-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gsb0saVxsM2pXZgjrAPy5GaPWBf8dXYBoL0uMr96FHm+gPOqLSzR+gjElc0hDRVw d22/TwoRpx8LsHnHdoTWag== 0000950123-99-006632.txt : 19990720 0000950123-99-006632.hdr.sgml : 19990720 ACCESSION NUMBER: 0000950123-99-006632 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19990719 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CUMULUS MEDIA INC CENTRAL INDEX KEY: 0001058623 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 364159663 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-81225 FILM NUMBER: 99666817 BUSINESS ADDRESS: STREET 1: 111 KILBOURNE AVE STREET 2: SUITE 2700 CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4146152800 MAIL ADDRESS: STREET 1: 111 EAST KILBOURN AVE STREET 2: SUITE 2700 CITY: MILWAUKEE STATE: WI ZIP: 53202 S-3/A 1 AMENDMENT NO. 2 TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1999 REGISTRATION NO. 333-81225 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 2 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ CUMULUS MEDIA INC. (Exact name of Registrant as specified in its charter) ILLINOIS 4832 36-4159663 (State or other jurisdiction of (Primary standard industrial (IRS employer incorporation or organization) classification code number) identification number)
111 EAST KILBOURN AVE. SUITE 2700 MILWAUKEE, WI 53202 (414) 615-2800 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive office) ------------------------ RICHARD W. WEENING EXECUTIVE CHAIRMAN LEWIS W. DICKEY, JR. EXECUTIVE VICE CHAIRMAN CUMULUS MEDIA INC. 111 EAST KILBOURN AVE. SUITE 2700 MILWAUKEE, WI 53202 (414) 615-2800 (Name, address, including zip code, and telephone number, including area code, of agent for service) COPIES TO: WILLIAM F. SCHWITTER, ESQ. GEORGE R. KROUSE, JR., ESQ. PAUL, HASTINGS, JANOFSKY & WALKER LLP SIMPSON THACHER & BARTLETT 399 PARK AVENUE 425 LEXINGTON AVENUE NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10017 (212) 318-6000 (212) 455-2000
------------------------ APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the only securities being registered on this form are being offered pursuant to dividend or interest investment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF TITLE OF SHARES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(2) - ------------------------------------------------------------------------------------------------------------------------------- Class A common stock, par value $.01 per share............... 9,963,600 shares(3) $24.9375 $248,467,275 $69,222 - ------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457. (2) $48,094 of the registration fee was previously paid in connection with the filing of the Company's Registration Statement on Form S-3 on June 21, 1999. (3) Includes 1,299,600 shares issuable upon exercise of the Underwriters' over-allotment option. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EXPLANATORY NOTE This Registration Statement contains two forms of prospectus: one to be used in connection with the offering of the Class A common stock in the U.S. and Canada and one to be used in connection with a concurrent offering of the Class A common stock outside the U.S. and Canada. The U.S. prospectus and the international prospectus will be identical in all respects except that they will contain a different front cover page. The U.S. prospectus is included herein and is followed by the alternate international cover page. The additional page for the international prospectus included herein has been labeled "Alternate Page for International Prospectus." If required pursuant to Rule 424(b) of the General Rules and the Regulations under the Securities Act of 1933, as amended, copies of each of the prospectuses in the forms in which they are used after the Registration Statement becomes effective will be filed with the Securities and Exchange Commission. 3 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. PROSPECTUS (Subject to Completion) Issued July , 1999 8,664,000 Shares cumulus logo CLASS A COMMON STOCK ------------------------ CUMULUS MEDIA INC. IS OFFERING 8,664,000 SHARES OF ITS CLASS A COMMON STOCK. INITIALLY, THE U.S. UNDERWRITERS ARE OFFERING 6,931,200 SHARES OF CLASS A COMMON STOCK IN THE U.S. AND CANADA AND THE INTERNATIONAL UNDERWRITERS ARE OFFERING 1,732,800 SHARES OF CLASS A COMMON STOCK OUTSIDE THE U.S. AND CANADA. ------------------------ CUMULUS MEDIA INC.'S CLASS A COMMON STOCK IS LISTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "CMLS." ON JULY 16, 1999, THE REPORTED LAST SALE PRICE OF THE CLASS A COMMON STOCK ON THE NASDAQ NATIONAL MARKET WAS $24.9375 PER SHARE. ------------------------ INVESTING IN THE CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 13. ------------------------ PRICE $ A SHARE ------------------------
UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC COMMISSIONS CUMULUS -------- ------------- ----------- Per Share................................... $ $ $ Total....................................... $ $ $
The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Cumulus Media Inc. has granted the U.S. underwriters the right to purchase up to an additional 1,299,600 shares to cover over-allotments. Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on , 1999. ------------------------ Joint Lead Managers MORGAN STANLEY DEAN WITTER LEHMAN BROTHERS BEAR, STEARNS & CO. INC. PRUDENTIAL SECURITIES , 1999 4 2 PAGE GATE FOLD Cover page of gate fold: collage of logos of radio stations owned by us. 5 Inside of gate fold: U.S. map and to the bottom right a Caribbean map showing the locations of our radio stations. 6 TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................... 5 Risk Factors.......................... 13 Use of Proceeds....................... 21 Class A Common Stock Price Range and Dividends........................... 22 Dividend Policy....................... 22 Capitalization........................ 23 Unaudited Pro Forma Financial Statements.......................... 24 Selected Historical Financial Data.... 36 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 38 Business.............................. 46 Management............................ 66
PAGE ---- Certain Relationships and Related Transactions........................ 70 Principal Shareholders................ 71 Description of Capital Stock.......... 72 Description of Certain Indebtedness... 79 Shares Eligible for Future Sale....... 82 Underwriters.......................... 83 Certain United States Tax Consequences to Non-U.S. Holders of Class A Common Stock........................ 87 Legal Matters......................... 90 Experts............................... 90 Where You Can Find More Information... 91
We are an Illinois corporation with our principal executive offices located at 111 East Kilbourn Avenue, Suite 2700, Milwaukee, Wisconsin 53202, telephone number (414) 615-2800. Our homepage is located at http://www.cumulusmedia.com. The information included on our homepage is not a part of this prospectus. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell shares of Class A common stock and seeking offers to buy shares of Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the Class A common stock. In this prospectus, the "Company," "Cumulus," "we," "us" and "our" refer to Cumulus Media Inc. and its consolidated subsidiaries. WE HAVE NOT TAKEN ANY ACTION TO PERMIT A PUBLIC OFFERING OF THE SHARES OF CLASS A COMMON STOCK OUTSIDE THE U.S. PERSONS OUTSIDE THE U.S. WHO COME INTO POSSESSION OF THIS PROSPECTUS MUST INFORM THEMSELVES ABOUT AND OBSERVE ANY RESTRICTIONS RELATING TO THE OFFERING OF THE SHARES OF CLASS A COMMON STOCK AND THE DISTRIBUTION OF THIS PROSPECTUS OUTSIDE OF THE U.S. 3 7 CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA We use the term local marketing agreement, or LMA, in various places in this prospectus. A typical LMA is an agreement under which a Federal Communications Commission licensee of a radio station makes available, for a fee, air time on its station to a party. Such party provides programming to be broadcast during such air time and collects revenues from advertising it sells for broadcast during such programming. A station's or station group's power ratio is defined as such station's or station group's revenue market share divided by its audience market share. Metropolitan Statistical Areas, or MSAs, are based on the Arbitron Radio Metro and Television Market Population Estimates 1997-1998. Unless otherwise indicated: - we obtained market ranking by radio advertising revenue, radio market advertising revenue and radio market advertising data from BIA's MasterAccess compiled by BIA Research, Inc.; - we obtained total industry listener and revenue levels from the Radio Advertising Bureau; - we derived all audience share data and audience rankings, including ranking by population, except where otherwise stated to the contrary, from surveys of people ages 12 and over, listening Monday through Sunday, 6 a.m. to 12 midnight, and based on the Spring 1998 Arbitron Market Report pertaining to each market, as reported by BIA; and - we obtained revenue share data in each market presented from BIA as adjusted for market information available to and known by us. ------------------------------ FORWARD-LOOKING STATEMENTS In various places in this prospectus, we use statements which constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our future plans, objectives, expectations and intentions. These statements may be identified by the use of words such as "expects," "anticipates," "intends," "plans" and similar expressions. We caution prospective purchasers of Class A common stock that forward-looking statements are not guarantees of future performance and that they may involve risks and uncertainties. Actual results may differ from those in the forward-looking statements as a result of various factors, including: - risks and uncertainties relating to leverage; - the need for additional funds; - consummation of pending acquisitions; - integration of such pending acquisitions; - our ability to eliminate certain costs; - the management of rapid growth; - the popularity of radio as a broadcasting and advertising medium; and - changing consumer tastes. Many of these factors are beyond our control, and our actual results could differ materially from those discussed in these statements. The "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" sections of this prospectus identify important factors that could cause such differences. If any of these factors were to occur, then the results in these statements could be significantly different. 4 8 PROSPECTUS SUMMARY You should read this summary together with the more detailed information and our consolidated financial statements and the notes to our consolidated financial statements appearing elsewhere or incorporated by reference in this prospectus. You should carefully consider, among other things, the matters set forth in "Risk Factors." THE COMPANY We are a radio broadcasting company focused on acquiring, operating and developing radio stations in mid-size radio markets in the U.S. and currently own and operate 192 stations in 39 U.S. markets. We also provide sales and marketing services under LMAs (pending FCC approval of acquisition) to 40 stations in 15 U.S. markets. We are the third largest radio broadcasting company in the U.S. based on number of stations, and we believe, the eighth largest radio broadcasting company in the U.S. based on 1998 pro forma net revenues. We will own and operate a total of 246 radio stations (171 FM and 75 AM) in 45 U.S. markets upon consummation of our pending acquisitions. According to BIA and the Radio Advertising Bureau, we have assembled market-leading groups or clusters of radio stations which rank first or second in terms of revenue share and/or audience share in substantially all of our markets. On an historical basis, for the three months ended March 31, 1999, we had net revenues of $31.9 million and broadcast cash flow of $5.0 million. After giving pro forma effect to the transactions described in the unaudited pro forma financial statements, we would have had net revenues of $37.9 million and broadcast cash flow of $6.4 million for the three months ended March 31, 1999. We believe that the attractive operating characteristics of mid-size markets, which we define as markets constituting Metropolitan Statistical Areas 100-268 as ranked by Arbitron, together with the relaxation of ownership limits under the Telecommunications Act of 1996 and FCC rules, create significant opportunities for growth from the formation of groups of radio stations within these markets. To maximize the advertising revenues and broadcast cash flow of our stations, we seek to enhance the quality of radio programs for listeners and the attractiveness of the radio station in a given market. We also increase the amount of locally-originated programming. Within each market, our stations are diversified in terms of format, target audience and geographic location, enabling us to attract larger and broader listener audiences and thereby a wider range of advertisers. This diversification, coupled with our favorable advertising pricing, also has provided us with the ability to compete successfully for advertising revenue against non-traditional competitors such as print media and television. We believe that we are in a position to generate revenue growth in excess of historical market rates, increase audience and revenue shares within these markets and, by capitalizing on economies of scale and by competing against other media for incremental advertising revenue, increase our broadcast cash flow growth rates and margins to those levels found in large markets. As we have assembled our portfolio of stations over the past two years, most of our markets are still in the development stage with the potential for substantial growth as we implement our operating strategy. MANAGEMENT TEAM Our senior management team has an aggregate of over 75 years of experience in the media and radio broadcasting industry. To date, our management team has negotiated 90 acquisitions, accounting for all 246 of our stations currently owned or to be acquired upon consummation of our pending acquisitions. Our Executive Chairman and Treasurer, Richard W. Weening, has over 20 years of operating experience as a chief executive officer in media and information companies, including significant experience in corporate finance and mergers and acquisitions. Lewis W. Dickey, Jr., our Executive Vice Chairman, has over 15 years of experience in the radio and television broadcasting industry and is a successful owner-operator of radio stations in large and mid-size markets. Mr. Dickey is also a nationally regarded business strategy and marketing consultant to the radio and television broadcasting industry. William M. Bungeroth, our President, has over 20 years of experience in the radio broadcasting industry. Mr. Bungeroth has developed an expertise in increasing revenues at stations under his management. 5 9 STATION PORTFOLIO Our radio stations are organized into four regions: the Southeast, Midwest, Southwest and Northeast. The listed regions correspond to the geographic location of our markets. We operate each market as a distinct business unit and we do not manage or report our business by region. The following chart sets forth certain information as of July 16, 1999 with respect to our stations in these regions, including stations for which we currently provide programming and sell advertising under LMAs (14 of the pending stations to be acquired are not under LMAs), before and after giving effect to our pending acquisitions:
STATION PORTFOLIO --------------------------------- MSA CLUSTER 12+ OWNED PENDING PRO FORMA MARKET RANKING BY AUDIENCE --------- --------- --------- MARKET RANK REVENUE SHARE SHARE FM AM FM AM FM AM ------ ------ ------------- -------- --- --- --- --- --- --- SOUTHEAST REGION Albany, GA........................... 246 2 36.4% 4 2 1 -- 5 2 Augusta, GA.......................... 110 1 28.1% 5 3 1 -- 6 3 Chattanooga, TN...................... 102 1 28.2% 4 1 -- -- 4 1 Columbus, GA......................... 169 1 32.4% 4 2 1 1 5 3 Columbus-Starkville, MS.............. n/a 1 -- -- -- 4 3 4 3 Florence, SC......................... 198 2 43.0% 6 3 1 -- 7 3 Laurel-Hattiesburg, MS............... 209 2 38.0% 2 1 3 1 5 2 Lexington-Fayette, KY................ 107 1 30.1% -- -- 4 1 4 1 Mobile, AL........................... 86 2 25.1% -- -- 3 2 3 2 Montgomery, AL....................... 141 1 30.0% 2 2 2 1 4 3 Muscle Shoals, AL.................... n/a 1 -- 2 1 -- -- 2 1 Myrtle Beach, SC..................... 173 2 17.6% 5 1 -- -- 5 1 Pensacola, FL........................ 121 2 12.0% -- -- 1 1 1 1 Salisbury-Ocean City, MD............. 152 1 26.7% 6 2 -- -- 6 2 Savannah, GA......................... 153 2 36.1% 5 2 -- -- 5 2 Tallahassee, FL...................... 163 1 32.3% 3 1 1 -- 4 1 Tupelo, MS........................... 178 1 22.7% 2 2 -- -- 2 2 Wilmington, NC....................... 177 2 21.4% 4 1 -- -- 4 1 MIDWEST REGION Ann Arbor, MI........................ 145 1 7.4% 2 2 -- -- 2 2 Appleton-Oshkosh, WI................. 135 3 14.0% 2 2 -- -- 2 2 Bismarck, ND......................... 260 1 50.9% 3 1 1 2 4 3 Dubuque, IA.......................... 219 2 34.0% 4 1 -- -- 4 1 Eau Claire, WI....................... 231 2 33.9% -- -- 4 2 4 2 Faribault-Owatonna-Waseca, MN........ n/a 1 -- 4 4 -- -- 4 4 Green Bay, WI........................ 183 2 11.6% 3 -- -- -- 3 -- Kalamazoo, MI........................ 174 1 24.6% 2 1 -- -- 2 1 Mankato-New Ulm-St. Peter, MN........ n/a 1 -- 4 2 -- -- 4 2 Marion-Carbondale, IL................ 212 1 30.1% 4 2 -- -- 4 2 Mason City, IA....................... n/a 1 -- 5 2 -- -- 5 2 Monroe, MI........................... n/a 1 -- 1 -- -- -- 1 -- Rochester, MN........................ n/a 1 -- 2 2 -- -- 2 2 Toledo, OH........................... 78 1 32.9% 4 2 1 -- 5 2 Topeka, KS........................... 180 2 19.6% 2 2 2 -- 4 2 SOUTHWEST REGION Abilene, TX.......................... 226 2 23.4% 4 -- -- -- 4 -- Amarillo, TX......................... 188 2 25.6% 4 2 -- -- 4 2 Beaumont-Port Arthur, TX............. 130 2 31.4% 3 2 -- -- 3 2 Fayetteville, AR..................... 156 2 24.6% 4 2 -- -- 4 2 Ft. Smith, AR........................ 170 4 14.9% 2 -- 1 -- 3 --
6 10
STATION PORTFOLIO --------------------------------- MSA CLUSTER 12+ OWNED PENDING PRO FORMA MARKET RANKING BY AUDIENCE --------- --------- --------- MARKET RANK REVENUE SHARE SHARE FM AM FM AM FM AM ------ ------ ------------- -------- --- --- --- --- --- --- Grand Junction, CO................... 249 1 49.6% 3 -- 1 2 4 2 Lake Charles, LA..................... 205 1 49.2% 3 1 -- -- 3 1 McAllen-Brownsville, TX.............. 62 3 23.8% -- -- 2 -- 2 -- Odessa-Midland, TX................... 176 1 34.9% 4 1 -- 1 4 2 Wichita Falls, TX.................... 236 2 40.8% 3 -- 1 -- 4 -- NORTHEAST REGION Augusta-Waterville, ME............... 247 1 31.8% 5 1 1 1 6 2 Bangor, ME........................... 261 1 35.2% 4 1 -- -- 4 1 --- -- -- -- --- -- TOTALS 135 57 36 18 171 75 Number of U.S. markets: 45 Number of stations: 246
We also own and operate five radio stations in various locations throughout the English-speaking Eastern Caribbean, including Trinidad, St. Kitts-Nevis, St. Lucia, Montserrat and Antigua-Barbuda, and we have been granted a license for a FM station covering Barbados and Tortola, British Virgin Islands. ACQUISITION STRATEGY In identifying acquisition candidates, we adhere to a specific acquisition strategy. We seek to acquire radio broadcasting stations in diversified, growing mid-size markets because we believe these markets offer substantial growth opportunities for us. We seek to acquire stations which will enable us to create a leading position in ratings and format in their markets. Additionally, we seek capable local management, an FCC license which enables coverage of the entire market, and high quality technical and operating facilities. We target stations that we believe give us the opportunity to significantly increase revenues and broadcast cash flow. In executing this strategy, we focus on markets with: - diversified, growing economies that do not depend on any single industry or employer; - a regional fit with our overall portfolio concentrations (the Southeast, Midwest, Southwest and Northeast regions of the U.S.); - proximity to larger markets that may lead to increased economic expansion into our markets; - previously unconsolidated radio stations with fragmented ownership; and - the opportunity to assemble a group of stations that have competitive signal coverage and that are diversified in format to provide a broad range of target audiences for advertisers. INTEGRATION OF ACQUIRED BUSINESSES Through our 90 completed and pending acquisitions, we have developed an efficient process of integrating newly acquired properties into our overall culture and operating philosophy. To do so, we have developed an integration plan consisting of five key elements: - use sophisticated market research to assess and enhance format quality and effectiveness to increase audience share; - make necessary improvements in transmission facilities, audio processing and studio facilities; - expand our sales organization through active recruiting and increase its effectiveness through in-depth training; - add new stations to our intranet communications network and install our centralized networked accounting system and proprietary system for real-time monitoring of station sales and inventory performance by management; and - establish revenue and expense budgets consistent with the programming and sales strategy. 7 11 From time to time, in compliance with applicable law, we enter into an LMA or a consulting arrangement with a target property prior to FCC final approval and the consummation of the acquisition in order to gain a head start on the integration process. See "Risk Factors -- Risks of Acquisition Strategy." OPERATING STRATEGY Our operating strategy has the following principal components: - ASSEMBLE AND DEVELOP LEADING STATION GROUPS. In each market, we acquire leading stations in terms of revenue or audience share as well as under-performing stations which we believe create an opportunity for growth. Each station within a market generally has a different format and an FCC license that provides for full signal coverage in the market area. - DEVELOP EACH STATION AS A UNIQUE ENTERPRISE. While stations within a market share common infrastructure in terms of office space, support personnel and certain senior management, each station is developed and marketed as an individual brand with its own identity, programming, programming personnel, inventory of time slots and sales force. We believe that this strategy maximizes the revenues per station and of the group as a whole. - USE RESEARCH TO GUIDE PROGRAMMING. We use audience research and music testing to refine each station's programming content to match the preferences of the station's target demographic audience. We also seek to enrich our listeners' experiences by increasing both the quality and quantity of local programming. We believe this strategy maximizes the number of listeners for each station. - POSITION STATION GROUPS TO COMPETE WITH PRINT AND TELEVISION. While advertising for each station is sold independently of other stations, the diverse station formats within each market have enabled us to attract a larger and broader listener audience which in turn has attracted a wider range of advertisers. We believe this diversification, coupled with our favorable advertising pricing, has provided us with the ability to compete successfully against not only traditional radio competitors, but also against non-traditional competitors such as newspapers, print media and television. - ORGANIZE MARKETS IN ADVERTISER REGIONS. Our markets are located in four regional concentrations: the Southeast, Midwest, Southwest and Northeast. By assembling market clusters with a regional concentration, we believe that we will be able to increase revenues by offering regional coverage of key demographic groups that were previously unavailable to national and regional advertisers. - EMPLOY INTERNET-BASED MANAGEMENT INFORMATION SYSTEMS. We have implemented an Internet-based proprietary software application which enables us to monitor daily sales activity and inventory performance by station and by market compared to their respective budgets. It also enables us to identify any under-performing stations, determine the explanation for the under-performance and take corrective action quickly. In addition, the Internet provides all of our stations with a cost-efficient and rapid medium to exchange ideas and views regarding station operations and ways to increase advertising revenues. OUR PENDING ACQUISITIONS We have entered into definitive purchase agreements to acquire 54 stations in 19 markets for an aggregate purchase price of approximately $162.3 million. We expect to consummate most of these pending acquisitions by the first quarter of 2000, but we cannot be certain that the transactions will be consummated within that time frame, or at all. For a discussion of certain factors affecting our pending acquisitions, see "Risk Factors -- Risks of Acquisition Strategy." We have entered into letters of intent with potential sellers of radio stations and other related businesses, and we are currently a party to eight letters of intent, seven of which account for ten stations. These arrangements allow us to review such potential sellers' radio stations and propose the terms of a possible purchase agreement. We cannot assure you that any potential transaction under a letter of intent will result in the execution of a definitive purchase agreement or be consummated. 8 12 OUR NEW CREDIT FACILITY We have signed a commitment letter with our existing lenders providing for a new credit facility in an aggregate principal amount of $225.0 million. We anticipate that our new credit facility will consist of an eight-year term loan facility in the amount of $75.0 million, an eight and one-half year term loan facility in the amount of $50.0 million, a revolving credit facility in the amount of $50.0 million that converts to a seven-year term loan 364 days after closing and a seven-year revolving credit facility in the amount of $50.0 million. See "Description of Certain Indebtedness -- Our New Credit Facility." 9 13 THE OFFERING Class A common stock offered(1): U.S. offering............... 6,931,200 shares International offering...... 1,732,800 shares -------------------------------------------- Total.................... 8,664,000 shares -------------------------------------------- -------------------------------------------- Common stock outstanding after this offering: Class A common stock........ 18,393,327 shares(1) Class B common stock........ 7,856,593 shares Class C common stock........ 2,151,277 shares -------------------------------------------- Total.................... 28,401,197 shares -------------------------------------------- -------------------------------------------- Over-allotment option......... 1,299,600 shares of Class A common stock. Shareholder rights............ Holders of Class A common stock, Class B common stock and Class C common stock have identical rights, except with respect to voting and conversion. Voting........................ Holders of the Class A common stock are entitled to one vote per share. Except upon the occurrence of certain events, holders of the Class B common stock are not entitled to vote. Holders of the Class C common stock are entitled to ten votes per share subject to certain exceptions. Conversion.................... Under certain conditions and subject to prior governmental approval, each share of Class B common stock is convertible into one share of Class A common stock or one share of Class C common stock at the option of the holder. Subject to prior governmental approval, each share of Class C common stock is convertible into one share of Class A common stock at the option of the holder. See "Description of Capital Stock." Use of proceeds............... Approximately $49.8 million of the net proceeds of this offering will be used to redeem a portion of our Series A preferred stock, including redemption premium, with the remaining amount to be used to repay the principal amount outstanding under our old credit facility and fund the completion of a portion of our pending acquisitions. We anticipate funding the completion of our remaining pending acquisitions and paying related fees and expenses with the proceeds from borrowings under our new credit facility. See "Use of Proceeds" and "Description of Certain Indebtedness." Nasdaq National Market Symbol........................ CMLS - ------------ (1) Unless otherwise specifically stated, the information throughout this prospectus does not take into account the possible issuance of additional shares of Class A common stock to the U.S. underwriters pursuant to their right to purchase additional shares to cover their over-allotments. RISK FACTORS See "Risk Factors" immediately following this summary for a discussion of certain risk factors relating to us, our business and an investment in shares of our Class A common stock. 10 14 SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA The following sets forth our summary historical financial data for the period from inception on May 22, 1997 to December 31, 1997, for the year ended December 31, 1998 and for the three months ended March 31, 1998 and 1999. The summary historical financial data are derived from, and should be read in connection with, our audited and unaudited consolidated financial statements incorporated by reference in this prospectus. The following also sets forth summary unaudited pro forma financial data which are derived from our unaudited pro forma financial statements included elsewhere in this prospectus. The pro forma statement of operations data for the year ended December 31, 1998 and the three months ended March 31, 1999 give effect to this offering, the completion of our 1998 and 1999 acquisitions and our pending acquisitions, our initial public offerings of our Class A common stock, our senior subordinated notes and our Series A preferred stock, the redemption of a portion of our Series A preferred stock, borrowings under and the repayment of all indebtedness outstanding under our old credit facility and borrowings under our new credit facility as if such transactions had occurred on January 1, 1998. The pro forma balance sheet data as of March 31, 1999, give effect to this offering, the redemption of a portion of our Series A preferred stock, the completion of our pending acquisitions and acquisitions completed after March 31, 1999, borrowings under and the repayment of all indebtedness outstanding under our old credit facility and borrowings under our new credit facility as if they had occurred on March 31, 1999. The summary unaudited pro forma financial data is presented for illustrative purposes only and is not indicative of the operating results or financial position that would have occurred if the transactions described above had been consummated on the dates indicated, nor is it indicative of future operating results or financial positions. The summary unaudited pro forma financial data are based on certain assumptions and adjustments described in the notes to the unaudited pro forma financial statements and should be read in conjunction therewith. See also "Risk Factors -- Substantial Leverage," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the unaudited pro forma financial statements and historical consolidated financial statements included elsewhere or incorporated by reference in this prospectus.
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31, PERIOD FROM ----------------------- ---------------------------------------- INCEPTION ON PRO FORMA PRO FORMA MAY 22, 1997 TO AS AS DECEMBER 31, ADJUSTED ADJUSTED 1997(1) 1998 1998 1998 1999 1999 --------------- -------- ------------ ----------- ----------- ------------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Net revenues....................... $ 9,163 $ 98,787 $169,449 $ 12,500 $ 31,915 $ 37,916 Station operating expenses excluding depreciation and amortization..................... 7,147 72,154 127,188 10,904 26,870 31,545 Depreciation and amortization...... 1,671 19,584 39,595 2,748 7,584 9,906 Corporate general and administrative expenses.......... 1,276 5,607 8,920 961 1,674 1,975 Non-cash stock compensation expense.......................... 1,689 -- -- -- -- -- ------- -------- -------- -------- -------- -------- Operating income (loss)............ (2,620) 1,442 (6,254) (2,113) (4,213) (5,510) Net interest expense............... 837 13,178 28,269 1,374 5,881 7,067 Net loss before extraordinary item............................. (3,578) (11,864) (34,824) (3,493) (10,094) (12,683) Basic and diluted loss per common share............................ (.31) (1.70) (1.64) (.49) (.74) (.56) OTHER FINANCIAL DATA: Broadcast cash flow(2)............. $ 2,016 $ 26,633 $ 42,261 $ 1,596 $ 5,045 $ 6,371 Broadcast cash flow margin(2)...... 22.0% 27.0% 24.9% 12.8% 15.8% 16.8% EBITDA(2).......................... $ 740 $ 21,026 $ 33,341 $ 635 $ 3,371 $ 4,396
11 15
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31, PERIOD FROM ----------------------- ---------------------------------------- INCEPTION ON PRO FORMA PRO FORMA MAY 22, 1997 TO AS AS DECEMBER 31, ADJUSTED ADJUSTED 1997(1) 1998 1998 1998 1999 1999 --------------- -------- ------------ ----------- ----------- ------------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) OTHER FINANCIAL DATA (CONTINUED): Net cash provided by (used in) operating activities............. $(1,887) $ (4,653) $ 4,541 $ (4,589) $(11,053) $ (750) Net cash used in investing activities....................... 95,100 351,025 6,649 79,153 31,139 5,038 Net cash provided by financing activities....................... 98,560 378,990 2,108 105,585 29,995 5,788
AS OF MARCH 31, --------------------------- AS OF DECEMBER 31, PRO FORMA -------------------- AS ADJUSTED 1997 1998 1999 1999 -------- -------- ----------- ------------ (IN THOUSANDS) BALANCE SHEET DATA: Total assets................................ $110,441 $517,631 $533,726 $727,832 Long-term debt, including current portion... 42,801 222,767 252,763 285,263 Preferred stock subject to mandatory redemption................................ 13,426 133,741 138,286 94,536 Total stockholders' equity.................. 49,976 125,135 110,495 308,484
- ------------ (1) We were incorporated on May 22, 1997. Between the date of formation of Cumulus Media, LLC, which was April 18, 1997, and May 22, 1997, Cumulus Media, LLC undertook certain activities on our behalf pending our incorporation, including the incurrence of expenses and the funding of escrow deposits for acquisitions. Upon our incorporation, these activities and the related expenses were transferred to us. (2) Broadcast cash flow consists of operating income (loss) before depreciation and amortization, non-cash stock compensation expense and corporate general and administrative expenses. EBITDA consists of operating income (loss) before depreciation and amortization and non-cash stock compensation expense. EBITDA, as defined by us, may not be comparable to similarly titled measures used by other companies. Although broadcast cash flow and EBITDA are not measures of performance calculated in accordance with GAAP, management believes that they are useful to an investor in evaluating our performance because they are measures widely used in the broadcast industry to evaluate a radio company's operating performance. However, broadcast cash flow and EBITDA should not be considered in isolation or as substitutes for net income, cash flow from operating activities and other income or cash flow statement data prepared in accordance with GAAP, or as measures of liquidity or profitability. 12 16 RISK FACTORS You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, results of operations or financial condition could be materially adversely affected by any of these risks. The trading price of our Class A common stock could decline due to any of these risks, and you may lose all or part of your investment. You should also refer to the other information set forth or incorporated by reference in this prospectus, including our consolidated financial statements and the notes to our consolidated financial statements. This prospectus contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of such terms and other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined below. These factors may cause our actual results to differ materially from any forward-looking statement. RISKS OF ACQUISITION STRATEGY -- THERE ARE SIGNIFICANT RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY. We intend to grow through internal expansion and by acquiring radio broadcasting companies, radio station groups and individual radio stations primarily in mid-size markets. We cannot predict whether we will be successful in pursuing such acquisitions or what the consequences of any such acquisitions would be. We are currently evaluating certain acquisitions, as described in "Business -- Acquisition Strategy." Consummation of our pending acquisitions and any subsequent acquisitions are subject to various conditions, including: - With regard to the FCC: -- approval of license assignments and transfers; -- limits on the number of stations a broadcaster may own in a given local market; and -- other rules or policies, such as the ownership attribution rules and cross-interest policy, which could limit our ability to acquire stations in certain markets where one or more of our shareholders has other media interests. - Filing with the U.S. Department of Justice and the Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"), where applicable; expiration or termination of the waiting period under the HSR Act; and possible review by the U.S. Department of Justice or the Federal Trade Commission of antitrust issues either under the HSR Act or otherwise. We cannot be certain that any of these conditions will be satisfied. In addition, the FCC has asserted the authority to review levels of local radio market concentration as part of its acquisition approval process, even where proposed assignments would comply with the numerical limits on local radio station ownership in the FCC's rules and the Telecommunications Act of 1996 (the "Telecom Act"). Petitions or informal objections are pending against our FCC license assignment applications in the following markets in which we have pending acquisitions: Grand Junction, Colorado; Columbus-Starkville, Mississippi; Columbus, Georgia; Augusta, Georgia; Wichita Falls, Texas; and Laurel-Hattiesburg, Mississippi. All such petitions and objections must be resolved before we can obtain FCC approval and consummate the pending acquisitions. In addition, the Department of Justice is actively investigating, and has issued civil investigative demands to us seeking documents and information with respect to our pending acquisitions of three stations in the Grand Junction, Colorado market and five stations in the Lexington-Fayette, Kentucky market that we currently operate under LMAs. These investigations could result in our inability to acquire one or more of these stations in each market. Other pending or subsequent acquisitions may be the subject of Department of Justice investigations from time to time. The Department of Justice has been active in reviewing radio broadcasting acquisitions and has challenged a number of such transactions where the transaction would result 13 17 in local radio advertising revenue shares for the acquiring firm of more than 40%, and in some cases, as low as 35%. We estimate that we have more than a 35% share of radio advertising revenues in many of our markets. See "Business -- Federal Regulation of Radio Broadcasting." However, we believe that our operating and sales practices and demand-driven pricing policies serve to improve our product, expand advertising volume and increase competition in a market while providing more choice to advertisers and to listeners. Upon consummation of our pending acquisitions, we will own and operate 246 radio stations in 45 U.S. markets. Our two largest markets in terms of net revenues and broadcast cash flow are Toledo, Ohio and Lexington-Fayette, Kentucky, which together account for 11.0% of net revenues and 19.0% of broadcast cash flow based on the pro forma statement of operations for the year ended December 31, 1998 included elsewhere in this prospectus. Accordingly, a decline in net revenues and broadcast cash flow in these markets could have a disproportionate effect on our business, results of operations or financial condition. Our acquisition strategy involves numerous risks, including risks associated with: - identifying acquisition candidates and negotiating definitive purchase agreements on satisfactory terms; - integrating operations and systems and managing a large and geographically diverse group of stations; - diverting management's attention from other business concerns; - potentially losing key employees at acquired stations; and - the diminishing number of properties available for sale in mid-size markets. We cannot be certain that we will be able to manage the resulting business effectively or that any pending or subsequent acquisition will benefit us. In addition, we are not certain that we will be able to acquire properties at valuations as favorable as previous acquisitions. Depending upon the nature, size and timing of future acquisitions, we may be required to raise financing in addition to the financing necessary to consummate the pending acquisitions. We cannot assure you that our new credit facility, the indenture governing our senior subordinated notes, the certificate of designation relating to our Series A preferred stock, the exchange debenture indenture governing the senior subordinated notes which may be issued in exchange for our Series A preferred stock or any other agreements to which we are a party will permit such additional financing or that such additional financing will be available to us or, if available, that such financing would be on terms acceptable to our management. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." LIMITED OPERATING HISTORY -- WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU MAY EVALUATE OUR PERFORMANCE. We began operations in May 1997 and, consequently, we have a limited operating history and limited historical financial information upon which you may evaluate our performance. MANAGEMENT OF RAPID GROWTH -- OUR RAPID GROWTH AND THE INTEGRATION OF ACQUIRED BUSINESSES WILL BE DIFFICULT TO MANAGE. Our rapid growth through acquisitions places significant demands on our administrative, operational and financial resources. Although we have been successful to date in initiating the integration of new properties, future performance and profitability, if any, will depend in part on our ability to fully integrate the operations and systems of acquired radio stations and radio groups, to hire additional qualified personnel, and to enhance our Internet-based and other management systems. NET LOSS -- WE HAVE INCURRED, AND EXPECT TO INCUR, LOSSES DURING OUR GROWTH PERIOD. We had a net loss attributable to common stockholders of approximately $14.6 million for the three months ended March 31, 1999 and $27.3 million for the year ended December 31, 1998. On a pro forma basis, net loss before extraordinary item attributable to common stockholders for the year ended December 31, 1998 and the three months ended March 31, 1999 would have been $46.6 million and $15.9 million, respectively. 14 18 Additional losses can be expected to continue while we pursue our strategy of acquiring and developing radio stations. SIGNIFICANT CAPITAL REQUIREMENTS -- WE WILL REQUIRE SIGNIFICANT CAPITAL TO CONSUMMATE OUR PENDING ACQUISITIONS AND REFINANCE OUR OLD CREDIT FACILITY. If consummated, the pending acquisitions and other acquisitions for which we have entered into letters of intent with potential sellers will require substantial capital. We estimate our capital requirements for the consummation of our pending acquisitions through the first quarter of 2000 to be $162.3 million. In addition, the refinancing of our old credit facility will require $114.5 million. We expect that our new credit facility, the proceeds from this offering and other sources available to us will provide sufficient funds for us to complete our pending acquisitions and refinance our old credit facility. Our future capital requirements will depend upon many factors, however, including the volume of future acquisitions and regulatory, technological and competitive developments in the radio broadcasting industry. Our future capital requirements may differ materially from our current estimates. SUBSTANTIAL LEVERAGE -- WE HAVE SIGNIFICANT INDEBTEDNESS WHICH COULD IMPAIR OUR ABILITY TO OPERATE AND EXPOSE US TO CERTAIN RISKS. After the consummation of this offering, we will have consolidated indebtedness that is substantial in relation to our consolidated cash flow and stockholders' equity. As of March 31, 1999, after giving effect to this offering, the completion of our pending acquisitions, our acquisitions completed after March 31, 1999, the redemption of a portion of our Series A preferred stock, borrowings under and the repayment of all indebtedness outstanding under our old credit facility and borrowings under our new credit facility, we would have had outstanding consolidated long-term indebtedness (including current portion) of approximately $285.3 million, preferred stock subject to mandatory redemption of approximately $94.5 million and stockholders' equity of approximately $308.5 million. See "Capitalization." Subject to certain significant exceptions, our new credit facility, indenture, certificate of designation and exchange debenture indenture limit our ability and our subsidiaries' ability to incur additional indebtedness. Our level of indebtedness could have several important consequences to the holders of the Class A common stock, including: - a substantial portion of our cash flow from operations will be used to repay our debts and will not be available for other purposes; - our ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate and other purposes may be impaired in the future; - the restrictions contained in our new credit facility, indenture, certificate of designation and exchange debenture indenture could further limit our ability to expand and make capital improvements; - certain of our borrowings will be at variable rates of interest, including any borrowings under our new credit facility, which will expose us to the risk of increased interest rates; - our level of indebtedness could make us more vulnerable to economic downturns, limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions; and - certain restrictions contained in our new credit facility, indenture, certificate of designation and exchange debenture indenture limit our ability to pay dividends and make other distributions to our stockholders. ABILITY TO SERVICE DEBT OBLIGATIONS -- OUR ABILITY TO FULFILL OUR DEBT OBLIGATIONS COULD BE ADVERSELY AFFECTED BY MANY FACTORS. Our ability to repay our debt obligations will depend upon our future financial and operating performance, which, in turn, is subject to prevailing economic conditions and financial, business, competitive, legislative and 15 19 regulatory factors, certain of which are beyond our control. We cannot be certain that our operating results, cash flow and capital resources will be sufficient to repay our debt and other obligations in the future. In the absence of such operating results and resources, we could face substantial liquidity problems and may be required to: - reduce or delay planned acquisitions, expansions and capital expenditures; - sell material assets and/or operations; - obtain additional equity capital; and/or - restructure our debt. We cannot provide you any assurance as to (1) the timing of any sales or the proceeds that we could realize from any such sales, (2) our ability to obtain additional equity capital or restructure debt or (3) whether such sales, additional equity capital or restructuring of debt could be effected on terms satisfactory to us or at all. RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS AND PREFERRED STOCK -- OUR EXISTING DEBT AGREEMENTS, NEW CREDIT FACILITY AND THE TERMS OF OUR SERIES A PREFERRED STOCK IMPOSE SIGNIFICANT RESTRICTIONS ON US. Our new credit facility, indenture, certificate of designation and exchange debenture indenture restrict, among other things, our ability to: - incur additional indebtedness; - pay dividends or make certain other restricted payments; - enter into certain transactions with affiliates; - merge or consolidate with any other person; or - sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets. In addition, our new credit facility, indenture, certificate of designation and exchange debenture indenture also restrict our ability to incur liens or to sell certain assets. Our new credit facility also requires us to maintain specified financial ratios and to satisfy certain financial condition tests. Our ability to meet those financial ratios and financial condition tests can be affected by events beyond our control, and we cannot be sure that we will meet those tests. A breach of any of these restrictions could result in a default under our new credit facility, indenture, certificate of designation and/or exchange debenture indenture. If an event of default under our new credit facility occurs, then our new credit facility lenders could declare all amounts outstanding, including accrued interest, immediately due and payable. If we could not repay those amounts, such lenders could proceed against the collateral pledged to them to secure that indebtedness. If our new credit facility indebtedness were accelerated, our assets may not be sufficient to repay in full such indebtedness and our other indebtedness. Our ability to comply with the restrictions and covenants in our new credit facility, indenture, certificate of designation and exchange debenture indenture will depend upon our future performance and various other factors, such as legislative, business and regulatory factors, certain of which are beyond our control. If we fail to comply with the restrictions and covenants in our new credit facility, indenture, certificate of designation or exchange debenture indenture, the holders of our senior subordinated notes, our exchange debentures issued or issuable in exchange for our Series A preferred stock and/or our indebtedness under our new credit facility could declare all amounts owed to them immediately due and payable. 16 20 BUSINESS RISKS -- MANY FACTORS COULD ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE. Our future operations are subject to many factors that could have a material adverse effect upon our financial performance. These factors include: - economic conditions, both generally and with respect to the radio broadcasting industry; - changes in population and other demographics; - changes in audience tastes; - the level of competition for advertising dollars with other radio stations, television stations and other entertainment and communications media; - fluctuations in operating costs; - technological changes and innovations; and - changes in laws and governmental regulations and policies and actions of federal regulatory bodies, including the Department of Justice, the Federal Trade Commission and the FCC. Although we believe that substantially all of our radio stations, including those to be acquired upon completion of our pending acquisitions, are positioned to compete effectively in their respective markets, we cannot be certain that any such station will be able to maintain or increase its current audience ratings and advertising revenues. See "Business -- Competition." COMPETITION -- WE OPERATE IN A VERY COMPETITIVE BUSINESS ENVIRONMENT. Radio broadcasting is a highly competitive business. Our stations, including those to be acquired upon completion of the pending acquisitions, compete for listeners and advertising revenues directly with other radio stations within their respective markets, as well as with other media such as newspapers, magazines, cable and broadcast television, outdoor advertising and direct mail. In addition, many of our stations compete with groups of two or more radio stations operated by a single operator. Audience ratings and market shares fluctuate, and any adverse change in a particular market could have a material adverse effect on the revenue of stations located in that market. While we already compete with other stations with comparable programming formats in many of our markets, our stations could suffer a reduction in ratings and/or revenue and could require increased promotional and other expenses, and consequently, could have a lower broadcast cash flow, if: - another radio station in the market were to convert its programming format to a format similar to one of our stations or launch aggressive promotional campaigns; - a new station were to adopt a competitive format; or - an existing competitor were to strengthen its operations. Radio broadcasting is also subject to competition from new media technologies, such as the delivery of audio programming by cable television systems, the introduction of digital audio broadcasting and delivery of radio programming over the Internet and by satellite. Digital audio broadcasting may deliver by satellite to nationwide and regional audiences multi-channel, multi-format digital radio services with sound quality equivalent to compact discs and may sell advertising. We cannot predict what effect, if any, such new technologies may have on the radio broadcasting industry or on us. See "Business -- Competition." The Telecom Act allows for the consolidation of ownership of radio broadcasting stations in the markets in which we operate or may operate in the future. Some competing consolidated owners may be larger and have substantially more financial and other resources than we do. In addition, increased consolidation in our target markets may result in greater competition for acquisition properties and a corresponding increase in purchase prices paid for such properties by us. See "Business -- Competition." 17 21 GOVERNMENTAL REGULATION OF BROADCASTING INDUSTRY -- THE BROADCASTING INDUSTRY IS SUBJECT TO EXTENSIVE AND CHANGING FEDERAL REGULATION. The Communications Act of 1934, as amended (the "Communications Act") requires prior FCC approval for the issuance, renewal, modification, transfer of control, or assignment of broadcasting station operating licenses. The Telecom Act and FCC rules limit the number of broadcasting properties that we may acquire in any market, and regulates certain operating practices of radio stations. Additionally, the Communications Act, and FCC rules impose limitations on non-U.S. ownership and voting of our capital stock. The Telecom Act creates significant new opportunities for broadcasting companies, but also creates uncertainties as to how the FCC and the courts will enforce and interpret the Telecom Act. The number of radio stations we may acquire or program pursuant to an LMA in any market, overall and in each service (i.e., AM or FM), is limited by the Telecom Act and FCC rules. That number may vary depending upon whether the interests in other radio stations or certain other media properties of certain of our affiliates are attributable to those affiliates under FCC rules. The FCC generally applies its ownership limits to "attributable" interests held by an individual, corporation, partnership or other association. The interests of our officers, directors and stockholders with five percent or greater voting power are generally attributable to us. Certain of our officers and directors, and at least one of our stockholders, have attributable broadcast interests outside of their involvement with us. These attributable interests will limit the number of radio stations that we may acquire or own in any market in which such officers or directors (or stockholders) hold or acquire such outside attributable broadcast interests. In addition, under the FCC's cross-interest policy, the FCC may prohibit a party from acquiring an attributable interest in one media outlet and a substantial non-attributable interest in another media outlet in the same market, which could prohibit a particular acquisition by us. Our business will depend upon our maintaining broadcasting licenses issued to us by the FCC. Such licenses are ordinarily issued for a maximum term of eight years. Although it is rare for the FCC to deny a license renewal application, we cannot be certain that our future renewal applications will be approved or that such renewals will not include conditions or qualifications that could adversely affect us. In addition, governmental regulations and policies may change over time and such changes could have a material adverse impact upon our business, results of operations or financial condition. See "Business -- Federal Regulation of Radio Broadcasting." REGULATORY APPROVALS -- WE ARE REQUIRED TO OBTAIN PRIOR FCC APPROVAL FOR EACH RADIO STATION ACQUISITION. The consummation of radio station acquisitions requires prior approval of the FCC with respect to the transfer of control or assignment of the broadcast licenses of the acquired stations. The FCC has not yet approved certain of our pending acquisitions. Certain of our pending acquisitions are being challenged before the FCC by competitors in six markets. The FCC staff has also stated that it is reevaluating its local radio market concentration policies and procedures, even where proposed assignments would comply with the Telecom Act and the FCC's multiple-ownership rules. The FCC could prohibit or require the restructuring of our future acquisitions, including the pending acquisitions, and/or could propose changes in its existing rules that may reduce the number of stations that we would be permitted to acquire in some markets, as a result of this policy review and its concerns about market concentration generally. In addition, where such acquisitions would result in certain local radio advertising revenue concentration thresholds being met, the FCC staff has a policy of reviewing applications for proposed radio station acquisitions with respect to local market concentration concerns, and specifically invites public comment on such applications. This policy may help trigger petitions to deny and informal objections against FCC applications for certain of our pending acquisitions and future acquisitions, as well as FCC requests for additional information. There can be no assurance that the FCC will approve our future acquisitions, including our pending acquisitions. 18 22 EFFECTS OF ECONOMIC RECESSION -- OUR ABILITY TO GENERATE ADVERTISING REVENUE COULD BE AFFECTED BY ECONOMIC RECESSION. We derive substantially all of our revenue from the sale of advertising time on our radio stations. Our broadcasting revenue could be adversely affected by a future national recession. In addition, because a substantial portion of the revenue is derived from local advertisers, our ability to generate advertising revenue in specific markets could be adversely affected by local or regional economic downturns. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business -- Advertising Sales." CONTROLLING SHAREHOLDERS -- CERTAIN SHAREHOLDERS WILL CONTROL OR HAVE THE ABILITY TO EXERT SIGNIFICANT INFLUENCE OVER 55.2% OF THE TOTAL VOTING POWER OF OUR CAPITAL STOCK. After the completion of this offering, Messrs. Weening and Dickey will own directly, or through QUAESTUS Management Corporation and DBBC of Georgia, LLC, respectively, an aggregate of 1.8% of the outstanding Class A common stock and 29.3% of the outstanding Class C common stock. In addition, as a result of their equity interests in CML Holdings, LLC, Messrs. Weening and Dickey have the ability to exert significant influence over the policies and operations of CML Holdings, LLC, which upon the consummation of the offering, will own 1.1% of the outstanding Class A common stock and 70.8% of the outstanding Class C common stock. Each share of Class C common stock, subject to certain exceptions, entitles its holder to ten votes. As a result, were their interests to be combined, Messrs. Weening and Dickey collectively would control, or have the ability to exert significant influence over a total of 55.2% of the aggregate voting power of our capital stock. Consequently, they will have the ability to exert significant influence over the policies and management of Cumulus. The interests of Messrs. Weening and Dickey may differ from the interests of the other holders of Class A common stock. See "Principal Shareholders." POTENTIAL CONFLICTS OF INTEREST -- CERTAIN MEMBERS OF MANAGEMENT HAVE POTENTIAL CONFLICTS OF INTEREST WITH US. Messrs. Weening and Dickey each have direct interests in entities that have entered into service agreements with us. Certain conflicts of interest may arise with respect to transactions between these entities and Cumulus. See "Certain Relationships and Related Transactions." TRANSACTIONS WITH AFFILIATES -- CERTAIN ENTITIES CONTROLLED BY MEMBERS OF MANAGEMENT HAVE ENTERED INTO SERVICE AGREEMENTS WITH US. QUAESTUS Management Corporation, which Mr. Weening controls, has acted as one of our financial and strategic advisors since our inception. Stratford Research, Inc., which Mr. Dickey controls, has acted as our market research and programming advisor since our inception. See "Certain Relationships and Related Transactions." YEAR 2000 RISK -- WE FACE RISKS FROM POTENTIAL YEAR 2000 PROBLEMS. The year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of our computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could cause a system failure or miscalculation in our broadcast and corporate locations which could cause disruptions of operations, including, among other things, a temporary inability to produce broadcast signals, process financial transactions, or engage in similar normal business activities. Based on recent system evaluations, surveys and ongoing on-site inventories, we will be required to modify or replace portions of our software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. We presently believe that with modifications or replacements of existing software and certain hardware, the year 2000 issue can be mitigated. If such modifications and replacements are not made, or are not completed in time, the year 2000 issue could have a material impact on our business, results of operations or financial condition. 19 23 While we believe our efforts will provide reasonable assurance that material disruptions will not occur due to internal failure, the possibility of interruption still exists. We are currently querying other significant vendors that do not share information systems with us (external agents). To date, we are not aware of any external agent with a year 2000 issue that would materially impact our business, results of operations or financial condition. However, we have no means of ensuring that external agents will be year 2000 ready. The inability of external agents to complete their year 2000 resolution process in a timely fashion could materially impact our business, results of operations or financial condition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Year 2000 Risk." RELIANCE ON KEY PERSONNEL -- THE LOSS OF CERTAIN KEY OFFICERS OR EMPLOYEES COULD ADVERSELY AFFECT US. Our business is managed by a small number of key management and operating personnel. The loss of key personnel could have a material adverse effect on business, results of operations or financial condition. We believe that our future success will depend in large part on our ability to attract and retain highly skilled and qualified personnel and to expand, train and manage our employee base. We have entered into employment agreements with Messrs. Weening, Dickey, Bungeroth and Bonick that include provisions restricting the ability of Messrs. Weening, Dickey, Bungeroth and Bonick to compete against us in certain circumstances. We have arranged for "key-man" insurance on the life of Mr. Weening, and intend to arrange for such insurance on the lives of Messrs. Dickey and Bungeroth. See "Management -- Employment Agreements." We also employ several on-air personalities with loyal audiences in their respective markets. The loss of one of these personalities could result in a short-term loss of audience share, but we do not believe that any such loss would have a material adverse effect on our business, results of operations or financial condition. SHARES ELIGIBLE FOR FUTURE SALE -- FUTURE SALES OF THE CLASS A COMMON STOCK IN THE PUBLIC MARKET COULD DEPRESS OUR STOCK PRICE. Upon completion of this offering, we will have outstanding 18,393,327 shares of Class A common stock, 7,856,593 shares of Class B common stock and 2,151,277 shares of Class C common stock. In addition, there will be outstanding options to purchase 1,120,745 shares of Class A common stock and 2,001,380 shares of Class C common stock. Of these shares, 18,216,395 shares of Class A common stock will be freely transferable without restriction (subject to any FCC consent that might be required) under the Securities Act of 1933, or further registration under the Securities Act, except that shares held by our "affiliates," as that term is defined in Rule 144 promulgated under the Securities Act, may generally only be sold subject to certain restrictions as to timing, manner and volume. Cumulus, our directors, certain shareholders and certain of our officers have agreed not to sell, or otherwise dispose of, any shares of Class A common stock or any securities convertible into or exercisable or exchangeable for shares of Class A common stock (including the Class B common stock and the Class C common stock) for a period of 90 days after the date of this prospectus without the prior written consent of Morgan Stanley & Co. Incorporated, on behalf of the underwriters. See "Shares Eligible for Future Sale" and "Underwriters." The market price of the common stock could drop as a result of sales of a large number of shares of common stock in the market after the offering, or the perception that such sales could occur. See "Shares Eligible for Future Sale" and "Underwriters." DIVIDEND POLICY -- WE HAVE NEVER PAID AND DO NOT EXPECT TO PAY ANY CASH DIVIDENDS. We do not anticipate declaring or paying any dividends except for the payment of scheduled dividends on the Series A preferred stock. We have never declared or paid any cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. In addition, our new credit facility, indenture, certificate of designation and exchange debenture indenture restrict our ability to pay dividends. See "Dividend Policy." 20 24 USE OF PROCEEDS We intend to use the proceeds from this offering to redeem a portion of our Series A preferred stock, repay the principal amount of indebtedness outstanding under our old credit facility, fund the completion of a portion of our pending acquisitions, and pay related fees and expenses. We expect to fund the completion of our remaining pending acquisitions and pay related fees and expenses with the proceeds from borrowings under our new credit facility. The terms of our Series A preferred stock allow us to redeem, at any time prior to July 1, 2001, at a redemption price equal to 113 3/4% of the $1,000 per share liquidation preference of the Series A preferred stock plus all accumulated and unpaid dividends up to the redemption date, up to 35% of the original aggregate liquidation preference of our Series A preferred stock with the proceeds of this offering. The following table presents the sources and uses of funds, giving effect to this offering, the redemption of a portion of our Series A preferred stock, the completion of our pending acquisitions and acquisitions completed after March 31, 1999, the repayment of all indebtedness outstanding under our old credit facility and borrowings under our new credit facility as if such transactions had occurred as of March 31, 1999:
(IN THOUSANDS) -------------- SOURCES OF FUNDS: Class A common stock offered(1)........................... $216,058 New credit facility(2).................................... 125,000 Escrow funds.............................................. 3,736 -------- $344,794 ======== USES OF FUNDS: Purchase price of pending acquisitions.................... $162,251 Repayment of old credit facility(3)....................... 114,450 Redemption of a portion of our Series A preferred stock... 49,766 Fees and expenses related to this offering................ 12,053 Fees and expenses related to the new credit facility...... 4,000 -------- Subtotal.................................................. 342,520 Increase in cash.......................................... 2,274 -------- $344,794 ========
- ------------ (1) $248.5 million if the underwriters' right to purchase shares to cover over-allotments is exercised in full. (2) Affiliates of Lehman Brothers Inc. act as arrangers and lenders under our new credit facility. (3) Our old credit facility, for which affiliates of Lehman Brothers Inc. act as arrangers and lenders, matures in 2006 and bears interest, at our option, at a rate equal to the Base Rate (as defined under the terms of our old credit facility) plus a margin ranging between 0.50% to 1.75%, or the Eurodollar Rate (as defined under the terms of our old credit facility) plus a margin ranging between 1.50% and 2.75% (in each case dependent upon our leverage ratio). For the three months ended March 31, 1999, the effective interest rate under our old credit facility was 8.00% per annum. The proceeds from our old credit facility were used to fund the completion of acquisitions and for general corporate purposes. See "Description of Certain Indebtedness -- Our Old Credit Facility." Pending the above uses, the net proceeds of the offering will be invested in U.S. government securities or other interest bearing short-term investment grade securities. 21 25 CLASS A COMMON STOCK PRICE RANGE AND DIVIDENDS Our Class A common stock is listed on the Nasdaq National Market under the symbol "CMLS." The following table sets forth the high and low closing sale prices for our Class A common stock for the periods indicated as reported on the Nasdaq National Market.
CLASS A COMMON STOCK PRICE --------------- HIGH LOW ---- --- Year ended December 31, 1998 Third Quarter............................................. $17.88 $ 7.75 Fourth Quarter............................................ 17.25 4.88 Year ended December 31, 1999 First Quarter............................................. $17.88 $ 9.75 Second Quarter............................................ 21.88 13.25 Third Quarter (through July 16th)......................... 24.94 20.00
A recent reported last sale price for Cumulus' Class A common stock as reported on the Nasdaq National Market is set forth on the cover page of this prospectus. On July 16, 1999, there were approximately 26 holders of record of Cumulus' Class A common stock. DIVIDEND POLICY We do not anticipate declaring or paying any dividends except for the payment of scheduled dividends on the Series A preferred stock. We have never declared or paid any cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. In addition, our credit facility, indenture, certificate of designation and exchange debenture indenture restrict our ability to pay dividends. 22 26 CAPITALIZATION The following table sets forth our cash and cash equivalents and capitalization as of March 31, 1999 on an historical basis and a pro forma as adjusted basis to give effect to this offering (assuming that the underwriters' over-allotment option is not exercised), the completion of our pending acquisitions and acquisitions completed after March 31, 1999, the redemption of a portion of our Series A preferred stock, the repayment of all indebtedness outstanding under our old credit facility, and borrowings under our new credit facility. This table should be read in conjunction with our unaudited pro forma financial statements and our consolidated financial statements included elsewhere and incorporated by reference in this prospectus.
AS OF MARCH 31, 1999 -------------------- PRO FORMA AS ACTUAL ADJUSTED ------ --------- (UNAUDITED) (IN THOUSANDS) Cash and cash equivalents................................... $ 12,688 $ 21,087 ======== ======== Long-term debt, including current maturities Old credit facility......................................... 92,500 -- New credit facility......................................... -- 125,000 Senior subordinated notes................................... 160,000 160,000 Other long-term debt........................................ 263 263 -------- -------- Total long-term debt.............................. 252,763 285,263 -------- -------- Series A preferred stock.................................... 138,286 94,536 -------- -------- Stockholders' equity: Class A common stock, par value $.01 per share; 50,000,000 shares authorized; 8,700,504 shares outstanding (actual); 17,364,504 shares outstanding (pro forma as adjusted)..... 87 174 Class B common stock, par value $.01 per share; 20,000,000 shares authorized; 8,660,416 shares outstanding (actual and pro forma as adjusted)................................ 87 87 Class C common stock, par value $.01 per share; 30,000,000 shares authorized; 2,376,277 shares outstanding........... 24 24 Additional paid-in-capital (actual and pro forma as adjusted)................................................. 137,665 335,567 Accumulated deficit and comprehensive income................ (27,368) (27,368) -------- -------- Total stockholders' equity........................ 110,495 308,484 -------- -------- Total capitalization........................................ $501,544 $688,283 ======== ========
23 27 UNAUDITED PRO FORMA FINANCIAL STATEMENTS The following unaudited pro forma financial statements reflect the results of operations for the year ended December 31, 1998 and the three months ended March 31, 1999 and the balance sheet as of March 31, 1999 after giving effect to the transactions described below. The information set forth under the heading "Cumulus Historical" in the pro forma statements of operations includes results relating to LMAs. The information set forth under the heading "Pending Acquisitions" in the pro forma statements of operations excludes results relating to LMAs to the extent that such activity is included in our historical financial information. The pro forma statements of operations for the year ended December 31, 1998 and the three months ended March 31, 1999 give effect to: - this offering, - the completion of our 1998 and 1999 acquisitions and our pending acquisitions, - our initial public offerings of our Class A common stock, our senior subordinated notes and our Series A preferred stock, - the redemption of a portion of our Series A preferred stock, - borrowings under and the repayment of all indebtedness outstanding under our old credit facility, and - borrowings under our new credit facility, in each case as if such transactions had occurred on January 1, 1998. The information set forth under the heading "Pro Forma Adjustments for Cumulus Historical and the 1999 Completed Acquisitions" in the pro forma statement of operations for the year ended December 31, 1998 includes the effects of our initial public offerings. The information set forth under the heading "1999 Subsequent Acquisitions" in the pro forma statement of operations for the three months ended March 31, 1999 includes the effect of our acquisitions completed after March 31, 1999. The pro forma balance sheet as of March 31, 1999 gives effect to: - this offering, - the redemption of a portion of our Series A preferred stock, - the completion of our pending acquisitions and acquisitions completed after March 31, 1999, - the borrowings under and repayment of all indebtedness outstanding under our old credit facility, and - borrowings under our new credit facility, in each case as if such transactions had occurred on March 31, 1999. The information set forth under the heading "Pro Forma Adjustments for the 1999 Subsequent Acquisitions" includes the effect of our acquisitions completed after March 31, 1999. The pro forma financial statements are based on our historical consolidated financial statements and the financial statements of those entities acquired, or from which assets were acquired, in conjunction with our completed and pending acquisitions. The unaudited pro forma financial information reflects the use of the purchase method of accounting for all acquisitions. For purposes of the unaudited pro forma financial statements, the purchase prices of the stations acquired and to be acquired in our completed acquisitions and pending acquisitions have been allocated based primarily on information furnished by management of the acquired stations. The final allocation of the relative purchase prices of the stations acquired and to be acquired to our completed acquisitions and pending acquisitions is determined a reasonable time after consummation of such transactions and are based on complete evaluations of the assets acquired and liabilities assumed. Accordingly the information presented herein may differ from the final purchase price allocation; however, in the opinion of our management, the final purchase price allocation will not differ significantly from the information presented herein. In the opinion of our management, all adjustments have been made that are necessary to present fairly the pro forma data. 24 28 The unaudited pro forma information is presented for illustrative purposes only and is not indicative of the operating results or financial position that would have occurred if the transactions referred to above had been consummated on the dates indicated, nor is it indicative of future operating results or financial positions. The failure of the aforementioned transactions to be completed would significantly alter the unaudited pro forma information. All pro forma financial information should be read in conjunction with our consolidated financial statements which have been incorporated by reference in this prospectus. See also "Risk Factors -- Substantial Leverage" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." 25 29 CUMULUS MEDIA INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
(D) PRO FORMA ADJUSTMENTS FOR CUMULUS (A)+(B)+(C)+ (B) (C) HISTORICAL (D) = (E) PRO FORMA 1999 AND THE PRO FORMA AS (A) ADJUSTMENTS FOR COMPLETED 1999 ADJUSTED FOR THE CUMULUS CUMULUS ACQUISITIONS COMPLETED 1999 COMPLETED HISTORICAL HISTORICAL(1)(2) (3) ACQUISITIONS ACQUISITIONS ---------- ---------------- ------------ ------------ ---------------- STATEMENT OF OPERATIONS DATA: Revenues............................. $108,172 $29,250 $9,836 $ -- $147,258 Less: agency commissions............. (9,385) (1,934) (379) -- (11,698) -------- ------- ------ -------- -------- Net revenues......................... 98,787 27,316 9,457 -- 135,560 Station operating expenses excluding depreciation and amortization....... 72,154 20,973 7,906 -- 101,033 Depreciation and amortization........ 19,584 3,772 1,272 6,025(4) 30,653 Corporate general and administrative expenses............................ 5,607 1,395 258 -- 7,260 -------- ------- ------ -------- -------- Operating income (loss).............. 1,442 1,176 21 (6,025) (3,386) Interest expense..................... (15,551) (2,950) (708) (8,175)(5) (27,384) Interest income...................... 2,373 -- -- (2,173)(6) 200 Gain (loss) on sale of assets........ -- 21,249 -- (21,249)(7) -- Other income (expense)............... (2) (182) 6 -- (178) -------- ------- ------ -------- -------- Income (loss) before income taxes.... (11,738) 19,293 (681) (37,622) (30,748) Income tax (expense) benefit......... (126) (86) -- -- (212) -------- ------- ------ -------- -------- Net income (loss) before extraordinary item.................. (11,864) 19,207 (681) (37,622) (30,960) Preferred stock dividends and accretion of discount............... 13,591 -- -- 4,503(8) 18,094 -------- ------- ------ -------- -------- Net income (loss) before extraordinary item attributable to common stockholders................. $(25,455) $19,207 $ (681) $(42,125) $(49,054) ======== ======= ====== ======== ======== (E)+(F)=(G) PRO FORMA AS (F) ADJUSTED FOR THE PRO FORMA 1999 COMPLETED ADJUSTMENTS ACQUISITIONS, (I) (G)+(H)+(I)= FOR THE OFFERING THE OFFERING PRO FORMA (J) AND THE AND THE (H) ADJUSTMENTS PRO FORMA NEW CREDIT NEW CREDIT PENDING FOR THE PENDING AS ADJUSTED FACILITY FACILITY ACQUISITIONS ACQUISITIONS (1) ---------------- ---------------- ------------ --------------- ------------ STATEMENT OF OPERATIONS DATA: Revenues............................. $ -- $147,258 $36,217 $ -- $183,475 Less: agency commissions............. -- (11,698) (2,328) -- (14,026) ------- -------- ------- ------- -------- Net revenues......................... -- 135,560 33,889 -- 169,449 Station operating expenses excluding depreciation and amortization....... -- 101,033 26,155 -- 127,188 Depreciation and amortization........ -- 30,653 5,494 3,448 39,595 Corporate general and administrative expenses............................ -- 7,260 1,660 -- 8,920 ------- -------- ------- ------- -------- Operating income (loss).............. -- (3,386) 580 (3,448) (6,254) Interest expense..................... (1,085)(9) (28,469) (3,514) 3,514(11) (28,469) Interest income...................... -- 200 -- -- 200 Gain (loss) on sale of assets........ -- -- 1,010 (1,010)(12) -- Other income (expense)............... -- (178) 57 -- (121) ------- -------- ------- ------- -------- Income (loss) before income taxes.... (1,085) (31,833) (1,867) (944) (34,644) Income tax (expense) benefit......... -- (212) 32 -- (180) ------- -------- ------- ------- -------- Net income (loss) before extraordinary item.................. (1,085) (32,045) (1,835) (944) (34,824) Preferred stock dividends and accretion of discount............... (6,333)(10) 11,761 -- -- 11,761 ------- -------- ------- ------- -------- Net income (loss) before extraordinary item attributable to common stockholders................. $ 5,248 $(43,806) $(1,835) $ (944) $(46,585) ======= ======== ======= ======= ========
See accompanying notes to the unaudited pro forma statement of operations. 26 30 NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS) (1) The pro forma financial results exclude the effects of estimated cost savings which management believes will result from the integration of our completed and pending acquisitions. (2) Reflects historical revenues and expenses of stations acquired by us in 1998 for the period from January 1, 1998 through the date the stations were acquired by us. (3) Reflects the historical revenues and expenses of stations acquired by us in 1999 for the period from January 1, 1998 through December 31, 1998. (4) Adjustments reflect (i) the change in depreciation and amortization expense resulting from conforming the estimated useful lives of our completed and pending acquisitions' assets to our policies and (ii) the additional depreciation and amortization expense resulting from the allocation of the purchase price to the estimated fair market value of the assets acquired. On a pro forma basis, depreciation expense is $9,357 and amortization expense is $30,240 after giving effect to the completed and pending acquisitions. Depreciation expense has been calculated on a straight line basis using a weighted average life of seven years for property and equipment. Goodwill and other intangible assets' amortization has been calculated on a straight line basis over 25 years. Non-compete agreements are being amortized over the lives of the agreements which range from one to three years. We allocate the purchase prices of the acquired stations based on evaluations of the assets acquired and the liabilities assumed. We believe that the excess of cost over the fair value of tangible net assets of an acquired radio station almost exclusively relates to the value of the FCC broadcasting license and goodwill. We believe that the purchase price allocation method described above is consistent with general practice in the radio broadcasting industry. (5) Adjustment to reflect increased interest expense resulting from: Interest on the $114,450 indebtedness under the old credit facility at 8.5%.......................................... $ 9,728 Interest on our senior subordinated notes at 10.375%........ 16,600 Annual amortization of $3,102 in transaction costs associated with the old credit facility over eight years..................................................... 387 Annual amortization of $6,689 in debt issue costs associated with our senior subordinated notes over ten years......... 669 -------- Total interest expense...................................... 27,384 Less: historical interest recorded by us and the businesses acquired in connection with our completed acquisitions......................................... (19,209) -------- Net adjustment.............................................. $ 8,175 ========
(6) Adjustment to reduce historical interest income to reflect the effects of our completed and pending acquisitions as of January 1, 1998. (7) Adjustment to eliminate non-recurring gains recognized by Crystal Radio Group, Inc., Midland Broadcasting, Inc. and Savannah Communications, L.P. on the 1998 sales of radio stations to us. (8) Adjustment to reflect additional accretion related to Series A preferred stock dividend as if the Series A preferred stock were outstanding for the full period from January 1, 1998 to December 31, 1998. Accretion of Series A preferred stock dividend (compounded quarterly at 13.75%)...................................... $ 18,094 Less: historical dividends recorded by us.................. (13,591) -------- Net adjustment.............................................. $ 4,503 ========
27 31 (9) Adjustment to reflect increased interest expense resulting from: Sources of funds: Amount financed by the new credit facility ($125,000 to Cumulus net of fees of $4,000)......................... $121,000 Class A common stock offered ($216,058 to Cumulus net of fees of $12,053)....................................... 204,005 -------- Total.................................................. $325,005 ======== Uses of funds: Repayment of the old credit facility...................... $114,450 Redemption of Series A preferred stock: Redemption of original liquidation preference (35% of $125,000)............................................ $43,750 Redemption premium (13.75% of redeemed amount)......... 6,016 ------- Total payment to Series A preferred stockholders....... 49,766 Cash on hand........................................... 160,789 -------- Total................................................ $325,005 ======== Interest on the $125,000 indebtedness under the new credit facility at 8.25%......................................... $ 10,312 Interest on our senior subordinated notes at 10.375%........ 16,600 Annual amortization of $7,102 in deferred transaction costs associated with the old and new credit facilities over eight years............................................... 888 Annual amortization of $6,689 in debt issue costs associated with our senior subordinated notes over ten years......... 669 -------- Total interest expense................................. 28,469 Less: interest expense recorded pro forma as adjusted for the 1999 completed acquisitions............. (27,384) -------- Net adjustment......................................... $ 1,085 ========
(10) Adjustment to reflect the reduction in the dividend on the Series A preferred stock, on a pro forma basis, as if the redemption had occurred as of January 1, 1998: Annual dividend on $81,250 Series A preferred stock at 13.75% compounded quarterly................................................. $ 11,761 Less: pro forma dividend as adjusted for the 1999 completed acquisitions....................................................... (18,094) -------- Net adjustment....................................................... $ (6,333) ========
28 32 (11) Adjustment to reflect interest expense resulting from: Sources of funds: Amount financed by the new credit facility ($125,000 to Cumulus net of fees of $4,000)......................... $121,000 Class A common stock offered ($216,058 to Cumulus net of fees of $12,053)....................................... 204,005 Escrow funds.............................................. 3,334 -------- Total................................................ $328,339 ======== Uses of funds: Purchase price of the pending acquisitions................ $162,251 Repayment of the old credit facility...................... 114,450 Redemption of Series A preferred stock: Redemption of original liquidation preference (35% of $125,000)............................................ $43,750 Redemption premium (13.75% of redeemed amount)......... 6,016 ------- Total payment to Series A preferred stockholders....... 49,766 -------- Subtotal............................................. $326,467 Increase in cash on hand.................................. 1,872 -------- Total................................................ 328,339 ======== Interest on the $125,000 indebtedness under the new credit facility at 8.25%......................................... $ 10,312 Interest on our senior subordinated notes at 10.375%........ 16,600 Annual amortization of $7,102 in deferred transaction costs associated with the old and new credit facilities over eight years............................................... 888 Annual amortization of $6,689 in debt issue costs associated with our senior subordinated notes over ten years......... 669 -------- Total interest expense................................. 28,469 Less: interest expense recorded pro forma as adjusted for the 1999 completed acquisitions, the offering, the new credit facility and the pending acquisitions..................................... (31,983) -------- Net adjustment......................................... $ (3,514) ========
The floating interest rate used to calculate pro forma interest expense on the new credit facility is eight and one quarter percent (8.25%). The rate on the new credit facility is based on our estimates, considering current market conditions for similar securities. A one-eighth of one percent (0.125%) change in the interest rate on the new credit facility results in a $156 increase or decrease in the pro forma interest expense for the twelve months ended December 31, 1998. (12) Adjustment recorded to eliminate a non-recurring gain recognized by Savannah Valley Broadcasting Radio Properties. The non-recurring gain was recognized by Savannah Valley Broadcasting Radio Properties upon the sale of assets not acquired by us. Upon the consummation of this offering, we will record a redemption premium of $6,016 on the redemption of $43,750 Series A preferred stock. - ------------ 29 33 CUMULUS MEDIA INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (IN THOUSANDS)
(D) PRO FORMA (A)+(B)+(C)+ (B) (C) ADJUSTMENTS (D)=(E) PRO FORMA 1999 FOR CUMULUS PRO FORMA AS (A) ADJUSTMENTS SUBSEQUENT HISTORICAL AND THE ADJUSTED FOR THE CUMULUS FOR CUMULUS ACQUISITIONS 1999 SUBSEQUENT 1999 SUBSEQUENT HISTORICAL HISTORICAL(1)(2) (3) ACQUISITIONS ACQUISITIONS ---------- ---------------- ------------ ------------------ ---------------- STATEMENT OF OPERATIONS DATA: Revenues............................... $ 34,495 $ 312 $ 88 $ -- $ 34,895 Less: agency commissions............... (2,580) (30) -- -- (2,610) -------- ----- ----- ------- -------- Net revenues........................... 31,915 282 88 -- 32,285 Station operating expenses excluding depreciation and amortization........ 26,870 342 75 -- 27,287 Depreciation and amortization.......... 7,584 -- 83 4(4) 7,671 Corporate general and administrative expenses............................. 1,674 -- 42 -- 1,716 -------- ----- ----- ------- -------- Operating income (loss)................ (4,213) (60) (112) (4) (4,389) Interest expense....................... (6,020) (71) -- (755) (5) (6,846) Interest income........................ 139 -- -- (89)(6) 50 Other income (expense)................. -- (1) 3 -- 2 -------- ----- ----- ------- -------- Income (loss) before income taxes...... (10,094) (132) (109) (848) (11,183) Income tax (expense) benefit........... -- -- -- -- -- -------- ----- ----- ------- -------- Net income (loss) before extraordinary item................................. (10,094) (132) (109) (848) (11,183) Preferred stock dividends.............. 4,545 -- -- 374(7) 4,919 -------- ----- ----- ------- -------- Net income (loss) before extraordinary item attributable to common stockholders......................... $(14,639) $(132) $(109) $(1,222) $(16,102) ======== ===== ===== ======= ======== (E)+(F)=(G) (F) PRO FORMA AS PRO FORMA ADJUSTED FOR THE (I) ADJUSTMENTS 1999 SUBSEQUENT PRO FORMA (G)+(H)+(I)= FOR THE OFFERING ACQUISITIONS, THE (H) ADJUSTMENTS FOR (J) AND THE NEW OFFERING AND THE PENDING THE PENDING PRO FORMA CREDIT FACILITY NEW CREDIT FACILITY ACQUISITIONS ACQUISITIONS AS ADJUSTED(1) ---------------- ------------------- ------------ --------------- -------------- STATEMENT OF OPERATIONS DATA: Revenues............................... $ -- $ 34,895 $ 6,249 $ -- $ 41,144 Less: agency commissions............... -- (2,610) (618) -- (3,228) ------ -------- ------- ------- -------- Net revenues........................... -- 32,285 5,631 -- 37,916 Station operating expenses excluding depreciation and amortization........ -- 27,287 4,258 -- 31,545 Depreciation and amortization.......... -- 7,671 1,246 989(4) 9,906 Corporate general and administrative expenses............................. -- 1,716 259 -- 1,975 ------ -------- ------- ------- -------- Operating income (loss)................ -- (4,389) (132) (989) (5,510) Interest expense....................... (271)(8) (7,117) (832) 832(10) (7,117) Interest income........................ -- 50 -- -- 50 Other income (expense)................. -- 2 (108) -- (106) ------ -------- ------- ------- -------- Income (loss) before income taxes...... (271) (11,454) (1,072) (157) (12,683) Income tax (expense) benefit........... -- -- -- -- -- ------ -------- ------- ------- -------- Net income (loss) before extraordinary item................................. (271) (11,454) (1,072) (157) (12,683) Preferred stock dividends.............. (1,722)(9) 3,197 -- -- 3,197 ------ -------- ------- ------- -------- Net income (loss) before extraordinary item attributable to common stockholders......................... $1,451 $(14,651) $(1,072) $ (157) $(15,880) ====== ======== ======= ======= ========
See accompanying notes to the unaudited pro forma statement of operations. 30 34 NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (IN THOUSANDS) (1) The pro forma financial results exclude the effects of estimated cost savings which management believes will result from the integration of our completed and pending acquisitions. (2) Reflects historical revenues and expenses of stations acquired by us in the first quarter of 1999 for the period from January 1, 1999 through the date the stations were acquired by us. (3) Reflects historical revenues and expenses of stations acquired by us after March 31, 1999 for the period from January 1, 1999 through March 31, 1999. (4) Adjustments reflect (i) the change in depreciation and amortization expense resulting from conforming the estimated useful lives of our completed and pending acquisitions' assets to our policies and (ii) the additional depreciation and amortization expense resulting from the allocation of the purchase price to the estimated fair market value of the assets acquired. On a pro forma basis, depreciation expense is $2,361 and amortization expense is $7,545 after giving effect to the completed and pending acquisitions. Depreciation expense has been calculated on a straight line basis using a weighted average life of seven years for property and equipment. Goodwill and other intangible assets' amortization has been calculated on a straight line basis over 25 years. Non-compete agreements are being amortized over the lives of the agreements which range from one to three years. We allocate the purchase prices of the acquired stations based on evaluations of the assets acquired and the liabilities assumed. We believe that the excess of cost over the fair value of tangible net assets of an acquired radio station almost exclusively relates to the value of the FCC broadcasting license and goodwill. We believe that the purchase price allocation method described above is consistent with general practice in the radio broadcasting industry. (5) Adjustment to reflect increased interest expense resulting from: Quarterly interest on the $114,450 indebtedness under the old credit facility at 8.5%............................... $ 2,432 Quarterly interest on our senior subordinated notes at 10.375%................................................... 4,150 Quarterly amortization of $3,102 in transaction costs associated with the old credit facility over eight years..................................................... 97 Quarterly amortization of $6,689 in debt issue costs associated with our senior subordinated notes over ten years..................................................... 167 ------- Total interest expense................................. 6,846 Less: historical interest recorded by us and the businesses acquired in connection with our completed acquisitions.......................................... (6,091) ------- Net adjustment......................................... $ 755 =======
(6) Adjustment to reduce historical interest income to reflect the effects of the completed and pending acquisitions as of January 1, 1999. (7) Adjustment to reflect additional accretion related to Series A preferred stock dividend as if the Series A preferred stock were outstanding for the period from January 1, 1998 to March 31, 1999: Accretion of Series A preferred stock dividend (compounded quarterly at 13.75%)...................................... $ 4,919 Less: historical dividends recorded by us.................. (4,545) ------- Net adjustment.............................................. $ 374 =======
31 35 (8) Adjustment to reflect increased interest expense resulting from: Sources of funds: Amount financed by the new credit facility ($125,000 to Cumulus net of fees of $4,000)......................... $121,000 Class A common stock offered ($216,058 to Cumulus net of fees of $12,053)....................................... 204,005 -------- Total................................................ $325,005 ======== Uses of funds: Repayment of the old credit facility...................... 114,450 Redemption of Series A preferred stock: Redemption of original liquidation preference (35% of $125,000)............................................ $43,750 Redemption premium (13.75% of redeemed amount)......... 6,016 ------- Total payment to Series A preferred stockholders....... 49,766 Cash on hand.............................................. $160,789 -------- Total................................................ $325,005 ======== Quarterly interest on the $125,000 indebtedness under the new credit facility at 8.25%.............................. 2,578 Quarterly interest on our senior subordinated notes at 10.375%................................................... 4,150 Quarterly amortization of $7,102 in deferred transaction costs associated with the new and old credit facilities over eight years.......................................... 222 Quarterly amortization of $6,689 in debt issue costs associated with our senior subordinated notes over ten years..................................................... 167 -------- Total interest expense................................. 7,117 Less: interest expense recorded pro forma as adjusted for our completed acquisitions....................... (6,846) -------- Net adjustment......................................... $ 271 ========
(9) Adjustment to reflect the reduction in Series A preferred stock, on a pro forma basis, as if the redemption had occurred as of January 1, 1998: Original Series A preferred stock........................... $125,000 Less: redemption of original liquidation preference......... (43,750) -------- Pro forma Series A preferred stock balance as of January 1, 1998...................................................... 81,250 Annual dividend on Series A preferred stock at 13.75% compounded quarterly...................................... 11,761 -------- Pro forma Series A preferred stock balance as of December 31, 1998.................................................. 93,011 Quarterly dividend on $93,011 Series A preferred stock at 13.75%.................................................... 3,197 Less: pro forma dividend as adjusted for the 1999 subsequent acquisitions.............................................. 4,919 -------- Net adjustment.............................................. $ (1,722) ========
32 36 (10) Adjustment to reflect interest expense resulting from: Sources of funds: Amount financed by the new credit facility ($125,000 to Cumulus net of fees of $4,000)......................... $121,000 Class A common stock offered ($216,058 to Cumulus net of fees of $12,053)....................................... 204,005 Escrow funds.............................................. 3,736 -------- Total................................................ $328,741 ======== Uses of funds: Purchase price of the pending acquisitions................ 162,251 Repayment of the old credit facility...................... 114,450 Redemption of Series A preferred stock: Redemption of original liquidation preference (35% of 125,000)............................................. $43,750 Redemption premium (13.75% of redeemed amount)......... 6,016 ------- Total payment to Series A preferred stockholders....... 49,766 -------- Increase in cash on hand............................... 2,274 Total................................................ $328,741 ======== Quarterly interest on the $125,000 indebtedness under the new credit facility at 8.25%.............................. 2,578 Quarterly interest on our senior subordinated notes at 10.375%................................................... 4,150 Quarterly amortization of $7,102 in deferred transaction costs associated with the old and new credit facilities over eight years.......................................... 222 Quarterly amortization of $6,689 in debt issue costs associated with our senior subordinated notes over ten years..................................................... 167 -------- Total interest expense.................................... 7,117 Less: interest expense recorded pro forma as adjusted for our pending acquisitions and pro forma as adjusted for our offering........................................... (7,949) -------- Net adjustment............................................ $ (832) ========
The floating interest rate used to calculate pro forma interest expense on the new credit facility is eight and one quarter percent (8.25%). The rate on the new credit facility is based on our estimates, considering current market conditions for similar securities. A one-eighth of one percent (0.125%) change in the interest rate on our new credit facility results in a $39 increase or decrease in the pro forma interest expense for the three months ended March 31, 1999. Upon the consummation of this offering, we will record the redemption premium of $6,016 on the redemption of $43,750 Series A preferred stock. 33 37 CUMULUS MEDIA INC. UNAUDITED PRO FORMA BALANCE SHEET AS OF MARCH 31, 1999 (IN THOUSANDS)
(C)+(D)=(E) (B) PRO FORMA AS PRO FORMA (A)+(B)=(C) (D) ADJUSTED FOR THE ADJUSTMENTS PRO FORMA AS PRO FORMA 1999 SUBSEQUENT (A) FOR THE ADJUSTED FOR THE ADJUSTMENTS FOR THE ACQUISITIONS, THE CUMULUS 1999 SUBSEQUENT 1999 SUBSEQUENT OFFERINGS AND THE OFFERING AND THE HISTORICAL ACQUISITIONS(1) ACQUISITIONS NEW CREDIT FACILITY NEW CREDIT FACILITY ---------- --------------- ---------------- ------------------- ------------------- ASSETS: Current assets: Cash and cash equivalents......... $ 12,688 $ 6,125 $ 18,813 $160,789(2) $179,602 Accounts receivable............... 29,252 -- 29,252 -- 29,252 Prepaid expenses and other current assets.......................... 4,405 -- 4,405 -- 4,405 ---------- -------- -------- -------- -------- Total current assets.......... 46,345 6,125 52,470 160,789 213,259 Property and equipment, net....... 46,336 1,582 47,918 -- 47,918 Intangible assets, net............ 424,067 14,243 438,310 -- 438,310 Other assets...................... 16,978 -- 16,978 4,000(3) 20,978 ---------- -------- -------- -------- -------- Total assets.................. $ 533,726 $ 21,950 $555,676 $164,789 $720,465 ========== ======== ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable and other liabilities..................... $ 14,798 $ -- $ 14,798 $ -- $ 14,798 Current portion of long-term debt............................ 20 -- 20 -- 20 ---------- -------- -------- -------- -------- Total current liabilities..... 14,818 -- 14,818 -- 14,818 Long-term debt: Old credit facility............... 92,500 21,950 114,450 (114,450)(4) -- New credit facility............... 125,000(4) 125,000 Senior subordinated notes......... 160,000 -- 160,000 -- 160,000 Other............................. 243 -- 243 -- 243 Other long-term liabilities: Deferred tax liability............ 15,074 -- 15,074 -- 15,074 Other long-term liabilities....... 2,310 -- 2,310 -- 2,310 ---------- -------- -------- -------- -------- Total liabilities............. 284,945 21,950 306,895 10,550 317,445 ---------- -------- -------- -------- -------- Preferred stock subject to 6,016(5) mandatory redemption............ 138,286 -- 138,286 (49,766)(4) 94,536 ---------- -------- -------- -------- -------- Stockholders' equity: Class A common stock............ 87 -- 87 87(4) 174 Class B common stock............ 87 -- 87 -- 87 Class C common stock............ 24 -- 24 -- 24 Additional paid in capital...... 137,665 -- 137,665 215,971(4) 335,567 (12,053)(4) (6,016)(5) Accumulated other comprehensive income........................ 5 -- 5 -- 5 Accumulated deficit............... (27,373) -- (27,373) -- (27,373) ---------- -------- -------- -------- -------- Total stockholders' equity.... 110,495 -- 110,495 197,989 308,484 ---------- -------- -------- -------- -------- Total liabilities and stockholders' equity........ $ 533,726 $ 21,950 $555,676 $164,789 $720,465 ========== ======== ======== ======== ======== (F) PRO FORMA (E)+(F)=(G) ADJUSTMENTS FOR THE PRO FORMA PENDING ACQUISITIONS(6) AS ADJUSTED ----------------------- ----------- ASSETS: Current assets: Cash and cash equivalents......... $(158,515) $ 21,087 Accounts receivable............... -- 29,252 Prepaid expenses and other current assets.......................... 4,405 --------- -------- Total current assets.......... (158,515) 54,744 Property and equipment, net....... 16,226 64,144 Intangible assets, net............ 153,392 591,702 Other assets...................... (3,736) 17,242 --------- -------- Total assets.................. $ 7,367 $727,832 ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable and other liabilities..................... $ -- $ 14,798 Current portion of long-term debt............................ -- 20 --------- -------- Total current liabilities..... -- 14,818 Long-term debt: Old credit facility............... -- -- New credit facility............... -- 125,000 Senior subordinated notes......... -- 160,000 Other............................. -- 243 Other long-term liabilities: Deferred tax liability............ 7,367 22,441 Other long-term liabilities....... -- 2,310 --------- -------- Total liabilities............. 7,367 324,812 --------- -------- Preferred stock subject to mandatory redemption............ -- 94,536 --------- -------- Stockholders' equity: Class A common stock............ -- 174 Class B common stock............ -- 87 Class C common stock............ -- 24 Additional paid in capital...... -- 335,567 Accumulated other comprehensive income........................ -- 5 Accumulated deficit............... -- (27,373) --------- -------- Total stockholders' equity.... -- 308,484 --------- -------- Total liabilities and stockholders' equity........ $ 7,367 $727,832 ========= ========
See accompanying notes to the unaudited pro forma balance sheet. 34 38 NOTES TO THE UNAUDITED PRO FORMA BALANCE SHEET AS OF MARCH 31, 1999 (IN THOUSANDS) (1) To record the allocation of the $15,825 purchase price paid for transactions consummated subsequent to March 31, 1999 through the use of old credit facility funds. The pro forma allocation of the purchase price of the 1999 subsequent acquisitions is as follows: Property and equipment..................................... $ 1,582 Intangible assets, principally broadcast licenses.......... 14,243 ------- $15,825 =======
(2) To reflect the net proceeds from this offering, the new credit facility, repayment of the old credit facility and the redemption of 35% of Series A preferred stock. Proceeds from the new credit facility and this offering will be used to finance the pending acquisitions. (3) To reflect the capitalization of $4,000 in transaction costs related to the new credit facility. (4) To reflect: (i) the net proceeds of the offering to Cumulus of $216,058, net of $12,053 in issuance costs; (ii) the redemption of 35% of the original liquidation preference of the Series A preferred stock in the amount of $43,750 plus a 13.75% redemption premium on the redeemed preferred stock in the amount of $6,016; (iii) borrowings of $125,000 under the new credit facility; and (iv) repayment of $114,450 of our old credit facility. Remaining proceeds of this offering and borrowings under our new credit facility will be used to fund the completion of our pending acquisitions. (5) Amount represents a redemption premium of 13.75% on the redemption of $43,750 of Series A preferred stock. (6) To record the allocation of the $162,251 in purchase price to be paid for the pending acquisitions and the recording of the related deferred income taxes of $7,367. To record the use of cash of $158,515, and escrow funds of $3,736 to complete the pending acquisitions. The pro forma allocation of the purchase price of the pending acquisitions is as follows: Property and equipment.................................... $ 16,226 Intangible assets, principally broadcast licenses......... 153,392 Deferred taxes............................................ (7,367) -------- $162,251 ========
35 39 SELECTED HISTORICAL FINANCIAL DATA The following sets forth our historical financial data for the period from inception on May 22, 1997 to December 31, 1997, for the year ended December 31, 1998 and for the three months ended March 31, 1998 and 1999. The historical financial data are derived from, and should be read in connection with, our audited and unaudited consolidated financial statements incorporated by reference in this prospectus. See also "Risk Factors -- Substantial Leverage," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical consolidated financial statements incorporated by reference in this prospectus.
PERIOD FROM INCEPTION ON MAY 22, THREE MONTHS 1997(1) TO YEAR ENDED ENDED MARCH 31, DECEMBER 31, DECEMBER 31, -------------------------- 1997 1998 1998 1999 ------------ ------------ ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Net revenues.............................. $ 9,163 $ 98,787 $ 12,500 $ 31,915 Station operating expenses excluding depreciation and amortization........... 7,147 72,154 10,904 26,870 Depreciation and amortization............. 1,671 19,584 2,748 7,584 Corporate general and administrative expenses................................ 1,276 5,607 961 1,674 Non-cash stock compensation expense....... 1,689 -- -- -- ------- --------- --------- -------- Operating income (loss)................... (2,620) 1,442 (2,113) (4,213) Net interest expense...................... 837 13,178 1,374 5,881 Net income (loss) before extraordinary item.................................... (3,578) (11,864) (3,493) (10,094) Extraordinary loss on early retirement of debt.................................... -- (1,837) (1,837) -- Net income (loss)......................... (3,578) (13,701) (5,330) (10,094) Preferred stock dividends................. 274 13,591 842 4,545 Net income (loss) attributable to common stockholders............................ (3,852) (27,292) (6,172) (14,639) Basic and diluted earnings (loss) per common share............................ (.31) (1.70) (.49) (.74) OTHER FINANCIAL DATA: Broadcast cash flow(2).................... $ 2,016 $ 26,633 $ 1,596 $ 5,045 Broadcast cash flow margin(2)............. 22.0% 27.0% 12.8% 15.8% EBITDA(2)................................. $ 740 $ 21,026 $ 635 $ 3,371 Net cash used in operating activities..... 1,887 4,653 4,589 11,053 Net cash used in investing activities..... 95,100 351,025 79,153 31,139 Net cash provided by financing activities.............................. 98,560 378,990 105,585 29,995
AS OF DECEMBER 31, -------------------- AS OF 1997 1998 MARCH 31, 1999 -------- -------- -------------- (IN THOUSANDS) BALANCE SHEET DATA: Total assets............................................ $110,441 $517,631 $533,726 Long-term debt, including current portion............... 42,801 222,767 252,763 Preferred stock subject to mandatory redemption......... 13,426 133,741 138,286 Total stockholders' equity.............................. 49,976 125,135 110,495
- ------------ (1) We were incorporated on May 22, 1997. Between the date of formation of Cumulus Media LLC, which was April 18, 1997, and May 22, 1997, Cumulus Media LLC undertook certain activities on behalf of us 36 40 pending our incorporation, including the incurrence of expenses and the funding of escrow deposits for acquisitions. Upon our incorporation, these activities and the related expenses were transferred to us. (2) Broadcast cash flow consists of operating income (loss) before depreciation and amortization, non-cash stock compensation expense and corporate general and administrative expenses. EBITDA consists of operating income (loss) before depreciation and amortization and non-cash stock compensation expense. EBITDA, as defined by us, may not be comparable to similarly titled measures used by other companies. Although broadcast cash flow and EBITDA are not measures of performance calculated in accordance with GAAP, management believes that they are useful to an investor in evaluating our performance because they are measures widely used in the broadcast industry to evaluate a radio company's operating performance. However, broadcast cash flow and EBITDA should not be considered in isolation or as substitutes for net income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP, or as a measure of liquidity or profitability. 37 41 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following information in conjunction with our consolidated financial statements and notes to our consolidated financial statements incorporated by reference in this prospectus. This discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors," in "Business," in this section and elsewhere in this prospectus. OVERVIEW We commenced operations in May 1997. For the period from our inception through March 31, 1999, we purchased or entered into LMAs with a total of 216 stations in 41 U.S. markets and five stations and obtained a license to commence operations on one station in the Caribbean market. The following discussion of our financial condition and results of operations includes the results of these acquisitions and LMAs. We currently own and operate 192 stations in 39 U.S. markets and provide sales and marketing services under LMAs (pending FCC approval of acquisition) to 40 stations in 15 U.S. markets. We are the third largest radio broadcasting company in the U.S. based on number of stations and we believe, the eighth largest in the U.S. based on 1998 pro forma net revenues. We will own and operate a total of 246 radio stations (171 FM and 75 AM) in 45 U.S. markets upon consummation of our pending acquisitions. ADVERTISING REVENUE AND BROADCAST CASH FLOW Our primary source of revenues is the sale of advertising time on our radio stations. Our sales of advertising time are primarily affected by the demand for advertising time from local and national advertisers and the advertising rates charged by our radio stations. Advertising demand and rates are based primarily on a station's ability to attract audiences in the demographic groups targeted by its advertisers, as measured principally by Arbitron on a periodic basis, generally once, twice or four times per year. Because audience ratings in local markets are crucial to a station's financial success, we endeavor to develop strong listener loyalty. We believe that the diversification of formats on our stations helps to insulate them from the effects of changes in the musical tastes of the public with respect to any particular format. The number of advertisements that can be broadcast without jeopardizing listening levels and the resulting rating is limited in part by the format of a particular station. Our stations strive to maximize revenue by constantly managing the number of commercials available for sale and adjusting prices based upon local market conditions. In the broadcasting industry, radio stations sometimes utilize trade or barter agreements which exchange advertising time for goods or services such as travel or lodging, instead of for cash. Our use of trade agreements was immaterial during 1997, 1998 and the three months ended March 31, 1999. We will seek to continue to minimize our use of trade agreements. Our advertising contracts are generally short-term. We generate most of our revenue from local advertising, which is sold primarily by a station's sales staff. In fiscal 1997, 1998 and the three months ended March 31, 1998 and March 31, 1999, approximately 89.0%, 88.0%, 88.0% and 88.0%, respectively, of our revenues were from local advertising. To generate national advertising sales, we engage Interep National Radio Sales, Inc., a national representative company. Our revenues vary throughout the year. As is typical in the radio broadcasting industry, we expect our first calendar quarter will produce the lowest revenues for the year, and the fourth calendar quarter will generally produce the highest revenues for the year, with the exception of certain of our stations such as those in Salisbury-Ocean City, Maryland and Myrtle Beach, South Carolina, where the stations generally earn higher revenues in the second and third quarters of the year because of the higher seasonal population in those communities. Our operating results in any period may be affected by the incurrence of advertising and promotion expenses that typically do not have an effect on revenue generation until future periods, if at all. 38 42 Our most significant station operating expenses are employee salaries and commissions, programming expenses, advertising and promotional expenditures, technical expenses, and general and administrative expenses. We strive to control these expenses by working closely with local station management. The performance of radio station groups, such as ours, is customarily measured by the ability to generate broadcast cash flow. Broadcast cash flow consists of operating income (loss) before depreciation and amortization, non-cash stock compensation expense and corporate general and administrative expenses. EBITDA consists of operating income (loss) before depreciation and amortization and non-cash stock compensation expense. EBITDA, as defined by us, may not be comparable to similarly titled measures used by other companies. Although broadcast cash flow and EBITDA are not measures of performance calculated in accordance with GAAP, management believes that they are useful to an investor in evaluating us because they are measures widely used in the broadcast industry to evaluate a radio company's operating performance. However, broadcast cash flow and EBITDA should not be considered in isolation or as substitutes for net income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with GAAP, or as measures of liquidity or profitability. RESULTS OF OPERATIONS HISTORICAL -- THREE MONTHS ENDED MARCH 31, 1999 VERSUS THE THREE MONTHS ENDED MARCH 31, 1998 Net Revenues. Net revenues increased $19.4 million, or 155.3%, to $31.9 million for the three months ended March 31, 1999 from $12.5 million for the three months ended March 31, 1998. This increase was primarily attributable to the acquisition of radio stations and revenue generated from LMAs entered into after March 31, 1998. In addition, on a same station basis, which we define as the fourteen markets (80 stations) owned or operated during the three months ended March 31, 1998, net revenues increased $2.6 million, or 22.6%, to $14.3 million for the three months ended March 31, 1999, from $11.7 million for the three months ended March 31, 1998. This increase was primarily attributable to growth in the sale of commercial time to local and national advertisers. Station Operating Expenses excluding Depreciation and Amortization. Station operating expenses, excluding depreciation and amortization, increased $16.0 million, or 146.4%, to $26.9 million for the three months ended March 31, 1999 from $10.9 million for the three month period ended March 31, 1998. This increase was attributable primarily to the acquisition of radio stations and expenses incurred from LMAs entered into after March 31, 1998. In addition, on a same station basis, station operating expenses excluding depreciation and amortization, increased $1.0 million, or 9.1%, to $11.7 million for three months ended March 31, 1999, from $10.7 million for the three months ended March 31, 1998. This increase was attributable primarily to the growth in the sale of commercial time to local and national advertisers in addition to investments in our programming and sales functions at the station level. Depreciation and Amortization. Depreciation and amortization increased $4.8 million to $7.6 million for the three months ended March 31, 1999 from $2.7 million for the period ended March 31, 1998, primarily due to the impact of various acquisitions consummated after March 31, 1998. Corporate General and Administrative Expenses. Corporate general and administrative expenses increased $0.7 million, to $1.7 million, or 74.2%, for the three months ended March 31, 1999, from $1.0 million for the three months ended March 31, 1998. This increase is due to the investment in additional corporate resources to manage our growing radio station portfolio in an effective manner. Other Expense (Income). Interest expense, net of interest income, increased $4.5 million, or 328.0%, from $1.4 million during the three months ended March 31, 1998 to $5.9 million for the three months ended March 31, 1999, primarily due to (1) additional borrowings under our old credit facility to finance acquisitions and (2) the issuance of our senior subordinated notes on July 1, 1998. 39 43 Net Income (Loss) Attributable to Common Stock. As a result of the factors described above and the accrual of dividends on our issued and outstanding Series A preferred stock, net loss attributable to common stock increased $8.5 million, or 137.2%, to $14.6 million for the three months ended March 31, 1999 from $6.2 million for the three months ended March 31, 1998. Broadcast Cash Flow. As a result of the factors described above, broadcast cash flow increased $3.4 million, or 216.1%, to $5.0 million for the three months ended March 31, 1999 from $1.6 million for the three months ended March 31, 1998. The broadcast cash flow margin was 15.8% for the three months ended March 31, 1999 versus 12.8% for the three months ended March 31, 1998. As a result of the changes in same station net revenues and expenses (as described above), same station broadcast cash flow increased $1.7 million, or 172.2%, to $2.7 million for the three months ended March 31, 1999 from $1.0 million for the three months ended March 31, 1998. The broadcast cash flow margin was 18.4% for the three months ended March 31, 1999 versus 8.3% for the three months ended March 31, 1998. EBITDA. As a result of the factors described above, EBITDA increased $2.7 million, or 430.9%, to $3.4 million for the three months ended March 31, 1999 from $0.6 million for the three months ended March 31, 1998. EBITDA margin was 10.6% for the three months ended March 31, 1999, versus 5.1% for the three months ended March 31, 1998. HISTORICAL -- YEAR ENDED DECEMBER 31, 1998 VERSUS THE PERIOD FROM INCEPTION ON MAY 22, 1997 TO DECEMBER 31, 1997 The growth in net revenues from $9.2 million in 1997 to $98.8 million in 1998 and the growth in station operating expenses, excluding depreciation and amortization from $7.1 million in 1997 to $72.2 million in 1998 was primarily attributable to two factors: (1) we commenced operations on May 22, 1997, and only began acquiring radio stations during the second half of 1997; and (2) there were additional revenues, station operating expenses excluding depreciation and amortization, and depreciation and amortization expenses associated with the radio properties acquired during 1998. The tangible and intangible assets associated with the above mentioned radio station acquisitions account for the majority of the increase in historical depreciation and amortization from $1.7 million in 1997 to $19.6 million in 1998. The increase in corporate general and administrative expenses from $1.3 million in 1997 to $5.6 million in 1998 was directly attributable in part to the investment in additional corporate resources to effectively manage growth and our growing radio station portfolio. In addition, the increases in depreciation and amortization and corporate general and administrative expenses also reflect the effect of a full year of operations in 1998 as compared to a partial year of operations in 1997. The increase in net interest expense from $0.8 million in 1997 to $13.2 million in 1998 was primarily attributable to (1) additional borrowings under our term loan facilities to finance acquisitions, (2) the issuance of our senior subordinated notes on July 1, 1998 and the resulting greater average outstanding long term debt levels and (3) the incurrence of interest expense for a full year. Preferred stock dividends increased $13.3 million as a result of the issuance of our Series A preferred stock on July 1, 1998. Additionally, on September 30, 1998, we recorded a one-time charge of $2.9 million associated with the accelerated accretion of discount on our 12% Class A Cumulative Preferred Stock that was exchanged for the Series A preferred stock. On March 2, 1998, we recorded an extraordinary loss of $1.8 million related to the write-off of previously capitalized debt issuance costs related to its old credit facility. For 1998 the net loss attributable to common stockholders (including an extraordinary loss of $1.8 million and the one-time charge of $2.9 million) was $27.3 million. The growth in broadcast cash flow from $2.0 million in 1997 to $26.6 million in 1998 was primarily attributable to the growth in net revenues, partially offset by the growth in station operating expenses, excluding depreciation and amortization as described above. 40 44 LIQUIDITY AND CAPITAL RESOURCES Our principal need for funds has been to fund the acquisition of radio stations and to a lesser extent, working capital needs, capital expenditures and interest and debt service payments. Our principal sources of funds for these requirements have been cash flow from financing activities, such as the proceeds from the offering of our debt and equity securities, and borrowings under credit agreements. Our principal need for funds in the future are expected to include the need to fund future acquisitions, interest and debt service payments, working capital needs and capital expenditures. We anticipate that our principal sources of funds will continue to be borrowings under our new credit facility and future debt and/or equity offerings. For the three months ended March 31, 1999, net cash used in operations increased $6.5 million to $11.1 million from net cash used in operations of $4.6 million for the three months ended March 31, 1998. This increase was due primarily to the investment in working capital and other current assets made in connection with acquisitions completed during fiscal 1998. For the three months ended March 31, 1999, net cash used in investing activities decreased $48.0 million to $31.1 million from $79.2 million for the three months ended March 31, 1998. This decrease was due primarily to the decline in acquisition activity during fiscal 1998. For the three months ended March 31, 1999, net cash provided from financing activities decreased $75.6 million to $30.0 million compared to $105.6 million during the three months ended March 31, 1998. The level of financing activity during the three months ended March 31, 1998 was the result of borrowings under our old credit facility as well as capital contributions from Cumulus Media, LLC, our immediate parent prior to the consummation of our initial public offering. Subsequent to March 31, 1999, we completed acquisitions of twelve radio stations in three markets for an aggregate purchase price of approximately $15.8 million. These transactions will be accounted for by the purchase method of accounting and were financed by borrowings under our credit facility. Historical Acquisitions. During the year ended December 31, 1998, we consummated 48 acquisitions across 33 markets having an aggregate purchase price of $344.0 million. Additional acquisitions have been subsequently completed in 1999 in eight markets for an aggregate purchase price of $37.3 million. The sources of funds for these acquisitions were primarily the proceeds of our credit facilities. Pending Acquisitions. The aggregate purchase price of our pending acquisitions is expected to be approximately $162.3 million, consisting almost entirely of cash. We intend to finance our pending acquisitions with a portion of the proceeds from this offering and borrowings under our new credit facility. We believe the sources of capital available to us are adequate to finance our pending acquisitions. We expect to consummate most of our pending acquisitions prior to March 31, 2000, although we cannot assure you that the transactions will be consummated within that time frame, or at all. Sources of Liquidity. We financed our acquisitions primarily through private equity financings, proceeds from our debt and equity offerings consummated in July 1998 and borrowings under our credit facilities. Our old credit facility dated as of March 2, 1998 and amended most recently as of May 1, 1999 with Lehman Brothers Inc., as arranger, and Lehman Commercial Paper Inc., as lender, syndication agent and administrative agent, provides for a revolving credit line of $25.0 million until March 2, 2006, and an eight-year term loan facility of $125.0 million. Under the terms of the old credit facility, we drew down $114.5 million of the term loan facility through July 16, 1999. The proceeds of the borrowings under the old credit facility have been used to finance acquisitions and operations as well as for other general corporate purposes. Our obligations under our old credit facility are secured by substantially all of our assets in which a security interest may lawfully be granted (including to the extent permitted by applicable law and the rules of the FCC, any FCC licenses held by our subsidiaries). The obligations under our old credit facility are also guaranteed by each of our subsidiaries and are required to be guaranteed by any additional subsidiaries we acquire. 41 45 Both revolving credit and term loan borrowings under the credit facility bear interest, at our option, at a rate equal to the Base Rate (as defined under the terms of our old credit facility) plus a margin ranging between 0.50% to 1.75% or the Eurodollar Rate (as defined under the terms of our old credit facility) plus a margin ranging between 1.50% to 2.75% (in each case dependent upon our leverage ratio). The revolving credit and term loan borrowings are repayable in quarterly installments beginning in 2000, subject to mandatory prepayment in certain circumstances. The scheduled annual amortization of the term loans is $2.0 million in each of the years 2000 through 2002, $10.0 million in 2003, $20.0 million in 2004, $69.0 million in 2005, and $20.0 million at maturity. The scheduled annual reduction in availability under the revolving credit loans is $7.5 million in each of the years 2003 through 2005, and $2.5 million in 2006. In addition, a fronting fee to be agreed to by Cumulus and the issuing bank of any letter of credit under the old credit facility calculated at a rate not to exceed 0.0125% per annum on the maximum amount of each letter of credit is payable quarterly to the issuing bank. Certain mandatory prepayments of the term loan facility and the revolving credit line and reductions in the availability of the revolving credit line are required to be made, including: - subject to certain exceptions, which are applicable to this offering, 100% of the net proceeds from any issuance of capital stock or incurrence of indebtedness; - 100% of the net proceeds from certain asset sales; and - between 50% and 75% (dependent on our leverage ratio) of our excess cash flow. On several occasions, our old credit facility was amended to modify or waive certain restrictive financial and operating covenants in connection with (1) our borrowings under the credit facility to finance acquisitions or (2) certain financial covenants. We have entered into a commitment letter with our existing lenders providing for a new credit facility in the aggregate principal amount of $225.0 million. See "Description of Certain Indebtedness." We have issued $160.0 million in aggregate principal amount of our senior subordinated notes which have a maturity date of July 1, 2008. The senior subordinated notes are our general unsecured obligations and are subordinated in right of payment to all our existing and future senior debt (including obligations under our credit facility). Interest on the senior subordinated notes is payable semi-annually in arrears. We issued $125.0 million of our Series A preferred stock in our initial public offerings on July 1, 1998. The holders of the Series A preferred stock are entitled to receive cumulative dividends at an annual rate equal to 13 3/4% of the liquidation preference per share of Series A preferred stock, payable quarterly, in arrears. On or before July 1, 2003, we may, at our option, pay dividends in cash or in additional fully paid and non-assessable shares of Series A preferred stock. From July 1, 1998 until March 31, 1999, we issued an additional $13.3 million as dividends on the Series A preferred stock. After July 1, 2003, dividends may only be paid in cash. To date, all of the dividends on the Series A preferred stock have been paid in shares. The shares of Series A preferred stock are subject to mandatory redemption on July 1, 2009 at a price equal to 100% of the liquidation preference plus any and all accrued and unpaid cumulative dividends. The Series A preferred stock may be redeemed by us prior to such date under certain circumstances, including the issuance of Class A common stock in this offering. We intend to use $49.8 million of the proceeds of this offering to redeem a portion of our Series A preferred stock, including redemption premium. The indenture and the certificate of designation limit the amount we may borrow without regard to the other limitations on incurrence of indebtedness contained therein under credit facilities to $150.0 million. As of March 31, 1999, we would be permitted, by the terms of the indenture and the certificate of designation, to incur $50.0 million of additional indebtedness under the old credit facility without regard to the debt ratios included in our indenture. 42 46 RECENT ACCOUNTING PRONOUNCEMENTS As of January 1, 1998, we adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income." Statement 130 establishes standards for the reporting and display of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources, which are excluded from net income. Statement 130 requires unrealized gains or losses on foreign currency translation adjustments, which prior to adoption were reported separately in stockholders' equity, to be included in comprehensive income. The adoption of this Statement had no impact on our net income or stockholders' equity. As of January 1, 1998, we adopted Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information." Statement 131 establishes new guidelines for identifying and reporting information about an entity's operating segments. This standard requires that management identify operating segments based upon the way management disaggregates the enterprise for making internal operating decisions. For the twelve months ending December 31, 1998, our management has maintained only one operating segment, radio broadcasting. Accordingly, our management does not believe that this statement has an impact on our consolidated financial statements. In June 1998, the Financial Accounting Standards Board issued Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities." Statement 133 standardizes the accounting for derivative instruments by requiring that an entity recognize those items as assets or liabilities in the statement of financial position and measure them at fair value. We have not engaged in any derivative or hedging transactions. As a result, we do not anticipate that the adoption of this new Statement will have a significant effect on our earnings or financial position. Statement 133 is required to be adopted in years beginning after June 15, 1999. In April 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued SOP 98-5, "Accounting for the Costs of Start-Up Activities." SOP 98-5, effective for 1999, requires organization costs to be expensed as incurred. Our adoption of SOP 98-5 in the first quarter of 1999 will result in the write-off of $0.4 million in the year ending December 31, 1999, representing the balance of capitalized organization costs at December 31, 1998. INFLATION We do not believe that inflation has a significant effect on our operations. YEAR 2000 RISK The year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of our computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could cause a system failure or miscalculation in our broadcast and corporate locations which could cause disruptions of operations, including, among other things, a temporary inability to produce broadcast signals, process financial transactions, or engage in similar normal business activities. Based on recent system evaluations, surveys, and ongoing, on-site inventories, we determined that we will be required to modify or replace portions of our software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. We presently believe that with modifications or replacements of existing software and certain hardware, the year 2000 issue can be mitigated. If such modifications and replacements are not made, or are not completed in time, the year 2000 issue could have a material impact on our business, results of operations or financial condition. Our plan to resolve the year 2000 issue involves the identification and assessment of the existing problem, plan of remediation, as well as a testing and implementation plan. To date, we have substantially completed 43 47 the identification and assessment process, with the following significant financial and operational components identified as being affected by the year 2000 issue: - Computer hardware running critical financial and operational software that is not capable of recognizing a four-digit code for the applicable year. - Our advertising inventory management software responsible for managing, scheduling and billing customer's broadcast advertising purchases. - Broadcast studio equipment and software necessary to deliver radio programming. - Corporate financial accounting and information system software. - Significant non-technical systems and equipment that may contain microcontrollers which are not year 2000 compliant are being identified and addressed if deemed critical. We have instituted the following remediation plan to address the year 2000 issues: - A computer hardware replacement plan for computers running essential broadcast, operational and financial software applications with year 2000 compatible computers has been instituted. As of March 31, 1999 approximately 75% of all essential computers related to broadcast or studio equipment are year 2000 compliant. Approximately 95% of all essential financial based computers are year 2000 compliant. We anticipate this replacement plan to be 100% complete by the end of the third quarter in 1999. - Software upgrades or replacement of advertising inventory management software which is year 2000 compliant have been planned, are in process, or have been completed as of March 31, 1999. We have received assurances from our software vendors that supply our advertising inventory management software that this software is year 2000 compliant with a few minor exceptions. For these non-compliant vendors, we will install inventory management software from a compliant vendor by the end of the third quarter of 1999. Approximately 80% of the broadcast properties have year 2000 compliant advertising inventory management software as of March 31, 1999. - We have received assurances from our software vendors that supply broadcasting digital automation systems that the software used by us is currently compliant or has upgrades currently available that are compliant. Broadcast software and studio equipment are considered to be 80% compliant as of March 31, 1999 and are anticipated to be 100% compliant by the third quarter of 1999. Financial accounting software for the broadcast segment has been replaced and is year 2000 compliant. While we believe our efforts will provide reasonable assurance that material disruptions will not occur due to internal failure, the possibility of interruption still exists. We are currently querying other significant vendors that do not share information systems with us (external agents). To date, we are not aware of any external agent with a year 2000 issue that would materially impact our business, results of operations or financial condition. However, we have no means of ensuring that external agents will be year 2000 ready. The inability of external agents to complete their year 2000 resolution process in a timely fashion could materially impact our business, results of operations or financial condition. The effect of non-compliance by external agents is not determinable. In the ordinary course of business, we have acquired or plan to acquire the necessary year 2000 compliant hardware and software. These purchases are part of specific operational and financial system enhancements completed during 1998 and early 1999 that were planned without specific regard to the year 2000 issue. These system enhancements resolve many year 2000 problems and have not been delayed or accelerated as a result of any additional efforts addressing the year 2000 issue. Accordingly, these costs have not been included as part of the costs of year 2000 remediation. However, there are several hardware and software expenditures that have been or will be incurred to specifically remediate year 2000 non-compliance. Incremental hardware and software costs that we have attributed to the year 2000 issue are estimated to be less than $1.5 million. Of this cost, approximately 10% will be expensed as modification or upgrade costs with the remaining costs being 44 48 capitalized as new hardware or software. Sources of funds for these expenditures will be supplied through cash flow generated from operations and/or available borrowings from our credit facility. Our accounting policy is to expense costs incurred due to maintenance, modifications or upgrades and to capitalize the cost of new hardware and software. We believe that we have an effective program in place to resolve the year 2000 issue in a timely manner. As noted above, we have not yet completed all necessary phases of the year 2000 program. In the event that we do not complete any additional phases, we could experience disruptions in our operations, including among other things, a temporary inability to produce broadcast signals, process financial transactions, or engage in similar normal business activities. In addition, disruptions in the economy generally resulting from the year 2000 issues could also materially adversely affect our business, results of operations or financial condition. We could be subject to litigation for computer systems failures, equipment shutdowns or failure to properly date business records. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. We have commenced development of contingency plans in the event we do not complete all phases of the year 2000 program prior to December 31, 1999. We expect the contingency plan to be fully developed and in place by September 30, 1999. 45 49 BUSINESS THE COMPANY We are a radio broadcasting company focused on acquiring, operating and developing radio stations in mid-size radio markets in the U.S. and currently own and operate 192 stations in 39 U.S. markets. We also provide sales and marketing services under LMAs (pending FCC approval of acquisition) to 40 stations in 15 U.S. markets. We are the third largest radio broadcasting company in the U.S. based on number of stations, and we believe, the eighth largest radio broadcasting company in the U.S. based on 1998 pro forma net revenues. We will own and operate a total of 246 radio stations (171 FM and 75 AM) in 45 U.S. markets upon consummation of our pending acquisitions. According to BIA and the Radio Advertising Bureau, we have assembled market-leading groups or clusters of radio stations which rank first or second in terms of revenue share and/or audience share in substantially all of our markets. On an historical basis, for the three months ended March 31, 1999, we had net revenues of $31.9 million and broadcast cash flow of $5.0 million. After giving pro forma effect to the transactions described in the unaudited pro forma financial statements, we would have had net revenues of $37.9 million and broadcast cash flow of $6.4 million for the three months ended March 31, 1999. Relative to the 100 largest markets in the U.S., we believe that the mid-size markets represent attractive operating environments and generally are characterized by: - a greater use of radio advertising as evidenced by the greater percentage of total media revenues captured by radio than the national average; - rising advertising revenues as the larger national and regional retailers expand into these markets; - small independent operators, many of whom lack the capital to produce high quality locally-originated programming and/or to employ more sophisticated research, marketing, management and sales techniques; and - lower overall susceptibility to economic downturns. We believe that the attractive operating characteristics of mid-size markets, together with the relaxation of radio station ownership limits under the Telecommunications Act of 1996 and FCC rules, create significant opportunities for growth from the formation of groups of radio stations within these markets. We believe that mid-size radio markets provide an excellent opportunity to acquire attractive properties at favorable purchase prices due to the size and fragmented nature of ownership in these markets and to the greater attention historically given to the larger markets by radio station acquirors. According to BIA, there are approximately 1,656 FM and 1,035 AM stations in the 169 U.S. radio markets ranked MSA 100-268. These 2,691 stations are owned by approximately 990 different operators. In addition, there are nearly 4,700 stations in unranked markets owned by approximately 2,500 operators. To maximize the advertising revenues and broadcast cash flow of our stations, we seek to enhance the quality of radio programs for listeners and the attractiveness of the radio station in a given market. We also increase the amount of locally-originated programming. Within each market, our stations are diversified in terms of format, target audience and geographic location, enabling us to attract larger and broader listener audiences and thereby a wider range of advertisers. This diversification, coupled with our favorable advertising pricing, also has provided us with the ability to compete successfully for advertising revenue against non-traditional competitors such as print media and television. We believe that we are in a position to generate revenue growth in excess of historical market rates, increase audience and revenue shares within these markets and, by capitalizing on economies of scale and by competing against other media for incremental advertising revenue, increase our broadcast cash flow growth rates and margins to those levels found in large markets. As we have assembled our portfolio of stations over the past two years, most of our markets are still in the development stage with the potential for substantial growth as we implement our operating strategy. 46 50 MANAGEMENT TEAM Our senior management team has an aggregate of over 75 years of experience in the media and radio broadcasting industry. To date, our management team has negotiated 90 acquisitions, accounting for all 246 of our stations currently owned or to be acquired upon consummation of our pending acquisitions. Our Executive Chairman and Treasurer, Richard W. Weening, has over 20 years of operating experience as a chief executive officer in media and information companies including significant experience in corporate finance and mergers and acquisitions. Lewis W. Dickey, Jr., our Executive Vice Chairman, has over 15 years of experience in the radio and television broadcasting industry and is a successful owner-operator of radio stations in large and mid-size markets. Mr. Dickey is also a nationally regarded business strategy and marketing consultant to the radio and television broadcasting industry. William M. Bungeroth, our President, has over 20 years of experience in the radio broadcasting industry. Mr. Bungeroth has developed an expertise in increasing revenues at stations under his management. Mr. Bungeroth is also President and Chief Executive Officer of Cumulus Broadcasting Inc. Mr. Bungeroth manages the broadcasting business along with the General Managers of each market, the Director of Programming and the regional Directors of Sales. Our Vice President and Chief Financial Officer, Richard J. Bonick, Jr., has 20 years of experience in the radio broadcasting industry. Mr. Bonick manages the financial reporting and control systems as well as the operational aspects of our broadcasting business. STATION PORTFOLIO Our radio stations are organized into four regions: the Southeast, Midwest, Southwest and Northeast. The listed regions correspond to the geographic location of our markets. We operate each market as a distinct business unit and we do not manage or report our business by region. The following chart sets forth certain information as of July 16, 1999 with respect to our stations in these regions, including stations for which we currently provide programming and sell advertising under LMAs (14 of the pending stations to be acquired are not under LMAs), before and after giving effect to our pending acquisitions:
STATION PORTFOLIO ----------------- MSA CLUSTER 12+ OWNED PENDING PRO FORMA MARKET RANKING BY AUDIENCE ----- ------- --------- MARKET RANK REVENUE SHARE SHARE FM AM FM AM FM AM - ------ ------ ------------- -------- -- -- -- -- -- -- SOUTHEAST REGION Albany, GA.......................... 246 2 36.4% 4 2 1 -- 5 2 Augusta, GA......................... 110 1 28.1% 5 3 1 -- 6 3 Chattanooga, TN..................... 102 1 28.2% 4 1 -- -- 4 1 Columbus, GA........................ 169 1 32.4% 4 2 1 1 5 3 Columbus-Starkville, MS............. n/a 1 -- -- -- 4 3 4 3 Florence, SC........................ 198 2 43.0% 6 3 1 -- 7 3 Laurel-Hattiesburg, MS.............. 209 2 38.0% 2 1 3 1 5 2 Lexington-Fayette, KY............... 107 1 30.1% -- -- 4 1 4 1 Mobile, AL.......................... 86 2 25.1% -- -- 3 2 3 2 Montgomery, AL...................... 141 1 30.0% 2 2 2 1 4 3 Muscle Shoals, AL................... n/a 1 -- 2 1 -- -- 2 1 Myrtle Beach, SC.................... 173 2 17.6% 5 1 -- -- 5 1 Pensacola, FL....................... 121 2 12.0% -- -- 1 1 1 1 Salisbury-Ocean City, MD............ 152 1 26.7% 6 2 -- -- 6 2 Savannah, GA........................ 153 2 36.1% 5 2 -- -- 5 2 Tallahassee, FL..................... 163 1 32.3% 3 1 1 -- 4 1 Tupelo, MS.......................... 178 1 22.7% 2 2 -- -- 2 2 Wilmington, NC...................... 177 2 21.4% 4 1 -- -- 4 1
47 51
STATION PORTFOLIO ----------------- MSA CLUSTER 12+ OWNED PENDING PRO FORMA MARKET RANKING BY AUDIENCE ----- ------- --------- MARKET RANK REVENUE SHARE SHARE FM AM FM AM FM AM - ------ ------ ------------- -------- -- -- -- -- -- -- MIDWEST REGION Ann Arbor, MI....................... 145 1 7.4% 2 2 -- -- 2 2 Appleton -- Oshkosh, WI............. 135 3 14.0% 2 2 -- -- 2 2 Bismarck, ND........................ 260 1 50.9% 3 1 1 2 4 3 Dubuque, IA......................... 219 2 34.0% 4 1 -- -- 4 1 Eau Claire, WI...................... 231 2 33.9% -- -- 4 2 4 2 Faribault-Owatonna-Waseca, MN....... n/a 1 -- 4 4 -- -- 4 4 Green Bay, WI....................... 183 2 11.6% 3 -- -- -- 3 -- Kalamazoo, MI....................... 174 1 24.6% 2 1 -- -- 2 1 Mankato-New Ulm-St. Peter, MN....... n/a 1 -- 4 2 -- -- 4 2 Marion-Carbondale, IL............... 212 1 30.1% 4 2 -- -- 4 2 Mason City, IA...................... n/a 1 -- 5 2 -- -- 5 2 Monroe, MI.......................... n/a 1 -- 1 -- -- -- 1 -- Rochester, MN....................... n/a 1 -- 2 2 -- -- 2 2 Toledo, OH.......................... 78 1 32.9% 4 2 1 -- 5 2 Topeka, KS.......................... 180 2 19.6% 2 2 2 -- 4 2 SOUTHWEST REGION Abilene, TX......................... 226 2 23.4% 4 -- -- -- 4 -- Amarillo, TX........................ 188 2 25.6% 4 2 -- -- 4 2 Beaumont-Port Arthur, TX............ 130 2 31.4% 3 2 -- -- 3 2 Fayetteville, AR.................... 156 2 24.6% 4 2 -- -- 4 2 Ft. Smith, AR....................... 170 4 14.9% 2 -- 1 -- 3 -- Grand Junction, CO.................. 249 1 49.6% 3 -- 1 2 4 2 Lake Charles, LA.................... 205 1 49.2% 3 1 -- -- 3 1 McAllen-Brownsville, TX............. 62 3 23.8% -- -- 2 -- 2 -- Odessa-Midland, TX.................. 176 1 34.9% 4 1 -- 1 4 2 Wichita Falls, TX................... 236 2 40.8% 3 -- 1 -- 4 -- NORTHEAST REGION Augusta-Waterville, ME.............. 247 1 31.8% 5 1 1 1 6 2 Bangor, ME.......................... 261 1 35.2% 4 1 -- -- 4 1 --- -- -- -- --- --- TOTALS 135 57 36 18 171 75 NUMBER OF U.S. MARKETS: 45 NUMBER OF STATIONS: 246
We also own and operate five radio stations in various locations throughout the English-speaking Eastern Caribbean including Trinidad, St. Kitts-Nevis, St. Lucia, Montserrat and Antigua-Barbuda, and we have been granted a license for a FM station covering Barbados and Tortola, British Virgin Islands. ACQUISITION STRATEGY In identifying acquisition candidates, we adhere to a specific acquisition strategy. We seek to acquire radio broadcasting stations in diversified, growing mid-size markets because we believe these markets offer substantial growth opportunities for us. We seek to acquire stations which will enable us to create a leading position in ratings and format in their markets. Additionally, we seek capable local management, an FCC license which enables coverage of the entire market, and high quality technical and operating facilities. We 48 52 target stations that we believe give us the opportunity to significantly increase revenues and broadcast cash flow. In executing this strategy, we focus on markets with: - diversified, growing economies that do not depend on any single industry or employer; - a regional fit with our overall portfolio concentrations (the Southeast, Midwest, Southwest and Northeast regions of the U.S.); - proximity to larger markets that may lead to increased economic expansion into our markets; - previously unconsolidated radio stations with fragmented ownership; and - the opportunity to assemble a group of stations that have competitive signal coverage and that are diversified in format to provide a broad range of target audiences for advertisers. We believe that our acquisition strategy will have a number of benefits, including: - growth and diversification of revenue and broadcast cash flow across a greater number of stations and markets; - improved broadcast cash flow margins through the consolidation of facilities and the elimination of redundant expenses; - enhanced utilization of certain corporate overhead functions including our senior management team; - improved leverage in various key vendor negotiations; - greater ability to recruit top industry management talent; and - increased overall scale, which should facilitate our future capital raising activities. INTEGRATION OF ACQUIRED BUSINESSES Through our 90 completed and pending acquisitions, we have developed an efficient process of integrating newly acquired properties into our overall culture and operating philosophy. To do so, we have developed an integration plan consisting of five key elements: - use sophisticated market research to assess and enhance format quality and effectiveness so that we can refine station formats, enrich the listener experience and increase audience and revenue share relative to other stations in the market; - make necessary improvements in transmission facilities, audio processing and studio facilities; - expand our sales organization through active recruiting and increase its effectiveness through in-depth training, thereby enhancing demand for the station's spot inventory to increase both revenue and margin; - add new stations to our intranet communications network and install our centralized networked accounting system and proprietary system for real-time monitoring of station sales and inventory performance by management; and - establish revenue and expense budgets consistent with the programming and sales strategy and corresponding cost adjustments. From time to time, in compliance with applicable law, we enter into an LMA or a consulting arrangement with a target property prior to FCC final approval and the consummation of the acquisition in order to gain a head start on the integration process. 49 53 OPERATING STRATEGY Our operating strategy has the following principal components: - ASSEMBLE AND DEVELOP LEADING STATION GROUPS. In each market, we acquire leading stations in terms of revenue or audience share as well as under-performing stations which we believe create an opportunity for growth. Each station within the market generally has a different format and an FCC license that provides for full signal coverage in the market area. - DEVELOP EACH STATION AS A UNIQUE ENTERPRISE. While stations within a market share common infrastructure in terms of office space, support personnel and certain senior management, each station is developed and marketed as an individual brand with its own identity, programming, programming personnel, inventory of time slots and sales force. We believe that this strategy maximizes the revenues per station and of the group as a whole. - USE RESEARCH TO GUIDE PROGRAMMING. We use audience research and music testing to refine each station's programming content to match the preferences of the station's target demographic audience. We also seek to enrich our listeners' experiences by increasing both the quality and quantity of local programming. We believe this strategy maximizes the number of listeners for each station. - POSITION STATION GROUPS TO COMPETE WITH PRINT AND TELEVISION. While advertising for each station is sold independently of other stations, the diverse station formats within each market have enabled us to attract a larger and broader listener audience which in turn has attracted a wider range of advertisers. We believe this diversification, coupled with our favorable advertising pricing, has provided us with the ability to compete successfully against not only traditional radio competitors, but also against non-traditional competitors such as newspapers, print media and television. - ORGANIZE MARKETS IN ADVERTISER REGIONS. Our markets are located in four regional concentrations: the Southeast, Midwest, Southwest and Northeast. By assembling market clusters with a regional concentration, we believe that we will be able to increase revenues by offering regional coverage of key demographic groups that were previously unavailable to national and regional advertisers. - EMPLOY INTERNET-BASED MANAGEMENT INFORMATION SYSTEMS. We have implemented an Internet-based proprietary software application which enables us to monitor daily sales activity and inventory performance by station and by market compared to their respective budgets. It also enables us to identify any under-performing stations, determine the explanation for the under-performance and take corrective action quickly. In addition, the Internet provides all of our stations with a cost-efficient and rapid medium to exchange ideas and views regarding station operations and ways to increase advertising revenues. OUR PENDING ACQUISITIONS We have entered into definitive purchase agreements to acquire 54 stations in 19 markets for an aggregate purchase price of approximately $162.3 million. We expect to consummate most of these pending acquisitions by the first quarter of 2000, but we cannot be certain that the transactions will be consummated within that time frame, or at all. For a discussion of certain factors affecting our pending acquisitions, see "Risk Factors -- Risks of Acquisition Strategy." Petitions or informal objections are currently pending against our FCC license assignment applications in the following markets in which we have pending acquisitions: Grand Junction, Colorado; Columbus-Starkville, Mississippi; Wichita Falls, Texas; Columbus, Georgia; Augusta, Georgia; and Laurel-Hattiesburg, Mississippi. In addition, the U.S. Department of Justice is actively investigating our pending acquisitions in the Grand Junction, Colorado and Lexington, Kentucky markets. All such petitions and objections, and in some cases, FCC staff inquiries must be resolved before FCC approval can be obtained and such acquisitions consummated. Other pending or future acquisitions may also be subjected to challenges from the FCC, the U.S. Department of Justice, competitors or others. We do not expect any such challenges to affect materially any transaction other than those specific pending or future acquisitions subject to such challenges. 50 54 We have entered into letters of intent with potential sellers of radio stations and other related businesses, and we are currently a party to eight letters of intent, seven of which account for ten stations. These arrangements allow us to review such potential sellers' radio stations and propose the terms of a possible purchase agreement. We cannot assure you that any potential transaction under a letter of intent will result in the execution of a definitive purchase agreement, or be consummated. INDUSTRY OVERVIEW The primary source of revenues for radio stations is generated from the sale of advertising time to local and national spot advertisers and national network advertisers. National spot advertisers assist advertisers in placing their advertisements in a specific market. National network advertisers place advertisements on a national network show and such advertisements will air in each market where the network has an affiliate. During the past decade, local advertising revenue as a percentage of total radio advertising revenue in a given market has ranged from approximately 72% to 87%. The growth in total radio advertising revenue tends to be fairly stable. With the exception of 1991, when total radio advertising revenue fell by approximately 3.1% compared to the prior year, advertising revenue has generally risen in each of the past 16 years faster than both inflation and the gross national product. According to the Radio Advertising Bureau's Radio Marketing Guide and Fact Book for Advertisers 1998, each week radio reaches approximately 96% of all Americans over the age of 12. More than 60% of all radio listening is done outside the home and car radio reaches four out of five adults each week. The average listener spends approximately three hours and 24 minutes per day listening to radio. The highest portion of radio listenership occurs during the morning, particularly between the time a listener wakes up and the time the listener reaches work. This "morning drive time" period reaches more than 80% of people over 12 years of age, and as a result, radio advertising sold during this period achieves premium advertising rates. Radio is considered an efficient, cost-effective means of reaching specifically identified demographic groups. Stations are typically classified by their on-air format, such as country, adult contemporary, oldies and news/talk. A station's format and style of presentation enables it to target specific segments of listeners sharing certain demographic features. By capturing a specific share of a market's radio listening audience, with particular concentration in a targeted demographic, a station is able to market its broadcasting time to advertisers seeking to reach a specific audience. Advertisers and stations use data published by audience measuring services, such as Arbitron, to estimate how many people within particular geographical markets and demographics listen to specific stations. The number of advertisements that can be broadcast without jeopardizing listening levels and the resulting ratings are limited in part by the format of a particular station and the local competitive environment. Although the number of advertisements broadcast during a given time period may vary, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. 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. To generate national advertising sales, a station usually will engage a firm that specializes in soliciting radio advertising sales on a national level. National sales representatives obtain advertising principally from advertising agencies located outside the station's market and receive commissions based on the revenue from the advertising they obtain. ADVERTISING SALES Virtually all of our revenue is generated from the sale of local, regional and national advertising for broadcast on our radio stations. Approximately 89% and 88% of our net broadcasting revenue was generated from the sale of local and regional advertising in 1997 and 1998, respectively. Additional broadcasting revenue is generated from the sale of national advertising. The major categories of our advertisers include: - - Automotive - Telecommunications - Movies - - Retail - Fast Food - Entertainment - - Healthcare - Beverage - Services
51 55 Each station's local sales staff solicits advertising either directly from the local advertiser or indirectly through an advertising agency. We employ a tiered commission structure to focus our individual sales staffs on new business development. Consistent with our operating strategy of dedicated sales forces for each of our stations, we have also increased the number of salespeople per station. We believe that we can outperform the traditional growth rates of our markets by (1) expanding our base of advertisers, (2) training newly hired sales people and (3) providing a higher level of service to our existing base. This requires larger sales staffs than most of the stations employ at the time they are acquired by Cumulus. We support our strategy of building local direct accounts by employing personnel in each of our markets to produce custom commercials that respond to the needs of our advertisers. In addition, in-house production provides advertisers greater flexibility in changing their commercial messages with minimal lead time. Our national sales are made by Interep National Radio Sales, Inc., a firm specializing in radio advertising sales on the national level, in exchange for a commission that is based on our net revenue from the advertising obtained. Regional sales, which we define as sales in regions surrounding our markets to buyers that advertise in our markets, are generally made by our local sales staff and market managers. Whereas we seek to grow our local sales through larger and more customer-focused sales staffs, we seek to grow our national and regional sales by offering to key national and regional advertisers groups of stations within specific markets and regions that make our stations more attractive. Many of these large accounts have previously been reluctant to advertise in these markets because of the logistics involved in buying advertising from individual stations. Certain of our stations had no national representation before being acquired by us. The number of advertisements that can be broadcast without jeopardizing listening levels and the resulting ratings are limited in part by the format of a particular station. We estimate the optimal number of advertisements available for sale depending on the programming format of a particular station. Each of our stations has a general target level of on-air inventory that it makes available for advertising. This target level of inventory for sale may be different at different times of the day but tends to remain stable over time. Our stations strive to maximize revenue by managing their on-air inventory of advertising time and adjusting prices up or down based on supply and demand. We seek to broaden our base of advertisers in each of our markets by providing a wide array of audience demographic segments across our cluster of stations, thereby providing each of our potential advertisers with an effective means of reaching a targeted demographic group. Our selling and pricing activity is based on demand for our radio stations' on-air inventory and, in general, we respond to this demand by varying prices rather than by varying our target inventory level for a particular station. Most changes in revenue are explained by demand-driven pricing changes rather than by changes in the available inventory. Advertising rates charged by radio stations are based primarily on: - a station's share of audiences generally, and in the demographic groups targeted by advertisers (as measured by ratings surveys); - the supply of and demand for radio advertising time generally and for time targeted at particular demographic groups; and - certain additional qualitative factors. Rates are generally highest during morning and afternoon commuting hours. A station's listenership is reflected in ratings surveys that estimate the number of listeners tuned to the station and the time they spend listening. Each station's ratings are used by its advertisers and advertising representatives to consider advertising with the station and are used by Cumulus to chart audience growth, set advertising rates and adjust programming. The radio broadcast industry's principal ratings service is Arbitron, which publishes periodic ratings surveys for significant domestic radio markets. These surveys are our primary source of ratings data. COMPETITION The radio broadcasting industry is highly competitive. The success of each of our stations depends largely upon its audience ratings and its share of the overall advertising revenue within its market. Our audience ratings and advertising revenue are subject to change, and any adverse change in a particular market affecting 52 56 advertising expenditures or an adverse change in the relative market positions of the stations located in a particular market could have a material adverse effect on the revenue of our radio stations located in that market. There can be no assurance that any one or all of our stations will be able to maintain or increase current audience ratings or advertising revenue market share. Our stations, including those to be acquired upon completion of the pending acquisitions, compete for listeners and advertising revenues directly with other radio stations within their respective markets, as well as with other advertising media as discussed below. Radio stations compete for listeners primarily on the basis of program content that appeals to a particular demographic group. By building a strong listener base consisting of specific demographic groups in each of our markets, we are able to attract advertisers seeking to reach those listeners. Companies that operate radio stations must be alert to the possibility of another station changing its format to compete directly for listeners and advertisers. Another station's decision to convert to a format similar to that of one of our radio stations in the same geographic area or to launch an aggressive promotional campaign may result in lower ratings and advertising revenue, increased promotion and other expenses and consequently, lower broadcast cash flow for Cumulus. Factors that are material to a radio station's competitive position include management experience, the station's local audience rank in its market, transmitter power and location, assigned frequency, audience characteristics, local program acceptance and the number and characteristics of other radio stations and other advertising media in the market area. We attempt to improve our competitive position in each market by extensively researching and improving our stations' programming, by implementing advertising campaigns aimed at the demographic groups for which our stations program and by managing our sales efforts to attract a larger share of advertising dollars for each station individually. However, we compete with some organizations that have substantially greater financial or other resources than we do. Recent changes in federal law and the FCC's rules and policies permit increased ownership and operation of multiple local radio stations. Management believes that radio stations that elect to take advantage of groups of commonly-owned stations or joint arrangements such as LMAs may in certain circumstances have lower operating costs and may be able to offer advertisers more attractive rates and services. Although we currently operate multiple stations in each of our markets and intend to pursue the creation of additional multiple station groups, our competitors in certain markets include operators of multiple stations or operators who already have entered into LMAs. We may also compete with other broadcast groups for the purchase of additional stations. Some of these groups are owned or operated by companies that have substantially greater financial and other resources than we do. Although the radio broadcasting industry is highly competitive, and competition is enhanced to some extent by changes in existing radio station formats and upgrades of power, among other actions, certain regulatory limitations on entry exist. The operation of a radio broadcast station requires a license from the FCC, and the number of radio stations that an entity can operate in a given market is limited by the availability of FM and AM radio frequencies allotted by the FCC to communities in that market, as well as by the multiple ownership rules regulating the number of stations that may be owned or programmed by a single entity. The multiple ownership provisions of the FCC's rules have changed significantly as a result of the Telecom Act. For a discussion of FCC regulation and the provisions of the Telecom Act, see "-- Federal Regulation of Radio Broadcasting." Our stations also compete for advertising revenue with other media, including newspapers, broadcast television, cable television, magazines, direct mail, coupons and outdoor advertising. In addition, the radio broadcasting industry is subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable television systems, by satellite and by digital audio broadcasting. Digital audio broadcasting may deliver by satellite to nationwide and regional audiences, multi-channel, multi-format, digital radio services with sound quality equivalent to compact discs. The delivery of information through the presently unregulated Internet also could create a new form of competition. The radio broadcasting industry historically has grown despite the introduction of new technologies for the delivery of entertainment and information, such as television broadcasting, cable television, audio tapes and compact discs. A growing population and greater availability of radios, particularly car and portable 53 57 radios, have contributed to this growth. There can be no assurance, however, that the development or introduction in the future of any new media technology will not have an adverse effect on the radio broadcasting industry. The FCC has recently authorized spectrum for the use of a new technology, satellite digital audio radio services, to deliver audio programming. The FCC has also authorized two companies to provide digital audio radio service. Digital audio radio services may provide a medium for the delivery by satellite or terrestrial means of multiple new audio programming formats to local and national audiences. It is not known at this time whether this digital technology also may be used in the future by existing radio broadcast stations either on existing or alternate broadcasting frequencies. The FCC also recently proposed a new low power FM radio service. Under this proposal, licenses to operate stations in this service would be available only to persons or entities that do not currently own FM radio stations. We cannot predict whether the FCC ultimately will adopt rules to implement this service or what effect, if any, the implementation of these services will have on our operations. Low power FM radio stations may, however, cause interference to our stations and compete with our stations for listeners and advertising revenues. We cannot predict what other matters might be considered in the future by the FCC or the Congress, nor can we assess in advance what impact, if any, the implementation of any of these proposals or changes might have on our business. See "-- Federal Regulation of Radio Broadcasting." FEDERAL REGULATION OF RADIO BROADCASTING Introduction. The ownership, operation and sale of broadcast stations, including those licensed to Cumulus, are subject to the jurisdiction of the FCC, which acts under authority derived from the Communications Act. In 1996, the Telecom Act amended the Communications Act to make changes in several broadcast laws and to direct the FCC to change certain of its broadcast rules. Among other things, the FCC grants permits and licenses to construct and operate radio stations; assigns frequency bands for broadcasting; determines whether to approve changes in ownership or control of station licenses; regulates equipment used by stations and the operating power and other technical parameters of stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of stations; regulates the content of some forms of radio broadcasting programming; and has the power to impose penalties for violations of its rules under the Communications Act. The following is a brief summary of certain provisions of the Communications Act, the Telecom Act and specific FCC rules and policies. This description does not purport to be comprehensive, and reference should be made to the Communications Act, the FCC's rules and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of radio broadcasting stations. Failure to observe the provisions of the Communications Act and the FCC's rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of "short-term" (less than the maximum term) license renewal or, for particularly egregious violations, the denial of a license renewal application, the revocation of a license or the denial of FCC consent to acquire additional broadcast properties. License Grant and Renewal. Radio broadcast licenses are granted and renewed for maximum terms of eight years. Licenses may be renewed through an application to the FCC. Petitions to deny license renewal applications can be filed by interested parties, including members of the public. We are not currently aware of any facts that would prevent the timely renewal of our licenses to operate our radio stations, although there can be no assurance that our licenses will be renewed. The area served by AM stations is determined by a combination of frequency, transmitter power and antenna orientation. To determine the effective service area of an AM station, its power, its operating frequency, its antenna patterns and its day/night operating modes are required. The area served by FM stations is determined by a combination of transmitter power and antenna height, with stations divided into classes according to their anticipated service area. 54 58 Class C FM stations operate at 100 kilowatts of power with up to 1,968 feet of antenna elevation above average terrain. They are the most powerful FM stations, providing service to a large area, typically a substantial portion of a state. Class B FM stations operate at up to 50 kilowatts of power with up to 500 feet of antenna elevation. These stations typically serve large metropolitan areas as well as their associated suburbs. Class A FM stations operate at 6 kilowatts with up to 328 feet of antenna elevation, and serve smaller cities and towns or suburbs of larger cities. The minimum and maximum facilities requirements for an FM station are determined by its class. FM class designations depend upon the geographic zone in which the transmitter of the FM station is located. In general, commercial FM stations are classified as follows, in order of increasing power and antenna height: Class A, B1, C3, B, C2, C1 and C. The following table sets forth the market, call letters, FCC license classification, antenna elevation above average terrain (for FM stations only), power and frequency of each of the stations owned or operated by Cumulus, assuming the consummation of the pending acquisitions, and the date on which each station's FCC license expires.
HEIGHT ABOVE POWER AVERAGE (IN KILOWATTS) EXPIRATION TERRAIN -------------- MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE (IN FEET) DAY NIGHT ------ ---------- ------------------ --------- ---------------- --------- ----- ----- SOUTHEAST REGION Albany, GA........................ WNUQ FM Albany, GA 101.7 April 1, 2004 299 3.0 3.0 WEGC FM Sasser, GA 107.7 April 1, 2004 328 25.0 25.0 WALG AM Albany, GA 1590 April 1, 2004 n/a 5.0 1.0 WJAD FM Leesburg, GA 103.5 April 1, 2004 463 12.5 12.5 WKAK FM Albany, GA 104.5 April 1, 2004 981 98.0 98.0 WGPC AM Albany, GA 1450 April 1, 2004 n/a 1.0 1.0 WQVE FM Camilla, GA 105.5 April 1, 2004 276 6.0 6.0 Augusta, GA....................... WEKL FM Augusta, GA 102.3 April 1, 2004 666 1.5 1.5 WRXR FM Aiken, SC 96.3 April 1, 2004 889 15.0 15.0 WUUS FM Martinez, GA 107.7 April 1, 2004 577 24.5 24.5 WGUS AM N. Augusta, SC 1380 April 1, 2004 n/a 4.0 0.1 WBBQ FM Augusta, GA 104.3 April 1, 2004 1001 100.0 100.0 WBBQ AM Augusta, GA 1340 April 1, 2004 n/a 1.0 1.0 WXKT FM Washington, GA 100.1 April 1, 2004 322 2.4 2.4 WLOV AM Washington, GA 1370 April 1, 2004 n/a 1.0 0.0 WZNY FM Augusta, GA 105.7 April 1, 2004 1168 100.0 100.0 Chattanooga, TN................... WUSY FM Cleveland, TN 100.7 April 1, 2005 1191 100.0 100.0 South Pittsburgh, WKXJ FM TN 97.3 April 1, 2005 856 16.0 16.0 WLMX FM Rossville, GA 105.5 April 1, 2004 646 1.6 1.6 WLMX AM Rossville, GA 980 April 1, 2004 n/a 0.5 0.1 Signal Mountain, WLOV FM TN 98.1 April 1, 2005 794 1.0 1.0 Columbus, GA...................... WVRK FM Columbus, GA 102.9 April 1, 2004 1519 100.0 100.0 WGSY FM Phenix City, GA 100.1 April 1, 2004 328 6.0 6.0 WMLF AM Columbus, GA 1270 April 1, 2004 n/a 5.0 0.2 WPNX AM Phenix City, GA 1460 April 1, 2004 n/a 4.0 0.1 WAGH FM Ft. Mitchell, GA 98.3 April 1, 2004 328 6.0 6.0 WSTH FM Alexander City, AL 106.1 April 1, 2004 981 81.0 81.0 WDAK AM Columbus, GA 540 April 1, 2004 n/a 5.0 0.5 WBFA FM Smiths, AL 101.3 April 1, 2004 328 6.0 6.0 Columbus-Starkville, MS........... WSSO AM Starkville, MS 1230 June 1, 2004 n/a 1.0 1.0 WMXU FM Starkville, MS 106.1 June 1, 2004 502 40.0 40.0 WSMS FM Artesia, MS 99.9 June 1, 2004 312 50.0 50.0 WKOR FM Columbus, MS 94.9 June 1, 2004 492 50.0 50.0 WKOR AM Starkville, MS 980 June 1, 2004 n/a 1.0 0.0 WJWF AM Columbus, MS 1400 June 1, 2004 n/a 1.0 1.0 WMBC FM Columbus, MS 103.1 June 1, 2004 755 22.0 22.0
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HEIGHT ABOVE POWER AVERAGE (IN KILOWATTS) EXPIRATION TERRAIN -------------- MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE (IN FEET) DAY NIGHT ------ ---------- ------------------ --------- ---------------- --------- ----- ----- Florence, SC...................... WYNN FM Florence, SC 106.3 December 1, 2003 325 6.0 6.0 WYNN AM Florence, SC 540 December 1, 2003 n/a 0.3 0.2 WHLZ FM Manning, SC 92.5 December 1, 2003 1171 98.0 98.0 WYMB AM Manning, SC 920 December 1, 2003 n/a 2.3 1.0 WCMG FM Latta, SC 94.3 December 1, 2003 502 10.5 10.5 WHSC AM Hartsville, SC 1450 December 1, 2003 n/a 1.0 1.0 WBZF FM Hartsville, SC 98.5 December 1, 2003 328 3.0 3.0 WFSF FM Marion, SC 100.5 December 1, 2003 354 21.5 21.5 WMXT FM Pamplico, SC 102.1 December 1, 2003 479 50.0 50.0 WWFN FM Lake City, SC 100.1 December 1, 2003 433 3.3 3.3 Laurel-Hattiesburg, MS............ WHER FM Heidelberg, MS 99.3 June 1, 2004 492 50.0 50.0 WFOR AM Hattiesburg, MS 1400 June 1, 2004 n/a 1.0 1.0 WUSW FM Hattiesburg, MS 103.7 June 1, 2004 1057 100.0 100.0 WNSL FM Laurel, MS 100.3 June 1, 2004 1066 100.0 100.0 WEEZ AM Laurel, MS 890 June 1, 2004 n/a 10.0 0.0 WJKX FM Ellisville, MS 102.5 June 1, 2004 492 50.0 50.0 WMFM FM Petal, MS 106.3 June 1, 2004 400 1.8 0.0 Lexington-Fayette, KY............. WVLK AM Lexington, KY 590 August 1, 2004 n/a 5.0 1.6 WVLK FM Lexington, KY 92.9 August 1, 2004 850 100.0 100.0 WLTO FM Nicholasville, KY 102.5 August 1, 2004 400 2.0 2.0 WLRO FM Richmond, KY 101.5 August 1, 2004 541 10.0 10.0 WXZZ FM Georgetown, KY 103.3 August 1, 2004 794 1.0 1.0 Mobile, AL........................ WYOK FM Atmore, AL 104.1 April 1, 2004 1555 100.0 100.0 WGOK AM Mobile, AL 900 April 1, 2004 n/a 1.0 0.4 WBLX FM Mobile, AL 92.9 April 1, 2004 1555 98.0 98.0 WDLT FM Chickasaw, AL 98.3 April 1, 2004 548 40.0 40.0 WDLT AM Fairhope, AL 660 April 1, 2004 n/a 10.0 0.0 Montgomery, AL.................... WMSP AM Montgomery, AL 740 April 1, 2004 n/a 10.0 0.0 WNZZ AM Montgomery, AL 950 April 1, 2004 n/a 1.0 0.4 WMXS FM Montgomery, AL 103.3 April 1, 2004 1096 100.0 100.0 WLWI FM Montgomery, AL 92.3 April 1, 2004 1096 100.0 100.0 WHHY FM Montgomery, AL 101.9 April 1, 2004 1096 100.0 100.0 WHHY AM Montgomery, AL 1440 April 1, 2004 n/a 5.0 1.0 WXFX FM Prattville, AL 95.1 April 1, 2004 476 50.0 50.0 Muscle Shoals, AL................. WLAY FM Muscle Shoals, AL 105.5 April 1, 2004 742 1.1 1.1 WLAY AM Muscle Shoals, AL 1450 April 1, 2004 n/a 1.0 1.0 WKGL FM Russellville, AL 97.7 April 1, 2004 430 3.5 3.5 Myrtle Beach, SC.................. WSYN FM Georgetown, SC 106.5 December 1, 2003 492 50.0 50.0 Pawley's Island, WDAI FM SC 98.5 December 1, 2003 328 6.0 6.0 WJXY FM Conway, SC 93.9 December 1, 2003 420 3.7 3.7 WXJY FM Georgetown, SC 93.7 December 1, 2003 328 6.0 6.0 WJXY AM Conway, SC 1050 December 1, 2003 n/a 5.0 0.5 WSEA FM Atlantic Beach, SC 100.3 December 1, 2003 476 2.6 2.6 Pensacola, FL..................... WWRO FM Pensacola, FL 100.7 February 1, 2004 1555 100.0 100.0 WCOA AM Pensacola, FL 1370 February 1, 2004 n/a 5.0 5.0 Salisbury-Ocean City, MD.......... WLVW FM Salisbury, MD 105.5 October 1, 2003 384 2.1 2.1 WLBW FM Fenwick Island, DE 92.1 August 1, 2006 308 6.0 6.0 WQHQ FM Salisbury, MD 104.7 October 1, 2003 610 33.0 33.0 WTGM AM Salisbury, MD 960 October 1, 2003 n/a 5.0 5.0 WOSC FM Bethany Beach, DE 95.9 October 1, 2003 377 18.8 18.8 WWFG FM Ocean City, MD 99.9 October 1, 2003 315 50.0 50.0 WSBY FM Salisbury, MD 98.9 October 1, 2003 325 6.0 6.0 WJDY AM Salisbury, MD 1470 October 1, 2003 n/a 5.0 0.0 Savannah, GA...................... WJCL FM Savannah, GA 96.5 April 1, 2004 1161 100.0 100.0 WIXV FM Savannah, GA 95.5 April 1, 2004 856 100.0 100.0 WSIS FM Springfield, GA 103.9 April 1, 2004 328 6.0 6.0 WBMQ AM Savannah, GA 630 April 1, 2004 n/a 5.0 5.0 WEAS FM Savannah, GA 93.1 April 1, 2004 981 97.0 97.0 WJLG AM Savannah, GA 900 April 1, 2004 n/a 4.4 0.2 WZAT FM Savannah, GA 102.1 April 1, 2004 1306 100.0 100.0
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HEIGHT ABOVE POWER AVERAGE (IN KILOWATTS) EXPIRATION TERRAIN -------------- MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE (IN FEET) DAY NIGHT ------ ---------- ------------------ --------- ---------------- --------- ----- ----- Tallahassee, FL................... WHBX FM Tallahassee, FL 96.1 February 1, 2004 479 37.0 37.0 WBZE FM Tallahassee, FL 98.9 February 1, 2004 604 100.0 100.0 WHBT AM Tallahassee, FL 1410 February 1, 2004 n/a 5.0 0.0 WWLD FM Tallahassee, FL 106.1 February 1, 2004 328 6.0 6.0 WGLF FM Tallahassee, FL 104.1 February 1, 2004 1394 90.0 90.0 Tupelo, MS........................ WESE FM Baldwyn, MS 92.5 June 1, 2004 328 5.4 5.4 WTUP AM Tupelo, MS 1490 June 1, 2004 n/a 1.0 1.0 WNRX AM Tupelo, MS 1060 June 1, 2004 n/a 9.6 0.0 WWZD FM New Albany, MS 106.7 June 1, 2004 656 28.0 28.0 Wilmington, NC.................... WWQQ FM Wilmington, NC 101.3 December 1, 2003 545 40.0 40.0 WQSL FM Jacksonville, NC 92.3 December 1, 2003 725 22.7 22.7 WXQR FM Jacksonville, NC 105.5 December 1, 2003 794 19.0 19.0 WAAV FM Leland, NC 94.1 December 1, 2003 148 5.0 5.0 WAAV AM Leland, NC 980 December 1, 2003 n/a 5.0 5.0 MIDWEST REGION Ann Arbor, MI..................... WIQB FM Ann Arbor, MI 102.9 October 1, 2004 499 49.0 49.0 WQKL FM Ann Arbor, MI 107.1 October 1, 2004 289 3.0 3.0 WTKA AM Ann Arbor, MI 1050 October 1, 2004 n/a 10.0 0.5 WDEO AM Saline, MI 1290 October 1, 2004 n/a 0.5 0.0 Appleton-Oshkosh, WI.............. WWWX FM Oshkosh, WI 96.7 December 1, 2004 328 6.0 6.0 WVBO FM Oshkosh, WI 103.9 December 1, 2004 318 25.0 25.0 WNAM AM Neenah Menasha, WI 1280 December 1, 2004 n/a 20.0 5.0 WOSH AM Oshkosh, WI 1490 December 1, 2004 n/a 1.0 1.0 Bismarck, ND...................... KBYZ FM Bismarck, ND 96.5 April 1, 2005 1001 100.0 100.0 KACL FM Bismarck, ND 98.7 April 1, 2005 1093 100.0 100.0 KKCT FM Bismarck, ND 97.5 April 1, 2005 830 100.0 100.0 KLXX AM Bismarck, ND 1270 April 1, 2005 n/a 1.0 0.3 KSSS FM Bismarck, ND 101.5 April 1, 2005 988 100.0 100.0 KBMR AM Bismarck, ND 1130 April 1, 2005 n/a 10.0 0.0 KXMR AM Bismarck, ND (1) (1) -- -- -- Dubuque, IA....................... KLYV FM Dubuque, IA 105.3 February 1, 2005 331 50.0 50.0 KXGE FM Dubuque, IA 102.3 February 1, 2005 410 1.7 1.7 WDBQ FM Galena, IL 107.5 February 1, 2005 328 3.0 3.0 WDBQ AM Dubuque, IA 1490 February 1, 2005 n/a 1.0 1.0 WJOD FM Asbury, IA 103.3 February 1, 2005 643 6.6 6.6 Eau Claire, WI.................... WBIZ AM Eau Claire, WI 1400 December 1, 2004 n/a 1.0 1.0 WBIZ FM Eau Claire, WI 100.7 December 1, 2004 482 100.0 100.0 WMEQ AM Menomonie, WI 880 December 1, 2004 n/a 10.0 0.2 WMEQ FM Menomonie, WI 92.1 December 1, 2004 699 18.0 18.0 WQRB FM Bloomer, WI 95.1 December 1, 2004 545 8.9 8.9 WATQ FM Chetek, WI 106.7 December 1, 2004 584 35.0 35.0 Faribault-Owatonna-Waseca, MN..... KRFO AM Owatonna, MN 1390 April 1, 2005 n/a 0.5 0.1 KRFO FM Owatonna, MN 104.9 April 1, 2005 174 4.7 4.7 KOWO AM Waseca, MN 1170 April 1, 2005 n/a 1.0 0.0 KRUE FM Waseca, MN 92.1 April 1, 2005 285 25.0 25.0 KDHL AM Faribault, MN 920 April 1, 2005 n/a 5.0 5.0 KQCL FM Faribault, MN 95.9 April 1, 2005 328 3.0 3.0 KQPR FM Albert Lea, MN 96.1 April 1, 2005 328 6.0 6.0 KNFX AM Austin, MN 970 April 1, 2005 n/a 5.0 0.5 Green Bay, WI..................... WOGB FM Kaukauna, WI 103.1 December 1, 2004 879 25.0 25.0 WJLW FM Allouez, WI 106.7 December 1, 2004 509 25.0 25.0 WXWX FM Brillion, WI 107.5 December 1, 2004 328 6.0 6.0 Kalamazoo, MI..................... WKFR FM Battle Creek, MI 103.3 October 1, 2004 482 50.0 50.0 WRKR FM Portage, MI 107.7 October 1, 2004 489 50.0 50.0 WKMI AM Kalamazoo, MI 1360 October 1, 2004 n/a 5.0 1.0 Mankato-New Ulm-St. Peter, MN..... KXLP FM New Ulm, MN 93.1 April 1, 2005 489 100.0 100.0 KYSM AM Mankato, MN 1230 April 1, 2005 n/a 1.0 1.0 KYSM FM Mankato, MN 103.5 April 1, 2005 541 100.0 100.0 KNUJ AM New Ulm, MN 860 April 1, 2005 n/a 1.0 0.1 KNUJ FM Sleepy Eye, MN 107.3 April 1, 2005 400 1.9 1.9 KNSG FM Springfield, MN 94.7 April 1, 2005 472 50.0 50.0
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HEIGHT ABOVE POWER AVERAGE (IN KILOWATTS) EXPIRATION TERRAIN -------------- MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE (IN FEET) DAY NIGHT ------ ---------- ------------------ --------- ---------------- --------- ----- ----- Marion-Carbondale, IL............. WDDD FM Marion, IL 107.3 December 1, 2004 492 50.0 50.0 WDDD AM Johnston City, IL 810 December 1, 2004 n/a 0.3 0.3 WFRX AM West Frankfort, IL 1300 December 1, 2004 n/a 1.0 0.1 WTAO FM Murphysboro, IL 105.1 December 1, 2004 308 25.0 25.0 WVZA FM Herrin, IL 92.7 December 1, 2004 328 25.0 25.0 WQUL FM West Frankfort, IL 97.7 December 1, 2004 433 3.5 3.5 Mason City, IA.................... KCHA FM Charles City, IA 95.9 February 1, 2005 299 3.0 3.0 KGLO AM Mason City, IA 1300 February 1, 2005 n/a 5.0 5.0 KIAI FM Mason City, IA 93.9 February 1, 2005 791 100.0 100.0 KLKK FM Clear Lake, IA 103.1 February 1, 2005 308 6.0 6.0 KCHA AM Charles City, IA 1580 February 1, 2005 n/a 0.5 0.0 KCZE FM New Hampton, IA 95.1 February 1, 2005 338 5.5 5.5 KWMM FM Osage, IA 103.7 February 1, 2005 154 6.0 6.0 Monroe, MI........................ WTWR FM Monroe, MI 98.3 October 1, 2004 466 1.4 1.4 Rochester, MN..................... KRCH FM Rochester, MN 101.7 April 1, 2005 554 39.0 39.0 KWEB AM Rochester, MN 1270 April 1, 2005 n/a 5.0 1.0 KMFX FM Lake City, MN 102.5 April 1, 2005 528 9.4 9.4 KMFX AM Wabasha, MN 1190 April 1, 2005 n/a 1.0 0.0 Toledo, OH........................ WKKO FM Toledo, OH 99.9 October 1, 2003 499 50.0 50.0 WRQN FM Bowling Green, OH 93.5 October 1, 2003 397 4.1 4.1 WTOD AM Toledo, OH 1560 October 1, 2003 n/a 5.0 0.0 WWWM FM Sylvania, OH 105.5 October 1, 2003 390 4.3 4.3 WLQR AM Toledo, OH 1470 October 1, 2003 n/a 1.0 1.0 WXKR FM Port Clinton, OH 94.5 October 1, 2003 630 30.0 30.0 WBUZ FM Delta, OH 106.5 October 1, 2003 328 3.0 3.0 Topeka, KS........................ KDVV FM Topeka, KS 100.3 August 1, 2005 984 100.0 100.0 KMAJ FM Topeka, KS 107.7 August 1, 2005 988 100.0 100.0 KQTP FM St. Marys, KS 102.9 August 1, 2005 318 50.0 50.0 KWIC FM Topeka, KS 99.3 August 1, 2005 292 6.0 6.0 KMAJ AM Topeka, KS 1440 August 1, 2005 n/a 5.0 1.0 KTOP AM Topeka, KS 1490 August 1, 2005 n/a 1.0 1.0 SOUTHWEST REGION Abilene, TX....................... KCDD FM Hamlin, TX 103.7 August 1, 2005 745 100.0 100.0 KBCY FM Tye, TX 99.7 August 1, 2005 984 98.0 98.0 KFQX FM Abilene, TX 106.3 August 1, 2005 492 50.0 50.0 KHXS FM Merkel, TX 102.7 August 1, 2005 1148 66.0 66.0
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HEIGHT ABOVE POWER AVERAGE (IN KILOWATTS) EXPIRATION TERRAIN -------------- MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE (IN FEET) DAY NIGHT ------ ---------- ------------------ --------- ---------------- --------- ----- ----- Amarillo, TX...................... KZRK FM Canyon, TX 107.9 August 1, 2005 476 100.0 100.0 KZRK AM Canyon, TX 1550 August 1, 2005 n/a 1.0 0.2 KARX FM Claude, TX 95.7 August 1, 2005 390 100.0 100.0 KPUR AM Amarillo, TX 1440 August 1, 2005 n/a 5.0 1.0 KPUR FM Canyon, TX 107.1 August 1, 2005 315 6.0 6.0 KQIZ FM Amarillo, TX 93.1 August 1, 2005 699 100.0 100.0 Beaumont-Port Arthur, TX.......... KAYD FM Beaumont, TX 97.5 August 1, 2005 1200 100.0 100.0 KQXY FM Beaumont, TX 94.1 August 1, 2005 1099 100.0 100.0 KQHN AM Nederland, TX 1510 August 1, 2005 n/a 5.0 0.0 KIKR AM Beaumont, TX 1450 August 1, 2005 n/a 1.0 1.0 KTCX FM Beaumont, TX 102.5 August 1, 2005 492 50.0 50.0 Fayetteville, AR.................. KFAY FM Bentonville, AR 98.3 June 1, 2004 617 100.0 100.0 KFAY AM Farmington, AR 1030 June 1, 2004 n/a 10.0 1.0 KKEG FM Fayetteville, AR 92.1 June 1, 2004 548 7.6 7.6 KAMO FM Rogers, AR 94.3 June 1, 2004 692 25.1 25.1 KMCK FM Siloam Springs, AR 105.7 June 1, 2004 476 100.0 100.0 KZRA AM Springdale, AR 1590 June 1, 2004 n/a 2.5 0.1 Fort Smith, AR.................... KLSZ FM Van Buren, AR 102.7 June 1, 2004 476 12.0 12.0 KOMS FM Poteau, OK 107.3 June 1, 2005 1811 100.0 100.0 KBBQ FM Fort Smith, AR 100.7 June 1, 2005 459 50.0 50.0 Grand Junction, CO................ KBKL FM Grand Junction, CO 107.9 April 1, 2005 1460 100.0 100.0 KEKB FM Fruita, CO 99.9 April 1, 2005 1542 79.0 79.0 KMXY FM Grand Junction, CO 104.3 April 1, 2005 1460 100.0 100.0 KKNN FM Delta, CO 95.1 April 1, 2005 1424 100.0 100.0 KEXO AM Grand Junction, CO 1230 April 1, 2005 n/a 1.0 1.0 KQIL AM Grand Junction, CO 1340 April 1, 2005 n/a 1.0 1.0 Lake Charles, LA.................. KKGB FM Sulphur, LA 101.3 June 1, 2004 289 25.0 25.0 KBIU FM Lake Charles, LA 103.7 June 1, 2004 469 100.0 100.0 KYKZ FM Lake Charles, LA 96.1 June 1, 2004 1204 97.0 97.0 KXZZ AM Lake Charles, LA 1580 June 1, 2004 n/a 1.0 1.0 McAllen-Brownsville, TX........... KBFM FM Edingburg, TX 104.1 August 1, 2005 1001 100.0 100.0 KTEX FM Brownsville, TX 100.3 August 1, 2005 1125 100.0 100.0 Odessa-Midland, TX................ KBAT FM Midland, TX 93.3 August 1, 2005 440 100.0 100.0 KODM FM Odessa, TX 97.9 August 1, 2005 1000 100.0 100.0 KNFM FM Midland, TX 92.3 August 1, 2005 984 100.0 100.0 KGEE FM Monahans, TX 99.9 August 1, 2005 574 98.0 98.0 KMND AM Midland, TX 1510 August 1, 2005 n/a 2.4 0.0 KRIL AM Odessa, TX 1410 August 1, 2005 n/a 1.0 1.0 Wichita Falls, TX................. KLUR FM Wichita Falls, TX 99.9 August 1, 2005 830 100.0 100.0 KQXC FM Wichita Falls, TX 102.5 August 1, 2005 312 4.5 4.5 KYYI FM Burkburnett, TX 104.7 August 1, 2005 1017 100.0 100.0 KOLI FM Electra, TX 94.9 August 1, 2005 492 50.0 50.0 NORTHEAST REGION Augusta-Waterville, ME............ WABK FM Gardiner, ME 104.3 April 1, 2006 371 50.0 50.0 WKCG FM Augusta, ME 101.3 April 1, 2006 322 50.0 50.0 WIGY FM Madison, ME 97.5 April 1, 2006 328 6.0 6.0 Boothbay Harbor, WCME FM ME 96.7 April 1, 2006 417 15.5 15.5 WFAU AM Gardiner, ME 1280 April 1, 2006 n/a 5.0 5.0 WTOS FM Skowhegan, ME 105.1 April 1, 2006 243 50.0 50.0 WCTB FM Fairfield, ME 93.5 April 1, 2006 499 10.5 10.5 WSKW AM Skowhegan, ME 1160 April 1, 2006 n/a 10.0 7.3
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HEIGHT ABOVE POWER AVERAGE (IN KILOWATTS) EXPIRATION TERRAIN -------------- MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE (IN FEET) DAY NIGHT ------ ---------- ------------------ --------- ---------------- --------- ----- ----- Bangor, ME........................ WQCB FM Brewer, ME 106.5 April 1, 2006 1079 98.0 98.0 WBZN FM Old Town, ME 107.3 April 1, 2006 436 50.0 50.0 WWMJ FM Ellsworth, ME 95.7 April 1, 2006 1030 11.5 11.5 WEZQ FM Bangor, ME 92.9 April 1, 2006 787 20.0 20.0 WDEA AM Ellsworth, ME 1370 April 1, 2006 n/a 5.0 5.0
- ------------ (1) Station has been granted a construction permit and is currently operating under program test authority. An application for a license is pending before the FCC. Regulatory Approvals. The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast license without the prior approval of the FCC. In determining whether to grant an application for assignment or transfer of control of a broadcast license, the Communications Act requires the FCC to find that the assignment or transfer would serve the public interest. The FCC considers a number of factors pertaining to the licensee, including compliance with various rules limiting common ownership of media properties, financial qualifications of the licensee, the "character" of the licensee and those persons holding "attributable" interests in the licensee, and compliance with the Communications Act's limitation on non-U.S. ownership, as well as compliance with other FCC rules and policies, including programming and filing requirements. The FCC also reviews the effect of proposed assignments and transfers of broadcast licenses on economic competition and diversity as discussed below. Ownership Matters. Under the Communications Act, we are restricted to having no more than one-fourth of our stock owned or voted by non-U.S. persons, foreign governments or non-U.S. corporations. We will be required to take appropriate steps to monitor the citizenship of our shareholders, such as through representative samplings on a periodic basis, to provide a reasonable basis for certifying compliance with the foreign ownership restrictions of the Communications Act. The Communications Act and FCC rules also generally restrict the common ownership, operation or control of radio broadcast stations serving the same local market, of a radio broadcast station and a television broadcast station serving the same local market, and of a radio broadcast station and a daily newspaper serving the same local market. The Telecom Act and the FCC's broadcast multiple ownership rules also restrict the number of radio stations one person or entity may own, operate or control on a local level. None of these multiple and cross ownership rules requires any change in our current ownership of radio broadcast stations or precludes consummation of our pending acquisitions. These FCC rules and policies will limit the number of additional stations that we may acquire in the future in certain of our markets. Because of these multiple and cross ownership rules, a purchaser of our voting stock which acquires an "attributable" interest in us (as discussed below) may violate the FCC's rules if such purchaser also has an attributable or a substantial non-attributable interest in other television or radio stations, or in daily newspapers, depending on the number and location of those radio or television stations or daily newspapers. Such a purchaser also may be restricted in the companies in which it may invest, to the extent that these investments give rise to an attributable or substantial non-attributable interest. If an attributable shareholder of Cumulus violates any of these ownership rules, we may be unable to obtain from the FCC one or more authorizations needed to conduct our radio station business and may be unable to obtain FCC consents for certain future acquisitions. 60 64 The FCC generally applies its television/radio/newspaper cross-ownership rules and its broadcast multiple ownership rules by considering the "attributable," or cognizable interests held by a person or entity. A person or entity can have such an interest in a radio station, television station or daily newspaper by being an officer, director, partner or shareholder of a company that owns that station or newspaper. Whether that interest is subject to the FCC's ownership rules is determined by the FCC's attribution rules. If an interest is attributable, the FCC treats the person or entity who holds that interest as the "owner" of the radio station, television station or daily newspaper in question, and therefore subject to the FCC's ownership rules. With respect to a corporation, officers, directors and persons or entities that directly or indirectly can vote 5% or more of the corporation's stock (10% or more of such stock in the case of insurance companies, investment companies, bank trust departments and certain other "passive investors" that hold such stock for investment purposes only) generally are attributed with ownership of the radio stations, television stations and daily newspapers the corporation owns. As discussed below, a local marketing agreement with another station also may result in an attributable interest. See "-- Local Marketing Agreements." With respect to a partnership, the interest of a general partner is attributable, as is the interest of any limited partner who is "materially involved" in the media-related activities of the partnership. Debt instruments, nonvoting stock, options and warrants for voting stock that have not yet been exercised, limited partnership interests where the limited partner is not "materially involved" in the media-related activities of the partnership and where the limited partnership agreement expressly "insulates" the limited partner from such material involvement, and minority (under 5%) voting stock, generally do not subject their holders to attribution. However, the FCC is currently reviewing its rules on attribution of broadcast interests, and it may adopt stricter criteria. See "-- Proposed Changes." In addition, the FCC has a "cross-interest" policy that, under certain circumstances, could prohibit a person or entity with an attributable interest in a broadcast station or daily newspaper from having a substantial (or, in the FCC's terms,"meaningful") nonattributable interest in another broadcast station or daily newspaper in the same local market. Among other things, "meaningful" interests could include significant equity interests (including non-voting stock and otherwise "insulated" limited partnership interests) and significant employment positions. This policy may limit the permissible investments a purchaser of our voting stock may make or hold. It also may limit the Company's ability to acquire stations in the same local market in which any of our non-attributable investors has an attributable media interest. Programming and Operation. The Communications Act requires broadcasters to serve the "public interest." Broadcasters are required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. Complaints from listeners concerning a station's programming will be considered by the FCC when it evaluates the licensee's renewal application, but such complaints may be filed and considered at any time. Stations also must follow various FCC rules that regulate, among other things, political advertising, the broadcast of obscene or indecent programming, sponsorship identification, the broadcast of contests and lotteries, and technical operations (including limits on radio frequency radiation). Failure to observe these or other rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of "short-term" (less than the maximum term) renewal or, for particularly egregious violations, the denial of a license renewal application or the revocation of a license. Local Marketing Agreements. A number of radio stations, including certain of our stations, have entered into what are commonly referred to as "local marketing agreements" or "time brokerage agreements." In a typical LMA, the licensee of a station makes available, for a fee, airtime on its station to a party which supplies programming to be broadcast during that airtime, and collects revenues from advertising aired during such programming. LMAs are subject to compliance with the antitrust laws and the FCC's rules and policies, including the requirement that the licensee of each station maintain independent control over the programming and other operations of its own station. The FCC has held that such agreements do not violate the Communications Act as long as the licensee of the station that is being substantially programmed by another entity maintains ultimate responsibility for, and control over, operations of its broadcast stations and otherwise ensures compliance with applicable FCC rules and policies. 61 65 A station that brokers substantial time on another station in its market or engages in an LMA with a station in the same market will be considered to have an attributable ownership interest in the brokered station for purposes of the FCC's ownership rules, discussed above. As a result, a broadcast station may not enter into an LMA that allows it to program more than 15% of the broadcast time, on a weekly basis, of another local station that it could not own under the FCC's local multiple ownership rules. Proposed Changes. In December 1994, the FCC initiated a proceeding to solicit comment on whether it should revise its radio and television ownership "attribution" rules by, among other proposals: - raising the basic benchmark for attributing ownership in a corporate licensee from 5% to 10% of the licensee's voting stock; - increasing from 10% to 20% of the licensee's voting stock the attribution benchmark for "passive investors" in corporate licensees; - considering joint sales agreements, debt and non-voting stock interests to be attributable under certain circumstances. The FCC, on April 2, 1997, awarded two licenses for the provision of satellite-delivered digital audio radio services. Under rules adopted for this service, licensees must begin operating within four years, and must be operating their entire system within six years. Digital technology also may be used in the future by terrestrial radio broadcast stations either on existing or alternate broadcasting frequencies, and the FCC has stated that it will consider making changes to its rules to permit AM and FM radio stations to offer digital audio broadcasting following industry analysis of technical standards and has invited and received comments on a petition requesting the FCC to initiate a rule making with respect to digital audio broadcasting. In February 1999, the FCC released a Notice of Proposed Rulemaking proposing to establish a new low power FM radio service. The FCC has proposed to limit ownership and operation of low power FM stations to persons and entities which do not currently have an attributable interest in any FM station. We cannot predict whether the FCC ultimately will adopt rules authorizing low power FM service, or what impact that service would have on our operations. Adverse effects of a new low power FM service on our operations could include interference with our stations, competition by low power stations for audiences and advertising revenues, and hindering the adoption of proposals which might enable the Company's stations to commence digital audio broadcasting operations on their existing frequencies at some future time. In addition, from time to time Congress and the FCC have considered, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and profitability of our radio stations, result in the loss of audience share and advertising revenues for our radio stations, and affect the ability of Cumulus to acquire additional radio stations or finance such acquisitions. The foregoing is a brief summary of certain provisions of the Communications Act, the Telecom Act and specific FCC rules and policies. This description does not purport to be comprehensive and reference should be made to the Communications Act, the FCC's rules and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of radio broadcast stations. Antitrust and Market Concentration Considerations. Certain of our pending acquisitions, which meet specified size thresholds, are subject to applicable waiting periods and possible review under the HSR Act by the Department of Justice or the Federal Trade Commission, which evaluate transactions to determine whether those transactions should be challenged under the federal antitrust laws. Acquisitions that are not required to be reported under the HSR Act may still be investigated by the Department of Justice or the Federal Trade Commission under the antitrust laws before or after consummation. At any time before or after the consummation of a proposed acquisition, the Department of Justice or the Federal Trade Commission could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition or seeking divestiture of the business acquired or certain of our other assets. The Department of Justice has been active in its review of radio station acquisitions, particularly where an operator proposes to acquire additional stations in its existing markets or multiple stations in new 62 66 markets, and has challenged a number of such transactions. Some of these challenges have resulted in consent decrees requiring the sale of certain stations, the termination of LMAs and other relief. In general, the Department of Justice has more closely scrutinized radio mergers and acquisitions resulting in local market shares in excess of 35% of radio advertising revenues, depending on format, signal strength and other factors. There is no precise numerical rule, though, and certain transactions resulting in more than 35% revenue shares have not been challenged, while certain other transactions may be challenged based on other criteria such as audience shares in one or more demographic groups as well as the percentage of revenue share. The Department of Justice can be expected to continue to enforce the antitrust laws in this manner, and we cannot be certain that one or more of our pending acquisitions are not or will not be the subject of an investigation or enforcement action by the Department of Justice or the Federal Trade Commission. We estimate that we have more than a 35% share of radio advertising revenues in many of our markets. If the Department of Justice or the Federal Trade Commission investigates or challenges one or more of the pending acquisitions or any subsequent acquisitions, we may need to restructure such transactions or divest other existing stations in a particular market. In addition, private parties may under certain circumstances bring legal action to challenge an acquisition under the antitrust laws. We are aware that the Department of Justice is actively investigating and has issued civil investigative demands to Cumulus seeking documents and information with respect to our pending acquisitions of three stations in the Grand Junction, Colorado market and five stations in the Lexington-Fayette, Kentucky market that we currently operate under LMAs. These investigations could result in our inability to acquire one or more of these stations in each market. The Department of Justice has also commenced, and subsequently discontinued, investigations of several other acquisitions and pending acquisitions by Cumulus. There can be no assurance, however, that one or more of the pending acquisitions currently under investigation will not be the subject of an enforcement action by the Department of Justice or that other pending acquisitions or future acquisitions will not be the subject of investigation or action by the Department of Justice or the Federal Trade Commission, and that the Department of Justice, the Federal Trade Commission or the FCC will not prohibit or require the restructuring of future acquisitions, including one or more of our pending acquisitions. With respect to our pending acquisitions in the Lexington-Fayette, Kentucky market, the parties were granted early termination of the waiting period under the HSR Act, but the Department of Justice is still investigating the seller's prior acquisition of the stations we are proposing to acquire, and may attempt to cause us to divest one or more such stations or take other action against us as a result of that investigation. In addition, where acquisitions would result in certain local radio advertising revenue concentration thresholds being met, the FCC staff has a policy of reviewing applications for proposed radio station acquisitions with respect to local market concentration concerns and specifically invites public comments on such applications. Such policy may help trigger petitions to deny and informal objections against FCC applications for certain pending acquisitions and future acquisitions. Specifically, the FCC staff has stated publicly that it is currently reviewing proposed acquisitions with respect to local radio market concentration if publicly available sources indicate that, following such acquisitions, one party would receive 50% or more of the radio advertising revenues in such local radio market, or that any two parties would together receive 70% or more of such revenues, notwithstanding that the proposed acquisitions would comply with the station ownership limits in the Telecom Act and the FCC's multiple ownership rules. The FCC places a specific notation on the public notices with respect to proposed radio station acquisitions that it believes may raise local market concentration concerns inviting public comment on such matters, and in some cases may request additional information with respect to such acquisitions. There can be no assurance that the FCC will ultimately approve any such acquisition. Competitors have also filed petitions or informal objections which are currently pending before the FCC on market concentration grounds in five markets (Grand Junction, Colorado; Columbus-Starkville, Mississippi; Columbus, Georgia; and Augusta, Georgia; and Laurel-Hattiesburg, Mississippi, and the FCC staff has requested that we provide certain additional information with respect to the effects on competition and diversity of our pending acquisition of one station in the Odessa-Midland, Texas market) and all such petitions, objections or FCC requests must be resolved before FCC approval can be obtained and the acquisitions consummated. In addition, the FCC has recently indicated that it may propose new rules to define a "market" for purposes of the local radio station ownership limits in the Telecom 63 67 Act and the FCC's multiple ownership rules, which if adopted potentially could reduce the number of stations that Cumulus would be allowed to acquire in some markets. As part of its increased scrutiny of radio station acquisitions, the Department of Justice has stated publicly that it believes that commencement of operations under LMAs, joint sales agreements and other similar agreements customarily entered into in connection with radio station ownership transfers prior to the expiration of the waiting period under the HSR Act could violate the HSR Act. In connection with acquisitions subject to the waiting period under the HSR Act, we will not commence operation of any affected station to be acquired under an LMA or similar agreement until the waiting period has expired or been terminated. SEASONALITY We expect that our operations and revenues will be seasonal in nature, with generally lower revenue generated in the first quarter of the year and generally higher revenue generated in the fourth quarter of the year, with the exception of certain of our stations such as those in Salisbury-Ocean City, Maryland, and Myrtle Beach, South Carolina where the stations generally earn higher revenues in the second and third quarters of the year because of the higher seasonal population in those communities. The seasonality of our business causes and will likely continue to cause a significant variation in our quarterly operating results. Such variations could have a material adverse effect on the timing of our cash flows and therefore on our ability to pay interest on or to repay our debt, including debt under our credit facility, indenture and exchange debenture indenture. EMPLOYEES At July 16, 1999, we employed approximately 2,550 people. No employees are covered by collective bargaining agreements, and we consider our relations with our employees to be satisfactory. We also employ several on-air personalities with large loyal audiences in their respective markets. On occasion, we enter into employment agreements with these personalities to protect our interests in those relationships that we believe to be valuable. The loss of one of these personalities could result in a short-term loss of audience share, but we do not believe that any such loss would have a material adverse effect on our business, results of operations or financial condition. PROPERTIES AND FACILITIES The types of properties required to support each of our radio stations include offices, studios, transmitter sites and antenna sites. A station's studios are generally housed with its offices in business districts of the station's community of license or largest nearby community. The transmitter sites and antenna sites are generally located so as to provide maximum market coverage. At July 16, 1999, we owned studio facilities in 44 markets and we owned transmitter and antenna sites in 38 markets. We lease additional studio and office facilities in 33 markets and transmitter and antenna sites in 19 markets. In addition, we lease corporate office space in Atlanta, Georgia, Chicago, Illinois, and Milwaukee, Wisconsin, which in the aggregate approximates 19,000 square feet. We do not anticipate any difficulties in renewing any facility leases or in leasing alternative or additional space, if required. We own substantially all of our other equipment, consisting principally of transmitting antennae, transmitters, studio equipment and general office equipment. No one property is material to our operations. We believe that our properties are generally in good condition and suitable for our operations; however, we continually look for opportunities to upgrade our properties and intend to upgrade studios, office space and transmission facilities in certain markets. 64 68 LEGAL PROCEEDINGS On April 29, 1999, Cumulus was served with a complaint filed in state court in New York, seeking approximately $1.9 million in damages arising from our alleged breach of national representation agreements. We believe we have a variety of defenses to this claim. We recently were served with a complaint filed in county court in Alabama alleging that in August 1997, an employee of Colonial Broadcasting, Inc., which we acquired in July 1998, was at fault in connection with an automobile accident. The plaintiff is seeking $8.5 million in damages. While we still are investigating the facts underlying this claim, we believe we have adequate insurance coverage in connection with this claim and, as a result, believe this claim is not likely to have a material adverse effect on our business, results of operations or financial condition. In addition, we currently and from time to time are involved in litigation incidental to the conduct of our business, but we are not a party to any lawsuit or proceeding which, in our opinion, is likely to have a material adverse effect on our business, results of operations or financial condition. REORGANIZATION AND CORPORATE STRUCTURE In March 1998, we amended our articles of incorporation to change our name from Cumulus Holdings, Inc. to Cumulus Media Inc. Until immediately prior to the closing of our initial public offerings of debt and equity securities on July 1, 1998, Cumulus Media, LLC held all of our outstanding common stock. Cumulus Media, LLC's members included State of Wisconsin Investment Board, BA Capital Company, L.P., Heller Equity Capital Corporation, The Northwestern Mutual Life Insurance Company, and certain members of our management or affiliates of management. See "Principal Shareholders." Cumulus Media, LLC was liquidated and the shares of Class A common stock, Class B common stock and Class C common stock held by Cumulus Media, LLC were distributed to its members in liquidation. We conduct our U.S. radio operations primarily through Cumulus Broadcasting, Inc., which owns the radio stations acquired pursuant to asset purchase agreements. Cumulus Licensing Corp. holds all of the FCC licenses for our stations. Cumulus Wireless Services, Inc. owns certain tower sites used in our U.S. radio operations and leases space on these towers to providers of communication services, particularly the wireless service industries. Caribbean Communications Company Ltd. owns and operates radio stations throughout the English-speaking Eastern Caribbean, including Trinidad, St. Kitts-Nevis, St. Lucia, Montserrat and Antigua-Barbuda, and we have been granted a license for an FM station covering Barbados and Tortola, British Virgin Islands. In December 1998, we formed Cumulus Wireless Services, Inc., a wholly owned subsidiary of Cumulus Broadcasting, Inc., which together with Cumulus Broadcasting, owns our 216 broadcast towers. Cumulus Wireless Services, Inc. leases space on its broadcast towers to providers of communications services, with particular focus on a collocation strategy with wireless services providers who are building out mid-size markets. 65 69 MANAGEMENT The following table sets forth certain information with respect to our directors, executive officers and managers:
NAME AGE POSITION(S) - ---- --- ----------- Richard W. Weening(1)................ 53 Executive Chairman, Treasurer and Director Lewis W. Dickey, Jr.(1).............. 37 Executive Vice Chairman and Director William M. Bungeroth(1).............. 53 President and Director Richard J. Bonick, Jr................ 48 Vice President and Chief Financial Officer Terrence Baun........................ 51 Director of Engineering John Dickey.......................... 32 Director of Programming Terrence Leahy....................... 44 Secretary and General Counsel Daniel O'Donnell..................... 39 Vice President, Finance Jeffrey J. Roznowski................. 41 Vice President and General Manager, Cumulus Wireless Services, Inc. Mini Srivathsa....................... 30 Director of Technology Robert H. Sheridan, III(2)(3)........ 36 Director Ralph B. Everett(2)(3)............... 47 Director
- ------------ (1) Member of the Executive Committee. (2) Member of the Compensation Committee. (3) Member of the Audit Committee. RICHARD W. WEENING has served as our Executive Chairman, Treasurer and a Director since March 1998. Mr. Weening served as our Chairman from our inception on May 22, 1997 until March 1998. Mr. Weening was a founder and an initial investor in Cumulus Media, LLC through his ownership interest in CML Holdings LLC, an investment fund managed by QUAESTUS Management Corporation, a private equity investment and advisory firm specializing in information services and media and new media companies. QUAESTUS Management Corporation was also a Managing Member of Cumulus Media, LLC. Mr. Weening served as Chairman and Chief Executive Officer of Cumulus Media, LLC from its inception in April 1997 until its dissolution in June 1998. Mr. Weening founded QUAESTUS Management Corporation in 1989 and served as its Chairman and Chief Executive Officer until March 1998. See "Certain Relationships and Related Transactions." Mr. Weening has over 20 years experience as a chief executive officer and investor in the information and media industry including, text and reference book publishing and business magazine publishing, radio broadcasting, interactive information services and electronic commerce software and services. In 1985, Mr. Weening founded Caribbean Communications Company Ltd., a radio broadcasting company acquired by Cumulus in May 1997. He currently serves as a director of QUAESTUS Management Corporation and ARI Network Services, Inc. He holds a Bachelor of Arts degree from St. John's University. LEWIS W. DICKEY, JR. has served as our Executive Vice Chairman and a Director since March 1998. Mr. Dickey was a founder and an initial investor in Cumulus Media, LLC through his interest in CML Holdings LLC and owns 75% of the outstanding equity interests of DBBC of Georgia, LLC, which was a Managing Member of Cumulus Media, LLC. He served as Executive Vice Chairman and a Director of Cumulus Media, LLC from its inception in April 1997 until its dissolution in June 1998. Mr. Dickey is the founder and was President of Stratford Research, Inc. from September 1985 to March 1998 and owns 25% of the outstanding capital stock of Stratford Research, Inc. Stratford Research, Inc. is a strategy consulting and market research firm advising radio and television broadcasters as well as other media related industries. From January 1988 until March 1998, Mr. Dickey served as President and Chief Operating Officer of Midwestern Broadcasting Corporation, which operated two stations in Toledo, Ohio that were acquired by the Company in November 1997. See "Certain Relationships and Related Transactions." He also has an ownership interest (along with members of his family and Mr. Weening) in three stations in Nashville, Tennessee: WQQK-FM, WNPL-FM and WVOL-AM. Mr. Dickey is a nationally regarded consultant on radio strategy and the author 66 70 of The Franchise -- Building Radio Brands, published by the National Association of Broadcasters, one of the industry's leading texts on competition and strategy. He holds Bachelor of Arts and Master of Arts degrees from Stanford University and a Master of Business Administration degree from Harvard University. Mr. Dickey is the brother of John Dickey. WILLIAM M. BUNGEROTH has served as our President and a Director and President and Chief Executive Officer of Cumulus Broadcasting, Inc. since the companies began operations in May 1997. Mr. Bungeroth joined Cumulus from WPNT Radio in Chicago where he was Vice President and General Manager of this flagship property of Century Broadcasting Corporation. Prior to joining Century Broadcasting Corporation in 1992, he was President of Consulting Partners, which specialized in improving the operations of radio stations in mid-size and smaller markets. From August 1989 to July 1990, Mr. Bungeroth was Vice President of Major Market Affiliations at Unistar Radio Networks. From August 1987 to August 1989, he was President and Chief Operating Officer of Sunbelt Communications. From 1982 to 1987, he was Vice President of Sales and Operations at Century Broadcasting. He holds a Bachelor of Arts degree from Lafayette College. RICHARD J. BONICK, JR. has served as our Vice President and Chief Financial Officer since May 1997. Prior to joining Cumulus, Mr. Bonick had a successful 20 year career with Century Broadcasting where he held various financial and operating positions, most recently as Executive Vice President and Chief Financial Officer. He began his career with Price Waterhouse. Mr. Bonick is a Certified Public Accountant and holds a Bachelor of Arts degree from the University of Dayton and a Master of Management degree in finance from the Kellogg School at Northwestern University. TERRENCE M. BAUN has served as our Director of Engineering and Vice President of Cumulus Broadcasting, Inc. since January 1998. Prior to joining Cumulus, Mr. Baun was President of Criterion Broadcast Services, a broadcast engineering technical support company serving clients in Wisconsin and Illinois, from January 1988 to January 1998. Prior to January 1988, he was Technical Director of Multimedia Broadcasting's Radio Division, and a Chief Engineer at several Milwaukee stations. Mr. Baun is certified by the Society of Broadcast Engineers ("SBE") as a Professional Broadcast Engineer and recently concluded two years of service as SBE President. He is a 20-year member of the Audio Engineering Society, and holds a Bachelor of Sciences degree from Marquette University. JOHN DICKEY has served as our Director of Programming and Vice President of Cumulus Broadcasting Inc. since March 1998. Mr. Dickey has served as Executive Vice President of Stratford Research, Inc. since June 1988. He served as Director of Programming for Midwestern Broadcasting from January 1990 to March 1998 and is a partner in both Stratford Research, Inc. as well as the Nashville stations. Mr. Dickey also owns 25% of the outstanding capital stock of Stratford Research, Inc. and 25% of the outstanding equity interests of DBBC of Georgia, LLC. See "Certain Relationships and Related Transactions." Mr. Dickey holds a Bachelor of Arts degree from Stanford University. Mr. Dickey is the brother of Lewis W. Dickey, Jr. TERRENCE J. LEAHY has served as our Secretary and General Counsel and Vice President of Cumulus Broadcasting, Inc. since March 1998. Prior to March 1998, Mr. Leahy served Cumulus in the same capacity as a Managing Director of QUAESTUS Management Corporation and Vice President of the Company. Mr. Leahy began his career practicing media, telecommunications and corporate law and litigation in Washington, D.C. with the law firms of Wilmer, Cutler & Pickering and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo. He joined QUAESTUS Management Corporation in April 1992 and was appointed General Counsel and Managing Director in January 1995. Mr. Leahy played a key role in the founding of Cumulus Media, LLC. He is an honors graduate of Princeton University, Harvard Law School, and the Executive MBA program at The Wharton School at the University of Pennsylvania. DANIEL O'DONNELL has served as our Vice President, Finance since June 1998 and our Director of Corporate Finance and Vice President of Cumulus Broadcasting, Inc. since March 1998. Prior to joining Cumulus in March 1998, Mr. O'Donnell was a Senior Vice President in the Corporate Finance Group of Heller Financial, Inc. from October 1994 to March 1998. Prior to joining Heller Financial Inc.'s Corporate Finance Group in 1992, Mr. O'Donnell held a number of offices within Heller Financial, Inc., including Vice President, Portfolio Manager for the Corporate Finance Group's media portfolio, Vice President of Heller's Corporate Asset Quality Group, and Vice President, Finance for Heller International Corporation. Prior to 67 71 joining Heller Financial, Inc., Mr. O'Donnell was a manager and audit supervisor for Arthur Young & Company in the Chicago office, which he joined in 1982. Mr. O'Donnell holds a Bachelor of Arts degree in Accounting from Loyola University in Chicago, and is a Certified Public Accountant. JEFFREY ROZNOWSKI has served as Vice President and General Manager of Cumulus Wireless Services, Inc. since December 1998. Prior to joining Cumulus, Mr. Roznowski had a successful 18-year career with Ameritech Corp. where he held a variety of engineering, financial, and operational positions, most recently serving as Director of Operations for Ameritech Cellular. He is certified as a professional engineer in the State of Wisconsin and serves on the faculty for the University of Wisconsin's Department of Engineering Professional Development. He holds a Bachelor of Science and Masters of Business Administration degrees from the University of Wisconsin. MINI SRIVATHSA has served as our Director of Technology and Vice President of Cumulus Broadcasting, Inc. since January 1998. Prior to joining Cumulus, Ms. Srivathsa was a Senior Consultant for Keane, Inc. from February 1997 to January 1998 and a Vice President of Wisconsin Java Users Group from July 1996 to May 1997. From December 1993 to February 1997, she served as a Systems Architect for ARI Network Services where she served as the lead architect for an object-oriented, distributed nation-wide ordering system and worldwide web-based search engine. From December 1992 to December 1993, Ms. Srivathsa was a consultant in the Consultant Services Division at the University of Wisconsin. Ms. Srivathsa has extensive experience in Internet-based applications, object-oriented technologies and electronic commerce. She was Vice President of the Wisconsin Java User Group and is a voting committee member of the Internet Developers Association. She has also published several articles on Internet technology. She holds a Bachelor of Science degree in Computer Science from Bangalore University and a Masters of Science degree in Computer Science from the University of Wisconsin. ROBERT H. SHERIDAN, III has served as our Director since July 1998. Mr. Sheridan served as a member of the Investment Committee of Cumulus Media, LLC from April 1997 until its dissolution in June 1998. Mr. Sheridan has served as a Managing Director of Bank of America Capital Investors, the principal investment group within Bank of America Corporation since January 1998, and is a Senior Vice President of BA Capital Company, L.P., formerly known as NationsBanc Capital Corp. He was a Director of a predecessor of Bank of America Capital Investors from January 1996 to January 1998. BA Capital Company, L.P., is a stockholder of the Company. Prior to joining NationsBanc Capital Investors in January 1994, Mr. Sheridan worked in the corporate bank division of a predecessor from June 1989 to January 1994. Mr. Sheridan holds a Bachelor of Arts degree from Vanderbilt University and a Master of Business Administration from Columbia University. See "Principal Shareholders." RALPH B. EVERETT has served as our Director since July 1998. Since 1989, Mr. Everett has been a partner with the Washington, D.C. office of the law firm of Paul, Hastings, Janofsky & Walker LLP, where he heads the firm's Federal Legislative Practice Group. Prior to 1989, he was Chief Counsel and Staff Director of the United States Senate Committee on Commerce, Science and Transportation. He is a Director and a member of the Investment Committee of Shenandoah Life Insurance Company. He is also a member of the Board of Visitors of Duke University Law School and the Norfolk Southern Corporation Advisory Board. Mr. Everett holds a Bachelor of Arts degree from Morehouse College and a Juris Doctor degree from Duke University. BOARD OF DIRECTORS COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee was established after completion of our initial public offering in July 1998. The Compensation Committee consists of Mr. Robert J. Sheridan, III as Chairman and Mr. Ralph B. Everett, neither of whom is an officer or employee of Cumulus or any of our subsidiaries. The Compensation Committee is responsible for making recommendations to the Board concerning the compensation levels of our executive officers. The Compensation Committee also administers our 1998 Stock Incentive Plan and Executive Stock Incentive Plan and determines awards to be made under such plan to our executive officers and to other eligible individuals. The Compensation Committee reviews compensation programs for executive officers annually. 68 72 We may grant additional options in the future as part of our 1998 Stock Incentive Plan and our Executive Stock Incentive Plan. Granting of such options would require the approval of both our Board of Directors and our shareholders. In 1998, virtually all of the compensation decisions for executive officers were made by our Board of Directors prior to the completion of our initial public offering. Mr. Everett is a partner with the Washington, D.C. office of the law firm of Paul, Hastings, Janofsky & Walker LLP, where he heads the firm's Federal Legislative Practice Group. We also engage the law firm of Paul, Hastings, Janofsky & Walker LLP on numerous matters dealing with compliance with federal regulations and corporate finance activities. AUDIT COMMITTEE Messrs. Sheridan and Everett serve as our Audit Committee. NON-EMPLOYEE DIRECTOR COMPENSATION Our directors who are not employees receive a fee of $1,000 for each Board meeting which they attend, plus out-of-pocket expenses incurred in connection with attendance at each such meeting. In addition, upon the completion of our initial public offering in July 1998, each non-employee director received options to purchase a total of 30,000 shares of Class A common stock. Such options will be exercisable at the fair market value of the Class A common stock at the date of grant. These options will vest 20% per year with each option being fully exercisable five years from the date of grant. 69 73 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In November 1997, we acquired two radio stations (one AM and one FM station) in Toledo, Ohio from Midwestern Broadcasting, Inc. ("Midwestern"), an entity controlled by Lewis Dickey, Sr., the father of both our Executive Vice Chairman and Director, Lewis W. Dickey, Jr., and Vice President and Director of Programming, John Dickey. Lewis W. Dickey, Jr. was Midwestern's President and Chief Operating Officer until March 1998. John Dickey served as Director of Programming of Midwestern from January 1990 until March 1998. The total purchase price of the stations purchased from Midwestern was $10.0 million. Richard W. Weening, Lewis W. Dickey, Jr., John Dickey and other members of the Dickey family have ownership interests in three radio stations (two FM stations and one AM station) in Nashville, Tennessee which are not our affiliates. Lewis W. Dickey, Jr. and John Dickey each have a 25% ownership interest in Stratford Research, Inc., an entity that provides programming and marketing consulting and market research services to us. Under an agreement with Stratford Research, Inc., Stratford Research, Inc. receives $25,000 to evaluate programming at target radio stations. Annual strategic studies cost us a minimum of $25,000, negotiable depending on competitive market conditions. Additionally, Stratford Research, Inc. will provide program consulting services for $810 per month per FM station, increasing to $890 per month per FM station over the three years of the agreement. Total fees paid to Stratford Research by Cumulus during 1998 and 1997 were $2.7 million and $184,000, respectively. QUAESTUS Management Corporation, an entity controlled by Mr. Weening, provides industry research, market support and due diligence support services, and transaction management for our acquisitions and provides certain corporate finance and related services in support of our treasury function. During 1998 and 1997, we paid QUAESTUS Management Corporation $1.4 million and $297,000, respectively for acquisition and corporate finance services. Under an agreement with QUAESTUS Management Corporation, QUAESTUS Management Corporation receives a specified rate per transaction between $15,000 and $60,000, depending on the number of FM stations acquired in the transaction, and conditioned on consummation of those transactions. In addition, we are obligated to reimburse QUAESTUS Management Corporation for all of its expenses incurred in connection with the performance of services under such agreement. We also paid to Cumulus Media, LLC in 1998 and 1997 fees consisting of (i) a non-recurring organizational fee of $300,000 in 1997 (with QUAESTUS Management Corporation receiving $180,000 of such fee and DBBC of Georgia, LLC, receiving $120,000 of such fee) and (ii) a management fee of $150,000 and $206,000 (with QUAESTUS Management Corporation receiving $90,000 and $123,600, respectively, of such fees from Cumulus Media, LLC and DBBC of Georgia, LLC, receiving $60,000 and $82,400, respectively, of such fees from Cumulus Media, LLC). The fees paid to Cumulus Media, LLC have terminated. Lewis W. Dickey, Jr. and John Dickey have a 75% and 25% ownership interest in DBBC of Georgia, LLC, respectively. One of our directors is Ralph B. Everett. Mr. Everett is a partner with the Washington, D.C. office of the law firm of Paul, Hastings, Janofsky & Walker LLP, where he heads the firm's Federal Legislative practice group. We also engage the law firm of Paul, Hastings, Janofsky & Walker LLP on numerous matters dealing with compliance with federal regulations and corporate finance activities. Total expenses paid to Paul, Hastings, Janofsky & Walker LLP during fiscal 1998 and 1997 were approximately $1.2 million and $0, respectively. 70 74 PRINCIPAL SHAREHOLDERS The following table sets forth as of July 16, 1999 and as adjusted to give effect to the sale of Class A common stock offered hereby, certain information regarding beneficial ownership of our common stock by (i) each person who is known to us to be the beneficial owner of more than five percent of the outstanding shares of common stock, (ii) each director, (iii) each of the Named Executive Officers and (iv) all directors and executive officers as a group. All persons listed have sole voting and investment power with respect to their shares unless otherwise indicated.
CLASS A COMMON STOCK (1) CLASS B COMMON STOCK (1) ------------------------------------- -------------------------------------- PRIOR TO OFFERING AFTER OFFERING PRIOR TO OFFERING AFTER OFFERING ----------------- ---------------- ----------------- ----------------- NAME NUMBER % NUMBER % NUMBER % NUMBER % - ---- --------- ---- --------- --- --------- ---- --------- ---- State of Wisconsin Investment Board....................... -- -- -- -- 3,791,619 48.3% 3,791,619 48.3% BA Capital Company, L.P...... -- -- -- -- 3,371,246 42.9% 3,371,246 42.9% Heller Equity Capital Corporation................. 803,823 8.3% 803,823 4.4% -- -- -- -- The Northwestern Mutual Life Insurance Company........... -- -- -- -- 693,728 8.8% 693,728 8.8% CML Holdings, LLC............ 201,100 2.1% 201,100 1.1% -- -- -- -- QUAESTUS Management Corporation................. 101,000 1.0% 101,000 * -- -- -- -- QUAESTUS Partner Fund........ 80,000 * 80,000 * -- -- -- -- DBBC of Georgia, LLC......... 95,000 1.0% 95,000 * -- -- -- -- Putnam Investment Management.................. 1,032,000 10.6% 1,032,000 5.6% -- -- -- -- J & W Seligman & Co.......... 896,905 9.2% 896,905 4.9% -- -- -- -- Franklin Advisers, Inc....... 785,000 8.1% 785,000 4.3% -- -- -- -- Richard W. Weening(3)........ 181,000 1.9% 181,000 1.0% -- -- -- -- Lewis W. Dickey, Jr.(3)...... 149,740 1.5% 149,740 * -- -- -- -- William M. Bungeroth(4)...... 135,466 1.4% 135,466 * -- -- -- -- Richard J. Bonick, Jr.(4).... 94,590 1.0% 94,590 * -- -- -- -- John Dickey(4)............... 65,542 * 65,542 * -- -- -- -- Robert H. Sheridan, III(5)... 6,000 * 6,000 * -- -- -- -- Ralph B. Everett(5).......... 8,000 * 8,000 * -- -- -- -- All Executive Officers and Directors, as a group (7 persons).................... 640,338 6.6% 640,338 3.5% -- -- -- -- CLASS C COMMON STOCK(1)(2) ---------------------------------------- PRIOR TO OFFERING AFTER OFFERING ------------------ ------------------ NAME NUMBER % NUMBER % - ---- --------- ----- --------- ----- State of Wisconsin Investment Board....................... -- -- -- -- BA Capital Company, L.P...... -- -- -- -- Heller Equity Capital Corporation................. -- -- -- -- The Northwestern Mutual Life Insurance Company........... -- -- -- -- CML Holdings, LLC............ 1,522,422 70.8% 1,522,422 70.8% QUAESTUS Management Corporation................. 337,313 15.7% 337,313 15.7% QUAESTUS Partner Fund........ -- -- -- -- DBBC of Georgia, LLC......... 291,542 13.6% 291,542 13.6% Putnam Investment Management.................. -- -- -- -- J & W Seligman & Co.......... -- -- -- -- Franklin Advisers, Inc....... -- -- -- -- Richard W. Weening(3)........ 687,486 28.6% 687,486 28.6% Lewis W. Dickey, Jr.(3)...... 541,715 22.6% 541,715 22.6% William M. Bungeroth(4)...... -- -- -- -- Richard J. Bonick, Jr.(4).... -- -- -- -- John Dickey(4)............... -- -- -- -- Robert H. Sheridan, III(5)... -- -- -- -- Ralph B. Everett(5).......... -- -- -- -- All Executive Officers and Directors, as a group (7 persons).................... 1,229,201 57.1% 1,229,201 57.1%
- ------------ * Indicates less than one percent. (1) Except upon the occurrence of certain events, holders of Class B common stock are not entitled to vote, whereas each share of Class A common stock entitles its holders to one vote and subject to certain exceptions, each share of Class C common stock entitles its holders to ten votes. Under certain conditions and subject to prior governmental approval, shares of Class B common stock are convertible into shares of Class A common stock or Class C common stock. (2) Subject to certain exceptions, each share of Class C common stock entitles its holders to ten votes. Under certain conditions and subject to prior governmental approval, shares of Class C common stock are convertible into shares of Class A common stock. (3) Represents beneficial ownership attributable to Mr. Weening as a result of his controlling interests in QUAESTUS Management Corporation and QUAESTUS Partner Fund and beneficial ownership attributable to Mr. L. Dickey as a result of his controlling interest in DBBC of Georgia, LLC. Includes options to purchase 250,173 shares of Class C common stock exercisable within 60 days granted to each of Messrs. Weening and L. Dickey under our executive stock incentive plan. (4) Includes options to purchase 47,000, 6,124 and 30,452 shares of Class A common stock exercisable within 60 days granted to Messrs. Bungeroth, Bonick and J. Dickey, respectively, under our 1998 stock incentive plan. (5) Includes options to purchase 6,000 shares of Class A common stock exercisable within 60 days granted to each of Messrs. Sheridan and Everett upon their election to our Board of Directors. 71 75 DESCRIPTION OF CAPITAL STOCK Because this is a summary description, it does not contain every term of our capital stock contained in our Amended and Restated Articles of Incorporation and Bylaws, and we refer you to the exhibits to our Registration Statement on Form S-1 filed with the SEC on March 30, 1998, which you can access through the SEC's website at http://www.sec.gov/edgarhp.htm, and to Illinois law. Our authorized capital stock consists of: (i) 50,000,000 shares of Class A common stock, par value $.01 per share; (ii) 20,000,000 shares of Class B common stock, par value $.01 per share; (iii) 30,000,000 shares of Class C common stock, par value $.01 per share and (iv) 262,000 shares of preferred stock, 250,000 of which is designated as Series A preferred stock. COMMON STOCK General. Except with respect to voting and conversion, shares of Class A common stock, Class B common stock and Class C common stock are identical in all respects. Holders of shares of Class A common stock are entitled to one vote per share; except as provided below, holders of Class B common stock are not entitled to vote; and, subject to the next sentence, holders of shares of Class C common stock are entitled to ten votes per share. During the period of time commencing with the date of conversion of any Class B common stock to Class C common stock by either BA Capital Company, L.P., or the State of Wisconsin Investment Board and ending with the date on which BA Capital Company, L.P., and State of Wisconsin Investment Board (together with their respective affiliates) each ceases to beneficially own at least 5% of the aggregate shares of common stock held by such holders immediately prior to the consummation of our initial public offerings in July 1998, holders of Class C common stock shall be entitled to only one vote per share. Voting. All actions submitted to a vote of our stockholders are voted on by holders of Class A common stock and Class C common stock, voting together as a single class. Holders of Class B common stock are not entitled to vote, except with respect to the following fundamental corporate actions: - any proposed amendment to our Articles of Incorporation or Bylaws; - any proposed merger, consolidation or other business combination, or sale, transfer or other disposition of all or substantially all of our assets; - any proposed voluntary liquidation, dissolution or termination of Cumulus; and - any proposed transaction resulting in a change of control and except as set forth below. The affirmative vote of the holders of a majority of the outstanding shares of Class A common stock and Class C common stock, voting together as a single class, and the consent of the holders of a majority of the outstanding shares of Class B common stock, consenting separately as a class, are required to approve any fundamental corporate action; provided that such consent rights will cease with respect to such holder of Class B common stock and the shares of Class B common stock held by such holder shall not be included in determining the aggregate number of shares outstanding for consent purposes, upon the failure of any such holder (together with its affiliates) to beneficially own at least 50% of the shares of common stock held by such holder immediately prior to the consummation of our initial public offerings in July 1998. In addition to the voting rights described above, our Amended and Restated Articles of Incorporation provides that, so long as BA Capital Company, L.P. (together with its affiliates) continues to own not less than 50% of the shares of common stock held by BA Capital Company, L.P., immediately prior to the consummation of our initial public offering in July 1998 and upon a final order by the FCC that the granting of the right to BA Capital Company, L.P., to designate a director to our Board of Directors pursuant to a stockholders agreement will not result in such holders' interest being "attributable" under applicable FCC rules, (a) the holders of the Class C common stock will be entitled to elect a director, which director shall be the BA Capital Company, L.P., designee (the "Class C Director") to our Board of Directors and (b) we may not take any of the following actions without the unanimous vote of our Board of Directors (including the Class C Director): (i) enter into any transaction with any of our affiliates or amend or otherwise modify any existing agreement with any of our affiliates other than transactions with affiliates which are on terms no less 72 76 favorable to us than we would obtain in a comparable arm's-length transaction with a Person not our affiliate and which are approved, after the disclosure of the terms thereof, by vote of the majority of the Board of Directors (provided, that any director which is an interested party or our affiliate of an interested party will not be entitled to vote and will not be included in determining whether a majority of the Board of Directors has approved the transaction); (ii) issue any shares of our Class B common stock or our Class C common stock; (iii) acquire (by purchase or otherwise) or sell, transfer or otherwise dispose of assets having a fair market value in excess of 10% of our stockholders' equity as of the last day of the preceding fiscal quarter for which financial statements are available; or (iv) amend, terminate or otherwise modify any of the foregoing clauses (i) through (iii) or this clause (iv) or any provision governing the voting or conversion rights of the Class B common stock or the Class C common stock. The holders of the Class C common stock have entered into a stockholders agreement with BA Capital Company, L.P. providing that such holders of Class C common stock will elect the person designated by BA Capital Company, L.P. as the Class C Director. The Amended and Restated Articles of Incorporation further provide that the Board of Directors will be required to consider in good faith any bona fide offer from any third party to acquire any of our stock or assets and to pursue diligently any transaction determined by the Board of Directors in good faith to be in the best interests of our stockholders. Dividends and Other Distributions (Including Distributions upon Liquidation or Sale of Cumulus). Each share of Class A common stock, Class B common stock and Class C common stock shares equally in dividends and other distributions in cash, stock or property (including distributions upon our liquidation and consideration to be received upon a sale or conveyance of all or substantially all of our assets); except that in the case of dividends or other distributions payable on the Class A common stock, Class B common stock or the Class C common stock in shares of such stock, including distributions pursuant to stock splits or dividends, only Class A common stock will be distributed with respect to Class A common stock, only Class B common stock will be distributed with respect to Class B common stock and only Class C common stock will be distributed with respect to Class C common stock. In no event will any of the Class A common stock, Class B common stock or the Class C common stock be split, divided or combined unless each other class is proportionately split, divided or combined. Convertibility of Class B Common Stock into Class A Common Stock or Class C Common Stock and Convertibility of Class C Common Stock into Class A Common Stock. The Class B common stock is convertible at any time, or from time to time, at the option of the holder of such Class B common stock (provided that the prior consent of any governmental authority required to make such conversion lawful shall have been obtained) without cost to such holder (except any transfer taxes that may be payable if certificates are to be issued in a name other than that in which the certificate surrendered is registered), into Class A common stock or Class C common stock on a share-for-share basis; provided such holder is not at the time of such conversion a Disqualified Person (as defined below). The Class C common stock is convertible at any time, or from time to time, at the option of the holder of such Class C common stock (provided that the prior consent of any governmental authority required to make such conversion lawful shall have been obtained) without cost to such holder (except any transfer taxes that may be payable if certificates are to be issued in a name other than that in which the certificate surrendered is registered), into Class A common stock on a share-for-share basis; provided such holder is not at the time of such conversion a Disqualified Person. In the event of the death of Richard W. Weening or Lewis W. Dickey, Jr. (each a "Principal") or the disability of a Principal which results in the termination of such Principal's employment, each share of Class C common stock held by such deceased or disabled Principal or any related party or affiliate of such deceased or disabled Principal shall automatically be converted into one share of Class A common stock. A record or beneficial owner of shares of Class B common stock or Class C common stock which was converted from Class B common stock may transfer such shares of Class B common stock or Class C common stock (whether by sale, assignment, gift, bequest, appointment or otherwise) to any transferee, provided that the prior consent of any governmental authority required to make such transfer lawful shall have been obtained, and provided, further, that the transferee is not a Disqualified Person. Concurrently with any such 73 77 transfer, all shares of such transferred Class B common stock or Class C common stock shall convert into shares of Class A common stock, and the holders of such converted common stock shall exchange their share certificates for Class A common stock. A record or beneficial owner of shares of Class C common stock may transfer such shares (whether by sale, assignment, gift, bequest, appointment or otherwise) to any transferee; provided that the prior consent of any governmental authority required to make such transfer lawful shall have first been obtained and the transferee is not a Disqualified Person, and provided further, that if the transferee is not an affiliate or a related party of a Principal, then, concurrently with any such transfer, each such transferred share of Class C common stock shall automatically be converted into one share of Class A common stock. As a condition to any proposed transfer or conversion, the person who intends to hold the transferred or converted shares will provide us with any information reasonably requested by us to enable us to determine whether such a person is a Disqualified Person. A person shall be deemed to be a "Disqualified Person" if (and with respect to any proposed conversion or transfer, after giving effect to such proposed conversion or transfer) our Board of Directors in good faith determines a person is (or would be after giving effect to such conversion or transfer), or a person becomes aware that he or she is (or would be after giving effect to such conversion or transfer), or the FCC determines by a final order that such person is (or would be after giving effect to such conversion or transfer), a person which, directly or indirectly, as a result of ownership of common stock or our other capital stock or otherwise (i) causes (or would cause) us or any of our subsidiaries to violate the multiple, cross-ownership, cross-interest or other rules, regulations, policies or orders of the FCC, or (ii) would result in our disqualification or the disqualification of any of our subsidiaries as a licensee of the FCC or (iii) would cause us to violate the provisions with respect to foreign ownership or voting of Cumulus or any of our subsidiaries as set forth in Section 310(b)(3) or (4) of the Communications Act, as applicable. Notwithstanding the foregoing, if a person objects in good faith, within 10 days of notice from us that the Board of Directors has determined that such person is a Disqualified Person, we and/or such person shall, when appropriate, apply for a determination by the FCC with respect thereto within 10 days of notice of such objection. If no determination is made by the FCC within 90 days from the date of such application or if we and such holder determine that it is inappropriate to make any application to the FCC, we and such holder agree that such determination shall be made by an arbitrator, mutually agreed upon by us and such holder. Notwithstanding the foregoing, until a determination is made by the FCC (and such determination is a final order) or by the arbitrator, such person will not be deemed a Disqualified Person. In the event the FCC determines by a final order, a person obtains knowledge that it is, or, subject to the above, the Board of Directors in good faith determines that, a person is a Disqualified Person, such person shall promptly take any and all actions necessary or required by the FCC to cause such person to cease being a Disqualified Person, including, without limitation, divesting all or a portion of its interest in Cumulus, making an application to or requesting a ruling from and/or cooperating with us in any application to or request for a ruling from the FCC seeking a waiver for or an approval of such ownership, divesting itself of any ownership interest in any entity which together with such person's interest in Cumulus makes such person a Disqualified Person, entering into a voting trust whereby its interest in Cumulus will not make such person a Disqualified Person or exchanging its shares of common stock for Class B common stock. Our Amended and Restated Articles of Incorporation provide that all shares of common stock will bear a legend regarding restrictions on transfer and ownership. Registration Rights of Certain Holders. Pursuant to an agreement among Cumulus, BA Capital Company, L.P., the State of Wisconsin Investment Board and certain other holders (collectively, the "Holders of Registrable Stock") of 7,856,593 shares of Class B common stock (which are convertible into 7,856,593 shares of Class A common stock upon the exercise of conversion rights with respect to the Class B common stock), the Holders of Registrable Stock are entitled to certain demand and piggyback registration rights (or, in some cases, piggyback registration rights only) with respect to shares of Class A common stock (the "Registrable Stock"). Pursuant to such agreement (i) in the case of a first notice, persons holding more than 25% of the Registrable Stock, (ii) in the case of a second notice, persons holding more than 25% of the 74 78 Registrable Stock, excluding Registrable Stock held by the person(s) initiating the first notice and (iii) in the case of a third notice, persons holding more than 20% of the Registrable Stock, excluding Registrable Stock held by person(s) initiating the first or second notice may request that we file a registration statement under the Securities Act. Upon such request and subject to certain conditions, we generally will be required to use our commercially reasonable efforts to effect any such registration. We are not required to effect more than three such demand registrations (subject to (i) one additional demand Registration if all Registrable Stock to be included in prior demand registrations are not so included and (ii) one additional demand to BA Capital Company, L.P., in the event BA Capital Company, L.P. is not permitted, pursuant to a no-action letter from the Commission, to "tack" the holding period of Cumulus Media, LLC to its own holding period with respect to the shares of the common stock distributed to BA Capital Company, L.P., upon dissolution of Cumulus Media, LLC). In addition, if we propose to register any of our securities, either for our own account or for the account of other stockholders (including, without limitation, for the account of any Holder of Registrable Stock), we are required, with certain exceptions, to notify all Holders of Registrable Stock and, subject to certain limitations, to include in such registration all of the shares of common stock requested to be included by the Holders of Registrable Stock. We are is generally obligated to bear the expenses, other than underwriting discounts and sales commissions, of all of these registrations. The piggyback registration rights expire at such time as a Holder of Registrable Stock would be able to dispose of all of its Registrable Stock in any six-month period under Rule 144 of the Securities Act. Preemptive Rights. Neither the Class A common stock nor the Class B common stock nor the Class C common stock carry any preemptive rights enabling a holder to subscribe for or receive shares of our stock of any class or any other securities convertible into shares of our stock. Our Board of Directors possesses the power to issue shares of authorized but unissued Class A common stock without further stockholder action. Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of Cumulus, whether voluntarily or involuntarily, after payment or provision for payment of our debts and other liabilities and the preferential amounts to which the holders of any stock ranking prior to the Class A common stock, the Class B common stock and the Class C common stock in the distribution of assets shall be entitled upon liquidation, the holders of the Class A common stock, the Class B common stock and the Class C common stock shall be entitled to share pro rata in our remaining assets according to their respective interests. PREFERRED STOCK Authorized shares of preferred stock may be issued from time to time by our Board of Directors, without stockholder approval, in one or more series. Subject to the provisions of the Amended and Restated Articles of Incorporation and the limitations prescribed by law, the Board of Directors is expressly authorized to adopt resolutions to issue the authorized shares of preferred stock, to fix the number of shares and to change the number of shares constituting any series, and to provide for or change the voting powers, designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, including dividend rights (including whether dividends are cumulative), dividend rates, terms of redemption (including sinking fund provisions), redemption prices, conversion rights and liquidation preferences of the shares constituting any class or series of preferred stock, in each case without any further action or vote by the stockholders. One of the effects of undesignated preferred stock may be to enable the Board of Directors to render more difficult or to discourage an attempt to obtain control of Cumulus by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of our management. The issuance of shares of the preferred stock pursuant to the Board of Directors' authority described above may adversely affect the rights of the holders of common stock. For example, our preferred stock may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred stock may discourage bids for the common stock at a premium or may otherwise adversely affect the market price of the common stock. 75 79 SERIES A PREFERRED STOCK AND EXCHANGEABLE DEBENTURES General. We currently have 138,286 shares of 13 3/4% Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009, with a liquidation preference of $1,000 per share outstanding. Dividends. The holders of the Series A preferred stock are entitled to receive cumulative dividends at an annual rate equal to 13 3/4% of the liquidation preference per share of the Series A preferred stock, payable quarterly, in arrears. On or before July 1, 2003, we may, at our option, pay dividends in cash or in additional fully paid and non-assessable shares of Series A preferred stock having a liquidation preference equal to the amount of such dividends. It is not expected that we will pay any dividends in cash prior to July 1, 2003. After July 1, 2003, dividends may be paid only in cash. The terms of our credit facility and indenture restrict, and our future indebtedness may restrict, the payment of cash dividends by Cumulus. Redemption. The shares of Series A preferred stock are subject to mandatory redemption on July 1, 2009, at a price equal to 100% of the liquidation preference thereof plus any and all accrued and unpaid cumulative dividends thereon. Except as provided herein, we may not redeem the Series A preferred stock prior to July 1, 2003. On or after such date, we may redeem the Series A preferred stock at the redemption prices set forth under the terms of our certificate of designation pursuant to which the Series A preferred stock was issued together with accumulated and unpaid dividends, if any, to the date of redemption. Prior to July 1, 2001, we may redeem up to 35% of the original aggregate liquidation preference of the Series A preferred stock with the proceeds of one or more Equity Offerings (as defined in the certificate of designation) at a redemption price equal to 113 3/4% of the liquidation preference thereof plus accumulated and unpaid dividends thereon, provided, however, that at least 65% of the original aggregate liquidation preference of the Series A preferred stock remains outstanding following each such redemption. A portion of the proceeds of this offering will be used to redeem Series A preferred stock. In the event of a change of control, we must offer to redeem the outstanding shares of the Series A preferred stock for cash at a purchase price of 101% of the liquidation preference thereof, together with all accumulated and unpaid dividends. Voting. The holders of the shares of the Series A preferred stock have no voting rights with respect to general corporate matters except that the holders of a majority of the then outstanding Series A preferred stock, voting as a class, may elect two directors to our Board of Directors in the event of (i) a failure to pay dividends on the Series A preferred stock for four consecutive quarters, (ii) a failure to discharge a redemption obligation with respect to the Series A preferred stock, (iii) a failure to offer to purchase the outstanding shares of Series A preferred stock following a change of control, (iv) a violation of certain covenants after the expiration of applicable grace periods, all as set forth in our certificate of designation or (v) a default in the payment of principal, premium or interest in our indebtedness or certain of its subsidiaries or any other default which results in the acceleration of such indebtedness prior to its maturity, in each case if the aggregate principal amount of all such indebtedness exceeds $5.0 million. Holders of a majority of the outstanding shares of Series A preferred stock, voting as a separate class, must approve (i) any merger, consolidation or sale of all or substantially all of our assets not specifically permitted by our certificate of designation and (ii) any modification to our certificate of designation or the form of the exchange debenture indenture. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of Cumulus, the holders of the Series A preferred stock are entitled to be paid for each share thereof out of our assets before any distribution is made to any shares of junior stock. Exchange. We may at our option exchange all, but not less than all, of the then outstanding shares of Series A preferred stock into exchange debentures on any dividend payment date, subject to certain restrictions contained in the certificate of designation. Exchange Debentures. The exchange debentures, if issued, will be issued under an indenture between Cumulus and U.S. Bank Trust National Association, as trustee. The exchange debentures will be issued in fully registered form only in denominations of $1,000 and integral multiples thereof. Interest on the exchange debentures will be payable semi-annually in arrears in cash (or on or prior to 2003, in additional exchange debentures, at our option). The exchange debentures will be unsecured and will be subordinated in right of 76 80 payment to all Exchange Debenture Senior Debt (as defined in the exchange debenture indenture), including debt in respect of our credit facility and our senior subordinated notes and will contain covenants and events of default and remedies with respect thereto which are substantially similar to the covenants contained in our senior subordinated notes. The exchange debentures are subject to mandatory redemption on July 1, 2009, at a price equal to 100% of the principal amount thereof together with accrued and unpaid interest, if any, to the date of redemption. Except as provided herein, we may not redeem the exchange debentures prior to July 1, 2003. On or after such date, we may redeem the exchange debentures at the redemption prices set forth in the indenture governing the exchange debentures together with accrued and unpaid interest, if any, to the date of redemption. Prior to July 1, 2001, we may redeem up to 35% of the original aggregate principal amount of the exchange debentures with the proceeds of one or more Equity Offerings (as defined in the exchange debenture indenture) at a redemption price equal to 113 3/4% of the principal amount thereof plus accrued and unpaid interest thereon. In the event of a change of control, we must offer to redeem the outstanding exchange debentures for cash at a purchase price of 101% of the principal amount thereof, together with all accrued and unpaid interest. CERTAIN STATUTORY AND OTHER PROVISIONS Illinois law and our Articles of Incorporation and Bylaws contain several provisions that may make the acquisition of control of Cumulus by means of tender offer, open market purchases, proxy contest or otherwise more difficult. Set forth below is a description of those provisions. Illinois Law. We are subject to Section 7.85 of the Business Corporation Act of Illinois. Section 7.85 prohibits a publicly held Illinois corporation from engaging in a "business combination" with an "interested shareholder," unless the proposed "business combination" (i) receives the affirmative vote of the holders of at least 80% of the combined voting power of the then outstanding shares of all classes and series of the corporation entitled to vote generally in the election of directors (the "Voting Shares") voting together as a single class, and the affirmative vote of a majority of the combined voting power of the then outstanding Voting Shares held by disinterested shareholders voting together as a single class, (ii) is approved by at least two-thirds of the "disinterested directors," or (iii) provides for consideration offered to shareholders that meets certain fair price standards and satisfies certain procedural requirements. Such fair price standards require that the fair market value per share of such consideration be equal to or greater than the higher of (A) the highest price paid by the "interested shareholder" during the two-year period immediately prior to the first public announcement of the proposed "business combination" or in the transaction by which the "interested shareholder" became such, and (B) the fair market value per common share on the first trading date after the date the first public announcement of the proposed "business combination" or after the date of the first public announcement that the "interested shareholder" has become such. For purposes of Section 7.85, "disinterested director" means any member of the board of directors of the corporation who (a) is neither the "interested shareholder" nor an affiliate or associate thereof, (b) was a member of the board of directors prior to the time that the "interested shareholder" became such, or was recommended to succeed a "disinterested director" by a majority of the "disinterested directors" then in office, and (c) was not nominated for election as a director by the "interested shareholder" of any affiliate or associate thereof. For purposes of Section 7.85 and Section 11.75 described below, a "business combination" includes a merger, asset sale or other transaction resulting in a financial benefit to the interested shareholder, and an "interested shareholder" is a person who, together with affiliates and associates, owns (or within the prior two years, did own) 10% or more of the combined voting power of the outstanding Voting Shares. We are also subject to Section 11.75 of the Business Corporation Act of Illinois which prohibits "business combinations" with "interested shareholders" for a period of three years following the date that such shareholder became an "interested shareholder," unless (i) prior to such date, the Board of Directors approve the transaction that resulted in the shareholder becoming an "interested shareholder," or (ii) upon consummation of such transaction, the "interested shareholder" owned at least 85% of the Voting Shares outstanding at the time such transaction commenced (excluding shares owned by directors who are also officers, and shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange 77 81 offer), or (iii) on or after such date, the "business combination" is approved by the Board of Directors and authorized at a meeting of the shareholders by two-thirds of the outstanding Voting Shares not owned by the "interested shareholder." For purposes of Section 11.75, an "interested shareholder" is a person who, together with affiliates and associates, owns (or within the prior three years, did own) 15% or more of the combined voting power of the Voting Shares. Although Illinois law generally requires the affirmative votes of at least two-thirds of the votes of our shares entitled to vote to approve or authorize any (a) merger or consolidation of Cumulus with or into another corporation, (b) sale, lease or other disposition of all or substantially all of our assets, (c) dissolution of Cumulus or (d) amendment of our Articles of Incorporation, we have elected, as permitted by Illinois law, to require only majority vote for the approval or authorization of such actions. The substitution of the majority voting requirement may have the effect of permitting a change of control of Cumulus not favored by a shareholder or group of shareholders holding a substantial minority of the outstanding voting stock. Elimination of Liability in Certain Circumstances. Our Articles of Incorporation eliminate the liability of our directors to Cumulus or our shareholders for monetary damages resulting from breaches of their fiduciary duties as directors. Directors remain liable for breaches of their duty of loyalty to Cumulus or our shareholders, as well as for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law and transactions from which a director derives improper personal benefit. Our Articles of Incorporation also do not absolve directors of liability under Section 8.65 of the Business Corporation Act of Illinois, which makes directors personally liable for (i) unlawful dividends or unlawful stock repurchases or redemptions if the director did not act in good faith, (ii) the barring of known claims against the corporation after dissolution, and (iii) debts incurred by a dissolved corporation in carrying on its business. The effect of this provision is to eliminate the personal liability of directors for monetary damages for actions involving a breach of their fiduciary duty of care, including any such actions involving gross negligence. We believe that this provision does not eliminate the liability of our directors to Cumulus or our stockholders for monetary damages under the federal securities laws. The Bylaws also provide indemnification for the benefit of our directors and officers to the fullest extent permitted by Illinois law as it may be amended from time to time, including most circumstances under which indemnification otherwise would be discretionary. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Class A common stock is Firstar Trust Company. 78 82 DESCRIPTION OF CERTAIN INDEBTEDNESS OUR NEW CREDIT FACILITY General. We have signed a commitment letter with Lehman Brothers Inc. and Lehman Brothers Commercial Paper Inc. for a new credit facility in an aggregate principal amount of $225.0 million. We anticipate that our new credit facility will consist of a seven-year revolving credit facility of $50.0 million, a revolving credit facility of $50.0 million that will convert into a seven-year term loan 364 days after closing, an eight-year term loan facility of $75.0 million and an eight and one-half year term loan facility of $50.0 million. The amount available under the seven-year revolving credit facility will be automatically reduced by 5% of the initial aggregate principal amount in each of the third and fourth years following closing, 10% of the initial aggregate principal amount in the fifth year following the closing, 20% of the initial aggregate principal amount in the sixth year following the closing and the remaining 60% of the initial aggregate principal amount in the seventh year following the closing. The proceeds of the borrowings under our new credit facility will be used to finance our pending acquisitions and repay in part outstanding indebtedness under our old credit facility. See "Use of Proceeds." Security; Guarantees. Our obligations under our new credit facility will be secured by substantially all of our assets in which a security interest may lawfully be granted (including FCC licenses held by our subsidiaries) including, without limitation, intellectual property, real property, and all of the capital stock of our direct and indirect domestic subsidiaries and 65% of the capital stock of any first-tier foreign subsidiaries. The obligations under our new credit facility will also be guaranteed by each of our direct and indirect domestic subsidiaries and will be required to be guaranteed by any additional subsidiaries acquired by Cumulus. Interest Rates; Fees; Repayments. Both the revolving credit and term loan borrowings under our new credit facility will bear interest, at our option, at a rate equal to the Base Rate (as defined under the terms of our new credit facility) plus a margin ranging between 0.50% to 2.125%, or the Eurodollar Rate (as defined under the terms of our new credit facility) plus a margin ranging between 1.50% to 3.125% (in each case dependent upon our leverage ratio). A commitment fee calculated at a rate ranging from 0.375% to 0.75% per annum (depending upon our utilization rate) of the average daily amount available under the revolving lines of credit will be payable quarterly in arrears and fees in respect of letters of credit issued under our new credit facility equal to the interest rate margin then applicable to Eurodollar Rate loans also will be payable quarterly in arrears. In addition, a fronting fee to be agreed to by Cumulus and the issuing bank of such letter of credit is payable quarterly to the issuing bank. The eight-year term loan borrowings will be repayable in quarterly installments beginning in 2001. The scheduled annual amortization will be $0.75 million for each of the third, fourth, fifth, sixth and seventh years following closing and $71.25 million in the eighth year following closing. The eight and a half year term loan will be repayable in two consecutive equal quarterly installments, commencing on the date 99 months after the closing date. The first revolving credit loan, upon conversion to a seven-year term loan, will be repayable in quarterly installments beginning in 2001. The scheduled annual amortization will be 10% of the initial aggregate principal amount in each of the third and fourth years following closing, 15% of the initial aggregate principal amount in each of the fifth and sixth years following closing and the remaining 50% of the initial aggregate principal amount in the seventh year following closing. The amount available under the second revolving credit facility will be automatically reduced in quarterly installments as described in the first paragraph above. Certain mandatory prepayments of the term loan facility and the revolving credit line and reductions in the availability of the revolving credit line will be required to be made including: (i) subject to certain exceptions, 100% of the net proceeds from any issuance of capital stock or incurrence of indebtedness; (ii) 100% of the net proceeds from certain asset sales; and (iii) between 50% and 75% (dependent on our leverage ratio) of our excess cash flow. Covenants. The terms of our new credit facility will contain operating and financial covenants, including, without limitation, requirements to maintain minimum ratios of cash flow to interest expense and cash flow to debt service/fixed charges and maximum ratios of total debt to cash flow and senior debt to cash 79 83 flow. Our new credit facility will provide that we must maintain (a) for any four fiscal quarters, a minimum ratio of cash flow to interest expense that will increase incrementally from 1.30 to 1.00 as of June 30, 1999, to 2.20 to 1.00 for the period ending December 31, 2001 or thereafter; (b) for any four fiscal quarters, a minimum ratio of cash flow to debt service that will increase incrementally from 1.05 to 1.00 as of June 30, 1999 to 1.20 to 1.00 for the period ending December 31, 2001 or thereafter; (c) for any four fiscal quarters, a maximum ratio of total debt to cash flow decreasing incrementally from 7.75 to 1.00 as of June 30, 1999 to 5.25 to 1.00 for the period ending December 31, 2001, and thereafter; and (d) for any four fiscal quarters, a maximum ratio of senior debt to cash flow decreasing incrementally from 3.75 to 1.00 as of June 30, 1999 to 3.00 to 1.00 for the period ending December 31, 2001, and thereafter. In addition, the terms of our new credit facility will restrict, among other things, the ability of Cumulus and our subsidiaries to incur additional indebtedness, incur liens, guarantee obligations, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets. Events of Default. The terms of our new credit facility will contain events of default after expiration of applicable grace periods, including failure to make payments on the credit facility, breach of covenants, breach of representations and warranties, invalidity of the agreement governing the credit facility and related documents, cross default under other agreements or conditions relating to indebtedness of Cumulus or our subsidiaries, certain events of liquidation, moratorium, insolvency, bankruptcy or similar events, enforcement of security, certain litigation or other proceedings, and certain events relating to changes in control. Upon the occurrence of an event of default under the terms of our new credit facility, the majority of the lenders will be able to declare all amounts under our new credit facility to be due and payable and take certain other actions, including enforcement of rights in respect of the collateral. The majority of the banks extending credit under each term loan facility and the majority of the banks under each revolving credit facility may terminate such term loan facility and such revolving credit facility, respectively. OUR OLD CREDIT FACILITY Our senior credit facility, dated as of March 2, 1998 and as amended, most recently as of May 1, 1999, provides for a revolving credit line of $25.0 million until March 2, 2006, and an eight-year term loan facility of $125.0 million. We have borrowed $114.5 million of the term loan facility. The proceeds of the borrowings under our credit facility have been used to finance acquisitions and repay our outstanding indebtedness under our prior credit facility. As of July 16, 1999, $114.5 million was outstanding under the old credit facility. Our obligations under the credit facility are secured by substantially all of our assets in which a security interest may lawfully be granted. Both revolving credit and term loan borrowings under our credit facility bear interest, at our option, at a rate equal to the Base Rate (as defined under the terms of our credit facility) plus a margin ranging between 0.50% to 1.75%, or the Eurodollar Rate (as defined under the terms of our credit facility) plus a margin ranging between 1.50% to 2.75% (in each case dependent upon our leverage ratio). The terms of our credit facility contain customary operating and financial covenants. The terms of our credit facility also restrict, among other things, the ability of Cumulus and our subsidiaries to incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets. In addition, the terms of our credit facility contain events of default after expiration of applicable grace periods. OUR SENIOR SUBORDINATED NOTES General. We have issued $160.0 million of our senior subordinated notes. Interest. Our senior subordinated notes bear interest at the rate of 10 3/8% per annum, payable semi-annually in arrears. 80 84 Redemption. Our senior subordinated notes mature on July 1, 2008, at a price equal to 100% of the principal amount thereof together with accrued and unpaid interest, if any, to the date of redemption. Except as provided herein, we may not redeem our senior subordinated notes prior to July 1, 2003. On or after such date, we may redeem the senior subordinated notes at the redemption prices set forth in the indenture pursuant to which our senior subordinated notes will be issued together with accrued and unpaid interest, if any, to the date of redemption. Prior to July 1, 2001, we may redeem up to 35% of the original aggregate principal amount of our senior subordinated notes with the proceeds of one or more Equity Offerings (as defined in the indenture) at a redemption price equal to 110 3/8% of the principal amount thereof plus accrued and unpaid interest thereon; provided, however, that at least 65% of the original aggregate principal amount of the senior subordinated notes remain outstanding following each such redemption. No portion of the proceeds from this offering will be used to redeem our senior subordinated notes. In the event of a change of control, we must offer to redeem the outstanding shares of our senior subordinated notes for cash at a purchase price of 101% of the principal amount thereof, together with all accrued and unpaid interest. Subsidiary Guarantees. Our senior subordinated notes are fully and unconditionally guaranteed on an unsecured, senior subordinated basis by each of our subsidiaries in existence on the date of the indenture under which the senior subordinated notes were issued and any Restricted Subsidiary (as defined in the indenture) created or acquired by Cumulus after such date. The subsidiary guarantees will be subordinated to all Guarantor Senior Debt (as defined in the indenture) on the same basis as our senior subordinated notes are subordinated to our Senior Debt (as defined in the indenture). Ranking. Our senior subordinated notes are general unsecured obligations of Cumulus, subordinated in right of payment to all existing and future Senior Debt (as defined in the indenture), including all our obligations under our credit facility. After giving effect to transactions described in our unaudited pro forma financial statements as if they had occurred on March 31, 1999, we would have had outstanding $125.0 million of Senior Debt. Certain Covenants. The indenture under which our senior subordinated notes were issued contains certain covenants that, among other things, limit the ability of Cumulus and our Restricted Subsidiaries to incur additional debt, pay dividends or make other distributions, repurchase any capital stock or subordinated debt, make certain investments, create certain liens, enter into certain transactions with affiliates, sell assets or enter into certain mergers and consolidations. In addition, the indenture contains a covenant limiting the lines of business of certain Unrestricted Subsidiaries (as defined in the indenture). Events of Default. The terms of the indenture under which our senior subordinated notes were issued contain events of defaults, including failure to make payments on our senior subordinated notes, breach of covenants, breach of representations and warranties, cross default under other agreements or conditions relating to indebtedness of Cumulus or our Restricted Subsidiaries (as defined in the indenture), certain events of liquidation, moratorium, insolvency, bankruptcy or similar events and certain litigation or other proceedings. 81 85 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, we will have outstanding 18,393,327 shares of Class A common stock, 7,856,593 shares of Class B common stock and 2,151,277 shares of Class C common stock. In addition, we will have outstanding options to purchase 1,120,745 shares of Class A common stock and 2,001,380 shares of Class C common stock. Of these shares, 18,216,395 shares of Class A common stock will be freely transferable without restriction (subject to any FCC consent that might be required) or further registration under the Securities Act, except that any shares purchased by our "affiliates," as that term is defined in Rule 144 of the Securities Act, may generally only be sold subject to certain restrictions as to timing, manner and volume. Cumulus, our directors, executive officers (which officers and directors directly or indirectly own 640,338 shares of Class A common stock and 1,229,201 shares of Class C common stock and options to purchase 477,880 shares of Class A common stock and 2,001,380 shares of Class C common stock) and certain other shareholders of Cumulus have agreed not to, subject to certain exceptions, directly or indirectly, (1) offer, pledge, sell contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of any shares of Class A common stock or any securities convertible into or exercisable any shares of Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Class A common stock whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Class A common stock or such other securities, in cash or otherwise, for a period of 90 days after the date of this prospectus without the prior written consent of Morgan Stanley & Co. Incorporated, on behalf of the underwriters. In general, under Rule 144 as currently in effect, a shareholder, including an Affiliate (as that term is defined in Rule 144), who has beneficially owned his or her restricted securities for at least one year from the later of the date such securities were acquired from Cumulus or (if applicable) the date they were acquired from an Affiliate is entitled to sell, within any three-month period, a number of such shares that does not exceed the greater of 1% of the then outstanding shares of Class A common stock or the average weekly trading volume in the Class A common stock during the four calendar weeks preceding the date on which notice of such sale was filed under Rule 144, provided certain requirements concerning availability of public information, manner of sale and notice of sale are satisfied. In addition, under Rule 144(k), if a period of at least two years has elapsed between the later of the date restricted securities were acquired from Cumulus or (if applicable) the date they were acquired from an Affiliate of Cumulus, a shareholder who is not an Affiliate of Cumulus at the time of sale and has not been an Affiliate of Cumulus for at least three months prior to the sale is entitled to sell the shares immediately without compliance with the foregoing requirements under Rule 144. No prediction can be made as to the effect, if any, that market sales of shares of Class A common stock and the availability of shares for sale will have on the market price of the Class A common stock prevailing from time to time. Nevertheless, sales of significant numbers of shares of Class A common stock in the public market could adversely affect the market price of the Class A common stock and could impair our ability to raise capital through an offering of its equity securities. See "Underwriters." 82 86 UNDERWRITERS Under the terms and subject to the conditions contained in an Underwriting Agreement dated the date hereof (the "Underwriting Agreement"), the U.S. underwriters named below, for whom Morgan Stanley & Co. Incorporated, Lehman Brothers Inc., Bear, Stearns & Co. Inc. and Prudential Securities Incorporated are acting as U.S. representatives, and the international underwriters named below for whom Morgan Stanley & Co. International Limited, Lehman Brothers International (Europe), Bear, Stearns International Limited and Prudential-Bache Securities (U.K.) Inc. are acting as international representatives, have severally agreed to purchase, and the Company has agreed to sell to them, severally, the respective number of shares of Class A common stock set forth opposite the names of such underwriters below:
NUMBER OF NAME SHARES - ---- --------- U.S. Underwriters: Morgan Stanley & Co. Incorporated......................... Lehman Brothers Inc. ..................................... Bear, Stearns & Co. Inc. ................................. Prudential Securities Incorporated........................ -------- Subtotal.................................................. ======== International Underwriters: Morgan Stanley & Co. International Limited................ Lehman Brothers International (Europe).................... Bear, Stearns International Limited....................... Prudential-Bache Securities (U.K.) Inc. .................. -------- Subtotal.................................................. ======== Total................................................ ========
The U.S. underwriters and the international underwriters, and the U.S. representatives and the international representatives, are collectively referred to as the "underwriters" and the "representatives", respectively. The underwriters are offering the shares of Class A common stock subject to their acceptance of the shares from Cumulus and subject to prior sale. The Underwriting Agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of Class A common stock offered hereby are subject to the approval of certain legal matters by their counsel and to certain other conditions. The Underwriters are obligated to take and pay for all of the shares of Class A common stock offered hereby (other than those covered by the U.S. underwriters' overallotment option described below) if any such shares are taken. Pursuant to the Agreement between U.S. and International Underwriters, each U.S. underwriter has represented and agreed that, with certain exceptions: (i) it is not purchasing any shares (as defined herein) for the account of anyone other than a United States or Canadian person (as defined herein) and (ii) it has not offered or sold, and will not offer or sell, directly or indirectly, any shares or distribute any prospectus relating to the shares outside the United States or Canada or to anyone other than a United States or Canadian person. Pursuant to the Agreement between U.S. and International Underwriters, each international underwriter has represented and agreed that, with certain exceptions: (i) it is not purchasing any shares for the account of any United States or Canadian person and (ii) it has not offered or sold, and will not offer or sell, directly or indirectly , any shares or distribute any prospectus relating to the shares in the United States or Canada or to any Untied States or Canadian person. With respect to any underwriter that is a U.S. underwriter and an international underwriter, the foregoing representations and agreements (i) made by it in its capacity as a U.S. underwriter apply only to it in its capacity as a U.S. underwriter and (ii) made by it in its capacity as an 83 87 international underwriter apply only to it in its capacity as an International Underwriter. The foregoing limitations do not apply to stabilization transactions or to certain other transactions specified in the Agreement between U.S. and international underwriters. As used herein, "United States or Canadian person" means any national or resident of the United States or Canada, or any corporation, pension, profit-sharing or other trust or other entity organized under the laws of the United States or Canada or of any political subdivision thereof (other than a branch located outside the United States and Canada of any United States or Canadian person), and includes any United States or Canadian branch of a person who is otherwise not a United States or Canadian person. All shares of Class A common stock to be purchased by the underwriters under the Underwriting Agreement are referred to herein as the "shares." Pursuant to the Agreement between U.S. and International Underwriters, sales may be made between U.S. underwriters and international underwriters of any number of shares as may be mutually agreed. The per share price of any shares so sold shall be the public offering price set forth on the cover page hereof, in United States dollars, less an amount not greater than the per share amount of the concession to dealers set forth below. Pursuant to the Agreement between U.S. and International Underwriters, each U.S. underwriter has represented that it has not offered or sold, and has agreed not to offer or sell, any shares, directly or indirectly, in any province or territory of Canada or to, or for the benefit of, any resident of any province or territory of Canada in contravention of the securities laws thereof and has represented that any offer or sale of shares in Canada will be made only pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer or sale is made. Each U.S. underwriter has further agreed to send to any dealer who purchases from it any of the shares a notice stating in substance that, by purchasing such shares, such dealer represents and agrees that it has not offered or sold, and will not offer or sell, directly or indirectly, any of such shares in any province or territory of Canada or to, or for the benefit of, any resident of any province or territory of Canada in contravention of the Securities laws thereof and that any offer or sale of shares in Canada will be made only pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer or sale is made, and that such dealer will deliver to any other dealer to whom it sells any of such shares a notice containing substantially the same statement as is contained in this sentence. Pursuant to the Agreement between U.S. and International Underwriters, each international underwriter has represented and agreed that (i) it has not offered or sold and, prior to the date six months after the closing date for the sale of the shares to the international underwriters, will not offer or sell, any shares to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have or otherwise in circumstance which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Shares in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the offering of the shares to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisement) (Exemptions) Order 1996 (as amended) or is a person to whom such document may otherwise lawfully be issued or passed on. Pursuant to the Agreement between U.S. and International Underwriters, each international underwriter has further represented that it has not offered or sold, and has agreed not to offer or sell, directly or indirectly, in Japan or to or for the account of any resident thereof, any of the shares acquired in connection with the distribution contemplated hereby, except for offers or sales to Japanese international underwriters or dealers and except pursuant to any exemption from the registrations requirements of the Securities and Exchange Law and otherwise in compliance with applicable provisions of Japanese law. Each international underwriter has further agreed to send to any dealer who purchases from it any of the shares a notice stating in substance that, by purchasing such shares, such dealer represents and agrees that it has not offered or sold, and will not offer or sell, any of such shares, directly or indirectly, in Japan or to or for the account of any resident thereof except for offers or sales to Japanese international underwriters or dealers and except pursuant to any 84 88 exemption from the registration requirements of the Securities and Exchange Law and otherwise in compliance with applicable provisions of Japanese law, and that such dealer will send to any other dealer to whom it sells any of such shares a notice containing substantially the same statement as is contained in this sentence. The underwriters initially propose to offer part of the shares of Class A common stock directly to the public at the public offering price set forth on the cover page hereof and part to certain dealers at a price that represents a concession not in excess of $ a share under the public offering price. Any underwriter may allow, and such dealers may reallow, a concession not in excess of $ a share to other underwriters or to certain dealers. After the offering of the shares of Class A common stock, the offering price and other selling terms may from time to time be varied by the representatives. We have granted to the U.S. underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of 1,299,600 additional shares of Class A common stock at the public offering price set forth on the cover page hereof, less underwriting discounts and commissions. The U.S. underwriters may exercise such option solely for the purpose of covering overallotments, if any, made in connection with the offering of the shares of Class A common stock offered hereby. To the extent such option is exercised, each U.S. underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares of Class A common stock as the number set forth next to such U.S. underwriter's name in the preceding table bears to the total number of shares of common stock set forth next to the names of all U.S. underwriters in the preceding table. If the U.S. underwriters' option is exercised in full, the total price to the public would be $ , the total underwriters' discounts and commissions would be $ and total proceeds to Cumulus would be $ . Each of Cumulus Media Inc. and our directors, executive officers and certain other stockholders of Cumulus has agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during the period ending 90 days after the date of this prospectus, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of directly or indirectly, any shares of Class A common stock or any securities convertible into or exercisable or exchangeable for common stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Class A common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Class A common stock or such other securities, in cash or otherwise. The restrictions described in this paragraph do not apply to (x) the sale of shares to the underwriters, (y) the conversion of shares of Class A common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing or (z) transactions by any person other than Cumulus relating to shares of Class A common stock or other securities acquired in open market transactions after the completion of the offering of the shares. In order to facilitate the offering of the Class A common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Class A common stock. Specifically, the underwriters may over-allot in connection with the offering, creating a short position in the Class A common stock for their own account. In addition, to cover over-allotments or to stabilize the price of the Class A common stock, the underwriters may bid for, and purchase, shares of Class A common stock in the open market. Finally, the underwriting syndicate may reclaim selling concession allowed to an underwriter or a dealer for distributing the Class A common stock in the offering, if the syndicate repurchases previously distributed Class A common stock in transactions to cover syndicate short positions, in stabilization transactions or otherwise. The underwriters have reserved the right to reclaim selling concessions in order to encourage underwriters and dealers to distribute the Class A common stock for investment, rather than for short-term profit taking. Increasing the proportion of the offering held for investment may reduce the supply of Class A common stock available for short-term trading. Any of these activities may stabilize or maintain the market price of the Class A common stock above independent market levels. The underwriters are not required to engage in these activities, and may end any of these activities at any time. 85 89 The underwriters and dealers may engage in passive market making transactions in the common stock in accordance with Rule 103 of Regulation M promulgated by the SEC. In general, a passive market maker may not bid for, or purchase, the common stock at a price that exceeds the highest independent bid. In addition, the net daily purchases made by any passive market maker generally may not exceed 30% of its average daily trading volume in the common stock during a specified two month prior period, or 200 shares, whichever is greater. A passive market maker must identify passive market making bids as such on the Nasdaq electronic inter-dealer reporting system. Passive market making may stabilize or maintain the market price of the common stock above independent market levels. Underwriters and dealers are not required to engage in passive market making and may end passive market making activities at any time. Cumulus Media Inc. and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. Lehman Brothers Inc. and Lehman Brothers Commercial Paper Inc., an affiliate of Lehman Brothers Inc., act as arranger, and syndication agent and administrative agent, respectively, in connection with the old credit facility and the new credit facility, and will receive any repayment by Cumulus of amounts outstanding under the old credit facility from the proceeds of the offering. Lehman Brothers Inc. and Bear, Stearns & Co. Inc. have engaged from time to time and may in the future engage in general financing and banking transactions with Cumulus or affiliates thereof. This offering is being conducted pursuant to the provisions of Conduct Rule 2710(c)(8) of the National Association of Securities Dealers, Inc. 86 90 CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-U.S. HOLDERS OF CLASS A COMMON STOCK The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of Class A common stock by a non-U.S. holder. As used in this discussion, the term "Non-U.S. holder" means a person that is not any of the following: - a citizen or resident of the United States, - a corporation or partnership created or organized in or under the laws of the United States or any political subdivision of the United States, - an estate the income of which is subject to U.S. federal income taxation regardless of its source or - a trust that either is subject to the supervision of a court within the United States and the control of one or more U.S. persons or has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. THIS DISCUSSION IS BASED ON CURRENT LAW WHICH MAY BE CHANGED EITHER RETROACTIVELY OR PROSPECTIVELY. THIS DISCUSSION IS FOR GENERAL INFORMATION ONLY, DOES NOT CONSIDER ANY SPECIFIC FACTS OR CIRCUMSTANCES THAT MAY APPLY TO A PARTICULAR NON-UNITED STATES HOLDER AND DOES NOT ADDRESS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION. IN ADDITION, IT DOES NOT REPRESENT A DETAILED DESCRIPTION OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES APPLICABLE TO YOU IF YOU ARE SUBJECT TO SPECIAL TREATMENT UNDER THE U.S. FEDERAL INCOME TAX LAWS, INCLUDING IF YOU ARE A "CONTROLLED FOREIGN CORPORATION," "PASSIVE FOREIGN INVESTMENT COMPANY" OR "FOREIGN PERSONAL HOLDING COMPANY." YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR REGARDING THE UNITED STATES FEDERAL TAX CONSEQUENCES OF OWNING AND DISPOSING OF CLASS A COMMON STOCK (INCLUDING THE INVESTOR'S STATUS AS A UNITED STATES PERSON OR NON-UNITED STATES HOLDER), AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY STATE, MUNICIPALITY, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION. DIVIDENDS Dividends paid to a Non-U.S. Holder will be subject to withholding of U.S. federal income tax at the rate of 30%, unless the dividend is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment," as defined therein) within the U.S. of the Non-U.S. Holder, in which case the dividend will be subject to the rules described in the next paragraph. Non-U.S. Holders should consult any applicable income tax treaties, which may provide for a reduced withholding rate or other rules different from those described above. For purposes of determining whether tax is to be withheld at a 30% rate or a reduced rate as specified by an income tax treaty, current law permits the Company to presume that dividends paid to an address in a foreign country are paid to a resident of such country absent definite knowledge that such presumption is not warranted. However, under U.S. Treasury regulations, in the case of dividends paid after December 31, 2000, a Non-U.S. Holder generally would be subject to U.S. backup withholding tax at a 31% rate under the backup withholding rules described below, rather than at a 30% rate or a reduced rate under an income tax treaty, unless certain certification procedures (or, in the case of payments made outside the U.S. with respect to an offshore account, certain documentary evidence procedures) are satisfied, directly or through an intermediary. Further, in order to claim the benefit of an applicable tax treaty rate for dividends paid after December 31, 2000, a Non-U.S. Holder must comply with Internal Revenue Service certification requirements. Certain IRS certification and disclosure requirements must be complied with in order to be exempt from withholding under the effectively connected income exemption. The U.S. Treasury regulations also provide special rules for dividend payments made to foreign intermediaries, U.S. or foreign wholly owned entities that are disregarded for U.S. federal income tax purposes 87 91 and entities that are treated as fiscally transparent in the U.S., the applicable income tax treaty jurisdiction, or both. Prospective investors should consult with their own tax advisers concerning the effect, if any, of the Treasury regulations on an investment in the Class A common stock. A Non-U.S. Holder who is eligible for a reduced withholding rate may obtain a refund of any excess amounts withheld by filing a tax return with the IRS. U.S. withholding tax will not apply to dividends paid to a Non-U.S. Holder if the company receives IRS Form 4224 or a successor form from that Non-U.S. Holder, establishing that such income is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment," as defined therein) of the Non-U.S. Holder within the U.S., unless the Company has knowledge to the contrary. Dividends paid to a Non-U.S. Holder that are effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, are attributable to a "permanent establishment," as defined therein) of the Non-U.S. Holder within the U.S. are generally taxed on a net income basis at the graduated rates that are applicable to U.S. persons. In the case of a Non-U.S. Holder that is a corporation, such income may also be subject to a branch profits tax (which is generally imposed on a foreign corporation upon the deemed repatriation from the U.S. of effectively connected earnings and profits) at a 30% rate, unless the rate is reduced or eliminated by an applicable income tax treaty and the Non-U.S. Holder is a qualified resident of the treaty country. GAIN ON SALE OR OTHER DISPOSITION Subject to special rules applicable to individuals as described below, a Non-U.S. Holder will generally not be subject to regular U.S. federal income tax on gain recognized on a sale or other disposition of Class A common stock, unless (i) the gain is effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is attributable to a "permanent establishment," as defined therein) of the Non-U.S. Holder within the U.S. or of a partnership, trust or estate in which the Non-U.S. Holder is a partner or beneficiary within the U.S., or (ii) the Company has been, is or becomes a "U.S. real property holding corporation" within the meaning of Section 897(c) (2) of the Code at any time within the shorter of the five-year period preceding such sale or other disposition or such Non-U.S. Holder's holding period for the Class A common stock. A corporation is generally considered to be a U.S. real property holding corporation if the fair market value of its "U.S. real property interests" within the meaning of Section 897(c)(1) of the Code equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus the fair market value of any other of its assets used or held for use in a trade or business. We believe that we have not been, are not currently and are not likely to become a U.S. real property holding corporation. Further, even if we were to become a U.S. real property holding corporation, any gain recognized by a Non-U.S. Holder still would not be subject to U.S. federal income tax if the Class A common stock were considered to be "regularly traded" (within the meaning of applicable U.S. Treasury regulations) on an established securities market (e.g., the New York Stock Exchange, on which the Class A common stock will be listed), and the Non-U.S. Holder did not own, directly or indirectly, at any time during the five-year period ending on the date of the sale or other disposition, more than 5% of the Class A common stock. Gains realized by a Non-U.S. Holder of Class A common stock that are effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, are attributable to a "permanent establishment," as defined therein) within the U.S. of the Non-U.S. Holder are generally taxed on a net income basis (that is, after allowance for applicable deductions) at the graduated rates that are applicable to U.S. persons. In the case of a Non-U.S. Holder that is a corporation, such income may also be subject to the branch profits tax (described above). In addition to being subject to the rules described above, an individual Non-U.S. Holder who holds Class A common stock as a capital asset generally will be subject to tax at a 30% rate on any gain recognized on the sale or other disposition of such stock if (i) such gain is not effectively connected with the conduct of a trade or business (or, if an income tax treaty applies, is not attributable to a "permanent establishment," as defined therein) of the Non-U.S. Holder within the U.S., and (ii) such individual is present in the U.S. for 88 92 183 days or more in the taxable year of the sale or other disposition and either (A) has a "tax home" in the U.S. (as specially defined for purposes of the U.S. federal income tax), or (B) maintains an office or other fixed place of business in the U.S. and the income from the sale of the stock is attributable to such office or other fixed place of business. Individual Non-U.S. Holders may also be subject to tax pursuant to provisions of U.S. federal income tax law applicable to certain U.S. expatriates. FEDERAL ESTATE TAXES Class A common stock owned or treated as owned by an individual (regardless of whether such an individual is a citizen or a resident of the U.S.) on the date of death will be included in such individual's estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. INFORMATION REPORTING AND BACKUP WITHHOLDING We must report annually to the IRS and to each Non-U.S. Holder the amount of dividends paid to, and the tax withheld with respect to, such Non-U.S. Holder, regardless of whether tax was actually withheld and whether withholding was reduced or eliminated by an applicable income tax treaty. Pursuant to certain income tax treaties and other agreements, that information may also be made available to the tax authorities of the country in which the Non-U.S. Holder resides. U.S. federal backup withholding (which generally is withholding imposed at the rate of 31% on certain payments to persons not otherwise exempt who fail to furnish certain identifying information) will generally not apply to (i) dividends paid to a Non-U.S. Holder that is subject to withholding at the 30% rate (or that is subject to withholding at a reduced rate under an applicable income tax treaty), or (ii) before January 1, 2001, dividends paid to a Non-U.S. Holder at an address outside of the U.S. (unless the payor has knowledge that the payee is a U.S. person). However, under U.S. Treasury regulations, in the case of dividends paid after December 31, 2000, a Non-U.S. Holder generally would be subject to U.S. withholding tax at a 31% rate, unless certain certification procedures (or, in the case of payments made outside the U.S. with respect to an offshore account, certain documentary evidence procedures) are satisfied, directly or through an intermediary. Backup withholding and information reporting generally will apply to dividends paid to addresses inside the U.S. on shares of Class A common stock to beneficial owners that are not "exempt recipients" and that fail to provide in the manner required certain identifying information. The backup withholding and information reporting requirements also apply to the gross proceeds paid to a Non-U.S. Holder upon the sale or other disposition of Class A common stock by or through a U.S. office of a U.S. or foreign broker, unless the Non-U.S. Holder certifies to the broker under penalties of perjury as to, among other things, its name, address and status as a Non-U.S. Holder or otherwise establishes an exemption. In general, backup withholding and information reporting will not apply to a payment of the proceeds of a sale or other disposition of Class A common stock effected by or through a foreign office of a broker. Before January 1, 2001, however, information reporting requirements (but not backup withholding) will apply to a payment of the proceeds of a sale or other disposition of Class A common stock effected at a foreign office of (i) a U.S. broker; (ii) a foreign broker 50% or more of whose gross income for certain periods is effectively connected with the conduct of a trade or business within the U.S.; or (iii) a foreign broker that is a "controlled foreign corporation" for U.S. federal income tax purposes, unless the broker has documentary evidence in its records that the Non-U.S. Holder is a Non-U.S. Holder (and the broker has no knowledge to the contrary) and certain other conditions are met, or unless the Non-U.S. Holder otherwise establishes an exemption. Further, after December 31, 2000, under U.S. Treasury regulations, information reporting and backup withholding may apply to payments of the gross proceeds from the sale or redemption of Class A common stock effected through foreign offices of brokers having any of a broader class of connections with the U.S. unless certain IRS certification requirements are complied with. Prospective investors should consult with their own tax advisers regarding these Treasury regulations, and in particular with respect to whether the use of a particular broker would subject the investor to these rules. 89 93 Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be refunded or credited against the Non-U.S. Holder's U.S. federal income tax liability, provided that the Non-U.S. Holder files a tax return with the IRS. LEGAL MATTERS Certain legal matters with respect to the shares of Class A common stock offered hereby will be passed upon for Cumulus by Holleb & Coff, Chicago, Illinois. Simpson Thacher & Bartlett, New York, New York, has acted as counsel to the underwriters in connection with this offering. One of our directors is Ralph B. Everett. Mr. Everett is a partner with the Washington, D.C. office of the law firm of Paul, Hastings, Janofsky & Walker LLP, where he heads the firm's Federal Legislative Practice Group. We also engage the law firm of Paul, Hastings, Janofsky & Walker LLP on numerous matters dealing with compliance with federal regulations and corporate finance activities. EXPERTS The financial statements incorporated by reference in this prospectus to the Annual Report on Form 10-K of Cumulus Media Inc. for the year ended December 31, 1998 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 90 94 WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements, or other information we file with the SEC at its Public Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549 and at the SEC's regional offices located at Seven World Trade Center, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public at the SEC's web site at http://www.sec.gov. Our Class A common stock is quoted on the Nasdaq National Market. You can inspect and copy our reports and other information at the offices of the National Association of Securities Dealers, Inc., located at 1735 K Street, N.W., Washington, D.C. 20006. We filed a registration statement on Form S-3 to register with the SEC our Class A common stock offered hereby. This prospectus is part of that registration statement. As permitted by SEC rules, this prospectus does not contain all of the information you can find in the registration statement or the exhibits to the registration statement. The SEC allows us to "incorporate by reference" the information we filed with them, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be a part of this prospectus, and later information filed with the SEC will update and supersede this information. We incorporate by reference the documents listed below: 1. Annual Report on Form 10-K for the fiscal year ended December 31, 1998, as amended by Form 10-K/A. 2. Quarterly Report on Form 10-Q for the three months ended March 31, 1999. All documents subsequently filed by us pursuant to Sections 13(a), 13(c), 15(d) or 16 of the Exchange Act, prior to the termination of this offering, will be deemed to be incorporated by reference into this prospectus. You may request a copy of these filings, at no cost, by writing or telephoning: Cumulus Media Inc. 111 East Kilbourn Avenue Suite 2700 Milwaukee, WI 53202 Attn: Office of Investor Relations (414) 615-2800 You should rely on the information incorporated by reference or provided in this prospectus. We have authorized no one to provide you different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of the document. 91 95 [CUMULUS LOGO] 96 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. PROSPECTUS (Subject to Completion) Issued July , 1999 [ALTERNATE PAGE FOR INTERNATIONAL OFFERING] 8,664,000 Shares cumulus logo CLASS A COMMON STOCK ------------------------ CUMULUS MEDIA INC. IS OFFERING 8,664,000 SHARES OF ITS CLASS A COMMON STOCK. INITIALLY, THE INTERNATIONAL UNDERWRITERS ARE OFFERING 1,732,800 SHARES OF CLASS A COMMON STOCK OUTSIDE THE U.S. AND CANADA AND THE U.S. UNDERWRITERS ARE OFFERING 6,931,200 SHARES OF CLASS A COMMON STOCK IN THE U.S. AND CANADA. ------------------------ CUMULUS MEDIA INC.'S CLASS A COMMON STOCK IS LISTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "CMLS." ON JULY 16, 1999, THE REPORTED LAST SALE PRICE OF THE CLASS A COMMON STOCK ON THE NASDAQ NATIONAL MARKET WAS $24.9375 PER SHARE. ------------------------ INVESTING IN THE CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 13. ------------------------ PRICE $ A SHARE ------------------------
UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC COMMISSIONS CUMULUS -------- ------------- ----------- Per Share................................... $ $ $ Total....................................... $ $ $
The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Cumulus Media Inc. has granted the U.S. underwriters the right to purchase up to an additional 1,299,600 shares to cover over-allotments. Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on , 1999. ------------------------ Joint Lead Managers MORGAN STANLEY DEAN WITTER LEHMAN BROTHERS BEAR, STEARNS INTERNATIONAL LIMITED PRUDENTIAL-BACHE SECURITIES , 1999 97 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts and commissions, to be paid in connection with the sale of the Class A common stock being registered, all of which will be paid by the Registrant. All amounts are estimates except the registration fee and the NASD filing fee. Registration fee............................................ $ 69,222 NASD filing fee............................................. 30,500 Nasdaq National Market listing fee.......................... 7,500 Blue Sky fees and expenses.................................. 3,000 Accounting fees and expenses................................ 200,000 Legal fees and expenses..................................... 500,000 Transfer agent and registrar fees........................... 5,000 Printing and engraving expenses............................. 200,000 Miscellaneous expenses...................................... 235,000 ---------- Total.................................................. $1,250,222 ==========
- ------------ * To be completed by amendment. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Company will maintain officers' and directors' liability insurance which will insure against liabilities that officers and directors of the Company may incur in such capacities. The Company has also entered into indemnification agreements with its directors and officers. Reference is made to the Proposed Form of Underwriting Agreement filed as Exhibit 1 which provides for indemnification of the directors and officers of the Company signing the Registration Statement and certain controlling persons of the Company against certain liabilities, including those arising under the Securities Act in certain instances, of the Underwriters. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits 1.1*** Form of Underwriting Agreement between the Registrant and the Underwriters. 1.2*** Form of Agreement Between the U.S. and International Underwriters. 3.1* Form of Amended and Restated Articles of Incorporation of Cumulus Media Inc. 3.2* Form of Amended and Restated Bylaws of Cumulus Media Inc. 3.3* Form of Certificate of Designation with respect to Series A Cumulative Exchangeable Redeemable Preferred Stock Due 2009. 3.4* Form of Class A common stock Certificate. 3.5* Form of Series A preferred stock Certificate. 5.1*** Opinion of Holleb & Coff as to the validity of the Class A common stock 10.1* Credit Agreement dated March 2, 1998 among Cumulus Media Inc., Lehman Brothers Inc. and Lehman Commercial Paper Inc. 10.2* First Amendment, dated May 1, 1998, to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Inc. and Lehman Commercial Paper.
II-1 98 10.3* Second Amendment, dated June 24, 1998, to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Inc. and Lehman Commercial Paper. 10.4*** Third Amendment, dated June 26, 1998, to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Inc. and Lehman Commercial Paper. 10.5*** Fourth Amendment, dated October 1, 1998, to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Inc. and Lehman Commercial Paper. 10.6*** Fifth Amendment, dated as of January 14, 1999 to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Inc. and Lehman Commercial Paper. 10.7*** Sixth Amendment, dated as of March 31, 1999 to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Commercial Paper. 10.8*** Seventh Amendment, dated as of May 1, 1999 to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Commercial Paper. 10.9* Form of Indenture between Cumulus Media Inc. and Firstar Bank of Minnesota, N.A., as Trustee. 10.10* Form of Exchange Debenture Indenture between Cumulus Media Inc. and U.S. Bank Trust National Association, as Trustee. 10.11* Form of Employment Agreement between Cumulus Media Inc. and Richard W. Weening. 10.12* Form of Employment Agreement between Cumulus Media Inc. and Lewis W. Dickey, Jr. 10.13* Employment Agreement between Cumulus Media Inc. and William M. Bungeroth. 10.14* Employment Agreement between Cumulus Media Inc. and Richard J. Bonick, Jr. 10.15* Form of Cumulus Media Inc. 1998 Employee Stock Incentive Plan. 10.16* Form of Cumulus Media Inc. 1998 Executive Stock Incentive Plan. 10.17* Services Agreement dated May 1, 1998 by and between QUAESTUS Management Corporation and Cumulus Media Inc. 10.18* Services Agreement dated March 23, 1998 between Stratford Research, Inc. and Cumulus Media Inc. 21.1*** Subsidiaries of the Company. 23.1*** Consent of PricewaterhouseCoopers LLP. 23.2*** Consent of Holleb & Coff (included in Exhibit 5.1). 24.1** Powers of Attorney, included on page II-4.
- --------------- * Incorporated by reference to our Registration Statement on Form S-1 declared effective on June 26, 1998. ** Previously filed. *** Filed herewith. ITEM 17. UNDERTAKINGS. (a) The Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. (b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In II-2 99 the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (c) The Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act (sec. 230.424(b)(1) or (4) or sec. 230.497(h)) shall be deemed to be part of this Registration Statement as of the time the Commission declared it effective. (2) For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement for the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (d) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to, and meeting the requirements of, Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934, and, where interim financial information required to be presented Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. II-3 100 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant hereby certifies that it has reasonable grounds to believe that it meets all of the requirements on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on July 16, 1999. CUMULUS MEDIA INC. By: /s/ RICHARD W. WEENING ------------------------------------ Richard W. Weening Executive Chairman Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities and on the dates indicated:
NAME TITLE DATE ---- ----- ---- /s/ RICHARD W. WEENING Executive Chairman, Treasurer and July 16, 1999 - ------------------------------------------ Director (Principal Executive Richard W. Weening Officer) /s/ RICHARD W. WEENING Executive Vice Chairman and Director July 16, 1999 - ------------------------------------------ Richard W. Weening, As Attorney-In-Fact for Lewis W. Dickey, Jr. /s/ RICHARD W. WEENING President and Director July 16, 1999 - ------------------------------------------ Richard W. Weening, As Attorney-In-Fact for William M. Bungeroth /s/ RICHARD W. WEENING Vice President and Chief Financial July 16, 1999 - ------------------------------------------ Officer (Principal Financial Officer Richard W. Weening, and Principal Accounting Officer) As Attorney-In-Fact for Richard J. Bonick, Jr. /s/ RICHARD W. WEENING Director July 16, 1999 - ------------------------------------------ Richard W. Weening, As Attorney-In-Fact for Ralph B. Everett /s/ RICHARD W. WEENING Director July 16, 1999 - ------------------------------------------ Richard W. Weening, As Attorney-In-Fact for Robert H. Sheridan, III
II-4 101 EXHIBIT INDEX
PAGE ----- 1.1*** Form of Underwriting Agreement between the Registrant and the Underwriters.......................................... 1.2*** Form of Agreement Between the U.S. Underwriters and the International Underwriters................................ 3.1* Forum of Amended and Restated Articles of Incorporation of Cumulus Media Inc. ....................................... 3.2* Form of Amended and Restated Bylaws of Cumulus Media Inc.... 3.3* Form of Certificate of Designation with respect to Series A Cumulative Exchangeable Redeemable Preferred Stock Due 2009. .................................................... 3.4* Form of Class A common stock Certificate. .................. 3.5* Form of Series A preferred stock Certificate. .............. 5.1*** Opinion of Holleb & Coff as to the validity of the Class A common stock. ............................................ 10.1* Credit Agreement dated March 2, 1998 among Cumulus Media Inc., Lehman Brothers Inc. and Lehman Commercial Paper Inc. ..................................................... 10.2* First Amendment, dated May 1, 1998, to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Inc. and Lehman Commercial Paper. ........................................ 10.3* Second Amendment, dated June 24, 1998, to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Inc. and Lehman Commercial Paper. ............................. 10.4*** Third Amendment, dated June 26, 1998, to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Inc. and Lehman Commercial Paper. ............................. 10.5*** Fourth Amendment, dated October 1, 1998, to the Credit Facility among Cumulus Media Inc., Lehman Brothers Inc. and Lehman Commercial Paper. ............................. 10.6*** Fifth Amendment, dated as of January 14, 1999 to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Inc. and Lehman Commercial Paper. 10.7*** Sixth Amendment, dated as of March 31, 1999 to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Commercial Paper. 10.8*** Seventh Amendment, dated as of May 1, 1999 to the Credit Agreement among Cumulus Media Inc., Lehman Brothers Commercial Paper. 10.9* Form of Indenture between Cumulus Media Inc. and Firstar Bank of Minnesota, N.A., as Trustee....................... 10.10* Form of Exchange Debenture Indenture between Cumulus Media Inc. and U.S. Bank Trust National Association, as Trustee................................................... 10.11* Form of Employment Agreement between Cumulus Media Inc. and Richard W. Weening........................................ 10.12* Form of Employment Agreement between Cumulus Media Inc. and Lewis W. Dickey, Jr. ..................................... 10.13* Employment Agreement between Cumulus Media Inc. and William M. Bungeroth.............................................. 10.14* Employment Agreement between Cumulus Media Inc. and Richard J. Bonick, Jr. ........................................... 10.15* Form of Cumulus Media Inc. 1998 Employee Stock Incentive Plan...................................................... 10.16* Form of Cumulus Media Inc. 1998 Executive Stock Incentive Plan...................................................... 10.17* Services Agreement dated May 1, 1998 by and between QUAESTUS Management Corporation and Cumulus Media Inc. ............ 10.18* Services Agreement dated March 23, 1998 between Stratford Research, Inc. and Cumulus Media Inc. .................... 21.1*** Subsidiaries of the Company................................. 23.1*** Consent of PricewaterhouseCoopers LLP....................... 23.2*** Consent of Holleb & Coff (included in Exhibit 5.1). ........ 24.1** Powers of Attorney, included on page II-4. .................
- --------------- * Incorporated by reference to our Registration Statement on Form S-1 declared effective on June 26, 1998. ** Previously filed. *** Filed herewith. II-5 EX-1.1 2 FORM OF UNDERWRITING AGREEMENT 1 _______________ SHARES CUMULUS MEDIA INC. CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE UNDERWRITING AGREEMENT _____________, 1999 2 _____________, 1999 Morgan Stanley & Co. Incorporated Lehman Brothers Inc. Bear, Stearns & Co. Inc. Prudential Securities Incorporated c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Morgan Stanley & Co. International Limited Lehman Brothers International (Europe) Bear, Stearns International Limited Prudential-Bache Securities (U.K.) Inc. c/o Morgan Stanley & Co. International Limited 25 Cabot Square Canary Wharf London E14 4QA England Dear Sirs and Mesdames: Cumulus Media Inc., an Illinois corporation (the "COMPANY"), proposes to issue and sell to the several Underwriters (as defined below) ________________ shares of its Class A Common Stock, par value $.01 per share (the "FIRM SHARES"). It is understood that, subject to the conditions hereinafter stated, ____________ Firm Shares (the "U.S. FIRM SHARES") will be sold to the several U.S. Underwriters named in Schedule I hereto (the "U.S. UNDERWRITERS") in connection with the offering and sale of such U.S. Firm Shares in the United States and Canada to United States and Canadian Persons (as such terms are defined in the Agreement Between U.S. and International Underwriters of even date herewith), and __________ Firm Shares (the "INTERNATIONAL SHARES") will be sold to the several International Underwriters named in Schedule II hereto (the "INTERNATIONAL UNDERWRITERS") in connection with the offering and sale of such International Shares outside the United States and Canada to persons other than United States and Canadian Persons. Morgan Stanley & Co. Incorporated, Lehman Brothers Inc., Bear Stearns & Co. Inc. and Prudential Securities Incorporated shall act as representatives (the "U.S. REPRESENTATIVES") of the several U.S. Underwriters, and Morgan Stanley & Co. International Limited, Lehman Brothers International (Europe), Bear, Stearns International Limited and Prudential-Bache Securities (U.K.) Inc. shall act as representatives (the "INTERNATIONAL REPRESENTATIVES") of the several 2 3 International Underwriters. The U.S. Underwriters and the International Underwriters are hereinafter collectively referred to as the Underwriters. The Company also proposes to issue and sell to the several U.S. Underwriters not more than an additional __________ shares of its Class A Common Stock, par value $.01 per share (the "ADDITIONAL SHARES") if and to the extent that the U.S. Representatives shall have determined to exercise, on behalf of the U.S. Underwriters, the right to purchase such shares of common stock granted to the U.S. Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "SHARES". The shares of Class A Common Stock, par value $.01 per share, of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the "COMMON STOCK". The Company has filed with the Securities and Exchange Commission (the "COMMISSION") a registration statement relating to the Shares. The registration statement contains two prospectuses to be used in connection with the offering and sale of the Shares: the U.S. prospectus, to be used in connection with the offering and sale of Shares in the United States and Canada to United States and Canadian Persons, and the international prospectus, to be used in connection with the offering and sale of Shares outside the United States and Canada to persons other than United States and Canadian Persons. The international prospectus is identical to the U.S. prospectus except for the outside front cover page. The registration statement as amended at the time it becomes effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter referred to as the "REGISTRATION STATEMENT"; the U.S. prospectus and the international prospectus in the respective forms first used to confirm sales of Shares are hereinafter collectively referred to as the "PROSPECTUS". If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the term "Registration Statement" shall be deemed to include such Rule 462 Registration Statement. 1. Representations and Warranties. The Company represents and warrants to and agrees with each of the Underwriters that: (a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission. (b) (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement and the Prospectus conform and, as amended or supplemented, if applicable, will conform in all material respects to the requirements of the Securities Act and the applicable rules and 3 4 regulations of the Commission thereunder and (iii) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein. (c) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (d) Each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims. (e) This Agreement has been duly authorized, executed and delivered by the Company. (f) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus. (g) The shares of Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable. (h) The Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights. 4 5 (i) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except for the registration of the Shares under the Securities Act and as may be required by the securities or Blue Sky laws of the various states or foreign securities laws in connection with the offer and sale of the Shares. (j) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement). (k) There are no legal or governmental proceedings pending or, to the best knowledge of the Company, threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject which, if determined adversely to the Company or any of its subsidiaries, might have a material adverse effect on the consolidated financial position, stockholders' equity, results of operations, business or prospects of the Company and its subsidiaries. (l) Each preliminary prospectus filed as part of the registration statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder. (m) Each of the Company and its subsidiaries is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder. (n) The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance 5 6 with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (o) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (p) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement. (q) The statistical and market-related data included in the Prospectus are based or derived from sources which the Company and its subsidiaries believe to be reliable and materially accurate. (r) The Company and its subsidiaries validly hold the Federal Communications Commission ("FCC") licenses for each of the radio stations owned or operated by the Company and its subsidiaries (the "Owned Station Licenses"). With respect to each station to which programming or sales marketing services are provided by the Company or its subsidiaries, but which are not owned by the Company and its subsidiaries, to the Company's knowledge, the parties with which the Company and its subsidiaries have entered into such programming or marketing arrangements validly hold the FCC licenses (the "Programmed Station Licenses") for such stations. Except as set forth in the Prospectus, no proceedings that would reasonably be expected to jeopardize the validity of the Owned Station Licenses are pending before or, to the Company's knowledge, threatened by, the FCC; and to the Company's knowledge, no proceedings that would reasonably be expected to jeopardize the validity of the Programmed Station Licenses are pending before, or threatened by, the FCC. The Company and its subsidiaries possess adequate certificates, authorizations, consents, orders, approvals, licenses or permits which are in full force and effect issued by other appropriate governmental agencies or bodies necessary to the ownership of their respective properties and the conduct of the businesses now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority, consent, order, approval, license or permit and the Company and its subsidiaries are in compliance in all material respects with the Communications Act of 1934, as amended, and the rules, regulations and policies of the FCC. 6 7 (s) The Company has no reason to believe that, after giving effect to the pending acquisitions (as described in the Registration Statement), any of the representations, warranties and agreements contained in this Section 1 would not be true and correct. (t) The Company has reviewed its operations to the extent and in the manner described in the Prospectus to evaluate the extent to which the business or operations of the Company will be affected by the Year 2000 Problem (that is, any significant risk that computer hardware or software applications used or relied upon by the Company will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000); as a result of such review, the Company does not believe that (i) there are any issues related to the Company's preparedness to address the Year 2000 Problem that are of a character required to be described or referred to in the Registration Statement or Prospectus which have not been accurately described in the Registration Statement or Prospectus or (ii) the Year 2000 Problem will have a material adverse effect on the Company and its subsidiaries, taken as a whole. 2. Agreements to Sell and Purchase. The Company hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Company the respective numbers of Firm Shares set forth in Schedules I and II hereto opposite its names at U.S.$_____ a share ("PURCHASE PRICE"). On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the U.S. Underwriters the Additional Shares, and the U.S. Underwriters shall have a one-time right to purchase, severally and not jointly, up to __________ Additional Shares at the Purchase Price. If the U.S. Representatives, on behalf of the U.S. Underwriters, elect to exercise such option, the U.S. Representatives shall so notify the Company in writing not later than 30 days after the date of this Agreement, which notice shall specify the number of Additional Shares to be purchased by the U.S. Underwriters and the date on which such shares are to be purchased. Such date may be the same as the Closing Date (as defined below) but not earlier than the Closing Date nor later than ten business days after the date of such notice. Additional Shares may be purchased as provided in Section 4 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. If any Additional Shares are to be purchased, each U.S. Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as the U.S. Representatives may determine) that bears the same proportion to the total number of Additional Shares to be purchased as the number of U.S. Firm Shares set forth in Schedule I hereto opposite the name of such U.S. Underwriter bears to the total number of U.S. Firm Shares. The Company hereby agrees that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during the period ending 7 8 90 days after the date of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold hereunder or (B) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof of which the Underwriters have been advised in writing. 3. Terms of Public Offering. The Company is advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable. The Company is further advised by you that the Shares are to be offered to the public initially at U.S.$_____ a share (the "PUBLIC OFFERING PRICE") and to certain dealers selected by you at a price that represents a concession not in excess of U.S.$____ a share under the Public Offering Price, and that any Underwriter may allow, and such dealers may reallow, a concession, not in excess of U.S.$____ a share, to any Underwriter or to certain other dealers. 4. Payment and Delivery. Payment for the Firm Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on ____________, 1999, or at such other time on the same or such other date, not later than _________, 1999, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "CLOSING DATE". Payment for any Additional Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the notice described in Section 2 or at such other time on the same or on such other date, in any event not later than _______, 1999 as shall be designated in writing by the U.S. Representatives. The time and date of such payment are hereinafter referred to as the "OPTION CLOSING DATE". Certificates for the Firm Shares and Additional Shares shall be in definitive form and registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the Option Closing Date, as the case may be. The certificates evidencing the Firm Shares and Additional Shares shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid, against payment of the Purchase Price therefor. 8 9 5. Conditions to the Underwriters' Obligations. The obligations of the Company to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date are subject to the condition that the Registration Statement shall have become effective not later than 5:00 p.m. (New York City time) on the date hereof. The several obligations of the Underwriters are subject to the following further conditions: (a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date: (i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company's debt securities or preferred stock by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; and (ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement) that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. (b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company, to the effect set forth in Section 5(a)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date. The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened. (c) The Underwriters shall have received on the Closing Date opinions of Paul, Hastings, Janofsky & Walker LLP, special counsel for the Company, and such other counsel for the Company (including, without limitation, the General Counsel of the Company) which is reasonably satisfactory to the Representatives, dated the Closing 9 10 Date, to the effect that: (i) the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) each U.S. subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) the authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus; (iv) the shares of Common Stock outstanding prior to the issuance of the Shares as described in the Prospectus have been duly authorized and are validly issued, fully paid and non-assessable; (v) all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and, based solely on a review of the stock ledger of each subsidiary, are owned of record by the Company or one of its subsidiaries, based solely on a review of the stock ledger of each subsidiary, are owned of record by the Company or one of its subsidiaries and, except for the collateral pledge of all of such shares to Lehman Commercial Paper Inc. as Syndication Agent and Administrative Agent for the Lender's to the Company's Credit Agreement, and other matters set forth in the Prospectus, there are no notations in the stock ledger or on the issued and outstanding certificates regarding any liens, encumbrances, equities or claims on the holder of record's right, title and interest in and to such shares; (vi) the Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights; (vii) this Agreement has been duly authorized, executed and delivered by the Company; 10 11 (viii) the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or, to the best of such counsel's knowledge, any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or, to the best of such counsel's knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except for the registration of Shares under the Securities Act and as may be required by the securities or Blue Sky laws of the various states or foreign securities laws in connection with the offer and sale of the Shares by the U.S. Underwriters; (ix) the statements in the Prospectus under the captions "Risk Factors--Governmental Regulation of Broadcasting Industry," "Business--Federal Regulation of Radio Broadcasting," "Description of Capital Stock" and "Certain United States Tax Consequences to Non-U.S. Holders of Class A Common Stock," in each case insofar as such statements describe legal documents or federal, New York or Illinois statutes, rules and regulations, constitute a fair summary thereof; (x) to such counsel's knowledge and other than as set forth in the Prospectus, there are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject which, if determined adversely to the Company or any of its subsidiaries, might have a material adverse effect on the consolidated financial position, stockholders' equity, results of operations, business or prospects of the Company and its subsidiaries; (xi) the Company and its subsidiaries validly hold the Owned Station Licenses; and, to such counsel's knowledge without investigation, the parties with which the Company and its subsidiaries have entered into programming or marketing arrangements validly hold the Programmed Station Licenses; and (xii) no proceedings that would reasonably be expected to jeopardize the validity of the Owned Station Licenses are pending before or, to such counsel's knowledge, threatened by, the FCC; and to such counsel's knowledge without investigation, no proceedings that would reasonably be expected to jeopardize the validity of the Programmed Station Licenses are 11 12 pending before, or threatened by, the FCC, except as set forth in the Prospectus. In addition, such counsel shall state that such counsel has participated in conferences with directors, officers and other representatives of the Company, the Underwriters, counsel to the Underwriters, and representatives of PricewaterhouseCoopers LLP, the independent public accountants of the Company, at which conferences the contents of the Registration Statement and the Prospectus, and related matters were discussed and subject to (a) the limitation that such counsel did not independently verify the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus, except as otherwise expressly stated in such counsel's opinion, (b) the limitations inherent in the information available to such counsel and (c) the nature and extent of such counsel's participation in such conferences being such that such counsel is unable to assume, and does not assume, any responsibility for the accuracy, completeness or fairness of such statements (and such counsel gives the Underwriters no assurance that such counsel's procedures described in the first sentence of this paragraph would necessarily reveal matters of significance with respect to such counsel's comments), no facts have come to such counsel's attention that would lead such counsel to believe that the Registration Statement as of its effective date contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, or that the Prospectus contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Such counsel may indicate that in making the foregoing comments, such counsel does not intend them to include or cover the financial statements and notes thereto and other financial, numerical, accounting or statistical data contained therein or omitted therefrom as to which such counsel need not express comment. (d) The Underwriters shall have received on the Closing Date an opinion of Simpson Thacher & Bartlett, counsel for the Underwriters, dated the Closing Date, covering the matters referred to in Sections 5(c)(vi), 5(c)(vii), 5(c)(ix) (but only as to the statements in the Prospectus under "Description of Capital Stock" and "Underwriters") and 5(c)(xiii) above. With respect to Section 5(c)(xiii) above, Simpson Thacher & Bartlett may state that their opinion and belief are based upon their participation in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification, except as specified. The opinion of Paul, Hastings, Janofsky & Walker LLP described in Section 5(c) above shall be rendered to the Underwriters at the request of the Company and shall so 12 13 state therein. (e) The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from PricewaterhouseCoopers LLP, independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus; provided that the letter delivered on the Closing Date shall use a "cut-off date" not earlier than the date hereof. (f) The "lock-up" agreements, each substantially in the form of Exhibit A hereto, between you and certain shareholders, officers and directors of the Company relating to sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to you on or before the date hereof, shall be in full force and effect on the Closing Date. (g) The several obligations of the U.S. Underwriters to purchase Additional Shares hereunder are subject to the delivery to the U.S. Representatives on the Option Closing Date of such documents as they may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares and other matters related to the issuance of the Additional Shares. 6. Covenants of the Company. In further consideration of the agreements of the Underwriters herein contained, the Company covenants with each Underwriter as follows: (a) To furnish to you, without charge, nine signed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to you in New York City, without charge, prior to 10:00 a.m. New York City time on the business day next succeeding the date of this Agreement and during the period mentioned in Section 6(c) below, as many copies of the Prospectus and any supplements and amendments thereto or to the Registration Statement as you may reasonably request. (b) Before amending or supplementing the Registration Statement or the Prospectus, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule. (c) If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or 13 14 condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses you will furnish to the Company) to which Shares may have been sold by you on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law. (d) To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request; provided that in connection therewith the Company shall not be required to qualify as a corporation in that jurisdiction or to file a general consent to service of process in any jurisdiction. (e) To make generally available to the Company's security holders and to you as soon as practicable an earning statement covering the twelve-month period ending ________, 2000 that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. (f) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company's counsel and the Company's accountants in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Prospectus and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iii) the cost of printing or producing any Blue Sky or Legal Investment memorandum in connection with the offer and sale of the Shares under state securities laws and all expenses in connection with the qualification of the Shares for offer and sale under state securities laws as provided in Section 6(d) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the Shares by the National Association of Securities Dealers, Inc., (v) all 14 15 fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Common Stock and any applicable listing or other fees, (vi) the cost of printing certificates representing the Shares, (vii) the costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any "road show" undertaken in connection with the marketing of the offering of the Shares, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and the cost of any aircraft chartered in connection with the road show, and (ix) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, Section 7 entitled "Indemnity and Contribution", and the last paragraph of Section 9 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make. It is also understood that the Underwriters agree to pay up to 50% of the reasonable cost of any aircraft chartered for road show participants in connection with the road show and its venues. 7. Indemnity and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through you expressly for use in the Registration Statement, any preliminary prospectus, the Prospectus or any amendments 15 16 or supplements thereto. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 7(a) or 7(b), such person (the "INDEMNIFIED PARTY") shall promptly notify the person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by Morgan Stanley & Co. Incorporated, in the case of parties indemnified pursuant to Section 7(a), and by the Company, in the case of parties indemnified pursuant to Section 7(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) To the extent the indemnification provided for in Section 7(a) or 7(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable 16 17 by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause 7(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 7(d)(i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 7 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint. (e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 7(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 7 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (f) The indemnity and contribution provisions contained in this Section 7 and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any person 17 18 controlling any Underwriter or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares. 8. Termination. This Agreement shall be subject to termination by notice given by you to the Company, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and (b) in the case of any of the events specified in clauses 8(a)(i) through 8(a)(iv), such event, singly or together with any other such event, makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. 9. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. If, on the Closing Date or the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule I or Schedule II bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as you may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 9 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased, and arrangements satisfactory to you and the Company for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. If, on the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to 18 19 purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase Additional Shares or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder. 10. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 11. Applicable Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York. 12. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement. Very truly yours, CUMULUS MEDIA INC. By:_______________________ Name: Title: Accepted as of the date hereof MORGAN STANLEY & CO. INCORPORATED LEHMAN BROTHERS INC. 19 20 BEAR, STEARNS & CO. INC. PRUDENTIAL SECURITIES INCORPORATED Acting severally on behalf of themselves and the several U.S. Underwriters named in Schedule I hereto. By: Morgan Stanley & Co. Incorporated By:___________________________ Name: Title: MORGAN STANLEY & CO. INTERNATIONAL LIMITED LEHMAN BROTHERS INTERNATIONAL (EUROPE) BEAR, STEARNS INTERNATIONAL LIMITED PRUDENTIAL-BACHE SECURITIES (U.K.) INC. Acting severally on behalf of themselves and the several International Underwriters named in Schedule II hereto. By: Morgan Stanley & Co. International Limited By: ____________________________ Name: Title: 20 21 SCHEDULE I U.S. UNDERWRITERS NUMBER OF FIRM SHARES UNDERWRITER TO BE PURCHASED Morgan Stanley & Co. Incorporated Lehman Brothers Inc. Bear, Stearns & Co. Inc. Prudential Securities Incorporated [NAMES OF OTHER U.S. UNDERWRITERS] -------------- Total U.S. Firm Shares =============== 22 SCHEDULE II INTERNATIONAL UNDERWRITERS NUMBER OF FIRM SHARES UNDERWRITER TO BE PURCHASED Morgan Stanley & Co. International Limited Lehman Brothers International (Europe) Bear, Stearns International Limited Prudential-Bache Securities (U.K.) Inc. [NAMES OF OTHER INTERNATIONAL CO-MANAGERS] --------------- Total International Firm Shares =============== 23 EXHIBIT A [FORM OF LOCK-UP LETTER] ____________, 1999 Morgan Stanley & Co. Incorporated Lehman Brothers Inc. Bear, Stearns & Co. Inc. Prudential Securities Incorporated c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, NY 10036 Morgan Stanley & Co. International Limited Lehman Brothers International (Europe) Bear, Stearns International Limited Prudential-Bache Securities (U.K.) Inc. c/o Morgan Stanley & Co. International Limited 25 Cabot Square Canary Wharf London E14 4QA England Dear Sirs and Mesdames: The undersigned understands that Morgan Stanley & Co. Incorporated ("MORGAN STANLEY") and Morgan Stanley & Co. International Limited ("MSIL") propose to enter into an Underwriting Agreement (the "UNDERWRITING AGREEMENT") with Cumulus Media Inc., an Illinois corporation (the "COMPANY") providing for the public offering (the "PUBLIC OFFERING") by the several Underwriters, including Morgan Stanley and MSIL (the "UNDERWRITERS") of ___ shares (the "SHARES") of the Class A Common Stock, par value $.01 per share, of the Company (the "COMMON STOCK"). To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 90 days after the date of the final prospectus relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell, contract to sell, sell any 23 24 option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (a) the sale of any Shares to the Underwriters pursuant to the Underwriting Agreement or (b) transactions relating to shares of Common Stock or other securities acquired in open market transactions after the completion of the Public Offering. In addition, the undersigned agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 90 days after the date of the Prospectus, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock. Notwithstanding the foregoing, nothing contained herein shall prohibit the exercise of any option or the conversion of any security held by the undersigned as of the date of the Prospectus and exercisable or convertible, as the case may be, into Common Stock. Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters. Very truly yours, ------------------------- Name: Title: ------------------------- (Name of Company) ------------------------- (Address) 24 EX-1.2 3 FORM OF AGREEMENT 1 Exhibit 1.2 _______________ Shares CUMULUS MEDIA INC. CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE AGREEMENT BETWEEN U.S. AND INTERNATIONAL UNDERWRITERS __________, 1999 2 _____________, 1999 To each of the Underwriters named in Schedules I and II to the Underwriting Agreement referred to below. Dear Sirs: We understand that Cumulus Media Inc. (the "COMPANY") has entered into an underwriting agreement (the "UNDERWRITING AGREEMENT") with Morgan Stanley & Co. Incorporated, Lehman Brothers Inc., Bear, Stearns & Co. Inc. and Prudential Securities Incorporated acting as representatives (the "U.S. REPRESENTATIVES") of the U.S. underwriters named in Schedule I thereto (the "U.S. UNDERWRITERS") and Morgan Stanley & Co. International Limited and, Lehman Brothers Inc., Bear, Stearns & Co. Inc. and Prudential Securities Incorporated as representatives (the "INTERNATIONAL REPRESENTATIVES") of the international underwriters named in Schedule II thereto (the "INTERNATIONAL UNDERWRITERS" and, together with the U.S. Underwriters, the "UNDERWRITERS"), pursuant to which the several Underwriters have agreed to purchase from the Company an aggregate of __________ shares of Class A Common Stock, par value $.01 per share of the Company ("COMMON STOCK"). In addition, the Company has granted the U.S. Underwriters the option to purchase up to __________ additional shares of Common Stock (the "ADDITIONAL SHARES"). All shares of Common Stock to be purchased by the U.S. Underwriters and the International Underwriters under the Underwriting Agreement, including any Additional Shares, are herein called the "U.S. SHARES" and the "INTERNATIONAL SHARES," respectively. The U.S. Shares and the International Shares are collectively referred to herein as the "SHARES." I. The U.S. Underwriters, acting through the U.S. Representatives, and the International Underwriters, acting through the International Representatives, agree that, in order to provide an orderly marketing effort for the offering, they will consult with each other as to the availability of the Shares for sale to the public, from time to time until the earlier of (a) notice from the U.S. Representatives to the U.S. Underwriters of the completion of the distribution of the U.S. Shares and (b) notice from the International Representatives to the International Underwriters of the completion of the distribution of the International Shares. From time to time as mutually agreed among the U.S. Underwriters and the International Underwriters, acting through Morgan Stanley & Co. Incorporated and Morgan Stanley & Co. International Limited, respectively, the Underwriters may purchase and sell among each other such number of Shares to be purchased pursuant to the Underwriting Agreement as may be so mutually agreed. The price and currency of settlement of any Shares so purchased or sold shall be the public offering price, in United States dollars, less an amount not greater than the selling concession. Settlement with respect to any Shares transferred hereunder prior to the Closing Date (as defined in the Underwriting Agreement) shall be made on the Closing Date, and in the case of 2 3 purchases and sales made thereafter, as promptly as practicable but in no event later than three business days after the transfer date. Certificates representing the Shares so purchased shall be delivered on the respective settlement dates. The liability of the Underwriters under the Underwriting Agreement for payment of the purchase price of the Shares purchased thereunder shall not be affected by the provisions of this Agreement. The obligations of each U.S. Underwriter in respect of any purchase or sale of Shares under this Article I by the U.S. Underwriters shall be pro rata in accordance with the proportion of the total number of U.S. Shares that such U.S. Underwriter is obligated to purchase under the Underwriting Agreement. The obligations of each International Underwriter in respect of any purchase or sale of Shares under this Article I by the International Underwriters shall be pro rata in accordance with the proportion of the total number of International Shares that such International Underwriter is obligated to purchase under the Underwriting Agreement. II. Each of the Underwriters represents that it is a member in good standing of the U.S. National Association of Securities Dealers, Inc. (the "NASD") or that it is a foreign bank or dealer not eligible for membership in the NASD. In making sales of Shares, if it is such a member, such Underwriter agrees to comply with all applicable rules of the NASD, including, without limitation, the NASD's Interpretation with Respect to Free-Riding and Withholding (IM-2110-1) and NASD Rule 2740, or, if it is such a foreign bank or dealer, such Underwriter agrees to comply with such Interpretation and NASD Rules 2730, 2740 and 2750 as though it were such a member and NASD Rule 2420 as it applies to a nonmember broker or dealer in a foreign country. III. Each U.S. Underwriter represents and agrees that, except for (x) sales between the U.S. Underwriters and the International Underwriters pursuant to Article I of this Agreement and (y) stabilization transactions, contemplated in Article IV of this Agreement, conducted through the U.S. Representatives as part of the distribution of the Shares, (a) it is not purchasing any Shares for the account of anyone other than a United States or Canadian Person and (b) it has not offered or sold, and will not offer or sell, directly or indirectly, any Shares or distribute any prospectus relating to the Shares outside the United States or Canada or to anyone other than a United States or Canadian Person, and any dealer to whom it may sell any Shares will represent that it is not purchasing any Shares for the account of anyone other than a United States or Canadian Person and will agree that it will not offer or resell any Shares directly or indirectly outside the United States or Canada or to anyone other than a United States or Canadian Person or to any other dealer who does not so represent and agree. Each International Underwriter represents and agrees that, except for (x) sales between the U.S. Underwriters and the International Underwriters pursuant to Article I of this Agreement and (y) stabilization transactions, contemplated in Article IV of this Agreement, conducted through the U.S. Representatives as part of the distribution of the Shares, (a) it is not purchasing any Shares for the account of any United States or Canadian Person and (b) it has not offered or 3 4 sold, and will not offer or sell, directly or indirectly, any Shares or distribute any prospectus relating to the Shares in the United States or Canada or to any United States or Canadian Person, and any dealer to whom it may sell any Shares will represent that it is not purchasing any Shares for the account of any United States or Canadian Person and will agree that it will not offer or resell any Shares directly or indirectly in the United States or Canada or to any United States or Canadian Person or to any other dealer who does not so represent and agree. With respect to any Underwriter that is a U.S. Underwriter and an International Underwriter, the foregoing representations and agreements (i) made by it in its capacity as a U.S. Underwriter shall apply only to it in its capacity as a U.S. Underwriter and (ii) made by it in its capacity as an International Underwriter shall apply only to it in its capacity as an International Underwriter. In addition, notwithstanding the foregoing representations and agreements, if an Underwriter (including its affiliates) is both a U.S. Underwriter and an International Underwriter, then the U.S. Underwriter and its corresponding International Underwriter may, with the consent of Morgan Stanley & Co. Incorporated, transfer between themselves at cost any Shares allocated to them for direct sale by the U.S. Representatives or the International Representatives so long as any Shares so transferred are treated as U.S. Shares while held by the U.S. Underwriter and International Shares while held by the International Underwriter for purposes of the foregoing representations and agreements. "UNITED STATES OR CANADIAN PERSON" shall mean any national or resident of the United States or Canada, or any corporation, pension, profit-sharing or other trust or other entity organized under the laws of the United States or Canada or of any political subdivision thereof (other than a branch located outside the United States and Canada of any United States or Canadian Person), and shall include any United States or Canadian branch of a person who is otherwise not a United States or Canadian Person. "UNITED STATES" shall mean the United States of America, its territories, its possessions and all areas subject to its jurisdiction. The agreements of the Underwriters set forth in the first and second paragraphs of this Article III shall terminate upon the earlier of (a) the mutual agreement of the U.S. Representatives and the International Representatives and (b) 30 days after the date hereof, unless the U.S. Representatives or the International Representatives shall have given notice to the other to the effect that the distribution of the Shares by the U.S. Underwriters or the International Underwriters, as the case may be, has not yet been completed. If such notice is given, the agreements set forth in such preceding paragraphs shall survive until the earlier of (x) the mutual agreement referred to in the preceding sentence and (y) 30 days after the date of any such notice. Each U.S. Underwriter represents that it has not offered or sold, and agrees not to offer or sell, any Shares, directly or indirectly, in any province or territory of Canada or to, or for the benefit of, any resident of any province or territory of Canada in contravention of the securities laws thereof and, without limiting the generality of the foregoing, represents that any offer or sale of Shares in Canada will be made only pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer or sale is made. Each U.S. Underwriter further agrees to send to any dealer who purchases from it any of the Shares a notice stating in substance that, by purchasing such Shares, such dealer represents and agrees that it has 4 5 not offered or sold, and will not offer or sell, directly or indirectly, any of such Shares in any province or territory of Canada or to, or for the benefit of, any resident of any province or territory of Canada in contravention of the securities laws thereof and that any offer or sale of Shares in Canada will be made only pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer or sale is made, and that such dealer will deliver to any other dealer to whom it sells any of such Shares a notice containing substantially the same statement as is contained in this sentence. The Underwriters understand that no action has been or will be taken in any jurisdiction by the Underwriters or the Company that would permit a public offering of the Shares, or possession or distribution of the Prospectus (as defined in the Underwriting Agreement), in preliminary or final form, in any jurisdiction where, or in any circumstances in which, action for that purpose is required, other than the United States. Each International Underwriter agrees that it will comply with all applicable laws and regulations, and make or obtain all necessary filings, consents or approvals, in each jurisdiction in which it purchases, offers, sells or delivers Shares (including, without limitation, any applicable requirements relating to the delivery of the international prospectus, in preliminary or final form), in each case at its own expense. In connection with sales of and offers to sell Shares made by it, each International Underwriter will either furnish to each person to whom any such sale or offer is made a copy of the then current international prospectus (in preliminary or final form and as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or inform such person that such international prospectus, in preliminary or final form, will be made available upon request, and will keep an accurate record of the names and addresses of all persons to whom it gives copies of the registration statement relating to the offering of the Shares, the international prospectus, in preliminary or final form, or any amendment or supplement thereto, and, when furnished with any subsequent amendment to such registration statement, any subsequent prospectus or any medium outlining changes in the registration statement or any prospectus, will upon request of the International Representatives, promptly forward copies thereof to such persons or inform such persons that such amendment, subsequent prospectus or other medium will be made available upon request. Each International Underwriter further represents that it has not offered or sold, and agrees not to offer or sell, directly or indirectly, in Japan or to or for the account of any resident thereof, any of the Shares acquired in connection with the distribution contemplated hereby, except for offers or sales to Japanese International Underwriters or dealers and except pursuant to any exemption from the registration requirements of the Securities and Exchange Law and otherwise in compliance with applicable provisions of Japanese law. Each International Underwriter further agrees to send to any dealer who purchases from it any of the Shares a notice stating in substance that, by purchasing such Shares, such dealer represents and agrees that it has not offered or sold, and will not offer or sell, any of such Shares, directly or indirectly, in Japan or to or for the account of any resident thereof except for offers or sales to Japanese International Underwriters or dealers and except pursuant to any exemption from the registration requirements of the Securities and Exchange Law and otherwise in compliance with applicable provisions of Japanese law, and that such dealer will send to any other dealer to whom it sells any of such 5 6 Shares a notice containing substantially the same statement as is contained in this sentence. Each International Underwriter further represents and agrees that (i) it has not offered or sold and, prior to the date six months after the Closing Date, will not offer or sell, any Shares to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Shares in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the offering of the Shares to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) or is a person to whom such document may otherwise lawfully be issued or passed on. Each International Underwriter agrees to indemnify and hold harmless each Underwriter and each person controlling any Underwriter from and against any and all losses, claims, damages and liabilities (including fees and disbursements of counsel) arising from any breach by it of any of the provisions of paragraphs eight, nine and ten of this Article III. IV. The overall direction and planning of the stabilization transactions contemplated herein shall be the responsibility of the U.S. Representatives and the International Representatives, which will consult with one another on a continuous basis so that such stabilization transactions shall be conducted in accordance with such direction and planning as is mutually agreed upon. All stabilization transactions shall be conducted only by Morgan Stanley & Co. Incorporated and shall be conducted in compliance with any applicable laws and regulations. Morgan Stanley & Co. Incorporated agrees to notify the International Representatives of the date of termination of stabilization. Each Underwriter agrees to file with Morgan Stanley & Co. Incorporated any reports required of such Underwriter pursuant to Rule 17a-2 under the U.S. Securities Exchange Act of 1934 and authorizes Morgan Stanley & Co. Incorporated to file with the U.S. Securities and Exchange Commission any reports required by such Rule on behalf of such Underwriter. The International Primary Market Association (IPMA) limits will not be complied with in connection with stabilization losses and expenses. All stabilization transactions shall be for the respective accounts of the several Underwriters and shall be allocated between the U.S. Underwriters and the International Underwriters in the respective proportions that the number of U.S. Shares and International Shares purchased pursuant to the Underwriting Agreement bears to the total number of Shares purchased. In no event shall the net commitment of any Underwriter, for either long or short account, resulting from such stabilization transactions and from the over-allotments referred to in Article V, exceed 15% of the total number of Shares that such Underwriter is obligated to purchase under the Underwriting Agreement; provided that the net 6 7 commitment of any Underwriter for short account shall be calculated (x) in the case of any U.S. Underwriter, after giving effect to the purchase of (i) any Shares that the U.S. Representatives have agreed to purchase for the account of such U.S. Underwriter pursuant to Article I of this Agreement and (ii) the maximum number of Additional Shares that such U.S. Underwriter is entitled to purchase under the Underwriting Agreement and (y) in the case of any International Underwriter, after giving effect to the purchase of any Shares that the International Representatives have agreed to purchase for the account of such International Underwriter pursuant to Article I of this Agreement. Each U.S. Underwriter represents that it has not offered or sold, and agrees that it will not offer or sell, directly or indirectly, Shares to any person at less than the public offering price, other than to (i) the International Underwriters pursuant to Article I hereof or (ii) other U.S. Underwriters or to dealers who have entered into the Master Dealer Agreement with Morgan Stanley & Co. Incorporated and who have received a pricing wire from the U.S. Representatives with respect to this offering that, among other things, sets forth such dealer's agreement that it is not purchasing Shares for the account of any persons other than United States or Canadian Persons and that it will not offer or resell Shares outside the United States and Canada. Such sales to U.S. dealers and other U.S. Underwriters shall be made in conformity with the provisions of Article II and at a price that is not below the public offering price less the maximum permissible reallowance to be specified in the Prospectus. Each U.S. Underwriter agrees that prior to offering Shares to any dealer at the public offering price less the reallowance, it will either ascertain that such dealer has entered into such Master Dealer Agreement and received such a pricing wire or make arrangements to ensure that such dealer will enter into such Master Dealer Agreement and receive such a pricing wire. Each International Underwriter represents that it has not offered or sold and agrees that it will not offer or sell, directly or indirectly, Shares to any person at less than the public offering price, other than to (i) the U.S. Underwriters pursuant to Article I hereof or (ii) other International Underwriters or to dealers who have entered into International Dealer Agreements (the "INTERNATIONAL DEALERS") with the International Representatives in the form of Exhibit C to the Agreement Among International Underwriters. Such sales to International Dealers and other International Underwriters shall be made in conformity with the provisions of Article II and at a price that is not below the public offering price less the maximum permissible reallowance to be specified in the Prospectus. Each International Underwriter agrees that prior to offering Shares to any dealer at the public offering price less the reallowance, it will either ascertain that such dealer has entered into such an International Dealer Agreement or make arrangements to ensure that such dealer will enter into an International Dealer Agreement. The agreements of the Underwriters set forth in the foregoing two paragraphs shall terminate upon the earlier of (a) the mutual agreement of the U.S. Representatives and the International Representatives and (b) 30 days after the date hereof, unless the U.S. Representatives or the International Representatives shall have given notice to the other to the effect that the distribution of the Shares by the U.S. Underwriters or the International Underwriters, as the case may be, has not yet been completed. If such notice is given, the agreements set forth in such preceding paragraphs shall survive until the earlier of (x) the mutual 7 8 agreement referred to in the preceding sentence and (y) 30 days after the date of any such notice. Each Underwriter agrees that it will not, without the advance approval of Morgan Stanley & Co. Incorporated, for its own account or the account of a customer, offer, bid for, buy, sell, deal, trade in or attempt to induce any person to bid for or buy any Covered Security, except (a) as provided in the Agreement Among International Underwriters, the Master Agreement Among Underwriters, this Agreement, the Underwriting Agreement, the Master Dealer Agreement or the International Dealer Agreement, (b) in brokerage transactions on unsolicited orders which have not resulted from activities on its part in connection with the solicitation of purchases and which are executed by it in the ordinary course of its brokerage business, (c) in market making transactions on Nasdaq or any similar market or quotation system executed by it in the ordinary course of its business so long as its bids and purchases are made consistent with the pricing restrictions set forth in Rule 103 of Regulation M of the U.S. Securities and Exchange Commission ("REGULATION M") and the volumes of such transactions are consistent with its past practice as a market maker, (d) in basket transactions that meet the standards set forth in Rule 101(b)(6) of Regulation M, (e) that it may convert, exchange or exercise any security owned by it prior to the commencement of this restriction and that it may sell any security obtained upon any such conversion, exchange or exercise, (f) that it may deliver securities owned by it upon the exercise of any option written by it as permitted by the provisions set forth herein, (g) that on or after the date of the initial public offering of the Shares, it may execute covered writing transactions for the accounts of customers in options to acquire Common Stock, when such transactions are covered by Shares and (h) that it may engage in principal purchases or sales with the intent of offsetting the market risk of principal positions in over-the-counter derivatives on solicited orders that were executed by it prior to the commencement of this restriction, and on unsolicited orders that were executed by it at any time, so long as such orders were executed by it in the ordinary course of its principal over-the-counter derivatives business. "COVERED SECURITY" means (a) the Common Stock and (b) any securities convertible into or exercisable or exchangeable for the Common Stock. An opening uncovered writing transaction in options to acquire Common Stock for an Underwriter's account or for the account of a customer shall be deemed, for purposes of this Article IV, to be a sale of Common Stock which is not unsolicited. The term "opening uncovered writing transaction in options to acquire" as used above means a transaction in which the seller intends to become a writer of an option to purchase Common Stock which he does not own. An opening uncovered purchase transaction in options to sell Common Stock for an Underwriter's account or for the account of a customer shall be deemed, for purposes of this paragraph, to be a sale of Common Stock which is not unsolicited. The term "opening uncovered purchase transaction in options to sell" as used above means a transaction where the purchaser intends to become an owner of an option to sell Common Stock which he does not own. Each Underwriter represents that it has not participated, from the time trading restrictions were imposed by Morgan Stanley & Co. Incorporated or Morgan Stanley & Co. International Limited, in any transaction prohibited by this Article IV and that it has at all times complied and agrees that it will at all times comply with the provisions of Regulation M applicable to this offering. 8 9 V. The overall direction and planning of any over-allotments to be made by the Underwriters in arranging for sales of Shares, and the related transactions required to cover such over-allotments, shall be the responsibility of the U.S. Representatives. All profits and losses arising from such over-allotments (excluding the excess, if any, of (i) the public selling price of any Additional Shares and any Shares purchased pursuant to Article I of this Agreement over (ii) the cost of such Additional Shares and such other Shares to the Underwriters making such sales) shall be for the respective accounts of the several Underwriters and shall be allocated between the U.S. Underwriters and the International Underwriters in the respective proportions that the number of U.S. Shares and International Shares purchased pursuant to the Underwriting Agreement bears to the total number of Shares purchased. VI. Each of the Underwriters agrees that the expenses incurred in connection with or attributable to the purchase, carrying or sale of the Shares, including the fees and disbursements of counsel to the Underwriters, shall be for the respective accounts of the several Underwriters and shall be allocated between the U.S. Underwriters and the International Underwriters in the respective proportions that the number of U.S. Shares and International Shares purchased pursuant to the Underwriting Agreement bears to the total number of Shares purchased. VII. Changes in the public offering price and in the concessions and reallowances to dealers will be made only upon the mutual agreement of the Underwriters during the period referred to in the first sentence of Article I hereof. VIII. The Representatives will keep one another fully informed of the progress of the offering of the Shares. The agreements of the Underwriters contained in Article II, the sixth through eleventh paragraphs of Article III, the last paragraph of Article IV, Article V and Article VI shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any termination of the Underwriting Agreement, (iii) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter or by or on behalf of the Company, its officers or directors or any other person controlling the Company and (iv) acceptance of and payment for any Shares. IX. This Agreement may be signed in counterparts, which together shall constitute one and the same instrument. This Agreement shall be governed and construed in all respects in accordance with the 9 10 laws of the State of New York and United States federal law. 10 11 IN WITNESS WHEREOF, this Agreement has been executed as of the date and year first above written by the undersigned for themselves and for the Underwriters as set forth above. MORGAN STANLEY & CO. INCORPORATED LEHMAN BROTHERS INC. BEAR, STEARNS & CO. INC. PRUDENTIAL SECURITIES INCORPORATED Acting severally on behalf of themselves and the several U.S. Underwriters named in Schedule I to the Underwriting Agreement referred to herein. By MORGAN STANLEY & CO. INCORPORATED By ________________________________ MORGAN STANLEY & CO. INTERNATIONAL LIMITED LEHMAN BROTHERS INTERNATIONAL (EUROPE) BEAR, STEARNS INTERNATIONAL LIMITED PRUDENTIAL-BACHE SECURITIES (U.K.) INC. Acting severally on behalf of themselves and the several International Underwriters named in Schedule II to the Underwriting Agreement referred to herein. By MORGAN STANLEY & CO. INTERNATIONAL LIMITED By _______________________________ 11 EX-5.1 4 OPINION OF HOLLEB & COFF 1 July 19, 1999 Cumulus Media Inc. 111 East Kilbourn Avenue, Suite 2700 Milwaukee, WI 53202 Ladies and Gentlemen: We have acted as special counsel for Cumulus Media Inc., an Illinois corporation (the "Company"), in connection with the Company's Registration Statement on Form S-3, as amended (the "Registration Statement"), being filed by the Company under the Securities Act of 1933, as amended, relating to the offer and sale of up to 9,963,600 shares (the "Shares") of the Company's Class A common stock, par value $.01 per share (the "Common Stock"). Of the Shares, 1,299,600 are subject to an option granted to the underwriters by the Company to cover over-allotments, if any. In connection with this letter, we have examined, considered and relied solely upon the following documents (collectively, the "Documents"): the Registration Statement; the Company's Amended and Restated Articles of Incorporation; the Company's Bylaws; certain resolutions of the Company's Board of Directors; a certificate of the Company's secretary; and such matters of law as we have considered necessary or appropriate for the expression of the opinions contained herein. In rendering the opinions set forth below, we have assumed without investigation the genuineness of all signatures and the authenticity of all documents submitted to us as originals, the conformity to authentic original documents of all documents submitted to us as copies, and the veracity of the Documents. As to questions of fact material to the opinions hereinafter expressed, we have relied upon the representations and warranties of the Company made in the Documents. Based solely upon and subject to the Documents, and subject to the qualification set forth below, we are of the opinion that the Shares, when duly delivered against payment therefor, as contemplated by the Registration Statement, will be duly authorized, validly issued, fully paid and non-assessable. This opinion letter is limited to the matters stated herein and no opinions may be implied 2 Cumulus Media Inc. July 19, 1999 Page 2 or inferred beyond the matters expressly stated herein. The opinions expressed herein are as of the date hereof, and we assume no obligation to update or supplement such opinions to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to us under the caption "Legal Matters" in the prospectus contained in the Registration Statement. Very truly yours, /s/ Holleb & Coff /mb EX-10.4 5 THIRD AMENDMENT 1 Exhibit 10.4 THIRD AMENDMENT THIRD AMENDMENT, dated as of June 26, 1998 (this "Amendment"), to the Credit Agreement, dated as of March 2, 1998 (as amended, supplemented or otherwise modified, the "Credit Agreement"), among CUMULUS MEDIA INC., an Illinois corporation formerly known as Cumulus Holdings, Inc. (the "Borrower"), the several banks and other financial institutions or entities parties thereto (the "Lenders"), LEHMAN BROTHERS INC., as advisor and arranger, LEHMAN COMMERCIAL PAPER INC., as syndication agent, and LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, extensions of credit to the Borrower; WHEREAS, the Borrower has requested, and upon this Amendment becoming effective, the Lenders have agreed, that certain provisions of the Credit Agreement be amended in the manner provided for in this Amendment; NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. SECTION 2. AMENDMENTS TO CREDIT AGREEMENT. 2.1 Amendment to Commitments. (a) Schedule 1.1A to the Credit Agreement is hereby amended by deleting such Schedule and inserting in lieu thereof the Schedule 1.1A attached hereto. (b) Section 1.1 of the Credit Agreement is hereby amended by inserting the following terms in proper alphabetical order and deleting, in the case of any of the following terms that are defined in Section 1.1 immediately prior to the effectiveness of this Amendment, such existing defined terms so replaced: 2 2 "Available Term Loan Commitment": as to any Term Loan Lender at any time, (a) from the Closing Date through July 1, 1998, an amount equal to the excess, if any, of (i) such Lender's Term Loan Commitment then in effect over (ii) the aggregate then unpaid principal amount of such Lender's Term Loans, and (b) after July 1, 1998, an amount equal to the excess, if any, of (i) such Lender's Delayed Draw Term Loan Commitment then in effect over (ii) the aggregate then unpaid principal amount of such Lender's Delayed Draw Term Loans. "Delayed Draw Term Loan": as defined in Section 2.1. "Delayed Draw Term Loan Commitment": as to any Lender, the obligation of such Lender, if any, to make a Term Loan to the Borrower pursuant to Section 2.1(b) in a principal amount not to exceed the amount set forth under the heading "Delayed Draw Term Loan Commitment" opposite such Lender's name on Schedule 1.1A. "Delayed Draw Term Loan Lender": each Lender which has a Delayed Draw Term Loan Commitment or which is the holder a Delayed Draw Term Loan. "Delayed Draw Term Loan Percentage": as to any Delayed Draw Term Loan Lender at any time, the percentage which such Lender's Delayed Draw Term Loan Commitment then constitutes of the aggregate Delayed Draw Term Loan Commitments (or, at any time after the Term Loan Commitment Termination Date, the percentage which the aggregate principal amount of such Lender's Delayed Draw Term Loans then outstanding constitutes of the aggregate principal amount of the Delayed Draw Term Loans then outstanding). "Facilities": each of (a) the Term Loan Commitments and the Term Loans made thereunder (the "Term Loan Facility"), (b) for the purposes of clause (B)(ii) of Section 8 only, the Delayed Draw Term Loan Commitments and the Delayed Draw Term Loans made thereunder (the "Delayed Draw Term Loan Facility"), (c) for the purposes of clause (B)(ii) of Section 8 only, the Initial Term Loan Commitments and the Initial Term Loans made thereunder (the "Initial Term Loan Facility") and (d) the Revolving Credit Commitments and the extensions of credit made thereunder (the "Revolving Credit Facility"). "Initial Term Loan": as defined in Section 2.1. "Initial Term Loan Commitment": as to any Lender, the obligation of such Lender, if any, to make a Term Loan to the Borrower pursuant to Section 2.1(a) in a principal amount not to exceed the amount set forth under the heading "Initial Term Loan Commitment" opposite such Lender's name on Schedule 1.1A. "Initial Term Loan Lender": each Lender which has an Initial Term Loan Commitment or which is the holder of an Initial Term Loan. 3 3 "Initial Term Loan Percentage": as to any Initial Term Loan Lender at any time, the percentage which such Lender's Initial Term Loan Commitment then constitutes of the aggregate Initial Term Loan Commitments (or, at any time after the Term Loan Commitment Termination Date, the percentage which the aggregate principal amount of such Lender's Initial Term Loans then outstanding constitutes of the aggregate principal amount of the Initial Term Loans then outstanding). "Majority Facility Lenders": with respect to any Facility, the holders of more than 50% of the aggregate unpaid principal amount of the Term Loans or the Total Revolving Extensions of Credit, as the case may be, outstanding under such Facility (or (a) in the case of the Delayed Draw Term Loan Facility, prior to any termination of the Term Loan Commitments, the holders of more than 50% of the aggregate amount of the Delayed Draw Term Loan Commitments, (b) prior to July 1, 1998, in the case of the Initial Term Loan Facility, prior to any termination of the Term Loan Commitments, the holders of more than 50% of the aggregate amount of the Initial Term Loan Commitments, and (c) in the case of the Revolving Credit Facility, prior to any termination of the Revolving Credit Commitments, the holders of more than 50% of the Total Revolving Credit Commitments). "Majority Delayed Draw Term Facility Lenders": the Majority Facility Lenders in respect of the Delayed Draw Term Loan Facility. "Majority Initial Term Facility Lenders": the Majority Facility Lenders in respect of the Initial Term Loan Facility. "Required Prepayment Lenders": the Majority Facility Lenders in respect of each of the Term Loan Facility and the Revolving Credit Facility. "Term Loan": the collective reference to each Delayed Draw Term Loan and Initial Term Loan. "Term Loan Commitment": as to any Lender, the collective reference to such Lender's Initial Term Loan Commitment and/or its Delayed-Draw Term Loan Commitment. "Term Loan Commitment Termination Date": September 30, 1998. (c) Sections 2.1, 2.2 and 2.3 of the Credit Agreement are hereby amended by deleting such Sections and inserting in lieu thereof the following (it being understood, for avoidance of doubt, that the Initial Term Loans are those Term Loans to be outstanding under Section 2.1(a) on July 1, 1998): 2.1 Term Loan Commitments. (a) Subject to the terms and conditions hereof, each Initial Term Loan Lender severally agrees to make, in a single draw during the 4 4 period commencing on the Closing Date and ending on the Term Loan Commitment Termination Date, term loans (each, an "Initial Term Loan") to the Borrower in an aggregate principal amount not to exceed the amount of the Initial Term Loan Commitment of such Lender. (b) Subject to the terms and conditions hereof, each Delayed Draw Term Loan Lender severally agrees to make, in up to five draws during the period commencing on the Closing Date and ending on the Term Loan Commitment Termination Date, term loans (each, a "Delayed Draw Term Loan") to the Borrower in an aggregate principal amount not to exceed the amount of the Delayed Draw Term Loan Commitment of such Lender. (c) The Term Loans may from time to time be Eurodollar Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.11. 2.2 Procedure for Term Loan Borrowing. The Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, (a) three Business Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or (b) one Business Day prior to the requested Borrowing Date, in the case of Base Rate Loans), specifying (i) the amount and Type of Term Loans to be borrowed, (ii) the requested Borrowing Date and (iii) in the case of Eurodollar Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Period therefor. The Initial Term Loans shall initially be Base Rate Loans, and no Term Loan may be converted into or continued as a Eurodollar Loan having an Interest Period in excess of one month prior to the Syndication Date. Each borrowing under the Term Loan Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, $1,000,000 or a whole multiple thereof and (y) in the case of Eurodollar Loans, $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Term Loan Lender thereof. Each Initial Term Loan Lender will make the amount of its pro rata share of each borrowing of the Initial Term Loans, and each Delayed Draw Term Loan Lender will make the amount of its pro rata share of each borrowing of Delayed Draw Term Loans, available to the Administrative Agent for the account of the Borrower at the Funding Office prior to 12:00 Noon, New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent in like funds as received by the Administrative Agent. 2.3 Repayment of Term Loans. (a) Each Initial Term Loan shall mature in consecutive installments on the dates set forth below, commencing on March 31, 2000 and ending on the Final Maturity Date, each of which shall be in an amount equal to such Lender's Initial Term Loan Percentage multiplied by the amount set forth below opposite such installment: 5 5
Installment Principal Amount ----------- ---------------- March 31, 2000 $ 250,000 June 30, 2000 $ 250,000 September 30, 2000 $ 250,000 December 31, 2000 $ 250,000 March 31, 2001 $ 250,000 June 30, 2001 $ 250,000 September 30, 2001 $ 250,000 December 31, 2001 $ 250,000 March 31, 2002 $ 250,000 June 30, 2002 $ 250,000 September 30, 2002 $ 250,000 December 31, 2002 $ 250,000 March 31, 2003 $1,250,000 June 30, 2003 $1,250,000 September 30, 2003 $1,250,000 December 31, 2003 $1,250,000 March 31, 2004 $2,500,000 June 30, 2004 $2,500,000 September 30, 2004 $2,500,000 December 31, 2004 $2,500,000 March 31, 2005 $8,625,000 June 30, 2005 $8,625,000 September 30, 2005 $8,625,000 December 31, 2005 $8,625,000 Final Maturity Date $10,000,000
(b) Each Delayed Draw Term Loan shall mature in consecutive installments on the dates set forth below, commencing on March 31, 2000 and ending on the Final Maturity Date, each of which shall be in an amount equal to such Lender's Delayed Draw Term Loan Percentage multiplied by the amount set forth below opposite such installment:
Installment Principal Amount ----------- ---------------- March 31, 2000 $ 250,000 June 30, 2000 $ 250,000 September 30, 2000 $ 250,000 December 31, 2000 $ 250,000 March 31, 2001 $ 250,000 June 30, 2001 $ 250,000 September 30, 2001 $ 250,000 December 31, 2001 $ 250,000 March 31, 2002 $ 250,000
6 6 June 30, 2002 $ 250,000 September 30, 2002 $ 250,000 December 31, 2002 $ 250,000 March 31, 2003 $1,250,000 June 30, 2003 $1,250,000 September 30, 2003 $1,250,000 December 31, 2003 $1,250,000 March 31, 2004 $2,500,000 June 30, 2004 $2,500,000 September 30, 2004 $2,500,000 December 31, 2004 $2,500,000 March 31, 2005 $8,625,000 June 30, 2005 $8,625,000 September 30, 2005 $8,625,000 December 31, 2005 $8,625,000 Final Maturity Date $10,000,000
provided, however, that if after giving effect to all Delayed Draw Term Loans made on or prior to the Term Loan Commitment Termination Date, the aggregate amount of the Delayed Draw Term Loan Commitments exceeds the amount of Delayed Draw Term Loans, the foregoing installments shall be ratably reduced by an aggregate amount equal to such excess." (d) Section 2.4(b) of the Credit Agreement is hereby amended by deleting such Section 2.4(b) and inserting in lieu thereof the following: "(b) The Revolving Credit Commitment of each Revolving Credit Lender shall be reduced in consecutive installments on the dates set forth below, commencing on March 31, 2003 and ending on the Final Maturity Date, each of which shall be in an amount equal to such Lender's Revolving Credit Percentage multiplied by the amount set forth below opposite such installment:
Installment Principal Amount ----------- ---------------- March 31, 2003 $1,875,000 June 30, 2003 $1,875,000 September 30, 2003 $1,875,000 December 31, 2003 $1,875,000 March 31, 2004 $1,875,000 June 30, 2004 $1,875,000 September 30, 2004 $1,875,000 December 31, 2004 $1,875,000 March 31, 2005 $1,875,000 June 30, 2005 $1,875,000 September 30, 2005 $1,875,000
7 7 December 31, 2005 $1,875,000 Final Maturity Date $2,500,000"
(e) Section 2.8 of the Credit Agreement is hereby amended by deleting the last two sentences of such Section 2.8 and inserting in lieu thereof the following: "The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to reduce the amount of the Delayed Draw Term Loan Commitments by an amount equal to the excess of the Delayed Draw Term Loan Commitments over the aggregate unpaid principal amount of Delayed Draw Term Loans then outstanding. Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the Delayed Draw Term Loan Commitments then in effect." (f) Sections 2.16(a) and (b) of the Credit Agreement are hereby amended by deleting such Sections 2.16(a) and (b) and inserting in lieu thereof the following: "(a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any commitment fee and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Delayed Draw Term Loan Percentages, Initial Term Loan Percentages or Revolving Credit Percentages, as the case may be, of the relevant Lenders. Each payment (other than prepayments) in respect of principal or interest in respect of the Loans, and each payment in respect of Reimbursement Obligations, shall be applied to the amounts of such obligations owing to the Lenders pro rata according to the respective amounts then due and owing to the Lenders. (b) Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Delayed Draw Term Loans shall be made pro rata according to the respective outstanding principal amounts of the Delayed Draw Term Loans then held by the Term Loan Lenders, and each payment (including each prepayment) by the Borrower on account of principal of and interest on the Initial Term Loans shall be made pro rata according to the respective outstanding principal amounts of the Initial Draw Term Loans then held by the Term Loan Lenders." (g) Section 8 of the Credit Agreement is hereby amended by deleting clause (B)(ii) thereof and inserting in lieu thereof the following: "(ii) with the consent of the Majority Delayed Draw Term Facility Lenders, the Administrative Agent may, or upon the request of the Majority Delayed Draw Term Facility Lenders, the Administrative Agent shall, by notice to the Borrower declare the Delayed Draw Term Loan Commitments to be terminated forthwith, whereupon the Delayed Draw Term Loan Commitments shall immediately terminate, and, with the consent of the Majority Initial Term Facility Lenders, the Administrative Agent may, 8 8 or upon the request of the Majority Initial Term Facility Lenders, the Administrative Agent shall, by notice to the Borrower declare the Initial Term Loan Commitments to be terminated forthwith, whereupon the Initial Term Loan Commitments shall immediately terminate;" 2.2 Additional Amendments to Section 1.1 of the Credit Agreement. Section 1.1 of the Credit Agreement is hereby amended (a) by replacing Annex A to the Credit Agreement, referred to in the definition of "Pricing Grid", with the Annex A attached hereto, and (b) by deleting the definition of "Consolidated Total Debt" therefrom and inserting in lieu thereof the following: '"Consolidated Total Debt": at any date, the aggregate principal amount of all Funded Debt of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP, minus, with respect to any date occurring on or prior to March 31, 1999, Excess Cash on Hand at such date (after giving effect to any allocation of Excess Cash on Hand to be used for Permitted Acquisitions), to the extent such Excess Cash on Hand is not subject to any Lien in favor of a third party (other than the Lien in favor of the Administrative Agent for the benefit of the Lenders) and is pledged to the Administrative Agent, for the benefit of the Lenders, as cash collateral for the Obligations pursuant to arrangements satisfactory to the Administrative Agent.' 2.3 Amendment to Section 6.11 of the Credit Agreement. Section 6.11 of the Credit Agreement is hereby amended by adding at the end thereof the following new clause (c): "(c) As promptly as practicable after July 1, 1998, the Borrower will execute such documentation as the Administrative Agent shall reasonably request establishing a cash collateral account (i) that is pledged to the Administrative Agent, for the benefit of the Lenders, to secure the Obligations, (ii) in which the unused proceeds of the Initial Term Loans, and any other cash from time to time that the Borrower elects to include as Excess Cash on Hand for the purposes of determining Consolidated Total Debt, shall be deposited and (ii) from which cash so deposited shall be released from time to time to the Borrower upon request so long as no Default or Event of Default is continuing, with each such request being deeming to constitute a representation to the effect of the matters set forth in Section 5.2(a) and (b)." 2.4 Amendments to Section 7.1 of the Credit Agreement. (a) Section 7.1(a) of the Credit Agreement is hereby amended by deleting in its entirety the table set forth in said section and substituting in lieu thereof the following: 9 9
Consolidated Test Period Leverage Ratio ----------- -------------- Closing Date to September 29, 1998 8.00 to 1.00 September 30, 1998 7.50 to 1.00 October 1, 1998 to December 31, 1998 7.25 to 1.00 January 1, 1999 to March 31, 1999 7.00 to 1.00 April 1, 1999 to June 30, 1999 6.50 to 1.00 July 1, 1999 to December 31, 1999 6.00 to 1.00 January 1, 2000 and thereafter 5.50 to 1.00
(b) Section 7.1(b) of the Credit Agreement is hereby amended by deleting in its entirety the table set forth in said section and substituting in lieu thereof the following:
Consolidated Test Period Senior Debt Ratio ----------- ----------------- Closing Date to the earlier of (x) the date of consummation of the IPO and (y) July 31, 1998 8.00 to 1.00 the earlier of (x) the day immediately following consummation of the IPO and (y) August 1, 1998 to December 31, 1998 3.75 to 1.00 January 1, 1999 to December 31, 1999 3.50 to 1.00 January 1, 2000 to December 31, 2000 3.25 to 1.00 January 1, 2001 and thereafter 3.00 to 1.00
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on the date (the "Amendment Effective Date") on which the Borrower and the Lenders shall have executed and delivered to the Administrative Agent this Amendment and each Subsidiary Guarantor shall have executed the Acknowledgement and Consent in the form annexed hereto. 10 10 SECTION 4. REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Loan Parties in the Loan Documents are true and correct on and as of the Amendment Effective Date, before and after giving effect to the effectiveness of this Amendment, as if made on and as of the Amendment Effective Date, except to the extent such representations and warranties expressly relate to a specific earlier date, in which case such representations and warranties were true and correct as of such earlier date. SECTION 5. PAYMENT OF EXPENSES. The Borrower agrees to pay or reimburse the Agents for all of their reasonable out-of-pocket costs and expenses incurred in connection with this Amendment and any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Agents. SECTION 6. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. On and after the Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or any Agent under any of the Loan Documents. Except as expressly amended herein, all of the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect in accordance with the terms thereof and are hereby in all respects ratified and confirmed. SECTION 7. COUNTERPARTS. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Amendment signed by all the parties shall be lodged with the Borrower and the Administrative Agent. SECTION 8. GOVERNING LAW. This Amendment and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 11 11 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. CUMULUS MEDIA INC. By: /s/ Richard Weening _____________________________________ Name: Richard Weening Title: Executive Chairman LEHMAN COMMERCIAL PAPER INC., as Lender By: /s/ William J. Gallagher _____________________________________ Name: William J. Gallagher Title: Authorize 12 ACKNOWLEDGMENT AND CONSENT Each of the undersigned corporations as guarantors under the Guarantee and Collateral Agreement, dated as of March 2, 1998, made by the undersigned corporations in favor of the Administrative Agent, for the benefit of the Lenders, hereby (a) consents to the transactions contemplated by this Amendment and (b) acknowledges and agrees that the guarantees (and grants of collateral security therefor) contained in such Guarantee and Collateral Agreement are, and shall remain, in full force and effect after giving effect to this Amendment and all prior modifications to the Credit Agreement. CUMULUS BROADCASTING, INC. By: /s/ Richard Weening _____________________________________ Title: Executive Chairman CUMULUS LICENSING CORP. By: /s/ Richard Weening _____________________________________ Title: Executive Chairman FORJAY BROADCASTING CORPORATION By: /s/ Richard Weening _____________________________________ Title: Executive Chairman FORJAY LICENSING CORP. By: /s/ Richard Weening _____________________________________ Title: Executive Chairman MINORITY RADIO ASSOCIATES, INC. By: /s/ Richard Weening _____________________________________ Title: Executive Chairman 13 2 MRA LICENSING CORP. By: /s/ Richard Wiening ----------------------------- Title: Executive Chairman 14 Annex A PRICING GRID FOR LOANS AND COMMITMENT FEES
============================================================================================================================== Consolidated Applicable Applicable Applicable Applicable Commit Leverage Ratio Margin Margin Margin Margin for -ment for Eurodollar for Base Rate for Eurodollar Base Rate Fee Loans - Term Loans - Term Loans - Loans - Rate Loans Loans Revolving Revolving Credit Loans Credit Loans - ------------------------------------------------------------------------------------------------------------------------------ Greater Than or Equal To 6.00 to 1.00 2.750% 1.750% 2.750% 1.750% 0.625% - ------------------------------------------------------------------------------------------------------------------------------ Greater Than or Equal To 5.50 to 1.00 and Less Than 2.750% 1.750% 2.500% 1.500% 0.625% 6.00 to 1.00 - ------------------------------------------------------------------------------------------------------------------------------ Greater Than or Equal To 5.00 to 1.00 and Less Than 2.750% 1.750% 2.125% 1.125% 0.625% 5.50 to 1.00 - ------------------------------------------------------------------------------------------------------------------------------ Greater Than or Equal To 4.50 to 1.00 and Less Than 2.250% 1.250% 2.000% 1.000% 0.625% 5.00 to 1.00 - ------------------------------------------------------------------------------------------------------------------------------ Greater Than or Equal To 4.00 to 1.00 and Less Than 2.250% 1.250% 1.750% 0.750% 0.500% 4.50 to 1.00 - ------------------------------------------------------------------------------------------------------------------------------ Less Than 4.00 to 1.00 2.250% 1.250% 1.500% 0.500% 0.500% ==============================================================================================================================
Changes in the Applicable Margin with respect to Loans or in the Commitment Fee Rate resulting from changes in the Consolidated Leverage Ratio shall become effective on the date (the "Adjustment Date") that is six full calendar months after the Closing Date, in the case of changes in the Applicable Margin, or the date on which financial statements for the fiscal quarter ending September 30, 1998 are delivered under Section 6.1(a) or (b), in the case of the Commitment Fee Rate, and, thereafter, on each date on which financial statements are delivered to the Lenders pursuant to Section 6.1 (but in any event not later than the 45th day after the end of each of the first three quarterly periods of each fiscal year or the 90th day after the end of each fiscal year, as the case may be) and shall remain in effect until the next change to be effected pursuant to this paragraph. Notwithstanding the foregoing, the Commitment Fee Rate shall be 0.750% for the period from and including June 26, 1998 through and including the date on which financial statements for the fiscal quarter ending September 30, 1998 are delivered under Section 6.1(a) or (b). If any financial statements referred to above are not delivered within the time periods specified above, then, until such financial statements are delivered, the Consolidated Leverage Ratio as at the end of the fiscal period that would have been covered thereby shall for the purposes of this definition be deemed to be greater than 6.00 to 1.00. In addition, at all times while an Event of Default shall have occurred and be continuing, the Consolidated Leverage Ratio shall for the purposes of this definition be deemed to be greater than 6.00 to 1.00. Each determination of the Consolidated Leverage Ratio pursuant to this definition shall be made with respect to the period of four consecutive fiscal quarters of the Borrower ending at the end of the period covered by the relevant financial statements. 15 SCHEDULE 1.1A COMMITMENTS: LENDING OFFICES AND ADDRESSES
Commitments ----------- Revolving Initial Delayed Draw Name of Lender and Credit Term Loan Term Loan Information for Notices Commitment Commitment Commitment Lehman Commercial Paper Inc. $25,000,000 $62,500,000 $62,500,000 3 World Financial Center New York, New York 10285 Attention: Michele Swanson Telecopy: (212) 528-0819 Telephone: (212) 526-0330
EX-10.5 6 FOURTH AMENDMENT 1 Exhibit 10.5 FOURTH AMENDMENT FOURTH AMENDMENT, dated as of October 1, 1998 (this "Amendment"), to the Credit Agreement, dated as of March 2, 1998 (as amended, supplemented or otherwise modified, the "Credit Agreement"), among CUMULUS MEDIA INC., an Illinois corporation formerly known as Cumulus Holdings, Inc. (the "Borrower"), the several banks and other financial institutions or entities parties thereto (the "Lenders"), LEHMAN BROTHERS INC., as advisor and arranger, LEHMAN COMMERCIAL PAPER INC., as syndication agent, and LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, extensions of credit to the Borrower; WHEREAS, the Borrower has requested, and upon this Amendment becoming effective, the Lenders have agreed, that certain provisions of the Credit Agreement be amended in the manner provided for in this Amendment; NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. SECTION 2. AMENDMENT TO SECTION 1.1 OF THE CREDIT AGREEMENT. Section 1.1 of the Credit Agreement is hereby amended by inserting the following term in proper alphabetical order and by deleting the definition of such term existing immediately prior to the effectiveness of this Amendment: "Term Loan Commitment Termination Date": January 15, 1999. SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on the date (the "Amendment Effective Date") on which the Borrower and the Lenders shall have executed and delivered to the Administrative Agent this Amendment and each Subsidiary Guarantor shall have executed the Acknowledgment and Consent in the form annexed hereto. 2 2 SECTION 4. REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Loan Parties in the Loan Documents are true and correct on and as of the Amendment Effective Date, before and after giving effect to the effectiveness of this Amendment, as if made on and as of the Amendment Effective Date, except to the extent such representations and warranties expressly relate to a specific earlier date, in which case such representations and warranties were true and correct as of such earlier date. SECTION 5. PAYMENT OF EXPENSES. The Borrower agrees to pay or reimburse the Agents for all of their reasonable out-of-pocket costs and expenses incurred in connection with this Amendment and any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Agents. SECTION 6. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. On and after the Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or any Agent under any of the Loan Documents. Except as expressly amended herein, all of the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect in accordance with the terms thereof and are hereby in all respects ratified and confirmed. SECTION 7. COUNTERPARTS. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Amendment signed by all the parties shall be lodged with the Borrower and the Administrative Agent. SECTION 8. GOVERNING LAW. This Amendment and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 3 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. CUMULUS MEDIA INC. By: /s/ Terrence Leahy ----------------------------------- Name: Terrence Leahy Title: Secretary LEHMAN COMMERCIAL PAPER INC., as Lender By: /s/ William J. Gallagher ----------------------------------- Name: William J. Gallagher Title: Authorized Signatory 4 ACKNOWLEDGMENT AND CONSENT Each of the undersigned corporations as guarantors under the Guarantee and Collateral Agreement, dated as of March 2, 1998, made by the undersigned corporations in favor of the Administrative Agent, for the benefit of the Lenders, hereby (a) consents to the transactions contemplated by this Amendment and (b) acknowledges and agrees that the guarantees (and grants of collateral security therefor) contained in such Guarantee and Collateral Agreement are, and shall remain, in full force and effect after giving effect to this Amendment and all prior modifications to the Credit Agreement. CUMULUS BROADCASTING, INC. By: /s/ Terrence Leahy ----------------------------------- Title: Vice President CUMULUS LICENSING CORP. By: /s/ Terrence Leahy ----------------------------------- Title: Vice President FORJAY BROADCASTING CORPORATION By: /s/ Terrence Leahy ----------------------------------- Title: Vice President FORJAY LICENSING CORP. By: /s/ Terrence Leahy ----------------------------------- Title: Vice President MINORITY RADIO ASSOCIATES, INC. By: /s/ Terrence Leahy ----------------------------------- Title: Vice President 5 2 MRA LICENSING CORP. By: /s/ Terrence Leahy ___________________________________ Title: Vice President REPUBLIC CORPORATION By: /s/ Terrence Leahy ___________________________________ Title: Vice President CBA BROADCASTING, INC. By: /s/ Terrence Leahy ___________________________________ Title: Vice President EX-10.6 7 FIFTH AMENDMENT 1 Exhibit 10.6 FIFTH AMENDMENT FIFTH AMENDMENT, dated as of January 14, 1999 (this "Amendment"), to the Credit Agreement, dated as of March 2, 1998 (as amended, supplemented or otherwise modified, the "Credit Agreement"), among CUMULUS MEDIA INC., an Illinois corporation formerly known as Cumulus Holdings, Inc. (the "Borrower"), the several banks and other financial institutions or entities parties thereto (the "Lenders"), LEHMAN BROTHERS INC., as advisor and arranger, LEHMAN COMMERCIAL PAPER INC., as syndication agent, and LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, extensions of credit to the Borrower; WHEREAS, the Borrower has requested, and upon this Amendment becoming effective, the Lenders have agreed, that certain provisions of the Credit Agreement be amended in the manner provided for in this Amendment; NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. SECTION 2. AMENDMENT TO SECTION 1.1 OF THE CREDIT AGREEMENT. Section 1.1 of the Credit Agreement is hereby amended by inserting the following term in proper alphabetical order and by deleting the definition of such term existing immediately prior to the effectiveness of this Amendment: "Term Loan Commitment Termination Date": May 1, 1999. SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on the date (the "Amendment Effective Date") on which the Borrower and the Lenders shall have executed and delivered to the Administrative Agent this Amendment and each Subsidiary Guarantor shall have executed the Acknowledgment and Consent in the form annexed hereto. 2 2 SECTION 4. REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Loan Parties in the Loan Documents are true and correct on and as of the Amendment Effective Date, before and after giving effect to the effectiveness of this Amendment, as if made on and as of the Amendment Effective Date, except to the extent such representations and warranties expressly relate to a specific earlier date, in which case such representations and warranties were true and correct as of such earlier date. SECTION 5. PAYMENT OF EXPENSES. The Borrower agrees to pay or reimburse the Agents for all of their reasonable out-of-pocket costs and expenses incurred in connection with this Amendment and any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Agents. SECTION 6. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. On and after the Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or any Agent under any of the Loan Documents. Except as expressly amended herein, all of the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect in accordance with the terms thereof and are hereby in all respects ratified and confirmed. SECTION 7. COUNTERPARTS. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Amendment signed by all the parties shall be lodged with the Borrower and the Administrative Agent. SECTION 8. GOVERNING LAW. This Amendment and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 3 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. CUMULUS MEDIA INC. By: /s/ Daniel O'Donnell ---------------------------- Name: Daniel O'Donnell Title: Vice President-Finance LEHMAN COMMERCIAL PAPER INC., as Lender By: /s/ William J. Gallagher ---------------------------- Name: William J. Gallagher Title: Authorized Signatory 4 ACKNOWLEDGMENT AND CONSENT Each of the undersigned corporations as guarantors under the Guarantee and Collateral Agreement, dated as of March 2, 1998, made by the undersigned corporations in favor of the Administrative Agent, for the benefit of the Lenders, hereby (a) consents to the transactions contemplated by this Amendment and (b) acknowledges and agrees that the guarantees (and grants of collateral security therefor) contained in such Guarantee and Collateral Agreement are, and shall remain, in full force and effect after giving effect to this Amendment and all prior modifications to the Credit Agreement. CUMULUS BROADCASTING, INC. By: /s/ Daniel O'Donnell -------------------------------- Title: Vice President CUMULUS LICENSING CORP. By: /s/ Terrence J. Leahy -------------------------------- Title: Secretary CARIBBEAN COMMUNICATIONS COMPANY LIMITED By: /s/ Terrence J. Leahy -------------------------------- Title: Secretary GEM RADIO FIVE LTD. By: /s/ Terrence J. Leahy -------------------------------- Title: Secretary EX-10.7 8 SIXTH AMENDMENT 1 Exhibit 10.7 SIXTH AMENDMENT SIXTH AMENDMENT, dated as of March 31, 1999 (this "Amendment"), to the Credit Agreement, dated as of March 2, 1998 (as amended, supplemented or otherwise modified, the "Credit Agreement"), among CUMULUS MEDIA INC., an Illinois corporation formerly known as Cumulus Holdings, Inc. (the "Borrower"), the several banks and other financial institutions or entities parties thereto (the "Lenders"), LEHMAN BROTHERS INC., as advisor and arranger, LEHMAN COMMERCIAL PAPER INC., as syndication agent, and LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, extensions of credit to the Borrower; WHEREAS, the Borrower has requested, and upon this Amendment becoming effective, the Lenders have agreed, that certain provisions of the Credit Agreement be amended in the manner provided for in this Amendment; NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. SECTION 2. AMENDMENT TO SECTION 7.1 OF THE CREDIT AGREEMENT. Section 7.1(c) of the Credit Agreement is hereby amended by deleting in its entirety the table set forth in said section and substituting in lieu thereof the following:
Consolidated Interest Test Period Coverage Ratio ----------- --------------------- Closing Date to September 30, 1998 1.30 to 1.00 October 1, 1998 to December 31, 1998 1.40 to 1.00 January 1, 1999 to March 31, 1999 1.40 to 1.00 April 1, 1999 to June 30, 1999 1.60 to 1.00
2 2 July 1, 1999 to September 30, 1999 1.70 to 1.00 October 1, 1999 to June 30, 2000 2.00 to 1.00 July 1, 2000 to June 30, 2001 2.25 to 1.00 July 1, 2001 and thereafter 2.50 to 1.00
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective as of March 31, 1999 (the "Amendment Effective Date") when the Borrower and the Lenders shall have executed and delivered to the Administrative Agent this Amendment and each Subsidiary Guarantor shall have executed the Acknowledgment and Consent in the form annexed hereto. SECTION 4. REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Loan Parties in the Loan Documents are true and correct on and as of the Amendment Effective Date, before and after giving effect to the effectiveness of this Amendment, as if made on and as of the Amendment Effective Date, except to the extent such representations and warranties expressly relate to a specific earlier date, in which case such representations and warranties were true and correct as of such earlier date. SECTION 5. PAYMENT OF EXPENSES. The Borrower agrees to pay or reimburse the Agents for all of their reasonable out-of-pocket costs and expenses incurred in connection with this Amendment and any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Agents. SECTION 6. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. On and after the Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or any Agent under any of the Loan Documents. Except as expressly amended herein, all of the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect in accordance with the terms thereof and are hereby in all respects ratified and confirmed. SECTION 7. COUNTERPARTS. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment by facsimile transmission shall be effective as 3 3 delivery of a manually executed counterpart hereof. A set of the copies of this Amendment signed by all the parties shall be lodged with the Borrower and the Administrative Agent. SECTION 8. GOVERNING LAW. This Amendment and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 4 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. CUMULUS MEDIA INC. By: /s/ Daniel O'Donnell ------------------------------------- Name: Daniel O'Donnell Title: Director of Finance LEHMAN COMMERCIAL PAPER INC., as Lender By: /s/ William J. Gallagher ------------------------------------- Name: William J. Gallagher Title: Authorized Signatory 5 ACKNOWLEDGMENT AND CONSENT Each of the undersigned corporations as guarantors under the Guarantee and Collateral Agreement, dated as of March 2, 1998, made by the undersigned corporations in favor of the Administrative Agent, for the benefit of the Lenders, hereby (a) consents to the transactions contemplated by this Amendment and (b) acknowledges and agrees that the guarantees (and grants of collateral security therefor) contained in such Guarantee and Collateral Agreement are, and shall remain, in full force and effect after giving effect to this Amendment and all prior modifications to the Credit Agreement. CUMULUS BROADCASTING, INC. By: Daniel O'Donnell ------------------------------------ Title: Vice-President CUMULUS LICENSING CORP. By: /s/ Terrence J. Leahy ------------------------------------ Title: Secretary CARIBBEAN COMMUNICATIONS COMPANY LIMITED By: /s/ Terrence J. Leahy ------------------------------------ Title: Secretary GEM RADIO FIVE LTD. By: /s/ Terrence J. Leahy ------------------------------------ Title: Secretary CUMULUS WIRELESS SERVICES INC. By: /s/ Terrence J. Leahy ------------------------------------ Title: Secretary EX-10.8 9 SEVENTH AMENDMENT 1 Exhibit 10.8 EXECUTION COPY SEVENTH AMENDMENT, CONSENT AND WAIVER SEVENTH AMENDMENT, CONSENT AND WAIVER, dated as of May 1, 1999 (this "Amendment"), to the Credit Agreement, dated as of March 2, 1998 (as amended, supplemented or otherwise modified, the "Credit Agreement"), among CUMULUS MEDIA INC., an Illinois corporation formerly known as Cumulus Holdings, Inc. (the "Borrower"), the several banks and other financial institutions or entities parties thereto (the "Lenders"), LEHMAN BROTHERS INC., as advisor and arranger, LEHMAN COMMERCIAL PAPER INC., as syndication agent, and LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, extensions of credit to the Borrower; WHEREAS, the Borrower has requested the Required Lenders to consent to certain acquisitions made by the Borrower, and the Required Lenders are willing to consent to such acquisitions in the manner provided for in this Amendment; and WHEREAS, the Borrower has requested the Required Lenders to waive and amend a certain covenant in the Credit Agreement, and the Required Lenders are willing to waive and amend such covenant in the manner provided for in this Amendment; NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. SECTION 2. AMENDMENT TO SECTION 7.1 OF THE CREDIT AGREEMENT. Section 7.1(a) of the Credit Agreement is hereby amended, effective retroactively to January 1, 1999, by (1) deleting the ratio "7.00 to 1.00" appearing directly opposite the words "January 1, 1999 to March 31, 1999" contained therein and inserting in lieu thereof the ratio "7.50 to 1.00", and (2) deleting the ratio "6.50 to 1.00" appearing directly opposite the words "April 1, 1999 to June 30, 1999" contained therein and inserting in lieu thereof the ratio "7.50 to 1.00". SECTION 3. WAIVER. The Required Lenders hereby waive any Default or Event of Default arising from violation of Section 7.1(a) of the Credit Agreement for the period ended March 31, 1999. 2 2 SECTION 4. CONSENT TO CERTAIN PERMITTED ACQUISITIONS. The Required Lenders hereby consent to the acquisitions made by the Borrower of Clarendon County (Florence), Nautical Broadcasting (Florence) and Pamplico Broadcasting (Florence) as Permitted Acquisitions. SECTION 5. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on the date (the "Amendment Effective Date") on which the Borrower and the Lenders shall have executed and delivered to the Administrative Agent this Amendment and each Subsidiary Guarantor shall have executed the Acknowledgment and Consent in the form annexed hereto. SECTION 6. REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Loan Parties in the Loan Documents are true and correct on and as of the Amendment Effective Date, before and after giving effect to the effectiveness of this Amendment, as if made on and as of the Amendment Effective Date, except to the extent such representations and warranties expressly relate to a specific earlier date, in which case such representations and warranties were true and correct as of such earlier date. SECTION 7. PAYMENT OF EXPENSES. The Borrower agrees to pay or reimburse the Agents for all of their reasonable out-of-pocket costs and expenses incurred in connection with this Amendment and any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Agents. SECTION 8. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. On and after the Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or any Agent under any of the Loan Documents. Except as expressly amended herein, all of the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect in accordance with the terms thereof and are hereby in all respects ratified and confirmed. SECTION 9. COUNTERPARTS. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Amendment signed by all the parties shall be lodged with the Borrower and the Administrative Agent. SECTION 10. GOVERNING LAW. This Amendment and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 3 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. CUMULUS MEDIA INC. By: /s/ Daniel O'Donnell -------------------------------- Name: Daniel O'Donnell Title: Director of Finance LEHMAN COMMERCIAL PAPER INC., as Administrative Agent and as Lender By: /s/ William J. Gallagher -------------------------------- Name: William J. Gallagher Title: Authorized Signatory 4 ACKNOWLEDGMENT AND CONSENT Each of the undersigned corporations as guarantors under the Guarantee and Collateral Agreement, dated as of March 2, 1998, made by the undersigned corporations in favor of the Administrative Agent, for the benefit of the Lenders, hereby (a) consents to the transactions contemplated by this Amendment and (b) acknowledges and agrees that the guarantees (and grants of collateral security therefor) contained in such Guarantee and Collateral Agreement are, and shall remain, in full force and effect after giving effect to this Amendment and all prior modifications to the Credit Agreement. CUMULUS BROADCASTING, INC. By: /s/ Daniel O'Donnell -------------------------------- Title: Vice President CUMULUS LICENSING CORP. By: /s/ Daniel O'Donnell -------------------------------- Title: Vice President CARIBBEAN COMMUNICATIONS COMPANY LIMITED By: /s/ Terrence J. Leahy -------------------------------- Title: Secretary GEM RADIO FIVE LTD. By: /s/ Terrence J. Leahy -------------------------------- Title: Secretary CUMULUS WIRELESS SERVICES INC. By: /s/ Terrence J. Leahy -------------------------------- Title: Secretary EX-21.1 10 SUBSIDIARIES OF THE COMPANY 1 Exhibit 21.1 SUBSIDIARIES OF THE COMPANY Cumulus Broadcasting, Inc., a Nevada corporation Cumulus Licensing Corp., a Nevada corporation Cumulus Wireless Services Inc., a Nevada corporation Cumulus Internet Services Inc., a Nevada corporation Cumulus Telecommunications Inc., a Nevada corporation Caribbean Communications Company, Ltd., a corporation organized under the laws of Montserrat GEM Radio Five Limited, a corporation organized under the laws of Trinidad and Tobago EX-23.1 11 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated April 14, 1999 relating to the financial statements and financial statement schedule, which appears in Cumulus Media Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP Chicago, Illinois July 16, 1999 -----END PRIVACY-ENHANCED MESSAGE-----