be
made by the shareholder; and
- the consent of each nominee to serve as director if elected.
Any such nomination must be submitted in writing by notice delivered to
the Corporate Secretary at the address set forth above.
If we have not received notice on or before February 13, 2002 of any
matter a shareholder intends to propose for a vote at the 2002 annual meeting,
then a proxy solicited by the board of directors may be voted on such matter in
the discretion of the proxy holder.
ANNUAL REPORT
We are mailing a copy of our 2000 Annual Report together with this
proxy statement to shareholders of record on the annual meeting record date. Any
shareholder who desires an additional copy may obtain it, without charge, by
addressing a request to the Corporate Secretary, Entercom Communications Corp.,
401 City Avenue, Suite 409, Bala Cynwyd, Pennsylvania 19004.
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APPENDIX A
Audit Committee Charter
Role and Independence
The audit committee of the board of directors assists the board in fulfilling
its responsibility for oversight of the quality and integrity of the accounting,
auditing, and reporting practices of the corporation and such other duties as
directed by the board. The membership of the committee shall consist of at least
three directors who are generally knowledgeable in financial and auditing
matters, including at least one member with accounting or related financial
management expertise. Each member shall be free of any relationship that, in the
opinion of the board, would interfere with his or her individual exercise of
independent judgment. The committee is expected to maintain free and open
communication (including private executive sessions at least annually) with the
independent accountants, the internal auditors, and the management of the
corporation. In discharging this oversight role, the committee is empowered to
investigate any matter bought to its attention, with full power to retain
outside counsel or other experts for this purpose. This charter shall be
reviewed, updated and approved annually by the Board of Directors.
Responsibilities
The audit committee's primary responsibilities include:
- Primary input into the recommendation to the board for the selection
and retention of the independent accountant that audits the financial
statements of the corporation. In the process, the committee will
discuss and consider the auditor's written affirmation that the auditor
is in fact independent, will discuss the nature and rigor of the audit
process, receive and review all reports, and will provide to the
independent accountant full access to the committee (and the board) to
report on any and all appropriate matters.
- Provision of guidance and oversight to the internal audit function of
the corporation, including review of the organization, plans, and
results of such activity.
- Review of financial statements with management and the independent
auditor. It is anticipated that these discussions will include quality
of earnings, review of reserves and accruals, consideration of the
suitability of accounting principles, review of highly judgmental
areas, audit adjustments whether or not recorded, and such other
inquiries as may be appropriate. Based on the review, the committee
shall make its recommendation to the board as to the inclusion of the
financial statements in the annual report on Form 10-K.
- Discussion with management and the auditors of the quality and adequacy
of the company's internal controls.
- Discussion with management of the status of pending litigation,
taxation matters, and other areas of oversight to the legal and
compliance area as may be appropriate.
- Reporting on audit committee activities to the full board and issuance
annually of a summary report (including appropriate oversight
conclusions) suitable for submission to the shareholders.
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APPENDIX B
FIRSTAMENDMENT TO
ENTERCOM
1998 EQUITY COMPENSATION PLAN
THIS FIRST AMENDMENT TO ENTERCOM 1998 EQUITY COMPENSATION PLAN is made
and adopted by ENTERCOM COMMUNICATIONS CORP., a Pennsylvania corporation (the
"Company"), as of March __, 2001. Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed to such terms in the
Plan (as defined below).
WHEREAS, the Company has adopted the Entercom 1998 Equity Compensation
Plan (the "Plan") for the benefit of its employees, directors and consultants;
and
WHEREAS, pursuant to Section 14(a) of the Plan, the Plan may be amended
by the Board of Directors of the Company from time to time.
NOW, THEREFORE, BE IT RESOLVED, that the Plan be amended as follows,
effective as of March __, 2001:
1. Subject to approval by the Company's shareholders, Section 3(a) of
the Plan is hereby amended and restated in its entirety as follows:
"(a) Limitations. At no time shall the number of shares of Company
Stock subject to Grants under the Plan exceed the sum of 2,500,000 and 10% of
the number of outstanding shares of all classes of common stock of the Company,
determined at the time of each Grant. In no event shall the foregoing limit be
considered to be exceeded as a result of a reduction in the number of
outstanding shares of Company Stock after a Grant is made. Restricted Stock
granted under the Plan shall not be taken into account for purposes of
determining the number of outstanding shares of Company Stock during any
restriction period until such restrictions have lapsed. As a further limitation,
subject to adjustment as described in subsection (b) below, the aggregate number
of shares of Company Stock that may be subject to Grants of Incentive Stock
Options shall not exceed 1,850,000 shares, and the aggregate number of shares of
Company Stock that may be subject to Restricted Stock Grants shall not exceed
925,000 shares. Subject to adjustment as described in subsection (b) below, the
aggregate number of shares of Company Stock that may be subject to Grants made
under the Plan to any individual during any calendar year shall not exceed
925,000 shares. The shares may be authorized but unissued shares of Company
Stock or reacquired shares of Common Stock, including shares purchased by the
Company on the open market for purposes of the Plan. If and to the extent
Options or SARs granted under the Plan terminate, expire or are canceled,
forfeited, exchanged or surrendered without having been exercised, or if any
shares of Restricted Stock are forfeited, the shares subject to such Grants
shall again be available for purposes of the Plan."
2. Section 8(b) of the Plan is hereby amended and restated in its
entirety as follows:
"(b) Election to Withhold Shares. If the Committee so permits, a
Grantee may elect to satisfy the Company's income tax withholding obligation
with respect to an Option, SAR or Restricted Stock by having the Company
withhold that number of shares having a Fair Market Value equal to the minimum
amount required to be withheld based on the statutory withholding rates for
federal and state tax purposes that apply to supplemental taxable income. The
Fair Market Value of the shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined. The election must be
in a form and manner prescribed by the Committee and shall be subject to the
prior approval of the Committee."
3. Sections 11(b) and (c) of the Plan are hereby amended and restated
in their entirety, and a new subsection (d) is hereby added, as follows:
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"(b) The consummation by the Company of (i) a merger or consolidation
of the Company with another corporation where the shareholders of the Company,
immediately prior to the merger or consolidation, will not beneficially own,
immediately after the merger or consolidation, shares entitling such
shareholders to more than 50% of all votes required to elect a majority of the
board of directors of the surviving corporation or (ii) the consummation of an
agreement (or agreements) providing for the sale or disposition by the Company
of all or substantially all of the assets of the Company;
(d) The shareholders of the Company approve an agreement providing for
a liquidation or dissolution of the Company; or
(e) After a Public Offering, any person has completed a tender offer or
exchange offer for shares representing more than 50% of all votes required to
elect a majority of the Board."
4. This First Amendment shall be and is hereby incorporated in and
forms a part of the Plan.
5. Except as set forth herein, the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, the Company has caused this First Amendment to the
Plan to be executed by its duly authorized officer as of ____, 2001.
ENTERCOM COMMUNICATIONS CORP.
By:
Name:
Title:
2
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APPENDIX C
ENTERCOM
1998 EQUITY COMPENSATION PLAN
The purpose of the Entercom 1998 Equity Compensation Plan (the "Plan")
is to provide (i) designated employees of Entercom Communications Corp. (the
"Company") and its subsidiaries, (ii) certain consultants and advisors who
perform services for the Company or its subsidiaries and (iii) non-employee
members of the Board of Directors of the Company (the "Board") with the
opportunity to receive grants of incentive stock options, nonqualified stock
options, stock appreciation rights or restricted stock. The Company believes
that the Plan will enhance the incentive for participants to contribute
materially to the growth of the Company, thereby benefiting the Company and the
Company's shareholders, and will align the economic interests of the
participants with those of the shareholders.
1. Administration
(a) Committee. The Plan shall be administered and interpreted by a
committee appointed by the Board (the "Committee"). The Committee shall consist
of two or more persons who may be " outside directors" as defined under section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and related
Treasury regulations and "non-employee directors" as defined under Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
However, the Board may retain the right to ratify or approve any grants as it
deems appropriate. If the Board requires ratification or approval of a grant and
the grant is not ratified or approved by the Board, such grant shall not be
effective. Before an initial public offering of the Company's stock as described
in Section 19(b) (a "Public Offering"), the Plan may be administered by the
Board. If the Board administers the Plan during a period prior to a Public
Offering, references in the Plan to the "Committee" shall be deemed to refer to
the Board during but only for such period.
(b) Committee Authority . Subject to ratification or approval by the
Board if the Board retains such right pursuant to subsection (a) above, the
Committee shall have the sole authority to (i) determine the individuals to whom
grants shall be made under the Plan, (ii) determine the type, size and terms of
the grants to be made to each such individual, (iii) determine the time when
grants will be made and the commencement and duration of any applicable exercise
or restriction period, including the criteria for exercisability and the
acceleration of exercisability and (iv) deal with any other matters arising
under the Plan.
(c) Committee Determinations. Subject to ratification or approval by
the Board if the Board retains such right pursuant to subsection (a) above, the
Committee shall have full power and authority to administer and interpret the
Plan, to make factual determinations and to adopt or amend such rules,
regulations, agreements and instruments for implementing the Plan and for the
conduct of its business as it deems necessary or advisable, in its sole
discretion. Subject to ratification or approval by the Board if the Board
retains such right pursuant to subsection (a) above, the Committee's
interpretations of the Plan and all determinations made by the Committee
pursuant to the powers vested in it hereunder shall be conclusive and binding on
all persons having any interest in the Plan or in any awards granted hereunder.
All powers of the Committee shall be executed in its sole discretion, in the
best interest of the Company, not as a fiduciary, and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated
individuals.
(d) Delegation of Authority. Notwithstanding the foregoing, the
Committee may delegate to the Chief Executive Officer of the Company the
authority to make grants under the Plan to employees and key advisors (as
defined herein) of the Company and its subsidiaries who are not subject to the
restrictions of section 16(b) of the Exchange Act and who are not expected to be
subject to the limitations of section 162(m) of the Code. The grant of authority
under this subsection 1(d) shall be subject to such conditions and limitations
as may be determined by the Committee, subject to ratification and approval by
the Board if the Board retains such right pursuant to subsection (a) above. If
the Chief Executive Officer makes grants pursuant to the delegated authority
under this subsection (d), references in the Plan to the "Committee,"as they
relate to making such grants (but not to the subsequent administration of such
grants), shall be deemed to refer to the Chief Executive Officer.
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2. Shares Subject to the Plan and Types of Grants
Before a Public Offering, awards may be made under the Plan with respect to
shares of non-voting common stock of the Company, and after a Public Offering,
awards may be made with respect to shares of Class A common stock of the
Company. The term "Company Stock"means, before a Public Offering, non-voting
common stock of the Company and, after a Public Offering, Class A common stock
of the Company. Awards under the Plan may consist of grants of (a) incentive
stock options as described in Section 5 ("Incentive Stock Options"), (b)
nonqualified stock options as described in Section 5 ("Nonqualified Stock
Options") (Incentive Stock Options and Nonqualified Stock Options are
collectively referred to as "Options"), (c) restricted stock as described in
Section 6 ("Restricted Stock" ) and (d) stock appreciation rights as described
in Section 7 ("SARs") (all such awards being hereinafter collectively referred
to as "Grants"). All Grants shall be subject to the terms and conditions set
forth herein and to such other terms and conditions consistent with this Plan as
the Committee deems appropriate and as are specified in writing by the Committee
to the individual in a grant instrument or an amendment to the grant instrument
made in conformance with the Plan (the "Grant Instrument"). The Committee shall
approve the form and provisions of each Grant Instrument. Grants under a
particular Section of the Plan need not be uniform as among the Grantees (as
defined below) or among any class or grouping of Grantees.
3. Limitations on the Number of Shares Subject to the Plan
(a) Limitations. At no time shall the number of shares of Company Stock
subject to Grants under the Plan exceed 10% of the number of outstanding shares
of all classes of common stock of the Company, determined at the time of each
Grant. In no event shall the foregoing limit be considered to be exceeded as a
result of a reduction in the number of outstanding shares of Company Stock after
a Grant is made. Restricted Stock granted under the Plan shall not be taken into
account for purposes of determining the number of outstanding shares of Company
Stock during any restriction period until such restrictions have lapsed. As a
further limitation, subject to adjustment as described in subsection (b) below,
the aggregate number of shares of Company Stock that may be subject to Grants of
Incentive Stock Options shall not exceed 10,000 shares, and the aggregate number
of shares of Company Stock that may be subject to Restricted Stock Grants shall
not exceed 5,000 shares. After a Public Offering, subject to adjustment as
described in subsection (b) below, the aggregate number of shares of Company
Stock that may be subject to Grants made under the Plan to any individual during
any calendar year shall not exceed 5,000 shares. The shares may be authorized
but unissued shares of Company Stock or reacquired shares of Company Stock,
including shares purchased by the Company on the open market for purposes of the
Plan. If and to the extent Options or SARs granted under the Plan terminate,
expire, or are canceled, forfeited, exchanged or surrendered without having been
exercised, or if any shares of Restricted Stock are forfeited, the shares
subject to such Grants shall again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of shares
of Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock without the Company's receipt of consideration, or
if the value of outstanding shares of Company Stock is substantially reduced as
a result of a spinoff or the Company's payment of an extraordinary dividend or
distribution, the maximum number of shares of Company Stock available for
Grants, the maximum number of shares of Company Stock that any individual
participating in the Plan may be granted in any year, the number of shares
covered by outstanding Grants, the kind of shares issued under the Plan, and the
price per share of such Grants may be appropriately adjusted by the Committee to
reflect any increase or decrease in the number of, or change in the kind or
value of, issued shares of Company Stock to preclude, to the extent practicable,
the enlargement or dilution of rights and benefits under such Grants; provided,
however, that any fractional shares resulting from such adjustment shall be
eliminated. Any adjustments determined by the Committee shall be final, binding
and conclusive.
4. Eligibility for Participation
(a) Eligible Persons. All employees of the Company and its
subsidiaries ("Employees"), including Employees who are officers or members of
the Board, and members of the Board who are not Employees ("Non-Employee
Directors") shall be eligible to participate in the Plan. Consultants and
advisors who perform services for
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the Company or any of its subsidiaries ("Key Advisors") shall be eligible to
participate in the Plan if the Key Advisors render bona fide services and such
services are not in connection with the offer or sale of securities in a
capital-raising transaction.
(b) Selection of Grantees. The Committee shall select the Employees,
Non-Employee Directors and Key Advisors to receive Grants and shall determine
the number of shares of Company Stock subject to a particular Grant in such
manner as the Committee determines. Employees, Key Advisors and Non-Employee
Directors who receive Grants under this Plan shall hereinafter be referred to as
"Grantees".
5. Granting of Options
(a) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each Grant of Options to
Employees, Non-Employee Directors and Key Advisors.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options which are intended
to qualify as "incentive stock options" within the meaning of section 422 of the
Code or Nonqualified Stock Options which are not intended so to qualify or any
combination of Incentive Stock Options and Nonqualified Stock Options, all in
accordance with the terms and conditions set forth herein. Incentive Stock
Options may be granted only to Employees. Nonqualified Stock Options may be
granted to Employees, Non-Employee Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Company Stock subject
to an Option shall be determined by the Committee and may be equal to, greater
than, or less than the Fair Market Value (as defined below) of a share of
Company Stock on the date the Option is granted; provided, however, that (x) the
Exercise Price of an Incentive Stock Option shall be equal to, or greater than,
the Fair Market Value of a share of Company Stock on the date the Incentive
Stock Option is granted and (y) an Incentive Stock Option may not be granted to
an Employee who, at the time of grant, owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or any
parent or subsidiary of the Company, unless the Exercise Price per share is not
less than 110% of the Fair Market Value of Company Stock on the date of grant.
(iii) If the Company Stock is publicly traded, then the Fair Market
Value per share shall be determined as follows: (x) if the principal trading
market for the Company Stock is a national securities exchange or the Nasdaq
National Market, the last reported sale price thereof on the relevant date or
(if there were no trades on that date) the latest preceding date upon which a
sale was reported, or (y) if the Company Stock is not principally traded on such
exchange or market, the mean between the last reported "bid" and "asked" prices
of Company Stock on the relevant date, as reported on Nasdaq or, if not so
reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Committee determines. If the Company Stock is not publicly traded or, if
publicly traded but not subject to reported transactions or "bid" or "asked"
quotations as set forth above, the Fair Market Value per share shall be as
determined by the Committee.
(c) Option Term. The Committee shall determine the term of each Option.
The term of any Option shall not exceed ten years from the date of grant.
However, an Incentive Stock Option which is granted to an Employee who, at the
time of grant, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company, or any parent or subsidiary of the
Company, may not have a term that exceeds five years from the date of grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument. The Committee
may accelerate the exercisability of any or all outstanding Options at any time
for any reason, and such acceleration need not be uniform as among any class or
grouping of Grantees.
(e) Termination of Employment, Disability or Death.
(i) Except as provided below, an Option may only be exercised while the
Grantee is employed by, or providing service to, the Company as an Employee, Key
Advisor or member of the Board. In the event that a
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Grantee ceases to be employed by, or provide service to, the Company for any
reason other than a Disability (as defined in subsection (v) below), death, or
termination for Cause (as defined in subsection (v) below), any Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within 90
days after the date on which the Grantee ceases to be employed by, or provide
service to, the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Except as otherwise provided by the Committee, any of the Grantee's
Options which are not otherwise exercisable as of the date on which the Grantee
ceases to be employed by, or provide service to, the Company shall terminate as
of the date such employment or service ceased.
(ii) In the event the Grantee ceases to be employed by, or provide
service to, the Company on account of a termination for Cause by the Company,
any Option held by the Grantee shall terminate as of the date and time the
Grantee ceases to be employed by, or provide service to, the Company. In
addition, notwithstanding any other provisions of this Section 5, if the
Committee determines that the Grantee has engaged in conduct that constitutes
Cause at any time while the Grantee is employed by, or providing service to, the
Company or after the Grantee's termination of employment or service, any Option
held by the Grantee shall immediately terminate. In the event the Committee
determines that the Grantee has engaged in conduct that constitutes Cause, in
addition to the immediate termination of all Grants, the Grantee shall
automatically forfeit all shares underlying any exercised portion of an Option
for which the Company has not yet delivered the share certificates, upon refund
by the Company of the Exercise Price paid by the Grantee for such shares
(subject to any right of setoff by the Company).
(iii) In the event the Grantee ceases to be employed by, or provide
service to, the Company because the Grantee is Disabled, any Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within one
year after the date on which the Grantee ceases to be employed by, or provide
service to, the Company (or within such other period of time as may be specified
by the Committee), but in any event no later than the date of expiration of the
Option term. Except as otherwise provided by the Committee, any of the Grantee's
Options which are not otherwise exercisable as of the date on which the Grantee
ceases to be employed by, or provide service to, the Company shall terminate as
of the date such employment or service ceased.
(iv) If the Grantee dies while employed by, or providing service to,
the Company or within 90 days after the date on which the Grantee ceases to be
employed or provide service on account of a termination specified in Section
5(e)(i) above (or within such other period of time as may be specified by the
Committee), any Option which is otherwise exercisable by the Grantee as of the
date of his or her death shall terminate unless exercised within one year after
the date on which the Grantee ceases to be employed by, or provide service to,
the Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the Option
term. Except as otherwise provided by the Committee, any of the Grantee's
Options which are not otherwise exercisable as of the date on which the Grantee
ceases to be employed by, or provide service to, the Company shall terminate as
of the date such employment or service ceased.
(v) For purposes of this Section 5(e) and Section 6:
(A) The term "Company" shall mean the Company and its parent and
subsidiary corporations.
(B) "Employed by, or provide service to, the Company" shall mean
employment or service as an Employee, Key Advisor or member of the Board (so
that, for purposes of exercising Options and SARs and satisfying conditions with
respect to Restricted Stock, a Grantee shall not be considered to have
terminated employment or service until the Grantee ceases to be an Employee, Key
Advisor or member of the Board), unless the Committee determines otherwise in
the Grant Instrument.
(C) "Disability" or "Disabled" shall mean a Grantee's becoming disabled
within the meaning of section 22(e)(3) of the Code.
(D) "Cause" shall mean, except to the extent specified otherwise by the
Committee, a finding by the Committee that, before or after termination of
employment, the Grantee (i) has engaged in fraud, embezzlement, theft,
commission of a felony or proven dishonesty in the course of his or her
employment or service, (ii) has breached any provision of his or her employment
or service contract with the Company, including, without limitation, any
covenant against competition and/or raiding of the Company's Employees,
Non-Employee Directors
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30
or Key Advisors, or (iii) has disclosed trade secrets or confidential
information of the Company to persons not entitled to receive such information.
(f) Exercise of Options. A Grantee may exercise an Option which has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee (x) in cash, (y) with
the approval of the Committee, subject to such restrictions as the Committee
deems appropriate, by delivering shares of Company Stock owned by the Grantee
(including Company Stock acquired in connection with the exercise of an Option)
and having a Fair Market Value on the date of exercise equal to the Exercise
Price or (z) by such other method as the Committee may approve, including, after
a Public Offering, payment through a broker in accordance with procedures
permitted by Regulation T of the Federal Reserve Board. Shares of Company Stock
used to exercise an Option must, unless otherwise determined by the Committee,
have been held by the Grantee for the requisite period of time to avoid adverse
accounting or tax consequences to the Company with respect to the Option. The
Grantee shall pay the Exercise Price and the amount of any withholding tax due
(pursuant to Section 8) at the time of exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that if the aggregate Fair Market Value of the stock with respect
to which Incentive Stock Options are exercisable for the first time during any
calendar year by a Grantee exceeds $100,000, then the Option, as to the excess,
shall be treated as a Nonqualified Stock Option. For this purpose, the Fair
Market Value of the stock shall be measured on the date of grant of the Option.
All Incentive Stock Options granted to the Grantee under the Plan or any other
stock option plan of the Company or a parent or subsidiary corporation shall be
taken into consideration in determining whether the foregoing limit has been
met. An Incentive Stock Option shall not be granted to any person who is not an
employee of the Company or a parent or subsidiary (within the meaning of section
424(f) of the Code) at the time of the grant.
6. Restricted Stock Grants
The Committee may issue or transfer shares of Company Stock to an
Employee, Non-Employee Director or Key Advisor under a Grant of Restricted
Stock, upon such terms as the Committee deems appropriate. The following
provisions are applicable to Restricted Stock:
(a) General Requirements. Shares of Company Stock issued or transferred
pursuant to Restricted Stock Grants may be issued or transferred for
consideration or for no consideration, as determined by the Committee. The
Committee may establish conditions under which restrictions on shares of
Restricted Stock shall lapse over a period of time or according to such other
criteria as the Committee deems appropriate. The period of time during which the
Restricted Stock will remain subject to restrictions will be designated in the
Grant Instrument as the "Restriction Period."
(b) Number of Shares. The Committee shall determine the number of
shares of Company Stock to be issued or transferred pursuant to a Restricted
Stock Grant and the restrictions applicable to such shares.
(c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Company (as defined in Section 5(e))
during a period designated in the Grant Instrument as the Restriction Period, or
if other specified conditions are not met, the Restricted Stock Grant shall
terminate as to all shares covered by the Grant as to which the restrictions
have not lapsed, and those shares of Company Stock must be immediately returned
to the Company. The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Stock Certificate. During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Restricted Stock except to a Successor
Grantee under Section 9(a). Each certificate for a share of Restricted Stock
shall contain a legend giving appropriate notice of the restrictions in the
Grant. The Grantee shall be entitled to have the legend removed from the stock
certificate covering the shares subject to restrictions when all restrictions on
such shares have lapsed. The Committee may determine that the Company will not
issue certificates for shares of Restricted Stock until all
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31
restrictions on such shares have lapsed, or that the Company will retain
possession of certificates for shares of Restricted Stock until all restrictions
on such shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote shares of Restricted Stock and to receive any dividends or other
distributions paid on such shares, subject to any restrictions deemed
appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on Restricted Stock
shall lapse upon the expiration of the applicable Restriction Period and the
satisfaction of all conditions imposed by the Committee. The Committee may waive
any or all restrictions and conditions of a Restricted Stock Grant.
7. Stock Appreciation Rights
(a) General Requirements. The Committee may grant SARs to an Employee,
Non-Employee Director or Key Advisor separately or in tandem with any Option
(for all or a portion of the applicable Option). Tandem SARs may be granted
either at the time the Option is granted or at any time thereafter while the
Option remains outstanding; provided, however, that, in the case of an Incentive
Stock Option, SARs may be granted only at the time of the Grant of the Incentive
Stock Option. The Committee shall establish the base amount of the SAR at the
time the SAR is granted. Unless the Committee determines otherwise, the base
amount of each SAR shall be equal to the per share Exercise Price of the related
Option or, if there is no related Option, the Fair Market Value of a share of
Company Stock as of the date of Grant of the SAR.
(b) Tandem SARs. In the case of tandem SARs, the number of SARs granted
to a Grantee that shall be exercisable during a specified period shall not
exceed the number of shares of Company Stock that the Grantee may purchase upon
the exercise of the related Option during such period. Upon the exercise of an
Option, the SARs relating to the Company Stock covered by such Option shall
terminate. Upon the exercise of SARs, the related Option shall terminate to the
extent of an equal number of shares of Company Stock.
(c) Exercisability. A SAR shall be exercisable during the period
specified by the Committee in the Grant Instrument and shall be subject to such
vesting and other restrictions as may be specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding SARs at
any time for any reason, and such acceleration need not be uniform as among any
class or grouping of Grantees. SARs may only be exercised while the Grantee is
employed by, or providing service to, the Company or during the applicable
period after termination of employment or service as described in Section 5(e)
with respect to Options, and such exercise shall be under and subject to all of
the limitations and termination and forfeiture provisions applicable to Options
under Section 5(e), including without limitation forfeiture of any SARs and the
release of any obligations of the Company to respond to the exercise of any SARs
under the circumstances set forth in Section 5(e)(ii). A tandem SAR shall be
exercisable only during the period when the Option to which it is related is
also exercisable.
(d) Value of SARs. When a Grantee exercises SARs, the Grantee shall
receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised, payable in cash, Company Stock or
a combination thereof. The stock appreciation for an SAR is the amount by which
the Fair Market Value of the underlying Company Stock on the date of exercise of
the SAR exceeds the base amount of the SAR as described in Subsection (a).
(e) Form of Payment. The Committee shall determine whether the
appreciation in a SAR shall be paid in the form of cash, shares of Company
Stock, or a combination of the two, in such proportion as the Committee deems
appropriate. For purposes of calculating the number of shares of Company Stock
to be received, shares of Company Stock shall be valued at their Fair Market
Value on the date of exercise of the SAR. If shares of Company Stock are to be
received upon exercise of a SAR, cash shall be delivered in lieu of any
fractional share.
8. Withholding of Taxes
(a) Required Withholding. All Grants under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. The Company may require that the Grantee or other person receiving
or exercising Grants pay to the Company the amount of any federal, state or
local taxes that the Company
6
32
is required to withhold with respect to such Grants and may require such payment
as a precondition for awarding or exercising such Grant, or the Company may
deduct from other wages paid by the Company the amount of any withholding taxes
due with respect to such Grants.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee
may elect to satisfy the Company's income tax withholding obligation with
respect to an Option, SAR or Restricted Stock by having shares withheld up to an
amount that does not materially exceed the Grantee's minimum applicable
withholding tax rate for federal (including FICA), state and local tax
liabilities. The election must be in a form and manner prescribed by the
Committee and shall be subject to the prior approval of the Committee.
9. Transferability of Grants
(a) Nontransferability of Grants. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or, with respect to Grants other than Incentive Stock Options,
if permitted in any specific case by the Committee, pursuant to a domestic
relations order (as defined under the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the regulations thereunder). When a
Grantee or permitted transferee dies, the personal representative or other
person entitled to succeed to the rights of the Grantee or permitted transferee
("Successor Grantee") may exercise such rights. A Successor Grantee must furnish
proof satisfactory to the Company of his or her right to receive the Grant under
the Grantee's will or under the applicable laws of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, the Committee may provide, in a Grant Instrument, that a Grantee may
transfer as a gift Nonqualified Stock Options to family members, one or more
trusts for the benefit of family members, or one or more partnerships of which
family members are the only partners, according to such terms as the Committee
may determine; provided that the Grantee receives no consideration for the
transfer of an Option and the transferred Option shall continue to be subject to
the same terms and conditions as were applicable to the Option immediately
before the transfer.
10. Shareholder Agreement
Prior to a Public Offering, the Committee shall, as a condition to any
Grant, require that a Grantee become a party to a shareholder agreement with
respect to any Grants and any Company Stock that may be obtained pursuant
thereto. Such shareholder agreement shall contain the terms of any then existing
shareholder agreement and/or any terms which the Committee deems appropriate.
11. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred
if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) (other than persons who are shareholders of the Company on the
date the Plan is adopted) becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing more than 50% of all votes required to elect a majority of the
Board, provided that a Change of Control shall not be deemed to occur as a
result of a change of ownership resulting from the death of a shareholder;
(b) The shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for (i) the
merger or consolidation of the Company with another corporation where the
shareholders of the Company, immediately prior to the merger or consolidation,
will not beneficially own, immediately after the merger or consolidation, shares
entitling such shareholders to more than 50% of all votes required to elect a
majority of the board of directors of the surviving corporation, (ii) the sale
or other disposition of all or substantially all of the assets of the Company,
or (iii) a liquidation or dissolution of the Company; or
(c) After a Public Offering, any person has completed a tender offer or
exchange offer for shares representing more than 50% of all votes required to
elect a majority of the Board.
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12. Consequences of a Change of Control
(a) Notice and Acceleration. Upon a Change of Control, unless the
Committee determines otherwise, (i) the Company shall provide each Grantee with
outstanding Grants written notice of such Change of Control, (ii) all
outstanding Options and SARs shall automatically accelerate and become fully
exercisable and (iii) the restrictions and conditions on all outstanding
Restricted Stock shall immediately lapse.
(b) Assumption of Grants. Upon a Change of Control where the Company is
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
and SARs that are not exercised shall be assumed by, or replaced with comparable
options and rights by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, subject to
subsection (d) below, in the event of a Change of Control, the Committee may
take one or both of the following actions: the Committee may (i) require that
Grantees surrender their outstanding Options and SARs in exchange for a payment
by the Company, in cash or Company Stock as determined by the Committee, in an
amount equal to the amount by which the then Fair Market Value of the shares of
Company Stock subject to the Grantee's unexercised Options and SARs exceeds the
Exercise Price of the Options or the base amount of the SARs, as applicable, or
(ii) after giving Grantees an opportunity to exercise their outstanding Options
and SARs, terminate any or all unexercised Options and SARs at such time as the
Committee deems appropriate. Such surrender or termination shall take place as
of the date of the Change of Control or such other date as the Committee may
specify.
(d) Committee. The Committee making the determinations under this
Section 12 following a Change of Control must be comprised of the same members
as those on the Committee immediately before the Change of Control. If the
Committee members do not meet this requirement, the automatic provisions of
subsections (a) and (b) shall apply, and the Committee shall not have discretion
to vary them (except to the extent Grants are rescinded pursuant to subsection
(d) below).
(e) Limitations. Notwithstanding anything in the Plan to the contrary,
in the event of a Change of Control, (i) the Committee (including the Committee
in place before a Change of Control and any Committee convened after a Change of
Control) shall not have the right to take any actions described in the Plan
(including without limitation actions described in Subsection (c) above) that
would make the Change of Control ineligible for pooling of interests accounting
treatment or that would make the Change of Control ineligible for desired tax
treatment if, in the absence of such right, the Change of Control would qualify
for such treatment and the Company (or, if applicable, the successor entity)
intends to use such treatment with respect to the Change of Control, and (ii)
without limiting the foregoing, in such event, the Committee (subject to the
limitations described in subsection (d) above) may rescind any Grants (whether
or not vested or exercisable) that would impair the use of pooling of interests
accounting treatment, as determined by the Company's certified public
accountants.
13. Limitations on Issuance or Transfer of Shares
No Company Stock shall be issued or transferred in connection with any Grant
hereunder unless and until all legal and contractual restrictions applicable to
the issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Grant made to any Grantee hereunder on such Grantee's undertaking in writing
to comply with such restrictions on his or her subsequent disposition of such
shares of Company Stock as the Committee shall deem necessary or advisable as a
result of (i) any applicable law, regulation or official interpretation thereof,
or (ii) the provisions of any stockholder agreement concerning Company Stock,
and certificates representing such shares shall be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued or
transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
14. Amendment and Termination o f the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that the Board shall not amend the Plan without shareholder
approval if such approval is required in order for Incentive
8
34
Stock Options granted or to be granted under the Plan to meet the requirements
of section 422 of the Code or if, after a Public Offering, such approval is
required in order to exempt compensation under the Plan from the deduction limit
under section 162(m) of the Code.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 20(b). The termination of the Plan shall not impair
the power and authority of the Committee with respect to an outstanding Grant.
Whether or not the Plan has terminated, an outstanding Grant may be terminated
or amended under Section 20(b) or may be amended by agreement of the Company and
the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
15. Funding of the Plan
This Plan shall be unfunded and is not intended to be subject to the Employee
Retirement Income Security Act of 1974, as amended. No provision contained
herein shall be construed to require that (i) the Company be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan, or (ii) interest be
paid or accrued on any Grant or on any subsequent distribution of Company Stock,
payment of cash, release or lapse of any restrictions on Company Stock, or any
other distribution or payment of property or cash pursuant to the exercise of
any rights provided by any Grants.
16. Rights of Participants
Nothing in this Plan shall entitle any Employee, Key Advisor,
Non-Employee Director or other person to any claim or right to be awarded a
Grant under this Plan. Neither this Plan nor any action taken hereunder shall be
construed as giving any individual any rights to be retained by or in the employ
of the Company or any other employment rights.
17. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered pursuant to
the Plan or any Grant. The Committee shall determine whether cash, other awards
or other property shall be issued or paid in lieu of such fractional shares or
whether such fractional shares or any rights thereto shall be disregarded or
otherwise eliminated.
18. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
19. Effective Date of the Plan.
(a) Effective Date. Subject to approval by the Company's shareholders,
the Plan shall be effective on June 24, 1998.
(b) Public Offering. The provisions of the Plan that refer to a Public
Offering, or that refer to, or are applicable to persons subject to, section 16
of the Exchange Act or section 162(m) of the Code, shall be effective, if at
all, upon the effective date of the initial registration of the Company Stock
under section 12(g) of the Exchange Act.
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35
20. Miscellaneous
(a) Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan. Without limiting the foregoing, the Committee may make a
Grant to an employee of another corporation who becomes an Employee by reason of
a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option or restricted stock grant made by such
corporation. The terms and conditions of the substitute grants may vary from the
terms and conditions required by the Plan and from those of the substituted
stock incentives. The Committee shall prescribe the provisions of the substitute
grants.
(b) Compliance with Law. The Plan, the exercise of Options and SARs
and the obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. It is the intent of the
Company that the Plan and applicable Grants under the Plan comply with the
applicable provisions of section 162(m) of the Code (after a Public Offering)
and section 422 of the Code (with respect to Incentive Stock Options). After a
Public Offering it is the intent of the Company, with respect to persons subject
to section 16 of the Exchange Act, that the Plan and all transactions under the
Plan comply with all applicable provisions of Rule 16b-3 or its successors under
the Exchange Act. To the extent that any legal requirement of section 162(m) or
422 of the Code or of section 16 of the Exchange Act ceases to be required by
law or that the restrictions thereof are liberalized, the Committee may provide,
in its sole discretion, that Plan provisions and restrictions relating to such
legal requirements shall cease to apply or be liberalized, as appropriate. The
Committee may revoke any Grant if it is contrary to law or modify a Grant to
bring it into compliance with any valid and mandatory government regulation. The
Committee may also adopt rules regarding the withholding of taxes on payments to
Grantees. The Committee may, in its sole discretion, agree to limit its
authority under this Section.
(c) Communications Laws. Notwithstanding any other provision in the
Plan to the contrary, if prior consent to the issuance or exercise of any Grant
hereunder is required for any reason under the Communications Act of 1934, as
amended, and/or the rules, regulations or policies of the Federal Communications
Commission (the "FCC") or any successor governmental agency (the "Communications
Laws") in effect at the time, whether as a consequence of the extent of the
current and proposed holdings of the Grantee, the citizenship or legal
qualifications of the Grantee or for any other reason under the Communications
Laws, then no Grant shall be issued, become effective or be exercised without
the Grantee first obtaining such prior written consent of the FCC or any
successor governmental agency.
(d) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall be governed
and construed by and determined in accordance with the laws of the Commonwealth
of Pennsylvania, without giving effect to the conflict of laws provisions
thereof.
ENTERCOM COMMUNICATIONS CORP.
By: ________________________________
Date: ______________________________
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36
ANNUAL MEETING OF SHAREHOLDERS
OF ENTERCOM COMMUNICATIONS CORP.
The 2001 Annual Meeting of Shareholders of Entercom Communications
Corp. will be held on Friday May 4, 2001 at the Radnor Hotel, 591 East Lancaster
Ave., St. Davids, Pennsylvania, 19087. The meeting will begin at 10:00 a.m.,
with a continental breakfast being provided to shareholders attending the
meeting. Doors to the meeting will open at 9:30 a.m.
Directions and Accommodations:
RADNOR HOTEL
591 EAST LANCASTER AVENUE
ST. DAVIDS, PA 19087
610-688-5800
DIRECTIONS:
From Downtown Philadelphia - I-76 West to I-476 South (Blue Route). Follow I-476
South to US-30 exit (Villanova-St. Davids), keep left at the fork in the ramp.
Turn left onto Lancaster Avenue/US 30 West. Proceed to Radnor Chester Road, turn
right into Radnor Hotel.
From Philadelphia International Airport - Interstate 95 South to I-476 North
(Blue Route). Follow I-476 North to the US-30 exit (Villanova-St. Davids), keep
left at the fork in the ramp. Turn left onto Lancaster Avenue/US 30 West.
Proceed to Radnor Chester Road, turn right into Radnor Hotel.
37
ENTERCOM COMMUNICATIONS CORP.
PROXY FOR CLASS A COMMON STOCK
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON FRIDAY MAY 4, 2001
AT 10:00 A.M.
The undersigned holder of Class A common stock, par value $0.01, of
Entercom Communications Corp. (the "Company") hereby appoints Joseph M. Field
and John C. Donlevie or either of them, proxies for the undersigned, each with
full power of substitution, to represent and to vote as specified in this proxy
all Class A common stock of the Company that the undersigned shareholder would
be entitled to vote if personally present at the Annual Meeting of Shareholders
(the "Annual Meeting") to be held on May 4, 2001 at 10:00 a.m. local time, at
the Radnor Hotel, 591 East Lancaster Ave., St. Davids, Pennsylvania, 19087, and
at any adjournments or postponements of the Annual Meeting. The undersigned
shareholder hereby revokes any proxy or proxies heretofore executed for such
matters.
This proxy, when properly executed, will be voted in the manner as
directed herein by the undersigned shareholder. If no direction is made, this
proxy will be voted FOR each of the proposals and in the discretion of the
proxies as to any other matters that may properly come before the Annual
Meeting. The undersigned shareholder may revoke this proxy at any time before it
is voted by delivering to the Corporate Secretary of the Company either a
written revocation of the proxy or a duly executed proxy bearing a later date,
or by appearing at the Annual Meeting and voting in person.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3 and 4.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE
ENCLOSED RETURN ENVELOPE. If you receive more than one proxy card, please sign
and return ALL cards in the enclosed envelope.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
38
(Reverse)
Entercom Communications Corp.
1. Election of Class A Directors
[ ] FOR [ ] WITHHOLD AUTHORITY [ ] EXCEPTIONS
to vote for all
nominees listed below
Nominees: David J. Berkman and Michael R. Hannon.
(INSTRUCTIONS: to withhold authority to vote for any individual
nominee, mark the "EXCEPTIONS" box and write that nominee's name in the
space provided below.)
Exceptions:
_______________________________________________________________________
2. Election of Other Directors
[ ] FOR [ ] WITHHOLD AUTHORITY [ ] EXCEPTIONS
to vote for all
nominees listed below
Nominees: Joseph M. Field, David J. Field, Marie H. Field, John C.
Donlevie, Herbert Kean, S. Gordon Elkins, Thomas J. Ginley, Jr. and Lee
Hague.
(INSTRUCTIONS: to withhold authority to vote for any individual
nominee, mark the "EXCEPTIONS" box and write that nominee's name in the
space provided below.)
Exceptions:
_______________________________________________________________________
3. Ratification of the appointment of Arthur Andersen LLP as independent
auditors of the Company to serve for the fiscal year 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of the First Amendment to the Entercom 1998 Equity
Compensation Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any
adjournment thereof.
The undersigned acknowledges receipt of the accompanying Notice of
Annual Meeting of Shareholders and Proxy Statement in which Proposals 1, 2, 3
and 4 are fully explained.
Signature: ______________________________
Signature (if held jointly): ________________________________
Date: ___________________________________
Please date and sign exactly as your name(s) is (are) shown on the
share certificate(s) to which the proxy applies. When shares are held as
joint-tenants, both should sign. When signing as an executor, administrator,
trustee, guardian, attorney-in-fact or other fiduciary, please give full title
as such. When signing as a corporation, please sign in full corporate name by
President or other authorized officer. When signing as a partnership, please
sign in partnership name by an authorized person.
39
ENTERCOM COMMUNICATIONS CORP.
PROXY FOR CLASS B COMMON STOCK
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON FRIDAY MAY 4, 2001 AT 10:00
A.M.
The undersigned holder of Class B common stock, par value $0.01, of
Entercom Communications Corp. (the "Company") hereby appoints Joseph M. Field
and John C. Donlevie or either of them, proxies for the undersigned, each with
full power of substitution, to represent and to vote as specified in this proxy
all Class B common stock of the Company that the undersigned shareholder would
be entitled to vote if personally present at the Annual Meeting of Shareholders
(the "Annual Meeting") to be held on Friday May 4, 2001 at 10:00 a.m. local
time, at the Radnor Hotel, 591 East Lancaster Ave., St. Davids, Pennsylvania,
19087, and at any adjournments or postponements of the Annual Meeting. The
undersigned shareholder hereby revokes any proxy or proxies heretofore executed
for such matters.
This proxy, when properly executed, will be voted in the manner as
directed herein by the undersigned shareholder. If no direction is made, this
proxy will be voted FOR each of the proposals and in the discretion of the
proxies as to any other matters that may properly come before the Annual
Meeting. The undersigned shareholder may revoke this proxy at any time before it
is voted by delivering to the Corporate Secretary of the Company either a
written revocation of the proxy or a duly executed proxy bearing a later date,
or by appearing at the Annual Meeting and voting in person.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 2, 3 and 4.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE
ENCLOSED RETURN ENVELOPE. If you receive more than one proxy card, please sign
and return ALL cards in the enclosed envelope.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
40
(Reverse)
Entercom Communications Corp.
2. Election of Other Directors
[ ] FOR [ ] WITHHOLD AUTHORITY [ ] EXCEPTIONS
to vote for all
nominees listed below
Nominees: Joseph M. Field, David J. Field, Marie H. Field, John C.
Donlevie, Herbert Kean, S. Gordon Elkins, Thomas J. Ginley, Jr. and Lee
Hague.
(INSTRUCTIONS: to withhold authority to vote for any individual
nominee, mark the "EXCEPTIONS" box and write that nominee's name in the
space provided below.)
Exceptions:
_______________________________________________________________________
3. Ratification of the appointment of Arthur Andersen LLP as independent
auditors of the Company to serve for the fiscal year 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of the First Amendment to the Entercom 1998 Equity
Compensation Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any
adjournment thereof.
The undersigned acknowledges receipt of the accompanying Notice of
Annual Meeting of Shareholders and Proxy Statement in which Proposals 2, 3 and 4
are fully explained.
Signature: ______________________________
Signature (if held jointly): ________________________________
Date: ___________________________________
Please date and sign exactly as your name(s) is (are) shown on the
share certificate(s) to which the proxy applies. When shares are held as
joint-tenants, both should sign. When signing as an executor, administrator,
trustee, guardian, attorney-in-fact or other fiduciary, please give full title
as such. When signing as a corporation, please sign in full corporate name by
President or other authorized officer. When signing as a partnership, please
sign in partnership name by an authorized person.