424B3 1 d362252d424b3.htm 424B3 424B3
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-217273

 

 

PROSPECTUS—OFFER TO EXCHANGE

CBS CORPORATION

Offer to Exchange up to 101,407,494 Shares of Common Stock of

CBS RADIO INC.

which are owned by CBS Corporation

and will be converted into

Shares of Class A Common Stock of

ENTERCOM COMMUNICATIONS CORP.

for

Outstanding Shares of Class B Common Stock of CBS Corporation

 

 

CBS Corporation, a Delaware corporation (“CBS”), is offering to exchange all shares of common stock, par value $0.01 (“Radio Common Stock”), of CBS Radio Inc., a Delaware corporation (“CBS Radio”), that are owned by CBS for outstanding shares of class B common stock of CBS, par value $0.001 (“CBS Class B Common Stock”), that are validly tendered and not properly withdrawn. In the exchange offer, CBS is offering 101,407,494 shares of Radio Common Stock, which are all of the shares of Radio Common Stock it will hold on the date of consummation of the exchange offer and, if necessary, the spin-off (as described below). The number of shares of CBS Class B Common Stock that will be accepted if the exchange offer is completed will depend on the final exchange ratio and the number of shares of CBS Class B Common Stock tendered. The terms and conditions of the exchange offer and the spin-off are described in this document, which you should read carefully. None of CBS, CBS Radio, any of their respective directors or officers or any of their respective representatives makes any recommendation as to whether you should participate in the exchange offer. You must make your own decision after reading this document and consulting with your advisors.

Immediately following consummation of the exchange offer and, if necessary, the spin-off a special purpose merger subsidiary of Entercom Communications Corp., a Pennsylvania corporation (“Entercom”) named Constitution Merger Sub Corp., a Delaware corporation (“Merger Sub”), will be merged with and into CBS Radio, whereby the separate corporate existence of Merger Sub will cease and CBS Radio will continue as the surviving company and a wholly owned subsidiary of Entercom (the “Merger”). In the Merger, each share of Radio Common Stock will be converted into the right to receive one share of Class A common stock of Entercom, par value $0.01 per share (“Entercom Class A Common Stock”). Entercom expects to issue 101,407,494 shares of Entercom Class A Common Stock in the Merger. In addition, the parties estimate that approximately 3,179,976 shares of Entercom Class A Common Stock will be eligible for issuance in respect of equity awards held by employees of CBS Radio in consideration of the replacement of their restricted stock units and stock options in CBS with those of Entercom. Accordingly, shares of Radio Common Stock will not be transferred to participants in the exchange offer or the spin-off, if it occurs, such participants will instead receive shares of Entercom Class A Common Stock in the Merger. No trading market currently exists or will ever exist for shares of Radio Common Stock. You will not be able to trade the shares of Radio Common Stock before they are exchanged for shares of Entercom Class A Common Stock in the Merger. There can be no assurance that shares of Entercom Class A Common Stock when issued in the Merger will trade at the same prices as shares of Entercom Class A Common Stock are traded prior to the Merger.

The value of CBS Class B Common Stock and Radio Common Stock will be determined by CBS by reference to the simple arithmetic average of the daily volume–weighted average prices (“VWAP”) on each of the Valuation Dates (as defined below) of CBS Class B Common Stock and Entercom Class A Common Stock on the New York Stock Exchange (the “NYSE”) during a period of three consecutive trading days (the “Valuation Dates”) ending on and including the second trading day preceding the expiration date of the exchange offer period. Based on an expiration date of November 16, 2017, the Valuation Dates are expected to be November 10, 2017, November 13, 2017 and November 14, 2017. See “The Exchange Offer—Terms of the Exchange Offer.”

For each $1.00 of CBS Class B Common Stock accepted in the exchange offer, you will receive approximately $1.08 of Radio Common Stock, subject to an upper limit of 5.7466 shares of Radio Common Stock per share of CBS Class B Common Stock. The exchange offer does not provide for a minimum exchange ratio. See “The Exchange Offer—Terms of the Exchange Offer.” If the upper limit is in effect, then the exchange ratio will be fixed at that limit. IF THE UPPER LIMIT IS IN EFFECT, AND UNLESS YOU PROPERLY WITHDRAW YOUR SHARES, YOU WILL RECEIVE LESS THAN $1.08 OF RADIO COMMON STOCK FOR EACH $1.00 OF CBS CLASS B COMMON STOCK THAT YOU TENDER, AND YOU COULD RECEIVE MUCH LESS.

The indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on October 18, 2017 (the last trading day before the date of this document), based on the daily VWAPs of CBS Class B Common Stock and Entercom Class A Common Stock on October 16, 2017, October 17, 2017 and October 18, 2017, would have provided for 5.2591 shares of Radio Common Stock to be exchanged for every share of CBS Class B Common Stock accepted. The value of Radio Common Stock received and, following the Merger, the value of Entercom Class A Common Stock received may not remain above the value of CBS Class B Common Stock tendered following the expiration date of the exchange offer on November 16, 2017.

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., NEW YORK CITY TIME, ON NOVEMBER 16, 2017, UNLESS THE EXCHANGE OFFER IS EXTENDED OR TERMINATED. SHARES OF CBS CLASS B COMMON STOCK TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THE EXCHANGE OFFER. IN ADDITION, SHARES OF CBS CLASS B COMMON STOCK TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AFTER DECEMBER 15, 2017 (I.E., AFTER THE EXPIRATION OF 40 BUSINESS DAYS FROM THE COMMENCEMENT OF THE EXCHANGE OFFER), IF CBS DOES NOT ACCEPT YOUR SHARES OF CBS CLASS B COMMON STOCK PURSUANT TO THE EXCHANGE OFFER BY SUCH DATE.

 

 

In reviewing this document, you should carefully consider the risk factors beginning on page 56 of this document.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus—Offer to Exchange is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus—Offer to Exchange is October 19, 2017


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The final exchange ratio used to determine the number of shares of Radio Common Stock that you will receive for each share of CBS Class B Common Stock accepted in the exchange offer (as well as whether the upper limit on the number of shares that can be received for each share of CBS Class B Common Stock tendered will be in effect) will be announced by press release and be available on the website www.cbscorpexchange.com, in each case by 11:59 p.m., New York City time, at the end of the second trading day (currently expected to be November 14, 2017) immediately preceding the expiration date of the exchange offer (currently expected to be November 16, 2017), unless the exchange offer is extended or terminated. At such time, the final exchange ratio will also be available from the information agent at the toll-free number provided on the back cover of this document. For each day during the exchange offer prior to the Valuation Dates, indicative exchange ratios (calculated in the manner described in this document) will also be available through www.cbscorpexchange.com and from the information agent at the toll-free number provided on the back cover of this document.

This document provides information regarding CBS, CBS Radio, Entercom, the exchange offer and the Merger in which shares of CBS Class B Common Stock may be exchanged for shares of Radio Common Stock which will then be immediately exchanged for shares of Entercom Class A Common Stock and distributed to participating CBS stockholders as described herein. This document also provides information on the spin-off. CBS Class B Common Stock is listed on the NYSE under the symbol “CBS.” Entercom Class A Common Stock is listed on the NYSE under the symbol “ETM.” On October 18, 2017, the last reported sale price of CBS Class B Common Stock on the NYSE was $56.96, and the last reported sale price of Entercom Class A Common Stock on the NYSE was $11.80. The market prices of CBS Class B Common Stock and of Entercom Class A Common Stock will fluctuate prior to the completion of the exchange offer and thereafter and may be higher or lower at the expiration date than the prices set forth above. No trading market currently exists for shares of Radio Common Stock, and no such market will exist in the future. CBS Radio has not applied for listing of its common stock on any exchange.

If the exchange offer is consummated but the exchange offer is not fully subscribed because less than all of the shares of Radio Common Stock owned by CBS are exchanged, or if the exchange offer is consummated but not all of the shares of Radio Common Stock owned by CBS are exchanged due to the upper limit being in effect, the remaining shares of Radio Common Stock owned by CBS will be distributed on a pro rata basis in a spin-off (the “spin-off”) based on the relative economic interest of each such holder in the total outstanding shares of CBS Class B Common Stock and class A common stock of CBS, par value $0.001 (the “CBS Class A Common Stock” and, together with the CBS Class B Common Stock, the “CBS Common Stock”), excluding those shares of CBS Class B Common Stock that have been validly tendered and not withdrawn in the exchange offer, to CBS stockholders whose shares of CBS Common Stock remain outstanding after the consummation of the exchange offer. The spin-off, if necessary, would also be consummated immediately prior to the Merger. Any holder of CBS Class B Common Stock who validly tenders (and does not properly withdraw) shares of CBS Class B Common Stock for shares of Radio Common Stock in the exchange offer will waive their rights with respect to such validly tendered shares (but not with respect to any other shares of CBS Class B Common Stock that are not validly tendered or validly tendered and validly withdrawn in the exchange offer) to receive, and forfeit any rights to, shares of Radio Common Stock distributed on a pro rata basis to CBS stockholders in the spin-off. This document covers all shares of Radio Common Stock offered by CBS in the exchange offer and all shares of Radio Common Stock that may be distributed by CBS as a pro rata distribution to holders of CBS Common Stock. See “The Exchange Offer—Distribution of Any Shares of Radio Common Stock Remaining After the Exchange Offer.”

Immediately following consummation of the exchange offer and, if necessary, the spin off, Merger Sub will be merged with and into CBS Radio in the Merger, whereby the separate corporate existence of Merger Sub will cease and CBS Radio will continue as the surviving company and a wholly owned subsidiary of Entercom. Each outstanding share of Radio Common Stock will be converted in the merger into the right to receive one share of Entercom Class A Common Stock. Immediately after the Merger, approximately 72% of the shares of Entercom Common Stock (as defined herein) are expected to be held by pre-Merger holders of CBS Common Stock or CBS employees who held certain CBS stock-based compensation rights on a fully diluted basis in the aggregate, and no more than approximately 28% of the shares of Entercom Common Stock are expected to be held by pre-Merger holders of Entercom Common Stock or pre-Merger Entercom employees who held certain Entercom stock-based compensation rights on a fully diluted basis in the aggregate.

CBS’s obligation to exchange shares of Radio Common Stock for CBS Class B Common Stock is subject to the conditions listed under “The Exchange Offer—Conditions for Consummation of the Final Distribution,” including the satisfaction of conditions to the Merger, which include the approval by Entercom’s shareholders of the issuance of Entercom Class A Common Stock in connection with the Merger, an amendment to Entercom’s Amended and Restated Articles of Incorporation in order to provide that the Entercom board of directors will be classified after the Merger and other conditions.


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFER, THE SPIN-OFF AND THE TRANSACTIONS

     1  

Questions and Answers About the Exchange Offer and the Spin-Off

     1  

Questions and Answers About the Transactions

     17  

SUMMARY

     23  

The Companies

     23  

The Transactions

     24  

CBS’s Reasons for the Transactions

     29  

Entercom’s Reasons for the Transactions

     30  

Opinions of Entercom’s Financial Advisors

     30  

Number of Shares of Radio Common Stock to Be Distributed to Holders of CBS Class B Common Stock

     32  

Terms of the Exchange Offer

     32  

Debt Financing

     39  

Board of Directors and Management of Entercom Following the Transactions

     39  

Entercom Shareholder Vote

     41  

Accounting Treatment and Considerations

     41  

Material U.S. Federal Income Tax Consequences of the Final Distribution and the Merger

     44  

Comparison of Stockholder Rights

     45  

The Exchange Agent for the Exchange Offer

     45  

The Exchange Agent for the Merger

     45  

The Information Agent

     45  

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

     46  

Summary Historical Consolidated Financial Data of CBS Radio

     46  

Summary Historical Consolidated Financial Data of CBS

     48  

Summary Historical Consolidated Financial Data of Entercom

     49  

Summary Unaudited Pro Forma Condensed Consolidated Financial Data of CBS

     51  

Summary Unaudited Pro Forma Condensed Combined Financial Information of Entercom and CBS Radio

     52  

Summary Comparative Historical and Pro Forma Per Share Data

     53  

RISK FACTORS

     56  

Risks Related to the Transactions

     56  

Risks Related to Entercom and the Combined Company

     65  

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

     71  

THE EXCHANGE OFFER

     73  

Terms of the Exchange Offer

     73  

Conditions for Consummation of the Final Distribution

     88  

Material U.S. Federal Income Tax Consequences of the Final Distribution and the Merger

     89  

Treatment of Specified CBS Compensatory Equity-Based Awards Held by Current CBS Radio Employees

     94  

Fees and Expenses

     94  

Legal Limitations; Certain Matters Relating to Non-U.S. Jurisdictions

     95  

Distribution of Any Shares of Radio Common Stock Remaining After the Exchange Offer

     95  

INFORMATION ON CBS

     97  

INFORMATION ON CBS RADIO

     98  

Content and Programming

     98  

Radio Stations

     99  

Digital Properties

     99  

Events

     100  

 

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Sources of Revenue

     100  

The Radio Industry

     101  

Business Strengths

     101  

Operating Strategy

     103  

Legal Proceedings

     104  

Employees

     104  

INFORMATION ON ENTERCOM

     105  

Overview

     105  

Strategy

     105  

Source of Revenue

     105  

Competition

     105  

HD Radio

     105  

Legal Proceedings

     106  

Employees

     106  

Entercom’s Business After the Consummation of the Transactions

     106  

Entercom’s Liquidity and Capital Resources After the Consummation of the Transactions

     107  

Directors and Officers of Entercom Before and After the Consummation of the Transactions

     107  

FEDERAL REGULATION OF RADIO BROADCASTING

     113  

Transfer or Assignment of Licenses

     113  

Ownership Regulation

     113  

Local Radio Ownership

     113  

Radio-Television Cross-Ownership Rule

     113  

Newspaper-Broadcast Cross-Ownership

     114  

Ownership Attribution

     114  

Foreign Ownership

     114  

Programming And Operation

     115  

License Renewal

     115  

Technical Rules

     116  

Enforcement Authority

     116  

Proposed Changes

     116  

Federal Antitrust Laws

     116  

Laws Affecting Intellectual Property

     116  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR CBS RADIO

     118  

Overview

     118  

Results of Operations—Six Months Ended June  30, 2017 versus Six Months Ended June 30, 2016

     120  

Results of Operations—2016 versus 2015

     125  

Results of Operations—2015 versus 2014

     131  

Capital Structure

     136  

Liquidity and Capital Resources

     138  

Guarantees

     139  

Critical Accounting Policies

     139  

Legal Matters

     142  

Market Risk

     143  

Related Parties

     143  

Adoption of New Accounting Standards

     144  

Recent Pronouncements

     145  

SELECTED HISTORICAL FINANCIAL DATA

     147  

Selected Historical Consolidated Financial Data of CBS Radio

     147  

Selected Historical Consolidated Financial Data of CBS

     148  

Selected Historical Consolidated Financial Data of Entercom

     150  

CBS CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     152  

 

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ENTERCOM AND CBS RADIO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     158  

HISTORICAL PER SHARE DATA, MARKET PRICE AND DIVIDEND DATA

     170  

Comparative Historical and Pro Forma Per Share Data

     170  

Historical Common Stock Market Price and Dividend Data

     170  

Entercom Dividend Policy

     171  

CBS Dividend Policy

     172  

THE TRANSACTIONS

     173  

Determination of Number of Shares of Radio Common Stock to be Distributed to Holders of CBS Class B Common Stock

     177  

Background of the Transactions

     177  

Entercom’s Reasons for the Transactions

     188  

Opinions of Entercom’s Financial Advisors

     192  

Certain Financial Projections Prepared by Entercom

     211  

Entercom’s Shareholders Meeting

     216  

CBS’s Reasons for the Transactions

     216  

Interests of CBS’s and CBS Radio’s Directors and Executive Officers in the Transactions

     219  

Interests of Entercom’s Directors and Executive Officers in the Transactions

     222  

Accounting Treatment and Considerations

     224  

Regulatory Approvals

     226  

Federal Securities Law Consequences; Resale Restrictions

     227  

No Appraisal or Dissenters’ Rights

     227  

THE MERGER AGREEMENT

     228  

The Merger

     228  

Closing; Effective Time

     228  

Merger Consideration

     228  

Exchange of Per Share Merger Consideration

     229  

Treatment of Specified CBS Compensatory Equity-Based Awards Held by Current CBS Radio Employees

     230  

Distributions With Respect to Shares of Entercom Class  A Common Stock After the Effective Time of the Merger

     230  

Termination of the Exchange Fund

     231  

Determination of Net Adjustment

     231  

Representations and Warranties

     233  

Conduct of Business Pending Closing

     235  

Tax Matters

     240  

SEC Filings

     240  

Shareholders Meeting

     241  

Regulatory Matters; Efforts

     241  

No Solicitation

     243  

Financing

     246  

Employment and Benefits Matters

     248  

CBS Brands License Agreements

     248  

Non-Competition; Non-Solicitation of Employees

     249  

Certain Other Covenants and Agreements

     250  

Conditions to the Merger

     250  

Termination

     252  

Effect of Termination

     253  

Termination Fee Payable in Certain Circumstances

     253  

Specific Performance

     254  

 

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Additional Obligations

     254  

Expenses

     255  

THE SEPARATION AGREEMENT

     256  

Overview

     256  

Radio Reorganization

     256  

The Final Distribution

     256  

Covenants

     260  

Release; Indemnification

     264  

Matters Relating to Employees

     266  

OTHER AGREEMENTS AND OTHER RELATED PARTY TRANSACTIONS

     268  

Tax Matters Agreement

     268  

Transition Services Agreement

     269  

Joint Digital Services Agreement

     270  

Voting Agreement

     271  

Field Family Side Letter Agreement

     272  

Advertising Side Letter Agreement

     273  

CBS Brands License Agreements

     273  

Other Related Party Transactions

     275  

DESCRIPTION OF ENTERCOM CAPITAL STOCK

     277  

Common Stock

     277  

Preferred Stock

     278  

Certain Anti-Takeover Effects of Provisions of the Entercom Articles and the Entercom Bylaws

     278  

Listing

     280  

Transfer Agent

     280  

OWNERSHIP OF ENTERCOM COMMON STOCK

     281  

COMPARISON OF RIGHTS OF HOLDERS OF CBS COMMON STOCK AND ENTERCOM COMMON STOCK

     283  

Authorized Capital Stock

     283  

Certain Anti-Takeover Effects of Provisions of the Entercom Articles, the Entercom Bylaws and Pennsylvania Law

     293  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     294  

LEGAL MATTERS

     294  

EXPERTS

     294  

WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE

     295  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     F-1  

Annex A-1: Fairness Opinion of Morgan Stanley & Co. LLC

     A-1-1  

Annex A-2: Fairness Opinion of Centerview Partners LLC

     A-2-1  

 

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This document incorporates by reference important business and financial information about CBS and Entercom from documents filed with the U.S. Securities and Exchange Commission (“SEC”) that have not been included in or delivered with this document. This information is available at the website that the SEC maintains at www.sec.gov, as well as from other sources. See “Where You Can Find More Information; Incorporation By Reference.” In addition, copies of these materials (when they become available) may be obtained free of charge by accessing CBS’s website at www.cbscorporation.com, or from Entercom by accessing Entercom’s website at www.entercom.com.

All information contained or incorporated by reference in this document with respect to Entercom and Merger Sub and their respective subsidiaries, as well as information on Entercom after the consummation of the Transactions, has been provided by Entercom. All other information contained or incorporated by reference in this document with respect to CBS, CBS Radio or their respective subsidiaries, and with respect to the terms and conditions of the exchange offer has been provided by CBS.

This prospectus is not an offer to sell or exchange and it is not a solicitation of an offer to buy any shares of CBS Common Stock, Radio Common Stock or Entercom Common Stock in any jurisdiction in which the offer, sale or exchange is not permitted. Non-U.S. stockholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of CBS Common Stock, Radio Common Stock or Entercom Common Stock that may apply in their home countries. CBS, CBS Radio and Entercom cannot provide any assurance about whether such limitations may exist. See “The Exchange Offer—Legal Limitations; Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

 

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QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFER AND THE TRANSACTIONS

Questions and Answers About the Exchange Offer and the Spin-Off

The following are answers to some of the questions that stockholders of CBS Corporation may have relating to the exchange offer and the Transactions (as defined below). These questions and answers, as well as the following summary, are not meant to be a substitute for the information contained in the remainder of this document, and this information is qualified in its entirety by the more detailed descriptions and explanations contained elsewhere in this document. You are urged to read this document in its entirety prior to making any decision.

CBS Corporation (“CBS,” which includes, unless the context otherwise requires, its subsidiaries) is a Delaware corporation. As used in this document, “CBS Radio” refers to CBS Radio Inc., a subsidiary of CBS and a Delaware corporation, as it existed on February 2, 2017. As described in greater detail in the Master Separation Agreement, dated as of February 2, 2017, by and between CBS and CBS Radio (the “Separation Agreement”), CBS Radio will be separated from CBS as part of the Transactions.

 

Q: Why has CBS decided to separate CBS Radio from CBS through the exchange offer?

 

A: CBS has decided to pursue the exchange offer in order to facilitate the separation of CBS’s radio business from CBS’s other mass media businesses in a tax-efficient manner, thereby better positioning CBS to focus on its core remaining businesses.

CBS believes that the separation of the radio business from the other businesses of CBS pursuant to the terms of the Separation Agreement (the “Separation” and, together with the other transactions contemplated in the Separation Agreement and the Merger Agreement, the “Transactions”) and the exchange offer have the potential to, among other things, allow CBS’s radio business to become a major component in a publicly traded company, Entercom Communications Corp., a Pennsylvania corporation (“Entercom,” which includes, unless the context otherwise requires, its subsidiaries), which is in the same line of business as CBS Radio. CBS’s radio business will, along with the business of Entercom, be part of a company with a publicly traded equity security linked to the performance of the broadcast radio businesses of CBS Radio and Entercom and digital, events and other products and services related thereto, rather than CBS’s much larger mass media businesses, which can be used efficiently to attract, retain and incentivize employees of CBS Radio. See “The Transactions—CBS’s Reasons for the Transactions.”

 

Q: What are you being offered in the Transactions?

 

A. In the exchange offer, CBS will offer to you the right to exchange all or a portion of your shares of outstanding CBS Class B common stock, par value $0.001 (the “CBS Class B Common Stock”), for shares of Radio Common Stock (as defined below).

CBS Radio anticipates that the final exchange ratio will be set by the Pricing Mechanism such that the exchange offer will be fully- or over-subscribed by holders of CBS Class B Common Stock. In the event that the exchange offer is consummated but is not fully subscribed, or in the event the exchange offer is consummated but not all of the shares of Radio Common Stock owned by CBS are exchanged due to the upper limit being in effect, CBS will distribute the remaining outstanding shares of Radio Common Stock held by CBS in a spin off, which distribution will be conducted subject to the terms of the Separation Agreement and the Merger Agreement (the “Spin-Off” and, together with the exchange offer, the “Final Distribution”). Such remaining outstanding shares of Radio Common Stock will be distributed by CBS on a pro rata basis in the Spin-Off to holders of CBS Common Stock (as defined below) whose shares of CBS Common Stock (as defined below) remain outstanding after consummation of the exchange offer, based on the relative economic interest of each such holder in the total outstanding shares of CBS Common Stock, excluding those shares of CBS Class B Common Stock that have been validly tendered and not withdrawn in the exchange offer.

 

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Any holder of CBS Class B Common Stock who validly tenders (and does not properly withdraw) shares of CBS Class B Common Stock for shares of Radio Common Stock in the exchange offer will waive their rights with respect to such validly tendered shares of CBS Class B Common Stock (but not with respect to any other shares that are not validly tendered or validly tendered and validly withdrawn in the exchange offer) to receive, and forfeit any rights to, shares of Radio Common Stock distributed in the Spin-Off. Such Spin-Off, if necessary, will not have a different impact on holders of different classes of CBS Common Stock, as holders of each outstanding share of CBS Class B Common Stock not validly tendered (or validly tendered and validly withdrawn) in the exchange offer and each outstanding share of CBS Class A Common Stock will receive an equal number of shares of Radio Common Stock in a Spin-Off, if necessary. The Spin-Off will only occur if the exchange offer is consummated but not fully subscribed (or if the exchange offer is consummated but not all of the shares of Radio Common Stock held by CBS are exchanged due to the upper limit being in effect), meaning that not all the outstanding shares of Radio Common Stock held by CBS will be distributed in the exchange offer.

In the Merger (as defined below), each outstanding share of Radio Common Stock will be converted into the right to receive an equal number of shares of Entercom Class A Common Stock as set forth in the Merger Agreement and as described in the section entitled “The Merger Agreement—Merger Consideration.”

 

Q: What is the aggregate number of shares of Radio Common Stock being offered in the exchange offer?

 

A: In the exchange offer, CBS is offering 101,407,494 shares of Radio Common Stock, which are all of the shares of Radio Common Stock it will hold on the date of consummation of the exchange offer.

 

Q: Why did CBS choose an exchange offer as the way to separate CBS Radio from CBS?

 

A: CBS believes that the distribution by CBS of its shares of the common stock of CBS Radio to the holders of shares of CBS Class B Common Stock, by way of an exchange offer, is a tax-efficient way to divest its interest in CBS Radio. Such a distribution will allow holders of shares of CBS Class B Common Stock to receive, and forfeit any rights to, shares of Radio Common Stock distributed in the interest in CBS Radio. See “The Transactions—CBS’s Reasons for the Transactions.” CBS and CBS Radio also have different competitive strengths and operating strategies and operate in different industries. CBS believes that the exchange offer is an efficient way to allow holders of CBS Class B Common Stock to own an interest in a post-Merger Entercom that includes the business of CBS Radio. As used in this document, the term “Radio Common Stock” means (a) before CBS Radio has completed the Stock Split (as defined below), the Radio Existing Common Stock and (b) after CBS Radio has completed the Stock Split, the Radio New Common Stock (each term, as defined below). See “The Transactions.”

If holders of CBS Class B Common Stock subscribe for less than all of the shares of the Radio Common Stock owned by CBS in the exchange offer, or in the event the exchange offer is consummated but not all of the shares of Radio Common Stock owned by CBS are exchanged due to the upper limit being in effect, CBS will distribute the remaining outstanding shares of Radio Common Stock held by CBS on a pro rata basis in the Spin-Off, based on the relative economic interest of each such holder in the number of total outstanding shares of CBS Class B Common Stock and the Class A common stock of CBS, par value $0.001 per share (the “CBS Class A Common Stock” and, together with the CBS Class B Common Stock, the “CBS Common Stock”) excluding those shares of CBS Class B Common Stock that have been validly tendered and not withdrawn in the exchange offer. Such Spin-Off, if necessary, will not have a different impact on holders of different classes of CBS Common Stock, as holders of each outstanding share of CBS Class B Common Stock not validly tendered (or validly tendered and validly withdrawn) in the exchange offer and each outstanding share of CBS Class A Common Stock will receive an equal number of shares of Radio Common Stock in any Spin-Off distribution.

The Final Distribution is expected to qualify as a tax-free distribution for U.S. federal income tax purposes under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”), and will thus give CBS’s stockholders an opportunity to adjust their current CBS investment between CBS and the combined

 

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Entercom-CBS Radio, which is referred to as the “combined company,” after the merger of Merger Sub with and into CBS Radio (the “Merger”) in a tax-free manner for U.S. federal income tax purposes (except with respect to cash received in the Merger in lieu of a fractional share of Class A common stock, par value $0.01 per share, of Entercom (the “Entercom Class A Common Stock”)). In the Merger, the separate corporate existence of Merger Sub will cease and CBS Radio will continue as the surviving company and as a wholly owned subsidiary of Entercom, as contemplated by the Agreement and Plan of Merger, dated as of February 2, 2017 and amended as of July 10, 2017 and September 13, 2017, by and among CBS, CBS Radio, Entercom and Merger Sub (as amended, the “Merger Agreement”).

 

Q: Who may participate in the exchange offer?

 

A: Any U.S. holders of CBS Class B Common Stock during the exchange offer period may participate in the exchange offer, including holders of shares held for the account of participants in the CBS 401(k) Plan and the CBS Radio 401(k) Plan (together, the “CBS Savings Plans”). Although CBS has mailed this prospectus to its stockholders to the extent required by U.S. law, including stockholders located outside the United States, this prospectus is not an offer to buy, sell or exchange, and it is not a solicitation of an offer to buy or sell, any shares of CBS Class B Common Stock, shares of Entercom Class A Common Stock or shares of Radio Common Stock in any jurisdiction in which such offer, sale or exchange is not permitted.

Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of CBS, Entercom or CBS Radio has taken any action under non-U.S. regulations to facilitate a public offer to exchange the shares of CBS Common Stock, Entercom Common Stock (as defined below) or Radio Common Stock outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of CBS Class B Common Stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in the exchange offer without the need for CBS, Entercom or CBS Radio to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

Non-U.S. stockholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of CBS Common Stock, Entercom Common Stock or Radio Common Stock that may apply in their home countries. None of CBS, Entercom or CBS Radio can provide any assurance about whether such limitations may exist. See “The Exchange Offer—Legal Limitations; Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

Participants in the CBS Savings Plans should follow the special instructions that are being sent to them by the plan administrator. Such participants should not use the letter of transmittal to direct the tender of shares of CBS Class B Common Stock held in these plans. As described in the special instructions, such participants may direct the applicable plan trustee to tender all, some or none of the shares of CBS Class B Common Stock allocable to their CBS Savings Plan accounts, subject to certain limitations set forth in any instructions provided by the plan administrator. To allow sufficient time for the tender of shares by the trustee of the applicable CBS Savings Plan, tendering holders must provide the tabulator for the trustee of the applicable CBS Savings Plan with the requisite instructions so that such instructions can be received by or processed before, as applicable, 1:00 p.m., New York City time, on November 10, 2017, unless the exchange offer is extended. If the exchange offer is extended, and if administratively feasible, the deadline for receipt of participants’ directions may also be extended.

Holders who are participants in the CBS Radio 401(k) Plan should note that, following the consummation of the exchange offer, Entercom intends to retain an independent fiduciary to assist it in evaluating any single stock investment as an available investment under the CBS Radio 401(k) Plan, including both the CBS Class B Company Stock Fund (the “CBS Class B Company Stock Fund”) and the Entercom common stock

 

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fund. Following the consummation of the exchange offer, the CBS Radio 401(k) Plan will be amended to provide that no new investment will be allowed into the Entercom common stock fund under the CBS Radio 401(k) Plan. Currently no new investment is permitted in the CBS Class B Company Stock Fund. Participants in the CBS Radio 401(k) Plan may continue to hold assets in the CBS Class B Company Stock Fund and the Entercom common stock fund and will be notified following the consummation of the exchange offer of any changes to the CBS Radio 401(k) Plan that may impact the continued holding of assets in the CBS Class B Company Stock Fund or the Entercom common stock fund.

Holders who are participants in the CBS 401(k) Plan should note that following the consummation of the exchange offer, no new investment into the Entercom common stock fund will be permitted under the CBS 401(k) Plan. In addition, CBS intends to remove the Entercom common stock fund from the CBS 401(k) Plan on January 31, 2018. To the extent that participants have any assets remaining in the Entercom common stock fund after January 31, 2018, the assets will be liquidated over a period of up to four days and the proceeds will be transferred to such participants’ qualified default investment alternative, which is the target retirement fund in the CBS 401(k) Plan with the target date closest to the year that such participant will reach age 65.

 

Q: How will Entercom acquire the equity interests in CBS Radio?

 

A: Entercom will acquire the equity interests in CBS Radio through a “Reverse Morris Trust” acquisition structure. A Reverse Morris Trust transaction allows a parent company (in this case, CBS) to divest a subsidiary (in this case, CBS Radio) in a tax-efficient manner. The first step of such a transaction is a distribution of the subsidiary’s stock to the parent company stockholders in a transaction that is generally tax-free for U.S. federal income tax purposes under Section 355 of the Code. A third party then acquires the distributed subsidiary (in this case, Entercom will acquire CBS Radio through a merger of Merger Sub with and into CBS Radio) in a reorganization that is generally tax-free for U.S. federal income tax purposes under Section 368 of the Code. Such a transaction can qualify as generally tax-free for U.S. federal income tax purposes for the parent company, its stockholders and the stockholders of the acquiring third party if the transaction structure meets all applicable requirements, including that the parent company stockholders own more than 50% of the combined entity (by vote and value) immediately after the merger. For information about the material tax consequences to CBS stockholders resulting from the Reverse Morris Trust structure of the Transactions, see “Summary—Material U.S. Federal Income Tax Consequences of the Final Distribution and the Merger.” For information about the material risks that the Final Distribution, the Merger or both could be taxable to CBS stockholders or the Internal Distributions (as defined below) or Final Distribution could be taxable to CBS, see “Risk Factors—Risks Related to the Transactions—If any of the Internal Distributions or the Final Distribution does not qualify as a transaction that is tax-free for U.S. federal income tax purposes under Section 355 of the Code or the Merger does not qualify as a tax-free “reorganization” under Section 368(a) of the Code, including as a result of actions taken in connection with the Internal Distributions, the Final Distribution or the Merger or as a result of subsequent acquisitions of shares of CBS, Entercom or CBS Radio, then CBS and/or holders of CBS Common Stock that received Radio Common Stock in the Final Distribution may be required to pay substantial U.S. federal income taxes, and, in certain circumstances, CBS Radio and Entercom may be required to indemnify CBS for any such tax liability.”

 

Q: What are the main ways that the relationship between CBS Radio and CBS will change after the exchange offer is completed?

 

A:

Following the completion of the exchange offer, assuming the exchange offer is fully subscribed, CBS Radio will be wholly independent from CBS, except that certain agreements between CBS and CBS Radio will remain in place. See “Other Agreements and Other Related Party Transactions.” If the exchange offer is consummated but less than all shares of Radio Common Stock owned by CBS are exchanged because the exchange offer is not fully subscribed (or if the exchange offer is consummated but not all of the shares of Radio Common Stock held by CBS are exchanged due to the upper limit being in effect), the additional shares of Radio Common Stock owned by CBS will be distributed on a pro rata basis to the holders of shares of CBS Common Stock, based on the relative economic interest of each such holder in the total

 

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  outstanding shares of CBS Common Stock, excluding those shares of CBS Class B Common Stock that have been validly tendered and not withdrawn in the exchange offer. Such Spin-Off, if necessary, will not have a different impact on holders of different classes of CBS Common Stock, as holders of each outstanding share of CBS Class B Common Stock not validly tendered (or validly tendered and validly withdrawn) in the exchange offer and each outstanding share of CBS Class A Common Stock will receive an equal number of shares of Radio Common Stock in any Spin-Off distribution. The Spin-Off will only occur if the exchange offer is consummated but not fully subscribed (or if the exchange offer is consummated but not all of the shares of Radio Common Stock held by CBS are exchanged due to the upper limit being in effect), meaning that not all the outstanding shares of Radio Common Stock held by CBS will be distributed in the exchange offer. See “The Exchange Offer—Distribution of Any Shares of Radio Common Stock Remaining After the Exchange Offer.”

 

Q: Will National Amusements, Inc. participate in the exchange offer?

 

A: National Amusements, Inc. (“National Amusements”), the controlling stockholder of CBS, has represented that it will not participate in the exchange offer. As of June 23, 2017, National Amusements beneficially owned shares of CBS Class A Common Stock representing approximately 79.5% of the voting power of all classes of CBS Common Stock. If the exchange offer is consummated but less than all shares of Radio Common Stock are exchanged because the exchange offer is not fully subscribed, or if the exchange offer is consummated but not all of the shares of Radio Common Stock owned by CBS are exchanged due to the upper limit being in effect, as a holder of CBS Class A Common Stock, National Amusements may receive shares of Radio Common Stock through the Spin-Off, if any, based on the relative economic interest of National Amusements in the number of total outstanding shares of CBS Common Stock. See “The Exchange Offer—Distribution of Any Shares of Radio Common Stock Remaining After the Exchange Offer.”

As of September 30, 2017, when 362,276,333 shares of CBS Class B Common Stock and 37,598,604 shares of CBS Class A Common Stock were outstanding, the maximum number of shares of Entercom Class A Common Stock that National Amusements could receive in the Spin-Off, if it occurred, would be 9,922,377 shares (after giving effect to the conversion of each share of Radio Common Stock distributed in the Spin-Off into the right to receive one share of Entercom Class A Common Stock). Such shares of Entercom Class A Common Stock would represent approximately 6.8% of the aggregate economic interest and approximately 5.5% of the aggregate voting interest of Entercom Common Stock, on a pro forma basis after giving effect to the Transactions. Consequently, it is not possible for National Amusements to become the controlling shareholder of Entercom solely as a result of the Transactions.

 

Q: How many shares of Radio Common Stock will I receive for each share of CBS Class B Common Stock that I tender?

 

A: The exchange offer is designed to permit you to exchange your shares of CBS Class B Common Stock for shares of Radio Common Stock. For each $1.00 of your CBS Class B Common Stock accepted in the exchange offer, you will receive approximately $1.08 of Radio Common Stock. The value of the CBS Class B Common Stock will be based on the calculated per-share value for the CBS Class B Common Stock on the New York Stock Exchange (the “NYSE”) and the value of the Radio Common Stock will be based on the calculated per-share value for Entercom Class A Common Stock on the NYSE, in each case determined by reference to the simple arithmetic average of the daily volume-weighted average prices (“VWAP”) of CBS Class B Common Stock and Entercom Class A Common Stock on the NYSE during a period of three consecutive trading days (the “Valuation Dates”) ending on and including the second trading day preceding the expiration date, as may be extended. The last day on which tenders will be accepted, whether on November 16, 2017 or any later date to which the exchange offer is extended, is referred to in this document as the “expiration date.” Please note, however, that:

 

    The number of shares you can receive is subject to an upper limit of an aggregate of 5.7466 shares of Radio Common Stock for each share of CBS Class B Common Stock accepted in the exchange offer. The questions and answers below describe how this limit may impact the value you receive.

 

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    The exchange offer does not provide for a minimum exchange ratio. See “The Exchange Offer—Terms of the Exchange Offer.”

 

    Because the exchange offer is subject to proration if it is over-subscribed, CBS may accept for exchange only a portion of the CBS Class B Common Stock tendered by you.

 

Q: Is there a limit on the number of shares of Radio Common Stock I can receive for each share of CBS Class B Common Stock that I tender?

 

A: The number of shares you can receive is subject to an upper limit of 5.7466 shares of Radio Common Stock for each share of CBS Class B Common Stock accepted in the exchange offer. If the upper limit is in effect, you will receive less than $1.08 of Radio Common Stock for each $1.00 of CBS Class B Common Stock that you tender, and you could receive much less. For example, if the calculated per-share value of CBS Class B Common Stock was $67.56 (the highest closing price for CBS Class B Common Stock on the NYSE during the three-month period prior to commencement of the exchange offer) and the calculated per-share value of Radio Common Stock was $9.50 (the lowest closing price for Entercom Class A Common Stock on the NYSE during that three-month period), the value of Radio Common Stock, based on the Entercom Class A Common Stock price, received for CBS Class B Common Stock accepted for exchange would be approximately $0.81 for each $1.00 of CBS Class B Common Stock accepted for exchange.

 

Q: Is there a minimum number of shares I must tender to participate in the exchange offer?

 

A: There is no minimum number of shares that must be tendered by a holder of CBS Class B Common Stock in order to participate in the exchange offer.

 

Q: Why is there an upper limit on the number of shares of Radio Common Stock I can receive for each share of CBS Class B Common Stock that I tender?

 

A: CBS management set the upper limit at the amount set forth herein to protect non-tendering holders of CBS Class B Common Stock from an unusual or unexpected drop in the trading price of Entercom Class A Common Stock, relative to the trading price of CBS Class B Common Stock, and the prospective loss of value to such non-tendering holders if shares of CBS Class B Common Stock were exchanged for shares of Radio Common Stock at an unduly high exchange ratio.

 

Q: How and when will I know the final exchange ratio and whether the upper limit is in effect?

 

A: CBS will announce the final exchange ratio used to determine the number of shares that can be received for each share of CBS Class B Common Stock accepted in the exchange offer by press release, and it will be available on the website www.cbscorpexchange.com, in each case by 11:59 p.m., New York City time, at the end of the second trading day (currently expected to be November 14, 2017) immediately preceding the expiration date of the exchange offer (currently expected to be November 16, 2017), unless the exchange offer is extended or terminated. At such time, the final exchange ratio will also be available from the information agent at the toll-free number provided on the back cover of this document. CBS will also announce at that time whether the upper limit on the number of shares that can be received for each share of CBS Class B Common Stock tendered will be in effect. Therefore, the timing of such announcement will provide each holder of CBS Class B Common Stock with two full business days after knowing the final exchange ratio and whether the upper limit is in effect during which to decide whether to tender or withdraw their shares in the exchange offer.

 

Q: How are the calculated per-share values of CBS Class B Common Stock and Entercom Class A Common Stock determined for purposes of calculating the number of shares of Radio Common Stock to be received in the exchange offer?

 

A:

The calculated per-share value of CBS Class B Common Stock and Entercom Class A Common Stock for purposes of the exchange offer will equal the simple arithmetic average of the daily VWAP of CBS Class B Common Stock and Entercom Class A Common Stock, as the case may be, on the NYSE on each of the Valuation Dates. The daily VWAP will be as reported by Bloomberg L.P. as displayed under the heading

 

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  Bloomberg VWAP on the Bloomberg pages “CBS UN<Equity>AQR” with respect to CBS Class B Common Stock and “ETM UN<Equity>AQR” with respect to Radio Common Stock (or any other recognized quotation source selected by CBS in its sole discretion if such pages are not available or are manifestly erroneous). The daily VWAPs of CBS Class B Common Stock and Entercom Class A Common Stock obtained from Bloomberg L.P. may be different from other sources of volume-weighted average prices or investors’ or other security holders’ own calculations. CBS will determine the simple arithmetic average of the VWAPs of each stock based on prices provided by Bloomberg L.P., and such determination will be final.

 

Q: What is the “daily volume-weighted average price” or “daily VWAP?”

 

A: The “daily volume-weighted average price” for CBS Class B Common Stock and Entercom Class A Common Stock will be the volume-weighted average price of CBS Class B Common Stock and Entercom Class A Common Stock on the NYSE during the period beginning at 9:30 a.m., New York City time (or such other time as is the official open of trading on the NYSE), and ending at 4:00 p.m., New York City time (or such other time as is the official close of trading on the NYSE) except that such data will only take into account adjustments made to reported trades included by 4:10 p.m., New York City time, as reported to CBS by Bloomberg L.P. for the equity ticker pages of CBS, in the case of CBS Class B Common Stock, and ETM, in the case of Entercom Class A Common Stock. The daily VWAPs of CBS Class B Common Stock and Entercom Class A Common Stock obtained from Bloomberg L.P. may be different from other sources of volume-weighted average prices or investors’ or other security holders’ own calculations. CBS will determine the simple arithmetic average of the VWAPs of each stock based on prices provided by Bloomberg L.P., and such determination will be final.

 

Q: Where can I find the daily VWAP of CBS Class B Common Stock and Entercom Class A Common Stock during the exchange offer period?

 

A: CBS will maintain a website at www.cbscorpexchange.com that will provide the daily VWAP of both CBS Class B Common Stock and Entercom Class A Common Stock for each day during the exchange offer (including each of the Valuation Dates). The website will also provide indicative exchange ratios commencing on the third trading day of the exchange offer until the first Valuation Date. On the first two Valuation Dates, when the values of CBS Class B Common Stock and Entercom Class A Common Stock are calculated for the purposes of the exchange offer, the website will show the indicative exchange ratios based on indicative calculated per-share values calculated by CBS, which will equal: (i) on the first Valuation Date, the daily VWAP of CBS Class B Common Stock and the Entercom Class A Common Stock for that day; and (ii) on the second Valuation Date, the simple arithmetic mean of the daily VWAPs of CBS Class B Common Stock and the Entercom Class A Common Stock for the first and second Valuation Dates. The website will not provide an indicative exchange ratio on the third Valuation Date. The final exchange ratio (as well as whether the upper limit on the number of shares that can be received for each share of CBS Class B Common Stock tendered will be in effect) will be announced by press release and be available on the website, in each case by 11:59 p.m., New York City time, at the end of the second trading day (currently expected to be November 14, 2017) immediately preceding the expiration date of the exchange offer (currently expected to be November 16, 2017). CBS will determine the simple arithmetic average of the VWAPs based on data provided by Bloomberg L.P., and such determinations will be final.

 

Q: Why is the calculated per-share value for Radio Common Stock based on the trading prices for Entercom Class A Common Stock?

 

A:

There is currently no trading market for Radio Common Stock and no such trading market will be established in the future. CBS believes, however, that the trading prices for Entercom Class A Common Stock are an appropriate proxy for the trading prices of Radio Common Stock because (i) in the Merger, each outstanding share of Radio Common Stock will be converted into the right to receive an equal number of shares of Entercom Class A Common Stock; (ii) CBS Radio will authorize the issuance of a number of shares of Radio Common Stock such that the total number of shares of Radio Common Stock outstanding immediately prior to the Merger will be 101,407,494 and each share of Radio Common Stock will be converted into one share of Entercom Class A Common Stock in the Merger; and (iii) at the Valuation Dates, it is expected that all the

 

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  material conditions to the consummation of the Merger will have been satisfied or, if permitted by the Merger Agreement, waived (except for those conditions that by their nature are satisfied at the closing of the Merger). In addition, the Special Meeting at which Entercom’s shareholders will be asked to approve the share issuance in connection with the Merger and amendment to the Entercom Articles (as defined below) to classify the Entercom board of directors may be held on one of the Valuation Dates. However, these approvals can be obtained based solely on the favorable vote of Joseph M. Field in accordance with the provisions of the Voting Agreement (as defined below). See “Other Agreements and Other Related Party Transactions—Voting Agreement.” The Merger will be expected to be consummated shortly thereafter, such that investors should be expected to be valuing Entercom Class A Common Stock based on the expected value of such Entercom Class A Common Stock after the Merger. There can be no assurance, however, that Entercom Class A Common Stock after the Merger will trade on the same basis as Entercom Class A Common Stock trades prior to the Merger. See “Risk Factors—Risks Related to the Transactions—The trading prices of Entercom Class A Common Stock may not be an appropriate proxy for the value of Radio Common Stock.”

 

Q: Will indicative exchange ratios be provided during the exchange offer period?

 

A: Yes. Prior to the Valuation Dates and commencing on the third trading day of the exchange offer, indicative exchange ratios will be available online or by contacting the information agent at the toll-free number provided on the back cover of this prospectus, calculated on each day as though that day were the expiration date of the exchange offer. A website will be maintained at www.cbscorpexchange.com that will provide the daily VWAPs of both CBS Class B Common Stock and Entercom Class A Common Stock during the exchange offer on each day prior to the third Valuation Date.

The indicative exchange ratios will also reflect whether the upper limit on the exchange ratio, described above, would have been in effect. You may also contact the information agent at its toll-free number to obtain these indicative exchange ratios. In addition, for purposes of illustration, a table that indicates the number of shares of Radio Common Stock that you would receive per share of CBS Class B Common Stock, calculated on the basis described above and taking into account the upper limit, assuming a range of averages of the daily VWAP of CBS Class B Common Stock and Entercom Class A Common Stock on the Valuation Dates is provided under “The Exchange Offer—Terms of the Exchange Offer.”

 

Q: What if the shares of CBS Class B Common Stock or Entercom Class A Common Stock do not trade on any of the Valuation Dates?

 

A: If a market disruption event occurs with respect to the shares of CBS Class B Common Stock or Entercom Class A Common Stock on any of the Valuation Dates, the calculated per-share value of CBS Class B Common Stock and Radio Common Stock will be determined using the daily VWAP of shares of CBS Class B Common Stock and shares of Entercom Class A Common Stock on the preceding trading day or days, as the case may be, on which no market disruption event occurred with respect to both CBS Class B Common Stock and Entercom Class A Common Stock. If, however, a market disruption event occurs as specified above, CBS may terminate the exchange offer if, in its reasonable judgment, the market disruption event has impaired the benefits of the exchange offer. If CBS decides to extend the exchange offer period following a market disruption event, the Valuation Dates will be reset, as with any extension of the exchange offer, to the period of three consecutive trading days ending on and including the second trading day preceding the expiration date, as may be extended. Therefore, the timing of such announcement will provide each holder of CBS Class B Common Stock with two full business days after knowing the final exchange ratio and whether the upper limit is in effect during which to decide whether to tender or withdraw their shares in the exchange offer. For specific information as to what would constitute a market disruption event, see “The Exchange Offer—Conditions for Consummation of the Final Distribution.”

 

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Q: Are there circumstances under which I would receive fewer shares of Radio Common Stock than I would have received if the exchange ratio were determined using the closing prices of CBS Class B Common Stock and Entercom Class A Common Stock on the expiration date of the exchange offer?

 

A: Yes. For example, if the trading price of CBS Class B Common Stock were to increase during the period of the Valuation Dates, the calculated per-share value of CBS Class B Common Stock would likely be lower than the closing price of CBS Class B Common Stock on the expiration date of the exchange offer. As a result, you may receive fewer shares of Radio Common Stock for each $1.00 of CBS Class B Common Stock than you would have if that per-share value were calculated on the basis of the closing price of CBS Class B Common Stock on the expiration date. Similarly, if the trading price of Entercom Class A Common Stock were to decrease during the period of the Valuation Dates, the calculated per-share value of Radio Common Stock would likely be higher than the closing price of Entercom Class A Common Stock on the expiration date. This could also result in your receiving fewer shares of Radio Common Stock for each $1.00 of CBS Class B Common Stock than you would otherwise receive if that per-share value were calculated on the basis of the closing price of Entercom Class A Common Stock on the expiration date of the exchange offer. See “The Exchange Offer—Terms of the Exchange Offer.”

 

Q: Will fractional shares of Radio Common Stock or Entercom Class A Common Stock be distributed in the exchange offer or the Merger?

 

A: No fractional shares will be issued in the Merger, as described in this document. See the section entitled “The Exchange Offer—Terms of the Exchange Offer—Final Exchange Ratio.” The exchange agent will hold shares of Radio Common Stock in trust for the holders of CBS Class B Common Stock who validly tendered their shares in the exchange offer or are entitled to receive shares in the Spin-Off, if any. Immediately following the consummation of the exchange offer and, if necessary, the Spin-Off, and by means of the Merger, each outstanding share of Radio Common Stock will be converted into the right to receive an equal number of shares of Entercom Class A Common Stock. In the Merger, no fractional shares of Entercom Class A Common Stock will be delivered to holders of Radio Common Stock. All fractional shares of Entercom Class A Common Stock that a holder of shares of Radio Common Stock would otherwise be entitled to receive as a result of the Merger will be aggregated by the transfer agent. The transfer agent will cause the whole shares obtained thereby to be sold on behalf of such holders of shares of Radio Common Stock that would otherwise be entitled to receive such fractional shares of Entercom Class A Common Stock pursuant to the Merger, in the open market or otherwise as reasonably directed by CBS, and in no case later than 10 business days after the Merger. The transfer agent will make available the net proceeds thereof, after deducting any required withholding taxes and brokerage charges, commissions and transfer taxes, on a pro rata basis, without interest, as soon as practicable to the holders of Radio Common Stock that would otherwise be entitled to receive such fractional shares of Entercom Class A Common Stock pursuant to the Merger.

 

Q: What happens if not enough shares of CBS Class B Common Stock are tendered to allow CBS to exchange all of the shares of Radio Common Stock it holds?

 

A:

CBS anticipates that the final exchange ratio will be set by the Pricing Mechanism such that the exchange offer will be fully- or over-subscribed by holders of CBS Class B Common Stock. Subject to the terms and conditions of the Merger Agreement and the Separation Agreement, in the event that the exchange offer is consummated but less than all shares of Radio Common Stock owned by CBS are exchanged because the exchange offer is not fully subscribed or in the event the exchange offer is consummated but not all of the shares of Radio Common Stock held by CBS are exchanged due to the upper limit being in effect, the additional shares of Radio Common Stock owned by CBS will be distributed on a pro rata basis to the holders of shares of CBS Common Stock in the Spin-Off, based on the relative economic interest of each such holder in the total outstanding shares of CBS Common Stock, excluding those shares of CBS Class B Common Stock that have been validly tendered and not withdrawn in the exchange offer. Any holder of CBS Class B Common Stock who validly tenders (and does not properly withdraw) shares of CBS Class B Common Stock for shares of Radio Common Stock in the exchange offer will waive their rights with respect to such validly tendered shares of CBS Class B Common Stock (but not with respect to any other shares that are not validly tendered or

 

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  validly tendered and validly withdrawn in the exchange offer) to receive, and forfeit any rights to, shares of Radio Common Stock distributed in the Spin-Off.

Upon consummation of the Final Distribution, CBS will deliver to the exchange agent a global certificate representing all of the Radio Common Stock being distributed in the exchange offer, with instructions to hold the shares of Radio Common Stock in trust for holders of shares of CBS Class B Common Stock validly tendered and not withdrawn and holders of shares of CBS Common Stock as of the distribution date of a Spin-Off, if any, which distribution will be conducted subject to the terms of the Separation Agreement and the Merger Agreement. If there is a Spin-Off, the exchange agent will calculate the exact number of shares of Radio Common Stock not exchanged in the exchange offer and to be distributed on a pro rata basis in the Spin-Off, based on the relative economic interest of each such holder in the total outstanding shares of CBS Common Stock, excluding those shares of CBS Class B Common Stock that have been validly tendered and not withdrawn in the exchange offer. The number of shares of Radio Common Stock will be held in trust for the holders of shares of CBS Common Stock who validly tendered their shares in the exchange offer or are entitled to receive shares in the Spin-Off. See “The Exchange Offer—Distribution of Any Shares of Radio Common Stock Remaining After the Exchange Offer.”

 

Q: Will all shares of CBS Class B Common Stock that I tender be accepted in the exchange offer?

 

A: Not necessarily. Depending on the number of shares of CBS Class B Common Stock validly tendered in the exchange offer and not properly withdrawn, and the calculated per-share values of CBS Class B Common Stock and Radio Common Stock determined as described above, CBS may have to limit the number of shares of CBS Class B Common Stock that it accepts in the exchange offer through a proration process. Any proration of the number of shares accepted in the exchange offer will be determined on the basis of the proration mechanics described under “Summary—Terms of the Exchange Offer—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of CBS Class B Common Stock.”

Stockholders who directly or beneficially own less than 100 shares of CBS Class B Common Stock (“odd-lots”) and who validly tender all of their shares will not be subject to proration. For instance, if you directly or beneficially own 50 shares of CBS Class B Common Stock and tender all 50 shares, your odd-lot will not be subject to proration. If, however, you hold less than 100 shares of CBS Class B Common Stock, but do not tender all of your shares, you will be subject to proration to the same extent as holders of more than 100 shares if the exchange offer is oversubscribed. Direct or beneficial holders of 100 or more shares of CBS Class B Common Stock will be subject to proration. In addition, shares held on behalf of participants in the CBS Savings Plans (each of which plans holds more than 100 shares of CBS Class B Common Stock) will be subject to proration.

Proration for each tendering stockholder subject to proration will be based on (i) the proportion that the total number of shares of CBS Class B Common Stock to be accepted, except for tenders of odd-lots, as described above, bears to the total number of shares of CBS Class B Common Stock validly tendered and not properly withdrawn, except for tenders of odd-lots, as described above, and (ii) the number of shares of CBS Class B Common Stock validly tendered and not properly withdrawn by that stockholder (and not on that stockholder’s aggregate ownership of shares of CBS Class B Common Stock). Any shares of CBS Class B Common Stock not accepted for exchange as a result of proration will be returned to tendering stockholders promptly after the final proration factor is determined.

CBS will announce its preliminary determination, if any, of the extent to which tenders will be prorated by press release by 9:00 a.m., New York City time, on the business day immediately following the expiration of the exchange offer. This preliminary determination is referred to as the “preliminary proration factor.” CBS will announce its final determination of the extent to which tenders will be prorated by press release promptly after this determination is made. This final determination is referred to as the “final proration factor.”

 

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Q: Will I be able to sell my shares of Radio Common Stock after the exchange offer and Spin-Off, if any, are completed?

 

A: No. There is currently no trading market for shares of Radio Common Stock and no such trading market is expected to be established in the future. In the Merger, each outstanding share of Radio Common Stock will automatically be converted into the right to receive an equal number of shares of Entercom Class A Common Stock. See “The Exchange Offer—Terms of the Exchange Offer.”

 

Q: How many shares of CBS Class B Common Stock will CBS accept if the exchange offer is completed?

 

A: The number of shares of CBS Class B Common Stock that will be accepted if the exchange offer is completed will depend on the final exchange ratio and the number of shares of CBS Class B Common Stock tendered. Prior to the consummation of the Final Distribution, CBS will directly hold 101,407,494 shares of Radio Common Stock. CBS will offer the 101,407,494 shares of Radio Common Stock in the exchange offer. The maximum number of shares of CBS Class B Common Stock that will be accepted if the exchange offer is completed will be equal to the number of shares of Radio Common Stock held by CBS (i.e., 101,407,494) divided by the final exchange ratio (which will be subject to the upper limit). For example, assuming that the final exchange ratio is 5.7466 (the upper limit for shares of Radio Common Stock that could be exchanged for one share of CBS Class B Common Stock), then CBS would accept up to 17,646,520 shares of CBS Class B Common Stock.

 

Q: Are there any conditions to CBS’s obligation to complete the exchange offer?

 

A: Yes. The Final Distribution (including the exchange offer and, if necessary, the Spin-Off) is subject to various conditions listed under “The Exchange Offer—Conditions for Consummation of the Final Distribution.” If any of these conditions are not satisfied or waived prior to the expiration of the exchange offer, CBS will not be required to accept shares for exchange and may extend or terminate the exchange offer. Any Spin-Off that may be required after the exchange offer is also subject to the same conditions as the exchange offer. The exchange offer is not subject to any condition that a minimum number of shares must be tendered in the exchange offer.

CBS may waive any of the conditions to the exchange offer, but if CBS waives the condition that it receive the Distribution Tax Opinion (as defined below) from its counsel, then CBS may be required to extend the exchange offer and pay a penalty to Entercom no later than five business days after the closing of the Merger (the “Tax Opinion Waiver Penalty”). For a description of the material conditions precedent to the exchange offer, including satisfaction or waiver of the conditions to the Transactions, the receipt of Entercom shareholder approval for the issuance of shares of Entercom Class A Common Stock in connection with the Merger, an amendment to Entercom’s Amended and Restated Articles of Incorporation (the “Entercom Articles”) in order to provide that the Entercom board of directors will be classified after the Merger and other conditions, see “The Exchange Offer—Conditions for Consummation of the Final Distribution.” Entercom has no right to waive any of the conditions to the exchange offer. For a description of the Tax Opinion Waiver Penalty, see “The Separation Agreement—The Final Distribution.”

 

Q: When does the exchange offer expire?

 

A: The period during which you are permitted to tender your shares of CBS Class B Common Stock in the exchange offer will expire at 11:59 p.m., New York City time, on November 16, 2017, unless CBS extends the exchange offer. See “The Exchange Offer—Terms of the Exchange Offer—Extension; Termination; Amendment.”

 

Q: Can the exchange offer be extended and under what circumstances?

 

A:

Yes. CBS can, subject to the terms and conditions of the Separation Agreement and the Merger Agreement, extend the exchange offer, in its sole discretion, at any time and from time to time. For instance, the exchange offer may be extended if any of the conditions for consummation of the exchange offer listed under “The Exchange Offer—Conditions for Consummation of the Final Distribution” are not satisfied or

 

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  waived prior to the expiration of the exchange offer. In case of an extension of the exchange offer, CBS will publicly announce the extension at www.cbscorpexchange.com and separately by press release no later than 9:00 a.m., New York City time, on the next business day following the previously scheduled expiration date.

CBS’s right to extend the exchange offer is subject to the terms and conditions of the Separation Agreement and the Merger Agreement. The Separation Agreement provides that the terms and conditions of the exchange offer must comply with all applicable legal requirements and with the rules and regulations of the NYSE. See “The Separation Agreement—The Final Distribution.” The Separation Agreement also provides that CBS is limited in its discretion to set the terms and conditions of the exchange offer by its obligations under the Merger Agreement’s provisions with respect to tax matters, its obligations to make certain filings at certain times with the SEC, the obligation of CBS to take certain actions to obtain approval of government authorities for the Merger, and the general obligations of CBS to consummate the Merger. See “Merger Agreement—Tax Matters,” “Merger Agreement—SEC Filings” and “Merger Agreement—Certain Other Covenants and Agreements.”

CBS’s right to extend the exchange offer is also limited by the termination date of the Merger Agreement, which is set at January 31, 2018 but may be extended to May 2, 2018 in certain circumstances by CBS or Entercom if the Merger is not consummated by November 2, 2017. The exchange offer must be consummated before the termination date, as it may be extended, of the Merger Agreement. Each party has the right to extend the Merger Agreement’s termination date if the approval of the Federal Communications Commission (“FCC”) has not been obtained or if the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) has not occurred, in each case only if the failure to consummate the Merger is not due to a party’s failure to perform its obligations under the Merger Agreement. However, if as of January 31, 2018, the conditions to the closing of the Merger concerning the expiration or termination of any applicable waiting period under the HSR Act, the approval of the FCC, the approval of Entercom’s shareholders and the absence of any law or order restraining, enjoining or prohibiting the consummation of the transaction have all been satisfied, CBS may not terminate the Merger Agreement due to the passing of the termination date of the Merger. See “Merger Agreement—Termination.”

 

Q: How do I decide whether to participate in the exchange offer?

 

A: Whether you should participate in the exchange offer depends on many factors. You should carefully examine your specific financial position, plans and needs before you decide whether to participate, as well as the relative risks associated with an investment in Entercom and CBS. In addition, you should consider all of the factors described in “Risk Factors.” None of CBS, Entercom, CBS Radio or any of their respective directors or officers or any other person make any recommendation as to whether you should tender all, some or none of your shares of CBS Class B Common Stock. You must make your own decision after carefully reading this prospectus, and the documents incorporated by reference and consulting with your advisors in light of your own particular circumstances. You are strongly encouraged to read this prospectus in its entirety, including any documents referred to in this document, very carefully.

 

Q: Can I participate in the exchange offer if I hold CBS Class A Common Stock?

 

A: CBS is only offering to exchange shares of Radio Common Stock for outstanding shares of CBS Class B Common Stock that are validly tendered and not properly withdrawn. However, if you hold CBS Class A Common Stock, you can participate in the exchange offer, but only by either:

 

    converting your shares of CBS Class A Common Stock into an equal number of shares of CBS Class B Common Stock in advance of the expiration date of the exchange offer and tendering such shares of CBS Class B Common Stock received upon conversion in advance of the expiration date; or

 

   

conditionally converting your shares of CBS Class A Common Stock into an equal number of shares of CBS Class B Common Stock pursuant to the procedures set forth in this document by executing and delivering to the exchange agent for the exchange offer: (i) a conditional notice of conversion for all such shares of CBS Class A Common Stock submitted to be exchanged, accompanied by payment of documentary, stamp or similar issue or transfer taxes, if any; and (ii) a letter of transmittal for CBS

 

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Class B Common Stock, properly completed and duly executed (including any signature guarantees that may be required) or, in the case of shares delivered by book-entry transfer through The Depository Trust Company, an agent’s message, in each case with respect to which the shares of CBS Class A Common Stock have been submitted for exchange, noting that shares of CBS Class A Common Stock will be converted to the extent the CBS Class B Common Stock is accepted for exchange in the exchange offer. To the extent shares of CBS Class A Common Stock are not converted, the exchange agent will promptly return your payment of documentary, stamp or similar issue or transfer taxes, if any.

If you elect to convert shares of CBS Class A Common Stock on a non-conditional basis, you may not withdraw such election of conversion and your conversion will be effective immediately upon receipt by the exchange agent. You may withdraw your tender in the exchange offer of the shares of CBS Class B Common Stock issued upon conversion by following the procedures set forth herein. If you elected to conditionally convert your shares of CBS Class A Common Stock into shares of CBS Class B Common Stock, if CBS proceeds with the exchange offer you may withdraw your conditional notice of conversion by withdrawing your tender of shares of CBS Class B Common Stock in the exchange offer, by following the procedures set forth herein.

Participants in the CBS 401(k) Plan that have assets in the CBS Class A Company Stock Fund and would like to participate in the exchange offer should follow the special instructions that are being sent to them by the plan administrator.

Notwithstanding the foregoing, National Amusements has represented that it will not participate in the exchange offer.

 

Q: Will holders of CBS stock options or restricted stock units have the opportunity to exchange their CBS stock options or restricted stock units for Radio Common Stock in the exchange offer?

 

A: No, neither holders of vested or unvested stock options nor holders of restricted stock units (including performance-based restricted stock units and time-based restricted stock units) can tender the shares of CBS Class B Common Stock underlying such awards in the exchange offer. However, holders of vested and unexercised CBS stock options can exercise their vested stock options in accordance with the terms of the plans under which the options were issued and tender the shares of CBS Class B Common Stock received upon exercise in the exchange offer. The exercise of a CBS stock option cannot be revoked for any reason, including if the exchange offer is terminated for any reason or if shares of CBS Class B Common Stock received upon exercise are tendered and not accepted for exchange in the exchange offer. Additionally, if you hold shares of CBS Class B Common Stock as a result of the vesting and settlement of restricted stock units, these shares can be tendered in the exchange offer.

If you are a holder of vested and unexercised CBS stock options and wish to exercise such stock options and tender shares of CBS Class B Common Stock received upon exercise in the exchange offer, you should be certain to initiate such exercise generally no later than 4:00 p.m., New York City time, on the tenth trading day prior to the expiration of the exchange offer, so that the shares of CBS Class B Common Stock are received in your account in enough time to tender the shares in accordance with the instructions for tendering available from your broker or account administrator. In the event that you choose to exercise such stock options and tender shares of CBS Class B Common Stock received upon exercise in the exchange offer, you will be required to satisfy the exercise price and any applicable tax withholding amounts in cash.

There are tax consequences associated with the exercise of a stock option, and individual tax circumstances may vary. You are urged to consult the prospectus provided to you in connection with your participation in the CBS Corporation 2004 Long-Term Management Incentive Plan (as amended and restated through May 25, 2006) and/or the CBS Corporation 2009 Long-Term Incentive Plan (as amended and restated May 23, 2013), as applicable, and to consult your own tax advisor regarding the consequences to you of exercising your stock options. You are also urged to read carefully the discussion in “The Exchange Offer—Material U.S. Federal Income Tax Consequences of the Final Distribution and the Merger” and to consult your own tax advisor regarding the consequences to you of the exchange offer.

 

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Q: How do I participate in the exchange offer?

 

A: The procedures you must follow to participate in the exchange offer will depend on whether you hold your shares of CBS Class B Common Stock through a bank or trust company or broker, as a participant in the CBS Savings Plans, or if your shares of CBS Class B Common Stock are registered in your name in CBS’s direct register of shares (the “DRS”). For specific instructions about how to participate, see “The Exchange Offer—Terms of the Exchange Offer—Procedures for Tendering.”

 

Q: How do I tender my shares of CBS Class B Common Stock after the final exchange ratio has been determined?

 

A: CBS will announce the final exchange ratio used to determine the number of shares that can be received for each share of CBS Class B Common Stock accepted in the exchange offer by press release and be available on the website www.cbscorpexchange.com, in each case by 11:59 p.m., New York City time, at the end of the second trading day (currently expected to be November 14, 2017) immediately preceding the expiration date of the exchange offer (currently expected to be November 16, 2017), unless the exchange offer is extended or terminated. The timing of such announcement will therefore provide each holder of CBS Class B Common Stock with two full business days after knowing the final exchange ratio during which to decide whether to tender or withdraw their shares in the exchange offer. If you wish to tender shares of CBS Class B Common Stock pursuant to the exchange offer but (i) the procedure for book-entry transfer cannot be completed on a timely basis or (ii) time will not permit all required documents to reach the exchange agent on or before the expiration date of the exchange offer, you may still tender your shares of CBS Class B Common Stock by complying with the guaranteed delivery procedures described in the section entitled “The Exchange Offer—Terms of the Exchange Offer—Procedures for Tendering—Guaranteed Delivery Procedures.” If you hold shares of CBS Class B Common Stock through a broker, dealer, commercial bank, trust company or similar institution, that institution must tender your shares on your behalf.

If your shares of CBS Class B Common Stock are held through an institution and you wish to tender your CBS Class B Common Stock after The Depository Trust Company has closed, the institution must deliver a notice of guaranteed delivery to the exchange agent via facsimile prior to 11:59 p.m., New York City time, on the expiration date.

 

Q: Can I tender only a portion of my shares of CBS Class B Common Stock in the exchange offer?

 

A: Yes. You may tender all, some or none of your shares of CBS Class B Common Stock. If you tender only a portion of your shares of CBS Class B Common Stock, or elect not to tender any of your shares, you will still be eligible to receive your pro rata distribution of shares in the Spin-Off, if any, with respect to the shares of CBS Class B Common Stock that you do not tender (and any shares of CBS Class A Common Stock that you own).

There is no minimum number of shares that must be tendered by a holder of CBS Class B Common Stock in order to participate in the exchange offer.

 

Q: What do I do if I want to retain all of my shares of CBS Class B Common Stock?

 

A: If you want to retain all of your shares of CBS Class B Common Stock, you do not need to take any action. However, after the Transactions, CBS Radio will no longer be owned by CBS, and as a holder of CBS Class B Common Stock you will no longer hold shares in a company that owns CBS Radio unless you receive shares of Radio Common Stock in the Spin-Off if necessary, which shares will be immediately thereafter converted into Entercom Class A Common Stock in the Merger.

 

Q: Can I change my mind after I tender my shares of CBS Class B Common Stock?

 

A: Yes. You may withdraw your tendered shares at any time before the exchange offer expires. See “The Exchange Offer—Terms of the Exchange Offer—Withdrawal Rights.” In addition, shares of CBS Class B Common Stock tendered pursuant to the exchange offer may be withdrawn after December 15, 2017 (i.e., after the expiration of 40 business days from the commencement of the exchange offer), if CBS does not accept your shares of CBS Class B Common Stock pursuant to the exchange offer by such date. If you change your mind again, you can re-tender your shares of CBS Class B Common Stock by following the tender procedures again prior to the expiration date of the exchange offer.

 

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If you hold your shares through the CBS Savings Plans, you may withdraw or change your previously submitted instructions to the trustee by issuing a new instruction to the trustee which will cancel any prior instruction. Any new instructions must be received by the tabulator for the trustee of the applicable CBS Savings Plan on your behalf before 1:00 p.m., New York City time, on November 10, 2017. If the exchange offer is extended, and if administratively feasible, the deadline for receipt of instructions to withdraw or change your previously submitted instructions may also be extended.

 

Q: Will I be able to withdraw the shares of CBS Class B Common Stock that I tender after the final exchange ratio has been determined?

 

A: Yes. The final exchange ratio used to determine the number of shares of Radio Common Stock that you will receive for each share of CBS Class B Common Stock accepted in the exchange offer will be announced by press release and be available on the website www.cbscorpexchange.com, in each case by 11:59 p.m., New York City time, at the end of the second trading day (currently expected to be November 14, 2017) immediately preceding the expiration date of the exchange offer (currently expected to be November 16, 2017), unless the exchange offer is extended or terminated. CBS will also announce at that time whether the upper limit on the number of shares of Radio Common Stock that can be received for each share of CBS Class B Common Stock tendered is in effect. The timing of such announcement will therefore provide each holder of CBS Class B Common Stock with two full business days after knowing the final exchange ratio and whether the upper limit is in effect during which to decide whether to tender or withdraw their shares in the exchange offer. Subject to any extension or termination, you have the right to withdraw shares of CBS Class B Common Stock you have tendered at any time before 11:59 p.m., New York City time, on the expiration date, which is November 16, 2017. In addition, shares of CBS Class B Common Stock tendered pursuant to the exchange offer may be withdrawn after December 15, 2017 (i.e., after the expiration of 40 business days from the commencement of the exchange offer), if CBS does not accept your shares of CBS Class B Common Stock pursuant to the exchange offer by such date. See “The Exchange Offer—Terms of the Exchange Offer.”

 

Q: How do I withdraw my tendered CBS Class B Common Stock after the final exchange ratio has been determined?

 

A: If you are a registered stockholder of Class B Common Stock holding shares through the DRS and you wish to withdraw your shares after the final exchange ratio has been determined, then you must deliver a written notice of withdrawal or a facsimile transmission notice of withdrawal to the exchange agent prior to 11:59 p.m., New York City time, on the expiration date. In addition, shares of CBS Class B Common Stock tendered pursuant to the exchange offer may be withdrawn after December 15, 2017 (i.e., after the expiration of 40 business days from the commencement of the exchange offer), if CBS does not accept your shares of CBS Class B Common Stock pursuant to the exchange offer by such date. The information that must be included in that notice is specified under “The Exchange Offer—Terms of the Exchange Offer—Withdrawal Rights.”

If you hold your shares through a broker, dealer, commercial bank, trust company or similar institution, you should consult that institution on the procedures you must comply with and the time by which such procedures must be completed in order for that institution to provide a written notice of withdrawal or facsimile notice of withdrawal to the exchange agent on your behalf before 11:59 p.m., New York City time, on the expiration date. In addition, shares of CBS Class B Common Stock tendered pursuant to the exchange offer may be withdrawn after December 15, 2017 (i.e., after the expiration of 40 business days from the commencement of the exchange offer), if CBS does not accept your shares of CBS Class B Common Stock pursuant to the exchange offer by such date. If you hold your shares through such an institution, that institution must deliver the notice of withdrawal with respect to any shares you wish to withdraw. In such a case, as a beneficial owner and not a registered stockholder, you will not be able to provide a notice of withdrawal for such shares directly to the exchange agent.

 

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If your shares of CBS Class B Common Stock are held through an institution and you wish to withdraw your shares of CBS Class B Common Stock after The Depository Trust Company has closed, the institution must deliver a written notice of withdrawal to the exchange agent prior to 11:59 p.m., New York City time, on the expiration date, in the form of The Depository Trust Company’s notice of withdrawal and you must specify the name and number of the account at The Depository Trust Company to be credited with the withdrawn shares and must otherwise comply with The Depository Trust Company’s procedures. In addition, shares of CBS Class B Common Stock tendered pursuant to the exchange offer may be withdrawn after December 15, 2017 (i.e., after the expiration of 40 business days from the commencement of the exchange offer), if CBS does not accept your shares of CBS Class B Common Stock pursuant to the exchange offer by such date. See “The Exchange Offer—Terms of the Exchange Offer—Withdrawal Rights.”

 

Q: Will I be subject to U.S. federal income tax on the shares of Radio Common Stock that I receive in the exchange offer or on the shares of Entercom Class A Common Stock that I receive in the Merger?

 

A: Stockholders of CBS generally will not recognize any gain or loss for U.S. federal income tax purposes as a result of the exchange offer or the Merger, except for any gain or loss attributable to the receipt of cash in lieu of fractional shares of Entercom Class A Common Stock received in the Merger. CBS expects to receive an opinion from Wachtell, Lipton, Rosen & Katz, counsel to CBS, that each of the Internal Distributions and the Final Distribution will qualify as a tax-free transaction under Section 355 of the Code (the “Distribution Tax Opinion”).

The material U.S. federal income tax consequences of the exchange offer and the Merger are described in more detail under “The Exchange Offer—Material U.S. Federal Income Tax Consequences of the Final Distribution and the Merger.”

 

Q: Are there any material differences between the rights of holders of CBS Class B Common Stock and Entercom Class A Common Stock?

 

A: Yes. Entercom is a Pennsylvania corporation and CBS is a Delaware corporation, and each is subject to different organizational documents. Holders of CBS Class B Common Stock, whose rights are currently governed by CBS’s organizational documents and Delaware law, will, with respect to the shares validly tendered and exchanged immediately following the exchange offer, become shareholders of Entercom and their rights will be governed by Entercom’s organizational documents and Pennsylvania law. The material differences between the rights associated with CBS Class B Common Stock and Entercom Class A Common Stock that may affect holders of CBS Class B Common Stock whose shares are accepted for exchange in the exchange offer and who will obtain shares of Entercom Class A Common Stock in the Merger, relate to, among other things, classification of the board of directors, removal of directors, advance notice procedures for shareholder proposals or director nominations, procedures for amending organizational documents and approval of certain business combinations. For a further discussion of the material differences between the rights of holders of CBS Class B Common Stock and Entercom Class A Common Stock, see the section entitled “Comparison of Rights of Holders of CBS Common Stock and Entercom Common Stock.”

 

Q: Are there any appraisal rights for holders of shares of CBS Class B Common Stock?

 

A: There are no appraisal rights available to holders of shares of CBS Class B Common Stock in connection with the Transactions.

 

Q: What will CBS do with the shares of CBS Class B Common Stock that are tendered, and what is the impact of the exchange offer on CBS’s share count?

 

A: The shares of CBS Class B Common Stock that are tendered in the exchange offer will be held as treasury stock by CBS. Any shares of CBS Class B Common Stock acquired by CBS in the exchange offer will reduce the total number of shares of CBS Class B Common Stock outstanding, although CBS’s actual number of shares outstanding on a given date reflects a variety of factors such as option exercises and release of shares upon vesting restricted stock units.

 

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Q: Whom do I contact for information regarding the exchange offer?

 

A: You may ask any questions about the exchange offer or request copies of the exchange offer documents and the other information incorporated by reference in this prospectus, including copies of this document and the letter of transmittal (including the instructions thereto), from CBS, without charge, upon written or oral request to the information agent, Georgeson LLC, at 1290 Avenue of the Americas, 9th Floor, New York, NY 10104 or by calling 1-866-741-9588 (toll-free for all stockholders in the United States) or +1-781-575-2137 (outside the United States).

Questions and Answers About the Transactions

 

Q: What are the key steps of the Transactions?

 

A: Below is a summary of the key steps of the Transactions. A step-by-step description of material events relating to the Transactions is set forth under “The Transactions.”

 

    CBS, certain of its subsidiaries and CBS Radio will complete the following distributions and stock split (which are together referred to in this document as the “Radio Reorganization”). At the time of the signing of the Merger Agreement on February 2, 2017, CBS Radio had two classes of common stock, the Radio Series 1 Common Stock, par value $0.01 per share (the “Radio Series 1 Common Stock”), and the Radio Series 2 Common Stock, par value $0.01 per share (the “Radio Series 2 Common Stock” and, together with the Radio Series 1 Common Stock, the “Radio Existing Common Stock”). As of February 2, 2017, CBS directly owned 100% of the equity of Westinghouse CBS Holding Company, Inc., a Delaware corporation (“Westinghouse”), Westinghouse directly owned 100% of the equity of CBS Broadcasting Inc., a New York corporation (“CBS Broadcasting”) and CBS Broadcasting directly owned 100% of the Radio Existing Common Stock. Prior to the consummation of the Final Distribution, CBS Broadcasting will distribute all of the outstanding equity of CBS Radio to Westinghouse, and Westinghouse will then distribute all of the outstanding equity of CBS Radio to CBS. These distributions are referred to in this document as the “Internal Distributions.”

 

    Following completion of the Internal Distributions, CBS Radio will (a) take all necessary actions to ensure that the Radio Series 1 Common Stock and the Radio Series 2 Common Stock are combined into a single class of common stock, par value $0.01 per share (the “Radio New Common Stock”), (b) authorize the issuance of at least 101,407,494 shares of Radio New Common Stock and (c) effect a stock split of the outstanding shares of Radio New Common Stock, as a result of which, as of immediately prior to the effective time of the Final Distribution, 101,407,494 shares of Radio New Common Stock will be issued and outstanding, all of which will be owned directly by CBS (collectively, (a) through (c), the “Stock Split”).

 

   

CBS will offer to holders of CBS Class B Common Stock the right to exchange all or a portion of their shares of CBS Class B Common Stock for shares of Radio Common Stock in the exchange offer. If the exchange offer is consummated but is not fully subscribed (or if the exchange offer is consummated but not all of the shares of Radio Common Stock held by CBS are exchanged due to the upper limit being in effect), CBS will distribute the remaining outstanding shares of Radio Common Stock held by CBS on a pro rata basis in the Spin-Off. Such remaining outstanding shares of Radio Common Stock will be distributed by CBS to holders of CBS Common Stock whose shares remain outstanding after consummation of the exchange offer, based on the relative economic interest of each such holder in the number of total outstanding shares of CBS Common Stock, excluding those shares of CBS Class B Common Stock that have been validly tendered and not withdrawn in the exchange offer. Such Spin-Off, if necessary, will not have a different impact on holders of different classes of CBS Common Stock, as holders of each outstanding share of CBS Class B Common Stock not validly tendered (or validly tendered and validly withdrawn) in the exchange offer and each outstanding share of CBS Class A Common Stock will receive an equal number of shares of Radio Common Stock in any Spin-Off. Any holder of CBS Common Stock who validly tenders (and does not properly withdraw)

 

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shares of CBS Class B Common Stock for shares of Radio Common Stock in the exchange offer will waive their rights with respect to such validly tendered shares of CBS Class B Common Stock (but not with respect to any other shares that are not validly tendered or validly tendered and validly withdrawn in the exchange offer) to receive, and forfeit any rights to, shares of Radio Common Stock distributed in the Spin-Off. The Spin-Off will only occur if the exchange offer is consummated but not fully subscribed (or if the exchange offer is consummated but not all of the shares of Radio Common Stock held by CBS are exchanged due to the upper limit being in effect), meaning that not all the outstanding shares of Radio Common Stock held by CBS will be distributed in the exchange offer. If there is a pro rata distribution, the exchange agent will calculate the exact number of shares of Radio Common Stock not exchanged in the exchange offer and to be distributed on a pro rata basis, and the number of shares of Entercom Class A Common Stock into which the remaining shares of Radio Common Stock will be converted in the Merger will be transferred to holders of CBS Common Stock (after giving effect to the consummation of the Final Distribution) as promptly as practicable thereafter.

 

    Immediately after the Final Distribution, Merger Sub will merge with and into CBS Radio, whereby the separate corporate existence of Merger Sub will cease and CBS Radio will continue as the surviving company and as a wholly owned subsidiary of Entercom. In the Merger, each outstanding share of Radio Common Stock will be automatically converted into the right to receive an equal number of shares of Entercom Class A Common Stock, as described in the section entitled “The Merger Agreement—Merger Consideration.”

 

    Following the Merger, Entercom will contribute all of the issued and outstanding equity interests of Entercom Radio, LLC to CBS Radio, such that Entercom Radio, LLC will become a wholly owned subsidiary of CBS Radio (the “Contribution”). Entercom Radio, LLC is a subsidiary of Entercom and owns and operates the radio stations of Entercom. Entercom Radio, LLC will then repay or cause to be repaid all outstanding amounts under its credit agreement, dated as of November 1, 2016 (as amended, supplemented or modified prior to the closing of the Merger) (the “Entercom Credit Agreement”), terminate all commitments under the Entercom Credit Agreement and obtain a release of all security interests for the Entercom Credit Agreement. In connection with such Contribution and the Radio Financing, Entercom Radio, LLC will become a guarantor under a credit agreement, dated as of October 17, 2016 among CBS Radio, the guarantors named therein, the lenders named therein, and JPMorgan Chase Bank, N.A., as administrative agent (as amended by Amendment No. 1, dated as of March 3, 2017, the “Radio Credit Agreement”), and an indenture dated as of October 17, 2016 among CBS Radio, the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee (the “Radio Notes Indenture”), and will pledge certain of its assets to secure amounts outstanding under the Radio Credit Agreement.

 

    In connection with the entry into the Merger Agreement, CBS Radio entered into a commitment letter (the “Commitment Letter”) with Goldman Sachs Bank USA and Morgan Stanley Senior Funding, Inc. (collectively, the “Initial Commitment Parties”) and a joinder thereto with Credit Suisse AG, Cayman Islands Branch, Bank of America, N.A., Wells Fargo Bank, N.A., JPMorgan Chase Bank, N.A. Citibank Global Markets, Inc., Deutsche Bank AG New York Branch, BNP Paribas, Sumitomo Mitsui Banking Corporation, U.S. Bank National Association, The Toronto-Dominion Bank, New York Branch and Societe Generale and the other lenders from time to time party thereto (collectively, together with the Initial Commitment Parties, the “Commitment Parties”), pursuant to which the Commitment Parties committed to provide, subject to customary closing conditions, up to $500 million of senior secured term loans as an additional tranche under the Radio Credit Agreement (the “Radio Financing”), the proceeds of which may be used by Entercom upon or following consummation of the Merger to refinance certain existing indebtedness of Entercom (as described above), to redeem Entercom’s preferred stock, and to pay fees and expenses in connection with the Transactions. CBS Radio expects to consummate and obtain the Radio Financing substantially simultaneously with the closing of the Merger and the Contribution and to apply the proceeds thereof as described in the preceding sentence in order to, among other things, simplify Entercom’s capital structure.

 

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Q: What are the material U.S. federal income tax consequences to Entercom and holders of Entercom’s common stock resulting from the Final Distribution and the Merger?

 

A: Entercom will not recognize any gain or loss for U.S. federal income tax purposes as a result of the Final Distribution or the Merger. Because holders of Entercom Class A Common Stock, the Class B common stock, par value $0.01 per share, of Entercom (the “Entercom Class B Common Stock”), and the Class C common stock, par value $0.01 per share (the “Entercom Class C Common Stock”), of Entercom (collectively, the “Entercom Common Stock”) will not participate in the Final Distribution or the Merger, holders of Entercom Common Stock will not recognize gain or loss upon either the Final Distribution (including the exchange offer) or the Merger as a result of holding Entercom Common Stock.

 

Q: What will holders of Entercom Common Stock receive in the Merger?

 

A: Entercom shareholders will not directly receive any consideration in the Merger. All shares of Entercom Common Stock issued and outstanding immediately before the Merger will remain issued and outstanding after consummation of the Merger. Immediately after the Merger, holders of Entercom Common Stock will continue to own shares in Entercom, which will include CBS Radio.

Following completion of the Transactions, CBS Radio will be a wholly owned subsidiary of Entercom and will continue to hold CBS’s radio business. Immediately after consummation of the Merger, approximately 72% of the outstanding shares of Entercom Common Stock are expected to be held by pre-Merger holders of CBS Common Stock and approximately 28% of the outstanding shares of Entercom Common Stock are expected to be held by pre-Merger holders of Entercom Common Stock, in each case on a fully diluted basis in the aggregate.

 

Q: What are the possible effects on the value of Entercom Class A Common Stock to be received by holders of CBS Class B Common Stock who participate in the exchange offer?

 

A: Holders of CBS Class B Common Stock that participate in the exchange offer will be exchanging their shares of CBS Class B Common Stock for shares of Radio Common Stock at a 7.0% discount per-share value of Entercom Class A Common Stock. CBS determined the discount for holders of CBS Class B Common Stock with the objective of creating an economic incentive to encourage such holders to participate in the exchange offer. During the exchange offer, the existence of this discount could negatively affect the market price of Entercom Class A Common Stock. See “The Exchange Offer—Terms of the Exchange Offer—General.” Prospective buyers of Entercom Class A Common Stock could choose to acquire shares of Entercom Class A Common Stock indirectly by purchasing shares of CBS Class B Common Stock and then tender such shares in the exchange offer. Additionally, certain market participants may use a hedging strategy to manage risk in the context of split-off transactions that involves shorting Entercom Class A Common Stock. Both occurrences, or either individually, could result in a decrease in the price of Entercom Class A Common Stock during the exchange offer. See “Risk Factors—Risks Related to the Transaction—Arbitrage trading during the exchange offer could adversely impact the price of Entercom Class A Common Stock.” However, because the Pricing Mechanism (as defined below) determines the final exchange ratio using VWAPs over the three Valuation Dates, any negative effect on the market price of Entercom Class A Common Stock prior to the Valuation Dates resulting from these strategies would be offset by a higher exchange ratio, thereby reducing the impact on holders of CBS Class B Common Stock participating in the exchange offer. See “The Exchange Offer—Terms of the Exchange Offer—Pricing Mechanism.”

Entercom’s management will also be required to devote a significant amount of time and attention to the process of integrating the operations of Entercom and CBS Radio. If Entercom’s management is not able to effectively manage this process, Entercom’s business could suffer and its stock price may decline. See “Risk Factors” for a further discussion of the material risks associated with the Transactions.

Furthermore, on February 2, 2017, Joseph M. Field, Marie Field and David J. Field entered into a Side Letter Agreement with Entercom (the “Field Family Side Letter Agreement”), pursuant to which such shareholders agreed to certain restrictions on the transfer of their Entercom Common Stock (with exceptions for certain estate planning transfers) for nine months after closing of the Merger. Such shareholders also agreed to automatically convert certain of their shares of Entercom Class B Common Stock into shares of

 

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Entercom Class A Common Stock upon the occurrence of certain events, including the conversion of 3,152,333 shares of Entercom Class B Common Stock upon the closing of the Merger and the conversion of the remaining shares of Entercom Class B Common Stock held by such shareholders if a minimum ownership threshold by such shareholders and their estates is not met, subject in each case to the terms and conditions of the Field Family Side Letter Agreement. Should these conversions occur as described in the Field Family Side Letter Agreement, and as a result of the effect of the conversion of Radio Common Stock into the right to receive Entercom Class A Common Stock in the Merger, following the consummation of the Merger the aggregate voting power of holders of Entercom Class A Common Stock will increase in relation to the aggregate voting power of holders of Entercom Class B Common Stock.

 

Q: How will the Transactions impact the future liquidity and capital resources of Entercom?

 

A: Following completion of the Merger, Entercom will not maintain both the Entercom Credit Agreement and the Radio Credit Agreement. In connection with entry into the Merger Agreement, CBS Radio entered into the Commitment Letter with the Commitment Parties, pursuant to which such Commitment Parties committed to provide, subject to customary closing conditions, up to $500 million of senior secured term loans as an additional tranche under the Radio Credit Agreement. CBS Radio expects to consummate and obtain the Radio Financing substantially simultaneously with the closing of the Merger and the Contribution and to apply the proceeds thereof as described below in order to, among other things, simplify Entercom’s capital structure.

Following consummation of the Merger, Entercom Radio, LLC will use the proceeds of the Radio Financing to pay fees and expenses in connection with the Transactions, redeem Entercom’s preferred stock, repay or cause to be repaid all outstanding amounts under the Entercom Credit Agreement, terminate all commitments under the Entercom Credit Agreement and obtain a release of all security interests for the Entercom Credit Agreement. In connection with the Contribution and the Radio Financing, Entercom Radio, LLC will become a guarantor under the Radio Credit Agreement and the Radio Notes Indenture, and will pledge certain of its assets to secure amounts outstanding under the Radio Credit Agreement.

Entercom anticipates that, following the consummation of the Merger, its primary sources of liquidity for working capital and operating activities, including any future acquisitions, will be cash from operations and borrowings under the Radio Credit Agreement. Entercom expects that these sources of liquidity will be sufficient to make required payments of interest on its outstanding debt and to fund working capital and capital expenditure requirements, including costs relating to the Transactions. See “Information on Entercom—Entercom’s Liquidity and Capital Resources After the Consummation of the Transactions” for a further discussion on Entercom’s future liquidity and capital resources.

 

Q: How do the Transactions impact Entercom’s dividend policy?

 

A: On each of May 25, 2016, August 15, 2016, November 7, 2016, February 8, 2017, May 10, 2017 and July 28, 2017, Entercom’s board of directors declared a cash dividend of $0.075 per share. The dividends were paid on June 15, 2016, September 15, 2016, December 15, 2016, March 15, 2017, June 15, 2017 and September 15, 2017, respectively. Additionally, on July 28, 2017, Entercom announced, as permitted under the Merger Agreement, a special one-time cash dividend of $0.20 per share, which was paid on August 30, 2017. Pursuant to the Merger Agreement, Entercom has agreed not to declare or pay any dividends or make other distributions in respect of any shares of its capital stock (whether in cash, securities or property), except for the declaration and payment of (a) regular quarterly cash dividends (i) not in excess of $0.125 per share of Entercom Common Stock and (ii) pursuant to the terms of the preferred stock of Entercom, par value $0.01 per share, and (b) cash dividends or distributions paid on or with respect to a class of capital stock all of which shares of capital stock of the applicable corporation are owned directly or indirectly by Entercom. The special one-time cash dividend of $0.20 per share is an exception under the Merger Agreement to the restrictions on payment of dividends.

 

Q: Are there any conditions to the consummation of the Transactions?

 

A: Yes. Consummation of the Transactions is subject to a number of conditions, including the consent of the FCC and the expiration or termination of any applicable waiting period (and any extension of any applicable waiting period) under the HSR Act.

 

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The consummation of the Radio Reorganization is subject to a number of conditions, including:

 

    the fulfillment or waiver of the conditions set forth to effect the Merger Agreement (except for the condition that the Radio Reorganization has been consummated and the conditions that by their nature are to be satisfied at the closing of the Merger (the “Closing”)—see “The Merger Agreement—Conditions to the Merger”);

 

    the receipt by CBS of the Distribution Tax Opinion (and, if CBS waives the condition that it receive the Distribution Tax Opinion, then CBS may be required to pay the Tax Opinion Waiver Penalty); and

 

    the receipt of all necessary permits and authorizations under state or federal securities laws.

The consummation of the Final Distribution (including the exchange offer and, if any, the Spin-Off) is subject to a number of conditions, including:

 

    the consummation of the Radio Reorganization;

 

    the receipt by CBS of the Distribution Tax Opinion (and, if CBS waives the condition that it receive the Distribution Tax Opinion, then CBS may be required to pay the Tax Opinion Waiver Penalty);

 

    the receipt of all necessary permits and authorizations under state or federal securities laws;

 

    the preparation and delivery to the holders of record of CBS Common Stock of all information required to be provided by law concerning CBS Radio, its business, operations and management, the Final Distribution and other matters; and

 

    the fulfillment or waiver of the conditions set forth to effect the Merger Agreement (except for the condition that the Final Distribution has been consummated and the conditions that by their nature are to be satisfied at the Closing).

The consummation of the Merger is subject to a number of conditions, including:

 

    consummation of the Radio Reorganization and the Final Distribution in accordance with the Separation Agreement and the Distribution Tax Opinion;

 

    the consent of the FCC for the Transactions and the expiration or termination of any applicable waiting period (and any extension of any applicable waiting period) under the HSR Act, each without the imposition of any Burdensome Restriction (as defined below);

 

    effectiveness of this registration statement and the other registration statements required for the Transactions;

 

    the obtaining by the parties of all necessary permits and authorizations under state securities or “blue sky” laws, the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) relating to the issuance and trading of shares of Entercom Class A Common Stock;

 

    the affirmative approval by a majority of the aggregate voting power represented by the Entercom Common Stock, voting as a single class, to approve the issuance of the Entercom Class A Common Stock;

 

    the affirmative approval by a majority of the aggregate voting power represented by the Entercom Common Stock, voting as a single class, to approve an amendment to the Entercom Articles in order to provide that the Entercom board of directors will be classified after the Merger;

 

    the absence of any law or order prohibiting any of the Transactions; and

 

    other customary conditions.

In addition to these closing conditions, a condition for Entercom to consummate the Merger is CBS Radio’s receipt of the Radio Financing. The exchange offer is not subject to any condition that a minimum number of shares must be tendered in the exchange offer. This document describes these conditions in more detail under “The Merger Agreement—Conditions to the Merger.”

 

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A “Burdensome Restriction” is defined as the imposition of a requirement that (i) Entercom or any of its subsidiaries, including for the purposes of this analysis CBS Radio and any of its subsidiaries, agree to restrictions or limitations on, or divest any of, their assets, business or properties that in the aggregate contributed more than $40 million in EBITDA in calendar year 2016, or (ii) CBS or any of its subsidiaries, excluding for the purposes of this analysis CBS Radio and any of its subsidiaries, agree to restrictions or limitations on or divest any of their assets, properties or businesses (other than reasonable and customary transitional arrangements to facilitate divestitures that Entercom is required to make).

 

Q: When will the Transactions be completed?

 

A: CBS, CBS Radio and Entercom expect to complete the Transactions in the fourth quarter of 2017. However, it is possible that the Transactions could be completed at a later time or not at all. For a discussion of the conditions to the Transactions, see “The Merger Agreement—Conditions to the Merger.”

 

Q: Are there risks associated with the Transactions?

 

A: Yes. The material risks associated with the Transactions are discussed in the section entitled “Risk Factors.” Those risks include the risk that sales of Entercom Class A Common Stock may negatively affect that security’s market price, the risk that the historical financial information of CBS Radio may not be a reliable indicator of its future results, the risk that Entercom may be unable to provide the same types and level of digital services and resources to CBS Radio that historically have been provided by CBS, the risk that Entercom’s business may be adversely affected by the Transactions and the risk that the Merger Agreement may be terminated and the exchange offer may not be consummated.

 

Q: What shareholder approvals are needed in connection with the Transactions?

 

A: After the execution of the Merger Agreement and the Separation Agreement, on February 2, 2017, CBS Broadcasting, which, as of February 2, 2017, was the sole shareholder of CBS Radio, approved the Transactions, including the Merger, the exchange offer and, if necessary, the Spin-Off.

Entercom cannot complete the Transactions unless the proposal relating to the issuance of shares of Entercom Class A Common Stock in the Merger and the amendment of the Entercom Articles in order to provide that the Entercom board of directors will be classified after the Merger is approved by the affirmative vote of a majority of the shares of Entercom Common Stock voting together as a single class represented and voting at the Special Meeting, either in person or by proxy. Concurrently with the execution of the Merger Agreement, Entercom and Joseph M. Field, who holds a controlling voting interest in Entercom, entered into a Voting Agreement, dated as of February 2, 2017 (the “Voting Agreement”). Pursuant to the Voting Agreement, Mr. Field committed to vote in favor of the issuance of shares of Entercom Class A Common Stock in the Merger, an amendment to the Entercom Articles to provide that the Entercom board of directors will be classified after the Merger and not to tender into or vote for any alternative proposal for one year after the termination of the Merger Agreement (but only through the termination provisions identified in the Voting Agreement). As a consequence, each of the approvals sought at the meeting required for the Merger can be approved based solely on the favorable vote of Joseph M. Field. See “Other Agreements and Other Related Party Transactions—Voting Agreement.”

 

Q: Where will the Entercom Class A Common Stock shares to be issued in the Merger be listed?

 

A: Entercom Class A Common Stock is listed on the NYSE under “ETM.” After the consummation of the Transactions, all shares of Entercom Class A Common Stock issued in the Merger, and all other outstanding shares of Entercom Class A Common Stock, will continue to be listed on the NYSE.

 

Q: Where can I find out more information about CBS, Entercom and CBS Radio?

 

A: You can find out more information about CBS, Entercom and CBS Radio by reading this prospectus and, with respect to CBS, from various sources described in “Where You Can Find More Information; Incorporation by Reference.”

 

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SUMMARY

The following summary contains certain information described in more detail elsewhere in this document. It does not contain all the details concerning the Transactions, including information that may be important to you. To better understand the Transactions, you should carefully review this entire document and the documents it refers to. See “Where You Can Find More Information; Incorporation by Reference.”

The Companies

CBS Corporation

CBS Corporation

51 W. 52nd Street

New York, New York 10019

Telephone: (212) 975-4321

CBS Corporation was incorporated in Delaware in 1986 and is referred to in this document as CBS. CBS operates businesses which span the media and entertainment industries, including the CBS Television Network, cable networks, content production and distribution, television and radio stations, Internet-based businesses and consumer publishing. CBS’s principal offices are located at 51 W. 52nd Street, New York, New York 10019.

CBS Radio Inc.

CBS Radio Inc.

1271 Avenue of the Americas, Fl. 44

New York, New York 10020

Telephone: (212) 649-9600

CBS Radio Inc., a Delaware corporation referred to in this document as CBS Radio, is an indirect wholly owned subsidiary of CBS. CBS Radio is a large-market focused, multi-platform national media company with a local footprint of 117 radio stations and digital properties in 26 radio markets, including all of the top 10 radio markets and 19 of the top 25 radio markets. CBS Radio’s programming focuses on three areas of content, Sports, News and Music & Entertainment, and the company also distributes content through an integrated suite of digital properties, including market-focused local websites, Radio.com (a streaming service), Eventful (an event discovery platform) and Play.it (a podcast network). In addition, CBS Radio produces live events, including concerts, multi-day musical festivals, speaker series, trade shows and sports-related events.

Prior to February 2, 2017, CBS transferred, or caused its subsidiaries to transfer, substantially all of the assets and liabilities of CBS’s radio business to CBS Radio. CBS will retain all liabilities related to the operations of the business of CBS other than those related to CBS’s radio business, environmental liabilities arising out of or relating to the occurrence or existence of certain actions of CBS Radio prior to the date of the Merger, costs incurred by CBS Radio and certain of its subsidiaries in connection with the Transactions and securities liabilities from CBS equity and debt holders (unless related to Entercom’s SEC filings or statements provided by Entercom).

Entercom Communications Corp.

Entercom Communications Corp.

401 E. City Avenue, Suite 809

Bala Cynwyd, Pennsylvania 19004

Telephone: (610) 660-5610

Entercom Communications Corp. is the fourth-largest radio broadcasting company in the United States with a portfolio of 125 radio stations in top markets across the country. Entercom is headquartered in the Philadelphia, Pennsylvania metropolitan area and is and has been a Pennsylvania corporation since its organization in 1968.

 



 

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Constitution Merger Sub Corp.

Constitution Merger Sub Corp.

c/o Entercom Communications Corp.

401 E. City Avenue, Suite 809

Bala Cynwyd, Pennsylvania 19004

Telephone: (610) 660-5610

Constitution Merger Sub Corp., a Delaware corporation referred to in this document as Merger Sub, is a newly formed, direct wholly owned subsidiary of Entercom that was organized specifically for the purpose of completing the Merger. Merger Sub has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and in connection with the Transactions.

The Transactions

On February 2, 2017, CBS and Entercom, along with CBS Radio and Merger Sub, entered into the Merger Agreement, and CBS and CBS Radio entered into the Separation Agreement, which together provide for the combination of Entercom’s business and CBS’s radio business. Prior to February 2, 2017, CBS transferred, or caused its subsidiaries to transfer, to CBS Radio or one or more of its subsidiaries substantially all of the assets and liabilities of CBS’s radio business.

Prior to the Merger, CBS, certain of its subsidiaries and CBS Radio will complete the Radio Reorganization. In the Internal Distributions, CBS Broadcasting will distribute all of the outstanding equity of CBS Radio to Westinghouse, and Westinghouse will then distribute all of the outstanding equity of CBS Radio to CBS. Following the consummation of the Internal Distributions, CBS Radio will then effect the Stock Split.

Following the consummation of the Radio Reorganization, CBS will consummate an offer to exchange all of the outstanding shares of Radio Common Stock for outstanding shares of CBS Class B Common Stock. CBS anticipates that the final exchange ratio will be set by the Pricing Mechanism such that the exchange offer will be fully- or over-subscribed by holders of CBS Class B Common Stock. Subject to the terms and conditions of the Merger Agreement and the Separation Agreement, in the event that holders of CBS Class B Common Stock subscribe for less than all of the outstanding shares of Radio Common Stock held by CBS in the exchange offer (or if the exchange offer is consummated but not all of the shares of Radio Common Stock held by CBS are exchanged due to the upper limit being in effect), CBS will distribute the remaining outstanding shares of Radio Common Stock held by CBS on a pro rata basis to holders of CBS Common Stock whose shares of CBS Common Stock remain outstanding after consummation of the exchange offer in the Spin-Off, which, if necessary, and together with the exchange offer, is referred to in this document as the Final Distribution. The Spin-Off will only occur if the exchange offer is consummated but not fully subscribed (or if the exchange offer is consummated but not all of the shares of Radio Common Stock held by CBS are exchanged due to the upper limit being in effect), meaning that not all the outstanding shares of Radio Common Stock held by CBS will be distributed in the exchange offer.

Immediately after the consummation of the Final Distribution, Merger Sub will merge with and into CBS Radio, with CBS Radio surviving as a wholly owned subsidiary of Entercom. In the Merger, all outstanding shares of Radio Common Stock will be converted into the right to receive an equal number of shares of Entercom Class A Common Stock, as described in the section entitled “The Merger Agreement—Merger Consideration.” Immediately after the Merger:

 

   

approximately 72% of the outstanding shares of Entercom Common Stock are expected to be held by pre-Merger holders of CBS Common Stock, including CBS employees who held certain CBS stock-based compensation rights that will be converted into the right to receive Entercom Class A Common Stock, on a fully diluted basis in the aggregate, and approximately 28% of the outstanding shares of

 



 

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Entercom Common Stock are expected to be held by pre-Merger holders of Entercom Common Stock, including Entercom employees who held Entercom stock-based compensation rights, on a fully diluted basis in the aggregate; and

 

    Entercom will contribute all of the issued and outstanding equity interests of Entercom Radio, LLC to CBS Radio, such that Entercom Radio, LLC will become a wholly owned subsidiary of CBS Radio.

Entercom Radio, LLC will then repay or cause to be repaid its debts under the Entercom Credit Agreement.

Entercom will issue 101,407,494 shares of Entercom Class A Common Stock in the Merger. In addition, the parties estimate that approximately 3,179,976 shares will be eligible for issuance in respect of equity awards held by employees of CBS Radio in consideration of the replacement of their restricted stock units and stock options in CBS with those of Entercom. With respect to such equity awards held by employees of CBS Radio, Entercom will convert outstanding options and restricted stock units in respect of CBS Class B Common Stock into options and restricted stock units, respectively, in respect of Entercom Class A Common Stock. For additional information, see “The Exchange Offer—Treatment of Specified CBS Compensatory Equity-Based Awards Held by Current CBS Radio Employees.”

In connection with the entry into the Merger Agreement, CBS Radio entered into the Commitment Letter with the Commitment Parties, pursuant to which the Commitment Parties committed to provide, subject to customary closing conditions, the Radio Financing that consists of up to $500 million of senior secured term loans as an additional tranche under the Radio Credit Agreement, the proceeds of which may be used by Entercom upon or following consummation of the Merger to refinance certain existing indebtedness of Entercom, to redeem Entercom’s preferred stock and to pay fees and expenses in connection with the Transactions. CBS Radio expects to consummate and obtain the Radio Financing substantially simultaneously with the closing of the Merger and the Contribution and to apply the proceeds thereof as described in the preceding sentence in order to, among other things, simplify Entercom’s capital structure.

After the Merger, Entercom will own and operate CBS’s radio business through CBS Radio, which will be Entercom’s wholly owned subsidiary, and will also continue to own and operate its current businesses. Entercom Class A Common Stock issued in the Merger will be listed on the NYSE under the current trading symbol for Entercom Class A Common Stock, “ETM.”

Below is a step-by-step description of the sequence of material events relating to the Transactions.

Step 1 CBS Radio Reorganization

At the time of the signing of the Merger Agreement on February 2, 2017, CBS directly owned 100% of the equity of Westinghouse, Westinghouse directly owned 100% of the equity of CBS Broadcasting and CBS Broadcasting directly owned 100% of the equity of CBS Radio. CBS Broadcasting will distribute all of the outstanding equity of CBS Radio to Westinghouse. Westinghouse will then distribute all of the outstanding equity of CBS Radio to CBS. CBS Radio will then complete the Stock Split by (a) taking all necessary actions to ensure that the Radio Series 1 Common Stock and Radio Series 2 Common Stock are combined into the Radio New Common Stock, (b) authorizing the issuance of at least 101,407,494 shares of Radio Common Stock and (c) effecting a stock split of the outstanding shares of Radio New Common Stock, as a result of which, as of immediately prior to the effective time of the Final Distribution, 101,407,494 shares of Radio New Common Stock will be issued and outstanding, all of which will be owned directly by CBS.

Step 2 Final Distribution—Exchange Offer and, if necessary, Spin-Off

CBS will offer to holders of CBS Class B Common Stock the right to exchange all or a portion of their shares of CBS Class B Common Stock for shares of Radio Common Stock in the exchange offer.-

 



 

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Participation in the exchange offer is voluntary, and it is expected that CBS, CBS Radio and Entercom will not make any recommendation about whether holders of CBS Common Stock should participate in the exchange offer.

If the exchange offer is consummated but is not fully subscribed (or if the exchange offer is consummated but not all of the shares of Radio Common Stock held by CBS are exchanged due to the upper limit being in effect), CBS will distribute its remaining shares of Radio Common Stock held by CBS in the Spin-Off on a pro rata basis to holders of CBS Common Stock whose shares remain outstanding after consummation of the exchange offer, based on the relative economic interest of each such holder in the number of total outstanding shares of CBS Common Stock, excluding those shares of CBS Class B Common Stock that have been validly tendered and not withdrawn in the exchange offer. Such Spin-Off, if necessary, will not have a different impact on holders of different classes of CBS Common Stock, as holders of each outstanding share of CBS Class B Common Stock not validly tendered (or validly tendered and validly withdrawn) in the exchange offer and each outstanding share of CBS Class A Common Stock will receive an equal number of shares of Radio Common Stock in any Spin-Off distribution. Any holder of CBS Common Stock who validly tenders (and does not properly withdraw) shares of CBS Class B Common Stock for shares of Radio Common Stock in the exchange offer will waive their rights with respect to such validly tendered shares of CBS Class B Common Stock (but not with respect to any other shares that are not validly tendered or validly tendered and validly withdrawn in the exchange offer) to receive, and forfeit any rights to, shares of Radio Common Stock distributed in the Spin-Off. The Spin-Off will only occur if the exchange offer is consummated but not fully subscribed (or if the exchange offer is consummated but not all of the shares of Radio Common Stock held by CBS are exchanged due to the upper limit being in effect), meaning that not all the outstanding shares of Radio Common Stock held by CBS will be distributed in the exchange offer. If there is a pro rata distribution, the exchange agent will calculate the exact number of shares of Radio Common Stock not exchanged in the exchange offer and to be distributed on a pro rata basis, and the number of shares of Entercom Class A Common Stock into which the remaining shares of Radio Common Stock will be converted in the Merger will be transferred to holders of CBS Common Stock (after giving effect to the consummation of the Final Distribution) as promptly as practicable thereafter.

The exchange agent will hold, for the account of the relevant holders of CBS Common Stock, the global certificate(s) representing all of the outstanding shares of Radio Common Stock, pending the consummation of the Merger. Shares of Radio Common Stock will not be able to be traded during this period.

Step 3 Merger

Immediately after the Final Distribution, Merger Sub will merge with and into CBS Radio, whereby the separate corporate existence of Merger Sub will cease and CBS Radio will continue as the surviving company and as a wholly owned subsidiary of Entercom. In the Merger, all outstanding shares of Radio Common Stock will be converted into the right to receive an equal number of shares of Entercom Class A Common Stock, as described in the section entitled “The Merger Agreement—Merger Consideration.”

Immediately after consummation of the Merger, approximately 72% of the outstanding shares of Entercom Common Stock are expected to be held by pre-Merger holders of CBS Common Stock, including CBS employees who held certain CBS stock-based compensation rights that will be converted into the right to receive Entercom Class A Common Stock, on a fully diluted basis in the aggregate, and approximately 28% of the outstanding shares of Entercom Common Stock are expected to be held by pre-Merger holders of Entercom Common Stock, including Entercom employees who held Entercom stock-based compensation rights, on a fully diluted basis in the aggregate, subject to potential adjustment under limited circumstances as described in the section entitled “The Merger Agreement—Merger Consideration.”

 



 

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Step 4 Contribution of Entercom Radio, LLC to CBS Radio

Following the Merger, Entercom will contribute all of the issued and outstanding equity interests of Entercom Radio, LLC to CBS Radio, such that Entercom Radio, LLC will become a wholly owned subsidiary of CBS Radio. Entercom Radio, LLC is a subsidiary of Entercom and owns and operates the radio stations of Entercom. Entercom Radio, LLC will then use proceeds of the Radio Financing, contributed to it by CBS Radio, to repay or cause to be repaid all outstanding amounts under the Entercom Credit Agreement, terminate all commitments under the Entercom Credit Agreement and obtain a release of all security interests for the Entercom Credit Agreement. In connection with such contribution, Entercom Radio, LLC will become a guarantor under the Radio Credit Agreement and the Radio Notes Indenture and will pledge certain of its assets to secure amounts outstanding under the Radio Credit Agreement.

Step 5 Incurrence of Debt

In connection with the entry into the Merger Agreement, CBS Radio entered into the Commitment Letter with the Commitment Parties, pursuant to which the Commitment Parties committed to provide, subject to customary closing conditions, the Radio Financing, which consists of up to $500 million of senior secured term loans as an additional tranche under the Radio Credit Agreement, the proceeds of which may be used by Entercom upon or following consummation of the Merger to refinance certain existing indebtedness of Entercom, to redeem Entercom’s preferred stock and to pay fees and expenses in connection with the Transactions. CBS Radio expects to consummate and obtain the Radio Financing substantially simultaneously with the closing of the Merger and the Contribution and to apply the proceeds thereof as described in the preceding sentence in order to, among other things, simplify Entercom’s capital structure.

 



 

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LOGO

After completion of all of the steps described above, CBS Radio will be a wholly owned subsidiary of Entercom and will continue to hold CBS’s radio business. Immediately after consummation of the Merger, approximately 72% of the outstanding shares of Entercom Common Stock are expected to be held by pre-Merger holders of CBS Common Stock, including CBS employees who held certain CBS stock-based compensation rights that will be converted into the right to receive Entercom Class A Common Stock, on a fully diluted basis in the aggregate, and approximately 28% of the outstanding shares of Entercom Common Stock are expected to be held by pre-Merger holders of Entercom Common Stock, including Entercom employees who held Entercom

 



 

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stock-based compensation rights, on a fully diluted basis in the aggregate, subject to potential adjustment under limited circumstances as described in the section entitled “The Merger Agreement—Merger Consideration.” In connection with the Transactions, Entercom, Merger Sub, CBS and/or CBS Radio, or their applicable subsidiaries, have entered into or will enter into the Ancillary Agreements (as defined below) relating to, among other things, certain tax matters, the provision of certain transition services and digital services during a transition period following the consummation of the Transactions and licensing of certain intellectual property. See “Other Agreements and Other Related Party Transactions.”

Recent Developments

As a result of the Merger, Entercom will own radio stations in seven markets in excess of the limits set forth in the FCC’s local radio ownership rule. In order to comply with this FCC rule, and/or to obtain clearance for the Merger from the Antitrust Division of the U.S. Department of Justice, Entercom has proposed to divest a total of 19 radio stations in such markets, consisting of eight Entercom stations and 11 CBS Radio stations. In connection with such proposed divestitures, as of October 10, 2017, Entercom has entered into a binding agreement with Educational Media Foundation for the sale of stations in three markets: Los Angeles, San Diego and Wilkes Barre. In addition, Entercom has reached preliminary, non-binding agreements with other third parties who will either acquire or operate stations in the remaining four markets.

As a result of these collective transactions, Entercom anticipates that it will receive approximately $265 million in gross cash proceeds in addition to 11 stations in three markets. Entercom cannot guarantee that the non-binding agreements will result in binding agreements or generate the anticipated level of gross cash proceeds. To the extent that any radio stations required to be divested are not divested to third parties as of the closing of the Merger, the stations will be transferred to a divestiture trust, and CBS and Entercom have proposed measures to ensure that these stations will be held separately until they are divested to third parties following the closing of the Merger.

CBS’s Reasons for the Transactions

In reaching its decision to approve the Merger Agreement, the Separation Agreement, the other Transaction Agreements (as defined below) and the transactions contemplated thereby, including the Transactions, CBS considered a number of factors, including but not limited to the following. See “The Transactions—Background of the Transactions.”

 

    CBS’s knowledge of CBS’s, CBS Radio’s and Entercom’s businesses, financial conditions, results of operations, industries and competitive environments, taking into account the results of CBS’s due diligence review of Entercom;

 

    CBS’s expectation that, upon completion of the Transactions, former holders of CBS Common Stock will receive approximately 101 million shares of Entercom Class A Common Stock, or approximately 72% of all outstanding shares of Entercom Common Stock when also including CBS employees who held certain CBS stock-based compensation rights that will be converted into the right to receive Entercom Class A Common Stock, on a fully diluted basis in the aggregate, which would allow such former holders of CBS Common Stock to participate in the potential benefits and synergies of the combined company after the consummation of the Transactions;

 

    CBS’s exploration of strategic options for CBS Radio and the belief of CBS, following such exploration, that the Transactions could provide more value to CBS and CBS’s stockholders than other potential strategic options for CBS Radio;

 



 

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    CBS’s expectation that the Transactions generally would result in a tax-efficient disposition of CBS Radio by CBS;

 

    the ability of each of CBS’s and Entercom’s management teams to focus on their respective core businesses following the Transactions, allowing each management team to pursue the development of business strategies most appropriate to their respective operations; and

 

    other reasons, including those set forth in the section entitled “The Transactions—CBS’s Reasons for the Transactions.”

Entercom’s Reasons for the Transactions

In evaluating the Merger, the Entercom board of directors consulted with Entercom’s management and legal and financial advisors and carefully considered a number of factors, including, but not limited to, the following significant factors which generally supported its decision to unanimously approve the Merger Agreement and the transactions contemplated thereby, including the Merger, and recommend that the Entercom shareholders approve the issuance of the Entercom Class A Common Stock and the amendment to the Entercom Articles in connection therewith:

 

    the opportunity to create a leading local media and entertainment company with a preeminent radio platform covering 23 of the country’s top 25 markets (without giving effect to any potential required divestitures), plus robust digital and events platforms, that will be better positioned to harness the strengths and advantages of the radio industry and more effectively compete with other media sources for advertising revenues;

 

    the expectation that, as a result of its increased scale, the combined company will have the size, financial resources and capabilities to more successfully meet the needs of the largest advertising clients and agencies and compete more effectively with larger media companies;

 

    the possibility to create increased value for shareholders of the combined company as a result of scale efficiencies allowing for the consolidation and more efficient deployment of resources;

 

    the expectation that the combined company will have an attractive financial profile, robust cash flow generation and an attractive dividend;

 

    that the management team of the combined company following the consummation of the Merger will consist of proven executive officers and other employees of both Entercom and CBS Radio led by David Field as President & Chief Executive Officer, allowing the combined company to benefit from such individuals’ experience driving growth, innovation and shareholder value and strong record of successful integrations of various acquisitions; and

 

    other reasons, including those set forth in the section entitled “The Transactions—Entercom’s Reasons for the Transactions.”

Opinions of Entercom’s Financial Advisors

Opinion of Morgan Stanley & Co. LLC

Entercom retained Morgan Stanley & Co. LLC (referred to in this document as “Morgan Stanley”) to act as its financial advisor and to provide a fairness opinion in connection with the Transactions, including the Merger. At the meeting of Entercom’s board of directors on February 1, 2017, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing on February 2, 2017, that, as of such date, and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in the written opinion, the exchange ratio pursuant to the Merger Agreement (which represents the number of shares of Entercom Class A Common Stock to be issued in the Merger in exchange for each share of Radio Common Stock, after giving effect to the Radio Reorganization) was fair from a financial point of view to Entercom.

 



 

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The full text of the written opinion of Morgan Stanley, dated as of February 2, 2017, which sets forth, among other things, the assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this document as Annex A-1. Entercom shareholders are encouraged to read the opinion carefully and in its entirety. The Morgan Stanley opinion was rendered for the benefit of Entercom’s board of directors, in its capacity as such, and addressed only the fairness from a financial point of view to Entercom of the exchange ratio pursuant to the Merger Agreement as of the date of the opinion. Morgan Stanley’s opinion did not address any other aspect of the Transactions, including the Merger, including the prices at which Entercom Class A Common Stock will trade following consummation of the Merger or at any time, or the fairness of the amount or nature of the compensation to any of CBS’s or Entercom’s officers, directors or employees, or any class of such persons, whether relative to the exchange ratio or otherwise. The opinion was addressed to, and rendered for the benefit of, Entercom’s board of directors and was not intended to, and did not, constitute advice or a recommendation to any shareholder of Entercom or any other person as to how such shareholder or other person should vote with respect to the Merger or otherwise act with respect to the Transactions or any other matter. The summary of the opinion of Morgan Stanley set forth in this document is qualified in its entirety by reference to the full text of the opinion.

Opinion of Centerview Partners LLC

Entercom retained Centerview Partners LLC, which is referred to in this document as “Centerview,” as financial advisor to the board of directors of Entercom in connection with the proposed Merger and the other transactions contemplated by the Merger Agreement (including the Radio Reorganization, the Exchange Offer, and the Distributions, each as defined in Centerview’s opinion), which are collectively referred to as the “Transaction” throughout this section and the summary of Centerview’s opinion below under the caption “Opinion of Centerview Partners LLC”. In connection with this engagement, the board of directors of Entercom requested that Centerview evaluate the fairness, from a financial point of view, to Entercom of the exchange ratio provided for pursuant to the Merger Agreement (which represents the number of shares of Entercom Class A Common Stock to be issued in the Merger in exchange for each share of Radio Common Stock after giving effect to the Radio Reorganization). On February 1, 2017, Centerview rendered to the board of directors of Entercom its oral opinion, which was subsequently confirmed by delivery of a written opinion dated February 2, 2017, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the exchange ratio provided for pursuant to the Merger Agreement was fair, from a financial point of view, to Entercom.

The full text of Centerview’s written opinion, dated February 2, 2017, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex A-2 and is incorporated herein by reference. Centerview’s financial advisory services and opinion were provided for the information and assistance of the board of directors of Entercom (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Transaction and Centerview’s opinion addressed only the fairness, from a financial point of view, as of the date thereof, to Entercom of the exchange ratio provided for pursuant to the Merger Agreement. Centerview’s opinion did not address any other term or aspect of the Agreements (as defined in Centerview’s opinion) or the Transaction and does not constitute a recommendation to any stockholder of Entercom or any other person as to how such stockholder or other person should vote with respect to the Merger or otherwise act with respect to the Transaction or any other matter.

The full text of Centerview’s written opinion should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.

 



 

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Number of Shares of Radio Common Stock to Be Distributed to Holders of CBS Class B Common Stock

CBS is offering to exchange all shares of Radio Common Stock for shares of CBS Class B Common Stock validly tendered and not properly withdrawn. CBS Radio will authorize the issuance of a number of shares of Radio Common Stock such that there will be 101,407,494 shares of Radio Common Stock outstanding immediately prior to the effective time of the Merger.

Terms of the Exchange Offer

CBS is offering holders of shares of CBS Class B Common Stock the opportunity to exchange their shares for shares of Radio Common Stock. You may tender all, some or none of your shares of CBS Class B Common Stock. This document and related documents are being sent to persons who directly held shares of CBS Class B Common Stock on October 11, 2017 and brokers, banks and similar persons whose names or the names of whose nominees appear on CBS’s stockholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of CBS Class B Common Stock.

CBS Class B Common Stock validly tendered and not properly withdrawn will be accepted for exchange at the exchange ratio determined as described under “The Exchange Offer—Terms of the Exchange Offer,” on the terms and conditions of the exchange offer and subject to the limitations described below, including the proration provisions. CBS will promptly return any shares of CBS Class B Common Stock that are not accepted for exchange following the expiration of the exchange offer and the determination of the final proration factor, if any, described below.

For the purposes of illustration, the table below indicates the number of shares of Radio Common Stock that you would receive per share of CBS Class B Common Stock you validly tender, calculated on the basis described under “The Exchange Offer—Terms of the Exchange Offer” and taking into account the upper limit, assuming a range of averages of the daily VWAP of CBS Class B Common Stock and Entercom Class A Common Stock on the Valuation Dates. The first row of the table below shows the indicative calculated per-share values of CBS Class B Common Stock and Radio Common Stock and the indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on October 18, 2017, based on the daily VWAPs of CBS Class B Common Stock and Entercom Class A Common Stock on October 16, 2017, October 17, 2017 and October 18, 2017. The table also shows the effects of a 10% increase or decrease in either or both the calculated per-share values of CBS Class B Common Stock and Radio Common Stock based on changes relative to the values as of October 18, 2017.

 

CBS Class B

Common Stock

  Entercom Class A
Common Stock
  Calculated
per-share value of
CBS Class B
Common Stock
    Calculated
per-share
value of Radio
Common Stock
    Shares of
Radio
Common Stock
per CBS
Class B
Common Stock
tendered
    Calculated
Value Ratio (a)
    Shares of
Entercom
Class A
Common Stock
per CBS
Class B
Common Stock
Tendered
 

As of October 18, 2017

  As of October 18,
2017
  $ 56.9122     $ 11.6362       5.2591       1.08       5.2591  

(1) Down 10%

  Up 10%   $ 51.2210     $ 12.7999       4.3029       1.08       4.3029  

(2) Down 10%

  Unchanged   $ 51.2210     $ 11.6362       4.7332       1.08       4.7332  

(3) Down 10%

  Down 10%   $ 51.2210     $ 10.4726       5.2591       1.08       5.2591  

(4) Unchanged

  Up 10%   $ 56.9122     $ 12.7999       4.7810       1.08       4.7810  

(5) Unchanged

  Down 10% (b)   $ 56.9122     $ 10.4726       5.7466       1.06       5.7466  

(6) Up 10%

  Up 10%   $ 62.6034     $ 12.7999       5.2591       1.08       5.2591  

(7) Up 10%

  Unchanged (b)   $ 62.6034     $ 11.6362       5.7466       1.07       5.7466  

(8) Up 10%

  Down 10% (b)   $ 62.6034     $ 10.4726       5.7466       0.96       5.7466  

 



 

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(a) The Calculated Value Ratio equals (i) the calculated per-share value of Radio Common Stock multiplied by the exchange ratio, divided by (ii) the calculated per-share value of CBS Class B Common Stock.
(b) In scenarios 5, 7 and 8, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 5.8434, 5.7850 and 6.4278 shares, respectively, of Radio Common Stock per share of CBS Class B Common Stock tendered. In this scenario, CBS would announce that the upper limit on the number of shares that can be received for each share of CBS Class B Common Stock tendered is in effect when CBS announces the final exchange ratio at 11:59 p.m., New York City time, at the end of the second trading day prior to the expiration date of the exchange offer.

During the three-month period of July 18, 2017 through October 18, 2017, the highest closing price of CBS Class B Common Stock on the NYSE was $67.56 and the lowest closing price of Entercom Class A Common Stock on the NYSE was $9.50. If the calculated per-share values of CBS Class B Common Stock and Radio Common Stock equaled these closing prices, you would have received only the limit of 5.7466 shares of Radio Common Stock for each share of CBS Class B Common Stock tendered, and the value of such shares of Radio Common Stock, based on the Entercom Class A Common Stock price, would have been approximately $0.81 of Radio Common Stock for each $1.00 of CBS Class B Common Stock accepted for exchange.

During the exchange offer, the daily VWAP will be as reported by Bloomberg L.P. as displayed under the heading Bloomberg VWAP on the Bloomberg pages “CBS UN<Equity>AQR” with respect to CBS Class B Common Stock and “ETM UN<Equity>AQR” with respect to Radio Common Stock (or any other recognized quotation source selected by CBS in its sole discretion if such pages are not available or are manifestly erroneous). The daily VWAPs of CBS Class B Common Stock and Entercom Class A Common Stock obtained from Bloomberg L.P. may be different from other sources of volume-weighted average prices or investors’ or other security holders’ own calculations. CBS will determine the simple arithmetic average of the VWAPs of each stock based on prices provided by Bloomberg L.P., and such determination will be final.

Termination; Extension

The exchange offer, and your withdrawal rights, will expire at 11:59 p.m., New York City time, on November 16, 2017, unless the exchange offer is extended. In addition, shares of CBS Class B Common Stock tendered pursuant to the exchange offer may be withdrawn after December 15, 2017 (i.e., after the expiration of 40 business days from the commencement of the exchange offer), if CBS does not accept your shares of CBS Class B Common Stock pursuant to the exchange offer by such date. You must tender your shares of CBS Class B Common Stock prior to this time if you want to participate in the exchange offer. CBS may extend or terminate the exchange offer as described in this document. If CBS decides to extend the exchange offer, the Valuation Dates will be reset to the period of three consecutive trading days ending on and including the second trading day preceding the expiration date, as may be extended.

Conditions for Consummation of the Final Distribution

CBS’s obligation to exchange shares of Radio Common Stock for shares of CBS Class B Common Stock is subject to the conditions listed under “The Exchange Offer—Conditions for Consummation of the Final Distribution.

All conditions to the exchange offer must be satisfied or waived at or prior to the expiration date of the exchange offer.

The consummation of the Final Distribution (including the exchange offer and, if necessary, the Spin-Off), is subject to a number of conditions that are outside the control of CBS, including:

 

    the receipt by CBS of the Distribution Tax Opinion (and, if CBS waives the condition that it receive the Distribution Tax Opinion, then CBS may be required to pay the Tax Opinion Waiver Penalty);

 



 

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    the receipt of all necessary permits and authorizations under state or federal securities laws;

 

    the consent of the FCC for the Transactions and the expiration or termination of any applicable waiting period (and any extension of any applicable waiting period) under the HSR Act, each without the imposition of any Burdensome Restriction; and

 

    the fulfillment or waiver of the conditions set forth to effect the Merger Agreement (except for the condition that the Final Distribution has been consummated and the conditions that by their nature are to be satisfied at the Closing).

The exchange offer is not subject to any condition that a minimum number of shares must be tendered into the exchange offer. For a description of the material conditions precedent to the Merger, see “The Merger Agreement—Conditions to the Merger.”

CBS may waive certain of the conditions to the exchange offer prior to the expiration of the exchange offer, but if CBS waives the condition that it receive the Distribution Tax Opinion, then CBS may be required to pay the Tax Opinion Waiver Penalty. Entercom has no right to waive any of the conditions to the exchange offer.

Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of CBS Class B Common Stock

If, upon the expiration of the exchange offer, holders of CBS Class B Common Stock have validly tendered more shares of CBS Class B Common Stock than CBS is able to accept for exchange (taking into account the exchange ratio and the total number of shares of Radio Common Stock owned by CBS), CBS will accept for exchange the shares of CBS Class B Common Stock validly tendered and not properly withdrawn by each tendering stockholder on a pro rata basis, based on the proportion that the total number of shares of CBS Class B Common Stock to be accepted, except for tenders of odd-lots, as described below, bears to the total number of shares of CBS Class B Common Stock validly tendered and not properly withdrawn (rounded to the nearest whole number of shares of CBS Class B Common Stock, and subject to any adjustment necessary to ensure the exchange of all shares of Radio Common Stock owned by CBS), except for tenders of odd-lots, as described below.

If applicable, CBS will announce the proration factor at www.cbscorpexchange.com and separately by press release promptly after the expiration date. Upon determining the number of shares of CBS Class B Common Stock validly tendered for exchange and not properly withdrawn, CBS will announce the final results of the exchange offer, including the final proration factor, if any.

Beneficial holders (other than plan participants in the CBS Savings Plans) of odd-lots who validly tender all of their shares will not be subject to proration if the exchange offer is oversubscribed and if CBS completes the exchange offer (those who own less than 100 shares but do not tender all of their shares will be subject to proration). In addition, shares held on behalf of participants in the CBS Savings Plans (each of which plans holds more than 100 shares of CBS Class B Common Stock) will be subject to proration.

Fractional Shares

Immediately following the consummation of the Final Distribution, Merger Sub will be merged with and into CBS Radio, whereby the separate corporate existence of Merger Sub will cease and CBS Radio will continue as the surviving company and a wholly owned subsidiary of Entercom. Each outstanding share of Radio Common Stock will be converted into the right to receive one share of Entercom Class A Common Stock in the Merger. In this conversion of shares of Radio Common Stock into the right to receive shares of Entercom Class A Common Stock, no fractional shares of Entercom Class A Common Stock will be delivered to holders of Radio Common Stock in the Merger.

 



 

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All fractional shares of Entercom Class A Common Stock that a holder of shares of Radio Common Stock would otherwise be entitled to receive as a result of the Merger will be aggregated by Entercom’s transfer agent. The transfer agent will cause the whole shares obtained thereby to be sold on behalf of such holders of shares of Radio Common Stock that would otherwise be entitled to receive such fractional shares of Entercom Class A Common Stock in the Merger in the open market or otherwise as reasonably directed by CBS, and in no case later than 10 business days after the Merger. The transfer agent will make available the net proceeds thereof, after deducting any required withholding taxes and brokerage charges, commissions and transfer taxes, on a pro rata basis, without interest, as soon as practicable to the holders of Radio Common Stock that would otherwise be entitled to receive such fractional shares of Entercom Class A Common Stock in the Merger.

Procedures for Tendering

For you to validly tender your shares of CBS Class B Common Stock pursuant to the exchange offer, prior to the expiration of the exchange offer:

 

    If you hold shares of CBS Class B Common Stock through the DRS, you must deliver to the exchange agent at an address listed on the letter of transmittal for CBS Class B Common Stock you will receive, a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other required documents.

 

    If you hold shares of CBS Class B Common Stock through a broker, you should receive instructions from your broker on how to participate in the exchange offer. In this situation, do not complete a letter of transmittal to tender your CBS Class B Common Stock. Please contact your broker directly if you have not yet received instructions. Some financial institutions may also effect tenders by book-entry transfer through The Depository Trust Company.

 

    Participants in the CBS Savings Plans should follow the special instructions that are being sent to them by the plan administrator. Such participants should not use the letter of transmittal to direct the tender of shares of CBS Class B Common Stock held in these plans. As described in the special instructions, such participants may direct the applicable plan trustee to tender all, some or none of the shares of CBS Class B Common Stock allocable to their CBS Savings Plan accounts, subject to certain limitations set forth in any instructions provided by the plan administrator. To allow sufficient time for the tender of shares by the trustee of the applicable CBS Savings Plan, tendering holders must provide the tabulator for the trustee of the applicable CBS Savings Plan with the requisite instructions so that such instructions can be received by or processed before, as applicable, 1:00 p.m., New York City time, on November 10, 2017, unless the exchange offer is extended. If the exchange offer is extended, and if administratively feasible, the deadline for receipt of participants’ directions may also be extended.

Delivery of Shares of Radio Common Stock

Upon consummation of the Final Distribution, CBS will irrevocably deliver to the exchange agent a global certificate representing all of the Radio Common Stock being exchanged in the exchange offer, with irrevocable instructions to hold shares of Radio Common Stock in trust for the holders of CBS Class B Common Stock who validly tendered their shares in the exchange offer or are entitled to receive shares in the Spin-Off, if any. Entercom will deposit with the transfer agent for the benefit of persons who received shares of Radio Common Stock in the exchange offer book-entry authorizations representing shares of Entercom Class A Common Stock, with irrevocable instructions to hold the shares of Entercom Class A Common Stock in trust for the holders of Radio Common Stock. Shares of Entercom Class A Common Stock will be delivered immediately following the expiration of the exchange offer, the acceptance of CBS Class B Common Stock for exchange, the determination of the final proration factor, if any, and the effectiveness of the Merger, pursuant to the procedures determined by the exchange agent and CBS’s transfer agent. See “The Exchange Offer—Terms of the Exchange Offer—Exchange of Shares of CBS Class B Common Stock.”

 



 

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Withdrawal Rights

You may withdraw your tendered CBS Class B Common Stock at any time prior to the expiration of the exchange offer by following the procedures described herein. In addition, shares of CBS Class B Common Stock tendered pursuant to the exchange offer may be withdrawn after December 15, 2017 (i.e., after the expiration of 40 business days from the commencement of the exchange offer), if CBS does not accept your shares of CBS Class B Common Stock pursuant to the exchange offer by such date. If you change your mind again, you may re-tender your CBS Class B Common Stock by again following the exchange offer procedures prior to the expiration of the exchange offer.

CBS Class A Common Stock

CBS is only offering to exchange shares of Radio Common Stock for outstanding shares of CBS Class B Common Stock that are validly tendered and not properly withdrawn. However, if you hold CBS Class A Common Stock, you can participate in the exchange offer, but only by either:

 

    converting your shares of CBS Class A Common Stock into an equal number of shares of CBS Class B Common Stock in advance of the expiration of the exchange offer and tendering such shares of CBS Class B Common Stock received upon conversion in advance of the expiration date; or

 

    conditionally converting your shares of CBS Class A Common Stock into an equal number of shares of CBS Class B Common Stock pursuant to the procedures set forth herein by executing and delivering to the exchange agent for the exchange offer: (i) a conditional notice of conversion for all such shares of CBS Class A Common Stock submitted to be exchanged, accompanied by payment of documentary, stamp or similar issue or transfer taxes, if any; and (ii) a letter of transmittal for CBS Class B Common Stock, properly completed and duly executed (including any signature guarantees that may be required) or, in the case of shares delivered by book-entry transfer through The Depository Trust Company, an agent’s message, in each case with respect to which the shares of CBS Class A Common Stock that have been submitted for exchange, noting that shares of CBS Class A Common Stock will be converted to the extent the CBS Class B Common Stock is accepted for exchange in the exchange offer. To the extent shares of CBS Class A Common Stock are not converted, the exchange agent will promptly return your payment of documentary, stamp or similar issue or transfer taxes, if any.

If you elect to convert shares of CBS Class A Common Stock on a non-conditional basis, you may not withdraw such election of conversion and your conversion will be effective immediately upon receipt by the exchange agent. You may withdraw your tender in the exchange offer of the shares of CBS Class B Common Stock issued upon conversion by following the procedures set forth herein. If you elected to conditionally convert your shares of CBS Class A Common Stock into shares of CBS Class B Common Stock, if CBS proceeds with the exchange offer you may withdraw your conditional notice of conversion by withdrawing your tender of shares of CBS Class B Common Stock in the exchange offer, by following the procedures set forth herein.

Participants in the CBS Savings Plans that have assets in the CBS Class A Company Stock Fund (“CBS Class A Company Stock Fund”) and would like to participate in the exchange offer should follow the special instructions that are being sent to them by the plan administrator.

When Distributed and When Issued Markets

CBS will announce the preliminary proration factor, if applicable, by press release promptly after the expiration of the exchange offer. At the expiration of the guaranteed delivery period (two NYSE trading days following the expiration of the exchange offer at 5:00 p.m.), CBS will confirm the final results of the exchange offer, including the final proration factor, if applicable, with the exchange agent. Promptly after the final results are confirmed, CBS will issue a press release announcing the final results of the exchange offer, including the final proration factor, if applicable.

 



 

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In the event proration is necessary, CBS expects that the NYSE will create a “when distributed” market for the shares of CBS Class B Common Stock not accepted for exchange in the exchange offer if the NYSE determines that the creation of such a market would be useful to allow investors to facilitate transactions in those shares. CBS expects that the “when distributed” market would be created promptly following CBS’s announcement of the preliminary proration factor. In the “when distributed” market, CBS expects that holders of CBS Class B Common Stock whose shares are not accepted for exchange in the exchange offer will be able to sell their rights to receive shares of CBS Class B Common Stock when those shares are returned by CBS as described above. CBS expects that such selling stockholders will, however, retain voting and dividend rights with respect to shares sold in the “when distributed” market accruing to stockholders of record as of any record date occurring prior to the date those shares are returned. Purchasers of shares of CBS Class B Common Stock in the “when distributed” market are expected to acquire the right to receive the shares of CBS Class B Common Stock when those shares are returned by CBS as described above but will not acquire voting or dividend rights with respect to those shares until those shares are received by the record holder and credited to the account of the purchaser. CBS expects that after the shares of CBS Class B Common Stock not accepted for exchange in the exchange offer are returned, “when distributed” trading with respect to shares of CBS Class B Common Stock will end.

In addition, Entercom expects that the NYSE will create a “when issued” market for the new shares of Entercom Class A Common Stock issuable to holders of CBS Class B Common Stock whose shares of CBS Class B Common Stock are accepted for exchange in the exchange offer promptly following CBS announcement of the preliminary proration factor, if applicable. Entercom expects that in the “when issued” market, holders of CBS Class B Common Stock whose shares are accepted for exchange in the exchange offer will be able to sell their rights to receive shares of Entercom Class A Common Stock when those shares are issued and delivered by Entercom’s transfer agent. Purchasers of shares of Entercom Class A Common Stock in the “when issued” market are expected to acquire the right to receive shares of Entercom Class A Common Stock when those shares are issued and delivered by Entercom’s transfer agent. These rights are not actual shares of Entercom Class A Common Stock and do not entitle holders to voting or dividend rights with respect to shares of Entercom Class A Common Stock. After the shares of Entercom Class A Common Stock issuable to holders of CBS Class B Common Stock are issued and delivered, Entercom expects that “when issued” trading with respect to shares of Entercom Class A Common Stock will end.

Any trades made in the “when distributed” and “when issued” markets will be made contingent on the actual return of shares of CBS Class B Common Stock or the actual issuance and delivery of shares of Entercom Class A Common Stock, as the case may be. The creation of a “when distributed” or “when issued” market is outside the control of CBS and Entercom. The NYSE is not required to create a “when distributed” or “when issued” market, and there can be no assurances that either such market will develop or if they develop the prices at which shares will trade.

No Appraisal or Dissenters’ Rights

None of Entercom, Merger Sub, CBS or CBS Radio stockholders will be entitled to exercise appraisal rights or to demand payment for their shares in connection with the Transactions.

Distribution of Any Shares of Radio Common Stock Remaining After the Exchange Offer

All outstanding shares of Radio Common Stock owned by CBS that are not exchanged in the exchange offer, if any, will be distributed on a pro rata basis in the Spin-Off, based on the relative economic interest of each such holder in the total outstanding shares of CBS Common Stock (excluding those shares of CBS Class B Common Stock that have been validly tendered and not withdrawn in the exchange offer) to the holders of shares of CBS Common Stock immediately following the consummation of the exchange offer, with a record date that

 



 

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will be no later than the date of the Merger, to be announced by CBS on such date. Such Spin-Off will not have a different impact on holders of different classes of CBS Common Stock, as holders of each outstanding share of CBS Class B Common Stock not validly tendered (or validly tendered and validly withdrawn) in the exchange offer and each outstanding share of CBS Class A common Stock will receive an equal number of shares of Radio Common Stock in the Spin-Off. Any holder of CBS Common Stock who validly tenders (and does not properly withdraw) shares of CBS Class B Common Stock for shares of Radio Common Stock in the exchange offer will waive their rights with respect to such validly tendered shares of CBS Class B Common Stock (but not with respect to any other shares that are not validly tendered or validly tendered and validly withdrawn in the exchange offer) to receive, and forfeit any rights to, shares of Radio Common Stock in the Spin-Off.

If the exchange offer is consummated, the exchange agent will calculate the exact number of shares of Radio Common Stock not exchanged in the exchange offer to be distributed on a pro rata basis, and that number of shares of Radio Common Stock will be held in trust for holders of CBS Common Stock entitled thereto.

If the exchange offer is terminated by CBS without the exchange of shares and the Merger Agreement is not concurrently terminated, but the conditions for consummation of the Transactions have otherwise been satisfied, CBS intends to distribute all shares of Radio Common Stock owned by CBS on a pro rata basis to the holders of CBS Common Stock, with a record date to be announced by CBS that will be no later than the date of the Merger.

Legal Limitations; Certain Matters Relating to Non-U.S. Jurisdictions

This document is not an offer to buy, sell or exchange, and it is not a solicitation of an offer to buy or sell any shares of CBS Class B Common Stock, Radio Common Stock or Entercom Class A Common Stock in any jurisdiction in which the offer, sale or exchange is not permitted. Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of CBS, Entercom or CBS Radio have taken any action under non-U.S. regulations to facilitate a public offer to exchange the shares of CBS Class B Common Stock, Radio Common Stock or Entercom Class A Common Stock outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of CBS Class B Common Stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in the exchange offer without the need for CBS, Entercom or CBS Radio to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

Non-U.S. stockholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of CBS Class B Common Stock, Radio Common Stock or Entercom Class A Common Stock that may apply in their home countries. None of CBS, Entercom or CBS Radio can provide any assurance about whether such limitations may exist. See “The Exchange Offer—Legal Limitations; Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

Holders who are participants in the CBS Radio 401(k) Plan should note that, following the consummation of the exchange offer, Entercom intends to retain an independent fiduciary to assist it in evaluating any single stock investment as an available investment under the CBS Radio 401(k) Plan, including both the CBS Class B Company Stock Fund and the Entercom common stock fund. Following the consummation of the exchange offer, the CBS Radio 401(k) Plan will be amended to provide that no new investment will be allowed into the Entercom common stock fund under the CBS Radio 401(k) Plan. Currently no new investment is permitted in the

 



 

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CBS Class B Company Stock Fund. Participants in the CBS Radio 401(k) Plan may continue to hold assets in the CBS Class B Company Stock Fund and the Entercom common stock fund and will be notified following the consummation of the exchange offer of any changes to the CBS Radio 401(k) Plan that may impact the continued holding of assets in the CBS Class B Company Stock Fund or the Entercom common stock fund.

Holders who are participants in the CBS 401(k) Plan should note that following the consummation of the exchange offer, no new investment into the Entercom common stock fund will be permitted under the CBS 401(k) Plan. In addition, CBS intends to remove the Entercom common stock fund from the CBS 401(k) Plan on January 31, 2018. To the extent that participants have any assets remaining in the Entercom common stock fund after January 31, 2018, the assets will be liquidated over a period of up to four days and the proceeds will be transferred to such participants’ qualified default investment alternative, which is the target retirement fund in the CBS 401(k) Plan with the target date closest to the year that such participant will reach age 65.

Risk Factors

In deciding whether to tender your shares of CBS Class B Common Stock in the exchange offer, you should carefully consider the matters described in the section entitled “Risk Factors,” as well as other information included in this document and the other documents to which you have been referred.

Debt Financing

In connection with the entry into the Merger Agreement, CBS Radio entered into the Commitment Letter with the Commitment Parties, pursuant to which the Commitment Parties committed to provide, subject to customary closing conditions, the Radio Financing, which consists of up to $500 million of senior secured term loans as an additional tranche under the Radio Credit Agreement, the proceeds of which may be used by Entercom substantially simultaneously with or following consummation of the Merger to refinance certain existing indebtedness of Entercom, to redeem Entercom’s preferred stock and to pay fees and expenses in connection with the Transactions. CBS Radio expects to consummate and obtain the Radio Financing substantially simultaneously with the closing of the Merger and the Contribution and to apply the proceeds thereof as described in the preceding sentence in order to, among other things, simplify Entercom’s capital structure.

On March 3, 2017, CBS Radio entered into Amendment No. 1 to the Radio Credit Agreement, pursuant to which CBS Radio, the guarantors party thereto, the lenders and letter of credit (“L/C”) issuers party thereto and JPMorgan Chase Bank, N.A., as administrative agent, amended the Radio Credit Agreement to, among other things, create a tranche of Term B-1 Loans in an aggregate principal amount not to exceed $500 million (the “Term B-1 Loans”). The Term B-1 Loans are expected to be funded substantially concurrently with the closing date of the Merger, subject to customary conditions. Also, on March 2, 2017, CBS Radio announced that it established pricing terms for the Term B-1 Loans.

Board of Directors and Management of Entercom Following the Transactions

Following the consummation of the Final Distribution, Merger Sub will merge with and into CBS Radio, whereby the separate corporate existence of Merger Sub will cease and CBS Radio will continue as the surviving company and a wholly owned subsidiary of Entercom. In connection with the Merger, Entercom will increase the size of its board of directors by four members. In connection with the Merger, Entercom shareholders will be asked to approve at a Special Meeting an amendment to Entercom’s articles of incorporation to classify the Entercom board of directors. The classes of the Entercom board of directors will be determined by Entercom according to its governing documents and Pennsylvania law. In accordance with the Merger Agreement, as amended by Amendment No. 1 to the Merger Agreement dated July 10, 2017 (which was further amended on

 



 

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September 13, 2017), immediately following the Merger, ten persons will serve on the Entercom board of directors, including all six directors from Entercom’s current board of directors (or their pre-Merger replacements) and four new directors agreed upon by CBS, two of whom are affiliated with CBS:

 

David J. Field

   Director; Chairman; President & Chief Executive Officer of Entercom

Joseph M. Field

   Director; Chairman Emeritus of Entercom

David J. Berkman

   Director

Joel Hollander

   Director

Mark R. LaNeve

   Director

David Levy

   Director

Leslie Moonves

   Director; Chairman of the Board, President and Chief Executive Officer of     CBS

Joseph R. Ianniello

   Director; Chief Operating Officer of CBS

Stefan M. Selig

   Director

Sean Creamer

   Director

As a result, current members of Entercom’s board of directors, or their pre-Merger replacements, will comprise a majority of the Entercom board of directors immediately following consummation of the Merger.

In accordance with the Merger Agreement, Messrs. Moonves and Ianniello have agreed to execute and deliver an irrevocable letter of resignation from the Entercom board of directors effective upon the earlier of (a) six months after the closing of the Merger and (b) the day prior to the first annual meeting of Entercom following closing of the Merger. Following such resignations, the resulting vacancies on the Entercom board of directors will be addressed in accordance with the Entercom Bylaws, as set forth below. Entercom does not currently have any plans to fill the vacancies that will be created by the resignations of Messrs. Moonves and Ianniello. If the vacancies remain unfilled, the size of the Entercom board of directors will be reduced from ten members to eight members.

Holders of Entercom Class A Common Stock are entitled by class vote to elect two directors (with each share of Entercom Class A Common Stock entitling the holder thereof to one vote per share in such election). Holders of Entercom Class A Common Stock and Entercom Class B Common Stock, voting as a single class, have the right to vote on the election of all other directors (with each share of Entercom Class B Common Stock held by Joseph Field or David Field in his own right in person (or by proxy or pursuant to a Qualified Voting Agreement (as defined in the Entercom Articles)) entitling the holder thereof to 10 votes per share in such election and each other share of Entercom Common Stock entitling the holder thereof to one vote per share in such election). The Entercom Bylaws provide that directors may be removed only for cause and only by the affirmative vote of a majority of the shareholders entitled to vote thereon. Any vacancies on Entercom’s Board can be filled by the affirmative vote of a majority of the remaining directors then in office, even if the remaining directors are less than a quorum, or by a sole remaining director. However, a vacancy in the position of Entercom Class A Director may only be filled by the sole remaining Entercom Class A Director, and if both Entercom Class A Director positions are vacant, then only the holders of the Entercom Class A Common Stock may fill such vacancies. See “Description of Entercom Capital Stock.”

CBS has not been involved in the election of Entercom’s directors prior to the signing of the Merger Agreement, and, other than the minority of the Entercom board of directors that CBS agrees upon prior to the Closing pursuant to the Merger Agreement, CBS will not be involved in the election, nomination or appointment of any Entercom directors after the Merger. It is therefore expected that, subject to the voting rights of Entercom shareholders as set forth in Entercom’s governing documents, Entercom’s pre-Merger directors (or their replacements) and their future nominees will comprise a majority of the Entercom board of directors on an ongoing basis following the consummation of the Transactions.

 



 

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The Merger Agreement provides that the initial post-Merger directors of CBS Radio (at which time CBS Radio will be a wholly owned subsidiary of Entercom) will consist of David J. Field, Richard J. Schmaeling and Andrew P. Sutor, IV. CBS did not have any formal or informal appointment, consent or approval rights with respect to the post-Merger directors of CBS Radio. CBS’s only input on the post-Merger directors of CBS Radio was suggestive and non-binding input.

The Merger Agreement also provides that Entercom will provide CBS with a “reasonable consultation” right in the determination of the post-Merger executive officers of Entercom. This is solely a right of CBS to discuss the executive officers of Entercom with Entercom. CBS’s involvement in the selection of the post-Merger executive officers of Entercom will be consultative only. While CBS may offer suggestive, non-binding input, CBS will not have any formal or informal appointment, consent or approval rights with respect to the composition of the executive officers of Entercom, pursuant to the Merger Agreement or otherwise. Entercom has determined, after reasonable consultation with CBS, that the executive officers of Entercom immediately following the consummation of the Merger will include David J. Field, who will continue as President & Chief Executive Officer, Richard J. Schmaeling, who will continue as Executive Vice President & Chief Financial Officer, Louise C. Kramer, who will continue as Chief Operating Officer, and Andrew P. Sutor, IV, who will continue as Senior Vice President, General Counsel & Secretary. Additionally, the post-Merger officers of CBS Radio will consist of David J. Field as President & Chief Executive Officer, Richard J. Schmaeling as Executive Vice President & Chief Financial Officer, Louise C. Kramer as Chief Operating Officer and Andrew P. Sutor, IV as Senior Vice President, General Counsel & Secretary, each of whom is a current officer of Entercom. CBS did not have any formal or informal appointment, consent or approval rights with respect to the composition of the post-Merger officers of CBS Radio, pursuant to the Merger Agreement or otherwise.

Entercom Shareholder Vote

Entercom cannot complete the Transactions unless, among other things, the proposals relating to the issuance of shares of Entercom Class A Common Stock in the Merger and the amendment to the Entercom Articles in order to provide that the Entercom board of directors will be classified after the Merger are approved by the affirmative vote of the holders of a majority of the shares of Entercom Common Stock, voting as a single class, represented and voting at the Special Meeting, either in person or by proxy. Concurrently with the execution of the Merger Agreement, Entercom and Joseph M. Field, who holds a controlling voting interest in Entercom, entered into the Voting Agreement. Pursuant to the Voting Agreement, Mr. Field committed to vote in favor of the issuance of shares of Entercom Class A Common Stock in the Merger and the amendment to the Entercom Articles in order to provide that the Entercom board of directors will be classified after the Merger and not to tender into or vote for any alternative proposal for one year after the Merger Agreement is terminated (but only through the termination provisions identified in the Voting Agreement). As a consequence, each of the approvals sought at the meeting required for the Merger can be approved based solely on the favorable vote of Joseph M. Field. See “Other Agreements and Other Related Party Transactions—Voting Agreement.”

Accounting Treatment and Considerations

Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 805, Business Combinations, requires the use of the acquisition method of accounting for business combinations. In applying the acquisition method, it is first necessary to identify the accounting acquiror. In a business combination effected through an exchange of equity interests, such as the Merger, the entity that issues the equity interests is generally the accounting acquiror. In this case Entercom is issuing the equity interests and will be the ongoing registrant of the combined entity. In identifying the accounting acquiror in a combination effected through an exchange of equity interests, however, all pertinent facts and circumstances must be considered. Based on an evaluation of all facts and circumstances, management has determined that Entercom is the accounting acquiror

 



 

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in the Merger. This is based primarily on the considerations outlined below and a detailed analysis of the relevant generally accepted accounting principles in the United States (“GAAP”) guidance.

 

    The relative voting interests after the Transactions and the existence of a large minority voting interest in the combined entity if no other owner or organized group of owners has a significant voting interest. In this case, holders of CBS Common Stock participating in the exchange offer (and Spin-Off, if any) are expected to receive approximately 72% of the outstanding shares of Entercom Common Stock on a fully diluted basis in the aggregate, when including CBS employees who held certain CBS stock-based compensation rights that will be converted into the right to receive Entercom Class A Common Stock, and approximately 58% of the voting interests in Entercom after the Transactions. However, this voting interest is expected to be widely dispersed, whereas, based on their holdings as of March 10, 2017, Joseph M. Field and David J. Field are expected to have a large minority voting interest in the combined entity of approximately 25%. This is an indicator that Entercom is the accounting acquiror.

 

    The composition of the governing body of Entercom after the Transactions. In this case, in accordance with the Merger Agreement, as amended by Amendment No. 1 to the Merger Agreement dated July 10, 2017 (which was further amended on September 13, 2017), immediately following the Merger, ten persons will serve on the Entercom board of directors, including all six directors from Entercom’s current board of directors (or their pre-Merger replacements) and four new directors agreed upon by CBS, two of whom are affiliated with CBS:

 

David J. Field

   Director; Chairman; President & Chief Executive Officer of Entercom

Joseph M. Field

   Director; Chairman Emeritus of Entercom

David J. Berkman

   Director

Joel Hollander

   Director

Mark R. LaNeve

   Director

David Levy

   Director

Leslie Moonves

   Director; Chairman of the Board, President and Chief Executive Officer of CBS

Joseph R. Ianniello

   Director; Chief Operating Officer of CBS

Stefan M. Selig

   Director

Sean Creamer

   Director

As a result, current members of Entercom’s board of directors, or their pre-Merger replacements, will comprise a majority of the Entercom board of directors immediately following consummation of the Merger. In accordance with the Merger Agreement, Messrs. Moonves and Ianniello have agreed to execute and deliver an irrevocable letter of resignation from the Entercom board of directors effective upon the earlier of (a) six months after the closing of the Merger and (b) the day prior to the first annual meeting of Entercom following closing of the Merger. Following such resignations, the resulting vacancies on the Entercom board of directors will be addressed in accordance with the Entercom Bylaws, as set forth below. Entercom does not currently have any plans to fill the vacancies that will be created by the resignations of Messrs. Moonves and Ianniello. If the vacancies remain unfilled, the size of the Entercom board of directors will be reduced from ten members to eight members.

Holders of Entercom Class A Common Stock are entitled by class vote to elect two directors (with each share of Entercom Class A Common Stock entitling the holder thereof to one vote per share in such election). Holders of Entercom Class A Common Stock and Entercom Class B Common Stock, voting as a single class, have the right to vote on the election of all other directors (with each share of Entercom Class B Common Stock held by Joseph Field or David Field in his own right in person (or by proxy or pursuant to a Qualified Voting Agreement (as defined in the Entercom Articles)) entitling the holder thereof to 10 votes per share in such election and each other share of Entercom Common Stock entitling the holder thereof to one vote per share in such election). The Entercom

 



 

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Bylaws provide that directors may be removed only for cause and only by the affirmative vote of a majority of the shareholders entitled to vote thereon. Any vacancies on Entercom’s Board can be filled by the affirmative vote of a majority of the remaining directors then in office, even if the remaining directors are less than a quorum, or by a sole remaining director. However, a vacancy in the position of Entercom Class A Director may only be filled by the sole remaining Entercom Class A Director, and if both Entercom Class A Director positions are vacant, then only the holders of the Entercom Class A Common Stock may fill such vacancies. See “Description of Entercom Capital Stock.” CBS has not been involved in the election of Entercom’s directors prior to the signing of the Merger Agreement, and, other than the minority of the Entercom board of directors that CBS agrees upon prior to the Closing pursuant to the Merger Agreement, CBS will not be involved in the election, nomination or appointment of any Entercom directors after the Merger. It is therefore expected that, subject to the voting rights of Entercom shareholders as set forth in Entercom’s governing documents, Entercom’s pre-Merger directors (or their replacements) and their future nominees will comprise a majority of the Entercom board of directors on an ongoing basis following the consummation of the Transactions.

The Merger Agreement provides that the initial post-Merger directors of CBS Radio (at which time CBS Radio will be a wholly owned subsidiary of Entercom) will consist of David J. Field, Richard J. Schmaeling and Andrew P. Sutor, IV. CBS did not have any formal or informal appointment, consent or approval rights with respect to the post-Merger directors of CBS Radio. CBS’s only input on the post-Merger directors of CBS Radio was suggestive and non-binding input.

The composition of the governing body of Entercom after the transaction, as described above, is an indicator that Entercom is the accounting acquiror.

 

    The composition of the senior management of Entercom after the Transactions. In this case, Entercom has determined, after reasonable consultation with CBS, that the executive officers of Entercom immediately following the consummation of the Merger will consist of current Entercom management, including David J. Field, who will continue as President & Chief Executive Officer; Richard J. Schmaeling, who will continue as Executive Vice President & Chief Financial Officer; Louise C. Kramer, who will continue as Chief Operating Officer; and Andrew P. Sutor, IV, who will continue as Senior Vice President, General Counsel & Secretary. Each of Mr. Field, Mr. Schmaeling, Ms. Kramer and Mr. Sutor serve pursuant to employment agreements with Entercom. All named executive officers of Entercom will report directly to the Chief Executive Officer of Entercom. The Chief Executive Officer will be responsible for all day-to-day operations and collaboration on, and implementation of, strategy. The Chief Financial Officer will be responsible for integration of Entercom and CBS Radio, including synergy realization, and serving as the principal external spokesperson for Entercom with analysts, investors, media and clients. CBS’s involvement in the selection of post-merger executive officers of Entercom is consultative only, allowing CBS to offer suggestive, non-binding input. CBS will not have any formal or informal appointment, consent or approval rights with respect to the composition of the post-merger officers of Entercom. The post-Merger officers of CBS Radio will consist of David J. Field as President & Chief Executive Officer, Richard J. Schmaeling as Executive Vice President & Chief Financial Officer, Louise C. Kramer as Chief Operating Officer and Andrew P. Sutor, IV as Senior Vice President, General Counsel & Secretary, each of whom is a current officer of Entercom. CBS did not have any formal or informal appointment, consent or approval rights with respect to the composition of the post-Merger officers of CBS Radio, pursuant to the Merger Agreement or otherwise.

The composition of the senior management of Entercom after the transactions, as described above, is an indicator that Entercom is the accounting acquiror.

 



 

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    Use of CBS Name and Trademarks. The Merger Agreement provides that Entercom may use the name “CBS Radio Inc.” until the date that is twelve months after the closing date (the “Name Change Date”), and after the Name Change Date, Entercom must remove “CBS” from the entity names of Entercom, CBS Radio and each of their respective subsidiaries subject to the CBS Brands License Agreements. Under the “CBS RADIO” Brands License Agreement, Entercom can use the name CBS RADIO as the name of the business, as part of entity names and use the eye design of CBS (the “CBS Eye Design”) for one year. This is an indicator that Entercom is the accounting acquiror. Management also considered that under another CBS Brands License Agreement, certain brands used by CBS for television stations may be used by Entercom for 20 years (i.e., WCBS and KCBS) and the remainder in perpetuity subject to the terms of the CBS Brands License Agreements. However, these are a small portion of the overall business and do not impact management’s accounting acquiror assessment.

Additionally, management considered the relative size of the combining entities. Although CBS Radio is larger than Entercom, management has concluded that the factors above outweigh the relative size of the combining entities and indicate that Entercom will control the combined entity.

Material U.S. Federal Income Tax Consequences of the Final Distribution and the Merger

It is a condition to the consummation of the Final Distribution (which includes the exchange offer) and related transactions that CBS receives the Distribution Tax Opinion. CBS may waive the condition that it receive the Distribution Tax Opinion from its counsel, in which case CBS may be required extend the exchange offer and to pay the Tax Opinion Waiver Penalty to Entercom no later than five business days after the closing of the Merger. For a description of the Tax Opinion Waiver Penalty, see “The Separation Agreement—The Final Distribution.”

If the Final Distribution qualifies as a transaction that is tax-free under Section 355 of the Code, for U.S. federal income tax purposes, no gain or loss will be recognized by, and no amount will be included in the income of, U.S. holders (as defined in “The Exchange Offer—Material U.S. Federal Income Tax Consequences of the Final Distribution and the Merger”) of CBS Class B Common Stock upon the receipt of Radio Common Stock in the exchange offer or in any pro rata distribution of Radio Common Stock distributed to holders of CBS Common Stock if the exchange offer is undersubscribed.

It is intended that the Merger qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to Entercom’s obligation to complete the Merger that Entercom receive an opinion from Latham & Watkins LLP, counsel to Entercom, to the effect that the Merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Code, and it is a condition to CBS and CBS Radio’s obligations to complete the Merger that CBS receive an opinion from Wachtell, Lipton, Rosen & Katz, counsel to CBS, to the effect that the Merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Code (each such opinion, a “Merger Tax Opinion”). If the Merger so qualifies, then a U.S. holder (as defined in “The Exchange Offer—Material U.S. Federal Income Tax Consequences of the Final Distribution and the Merger”) of Radio Common Stock generally will not recognize any gain or loss for U.S. federal income tax purposes upon the receipt of shares of Entercom Class A Common Stock in exchange for Radio Common Stock in the Merger (other than gain or loss with respect to cash received in lieu of a fractional share of Entercom Class A Common Stock, if any).

Tax matters are complicated, and the tax consequences of the Transactions to you will depend on the facts of your own situation. You should read the summary in the section entitled “The Exchange Offer—Material U.S. Federal Income Tax Consequences of the Final Distribution and the Merger” and consult your own tax advisor for a full understanding of the tax consequences to you of the Transactions.

 



 

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Comparison of Stockholder Rights

CBS is incorporated under the laws of the State of Delaware and Entercom is incorporated under the laws of the Commonwealth of Pennsylvania. Differences in the rights of a stockholder of CBS from those of a shareholder of Entercom arise from differences in the laws of these jurisdictions as well as from provisions of the constitutive documents of each of CBS and Entercom. See “Comparison of Rights of Holders of CBS Common Stock and Entercom Common Stock.”

The Exchange Agent for the Exchange Offer

The exchange agent for the exchange offer is Wells Fargo Bank, N.A. (the “exchange agent”).

The Exchange Agent for the Merger

The exchange agent for the Merger is American Stock Transfer & Trust Company (the “merger exchange agent”).

The Information Agent

The information agent for the exchange offer is Georgeson LLC.

 



 

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following summary consolidated financial data of CBS Radio, CBS and Entercom are being provided to help you in your analysis of the financial aspects of the Transactions. You should read this information in conjunction with the financial information included elsewhere and incorporated by reference into this document. See “Where You Can Find More Information; Incorporation By Reference,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations for CBS Radio,” “Information on CBS Radio,” “Information on CBS,” “Information on Entercom,” and “Selected Historical Financial Data.”

Summary Historical Consolidated Financial Data of CBS Radio

The following table summarizes the historical consolidated financial data of CBS Radio for the periods presented. The summary historical consolidated statements of operations and cash flow information for the six

months ended June 30, 2017 and 2016 and the summary historical consolidated balance sheet information as of

June 30, 2017 have been derived from the unaudited historical consolidated financial statements of CBS Radio included elsewhere in this document. The summary historical consolidated balance sheet information as of December 31, 2016 and 2015 and the summary historical statements of operations and cash flow information for each of the three years in the period ended December 31, 2016 have been derived from the audited consolidated financial statements of CBS Radio included elsewhere in this document. The summary historical consolidated balance sheet information as of December 31, 2014 has been derived from the audited consolidated financial statements of CBS Radio not included in this document. The historical consolidated financial statements of CBS Radio have been presented on a “carve-out” basis from CBS’s consolidated financial statements using the historical results of operations, cash flows, assets and liabilities of CBS Radio and include allocations of expenses from CBS. The summary historical consolidated financial information set forth below and the financial statements included elsewhere in this document do not necessarily reflect what CBS Radio’s results of operations, financial condition or cash flows would have been if CBS Radio had operated as a stand-alone company during all periods presented, and, accordingly, such information should not be relied upon as an indicator of CBS Radio’s future performance, financial condition or liquidity. This information is only a summary and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations for CBS Radio” and the financial statements of CBS Radio and the notes thereto included elsewhere in this document.

 

    Six Months Ended
June 30,
     Year Ended December 31,  
    2017     2016      2016 (a)     2015 (b)     2014 (c)  
   

(in millions, except per share amounts)

 

Statement of Operations data:

          

Revenues

  $ 555.6     $ 577.1      $ 1,221.6     $ 1,230.6     $ 1,303.0  

Operating income (loss)

  $ 90.0     $ 137.4      $ (561.0   $ (240.3   $ 299.3  

Net income (loss) from continuing operations

  $ 30.5     $ 82.5      $ (552.4   $ (136.5   $ 176.5  

Basic and diluted net income (loss) from continuing operations per common share (d)

  $ 435,714     $ 1,178,571      $ (7,891,429   $ (1,950,000   $ 2,521,429  

Balance Sheet data (at period end):

          

Total assets

  $ 4,339.7        $ 4,331.2     $ 5,216.5     $ 5,771.6  

Current liabilities

  $ 132.5        $ 159.3     $ 105.9     $ 102.3  

Total debt

  $ 1,366.2        $ 1,345.3     $ —       $ —    

Stockholder’s equity/ invested equity

  $ 1,865.2        $ 1,860.4     $ 3,994.1     $ 4,360.2  

Cash Flow data:

          

Cash flow provided by operating activities from continuing operations

  $ 10.9     $ 99.5      $ 282.5     $ 212.8     $ 276.9  

Non-GAAP financial data:

          

Adjusted OIBDA (e)

  $ 116.6     $ 157.7      $ 338.7     $ 321.8     $ 402.3  

 



 

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(a) For the year ended December 31, 2016, CBS Radio recorded noncash impairment charges of $852.8 million ($723.0 million, net of tax) to reduce the carrying value of goodwill and FCC licenses to their fair value.
(b) For the year ended December 31, 2015, CBS Radio recorded a noncash impairment charge of $482.9 million ($292.5 million, net of tax) to reduce the carrying value of FCC licenses to their fair value.
(c) In 2014, CBS Radio completed a radio station swap with Beasley Broadcast Group, Inc. In connection with the swap, CBS Radio recorded a noncash impairment charge of $48.6 million ($29.3 million, net of tax) to reduce the carrying value of goodwill allocated to the disposed radio stations to its fair value.
(d) Basic and diluted net income (loss) from continuing operations per common share for all periods presented is calculated based on the 70 outstanding shares of CBS Radio common stock. Prior to the consummation of the Transactions, CBS Radio intends to conduct a stock split to increase the aggregate number of outstanding shares of CBS Radio common stock. Subsequent to the stock split, net income (loss) from continuing operations per common share will be restated to reflect the post-split shares for all periods presented.
(e) Adjusted OIBDA is a measure of performance not calculated in accordance with GAAP. CBS Radio defines Adjusted OIBDA as operating income (loss) before depreciation, stock-based compensation expense, restructuring charges and impairment charges. CBS Radio uses Adjusted OIBDA to evaluate its operating performance. Adjusted OIBDA is among the primary measures CBS Radio uses for planning and forecasting of future periods, and it is an important indicator of its operational strength and business performance. CBS Radio believes Adjusted OIBDA is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by CBS Radio’s management, helps improve investors’ understanding of CBS Radio’s operating performance and makes it easier for investors to compare CBS Radio’s results with other companies that have different financing and capital structures or tax rates. In addition, Adjusted OIBDA is among the primary measures used by investors, analysts and peers in CBS Radio’s industry for purposes of valuation and the comparison of CBS Radio’s operating performance to other companies in CBS Radio’s industry and to compare year-over-year results.

 

     Since Adjusted OIBDA is a measure not calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net income (loss) or operating income (loss) as indicators of operating performance. Adjusted OIBDA, as CBS Radio calculates it, may not be comparable to similarly titled measures employed by other companies. Since Adjusted OIBDA excludes certain financial information that is included in net income (loss) from continuing operations, the most directly comparable GAAP financial measure, users of this information should consider the types of events and transactions that are excluded.

The following table presents a reconciliation of net income (loss) from continuing operations to Adjusted OIBDA.

 

     Six Months Ended
June 30,
     Year Ended December 31,  
         2017              2016          2016     2015     2014  
    

(in millions)

 

Net income (loss) from continuing operations

   $ 30.5      $ 82.5      $ (552.4   $ (136.5   $ 176.5  

Exclude:

            

Provision (benefit) for income taxes

     20.4        54.9        (25.4     (103.8     122.8  

Interest expense

     39.1        —          16.8       —         —    

Impairment charges

     —          —          852.8       482.9       48.6  

Restructuring charges

     7.5        —          8.6       36.5       7.0  

Depreciation

     12.5        13.2        26.1       28.5       30.8  

Stock-based compensation (a)

     6.6        7.1        12.2       14.2       16.6  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted OIBDA

   $ 116.6      $ 157.7      $ 338.7     $ 321.8     $ 402.3  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

(a) For the year ended December 31, 2015, stock-based compensation of $2.9 million was reflected in restructuring charges.

 



 

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Summary Historical Consolidated Financial Data of CBS

The following table summarizes the historical consolidated financial data of CBS for the periods presented. The summary historical consolidated statements of operations and cash flow information for the six months ended June 30, 2017 and 2016 and the summary historical consolidated balance sheet information as of June 30, 2017 have been derived from the unaudited historical consolidated financial statements of CBS incorporated by reference in this document. The summary historical consolidated balance sheet information as of December 31, 2016 and 2015, and the summary historical consolidated statements of operations information for each of the three years in the period ended December 31, 2016 have been derived from the audited consolidated financial statements of CBS incorporated by reference in this document. The summary historical consolidated balance sheet information as of December 31, 2014 has been derived from the consolidated financial statements of CBS not included in or incorporated by reference into this document. This information is only a summary and should be read in conjunction with the financial statements of CBS and the notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operation” section contained in CBS’s quarterly report on Form 10-Q for the quarter ended June 30, 2017, and CBS’s annual report on Form 10-K for the year ended December 31, 2016, which are incorporated by reference into this document. See “Where You Can Find More Information; Incorporation By Reference.”

 

     Six Months
Ended June 30, (a)
     Year Ended December 31, (a)  
     2017 (b)     2016      2016 (b) (c)     2015 (b) (d)     2014 (b) (e)  
     (in millions, except per share amounts)  

Statement of Operations data:

           

Revenues

   $ 6,600     $ 6,564      $ 13,166     $ 12,671     $ 12,519  

Operating income

   $ 1,373     $ 1,416      $ 2,621     $ 2,658     $ 2,590  

Net earnings from continuing operations

   $ 851     $ 815      $ 1,552     $ 1,554     $ 1,151  

Net earnings (loss) from discontinued operations, net of tax

   $ (1,045   $ 81      $ (291   $ (141   $ 1,808  

Net earnings (loss)

   $ (194   $ 896      $ 1,261     $ 1,413     $ 2,959  

Basic net earnings (loss) per common share:

           

Net earnings from continuing operations

   $ 2.09     $ 1.79      $ 3.50     $ 3.21     $ 2.09  

Net earnings (loss) from discontinued operations, net of tax

   $ (2.57   $ .18      $ (.66   $ (.29   $ 3.29  

Net earnings (loss)

   $ (.48   $ 1.97      $ 2.84     $ 2.92     $ 5.38  

Diluted net earnings (loss) per common share:

           

Net earnings from continuing operations

   $ 2.06     $ 1.78      $ 3.46     $ 3.18     $ 2.05  

Net earnings (loss) from discontinued operations, net of tax

   $ (2.53   $ .18      $ (.65   $ (.29   $ 3.22  

Net earnings (loss)

   $ (.47   $ 1.95      $ 2.81     $ 2.89     $ 5.27  

Dividends per common share

   $ .36     $ .30      $ .66     $ .60     $ .54  

Balance Sheet data (at period end):

           

Total assets:

           

Continuing operations

   $ 19,136        $ 19,642     $ 18,695     $ 18,372  

Discontinued operations

     3,517          4,596       5,070       5,563  

Total assets

   $ 22,653        $ 24,238     $ 23,765     $ 23,935  

Total debt:

           

Continuing operations

   $ 9,184        $ 9,375     $ 8,448     $ 7,112  

Discontinued operations

     1,366          1,345       —         —    

Total debt

   $ 10,550        $ 10,720     $ 8,448     $ 7,112  

Total Stockholders’ Equity

   $ 2,627        $ 3,689     $ 5,563     $ 6,970  

 

(a) During the fourth quarter of 2016, CBS classified CBS Radio as held for sale and as a result, CBS Radio has been presented as a discontinued operation in CBS’s consolidated financial statements for all periods presented. Also included in CBS’s discontinued operations is CBS Outdoor Americas Inc., which was disposed of in 2014.

 



 

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(b) Included in net earnings (loss) from discontinued operations, net of tax, for the six months ended June 30, 2017 is a noncash charge of $1.08 billion, or $2.62 per diluted share, to reduce the carrying value of CBS Radio to the value indicated by the stock valuation of Entercom. Included in net earnings (loss) from discontinued operations, net of tax, are noncash impairment charges of $444 million ($427 million, net of tax), or $.95 per diluted share, in 2016, and $484 million ($297 million, net of tax), or $.61 per diluted share, in 2015, in each case to reduce the carrying value of CBS Radio’s intangible assets. For 2014, net earnings from discontinued operations, net of tax, included a gain on the disposal of CBS Outdoor Americas Inc. of $1.56 billion, or $2.78 per diluted share.
(c) In 2016, CBS recorded a one-time pension settlement charge of $211 million in operating income ($130 million, net of tax), or $.29 per diluted share, for the settlement of pension obligations resulting from the completion of CBS’s offer to eligible former employees to receive lump-sum distributions of their pension benefits.
(d) In 2015, CBS recorded gains from the sales of internet businesses in China of $139 million in operating income ($131 million, net of tax), or $.27 per diluted share.
(e) In 2014, in connection with the early redemption of $1.07 billion of its debt, CBS recorded a pretax loss on early extinguishment of debt of $352 million ($219 million, net of tax), or $.39 per diluted share.

Summary Historical Consolidated Financial Data of Entercom

The following table summarizes the historical consolidated financial data of Entercom for the periods presented. The summary historical consolidated statements of operations and cash flow information for the six months ended June 30, 2017 and 2016 and the summary historical consolidated balance sheet information as of June 30, 2017 have been derived from the unaudited historical consolidated financial statements of Entercom incorporated by reference into this document. The summary historical consolidated balance sheet information as of December 31, 2016 and 2015, and the summary historical consolidated statements of operations and cash flow information for each of the three years in the period ended December 31, 2016 have been derived from Entercom’s audited consolidated financial statements incorporated by reference into this document. The summary historical consolidated balance sheet information as of December 31, 2014 has been derived from the consolidated financial statements of Entercom not included in or incorporated by reference into this document. This information is only a summary and should be read in conjunction with the financial statements of Entercom and the notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in Entercom’s quarterly report on Form 10-Q for the quarter ended June 30, 2017 and Entercom’s annual report on Form 10-K for the year ended December 31, 2016, which are incorporated by reference into this document. See “Where You Can Find More Information; Incorporation By Reference.”

Entercom’s financial results are not comparable from year to year due to acquisitions and dispositions of radio stations, adoption of new accounting standards, and other significant events:

 

    In connection with the preparation of Entercom’s consolidated financial statements, Entercom identified immaterial errors in prior periods relating to the netting of certain digital expenses against certain digital revenues. Since Entercom acts as a principal in certain digital revenue contracts, the expenses should not have been netted against gross revenues. The impact of these errors was not material to any prior period. Consequently, Entercom corrected the errors in the second quarter of 2017 by increasing net revenues and station operating expenses on the consolidated statements of operations. As the two line items are adjusted by offsetting amounts, the corrections had no impact on income before taxes, income taxes (benefit), net income, earnings per share or diluted earnings per share, shareholders’ equity, cash flows from operations, or working capital. The corrections had no impact on the consolidated balance sheets or statements of cash flows. Refer to footnote 1 of Entercom’s Form 10-Q for the quarter ended June 30, 2017 for further details.

 

    In November 2016, Entercom commenced operations under a time brokerage agreement (“TBA”) for several radio stations in Charlotte, North Carolina.

 



 

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    In November 2016, Entercom refinanced its outstanding senior credit facility and retired its Senior Notes outstanding. As a result of the refinancing, Entercom recognized a loss on extinguishment of debt of approximately $10.9 million.

 

    In 2016, Entercom sold an AM station in Denver, Colorado, for $3.8 million and an AM station in Atlanta, Georgia for $.9 million. These two sales generated gains of $.3 million, and $.2 million, respectively.

 

    In 2016, Entercom settled a legal claim with British Petroleum and recovered $2.3 million on a net basis after deducting certain related expenses. This amount was included in other income and expense.

 

    In 2015, Entercom acquired multiple radio stations, net of certain dispositions. Related to these transactions, Entercom incurred: (1) merger and acquisition costs of $4.0 million in 2015 and $1.0 million in 2014; and (2) restructuring charges of $2.8 million in 2015 from the restructuring of operations.

 

    Six Months Ended
June 30,
    Year Ended December 31,  
    2017     2016     2016     2015     2014  
    (in thousands, except per share amounts)  

Operating Data:

         

Net revenues

  $ 223,971     $ 218,580     $ 464,771     $ 414,481     $ 380,376  

Operating income

  $ 1,363     $ 42,329     $ 98,057     $ 85,582     $ 85,576  

Net income (loss) attributable to Company

  $ (2,917   $ 15,246     $ 38,065     $ 29,184     $ 26,823  

Net income (loss) attributable to common stockholders

  $ (4,017   $ 14,421     $ 36,164     $ 28,432     $ 26,823  

Net income (loss) attributable to common stockholders per share—basic:

  $ (.10   $ .37     $ .94     $ .75     $ .71  

Net income (loss) attributable to common stockholders per share—diluted:

  $ (.10   $ .37     $ .91     $ .73     $ .69  

Weighted average shares—basic

    38,935       38,463       38,500       38,084       37,763  

Weighted average shares—diluted

    38,935       39,274       39,568       39,038       38,664  

Cash Flows Data:

         

Cash flows related to:

         

Operating activities

  $ 14,925     $ 24,598     $ 72,030     $ 64,790     $ 65,296  

Investing activities

  $ (31,328   $ 4,925     $ 495     $ (91,744   $ (7,055

Financing activities

  $ (21,848   $ (27,621   $ (34,851   $ 4,583     $ (38,932

Other Data:

         

Common stock dividends declared and paid

  $ 5,837     $ 2,886     $ 8,666     $ —       $ —    

Cash dividends declared per common share

  $ .15     $ .075     $ .225     $ —       $ —    

Perpetual cumulative convertible preferred stock dividends declared and paid

  $ 1,100     $ 825     $ 1,788     $ 413     $ —    

 

     At June 30,
2017
     At December 31,  
        2016      2015      2014  
     (in thousands)  

Balance Sheet Data:

           

Cash and cash equivalents—including cash of VIE

   $ 8,592      $ 46,843      $ 9,169      $ 31,540  

Total assets

   $ 1,028,956      $ 1,076,233      $ 1,022,108      $ 926,615  

Senior secured debt and other, including current portion

   $ 461,014      $ 480,087      $ 268,750      $ 262,000  

Senior unsecured notes, senior subordinated notes and other

   $ —        $ —        $ 218,269      $ 217,929  

Deferred tax liabilities and other long-term liabilities

   $ 107,626      $ 119,759      $ 109,251      $ 89,904  

Perpetual cumulative convertible preferred stock (mezzanine)

   $ 27,732      $ 27,732      $ 27,619      $ —    

Total stockholders’ equity

   $ 389,150      $ 393,374      $ 361,450      $ 329,021  

 

 



 

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Summary Unaudited Pro Forma Condensed Consolidated Financial Data of CBS

The following summary unaudited pro forma condensed consolidated financial information of CBS gives effect to the split-off of CBS Radio through an exchange offer, and CBS’s use of the proceeds of CBS Radio’s indebtedness incurred in connection with the disposition of CBS Radio (“the split-off and related events”). The summary unaudited pro forma condensed consolidated statements of operations information is presented as if the split-off and related events had been completed on January 1, 2016. The summary unaudited pro forma condensed consolidated balance sheet information is presented as if the split-off and related events had been completed on June 30, 2017. The summary unaudited pro forma condensed consolidated financial information is derived from, and should be read in conjunction with, the information provided in “CBS Corporation Unaudited Pro Forma Condensed Consolidated Financial Statements” and the notes thereto. The summary unaudited pro forma condensed consolidated financial information has been derived from the historical financial statements of CBS.

CBS Summary Unaudited Pro Forma Condensed Consolidated Statement of Operations Information (in millions, except per share amounts)

 

     Six Months
Ended June 30,
2017
     Year Ended
December 31,
2016
 

Revenues

   $ 6,600      $ 13,166  

Operating income

   $ 1,373      $ 2,621  

Net earnings from continuing operations

   $ 851      $ 1,552  

Net earnings from continuing operations per common share—Basic

   $ 2.19      $ 3.84  

Net earnings from continuing operations per common share—Diluted

   $ 2.16      $ 3.80  

Weighted average number of common shares outstanding:

     

Basic

     388        404  

Diluted

     394        408  

CBS Summary Unaudited Pro Forma Condensed Consolidated Balance Sheet Information (in millions)

 

     At June 30,
2017
 

Total Assets

   $ 19,162  

Long-term debt from continuing operations, including capital lease obligations

   $ 8,921  

Stockholders’ equity

   $ 1,658  

 



 

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Summary Unaudited Pro Forma Condensed Combined Financial Information of Entercom and CBS Radio

The following summary unaudited pro forma condensed combined financial information gives effect to the Merger of Merger Sub, a wholly owned acquisition subsidiary of Entercom, with and into CBS Radio, an indirect wholly owned subsidiary of CBS, and the associated refinancing of Entercom’s debt. The summary unaudited pro forma condensed combined statement of operations information is presented as if these transactions occurred on January 1, 2016. The summary unaudited pro forma condensed combined balance sheet information is presented as if these transactions occurred on June 30, 2017. The unaudited pro forma condensed combined financial information is derived from Entercom’s and CBS Radio’s respective historical consolidated financial statements for each period presented. The summary unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not necessarily reflect the operating results or financial position that would have occurred if the Merger had been consummated on the dates indicated, nor is it necessarily indicative of the results of operations or financial condition that may be expected for any future period or date. Accordingly, such information should not be relied upon as an indicator of future performance, financial condition or liquidity.

Summary Unaudited Pro Forma Condensed Combined Statement of Operations of Entercom and CBS Radio (in millions, except per share amounts)

 

     Six Months
Ended

June 30, 2017
     Year Ended
December 31,
2016
 

Net revenues

   $ 727.9      $ 1,555.1  

Operating income (loss)

   $ 93.7      $ (507.7

Net income (loss) available to Common shareholders

   $ 38.9      $ (563.3

Net income (loss) available to Common shareholders per share:

     

Basic

   $ .28      $ (4.03

Diluted

   $ .27      $ (4.03

Weighted average number of common shares outstanding:

     

Basic

     140.3        139.9  

Diluted

     142.0        139.9  

Summary Unaudited Pro Forma Condensed Combined Balance Sheet of Entercom and CBS Radio (in millions)

 

     At June 30,
2017
 

Total assets

   $ 4,687.3  

Long-term debt

   $ 1,883.8  

Shareholders’ equity

   $ 1,519.0  

 



 

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Summary Comparative Historical and Pro Forma Per Share Data

The following tables set forth certain historical and pro forma per share data for Entercom and CBS. The Entercom historical data have been derived from and should be read together with Entercom’s unaudited consolidated financial statements and related notes contained in Entercom’s quarterly report on Form 10-Q for the quarter ended June 30, 2017 and Entercom’s audited consolidated financial statements and related notes thereto contained in Entercom’s annual report on Form 10-K for the year ended December 31, 2016, which are each incorporated by reference into this document. The Entercom pro forma data have been derived from the unaudited pro forma condensed combined financial statements of Entercom and CBS Radio included elsewhere in this document. The CBS historical data have been derived from and should be read together with the unaudited consolidated financial statements of CBS and related notes thereto contained in CBS’s quarterly report on Form 10-Q for the quarter ended June 30, 2017 and the audited consolidated financial statements of CBS and related notes thereto contained in CBS’s annual report on Form 10-K for the year ended December 31, 2016, which are each incorporated by reference into this document. The CBS pro forma data have been derived from the unaudited pro forma condensed consolidated financial statements of CBS included elsewhere in this document. See “Where You Can Find More Information; Incorporation By Reference.”

This summary comparative historical and pro forma per share data is being presented for illustrative purposes only. CBS, Entercom and CBS Radio may have performed differently had the Transactions occurred prior to the periods or at the date presented. You should not rely on the pro forma per share data presented as being indicative of the results that would have been achieved had CBS Radio been separated from CBS and combined with Entercom during the periods or at the date presented or of the actual future results or financial condition of CBS, Entercom or CBS Radio to be achieved following the Transactions.

 

     Six Months
Ended or At

June 30, 2017
    Year Ended
December 31,
2016
 
     (shares in millions)  

Entercom

    

Net income (loss) available to common shareholders per share:

    

Historical:

    

Basic

   $ (.10   $ .94  

Diluted

   $ (.10   $ .91  

Pro forma: (a)

    

Basic

   $ .28     $ (4.03

Diluted

   $ .27     $ (4.03

Weighted average shares:

    

Historical:

    

Basic

     38.9       38.5  

Diluted

     38.9       39.6  

Pro forma:

    

Basic

     140.3       139.9  

Diluted

     142.0       139.9  

Dividends declared per share of common stock

   $ .15     $ .225  

Book value per share of common stock:

    

Historical

   $ 9.54    

Pro forma

   $ 10.68    

 

(a) The pro forma basic and diluted net loss available to common shareholders per share of Entercom for the year ended December 31, 2016 includes impairment losses of $853.0 million ($723.2 million, net of tax), or $5.17 per basic and diluted share.

 



 

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     Six Months
Ended or At
June 30, 2017
     Year Ended
December 31, 2016
 
     (shares in millions)  

CBS

     

Net earnings from continuing operations per common share:

     

Historical:

     

Basic

   $ 2.09      $ 3.50  

Diluted

   $ 2.06      $ 3.46  

Pro forma:

     

Basic

   $ 2.19      $ 3.84  

Diluted

   $ 2.16      $ 3.80  

Weighted average shares:

     

Historical:

     

Basic

     407        444  

Diluted

     413        448  

Pro forma:

     

Basic

     388        404  

Diluted

     394        408  

Dividends declared per share of common stock

   $ .36      $ .66  

Book value per share of common stock:

     

Historical

   $ 6.52     

Pro forma

   $ 4.32     

 

     As of and for the
Six Months Ended
June 30, 2017
 

Equivalent pro forma(a):

  

Net income available to common shareholders per share—Basic

   $ 1.47  

Net income available to common shareholders per share—Diluted

   $ 1.42  

Book value per share of common stock

   $ 56.17  

 

(a) Equivalent pro forma per share data is calculated by multiplying the Entercom pro forma per share amounts by the exchange ratio of 5.2591 shares of Radio Common Stock for each share of CBS Class B Common Stock tendered in the exchange offer, which represents the indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on October 18, 2017, and is calculated as the average price of CBS Class B Common Stock of $56.9122 per share divided by 93.0% of the average price of Entercom Class A Common Stock of $11.6362 per share, reflecting a discount of 7.0%.

Historical Common Stock Market Price and Dividend Data

Historical market price data for CBS Radio has not been presented as it is currently operated by CBS and there is no established trading market for CBS Radio Common Stock separate from CBS Common Stock.

Shares of CBS Class B Common Stock currently trade on the NYSE under the symbol “CBS.” On February 1, 2017, the last trading day before the announcement of the Transactions, the last sale price of CBS Class B Common Stock reported by the NYSE was $64.60. On October 18, 2017, the last trading day prior to the date of this document, the last sale price of CBS Class B Common Stock reported by the NYSE was $56.96.

Shares of Entercom Class A Common Stock currently trade on the NYSE under the symbol “ETM.” On February 1, 2017, the last trading day before the announcement of the Transactions, the last sale price of Entercom Class A Common Stock reported by the NYSE was $14.15. On October 18, 2017, the last trading day prior to the date of this document, the last sale price of Entercom Class A Common Stock reported by the NYSE was $11.80.

 



 

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The following table sets forth the high and low sale prices of CBS Class B Common Stock according to the Wall Street Journal and Entercom Common Stock according to Bloomberg L.P. on the NYSE for the periods indicated as well as the dividends per share paid by CBS to holders of CBS Class B Common Stock and Entercom to holders of Entercom Class A Common Stock for these periods. The quotations are as reported in CBS’s annual report on Form 10-K for the year ended December 31, 2016 and Entercom’s annual report on Form 10-K for the year ended December 31, 2016, which are incorporated by reference into this document. See “Where You Can Find More Information; Incorporation By Reference.”

 

     CBS Per
Share
Dividends
     CBS Class B
Common Stock
     Entercom
Per Share
Dividends
    Entercom Class A
Common Stock
 
        High      Low        High      Low  

Year Ended December 31, 2017

                

First Quarter

   $ .18      $ 69.60      $ 61.95      $ .075     $ 16.55      $ 13.55  

Second Quarter

   $ .18      $ 70.10      $ 59.72      $ .075     $ 14.38      $ 9.60  

Third Quarter

   $ .18      $ 68.75      $ 56.91      $ .275 (1)    $ 11.65      $ 9.45  

Fourth Quarter (through October 18, 2017)

   $ .18      $ 60.28      $ 56.22      $ —       $ 12.40      $ 11.40  

Year Ended December 31, 2016

                

First Quarter

   $ .15      $ 55.38      $ 41.36      $ —       $ 12.09      $ 8.88  

Second Quarter

   $ .15      $ 57.89      $ 50.53      $ .075     $ 13.93      $ 10.39  

Third Quarter

   $ .18      $ 58.22      $ 48.88      $ .075     $ 14.94      $ 12.65  

Fourth Quarter

   $ .18      $ 65.09      $ 54.35      $ .075     $ 16.45      $ 12.45  

Year Ended December 31, 2015

                

First Quarter

   $ .15      $ 63.71      $ 52.94      $ —       $ 13.09      $ 11.16  

Second Quarter

   $ .15      $ 63.95      $ 55.21      $ —       $ 13.33      $ 11.00  

Third Quarter

   $ .15      $ 56.39      $ 38.51      $ —       $ 11.99      $ 9.62  

Fourth Quarter

   $ .15      $ 52.18      $ 38.76      $ —       $ 12.45      $ 9.75  

 

(1) Includes a special one-time cash dividend of $0.20 per share paid on August 30, 2017.

 



 

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RISK FACTORS

You should carefully consider each of the following risks and all of the other information contained and incorporated by reference in this document and the exhibits hereto, including especially the Risk Factors section of Entercom’s Annual Report on Form 10-K and the Risk Factors section of CBS’s Annual Report on Form 10-K relating to CBS Radio. See “Where You Can Find More Information; Incorporation By Reference.” Some of the risks described below relate principally to the business and the industry in which Entercom, including CBS Radio, will operate after the Transactions, while others relate principally to the Transactions and participation in the exchange offer. The remaining risks relate principally to the securities markets generally and ownership of shares of Entercom Class A Common Stock. The risks described below are not the only risks that Entercom currently faces or will face after the consummation of the Transactions or to participating in the exchange offer.

Risks Related to the Transactions

Sales of Entercom Class A Common Stock after the Transactions may negatively affect the market price of Entercom Class A Common Stock.

The shares of Entercom Class A Common Stock to be issued in the Transactions to holders of Radio Common Stock will generally be eligible for immediate resale. The market price of Entercom Class A Common Stock could decline as a result of sales of a large number of shares of Entercom Class A Common Stock in the market after the consummation of the Transactions or even the perception that these sales could occur.

Immediately after consummation of the Merger, approximately 72% of the outstanding shares of Entercom Common Stock are expected to be held by pre-Merger holders of CBS Common Stock, including CBS employees who held certain CBS stock-based compensation rights that will be converted into the right to receive Entercom Class A Common Stock, on a fully diluted basis in the aggregate, and approximately 28% of the outstanding shares of Entercom Common Stock are expected to be held by pre-Merger holders of Entercom Common Stock, including Entercom employees who held Entercom stock-based compensation rights, on a fully diluted basis in the aggregate, subject to potential adjustment under limited circumstances as described in the section entitled “The Merger Agreement—Merger Consideration.” Currently, holders of CBS Common Stock may include index funds that have performance tied to the Standard & Poor’s 500 Index or other stock indices, and institutional investors subject to various investing guidelines. Because Entercom may not be included in these indices following the consummation of the Transactions or may not meet the investing guidelines of some of these institutional investors, these index funds and institutional investors may decide to or may be required to sell the Entercom Class A Common Stock that they receive in the Transactions. In addition, the investment fiduciaries of CBS’s defined contribution and defined benefit plans may decide to sell any Entercom Class A Common Stock that the trusts for these plans receive in the Transactions, or may decide not to participate in the exchange offer, in response to their fiduciary obligations under applicable law. These sales, or the possibility that these sales may occur, may also make it more difficult for Entercom to obtain additional capital by selling equity securities in the future at a time and at a price that it deems appropriate.

The historical and pro forma financial information that is included in this document may not be representative of the results CBS Radio would have achieved as a stand-alone public company and may not be a reliable indicator of CBS Radio’s future results.

The historical consolidated financial statements and unaudited pro forma condensed consolidated financial statements that are included in this document have been presented on a “carve-out” basis from CBS’s consolidated financial statements using the historical results of operations, cash flows, assets and liabilities of CBS Radio and include allocations of expenses from CBS. As a result, CBS Radio’s historical and pro forma financial statements may not necessarily reflect what its financial condition, results of operations or cash flows would have been had CBS Radio been an independent, stand-alone entity during the periods presented or those that CBS Radio will achieve in the future. Therefore, CBS Radio’s consolidated historical financial statements

 

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that are included in this document may not necessarily be indicative of what CBS Radio’s financial condition, results of operations or cash flows will be in the future.

Entercom may be unable to provide the same types and level of services, digital services and resources to CBS Radio that historically have been provided by CBS, or may be unable to provide them at the same cost.

CBS Radio has been able to receive benefits and services from CBS and has been able to benefit from CBS’s financial strength and extensive business relationships. After the Transactions, CBS Radio will be owned by Entercom and will no longer benefit from CBS’s resources. In connection with the Merger, Entercom will enter into a Transition Services Agreement and a Joint Digital Services Agreement, pursuant to which CBS will agree to provide certain transition services for certain periods following the consummation of the Transactions (not to exceed twenty-four months following the consummation of the Transactions). It cannot be assured that Entercom will be able to adequately replace those resources or replace them at the same cost. If Entercom is not able to replace the resources provided by CBS or is unable to replace them at the same cost or is delayed in replacing the resources provided by CBS, Entercom’s results of operations may be materially adversely impacted.

Entercom’s business, financial condition and results of operations may be adversely affected following the Transactions if Entercom cannot negotiate terms that are as favorable as those CBS and CBS Radio have received when Entercom replaces contracts after the closing of the Transactions.

Prior to consummation of the Transactions, certain functions (such as legal, financial, insurance, employment and other services) for CBS Radio are generally being performed under CBS’s centralized systems. While CBS, under the Transition Services Agreement, will agree to provide Entercom with certain services, there can be no assurance that Entercom will be able to obtain those consents or negotiate terms that are as favorable as those CBS received when and if Entercom replaces these services with its own agreements for similar services. Although Entercom believes that it will be able to obtain any such consents or enter into new agreements for similar services, it is possible that the failure to replace a significant number of these agreements for any of these services could have a material adverse impact on Entercom following the Transactions.

The Merger Agreement may be terminated in accordance with its terms, and the exchange offer and Spin-Off if necessary may therefore not be consummated.

The Merger Agreement contains a number of conditions that must be fulfilled to consummate the Merger, in which case the exchange offer and the Spin-Off if necessary will not be consummated. Those conditions include: consummation of the Radio Reorganization and the Final Distribution in accordance with the Separation Agreement and the Distribution Tax Opinion; expiration or termination of any applicable waiting period (and any extension thereof) under the HSR Act; consent of the FCC for the Transactions; effectiveness of this registration statement and the other registration statements required for the Transactions; the obtaining by the parties of all necessary permits and authorizations under state securities or “blue sky” laws, the Securities Act and the Exchange Act relating to the issuance and trading of shares of Entercom Class A Common Stock; approval by Entercom’s shareholders of the issuance of Entercom Class A Common Stock and the other approvals required by Entercom’s shareholders in the Merger Agreement; and the absence of any law or order prohibiting any of the Transactions. These conditions to the closing of the merger may not be fulfilled and, accordingly, the merger may not be consummated. In addition, if the merger is not consummated by January 31, 2018 (subject to extension to May 2, 2018 if the only conditions not satisfied or waived (other than those conditions that by their nature are to be satisfied at the closing of the Merger, which conditions are capable of being satisfied) are conditions relating to required regulatory filings and clearances and the absence of certain legal impediments to the consummation of the Merger) either CBS or Entercom may choose not to proceed with the merger. In addition, CBS or Entercom may elect to terminate the Merger Agreement in certain other circumstances. See “The Merger Agreement—Conditions to the Merger” and “The Merger Agreement—Termination.”

 

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If any of the Internal Distributions or the Final Distribution does not qualify as a transaction that is tax-free for U.S. federal income tax purposes under Section 355 of the Code or the Merger does not qualify as a tax-free “reorganization” under Section 368(a) of the Code, including as a result of actions taken in connection with the Internal Distributions, the Final Distribution or the Merger or as a result of subsequent acquisitions of shares of CBS, Entercom or CBS Radio, then CBS and/or holders of CBS Common Stock that received Radio Common Stock in the Final Distribution may be required to pay substantial U.S. federal income taxes, and, in certain circumstances, CBS Radio and Entercom may be required to indemnify CBS for any such tax liability.

The consummation of the Transactions is conditioned on the receipt by CBS of the Distribution Tax Opinion and a Merger Tax Opinion and by Entercom of a Merger Tax Opinion and a copy of the Distribution Tax Opinion. CBS may waive the condition that it receive the Distribution Tax Opinion from its counsel, in which case CBS may be required extend the exchange offer and to pay the Tax Opinion Waiver Penalty to Entercom no later than five business days after the closing of the Merger. For a description of the Tax Opinion Waiver Penalty, see “The Separation Agreement—The Final Distribution.”

The opinions of counsel will be based upon and rely on, among other things, current law, certain facts and assumptions, as well as certain representations, statements, and undertakings of CBS, CBS Radio, Entercom, and Merger Sub, including those relating to the past and future conduct of CBS, CBS Radio, Entercom, and Merger Sub. If any of these representations, statements or undertakings are, or become, inaccurate or incomplete, or if CBS, CBS Radio, Entercom, or Merger Sub breaches any of its covenants in the Transaction Agreements, the opinions of counsel may be invalid and the conclusions reached therein could be jeopardized. Notwithstanding the opinions of counsel, the Internal Revenue Service (the “IRS”) could determine that the Final Distribution and/or the Merger should be treated as a taxable transaction if it determines that any of the facts, assumptions, representations, statements or undertakings upon which the opinions of counsel were based are false or have been violated, or if it disagrees with the conclusions in the opinions of counsel. The opinions of counsel are not binding on the IRS and there can be no assurance that the IRS will not assert a contrary position.

If the Final Distribution fails to qualify as a transaction that is tax-free, for U.S. federal income tax purposes, under Section 355 of the Code, in general, CBS would recognize taxable gain as if it had sold the Radio Common Stock in a taxable sale for its fair market value, and holders of CBS Common Stock who receive shares of Radio Common Stock in the Final Distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.

Even if the Final Distribution were to otherwise to qualify as a tax-free transaction under Section 355 of the Code, the Final Distribution or either Internal Distribution would be taxable to CBS (but not to CBS stockholders) pursuant to Section 355(e) of the Code if there is a 50% or greater change in ownership of either CBS or CBS Radio (including stock of Entercom after the Merger), directly or indirectly, as part of a plan or series of related transactions that include the Final Distribution or such Internal Distribution, as applicable. For this purpose, any acquisitions of CBS or CBS Radio stock (including stock of Entercom after the Merger) within the period beginning two years before the Final Distribution or such Internal Distribution, as applicable, and ending two years after the Final Distribution or such Internal Distribution, as applicable, are presumed to be part of such a plan, although CBS may be able to rebut that presumption. Further, for purposes of this test, the Merger will be treated as part of such a plan, but the Merger standing alone should not cause the Final Distribution or either Internal Distribution to be taxable to CBS under Section 355(e) of the Code because pre-Merger holders of Radio Common Stock will hold at least 50.25% of the aggregate value of Entercom Common Stock and at least 50.25% of the aggregate voting power of Entercom Common Stock, in each case, immediately following the Merger. However, if the IRS were to determine that other acquisitions of CBS or CBS Radio stock (including stock of Entercom after the Merger), either before or after the Final Distribution or either Internal Distribution, were part of a plan or series of related transactions that included the Final Distribution or such Internal Distribution, as applicable, such determination could result in significant tax to CBS.

 

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Under the Tax Matters Agreement to be entered into by CBS, CBS Radio, and Entercom in connection with the Transactions, CBS Radio (and Entercom, if applicable) will be required to indemnify CBS against all or a portion of any taxes on the Internal Distributions and Final Distribution that arise as a result of certain actions or failures to act by Entercom or CBS Radio, certain events (or series of events) after the Transactions involving the stock or assets of CBS Radio or Entercom, or any breach by Entercom or, after the Transactions, CBS Radio of any representation or covenant made by them in the Tax Matters Agreement (a “disqualifying action”). If CBS were to recognize gain on either Internal Distribution or the Final Distribution for reasons not related to a disqualifying action by CBS Radio or Entercom, CBS would generally not be entitled to be indemnified under the Tax Matters Agreement and the resulting tax to CBS could have a material adverse effect on CBS. In addition, in certain circumstances, under the Tax Matters Agreement, CBS Radio (and Entercom) will be required to indemnify CBS against taxes on the Merger that arise as a result of a disqualifying action by CBS Radio or Entercom. If CBS were to recognize gain on the Merger for reasons not related to a disqualifying action by CBS Radio or Entercom, CBS would generally not be entitled to indemnification by CBS Radio (or Entercom) under the Tax Matters Agreement. If CBS Radio (or Entercom, if applicable) is required to indemnify CBS if the Final Distribution or the Merger is taxable, this indemnification obligation could be substantial and could have a material adverse effect on Entercom, including with respect to its financial condition and results of operations. In addition, even if Entercom and CBS Radio are not responsible for tax liabilities of CBS under the Tax Matters Agreement, CBS Radio nonetheless could be liable under applicable tax law for such liabilities if CBS were to fail to pay such taxes.

CBS Radio and Entercom may be affected by significant restrictions following the Transactions in order to avoid significant tax-related liabilities.

The Tax Matters Agreement generally will prohibit CBS Radio, Entercom and their affiliates from taking certain actions that could cause the Internal Distributions, the Final Distribution and the Merger to fail to qualify as tax-free transactions. In particular, for a two-year period following the date of the Final Distribution (the “Final Distribution Date”), except as described below, neither CBS Radio nor Entercom may:

 

    enter into any transaction or series of transactions (or any agreement, understanding or arrangement) as a result of which one or more persons would acquire (directly or indirectly) stock comprising 50% or more of the vote or value of CBS Radio or Entercom (taking into account the stock of CBS Radio acquired pursuant to the Merger);

 

    redeem or repurchase any stock or stock rights, other than in certain open-market transactions;

 

    amend its certificate of incorporation or take any other action affecting the relative voting rights of its capital stock;

 

    merge or consolidate with any other person (other than pursuant to the Merger or mergers or consolidations that do not result in CBS Radio ceasing to exist as a corporation for U.S. federal income tax purposes);

 

    take any other action that would, when combined with any other direct or indirect changes in ownership of CBS Radio and Entercom capital stock (including pursuant to the Merger), have the effect of causing one or more persons to acquire stock comprising 50% or more of the vote or value of CBS Radio or Entercom, or would reasonably be expected to result in a failure to preserve the tax-free status of the Transactions;

 

    cause CBS Radio to liquidate;

 

    cause CBS Radio to discontinue the active conduct of certain of its businesses; or

 

    sell, transfer or otherwise dispose of assets (including stock of subsidiaries) of certain of CBS Radio’s business beyond certain thresholds (subject to exceptions for, among other things, ordinary course dispositions and repayments or prepayments of CBS Radio debt).

 

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If CBS Radio (or Entercom, if applicable) intends to take any such restricted action, CBS Radio (or Entercom, if applicable) will be required to cooperate with CBS in obtaining an IRS ruling or an unqualified tax opinion satisfactory to CBS in its reasonable discretion to the effect that such action will not affect the status of any of the Internal Distributions, the Final Distribution or the Merger as tax-free transactions, unless CBS waives such requirement. However, if CBS Radio (or Entercom, if applicable) takes any of the actions above and such actions result in tax-related losses to CBS, then CBS Radio (or Entercom, if applicable) generally will be required to indemnify CBS for such losses, without regard to whether CBS has given CBS Radio and/or Entercom prior consent. See “Other Agreements and Other Related Party Transactions—Tax Matters Agreement.” In the event CBS does not receive a tax opinion from Wachtell, Lipton, Rosen & Katz concluding at a comfort level of “should” or higher that each of the Internal Distributions and the Final Distribution qualifies as a tax-free transaction under Section 355 of the Code or takes or fails to take, or permits any of its affiliates to take or fail to take, any action solely as a result of which (together with other actions or failures to act by CBS and its affiliates) either of the Internal Distributions and/or the Final Distribution would reasonably be expected to fail to qualify as tax-free transactions, then the restrictions set forth above shall not apply.

Due to these restrictions and indemnification obligations under the Tax Matters Agreement, Entercom may be limited in its ability to pursue strategic transactions, equity or convertible debt financings or other transactions that may otherwise be in Entercom’s best interests. Also, Entercom’s potential indemnity obligation to CBS might discourage, delay or prevent a change of control during this two-year period that Entercom shareholders may consider favorable and its ability to pursue strategic transactions, equity or convertible debt financings, or other transactions that may otherwise be in Entercom’s best interests.

Tendering holders of CBS Class B Common Stock may receive a reduced premium or may not receive any premium in the exchange offer.

The exchange offer is designed to permit you to exchange your shares of CBS Class B Common Stock for shares of Radio Common Stock, calculated as set forth in this document. Stated another way, for each $1.00 of your CBS Class B Common Stock accepted in the exchange offer, you will receive approximately $1.08 of Radio Common Stock. The value of the CBS Class B Common Stock will be based on the calculated per-share value for the CBS Class B Common Stock on the NYSE and the value of the Radio Common Stock will be based on the calculated per-share value of Entercom Class A Common Stock on the NYSE, in each case determined by reference to the simple arithmetic average of the daily VWAP on each of the Valuation Dates.

The number of shares you can receive is, however, subject to an upper limit of 5.7466 shares of Radio Common Stock for each share of CBS Class B Common Stock accepted in the exchange offer. As a result, you may receive less than $1.08 of Radio Common Stock for each $1.00 of CBS Class B Common Stock, depending on the calculated per-share values of CBS Class B Common Stock and Radio Common Stock at the expiration date. Because of the limit on the number of shares of Radio Common Stock you may receive in the exchange offer, if there is a drop of sufficient magnitude in the trading price of Entercom Class A Common Stock relative to the trading price of CBS Class B Common Stock, or if there is an increase of sufficient magnitude in the trading price of CBS Class B Common Stock relative to the trading price of Entercom Class A Common Stock, you may not receive $1.08 of Radio Common Stock for each $1.00 of CBS Class B Common Stock, and could receive much less.

For example, if the calculated per-share value of CBS Class B Common Stock was $67.56 (the highest closing price for CBS Class B Common Stock on the NYSE during the three-month period prior to commencement of the exchange offer) and the calculated per-share value of Radio Common Stock was $9.50 (the lowest closing price for Entercom Class A Common Stock on the NYSE during that three-month period), the value of Radio Common Stock, based on the Entercom Class A Common Stock price, received for CBS Class B Common Stock accepted for exchange would be approximately $0.81 for each $1.00 of CBS Class B Common Stock accepted for exchange. The exchange offer does not provide for a minimum exchange ratio. See “The Exchange Offer—Terms of the Exchange Offer.” If the upper limit on the number of shares of

 

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Radio Common Stock that can be received for each share of CBS Class B Common Stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit.

For example, if the trading price of CBS Class B Common Stock were to increase during the last two trading days of the exchange offer, the average price of CBS Class B Common Stock used to calculate the exchange ratio would likely be lower than the closing price of shares of CBS Class B Common Stock on the expiration date of the exchange offer. As a result, you may receive fewer shares of Radio Common Stock, and therefore effectively fewer shares of Entercom Class A Common Stock, for each $1.00 of shares of CBS Class B Common Stock than you would have if the average price of CBS Class B Common Stock were calculated on the basis of the closing price of shares of CBS Class B Common Stock on the expiration date of the exchange offer or on the basis of an averaging period that includes the last two trading days prior to the expiration of the exchange offer period. Similarly, if the trading price of Entercom Class A Common Stock were to decrease during the last two trading days prior to the expiration of the exchange offer period, the average Entercom Class A Common Stock price used to calculate the exchange ratio would likely be higher than the closing price of Entercom Class A Common Stock on the expiration date. This could also result in your receiving fewer shares of Radio Common Stock, and therefore effectively fewer shares of Entercom Class A Common Stock, for each $1.00 of CBS Class B Common Stock than you would otherwise receive if the average Entercom Class A Common Stock price were calculated on the basis of the closing price of Entercom Class A Common Stock on the expiration date or on the basis of an averaging period that included the last two trading days prior to the expiration of the exchange offer period.

In addition, there is no assurance that holders of shares of CBS Class B Common Stock that are exchanged for Radio Common Stock in the exchange offer will be able to sell the shares of Entercom Class A Common Stock after receipt in the Merger at prices comparable to the calculated per-share value of Radio Common Stock at the expiration date.

The trading prices of Entercom Class A Common Stock may not be an appropriate proxy for the value of Radio Common Stock.

The calculated per-share value for Radio Common Stock is based on the trading prices for Entercom Class A Common Stock, which may not be an appropriate proxy for the value of Radio Common Stock. There is currently no trading market for Radio Common Stock and no such market will be established in the future. CBS believes, however, that the trading prices for Entercom Class A Common Stock are an appropriate proxy for the trading value of Radio Common Stock because immediately following the consummation of the Final Distribution, Merger Sub will merge with and into CBS Radio, whereby the separate corporate existence of Merger Sub will cease and CBS Radio will continue as the surviving company and a wholly owned subsidiary of Entercom. Each outstanding share of Radio Common Stock will be canceled and retired and will cease to exist and the holders of Radio Common Stock will receive the right to receive an equal number of shares of Entercom Class A Common Stock. In addition, CBS Radio will authorize the issuance of a number of shares of Radio Common Stock such that the total number of shares of Radio Common Stock outstanding immediately prior to the Merger will be that number that results in the exchange ratio in the Merger equaling one and, as a result, each outstanding share of Radio Common Stock (except shares of Radio Common Stock held by CBS Radio as treasury stock) will be converted into one share of Entercom Class A Common Stock in the Merger. There can be no assurance, however, that Entercom Class A Common Stock after the issuance of Radio Common Stock and the Merger will trade on the same basis as Entercom Class A Common Stock trades prior to the Transactions. In addition, it is possible that the trading prices of Entercom Class A Common Stock prior to consummation of the Merger will not fully reflect the anticipated value of Entercom Class A Common Stock after the Merger. For example, trading prices of Entercom Class A Common Stock on the Valuation Dates could reflect some uncertainty as to the timing or consummation of the Merger or could reflect trading activity by investors seeking to profit from market arbitrage.

 

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Following the exchange of shares of Entercom Class A Common Stock for shares of Radio Common Stock in the Merger, the former holders of shares of Radio Common Stock may experience a delay prior to receiving their shares of Entercom Class A Common Stock or their cash in lieu of fractional shares, if any.

Following the exchange of shares of Entercom Class A Common Stock for shares of Radio Common Stock, the former holders of Radio Common Stock will receive their shares of Entercom Class A Common Stock or their cash in lieu of fractional shares, if any, only upon surrender of all necessary documents, duly executed, to the transfer agent. Although Entercom expects that the NYSE will create a “when issued” market for the new shares of Entercom Class A Common Stock issuable to holders of CBS Class B Common Stock whose shares of CBS Class B Common Stock are accepted in the exchange offer, the creation of a “when issued” market is outside the control of Entercom, and there can be no assurance that such a market will develop. Until the distribution of the shares of Entercom Class A Common Stock to the individual shareholder has been completed, the relevant holder of shares of Entercom Class A Common Stock will not be able to sell its shares of Entercom Class A Common Stock. Consequently, in case the market price for Entercom Class A Common Stock should decrease during that period, the relevant shareholder would not be able to stop any losses by selling the shares of Entercom Class A Common Stock. Similarly, the former holders of Radio Common Stock who received cash in lieu of fractional shares will not be able to invest the cash until the distribution to the relevant shareholder has been completed, and they will not receive interest payments for this time period.

The Pricing Mechanism (as defined below) for the exchange offer will not be fixed prior to the launch of the exchange offer, but will be instead determined while the exchange offer is open, creating a risk of arbitrage trading during the exchange offer that could impact the final exchange ratio.

The exchange offer does not set forth a fixed exchange ratio at the outset of the exchange offer. Rather, the exchange offer price is expressed as a ratio of Radio Common Stock for each $1.00 of CBS Class B Common Stock validly tendered and not withdrawn pursuant to the exchange offer (subject to the limit on the exchange ratio that could result from the upper limit, as described in greater detailed in this document). The exchange offer’s pricing mechanism (the “Pricing Mechanism”) will calculate the values of CBS Class B Common Stock and Radio Common Stock by reference to a simple arithmetic average of daily VWAPs over the three Valuation Dates. The per-share values for CBS Class B Common Stock will be determined by CBS by reference to the simple arithmetic mean of the daily VWAP of CBS Class B Common Stock on the NYSE over the three Valuation Dates. Similarly, the per-share values for Radio Common Stock will be determined by CBS by reference to the simple arithmetic mean of the daily VWAP of Entercom Class A Common Stock on the NYSE over the Valuation Dates (since each share of Radio Common Stock will be exchanged for one share of Entercom Class A Common Stock in the Merger). If the exchange offer is extended, the Valuation Dates will reset to the period of three consecutive trading days ending on and including the second trading day preceding the revised expiration date, as may be extended. The final exchange ratio will be announced by press release and be available on the website www.cbscorpexchange.com, in each case by 11:59 p.m., New York City time, at the end of the second trading day preceding the expiration of the exchange offer, as may be extended, and therefore provides for a two business day window between pricing and exchange offer’s expiration. See “The Exchange Offer—Terms of the Exchange Offer—Pricing Mechanism.”

As the Pricing Mechanism results in the final exchange ratio being fixed two business days before the expiration of the exchange offer, the value of CBS Class B Common Stock and Entercom Class A Common Stock may change after the final exchange ratio is fixed by the Pricing Mechanism. The difference between the changing prices of publicly traded CBS Class B Common Stock and Entercom Class A Common Stock and the fixed exchange ratio could allow for investors to engage in arbitrage trading during the final two business days prior to the expiration of the exchange offer, which could affect the price of CBS Class B Common Stock, Entercom Class A Common Stock or both. Such trading could impact the value of the consideration received by holders of CBS Class B Common Stock participating in the exchange offer.

 

 

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Arbitrage trading during the exchange offer could adversely impact the price of Entercom Class A Common Stock.

The shares of Radio Common Stock to be received by holders of CBS Class B Common Stock who validly tender such stock in the exchange offer will be issued at a discount to the per-share value of Entercom Class A Common Stock. During the exchange offer, the existence of this discount could negatively affect the market price of Entercom Class A Common Stock. See “The Exchange Offer—Terms of the Exchange Offer—General.” Prospective buyers of Entercom Class A Common Stock could choose to acquire shares of Entercom Class A Common Stock indirectly by purchasing shares of CBS Class B Common Stock and then tender such shares in the exchange offer. Additionally, certain market participants may use a hedging strategy to manage risk in the context of split-off transactions that involves shorting Entercom Class A Common Stock. Both occurrences, or either individually, could result in a decrease in the price of Entercom Class A Common Stock during the exchange offer. See “The Exchange Offer—Terms of the Exchange Offer— General.”

Ownership of Entercom Class A Common Stock will entitle holders to different rights than ownership of CBS Class B Common Stock.

Following completion of the exchange offer and, if necessary, the Spin-Off, and subsequent Merger, former holders of CBS Class B Common Stock who have validly tendered and not properly withdrawn their shares of CBS and stockholders who do not tender but do receive Class B Common Stock will no longer be stockholders of CBS but will instead be shareholders of Entercom. There are material differences between the rights that holders of CBS Class B Common Stock have with respect to CBS compared to the rights that holders of Entercom Class A Common Stock have with respect to Entercom. See “Description of Entercom Capital Stock.” The material differences relate to, among other things, rights with respect to the election and removal of directors, advance notice procedures for stockholder proposals or director nominations, procedures for amending organizational documents and approval rights for certain business combinations. For a further discussion, see the section entitled “Comparison of Rights of Holders of CBS Common Stock and Entercom Common Stock.”

The concentration of Entercom’s capital stock ownership with its founders will limit the ability of holders of Entercom Class A Common Stock to influence corporate matters, and the interests of Entercom’s founders may differ from the interests of other stockholders.

As of March 10, 2017, Joseph M. Field, Entercom’s Chairman of the Board, beneficially owned 1,364,165 shares of Entercom Class A Common Stock and 6,148,282 shares of Entercom Class B Common Stock, representing approximately 61.1% of the total voting power of all of outstanding Entercom Common Stock. Collectively, Joseph M. Field, David J. Field, other members of the Field family or entities that they control beneficially own all outstanding shares of Entercom Class B Common Stock. Other members of the Field family and entities that they control also own shares of Entercom Class A Common Stock. Based on their holdings as of March 10, 2017, Joseph M. Field, David J. Field and their affiliates are expected to beneficially own or control 9,282,322 of the outstanding shares of the Entercom Common Stock of the combined company following the completion of the Merger. For additional information on the ownership of Entercom Common Stock and how it will change after the Merger, see the section entitled “Other Agreements and Other Related Party Transactions—Field Family Side Letter Agreement.”

Additionally, the Entercom Articles provide that holders of Entercom Class B Common Stock are entitled to ten votes for each share held of record at such times as the shares are voted by a management shareholder (Joseph M. Field and David J. Field) in his own right in person or by proxy or pursuant to a qualified voting agreement; at all other times the holders of Entercom Class B Common Stock will be entitled to one vote per share. Holders of Entercom Class A Common Stock are entitled to one vote per share. See the section entitled “Description of Entercom Capital Stock.”

Based on their holdings as of March 10, 2017, Joseph M. Field and David J. Field are expected to have a large minority voting interest in the combined entity of approximately 25% following consummation of the

 

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Merger, whereas the total voting share of all other holders of Entercom Common Stock will be approximately 75% following consummation of the Merger, with approximately 58% being held by former holders of CBS Common Stock and approximately 17% being held by former holders of Entercom Common Stock other than the Field family. Accordingly, Joseph M. Field, David J. Field and each of their affiliates will have substantial influence over the outcome of corporate actions requiring shareholder approval, and their interests may differ from the interests of other shareholders. See the section entitled “The Transactions—Interests of Entercom’s Directors and Executive Officers in the Transactions.” The concentration of stock ownership will limit the ability of Entercom Class A Common Stockholders to influence corporate matters. As a result, Entercom may take actions that its shareholders do not view as beneficial or may give investors the perception that conflicts of interest may exist or arise, which may adversely affect the market price of Entercom Class A Common Stock.

The fairness opinions obtained by the Entercom board of directors from Morgan Stanley and Centerview, respectively, will not reflect changes, circumstances, developments or events that may have occurred or may occur after the date of such opinions.

On February 1, 2017, each of Morgan Stanley and Centerview separately rendered to the board of directors of Entercom an oral opinion, each of which was subsequently confirmed by delivery of separate written opinions dated February 2, 2017, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken in preparing its opinion, the exchange ratio provided for pursuant to the Merger Agreement was fair, from a financial point of view, to Entercom.

The Entercom board has not obtained an updated fairness opinion as of the date of this document from Morgan Stanley or Centerview, and the Entercom board does not expect to receive an updated fairness opinion prior to the completion of the Merger.

The opinions delivered by Morgan Stanley and Centerview were necessarily based on economic, market, financial and other conditions as they existed on, and on the information made available to Morgan Stanley and Centerview, respectively, as of, February 2, 2017. The opinions do not speak as of the time the Merger will be completed or as of any date other than the date of such opinions. Although subsequent developments may affect its opinion, neither Morgan Stanley nor Centerview has any obligation to update, revise or reaffirm its opinion. These developments may include changes to the operations and prospects of CBS Radio or Entercom, regulatory or legal changes, general market and economic conditions and other factors that may be beyond the control of CBS Radio and Entercom, and on which such opinions were based, and that may alter the value of CBS Radio or Entercom or the prices of securities of CBS, Entercom, and CBS Radio at the effective time. The value of the merger consideration has fluctuated since, and could be materially different from its value as of, the date of the opinions delivered by Morgan Stanley and Centerview, and neither Morgan Stanley nor Centerview has expressed any opinion as to the price or range of prices at which any securities of CBS, Entercom, or CBS Radio may trade at any time.

For a more complete description of the opinion that Morgan Stanley delivered to the Entercom board of directors and a summary of the material financial analyses performed by Morgan Stanley and reviewed by the Entercom board of directors in connection with its opinion, please refer to the section entitled “—Opinion of Morgan Stanley & Co. LLC” and to the full text of text of the written opinion included as Annex A-1 to this document. For a more complete description of the opinion that Centerview delivered to the Entercom board of directors and a summary of the material financial analyses performed by Centerview and reviewed by the Entercom board of directors in connection with its opinion, please refer to the section “—Opinion of Centerview Partners LLC” and to the full text of text of the written opinion included as Annex A-2 to this document.

 

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Risks Related to Entercom and the Combined Company

Entercom and CBS Radio will incur transaction- and merger-related costs in connection with the Transactions.

Entercom and CBS Radio have incurred and expect to incur a number of non-recurring direct and indirect costs associated with the Transactions. These costs and expenses include fees paid to financial, legal and accounting advisors, severance and other potential employment-related costs, including payments that may be made to certain Entercom and CBS Radio executives, filing fees, printing expenses and other related charges. Some of these costs are payable by Entercom and CBS Radio regardless of whether the Transactions are completed. There are also processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the Transactions and the integration of the two companies’ businesses. While both Entercom and CBS Radio have assumed that a certain level of expenses would be incurred in connection with the Transactions and the other operations contemplated by the Merger Agreement and continue to assess the magnitude of these costs, there are many factors beyond their control that could affect the total amount or the timing of the integration and implementation expenses.

There may also be additional unanticipated costs in connection with the Transactions that Entercom and CBS Radio may not recoup. These costs and expenses could reduce the realization of efficiencies and strategic benefits Entercom and CBS Radio expect to achieve from the Transactions. Although Entercom and CBS Radio expect that these benefits will offset the transaction expenses and implementation costs over time, this net benefit may not be achieved in the near term or at all.

Increases in or new royalties, including through legislation, could adversely impact CBS Radio’s and Entercom’s business, financial condition and results of operations following the consummation of the Merger.

CBS Radio and Entercom pay royalties to song composers and publishers through performance rights organizations (“PROs”), currently American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music, Inc. (BMI) and SESAC, Inc. for the performance of music on its radio stations and websites. The emergence of new PROs, such as Global Music Rights, could increase the royalties that they pay. Although CBS Radio and Entercom pay royalties to record labels and recording artists for distributing music content online, they do not pay royalties to record labels or recording artists for broadcasts of music on our radio stations. From time to time, the U.S. Congress considers legislation that could require that radio broadcasters pay performance royalties to record labels and recording artists. The proposed legislation has been the subject of considerable debate and activity by the radio broadcast industry and other parties that could be affected. Neither CBS Radio nor Entercom can predict whether any proposed legislation will become law. In addition, royalty rates are subject to adjustment and it is possible that CBS Radio’s or Entercom’s royalty rates associated with obtaining rights to use musical compositions and sound recordings in its programming content could increase as a result of private negotiations, regulatory rate-setting processes, or administrative and court decisions. Various independent record companies that claim to own the rights to several hundred sound recordings created prior to February 15, 1972 (the “Pre-1972 Recordings”) have sued several radio broadcasters (including CBS Radio) for allegedly infringing their exclusive right of public performance in certain states. In August 2015, CBS Radio was named as a defendant in two separate putative class action lawsuits in a federal court in each of California and New York for common law copyright infringement as well as related state law claims. In May 2016, the California court dismissed the California case against CBS Radio. In June 2016, the plaintiff record companies appealed this judgment to the U.S. Court of Appeals for the Ninth Circuit. In March 2017, the New York federal court dismissed the New York suit with prejudice. CBS Radio intends to vigorously defend itself in the California case. An adverse decision in the California case could impede CBS Radio’s ability to broadcast or stream the Pre-1972 Recordings and/or increase its royalty payments. New or increased royalty payments could increase CBS Radio’s and Entercom’s expenses, which could adversely impact their businesses, financial conditions and results of operations.

 

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The failure to protect CBS Radio’s intellectual property could adversely impact the business, financial condition and results of operations of Entercom and its subsidiaries, including CBS Radio, following completion of the Merger.

Following the Separation, CBS Radio will have limited rights to use the trademarks “CBS Radio,” “CBS Sports Radio” and certain other trademarks owned by CBS, subject in each case to the CBS Brands License Agreements. See “Other Agreements and Other Related Party Transactions—CBS Brands License Agreements” for more information on CBS Radio’s rights and obligations under the license agreements. Any substantial failure to protect and enforce CBS Radio’s intellectual property rights during the period between the Separation and the expiration of CBS Radio’s rights to use Trademarks owned by CBS and its subsidiaries could adversely impact Entercom’s business, financial condition and results of operations following the consummation of the Merger. In addition, early termination of the trademark licenses could result in Entercom rebranding such trademarks before it is prepared to do so and could require that Entercom spend significant unanticipated resources.

CBS Radio’s ability to protect and enforce its intellectual property rights is important to the success of CBS Radio’s business. CBS Radio endeavors to protect its intellectual property under trade secret, trademark, copyright and patent law, and through a combination of employee and third-party nondisclosure agreements, other contractual restrictions, and other methods. CBS Radio has registered trademarks in state and federal trademark offices in the United States and enforces its rights through, among other things, filing oppositions with the United States Patent and Trademark Offices. There is a risk that unauthorized digital distribution of CBS Radio content could occur and competitors may adopt names similar to CBS Radio’s or use confusingly similar terms as keywords in internet search engine advertising programs, thereby impeding CBS Radio’s ability to build brand identity and leading to confusion among CBS Radio audience or advertisers. Moreover, maintaining and policing CBS Radio’s intellectual property rights may require CBS Radio to spend significant resources as litigation or proceedings before the United States Patent and Trademark Office, courts or other administrative bodies, is unpredictable, costly and may not always be cost effective. CBS Radio cannot assure you that it will have sufficient resources to adequately protect and enforce its intellectual property. The failure to protect and enforce CBS Radio’s intellectual property could adversely impact the business, financial condition and results of operations of Entercom and its subsidiaries, including CBS Radio, following consummation of the Merger.

CBS Radio may be subject to claims and litigation from third parties claiming that its operations infringe on their intellectual property. Any intellectual property litigation could be costly and could divert the efforts and attention of CBS Radio’s management and technical personnel, which could have a material adverse effect on CBS Radio’s business, financial condition and results of operations. If any such actions are successful, in addition to any potential liability for damages, CBS Radio could be required to obtain a license in order to continue to operate its business.

CBS Radio could suffer losses due to asset impairment charges for FCC licenses and goodwill, which may adversely impact CBS Radio’s financial results.

As of June 30, 2017, CBS Radio’s FCC licenses and goodwill comprised 89% of the book value of its assets. CBS Radio tests goodwill and FCC licenses for impairment during the fourth quarter of each year and between annual tests if events or circumstances require an interim impairment assessment. FCC licenses are tested for impairment at the geographic market level and goodwill is tested at the reporting unit level, which is one level below CBS Radio’s operating segment. As of December 31, 2016, CBS Radio had three reporting units. During 2016, CBS Radio recognized a pretax noncash impairment charge of $322.7 million to reduce the carrying values of FCC licenses in 23 of its markets to their fair value. Also during 2016, CBS Radio concluded that the estimated fair value of each of its three reporting units was below their respective carrying values, after the above-mentioned FCC licenses impairment charge, and as a result CBS Radio performed the second step of the goodwill impairment test for each reporting unit and recorded a pretax noncash impairment charge of $530.1 million to reduce the carrying value of its goodwill.

 

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After the above-mentioned impairment charges, the fair values of each of CBS Radio’s three reporting units exceeded their respective carrying values by approximately 3%, the fair values of FCC licenses in 23 of its markets were the same as their carrying values, and the fair values of FCC licenses in two markets exceeded their respective carrying values by less than 5%. A downward revision to the estimated fair value of CBS Radio’s reporting units and/or FCC licenses could cause the estimated fair value to fall below their respective carrying values, which could result in a noncash impairment charge.

Entercom’s stock price is one indicator in management’s assessment of the fair value of CBS Radio. A decline in Entercom’s stock price could indicate that the fair value of CBS Radio is lower than its carrying value and could result in an impairment in a future period. Any impairment charge for goodwill and/or FCC licenses could have a material impact on CBS Radio’s financial results.

Following the consummation of the Merger, Entercom and CBS Radio will have substantial indebtedness, which could adversely impact the business, financial condition and results of operations of Entercom and its subsidiaries, including CBS Radio.

Entercom and its subsidiaries, and CBS Radio and its subsidiaries each have a significant amount of indebtedness and, following the consummation of the Transactions, will continue to have significant indebtedness and liabilities. As of June 30, 2017, on a pro forma basis after giving effect to the Transactions, Entercom would have had outstanding long-term debt, including the current portion, of $1,883.8 million, on a consolidated basis. Entercom and its subsidiaries, including, after the consummation of the Transactions, CBS Radio, have and will continue to have the ability to incur a significant amount of additional debt. After the consummation of the Transactions, the indebtedness of Entercom and its subsidiaries, including CBS Radio, could have important consequences, including but not limited to:

 

    making it more difficult for Entercom and its subsidiaries, including CBS Radio, as applicable, to satisfy their obligations with respect to their debt;

 

    requiring Entercom and its subsidiaries, including CBS Radio, as applicable, to dedicate a substantial portion of their cash flow from operations to payments on indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures and other corporate purposes;

 

    increasing the vulnerability of Entercom and its subsidiaries, including CBS Radio, to and limiting the flexibility in planning for, or reacting to, changes in the business, the industries in which they operate, the economy and government regulations;

 

    restricting Entercom and its subsidiaries, including CBS Radio, from making strategic acquisitions or causing them to make non-strategic divestitures;

 

    placing Entercom and its subsidiaries, including CBS Radio, at a competitive disadvantage compared to their competitors that have less debt;

 

    exposing Entercom and its subsidiaries, including CBS Radio, to the risk of increased interest rates as borrowings under the Radio Credit Agreement are subject to variable rates of interest; and

 

    limiting the ability of Entercom and its subsidiaries, including CBS Radio, to borrow additional funds.

The terms of the Radio Credit Agreement and the Radio Notes Indenture may restrict the current and future operations of CBS Radio and its subsidiaries, particularly the ability to incur additional debt.

The Radio Credit Agreement and the Radio Notes Indenture contain a number of restrictive covenants that impose significant operating and financial restrictions on CBS Radio and its subsidiaries and limit CBS Radio’s ability to engage in actions that may be in its long-term best interests, including restrictions on its and its subsidiaries’ abilities to:

 

    incur additional indebtedness;

 

    pay dividends on, repurchase or make distributions in respect of CBS Radio’s stock;

 

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    make investments or acquisitions;

 

    sell, transfer or otherwise convey certain assets;

 

    change its accounting methodology;

 

    incur liens;

 

    enter into sale/leaseback transactions;

 

    enter into agreements restricting the ability to pay dividends or make other intercompany transfers;

 

    consolidate, merge, sell or otherwise dispose of all or substantially all of CBS Radio’s or CBS Radio’s subsidiaries’ assets;

 

    enter into transactions with affiliates;

 

    prepay certain kinds of indebtedness;

 

    issue or sell stock of CBS Radio’s subsidiaries; and

 

    change the nature of CBS Radio’s business.

In addition, the Radio Credit Agreement has a financial covenant that requires CBS Radio to maintain a Maximum Consolidated Net Secured Leverage Ratio (as defined in the Radio Credit Agreement). CBS Radio’s ability to meet this financial covenant may be affected by events beyond Entercom’s or CBS Radio’s control.

As a result of all of these restrictions, after the Merger, Entercom and its subsidiaries, including CBS Radio, may be:

 

    limited in how they conduct their business;

 

    unable to raise additional debt or equity financing to operate during general economic or business downturns; or

 

    unable to compete effectively or to take advantage of new business opportunities.

These restrictions could hinder the ability of Entercom and its subsidiaries, including, after the consummation of the Transactions, CBS Radio, to pursue their business strategy or inhibit the ability to adhere to their intended dividend policies.

A breach of the covenants under the Radio Notes Indenture or under the Radio Credit Agreement could result in an event of default under the applicable agreement. Such a default would allow the lenders under the Radio Credit Agreement and/or the holders of CBS Radio’s Senior Notes to accelerate the repayment of such debt and may result in the acceleration of the repayment of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the Radio Credit Agreement would also permit the lenders under the Radio Credit Agreement to terminate all other commitments to extend additional credit under the Radio Credit Agreement.

Furthermore, if CBS Radio were unable to repay the amounts due and payable under the Radio Credit Agreement, those lenders could proceed against the collateral that secures such indebtedness. In the event that CBS Radio’s creditors accelerate the repayment of its borrowings, CBS Radio and its subsidiaries may not have sufficient assets to repay that indebtedness.

 

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Following completion of the Merger, Entercom and its subsidiaries, including CBS Radio, may still be able to incur substantial additional amounts of debt, including secured indebtedness, which could further exacerbate the risks associated with the indebtedness of Entercom and its subsidiaries, including CBS Radio, and adversely impact the business, financial condition and results of operations of Entercom and its subsidiaries, including CBS Radio.

Following completion of the Merger, Entercom and its subsidiaries, including CBS Radio, may incur substantial additional amounts of debt, which could further exacerbate the risks associated with the indebtedness of Entercom and its subsidiaries, including CBS Radio. Although the terms of the agreements governing CBS Radio’s existing indebtedness contain restrictions on the incurrence of additional indebtedness and additional liens, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. Following completion of the Merger, these restrictions also will not prevent Entercom and its subsidiaries, including CBS Radio, from incurring obligations that do not constitute indebtedness. If new debt is added to Entercom’s or CBS Radio’s existing debt levels, the related risks that Entercom and its subsidiaries, including CBS Radio, face following completion of the Merger would intensify, and Entercom and its subsidiaries, including CBS Radio, may not be able to meet all of their respective debt obligations. Following the completion of the Merger, Entercom’s and CBS Radio’s indebtedness may adversely impact the business, financial condition and results of operations of Entercom and its subsidiaries, including CBS Radio.

CBS Radio’s variable-rate indebtedness gives rise to interest rate risk, which could cause CBS Radio’s debt service obligations to increase following completion of the Merger. Any increase in CBS Radio’s debt service obligations could adversely impact the business, financial condition and results of operations of Entercom and its subsidiaries, including CBS Radio, following completion of the Merger.

On October 17, 2016, CBS Radio entered into the Radio Revolving Credit Facility (as defined below) and the Radio Term Loan (as defined below), both pursuant to the Radio Credit Agreement, and borrowed the full amount of the Radio Term Loan. On March 3, 2017, the Radio Credit Agreement was amended to create a tranche of Term B-1 Loans not to exceed $500 million, which are expected to be funded substantially concurrently with the closing date of the Merger, subject to customary closing conditions. CBS Radio’s borrowings under the Radio Term Loan and the Radio Revolving Credit Facility bear interest at floating rates that expose CBS Radio to interest rate risk. If interest rates increase, the debt service obligations following completion of the Merger relating to CBS Radio’s variable-rate indebtedness will increase, even though the amount borrowed remains the same, and Entercom’s and CBS Radio’s net income and cash flows will correspondingly decrease. In the future, Entercom and CBS Radio may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce future interest rate volatility. However, Entercom and CBS Radio may not elect to maintain such interest rate swaps with respect to any variable rate indebtedness, and any swaps Entercom or CBS Radio enters into may not fully mitigate their interest rate risk. An increase in CBS Radio’s debt service obligations could adversely impact the business, financial condition and results of operations of Entercom and its subsidiaries, including CBS Radio following completion of the Merger.

To service CBS Radio’s indebtedness and other cash needs following completion of the Merger, Entercom and its subsidiaries, including CBS Radio, will require a significant amount of cash. Entercom and its subsidiaries’ ability to generate cash depends on many factors beyond their control.

Entercom’s ability to satisfy CBS Radio’s debt obligations and to fund any planned capital expenditures, dividends and other cash needs will depend in part upon the future financial and operating performance of Entercom and its subsidiaries, including CBS Radio, and upon its ability to renew or refinance borrowings. Entercom cannot assure you that it and its subsidiaries, including CBS Radio, will generate cash flow from operations, or that CBS Radio will be able to draw under the Radio Revolving Credit Facility or otherwise, in an amount sufficient to fund its liquidity needs, including the payment of principal and interest on its indebtedness.

 

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Prevailing economic conditions and financial, business, competitive, legislative, regulatory and other factors, many of which are beyond Entercom’s control, will affect its ability to make these payments.

If Entercom is unable to make payments on or refinance CBS Radio’s debt or obtain new financing under these circumstances following completion of the Merger, Entercom may consider other options, including:

 

    sales of assets;

 

    sales of equity;

 

    reduction or delay of capital expenditures, strategic acquisitions, investments and alliances; or

 

    negotiations with lenders to restructure the applicable debt.

These alternative measures may not be successful and may not enable Entercom to meet CBS Radio’s scheduled debt service obligations. Entercom’s ability to restructure or refinance CBS Radio’s debt will depend on the condition of the capital markets and Entercom’s and CBS Radio’s financial condition at such time. Any refinancing of CBS Radio’s debt could be at higher interest rates and may require Entercom and/or CBS Radio to comply with more onerous covenants, which could further restrict Entercom’s and its subsidiaries’ business operations. In addition, the terms of existing or future debt agreements may restrict Entercom and/or CBS Radio from adopting some of these alternatives. In the absence of sufficient cash flow from operating results and other resources, Entercom could face substantial liquidity problems and could be required to dispose of material assets or operations to meet CBS Radio’s debt service and other obligations. Entercom may not be able to consummate those dispositions for fair market value, or at all. Furthermore, any proceeds that Entercom could realize from any such dispositions may not be adequate to meet CBS Radio’s debt service obligations then due. Entercom’s inability to generate sufficient cash flow to satisfy CBS Radio’s debt obligations, or to refinance such indebtedness on commercially reasonable terms or at all, could adversely impact Entercom’s and its subsidiaries’ business, financial condition or results of operations following completion of the Merger. Any failure of CBS Radio to meet its scheduled debt service obligations could adversely impact Entercom’s business, financial condition and results of operations following completion of the Merger.

Any decline in the ratings of Entercom’s long-term debt could adversely affect its ability to access capital.

Any decline in the ratings of Entercom’s corporate credit or any indications from the rating agencies that their ratings on Entercom’s corporate credit are under surveillance or review with possible negative implications could adversely impact the ability of Entercom and its subsidiaries, including CBS Radio, to access capital which could adversely impact Entercom’s business, financial condition and results of operations.

 

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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This document contains and incorporates by reference certain statements relating to future events and each of CBS’s, CBS Radio’s and Entercom’s intentions, beliefs, expectations, and predictions for the future. Any such statements other than statements of historical fact are forward-looking statements within the meaning of the Securities Act and the Exchange Act. Words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “believe,” “expect,” “estimate,” “project,” “may,” “will,” “intend,” “plan,” “believe,” “target,” “forecast,” “would” or “could” (including the negative variations thereof) or similar terminology used in connection with any discussion of future plans, actions or events, including with respect to the Transactions, generally identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding expected benefits of the Transactions, integration plans and expected synergies therefrom, the expected timing of consummation of the Transactions, and each of CBS’s, CBS Radio’s and Entercom’s anticipated future financial and operating performance and results, including its estimates for growth. These statements are based on the current expectations of management of each of CBS, CBS Radio and Entercom. There are a number of risks and uncertainties that could cause each company’s actual results to differ materially from the forward-looking statements included in this document. These risks and uncertainties include risks relating to:

 

    impact of stock sales on the market price of Entercom Class A Common Stock;

 

    reliability of historical and pro forma financial information that is included in this document as representative of the results CBS Radio would have achieved as a stand-alone public company and as an indicator of CBS Radio’s future results;

 

    inability of Entercom to provide the same types and level of services, digital services and resources to CBS Radio that historically have been provided by CBS, or inability to provide them at the same cost;

 

    inability of Entercom to negotiate terms that are as favorable as those CBS and CBS Radio have received when Entercom replaces contracts after the closing of the Transactions;

 

    potential termination of the Merger Agreement in accordance with its terms, and thus failure to consummate the exchange offer and, if necessary, the Spin-Off;

 

    failure of the Internal Distributions or the Final Distribution to qualify as a transaction that is tax-free for U.S. federal income tax purposes under Section 355 of the Code or failure of the Merger to qualify as a tax-free “reorganization” under Section 368(a) of the Code;

 

    subject to the terms and conditions of the Tax Matters Agreement, restrictions on CBS Radio and Entercom following the Transactions in order to avoid significant tax-related liabilities;

 

    possibility of a reduced premium or no premium for tendering holders of CBS Class B Common Stock in the exchange offer;

 

    reliability of the trading prices of Entercom Class A Common Stock as a proxy for the value of Radio Common Stock;

 

    potential delay for the former holders of shares of Radio Common Stock prior to receiving their shares of Entercom Class A Common Stock or their cash in lieu of fractional shares, if any, following the exchange of shares of Entercom Class A Common Stock for shares of Radio Common Stock in the Merger;

 

    differences between the ownership rights for Entercom Class A Common stock and CBS Class B Common Stock;

 

    the Pricing Mechanism of the exchange offer;

 

    concentration of the ownership of Entercom capital stock with its founders and their affiliates;

 

    no updates to fairness opinions regarding the exchange ratio pursuant to the Merger Agreement;

 

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    incurrence of costs related to the Transactions;

 

    increases in or new royalties to which CBS Radio or Entercom are subject;

 

    the failure to protect CBS Radio’s intellectual property;

 

    the impact of asset impairment charges for FCC licenses and goodwill;

 

    impact of substantial existing and future indebtedness;

 

    restrictions on CBS Radio’s operations, including its ability to incur additional debt, pursuant to the Radio Credit Agreement and the Radio Notes Indenture;

 

    Entercom’s and its subsidiaries’ ability to incur substantial additional amounts of indebtedness after the Merger;

 

    impact of variable-rate indebtedness;

 

    requirements for a significant amount of cash to service existing indebtedness and other cash needs; and

 

    any decline in Entercom’s long-term debt rating.

In light of these risks, uncertainties, assumptions and other factors, the forward-looking statements discussed in this document may not occur. Other unknown or unpredictable factors could also have a material adverse effect on each of CBS’s, CBS Radio’s and Entercom’s actual future results, performance, or achievements. For a further discussion of these and other risks and uncertainties, see the section of this document entitled “Risk Factors.” As a result of the foregoing, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. None of Entercom, CBS or CBS Radio undertakes, and each expressly disclaims, any duty to update any forward-looking statement whether as a result of new information, future events, or changes in its respective expectations, except as required by law.

 

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THE EXCHANGE OFFER

Terms of the Exchange Offer

General

CBS is offering to exchange all shares of Radio Common Stock that are owned by CBS for shares of CBS Class B Common Stock, at an exchange ratio to be calculated in the manner described below, on the terms and conditions and subject to the limitations described below and in the letter of transmittal (including the instructions thereto) filed as an exhibit to the registration statement of which this document forms a part, by 11:59 p.m., New York City time, on November 16, 2017, unless the exchange offer is extended or terminated. The last day on which tenders will be accepted, whether on November 16, 2017 or any later date to which the exchange offer is extended, is referred to in this document as the “expiration date.” You may tender all, some or none of your shares of CBS Class B Common Stock. Shares of CBS Class B Common Stock tendered pursuant to the exchange offer may be withdrawn after December 15, 2017 (i.e., after the expiration of 40 business days from the commencement of the exchange offer), if CBS does not accept your shares of CBS Class B Common Stock pursuant to the exchange offer by such date.

CBS Radio will issue 101,407,494 shares of Radio Common Stock in the transactions contemplated by the Merger Agreement and the Separation Agreement, which provide for, among other things, the Transactions. CBS will then offer the 101,407,494 shares of Radio Common Stock in the exchange offer, and the largest possible number of shares of CBS Class B Common Stock that will be accepted would equal 101,407,494 divided by the final exchange ratio, subject to the upper limit. See “—Upper Limit.”

CBS’s obligation to complete the exchange offer is subject to important conditions that are described in the section entitled “—Conditions for Consummation of the Final Distribution.”

For each share of CBS Class B Common Stock that you validly tender in the exchange offer and do not properly withdraw and that are accepted, you will receive a number of shares of Radio Common Stock at a 7.0% discount to the per-share value of Entercom Class A Common Stock, calculated as set forth below, subject to an upper limit of 5.7466 shares of Radio Common Stock per share of CBS Class B Common Stock. Stated another way, subject to the upper limit described below, for each $1.00 of CBS Class B Common Stock accepted in the exchange offer, you will receive approximately $1.08 of Radio Common Stock.

The final calculated per-share values will be equal to:

(i) with respect to CBS Class B Common Stock, the simple arithmetic average of the daily VWAP of CBS Class B Common Stock on the NYSE for each of the Valuation Dates, calculated by CBS based on data provided by Bloomberg L.P. for the equity ticker CBS; and

(ii) with respect to Radio Common Stock, the simple arithmetic average of the daily VWAP of Entercom Class A Common Stock on the NYSE for each of the Valuation Dates, calculated by CBS based on data provided by Bloomberg L.P. for the equity ticker ETM.

The daily VWAP will be as reported by Bloomberg L.P. as displayed under the heading Bloomberg VWAP on the Bloomberg pages “CBS UN<Equity>AQR” with respect to CBS Class B Common Stock and “ETM UN<Equity>AQR” with respect to Radio Common Stock (or any other recognized quotation source selected by CBS in its sole discretion if such pages are not available or are manifestly erroneous). The daily VWAP of CBS Class B Common Stock and the Entercom Class A Common Stock calculated by CBS based on data provided by Bloomberg L.P. may be different from other sources of volume-weighted average prices or investors’ or security holders’ own calculations of volume-weighted average prices. CBS will determine such calculations of the per-share values of CBS Class B Common Stock and Radio Common Stock, and such determinations will be final.

If the upper limit on the number of shares that can be received for each share of CBS Class B Common Stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the limit. CBS will announce whether the upper limit is in effect when CBS announces the final exchange ratio.

 

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Upper Limit

The number of shares you can receive is subject to an upper limit of 5.7466 shares of Radio Common Stock for each share of CBS Class B Common Stock accepted in the exchange offer. The upper limit would represent a 16.0% discount for Radio Common Stock based on the closing price of CBS Class B Common Stock on the NYSE and Entercom Class A Common Stock on the NYSE on the trading day immediately preceding the commencement of the exchange offer. CBS management set the upper limit at this amount based on its views of an appropriate upper limit to protect non-tendering holders of CBS Class B Common Stock from an unusual or unexpected drop in the trading price of Entercom Class A Common Stock, relative to the trading price of CBS Class B Common Stock, and the prospective loss of value to such non-tendering holders if shares of CBS Class B Common Stock were exchanged for shares of Radio Common Stock at an unduly high exchange ratio. If the upper limit is in effect, a stockholder will receive less than $1.08 of Radio Common Stock for each $1.00 of CBS Class B Common Stock that the stockholder validly tenders, that is not properly withdrawn and that is accepted in the exchange offer, and the stockholder could receive much less. CBS management set this limit at this amount to ensure that an unusual or unexpected drop in the trading price of Entercom Class A Common Stock, relative to the trading price of CBS Class B Common Stock, would not result in an unduly high number of shares of Radio Common Stock being exchanged for each share of CBS Class B Common Stock accepted in the exchange offer.

Pricing Mechanism

The terms of the exchange offer are designed to result in your receiving $1.08 of Radio Common Stock for each $1.00 of CBS Class B Common Stock validly tendered, not properly withdrawn and accepted in the exchange offer, based on the calculated per-share values described above. See “Risk Factors—Risks Related to the Transaction—The Pricing Mechanism for the exchange offer will not be fixed prior to the launch of the exchange offer, but will be instead determined while the exchange offer is open, creating a risk of arbitrage trading during the exchange offer that could impact the final exchange ratio.” The exchange offer does not provide for a minimum exchange ratio because a minimum exchange ratio could result in the shares of Radio Common Stock exchanged for each $1.00 of CBS Class B Common Stock being valued higher than approximately $1.08. Regardless of the final exchange ratio, the terms of the exchange offer would always result in your receiving approximately $1.08 of Radio Common Stock for each $1.00 of CBS Class B Common Stock, so long as the upper limit is not in effect. See the table on page 77 for purposes of illustration.

Subject to the upper limit described above, for each $1.00 of CBS Class B Common Stock accepted in the exchange offer, you will receive approximately $1.08 of Radio Common Stock. The following formula will be used to calculate the number of shares of Radio Common Stock you will receive for shares of CBS Class B Common Stock accepted in the exchange offer:

 

Number of shares of Radio Common Stock   =    Number of shares of CBS Class B Common Stock tendered and accepted, multiplied by the lesser of:   (a) 5.7466 and   (b) 100% of the calculated per-share value of CBS Class B Common divided by 93.0% of the calculated per-share value of Radio Common Stock (calculated as described below)

The calculated per-share value of a share of CBS Class B Common Stock for purposes of the exchange offer will equal the simple arithmetic average of the daily VWAP of CBS Class B Common Stock on the NYSE on each of the Valuation Dates. The calculated per-share value of a share of Radio Common Stock for purposes of the exchange offer will equal the simple arithmetic average of the daily VWAP of Entercom Class A Common Stock on the NYSE on each of the Valuation Dates.

If the upper limit is in effect, the exchange ratio will be fixed and the calculated per-share values of CBS Class B Common Stock and Radio Common Stock based on the daily VWAP of CBS Class B Common Stock

 

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and Entercom Class A Common Stock will no longer affect the exchange ratio. To help illustrate the way this calculation works, below are two examples:

Example 1: Assuming that the average of the daily VWAP on the Valuation Dates is $56.9122 per share of CBS Class B Common Stock and $11.6362 per share of Entercom Class A Common Stock, you would receive 5.2591 shares ($56.9122 divided by 93.0% of $11.6362) of Radio Common Stock for each share of CBS Class B Common Stock accepted in the exchange offer. In this example, the upper limit of 5.7466 shares of Radio Common Stock for each share of CBS Class B Common Stock would not apply.

Example 2: Assuming that the average of the daily VWAP on the Valuation Dates is $62.0000 per share of CBS Class B Common Stock and $10.0000 per share of Entercom Class A Common Stock, the upper limit would apply and you would only receive 5.7466 shares of Radio Common Stock for each share of CBS Class B Common Stock accepted in the exchange offer because the upper limit is less than 6.6667 ($62.0000 divided by 93.0% of $10.0000) of Radio Common Stock for each share of CBS Class B Common Stock.

Indicative Per-Share Values

From the third trading day after the commencement of the exchange offer until the first Valuation Date, the website will show the indicative exchange ratios and the indicative calculated per-share values, calculated as though that day were the expiration date of the exchange offer, of (i) CBS Class B Common Stock, which will equal the simple arithmetic average of the daily VWAP of CBS Class B Common Stock, as calculated by CBS, on each of the three prior trading days and (ii) Radio Common Stock, which will equal the simple arithmetic average of the daily VWAP of Entercom Class A Common Stock, as calculated by CBS, on each of the three prior trading days.

On the first two Valuation Dates, when the values of CBS Class B Common Stock and Entercom Class A Common Stock are calculated for the purposes of the exchange offer, the website will show the indicative calculated per-share values of CBS Class B Common Stock and Entercom Class A Common Stock, as calculated by CBS, which will equal, with respect to each stock, (i) on the first Valuation Date, the daily VWAP of CBS Class B Common Stock and the Entercom Class A Common Stock for that day; and (ii) on the second Valuation Date, the simple arithmetic mean of the daily VWAPs of CBS Class B Common Stock and the Entercom Class A Common Stock for the first and second Valuation Dates. The website will not provide an indicative exchange ratio on the third Valuation Date. The final exchange ratio will be announced by press release and be available on the website, in each case by 11:59 p.m., New York City time, at the end of the second trading day (currently expected to be November 14, 2017) immediately preceding the expiration date of the exchange offer (currently expected to be November 16, 2017). CBS will determine the simple arithmetic average of the VWAPs based on data provided by Bloomberg L.P., and such determinations will be final.

Final Exchange Ratio

The final exchange ratio that shows the number of shares of Radio Common Stock that you will receive for each share of CBS Class B Common Stock accepted in the exchange offer will be announced by press release and be available on the website www.cbscorpexchange.com, in each case by 11:59 p.m., New York City time, at the end of the second trading day (currently expected to be November 14, 2017) immediately preceding the expiration date of the exchange offer (currently expected to be November 16, 2017), unless the exchange offer is extended or terminated.

You may also contact the information agent to obtain these indicative exchange ratios and the final exchange ratio at its toll-free number provided on the back cover of this document.

Each of the daily VWAPs, calculated per-share values and the final exchange ratio will be rounded to four decimal places.

 

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If a market disruption event occurs with respect to CBS Class B Common Stock or Entercom Class A Common Stock on any of the Valuation Dates, the calculated per-share value of CBS Class B Common Stock and Radio Common Stock will be determined using the daily VWAP of CBS Class B Common Stock and Entercom Class A Common Stock on the preceding trading day or days, as the case may be, on which no market disruption event occurred with respect to both CBS Class B Common Stock and Entercom Class A Common Stock. See “—Conditions for Consummation of the Final Distribution.”

A market disruption event with respect to either CBS Class B Common Stock or Entercom Class A Common Stock means a suspension, absence or material limitation of trading of CBS Class B Common Stock or Entercom Class A Common Stock on the NYSE for more than two hours of trading or a breakdown or failure in the price and trade reporting systems of the NYSE as a result of which the reported trading prices for CBS Class B Common Stock or Entercom Class A Common Stock on the NYSE during any half-hour trading period during the principal trading session in the NYSE are materially inaccurate, as determined by CBS or the exchange agent in its sole discretion, on the day with respect to which such determination is being made. For purposes of such determination, a limitation on the hours or number of days of trading will not constitute a market disruption event if it results from an announced change in the regular business hours of the NYSE.

Since the exchange offer is scheduled to expire at 11:59 p.m., New York City time, on the last day of the exchange offer period, and the final exchange ratio will be announced by 11:59 p.m., New York City time, at the end of the second trading day (currently expected to be November 14, 2017) immediately preceding the expiration date of the exchange offer (currently expected to be November 16, 2017), unless the exchange offer is extended or terminated, you will be able to tender or withdraw your shares of CBS Class B Common Stock after the final exchange ratio is determined. The timing of such announcement will therefore provide each holder of CBS Class B Common Stock with two full business days after knowing the final exchange ratio and whether the upper limit is in effect during which to decide whether to tender or withdraw their shares in the exchange offer. For more information on validly tendering and properly withdrawing your shares, see “—Terms of the Exchange Offer—Procedures for Tendering” and “—Terms of the Exchange Offer—Withdrawal Rights.”

For the purposes of illustration, the table below indicates the number of shares of Radio Common Stock that you would receive per share of CBS Class B Common Stock, calculated on the basis described above and taking into account the limit described above, assuming a range of averages of the daily VWAP of CBS Class B Common Stock and Entercom Class A Common Stock on the Valuation Dates. The first row of the table below shows the indicative calculated per-share values of CBS Class B Common Stock and Radio Common Stock and the indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on October 18, 2017, based on the daily VWAPs of CBS Class B Common Stock and Entercom Class A Common Stock on October 16, 2017, October 17, 2017 and October 18, 2017. The table also shows the effects of

 

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a 10.0% increase or decrease in either or both the calculated per-share values of CBS Class B Common Stock and Radio Common Stock based on changes relative to the values of October 18, 2017.

 

CBS Class B Common
Stock

 

Entercom Class A

Common Stock

  Calculated 
per-share value
of CBS Class B
Common Stock
    Calculated
per-share value
of Radio
Common Stock
    Shares of Radio
Common Stock
per CBS Class B
Common Stock
tendered
    Calculated
Value Ratio (a)
    Shares of
Entercom
Class A
Common Stock
per CBS
Class B
Common Stock
Tendered
 

As of October 18, 2017

  As of October 18, 2017   $ 56.9122     $ 11.6362       5.2591       1.08       5.2591  

(1) Down 10%

  Up 10%   $ 51.2210     $ 12.7999       4.3029       1.08       4.3029  

(2) Down 10%

  Unchanged   $ 51.2210     $ 11.6362       4.7332       1.08       4.7332  

(3) Down 10%

  Down 10%   $ 51.2210     $ 10.4726       5.2591       1.08       5.2591  

(4) Unchanged

  Up 10%   $ 56.9122     $ 12.7999       4.7810       1.08       4.7810  

(5) Unchanged

  Down 10% (b)   $ 56.9122     $ 10.4726       5.7466       1.06       5.7466  

(6) Up 10%

  Up 10%   $ 62.6034     $ 12.7999       5.2591       1.08       5.2591  

(7) Up 10%

  Unchanged (b)   $ 62.6034     $ 11.6362       5.7466       1.07       5.7466  

(8) Up 10%

  Down 10% (b)   $ 62.6034     $ 10.4726       5.7466       0.96       5.7466  

 

(a) The Calculated Value Ratio equals (i) the calculated per-share value of Radio Common Stock multiplied by the exchange ratio, divided by (ii) the calculated per-share value of CBS Class B Common Stock.

 

(b) In scenarios 5, 7 and 8, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 5.8434, 5.7850 and 6.4278 shares, respectively, of Radio Common Stock per share of CBS Class B Common Stock tendered. In this scenario, CBS would announce that the upper limit on the number of shares that can be received for each share of CBS Class B Common Stock tendered is in effect when CBS announces the final exchange ratio at 11:59 p.m., New York City time, at the end of the second trading day prior to the expiration date of the exchange offer.

During the three-month period of July 18, 2017 through October 18, 2017, the highest closing price of CBS Class B Common Stock on the NYSE was $67.56 and the lowest closing price of Entercom Class A Common Stock on the NYSE was $9.50. If the calculated per-share values of CBS Class B Common Stock and Radio Common Stock equaled these closing prices, you would have received only the upper limit of 5.7466 shares of Radio Common Stock for each share of CBS Class B Common Stock tendered, and the value of such shares of Radio Common Stock, based on the Entercom Class A Common Stock price, would have been approximately $0.81 of Radio Common Stock for each $1.00 of CBS Class B Common Stock accepted for exchange.

If the trading price of CBS Class B Common Stock were to increase during the last two trading days prior to the expiration of the exchange offer, the average CBS Class B Common Stock price used to calculate the exchange ratio would likely be lower than the closing price of CBS Class B Common Stock on the expiration date of the exchange offer. As a result, you may receive fewer shares of Radio Common Stock, and therefore effectively fewer shares of Entercom Class A Common Stock, for each $1.00 of CBS Class B Common Stock than you would have if that per-share value were calculated on the basis of the closing price of CBS Class B Common Stock on the expiration date of the exchange offer. Similarly, if the trading price of Entercom Class A Common Stock were to decrease during the last two trading days prior to the expiration of the exchange offer, the average Radio Common Stock used to calculate the exchange ratio would likely be higher than the closing price of Entercom Class A Common Stock on the expiration date of the exchange offer, or on the basis of an averaging period that included the last two days of the exchange offer period. This could also result in your receiving fewer shares of Radio Common Stock, and therefore effectively fewer shares of Entercom Class A Common Stock, for each $1.00 of CBS Class B Common Stock than you would otherwise receive if that per-share value were calculated on the basis of the closing price of Entercom Class A Common Stock on the expiration date of the exchange offer, or on the basis of an averaging period that included the last two days of the exchange offer period.

 

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The number of shares of CBS Class B Common Stock that may be accepted in the exchange offer may be subject to proration. Depending on the number of shares of CBS Class B Common Stock validly tendered, and not properly withdrawn in the exchange offer, and the final exchange ratio, determined as described above, CBS may have to limit the number of shares of CBS Class B Common Stock that it accepts in the exchange offer through a proration process. Any proration of the number of shares accepted in the exchange offer will be determined on the basis of the proration mechanics described below under “—Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of CBS Class B Common Stock.”

This document and related documents are being sent to persons who directly held shares of CBS Class B Common Stock on October 11, 2017 and brokers, banks and similar persons whose names or the names of whose nominees appear on CBS’s stockholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of CBS Class B Common Stock.

Proration; Tenders for Exchange by Holders of Fewer than 100 Shares of CBS Class B Common Stock

If, upon the expiration of the exchange offer, holders of CBS Class B Common Stock have validly tendered and not properly withdrawn more shares of CBS Class B Common Stock than CBS is able to accept for exchange (taking into account the final exchange ratio, the upper limit and the total number of shares of Radio Common Stock owned by CBS), CBS will accept for exchange the CBS Class B Common Stock validly tendered and not properly withdrawn by each tendering stockholder on a pro rata basis, based on the proportion that the total number of shares of CBS Class B Common Stock to be accepted, except for tenders of odd-lots, as described below, bears to the total number of shares of CBS Class B Common Stock validly tendered and not properly withdrawn (rounded to the nearest whole number of shares of CBS Class B Common Stock), and subject to any adjustment necessary to ensure the exchange of all shares of Radio Common Stock owned by CBS, except for tenders of odd-lots, as described below.

Except as otherwise provided in this section, beneficial holders (other than plan participants in the CBS Savings Plans) of odd-lots who validly tender all of their shares will not be subject to proration if the exchange offer is oversubscribed and if CBS completes the exchange offer (those who own less than 100 shares but do not tender all of their shares will be subject to proration). In addition, shares held on behalf of participants in the CBS Savings Plans (each of which plans holds more than 100 shares of CBS Class B Common Stock) will be subject to proration.

Any beneficial holder of less than 100 shares of CBS Class B Common Stock who wishes to tender all of the shares must complete the box entitled “Odd–Lot Shares” on the letter of transmittal. If your odd-lot shares are held by a broker for your account, you can contact your broker and request the preferential treatment.

CBS will announce the preliminary proration factor, if applicable, by press release promptly after the expiration date. Upon determining the number of shares of CBS Class B Common Stock validly tendered for exchange, CBS will announce the final results, including the final proration factor.

Any shares of CBS Class B Common Stock not accepted for exchange in the exchange offer as a result of proration or otherwise will be returned to the tendering stockholder promptly after the final proration factor is determined. For a discussion of the “when distributed” market expected to be created by the NYSE, see “—When Distributed and When Issued Markets.”

For purposes of the exchange offer, a “business day” means any day other than a Saturday, Sunday or U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time.

Fractional Shares

Immediately following the consummation of the Final Distribution, Merger Sub will be merged with and into CBS Radio, whereby the separate corporate existence of Merger Sub will cease and CBS Radio will

 

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continue as the surviving company and a wholly owned subsidiary of Entercom. Each outstanding share of Radio Common Stock will be converted into the right to receive one share of Entercom Class A Common Stock in the Merger. In this conversion of shares of Radio Common Stock into the right to receive shares of Entercom Class A Common Stock, no fractional shares of Entercom Class A Common Stock will be delivered to holders of Radio Common Stock in the Merger.

All fractional shares of Entercom Class A Common Stock that a holder of shares of Radio Common Stock would otherwise be entitled to receive as a result of the Merger will be aggregated by Entercom’s transfer agent. The transfer agent will cause the whole shares obtained thereby to be sold on behalf of such holders of shares of Radio Common Stock that would otherwise be entitled to receive such fractional shares of Entercom Class A Common Stock in the Merger, in the open market or otherwise as reasonably directed by CBS, and in no case later than 10 business days after the Merger. The transfer agent will make available the net proceeds thereof, after deducting any required withholding taxes and brokerage charges, commissions and transfer taxes, on a pro rata basis, without interest, as soon as practicable to the holders of Radio Common Stock that would otherwise be entitled to receive such fractional shares of Entercom Class A Common Stock in the Merger.

Exchange of Shares of CBS Class B Common Stock

Upon the terms and subject to the conditions of the exchange offer (including, if the exchange offer is extended or amended, the terms and conditions of the extension or amendment), CBS will accept for exchange, and will exchange, for shares of Radio Common Stock owned by CBS, the CBS Class B Common Stock validly tendered, and not properly withdrawn, prior to the expiration of the exchange offer, promptly after the expiration date (or, if the exchange offer is undersubscribed will distribute its shares of Radio Common Stock through the Spin-Off).

The exchange of CBS Class B Common Stock tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of (a) the letter of transmittal for CBS Class B Common Stock, properly completed and duly executed, with any required signature guarantees, or, in the case of a book–entry transfer through The Depository Trust Company, an agent’s message and (b) any other required documents, in each case pursuant to the procedures set forth in the section entitled “—Procedures for Tendering.”

For purposes of the exchange offer, CBS will be deemed to have accepted for exchange, and thereby exchanged, CBS Class B Common Stock validly tendered and not properly withdrawn if and when CBS notifies the exchange agent of its acceptance of the tenders of those shares of CBS Class B Common Stock pursuant to the exchange offer.

Upon the consummation of the Final Distribution, CBS will deliver to the exchange agent a global certificate representing all of the Radio Common Stock being distributed in the exchange offer, with instructions to hold shares of Radio Common Stock in trust for the holders of CBS Class B Common Stock who validly tendered their shares in the exchange offer or are entitled to receive shares in the Spin-Off if any (as described below under “—Distribution of Any Shares of Radio Common Stock Remaining After the Exchange Offer”). Entercom will deposit with the transfer agent for the benefit of persons who received shares of Radio Common Stock in the exchange offer certificates or book-entry authorizations representing shares of Entercom Class A Common Stock, with irrevocable instructions to hold the shares of Entercom Class A Common Stock in trust for the holders of Radio Common Stock.

Upon surrender of the documents required by the transfer agent, duly executed, each former holder of Radio Common Stock will receive from the transfer agent in exchange therefor shares of Entercom Class A Common Stock and/or cash in lieu of fractional shares, as the case may be. You will not receive any interest on any cash paid to you, even if there is a delay in making the payment.

If CBS does not accept for exchange any tendered CBS Class B Common Stock for any reason pursuant to the terms and conditions of the exchange offer, the exchange agent will, in the case of shares tendered by

 

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book-entry transfer pursuant to the procedures set forth below in the section entitled “—Procedures for Tendering,” credit such shares to an account maintained within The Depository Trust Company, in each case promptly following expiration or termination of the exchange offer.

CBS Class A Common Stock

CBS is only offering to exchange shares of Radio Common Stock for outstanding shares of CBS Class B Common Stock that are validly tendered and not properly withdrawn. However, if you hold CBS Class A Common Stock, you can participate in the exchange offer, but only by either:

 

    converting your shares of CBS Class A Common Stock into an equal number of shares of CBS Class B Common Stock in advance of the expiration date of the exchange offer and tendering such shares of CBS Class B Common Stock received upon conversion in advance of the expiration date; or

 

    conditionally converting your shares of CBS Class A Common Stock into an equal number of shares of CBS Class B Common Stock pursuant to the procedures set forth herein by executing and delivering to the exchange agent for the exchange offer: (i) a conditional notice of conversion for all such shares of CBS Class A Common Stock submitted to be exchanged, accompanied by payment of documentary, stamp or similar issue or transfer taxes, if any; and (ii) a letter of transmittal for CBS Class B Common Stock, properly completed and duly executed (including any signature guarantees that may be required) or, in the case of shares delivered by book-entry transfer through The Depository Trust Company, an agent’s message, in each case with respect to which the shares of CBS Class A Common Stock that have been submitted for exchange, noting that shares of CBS Class A Common Stock will be converted to the extent the CBS Class B Common Stock is accepted for exchange in the exchange offer. To the extent shares of CBS Class A Common Stock are not converted, the exchange agent will promptly return your payment of documentary, stamp or similar issue or transfer taxes, if any.

If you elect to convert shares of CBS Class A Common Stock on a non-conditional basis, you may not withdraw such election of conversion and your conversion will be effective immediately upon receipt by the exchange agent. You may withdraw your tender in the exchange offer of the shares of CBS Class B Common Stock issued upon conversion by following the procedures set forth herein. If you elected to conditionally convert your shares of CBS Class A Common Stock into shares of CBS Class B Common Stock, if CBS proceeds with the exchange offer you may withdraw your conditional notice of conversion by withdrawing your tender of shares of CBS Class B Common Stock in the exchange offer, by following the procedures set forth herein.

Participants in the CBS 401(k) Plan that have assets in the CBS Class A Company Stock Fund and would like to participate in the exchange offer should follow the special instructions that are being sent to them by the plan administrator.

National Amusements, the controlling stockholder of CBS, has represented that it will not participate in the exchange offer.

Procedures for Tendering

Shares Held in Book-Entry through the DRS

If your shares of CBS Class B Common Stock are held through the DRS, you must deliver to the exchange agent at the address listed on the letter of transmittal a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other required documents.

Shares Held Through a Broker, Dealer, Commercial Bank, Trust Company or Similar Institution

If you hold shares of CBS Class B Common Stock through a broker, dealer, commercial bank, trust company or similar institution and wish to tender your shares of CBS Class B Common Stock in the exchange

 

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offer, you should follow the instructions sent to you separately by that institution. In this case, you should not use a letter of transmittal to direct the tender of your CBS Class B Common Stock. If that institution holds shares of CBS Class B Common Stock through The Depository Trust Company, it must notify The Depository Trust Company and cause it to transfer the shares into the exchange agent’s account in accordance with The Depository Trust Company’s procedures. The institution must also ensure that the exchange agent receives an agent’s message from The Depository Trust Company confirming the book-entry transfer of your CBS Class B Common Stock. A tender by book-entry transfer will be completed upon receipt by the exchange agent of an agent’s message, book-entry confirmation from The Depository Trust Company and any other required documents.

The term “agent’s message” means a message, transmitted by The Depository Trust Company to, and received by, the exchange agent and forming a part of a book-entry confirmation, which states that The Depository Trust Company has received an express acknowledgment from the participant in The Depository Trust Company tendering the shares of CBS Class B Common Stock which are the subject of the book-entry confirmation, that the participant has received and agrees to be bound by the terms of the letter of transmittal (including the instructions thereto) and that CBS may enforce that agreement against the participant.

The exchange agent will establish an account with respect to the shares of CBS Class B Common Stock at The Depository Trust Company for purposes of the exchange offer, and any eligible institution that is a participant in

The Depository Trust Company may make book–entry delivery of shares of CBS Class B Common Stock by causing The Depository Trust Company to transfer such shares into the exchange agent’s account at The Depository Trust Company in accordance with The Depository Trust Company’s procedure for the transfer. Delivery of documents to The Depository Trust Company does not constitute delivery to the exchange agent.

Shares Held in the CBS 401(k) Plan and the CBS Radio 401(k) Plan

Participants in the CBS Savings Plans should follow the special instructions that are being sent to them by the plan administrator. Such participants should not use the letter of transmittal to direct the tender of shares of CBS Class B Common Stock held in these plans. As described in the special instructions, such participants may direct the applicable plan trustee to tender all, some or none of the shares of CBS Class B Common Stock allocable to their CBS Savings Plan accounts, subject to certain limitations set forth in any instructions provided by the plan administrator. To allow sufficient time for the tender of shares by the trustee of the applicable CBS Savings Plan, tendering holders must provide the tabulator for the trustee of the applicable CBS Savings Plan with the requisite instructions so that such instructions can be received by or processed before, as applicable, 1:00 p.m., New York City time, on November 10, 2017, unless the exchange offer is extended. If the exchange offer is extended, and if administratively feasible, the deadline for receipt of participants’ directions may also be extended.

General Instructions

Do not send letters of transmittal to CBS, Entercom, CBS Radio or the information agent. Letters of transmittal for shares of CBS Class B Common Stock should be sent to the exchange agent at an address listed on the letter of transmittal. Trustees, executors, administrators, guardians, attorneys–in–fact, officers of corporations or others acting in a fiduciary or representative capacity who sign a letter of transmittal or any stock powers must indicate the capacity in which they are signing and must submit evidence of their power to act in that capacity unless waived by CBS.

The exchange agent must receive the letter of transmittal for shares of CBS Class B Common Stock at the address set forth on the back cover of this document prior to the expiration of the exchange offer. Alternatively, in case of a book–entry transfer of CBS Class B Common Stock through The Depository Trust Company, the exchange agent must receive the agent’s message and a book–entry confirmation.

 

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Letters of transmittal for shares of CBS Class B Common Stock must be received by the exchange agent. Please read carefully the instructions to the letter of transmittal you have been sent. You should contact the information agent if you have any questions regarding tendering your CBS Class B Common Stock.

Signature Guarantees

Signatures on all letters of transmittal for CBS Class B Common Stock must be guaranteed by a firm which is a member of the Securities Transfer Agents Medallion Program, or by any other “eligible guarantor institution,” as such term is defined in Rule 17Ad–15 under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) (each of the foregoing being a “U.S. eligible institution”), except in cases in which shares of CBS Class B Common Stock are tendered either (1) by a registered stockholder who has not completed the box entitled “Special Issuance Instructions” on the letter of transmittal or (2) for the account of a U.S. eligible institution.

If shares of CBS Class B Common Stock held through the DRS are registered in the name of a person other than the person who signs the letter of transmittal, the letter of transmittal must be accompanied by appropriate stock powers signed exactly as the name or names of the registered owner or owners appear on the letter of transmittal accompanying the tender of shares of CBS Class B Common Stock held through the DRS without alteration, enlargement or any change whatsoever, with the signature(s) on the letter of transmittal or stock powers guaranteed by an eligible institution.

Guaranteed Delivery Procedures

If you wish to tender shares of CBS Class B Common Stock pursuant to the exchange offer but (i) the procedure for book-entry transfer cannot be completed on a timely basis or (ii) time will not permit all required documents to reach the exchange agent on or before the expiration date of the exchange offer, you may still tender your shares of CBS Class B Common Stock, so long as all of the following conditions are satisfied:

 

    on or before the expiration date of the exchange offer (currently expected to be November 16, 2017), the exchange agent must receive a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by CBS, in the manner provided below; and

 

    no later than 5:00 p.m. on the second NYSE trading day after the date of execution of such notice of guaranteed delivery, the exchange agent must receive (1) a letter of transmittal for shares of CBS Class B Common Stock, properly completed and duly executed (including any signature guarantees that may be required) or, in the case of shares delivered by book-entry transfer through The Depository Trust Company, an agent’s message and (2) any other required documents (including, for holders of CBS Class A Common Stock, a properly completed and duly executed Conditional Notice of Conversion).

Registered stockholders (including any participant in The Depository Trust Company whose name appears on a security position listing of The Depository Trust Company as the owner of shares of CBS Class B Common Stock) may transmit the notice of guaranteed delivery by facsimile transmission or mail it to the exchange agent. If you hold shares of CBS Class B Common Stock through a broker, dealer, commercial bank, trust company, custodian or similar institution, that institution must submit any notice of guaranteed delivery on your behalf, which must include a Medallion guarantee by an eligible institution in the form set forth in the Notice of Guaranteed Delivery. Holders of CBS Class B Common Stock who cannot complete the procedure for book-entry transfer on a timely basis, or who cannot deliver all other required documents to the exchange agent prior to 11:59 p.m., New York City time, on the expiration date of the exchange offer, must deliver to the exchange agent by facsimile transmission a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by CBS.

 

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Effect of Tenders

A tender of CBS Class B Common Stock pursuant to any of the procedures described above will constitute your acceptance of the terms and conditions of the exchange offer as well as your representation and warranty to CBS that (1) you have the full power and authority to tender, sell, assign and transfer the tendered shares (and any and all other shares of CBS Class B Common Stock or other securities issued or issuable in respect of such shares), (2) when the same are accepted for exchange, CBS will acquire good and unencumbered title to such shares, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims and (3) you own the shares being tendered within the meaning of Rule 14e–4 promulgated under the Exchange Act.

It is a violation of Rule 14e–4 under the Exchange Act for a person, directly or indirectly, to tender CBS Class B Common Stock for such person’s own account unless, at the time of tender, the person so tendering (1) has a net long position equal to or greater than the amount of (a) shares of CBS Class B Common Stock tendered or (b) other securities immediately convertible into or exchangeable or exercisable for the shares of CBS Class B Common Stock tendered and such person will acquire such shares for tender by conversion, exchange or exercise and (2) will cause such shares to be delivered in accordance with the terms of this document. Rule 14e–4 provides a similar restriction applicable to the tender of guarantee of a tender on behalf of another person.

The exchange of CBS Class B Common Stock validly tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of (a) the letter of transmittal for CBS Class B Common Stock, properly completed and duly executed, with any required signature guarantees, or, in the case of a book–entry transfer through The Depository Trust Company, an agent’s message and (b) any other required documents.

Appointment of Attorneys–in–Fact and Proxies

By executing a letter of transmittal as set forth above, you irrevocably appoint CBS’s designees as your attorneys–in–fact and proxies, each with full power of substitution, to the full extent of your rights with respect to your CBS Class B Common Stock tendered and accepted for exchange by CBS and with respect to any and all other CBS Class B Common Stock and other securities issued or issuable in respect of the CBS Class B Common Stock on or after the expiration of the exchange offer. That appointment is effective when and only to the extent that CBS deposits the shares of Radio Common Stock for the shares of CBS Class B Common Stock that you have tendered with the exchange agent. All such proxies will be considered coupled with an interest in the tendered shares of CBS Class B Common Stock and therefore will not be revocable. Upon the effectiveness of such appointment, all prior proxies that you have given will be revoked and you may not give any subsequent proxies (and, if given, they will not be deemed effective). CBS’s designees will, with respect to the shares of CBS Class B Common Stock for which the appointment is effective, be empowered, among other things, to exercise all of your voting and other rights as they, in their sole discretion, deem proper. CBS reserves the right to require that, in order for CBS Class B Common Stock to be deemed validly tendered, immediately upon CBS’s acceptance for exchange of those shares of CBS Class B Common Stock, CBS must be able to exercise full voting rights with respect to such shares.

Determination of Validity

CBS will determine questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of CBS Class B Common Stock, in CBS’s sole discretion, and its determination will be final and binding. CBS reserves the absolute right to reject any and all tenders of CBS Class B Common Stock that it determines are not in proper form or the acceptance of or exchange for which may, in the opinion of its counsel, be unlawful. CBS also reserves the absolute right to waive any of the conditions of the exchange offer, or any defect or irregularity in the tender of any shares of CBS Class B Common Stock. No tender of CBS Class B Common Stock is valid until all defects and irregularities in tenders of CBS Class B Common

 

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Stock have been cured or waived. Neither CBS nor the exchange agent, the information agent or any other person is under any duty to give notification of any defects or irregularities in the tender of any CBS Class B Common Stock or will incur any liability for failure to give any such notification. CBS’s interpretation of the terms and conditions of the exchange offer (including the letter of transmittal and instructions thereto) will be final and binding.

Binding Agreement

The tender of CBS Class B Common Stock pursuant to any of the procedures described above will constitute a binding agreement between CBS and you upon the terms of and subject to the conditions to the exchange offer.

The method of delivery of shares of CBS Class B Common Stock and all other required documents, including delivery through The Depository Trust Company, is at your option and risk, and the delivery will be deemed made only when actually received by the exchange agent. If delivery is by mail, it is recommended that you use registered mail with return receipt requested, properly insured. In all cases, you should allow sufficient time to ensure timely delivery.

Partial Tenders

If shares of CBS Class B Common Stock are delivered and not accepted due to proration or a partial tender, (i) shares of CBS Class B Common Stock held through the DRS that were delivered will remain in book-entry form in the holder’s name and (ii) shares of CBS Class B Common stock held through The Depository Trust Company will be credited back through The Depository Trust Company in book-entry form.

If you validly withdraw your shares of CBS Class B Common Stock or the exchange offer is not completed, (i) shares of CBS Class B Common Stock held through the DRS that were delivered will remain in book-entry form in the holder’s name and (ii) shares of CBS Class B Common Stock held through The Depository Trust Company will be credited back through The Depository Trust Company in book-entry form.

Withdrawal Rights

Shares of CBS Class B Common Stock tendered pursuant to the exchange offer may be withdrawn at any time after the commencement of the exchange offer on October 19, 2017 and before 11:59 p.m., New York City time, on the expiration date of the exchange offer (currently expected to be November 16, 2017). Once CBS accepts shares of CBS Class B Common Stock pursuant to the exchange offer, your tender is irrevocable. In addition, shares of CBS Class B Common Stock tendered pursuant to the exchange offer may be withdrawn after December 15, 2017 (i.e., after the expiration of 40 business days from the commencement of the exchange offer), if CBS does not accept your shares of CBS Class B Common Stock pursuant to the exchange offer by such date. Once CBS accepts shares of CBS Class B Common Stock pursuant to the exchange offer, your tender is irrevocable.

For a withdrawal of shares of CBS Class B Common Stock to be effective, the exchange agent must receive from you a written notice of withdrawal or facsimile transmission of notice of withdrawal, in the form of the notice of withdrawal provided by CBS, at one of its addresses or fax numbers, respectively, set forth on the back cover of this prospectus, and your notice must include your name and the number of shares of CBS Class B common stock to be withdrawn.

If shares of CBS Class B Common Stock have been tendered pursuant to the procedures for book-entry tender through The Depository Trust Company discussed in the section entitled “—Procedures for Tendering,” any notice of withdrawal must comply with the procedures of The Depository Trust Company.

 

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If you hold your shares through a broker, dealer, commercial bank, trust company, custodian or similar institution, you should consult that institution on the procedures you must comply with and the time by which such procedures must be completed in order for that institution to provide a written notice of withdrawal or facsimile notice of withdrawal to the exchange agent on your behalf before 11:59 p.m., New York City time, on the expiration date of the exchange offer. In addition, shares of CBS Class B Common Stock tendered pursuant to the exchange offer may be withdrawn after December 15, 2017 (i.e., after the expiration of 40 business days from the commencement of the exchange offer), if CBS does not accept your shares of CBS Class B Common Stock pursuant to the exchange offer by such date. If you hold your shares through such an institution, that institution must deliver the notice of withdrawal with respect to any shares you wish to withdraw. In such a case, as a beneficial owner and not a registered stockholder, you will not be able to provide a notice of withdrawal for such shares directly to the exchange agent.

CBS will decide all questions as to the form and validity (including time of receipt) of any notice of withdrawal, in its sole discretion. CBS may delegate such power in whole or in part to the exchange agent. None of CBS, the exchange agent, the information agent nor any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any notification. Any such determinations may be challenged in a court of competent jurisdiction.

Any shares of CBS Class B Common Stock validly withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer. However, you may re-tender withdrawn shares of CBS Class B Common Stock by following one of the procedures discussed in the section entitled “—Procedures for Tendering” at any time prior to the expiration of the exchange offer (or pursuant to the instructions sent to you separately).

If you hold your shares through the CBS Savings Plans, you may withdraw or change your previously submitted instructions to the trustee by issuing a new instruction to the trustee which will cancel any prior instruction. Any new instructions must be received by the tabulator for the trustee of the applicable CBS Savings Plan on your behalf before 1:00 p.m., New York City time, on November 10, 2017. If the exchange offer is extended, and if administratively feasible, the deadline for receipt of instructions to withdraw or change your previously submitted instructions may also be extended.

If you elect to convert shares of CBS Class A Common Stock on a non-conditional basis, you may not withdraw such election of conversion and your conversion will be effective immediately upon receipt by the exchange agent. You may withdraw your tender in the exchange offer of the shares of CBS Class B Common Stock issued upon conversion by following the procedures set forth herein. If you elected to conditionally convert your shares of CBS Class A Common Stock into shares of CBS Class B Common Stock to the extent the CBS Class B Common Stock is accepted for exchange in the exchange offer, you may withdraw your conditional notice of conversion by withdrawing your tender of shares of CBS Class B Common Stock in the exchange offer, by following the procedures set forth herein.

Except for the withdrawal rights described above, any tender made under the exchange offer is irrevocable.

Book–Entry Accounts

Certificates representing shares of Radio Common Stock will not be issued to holders of CBS Class B Common Stock pursuant to the exchange offer. Rather than issuing certificates representing such shares of Radio Common Stock to tendering holders of CBS Class B Common Stock, the exchange agent will cause shares of Radio Common Stock to be credited to records maintained by the exchange agent for the benefit of the respective holders. Immediately following the consummation of the Final Distribution, Merger Sub will in the Merger be merged with and into CBS Radio in the Merger and each outstanding share of Radio Common Stock will be converted into the right to receive one share of Entercom Class A Common Stock and cash in lieu of fractional shares. In connection with the exchange offer, you will receive a letter of transmittal and instructions for use in

 

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effecting surrender of any shares of CBS Class B Common Stock in exchange for Entercom Class A Common Stock and cash in lieu of fractional shares. As promptly as practicable following the Merger and CBS’s notice and determination of the final proration factor, if any, Entercom’s transfer agent will credit the shares of Entercom Class A Common Stock into which the shares of Radio Common Stock have been converted to book-entry accounts maintained for the benefit of the holders of CBS Class B Common Stock who received shares of Radio Common Stock in the exchange offer or as a Spin-Off, if any, and will send these holders a statement evidencing their holdings of shares of Entercom Class A Common Stock.

When Distributed and When Issued Markets

CBS will announce the preliminary proration factor, if applicable, by press release promptly after the expiration of the exchange offer. At the expiration of the guaranteed delivery period (at 5:00 p.m. on the second NYSE trading day following the expiration of the exchange offer), CBS will confirm the final results of the exchange offer, including the final proration factor, if applicable, with the exchange agent. Promptly after the final results are confirmed, CBS will issue a press release announcing the final results of the exchange offer, including the final proration factor, if applicable.

In the event proration is necessary, CBS expects that the NYSE will create a “when distributed” market for the shares of CBS Class B Common Stock not accepted for exchange in the exchange offer if the NYSE determines that the creation of such a market would be useful to allow investors to facilitate transactions in those shares. CBS expects that the “when distributed” market would be created promptly following CBS’s announcement of the preliminary proration factor. In the “when distributed” market, CBS expects that holders of CBS Class B Common Stock whose shares are not accepted for exchange in the exchange offer will be able to sell their rights to receive shares of CBS Class B Common Stock when those shares are returned by CBS as described above. CBS expects that such selling stockholders will, however, retain voting and dividend rights with respect to shares sold in the “when distributed” market accruing to stockholders of record as of any record date occurring prior to the date those shares are returned. Purchasers of shares of CBS Class B Common Stock in the “when distributed” market are expected to acquire the right to receive the shares of CBS Class B Common Stock when those shares are returned by CBS as described above but will not acquire voting or dividend rights with respect to those shares until those shares are received by the record holder and credited to the account of the purchaser. CBS expects that after the shares of CBS Class B Common Stock not accepted for exchange in the exchange offer are returned, “when distributed” trading with respect to shares of CBS Class B Common Stock will end.

In addition, Entercom expects that the NYSE will create a “when issued” market for the new shares of Entercom Class A Common Stock issuable to holders of CBS Class B Common Stock whose shares of CBS Class B Common Stock are accepted for exchange in the exchange offer promptly following CBS announcement of the preliminary proration factor, if applicable. Entercom expects that in the “when issued” market, holders of CBS Class B Common Stock whose shares are accepted for exchange in the exchange offer will be able to sell their rights to receive shares of Entercom Class A Common Stock when those shares are issued and delivered by Entercom’s transfer agent. Purchasers of shares of Entercom Class A Common Stock in the “when issued” market are expected to acquire the right to receive shares of Entercom Class A Common Stock when those shares are issued and delivered by Entercom’s transfer agent. These rights are not actual shares of Entercom Class A Common Stock and do not entitle holders to voting or dividend rights with respect to shares of Entercom Class A Common Stock. After the shares of Entercom Class A Common Stock issuable to holders of CBS Class B Common Stock are issued and delivered, Entercom expects that “when issued” trading with respect to shares of Entercom Class A Common Stock will end.

Any trades made in the “when distributed” and “when issued” markets will be made contingent on the actual return of shares of CBS Class B Common Stock or issuance and delivery of shares of Entercom Class A Common Stock, as the case may be. The creation of a “when distributed” or “when issued” market is outside the control of CBS and Entercom. The NYSE is not required to create a “when distributed” or “when issued” market,

 

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and there can be no assurances that either such market will develop or if they develop the prices at which shares will trade.

Extension; Termination; Amendment

Extension, Termination or Amendment by CBS

Subject to the terms of the Separation Agreement and the Merger Agreement, CBS expressly reserves the right, in its sole discretion, at any time and from time to time to extend the period of time during which the exchange offer is open and thereby delay acceptance for payment of, and the payment for, any shares of CBS Class B Common Stock validly tendered and not properly withdrawn in the exchange offer. For example, the exchange offer can be extended if any of the conditions for consummation of the Final Distribution, described in the next section entitled “—Conditions for Consummation of the Final Distribution” are not satisfied or waived prior to the expiration of the exchange offer. If CBS decides to extend the exchange offer, the Valuation Dates will be reset to the period of three consecutive trading days ending on and including the second trading day preceding the expiration date, as may be extended.

Subject to the terms of the Separation Agreement and the Merger Agreement, CBS expressly reserves the right, in its sole discretion, to amend the terms of the exchange offer in any respect prior to the expiration date, except that CBS does not intend to extend the exchange offer other than in the circumstances described above.

CBS’s right to extend the exchange offer is subject to the terms and conditions of the Separation Agreement and the Merger Agreement. The Separation Agreement provides that the terms and conditions of the exchange offer must comply with all applicable legal requirements and with the rules and regulations of the NYSE. “The Separation Agreement—The Final Distribution.” The Separation Agreement also provides that CBS is limited in its discretion to set the terms and conditions of the exchange offer by its obligations under the Merger Agreement’s provisions with respect to tax matters, its obligations to make certain filings with the SEC and the obligations of CBS to take certain actions to obtain approval of government authorities for the Merger. “Merger Agreement—Tax Matters,” “Merger Agreement—SEC Filings” and “Merger Agreement—Certain Other Covenants and Agreements.”

CBS’s right to extend the exchange offer is also limited by the termination date of the Merger Agreement, which is set at January 31, 2018 but may be extended to May 2, 2018 in certain circumstances by CBS or Entercom if the Merger is not consummated by November 2, 2017. The exchange offer must be consummated before the termination date, as it may be extended, of the Merger Agreement. Each party has the right to extend the Merger Agreement’s termination date if the approval of the FCC has not been obtained or if the expiration or termination of any applicable waiting period under the HSR Act has not occurred, in each case only if the failure to consummate the Merger is not due to a party’s failure to perform its obligations under the Merger Agreement. However, if as of January 31, 2018, the conditions to the closing of the Merger concerning the expiration or termination of any applicable waiting period under the HSR Act, the approval of the FCC, the approval of Entercom’s shareholders and the absence of any law or order restraining, enjoining or prohibiting the consummation of the transaction have all been satisfied, CBS may not terminate the Merger Agreement due to the passing of the termination date of the Merger. See “Merger Agreement—Termination.”

If CBS materially changes the terms of or information concerning the exchange offer or if CBS waives a material condition of the exchange offer, it will extend the exchange offer if required by law. The SEC has stated that, as a general rule, it believes that an offer should remain open for a minimum of five business days from the date that notice of the material change is first given or in the event there is a waiver of a material condition to the exchange offer. The length of time will depend on the particular facts and circumstances.

 

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As required by law, the exchange offer will be extended so that it remains open for a minimum of ten business days following the announcement if:

 

    CBS changes the method for calculating the number of shares of Radio Common Stock offered in exchange for each share of CBS Class B Common Stock; and

 

    the exchange offer is scheduled to expire within ten business days of announcing any such change.

If CBS extends the exchange offer, is delayed in accepting for exchange any shares of CBS Class B Common Stock or is unable to accept for exchange any shares of CBS Class B Common Stock under the exchange offer for any reason, then, without affecting CBS’s rights under the exchange offer, the exchange agent may retain all shares of CBS Class B Common Stock tendered on CBS’s behalf. These shares of CBS Class B Common Stock may not be withdrawn except as provided in the section entitled “—Terms of the Exchange Offer—Withdrawal Rights.”

CBS’s reservation of the right to delay acceptance of any shares of CBS Class B Common Stock is subject to applicable law, which requires that CBS pay the consideration offered or return the shares of CBS Class B Common Stock deposited promptly after the termination or withdrawal of the exchange offer.

CBS will issue a press release or other public announcement no later than 9:00 a.m., New York City Time, on the next business day following any extension, amendment, non–acceptance or termination of the previously scheduled expiration date.

Method of Public Announcement

Subject to applicable law (including Rules 13e–4(d), 13e–4(e)(3) and 14e–1 under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the exchange offer be promptly disclosed to stockholders in a manner reasonably designed to inform them of the change) and without limiting the manner in which CBS may choose to make any public announcement, CBS assumes no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to Business Wire.

Conditions for Consummation of the Final Distribution

CBS’s obligation to exchange shares of Radio Common Stock for shares of CBS Class B Common Stock or distribute shares of Radio Common Stock in the Spin-Off is subject to the conditions set forth in this section. All conditions to the exchange offer must be satisfied or waived at or prior to the expiration date of the exchange offer.

The consummation of the Final Distribution (including the exchange offer and, if necessary, the Spin-Off), is subject to a number of conditions that are outside the control of CBS, including:

 

    the receipt by CBS of the Distribution Tax Opinion (and, if CBS waives the condition that it receive the Distribution Tax Opinion, then CBS may be required to pay the Tax Opinion Waiver Penalty);

 

    the receipt of all necessary permits and authorizations under state or federal securities laws;

 

    the consent of the FCC for the Transactions and the expiration or termination of any applicable waiting period (and any extension of any applicable waiting period) under the HSR Act; and

 

    the fulfillment or waiver of the conditions set forth to effect the Merger Agreement (except for the condition that the Final Distribution has been consummated and the conditions that by their nature are to be satisfied at the Closing).

 

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The consummation of the Merger is subject to a number of conditions that are outside the control of CBS, including:

 

    consummation of the Radio Reorganization and the Final Distribution in accordance with the Separation Agreement and the Distribution Tax Opinion;

 

    expiration or termination of any applicable waiting period (and any extension of any applicable waiting period) under the HSR Act without the imposition of any Burdensome Restriction;

 

    consent of the FCC for the Transactions without the imposition of any Burdensome Restriction;

 

    effectiveness of this registration statement and the other registration statements required for the Transactions;

 

    the obtaining by the parties of all necessary permits and authorizations under state securities or “blue sky” laws, the Securities Act and the Exchange Act relating to the issuance and trading of shares of Entercom Class A Common Stock;

 

    the affirmative approval by a majority of the aggregate voting power represented by the Entercom Common Stock, voting as a single class, to approve the issuance of the Entercom Class A Common Stock;

 

    the affirmative approval by a majority of the aggregate voting power represented by the Entercom Common Stock, voting as a single class, to approve an amendment to the Entercom Articles in order to provide that the Entercom board of directors will be classified after the Merger;

 

    the absence of any law or order prohibiting any of the Transactions; and

 

    other customary conditions.

The exchange offer is not subject to any condition that a minimum number of shares must be tendered into the exchange offer.

In addition to these closing conditions, a condition for Entercom to consummate the Merger is CBS Radio’s receipt of the Radio Financing. Each of the foregoing conditions to the consummation of the Final Distribution, is independent of any other condition; the exclusion of any event from a particular condition above does not mean that such event may not be included in another condition.

The Merger Agreement may be terminated if certain of the above conditions are not met, or for other reasons, in which case the exchange offer will not be consummated. See “The Merger Agreement—Termination.”

Material U.S. Federal Income Tax Consequences of the Final Distribution and the Merger

The following discusses the material U.S. federal income tax consequences of the Final Distribution (which includes the exchange offer) and the Merger to “U.S. holders” (as defined below) of CBS Common Stock. The discussion that follows is based on the Code, Treasury regulations promulgated under the Code, rulings and other administrative pronouncements issued by the IRS, and judicial decisions, all as in effect on the date of this document, and all of which are subject to differing interpretation and change at any time, possibly with retroactive effect. The discussion applies only to U.S. holders of shares of CBS Common Stock who hold such shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion is based upon the assumption that the Final Distribution, the Merger and certain related transactions will be consummated in accordance with the Separation Agreement, the Merger Agreement, and the other Transaction Agreements and as further described in this document. This discussion is for general information only and is not tax advice. It does not discuss all aspects of U.S. federal income taxation that may be relevant to particular holders in light of their particular circumstances or to stockholders subject to special rules

 

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under the Code, including, for example, banks and certain other financial institutions, dealers or brokers in stocks and securities, commodities or currencies, traders in securities who elect to apply a mark-to-market method of accounting, insurance companies, tax-exempt entities, partnerships, S corporations or other pass-through entities (or investors in partnerships, S corporations or other pass-through entities), regulated investment companies, mutual funds, real estate investment trusts, individuals who received shares of CBS Common Stock, Radio Common Stock, or Entercom Class A Common Stock upon the exercise of employee stock options or otherwise as compensation, holders who are liable for the alternative minimum tax, holders that are not U.S. holders, U.S. holders whose functional currency is not the U.S. dollar, U.S. expatriates, and holders who hold their shares of CBS Common Stock as part of a “hedge,” “straddle,” “conversion,” “synthetic security,” “integrated investment” or “constructive sale” transaction. This discussion also does not address any tax consequences arising under the unearned Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, nor does it address any tax considerations under state, local or foreign laws or U.S. federal laws other than those pertaining to the U.S. federal income tax.

For purposes of this discussion, a “U.S. holder” means a beneficial owner of CBS Common Stock that for U.S. federal income tax purposes is:

 

    an individual who is a citizen or resident of the United States;

 

    a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

    an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

    a trust if (i) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) such trust has made a valid election to be treated as a U.S. person for U.S. federal income tax purposes.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds CBS Common Stock, the U.S. federal income tax treatment of a partner in such entity or arrangement generally will depend on the status of the partner and the activities of the partnership. Any entity treated as a partnership for U.S. federal income tax purposes that holds CBS Common Stock and any partners in such partnership should consult their independent tax advisors regarding the tax consequences of the Final Distribution and the Merger to their specific circumstances.

The following discussion is a summary of material U.S. federal income tax consequences of the Final Distribution and the Merger under current law and is for general information only. Determining the actual tax consequences of the Final Distribution and the Merger to a particular holder of CBS Common Stock may be complex and will depend on the holder’s specific situation and on factors that are not within CBS’s, CBS Radio’s or Entercom’s control. All holders should consult their own tax advisors as to the particular tax consequences of the Final Distribution and the Merger to them, including the application and effect of U.S. federal, state, local, and foreign tax laws.

Neither CBS nor Entercom has sought and neither intends to seek a ruling from the IRS with respect to the treatment of the Final Distribution or the Merger for U.S. federal income tax purposes, and there can be no assurance that the IRS will not assert that the Final Distribution and/or the Merger are taxable. It is a condition to the consummation of the Final Distribution (which includes the exchange offer) and related transactions that CBS receives the Distribution Tax Opinion. It is a condition to Entercom’s obligation to complete the Merger that Entercom receive a Merger Tax Opinion and a copy of the Distribution Tax Opinion, and it is a condition to CBS and CBS Radio’s obligations to complete the Merger that CBS receive a Merger Tax Opinion. The opinions of counsel will be based upon and rely on, among other things, current law, certain facts and assumptions, as well as certain representations, statements, and undertakings of CBS, CBS Radio, Entercom, and Merger Sub, including those relating to the past and future conduct of CBS, CBS Radio, Entercom and Merger Sub. If any of

 

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these representations, statements or undertakings are, or become, inaccurate or incomplete, or if CBS, CBS Radio, Entercom or Merger Sub breaches any of its covenants in the Transaction Agreements, the opinions of counsel may be invalid and the conclusions reached therein could be jeopardized. An opinion of counsel is not binding on the IRS or any court.

Notwithstanding the receipt by CBS and Entercom of the opinions of counsel, the IRS could assert that the Final Distribution and/or the Merger do not qualify for tax-free treatment for U.S. federal income tax purposes. If the IRS were successful in taking this position, CBS, CBS Radio and CBS stockholders could be subject to significant U.S. federal income tax liability.

The Final Distribution

If the Final Distribution qualifies as a transaction that is tax-free for U.S. federal income tax purposes under Section 355 of the Code, in general, the U.S. federal income tax consequences of the Final Distribution generally are as follows:

 

    no gain or loss will be recognized by, and no amount will be includable in the income of CBS, as a result of the Final Distribution, other than with respect to any “excess loss account” or “intercompany transaction” required to be taken into account by CBS under U.S. Treasury regulations relating to consolidated federal income tax returns;

 

    no gain or loss will be recognized by, and no amount will be includable in the income of, U.S. holders of CBS Common Stock upon the receipt of Radio Common Stock in the Final Distribution (including in the exchange offer or in any Spin-Off);

 

    in the exchange offer, the aggregate tax basis of the shares of Radio Common Stock (including fractional shares) issued to a holder of CBS Class B Common Stock will equal the aggregate tax basis of the shares of CBS Class B Common Stock exchanged therefor;

 

    the aggregate tax basis of any shares of Radio Common Stock (including fractional shares) issued as a pro rata distribution to holders of CBS Common Stock in a Spin-Off if the exchange offer is undersubscribed will be determined by allocating the aggregate tax basis of such holder in the shares of CBS Common Stock with respect to which the Spin-Off is made immediately before such distribution between such CBS Common Stock and the Radio Common Stock in proportion to the relative fair market value of each immediately following such distribution; and

 

    the holding period of the shares of Radio Common Stock received by each U.S. holder of CBS Common Stock in the Final Distribution will include the holding period at the time of the consummation of the Final Distribution of the shares of CBS Common Stock with respect to which the shares of Radio Common Stock were received.

If a U.S. holder of CBS Common Stock holds different blocks of CBS Common Stock (generally shares of CBS Common Stock acquired on different dates or at different prices), such holder should consult its tax advisor regarding the determination of the basis and holding period of shares of Radio Common Stock received in the Final Distribution in respect of particular blocks of CBS Common Stock.

As discussed above, CBS has not sought and does not intend to seek a ruling from the IRS with respect to the treatment of Final Distribution for U.S. federal income tax purposes. Notwithstanding receipt by CBS of the Distribution Tax Opinion, the IRS could assert that the Final Distribution does not qualify for tax-free treatment for U.S. federal income tax purposes. If the IRS were successful in taking this position, the consequences described above would not apply, and CBS, CBS Radio and CBS stockholders could be subject to significant U.S. federal income tax liability. In addition, certain events that may or may not be within the control of CBS or CBS Radio could cause the Final Distribution to not qualify for tax-free treatment for U.S. federal income tax purposes. Depending on the circumstances, CBS Radio and Entercom may be required to indemnify CBS for taxes (and certain related losses) resulting from the Final Distribution not qualifying as tax-free for U.S. federal income tax purposes.

 

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If the Final Distribution fails to qualify as a tax-free transaction for U.S. federal income tax purposes, in general, the exchange offer would be treated as a taxable exchange to holders of CBS Class B Common Stock who receive Radio Common Stock in the exchange offer and the Spin-Off, if any, would be treated as a taxable dividend to holders of CBS Common Stock who receive such distribution in an amount equal to the fair market value of the Radio Common Stock received, to the extent of such CBS stockholder’s ratable share of CBS’s earnings and profits. In addition, if the Final Distribution does not qualify as a tax-free transaction for U.S. federal income tax purposes, in general, CBS would have taxable gain, which could result in significant tax to CBS.

Even if the Final Distribution were otherwise to qualify as tax-free under Section 355 of the Code, it could result in taxable gain to CBS under Section 355(e) of the Code if the Final Distribution were later deemed to be a part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, shares representing a 50% or greater interest (by vote or value) in CBS, or CBS Radio (including as a result of direct or indirect acquisitions of interests in Entercom after the Merger). For this purpose, any acquisitions of CBS or CBS Radio stock (including Entercom stock after the Merger) within the period beginning two years before the Final Distribution and ending two years after the Final Distribution are presumed to be part of such a plan, although CBS may be able to rebut that presumption. Further, for purposes of this test, the Merger will be treated as part of such a plan, but the Merger standing alone should not cause the Final Distribution to be taxable to CBS under Section 355(e) of the Code because pre-Merger holders of Radio Common Stock will own at least 50.25% of the aggregate value of Entercom Common Stock and at least 50.25% of the aggregate voting power of Entercom Common Stock, in each case, immediately following the Merger. However, if the IRS were to determine that other acquisitions of CBS or CBS Radio stock (including stock of Entercom after the Merger), either before or after the Final Distribution, were part of a plan or series of related transactions that included the Final Distribution, such determination could result in the recognition of a substantial amount of gain by CBS under Section 355(e) of the Code, which could result in significant tax to CBS.

In certain circumstances, under the Tax Matters Agreement, CBS Radio (and Entercom, if applicable) will be required to indemnify CBS against all or a portion of any taxes on the Final Distribution that arise as a result of a certain disqualifying action by Entercom or CBS Radio. If CBS were to recognize gain on the Final Distribution for reasons not related to a disqualifying action by CBS Radio or Entercom, CBS would not generally be entitled to be indemnified under the Tax Matters Agreement and the resulting tax to CBS could have a material adverse effect on CBS. In addition, in certain circumstances, under the Tax Matters Agreement, CBS Radio (and Entercom) will be required to indemnify CBS against taxes on the Merger that arise as a result of a disqualifying action by CBS Radio or Entercom. If CBS were to recognize gain on the Merger for reasons not related to a disqualifying action by CBS Radio or Entercom, CBS would generally not be entitled to indemnification by CBS Radio (or Entercom) under the Tax Matters Agreement. If CBS Radio (or Entercom, if applicable) is required to indemnify CBS if the Final Distribution or the Merger is taxable, this indemnification obligation could be substantial and could have a material adverse effect on Entercom, including with respect to its financial condition and results of operations. See “Other Agreements and Other Related Party Transactions—Tax Matters Agreement” for a summary of the Tax Matters Agreement.

The Merger

CBS, CBS Radio and Entercom intend for the Merger to be treated as a “reorganization” for U.S. federal income tax purposes within the meaning of Section 368(a) of the Code.

If the Merger qualifies as a “reorganization” for U.S. federal income tax purposes within the meaning of Section 368(a) of the Code, in general, the U.S. federal income tax consequences of the Merger to U.S. holders of Radio Common Stock generally are as follows:

 

   

no gain or loss will be recognized by, and no amount will be included in the income of, U.S. holders of Radio Common Stock upon the receipt of Entercom Class A Common Stock in the Merger, except for

 

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any gain or loss recognized with respect to cash received in lieu of a fractional share of Entercom Class A Common Stock;

 

    gain or loss will be recognized by U.S. holders of Radio Common Stock on any cash received in lieu of a fractional share of Entercom Class A Common Stock in the Merger equal to the difference between the amount of cash received in lieu of such fractional share and the U.S. holder’s tax basis in such fractional share of Entercom Class A Common Stock (determined in the manner described below); such gain or loss will be long-term capital gain or loss if, as of the effective time of the Merger, the U.S. holder’s holding period for such fractional share (determined in the manner described below) exceeds one year; and long-term capital gains of certain non-corporate taxpayers, including individuals, are generally eligible for reduced rates of taxation and the deductibility of capital losses is subject to limitations;

 

    the aggregate tax basis of Entercom Class A Common Stock received by a U.S. holder of Radio Common Stock in the Merger, including any fractional share of Entercom Class A Common Stock deemed received and exchanged for cash, will equal the aggregate adjusted tax basis in the shares of Radio Common Stock deemed exchanged therefor; and

 

    the holding period of Entercom Class A Common Stock received by a U.S. holder of Radio Common Stock in the Merger, including any fractional shares deemed received and exchanged for cash, will include the holding period of the Radio Common Stock exchanged therefor.

Information Reporting and Backup Withholding

If the Final Distribution qualifies under Section 355 of the Code, current Treasury regulations require certain U.S. holders who are “significant distributees” (generally, a U.S. holder that owns at least 5% of the outstanding CBS stock immediately before the Final Distribution) and who receive Radio Common Stock pursuant to the Final Distribution to attach to their U.S. federal income tax returns for the taxable year in which the Final Distribution occurs a statement setting forth certain information with respect to the transaction. CBS will provide U.S. holders of CBS Common Stock with the information necessary to comply with this requirement. Holders should consult their tax advisors to determine whether they are significant distributees required to provide the foregoing statement.

If the Merger qualifies as a “reorganization” under Section 368(a) of the Code, current Treasury regulations require certain U.S. holders who become “significant holders” of Radio Common Stock in the Final Distribution (generally, a U.S. holder that owns at least 1% of the outstanding Radio Common Stock immediately before the Merger) to comply with certain reporting requirements. Significant holders generally will be required to file a statement with their U.S. federal income tax returns for the taxable year in which the Merger occurs setting forth certain information with respect to the transaction. Holders should consult their tax advisors to determine whether they are significant holders required to provide the foregoing statement.

Certain U.S. holders of Radio Common Stock may be subject to information reporting and backup withholding of U.S. federal income tax with respect to any cash received pursuant to the Merger. Backup withholding will not apply, however, to a U.S. holder of Radio Common Stock that furnishes a correct taxpayer identification number and certifies that it is not subject to backup withholding on IRS Form W-9 or is otherwise exempt from backup withholding and provides proof of the applicable exemption. Backup withholding is not an additional tax and any amounts withheld will be allowed as a refund or credit against the U.S. holder’s U.S. federal income tax liability, if any, provided that such U.S. holder timely furnishes the required information to the IRS.

THE FOREGOING DISCUSSION IS A SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE FINAL DISTRIBUTION AND THE MERGER UNDER CURRENT LAW AND IS FOR GENERAL INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT

 

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PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL THE POTENTIAL TAX CONSEQUENCES OF THE FINAL DISTRIBUTION AND THE MERGER. EACH HOLDER OF CBS COMMON STOCK SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE FINAL DISTRIBUTION AND THE MERGER TO SUCH STOCKHOLDER, INCLUDING THE APPLICATION AND EFFECT OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.

Treatment of Specified CBS Compensatory Equity-Based Awards Held by Current CBS Radio Employees

Stock Options. Each option to purchase shares of CBS Class B Common Stock that is outstanding as of immediately prior to the effective time of the Merger and is held by an individual employed by CBS Radio, as of the effective time of the Merger, will be canceled and converted into an option to purchase, on the same terms and conditions, a number of shares of Entercom Class A Common Stock equal to the product (rounded down to the nearest whole share) of (a) the number of shares of CBS Class B Common Stock subject to such option as of immediately prior to the effective time of the Merger multiplied by (b) the equity award adjustment ratio (as defined below), at an exercise price per share equal to the quotient (rounded up to the nearest whole cent) of (x) the per share exercise price for the CBS Class B Common Stock subject to such option as of immediately prior to the effective time of the Merger divided by (y) the equity award adjustment ratio.

Restricted Stock Units. Each restricted stock unit in respect of shares of CBS Class B Common Stock that is outstanding as of immediately prior to the effective time of the Merger and is held by an individual employed by CBS Radio, as of the effective time of the Merger, will be canceled and converted into a restricted stock unit, on the same terms and conditions, in respect of a number of shares of Entercom Class A Common Stock equal to the product (rounded up to the nearest whole share) of (a) the number of shares of CBS Class B Common Stock subject to such restricted stock unit as of immediately prior to the effective time of the Merger multiplied by (b) the equity award adjustment ratio.

The “equity award adjustment ratio” is the quotient of (a) the volume-weighted average per-share closing price of CBS Class B Common Stock on the five trading days immediately prior to the date on which the effective time occurs, divided by (b) the volume-weighted average per-share closing price of Entercom Class A Common Stock on the five trading days immediately following the date on which the effective time occurs.

Fees and Expenses

CBS has retained Georgeson LLC to act as the information agent and Wells Fargo Bank, N.A. to act as the exchange agent in connection with the exchange offer and if necessary, the Spin-Off. The information agent may contact holders of CBS Class B Common Stock by mail, e-mail, telephone, facsimile transmission and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials relating to the exchange offer to beneficial owners. The information agent and the exchange agent each will receive reasonable compensation for their respective services, will be reimbursed for reasonable out–of–pocket expenses and will be indemnified against specified liabilities in connection with their services, including liabilities under the federal securities laws.

None of the information agent or the exchange agent has been retained to make solicitations or recommendations with respect to the exchange offer and the spin-off. The fees they receive will not be based on the number of shares of CBS Class B Common Stock tendered under the exchange offer.

CBS will not pay any fees or commissions to any broker or dealer or any other person for soliciting tenders of CBS Class B Common Stock under the exchange offer. CBS will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers.

 

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No broker, dealer, bank, trust company or fiduciary will be deemed to be CBS’s agent or the agent of CBS Radio, the information agent or the exchange agent for purposes of the exchange offer.

Legal Limitations; Certain Matters Relating to Non-U.S. Jurisdictions

This document is not an offer to buy, sell or exchange, and it is not a solicitation of an offer to buy or sell any shares of Radio Common Stock, CBS Class B Common Stock or Entercom Class A Common Stock in any jurisdiction in which the offer, sale or exchange is not permitted. After the consummation of the Final Distribution, and prior to the Merger it will not be possible to trade the shares of Radio Common Stock.

Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of CBS, Entercom or CBS Radio has taken any action under non-U.S. regulations to facilitate a public offer to exchange the shares of CBS Class B Common Stock, Entercom Class A Common Stock or Radio Common Stock outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of CBS Class B Common Stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in the exchange offer without the need for CBS, Entercom or CBS Radio to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

Non-U.S. stockholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of CBS Class B Common Stock, Entercom Class A Common Stock or Radio Common Stock that may apply in their home countries. None of CBS, Entercom or CBS Radio can provide any assurance about whether such limitations may exist.

Holders who are participants in the CBS Radio 401(k) Plan should note that, following the consummation of the exchange offer, Entercom intends to retain an independent fiduciary to assist it in evaluating any single stock investment as an available investment under the CBS Radio 401(k) Plan, including both the CBS Class B Company Stock Fund and the Entercom common stock fund. Following the consummation of the exchange offer, the CBS Radio 401(k) Plan will be amended to provide that no new investment will be allowed into the Entercom common stock fund under the CBS Radio 401(k) Plan. Currently no new investment is permitted in the CBS Class B Company Stock Fund. Participants in the CBS Radio 401(k) Plan may continue to hold assets in the CBS Class B Company Stock Fund and the Entercom common stock fund and will be notified following the consummation of the exchange offer of any changes to the CBS Radio 401(k) Plan that may impact the continued holding of assets in the CBS Class B Company Stock Fund or the Entercom common stock fund.

Holders who are participants in the CBS 401(k) Plan should note that following the consummation of the exchange offer, no new investment into the Entercom common stock fund will be permitted under the CBS 401(k) Plan. In addition, CBS intends to remove the Entercom common stock fund from the CBS 401(k) Plan on January 31, 2018. To the extent that participants have any assets remaining in the Entercom common stock fund after January 31, 2018, the assets will be liquidated over a period of up to four days and the proceeds will be transferred to such participants’ qualified default investment alternative, which is the target retirement fund in the CBS 401(k) Plan with the target date closest to the year that such participant will reach age 65.

Distribution of Any Shares of Radio Common Stock Remaining After the Exchange Offer

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of each such holder in the number of total outstanding shares of CBS Common Stock, excluding those that have been validly tendered and not withdrawn in the exchange offer, to holders of CBS Common Stock as of the distribution record date, which will be no later than the date of the Merger. Such Spin-Off, will not have a different impact on holders of different classes of CBS Common Stock, as holders of each outstanding share of CBS Class B Common Stock not validly tendered (or validly tendered and validly withdrawn) in the exchange offer and each outstanding share of CBS Class A Common Stock will receive an equal number of shares of Radio Common Stock in the Spin-Off. Any holder of CBS Class B Common Stock who validly tenders (and does not properly withdraw) shares of CBS Class B Common Stock for shares of Radio Common Stock in the exchange offer will waive their rights with respect to such validly tendered shares of CBS Class B Common Stock (but not with respect to any other shares that are not validly tendered or validly tendered and validly withdrawn in the exchange offer) to receive, and forfeit any rights to, shares of Radio Common Stock distributed on a pro rata basis in the Spin-Off, based on the relative economic interest of each such holder in the total outstanding shares of CBS Common Stock, excluding those shares of CBS Class B Common Stock that have been validly tendered and not withdrawn in the exchange offer.

Upon consummation of the Final Distribution, CBS will irrevocably deliver to the exchange agent a global certificate representing all of the Radio Common Stock being exchanged in the exchange offer, with irrevocable instructions to hold shares of Radio Common Stock in trust for the holders of CBS Class B Common Stock who validly tendered their shares in the exchange offer or are entitled to receive shares in the Spin-Off if any. Entercom will deposit with the transfer agent for the benefit of persons who received shares of Radio Common Stock in the exchange offer certificates or book-entry authorizations representing Entercom Class A Common Stock, with irrevocable instructions to hold the shares of Entercom Class A Common Stock in trust for the holders of Radio Common Stock. Shares of Entercom Class A Common Stock will be delivered immediately following the expiration of the exchange offer, the acceptance of CBS Class B Common Stock for exchange, the determination of the final proration factor, if any, and the effectiveness of the Merger, pursuant to the procedures determined by the exchange agent and the transfer agent. See “The Exchange Offer—Terms of the Exchange Offer—Exchange of Shares of CBS Class B Common Stock.”

If the exchange offer is terminated by CBS without the exchange of shares and the Merger Agreement is not concurrently terminated, but the conditions for consummation of the Transactions have otherwise been satisfied, CBS intends to distribute all shares of Radio Common Stock owned by CBS on a pro rata basis to holders of CBS Common Stock, with a record date to be announced by CBS that will be no later than the date of the Merger. The Spin-Off will only occur if the exchange offer is consummated but not fully subscribed (or if the exchange offer is consummated but not all of the shares of Radio Common Stock held by CBS are exchanged due to the upper limit being in effect), meaning that not all the outstanding shares of Radio Common Stock held by CBS will be distributed in the exchange offer.

 

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INFORMATION ON CBS

CBS, incorporated in Delaware in 1986, is a mass media company with operations in the following segments:

Entertainment: The Entertainment segment (67%, 67% and 66% of CBS’s consolidated revenues in 2016, 2015 and 2014, respectively, and 53%, 51% and 50% of CBS’s total segment operating income in 2016, 2015 and 2014, respectively) is composed of the CBS® Television Network; CBS Television Studios®, CBS Studios International™ and CBS Television Distribution™, CBS’s television production and syndication operations; CBS Interactive™, CBS’s digital properties for information and entertainment; CBS Films®, CBS’s producer and distributor of theatrical motion pictures; and CBS’s digital streaming services, CBS All Access® and CBSN®.

Cable Networks: The Cable Networks segment (16%, 18% and 17% of CBS’s consolidated revenues in 2016, 2015 and 2014, respectively, and 33%, 37% and 37% of the CBS’s total segment operating income in 2016, 2015, and 2014, respectively) is composed of Showtime Networks, which operates CBS’s premium subscription program services, Showtime®, The Movie Channel®, and Flix®, including a digital streaming subscription offering; CBS Sports Network®, CBS’s cable network focused on college athletics and other sports; and Smithsonian Networks™, a venture between Showtime Networks and Smithsonian Institution, which operates Smithsonian Channel™, a basic cable program service, and a digital streaming subscription service.

Publishing: The Publishing segment (6% of CBS’s consolidated revenues in each of 2016, 2015 and 2014, and 4% of CBS’s total segment operating income in each of 2016, 2015 and 2014) is composed of Simon & Schuster, which publishes and distributes consumer books in the U.S. and internationally under imprints such as Simon & Schuster®, Pocket Books®, Scribner®, Gallery Books®, Touchstone® and Atria Books®. Simon & Schuster publishes and distributes adult and children’s consumer books in printed, digital and audio formats in the U.S. and internationally. Its digital formats include electronic books and audio books.

Local Media: The Local Media segment (14%, 12% and 13% of CBS’s consolidated revenues in 2016, 2015 and 2014, respectively, and 22%, 19% and 20% of CBS’s total segment operating income in 2016, 2015 and 2014, respectively) is composed of CBS Television Stations, CBS’s 30 owned broadcast television stations and CBS Local Digital Media, which operates local websites including content from CBS’s television stations and news and sports radio stations.

CBS generated approximately 14% of its total revenues from international regions in 2016. For the year ended December 31, 2016, approximately 54% and 14% of CBS’s total international revenues of approximately $1.85 billion were generated in Europe and Canada, respectively.

CBS’s revenues in 2016 totaled $13.17 billion and 2016 net earnings was $1.26 billion. CBS’s corporate headquarters is located in New York, New York. CBS’s internet address is http://www.cbscorporation.com. The information on CBS’s website is not incorporated by reference into or a part of this document.

 

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INFORMATION ON CBS RADIO

CBS Radio is a large-market focused, multi-platform national media company with a local footprint of 117 radio stations and digital properties in 26 radio markets, including all of the top 10 radio markets and 19 of the top 25 radio markets. CBS Radio focuses on three areas of content: Sports, News and Music & Entertainment. CBS Radio’s radio portfolio includes many of the leading radio stations in the United States, including the most listened-to Sports (WFAN® in New York), News (1010 WINS® in New York) and Classic Hits (WCBS-FM® in New York) radio stations. CBS Radio owns the #1- or #2-rated local Sports radio station and the #1-rated All-News radio station in each of the markets in which CBS Radio programs these formats. CBS Radio’s radio stations reached an audience of more than 65 million people per week in 2016, making CBS Radio the second largest radio group in the United States as measured both by audience and by revenue. CBS Radio also distributes its content through an integrated suite of digital properties, including market-focused local websites, Radio.com™ (a streaming service), Eventful® (an event discovery platform) and Play.it® (a podcast network), which collectively reached an average of 63.4 million internet and mobile unique users per month in 2016. In addition, CBS Radio produces events across its markets, including concerts, multi-day musical festivals, speaker series, trade shows and sports-related events. CBS Radio produced, co-produced or co-promoted over 600 such events in 2016.

CBS Radio focuses primarily on large metropolitan markets through clusters of radio stations and digital properties. CBS Radio has the #1- or #2-ranked station clusters in approximately 64% of its markets as measured by revenue, as reported by the public accounting firm Miller Kaplan Arase, LLP. As of December 2016, CBS Radio employed approximately 1,000 sales personnel dedicated to local and national radio advertising, digital advertising and events, with a local presence in all of the markets in which CBS Radio operates.

Content and Programming

CBS Radio produces and distributes compelling content for multiple media platforms, including its radio stations and owned web, mobile, streaming and podcast properties, as well as on third party platforms such as Facebook, Twitter, Instagram, TuneIn and YouTube. CBS Radio’s local on-air personalities create original programming that delivers the latest in Sports, News and Music & Entertainment tailored to specific markets and their target audiences:

 

    Sports. CBS Radio is a leading sports radio company in the United States with the two most listened-to sports radio stations in the United States (WFAN AM/FM in New York and WSCR-AM in Chicago). CBS Radio owns the #1-rated local Sports radio station in 13 of the 14 markets in which CBS Radio programs a local Sports format. For the year ended December 31, 2016, CBS Radio broadcast over 3,000 live games for over 30 professional sports franchises, including the New York Yankees, the New England Patriots, the Chicago Cubs and the Detroit Red Wings, and for over 15 collegiate sports programs, including teams from the University of Michigan, the University of Pittsburgh, the University of Connecticut, the University of Maryland and the University of Texas. CBS Radio’s sports radio stations feature popular local personalities, who deliver sports-related news, opinion and debate and facilitate audience interaction on local sports. In addition, CBS Radio owns the CBS Sports Radio Network™, which provides national sports content that is syndicated by a third party to more than 300 affiliated radio stations (including 22 of CBS Radio’s radio stations) across the United States.

 

    News. CBS Radio provides its communities with trusted, live, up-to-the-minute news, traffic and weather information. CBS Radio owns the #1-rated All-News radio station in all of the markets in which CBS Radio programs an all-news format and the #1-rated News-Talk station in six markets where CBS Radio programs the format. CBS Radio also owns seven of the top eight most listened to All-News stations in the United States. CBS Radio’s award-winning All-News radio stations include 1010 WINS in New York, KNX (AM)® in Los Angeles and WBBM (AM)® in Chicago. CBS Radio’s News-Talk stations include KDKA (AM)® in Pittsburgh, KMOX (AM)® in St. Louis and WTIC (AM)® in Hartford.

 

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    Music & Entertainment. CBS Radio provides its audience with unique music and entertainment experiences through personality-driven local programming. CBS Radio’s programming includes a wide variety of music genres, including Rock, Adult Album Alternative, Classic Hits, Adult Contemporary, Top 40, Urban, Spanish and Country, each targeting a distinct demographic group. CBS Radio has the most listened-to station in the United States in numerous formats, including Classic Hits (WCBS-FM in New York), Adult Hits (KCBS-FM® in Los Angeles), Rhythmic AC (94.7 The Wave in Los Angeles) and Adult Album Alternative (WXRT-FM® in Chicago), according to Nielsen. CBS Radio also introduces new and emerging artists to its audiences through its over-the-air and digital platforms and develops exclusive content with artists, including interviews and live performances.

Radio Stations

As of December 31, 2016, CBS Radio owns and operates 117 radio stations in the United States, including stations in all of the top 10 radio markets and 19 of the top 25 radio markets. The following table summarizes CBS Radio’s radio stations, which are grouped by market size as defined by Nielsen.

 

     Format Type  
     Sports      News/
News-Talk
     Music &
Entertainment
     Total  

Top 25 radio markets (1) (2)

     18        16        56        90  

Non-Top 25 radio markets

     4        3        20        27  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     22        19        76        117  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Market rankings based on Nielsen Audio Radio Market Survey, Fall 2016.
(2) Includes two Victor Valley, CA stations operated as part of the Riverside market: KRAK, a Sports station, and KVFG, a Music & Entertainment station.

Digital Properties

CBS Radio operates digital properties on multiple platforms, including websites, mobile apps, and social media, and through third-party distribution partners. CBS Radio streams its over-the-air radio station broadcasts and provides on-demand audio and video content and text, imagery and event information. CBS Radio’s digital properties complement its business and operations and positively impact its operating results.

 

    Music & Entertainment Station Websites. CBS Radio maintains an online presence for each of its Music & Entertainment stations, including KROQ.com in Los Angeles, B96.com in Chicago and V-103.com in Atlanta. CBS Radio distributes content that it broadcasts on its radio stations across its Music & Entertainment station websites, and CBS Radio drives traffic to these websites by using extensive and integrated on-air promotion. CBS Radio’s Music & Entertainment station websites, in turn, promote and drive traffic to CBS Radio’s radio stations.

 

    Market-Focused Local Websites. All of CBS Radio’s local Sports and News/NewsTalk radio stations (the “Sports and News Stations”) have a digital presence on 23 market-focused local websites and mobile applications that CBS Local Digital Media operates for CBS Radio’s Sports and News Stations (“CBS Local Websites”) and for CBS’s owned and operated television stations (“CBS TV Stations”), including CBSNewYork.com, CBSBoston.com and CBSSanFrancisco.com. Each of these market-focused CBS Local Websites provides extensive locally focused news, sports and traffic and weather information utilizing the text, video and audio content produced by CBS Radio’s Sports and News Stations and the CBS TV Stations, where applicable, in that market.

 

    Radio.com. CBS Radio provides streaming services through its Radio.com platform, where users can listen live to stations online, including simulcasts of CBS Radio’s over-the-air radio stations. Radio.com generates approximately 23 million listening hours per month.

 

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    Eventful. CBS Radio’s local event discovery business, Eventful, provides its 26.6 million registered users and over 8.5 million monthly unique visitors with local event information ranging from concerts to movies to restaurants. Eventful’s services can also be accessed through CBS Radio’s music radio station websites and the CBS Local Websites in all of CBS Radio’s markets. Eventful also provides ticketing services to consumers and licenses its events data to third parties.

 

    Play.it. CBS Radio’s podcast network, Play.it, offers a portfolio of over 400 different podcast titles and delivers approximately 24 million streams and downloads per month. Examples include “Engage: The Official Star Trek Podcast™” focused on Star Trek® and “Rap Radar®” focused on hip hop.

Events

CBS Radio creates, promotes and produces a diverse range of live events, ranging from concerts and multi-day music festivals to speaker series and sports-related events. CBS Radio’s events complement its business and operations and positively impact its operating results. In 2016, CBS Radio produced, co-produced or co-promoted over 600 live events. Live events offer unique, out-of-home experiences for CBS Radio’s audiences, as well as sponsorships, exhibit space and consumer engagement opportunities for CBS Radio’s advertisers. CBS Radio’s events in 2016 included:

 

    Tent-pole events with national appeal, such as “We Can Survive™” and “The Night Before™,” that pair marquee experiences with world-class performing artists.

 

    Heritage local live events, such as “B96 Summer Bash™” in Chicago and “Downtown Hoedown®” in Detroit.

 

    Events that showcase key station talent, such as “Wing Bowl®” in Philadelphia and “April Foolishness™” in Los Angeles.

Sources of Revenue

CBS Radio’s revenue is derived from Broadcasting and Digital, Events and Other sources. For the year ended December 31, 2016, CBS Radio generated approximately 79% of its revenue from local advertisers and 21% from national advertisers.

Broadcasting Revenue. CBS Radio generates Broadcasting revenue from the sale of advertising time on its radio stations to a wide range of local and national advertisers in consumer-focused industries, including automotive, entertainment, retail and financial services. Local advertising is generated primarily in a station’s individual market and national advertising is generated across multiple markets. For the year ended December 31, 2016, CBS Radio generated Broadcasting revenue of $982.3 million, representing approximately 80% of its total revenues for this period.

Digital, Events and Other Revenue. CBS Radio generates digital revenue primarily from the sale of display, audio and video advertising across its digital properties, which enables CBS Radio to further monetize the content produced by its radio stations. CBS Radio also generates digital revenue through content and data licensing, local offers, and affiliate commissions. Events revenue is generated primarily from advertising and sponsorships associated with various live events which CBS Radio produces, co-produces and co-promotes. Other revenues are generated primarily from the syndication of CBS Radio’s programming, sponsorships of programming features and naming rights of radio station assets. For the year ended December 31, 2016, CBS Radio generated Digital, Events and Other revenues of $239.3 million, representing approximately 20% of its total revenues for this period.

 

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The Radio Industry

Radio is a proven and effective mass-marketing medium given its broad reach, resilient audience, low price-point and access to audience at key buying times. In particular:

 

  1. Radio has the highest and most stable reach of any media, reaching 93% of all adults aged 18+ across the United States, according to Nielsen.

 

  2. Radio listenership has remained resilient for the past 10 years, growing from 234 million listeners in 2008 to 247 million listeners in 2016, according to Nielsen.

 

  3. Time spent listening to radio has been relatively stable since 2014, based on Nielsen Total Audience Reports for the second quarters of 2014 through 2016.

 

  4. Radio listening predominantly occurs away from home, according to Nielsen, and it remains the primary in-car medium according to “The Infinite Dial 2016,” a report by Edison Research and Triton Digital. The report indicates that 84% of adults 18 years or older who had driven or ridden in their primary vehicle in the previous month reported listening to AM/FM radio, and 54% reported that they listened to AM/FM radio either exclusively or the most in their primary vehicle over other audio sources. According to Jacobs Media’s TechSurvey 12, in a survey of consumers planning to buy a new vehicle in 2016, nearly 9 out of 10 indicated that an AM/FM radio is an important feature and that of those who spend time in a car in an average week, 93% indicated that they listen to AM/FM radio in the car on an average weekday.

 

  5. Radio offers a cost-efficient and creatively simple way for advertisers to reach a broad diverse audience. According to 2016 data from Intermedia Dimensions, based on national coverage, the cost per thousand (“CPM”) for a local spot radio 30-second advertisement during the afternoon drive period is $10.97 versus $24.40 CPM for a 30-second network prime time television spot and $14.62 CPM for a one-third page black and white advertisement in a newspaper.

 

  6. In 2016, radio delivered a high return on investment across major listener categories, with payback per dollar spent as high as $23.21, according to Nielsen.

 

  7. According to SNL Kagan’s report titled “Radio/TV Station Annual Outlook, 2016 Edition,” from 2011 through 2015, the radio industry annually generated between approximately $13.2 billion and $14.2 billion in spot revenue; between approximately $1.5 billion and $2.0 billion in off-air revenue; approximately $1.1 billion in network revenue; and between approximately $709 million and $1.0 billion in digital/internet radio advertising revenue. According to SNL Kagan, the radio industry generated approximately $13.2 billion in spot revenue, compared to approximately $2.0 billion for total off-air revenue, approximately $1.0 billion for network revenue and approximately $1.0 billion for digital/internet radio advertising revenue in 2015. SNL Kagan estimates that spot revenue will account for approximately $13.1 billion to $13.2 billion annually from 2016 through 2018 while off-air revenue will account for approximately $2.2 billion to $2.6 billion annually, network revenue will account for approximately $1.1 billion annually and digital/internet radio revenue will account for approximately $1.1 billion to $1.2 billion annually during the same period.

Business Strengths

Large Market Focus and National Footprint. CBS Radio’s radio stations and digital properties are predominantly concentrated in large metropolitan markets, which account for a significant share of local advertising revenues. According to SNL Kagan’s report titled “Radio/TV Station Annual Outlook, 2016 Edition,” the 25 top radio markets generated approximately $5.77 billion, or approximately 40%, of spot and digital/internet radio advertising revenue, which comprises over 80% of total radio revenue, in the U.S. radio industry for the year ended December 31, 2015. CBS Radio’s radio stations are in all of the top 10 radio markets, and 19 of the top 25 radio markets by revenue. CBS Radio generates approximately 87% of its revenue from these 19 markets. CBS Radio’s share of revenue in the top 25 radio markets was 25.2% in 2016, based on Miller

 

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Kaplan Arase, LLP. In 2016, CBS Radio’s average revenue per station in these top 25 markets was 2.3 times CBS Radio’s average revenue per station in non-top 25 markets. CBS Radio’s portfolio of large market stations and digital properties, such as Radio.com, Eventful.com and Play.it, provides CBS Radio with a national footprint and the ability to create compelling local and national campaigns for its advertisers across its broadcast, digital and live event offerings.

Strong Radio Station Clusters and Local Market Scale. CBS Radio owns three or more radio stations in 24 of its 26 markets. Owning multiple stations and digital properties in a market allows CBS Radio to capture a greater share of audience and advertising dollars. Station clusters allow CBS Radio to gain scale in local markets, which increases its operating efficiency and profitability. CBS Radio carefully constructs its clusters and programs its stations to appeal to distinct demographic groups to maximize their collective in-market reach. For example, in New York, CBS Radio owns seven radio stations operating out of a single facility, including the popular WFAN sports radio simulcast on two frequencies, two All-News stations and three stations with music formats.

Powerful Local Brands. CBS Radio’s radio portfolio includes many of the leading national and local radio stations in the United States, including the most listened-to Sports (WFAN in New York), News (1010 WINS in New York), Classic Hits (WCBS-FM in New York), Adult Album Alternative (WXRT in Chicago) and Adult Hits (KCBS-FM in Los Angeles) radio stations in the United States. CBS Radio also owns the #1- or #2-rated Sports radio stations and the #1-rated All-News radio stations in each of the markets in which CBS Radio programs these formats. Among its powerful local brands are the “World Famous KROQ®” in Los Angeles and the unmistakable “teletype” sound of 1010 WINS in New York, as well as “Traffic and Weather Together®” in the New York market and elsewhere, “All News All The Time®” and “You Give Us 22 Minutes. We’ll Give You the World.®” in New York.

Compelling, Exclusive Content. CBS Radio produces live radio and digital content with up-to-the-minute broadcasts of timely information such as sports, news, traffic and weather that drive listenership, loyalty and engagement from its audience. CBS Radio’s audience turns to CBS Radio for exclusive content, including news, live sports and sports talk. CBS Radio employs more than 900 on-air talent who inform and entertain their listeners and serve their local communities. For the year ended December 31, 2016, CBS Radio broadcasted more than 3,000 live games for over 30 professional sports franchises in the National Football League (“NFL”), Major League Baseball (“MLB”), the National Basketball Association (“NBA”), the National Hockey League (“NHL”) and Major League Soccer (“MLS”) and for over 15 collegiate sports programs.

Extensive Digital Platform. CBS Radio owns and operates digital properties in all 26 of its markets, each of which is integrated with CBS Radio’s in-market over-the-air radio stations, enabling its audience to consume its audio and video content across multiple platforms. CBS Radio’s digital properties expand its in-market reach, increase and broaden its audience and enhance audience engagement. CBS Radio’s extensive local digital properties allow it to better serve its audience and provide its advertisers with increasingly effective, targeted and measurable digital advertising solutions, including as part of integrated campaigns utilizing CBS Radio’s broadcast and live event platforms. Radio.com is CBS Radio’s national web destination and dedicated mobile app providing the streams for all CBS Radio stations, allowing for targeted demographic and geographic streaming audio sales opportunities. Play.it is CBS Radio’s podcast platform for both radio station shows and national talent, and is the sales brand for broad-based sponsorships of on-demand audio.

Attractive Financial Profile. CBS Radio’s business requires low levels of capital expenditures and generates significant operating cash flow. CBS Radio also benefits from its national scale and the local clustering of its radio station and digital assets, which allows CBS Radio to generate significant cash flows from incremental revenues.

Sales-Oriented Organization Led by Experienced Management Team. CBS Radio has a strong sales-oriented culture with extensive local relationships focused on growing revenue across its platform through

 

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innovative marketing campaigns for its diversified base of over 18,000 advertising clients. As of October 3, 2017, CBS Radio employed over 1,000 sales personnel dedicated to local and national advertising, digital advertising and events, with a local presence in all of the markets in which CBS Radio operates. In the year ended December 31, 2016, CBS Radio generated revenue share in excess of its audience share in every one of its 26 markets. CBS Radio is led by an experienced senior management team with strong sales and leadership capabilities and deep knowledge of the radio, digital and local media industries. CBS Radio’s President and Chief Executive Officer, Andre J. Fernandez, previously served as President of a publicly traded, diversified local media company and has a successful track record of delivering results. Further, CBS Radio benefits from highly experienced, sales-focused management teams in each of its local markets.

Operating Strategy

Continue to Develop Compelling Content. CBS Radio develops and invests in compelling local and national content, including exclusive live sports broadcasts and live sports, news, talk, music, and entertainment programming hosted by more than 900 trusted local personalities across CBS Radio’s integrated radio, digital and event offerings. CBS Radio focuses on news and sports content in particular because of the live, up-to-the-minute nature of news and its audience’s passion for local sports, which increases CBS Radio’s audience size and engagement with its radio stations and affiliated digital properties, providing attractive platforms for its advertisers. By continuing to seek, develop and invest in relevant audio, video and digital content, CBS Radio intends to build upon the longstanding and intimate relationship between CBS Radio’s local brands and on-air personalities and their audiences to sustain and increase listenership and provide effective advertising campaigns to CBS Radio’s marketing partners.

Expand Multi-Platform Distribution. CBS Radio distributes its audio and video content across its owned sites and third-party digital and mobile platforms to maximize its reach, serve its audience and enhance its offerings. CBS Radio’s audience expects the flexibility to consume content across multiple platforms wherever, whenever and however they choose and expects the increasingly integrated, intuitive and personalized experiences that CBS Radio’s digital platforms deliver. CBS Radio believes that by increasing the availability and accessibility of its content across multiple platforms, including mobile and social media, CBS Radio will expand its audience, strengthen its local brands and increase its relevance among its audience and its advertisers.

Grow Digital, Events and Other Revenues. CBS Radio is focused on growing its digital and other non-broadcasting based revenues. CBS Radio’s large market footprint of strong radio station clusters and promotional capabilities provides it with a platform to expand its brands and content into digital platforms and develop new, complementary marketing products, including live local events. CBS Radio plans to expand its event offerings. Digital platforms provide CBS Radio opportunities to monetize its audio and video content through syndication, licensing and sponsorship arrangements. CBS Radio plans to launch new local, branded news and sports products while maintaining networked scale and operating efficiencies. These non-broadcast revenue sources enhance CBS Radio’s local brands and provide additional channels for CBS Radio and CBS Radio’s advertisers to engage their audiences via immersive and novel experiences.

Drive Enhanced Revenue Management. CBS Radio focuses on advertising rate discipline to improve revenue yield on its radio and digital properties. CBS Radio has combined certain management functions to reinvigorate market and station management, increased accountability and transparency and rebuilt station marketing strategies by better aligning its programming with consumer and market demand. By carefully managing the amount of advertising inventory sold through third-party networks and selling that inventory at higher local and national spot rates, CBS Radio seeks to improve revenue yield on spot advertising. In addition, CBS Radio collects and uses audience data to inform its programming and enhance the targeting and measurement capabilities of its advertisers’ marketing campaigns. This data allows CBS Radio to demonstrate to its advertisers the effectiveness of their campaigns, and helps CBS Radio to attract and retain new advertisers for radio and digital platforms. CBS Radio uses its national radio and digital footprints to enhance its appeal to national advertisers and grow its national revenues.

 

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Enhance Radio Clusters and Digital Assets via Selective Acquisitions. CBS Radio believes that its existing scale, digital capabilities, strong balance sheet and management experience positions it well to exploit opportunities to enhance and grow its business. CBS Radio will seek acquisition opportunities that optimize the performance of its existing clusters and expand its presence into new markets. CBS Radio will consider complementary acquisitions to enhance consumer experience and engagement with its offerings and improve the effectiveness of advertising on its platforms. CBS Radio will also evaluate digital properties and capabilities that can provide CBS Radio with the opportunity to enhance its local presence as well as broaden its national footprint.

Legal Proceedings

On an ongoing basis, CBS Radio vigorously defends itself in numerous lawsuits and proceedings and responds to various investigations and inquiries from federal, state and local authorities (collectively, “litigation”). Litigation may be brought against CBS Radio without merit, is inherently uncertain and always difficult to predict. However, based on CBS Radio’s understanding and evaluation of the relevant facts and circumstances, CBS Radio believes that the litigation to which it is a party is not likely to have a material adverse effect on CBS Radio’s results of operations, financial position or cash flows.

Employees

The number of persons employed by CBS Radio during 2016 was approximately 3,800. Certain of CBS Radio’s hourly workers are represented by collective bargaining agreements. These contracts expire at various times over the next several years. Management believes that its relationships with its employees and their representative organizations are good.

 

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INFORMATION ON ENTERCOM

Overview

Entercom Communications Corp. is the fourth-largest radio broadcasting company in the United States with a portfolio of 125 radio stations in 28 top markets across the country. Entercom reaches and engages more than 40 million people a week through its portfolio of highly rated stations. Entercom is headquartered in the Philadelphia, Pennsylvania metropolitan area and is and has been a Pennsylvania corporation since its organization in 1968.

Strategy

Entercom’s strategy focuses on providing compelling content in the communities it serves to enable Entercom to offer its advertisers an effective marketing platform to reach a large targeted local audience. The principal components of Entercom’s strategy are to: (i) focus on creating effective integrated marketing solutions for its customers that incorporate its audio, digital and experiential assets; (ii) build strongly-branded radio stations with highly compelling content; (iii) develop market leading station clusters; and (iv) recruit, develop, motivate and retain superior employees.

Source of Revenue

The primary source of revenue for Entercom’s radio stations is the sale of advertising time to local, regional and national advertisers and national network advertisers who purchase spot commercials in varying lengths. A growing source of revenue is from station-related digital product suites, which allow for enhanced audience interaction and participation, and integrated digital advertising solutions. A station’s local sales staff generates the majority of its local and regional advertising sales through direct solicitations of local advertising agencies and businesses. Entercom retains a national representation firm to sell to advertisers outside of Entercom’s local markets.

Entercom’s stations are typically classified by their format, such as news, sports, talk, classic rock, adult contemporary, alternative and country, among others. A station’s format enables it to target specific segments of listeners sharing certain demographics. Advertisers and stations use data published by audience measuring services to estimate how many people within particular geographical markets and demographics listen to specific stations. Entercom’s geographically and demographically diverse portfolio of radio stations allows Entercom to deliver targeted messages to specific audiences for advertisers on a local, regional and national basis.

Competition

The radio broadcasting industry is highly competitive. Entercom’s stations compete for listeners and advertising revenue with other radio stations within their respective markets. In addition, Entercom’s stations compete for audiences and advertising revenues with other media including: digital audio streaming, satellite radio, broadcast television, digital, satellite and cable television, newspapers and magazines, outdoor advertising, direct mail, yellow pages, wireless media alternatives, cellular phones and other forms of audio entertainment and advertisement.

HD Radio

AM and FM radio stations may use the FCC selected In-Band On-Channel (“IBOC”) as the exclusive technology for terrestrial digital operations. IBOC, developed by DTS, Inc. (formerly iBiquity Digital Corporation), is also known as “HD Radio.”

HD Radio technology permits a station to transmit radio programming in digital format. Entercom currently uses HD Radio digital technology on most of its FM stations. The advantages of digital audio broadcasting over traditional analog broadcasting technology include improved sound quality, the availability of additional channels and the ability to offer a greater variety of auxiliary services.

 

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Legal Proceedings

Entercom currently and from time to time is involved in litigation incidental to the conduct of its business. Entercom’s management anticipates that any potential liability of Entercom’s that may arise out of or with respect to these matters will not materially adversely affect its financial position, results of operations or cash flows.

Employees

As of January 31, 2017, Entercom had 1,683 full-time employees and 1,145 part-time employees. With respect to certain Entercom stations in Entercom’s Kansas City and San Francisco markets, Entercom is a party to collective bargaining agreements with the Screen Actors Guild—American Federation of Television and Radio Artists (known as SAG-AFTRA). Approximately 46 employees are represented by these collective bargaining agreements. Entercom believes that its relations with its employees are good.

Entercom’s Business After the Consummation of the Transactions

The combination of CBS Radio with Entercom’s existing business is intended to create a leading local media and entertainment company with strong, complementary assets on a national scale. Entercom expects the Transactions to have the following strategic benefits:

 

    Enhanced platform and geographical presence. As a result of the Transactions, Entercom expects the combined business to have a nationwide footprint of radio stations, including 23 of the top 25 U.S. markets (without giving effect to any potential required divestitures), as well as robust digital capabilities and a growing events platform.

 

    Synergies. The combined company is expected to achieve estimated annual cost synergies of $25 million within 12-18 months after the consummation of the Transactions.

 

    Improved Financial Profile. The consummation of the Transactions is expected to increase Entercom’s revenues and earnings leading to enhanced cash flow generation. Equity market capitalization and liquidity will be enhanced by the issuance of over 100 million new shares of Entercom Class A Common Stock in connection with the Merger.

To enable Entercom to manage an orderly transition in its operation of CBS Radio, CBS and Entercom will enter into the Transition Services Agreement, pursuant to which CBS will provide certain services to Entercom in support of CBS Radio and Entercom will provide certain limited services to CBS for a period not to exceed twenty-four months following the consummation of the Transactions. See “Other Agreements and Other Related Party Transactions—Transition Services Agreement.”

In addition, CBS and Entercom will enter into the Joint Digital Services Agreement, pursuant to which CBS Local Digital Media will continue to operate the digital presences for CBS Radio’s Sports and News Stations and CBS TV Stations. The Joint Digital Services Agreement represents a collaborative arrangement between CBS and Entercom, providing for the sharing of revenues, costs and content, in connection with the operation of the CBS Local Websites, as described in “Other Agreements and Other Related Party Transactions—Joint Digital Services Agreement.”

Entercom will be required to divest 14 FM radio stations in certain markets (some of which may be CBS Radio stations) in order to comply with the FCC’s local radio ownership rule. Such divestitures may be accomplished through cash sales or otherwise, and may materially impact the operating metrics and pro forma financials as presented herein. However, these divestitures will not diminish the number of markets in which Entercom will operate following consummation of the Merger. For more information, see ”Federal Regulation of Radio Broadcasting—Transfer or Assignment of Licenses” and “Federal Regulation of Radio Broadcasting—Ownership Regulation.”

 

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Entercom’s Liquidity and Capital Resources After the Consummation of the Transactions

As of June 30, 2017, Entercom had current assets of $107.5 million, total assets of $1,029.0 million, total current liabilities of $57.1 million and long-term debt, net of current portion of $447.4 million. Following the consummation of the Transactions, Entercom’s total assets and liabilities will increase significantly.

As of June 30, 2017, on a pro forma basis (as described in “Entercom and CBS Radio Unaudited Pro Forma Condensed Combined Financial Statements”), Entercom would have had current assets of $682.4 million, total assets of $4,687.3 million, total current liabilities of $245.0 million and long-term debt, net of current portion, of $1,865.7 million. Entercom expects its cash from operations to increase significantly as a result of the consummation of the Transactions and the integration of the CBS Radio Business.

Entercom believes that, within twelve to eighteen months of the consummation of the Transactions, the combination of the CBS Radio Business with Entercom’s existing business will result in annual cost savings of approximately $25 million, primarily related to the consolidation of corporate overhead costs and cost savings in local markets in which Entercom and CBS Radio overlap. Entercom expects to incur significant, one-time costs in connection with the Transactions, including financial advisory, professional services and other fees estimated at approximately $39.6 million. No assurances of the timing or amount of synergies able to be captured, or the costs necessary to achieve those synergies, can be provided.

In connection with entry into the Merger Agreement, CBS Radio entered into the Commitment Letter with the Commitment Parties, pursuant to which such Commitment Parties committed to provide, subject to customary closing conditions, up to $500 million of senior secured term loans as an additional tranche under the Radio Credit Agreement, the proceeds of which may be used by Entercom upon or following consummation of the Merger to refinance certain existing indebtedness of Entercom, to redeem Entercom’s preferred stock, and to pay fees and expenses in connection with the Transactions. CBS Radio expects to consummate and obtain the Radio Financing substantially simultaneously with the closing of the Merger and the Contribution and to apply the proceeds thereof as described in the preceding sentence in order to, among other things, simplify Entercom’s capital structure.

Entercom Radio, LLC will use the proceeds of the Radio Financing to repay or cause to be repaid all outstanding amounts under the Entercom Credit Agreement, terminate all commitments under the Entercom Credit Agreement and obtain a release of all security interests for the Entercom Credit Agreement. In connection with the Contribution and the Radio Financing, Entercom Radio, LLC will become a guarantor under the Radio Credit Agreement and the Radio Notes Indenture, and will pledge certain of its assets to secure amounts outstanding under the Radio Credit Agreement.

Entercom anticipates that its primary sources of liquidity for working capital and operating activities, including any future acquisitions, will be cash from operations and borrowings under the Radio Credit Agreement. Entercom expects that, following the consummation of the Merger, these sources of liquidity will be sufficient to make required payments of interest on its outstanding debt and to fund working capital and capital expenditure requirements, including costs relating to the Transactions.

For more information on Entercom’s existing sources of liquidity, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Entercom’s quarterly report on Form 10-Q for the quarter ended June 30, 2017 and Entercom’s annual report on Form 10-K for the year ended December 31, 2016, filed with the SEC and incorporated by reference in this document. See “Where You Can Find More Information; Incorporation by Reference.”

Directors and Officers of Entercom Before and After the Consummation of the Transactions

Board of Directors

The Entercom board of directors currently consists of six directors as follows:

 

    Joseph M. Field, Chairman and Director

 

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    David J. Field, Director, President and Chief Executive Officer of Entercom

 

    David J. Berkman, Director

 

    Joel Hollander, Director

 

    Mark R. LaNeve, Director

 

    David Levy, Director

Listed below is the biographical information for each person who is currently a member of the Entercom board of directors.

Joseph M. Field—Chairman & Director. Joseph M. Field (age 85) founded Entercom in 1968 and has served as Chairman of the Entercom board of directors since its inception. Mr. Field served as Entercom’s Chief Executive Officer from Entercom’s inception until 2002 and as Entercom’s President from its inception until 1998. Before entering the broadcasting business, he practiced law for 14 years in New York (including service as an Assistant United States Attorney) and Philadelphia. Mr. Field served on the board of directors of the National Association of Broadcasters for the years 1992 through 1996. Mr. Field currently serves on the boards of directors of the Broadcasters’ Foundation, Mediacast, LLC (d/b/a Specticast), the Philadelphia Orchestra Association, The Mary Louise Curtis Bok Foundation, the Settlement Music School, the National Liberty Museum and the Philadelphia Chamber Music Society. In addition, he serves on the Advisory Board of the University of Pennsylvania’s Field Center for Children’s Policy, Practice & Research. Mr. Field has a B.A. from the University of Pennsylvania, an L.L.B. from Yale Law School and a D.M. from the Curtis Institute of Music. Mr. Field is the father of David J. Field.

David J. Field—Director, President and Chief Executive Officer. David J. Field (age 55) has served as Entercom’s Chief Executive Officer since 2002, its President since 1998, and one of its directors since 1995. Mr. Field is Entercom’s Principal Executive Officer. He also served as Entercom’s Chief Operating Officer from 1996 to 2002 and Chief Financial Officer from 1992 to 1998. Mr. Field served as Vice President-Operations and Chief Financial Officer of Entercom from 1992 to 1995 and Senior Vice-President-Operations and Chief Financial Officer from 1995 to 1996. Mr. Field served as Chairman of the Radio Board of the National Association of Broadcasters from 2005 to 2007. Mr. Field also currently serves on the boards of directors of the National Constitution Center 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 was named the 2006 Radio Executive of the Year by Radio Ink Magazine and was also recognized as one of the best CEOs in America by Institutional Investor Magazine in 2006, 2007 and 2008. Mr. Field is the son of Joseph M. Field.

David J. Berkman—Director. David J. Berkman (age 55) has served as one of Entercom’s directors since the consummation of its initial public offering in January 1999. Since January 2000, Mr. Berkman has served as the Managing Partner of Associated Partners, LP, a private equity firm primarily engaged in telecommunications infrastructure investments. He also serves on the boards of directors of Actua Corporation (formerly ICG Group, Inc.) and Franklin Square Holdings, LP. Civically, Mr. Berkman serves on the Board of Overseers of the University of Pennsylvania School of Engineering and Science. Mr. Berkman has a B.S. from the Wharton School of the University of Pennsylvania.

Joel Hollander—Director. Joel Hollander (age 61) has served as one of Entercom’s directors since November 2013. Since May 2007, Mr. Hollander has been serving as President and Chief Executive Officer of 264 Echo Place Partners, an investment advisory firm. Mr. Hollander previously served as President and Chief Executive Officer of CBS Radio from 2002 until 2007. Prior to joining CBS Radio, Mr. Hollander was Chairman and Chief Executive Officer of Westwood One, a radio program syndication company. Mr. Hollander also currently serves on the Merrill Lynch Client Advisory Board, as well as on the boards of directors of The C. J. Foundation for SIDS, the Tomorrow’s Children Fund, RiverSpring Health Center and the Hackensack Medical Center. Mr. Hollander has a B.S. in Communication and Media Studies from Indiana State University.

 

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Mark R. LaNeve—Director. Mark R. LaNeve (age 58) has served as one of Entercom’s directors since March 2014. Since January 2015, Mr. LaNeve has been serving as Vice President, U.S. Marketing, Sales and Service of the Ford Motor Company. From August 2012 through January 2014, Mr. LaNeve served as Chief Operating Officer of Global Team Ford, an agency that serves as the marketing and advertising agency for the Ford Motor Company and the Ford and Lincoln brands on a global basis. Global Team Ford is part of the WPP Group, a multinational advertising and public relations company. Mr. LaNeve was previously with Allstate Insurance Corporation where he served as Senior Executive Vice President (January 2011–February 2012) and Chief Marketing Officer (October 2009–February 2012). Prior to joining Allstate, Mr. LaNeve was Vice President of Sales, Service and Marketing at General Motors Corporation (September 2004–January 2009). Mr. LaNeve is involved with various organizations that assist people affected by autism and sits on the boards of Autism Speaks in New York City and Eton Academy for different learners in Birmingham, Michigan. He also serves on the board of Angel’s Place, a non-profit organization that provides people-centered services, including homes and professional support for adults with developmental disabilities. Mr. LaNeve has a B.A. in Marketing from the University of Virginia.

David Levy—Director. David Levy (age 54) has served as one of Entercom’s directors since May 2015. Since 2013, Mr. Levy has served as President of Turner Broadcasting System, Inc. where he oversees all creative and business activity of the Turner signature entertainment networks TBS, TNT, Turner Classic Movies, truTV, Cartoon Network, Boomerang and Adult Swim, and their digital brand extensions, as well as Turner Sports. Additionally, Mr. Levy is responsible for overseeing domestic ad sales and distribution revenue for Turner’s portfolio of networks including TNT, TBS, CNN, HLN, TCM, Cartoon Network, Adult Swim, Boomerang, truTV and CNN Airport Network. Mr. Levy had previously served as President, Sales, Distribution and Sports for Turner since 2003. Mr. Levy also currently serves on the board of Duplication Services Inc., a privately owned company. Mr. Levy has a B.S. from Syracuse University – Martin J. Whitman School of Management.

The Entercom board of directors has determined that each of its non-employee directors (all directors other than Joseph M. Field and David J. Field) satisfy the listing standards for independence of the NYSE and Rule 10A-3 under the Exchange Act.

In connection with the Merger, Entercom will increase the size of its board of directors by four members. In accordance with the Merger Agreement, as amended by Amendment No. 1 to the Merger Agreement dated July 10, 2017 (which was further amended on September 13, 2017), immediately following the Merger, ten persons will serve on the Entercom board of directors, including all six directors from Entercom’s current board of directors (or their pre-Merger replacements) and four new directors agreed upon by CBS, two of whom are affiliated with CBS:

 

David J. Field

   Director; Chairman; President & Chief Executive Officer of Entercom

Joseph M. Field

   Director; Chairman Emeritus of Entercom

David J. Berkman

   Director

Joel Hollander

   Director

Mark R. LaNeve

   Director

David Levy

   Director

Leslie Moonves

   Director; Chairman of the Board, President and Chief Executive Officer of     CBS

Joseph R. Ianniello

   Director; Chief Operating Officer of CBS

Stefan M. Selig

   Director

Sean Creamer

   Director

Listed below is the biographical information for the four new directors agreed upon by CBS.

Sean Creamer—Director. Sean Creamer (age 52) has been Executive Vice President, Chief Financial Officer and a member of the board of directors of Merkle Inc. since April 2016. Formerly, he was Executive Vice President and Chief Financial Officer of The Madison Square Garden Company (“MSG”) from 2014 to 2015. Prior to that, he served as President and Chief Executive Officer of Arbitron Inc. (now known as Nielsen Audio)

 

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from 2012 to 2014, its Executive Vice President and Chief Operating Officer from 2011-2012, and various other financial leadership positions at Arbitron beginning in 2005. During that time CBS Radio conducted business with Arbitron Inc., and continues to do so. During the past five years, Mr. Creamer was also a director of Arbitron.

Joseph R. Ianniello—Director; Chief Operating Officer of CBS. Joseph R. Ianniello (age 49) has served as the Chief Operating Officer of CBS since June 2013, and, prior to that, its Executive Vice President and Chief Financial Officer since August 2009. Previously, Mr. Ianniello served as Deputy Chief Financial Officer of CBS since November 2008, and prior to that, in various executive and finance positions at CBS since 2000. During the past five years, he was also a director of CBS Outdoor Americas Inc. (currently known as Outfront Media Inc.).

Leslie Moonves—Director; Chairman of the Board, President and Chief Executive Officer of CBS. Leslie Moonves (age 67) has served as Chairman of the Board of Directors of CBS since February 3, 2016, and President and Chief Executive Officer and a Director of CBS since January 2006. Previously, Mr. Moonves served as Co-President and Co-Chief Operating Officer of former Viacom Inc. since June 2004. Prior to that, he served as Chairman and Chief Executive Officer of CBS Broadcasting since 2003 and as its President and Chief Executive Officer since 1998. Mr. Moonves joined former CBS Corporation in 1995 as President, CBS Entertainment. Prior to that, Mr. Moonves was President of Warner Bros. Television since July 1993. During the past five years, he was also a director of CBS Outdoor Americas Inc. (currently known as Outfront Media Inc.) and KB Home.

Stefan M. Selig—Director. Stegan M. Selig (age 54) served as Under Secretary of Commerce for International Trade at the U.S. Department of Commerce from June 2014 to June 2016, and during this period headed the International Trade Administration, a global bureau of more than 2,200 trade and investment professionals. During this period, he also served as the Executive Director of the Travel and Tourism Advisory Board, sat on the board of directors of the Overseas Private Investment Corporation, was a Commissioner for the Congressional Executive Commission on China and was the Executive Director of the President’s Advisory Council on Doing Business in Africa. Prior to that, he held various senior level leadership positions at Bank of America Merrill Lynch beginning in 1999, including being the Executive Vice Chairman of Global Corporate & Investment Banking from 2009 to 2014, and prior to that, he was Vice Chairman of Global Investment Banking and Global Head of Mergers & Acquisitions. Prior to joining Bank of America, he held various senior investment banking positions at UBS Securities and Wasserstein Perella & Co., and began his investment banking career at The First Boston Corporation.

As a result, current members of Entercom’s board of directors, or their pre-Merger replacements, will comprise a majority of the Entercom board of directors immediately following consummation of the Merger.

In accordance with the Merger Agreement, Messrs. Moonves and Ianniello have agreed to execute and deliver an irrevocable letter of resignation from the Entercom board of directors effective upon the earlier of (a) six months after the closing of the Merger and (b) the day prior to the first annual meeting of Entercom following closing of the Merger. Following such resignations, the resulting vacancies on the Entercom board of directors will be addressed in accordance with the Entercom Bylaws, as set forth below. Entercom does not currently have any plans to fill the vacancies that will be created by the resignations of Messrs. Moonves and Ianniello. If the vacancies remain unfilled, the size of the Entercom board of directors will be reduced from ten members to eight members.

Holders of Entercom Class A Common Stock are entitled by class vote to elect two directors (with each share of Entercom Class A Common Stock entitling the holder thereof to one vote per share in such election). Holders of Entercom Class A Common Stock and Entercom Class B Common Stock, voting as a single class, have the right to vote on the election of all other directors (with each share of Entercom Class B Common Stock held by Joseph Field or David Field in his own right in person (or by proxy or pursuant to a Qualified Voting Agreement (as defined in the Entercom Articles)) entitling the holder thereof to 10 votes per share in such election and each other share of Entercom Common Stock entitling the holder thereof to one vote per share in

 

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such election). The Entercom Bylaws provide that directors may be removed only for cause and only by the affirmative vote of a majority of the shareholders entitled to vote thereon. Any vacancies on Entercom’s Board can be filled by the affirmative vote of a majority of the remaining directors then in office, even if the remaining directors are less than a quorum, or by a sole remaining director. However, a vacancy in the position of Entercom Class A Director may only be filled by the sole remaining Entercom Class A Director, and if both Entercom Class A Director positions are vacant, then only the holders of the Entercom Class A Common Stock may fill such vacancies. See “Description of Entercom Capital Stock.”

CBS has not been involved in the election of Entercom’s directors prior to the signing of the Merger Agreement, and, other than the minority of the Entercom board of directors that CBS agrees upon prior to the Closing pursuant to the Merger Agreement, CBS will not be involved in the election, nomination or appointment of any Entercom directors after the Merger. It is therefore expected that, subject to the voting rights of Entercom shareholders as set forth in Entercom’s governing documents, Entercom’s pre-Merger directors (or their replacements) and their future nominees will comprise a majority of the Entercom board of directors on an ongoing basis following the consummation of the Transactions.

The Merger Agreement provides that the initial post-Merger directors of CBS Radio (at which time CBS Radio will be a wholly owned subsidiary of Entercom) will consist of David J. Field, Richard J. Schmaeling and Andrew P. Sutor, IV. CBS did not have any formal or informal appointment, consent or approval rights with respect to the post-Merger directors of CBS Radio. CBS’s only input on the post-Merger directors of CBS Radio was suggestive and non-binding input.

Executive Officers

The Merger Agreement provides that Entercom will provide CBS with a “reasonable consultation” right in the determination of the post-Merger executive officers of Entercom. This is solely a right of CBS to discuss the executive officers of Entercom with Entercom. CBS’s involvement in the selection of the post-Merger executive officers of Entercom will be consultative only. While CBS may offer suggestive, non-binding input, CBS will not have any formal or informal appointment, consent or approval rights with respect to the composition of the executive officers of Entercom, pursuant to the Merger Agreement or otherwise. Entercom has determined, after reasonable consultation with CBS, that the executive officers of Entercom immediately following the consummation of the Merger will include David J. Field, who will continue as President & Chief Executive Officer, Richard J. Schmaeling as Executive Vice President & Chief Financial Officer, Louise C. Kramer as Chief Operating Officer, and Andrew P. Sutor, IV as Senior Vice President, General Counsel & Secretary. Listed below is the biographical information for each person who is expected to be an executive officer of Entercom following the consummation of the Merger. The biographical information for David J. Field is included above under the section entitled “—Board of Directors.” Additional information can be found in the documents incorporated by reference into this document; see “Where You Can Find More Information; Incorporation by Reference.”

Richard J. Schmaeling—Executive Vice President and Chief Financial Officer. Richard J. Schmaeling (age 52) has served as Executive Vice President and Chief Financial Officer of Entercom since April 2017. Prior to that time, he served as Chief Financial Officer of Travel Leaders Group, LLC, the largest travel agency company in the United States since July 2016. From August 2015 through June 2016, Mr. Schmaeling was Chief Financial Officer of MediaMath, Inc., a private equity controlled advertising technology company. From January 2015 through August 2015, Mr. Schmaeling provided integration consulting to Media General, Inc., a TV and digital media company which acquired LIN Media, LLC, a local TV and digital media provider serving 23 markets and approximately 10% of U.S. households, where Mr. Schmaeling was Chief Financial Officer from 2008 through December 2014. Mr. Schmaeling is a Certified Public Accountant and has a B.S. in Accounting from Rutgers University.

 

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Louise C. Kramer—Chief Operating Officer. Louise C. Kramer (age 61) has served as Entercom’s Chief Operating Officer since May 2015. Ms. Kramer previously served as Entercom’s Station Group President from April 2013 through May 2015, one of Entercom’s Regional Presidents from December 2007 through April 2013 and a Regional Vice President from January 2000 through December 2007. Prior to joining Entercom in 2000, Ms. Kramer served as General Manager for CBS Radio in Chicago.

Andrew P. Sutor, IV—Senior Vice President, General Counsel & Secretary. Andrew P. Sutor, IV (age 44) currently serves as Entercom’s Senior Vice President and General Counsel (since January 2013) and Secretary (since January 2014). Since July 2014, Mr. Sutor has oversight of Entercom’s Technical Operations Department. Mr. Sutor previously served as Entercom’s Vice President (since September 2010) and Corporate Counsel (since 2007). Prior to joining Entercom in 2002, Mr. Sutor was an associate in the Business Law Department of Saul Ewing, LLP, a regional Mid-Atlantic law firm based in Philadelphia, Pennsylvania. Mr. Sutor has a J.D. from the Villanova University School of Law and a B.A. in both Economics and Political Science from the University of Pennsylvania.

Additionally, the post-Merger officers of CBS Radio will consist of David J. Field as President & Chief Executive Officer, Richard J. Schmaeling as Executive Vice President & Chief Financial Officer, Louise C. Kramer as Chief Operating Officer and Andrew P. Sutor, IV as Senior Vice President, General Counsel & Secretary, each of whom is a current officer of Entercom. CBS did not have any formal or informal appointment, consent or approval rights with respect to the composition of the post-Merger officers of CBS Radio, pursuant to the Merger Agreement or otherwise.

 

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FEDERAL REGULATION OF RADIO BROADCASTING

The radio broadcasting industry is subject to extensive and changing regulation by the FCC and other federal agencies of ownership, programming, technical operations, employment and other business practices. The FCC regulates broadcast radio stations pursuant to the Communications Act of 1934, as amended (“Communications Act”). The following is a brief summary of certain provisions of the Communications Act and of certain specific FCC regulations and policies. This summary is not a comprehensive listing of all of the regulations and policies affecting radio stations. For further information concerning the nature and extent of federal regulation of radio stations, you should refer to the Communications Act, FCC rules and FCC public notices and rulings.

The Communications Act permits the operation of a broadcast radio station only in accordance with a license issued by the FCC. A licensee’s failure to comply with the requirements of the Communications Act or FCC rules and policies may result in the imposition of sanctions, including admonishment, fines, the grant of a license renewal for less than a full eight-year term or with conditions, denial of a license renewal application, the revocation of an FCC license, and/or the denial of FCC consent to acquire additional broadcast properties.

Transfer or Assignment of Licenses

The Communications Act prohibits the assignment of broadcast licenses or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant such approval, the FCC considers a number of factors pertaining to the existing licensee and the proposed licensee, including:

 

    compliance with the FCC’s ownership rules;

 

    the “character” of the proposed licensee; and

 

    compliance with the Communications Act’s limitations on alien ownership as well as general compliance with FCC regulations and policies.

To obtain FCC consent for the assignment or transfer of control of a broadcast license, appropriate applications must be filed with the FCC. Interested parties may file objections or petitions to deny such applications.

Ownership Regulation

The FCC’s current ownership rules as applicable to CBS Radio and Entercom are briefly summarized below. Entercom is seeking approval from its shareholders at the Special Meeting to amend its Articles of Incorporation to help ensure its compliance with the FCC’s ownership rules.

Local Radio Ownership

The local radio ownership rule limits the number of radio stations that may be commonly owned or controlled in local markets, (i) as defined and rated by Nielsen Audio; and (ii) in areas outside of Nielsen Audio markets, as determined by overlap of specified signal contours. Under that rule, one party may own up to eight radio stations in the largest markets, no more than five of which may be either AM or FM. With a few exceptions, the rule permits the common ownership of eight radio stations in the top 50 radio markets, where CBS Radio and Entercom have significant holdings.

Radio-Television Cross-Ownership Rule

The FCC’s radio-television cross-ownership rule limits the common ownership of radio and television stations in the same market. The numeric limit varies according to the number of independent media voices in the market. In most markets where CBS Radio owns radio stations and CBS owns a television station, the rule limits CBS Radio to owning no more than six or seven radio stations.

 

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Newspaper-Broadcast Cross-Ownership

The newspaper-broadcast cross-ownership rule prohibits the common ownership of a radio or television station and daily newspaper in the same market absent a waiver by the FCC.

The FCC is required to periodically review certain of its media ownership rules, and it completed its most recent review in August 2016 when it affirmed, with minor changes, the rules summarized above. The FCC’s August 2016 decision is subject to review by the U.S. Court of Appeals. Certain unrelated third parties have separately petitioned the FCC to reconsider aspects of that decision including the decision to retain the radio-television and the newspaper-broadcast cross-ownership rules.

Ownership Attribution

In applying its ownership limitations, the FCC generally considers only “attributable” ownership interests. Attributable interests generally include: (i) equity and debt interests which when combined exceed 33% of a licensee’s or other media entity’s total asset value, if the interest holder supplies more than 15% of a station’s total weekly programming or has an attributable interest in any same-market media outlet (television, radio or newspaper), with a higher threshold in the case of investments in certain “eligible entities” acquiring broadcast stations; (ii) a 5% or greater direct or indirect voting stock interest, including certain interests held in trust, unless the holder is a qualified passive investor, in which case the threshold is a 20% or greater voting stock interest; (iii) any equity interest in a limited liability company or a partnership, including a limited partnership, unless properly “insulated” from management activities; and (iv) any position as an officer or director of a licensee or of its direct or indirect parent.

Under the current attribution rules, a minority stockholder is not attributed with an ownership interest even if it directly or indirectly owns 5% or more of the voting stock of a licensee, if there is a single majority voting stockholder. National Amusements is the single majority voting stockholder of CBS, and Joseph Field is the single majority voting stockholder of Entercom. Following the Merger, however, Entercom will not have a single majority voting stockholder; therefore, any person or entity holding directly or indirectly 5% or more of the voting power in Entercom will be an attributable interest holder under the FCC’s ownership rules, which may limit direct or indirect purchases of Entercom’s stock. In addition, for a period of up to six months following the Merger, CBS and Entercom will have two common directors. During this period, the broadcast stations owned by each company will be attributable to the other, which may have the effect of limiting and affecting the activities, strategic business alternatives and business terms available to CBS and Entercom. In particular, so long as CBS and Entercom share common directors, Entercom will be treated for FCC purposes as commonly owned with CBS. Because CBS owns television stations in 16 of the markets where Entercom will own radio stations following the Merger, Entercom and CBS will continue to be subject to the limits of the radio-television cross-ownership rule in those markets (or in any other market where CBS may acquire a television station) until CBS and Entercom cease to share an attributable ownership or have common officers or directors. Entercom and CBS have requested a temporary waiver of the FCC’s radio-television cross ownership rule to enable them to continue to own radio and televisions stations in four markets during that period when Entercom and CBS will have common directors.

As a result of the Merger, Entercom would own radio stations in seven markets exceeding the limit under the FCC’s local radio ownership rule. In connection with the applications that CBS Radio and Entercom have filed with the FCC for consent to the Merger, Entercom and CBS Radio have proposed to divest 19 stations to comply with the FCC’s rules and to gain approval from the Antitrust Division of the U.S. Department of Justice. To the extent that these stations have not been divested as of the closing of the Merger, CBS Radio and Entercom have proposed to transfer these stations to a divestiture trustee, who will be charged with operating and promptly divesting the stations.

Foreign Ownership

In general, the Communications Act prohibits foreign individuals or entities from owning more than 25% of the voting power or equity of CBS Radio. In November 2013, the FCC confirmed that it will consider on a case-

 

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by-case basis petitions for approval of foreign ownership of broadcast licenses that exceeds the 25% threshold and, in September 2016, the FCC adopted specific rules and procedures for the filing and review of such requests. In the September 2016 decision, the FCC confirmed that it will allow broadcast licensees to seek approval of up to 100% foreign ownership. The FCC also adopted a methodology for determining the citizenship of the beneficial owners of publicly held shares that companies may use to ascertain compliance with the foreign ownership rules.

Programming And Operation

The Communications Act requires broadcasters to serve the “public interest.” A licensee is required to present programming that is responsive to issues in the station’s community of license and to maintain records demonstrating this responsiveness. The FCC also regulates, among other things, political advertising; sponsorship identification; the advertisement of contests and lotteries; the conduct of station-run contests and obscene, indecent and profane broadcasts.

The FCC’s rules prohibit the broadcast of obscene material at any time and indecent or profane material between the hours of 6:00 a.m. and 10:00 p.m., local time. Broadcasters risk violating the prohibition against broadcasting indecent or profane material because the vagueness of the FCC’s indecency/profanity definition makes it difficult to apply, particularly with respect to spontaneous, live programming. The FCC’s maximum forfeiture penalty per radio station for broadcasting indecent or profane programming is $389,305 per indecent or profane utterance with a maximum forfeiture exposure of $3,593,585 for any continuing violation arising from a single act or failure to act. CBS Radio and Entercom have been involved in litigation and, from time to time, have received and may receive in the future letters of inquiry from the FCC prompted by complaints alleging that certain programming on its broadcast radio stations included indecent or profane material.

The FCC regulates the conduct of on-air station contests, requiring in general that the material rules and terms of the contest be broadcast periodically or posted online and that the contest be conducted substantially as announced.

License Renewal

Radio station licenses issued by the FCC are renewable ordinarily for an eight-year term. A station may continue to operate beyond the expiration date of its license if a timely filed license renewal application is pending.

Generally, the FCC renews radio broadcast licenses without a hearing upon a finding that:

 

    the radio station has served the public interest, convenience and necessity;

 

    there have been no serious violations by the licensee of the Communications Act or FCC rules and regulations; and

 

    there have been no other violations by the licensee of the Communications Act or FCC rules and regulations which, taken together, indicate a pattern of abuse.

After considering these factors and any petitions to deny a license renewal application (which may lead to a hearing) that have been filed by third parties, the FCC may grant the license renewal application with or without conditions, including renewal for a term less than the maximum otherwise permitted. Historically, CBS Radio’s and Entercom’s licenses have been renewed for full eight-year terms without any conditions or sanctions imposed; however, there can be no assurance that the licenses of each of CBS Radio’s and Entercom’s radio stations will be renewed for a full term without conditions or sanctions. With one exception, as described below, all of the renewal applications filed by CBS Radio and Entercom during the most recent renewal windows have been granted.

 

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The FCC initiated an investigation in January 2007 related to a contest at one of Entercom’s stations. In October 2016, the FCC designated for a hearing whether Entercom operated this station in the public interest and whether such station’s license should be renewed. In February 2017, in order to facilitate the Merger, Entercom permanently discontinued operation of and relinquished the FCC license for this station, and in March 2017 an FCC administrative law judge terminated the renewal hearing. Although the license renewal application for that station may technically remain pending, the relinquishment of the license effectively moots that application.

Technical Rules

Numerous FCC rules govern the technical operating parameters of radio stations, including permissible operating frequency, power and antenna height and interference protections between stations. Changes to these rules could negatively affect the operation of radio stations owned by CBS Radio and Entercom. For example, in October 2015, the FCC proposed rules that, if adopted, could reduce the degree of interference protection afforded to certain of CBS Radio’s AM radio stations that serve wide areas.

Enforcement Authority

The FCC has the power to impose penalties for violations of its rules under the Communications Act, including the imposition of monetary fines, the issuance of short-term licenses, the imposition of a condition on the renewal of a license, the denial of authority to acquire new stations, and the revocation of operating authority. The maximum fine for a broadcast radio station for a single violation of the FCC’s rules (other than indecency rules—see discussion above) is $48,114 for a single violation and $481,147 for a continuing violation.

Proposed Changes

Congress, the FCC and other federal agencies are considering or may in the future consider and adopt new laws, regulations and policies regarding a wide variety of matters that could: (1) affect, directly or indirectly, the operation, ownership and profitability of Entercom’s radio stations; (2) result in the loss of audience share and advertising revenues for Entercom’s radio stations; and (3)  affect Entercom’s ability to acquire additional radio stations or to finance those acquisitions.

Federal Antitrust Laws

The federal agencies responsible for enforcing the federal antitrust laws, the Federal Trade Commission and the Department of Justice, may investigate certain acquisitions. For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires the parties to file Notification and Report Forms with the Federal Trade Commission and the Department of Justice and to observe specified waiting-period requirements before consummating the acquisition. The transaction contemplated by the Merger Agreement will be subject to review by the Federal Trade Commission and the Department of Justice. On February 7, 2017 Entercom and CBS Radio were advised that the Department of Justice has initiated an informal investigation regarding transactions contemplated by the Merger Agreement. Entercom and CBS each filed the requisite notification and report forms with the Federal Trade Commission and the Antitrust Division on March 20, 2017. On April 19, 2017, CBS Radio and Entercom each received a request for additional information and documentary material, often referred to as a “second request,” from the United States Department of Justice under the HSR Act.

Laws Affecting Intellectual Property

Laws affecting intellectual property are of significant importance to CBS Radio and Entercom to protect brands and copyrights. Protection of brands requires the vigilance and action by the brand owner. CBS Radio and Entercom seek trademark registrations for significant brand assets and enforces its brand rights against infringing parties through legal actions, including actions in the United States Patent and Trademark Office.

 

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Unauthorized Distribution of Copyright Content and Piracy

Unauthorized distribution or reproduction of content, especially in digital formats such as unlicensed live simultaneous or stored streaming of audio recordings and peer-to-peer file “sharing,” are threats to any copyright owners’ ability to protect and exploit their property. CBS Radio and Entercom monitor legal changes that might impact the exclusive rights it has in broadcasts, streams and recorded content. CBS Radio’s and Entercom’s digital delivery services and commercial arrangements with digital content providers help reduce the risks associated with unauthorized access to CBS Radio’s and Entercom’s content. CBS Radio and Entercom are also engaged in enforcement and other activities to protect its intellectual property. Policing CBS Radio’s and Entercom’s intellectual property rights, or litigation or proceedings before the United States Patent and Trademark Office, courts or other administrative bodies, is unpredictable, costly and may not always be cost effective.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR CBS RADIO

(Tabular dollars in millions)

You should read the following discussion and analysis of CBS Radio’s financial condition and results of operations in conjunction with “Selected Historical Consolidated Financial Data of CBS Radio,” “Information on CBS Radio” and the historical consolidated financial statements of CBS Radio and the notes thereto included elsewhere in this document. This discussion contains forward-looking statements that involve numerous risks and uncertainties. The forward-looking statements are subject to a number of important factors, including those factors discussed under “Risk Factors” and “Cautionary Statement on Forward-Looking Statements,” that could cause actual results to differ materially from the results described herein or implied by such forward-looking statements.

CBS Radio’s historical financial statements included in this document have been presented on a “carve-out” basis from CBS’s consolidated financial statements using the historical results of operations, cash flows, assets and liabilities of CBS Radio and include allocations of corporate expenses from CBS. These allocations reflect significant assumptions, and the financial statements do not fully reflect what CBS Radio’s financial position, results of operations or cash flows would have been had it been a stand-alone company during the periods presented. As a result, historical financial information is not necessarily indicative of CBS Radio’s future results of operations, financial position or cash flows. See “Risk Factors—Risks Related to the Transactions—The historical and pro forma financial information that is included in this document may not be representative of the results CBS Radio would have achieved as a stand-alone public company and may not be a reliable indicator of CBS Radio’s future results.”

Set forth below is a discussion of CBS Radio’s historical operations. The effects of the Transactions are reflected in the unaudited pro forma condensed combined financial statements of Entercom and CBS Radio included elsewhere in this document.

Overview

Business Overview and Strategy

CBS Radio is a large-market focused, multi-platform national media company with a local footprint of 117 radio stations and digital properties in 26 radio markets, including all of the top 10 radio markets and 19 of the top 25 radio markets. CBS Radio focuses on three areas of content: Sports, News and Music & Entertainment. CBS Radio’s radio portfolio includes many of the leading radio stations in the United States, including the most listened-to Sports (WFAN in New York), News (1010 WINS in New York) and Classic Hits (WCBS-FM in New York) radio stations. CBS Radio owns the #1- or #2-rated local Sports radio station and the #1-rated All-News radio station in each of the markets in which it programs these formats. CBS Radio’s radio stations reached an audience of more than 65 million people per week in 2016, making it the second largest radio group in the United States as measured both by audience and by revenue. CBS Radio also distributes its content through an integrated suite of digital properties, including market-focused local websites, Radio.com (a streaming service), Eventful (an event discovery platform) and Play.it (a podcast network), which collectively reached an average of 63.4 million internet and mobile unique users per month in 2016. In addition, CBS Radio produces events across its markets, including concerts, multi-day musical festivals, speaker series, trade shows and sports-related events. CBS Radio produced, co-produced or co-promoted approximately 600 such events in 2016.

CBS Radio focuses primarily on large metropolitan markets through clusters of radio stations and digital properties. CBS Radio has the #1- or #2-ranked station clusters in approximately 64% of its markets as measured by revenue, as reported by Miller Kaplan Arase, LLP. As of December 2016, CBS Radio employed approximately 1,000 sales personnel dedicated to local and national radio advertising, digital advertising and events, with a local presence in all of the markets in which it operates.

 

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Since 2013, CBS Radio has experienced a declining trend in its traditional broadcast spot advertising revenues resulting from industry-wide challenges in local advertising, and a loss in market share primarily from increased competition in the programming formats it offers. The radio broadcasting industry is highly competitive and the radio advertising marketplace has been affected by competition from the proliferation of digital platforms. In an effort to mitigate these negative trends, over the last few years, CBS Radio has initiated several strategic changes to its business to regain market share in its traditional radio broadcast spot advertising business and reduce its cost structure. Such actions included appointing a new President as well as other members of its senior management team; realigning and enhancing its sales structure; combining certain station management functions to better align its programming with consumer and market demand; and initiating measures intended to improve its overall pricing discipline. In addition, on February 2, 2017, an agreement was reached to combine CBS Radio with Entercom in a merger, which will create a well-capitalized company with a strong balance sheet and significant free cash flow generation, and create scale-driven efficiencies and opportunities to compete more effectively with other media. CBS Radio believes that taken together, these actions will enable it to maintain and expand its operating margins and continue to generate significant levels of operating cash flow, therefore enhancing the overall value of its business. During the second quarter of 2017, CBS Radio implemented additional restructuring activities to streamline its operations and further reduce its cost structure.

CBS Radio has also taken additional steps to drive future revenue growth. These steps include implementing a recalibrated sales commission incentive structure, changing the format of certain of its stations in key markets, increasing local demand by hiring additional business development sellers, limiting the amount of CBS Radio’s inventory available to be sold by third-party resellers who have the ability to reduce CBS Radio’s advertising rates, and focusing on improving the terms of its strategic partnerships. In addition, CBS Radio continues to pursue opportunities for revenue growth beyond its broadcast advertising revenues, including from its digital platforms and non-traditional revenue sources such as events, programming sponsorships, and naming rights of radio station assets, including radio station studios and performance spaces. CBS Radio also continues to develop and invest in compelling local and national content, and enhance its existing radio clusters and digital assets. CBS Radio believes this strategy will increase its relevance among its audiences and advertisers, strengthen its local brands and provide it with additional opportunities to monetize its content. See “Information on CBS Radio—Operating Strategy.”

All references to historical financial market performance and market share included herein have been obtained from information published by the public accounting firm Miller Kaplan Arase, LLP.

Revenues

CBS Radio derives its revenues from the following revenue streams:

Broadcasting Revenue. CBS Radio generates broadcasting revenue from the sale of advertising time on its radio stations to a wide range of local and national advertisers in consumer-focused industries, including automotive, entertainment, retail and financial services. Local advertising is generated primarily in a station’s individual market and national advertising is generated across multiple markets. Political advertising reflects advertising spending by political candidates and special interest groups relating to local and national elections. Revenue is recognized in the period during which the advertising spot is broadcast and is reported net of agency commissions, which are calculated based on a stated percentage applied to gross billing revenue. CBS Radio also earns revenues from advertising spots sold across radio networks and from advertising time provided in exchange for goods and services in trade and barter transactions.

Digital, Events and Other Revenue. CBS Radio generates digital revenue primarily from the sale of display, audio and video advertising across its digital properties, which enables it to further monetize the content produced by its radio stations. Events revenue is generated primarily from advertising and sponsorships as well as ticket sales associated with various live events which CBS Radio produces, promotes, co-produces and co-promotes.

 

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Other revenues are generated primarily from the syndication of programming, sponsorships of programming features and naming rights of radio station assets. Digital advertising revenues are recognized in the period during which the advertising is displayed. Other revenues, including events, are recognized when the related service is provided and syndication revenue is recognized when the program is made available.

Expenses

Operating Expenses. CBS Radio’s operating expenses include costs relating to the production and acquisition of its radio programming, including on-air talent, acquired sports programming rights, music license fees and employee compensation costs.

Selling, General and Administrative Expenses. CBS Radio’s selling, general and administrative (“SG&A”) expenses include advertising and promotion costs, commissions, employee compensation, bad debt expense and other costs associated with administrative departments which support its operations.

Non-GAAP Measures

Adjusted OIBDA and Adjusted net income from continuing operations are measures of performance not calculated in accordance with GAAP. “Adjusted OIBDA” is defined as operating income (loss) before depreciation, stock-based compensation expense, restructuring charges and impairment charges and “Adjusted net income from continuing operations” is defined as net income (loss) from continuing operations before restructuring charges and impairment charges. Management uses Adjusted OIBDA and Adjusted net income from continuing operations to evaluate CBS Radio’s operating performance. Adjusted OIBDA and Adjusted net income from continuing operations are relevant and useful for investors because they allow investors to view performance in a manner similar to the method used by CBS Radio’s management, help improve investors’ understanding of CBS Radio’s operating performance and make it easier for investors to compare CBS Radio’s results with other companies that have different financing and capital structures or tax rates. Adjusted OIBDA is among the primary measures used by management for planning and forecasting of future periods, and it is an important indicator of operational strength and business performance. In addition, Adjusted OIBDA is among the primary measures used by investors, analysts and peers in CBS Radio’s industry for purposes of valuation and the comparison of CBS Radio’s operating performance to other companies in CBS Radio’s industry and to compare year-over-year results. As Adjusted OIBDA and Adjusted net income from continuing operations are non-GAAP financial measures, reconciliations of Adjusted OIBDA and Adjusted net income from continuing operations to net income (loss) or net income (loss) from continuing operations, as applicable, the most directly comparable GAAP financial measures, are provided when Adjusted OIBDA and Adjusted net income from continuing operations are presented.

Results of Operations

Six Months Ended June 30, 2017 versus Six Months Ended June 30, 2016

Operational Highlights

 

           Increase/(Decrease)  
Six Months Ended June 30,    2017     2016           $                 %        

GAAP:

        

Revenues

   $ 555.6     $ 577.1     $ (21.5     (4 )% 

Operating income

   $ 90.0     $ 137.4     $ (47.4     (34 )% 

Operating income margin (a)

     16     24    

Net income

   $ 30.5     $ 82.5     $ (52.0     (63 )% 

Operating cash flow

   $ 10.9     $ 99.5     $ (88.6     (89 )% 

Non-GAAP:

        

Adjusted OIBDA (b)

   $ 116.6     $ 157.7     $ (41.1     (26 )% 

Adjusted OIBDA margin (a)

     21     27    

Adjusted net income (b)

   $ 35.1     $ 82.5     $ (47.4     (57 )% 

 

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(a) Margin is defined as operating income or Adjusted OIBDA divided by revenues.
(b) See “—Reconciliation of Non-GAAP Measures” for reconciliations of adjusted results to the most directly comparable financial measures in accordance with GAAP.

For the six months ended June 30, 2017, the 4% decrease in revenues was primarily driven by declines in local and national broadcasting revenues, primarily as a result of loss in market share and, to a lesser extent, lower demand in the radio marketplace. These declines were partially offset by growth from non-traditional revenue sources such as events, programming sponsorships and naming rights of station assets, as well as revenues from a new traffic network arrangement. Long-term projections of CBS Radio’s results for 2017 through 2021, as presented in “The Transactions – Certain Financial Projections Prepared by Entercom – CBS Radio Projections,” forecasted an increase in CBS Radio’s full year revenue for 2017 compared to 2016, driven by expected growth from digital, events and other revenue, which is consistent with the growth CBS Radio experienced in the first six months of 2017. The projections for 2017, however, did not anticipate the loss in market share or decline in market demand that CBS Radio experienced in the first six months of 2017. CBS Radio has taken additional steps to drive future revenue growth. These steps include implementing a recalibrated sales commission incentive structure, changing the format of certain of its stations in key markets, increasing local demand by hiring additional business development sellers, limiting the amount of CBS Radio’s inventory available to be sold by third-party resellers who have the ability to reduce CBS Radio’s advertising rates, and focusing on improving the terms of its strategic partnerships.

Operating income for the six months ended June 30, 2017 decreased 34% and Adjusted OIBDA decreased 26% as a result of lower broadcasting revenue as well as higher costs, including costs associated with the aforementioned growth initiatives.

CBS Radio generated operating cash flow of $10.9 million for the six months ended June 30, 2017 compared to $99.5 million for the six months ended June 30, 2016. This decrease was primarily driven by lower operating income, interest paid on long-term debt and higher payments for income taxes, reflecting the timing of payments.

Reconciliation of Non-GAAP Measures

The following tables present reconciliations of Adjusted OIBDA and Adjusted net income to net income, the most directly comparable financial measure in accordance with GAAP.

 

            Increase/(Decrease)  
Six Months Ended June 30,        2017              2016                  $                     %      

Net income

   $ 30.5      $ 82.5      $ (52.0     (63 )%