-----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, BLGst0xC6jHZzghgxNfZ/Jq5MGBkq/F1uq/wVe4KD5QXCOuKMFemfQe84E03UlKu LpnZYTR3BAuFd8YHi970cQ== 0000950123-99-009770.txt : 19991105 0000950123-99-009770.hdr.sgml : 19991105 ACCESSION NUMBER: 0000950123-99-009770 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19991104 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: 333-89825 FILM NUMBER: 99741103 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. 1 TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1999. REGISTRATION STATEMENT NO. 333-89825 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------ AMENDMENT NO. 1 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 (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification No.)
111 EAST KILBOURN AVENUE, SUITE 2700, MILWAUKEE, WI 53202, (414) 615-2800 (Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------------------------------ RICHARD W. WEENING, EXECUTIVE CHAIRMAN LEWIS W. DICKEY, JR., EXECUTIVE VICE CHAIRMAN CUMULUS MEDIA INC. 111 EAST KILBOURN AVENUE, 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 reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [ ] 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 MAXIMUM AMOUNT OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING REGISTRATION TITLE OF SHARES TO BE REGISTERED BE REGISTERED PER SHARE (1) PRICE (1) FEE - ----------------------------------------------------------------------------------------------------------------------------- Class A common stock, par value $0.01 per share......... 4,600,000 shares (2) $33.9375 $156,112,500 $43,399 (3) - -----------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457. (2) Includes 600,000 shares issuable upon exercise of the Underwriters' over-allotment option. (3) $42,256 of the registration fee was previously paid in connection with the Company's filing on October 28, 1999. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 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 November 4, 1999 4,000,000 Shares cumulus logo CLASS A COMMON STOCK ------------------------ WE ARE OFFERING 3,000,000 SHARES OF OUR CLASS A COMMON STOCK AND THE SELLING SHAREHOLDERS ARE SELLING 1,000,000 SHARES OF OUR CLASS A COMMON STOCK. ------------------------ CUMULUS MEDIA INC.'S CLASS A COMMON STOCK IS LISTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "CMLS." ON NOVEMBER 2, 1999, THE REPORTED LAST SALE PRICE OF THE CLASS A COMMON STOCK ON THE NASDAQ NATIONAL MARKET WAS $33.9375 PER SHARE. ------------------------ INVESTING IN THE CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 14. ------------------------ PRICE $ A SHARE ------------------------
UNDERWRITING PROCEEDS TO PRICE TO DISCOUNTS AND PROCEEDS TO SELLING PUBLIC COMMISSIONS CUMULUS SHAREHOLDERS -------- ------------- ----------- ------------ Per Share................ $ $ $ $ Total.................... $ $ $ $
We and the selling shareholders have granted the underwriters the right to purchase up to an additional 600,000 shares to cover over-allotments. 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. Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on , 1999. ------------------------ MORGAN STANLEY DEAN WITTER BEAR, STEARNS & CO. INC. GOLDMAN, SACHS & CO. PRUDENTIAL SECURITIES LEHMAN BROTHERS BANC OF AMERICA SECURITIES LLC , 1999 3 2 PAGE GATE FOLD Cover page of gate fold: collage of logos of radio stations owned by us. 4 Inside of gate fold: U.S. map and to the bottom right a Caribbean map showing the locations of our radio stations. 5 TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................... 5 Risk Factors.......................... 14 Use of Proceeds....................... 23 Class A Common Stock Price Range and Dividends........................... 23 Dividend Policy....................... 23 Capitalization........................ 24 Unaudited Pro Forma Financial Statements.......................... 25 Selected Historical Financial Data.... 38 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 40 Business.............................. 47 Management............................ 67
PAGE ---- Certain Relationships and Related Transactions........................ 73 Principal and Selling Shareholders.... 74 Description of Capital Stock.......... 76 Description of Certain Indebtedness... 83 Shares Eligible for Future Sale....... 86 Underwriters.......................... 87 Certain United States Tax Consequences To Non-U.S. Holders of Class A Common Stock........................ 89 Legal Matters......................... 92 Experts............................... 92 Where You Can Find More Information......................... 93
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 6 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 1998-1999. 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 1999 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 7 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 211 stations in 44 U.S. markets. We also provide sales and marketing services under LMAs (pending FCC approval of acquisition) to 43 stations in 18 U.S. markets. We are the third largest radio broadcasting company in the U.S. based on number of stations and believe we will be the second largest such company following completion of the acquisition of AMFM, Inc. by Clear Channel Communications, Inc. We believe we are the eighth largest radio broadcasting company in the U.S. based on 1998 pro forma net revenues and believe we will be the seventh largest such company following completion of Clear Channel's acquisition of AMFM. We will own and operate a total of 261 radio stations (184 FM and 77 AM) in 48 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 six months ended June 30, 1999, we had net revenues of $77.7 million and broadcast cash flow of $18.6 million. After giving pro forma effect to the transactions described in the unaudited pro forma financial statements, we would have had net revenues of $96.1 million and broadcast cash flow of $22.1 million for the six months ended June 30, 1999. We believe that the attractive operating characteristics of mid-size markets, which we define as markets constituting Metropolitan Statistical Areas 100-276 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 100 acquisitions, accounting for all 261 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 5 8 20 years of experience in the radio broadcasting industry. Mr. Bungeroth has developed an expertise in increasing revenues at stations under his management. 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 November 2, 1999 with respect to our stations in these regions, including stations for which we currently provide programming and sell advertising under LMAs (seven 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........................... 252 2 36.6% 4 2 1 -- 5 2 Augusta, GA.......................... 114 1 25.7%% 5 3 1 -- 6 3 Chattanooga, TN...................... 104 1 30.0% 4 1 -- -- 4 1 Columbus, GA......................... 169 1 35.6% 4 2 1 1 5 3 Columbus-Starkville, MS.............. 247 1 -- -- -- 4 3 4 3 Fayetteville, NC..................... 126 2 19.2% -- -- 3 1 3 1 Florence, SC......................... 198 2 43.2% 6 3 1 -- 7 3 Greenville-New Bern-Jacksonville, NC................................. 81 4 3.8% 2 -- -- -- 2 -- Laurel-Hattiesburg, MS............... 208 2 30.6% 2 1 3 1 5 2 Lexington-Fayette, KY................ 106 1 28.4% 4 1 -- -- 4 1 Mobile, AL........................... 88 2 29.5% 2 1 2 1 4 2 Montgomery, AL....................... 142 1 33.9% 2 2 2 1 4 3 Muscle Shoals, AL.................... 240 1 -- 2 1 1 1 3 2 Myrtle Beach, SC..................... 173 2 20.7% 5 1 -- -- 5 1 Pensacola, FL........................ 121 2 8.6% -- -- 1 1 1 1 Salisbury-Ocean City, MD............. 150 1 24.7% 6 2 -- -- 6 2 Savannah, GA......................... 154 2 40.3% 5 2 -- -- 5 2 Tallahassee, FL...................... 159 1 38.2% 3 1 1 -- 4 1 Tupelo, MS........................... 178 1 23.4% 2 2 1 -- 3 2 Wilmington, NC....................... 175 2 33.8% 2 1 2 -- 4 1 MIDWEST REGION Ann Arbor, MI........................ 145 1 6.3% 2 2 -- -- 2 2 Appleton-Oshkosh, WI................. 134 3 19.0% 2 2 -- -- 2 2 Bismarck, ND......................... 265 1 56.7% 3 1 1 2 4 3 Dubuque, IA.......................... 220 2 34.7% 4 1 -- -- 4 1 Eau Claire, WI....................... 231 2 32.8% 4 2 -- -- 4 2 Faribault-Owatonna-Waseca, MN........ N/A 1 -- 4 4 -- -- 4 4 Green Bay, WI........................ 183 2 24.3% 3 -- 1 1 4 1 Kalamazoo, MI........................ 176 1 27.1% 2 1 -- -- 2 1 Mankato-New Ulm-St. Peter, MN........ 255 1 -- 4 2 -- -- 4 2 Marion-Carbondale, IL................ 213 1 28.8% 4 2 -- -- 4 2 Mason City, IA....................... 269 1 -- 5 2 -- -- 5 2 Monroe, MI........................... N/A 1 -- 1 -- -- -- 1 -- Rochester, MN........................ 229 1 -- 2 2 -- -- 2 2 Toledo, OH........................... 79 1 35.5% 4 2 1 -- 5 2 Topeka, KS........................... 181 2 35.4% 2 2 2 -- 4 2
6 9
STATION PORTFOLIO --------------------------------- MSA CLUSTER 12+ OWNED PENDING PRO FORMA MARKET RANKING BY AUDIENCE --------- --------- --------- MARKET RANK REVENUE SHARE SHARE FM AM FM AM FM AM ------ ------ ------------- -------- --- --- --- --- --- --- SOUTHWEST REGION Abilene, TX.......................... 221 2 26.8% 4 -- -- -- 4 -- Amarillo, TX......................... 188 2 25.1% 4 2 -- -- 4 2 Beaumont-Port Arthur, TX............. 127 2 31.2% 3 2 -- -- 3 2 Fayetteville, AR..................... 155 2 27.2% 4 2 -- -- 4 2 Ft. Smith, AR........................ 171 4 14.7% 3 -- -- -- 3 -- Grand Junction, CO................... 251 1 41.7% 3 -- 1 1 4 1 Killeen-Temple, TX................... 149 1 18.5% -- -- 4 -- 4 -- Lake Charles, LA..................... 205 1 45.8% 3 1 -- -- 3 1 McAllen-Brownsville, TX.............. 63 3 21.3% 2 -- -- -- 2 -- Odessa-Midland, TX................... 174 1 37.8% 4 2 -- -- 4 2 Wichita Falls, TX.................... 242 2 36.6% 4 -- -- -- 4 -- NORTHEAST REGION Augusta-Waterville, ME............... 250 1 20.5% 5 1 1 1 6 2 Bangor, ME........................... 268 1 30.7% 4 1 -- -- 4 1 --- --- --- --- --- --- TOTALS............................... 149 62 35 15 184 77 === === === === === === Number of U.S. markets: 48 Number of stations: 261
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 coverages and that are diversified in format to provide a broad range of target audiences for advertisers. INTEGRATION OF ACQUIRED BUSINESSES Through our 100 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; 7 10 - 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. 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 print media and television. - ORGANIZE MARKETS IN ADVERTISER REGIONS. Our markets are located primarily 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 50 stations in 21 markets for an aggregate purchase price of approximately $144.6 million, assuming a purchase price of $7.0 million for the acquisition 8 11 of stations from Green Bay Broadcasting Company, Inc. We expect to consummate most of these pending acquisitions by the second 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 we are currently a party to nine letters of intent. 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. 9 12 THE OFFERING Class A common stock offered by Cumulus.................... 3,000,000 shares Class A common stock offered by the selling shareholders... 1,000,000 shares -------------------------------------------- Total.................... 4,000,000 shares(1) -------------------------------------------- -------------------------------------------- Common stock outstanding after this offering: Class A common stock........ 25,014,323 shares(1) Class B common stock........ 6,856,593 shares(1) Class C common stock........ 2,151,277 shares -------------------------------------------- Total.................... 34,022,193 shares -------------------------------------------- -------------------------------------------- Over-allotment option......... 300,000 shares of Class A common stock to be issued by Cumulus and 300,000 shares of Class A common stock to be sold by the selling shareholders. 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............... The net proceeds of this offering will be used to fund the completion of a portion of our pending acquisitions. We anticipate funding the completion of our remaining pending acquisitions with cash on hand. See "Use of Proceeds". 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 by Cumulus or the possible sale of additional shares of Class A common stock by the selling shareholders to the underwriters pursuant to their right to purchase additional shares to cover their over-allotments. 10 13 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. 11 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 six months ended June 30, 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 six months ended June 30, 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, our July 1999 offering of our Class A common 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 credit facility as if such transactions had occurred on January 1, 1998. The pro forma balance sheet data as of June 30, 1999, give effect to this offering, our July 1999 offering of our Class A common stock, the redemption of a portion of our Series A preferred stock, the completion of our pending acquisitions and acquisitions completed after June 30, 1999, borrowings under and the repayment of all indebtedness outstanding under our old credit facility and borrowings under our credit facility as if such transactions had occurred on June 30, 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, SIX MONTHS ENDED JUNE 30, 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 DATA) STATEMENT OF OPERATIONS DATA: Net revenues.......................... $ 9,163 $ 98,787 $184,587 $ 34,382 $ 77,715 $ 96,071 Station operating expenses excluding depreciation and amortization....... 7,147 72,154 139,529 27,275 59,126 74,000 Depreciation and amortization......... 1,671 19,584 44,834 6,901 16,341 22,026 Corporate general and administrative expenses............................ 1,276 5,607 9,125 2,231 3,410 4,148 Non-cash stock compensation expense... 1,689 -- -- -- -- -- -------- -------- -------- -------- -------- -------- Operating income (loss)............... (2,620) 1,442 (8,901) (2,025) (1,162) (4,103) Net interest expense.................. 837 13,178 28,580 3,894 12,272 14,340 Net loss before extraordinary item.... (3,578) (11,864) (37,565) (5,942) (13,436) (18,203) Basic and diluted loss per common share............................... $ (.31) $ (1.70) $ (1.45) $ (.78) $ (1.15) $ (.73)
12 15
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, 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 DATA) OTHER FINANCIAL DATA: Broadcast cash flow(2)................ $ 2,016 $ 26,633 $ 45,058 $ 7,107 $ 18,589 $ 22,071 Broadcast cash flow margin(2)......... 22.0% 27.0% 24.4% 20.7% 23.9% 23.0% EBITDA(2)............................. $ 740 $ 21,026 $ 35,933 $ 4,876 $ 15,179 $ 17,923 Net cash provided by (used in) operating activities................ (1,887) (4,653) 7,269 (13,767) (14,289) 2,762 Net cash used in investing activities.......................... 95,100 351,025 (8,428) 113,576 47,299 (8,463) Net cash provided by financing activities.......................... 98,560 378,990 1,159 127,637 45,789 5,701
AS OF DECEMBER 31, AS OF JUNE 30, -------------------- --------------------------- PRO FORMA AS ADJUSTED 1997 1998 1999 1999 -------- -------- ----------- ------------ (IN THOUSANDS) BALANCE SHEET DATA: Total assets................................ $110,441 $517,631 $552,466 $876,469 Long-term debt, including current portion... 42,801 222,767 268,557 285,000 Preferred stock subject to mandatory redemption................................ 13,426 133,741 143,038 99,288 Total stockholders' equity.................. 49,976 125,135 102,401 445,324
- ------------ (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. 13 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, 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, 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 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; Topeka, Kansas; Pensacola, Florida; 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 currently has two pending investigations regarding our acquisitions of up to eight stations in two markets. 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 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 14 17 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 261 radio stations in 48 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 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 $27.3 million for the year ended December 31, 1998 and $22.7 million for the six months ended June 30, 1999. On a pro forma basis, net loss before extraordinary item attributable to common stockholders for the year ended December 31, 1998 and the six months ended June 30, 1999 would have been $49.3 million and $24.7 million, respectively. Additional losses can be expected to continue while we pursue our strategy of acquiring and developing radio stations. 15 18 SIGNIFICANT CAPITAL REQUIREMENTS -- WE WILL REQUIRE SIGNIFICANT CAPITAL TO CONSUMMATE OUR PENDING ACQUISITIONS. 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 second quarter of 2000 to be $144.6 million. We expect that the proceeds from this offering and cash on hand will provide sufficient funds for us to complete our pending acquisitions. 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 June 30, 1999, after giving effect to this offering, the July 1999 offering of our Class A common stock, the completion of our pending acquisitions, our acquisitions completed after June 30, 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 credit facility, we would have had outstanding consolidated long-term indebtedness (including current portion) of approximately $285.0 million, preferred stock subject to mandatory redemption of approximately $99.3 million and stockholders' equity of approximately $445.3 million. See "Capitalization." Subject to certain significant exceptions, our 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 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 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 credit facility, indenture, certificate of designation and exchange debenture indenture limit our ability to pay dividends and make other distributions to our shareholders. 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 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; 16 19 - 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 AND THE TERMS OF OUR SERIES A PREFERRED STOCK IMPOSE SIGNIFICANT RESTRICTIONS ON US. Our 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 credit facility, indenture, certificate of designation and exchange debenture indenture also restrict our ability to incur liens or to sell certain assets. Our 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 credit facility, indenture, certificate of designation and/or exchange debenture indenture. If an event of default under our credit facility occurs, then our 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 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 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 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 credit facility could declare all amounts owed to them immediately due and payable. 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; 17 20 - 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." GOVERNMENTAL REGULATION OF BROADCASTING INDUSTRY -- THE BROADCASTING INDUSTRY IS SUBJECT TO EXTENSIVE AND CHANGING FEDERAL REGULATION. The Communications Act of 1934 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 18 21 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. 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. For example, the FCC has recently indicated it may propose new rules to define a "market" for purposes of the local radio station ownership limits in the Telecom 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. 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 eight 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 staff requests for additional information. There can be no assurance that the FCC will approve our future acquisitions, including our pending acquisitions. 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 50.2% 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 1.5% 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 19 22 of the offering, will own 0.9% 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 50.2% 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 and Selling 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 three separate recent system evaluations, the most recent of which was completed in early October 1999, as well as 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. 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 noncompliance by external agents is not determinable. 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 our 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 20 23 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 are in the process of arranging 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. THE PUBLIC MARKET FOR OUR CLASS A COMMON STOCK MAY BE VOLATILE. We cannot assure you that the market price of our Class A common stock will not decline, and the market price could be subject to wide fluctuations in response to such factors as: - actual or anticipated variations in our quarterly operating results, - announcements of new product or service offerings, - technological innovations, - competitive developments, - changes in financial estimates by securities analysts, - conditions and trends in the radio broadcasting industry, - adoption of new accounting standards affecting the radio broadcasting industry, and - general market conditions and other factors. Further, the stock markets, and in particular the Nasdaq National Market, have experienced extreme price and volume fluctuations that have particularly affected the market prices of equity securities of many technology and media companies and have often been unrelated or disproportionate to the operating performance of such companies. In addition, general economic, political and market conditions such as recessions, interest rates or international currency fluctuations, may adversely affect the market price of our Class A common stock. 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 25,014,323 shares of Class A common stock, 6,856,593 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 2,114,309 shares of Class A common stock and 3,001,380 shares of Class C common stock. Of these shares, 23,684,755 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." 21 24 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 credit facility, indenture, certificate of designation and exchange debenture indenture restrict our ability to pay dividends. See "Dividend Policy." 22 25 USE OF PROCEEDS We intend to use the proceeds from this offering to fund the completion of a portion of our pending acquisitions and pay related fees and expenses. We anticipate funding the completion of our remaining pending acquisitions with cash on hand. The following table presents the sources and uses of funds, giving effect to this offering, the completion of our pending acquisitions and acquisitions completed after June 30, 1999, the repayment of all indebtedness outstanding under our old credit facility and borrowings under our credit facility as if such transactions had occurred as of June 30, 1999:
(IN THOUSANDS) -------------- SOURCES OF FUNDS: Class A common stock offered.............................. $101,820(1) Cash on hand.............................................. 45,380 Escrow funds.............................................. 3,736 -------- $150,936 ======== USES OF FUNDS: Purchase price of pending acquisitions.................... $144,595 Fees and expenses related to this offering................ 6,341 -------- $150,936 ========
- ------------ (1) $112.0 million if the underwriters' right to purchase shares to cover over-allotments is exercised in full. 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. 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.
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............................................. 32.69 20.00 Fourth Quarter (through November 2)....................... 35.88 29.25
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 November 2, 1999, there were approximately 33 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. 23 26 CAPITALIZATION The following table sets forth our cash and cash equivalents and capitalization as of June 30, 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), our July 1999 offering of our Class A common stock, the completion of our pending acquisitions and acquisitions completed after June 30, 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 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 JUNE 30, 1999 --------------------- PRO FORMA AS ACTUAL ADJUSTED -------- --------- (UNAUDITED) (IN THOUSANDS) Cash and cash equivalents................................... $ 9,086 $ 78,813 ======== ======== Long-term debt, including current maturities: Old credit facility......................................... 107,274 -- Credit facility............................................. -- 125,000 Senior subordinated notes................................... 160,000 160,000 Other long-term debt........................................ 263 -- -------- -------- Total long-term debt.............................. 267,537 285,000 -------- -------- Series A preferred stock.................................... 143,038 99,288 -------- -------- Stockholders' equity: Class A common stock, par value $.01 per share; 50,000,000 shares authorized; 8,700,504 shares outstanding (actual); 23,814,104 shares outstanding (pro forma as adjusted)..... 87 238 Class B common stock, par value $.01 per share; 20,000,000 shares authorized; 8,660,416 shares outstanding (actual); 7,660,416 (pro forma as adjusted)......................... 87 77 Class C common stock, par value $.01 per share; 30,000,000 shares authorized; 2,376,277 shares outstanding (actual and pro forma as adjusted)................................ 24 24 Additional paid-in-capital (actual and pro forma as adjusted)................................................. 132,913 475,695 Accumulated deficit and comprehensive income................ (30,710) (30,710) -------- -------- Total stockholders' equity........................ 102,401 445,324 -------- -------- Total capitalization........................................ $512,976 $829,612 ======== ========
24 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 six months ended June 30, 1999 and the balance sheet as of June 30, 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 six months ended June 30, 1999 give effect to: - this offering, - the July 1999 offering of our Class A common stock, - 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 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 six months ended June 30, 1999 includes the effect of our acquisitions completed after June 30, 1999. - The pro forma balance sheet as of June 30, 1999 gives effect to: - this offering, - the July 1999 offering of our Class A common stock, - the redemption of a portion of our Series A preferred stock, - the completion of our pending acquisitions and acquisitions completed after June 30, 1999, - the borrowings under and repayment of all indebtedness outstanding under our old credit facility, and - borrowings under our credit facility, in each case as if such transactions had occurred on June 30, 1999. The information set forth under the heading "Pro Forma Adjustments for the 1999 Subsequent Acquisitions" includes the effect of our acquisitions completed after June 30, 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 25 28 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. 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." 26 29 CUMULUS MEDIA INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
(D) PRO FORMA ADJUSTMENTS FOR (A)+(B)+(C)+ CUMULUS (D) = (E) (B) HISTORICAL PRO FORMA AS PRO FORMA (C) AND THE ADJUSTED FOR (A) ADJUSTMENTS 1999 1999 THE 1999 CUMULUS FOR CUMULUS COMPLETED COMPLETED COMPLETED HISTORICAL HISTORICAL(2) ACQUISITIONS(3) ACQUISITIONS ACQUISITIONS ---------- ------------- --------------- ------------ ------------ STATEMENT OF OPERATIONS DATA: Revenues..................................... $108,172 $29,250 $32,304 $ -- $169,726 Less: agency commissions..................... (9,385) (1,934) (1,815) -- (13,134) -------- ------- ------- -------- -------- Net revenues................................. 98,787 27,316 30,489 -- 156,592 Station operating expenses excluding depreciation and amortization............... 72,154 20,973 22,019 -- 115,146 Depreciation and amortization................ 19,584 3,772 4,794 8,015(4) 36,165 Corporate general and administrative expenses.................................... 5,607 1,395 1,116 -- 8,118 -------- ------- ------- -------- -------- Operating income (loss)...................... 1,442 1,176 2,560 (8,015) (2,837) Interest expense............................. (15,551) (2,950) (3,482) (5,400)(5) (27,383) Interest income.............................. 2,373 -- -- (2,173)(6) 200 Gain (loss) on sale of assets................ -- 21,249 (72) (21,177)(7) -- Other income (expense)....................... (2) (182) (129) -- (313) -------- ------- ------- -------- -------- Income (loss) before income taxes............ (11,738) 19,293 (1,123) (36,765) (30,333) Income tax (expense) benefit................. (126) (86) (24) -- (236) -------- ------- ------- -------- -------- Net income (loss) before extraordinary item........................................ (11,864) 19,207 (1,147) (36,765) (30,569) 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 $(1,147) $(41,268) $(48,663) ======== ======= ======= ======== ======== (E)+(F)=(G) (F) PRO FORMA AS (I) PRO FORMA ADJUSTED FOR THE PRO FORMA ADJUSTMENTS 1999 COMPLETED ADJUSTMENTS FOR THE ACQUISITIONS, FOR THE PENDING COMPLETED THE COMPLETED ACQUISITIONS OFFERING OFFERING AND (H) AND THE (G)+(H)+(I)=(J) AND THE NEW THE NEW CREDIT PENDING CURRENT PRO FORMA CREDIT FACILITY FACILITY ACQUISITIONS OFFERING AS ADJUSTED(1) --------------- ---------------- ------------ --------------- --------------- STATEMENT OF OPERATIONS DATA: Revenues..................................... $ -- $169,726 $30,149 $ -- $199,875 Less: agency commissions..................... -- (13,134) (2,154) -- (15,288) ------- -------- ------- ------- -------- Net revenues................................. -- 156,592 27,995 -- 184,587 Station operating expenses excluding depreciation and amortization............... -- 115,146 24,383 139,529 Depreciation and amortization................ -- 36,165 2,975 5,694(4) 44,834 Corporate general and administrative expenses.................................... -- 8,118 1,007 -- 9,125 ------- -------- ------- ------- -------- Operating income (loss)...................... -- (2,837) (370) (5,694) (8,901) Interest expense............................. (1,397)(9) (28,780) (1,210) 1,210(11) (28,780) Interest income.............................. -- 200 -- 200 Gain (loss) on sale of assets................ -- -- 1,072 (1,072)(12) -- Other income (expense)....................... -- (313) 433 120 ------- -------- ------- ------- -------- Income (loss) before income taxes............ (1,397) (31,730) (75) (5,556) (37,361) Income tax (expense) benefit................. -- (236) 32 -- (204) ------- -------- ------- ------- -------- Net income (loss) before extraordinary item........................................ (1,397) (31,966) (43) (5,556) (37,565) Preferred stock dividends and accretion of discount.................................... 6,333(10) (11,761) -- -- (11,761) ------- -------- ------- ------- -------- Net income (loss) before extraordinary item attributable to common stockholders......... $ 4,936 $(43,727) $ (43) $(5,556) $(49,326) ======= ======== ======= ======= ========
See accompanying notes to the unaudited pro forma statement of operations. 27 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 $10,560 and amortization expense is $34,274 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......... 668 -------- Total interest expense...................................... 27,383 Less: historical interest recorded by us and the businesses acquired in connection with our completed acquisitions.... (21,983) -------- Net adjustment.............................................. $ 5,400 ========
(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 intercompany 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. 28 31 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 ========
(9) Adjustment to reflect increased interest expense resulting from: Sources of funds from Completed Offering and Credit Facility: Amount financed by the credit facility ($125,000 to Cumulus net of fees of $4,000)...................................... $121,000 Class A common stock offered ($268,116 to Cumulus net of fees of $14,656)....................................... 253,460 -------- Total.................................................. $374,460 ======== Uses of funds: Repayment of the old credit facility...................... $ 62,500 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........................................... 262,194 -------- Total................................................ $374,460 ======== Interest on the $125,000 indebtedness under the credit facility at 8.50%......................................... $ 10,625 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............................................... 887 Annual amortization of $6,689 in debt issue costs associated with our senior subordinated notes over ten years......... 668 -------- Total interest expense................................. 28,780 Less: interest expense recorded pro forma as adjusted for the 1999 completed acquisitions.................. (27,383) -------- Net adjustment......................................... $ 1,397 ========
(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%...................................................... $ 11,761 Less: pro forma dividend as adjusted for the 1999 completed acquisitions.............................................. (18,094) -------- Net adjustment.............................................. $ 6,333 ========
(11) Adjustment to reflect the elimination of $1,210 of interest expense recorded by sellers related to debt which was not assumed by Cumulus. (12) Adjustment recorded to eliminate the net non-recurring gains (losses) on the sale of assets recorded by Anderson Broadcasting Company and Calendar Broadcasting Inc., combined with an adjustment recorded to eliminate the net non-recurring gain recognized by Savannah Valley Broadcasting Radio 29 32 Properties. The non-recurring gain was recognized by Savannah Valley Broadcasting Radio Properties upon the sale of assets not acquired by us. Sources of funds from Current Offering: Class A common stock offered ($101,820 to Cumulus net of fees of $6,341)........................................ $ 95,479 Escrow funds.............................................. 3,736 -------- Total.................................................. $ 99,215 ======== Uses of funds: Purchase price of the pending acquisitions................ $144,595 Decrease in cash on hand.................................. (45,380) -------- Total.................................................. $ 99,215 ========
The floating interest rate used to calculate pro forma interest expense on the credit facility is eight and one half percent (8.50%). The rate on the 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 credit facility results in a $156 increase or decrease in the pro forma interest expense for the twelve months ended December 31, 1998. Upon the consummation of the preferred stock redemption on October 1, 1999, we will record a redemption premium of $6,016 on the redemption of $43,750 Series A preferred stock in the fourth quarter of 1999. 30 33 CUMULUS MEDIA INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 (IN THOUSANDS)
(D) PRO FORMA (A)+(B)+(C)+ (B) ADJUSTMENTS (D)=(E) PRO FORMA (C) FOR CUMULUS PRO FORMA AS (A) ADJUSTMENTS 1999 HISTORICAL AND THE ADJUSTED FOR THE CUMULUS FOR CUMULUS SUBSEQUENT 1999 COMPLETED 1999 COMPLETED HISTORICAL HISTORICAL(1)(2) ACQUISITIONS(3) ACQUISITIONS ACQUISITIONS ---------- ---------------- --------------- ------------------ ---------------- STATEMENT OF OPERATIONS DATA: Revenues......................... $ 84,241 $ 400 $ 8,308 $ -- $ 92,949 Less: agency commissions......... (6,526) (30) (765) -- (7,321) -------- ----- ------- ----- -------- Net revenues..................... 77,715 370 7,543 -- 85,628 Station operating expenses excluding depreciation and amortization................... 59,126 427 5,239 -- 64,792 Depreciation and amortization.... 16,341 110 1,857 (617)(4) 17,691 Corporate general and administrative expenses........ 3,410 -- 537 -- 3,947 -------- ----- ------- ----- -------- Operating income (loss).......... (1,162) (167) (90) 617 (802) Interest expense................. (12,492) (71) (1,313) 478(5) (13,398) Interest income.................. 220 -- -- (170)(6) 50 (Gain) loss on sale of asset..... -- -- -- -- -- Other income (expense)........... (2) 2 123 -- 123 -------- ----- ------- ----- -------- Income (loss) before income taxes.......................... (13,436) (236) (1,280) 925 (14,027) Income tax (expense) benefit..... -- -- -- -- -- -------- ----- ------- ----- -------- Net income (loss) before extraordinary item............. (13,436) (236) (1,280) 925 (14,027) Preferred stock dividends........ (9,297) -- -- --(7) (9,297) -------- ----- ------- ----- -------- Net income (loss) before extraordinary item attributable to common stockholders......... (22,733) (236) (1,280) 925 (23,324) ======== ===== ======= ===== ======== (E)+(F)=(G) PRO FORMA AS (I) (F) ADJUSTED FOR PRO FORMA PRO FORMA THE 1999 ADJUSTMENTS ADJUSTMENTS COMPLETED FOR THE FOR THE ACQUISITIONS, PENDING COMPLETED THE COMPLETED ACQUISITIONS OFFERING OFFERING AND (H) AND THE (G)+(H)+(I)= (J) AND THE NEW THE NEW CREDIT PENDING CURRENT PRO FORMA CREDIT FACILITY FACILITY ACQUISITIONS OFFERING COMBINED(1) --------------- -------------- ------------ ------------ ---------------- STATEMENT OF OPERATIONS DATA: Revenues......................... $ -- $ 92,949 $11,235 $ $104,184 Less: agency commissions......... -- (7,321) (792) -- (8,113) ------ -------- ------- ------- -------- Net revenues..................... -- 85,628 10,443 -- 96,071 Station operating expenses excluding depreciation and amortization................... -- 64,792 9,208 74,000 Depreciation and amortization.... -- 17,691 1,378 2,957(4) 22,026 Corporate general and administrative expenses........ -- 3,947 201 -- 4,148 ------ -------- ------- ------- -------- Operating income (loss).......... -- (802) (344) (2,957) (4,103) Interest expense................. (992)(8) (14,390) (533) 533(10) (14,390) Interest income.................. -- 50 -- 50 (Gain) loss on sale of asset..... -- -- 60 (60)(11) -- Other income (expense)........... -- 123 117 240 ------ -------- ------- ------- -------- Income (loss) before income taxes.......................... (992) (15,019) (700) (2,484) (18,203) Income tax (expense) benefit..... -- -- -- -- -- ------ -------- ------- ------- -------- Net income (loss) before extraordinary item............. (992) (15,019) (700) (2,484) (18,203) Preferred stock dividends........ 2,793(9) (6,504) -- -- (6,504) ------ -------- ------- ------- -------- Net income (loss) before extraordinary item attributable to common stockholders......... 1,801 (21,523) (700) (2,484) (24,707) ====== ======== ======= ======= ========
See accompanying notes to the unaudited pro forma statement of operations. 31 34 NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 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 six months of 1999 for the period from January 1, 1999 through the date the stations were acquired by us. (3) Reflects the historical revenues and expenses of stations acquired by us after June 30, 1999 for the period from January 1, 1999 through June 30, 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 $5,211 and amortization expense is $16,815 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: Six months of interest on the $114,450 indebtedness under the old credit facility at 8.5%........................... $ 4,570 Six months of interest on our senior subordinated notes at 10.375%..................................................... 8,300 Six months of amortization of $3,102 in transaction costs associated with the old credit facility over eight years..................................................... 194 Six months of amortization of $6,689 in debt issue costs associated with our senior subordinated notes over ten years..................................................... 334 -------- Total interest expense................................. 13,398 Less: historical interest recorded by us and the businesses acquired in connection with our completed acquisitions.......................................... (13,876) -------- Net adjustment......................................... $ (478) ========
(6) Adjustments to reduce historical interest income to reflect the effects of our 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 full period from January 1, 1998 to June 30, 1999. Accretion of Series A preferred stock dividend (compounded quarterly at 13.75%)...................................... $ 9,297 Less: historical dividends recorded by us.................. (9,297) ------- Net adjustment.............................................. $ 0 =======
32 35 (8) Adjustment to reflect increased interest expense resulting from: Sources of funds: Amount financed by the credit facility ($125,000 to Cumulus net of fees of $4,000)...................................... $121,000 Class A common stock offered ($268,116 to Cumulus net of fees of $14,656)....................................... 253,460 -------- Total................................................ $374,460 ======== Uses of funds: Repayment of the old credit facility...................... $107,537 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.............................................. $217,157 -------- Total................................................ $374,460 ======== Six months interest on the $125,000 indebtedness under the credit facility at 8.50%.................................. 5,312 Six months interest on our senior subordinated notes at 10.375%................................................... 8,300 Six months amortization of $7,102 in deferred transaction costs associated with the old and current credit facilities over eight years............................... 444 Six months amortization of $6,689 in debt issue costs associated with our senior subordinated notes over ten years..................................................... 334 -------- Total interest expense................................. 14,390 Less: interest expense recorded pro forma as adjusted for our completed acquisitions....................... (13,398) -------- Net adjustment......................................... $ 992 ========
(9) Adjustment to reflect the redemption of 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 Six Months dividend on $93,011 Series A preferred stock at 13.75%................................................. (6,504) Less: pro forma dividend as adjusted for the 1999 subsequent acquisitions................................ (9,297) -------- Net adjustment............................................ $ 2,793 ========
(10) Adjustment to reflect the elimination of $533 of interest expense recorded by sellers related to debt which was not assumed by Cumulus. 33 36 (11) Adjustment recorded to eliminate the non-recurring gain on the sale of assets recorded by Centroplex Communications Inc. Sources of funds: Class A common stock offered ($101,820 to Cumulus net of fees of $6,341)............................................. $ 95,479 Escrow funds.............................................. 3,736 -------- Total.................................................. $ 99,215 ======== Uses of funds: Purchase price of the pending acquisitions............. $144,595 Decrease in cash on hand............................. (45,380) -------- Total................................................ $ 99,215 ========
The floating interest rate used to calculate pro forma interest expense on the credit facility is eight and one quarter percent (8.25%). The rate on the 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 credit facility results in a $39 increase or decrease in the pro forma interest expense for the twelve months ended March 31, 1999. Upon the consummation of the Series A preferred stock redemption on October 1, 1999, we will record a redemption premium of $6,016 on the redemption of $43,750 Series A preferred stock in the fourth quarter of 1999. 34 37 CUMULUS MEDIA INC. UNAUDITED PRO FORMA BALANCE SHEET AS OF JUNE 30, 1999 (IN THOUSANDS)
(A)+(B)+(C)=(D) (B) (C) PRO FORMA AS PRO FORMA PRO FORMA ADJUSTED FOR THE ADJUSTMENTS FOR ADJUSTMENTS COMPLETED OFFERINGS, (A) THE COMPLETED FOR THE 1999 THE CREDIT FACILITY CUMULUS OFFERINGS AND THE SUBSEQUENT AND THE 1999 HISTORICAL CREDIT FACILITY(1) ACQUISITIONS(2) SUBSEQUENT ACQUISITIONS ---------- ------------------ --------------- ----------------------- ASSETS: Current assets: Cash and cash equivalents.......... $ 9,086 $ 217,157 $(102,050) $124,193 Accounts receivable................ 41,508 -- -- 41,508 Prepaid expenses and other current assets........................... 5,723 -- -- 5,723 -------- --------- --------- -------- Total current assets........... 56,317 217,157 (102,050) 171,424 Property and equipment, net........ 49,228 -- 10,205 59,433 Intangible assets, net............. 431,113 -- 98,325 529,438 Other assets....................... 15,808 4,000 -- 19,808 -------- --------- --------- -------- Total assets................... $552,466 $ 221,157 $ 6,480 $780,103 ======== ========= ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable and other liabilities...................... $ 21,152 $ -- $ -- $ 21,152 Current portion of long-term debt............................. 1,020 -- -- 1,020 -------- --------- --------- -------- Total current liabilities...... 22,172 -- -- 22,172 Long-term debt: Old credit facility.............. 107,537 (107,537) -- -- New credit facility.............. 125,000 125,000 Senior subordinated notes........ 160,000 -- -- 160,000 Other............................ -- -- -- -- Other long-term liabilities: Deferred tax liability............. 15,074 -- 6,480 21,554 Other long-term liabilities........ 2,244 -- -- 2,244 -------- --------- --------- -------- Total liabilities.............. 307,027 17,463 6,480 330,970 -------- --------- --------- -------- Preferred stock subject to mandatory redemption............. 143,038 (43,750) -- 99,288 -------- --------- --------- -------- Stockholders' equity: Class A common stock............. 87 111 -- 198 Class B common stock............. 87 -- -- 87 Class C common stock............. 24 -- -- 24 Additional paid in capital....... 132,913 268,004 -- 400,917 (14,655) (14,655) (6,016) (6,016) -- -- Accumulated other comprehensive income........................... 5 -- -- 5 Retained earnings (deficit)........ (30,715) -- -- (30,715) -------- --------- --------- -------- Total stockholders' equity..... 102,401 247,444 -- 349,845 -------- --------- --------- -------- Total liabilities and stockholders' equity......... $552,466 $ 221,157 $ 6,480 $780,103 ======== ========= ========= ======== (E) (F) PRO FORMA PRO FORMA ADJUSTMENTS ADJUSTMENTS (E)+(F)=(G) FOR THE FOR THE PENDING PRO FORMA CURRENT OFFERING(3) ACQUISITIONS(4) COMBINED ------------------- --------------- ----------- ASSETS: Current assets: Cash and cash equivalents.......... $95,479 $(140,859) $ 78,813 Accounts receivable................ -- -- 41,508 Prepaid expenses and other current assets........................... -- -- 5,723 ------- --------- -------- Total current assets........... 95,479 (140,859) 126,044 Property and equipment, net........ -- 14,460 73,893 Intangible assets, net............. -- 131,022 660,460 Other assets....................... -- (3,736) 16,072 ------- --------- -------- Total assets................... $95,479 $ 887 $876,469 ======= ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable and other liabilities...................... $ -- $ -- $ 21,152 Current portion of long-term debt............................. -- -- 1,020 ------- --------- -------- Total current liabilities...... -- -- 22,172 Long-term debt: Old credit facility.............. -- -- -- New credit facility.............. -- -- 125,000 Senior subordinated notes........ -- -- 160,000 Other............................ -- -- -- Other long-term liabilities: Deferred tax liability............. -- 887 22,441 Other long-term liabilities........ -- -- 2,244 ------- --------- -------- Total liabilities.............. -- 887 331,857 ------- --------- -------- Preferred stock subject to mandatory redemption............. -- -- 99,288 ------- --------- -------- Stockholders' equity: Class A common stock............. 40 -- 238 Class B common stock............. (10) -- 77 Class C common stock............. -- -- 24 Additional paid in capital....... 101,790 -- 475,695 (6,341) Accumulated other comprehensive income........................... -- -- 5 Retained earnings (deficit)........ -- -- (30,715) ------- --------- -------- Total stockholders' equity..... 95,479 -- 445,324 ------- --------- -------- Total liabilities and stockholders' equity......... $95,479 $ 887 $876,469 ======= ========= ========
See accompanying notes to the unaudited pro forma balance sheet. 35 38 NOTES TO THE UNAUDITED PRO FORMA BALANCE SHEET AS OF JUNE 30, 1999 (IN THOUSANDS) (1) To reflect: (i) the net proceeds of July offering to Cumulus of $268,115, net of $14,655 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 credit facility; and (iv) a net repayment of $107,537 of our old credit facility. Remaining proceeds of this offering and borrowings under our credit facility will be used to fund the completion of our pending acquisitions. Sources of funds: Amount financed by the credit facility ($125,000 to Cumulus net of fees of $4,000)............. $121,000 Class A common stock offered ($268,115 to Cumulus net of fees of $14,655)............... 253,460 -------- Total................................. $374,460 ======== Uses of funds: Repayment of the old credit facility............ $107,537 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.................................. $217,157 -------- Total................................. $374,460 ========
(2) To record the allocation of the $102,050 purchase price paid for transactions consummated subsequent to June 30, 1999. The pro forma allocation of the purchase price of the 1999 subsequent acquisitions is as follows: Property and equipment.......................... $ 10,205 Intangible assets, principally broadcast licenses...................................... 98,325 Deferred tax liability.......................... (6,480) --------- $ 102,050 =========
(3) To reflect: (i) the net proceeds of Current Offering to Cumulus of $101,820, net of $6,341 in issuance costs Sources of funds from the Current Offering: Class A common stock offered ($101,820 to Cumulus net of fees of $6,341)...................................... $ 95,479 Escrow funds............................................ 3,736 -------- Total........................................... $ 99,215 ======== Uses of funds: Purchase price of the pending acquisitions.............. $144,595 Decrease in cash on hand................................ (45,380) ======== Total........................................... $ 99,215 ========
36 39 (4) To record the allocation of the $144,595 in purchase price to be paid for the pending acquisitions and the recording of the related deferred income taxes of $887. To record the use of cash of $140,859, 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.......................... $ 14,460 Intangible assets, principally broadcast licenses...................................... 131,022 Deferred taxes.................................. (887) --------- $ 144,595 =========
37 40 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 six months ended June 30, 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, SIX MONTHS 1997(1) TO YEAR ENDED ENDED JUNE 30, DECEMBER 31, DECEMBER 31, -------------------------- 1997 1998 1998 1999 ------------ ------------ ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Net revenues.............................. $ 9,163 $ 98,787 $ 34,382 $ 77,715 Station operating expenses excluding depreciation and amortization........... 7,147 72,154 27,275 59,126 Depreciation and amortization............. 1,671 19,584 6,901 16,341 Corporate general and administrative expenses................................ 1,276 5,607 2,231 3,410 Non-cash stock compensation expense....... 1,689 -- -- -- ------- --------- --------- -------- Operating income (loss)................... (2,620) 1,442 (2,025) (1,162) Net interest expense...................... 837 13,178 3,894 12,272 Net income (loss) before extraordinary item.................................... (3,578) (11,864) (5,942) (13,436) Extraordinary loss on early retirement of debt.................................... -- (1,837) (1,837) -- Net income (loss)......................... (3,578) (13,701) (7,779) (13,436) Preferred stock dividends................. 274 13,591 1,926 9,297 Net income (loss) attributable to common stockholders............................ (3,852) (27,292) (9,705) (22,733) Basic and diluted earnings (loss) per common share............................ (.31) (1.70) (.78) (1.15) OTHER FINANCIAL DATA: Broadcast cash flow(2).................... $ 2,016 $ 26,633 $ 7,107 $ 18,589 Broadcast cash flow margin(2)............. 22.0% 27.0% 20.7% 23.9% EBITDA(2)................................. $ 740 $ 21,026 $ 4,876 $ 15,179 Net cash used in operating activities..... 1,887 4,653 13,767 14,289 Net cash used in investing activities..... 95,100 351,025 113,576 47,299 Net cash provided by financing activities.............................. 98,560 378,990 127,637 45,789
DECEMBER 31, 1999 -------------------- AS OF 1997 1998 JUNE 30, 1999 -------- -------- ------------- (IN THOUSANDS) BALANCE SHEET DATA: Total assets............................................. $110,441 $517,631 $552,466 Long-term debt, including current portion................ 42,801 222,767 268,557 Preferred stock subject to mandatory redemption.......... 13,426 133,741 143,038 Total stockholders' equity............................... 49,976 125,135 102,401
- ------------ (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 38 41 pending its 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. 39 42 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 June 30, 1999, we purchased or entered into LMAs with a total of 228 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 211 stations in 44 U.S. markets and provide sales and marketing services under LMAs (pending FCC approval of acquisition) to 43 stations in 18 U.S. markets. We are the third largest radio broadcasting company in the U.S. based on number of stations and believe we will be the second largest such company following completion of the acquisition of AMFM by Clear Channel. We believe we are the eighth largest radio broadcasting company in the U.S. based on 1998 pro forma net revenues and believe we will be the seventh largest such company following completion of Clear Channel's acquisition of AMFM. We will own and operate a total of 261 radio stations (184 FM and 77 AM) in 48 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, regional 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 six months ended June 30, 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 six months ended June 30, 1999, approximately 89.0%, 88.0% and 88%, 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 40 43 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. 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 SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998 Net Revenues. Net revenues increased $43.2 million, or 125.9%, to $77.7 million for the six months ended June 30, 1999 from $34.5 million for the six months ending June 30, 1998. This increase was primarily attributable to the acquisition of radio stations and revenue generated from LMAs entered into after June 30, 1998, as well as the sale of incremental advertising time, primarily to local advertisers for the stations owned or operated. In addition, on a same station basis, net revenues increased $8.3 million or, 21.3%, to $47.2 million for the six months ended June 30, 1999, compared to $38.9 million for the six months ended June 30, 1998. This increase was primarily attributable to growth in the sale of commercial time to local and national advertisers. Station Operating Expenses excluding Depreciation & Amortization. Station operating expenses, excluding depreciation and amortization, increased $31.8 million, or 116.8%, to $59.1 million for the six months ended June 30, 1999 from $27.3 million for the six months ended June 30, 1998. The increase was attributable primarily to the acquisition of radio stations and expenses incurred from LMAs entered into after June 30, 1998. In addition, on a same station basis, station operating expenses excluding depreciation and amortization, increased $2.7 million, or 8.6%, to $34.9 million for the six months ended June 30, 1999, from $32.2 million for the six months ended June 30, 1998. This increase was attributable primarily to the growth in the sale of commercial time to local, regional and national advertisers in addition to investments in our programming and sales functions at the station level. Depreciation and Amortization. Depreciation and amortization increased $9.4 million, or 136.2%, to $16.3 million for the six months ended June 30, 1999 from $6.9 million for the six months ended June 30, 1998 primarily due to the impact of various acquisitions consummated after June 30, 1998. Corporate General and Administrative Expenses. Corporate general and administrative expenses increased $1.2 million, or 54.5%, to $3.4 million for the six months ended June 30, 1999 from $2.2 million for the six months ended June 30, 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). December 31, 1998 Interest expense, net of interest income, increased $8.4 million, or 215.4%, from $3.9 million during the six months ended June 30, 1998 to $12.3 million for the six months ended June 30, 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. 41 44 Net Income (Loss) Attributable to Common Stock. As a result of the factors described above and the accrual of dividends on the our issued and outstanding Series A preferred stock, net loss attributable to common stock increased $13.0 million, or 134.0%, to $22.7 million for the six months ended June 30, 1999 from $9.7 million for the six months ended June 30, 1998. Broadcast Cash Flow. As a result of the factors described above, broadcast cash flow increased $11.5 million, or 162.0%, to $18.6 million for the six months ended June 30, 1999 from $7.1 million for the six months ended June 30, 1998. The broadcast cash flow margin was 23.9% for the six months ended June 30, 1999 compared with 20.7% for the six months ended June 30, 1998. EBITDA. As a result of the factors described above, EBITDA increased $10.3 million, or 210.2%, to $15.2 million for the six months ended June 30, 1999 from $4.9 million for the six month period ended June 30, 1998. 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 our 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. 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 believe that availability under our credit 42 45 facility, cash generated from operations and proceeds from this offering will be sufficient to meet our capital needs. For the six months ended June 30, 1999, net cash used in operations increased $0.5 million to $14.3 million from net cash used in operations of $13.8 million for the six months ended June 30, 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 six months ended June 30, 1999, net cash used in investing activities decreased $66.3 million to $47.3 million from $113.6 million for the six months ended June 30, 1998. This decrease was due primarily to lower acquisition activity during fiscal 1998. For the six months ended June 30, 1999, net cash provided from financing activities decreased $81.9 million to $45.8 million compared to $127.7 million during the six months ended June 30, 1998. The level of financing activity during the six months ended June 30, 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 offerings. On July 27, 1999, we completed a public offering of 9,664,000 shares of our Class A common stock for $22.919 per share, after underwriter's discounts and commissions. The net proceeds of the offering were approximately $221.5 million. We used the net proceeds from the offering to redeem a portion of our Series A preferred stock, repay the principal amount of indebtedness outstanding under our old credit facility and fund the completion of a portion of our pending acquisitions. We sold an additional 1,449,600 shares of our Class A common stock as a result of the exercise of underwriters' overallotment option, for $22.919 per share, resulting in $33.2 million additional net proceeds to Cumulus. Historical Acquisitions. During the year ended December 31, 1998, we completed 48 acquisitions across 33 markets having an aggregate purchase price of $344.0 million. During the six months ended June 30, 1999, we completed 13 acquisitions across eight markets having an aggregate purchase price of $42.8 million. Additional acquisitions have been subsequently completed in 1999 in five markets for an aggregate purchase price of $106.9 million. The sources of funds for these acquisitions were primarily the proceeds of our credit facilities and our debt and equity offerings. Pending Acquisitions. The aggregate purchase price of our pending acquisitions is expected to be approximately $144.6 million, consisting almost entirely of cash. We intend to finance the completion of our pending acquisitions with the proceeds from this offering and cash on hand. We expect to consummate most of our pending acquisitions prior to June 30, 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 July 1999 and borrowings under our credit facilities. Our credit facility with Lehman Brothers Inc. as arranger, Barclays Capital, as syndication agent and Lehman Brothers Commercial Paper Inc., as administrative agent, consists 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 forth 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. 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 43 46 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 June 30, 1999, we issued an additional $18.1 million of shares of Series A preferred stock 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. On October 1, 1999 we used $51.3 million of the proceeds of our July 1999 offering of our Class A common stock to redeem a portion of our Series A preferred stock, including redemption premium and accrued and unpaid dividends as of the redemption date. 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 June 30, 1999, we would be permitted, by the terms of the indenture and the certificate of designation, to incur $35.5 million of additional indebtedness under the old credit facility without regard to the debt ratios included in our indenture. 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 consolidated 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 consolidated earnings or financial position. Statement 133, as modified, is required to be adopted in years beginning after June 15, 2000. 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. 44 47 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 three separate system evaluations, the most recent of which was completed in early October 1999, as well as 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 has involved the identification and assessment of the existing problem, developing a plan of remediation, as well as a testing and implementation plan. To date, we have completed the identification and assessment process, and are substantially completed with our implementation plan, 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 October 25, 1999, 100% of all essential computers related to broadcast or studio equipment are year 2000 compliant. Also, 100% of all essential financial based computers are year 2000 compliant. - Software upgrades or replacement of advertising inventory management software which is year 2000 compliant have been completed as of October 30, 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. As of October 25, 1999 all of the broadcast properties we operate have year 2000 compliant advertising inventory management software with the exception of the Caribbean, which is scheduled to have a compliant inventory management system selected, installed and tested by November 15, 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 100% compliant as of October 25, 45 48 1999, with the exception of eight of our markets discussed below. 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 $2.0 million. Of this cost, approximately 10% will be expensed as modification or upgrade costs with the remaining costs being 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. 46 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 211 stations in 44 U.S. markets. We also provide sales and marketing services under LMAs (pending FCC approval of acquisition) to 43 stations in 18 U.S. markets. We are the third largest radio broadcasting company in the U.S. based on number of stations and believe we will be the second largest such company following completion of the acquisition of AMFM by Clear Channel. We believe we are the eighth largest radio broadcasting company in the U.S. based on 1998 pro forma net revenues and believe we will be the seventh largest such company following completion of Clear Channel's acquisition of AMFM. We will own and operate a total of 261 radio stations (184 FM and 77 AM) in 48 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 six months ended June 30, 1999, we had net revenues of $77.7 million and broadcast cash flow of $18.6 million. After giving pro forma effect to the transactions described in the unaudited pro forma financial statements, we would have had net revenues of $96.1 million and broadcast cash flow of $22.1 million for the six months ended June 30, 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 Telecom Act 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 177 U.S. radio markets ranked MSA 100-276. 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. 47 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 100 acquisitions, accounting for all 261 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 November 2, 1999 with respect to our stations in these regions, including stations for which we currently provide programming and sell advertising under LMAs (seven 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.......................... 252 2 36.6% 4 2 1 -- 5 2 Augusta, GA......................... 114 1 25.7% 5 3 1 -- 6 3 Chattanooga, TN..................... 104 1 30.0% 4 1 -- -- 4 1 Columbus, GA........................ 169 1 35.6% 4 2 1 1 5 3 Columbus-Starkville, MS............. 247 1 -- -- -- 4 3 4 3 Fayetteville, NC.................... 126 2 19.2% -- -- 3 1 3 1 Florence, SC........................ 198 2 43.2% 6 3 1 -- 7 3 Greenville-New Bern-Jacksonville, NC................................ 81 4 3.8% 2 -- -- -- 2 -- Laurel-Hattiesburg, MS.............. 208 2 30.6% 2 1 3 1 5 2 Lexington-Fayette, KY............... 106 1 28.4% 4 1 -- -- 4 1 Mobile, AL.......................... 88 2 29.5% 2 1 2 1 4 2 Montgomery, AL...................... 142 1 33.9% 2 2 2 1 4 3 Muscle Shoals, AL................... 240 1 -- 2 1 1 1 3 2 Myrtle Beach, SC.................... 173 2 20.7% 5 1 -- -- 5 1 Pensacola, FL....................... 121 2 8.6% -- -- 1 1 1 1 Salisbury-Ocean City, MD............ 150 1 24.7% 6 2 -- -- 6 2 Savannah, GA........................ 154 2 40.3% 5 2 -- -- 5 2 Tallahassee, FL..................... 159 1 38.2% 3 1 1 -- 4 1 Tupelo, MS.......................... 178 1 23.4% 2 2 1 -- 3 2 Wilmington, NC...................... 175 2 33.8% 2 1 2 -- 4 1
48 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 6.3% 2 2 -- -- 2 2 Appleton-Oshkosh, WI................ 134 3 19.0% 2 2 -- -- 2 2 Bismarck, ND........................ 265 1 56.7% 3 1 1 2 4 3 Dubuque, IA......................... 220 2 34.7% 4 1 -- -- 4 1 Eau Claire, WI...................... 231 2 32.8% 4 2 -- -- 4 2 Faribault-Owatonna-Waseca, MN....... n/a 1 -- 4 4 -- -- 4 4 Green Bay, WI....................... 183 2 24.3% 3 -- 1 1 4 1 Kalamazoo, MI....................... 176 1 27.1% 2 1 -- -- 2 1 Mankato-New Ulm-St. Peter, MN....... 255 1 -- 4 2 -- -- 4 2 Marion-Carbondale, IL............... 213 1 28.8% 4 2 -- -- 4 2 Mason City, IA...................... 269 1 -- 5 2 -- -- 5 2 Monroe, MI.......................... n/a 1 -- 1 -- -- -- 1 -- Rochester, MN....................... 229 1 -- 2 2 -- -- 2 2 Toledo, OH.......................... 79 1 35.5% 4 2 1 -- 5 2 Topeka, KS.......................... 181 2 35.4% 2 2 2 -- 4 2 SOUTHWEST REGION Abilene, TX......................... 221 2 26.8% 4 -- -- -- 4 -- Amarillo, TX........................ 188 2 25.1% 4 2 -- -- 4 2 Beaumont-Port Arthur, TX............ 127 2 31.2% 3 2 -- -- 3 2 Fayetteville, AR.................... 155 2 27.2% 4 2 -- -- 4 2 Ft. Smith, AR....................... 171 4 14.7% 3 -- -- -- 3 -- Grand Junction, CO.................. 251 1 41.7% 3 -- 1 1 4 1 Killeen-Temple, TX.................. 149 1 18.5% -- 4 -- 4 -- Lake Charles, LA.................... 205 1 45.8% 3 1 -- -- 3 1 McAllen-Brownsville, TX............. 63 3 21.3% 2 -- -- -- 2 -- Odessa-Midland, TX.................. 174 1 37.8% 4 2 -- -- 4 2 Wichita Falls, TX................... 242 2 36.6% 4 -- -- -- 4 -- NORTHEAST REGION Augusta-Waterville, ME.............. 250 1 20.5% 5 1 1 1 6 2 Bangor, ME.......................... 268 1 30.7% 4 1 -- -- 4 1 --- --- --- --- --- --- TOTALS.............................. 149 62 35 15 184 77 === === === === === === NUMBER OF U.S. MARKETS: 48 NUMBER OF STATIONS: 261
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 49 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 100 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. 50 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 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 50 stations in 21 markets for an aggregate purchase price of approximately $144.6 million, assuming a purchase price of $7.0 million for the acquisition of stations from Green Bay Broadcasting Company, Inc. We expect to consummate most of these pending acquisitions by the second 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; Topeka, Kansas; Pensacola, Florida; Columbus, Georgia; Augusta, Georgia; and Laurel-Hattiesburg, Mississippi. The FCC has also initiated inquiries based upon market concentration concerns into pending acquisitions where no petitions to deny or informal objections against our applications have been filed, and has recently requested that we provide additional information as to the effect of pending acquisitions on competition and diversity in three markets where no petitions or objections had been filed. In addition, the Department of Justice currently has two pending investigations regarding our acquisitions of up to eight stations in two markets. All petitions and objections before the FCC, and all FCC staff inquiries, must be resolved before FCC approval can be obtained 51 54 and such acquisitions consummated. Other pending or future acquisitions may also be subject to challenges from the FCC, the 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. Under the terms of an option agreement with Green Bay Broadcasting, Green Bay Broadcasting has the right to cause us to acquire two stations in Green Bay from Green Bay Broadcasting that we are currently operating under an LMA at any time until November 30, 2003. The purchase price payable upon exercise of the option increases over the term of the option from $5.0 million to $7.0 million. We have an option to purchase the stations from Green Bay Broadcasting for a purchase price of $7.6 million at any time between June 1, 2003 and September 15, 2004. We have entered into letters of intent with potential sellers of radio stations, and we are currently a party to nine letters of intent. 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. 52 55 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
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 53 56 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 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 or 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." 54 57 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 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 55 58 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. 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, 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 WKXJ FM Signal Mountain, 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
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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 ------ ---------- ------------------- --------- ---------------- --------- ----- ----- 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 Fayetteville, NC................. WRCQ FM Dunn, NC 103.5 December 1, 2003 502 47.5 47.5 WFNC FM Lumberton, NC 102.3 December 1, 2003 269 3.0 3.0 WFNC AM Fayetteville, NC 640 December 1, 2003 n/a 10.0 1.0 WQSM FM Fayetteville, NC 98.1 December 1, 2003 830 100.0 100.0 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 Greenville -New Bern - Jacksonville, NC............... 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 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 WAVH FM Daphne, AL 106.5 April 1, 2004 450 50.0 50.0 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 WVNA FM Tuscumbia, AL 100.3 April 1, 2004 246 100.0 100.0 WVNA AM Tuscumbia, AL 1590 April 1, 2004 n/a 5.0 1.0 Myrtle Beach, SC................. WSYN FM Georgetown, SC 106.5 December 1, 2003 492 50.0 50.0 WDAI FM Pawley's Island, 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
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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 ------ ---------- ------------------- --------- ---------------- --------- ----- ----- 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 5.01 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 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 WWKZ FM Aberdeen, MS 105.3 June 1, 2004 673 28.0 28.0 Wilmington, NC................... WWQQ FM Wilmington, NC 101.3 December 1, 2003 545 40.0 40.0 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 WGNI FM Wilmington, NC 102.7 December 1, 2003 981 100.0 100.0 WMNX FM Wilmington, NC 97.3 December 1, 2003 883 100.0 100.0 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 WYBN 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
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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 ------ ---------- ------------------- --------- ---------------- --------- ----- ----- Faribault-Owatonna-Waseca, MN.... KRFO AM Owatonna, MN 1,390 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 1,170 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 WQLH FM Green Bay, WI 98.5 December 1, 2004 499 100.0 100.0 WDUZ AM Green Bay, WI 1,400 December 1, 2004 n/a 1.0 1.0 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 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 Kileen-Temple, TX................ KLTD FM Temple, TX 101.7 August 1, 2005 410 16.6 16.6 KOOC FM Belton, TX 106.3 August 1, 2005 489 11.5 11.5 KOOV FM Copperas Cove, TX 103.1 August 1, 2005 558 8.6 8.6 KYUL FM Harker Heights, TX 105.5 August 1, 2005 577 36.0 36.0 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 WCME FM Boothbay Harbor, 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 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 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 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. 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. 61 64 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, except non-voting equity and debt interests which in the aggregate constitute 33% or more of a licensee's total equity and debt capitalization will become attributable in certain circumstances pursuant to FCC rules scheduled to go into effect on November 16, 1999. 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. The FCC cross-interest policy will be eliminated under FCC rules scheduled to become effective on November 16, 1999. 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. 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. Pursuant to rules scheduled to go into effect on November 16, 1999, the FCC has revised certain of its radio and television ownership attribution policies, including by making non-voting equity and debt attributable interests under certain circumstances, and eliminating the cross-interest policy. There 62 65 can be no assurance, however, that the effectiveness of those rules will not be stayed, or that those rules will not be reconsidered by the FCC or will ultimately become effective or adopted. 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 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 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 63 66 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 currently has two pending investigations regarding our acquisitions of up to eight stations in two markets. These investigations could result in our inability to acquire one or more of these stations in either or both markets. 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, or 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. 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 and/or alleging non-compliance with the FCC's multiple ownership rules in seven markets (Grand Junction, Colorado; Columbus-Starkville, Mississippi; Columbus, Georgia; Augusta, Georgia; Topeka, Kansas; Pensacola, Florida; 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 stations in the Toledo, Ohio and Augusta-Waterville, Maine markets) 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 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 64 67 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 November 2, 1999, we employed approximately 2,700 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 November 2, 1999, we owned studio facilities in 34 markets and we owned transmitter and antenna sites in 43 markets. We lease additional studio and office facilities in 37 markets and transmitter and antenna sites in 27 markets. In addition, we lease corporate office space in Atlanta, Georgia, Chicago, Illinois, and Milwaukee, Wisconsin, which in the aggregate approximates 20,000 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. 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. This action is currently in discovery. 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. We believe we have a right to indemnification from the sellers of Colonial Broadcasting under the related purchase agreement. The sellers' insurance company has assumed the defense of the matter. 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 and Selling Shareholders." Cumulus Media, LLC 65 68 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. 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. 66 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................ 49 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(3).................. 47 Director Eric P. Robison(2)(3)................ 40 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, 67 70 WNPL-FM and WVOL-AM. Mr. Dickey is a nationally regarded consultant on radio strategy and the author 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 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 68 71 Corporate Asset Quality Group, and Vice President, Finance for Heller International Corporation. Prior to 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 an 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, NationsBank Capital Investors, the 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 NationsBank Capital Investors in January 1994, Mr. Sheridan worked in the corporate bank division of NationsBank Corporation, the predecessor of Bank of America Corporation 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 and Selling 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. ERIC P. ROBISON has served as our Director since August 1999. Since January 1994, Mr. Robison has worked for Vulcan Northwest, Inc., the holding company that manages all personal and business interests for investor Paul G. Allen. In this role Mr. Robison serves as a Business Development Associate for Vulcan Ventures, Inc., the venture fund division of Vulcan and investigates and secures investment opportunities. Mr. Robison also serves on the board of directors of C/NET, Inc., ARI Network Services, Inc., Egghead.com, Inc. and Liquid Audio, Inc. Prior to joining Vulcan, Mr. Robison was co-founder and vice president of the Stanton Robison Group, Inc., a business development, marketing and advertising consulting firm. Mr. Robison has served in marketing management positions with SGS, Inc., Ashton-Tate, Inc., Denny's Inc. He has also worked on the account staff of some of several advertising agencies including McCann Erickson, Doyle Dane Bernbach and Foote Cone and Belding. Mr. Robison holds a Bachelor of Arts degree in communication 69 72 studies from California State University, Sacramento, and a Master of Business Administration in general management from the University of California, Davis. 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. Eric P. Robison, 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. 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. AUDIT COMMITTEE Messrs. Sheridan, Robison 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 and Mr. Robison received options to purchase 50,000 shares of Class A common stock upon his appointment to the Board on August 30, 1999. Messrs. Sheridan and Everett each received options to purchase an additional 10,000 shares of Class A common stock on August 30, 1999. 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, subject to acceleration under certain circumstances. 1998 STOCK INCENTIVE PLAN Our Board of Directors adopted the 1998 Stock Incentive Plan to provide our officers, other key employees and non-employee directors (other than participants in our executive plans described below), as well as consultants to the Cumulus, with additional incentives by increasing their proprietary interest in Cumulus. An aggregate of 1,288,834 shares of Class A common stock is subject to the 1998 Stock Incentive Plan, of which a maximum of 1,228,834 shares of Class A Common Stock is subject to incentive stock options and a maximum of 100,000 shares of Class A common stock is available to be awarded as restricted stock. In addition, subject to certain equitable adjustments, no one person will be eligible to receive options for more than 300,000 shares in any one calendar year and the maximum amount of restricted stock which will be awarded to any one person during any calendar year is $500,000. The 1998 Stock Incentive Plan permits Cumulus to grant awards in the form of stock options (including both incentive stock options that meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, and non-qualified stock options) and restricted shares of the Class A common stock. All stock options awarded under the plan will be granted at an exercise price of not less than fair market value of the Class A common stock on the date of grant. No award is allowed to be granted under the 1998 Stock Incentive Plan after June 22, 2008. The 1998 Stock Incentive Plan is administered by the Compensation Committee of the Board, which has exclusive 70 73 authority to grant awards under the plan and to make all interpretations and determinations affecting the plan. The Compensation Committee has discretion to determine the individuals to whom awards are granted, the amount of such award, any applicable vesting schedule, whether awards vest upon the occurrence of a change in control and other terms of any award. The Compensation Committee may delegate to certain senior officers of Cumulus its duties under the plan subject to such conditions or limitations as the Compensation Committee may establish. Any award made to a non-employee director must be approved by our Board of Directors. In the event of any changes in our capital structure, the Compensation Committee will make equitable adjustments to outstanding awards so that the net value of the award is not changed. As of September 30, 1999, there were outstanding options to purchase a total of 1,285,284 shares of Class A common stock exercisable at a price of $14.00 per share under the 1998 Stock Incentive Plan. These options vest, in general, over five years, with the possible acceleration of vesting for some options if certain performance criteria are met. In addition, all options vest upon a change of control as more fully described in the 1998 Stock Incentive Plan. 1999 STOCK INCENTIVE PLAN Our Board of Directors adopted the 1999 Stock Incentive Plan, subject to the approval of our shareholders at our November 2, 1999 annual meeting of shareholders. An aggregate of 900,000 shares of Class A common stock is subject to the 1999 Stock Incentive Plan, of which a maximum of 900,000 shares of Class A common stock is subject to incentive stock options and a maximum of 100,000 shares of Class A common stock is available to be awarded as restricted stock. In addition, subject to certain equitable adjustments, no one person will be eligible to receive options for more than 300,000 shares in any one calendar year and the maximum amount of restricted stock which will be awarded to any one person during any calendar year is $500,000. The 1999 Stock Incentive Plan permits us to grant awards in the form of stock options (including both incentive stock options that meet the requirements of Section 422 of the Internal Revenue Code and non-qualified stock options) and restricted shares of the Class A common stock. All stock options awarded under the plan will be granted at an exercise price of not less than fair market value of the Class A common stock on the date of grant. No award is allowed to be granted under the 1999 Stock Incentive Plan after August 30, 2009. The 1999 Stock Incentive Plan is administered by the Compensation Committee of the Board, which has exclusive authority to grant awards under the plan and to make all interpretations and determinations affecting the plan. The Compensation Committee has discretion to determine the individuals to whom awards are granted, the amount of such award, any applicable vesting schedule, whether awards vest upon the occurrence of a change in control and other terms of any award. The Compensation Committee may delegate to certain senior officers of Cumulus its duties under the plan subject to such conditions or limitations as the Compensation Committee may establish. Any award made to a non-employee director must be approved by our Board of Directors. In the event of any changes in Cumulus' capital structure, the Compensation Committee will make equitable adjustments to outstanding awards so that the net value of the award is not changed. As of September 30, 1999, there were outstanding options to purchase a total of 829,025 shares of Class A common stock exercisable at a price of $21.875 per share under the 1999 Stock Incentive Plan. These options vest, in general, over five years, with the possible acceleration of vesting for some options if certain performance criteria are met. In addition, all options vest upon a change of control as more fully described in the 1999 Stock Incentive Plan. 1998 EXECUTIVE STOCK INCENTIVE PLAN Our Board of Directors adopted the 1998 Executive Stock Incentive Plan to provide certain of our key executives with additional incentives by increasing their proprietary interest in Cumulus. An aggregate of 2,001,380 shares of Class C common stock is subject to the 1998 executive plan. In addition, no one person will be eligible to receive options for more than 1,000,690 shares in any one calendar year. Richard W. Weening, Executive Chairman, Treasurer and Director, and Lewis W. Dickey, Jr., Executive Vice Chairman and Director are the sole participants in the 1998 executive plan. The 1998 executive plan permits Cumulus to grant awards in the form of stock options (including both incentive stock options that meet the requirements of Section 422 of the Internal Revenue Code and non-qualified stock options) of Class C common stock. Stock options under the 1998 executive plan were granted on July 1, 1998 and are divided into three groups. 71 74 Group 1 consists of time vested options with an exercise price equal to $14.00 per share and vest quarterly in equal installments over a four-year period (subject to accelerated vesting in certain circumstances). Group 2 and Group 3 also consist of time-based options which vest in four equal annual installments on July 1, 1999, July 1, 2000, July 1, 2001 and July 1, 2002 (subject to accelerated vesting in certain circumstances). The first installment of both the Group 2 options and Group 3 options are exercisable at a price of $14.00 per share on July 1, 1999 and subsequent installments are exercisable at a price 15% (or 20% in the case of Group 3 options) greater than the prior year's exercise price for each of the next three years. The 1998 executive plan is administered by the Compensation Committee of the Board, which will have exclusive authority to grant awards under the 1998 executive plan and to make all interpretations and determinations affecting the 1998 executive plan. In the event of any changes in Cumulus' capital structure, the Compensation Committee will make equitable adjustments to outstanding awards granted under the 1998 executive plan so that the net value of the award is not changed. As of December 31, 1998, there are outstanding options to purchase a total of 2,001,380 shares of Class C common stock under the 1998 executive plan. 1999 EXECUTIVE STOCK INCENTIVE PLAN Our Board of Directors has also adopted the 1999 Executive Stock Incentive Plan, subject to the approval of our shareholders at our November 2, 1999 annual meeting of shareholders, to provide certain of our key executives with additional incentives by increasing their proprietary interest in Cumulus. An aggregate of 1,000,000 shares of Class C common stock is subject to the 1999 Executive Plan. In addition, no one person will be eligible to receive options for more than 500,000 shares in any one calendar year. Richard W. Weening, Executive Chairman, Treasurer and Director, and Lewis W. Dickey, Jr., Executive Vice Chairman and Director are the sole participants in the 1999 executive plan. The 1999 executive plan permits Cumulus to grant awards in the form of stock options (including both incentive stock options that meet the requirements of Section 422 of the Internal Revenue Code and non-qualified stock options) of Class C common stock. Stock options under the 1999 executive plan were granted on August 30, 1999 at an exercise price of $27.875 per share and vest quarterly in equal installments over a four-year period (subject to accelerated vesting in certain circumstances). The 1999 executive plan is administered by the Compensation Committee of the Board, which will have exclusive authority to grant awards under the executive plan and to make all interpretations and determinations affecting the 1999 executive plan. In the event of any changes in Cumulus' capital structure, the Compensation Committee will make equitable adjustments to outstanding awards granted under the 1999 executive plan so that the net value of the award is not changed. As of September 30, 1999, there are outstanding options to purchase a total of 1,000,000 shares of Class C common stock under the 1999 executive plan. 1999 EMPLOYEE STOCK PURCHASE PLAN Our Board of Directors has adopted the 1999 Employee Stock Purchase Plan, subject to the approval of our shareholders at our November 2, 1999 annual meeting of shareholders. The 1999 Employee Stock Purchase Plan is designed to qualify for certain income tax benefits for employees under Section 423 of the Internal Revenue Code and contains 1,000,000 shares of Class A Common Stock. The plan allows qualifying employees to purchase Class A common stock at the end of each calendar year, commencing with the calendar year beginning January 1, 1999, at 85% of the lesser of the fair market value of the Class A common stock on the first or last trading days of the year. The amount each employee can purchase is limited to the lesser of (i) 15% of pay or (ii) $25,000 of stock valued on the first trading day of the year. An employee must be employed at least six months as of the first trading day of the year in order to participate in the 1999 Employee Stock Purchase Plan. We apply APB Opinion No. 25 in accounting for stock options issued to employees and SFAS No. 123 in accounting for stock options issued to non-employees. Accordingly, no compensation cost has been recognized for its stock options in the consolidated financial statements. 72 75 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, Stratford Research 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 the six months ended June 30, 1999 and the year ended December 31, 1998 were $1.3 million and $2.7 million, 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 the six months ended June 30, 1999 and the year ended December 31, 1998, we paid QUAESTUS Management Corporation $430,000 and $1.4 million, 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. 73 76 PRINCIPAL AND SELLING SHAREHOLDERS The following table sets forth as of October 26, 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 five most highly compensated 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 AFTER PRIOR TO OFFERING OFFERING OFFERING SHARES --------------- --------------- ---------------- BEING NAME NUMBER % NUMBER % NUMBER % OFFERED(3) - ---- --------- --- --------- --- --------- ---- ---------- State of Wisconsin Investment Board(4)........ -- -- -- -- 3,791,619 48.3% 500,000 BA Capital Company, L.P....................... -- -- -- -- 3,371,246 42.9% 500,000 The Northwestern Mutual Life Insurance Company(5)................................... -- -- -- -- 693,728 8.8% -- CML Holdings, LLC(6).......................... 201,100 * 201,100 * -- -- -- QUAESTUS Management Corporation(6)............ 101,000 * 101,000 * -- -- -- QUAESTUS Partner Fund(6)...................... 80,000 * 80,000 * -- -- -- DBBC of Georgia, LLC(7)....................... -- -- -- -- -- -- Putnam Investment Management(8)............... 1,123,900 5.1% 1,123,900 5.0% -- -- -- Richard W. Weening(9)......................... 181,000 * 181,000 * -- -- -- Lewis W. Dickey, Jr.(9)....................... 149,740 * 149,740 * -- -- -- William M. Bungeroth(10)...................... 135,466 * 135,466 * -- -- -- Richard J. Bonick, Jr.(10).................... 95,790 * 94,590 * -- -- -- John Dickey(10)............................... 65,542 * 65,542 * -- -- -- Robert H. Sheridan, III(11)................... 6,000 * 6,000 * -- -- -- Ralph B. Everett(11).......................... 8,000 * 8,000 * -- -- -- Eric P. Robison............................... -- -- -- -- -- -- -- All Executive Officers and Directors, as a group (7 persons)............................ 641,538 2.9% 641,538 2.6% -- -- CLASS B COMMON STOCK(1) CLASS C COMMON STOCK(1)(2) -------------------- ----------------------------------- AFTER PRIOR TO AFTER OFFERING OFFERING OFFERING ---------------- ---------------- ---------------- NAME NUMBER % NUMBER % NUMBER % - ---- --------- ---- --------- ---- --------- ---- State of Wisconsin Investment Board(4)........ 3,291,619 48.0% -- -- -- -- BA Capital Company, L.P....................... 2,871,246 41.9% -- -- -- -- The Northwestern Mutual Life Insurance Company(5)................................... 693,728 10.1% -- -- -- -- CML Holdings, LLC(6).......................... -- -- 1,522,422 70.8% 1,522,422 70.8% QUAESTUS Management Corporation(6)............ -- -- 337,313 15.7% 337,313 15.7% QUAESTUS Partner Fund(6)...................... -- -- -- -- -- -- DBBC of Georgia, LLC(7)....................... -- -- 291,542 13.6% 291,542 13.6% Putnam Investment Management(8)............... -- -- -- -- -- -- Richard W. Weening(9)......................... -- -- 738,281 30.1% 738,281 30.1% Lewis W. Dickey, Jr.(9)....................... -- -- 592,510 24.1% 592,510 24.1% William M. Bungeroth(10)...................... -- -- -- -- -- -- Richard J. Bonick, Jr.(10).................... -- -- -- -- -- -- John Dickey(10)............................... -- -- -- -- -- -- Robert H. Sheridan, III(11)................... -- -- -- -- -- -- Ralph B. Everett(11).......................... -- -- -- -- -- -- Eric P. Robison............................... -- -- -- -- -- -- All Executive Officers and Directors, as a group (7 persons)............................ -- -- 1,330,791 48.3% 1,330,791 48.3%
- ------------ * 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 shares of Class B common stock to be converted into shares of Class A common stock and sold in this offering. (4) The address of the State of Wisconsin Investment Board is P.O. Box 7842, Madison, Wisconsin 53707. This information is based on a Schedule 13G dated February 4, 1999. (5) The address of the Northwestern Mutual Life Insurance Company is 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. This information is based on a Schedule 13G dated February 10, 1999. (6) The address of CML Holdings, LLC, QUAESTUS Management Corporation and QUAESTUS Partner Fund is 111 East Kilbourn Avenue, Suite 2700, Milwaukee, WI 53202. (7) The address of DBBC of Georgia, LLC is 3060 Peachtree Road, N.W., Suite 730, Atlanta, Georgia 30305. This information is based on a Schedule 13G dated February 16, 1999. (8) The address of Putnam Investments, Inc. is One Post Office Square, Boston, Massachusetts 02109. This information is based on a Schedule 13G dated May 5, 1999. Of these shares, Putnam Investments, Inc. has shared voting power as to 592,000 shares and shared dispositive power as to all 1,123,900 shares of Class A common stock. (9) 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 74 77 attributable to Mr. L. Dickey as a result of his controlling interest in DBBC of Georgia, LLC. Includes options to purchase 300,968 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. (10) Includes options to purchase 47,000, 7,324 and 30,542 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. (11) 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. Mr. Sheridan's options are held for the benefit of BA Capital Company, L.P. 75 78 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 are designated as Series A preferred stock. As provided in our definitive proxy statement dated September 30, 1999, our Board has approved, and has submitted to our shareholders for approval at our Annual Meeting of Shareholders to be held November 2, 1999, an amendment to our Amended and Restated Articles of Incorporation to increase the number of authorized shares of Class A common stock from 50,000,000 to 100,000,000. 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 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 the fundamental corporate actions referred to above; 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 provide 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 holder's 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 76 79 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 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 provide that, so long as BA Capital Company, L.P. (together with its affiliates) continues to own not less than 50% of the shares of our common stock held by BA Capital Company, L.P. immediately prior to the consummation of our initial public offerings, Cumulus may not, so long as the BA Capital designee is not a director, take any action with respect to the actions described above without the affirmative vote of the holders of a majority of the outstanding shares of Class B common stock, voting separately as a class. 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 77 80 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 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 78 81 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 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 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. 79 82 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. SERIES A PREFERRED STOCK AND EXCHANGEABLE DEBENTURES General. We currently have 106,126 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. 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. 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 80 83 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 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 capital stock 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 81 84 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 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. As provided in our definitive proxy statement dated September 30, 1999, our Board has approved, and has submitted to our shareholders for approval at our Annual Meeting of Shareholders to be held November 2, 1999, an amendment to our Articles of Incorporation to provide for staggered three-year terms for our directors. Such a provision, if adopted, would effectively prevent a change in a majority of the directors of Cumulus from being effected at a single annual meeting of shareholders. While the principal purpose of such a provision is to provide continuity on the Board of Directors, the provisions could have the effect of discouraging a third party from attempting to change the management and policies of Cumulus by effecting a change in the majority of the Board of Directors through a proxy contest. 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 with certain exceptions specified in our Articles of Incorporation and by Illinois law. 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 net effect of these provisions is to eliminate the personal liability of directors for monetary damages for breach of their fiduciary duty of care, even in cases of gross negligence, but not in cases of intentional wrongdoing. 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. 82 85 DESCRIPTION OF CERTAIN INDEBTEDNESS OUR CREDIT FACILITY General. Our credit facility with Lehman Brothers Inc., as arranger, Barclays Capital, as syndication agent, and Lehman Brothers Commercial Paper Inc., as administrative agent, is in an aggregate principal amount of $225.0 million. Our new credit facility consists 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. Security; Guarantees. Our obligations under our credit facility are 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, except the capital stock of Broadcast Software International, Inc., Cumulus Internet Services Inc. and Cumulus Telecommunications, Inc., and 65% of the capital stock of any first-tier foreign subsidiaries. The obligations under our credit facility are also guaranteed by each of our direct and indirect domestic subsidiaries, except Broadcast Software, Cumulus Internet Services and Cumulus Telecommunications, and are 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 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 2.125%, or the Eurodollar Rate (as defined under the terms of our 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 is payable quarterly in arrears and fees in respect of letters of credit issued under our credit facility equal to the interest rate margin then applicable to Eurodollar Rate loans under our seven-year revolving credit facility also will be payable quarterly in arrears. In addition, a fronting fee of 0.125% is payable quarterly to the issuing bank. The eight-year term loan borrowings are repayable in quarterly installments beginning in 2001. The scheduled annual amortization is $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 is repayable in two consecutive equal quarterly installments on November 30, 2007 and February 28, 2008. The first revolving credit loan, upon conversion to a seven-year term loan, is repayable in quarterly installments beginning in 2001. The scheduled annual amortization is 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 are required to be made including: (i) 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; (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 credit facility 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 flow. Our credit facility provides that we must maintain (a) for any four fiscal quarters, a minimum ratio of cash flow to interest expense that increases incrementally from 1.40 to 1.00 as of December 31, 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 83 86 to debt service that increases incrementally from 1.10 to 1.00 as of December 31, 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 7.25 to 1.00 as of December 31, 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 December 31, 1999 to 3.00 to 1.00 for the period ending December 31, 2001, and thereafter. In addition, the terms of our credit facility will restrict, among other things, the ability of Cumulus and our restricted 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 credit facility 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 restricted 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 credit facility, the majority of the lenders are able to declare all amounts under our 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 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. 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 were 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 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 are 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 84 87 financial statements as if they had occurred on June 30, 1999, we would have had outstanding $285.0 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. 85 88 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, we will have outstanding 25,014,323 shares of Class A common stock, 6,856,593 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 2,114,309 shares of Class A common stock and 3,001,380 shares of Class C common stock. Of these shares, 23,684,755 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 213,932 shares of Class A common stock and 729,395 shares of Class C common stock and options to purchase 537,880 shares of Class A common stock and 3,001,380 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 for 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." 86 89 UNDERWRITERS Under the terms and subject to the conditions contained in an underwriting agreement dated the date of this prospectus, the underwriters named below have severally agreed to purchase an aggregate of 3,000,000 shares of Class A common stock from us and 1,000,000 shares from the selling shareholders. The number of shares of Class A common stock that each underwriter has agreed to purchase is set forth opposite its name below.
NUMBER OF NAME SHARES - ---- --------- Morgan Stanley & Co. Incorporated........................... Bear, Stearns & Co. Inc. ................................... Goldman, Sachs & Co. ....................................... Prudential Securities Incorporated.......................... Lehman Brothers Inc. ....................................... Banc of America Securities LLC.............................. --------- Total.................................................. 4,000,000 =========
The underwriters are offering the shares of Class A common stock subject to their acceptance of the shares from Cumulus and the selling shareholders 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 by this prospectus 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 by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters over-allotment option described below. The underwriters initially propose to offer part of the shares of Class A common stock directly to the public at the public offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $ a share under the public offering price. After the initial 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 underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to 300,000 additional shares of Class A common stock and the selling shareholders have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of 300,000 additional shares of Class A common stock, in each case, at the public offering price set forth on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this 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 by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of Class A common stock as the number listed next to the underwriter's name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table. If the underwriters' option is exercised in full, the total price to the public would be $ , the total underwriters' discounts and commissions would be $ , the total proceeds to Cumulus would be $ and the total proceeds to the selling shareholders would be $ . Each of Cumulus Media Inc., our directors and executive officers and the selling shareholders has agreed, subject to limited exceptions, for a period of 90 days after the date of this prospectus that they will not, without the prior written consent of Morgan Stanley & Co. Incorporated, directly or indirectly: - 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 or exchangeable for common stock; or 87 90 - 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 this clause or the above clause 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 in certain circumstances, including: - the sale of shares to the underwriters; - 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 - 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 concessions 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. 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. Cumulus Media Inc., the selling stockholders 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 administrative agent, respectively, in connection with the credit facility. BA Capital Company, L.P., an affiliate of Banc of America Securities LLC, is a shareholder of Cumulus. Robert H. Sheridan, III, a member of Cumulus' Board of Directors, is a Senior Vice President of BA Capital Company and an officer of various entities comprising Bank of America Capital Investors, each an affiliate of Banc of America Securities. 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. In that BA Capital Company, which currently owns 42.9% of the shares of Class B common stock of Cumulus, is an affiliate of Banc of America Securities LLC, a member of the National Association of Securities Dealers, Inc. (the "NASD") and an underwriter in the offering, this offering is subject to the provisions of NASD Conduct Rule 2720. The underwriters will not confirm sales to any discretionary accounts. 88 91 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 89 92 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 shorter of the five year period preceding the date of disposition or the Non-U.S. Holder's holding period, 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 90 93 183 days or more in the taxable year of the sale or other disposition and certain other conditions are met. Such gain may, however, be offset by United States source capital losses (even though the Non-U.S. Holder is not considered a resident of the United States). 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. 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.; (iii) a foreign broker that is a "controlled foreign corporation" for U.S. federal income tax purposes; or (iv) for taxable years beginning after December 31, 2000, a foreign partnership, in which one or more United States persons, in the aggregate, own more than 50% of the income or capital interests in the partnership or if the partnership is engaged in a trade or business in the United States, 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. 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. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against such investor's U.S. federal income tax liability provided the required information is furnished to the IRS. 91 94 LEGAL MATTERS Certain legal matters with respect to the shares of Class A common stock offered hereby will be passed upon for Cumulus by Paul, Hastings, Janofsky & Walker LLP, New York, New York, and the validity of the shares of Class A common stock offered hereby will be passed upon 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. The following financial statements as of and for the year ended December 31, 1998 are incorporated by reference in this prospectus in reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting: HMH Broadcasting, Inc. Cape Fear Broadcasting Company C.F. Radio, Inc. Coast Radio LLC The financial statements of Phillips Broadcasting Company, Inc. as of and for the year ended December 31, 1998 are incorporated by reference in this prospectus in reliance on the report of Wipfli Ullrich Bertelson LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The consolidated financial statements of Calendar Broadcasting, Inc. and subsidiaries as of and for the year ended December 31, 1998, included in the Current Report on Form 8-K of Cumulus Media Inc. filed with the SEC on November 3, 1999, have been incorporated by reference herein and in the registration statement on Form S-3 of which this prospectus is a part in reliance upon the report of KPMG LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. 92 95 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 six months ended June 30, 1999. 3. Current Report on Form 8-K filed with the SEC on November 3, 1999. All documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) 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. 93 96 [LOGO] 94 97 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The expenses in connection with the distribution of the securities being registered are set forth in the following table (all amounts except the registration fee, the NASD fee and the Nasdaq National Market fee are estimated): Registration fee............................................ $ 42,256 NASD fee.................................................... 15,680 Nasdaq National Market fee.................................. 7,500 Printing expenses........................................... * Legal fees and expenses..................................... * Accounting fees and expenses................................ * Blue sky fees and expenses (including attorneys' fees)...... * Transfer agent fee.......................................... * Miscellaneous............................................... * ---------- TOTAL................................................ $ * ==========
- ------------ * To be completed by amendment. All expenses in connection with the issuance and distribution of the Class A common stock being offered will be borne by the Company (other than selling commissions). ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company maintains 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 1.1 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. There are filed with the Registration Statement the following exhibits:
EXHIBIT NO. DESCRIPTION - ----------- ----------- 1.1*** Form of Underwriting Agreement between the Registrant and the Underwriters. 2.1** Asset Purchase Agreement and Plan of Reorganization by and between Cumulus Media Inc., Broadcast Software International Inc. and Ron Burley, dated as of September 15, 1999. 2.2** Option Agreement by and between Cumulus Broadcasting Company, Inc., Cumulus Licensing Corp., Cumulus Wireless Services Inc. and Green Bay Broadcasting Company, Inc., dated as of September 15, 1999. 2.3***** Asset Purchase Agreement by and between Cumulus Broadcasting, Inc., Cumulus Licensing Corp., Cumulus Wireless Services Inc., C.F. Radio, Inc., Cape Fear Radio, LLC, Cape Fear Broadcasting Company and Cape Fear Tower Systems, LLC dated as of September 23, 1999. 2.4***** Asset Purchase Agreement dated as of April 2, 1999, by and between Cumulus Broadcasting, Cumulus Licensing, Cumulus Wireless and Phillips Broadcasting Company, Inc.
II-1 98
EXHIBIT NO. DESCRIPTION - ----------- ----------- 2.5***** Asset Purchase Agreement dated as of March 9, 1999 by and between Cumulus Broadcasting, Cumulus Licensing, Cumulus Wireless, HMH Broadcasting Inc., a Kentucky corporation and HMH Realty, LLC. 2.6***** Stock Purchase Agreement dated June 15, 1999, among the Company and M&F Calendar Holdings, L.P., Kevin C. Whitman, nassau Capital Partners L.P., NAS Partners I L.L.C., and Philip J. Giordano. 2.7***** Asset Purchase Agreement dated as of June 29, 1999, by and among Cumulus Broadcasting, Cumulus Licensing and Coast Radio, L.L.C., a Florida limited liability company. 4.1**** Form of Certificate of Designation with respect to Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009. 4.2**** Form of Exchange Debenture Indenture between Cumulus Media Inc. and U.S. Bank Trust National Association, as Trustee. 4.3**** Form of Indenture between Cumulus Media Inc. and Firstar Bank of Minnesota, N.A., as Trustee. 5.1*** Opinion of Holleb & Coff as to the validity of the Class A common stock. 10.1** Amended and Restated Credit Agreement among Cumulus Media Inc., Lehman Brothers Inc., Barclays Capital and Lehman Commercial Paper. 10.2** Cumulus Media Inc. 1999 Employee Stock Incentive Plan. 10.3** Cumulus Media Inc. 1999 Executive Stock Incentive Plan. 21.1* Subsidiaries of Cumulus Media Inc. 23.1** Consent of PricewaterhouseCoopers LLP. 23.2*** Consent of Holleb & Coff (included in Exhibit 5.1). 23.3** Consent of Wipfli Ullrich Bertelson LLP. 23.4** Consent of KPMG LLP. 24.1* Powers of Attorney, included on page II-4.
- ------------ * Previously filed. ** Filed herewith. *** To be filed by amendment. **** Incorporated by reference to our Registration Statement on Form S-1 (Registration Statement No. 333-48849) declared effective on June 26, 1998. ***** Incorporated by reference to our Current Report on Form 8-K filed with SEC on November 3, 1999. ITEM 17. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any acts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in II-2 99 volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do not apply if the Registration Statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement; (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (a) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, 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 of 1933, as amended, and is, therefore, unenforceable. In 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 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 of 1933, as amended, and will be governed by the final adjudication of such issue. (c) The undersigned registrant hereby undertakes to file an application for the purpose of determining eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Securities and Exchange Commission under Section 305(b)(2) of the Trust Indenture Act. II-3 100 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused Amendment No. 1 to the 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 November 4, 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 by the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ RICHARD W. WEENING Executive Chairman, Treasurer and November 4, 1999 - --------------------------------------------- Director (Principal Executive Richard W. Weening Officer) /s/ RICHARD W. WEENING Executive Vice Chairman and November 4, 1999 - --------------------------------------------- Director Lewis W. Dickey, Jr., by Richard W. Weening, Attorney-in-Fact /s/ RICHARD W. WEENING President and Director November 4, 1999 - --------------------------------------------- William M. Bungeroth, by Richard W. Weening, Attorney-in-Fact /s/ RICHARD W. WEENING Vice President and Chief Financial November 4, 1999 - --------------------------------------------- Officer (Principal Accounting Richard J. Bonick, by Richard W. Weening, Officer) Attorney-in-Fact Director November , 1999 - --------------------------------------------- Ralph B. Everett /s/ RICHARD W. WEENING Director November 4, 1999 - --------------------------------------------- Robert H. Sheridan, III, by Richard W. Weening, Attorney-in-Fact Director November , 1999 - --------------------------------------------- Eric P. Robison
II-4 101 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- 1.1*** Form of Underwriting Agreement between the Registrant and the Underwriters. 2.1** Asset Purchase Agreement and Plan of Reorganization by and between Cumulus Media Inc., Broadcast Software International Inc. and Ron Burley, dated as of September 15, 1999. 2.2** Option Agreement by and between Cumulus Broadcasting Company, Inc., Cumulus Licensing Corp., Cumulus Wireless Services Inc. and Green Bay Broadcasting Company, Inc., dated as of September 15, 1999. 2.3***** Asset Purchase Agreement by and between Cumulus Broadcasting, Inc., Cumulus Licensing Corp., Cumulus Wireless Services Inc., C.F. Radio, Inc., Cape Fear Radio, LLC, Cape Fear Broadcasting Company and Cape Fear Tower Systems, LLC dated as of September 23, 1999. 2.4***** Asset Purchase Agreement dated as of April 2, 1999, by and between Cumulus Broadcasting, Cumulus Licensing, Cumulus Wireless and Phillips Broadcasting Company, Inc. 2.5***** Asset Purchase Agreement dated as of March 9, 1999 by and between Cumulus Broadcasting, Cumulus Licensing, Cumulus Wireless, HMH Broadcasting Inc., a Kentucky corporation and HMH Realty, LLC. 2.6***** Stock Purchase Agreement dated June 15, 1999, among the Company and M&F Calendar Holdings, L.P., Kevin C. Whitman, nassau Capital Partners L.P., NAS Partners I L.L.C., and Philip J. Giordano. 2.7***** Asset Purchase Agreement dated as of June 29, 1999, by and among Cumulus Broadcasting, Cumulus Licensing and Coast Radio, L.L.C., a Florida limited liability company. 4.1**** Form of Certificate of Designation with respect to Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009. 4.2**** Form of Exchange Debenture Indenture between Cumulus Media Inc. and U.S. Bank Trust National Association, as Trustee. 4.3**** Form of Indenture between Cumulus Media Inc. and Firstar Bank of Minnesota, N.A., as Trustee. 5.1*** Opinion of Holleb & Coff as to the validity of the Class A common stock. 10.1** Amended and Restated Credit Agreement among Cumulus Media Inc., Lehman Brothers Inc., Barclays Capital and Lehman Commercial Paper. 10.2** Cumulus Media Inc. 1999 Employee Stock Incentive Plan. 10.3** Cumulus Media Inc. 1999 Executive Stock Incentive Plan. 21.1* Subsidiaries of Cumulus Media Inc. 23.1** Consent of PricewaterhouseCoopers LLP. 23.2*** Consent of Holleb & Coff (included in Exhibit 5.1). 23.3** Consent of Wipfli Ullrich Bertelson LLP. 23.4** Consent of KPMG LLP. 24.1* Powers of Attorney, included on page II-4.
- --------------- * Previously filed. ** Filed herewith. *** To be filed by amendment. **** Incorporated by reference to our Registration Statement on Form S-1 (Registration Statement No. 333-48849) declared effective on June 26, 1998. ***** Incorporated by reference to our Current Report on Form 8-K filed with the SEC on November 3, 1999. EX-2.1 2 ASSET PURCHASE AGMT. AND PLAN OF REORGANIZATION 1 EXHIBIT 2.1 ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION This Agreement ("Agreement") is entered into as of September 15, 1999, by and between CUMULUS MEDIA Inc., a Nevada corporation, or its wholly-owned subsidiary created for the purpose of implementing this transaction, Broadcast Software International Inc., a corporation of Nevada ("Buyer"), and Broadcast Software INTERNATIONAL INC., an Oregon corporation ("BSI"), and RON BURLEY, an individual resident of Oregon ("Burley"). BSI and Burley are referred to collectively as the "Seller." The Buyer and the Seller are referred to individually as the "Party" or collectively as the "Parties." Capitalized terms used in this Agreement are defined in Section 7 hereof. Subject to the terms and conditions of this Agreement, the Buyer hereby agrees to purchase substantially all of the assets of the Seller in return for cash and stock of Buyer. Now, therefore, in consideration of the above premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows: 1. BASIC TRANSACTION. A. PURCHASE AND SALE OF ASSETS. On and subject to the terms and conditions of this Agreement, the Seller agrees to sell, transfer, convey and deliver to Buyer all of the Acquired Assets at the Closing for the consideration specified below in this Section 1. B. ASSUMPTION OF LIABILITIES. On and subject to the terms and conditions of this Agreement, Buyer agrees to assume and become responsible for all of the Assumed Liabilities at Closing. The Buyer will not assume or have any responsibility, however, with respect to any other obligation or Liability of the Seller, and the Seller agrees to pay and discharge all Liabilities and obligations of the Seller. C. PURCHASE PRICE. The Buyer agrees to pay to the Seller, as consideration for the Acquired Assets, the purchase price (the "Purchase Price") consisting of the following: (i) Seller acknowledges that Buyer on August 20, 1999, paid the Seller cash in the amount of Five Hundred Thousand and no/100 Dollars ($500,000), by wire transfer of immediately available U.S. funds, as a deposit toward the Purchase Price; and (ii) on the Closing Date, the Buyer shall issue to the Seller One Hundred Fifty-Two Thousand, Six Hundred Thirty-Six (152,636) Class A Common Shares of Cumulus Media Inc. (the "Shares"). The Shares shall not have been registered and shall be characterized as "restricted securities" under the federal securities laws, and under such laws such shares may be resold without registration under the Securities Act of 1933, as amended (the "Securities Act") only in certain limited circumstances. The Shares shall also be subject to the restrictions 1 2 specified in this Agreement. Each certificate of the Shares to be issued pursuant to this Agreement shall bear the following legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL TO THE STOCKHOLDER, WHICH COUNSEL MUST BE, AND THE FORM AND SUBSTANCE OF WHICH OPINION ARE, SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH LAWS. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER DESCRIBED IN THAT CERTAIN ASSET PUCHASE AGREEMENT DATED AS OF SEPTEMBER 15, 1999 BY AND AMONG CUMULUS MEDIA INC., BROADCAST SOFTWARE INTERNATIONAL, INC. AND MR. RON BURLEY, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICE OF THE SECRETARY OF THE COMPANY." D. CLOSING. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at a mutually agreed location, commencing at 1:00 p.m. on the date of execution of this Agreement, or such other date as the Parties may mutually determine (the "Closing Date"). E. DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will deliver to the Buyer the various certificates, instruments, and documents referred to in Section 4(a) below; (ii) the Seller will execute, acknowledge (if appropriate), and deliver to the Buyer (A) assignments (including Lease and other Assumed Contract assignments and Intellectual Property transfer documents), and bills of sale in form acceptable to the Buyer, (B) such affidavits, transfer tax returns, memorandums of lease, and such other documents as may be necessary to provide public notice of existence of the Leases, and (C) such other instruments of sale, transfer, conveyance, and assignment as the Buyer and their counsel reasonably may request; (iii) the Buyer will deliver to the Seller the various certificates, instruments, and documents referred to in Section 4(b) below; and (iv) the Buyer will deliver to the Seller the consideration specified in Section 1(c) above. 2 3 F. EMPLOYMENT AGREEMENTS. On the Closing Date, the Seller shall execute, and shall cause Mr. Ron Burley and Mr. Frank Klekner to execute Employment Agreements including covenants not to compete with the Buyer. 2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents and warrants to the Buyer that the statements contained in this Section 2 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date, except as set forth in the Seller's disclosure schedule attached to this Agreement (the "Disclosure Schedule"). A. ORGANIZATION OF THE SELLER. BSI is a Subchapter S corporation duly organized, validly existing, and in good standing under the laws of Oregon. BSI does not have any Subsidiaries. BSI has the power and authority to own or lease its properties and to carry on all business activities now conducted by it. BSI is qualified to do business and is in good standing, where applicable, in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by makes such qualification necessary. True, accurate and complete copies of BSI's Articles of Incorporation and Bylaws, as in effect on the date hereof, have been delivered to Buyer. BSI is not in violation of any of the provisions of its Articles of Incorporation or Bylaws. The sole shareholder of BSI is Burley. B. AUTHORIZATION OF TRANSACTION. The Seller has full power and authority to execute and deliver this Agreement and all agreements and instruments to be executed and delivered by Seller pursuant to this Agreement (collectively, the "Ancillary Agreements") and to perform its obligations hereunder and thereunder. Without limiting the generality of the foregoing, the Shareholders and Board of Directors of BSI have duly authorized the execution, delivery, and performance of this Agreement and the Ancillary Agreements by BSI. This Agreement and the Ancillary Agreements constitute the valid and legally binding obligation of the Seller, enforceable in accordance with their respective terms and conditions. C. NONCONTRAVENTION. Assuming the receipt of the consent of Seller's landlord as more fully described in Section 2(c) of the Disclosure Schedule, neither the execution and the delivery of this Agreement or the Ancillary Agreements, nor the consummation of the transactions contemplated hereby and thereby (including the assignments and assumptions referred to in Section 1(e) above), will (i) violate any statute, regulation, rule, judgment, order, decree, stipulation, injunction, charge, or other restriction of any government, governmental agency, or court to which the Seller is subject or any provision of the charter or bylaws of the Seller; or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice or third party consent under any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed money, instrument of indebtedness, Security Interest, or other agreement, arrangement to which the Seller is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Security Interest upon any of its assets). The Seller does not need to give any notice to, make any filing with, or obtain any Licenses, consent, or approval of any court or government or 3 4 governmental agency in order for the Parties to enter into this Agreement or the Ancillary Agreements or to consummate the transactions contemplated by this Agreement or the Ancillary Agreements (including the assignments and assumptions referred to in Section 1(e) above). D. TITLE TO ACQUIRED ASSETS. Other than the Security Interests set forth on Section 2(d) of the Disclosure Schedule (which shall be released at or before the Closing) the Seller has good and marketable title to all of the Acquired Assets, free and clear of any Security Interest or restriction on transfer. E. FINANCIAL STATEMENTS. Included in Section 2(e) of the Disclosure Schedule are the following financial statements (collectively the "Financial Statements"): (i) unaudited balance sheets and statements of income, and cash flow as of and for the fiscal year ended December 31, 1998 for the Seller; and (ii) unaudited balance sheets and statements of income, as of and for each month during 1998 and each month to date in 1999 for the Seller. The Financial Statements have been prepared in conformity with the Seller's normal accounting policies, practices and procedures applied on a consistent basis, throughout the periods covered thereby, are correct and complete, fairly present the financial condition of the Seller and the results of operation of Seller at the dates and for the periods indicated, and are consistent with the books and records of the Seller (which books and records are correct and complete). The Financial Statements accurately state the revenues of the Seller for the period indicated therein and include an accurate breakout of cash and trade revenues. F. EVENTS SUBSEQUENT TO JANUARY 1, 1999. Since January 1, 1999, except as set forth in Section 2(f) of the Disclosure Schedule, there has not been any material adverse change in the assets, Liabilities, business, financial condition, operations, results of operations, or future prospects of the Seller. Without limiting the generality of the foregoing, since January 1, 1999: (i) other than this Agreement, the Seller has not entered into any agreement, contract, lease, sublease, license, or sublicense (or series of related agreements, contracts, leases, subleases, licenses, and sublicenses) outside the Ordinary Course of Business; (ii) the Seller has not delayed or postponed (beyond its normal practice in the Ordinary Course of Business) the payment of accounts payable and other Liabilities; (iii) the Seller has not altered its credit and collection policies or its accounting policies; (iv) other than in the Ordinary Course of Business, the Seller has not entered into or terminated any employment arrangement, employment contract, consulting contract or severance agreement or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement; 4 5 (v) other than in the Ordinary Course of Business, there have been no changes and, to Seller's knowledge, any threatened changes in employment terms for any of its directors, officers, and employees; (vi) there has not been any other occurrence, event, incident, action, failure to act, or transaction outside the Ordinary Course of Business involving the Seller; and (vii) the Seller has not committed to any of the foregoing. G. TAX MATTERS. The Seller has timely and properly filed all Tax Returns that it was required to file with respect to the Seller's operations. All such Tax Returns were correct and complete and properly reflect the tax liability of the Seller. No Tax deficiencies have been proposed or assessed against the Seller. All Taxes owed by the Seller with respect to its operations (whether or not shown on any Tax Return) have been paid. The Seller has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, independent contractor, or other third party. No claim has ever been made by any authority in any jurisdiction where the Seller does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. H. TANGIBLE ASSETS. Section 2(h) of the Disclosure Schedule sets forth a listing of all of the tangible personal property used in conducting the business of the Seller. The Seller owns or leases all tangible assets necessary for the conduct of the operation and business of the Seller's business as presently conducted and as presently proposed to be conducted and all leased assets are specifically identified as such in Section 2(h) of the Disclosure Schedule. All of the tangible personal property included in the Acquired Assets is (a) in good operating condition and repair, ordinary wear and tear excepted, and (b) maintained in accordance with sound maintenance practices. The Acquired Assets are sufficient for the operation of Seller's business in the ordinary course and are suitable for the purposes for which they are being used. I. REAL PROPERTY. Section 2(i) of the Disclosure Schedule lists and describes briefly all real property leased to the Seller (including, without limitation, complete legal descriptions for all of the Real Estate). The Seller does not own and has never owned any real property. The Seller has delivered to the Buyer correct and complete copies of the Leases. With respect to the Real Estate: (i) the Leases are and, following the Closing will continue to be, legal, valid, binding, enforceable, and in full force and effect; (ii) no party to any Lease is in breach or default (or has repudiated any provision thereof), and no event has occurred which, with notice or lapse of time, would constitute a breach or default thereunder or permit termination, modification, or acceleration thereunder; 5 6 (iii) there are no disputes, oral agreements, or forbearance programs in effect as to any Lease; (iv) to the Seller's Knowledge, none of the properties subject to the Leases is subject to any lease (other than Leases), option to purchase or rights of first refusal; (v) the Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the Leases or its rights thereunder; (vi) to the Seller's Knowledge, all facilities on the Real Estate have received all approvals of governmental authorities (including licenses, permits and zoning approvals) required in connection with the operation thereof and have been operated and maintained in accordance with applicable laws, rules, and regulations; and (vii) to the Seller's Knowledge, the owner of each leased facility has good and marketable title to the underlying parcel of real property, free and clear of any Security Interest, easement, covenant, or other restriction, except for Permitted Real Estate Encumbrances and Seller's leasehold interest in each Lease has priority over any other interest except for the fee interest therein and Permitted Real Estate Encumbrances. J. CONTRACTS. Section 2(j) of the Disclosure Schedule lists any written arrangement (or group of related written arrangements) either involving more than $5,000 or not entered into in the Ordinary Course of Business. The Seller has delivered to the Buyer a correct and complete copy of each written arrangement listed in Section 2(j) of the Disclosure Schedule (as amended to date). With respect to each written arrangement so listed which constitutes an Assumed Contract: (A) the written arrangement is legal, valid, binding, enforceable, and in full force and effect; (B) the written arrangement will continue to be legal, valid, binding, and enforceable and in full force and effect on identical terms following the Closing (if the arrangement has not expired according to its terms); (C) no party is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification, or acceleration, under the written arrangement; and (D) no party has repudiated any provision of the written arrangement. The Seller is not a party to any verbal contract, agreement, or other arrangement which, if reduced to written form, would be required to be listed in Section 2(j) of the Disclosure Schedule under the terms of this Section 2(j). Except for the Assumed Contracts, the Buyer shall not have any Liability or obligations for or in respect of any of the contracts set forth in Section 2(j) of the Disclosure Schedule or any other contracts or agreements of the Seller. 6 7 K. PRODUCT WARRANTIES. All software and other products and services manufactured, sold, or licensed by Seller have been in conformity with all applicable contractual commitments, all express or implied warranties, and all specifications, documentation, performance standards, representations or statements provided with respect thereto by or on behalf of the Seller. No liability for any warranty claims exists for the placement of such software or other products. All product labeling of the Seller is in conformity with all applicable Laws. There are no pending or threatened claims by any of Seller's customers for the correction of any so-called computer software "bug" and the Seller does not know of any so-called "bugs" which may form the basis for any such claim. L. INTELLECTUAL PROPERTY. (1) For purposes of this Agreement, "Intellectual Property" means inventions, designs, models, processes, formulations, know-how and schematics, whether or not patented and/or patentable, patents and patent applications, trade names, trademarks, service marks and Internet domain names, and copyrights and registrations thereof and/or registration applications therefor, mask works, algorithms, authoring tools, computer software programs or applications (in both source code and object code form), including, without limitation, the Software as defined below, and web-sites that are used or currently proposed to be used in the business of the Seller, and documentation relating thereto or explaining the use thereof, and the goodwill related to any of the foregoing. (2) Section 2(l)(2) of the Disclosure Schedule identifies (i) all patents owned and patent applications made by the Seller, and the jurisdictions in which each such patent has been issued or in which each such application has been filed; (ii) all trade names, trademarks, service marks and Internet domain names used by the Seller, whether or not owned by the Seller, (iii) all registrations made and all registration applications filed by the Seller for trade names, trademarks, service marks and Internet domain names owed by the Seller, and the jurisdictions by which each such registration has been issued or in which each such application has been filed, (iv) all registrations made and registration applications filed by the Seller for copyrights owned by the Seller, and each jurisdiction by which each such registration has been issued or in which each such application has been filed. To the Seller's Knowledge, all of the patents and registrations listed on Section 2(l)(2) are valid and subsisting, and no such patent or registration has been declared invalid or, in whole or in part, been abandoned, dedicated, disclaimed or allowed to lapse for nonpayment of fees or taxes or for any other reason. (3) Section 2(l)(3) of the Disclosure Schedule lists all licenses, sublicenses and other agreements under which the Seller is authorized to use any Intellectual Property owned by any third party and the royalty payments payable by the Seller in connection therewith (the "Third Party Intellectual Property"). (4) Except for the rights existing under the agreements referred to in Section 2(l)(6), below, the Seller is the sole and exclusive owners of, with all right, title and interest in and to, free of all liens, valid claims and encumbrances, all Intellectual Property, other than Third Party Intellectual Property. No claims with respect to the Seller's Intellectual Property or the 7 8 Third Party Intellectual Property (to the extent arising out of any use, reproduction or distribution of such Third Party Intellectual Property by the Seller) are pending or, to the Seller's Knowledge, threatened by any person, nor does the Seller know of any valid ground for any claim (i) to the effect that the development, marketing, licensing or use of any product or Intellectual Property as now marketed, licensed or used by the Seller infringes upon any Intellectual Property belonging to another person, (ii) against the use and/or distribution of any Intellectual Property by the Seller, (iii) challenging the ownership, validity or effectiveness of any of the Seller's Intellectual Property, (iv) challenging the Seller's license or legally enforceable right to use any Third Party Intellectual Property, or (v) to the effect that the Seller is obligated to pay any compensation with respect to ownership, sale, use or disposition of the Intellectual Property. To the Seller's Knowledge, there is no unauthorized use, infringement or misappropriation of any of the Seller's Intellectual Property by any third party, including any employee or former employee of the Seller. (5) Copies of all algorithms, tools and other software and all source and object programs and codes and related documentation incorporated in, used in or related to the Seller's products are located either at the Seller's principal executive offices, or at an off-premise site under the Seller's control as identified in Section 2(l)(5) of the Disclosure Schedule. Such algorithms, tools, software, programs, codes and documentation are fully usable and understandable by persons ordinarily skilled in computer programming and are sufficient to permit the maintenance and further development of all software products and rights currently marketed and licensed by the Seller. Without limitation, the Seller's source code includes a full source language statement of the programs comprising all of the software developed by the Seller, including any support utilities which are not commercially available and which are required to build the object code from the source code. (6) Section 2(l)(6) of the Disclosure Schedule lists all licenses, sublicenses and other agreements under which any person is authorized to use any Intellectual Property owned by the Seller. (7) Section 2(l)(7) of the Disclosure Schedule lists each person who has authored any portion of the programs developed or marketed by the Seller (not including Third Party Intellectual Property incorporated therein). Section 2(l)(7) of the Disclosure Schedule identifies all contracts executed by such persons for the benefit of the Seller with respect to code authored by such persons. (8) The Seller has not entered into any agreement to indemnify any other person against any charge of infringement of any Intellectual Property, other than indemnification provisions contained in sales agreements arising in the ordinary course of business. (9) The Seller is not, nor will it be as a result of the execution and delivery of this Agreement or the performance of obligations under this Agreement, in breach of any license, sublicense or other agreement relating to the Intellectual Property or Third Party Intellectual Property, the breach of which would have a material adverse effect on the Seller's business. 8 9 (10) The Seller has taken all commercially reasonable and customary measures and precautions necessary to protect and maintain the confidentiality of all Intellectual Property (except such Intellectual Property whose value would be unimpaired by public disclosure) and otherwise to maintain and protect the full value of all proprietary assets. All use, disclosure or appropriation of Intellectual Property not otherwise protected by patents, patent applications or copyright ("Confidential Information") owned by the Seller or licensed to a third party has been pursuant to the terms of a written agreement between the Seller and such third party. All use, disclosure or appropriation of Confidential Information not owned by the Seller has been pursuant to the terms of a written agreement between the Seller and the owner of such Confidential Information, or is otherwise lawful. (11) With respect to the broadcast automation software sold by the Seller (the "Software"): (i) The Software performs substantially in accordance with its functional specifications and related documentation. The Seller has provided the Corporation with all fault logs and other logs and other records relating to the Software and any defects or deficiencies in the possession of the Seller. (ii) Except as set forth on Section 2(l)(11) of the Disclosure Schedule, the Seller has not disclosed the source code for any of the Software or other confidential or proprietary information constituting, embodied in or pertaining to the Software to any person or entity other than employees or contractors of Seller who are bound by confidentiality agreements in substantially the form disclosed to Buyer. Except as set forth in Section 2(l)(11) of the Disclosure Schedule, none of the Software has been placed in escrow or is subject to other arrangements pursuant to which the source code has been or could be delivered or disclosed to any third party. M. INSURANCE. Section 2(m) of the Disclosure Schedule sets forth a complete and accurate description of all Seller's insurance coverage. With respect to each such insurance policy: (A) the policy is legal, valid, binding, and enforceable and in full force and effect; (B) the policy will continue to be legal, valid, binding, and enforceable and in full force and effect on identical terms through the Closing Date. N. LITIGATION. The Seller is not: (i) subject to any unsatisfied judgment, order, decree, stipulation, injunction, or charge; or (ii) a party or, to the Knowledge of the Seller, is threatened to be made a party to any charge, complaint, action, suit, proceeding, hearing, or investigation of or in any court or quasijudicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator. The Seller has no Knowledge of any Basis for any such charge, complaint, action, suit, proceeding, hearing, or investigation against the Seller. O. EMPLOYEES. Section 2(o) of the Disclosure Schedule sets forth a listing of the names, positions, job descriptions, salary or wage rates and all other forms of compensation paid for work in the business of the Seller. To the Knowledge of the Seller, no key employee or 9 10 group of employees has any plans to terminate employment with the Seller. The Seller is not a party to or bound by any collective bargaining or similar agreement, nor has it experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes. The Seller has no Knowledge of any organizational effort presently being made or threatened by or on behalf of any labor union with respect to the employees of the Seller. The Seller has no Knowledge of any Basis for any claim by past or current employees of the Seller or applicants for employment that the Seller or its management has discriminated based on each individuals race, sex, national origin, religion, ethnicity, handicap or any other protected characteristic under applicable law. P. EMPLOYEE BENEFITS. Section 2(p) of the Disclosure Schedule lists all Employee Benefit Plans that the Seller maintains or to which the Seller contributes or is required to contribute for the benefit of any current or former employee of the Seller and true and correct copies of each such Employee Benefit Plan have been delivered to the Buyer. Each Employee Benefit Plan (and each related trust or insurance contract) complies and at all times has complied in form and in operation in all respects with the applicable requirements of ERISA and the Code. The Seller does not have any commitment to create any additional Employee Benefit Plan or modify or change any existing Employee Benefit Plan that would affect any employee or terminated employee of the Seller. There are no pending or, to the Knowledge of the Seller, threatened claims under, by or on behalf of any of the Employee Benefit Plans, by any employee or beneficiary covered by any such Employee Benefit Plan, or otherwise involving any such Employee Benefit Plan (other than routine claims for benefits), nor have there been any Reportable Events or Prohibited Transactions with respect to any Employee Benefit Plan. Q. ENVIRONMENT, HEALTH, AND SAFETY. (i) The Seller is, and at all times in the past has been, in compliance in all material respects with all Environmental Laws and all laws (including rules and regulations thereunder) of federal, state, and local governments (and all agencies thereof) concerning employee health and safety, and the Seller has no Liability (and to Seller's Knowledge there is no Basis related to the past or present operations of the Seller or its predecessors for any present or future Liability) under any Environmental Law. The Seller has no Liability (and to Seller's Knowledge there is no Basis for any present or future charge, complaint, action, suit, proceeding, hearing, investigation, claim, or demand against the Seller giving rise to any Liability) under the Occupational Safety and Health Act, as amended, or any other law (or rule or regulation thereunder) of any federal, state, local, or foreign government (or agency thereof) concerning employee health and safety, or for any illness of or personal injury to any employee. (ii) The Seller has obtained and at all times has been in compliance in all material respects with all of the terms and conditions of all permits, licenses, and other authorizations which are required under, and has complied with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules, and timetables which are contained in, all Environmental Laws or law of any federal, state, or local or foreign government relating to worker health and safety. 10 11 (iii) To Seller's Knowledge, all properties and equipment used in the Seller's operations and the Acquired Assets have been free of asbestos, PCB's, methylene chloride, trichloroethylene, 1, 2-trans-dichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous Substances. To Seller's Knowledge, no pollutant, contaminant, or chemical, industrial, hazardous, or toxic material or waste ever has been buried, stored, spilled, leaked, discharged, emitted, or released on any of the Real Estate. To Seller's Knowledge, no above ground or underground storage tanks have ever been located at, on or under the Real Estate. The Seller has delivered to the Buyer a complete copy of all environmental claims, reports, studies, compliance actions or the like of the Seller or which are available to the Seller with respect to any of the Real Estate or any of the Acquired Assets. R. LEGAL COMPLIANCE. The Seller has complied in all material respects with all laws (including rules and regulations thereunder) of federal, state, local and foreign governments (and all agencies thereof). The Seller has filed in a timely manner all reports, documents, and other materials it was required to file (and the information contained therein was correct and complete in all material respects) under all applicable laws. S. BROKERS' FEES. The Seller has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement. T. CUSTOMIZATION PROJECTS. The Seller has engaged and is currently engaged in no customization or software development projects of the Seller in process, or pending proposals regarding customization or software development projects for third party customers. U. TRANSACTIONS WITH AFFILIATES. Neither Seller nor its affiliates has had (a) any interests in any entity which has purchased, sold or furnished to Seller any goods or services, (b) a beneficial interest in any contract, lease commitment or understanding to which the Seller is a party or by which it is bound or affected, (c) any interest or claim against the Seller or any of its assets, or (d) any interest in any assets used by Seller in its business. V. YEAR 2000 COMPLIANCE. (1) All data processing systems, other computer systems, chips, firmware and software owned, used, affecting or relied upon by Seller ("Computer Systems") will be usable to, during and after the calendar year 2000, and will operate during such time period without error relating to date data, specifically including any error relating to, or the product of, date data which represents or references different centuries or more than one century. The Computer Systems will manage and manipulate data involving dates, including but not limited to single century formulas and multi-century formulas, and will not cause an abnormally ending scenario within the application or generate incorrect values or invalid results involving such date(s). 11 12 (2) There is no deficiency or inadequacy in the manufacture, design or formulation of any of Seller's products (including, without limitation, the Software) which may hereafter give rise to any such failure or results in an product liability claim arising out of deficiencies or inadequacies relating to the year 2000. W. UNDISCLOSED COMMITMENTS OR LIABILITIES. There are no material commitments, liabilities or obligations relating to the business of the Seller, whether accrued, absolute, contingent or otherwise including, without limitation, guaranties by the Seller of the liabilities of third parties, for which specific and adequate provisions have not been made on the Financial Statements. X. INVESTMENT REPRESENTATIONS. (a) The Seller represents and warrants that it is acquiring the Shares solely for investment, solely for its own account and not with a view to or for the resale or distribution thereof except as permitted under the Securities Act and except as follows: (1) BSI intends to transfer some or all of the Shares to Burley upon the liquidation of BSI after the Closing (or to such entities wholly controlled by, or individuals related to, Burley upon the prior approval of the Buyer and its counsel); (2) Burley may transfer Shares to entities wholly controlled by, or individuals related to, Burley upon the prior approval of Buyer and its counsel; (3) BSI or Burley may transfer up to 22,896 of the Shares to Mr. Frank Klekner, if Klekner makes investment representations and warranties as Buyer and its counsel deem sufficient to qualify for an exemption to applicable securities registration requirements governing transfer of the shares, and if Klekner consents to the same rights of first refusal and restrictions on transfer of the Shares contained in this Agreement, all to be contained in a written document to be executed by Klekner in form reasonably acceptable to Company and its counsel; provided, however, that if such Shares are transferred to Klekner, on and after September 15, 2000 only 11,000 of the Shares transferred to Klekner shall be subject to the Repurchase Rights, as set forth Section 5(g) below, and any additional Shares transferred to Klekner shall not be subject to Repurchase Rights. (b) Seller understands that it may sell or otherwise transfer the Shares only if such transaction is duly registered under the Securities Act, under a registration statement or otherwise, or if Seller shall have received the favorable opinion of counsel to Seller to the effect that such sale or other transfer may be made in the absence of registration under the Securities Act, and registration or qualification in every applicable state. The certificates representing the Shares will be legended to reflect these restrictions, and stop transfer instructions will apply. The Seller acknowledges that the Shares are not currently registered, that there are no current plans for the Shares to be registered, and that the Shares are not a liquid investment. (c) The Seller has the knowledge and experience to evaluate the Company and the risks and merits relating thereto. (d) The Seller represents and warrants that it is an "accredited investor" as such term is defined in Rule 501 of the Regulation D promulgated pursuant to the Securities Act, and shall be such on the date any of the Shares is issued to Stockholder; Seller acknowledges 12 13 that it is able to bear the economic risk of losing its entire investment in the shares and understands that an investment in the Company involves substantial risks; Seller has the power and authority to enter into this Agreement; and the execution and delivery of, and performance under this Agreement shall not conflict with any rule, regulation, judgment or agreement applicable to Seller. Seller has had the opportunity to discuss, and has discussed, the Company's affairs with the Company's officers. (e) The warranties and representations of the Seller contained in this Section shall be true and correct on the Closing Date and shall survive the consummation of the transaction contemplated by this Agreement Y. DISCLOSURE. The representations and warranties contained in this Section 2 do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 2 not misleading. 3. REPRESENTATIONS AND WARRANTIES OF THE BUYER. Buyer represents and warrants to the Seller that the statements contained in this Section 3 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date except as set forth in the Disclosure Schedule. A. ORGANIZATION OF THE BUYER. Cumulus Media Inc. is a corporation duly organized, validly existing, and in good standing under the laws of Illinois, and through its subsidiary "Broadcast Software International Inc., a corporation of Nevada," is duly qualified, validly existing, and in good standing under the laws of Nevada, and is qualified to do business in the State of Oregon. Cumulus Broadcasting, Inc. is a subsidiary of Cumulus Media Inc., which is duly organized, validly existing, and in good standing under the laws of Illinois. B. AUTHORIZATION OF TRANSACTION. Buyer has full power and authority to execute and deliver this Agreement and the Ancillary Agreements and to perform their obligations hereunder and thereunder. This Agreement and the Ancillary Agreements constitute legally binding obligations of the Buyer, enforceable against the Buyer in accordance with their respective terms and conditions. C. NONCONTRAVENTION. Neither the execution and the delivery of this Agreement or the Ancillary Agreements, nor the consummation of the transactions contemplated hereby and thereby (including the assignments and assumptions referred to in Section 1(e) above), will (i) violate any statute, regulation, rule, judgment, order, decree, stipulation, injunction, charge, or other restriction of any government, governmental agency, or court to which the Buyer are subject or any provision of their articles of organization or other charter documents, or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice or third party consent under any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed money, instrument of indebtedness, Security Interest, or other arrangement to which the Buyer are a party or by which they are bound or to 13 14 which any of their assets is subject. The Buyer does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any court or government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement or the Ancillary Agreements (including the assignments and assumptions referred to in Section 1 (e) above). D. SECURITIES REPORTS AND FINANCIAL STATEMENTS. The Buyer has filed with the Securities and Exchange Commission (the "SEC") all forms, statements, reports and documents (including all exhibits, amendments and supplements thereto) required to be filed by it prior to the date hereof under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Securities Act and the respective rules and regulations thereunder, all of which, as amended if applicable, complied in all material respects with all applicable requirements of the appropriate act and the rules and regulations thereunder (collectively, the "Cumulus SEC Reports"). As of their respective dates, the Cumulus SEC Reports did 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, in light of the circumstances under which they were made, not misleading. The audited combined and consolidated financial statements for the year ended December 31, 1998 of Cumulus Media Inc. (the "Cumulus Financial Statements") which heretofore have been provided to Seller, have been prepared in accordance with GAAP (except as may be indicated therein or in the notes thereto) and fairly present the financial position of Cumulus Media Inc. as of the dates thereof and the results of their operations and changes in financial position for the period then ended. E. BROKERS' FEES. The Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Seller could become liable or obligated. 4. CONDITIONS TO OBLIGATION TO CLOSE. A. CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of Buyer to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 2 above shall be true and correct in all material respects at and as of the Closing Date as though made on and as of the Closing Date; (ii) no action, suit, investigation, inquiry or other proceeding shall be pending or threatened before any court or quasijudicial or administrative agency of any federal, state, local, or foreign jurisdiction wherein an unfavorable judgment, order, decree, stipulation, injunction, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or impose damages or penalties upon any of the parties if such transactions are consummated, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, or (C) affect 14 15 adversely the right of the Buyer to own, operate, or control the Acquired Assets (and no such judgment, order, decree, stipulation, injunction, or charge shall be in effect); (iii) the Seller shall have delivered to the Buyer a certificate (without qualification as to knowledge or materiality or otherwise) to the effect that each of the conditions specified above in Sections 4(a)(i) through (ii) is satisfied in all respects; (iv) Mr. Ron Burley shall have entered into the Employment Agreement with Buyer; (v) Mr. Frank Kleckner shall have entered into the Employment Agreement with Buyer; (vi) the Buyer shall have received from counsel to the Seller an opinion with respect to the matters set forth in Exhibit A attached hereto, addressed to the Buyer and its lender and dated as of the Closing Date; (vii) the Parties shall have agreed to allocate the Purchase Price (and all other capitalizable costs) among the Acquired Assets for all purposes (including financial accounting and tax purposes) in accordance with an allocation schedule to be delivered at Closing; and (viii) all actions to be taken by the Seller in connection with the consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer. B. CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3 above shall be true and correct in all respects at and as of the Closing Date as though made on and as of the Closing Date; (ii) no action, suit, investigation, inquiry or other proceeding shall be pending or threatened before any court or quasi judicial or administrative agency of any federal, state, local, or foreign jurisdiction wherein an unfavorable judgment, order, decree, stipulation, injunction, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or impose damages or penalties upon any of the Parties if such transactions are consummated, or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such judgment, order, decree, stipulation, injunction, or charge shall be in effect); 15 16 (iii) the Buyer shall have delivered to the Seller a certificate (without qualification as to knowledge or materiality or otherwise) to the effect that each of the conditions specified above in Section 4(b)(i)-(ii) is satisfied in all respects; (iv) Mr. Ron Burley shall have entered into the Employment Agreement with Buyer; and (v) all actions to be taken by the Buyer in connection with the consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Seller. 5. POST-CLOSING COVENANTS. The Parties agree as follows with respect to the period following the Closing: A. GENERAL. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefor under Section 6 below). B. TAX-FREE TREATMENT; LIQUIDATION OF BSI. The Parties shall use commercially reasonable efforts to cause the transaction contemplated by this Agreement to be treated as a tax-free reorganization for federal, state and foreign income tax purposes. To effectuate this intent, in part, Seller covenants that it will liquidate and wind up the affairs of BSI promptly after the Closing. In conjunction with the liquidation, Seller will notify the state corporation office of its intent no longer to use the name Broadcast Software International, Inc., so that such corporate name will be free for Buyer's use as soon as possible following the Closing. C. LITIGATION SUPPORT. In the event and for so long as any Party actively is contesting or defending against any charge, complaint, action, suit, proceeding, hearing, investigation, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Seller, each of the other Parties will reasonably cooperate with the contesting or defending Party and its counsel in the contest or defense, make available his or its personnel, and provide such testimony and access to its books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under Section 7 below); provided, however, that such access and cooperation does not unreasonably disrupt the normal operations of the cooperating party. 16 17 D. ADJUSTMENTS. Operation of the business of the Seller and the income and expenses attributable thereto up through the close of business on the day before the Closing Date shall be for the account of the Seller and thereafter for the account of the Buyer. Such items as employee salaries, vacation, sick day and personal time accruals, and fringe benefits, power and utilities charges, insurance, real and personal property taxes, prepaid expenses, deposits, music license fees, and rents and payments pertaining to the Assumed Contracts (including any contracts for the sale of time for cash, trade or barter so assigned) shall be prorated between the Seller and the Buyer as of the Closing Date in accordance with the foregoing principle. In addition, all commissions payable with respect to the accounts receivable of the Seller (whether due before or after Closing) shall be solely for the account and responsibility of the Seller. Contractual arrangements that do not reflect an equal rate of compensation over the term of the agreement shall be equitably adjusted as of the Closing Date. The prorations and adjustments hereunder shall be made and paid insofar as feasible on the Closing Date, with a final settlement sixty (60) days after the Closing Date. In the event of any disputes between the Parties as to such adjustments, the amounts not in dispute shall nonetheless be paid at such time and such disputes shall be determined by an independent accounting firm mutually acceptable to both parties and the fees and expenses of such accounting firm shall be paid one-half (1/2) by the Seller and one-half (1/2) by the Buyer. E. CONSENTS. In the event any of the Assumed Contracts are not assignable or any consent to such assignment is not obtained on or prior to the Closing Date, and the Buyer elect to consummate the transactions contemplated herein despite such failure or inability to obtain such consent, the Seller shall continue to use commercially reasonable efforts to obtain any such assignment or consent after the Closing Date. Until such time as such assignment or approval has been obtained, the Seller will cooperate with Buyer in any lawful and economically feasible arrangement to provide that the Buyer shall receive the Seller's interest in the benefits under any such Assumed Contract, including performance by the Seller as agent, if economically feasible; provided, however, that the Buyer shall undertake to pay or satisfy the corresponding liabilities for the enjoyment of such benefit to the extent that Buyer would have been responsible therefor if such consent or assignment had been obtained. F. ACCESS FOR AUDITS. Seller acknowledges the Buyer is a subsidiary of a publicly traded company and as such may have responsibilities under SEC rules and regulations to obtain audits of the Seller for the period prior to the date of this Agreement. Seller agrees to use best efforts, before or after Closing to prepare such audits at Buyer' request and at Buyer' expense, and to provide such access to its historical records as may be reasonably necessary for Buyer to comply with their financial reporting obligations. G. RESTRICTIONS ON TRANSFER OF SHARES; RIGHT OF FIRST REFUSAL. Seller hereby agrees that it shall not sell, transfer, pledge or otherwise convey the Shares except in compliance with the procedures in this Section 5(g). Seller grants Buyer a right of first refusal to purchase the Shares, as follows: 17 18 (a) The Buyer's right of first refusal (the "Repurchase Rights") as described in this Section 5(g) shall apply to a certain number of the Shares held by Seller according to the following schedule: September 15, 1999 to September 14, 2000: 152,636 shares September 15, 2000 to September 14, 2001: 122,109 shares September 15, 2001 to September 14, 2002: 91,519 shares September 15, 2002 to September 14, 2003: 61,054 shares September 15, 2003 to September 14, 2004: 30,527 shares On and after September 15, 2004, Seller shall have no Repurchase Rights with respect to any of the Shares. (b) In the event Seller receives a written offer from a third party to purchase some or all of the Shares (the "Offer"), within fifteen (15) days of the receipt of the offer, Seller shall provide written notice to Buyer enclosing a copy of the Offer. Buyer shall have the opportunity to purchase from Seller the portion of the Shares subject to Repurchase Rights, on the same terms and conditions as proposed in the Offer. Within thirty (30) days of the receipt of notice of the Offer, Buyer will notify Seller whether it wishes to exercise its Repurchase Rights with respect to some or all of the Shares subject to the Repurchase Rights. (c) In the event Buyer elects to exercise the Repurchase Rights, Buyer and Seller shall agree on a mutually convenient closing date and shall execute such further agreements and documents as may be necessary to effectuate the purchase of the shares by Buyer. In the event the Buyer elects not to exercise the Repurchase Rights with respect to all of the Shares, Buyer shall provide written notice to Seller of this decision. Seller may sell the Shares as to which Buyer has declined to exercise Repurchase Rights within thirty (30) days of the receipt of such notice from Buyer. If the sale is not completed within thirty (30) days of such notice, the transfer of such Shares shall again be subject to the restrictions in this Section 5(g). (d) The certificates representing the Shares will be legended to reflect the restrictions in this Section 5(g), and stop transfer instructions will apply. (e) In the event that BSI or Burley transfers Shares to Klekner as described in Section 2(x)(a) above, the number of Shares held by Burley which shall be subject to the Repurchase Rights under Section 5(g)(a), and the schedule for the removal of such restrictions for BSI or Burley shall be adjusted on a pro rata basis. A maximum of 11,000 of the Shares held by Klekner shall by subject to Repurchase Rights, with 2,200 of such 11,000 Shares becoming free of such Repurchase Rights on each anniversary of the Closing Date. If more than 11,000 Shares are transferred to Klekner, none of the excess shares over 11,000 shall be subject to the Repurchase Rights. 18 19 (f) Notwithstanding this Section 5(g), the restrictions on transfer of Shares and the Repurchase Rights are subject to termination on the terms and conditions set forth in those certain employment agreements between Buyer and Ron Burley and Buyer and Frank Klekner. 6. REMEDIES FOR BREACHES OF THIS AGREEMENT. A. SURVIVAL. All of the representations and warranties of the Seller contained in Section 2 of this Agreement (other than the representations and warranties of the Seller contained in Sections 2(a), 2(b), 2(c), and 2(d) hereof or relating to the Seller's title to the Acquired Assets) shall survive the Closing and continue in full force and effect for a period until 90 days after the applicable statute of limitations has expired with respect to any claim by the Buyer based on a claim or action by a third party and for a period of three (3) years following Closing with respect to any claim by the Buyer not based on a claim or action by a third party. All of the other representations and warranties of Seller (including the representations and warranties of Seller contained in Sections 2(a), 2(b), 2(c), and 2(d) hereof or relating to the Seller's title to the Acquired Assets) and all representations and warranties of the Buyer shall survive the Closing and continue in full force and effect forever thereafter. B. INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE BUYER. The Seller agrees to indemnify the Buyer from and against the entirety of any Adverse Consequences the Buyer may suffer resulting from, arising out of, relating to, in the nature of, or caused by: (i) any misrepresentation or breach of any of the Seller's representations or warranties, and covenants contained in this Agreement or in any Ancillary Agreement executed and/or delivered by the Seller (so long as the Buyer make a written claim for indemnification within the applicable survival period); (ii) any breach or nonfulfillment of any agreement or covenant of the Seller contained herein or in any Ancillary Agreement; (iii) any Liability of the Seller; and/or (iv) any Liability of the Buyer arising by operation of law (including under any bulk transfer law of any jurisdiction or under any common law doctrine of defacto merger or successor liability) which is not an Assumed Liability. C. INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE SELLER. The Buyer agrees to indemnify the Seller from and against the entirety of any Adverse Consequences the Seller may suffer resulting from, arising out of, relating to, in the nature of, or caused by (i) any misrepresentation or breach of any of the Buyer' representations or warranties contained in this Agreement or in any Ancillary Agreement executed and/or delivered by the Buyer (so long as the Seller makes a written claim for indemnification within the applicable survival period) or (ii) 19 20 any breach or nonfulfillment of any agreement or covenant of the Buyer contained herein or in any Ancillary Agreement. D. MATTERS INVOLVING THIRD PARTIES. If any third party shall notify any Party (the "Indemnified Party") with respect to any matter which may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under this Section 6, then the Indemnified Party shall notify the Indemnifying Party thereof promptly; provided, however, that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from any liability or obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is damaged as a result of such failure. In the event any Indemnifying Party notifies the Indemnified Party within 15 days after the Indemnified Party has given notice of the matter that the Indemnifying Party is assuming the defense thereof, (i) the Indemnifying Party will defend the Indemnified Party against the matter with counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may retain separate co-counsel at its sole cost and expense (except that the Indemnifying Party will be responsible for the fees and expenses of the separate co-counsel to the extent the Indemnified Party reasonably concludes that the counsel the Indemnifying Party has selected has a conflict of interest), (iii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the matter without the written consent of the Indemnifying Party (not to be withheld unreasonably), and (iv) the Indemnifying Party will not consent to the entry of any judgment with respect to the matter, or enter into any settlement which does not include a provision whereby the plaintiff or claimant in the matter releases the Indemnified Party from all Liability with respect thereto, without the written consent of the Indemnified Party (not to be withheld unreasonably). In the event the Indemnifying Party does not notify the Indemnified Party within 15 days after the Indemnified Party has given notice of the matter that the Indemnifying Party is assuming the defense thereof, however, and/or in the event the Indemnifying Party shall fail to defend such claim actively and in good faith, then the Indemnified Party may defend against, or enter into any settlement with respect to, the matter in any manner it reasonably may deem appropriate. E. LIMITATION OF LIABILITY. Notwithstanding anything in this Agreement to the contrary, after the Closing neither party shall indemnify or otherwise be liable to the other party from and after the Closing Date except to the extent that the Adverse Consequences suffered by the Indemnified Party, in the aggregate from all indemnifiable events shall exceed Ten Thousand Dollars ($10,000) and indemnification shall be made by the indemnifying party only to the extent of such excess over Ten Thousand Dollars ($10,000); provided however that the foregoing limitation shall not be applicable to: (i) the obligations of the Buyer to pay and discharge any Liability of the Seller to third parties from and after the Closing Date assumed by the Buyer under the terms of this Agreement; (ii) the obligation of the Seller to pay and discharge any Liability to third parties, or (iii) the Seller's obligation to deliver clear title to the Acquired Assets. 7. DEFINITIONS. 20 21 "ACQUIRED ASSETS" means all right, title, and interest in and to all of the assets of the Seller, other than Retained Assets that are used or useful in the operation of the business of the Seller, wherever located, including but not limited to all of its (a) software owned or developed by Seller, including source code and object code version; (b) all documents, files and records; (c) all customer lists and goodwill; (d) all customer or operating manuals, training materials, references guides, and sales materials; (e) all contract and license rights; (f) all slogans, trade names and service marks; (g) copyrights; (h) real property, leaseholds and other interests of any kind therein, improvements, fixtures, and fittings thereon, and easements, rights-of-way, and other appurtenances thereto; (i) tangible personal property (such as fixed assets, computers, data processing equipment, electrical devices, monitoring equipment, test equipment, furniture, furnishings, other supplies, and vehicles) and all assignable warranties with respect thereto; (j) Intellectual Property, goodwill associated therewith, licenses and sublicenses granted and obtained with respect thereto, and rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the laws of all jurisdictions; (k) rights under orders and agreements now existing or entered into in the Ordinary Course of Business; (l) Assumed Contracts, indentures, Security Interests, guaranties, other similar arrangements, and rights thereunder; (m) claims, deposits, prepayments, refunds, causes of action, chooses in action, rights of recovery (including rights under policies of insurance), rights of set off, and rights of recoupment; (n) Licenses and similar rights obtained from governments and governmental agencies; (o) goodwill of the Seller; (p) Ten Thousand and no/100 Dollars ($10,000); and (q) all accounts receivable. "ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits, proceedings, hearings, investigations, claims, demands, judgments, orders, decrees, stipulations, injunctions, damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including all attorneys' fees and court costs. "AFFILIATE" means with reference to any person or entity, another person or entity controlled by, under the control of or under common control with that person or entity. "ASSUMED CONTRACTS" means the Leases, and those contracts identified on Section 2(j) of the Disclosure Schedule as those to be assumed by Buyer. "ASSUMED LIABILITIES" means (a) obligations of the Seller which accrue after the Closing Date under the Assumed Contracts either: (i) to furnish services, and other non-Cash benefits to another party after the Closing; or (ii) to pay for goods, services, and other non-Cash benefits that another party will furnish to it after the Closing, and (b) Seller's accounts payable which are listed in Section 8 of the Disclosure Schedule. The Assumed Liabilities shall not include any Retained Liabilities. "BASIS" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or could form the basis for any specified consequence. "BUYER" has the meaning set forth in the preface above. 21 22 "CASH" means cash and cash equivalents determined in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements. "CLOSING" has the meaning set forth in Section 1(d) above. "CLOSING DATE" has the meaning set forth in Section 1(d) above. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPUTER SYSTEMS" has the meaning set forth in Section 2(v) above. "CONFIDENTIAL INFORMATION" means any information concerning the businesses and affairs of the Seller. "DISCLOSURE SCHEDULE" has the meaning set forth in Section 2 above. "EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multi-employer Plan), or (d) Employee Welfare Benefit Plan or material fringe benefit plan or program. "EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec. 3(2). "EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec. 3(1). "ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean Air Act of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances Control Act of 1976, the Refuse Act of 1899, or the Emergency Planning and Community Right-to-Know Act of 1986 (each as amended), or any other law of any federal, state, local, or foreign government or agency thereof (including rules, regulations, codes, plans, judgments, orders, decrees, stipulations, injunctions, and charges thereunder) relating to public health and safety, or pollution or protection of the environment, including, without limitation, laws relating to emissions, discharges, releases, or threatened releases of pollutants, contaminants, or chemical, industrial, hazardous or toxic materials or wastes into ambient air, surface water, ground water, or lands or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 22 23 "Extremely Hazardous Substance" has the meaning set forth in Section 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as amended. "FINANCIAL STATEMENTS" has the meaning set forth in Section 2(e) above. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "INDEMNIFIED PARTY" has the meaning set forth in Section 6(d) above. "INDEMNIFYING PARTY" has the meaning set forth in Section 6(d) above. "INTELLECTUAL PROPERTY" has the meaning set forth in Section 2(l) above. "KNOWLEDGE" means actual knowledge after reasonable investigation. "LEASES" means those real estate leases to which Seller is a party, as described in Section 2(i) of the Disclosure Schedule. "LIABILITY" means any liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes. "LICENSES" means all governmental licenses, franchises, approvals, certificates, authorizations and rights of the Seller with respect to the operations of the business and all applications therefor, together with any renewals, extension or modifications thereof and additions thereto. "MULTI-EMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37). "ORDINARY COURSE OF BUSINESS" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency). "PARTY" has the meaning set forth in the preface above. "PROHIBITED TRANSACTION" has the meaning set forth in ERISA Section 406 and Code Section 4975. "PURCHASE PRICE " has the meaning set forth in Section 1(c) above. "REAL ESTATE" means the the real estate, building, fixtures and improvements which are the subject of the Leases. "REPORTABLE EVENT" has the meaning set forth in ERISA Section 4043. 23 24 "RETAINED ASSETS" means (i) the corporate charter, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, minute books, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance, and existence of the Seller as a corporation; and (ii) any of the rights of the Seller under this Agreement (or under any side agreement between the Seller on the one hand and the Buyer on the other hand entered into on or after the date of this Agreement). "RETAINED LIABILITIES" means any obligations or Liabilities of the Seller, including but not limited to: (i) any Liability relating to the ownership or operation of the business prior to the Closing; (ii) any Liability of the Seller for income, transfer, sales, use, and other Taxes arising in connection with the consummation contemplated hereby; (iii) any Liability of the Seller for costs and expenses incurred in connection with this Agreement or the consummation of the transactions contemplated hereby; or (iv) any Liability or obligation of the Seller under this Agreement (or under any side agreement between the Seller on the one hand and the Buyer on the other hand entered into on or after the date of this Agreement). "SECURITY INTEREST" means any mortgage, pledge, security interest, encumbrance, charge, or other lien, other than (a) liens for Taxes not yet due and payable; and (b) liens arising under worker's compensation, unemployment insurance, social security, retirement, and similar legislation. "SELLER" has the meaning set forth in the preface above. "SUBSIDIARY," with respect to any person, means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which ) 50% or more of (i) the outstanding capital stock or other equity interest having voting power to elect a majority of the Board of Directors of such corporation or persons having a similar role as to an entity that is not a corporation, (ii) the interest in the profits of such partnership or joint venture, or (iii) the beneficial interest of such trust or estate are at such time directly or indirectly owned by such person or one or more of such person's Subsidiaries. "SHARES" has the meaning set forth in Section 1(c) above. "SOFTWARE" has the meaning set forth in Section 2(l) above. "TAX" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Sec. 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. 24 25 "TAX RETURN" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "THIRD PARTY INTELLECTUAL PROPERTY" has the meaning set forth in Section 2(l)(3) above. 8. TERMINATION. A. TERMINATION OF AGREEMENT. Certain of the Parties may terminate this Agreement as provided below: (i) the Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing in the event the Seller is in breach of any representation, warranty, or covenant contained in this Agreement; provided, however, that if such breach is capable of being cured, such breach also remains uncured for twenty (20) days after notice of breach is received by the Seller from the Buyer; and (iii) the Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing in the event the Buyer are in breach of any representation, warranty, or covenant contained in this Agreement; provided, however that if such breach is capable being cured, such breach remains uncured for twenty (20) days after notice of breach is received by the Buyer from the Seller. B. EFFECT OF TERMINATION. If any Party terminates this Agreement pursuant to Section 8(a) above, all obligations of the Parties hereunder shall terminate without any Liability of any Party to any other Party (except for any Liability of any Party then in breach). 9. MISCELLANEOUS. A. NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns. B. ENTIRE AGREEMENT. This Agreement (including the documents referred to herein) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, that may have related in any way to the subject matter hereof. C. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and enure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party, provided that (i) the Buyer may 25 26 assign all of their right, title and interest in, to and under this Agreement to one or more Affiliates, who shall then, subject to the terms and conditions of this Agreement, have the right to receive the Acquired Assets, assume the Assumed Liabilities, and to pay to the Seller the Purchase Price therefor or to any successor to the Buyer in the event of any sale, merger or consolidation of the Buyer, and (ii) Buyer may assign their indemnification claims and their rights under the warranties and representations of the Seller to the financial institution(s) providing financing to the Buyer in connection with this transaction. D. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. E. HEADINGS. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. F. NOTICES. All notices, requests, demands, claims, and other communications hereunder will be in writing and shall be considered to be given and received in all respects when hand delivered, when delivered via prepaid express or courier delivery service, when sent by facsimile transmission actually received by the receiving equipment or three (3) days after deposited in the United States mail, certified mail, postage prepaid, return receipt requested, in each case addressed to the intended recipient as set forth below: If to the Seller: Mr. Ron Burley Broadcast Software International Inc. 1925 Bailey Hill Road, Suite A Eugene, Oregon 97405 Phone: (541) 338-8588 Fax: (541) 338-8656 Copy to: Thomas Herrmann, Esquire Gleaves Swearingen Larsen Potter Scott & Smith LLP 975 Oak Street Suite 800 Eugene, Oregon 97401 Phone: (541) 686-8833 Fax: (541) 345-2034 (which copy shall not constitute notice to Seller) If to the Buyer: 26 27 Cumulus Broadcast Software International, Inc. c/o Cumulus Broadcasting, Inc. 111 E. Kilbourn Avenue, Suite 2700 Milwaukee, WI 53202 Attn: Terrence J. Leahy Fax: (414) 615-2880 With a copy to: Cumulus Broadcasting, Inc. 875 N. Michigan Avenue Suite 3650 Chicago, Illinois 60611 Attn: Richard J. Bonick Fax: (312) 867-0098 Any Party may give any notice, request, demand, claim or other communication hereunder using any other means (including telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth. G. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws (and not the law of conflicts) of the State of Oregon. H. AMENDMENTS AND WAIVERS. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and the Seller. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. I. SEVERABILITY. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. 27 28 J. EXPENSES. The Buyer and the Seller will each bear their own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. The Seller and the Buyer will each pay one-half (1/2) of any transfer or sales taxes and other recording or similar fees necessary to vest title to each of the Acquired Assets in the Buyer. K. CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Disclosure Schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. L. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. * * * * * 28 29 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as of the date first above written. CUMULUS MEDIA INC. By: /s/ Richard Weening --------------------------- Richard Weening Title: Executive Chairman BROADCAST SOFTWARE INTERNATIONAL INC. By: /s/ Ron Burley ------------------------------ Ron Burley (printed) ------------------------------ Title: President --------------------------- MR. RON BURLEY /s/ Ron Burley - --------------------------------- 29 EX-2.2 3 OPTION AGREEMENT 1 EXHIBIT 2.2 OPTION AGREEMENT This Option Agreement (this "Agreement") is made and entered into this 15th day of September, 1999, by and among Cumulus Broadcasting, Inc., a Nevada corporation, Cumulus Licensing Corp., a Nevada corporation, Cumulus Wireless Services Inc., their successors and assigns (collectively "Cumulus") and Green Bay Broadcasting Company, Inc., a Wisconsin corporation ("GBBC"). W I T N E S S E T H: WHEREAS, GBBC is a licensee of radio stations WQLH-FM and WDUZ-AM licensed to Green Bay, Wisconsin (collectively the "Stations") under the rules and regulations of the Federal Communications Commission ("FCC"); and WHEREAS, the parties have entered into a Local Marketing Agreement (the "LMA Agreement") of even date whereby GBBC has sold to Cumulus air time on the Stations under the terms and conditions set forth in that Agreement; and WHEREAS, Cumulus desires to acquire an exclusive option to acquire certain assets of the Stations used or intended for use in the Stations' operations (the "Option to Purchase"), including all permits, authorizations and licenses issued by the FCC (the "Assets") as set forth in the asset purchase agreement attached hereto as EXHIBIT A (the "Asset Purchase Agreement"); and WHEREAS, GBBC desires to have the right during the term of this Option to require that Cumulus purchase the Assets pursuant to the terms and conditions of the Asset Purchase Agreement (the "Put"); and WHEREAS, the parties have entered an escrow agreement of even date with Blackburn & Associates ("Escrow Agent"), pursuant to which Escrow Agent shall carry out various duties to implement the sale and purchase transaction in the event that the Option to Purchase or Put is exercised, a copy of which is attached hereto as EXHIBIT B ("Escrow Agreement"); NOW, THEREFORE, in consideration of Ten Dollars ($10) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. GRANT OF OPTION TO PURCHASE. GBBC hereby grants to Cumulus the Option to Purchase. The Option to Purchase may be exercised by Cumulus at any time between March 15, 2003 and September 15, 2004. The Option to Purchase may be exercised by Cumulus at any time by the delivery of notice by Cumulus to GBBC as provided below. After Septembr 15, 2004, the Option to Purchase shall terminate and shall have no further force and effect. 2. OPTION PURCHASE PRICE. The purchase price to be paid to GBBC by Cumulus in the event that Cumulus exercises the Option to Purchase hereunder shall be Seven Million Two 2 Hundred Fifty Thousand and no/100 Dollars ($7,250,000), payable on the terms and conditions set forth in the Asset Purchase Agreement. 3. GRANT OF PUT. Cumulus hereby grants to GBBC the Put. In the event of the exercise of this Put, Cumulus shall have the obligation to purchase the Assets pursuant to the terms and conditions of the Asset Purchase Agreement. This Put may be exercised by GBBC at any time between March 15, 2002, and March 14, 2003 by delivery of notive by GBBC to Cumulus as provided below; provided, however, that (1) the Closing of the transaction following exercise of the Put shall not occur before January 1, 2003, and (2) GBBC shall have the right to immediately exercise its Put in the event of a material and uncured breach of the LMA by Cumulus. After March 14, 2003, the Put shall terminate and be of no further force and effect. 4. PUT PURCHASE PRICE. The purchase price to be paid to GBBC by Cumulus as consideration for the Assets in the event that GBBC exercises the Put hereunder shall be Seven Million and no/100 Dollars ($7,000,000), payable by wire transfer of immediately available U.S. funds, under the terms and conditions of the Asset Purchase Agreement. 5. ESCROW AGREEMENT. Simultaneously with the execution of this Agreement, Cumulus and GBBC have executed, but not dated, duplicate copies of the Asset Purchase Agreement, a copy of which is attached hereto as Exhibit A. Both copies of the executed but undated Purchase Agreement shall be delivered to the Escrow Agent to be held by Escrow Agent subject to the terms of the Escrow Agreement. 6. EXERCISE OF THE OPTIONS. Either party may exercise the options granted hereunder at any time permitted under the terms of this Agreement by the delivery of notice to the other party as provided below. Within the five (5) business days of the delivery of the notice of the exercise of the Option to Purchase or Put by either Cumulus or GBBC, respectively, the parties acknowledge and agree that the Escrow Agent shall date the two executed copies of the Asset Purchase Agreement with the date of receipt of notice and shall deliver one such dated executed copy of the Asset Purchase Agreement to each of Cumulus and GBBC, respectively, and shall carry out the duties of the Escrow Agent specified in the Escrow Agreement. 7. AGREEMENT TO FULFILL CONDITIONS. Both parties agree to use their respective best efforts to fulfill and perform all conditions of obligations on its part to be fulfilled and performed under this Agreement and the Asset Purchase Agreement and to cause the transactions contemplated by this Agreement to be fully carried out. 8. NOTICES. (a) Notices. All notices, demands, and requests required or permitted hereunder shall be in writing, and shall be deemed properly given if delivered personally or sent by certified mail, postage prepaid, return receipt requested, or by commercial overnight delivery service to the parties at the following addresses or such other address as either party may specify by written notice to the other. Notices shall be deemed given on the date of receipt (if delivered in person) or on 2 3 the date of delivery set forth in the records of the delivery service (if delivered by commercial delivery service) or on the return receipt (if delivered by certified mail). If to GBBC: ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- with copy to: ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- If to Cumulus: Cumulus Broadcasting, Inc. Cumulus Licensing Corp. Cumulus Wireless Services Inc. 111. E. Kilbourn Avenue, Suite 2700 Milwaukee, WI 53202 Attn: Terrence J. Leahy Phone: (414) 615-2800 Fax: (414) 615-2880 If to Escrow Agent: ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- (b) Written notification to counsel or by telephone facsimile shall not constitute notice for purposes of this paragraph. 10. NO WAIVER. The failure of any party at any time to require performance of any provision of this Agreement shall not affect its right at a later time to enforce the provision. No waiver of any party of any condition or of any breach of any term, covenant, representation or warranty contained in this Agreement shall be effective unless in writing, and no waiver in any one or more instances shall be deemed to be in other instances a waiver of any other condition or breach of any other term, covenant, representation or warranty. 11. ENFORCEMENT. Should either party breach or be in default under this Agreement, the other party shall be entitled to seek judicial enforcement in law and equity, and such damages as a court of competent jurisdiction may determine. In any court action, the prevailing party will be entitled to recovery of reasonable attorney's expenses, court costs, and reasonable attorney's fees. 12. CONTROL OF STATION. During the term of this Agreement, and until such time as the Option to Purchase or Put has been exercised, the Commission has approved the assignment of 3 4 the licenses for Stations from GBBC to Cumulus and the transactions have been consummated, Cumulus shall not control or attempt to control the operation of the Stations, but such operations shall be the responsibility of GBBC. 13. OTHER AGREEMENTS. The parties acknowledge that simultaneously with the execution of this Agreement, the parties have executed a Local Marketing Agreement and Escrow Agreement, and have executed (but not dated) duplicate originals of the Asset Purchase Agreement. Notwithstanding, neither GBBC nor Cumulus may terminate, or refuse to fully and timely perform under, this Agreement, for any reason relating to the LMA Agreement, the Asset Purchase Agreement or the Escrow Agreement. Moreover, the termination of the LMA Agreement by either Cumulus or GBBC shall not be a basis for GBBC or Cumulus to terminate or refuse to fully and timely perform under this Agreement. 14. AMENDMENTS. The provisions of this Agreement may be amended, terminated, or waived only by an instrument in writing executed by both parties or by the party granting a waiver. 15. HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect its meaning or interpretation. 16. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 17. COMPLIANCE WITH COMMUNICATIONS ACT AND FCC RULES. The parties agree that the provisions of this Agreement are subject to all applicable requirements under the Communications Act of 1934, as amended (the "Communications Act"), and the rules, regulations and policies of the FCC promulgated thereunder ("FCC Rules"). The parties agree that all actions undertaken pursuant to this Agreement shall be in full compliance with the requirements of the Communications Act and the FCC Rules, and the parties shall take no action which would be in violation thereof. Each party agrees to execute, and to cooperate in the filing and prosecution of, all applications and other documents which in the opinion of counsel are necessary to obtain FCC or other governmental approval of any transaction contemplated by this Agreement. 18. FURTHER ASSURANCES. The parties to this Agreement hereby each pledge to the other that they shall take whatever steps are reasonably necessary, in good faith, and shall use their best efforts to carry out their obligations under this Agreement so that the transactions contemplated herein shall be consummated in a complete and expeditious manner. 19. OTHER DOCUMENTS. The parties shall execute such other documents as may be necessary and desirable to the implementation and consummation of this Agreement. 20. ASSIGNMENT. The rights granted to Cumulus by this Agreement may be assigned by Cumulus to an entity which is controlled by or under common control with Cumulus upon the providing of written notice to GBBC, provided that such assignment shall not relieve Cumulus of 4 5 its obligations under this Agreement. 21. CONSTRUCTION. This Agreement shall be construed in accordance with the laws of the State of Wisconsin. 22. APPLICABLE LAW. This Agreement shall be construed and interpreted in accordance with Wisconsin law, and all suits herein or in respect hereto shall be instituted in courts having their forum within the State of Wisconsin. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. GREEN BAY BROADCASTING COMPANY, INC. By: /s/ Benjamin W. Laird --------------------------------------- Its: Chief Executive Officer -------------------------------------- CUMULUS BROADCASTING, INC. By: /s/ Richard Weening --------------------------------------- Its: Executive Chairman -------------------------------------- CUMULUS LICENSING CORP. By: /s/ Richard Weening ---------------------------------------- Its: Executive Chairman --------------------------------------- CUMULUS WIRELESS SERVICES INC. By: /s/ Richard Weening ---------------------------------------- Its: /s/ Executive Chairman --------------------------------------- 5 EX-10.1 4 AMENDED AND RESTATED CREDIT AGREEMENT 1 EXHIBIT 10.1 ================================================================================ $225,000,000 AMENDED AND RESTATED CREDIT AGREEMENT among CUMULUS MEDIA INC., as Borrower, The Several Lenders from Time to Time Parties Hereto, LEHMAN BROTHERS INC., as Arranger, BARCLAYS CAPITAL, as Syndication Agent, and LEHMAN COMMERCIAL PAPER INC., as Administrative Agent Dated as of August 31, 1999 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page SECTION 1. DEFINITIONS 1 1.1 Defined Terms 1 1.2 Other Definitional Provisions 32 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 33 2.1 Term Loan Commitments 33 2.2 Procedure for Term Loan Borrowing 33 2.3 Revolving Credit Commitments 33 2.4 Procedure for Revolving Credit Borrowing 35 2.5 Conversion Term Loans 35 2.6 Repayment of Term Loans 36 2.7 Repayment of Loans; Evidence of Debt 37 2.8 Commitment Fees, etc. 38 2.9 Termination or Reduction of Commitments 39 2.10 Optional Prepayments 39 2.11 Mandatory Prepayments and Commitment Reductions 40 2.12 Conversion and Continuation Options 42 2.13 Minimum Amounts and Maximum Number of Eurodollar Tranches 42 2.14 Interest Rates and Payment Dates 43 2.15 Computation of Interest and Fees 43 2.16 Inability to Determine Interest Rate 44 2.17 Pro Rata Treatment and Payments 44 2.18 Requirements of Law 46 2.19 Taxes 47 2.20 Indemnity 49 2.21 Illegality 49 2.22 Change of Lending Office 49 SECTION 3. LETTERS OF CREDIT 50 3.1 L/C Commitment 50 3.2 Procedure for Issuance of Letter of Credit 50 3.3 Fees and Other Charges 51 3.4 L/C Participations 51 3.5 Reimbursement Obligation of the Borrower 52 3.6 Obligations Absolute 52 3.7 Letter of Credit Payments 53 3.8 Applications 53 SECTION 4. REPRESENTATIONS AND WARRANTIES 53 4.1 Financial Condition 53 4.2 No Change 54 4.3 Corporate Existence; Compliance with Law 54 4.4 Corporate Power; Authorization; Enforceable Obligations 54 4.5 No Legal Bar 55 4.6 No Material Litigation 55
3 4.7 No Default 55 4.8 Ownership of Property; Liens 55 4.9 Intellectual Property 55 4.10 Taxes 56 4.11 Federal Regulations 56 4.12 Labor Matters 56 4.13 ERISA 56 4.14 Investment Company Act; Other Regulations 57 4.15 Subsidiaries 57 4.16 Use of Proceeds 57 4.17 Environmental Matters 57 4.18 Accuracy of Information, etc. 58 4.19 Security Documents 58 4.20 Solvency 59 4.21 Senior Debt; Credit Facility 59 4.22 Regulation H 60 4.23 Licenses; Permits; etc. 60 4.24 FCC Compliance, etc. 61 4.25 Year 2000 Matters 61 SECTION 5. CONDITIONS PRECEDENT 61 5.1 Conditions to Initial Extension of Credit 61 5.2 Conditions to Each Extension of Credit 65 SECTION 6. AFFIRMATIVE COVENANTS 66 6.1 Financial Statements 66 6.2 Certificates; Other Information 66 6.3 Payment of Obligations 68 6.4 Conduct of Business and Maintenance of Existence, etc. 68 6.5 Maintenance of Property; Insurance 68 6.6 Inspection of Property; Books and Records; Discussions 68 6.7 Notices 68 6.8 Environmental Laws 69 6.9 Interest Rate Protection 70 6.10 Additional Collateral, etc. 70 6.11 Further Assurances 71 6.12 Transfer of FCC Licenses 72 6.13 Post-Closing Events. 72 SECTION 7. NEGATIVE COVENANTS 73 7.1 Financial Condition Covenants 73 7.2 Limitation on Indebtedness 74 7.3 Limitation on Liens 76 7.4 Limitation on Fundamental Changes 77 7.5 Limitation on Disposition of Property 78 7.6 Limitation on Restricted Payments 78 7.7 Limitation on Capital Expenditures 79 7.8 Limitation on Investments 79 7.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc. 80
4 7.10 Limitation on Transactions with Affiliates 81 7.11 Limitation on Sales and Leasebacks 81 7.12 Limitation on Changes in Fiscal Periods 81 7.13 Limitation on Negative Pledge Clauses 81 7.14 limitation on Restrictions on Subsidiary Distributions 82 7.15 Limitation on Lines of Business 82 7.16 Limitation on License Subsidiary 82 7.17 Limitation on Hedge Agreements 82 SECTION 8. EVENTS OF DEFAULT 82 SECTION 9. THE AGENTS 86 9.1 Appointment 86 9.2 Delegation of Duties 86 9.3 Exculpatory Provisions 87 9.4 Reliance by the Agents 87 9.5 Notice of Default 87 9.6 Non-Reliance on Agents and Other Lenders 88 9.7 Indemnification 88 9.8 Agent in Its Individual Capacity 89 9.9 Successor Agents 89 9.10 Authorization to Release Liens and Guarantees 89 9.11 The Arranger and the Syndication Agent 89 SECTION 10. MISCELLANEOUS 90 10.1 Amendments and Waivers 90 10.2 Notices 91 10.3 No Waiver; Cumulative Remedies 92 10.4 Survival of Representations and Warranties 92 10.5 Payment of Expenses 92 10.6 Successors and Assigns; Participations and Assignments 94 10.7 Adjustments; Set-off 96 10.8 Counterparts 97 10.9 Severability 97 10.10 Integration 97 10.11 GOVERNING LAW 97 10.12 Submission To Jurisdiction; Waivers 97 10.13 Acknowledgments 98 10.14 WAIVERS OF JURY TRIAL 98 10.15 Confidentiality 98 10.16 Release of Collateral and Guarantee Obligations 99 10.17 Delivery of Lender Addenda 99
5 AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 31, 1999, among CUMULUS MEDIA INC., an Illinois corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties to this Agreement (the "Lenders"), LEHMAN BROTHERS INC., as advisor, lead arranger and book manager (in such capacity, the "Arranger"), BARCLAYS CAPITAL, as syndication agent (in such capacity, the "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, the Borrower, the financial institutions party thereto and Lehman Commercial Paper Inc., as administrative agent, are parties to the Credit Agreement, dated as of March 2, 1998 and as heretofore amended, supplemented or otherwise modified (the "Existing Credit Agreement"); WHEREAS, the Borrower has entered into asset purchase agreements with the sellers named therein providing for the purchase by the Borrower of properties and assets to be used in the operation of radio broadcast stations (collectively, the "Acquisition"), as described in the asset purchase agreements listed on Schedule 1.1A (collectively, the "Acquisition Agreements"); WHEREAS, the Borrower desires to finance the Acquisition and other acquisitions of properties and assets to be used in the operation of radio broadcast stations and to finance the Borrower's ongoing working capital and general corporate needs; WHEREAS, the Borrower wishes to amend and restate the Existing Credit Agreement; and WHEREAS, the Lenders are willing to amend and restate the Existing Credit Agreement on and subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto hereby agree that on the Closing Date the Existing Credit Agreement will be amended and restated in its entirety as follows: 1. SECTION DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1. "Acquisition": as defined in the recitals to this Agreement. 6 "Acquisition Agreements": as defined in the recitals to this Agreement. "Adjustment Date": as defined in the Pricing Grid. "Administrative Agent": as defined in the preamble hereto. "Affiliate": as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents": the collective reference to the Syndication Agent and the Administrative Agent. "Aggregate Exposure": with respect to any Lender at any time, an amount equal to (a) until the Closing Date, the aggregate amount of such Lender's Commitments at such time and (b) thereafter, the sum of (i) the aggregate then unpaid principal amount of such Lender's Term Loans, (ii) the amount of such Lender's Seven-Year Revolving Credit Commitment then in effect or, if the Seven-Year Revolving Credit Commitments have been terminated, the amount of such Lender's Seven-Year Revolving Extensions of Credit then outstanding and (iii) the amount of such Lender's 364-Day Revolving Credit Commitments then in effect or, if the 364-Day Revolving Credit Commitments have been terminated, the amount of such Lender's 364-Day Revolving Credit Loans then outstanding. "Aggregate Exposure Percentage": with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure at such time to the sum of the Aggregate Exposures of all Lenders at such time. "Agreement": this Amended and Restated Credit Agreement, as amended, supplemented or otherwise modified from time to time. "Applicable Margin": for each Type of Loan, the rate per annum set forth opposite such Loan under the relevant column heading below: 7 3
Base Rate Eurodollar Loans Loans --------- ---------- Revolving Credit Loans 2.000% 3.000% Conversion Term Loans 2.000% 3.000% Tranche B Term Loans 2.000% 3.000% Tranche C Term Loans 2.125% 3.125%
provided, that on and after the first Adjustment Date occurring on or after the date of delivery pursuant to Section 6.1 of the Borrower's financial statements for the period ending December 31, 1999, the Applicable Margins with respect to Revolving Credit Loans and Term Loans will be determined pursuant to the Pricing Grid. "Application": an application, in such form as the relevant Issuing Lender may specify from time to time, requesting such Issuing Lender to issue a Letter of Credit. "Arranger": as defined in the preamble hereto. "Asset Sale": any Disposition of Property or series of related Dispositions of Property (excluding any such Disposition permitted by clause (a), (b), (c), (d) or (e) of Section 7.5) in excess of $25,000. "Assignee": as defined in Section 10.6(c). "Assignor": as defined in Section 10.6(c). "Available Seven-Year Revolving Credit Commitment": with respect to any Seven-Year Revolving Credit Lender at any time, an amount equal to the excess, if any, of (a) such Lender's Seven-Year Revolving Credit Commitment then in effect over (b) such Lender's Seven-Year Revolving Extensions of Credit then outstanding. "Available 364-Day Revolving Credit Commitment": with respect to any 364-Day Revolving Credit Lender at any time, an amount equal to the excess, if any, of (a) such Lender's 364-Day Revolving Credit Commitment then in effect over (b) such Lender's 364-Day Revolving Credit Loans then outstanding. "Barclays Capital": the investment banking division of Barclays Bank PLC. "Base Rate": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Reference Lender as its prime or base rate in effect at its principal office in New York City (the Prime Rate not 8 4 being intended to be the lowest rate of interest charged by the Reference Lender in connection with extensions of credit to debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate; and "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Reference Lender from three New York City negotiable certificate of deposit dealers of recognized standing selected by it. Any change in the Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. "Base Rate Loans": Loans the rate of interest applicable to which is based upon the Base Rate. "Benefitted Lender": as defined in Section 10.7(a). "Board": the Board of Governors of the Federal Reserve System of the United States (or any successor). "Borrower": as defined in the preamble hereto. "Borrowing Date": any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder. "BSI": Broadcast Software International, Inc. "Business": as defined in Section 4.17(b). "Business Day": (a) for all purposes other than as covered by clause (b) below, a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close and (b) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (a) and which is also a day for trading by and between banks in Dollar deposits in the interbank eurodollar market. 9 5 "Capital Expenditures": for any period, with respect to any Person, the aggregate of all expenditures by such Person and its Subsidiaries for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which should be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries. "Capital Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing. "Cash Equivalents": (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an issuer rated at least A-2 by Standard & Poor's Ratings Services ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the 10 6 requirements of clause (b) of this definition; or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. "C/D Assessment Rate": for any day as applied to any Base Rate Loan, the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation (the "FDIC") classified as well-capitalized and within supervisory subgroup "B" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. ss. 327.4 (or any successor provision) to the FDIC (or any successor) for the FDIC's (or such successor's) insuring time deposits at offices of such institution in the United States. "C/D Reserve Percentage": for any day as applied to any Base Rate Loan, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board, for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board as in effect from time to time) in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more. "Closing Date": the date on which the conditions precedent set forth in Section 5.1 shall have been satisfied, which date shall be not later than August 31, 1999. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all Property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document. "Commitment": with respect to any Lender, each of the Tranche B Term Loan Commitment, the Tranche C Term Loan Commitment, the Seven-Year Revolving Credit Commitment and the 364-Day Revolving Credit Commitment of such Lender. "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 of the Code. "Compliance Certificate": a certificate duly executed by a Responsible Officer substantially in the form of Exhibit B. "Confidential Information Memorandum": the Confidential Information Memorandum dated July 1999 and furnished to the initial Lenders in connection with the syndication of the Facilities. "Consolidated Current Assets": at any date, all amounts (other than cash and Cash Equivalents) which would, in conformity with GAAP, be set forth opposite the caption 11 7 "total current assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries at such date. "Consolidated Current Liabilities": at any date, all amounts which would, in conformity with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries at such date, but excluding (a) the current portion of any Funded Debt of the Borrower and its Restricted Subsidiaries and (b) without duplication of clause (a) above, all Indebtedness consisting of Revolving Credit Loans to the extent otherwise included therein. "Consolidated EBITDA": for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary, unusual or non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, losses on sales of assets outside of the ordinary course of business) and (f) any other non-cash charges, provided that in the event that the Borrower or any Restricted Subsidiary makes any cash payment in respect of any such non-cash charge, such cash payment shall be deducted from Consolidated EBITDA in the period in which such payment is made, and plus Cost Savings for such period, and minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (a) interest income, (b) any extraordinary, unusual or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (c) any other non-cash income, all as determined on a consolidated basis; provided, that for purposes of calculating the Consolidated Fixed Charge Coverage Ratio, the Consolidated Interest Coverage Ratio, the Consolidated Leverage Ratio and the Consolidated Senior Debt Ratio, (i) the Consolidated EBITDA of any Person acquired by the Borrower or its Restricted Subsidiaries in a Permitted Acquisition during such period, and any Cost Savings in connection with such Permitted Acquisition, shall be included in the calculation of the Consolidated EBITDA of the Borrower and its Restricted Subsidiaries for such period on a pro forma basis for such period (assuming the consummation of such Permitted Acquisition and the incurrence or assumption of any Indebtedness in connection therewith occurred on the first day of such period) if the consolidated statements of income and of cash flows (which statement of cash flows need only be sufficient to reflect broadcast cash flows and EBITDA) of such acquired Person and its consolidated Subsidiaries for the period in respect of which Consolidated EBITDA is to be calculated, and, to the extent available, the related statement of stockholders' equity for such period and the consolidated balance sheet of such acquired Person and its consolidated Subsidiaries as at the end of the period 12 8 preceding the acquisition of such Person, (A) have been provided to the Administrative Agent and the Lenders prior to the date of such Acquisition and (B) either (x) have been reported on without a qualification arising out of the scope of the audit by independent certified public accountants of nationally recognized standing or (y) have been found acceptable by the Administrative Agent, it being understood that the acceptability of such financial statements would be determined based on the quality and method of presentation, and not the substance, of the financial information presented therein, and (ii) the Consolidated EBITDA of any Person Disposed of by the Borrower or its Restricted Subsidiaries, or attributable to the assets of the Borrower or any Restricted Subsidiary sold in any Asset Sale, during such period shall be excluded from the calculation of Consolidated EBITDA of the Borrower and its Restricted Subsidiaries for such period (assuming the consummation of such Disposition and the repayment of any Indebtedness in connection therewith occurred on the first day of such period). "Consolidated Fixed Charge Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA for such period less Maintenance CapEx for such period to (b) Consolidated Fixed Charges for such period. "Consolidated Fixed Charges": for any period, the sum (without duplication) of (a) Consolidated Interest Expense for such period, (b) provision for cash income taxes made by the Borrower or any of its Restricted Subsidiaries on a consolidated basis in respect of such period, (c) scheduled payments made during such period on account of principal of Indebtedness of the Borrower or any of its Restricted Subsidiaries (including scheduled principal payments in respect of the Term Loans and scheduled reductions of the Seven-Year Revolving Credit Commitments) and (d) total cash dividend payments made during such period in respect of Preferred Stock. "Consolidated Interest Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period. "Consolidated Interest Expense": for any period, total cash interest expense (including that attributable to Capital Lease Obligations) of the Borrower and its Restricted Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Restricted Subsidiaries (including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Hedge Agreements in respect of interest or exchange rates to the extent such net costs are allocable to such period in accordance with GAAP) minus total cash interest income (calculated as if the Eurodollar Rate in effect on the Calculation Date (as defined below) had been the applicable rate for the entire period) of the Borrower and its Restricted Subsidiaries for such period with respect to Excess Cash on Hand (after giving effect to any allocation of Excess Cash on Hand to be used for Permitted Acquisitions) on the Calculation Date. In the event that the Borrower or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any 13 9 Indebtedness or issues or redeems Preferred Stock subsequent to the commencement of the period for which the calculation of the Consolidated Fixed Charge Coverage Ratio and the Consolidated Interest Coverage Ratio is made (the "Calculation Date"), then Consolidated Interest Expense shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period. For purposes of this definition, whenever pro forma effect is to be given to a transaction, the pro forma calculations shall be made as determined in good faith by a Responsible Officer of the Borrower. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Hedge Agreements applicable to such Indebtedness). Interest that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Borrower may designate. "Consolidated Leverage Ratio": as at the last day of any period of four consecutive fiscal quarters of the Borrower, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA for such period. "Consolidated Net Income": for any period, the consolidated net income (or loss) of the Borrower and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Restricted Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Restricted Subsidiaries, (b) the income (or deficit) of any Person (other than a Restricted Subsidiary of the Borrower) in which the Borrower or any of its Restricted Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Restricted Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Restricted Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Restricted Subsidiary. "Consolidated Senior Debt": all Consolidated Total Debt other than Subordinated Debt. "Consolidated Senior Debt Ratio": as of the last day of any period of four consecutive fiscal quarters of the Borrower, the ratio of (a) Consolidated Senior Debt on such day to (b) Consolidated EBITDA for such period. 14 10 "Consolidated Total Debt": at any date, the aggregate principal amount of all Funded Debt of the Borrower and its Restricted Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP. "Consolidated Working Capital": at any date, the excess of Consolidated Current Assets on such date over Consolidated Current Liabilities on such date. "Continuing Directors": the directors of the Borrower on the Closing Date, after giving effect to the Acquisition and the other transactions contemplated hereby, and each other director, if, in each case, such other director's nomination for election to the board of directors of the Borrower is recommended by at least 66-2/3% of the then Continuing Directors of the Borrower. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its Property is bound. "Control Investment Affiliate": as to any Person, any other Person which (a) directly or indirectly, is in control of, is controlled by, or is under common control with, such Person and (b) is organized by such Person primarily for the purpose of making equity or debt investments in one or more companies. For purposes of this definition, "control" of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Conversion Term Loan Facility": as defined in the definition of "Facility" in this Section 1.1. "Conversion Term Loan Lenders": each Lender which is the holder of a Conversion Term Loan. "Conversion Term Loan Percentage": as to any Conversion Term Loan Lender at any time, the percentage which the aggregate principal amount of such Lender's Conversion Term Loans then outstanding constitutes of the aggregate principal amount of the Conversion Term Loans then outstanding. "Conversion Term Loans": as defined in Section 2.5. "Cost Savings": for any period, cost savings attributable to such period in conjunction with a Permitted Acquisition which result from employee terminations, facilities consolidations and closings, standardization of employee benefits and compensation practices, consolidation of property, casualty and other insurance coverage and policies, standardization of sales representation commissions and other contract rates, reductions in taxes other than income taxes, and other similar cost savings attributable to such Permitted Acquisition, which cost savings the Borrower reasonably believes in good 15 11 faith would have been achieved during such period as a result of such acquisition (regardless of whether such cost savings could then be reflected in pro forma financial statements under GAAP); provided that (a) such cost savings and cost savings measures were identified and such cost savings were quantified in a certificate of a Responsible Officer of the Borrower delivered to the Administrative Agent at the time of the consummation of such Permitted Acquisition (it being understood that such certificate may be amended by the Borrower from time to time thereafter by furnishing a revised certificate of a Responsible Officer as to the matters set forth in this clause (a)) and (b) with respect to each Permitted Acquisition completed prior to the 90th day preceding such date of determination, actions were commenced or initiated by the Borrower or its Restricted Subsidiaries within 90 days of such acquisition to effect the cost savings measures identified in such officer's certificate (regardless, however, of whether the corresponding cost savings were ultimately achieved). "Cumulus Wireless": Cumulus Wireless Services Inc., a Nevada corporation that is a Wholly Owned Subsidiary of Cumulus Broadcasting, Inc. and a Subsidiary Guarantor. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Disposition": with respect to any Property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof; the terms "Dispose" and "Disposed of" shall have correlative meanings. "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic Subsidiary": any Subsidiary of the Borrower organized under the laws of any jurisdiction within the United States of America. "ECF Percentage": 75%; provided, that the ECF Percentage shall be 50% in respect of any fiscal year if the Consolidated Leverage Ratio as of the last day of such fiscal year is less than 5.0 to 1.0. "Environmental Laws": any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. 16 12 "Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System. "Eurodollar Base Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate screen (or otherwise on such screen), the "Eurodollar Base Rate" for purposes of this definition shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Base Rate ---------------------------------------- 1.00 - Eurocurrency Reserve Requirements "Eurodollar Tranche": the collective reference to Eurodollar Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Excess Cash Flow": for any fiscal year of the Borrower, the excess, if any, of (a) the sum, without duplication, of (i) Consolidated Net Income for such fiscal year, (ii) an 17 13 amount equal to the amount of all non-cash charges (including depreciation and amortization) deducted in arriving at such Consolidated Net Income, (iii) decreases in Consolidated Working Capital for such fiscal year, (iv) an amount equal to the aggregate net non-cash loss on the Disposition of Property by the Borrower and its Restricted Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent deducted in arriving at such Consolidated Net Income and (v) the net increase during such fiscal year (if any) in deferred tax accounts of the Borrower over (b) the sum, without duplication, of (i) an amount equal to the amount of all non-cash credits included in arriving at such Consolidated Net Income, (ii) the aggregate amount actually paid by the Borrower and its Restricted Subsidiaries in cash during such fiscal year on account of Capital Expenditures (excluding the principal amount of Indebtedness incurred in connection with such expenditures and any such expenditures financed with the proceeds of any Reinvestment Deferred Amount), (iii) the aggregate amount of all prepayments of Revolving Credit Loans during such fiscal year to the extent accompanying permanent optional reductions of the Revolving Credit Commitments and all optional prepayments of the Term Loans and other Funded Debt during such fiscal year, (iv) the aggregate amount of all regularly scheduled principal payments of Funded Debt (including, without limitation, the Loans) of the Borrower and its Restricted Subsidiaries made during such fiscal year (other than in respect of any revolving credit facility to the extent there is not an equivalent permanent reduction in commitments thereunder), (v) increases in Consolidated Working Capital for such fiscal year, (vi) an amount equal to the aggregate net non-cash gain on the Disposition of Property by the Borrower and its Restricted Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent included in arriving at such Consolidated Net Income, (vii) the net decrease during such fiscal year (if any) in deferred tax accounts of the Borrower and (viii) the aggregate amount of all dividends paid in cash in respect of Exchangeable Preferred Stock during such fiscal year. "Excess Cash Flow Application Date": as defined in Section 2.11(c). "Excess Cash on Hand": at any date, an amount equal to cash and Cash Equivalents of the Borrower and its Restricted Subsidiaries on hand on such date minus $2,500,000. "Exchangeable Preferred Stock": the Borrower's Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009, as the terms for such Preferred Stock may be amended, supplemented or otherwise modified from time to time in accordance with Section 7.9. "Excluded Foreign Subsidiaries": Caribbean Communications Company Limited and any other Foreign Subsidiary in respect of which either (a) the pledge of all of the Capital Stock of such Subsidiary as Collateral or (b) the guaranteeing by such Subsidiary of the Obligations, would, in the good faith judgment of the Borrower, result in adverse tax consequences to the Borrower. 18 14 "Existing Credit Agreement": as defined in the recitals to this Agreement. "Existing Issuing Lender": Lehman Commercial Paper Inc., as issuer of the Existing Letters of Credit. "Existing Letters of Credit": the collective reference to the outstanding letters of credit listed on Schedule 1.1C issued for the account of the Borrower pursuant to the terms of the Existing Credit Agreement. "Facility": each of (a) the Tranche B Term Loan Commitments and the Tranche B Term Loans made thereunder (the "Tranche B Term Loan Facility"), (b) the Tranche C Term Loan Commitments and the Tranche C Term Loans made thereunder (the "Tranche C Term Loan Facility"), (c) the Seven-Year Revolving Credit Commitments and the Seven-Year Revolving Extensions of Credit made thereunder (the "Seven-Year Revolving Credit Facility"), (d) the 364-Day Revolving Credit Commitments and the 364-Day Revolving Credit Loans made thereunder (the "364-Day Revolving Credit Facility") and (e) the Conversion Term Loans (the "Conversion Term Loan Facility"). "FCC": the Federal Communications Commission (or any successor). "FCC Licenses": Licenses issued by the FCC to own and operate radio stations owned or acquired by the Borrower and its Subsidiaries. "Federal Funds Effective Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Reference Lender from three federal funds brokers of recognized standing selected by it. "Final Maturity Date": February 28, 2008. "Foreign Subsidiary": any Subsidiary of the Borrower that is not a Domestic Subsidiary. "Funded Debt": as to any Person, all Indebtedness (other than issued but undrawn Letters of Credit) of such Person that matures more than one year from the date of its creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including, without limitation, all current maturities and current sinking fund payments in respect of such Indebtedness 19 15 whether or not required to be paid within one year from the date of its creation and, in the case of the Borrower, Indebtedness in respect of the Loans; provided, that for purposes of calculating Funded Debt of the Borrower, the Preferred Stock and any obligations in respect of such Preferred Stock described in clause (g) or (k) of the definition of Indebtedness shall be excluded. "Funding Office": the office specified from time to time by the Administrative Agent as its funding office by notice to the Borrower and the Lenders. "GAAP": generally accepted accounting principles in the United States of America as in effect from time to time, except that for purposes of Section 7.1, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered pursuant to Section 4.1(a). "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government (including, without limitation, the National Association of Insurance Commissioners). "Guarantee and Collateral Agreement": the Amended and Restated Guarantee and Collateral Agreement to be executed and delivered by the Borrower and each Subsidiary Guarantor, substantially in the form of Exhibit A, as the same may be amended, supplemented or otherwise modified from time to time. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any Property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase Property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (x) an amount equal to the stated 20 16 or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (y) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Hedge Agreements": all interest rate swaps, caps or collar agreements or similar arrangements entered into by the Borrower providing for protection against fluctuations in interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies. "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of Property or services (other than current trade payables incurred in the ordinary course of such Person's business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to Property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such Property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under acceptance, letter of credit or similar facilities, (g) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on Property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, (j) for the purposes of Section 8(e) only, all obligations of such Person in respect of Hedge Agreements and (k) the liquidation value of any preferred Capital Stock of such Person or its Subsidiaries held by any Person other than such Person and its Wholly Owned Subsidiaries. "Indemnified Liabilities": as defined in Section 10.5. "Indemnitee": as defined in Section 10.5. "Indentures": the collective reference to the Senior Subordinated Note Indenture and the Subordinated Exchange Debenture Indenture. 21 17 "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. "Interest Payment Date": (a) as to any Base Rate Loan, the last day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day which is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period and (d) as to any Loan (other than any Revolving Credit Loan that is a Base Rate Loan), the date of any repayment or prepayment made in respect thereof. "Interest Period": as to any Eurodollar Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period that would otherwise extend beyond the 364-Day Revolving Credit Date, the Seven-Year Revolving Credit Termination Date or beyond the date final payment is due on the Conversion Term Loans, the Tranche B Term Loans or the Tranche C Term Loans, as the case may be, shall end on the 364-Day Revolving Credit Date, the Seven Year Revolving Credit Termination Date or such due date, as applicable; 22 18 (iii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iv) the Borrower shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan. "Investments": as defined in Section 7.8. "Issuing Lender": the Existing Issuing Lender and any other Seven-Year Revolving Credit Lender from time to time designated by the Borrower as an Issuing Lender with the approval of such Seven-Year Revolving Credit Lender and the Administrative Agent. "L/C Commitment": $25,000,000; provided, however, that the L/C Commitment shall be reduced in consecutive installments on each of the dates set forth in Section 2.3(b), commencing on December 31, 2001, each of which reductions shall be in an amount equal to the percentage set forth in Section 2.3(b) opposite such date multiplied by the L/C Commitment on the Closing Date; and provided, further, that the L/C Commitment shall not be reduced to an amount less than $15,000,000. "L/C Fee Payment Date": the last day of each March, June, September and December and the Seven-Year Revolving Credit Termination Date. "L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to Section 3.5. "L/C Participants": with respect to any Letter of Credit, the collective reference to all the Seven-Year Revolving Credit Lenders other than the Issuing Lender that issued such Letter of Credit. "Lehman Entity": any of Lehman Commercial Paper or any of its affiliates (including Syndicated Loan Funding Trust). "Lender Addendum": with respect to any initial Lender, a Lender Addendum, substantially in the form of Exhibit I to be executed and delivered by such Lender on the Closing Date as provided in Section 10.17. "Lenders": as defined in the preamble hereto. 23 19 "Letters of Credit": as defined in Section 3.1(a). "Licenses": as defined in Section 4.23. "License Subsidiary": the collective reference to Cumulus Licensing Corp., a Nevada corporation, and any other direct or indirect Subsidiary of the Borrower that holds FCC Licenses and engages in no other business. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by any Lender pursuant to this Agreement. "Loan Documents": this Agreement, the Security Documents, the Applications and the Notes. "Loan Parties": the Borrower and each Subsidiary of the Borrower which is a party to a Loan Document. "Local Marketing Agreement": any local marketing agreement entered into between the Borrower or any of its Restricted Subsidiaries and a seller of the stock or assets of a radio broadcast station. "Maintenance CapEx": for each fiscal year of the Borrower, the product of $30,000 multiplied by the number of radio broadcast stations owned by the Borrower and its Restricted Subsidiaries as at the last day of the applicable measurement period. "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 Seven-Year Revolving Credit Facility, prior to any termination of the Seven-Year Revolving Credit Commitments, the holders of more than 50% of the aggregate amount of the Total Seven-Year Revolving Credit Commitments and (b) in the case of the 364-Day Revolving Credit Facility, prior to any termination of the 364-Day Revolving Credit Commitments, the holders of more than 50% of the Total 364-Day Revolving Credit Commitments). "Majority Seven-Year Revolving Credit Facility Lenders": the Majority Facility Lenders in respect of the Seven-Year Revolving Credit Facility. 24 20 "Majority 364-Day Revolving Credit Facility Lenders": the Majority Facility Lenders in respect of the 364-Day Revolving Credit Facility. "Material Adverse Effect": a material adverse effect on (a) the business, assets, property, condition (financial or otherwise) or prospects of the Borrower and its Restricted Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Agents or the Lenders hereunder or thereunder. "Material Environmental Amount": an amount payable by the Borrower and/or its Restricted Subsidiaries in excess of $5,000,000 for remedial costs, compliance costs, compensatory damages, punitive damages, fines, penalties or any combination thereof. "Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, forces, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, radioactivity, polychlorinated biphenyls and urea-formaldehyde insulation. "Mortgaged Properties": the real properties listed on Schedule 1.1B, as to which the Administrative Agent for the benefit of the Lenders shall be granted a Lien pursuant to the Mortgages. "Mortgages": each of the mortgages and deeds of trust made by any Loan Party in favor of, or for the benefit of, the Administrative Agent for the benefit of the Lenders, substantially in the form of Exhibit D (with such changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or deed of trust is to be recorded), as the same may be amended, supplemented or otherwise modified from time to time. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds": (a) in connection with any Asset Sale or any Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such Asset Sale or Recovery Event, net of attorneys' fees, accountants' fees, investment banking fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset which is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any 25 21 tax sharing arrangements) and (b) in connection with any issuance or sale of equity securities or debt securities or instruments or the incurrence of loans, the cash proceeds received from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith. "Non-Excluded Taxes": as defined in Section 2.19(a). "Non-Recourse Debt": Indebtedness (a) as to which neither the Borrower nor any of its Restricted Subsidiaries (i) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness) or (ii) is directly or indirectly liable (as a guarantor or otherwise), (b) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Borrower or any of its Restricted Subsidiaries (other than the Obligations) to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity and (c) the explicit terms of which provide that there is no recourse against the Capital Stock or any of the assets of the Borrower or its Restricted Subsidiaries. "Non-U.S. Lender": as defined in Section 2.19(d). "Notes": the collective reference to any promissory note evidencing Loans. "Obligations": the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans, the Reimbursement Obligations and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender (or, in the case of Specified Hedge Agreements, any affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, arising under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit, any Specified Hedge Agreement entered into with any Lender or any affiliate of any Lender or any other document made, delivered or given by the Borrower in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise; provided, that (a) obligations of the Borrower under any Specified Hedge Agreement shall be secured and guaranteed pursuant to the Security Documents only to the extent that, and for so long as, the other Obligations are so secured and guaranteed and (b) any 26 22 release of Collateral or Subsidiary Guarantors effected in the manner permitted by this Agreement shall not require the consent of holders of obligations under Specified Hedge Agreements. "Other Taxes": any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. "Participant": as defined in Section 10.6(b). "Payment Office": the office specified from time to time by the Administrative Agent as its payment office by notice to the Borrower and the Lenders. "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor). "Permitted Acquisition": (a) the Acquisition and any other acquisition for which the Borrower has obtained the prior written approval of the Required Lenders and (b) any other acquisition made by the Borrower or any of its Restricted Subsidiaries so long as, with respect to any such other acquisition, the following conditions are satisfied: (i) no Default or Event of Default shall have occurred and be continuing or would result from such acquisition; (ii) after giving effect to such acquisition, the Borrower shall be in pro forma compliance with the financial covenants set forth in Section 7.1 (such pro forma calculation to be made on the basis of the financial statements most recently delivered by the Borrower to the Lenders prior to the date of such acquisition and on the basis of financial covenant levels applicable to the last day of the fiscal period covered by such financial statements); (iii) the target of such acquisition shall have no more than $1,000,000 of negative cash flow after giving effect to any Cost Savings; (iv) the target of such acquisition shall be the stock or assets of a radio station located in the United States of America or in the Caribbean; (v) the acquisition shall conform with the Borrower's stated management strategy to acquire more than one station in any market in which it acquires a station; (vi) the acquisition shall be (A) in an existing market of the Borrower, (B) in a market where the Borrower has entered, or intends to enter, into a contractual 27 23 arrangement to purchase the stock or assets of another radio station or (C) in a market where the target (or targets) of such acquisition has (or have) a minimum market share of 15% of the "12 plus" audience, as measured by Arbitron (or a comparable rating service acceptable to the Administrative Agent) in its most recent rating survey; (vii) the aggregate consideration for such acquisition shall not exceed $40,000,000; (viii) after giving effect to such acquisition, the aggregate Available Seven-Year Revolving Credit Commitments shall be at least $10,000,000; and (ix) an environmental audit satisfactory to the Administrative Agent shall have been performed with respect to the properties to be acquired. "Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Preferred Stock": the collective reference to (a) the Exchangeable Preferred Stock and (b) any additional non-voting cumulative preferred stock issued by the Borrower after the date hereof so long as any such preferred stock referred to in this clause (b), by its terms, (i) may not be purchased, redeemed, retired or otherwise acquired for value prior to the first anniversary of the Final Maturity Date and (ii) provides for the payment of dividends thereon solely in additional shares of non-voting cumulative preferred stock. "Pricing Grid": the pricing grid for Loans attached hereto as Annex A. "Pro Forma Balance Sheet": as defined in Section 4.1(c). "Projections": as defined in Section 6.2(c). "Properties": as defined in Section 4.17(a). "Property": any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock. 28 24 "Recovery Event": any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of the Borrower or any of its Restricted Subsidiaries. "Reference Lender": Bankers Trust Company or such other bank agreed upon by the Administrative Agent and the Borrower. "Register": as defined in Section 10.6(d). "Regulation H": Regulation H of the Board as in effect from time to time. "Regulation U": Regulation U of the Board as in effect from time to time. "Reimbursement Obligation": the obligation of the Borrower to reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit issued by such Issuing Lender. "Reinvestment Deferred Amount": with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by the Borrower or any of its Restricted Subsidiaries in connection therewith which are not applied to prepay the Term Loans or reduce the Revolving Credit Commitments pursuant to Section 2.11(a) or 2.11(b) as a result of the delivery of a Reinvestment Notice. "Reinvestment Event": any issuance of Capital Stock, incurrence of Indebtedness (excluding any Indebtedness incurred in accordance with Section 7.2 (other than Section 7.2(i)) as in effect on the date of this Agreement), Asset Sale or Recovery Event in respect of which the Borrower has delivered a Reinvestment Notice. "Reinvestment Notice": a written notice executed by a Responsible Officer stating that no Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through a Restricted Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of an issuance of Capital Stock, incurrence of Indebtedness, Asset Sale or Recovery Event, as the case may be, to acquire assets useful in its business. "Reinvestment Prepayment Amount": with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date to acquire assets useful in the Borrower's business. "Reinvestment Prepayment Date": with respect to any Reinvestment Event, the earlier of (a) the date occurring one year after such Reinvestment Event and (b) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, acquire assets useful in the Borrower's business with all or any portion of the relevant Reinvestment Deferred Amount. 29 25 "Related Fund": with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the 30-day notice period is waived under subsection.27,.28,.29,.30,.31,.32,.34 or.35 of PBGC Reg. ss. 4043. "Required Lenders": at any time, the holders of more than 50% of (a) until the Closing Date, the Commitments and (b) thereafter, the sum of (i) the aggregate unpaid principal amount of the Term Loans then outstanding, (ii) the Total Seven-Year Revolving Credit Commitments then in effect or, if the Seven-Year Revolving Credit Commitments have been terminated, the Total Seven-Year Revolving Extensions of Credit then outstanding and (iii) the Total 364-Day Revolving Credit Commitments then in effect or, if the 364-Day Revolving Credit Commitments have been terminated, the Total 364-Day Revolving Extensions of Credit then outstanding. "Required Prepayment Lenders": the Majority Facility Lenders in respect of each Facility. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "Responsible Officer": the chief executive officer, president or chief financial officer of the Borrower, but in any event, with respect to financial matters, the chief financial officer of the Borrower. "Restricted Payments": as defined in Section 7.6. "Restricted Subsidiary": each Subsidiary of the Borrower other than an Unrestricted Subsidiary. "Revolving Credit Commitment": as to any Lender, the collective reference to such Lender's Seven-Year Revolving Credit Commitment and/or its 364-Day Revolving Credit Commitment. 30 26 "Revolving Credit Lender": the collective reference to the Seven-Year Revolving Credit Lenders and the 364-Day Revolving Credit Lenders. "Revolving Credit Loans": the collective reference to the Seven-Year Revolving Credit Loans and the 364-Day Revolving Credit Loans. "Security Documents": the collective reference to the Guarantee and Collateral Agreement, the Mortgages and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any Property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document. "Sellers": the collective reference to each of the sellers party to any of the Acquisition Agreements. "Senior Subordinated Note Indenture": the Indenture, dated as of July 1, 1998, among the Borrower, the Subsidiaries listed therein and Firstar Bank of Minnesota, N.A., as trustee, in connection with the issuance of the Senior Subordinated Notes, together with all instruments and other agreements entered into by the Borrower in connection therewith, as the same may be amended, supplemented or otherwise modified from time to time in accordance with Section 7.9. "Senior Subordinated Notes": up to $160,000,000 in aggregate principal amount of the Borrower's 10-3/8% senior subordinated notes due 2008 issued pursuant to the Senior Subordinated Note Indenture. "Seven-Year Revolving Credit Commitment": as to any Lender, the obligation of such Lender, if any, to make Seven-Year Revolving Credit Loans and participate in Letters of Credit, in an aggregate principal and/or face amount not to exceed the amount set forth under the heading "Seven-Year Revolving Credit Commitment" opposite such Lender's name on Schedule 1 to the Lender Addendum delivered by such Lender, or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be reduced from time to time pursuant to Sections 2.3(b), 2.7, 2.9 and 2.11 or otherwise changed from time to time pursuant to the terms hereof. The original amount of the Total Seven-Year Revolving Credit Commitments is $50,000,000. "Seven-Year Revolving Credit Commitment Period": the period from and including the Closing Date to the Seven-Year Revolving Credit Termination Date. "Seven-Year Revolving Credit Facility": as defined in the definition of "Facility" in this Section 1.1. 31 27 "Seven-Year Revolving Credit Lender": each Lender which has a Seven-Year Revolving Credit Commitment or which is the holder of Seven-Year Revolving Extensions of Credit. "Seven-Year Revolving Credit Loans": as defined in Section 2.3(a). "Seven-Year Revolving Credit Percentage": as to any Seven-Year Revolving Credit Lender at any time, the percentage which such Lender's Seven-Year Revolving Credit Commitment then constitutes of the Total Seven-Year Revolving Credit Commitments (or, at any time after the Seven-Year Revolving Credit Commitments shall have expired or terminated, the percentage which the aggregate amount of such Lender's Seven-Year Extensions of Credit then outstanding constitutes of the amount of the Total Seven-Year Revolving Extensions of Credit then outstanding). "Seven-Year Revolving Credit Termination Date": September 30, 2006. "Seven-Year Revolving Extensions of Credit": as to any Seven-Year Revolving Credit Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Seven-Year Revolving Credit Loans made by such Lender then outstanding and (b) such Lender's Seven-Year Revolving Credit Percentage of the L/C Obligations then outstanding. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Solvent": when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Specified Change of Control": a "Change of Control" (or an event of similar designation), as defined in any Indenture. 32 28 "Specified Hedge Agreement": any Hedge Agreement (a) entered into by (i) the Borrower and (ii) any Lender or any affiliate thereof, as counterparty, and (b) that has been designated by such Lender and the Borrower, by notice to the Administrative Agent, as a Specified Hedge Agreement. The designation of any Hedge Agreement as a Specified Hedge Agreement shall not create in favor of the Lender or affiliate thereof that is a party thereto any rights in connection with the management or release of any Collateral or of the obligations of any Subsidiary Guarantor under the Guarantee and Collateral Agreement. "Subordinated Debt": the collective reference to (a) the Senior Subordinated Notes, (b) the Subordinated Exchange Debentures and (c) any other unsecured Indebtedness of the Borrower or any of its Restricted Subsidiaries so long as, with respect to any such Subordinated Debt referred to in this clause (c), (i) no part of the principal thereof shall be required to be paid (whether by way of mandatory sinking fund, mandatory redemption, mandatory prepayment or otherwise) prior to the Final Maturity Date, (ii) the payment of the principal of and interest thereon and on other obligations of the Borrower and its Restricted Subsidiaries in respect thereof shall be subordinated, on terms and conditions approved in writing by the Required Lenders, to the prior payment in full of the principal of and interest (including post-petition interest) on the Loans and all other obligations and liabilities of the Loan Parties to the Agents and the Lenders hereunder and under the other Loan Documents and (iii) all other terms and conditions thereof shall be satisfactory in form and substance to the Required Lenders (as evidenced by their prior written approval thereof). "Subordinated Exchange Debenture Indenture": the Indenture to be entered into by the Borrower and U.S. Bank Trust National Association, as trustee, in connection with the issuance of the Subordinated Exchange Debentures, together with all instruments and other agreements entered into by the Borrower in connection therewith, in the form delivered to the Administrative Agent pursuant to Section 5.1(d), as the same may be amended, supplemented or otherwise modified from time to time in accordance with Section 7.9. "Subordinated Exchange Debentures": up to $250,000,000 in aggregate principal amount of subordinated exchange debentures of the Borrower to be issued pursuant to the Subordinated Exchange Debenture Indenture upon the exchange, at the Borrower's option, of shares of Exchangeable Preferred Stock. "Subsidiary": as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly 33 29 through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiary Guarantor": each Subsidiary of the Borrower other than (a) any Excluded Foreign Subsidiary and (b) any Unrestricted Subsidiary. "Syndication Agent": as defined in the preamble hereto. "Syndication Date": the date on which the Syndication Agent completes the syndication of the Facilities and the entities selected in such syndication process become parties to this Agreement. "Term Loan Commitment": as to any Lender, the collective reference to such Lender's Tranche B Term Loan Commitment and/or its Tranche C Term Loan Commitment. "Term Loan Facilities": the collective reference to the Conversion Term Loan Facility, the Tranche B Term Loan Facility and the Tranche C Term Loan Facility. "Term Loan Lenders": the collective reference to the Conversion Term Loan Lenders, the Tranche B Term Loan Lenders and the Tranche C Term Loan Lenders. "Term Loans": the collective reference to the Conversion Term Loans, the Tranche B Term Loans and the Tranche C Term Loans. "364-Day Revolving Credit Commitment": as to any Lender, the obligation of such Lender, if any, to make 364-Day Revolving Credit Loans, in an aggregate principal amount not to exceed the amount set forth under the heading "364-Day Revolving Credit Commitment" opposite such Lender's name on Schedule 1 to the Lender Addendum delivered by such Lender, or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be reduced from time to time pursuant to Sections 2.3(b), 2.7, 2.9 and 2.11 or otherwise changed from time to time pursuant to the terms hereof. The original amount of the Total 364-Day Revolving Credit Commitments is $50,000,000. "364-Day Revolving Credit Commitment Period": the period from and including the Closing Date to the 364-Day Revolving Credit Termination Date. "364-Day Revolving Credit Facility": as defined in the definition of "Facility" in this Section 1.1. 34 30 "364-Day Revolving Credit Lender": each Lender which has a 364-Day Revolving Credit Commitment or which is the holder of 364-Day Revolving Credit Loans. "364-Day Revolving Credit Loans": as defined in Section 2.3(a). "364-Day Revolving Credit Percentage": as to any 364-Day Revolving Credit Lender at any time, the percentage which such Lender's 364-Day Revolving Credit Commitment then constitutes of the Total 364-Day Revolving Credit Commitments (or, at any time after the 364-Day Revolving Credit Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's 364-Day Revolving Credit Loans then outstanding constitutes of the amount of the Total 364-Day Revolving Extensions of Credit then outstanding). "364-Day Revolving Credit Termination Date": the date that is 364 days after the Closing Date. "Total Revolving Credit Commitments": at any time, the aggregate amount of the Revolving Credit Commitments then in effect. "Total Revolving Extensions of Credit": at any time, the aggregate amount of the the Total Seven-Year Revolving Extensions of Credit and the Total 364-Day Revolving Extensions of Credit. "Total Seven-Year Revolving Credit Commitments": at any time, the aggregate amount of the Seven-Year Revolving Credit Commitments then in effect. "Total Seven-Year Revolving Extensions of Credit": at any time, the aggregate amount of the Seven-Year Revolving Extensions of Credit of the Seven-Year Revolving Credit Lenders outstanding at such time. "Total 364-Day Revolving Credit Commitments": at any time, the aggregate amount of the 364-Day Revolving Credit Commitments then in effect. "Total 364-Day Revolving Extensions of Credit": at any time, the aggregate amount of the 364-Day Revolving Credit Loans of the 364-Day Revolving Credit Lenders outstanding at such time. "Tranche B Term Loan": as defined in Section 2.1. "Tranche B Term Loan Commitment": as to any Tranche B Term Loan Lender, the obligation of such Lender, if any, to make a Tranche B Term Loan to the Borrower hereunder in a principal amount not to exceed the amount set forth under the heading "Tranche B Term Loan Commitment" opposite such Lender's name on Schedule 1 to the Lender Addendum delivered by such Lender, or, as the case may be, in the Assignment 35 31 and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original aggregate amount of the Tranche B Term Loan Commitments is $75,000,000. "Tranche B Term Loan Facility": as defined in the definition of "Facility" in this Section 1.1. "Tranche B Term Loan Lender": each Lender that has a Tranche B Term Loan Commitment or is the holder of a Tranche B Term Loan. "Tranche B Term Loan Percentage": as to any Tranche B Term Loan Lender at any time, the percentage which such Lender's Tranche B Term Loan Commitment then constitutes of the aggregate Tranche B Term Loan Commitments (or, at any time after the Closing Date, the percentage which the aggregate principal amount of such Lender's Tranche B Term Loan then outstanding constitutes of the aggregate principal amount of the Tranche B Term Loans then outstanding). "Tranche C Term Loan": as defined in Section 2.1. "Tranche C Term Loan Commitment": as to any Tranche C Term Loan Lender, the obligation of such Lender, if any, to make a Tranche C Term Loan to the Borrower hereunder in a principal amount not to exceed the amount set forth under the heading "Tranche C Term Loan Commitment" opposite such Lender's name on Schedule 1 to the Lender Addendum delivered by such Lender, or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original aggregate amount of the Tranche C Term Loan Commitments is $50,000,000. "Tranche C Term Loan Facility": as defined in the definition of "Facility" in this Section 1.1. "Tranche C Term Loan Lender": each Lender that has a Tranche C Term Loan Commitment or is the holder of a Tranche C Term Loan. "Tranche C Term Loan Percentage": as to any Tranche C Term Loan Lender at any time, the percentage which such Lender's Tranche C Term Loan Commitment then constitutes of the aggregate Tranche C Term Loan Commitments (or, at any time after the Closing Date, the percentage which the aggregate principal amount of such Lender's Tranche C Term Loan then outstanding constitutes of the aggregate principal amount of the Tranche C Term Loans then outstanding). "Transferee": as defined in Section 10.15. "Type": as to any Loan, its nature as a Base Rate Loan or a Eurodollar Loan. 36 32 "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. "Unrestricted Subsidiary": each of Cumulus Internet Services Inc. and Cumulus Telecommunications Inc., each a Nevada corporation and a Subsidiary of the Borrower, provided that (a) neither such Subsidiary owns or holds any Lien on any property of the Borrower or any Restricted Subsidiary of the Borrower, (b) all the Indebtedness of each such Subsidiary shall consist of Non-Recourse Debt, (c) neither such Subsidiary is a party to any agreement, contract, arrangement or understanding with the Borrower or any Restricted Subsidiary not permitted by Section 7.10, (d) neither such Subsidiary, directly or indirectly, owns any Indebtedness or Capital Stock of, or has any Investments in, the Borrower or any Restricted Subsidiary of the Borrower and (e) each such Subsidiary is a Person with respect to which neither the Borrower nor any of its Restricted Subsidiaries has any direct or indirect obligation (i) to subscribe for additional Capital Stock, (ii) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results or (iii) otherwise to guarantee performance or payment. If, at any time, either of the foregoing Unrestricted Subsidiaries would fail to meet the foregoing requirements as an Unrestricted Subsidiary (or, in the case of Cumulus Internet Services Inc., is redesignated by the Borrower as a Restricted Subsidiary), such Subsidiary shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Agreement, any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of such date, any Liens on the property of such Subsidiary shall be deemed to be Liens on property of a Restricted Subsidiary, any Investments in such Subsidiary shall be deemed to be Investments in a Restricted Subsidiary as of such date (and, if such Indebtedness, Investments or Liens are not permitted to be incurred or to exist hereunder, the Borrower shall be in default hereunder) and the Borrower shall promptly comply with the requirements of Section 6.10(c) with respect to such Subsidiary. The Board of Directors of the Borrower may designate Cumulus Internet Services Inc. to be a Restricted Subsidiary, provided that, immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof and the Borrower shall be in pro forma compliance with the financial covenants set forth in Section 7.1 (such pro forma calculation to be made on the basis of the financial statements most recently delivered by the Borrower to the Lenders prior to the date of such designation and on the basis of financial covenant levels applicable to the last day of the fiscal period covered by such financial statements). "Utilization Percentage": for any fiscal quarter, (a) with respect to the Seven-Year Revolving Credit Facility, the percentage equivalent of a fraction (i) the numerator of which is the aggregate average daily amount of the Total Seven-Year Revolving Extensions of Credit during such period and (ii) the denominator of which is the aggregate average daily amount of the Total Seven-Year Revolving Credit Commitments during such period (it being understood that, with respect to any day after termination of 37 33 such Commitments, the Total Seven-Year Revolving Credit Commitments for such day shall be deemed to be the Total Seven-Year Revolving Credit Commitments in effect immediately preceding such termination), and (b) with respect to the 364-Day Revolving Credit Facility, the percentage equivalent of a fraction (i) the numerator of which is the aggregate average daily amount of the Total 364-Day Revolving Extensions of Credit during such period and (ii) the denominator of which is the aggregate average daily amount of the Total 364-Day-Year Revolving Credit Commitments during such period (it being understood that, with respect to any day after termination of such Commitments, the Total 364-Day Revolving Credit Commitments for such day shall be deemed to be the Total 364-Day Revolving Credit Commitments in effect immediately preceding such termination). "Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto. (b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, accounting terms relating to the Borrower and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 Term Loan Commitments. Subject to the terms and conditions hereof, (a) the Tranche B Term Loan Lenders severally agree to make term loans (each, a "Tranche B Term Loan") to the Borrower on the Closing Date in an amount for each Tranche B Term Loan Lender not to exceed the amount of the Tranche B Term Loan Commitment of such Lender and (b) the Tranche C Term Loan Lenders severally agree to make term loans (each, a "Tranche C Term Loan") to the Borrower on the Closing Date in an amount for each Tranche C Term Loan Lender not to exceed the amount of the Tranche C Term Loan Commitment of such Lender. The 38 34 obligations of the Term Loan Lenders to make Tranche B Term Loans and Tranche C Term Loans terminate following the Closing Date. 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 2.12. 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, one Business Day prior to the anticipated Closing Date), requesting that the Term Loan Lenders make the Tranche B Term Loans and Tranche C Term Loans on the Closing Date and specifying the amount and Type of such Term Loans to be borrowed. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Term Loan Lender thereof. Each Term Loan Lender will make the amount of its pro rata share of each borrowing of the 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 Closing Date 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 Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, (i) each Seven-Year Revolving Credit Lender severally agrees to make revolving credit loans ("Seven-Year Revolving Credit Loans") to the Borrower from time to time during the Seven-Year Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Lender's Seven-Year Revolving Credit Percentage of the L/C Obligations then outstanding, does not exceed the amount of such Lender's Seven-Year Revolving Credit Commitment and (ii) each 364-Day Revolving Credit Lender severally agrees to make revolving credit loans ("364-Day Revolving Credit Loans") to the Borrower from time to time during the 364-Day Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding which does not exceed the amount of such Lender's 364-Day Revolving Credit Commitment. During the Seven-Year Revolving Credit Commitment Period, the Borrower may use the Seven-Year Revolving Credit Commitments by borrowing, prepaying the Seven-Year Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. During the 364-Day Revolving Credit Commitment Period, the Borrower may use the 364-Day Revolving Credit Commitments by borrowing, prepaying the 364-Day Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. The Revolving Credit 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 2.4 and 2.12, provided that no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to (A) the Seven-Year Revolving Credit Termination Date in the case of Seven-Year Revolving Credit Loans or (B) the 364-Day Revolving Credit Termination Date in the case of 364-Day Revolving Credit Loans. (b) The Seven-Year Revolving Credit Commitment of each Seven-Year Revolving Credit Lender shall be reduced in 20 consecutive installments on the dates set forth 39 35 below, commencing on December 31, 2001, each of which reductions shall be in an amount equal to such Lender's Seven-Year Revolving Credit Percentage multiplied by an amount equal to (i) the percentage set forth below opposite such date multiplied by (ii) the aggregate initial principal amount of the Seven-Year Revolving Credit Commitments of the Seven-Year Revolving Credit Lenders on the Closing Date:
Installment Percentage ----------- ---------- December 31, 2001 1.25% March 31, 2002 1.25% June 30, 2002 1.25% September 30, 2002 1.25% December 31, 2002 1.25% March 31, 2003 1.25% June 30, 2003 1.25% September 30, 2003 1.25% December 31, 2003 2.50% March 31, 2004 2.50% June 30, 2004 2.50% September 30, 2004 2.50% December 31, 2004 5.00% March 31, 2005 5.00% June 30, 2005 5.00% September 30, 2005 5.00% December 31, 2005 15.00% March 31, 2006 15.00% June 30, 2006 15.00% September 30, 2006 15.00%
2.4 Procedure for Revolving Credit Borrowing. The Borrower may borrow under the Seven-Year Revolving Credit Commitments during the Seven-Year Revolving Credit Commitment Period, and may borrow under the 364-Day Revolving Credit Commitments during the 364-Day Revolving Credit Commitment Period, in each case on any Business Day, provided that 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 Revolving Credit Loans to be borrowed, (ii) whether such requested Loans are Seven-Year Revolving Credit Loans or 364-Day Revolving Credit Loans, (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. Each borrowing under the Revolving Credit Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, $1,000,000 or a whole multiple thereof (or, (A) with respect to Seven-Year Revolving Credit Loans, if the then aggregate Available Seven-Year Revolving Credit 40 36 Commitments are less than $1,000,000, such lesser amount and (B) with respect to 364-Day Revolving Credit Loans, if the then aggregate Available 364-Day Revolving Credit Commitments are less than $1,000,000, such lesser amount) 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 Seven-Year Revolving Credit Lender or 364-Day Revolving Credit Lender, as the case may be, thereof. Each such Revolving Credit Lender will make the amount of its pro rata share of each borrowing 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. 2.5 Conversion Term Loans. Subject to the terms and conditions hereof, the Borrower may, on the 364-Day Revolving Credit Termination Date, convert all or any portion of outstanding 364-Day Revolving Credit Loans of any 364-Day Revolving Credit Lender to term loans ("Conversion Term Loans"); provided that if the Borrower elects to convert any portion of the 364-Day Revolving Credit Loans of any such Lender on the 364-Day Revolving Credit Termination Date, the Borrower must elect to convert the same percentage portion of the outstanding 364-Day Revolving Credit Loans of each other 364-Day Revolving Credit Lender. Such conversion shall be requested by the Borrower by irrevocable notice to the Administrative Agent (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 364-Day Revolving Credit Termination Date, if all or any part of the Conversion Term Loans are to be Eurodollar Loans, or (b) one Business Day prior to the 364-Day Revolving Credit Termination Date, otherwise), specifying (i) the amount of 364-Day Revolving Credit Loans to be converted to Conversion Term Loans, (ii) the initial Type of the Conversion Term Loans and (iii) in the case of Conversion Term Loans that are to be initially Eurodollar Loans, the amount thereof and the length of the initial Interest Period therefor. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each 364-Day Revolving Credit Lender thereof. On the 364-Day Revolving Credit Termination Date, outstanding 364-Day Revolving Credit Loans shall be converted to Conversion Term Loans in accordance with such notice. The 364-Day Revolving Credit Loans of each 364-Day Revolving Credit Lender, to the extent not converted to Conversion Term Loans on the 364-Day Revolving Credit Termination Date, shall mature and be payable in full on such date. 2.6 Repayment of Term Loans. (a) The Tranche B Term Loan of each Tranche B Lender shall mature in 24 consecutive quarterly installments, commencing on December 31, 2001, each of which shall be in an amount equal to such Lender's Tranche B Term Loan Percentage multiplied by the amount set forth below opposite such installment:
Installment Principal Amount ----------- ---------------- December 31, 2001 $187,500 March 31, 2002 $187,500
41 37
Installment Principal Amount ----------- ---------------- June 30, 2002 $187,500 September 30, 2002 $187,500 December 31, 2002 $187,500 March 31, 2003 $187,500 June 30, 2003 $187,500 September 30, 2003 $187,500 December 31, 2003 $187,500 March 31, 2004 $187,500 June 30, 2004 $187,500 September 30, 2004 $187,500 December 31, 2004 $187,500 March 31, 2005 $187,500 June 30, 2005 $187,500 September 30, 2005 $187,500 December 31, 2005 $187,500 March 31, 2006 $187,500 June 30, 2006 $187,500 September 30, 2006 $187,500 December 31, 2006 $17,812,500 March 31, 2007 $17,812,500 June 30, 2007 $17,812,500 September 30, 2007 $17,812,500
(b) The Tranche C Term Loan of each Tranche C Lender shall mature in two consecutive quarterly installments, commencing on November 30, 2007, each of which shall be in an amount equal to such Lender's Tranche C Term Loan Percentage multiplied by the amount set forth below opposite such installment:
Installment Principal Amount ----------- ---------------- November 30, 2007 $25,000,000 February 28, 2008 $25,000,000
(c) The Conversion Term Loan of each Conversion Term Loan Lender shall mature in 20 consecutive quarterly installments on the dates set forth below, commencing on December 31, 2001, each of which shall be in an amount equal to such Lender's Conversion Term Loan Percentage multiplied by an amount equal to (i) the percentage set forth below opposite such date multiplied by (ii) the aggregate principal amount of 364-Day Revolving Credit Loans converted into Conversion Term Loans on the 364-Day Revolving Credit Termination Date: 42 38
Installment Percentage ----------- ---------- December 31, 2001 2.50% March 31, 2002 2.50% June 30, 2002 2.50% September 30, 2002 2.50% December 31, 2002 2.50% March 31, 2003 2.50% June 30, 2003 2.50% September 30, 2003 2.50% December 31, 2003 3.75% March 31, 2004 3.75% June 30, 2004 3.75% September 30, 2004 3.75% December 31, 2004 3.75% March 31, 2005 3.75% June 30, 2005 3.75% September 30, 2005 3.75% December 31, 2005 12.50% March 31, 2006 12.50% June 30, 2006 12.50% September 30, 2006 12.50%
2.7 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of the appropriate Revolving Credit Lender or Term Loan Lender, as the case may be, (i) the then unpaid principal amount of each Seven-Year Revolving Credit Loan of such Revolving Credit Lender in installments according to the amortization schedule set forth in Section 2.3(b), in accordance with Section 2.11(e) and on the Seven-Year Revolving Credit Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 8), (ii) the then unpaid principal amount of each 364-Day Revolving Credit Loan of such Revolving Credit Lender in accordance with Section 2.11(f) and on the 364-Day Revolving Credit Termination Date (or such earlier date on which the Loans become due and payable pursuant to Section 8), to the extent such 364-Day Revolving Credit Loans are not converted to Conversion Term Loans on such date, and (iii) the principal amount of each Term Loan of such Term Loan Lender in installments according to the applicable amortization schedules set forth in Section 2.6 (or on such earlier date on which the Loans become due and payable pursuant to Section 8). The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 2.14. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of 43 39 such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (c) The Administrative Agent, on behalf of the Borrower, shall maintain the Register pursuant to Section 10.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan made hereunder and any Note evidencing such Loan, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (d) The entries made in the Register and the accounts of each Lender maintained pursuant to Section 2.7(c) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement. (e) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a promissory note of the Borrower evidencing any Term Loans or Revolving Credit Loans, as the case may be, of such Lender, substantially in the forms of Exhibit G-1 or G-2, respectively, with appropriate insertions as to date and principal amount. 2.8 Commitment Fees, etc. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Seven-Year Revolving Credit Lender a commitment fee for the period from and including the Closing Date to the last day of the Seven-Year Revolving Credit Commitment Period, computed at a rate per annum, determined in accordance with the pricing grid attached hereto as Annex B, based upon the Utilization Percentage of the Seven-Year Revolving Credit Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the Seven-Year Revolving Credit Termination Date, commencing on the first of such dates to occur after the date hereof. (b) The Borrower agrees to pay to the Administrative Agent for the account of each 364-Day Revolving Credit Lender a commitment fee for the period from and including the Closing Date to the last day of the 364-Day Revolving Credit Commitment Period, computed at a rate per annum, determined in accordance with the pricing grid attached hereto as Annex B, based upon the Utilization Percentage of the 364-Day Revolving Credit Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the 364-Day Revolving Credit Termination Date, commencing on the first of such dates to occur after the date hereof. 44 40 (c) The Borrower agrees to pay to the Syndication Agent the fees in the amounts and on the dates previously agreed to in writing by the Borrower and the Syndication Agent. (d) The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates from time to time agreed to in writing by the Borrower and the Administrative Agent. 2.9 Termination or Reduction of Commitments. (a) The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Seven-Year Revolving Credit Commitments or, from time to time, to reduce the aggregate amount of the Seven-Year Revolving Credit Commitments; provided that no such termination or reduction of Seven-Year Revolving Credit Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Seven-Year Revolving Credit Loans made on the effective date thereof, the Total Seven-Year Revolving Extensions of Credit would exceed the Total Seven-Year Revolving Credit Commitments. Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the Seven-Year Revolving Credit Commitments then in effect. On the date of each reduction of the Seven-Year Revolving Credit Commitments, there shall be an equal reduction in the amount of the 364-Day Revolving Credit Commitments. (b) The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the 364-Day Revolving Credit Commitments or, from time to time, to reduce the aggregate amount of the 364-Day Revolving Credit Commitments; provided that no such termination or reduction of 364-Day Revolving Credit Commitments shall be permitted if, after giving effect thereto and to any prepayments of the 364-Day Revolving Credit Loans made on the effective date thereof, the Total 364-Day Revolving Credit Extensions of Credit would exceed the Total 364-Day Revolving Credit Commitments. Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the 364-Day Revolving Credit Commitments then in effect. On the date of each reduction of the 364-Day Revolving Credit Commitments, there shall be an equal reduction in the amount of the Seven-Year Revolving Credit Commitments. 2.10 Optional Prepayments. The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon irrevocable notice delivered to the Administrative Agent at least three Business Days prior thereto in the case of Eurodollar Loans and at least one Business Day prior thereto in the case of Base Rate Loans, which notice shall specify the date and amount of prepayment and whether the prepayment is of Eurodollar Loans or Base Rate Loans; provided, that if a Eurodollar Loan is prepaid on any day other than the last day of the Interest Period applicable thereto, the Borrower shall also pay any amounts owing pursuant to Section 2.20. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with (except in the case of Revolving Credit Loans which are Base Rate Loans) accrued interest to such date on the amount prepaid. Partial prepayments of Term Loans and Revolving Credit 45 41 Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof. Optional prepayments of the Term Loans shall be applied to the Conversion Term Loans, the Tranche B Term Loans and the Tranche C Term Loans ratably and to the installments thereof ratably in accordance with the then outstanding amounts thereof and may not be reborrowed. 2.11 Mandatory Prepayments and Commitment Reductions. (a) Unless the Required Prepayment Lenders shall otherwise agree, if any Capital Stock shall be issued, or Indebtedness incurred, by the Borrower or any of its Restricted Subsidiaries (excluding any Indebtedness incurred in accordance with Section 7.2 (other than Section 7.2(i)) as in effect on the date of this Agreement), then, unless a Reinvestment Notice shall be delivered in respect thereof, an amount equal to 100% of the Net Cash Proceeds thereof shall be applied on the date of such issuance or incurrence toward the prepayment of the Term Loans and the reduction of the Revolving Credit Commitments as set forth in Section 2.11(d); provided, that, notwithstanding the foregoing, on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied toward the prepayment of the Term Loans and the reduction of the Revolving Credit Commitments as set forth in Section 2.11(d). (b) Unless the Required Prepayment Lenders shall otherwise agree, if on any date the Borrower or any of its Restricted Subsidiaries shall receive Net Cash Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment Notice shall be delivered in respect thereof, such Net Cash Proceeds shall be applied on such date toward the prepayment of the Term Loans and the reduction of the Revolving Credit Commitments as set forth in Section 2.11(d); provided, that, notwithstanding the foregoing, (i) the aggregate Reinvestment Deferred Amount in respect of Asset Sales and Recovery Events less any amounts expended prior to the most recent Reinvestment Prepayment Date to acquire assets useful in the Borrower's business shall not exceed (A) during the period from the Closing Date through and including December 31, 2000, $40,000,000 at any one time and (B) on and after January 1, 2001, $20,000,000 at any one time and (ii) on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied toward the prepayment of the Term Loans and the reduction of the Revolving Credit Commitments as set forth in Section 2.11(d). (c) Unless the Required Prepayment Lenders shall otherwise agree, if, for any fiscal year of the Borrower commencing with the fiscal year ending December 31, 2000, there shall be Excess Cash Flow, the Borrower shall, on the relevant Excess Cash Flow Application Date, apply the ECF Percentage of such Excess Cash Flow toward the prepayment of the Term Loans and the reduction of the Revolving Credit Commitments as set forth in Section 2.11(d). Each such prepayment and commitment reduction shall be made on a date (an "Excess Cash Flow Application Date") no later than five days after the earlier of (i) the date on which the financial statements of the Borrower referred to in Section 6.1(a), for the fiscal year with respect to which such prepayment is made, are required to be delivered to the Lenders and (ii) the date such financial statements are actually delivered. 46 42 (d) Amounts to be applied in connection with prepayments and Commitment reductions made pursuant to paragraphs (a), (b) and (c) of this Section shall be applied, first, to the prepayment of the Term Loans, in accordance with paragraph (g) below, and, second, to reduce permanently and ratably the Revolving Credit Commitments. Any such reduction of the Revolving Credit Commitments shall be accompanied by prepayment of the Revolving Credit Loans to the extent, if any, that the Total 364-Day Revolving Extensions of Credit exceed the amount of the Total 364-Day Revolving Credit Commitments as so reduced, and to the extent, if any, that the Total Seven-Year Revolving Extensions of Credit exceed the amount of the Total Seven-Year Revolving Credit Commitments as so reduced, provided that if the aggregate principal amount of Seven-Year Revolving Credit Loans then outstanding is less than the amount of such excess (because L/C Obligations constitute a portion thereof), the Borrower shall, to the extent of the balance of such excess, replace outstanding Letters of Credit and/or deposit an amount in cash in a cash collateral account established with the Administrative Agent for the benefit of the Lenders on terms and conditions satisfactory to the Administrative Agent. (e) If, at any time during the Seven-Year Revolving Credit Commitment Period, the Total Seven-Year Revolving Extensions of Credit exceeds the amount of the Total Seven-Year Revolving Credit Commitments then in effect, the Borrower shall, without notice or demand, immediately repay the Seven-Year Revolving Credit Loans in an aggregate principal amount equal to such excess, provided that if the aggregate principal amount of Seven-Year Revolving Credit Loans then outstanding is less than the amount of such excess (because L/C Obligations constitute a portion thereof), the Borrower shall, to the extent of the balance of such excess, replace outstanding Letters of Credit and/or deposit an amount in cash in a cash collateral account established with the Administrative Agent for the benefit of the Lenders on terms and conditions satisfactory to the Administrative Agent. (f) If, at any time during the 364-Day Revolving Credit Commitment Period, the Total 364-Day Revolving Extensions of Credit exceeds the amount of the Total 364-Day Revolving Credit Commitments then in effect, the Borrower shall, without notice or demand, immediately repay the 364-Day Revolving Credit Loans in an aggregate principal amount equal to such excess. (g) The amount of each principal prepayment of the Term Loans shall be applied to the Conversion Term Loans, the Tranche B Term Loans and the Tranche C Term Loans ratably and to reduce the then remaining installments of the Term Loans pro rata based upon the then remaining principal amounts thereof. Amounts prepaid on account of the Term Loans may not be reborrowed. The amount of each reduction of the Seven-Year Revolving Credit Commitments shall be applied to reduce the then remaining scheduled Seven-Year Revolving Credit Commitment reductions pro rata based upon the scheduled amounts of such reductions. (h) The application of any prepayment pursuant to this Section shall be made first to Base Rate Loans and second to Eurodollar Loans. Each prepayment of the Loans under this Section (except in the case of Revolving Credit Loans that are Base Rate Loans) shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid. 47 43 2.12 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to Base Rate Loans by giving the Administrative Agent at least two Business Days' prior irrevocable notice of such election, provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election (which notice shall specify the length of the initial Interest Period therefor), provided that no Base Rate Loan under a particular Facility may be converted into a Eurodollar Loan (i) when any Event of Default has occurred and is continuing and the Administrative Agent has, or the Majority Facility Lenders in respect of such Facility have, determined in its or their sole discretion not to permit such conversions or (ii) after the date that is one month prior to the final scheduled termination or maturity date of such Facility. Upon receipt of any such notice, the Administrative Agent shall promptly notify each relevant Lender thereof. (b) The Borrower may elect to continue any Eurodollar Loan as such upon the expiration of the then current Interest Period with respect thereto by giving irrevocable notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurodollar Loan under a particular Facility may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has, or the Majority Facility Lenders in respect of such Facility have, determined in its or their sole discretion not to permit such continuations or (ii) after the date that is one month prior to the final scheduled termination or maturity date of such Facility, and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period. Upon receipt of any such notice, the Administrative Agent shall promptly notify each relevant Lender thereof. 2.13 Minimum Amounts and Maximum Number of Eurodollar Tranches. Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions, continuations and optional prepayments of Eurodollar Loans and all selections of Interest Periods shall be in such amounts and be made pursuant to such elections so that, (a) after giving effect thereto, the aggregate principal amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof and (b) no more than ten Eurodollar Tranches shall be outstanding at any one time. 2.14 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin. 48 44 (c) (i) If all or a portion of the principal amount of any Loan or Reimbursement Obligation shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement Obligations (whether or not overdue) shall bear interest at a rate per annum which is equal to (x) in the case of the Loans, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2% or (y) in the case of Reimbursement Obligations, the rate applicable to Base Rate Loans under the Seven-Year Revolving Credit Facility plus 2%, and (ii) if all or a portion of any interest payable on any Loan or Reimbursement Obligation or any commitment fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then applicable to Base Rate Loans under the relevant Facility plus 2% (or, in the case of any such other amounts that do not relate to a particular Facility, the rate then applicable to Base Rate Loans under the Seven-Year Revolving Credit Facility plus 2%), in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full (after as well as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand. 2.15 Computation of Interest and Fees. (a) Interest, fees and commissions payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to Base Rate Loans the rate of interest on which is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.14(a). 2.16 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the 49 45 relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Majority Facility Lenders in respect of the relevant Facility that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans under the relevant Facility requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans under the relevant Facility that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as Base Rate Loans and (z) any outstanding Eurodollar Loans under the relevant Facility shall be converted, on the last day of the then current Interest Period with respect thereto, to Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans under the relevant Facility shall be made or continued as such, nor shall the Borrower have the right to convert Loans under the relevant Facility to Eurodollar Loans. 2.17 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any commitment fee or Letter of Credit fee, and any reduction of the Commitments of the Lenders, shall be made pro rata according to the respective Tranche B Loan Percentages, Tranche C Term Loan Percentages, Conversion Term Loan Percentages, Seven-Year Revolving Credit Percentages or 364-Day 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 the fees payable hereunder and the 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 Term Loans shall be allocated among the Term Loan Facilities pro rata according to the respective outstanding principal amounts of Term Loans under such Facilities. Each payment (including each prepayment) of the Term Loans outstanding under any Term Loan Facility shall be allocated among the Term Loan Lenders holding such Term Loans pro rata based on the principal amount of such Term Loans held by such Term Loan Lenders, and shall be applied to the installments of such Term Loans pro rata based on the remaining outstanding principal amount of such installments. (c) Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Credit Loans shall be allocated among the Revolving Credit Facilities pro rata according to the respective Total Revolving Credit Commitments in respect thereof. Each payment (including each prepayment) of the Revolving Credit Loans 50 46 outstanding under any Revolving Credit Facility shall be allocated among the Revolving Credit Lenders holding such Revolving Credit Loans pro rata according to the respective outstanding principal amounts of the Revolving Credit Loans then held by such Revolving Credit Lenders, and, in the case of the Seven-Year Revolving Credit Facility, shall be applied to the scheduled reductions of such Revolving Credit Loans pro rata based on the remaining outstanding principal amount of such reductions. Each payment in respect of Reimbursement Obligations in respect of any Letter of Credit shall be made to the Issuing Lender that issued such Letters of Credit. (d) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Payment Office, in Dollars and in immediately available funds. Any payment made by the Borrower after 12:00 Noon, New York City time, on any Business Day shall be deemed to have been made on the next following Business Day. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension. (e) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days after such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans under the relevant Facility, on demand, from the Borrower. (f) Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent 51 47 may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower. 2.18 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.19 and changes in the rate of tax on the overall net income of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations 52 48 hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction. (c) A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The obligations of the Borrower pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (d) Each Lender agrees that, in calculating the amounts payable by the Borrower pursuant to this Section, it will calculate such amounts on a basis no less favorable to the Borrower than the basis of calculation used by such Lender for other borrowers deemed by such Lender to be similarly situated. 2.19 Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on any Agent or any Lender as a result of a present or former connection between such Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") or any Other Taxes are required to be withheld from any amounts payable to any Agent or any Lender hereunder, the amounts so payable to such Agent or such Lender shall be increased to the extent necessary to yield to such Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender's failure to comply with the requirements of paragraph (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph (a). 53 49 (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for the account of the relevant Agent or Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agents and the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent or any Lender as a result of any such failure. The agreements in this Section 2.19 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (d) Each Lender (or Transferee) that is not a citizen or resident of the United States of America, a corporation, partnership or other entity created or organized in or under the laws of the United States of America (or any jurisdiction thereof), or any estate or trust that is subject to federal income taxation regardless of the source of its income (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest" a statement substantially in the form of Exhibit H and a Form W-8, or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver. (e) A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender is legally entitled to complete, 54 50 execute and deliver such documentation and in such Lender's reasonable judgment such completion, execution or submission would not materially prejudice the legal position of such Lender. 2.20 Indemnity. The Borrower agrees to indemnify each Lender for, and to hold each Lender harmless from, any loss or expense which such Lender sustains or incurs as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment or conversion of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. A certificate as to any amounts payable pursuant to this Section submitted to the Borrower by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.21 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be cancelled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.20. 2.22 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.18 or 2.19(a) with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to 55 51 suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of any Borrower or the rights of any Lender pursuant to Section 2.18 or 2.19(a). SECTION 3. LETTERS OF CREDIT 3.1 L/C Commitment. (a) Prior to the Closing Date, the Existing Issuing Lender has issued the Existing Letters of Credit which, from and after the Closing Date, shall constitute Letters of Credit hereunder. Subject to the terms and conditions hereof, each Issuing Lender (other than the Existing Issuing Lender), in reliance on the agreements of the other Revolving Credit Lenders set forth in Section 3.4(a), agrees to issue letters of credit (the letters of credit issued on and after the Closing Date pursuant to this Section 3, together with the Existing Letters of Credit, collectively, the "Letters of Credit") for the account of the Borrower on any Business Day during the Revolving Credit Commitment Period in such form as may be approved from time to time by such Issuing Lender; provided that no Issuing Lender shall have any obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the Available Seven-Year Revolving Credit Commitments would be less than zero. Each Letter of Credit shall (i) be denominated in Dollars and (ii) expire no later than the earlier of (x) the first anniversary of its date of issuance and (y) the date which is five Business Days prior to the Seven-Year Revolving Credit Termination Date, provided that any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (y) above). (b) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York. (c) No Issuing Lender shall at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause such Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law. 3.2 Procedure for Issuance of Letter of Credit. The Borrower may from time to time request that an Issuing Lender issue a Letter of Credit by delivering to such Issuing Lender at its address for notices specified herein an Application therefor, completed to the satisfaction of such Issuing Lender, and such other certificates, documents and other papers and information as such Issuing Lender may request. Upon receipt of any Application, an Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall any Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by such Issuing Lender and the Borrower. Each Issuing Lender shall 56 52 furnish a copy of such Letter of Credit to the Borrower promptly following the issuance thereof. Each Issuing Lender shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Lenders, notice of the issuance of each Letter of Credit issued by it (including the amount thereof). 3.3 Fees and Other Charges. (a) The Borrower will pay a fee on the aggregate drawable amount of all outstanding Letters of Credit at a per annum rate equal to the Applicable Margin then in effect with respect to Eurodollar Loans under the Seven-Year Revolving Credit Facility, shared ratably among the Seven-Year Revolving Credit Lenders in accordance with their respective Seven-Year Revolving Credit Percentages and payable quarterly in arrears on each L/C Fee Payment Date after the issuance date. In addition, the Borrower shall pay to the relevant Issuing Lender for such Issuing Lender's own account a fronting fee on the aggregate drawable amount of all outstanding Letters of Credit issued by such Issuing Lender at a rate per annum agreed upon by the Borrower and such Issuing Lender, payable quarterly in arrears on each L/C Fee Payment Date after the Issuance Date. (b) In addition to the foregoing fees, the Borrower shall pay or reimburse each Issuing Lender for such normal and customary costs and expenses as are incurred or charged by such Issuing Lender in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of Credit. 3.4 L/C Participations. (a) Each Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce each Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from each Issuing Lender on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Seven-Year Revolving Credit Percentage in the obligations and rights of each Issuing Lender under each Letter of Credit issued by such Issuing Lender and the amount of each draft paid by such Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with each Issuing Lender that, if a draft is paid under any Letter of Credit issued by such Issuing Lender for which such Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to such Issuing Lender upon demand at such Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's Seven-Year Revolving Credit Percentage of the amount of such draft, or any part thereof, which is not so reimbursed. (b) If any amount required to be paid by any L/C Participant to an Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by such Issuing Lender under any Letter of Credit is paid to such Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to such Issuing Lender on demand an amount equal to the product of such amount, times the daily average Federal Funds Effective Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to such Issuing Lender times a fraction the numerator of which is the number of days that elapse during such period and the 57 53 denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to Section 3.4(a) is not made available to such Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, such Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans under the Seven-Year Revolving Credit Facility. A certificate of such Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error. (c) Whenever, at any time after an Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with Section 3.4(a), such Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by such Issuing Lender), or any payment of interest on account thereof, such Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by such Issuing Lender shall be required to be returned by it, such L/C Participant shall return to such Issuing Lender the portion thereof previously distributed by such Issuing Lender to such L/C Participant. 3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to reimburse each Issuing Lender on each date on which such Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by such Issuing Lender for the amount of (a) such draft so paid and (b) any taxes, fees, charges or other costs or expenses incurred by such Issuing Lender in connection with such payment. Each such payment shall be made to such Issuing Lender at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this Section from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full at the rate set forth in (i) until the second Business Day following the date of the applicable drawing, Section 2.14(b) and (ii) thereafter, Section 2.14(c). Each drawing under any Letter of Credit shall (unless an event of the type described in clause (i) or (ii) of Section 8(f) shall have occurred and be continuing with respect to the Borrower, in which case the procedures specified in Section 3.4 for funding by L/C Participants shall apply) constitute a request by the Borrower to the Administrative Agent for a borrowing pursuant to Section 2.4 of Seven-Year Revolving Credit Loans that are Base Rate Loans in the amount of such drawing. The Borrowing Date with respect to such borrowing shall be the date of such drawing. 3.6 Obligations Absolute. The Borrower's obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against any Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with each Issuing Lender that such Lender shall not be responsible for, and the Borrower's Reimbursement Obligations under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such 58 54 documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. No Issuing Lender shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Lender. The Borrower agrees that any action taken or omitted by an Issuing Lender under or in connection with any Letter of Credit issued by it or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of such Issuing Lender to the Borrower. 3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the relevant Issuing Lender shall promptly notify the Borrower of the date and amount thereof. The responsibility of the relevant Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit issued by such Issuing Lender, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with such Letter of Credit. 3.8 Applications. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply. SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Agents and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to each Agent and each Lender that: 4.1 Financial Condition. (a) The audited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at December 31, 1997 and December 31, 1998, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from Pricewaterhouse Coopers LLP present fairly in all material respects the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at June 30, 1999, and the related unaudited consolidated statements of income and of cash flows for the six-month period ended on such date, present fairly in all material respects the consolidated 59 55 financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the six-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as disclosed therein). (b) As of the date hereof, the Borrower and its Subsidiaries do not have any Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including, without limitation, any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives that could, in the aggregate, reasonably be expected to have a Material Adverse Effect. During the period from December 31, 1998, to and including the date hereof there has been no Disposition by the Borrower or any of its Subsidiaries of any material part of its business or Property. (c) The unaudited pro forma consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at June 30, 1999 (including the notes thereto) (the "Pro Forma Balance Sheet"), copies of which have heretofore been furnished to each Lender, has been prepared giving effect (as if such events had occurred on such date) to (i) the consummation of the Acquisition, (ii) the Loans made on the Closing Date and the use of proceeds thereof and (iii) the payment of fees and expenses in connection with the foregoing. The Pro Forma Balance Sheet has been prepared based on the best information available to the Borrower as of the date of delivery thereof, and presents fairly on a pro forma basis the estimated financial position of the Borrower and its consolidated Subsidiaries as at June 30, 1999, assuming that the events specified in the preceding sentence had actually occurred at such date. 4.2 No Change. Since December 31, 1998 there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. 4.3 Corporate Existence; Compliance with Law. Each of the Borrower and each of its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its Property, to lease the Property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of Property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 4.4 Corporate Power; Authorization; Enforceable Obligations. Each Loan Party has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to borrow hereunder and to consummate the Acquisition. Each Loan Party has taken all necessary corporate action to authorize the execution, delivery and performance of the Loan Documents to which it is a party, to consummate the Acquisition and, in the case of the Borrower, to authorize the borrowings on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to 60 56 or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the Acquisition or the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except (i) consents, authorizations, filings and notices described in Schedule 4.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect and (ii) the filings referred to in Section 4.19. Each Loan Document has been duly executed and delivered on behalf of each Loan Party party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 4.5 No Legal Bar. The execution, delivery and performance of this Agreement and the other Loan Documents, the consummation of the Acquisition, the issuance of Letters of Credit, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of the Borrower or any of its Restricted Subsidiaries (after taking into account all consents and waivers obtained by the Borrower prior to the date hereof) and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents). Management of the Borrower has no reason to believe that any Requirement of Law or Contractual Obligation applicable to the Borrower or any of its Subsidiaries could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 4.6 No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of their respective properties or revenues (a) with respect to any of the Loan Documents, the Acquisition or any of the other transactions contemplated hereby or thereby, or (b) which could reasonably be expected to have a Material Adverse Effect. 4.7 No Default. Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 4.8 Ownership of Property; Liens. Each of the Borrower and each of its Restricted Subsidiaries has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other Property, and none of such Property is subject to any Lien except as permitted by Section 7.3. 4.9 Intellectual Property. The Borrower and each of its Restricted Subsidiaries owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as 61 57 currently conducted. No material claim has been asserted and is pending by any Person against, or affecting the property or assets of, the Borrower or any of its Restricted Subsidiaries challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does the Borrower know of any valid basis for any such claim. The use of Intellectual Property by the Borrower and its Restricted Subsidiaries does not infringe on the rights of any Person in any material respect. 4.10 Taxes. Each of the Borrower and each of its Restricted Subsidiaries has filed or caused to be filed all Federal, state and other material tax returns which are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its Property and all other taxes, fees or other charges imposed on it or any of its Property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Restricted Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 4.11 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose which violates the provisions of the Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1 referred to in Regulation U. 4.12 Labor Matters. There are no strikes or other labor disputes against the Borrower or any of its Subsidiaries pending or, to the knowledge of the Borrower, threatened that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. Hours worked by and payments made to employees of the Borrower and its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. All payments due from the Borrower or any of its Subsidiaries on account of employee health and welfare insurance that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of the Borrower or the relevant Subsidiary. 4.13 ERISA. Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan that could reasonably be expected to affect the Borrower or any Restricted Subsidiary, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code, except where the failure to so comply could not reasonably be expected to affect the Borrower or any Restricted Subsidiary. No termination of a Single Employer Plan has occurred that could reasonably be expected to affect the Borrower or any Restricted Subsidiary, and no Lien on assets of the Borrower or any Restricted Subsidiary in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan with respect to which the Borrower or 62 58 any Restricted Subsidiary may have any liability or obligation (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan which has resulted or could reasonably be expected to result in a material liability of the Borrower or any Restricted Subsidiary under ERISA, and neither the Borrower nor any Commonly Controlled Entity (other than an Unrestricted Subsidiary) would become subject to any material liability under ERISA if the Borrower or any Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. 4.14 Investment Company Act; Other Regulations. No Loan Party is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Requirement of Law (other than Regulation X of the Board) which limits its ability to incur Indebtedness. 4.15 Subsidiaries. The Subsidiaries listed on Schedule 4.15 constitute all the Subsidiaries of the Borrower at the date hereof. 4.16 Use of Proceeds. The proceeds of the Tranche B Term Loans and Tranche C Term Loans shall be used to finance the payment by the Borrower of outstanding Indebtedness under the Existing Credit Agreement, to pay related fees and expenses and for general corporate purposes, including Permitted Acquisitions. The proceeds of the Revolving Credit Loans, the Conversion Term Loans and the Letters of Credit shall be used to finance Permitted Acquisitions, working capital needs, Capital Expenditures and other general corporate purposes of the Borrower and its Restricted Subsidiaries in the ordinary course of business. 4.17 Environmental Matters. Other than as could not, individually or in the aggregate, reasonably be expected to result in the payment of a Material Environmental Amount: (a) the facilities and properties owned, leased or operated by the Borrower or any of its Subsidiaries (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances which (i) constitute or constituted a violation of, or (ii) could give rise to liability under, any Environmental Law; (b) the Properties and all operations at the Properties are in material compliance, and have in the last five years been in material compliance, with all applicable Environmental 63 59 Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by the Borrower or any of its Subsidiaries (the "Business"); neither the Borrower nor any of its Subsidiaries has contractually assumed any liability of any other Person under Environmental Laws; (c) neither the Borrower nor any of its Subsidiaries has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened; (d) materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law; (e) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any Subsidiary is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business; and (f) there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws. 4.18 Accuracy of Information, etc. The statements and information contained in this Agreement, any other Loan Document, the Confidential Information Memorandum and any other document, certificate or statement furnished to the Agents or the Lenders or any of them, by or on behalf of any Loan Party for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, taken as a whole, did not contain as of the date such statements, information, documents and certificate were so furnished, any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein not misleading. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Agents and the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. As of the date hereof, the representations and warranties of the Borrower and, to the Borrower's 64 60 knowledge, of the Sellers contained in the Acquisition Agreements are true and correct in all material respects. There is no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents, in the Confidential Information Memorandum or in any other documents, certificates and statements furnished to the Agents and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents. 4.19 Security Documents. (a) Subject to the limitations contained in Section 6.11(b), the Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Guarantee and Collateral Agreement, when stock certificates representing such Pledged Stock are delivered to the Administrative Agent, and in the case of the other Collateral described in the Guarantee and Collateral Agreement, when financing statements in appropriate form are filed in the offices specified on Schedule 4.19(a), and, in each case, subject to the limitations contained in Section 6.11(b), the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person. (b) Each of the Mortgages is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable Lien on the Mortgaged Properties described therein and proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 4.19(b) (in the case of the Mortgages in existence on the date hereof and the Mortgages to be executed and delivered within 30 days after the Closing Date pursuant to Sections 5.1(a)(iii) and 6.13) or in the recording office designated by the Borrower (in the case of any Mortgage to be executed and delivered pursuant to Section 6.10(b)), each such Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Mortgaged Properties described therein and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to any other Person (other than Persons holding Liens or other encumbrances or rights permitted by the relevant Mortgage). 4.20 Solvency. Each Loan Party is, and after giving effect to the Acquisitions and the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith will be and will continue to be, Solvent. 4.21 Senior Debt; Credit Facility. (a) The Obligations constitute "Senior Debt" of the Borrower under and as defined in the Senior Subordinated Note Indenture, and the obligations of each Subsidiary Guarantor under the Guarantee and Collateral Agreement constitute "Guarantor Senior Debt" of such Subsidiary Guarantor under and as defined in such Indenture, and (b) upon execution of the Subordinated Exchange Debenture Indenture, the Obligations will constitute "Exchange Debenture Senior Debt" of the Borrower under and as 65 61 defined in such Indenture, and the obligations of each Subsidiary Guarantor under the Guarantee and Collateral Agreement will constitute "Guarantor Senior Debt" of such Subsidiary Guarantor under and as defined in such Indenture. The Conversion Term Loan Facility, the Tranche C Term Loan Facility, the Seven-Year Revolving Credit Facility and the 364-Day Revolving Credit Facility constitute the "Credit Facility" under and as defined in each of the Indentures. The Borrower hereby designates the obligations of the Borrower and the Subsidiary Guarantors in respect of the Tranche B Term Loan Facility as "Designated Senior Debt" under and as defined in the Senior Subordinated Note Indenture and as "Designated Exchange Debenture Senior Debt" under and as defined in the Subordinated Exchange Debenture Indenture. 4.22 Regulation H. No Mortgage encumbers improved real property which is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968. 4.23 Licenses; Permits; etc. Schedule 4.23 accurately and completely lists as of the date hereof all material authorizations, licenses and permits of any public or governmental regulatory body granted or assigned to the Borrower or any of its Restricted Subsidiaries, including but not limited to all material authorizations, licenses and permits for the operation of any radio station, and all material FCC Licenses held by other entities with which the Borrower or its Restricted Subsidiaries have entered into Local Marketing Agreements giving the Borrower or its Restricted Subsidiaries, subject to the restrictions contained in the Communications Act of 1934, as amended, and the rules and regulations of the FCC, the right to provide programming for, and conduct certain operations of, the radio stations with respect to which such FCC Licenses were granted, and the same constitute the only material authorizations, licenses and permits of any public or governmental regulatory body which are required or necessary for the conduct of the respective businesses of the Borrower and its Restricted Subsidiaries as now conducted or proposed to be conducted (such authorizations, licenses and permits, together with any extensions or renewals thereof, being herein sometimes referred to collectively as the "Licenses"). Except with respect to FCC Licenses relating to stations subject to a Local Marketing Agreement (as identified in Schedule 4.23), all of such Licenses listed in Schedule 4.23 are issued in the name of, or are (or, in the case of those Licenses relating to the operation of radio stations subject to a Local Marketing Agreement but which are to be acquired in the Acquisition, upon the consummation of the Acquisition, will be) validly assigned to, the Borrower or the License Subsidiary and are (or, in the case of those FCC Licenses relating to the operation of radio stations subject to a Local Marketing Agreement and which are to be acquired in the Acquisition, to the best of the Borrower's knowledge are) validly issued and in full force and effect, and the Borrower has (or, in the case of those FCC Licenses relating to the operation of radio stations subject to a Local Marketing Agreement and which are to be acquired in the Acquisition, to the best of the Borrower's knowledge each holder of such Licenses has) (i) fulfilled and performed in all material respects all of its obligations with respect thereto and (ii) full power and authority to operate thereunder. Except with respect to those stations identified in Schedule 4.23 as being subject to Local Marketing Agreements, the transfer from the Sellers to the Borrower of control of the radio stations being acquired in the Acquisition and 66 62 the assets related thereto and the transfer of the related FCC Licenses from the Sellers to the Borrower have been approved by the FCC or will have been approved at or prior to the consummation of such Acquisition, it being understood that, (A) to the extent such FCC approval has not been obtained, and except as set forth on Schedule 4.23, management of the Borrower has no reason to believe such FCC approval will not be obtained at or prior to the consummation of such Acquisition and (B) in the event such FCC approval for an Acquisition is not obtained, such Acquisition will not be consummated. Complete and correct copies of such orders of the FCC have been delivered to the Administrative Agent. All FCC Licenses are held by the License Subsidiary. 4.24 FCC Compliance, etc. The Borrower and each of its Subsidiaries are (and, after giving effect to the Acquisition, each will be) in compliance with all rules, regulations and administrative orders of the FCC applicable to the Borrower or any of its Subsidiaries or the operation of its Properties, except where the failure to be in such compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 4.25 Year 2000 Matters. Any reprogramming required to permit the proper functioning, in and following the year 2000, of (a) the Borrower's computer systems and (b) equipment containing embedded microchips (including systems and equipment supplied by others or with which Borrower's systems interface) and the testing of all such systems and equipment, as so reprogrammed, will be completed by November 30, 1999. The cost to the Borrower of such reprogramming and testing and of the reasonably foreseeable consequences of year 2000 to the Borrower (including, without limitation, reprogramming errors and the failure of others' systems or equipment) will not result in a Default or a Material Adverse Effect. Except for such of the reprogramming referred to in the preceding sentence as may be necessary, the computer and management information systems of the Borrower and its Subsidiaries are and, with ordinary course upgrading and maintenance, will continue to be, sufficient to permit the Borrower to conduct its business without Material Adverse Effect. SECTION 5. CONDITIONS PRECEDENT 5.1 Conditions to Initial Extension of Credit. The agreement of each Lender to make the initial extension of credit requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such extension of credit on the Closing Date, of the following conditions precedent: (a) Loan Documents. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Borrower, (ii) the Guarantee and Collateral Agreement, executed and delivered by a duly authorized officer of the Borrower and each Subsidiary Guarantor, (iii) subject to Section 6.13, a Mortgage covering each of the Mortgaged Properties, executed and delivered by a duly authorized officer of each party thereto and (iv) for the account of each relevant Lender, Notes 67 63 conforming to the requirements hereof and executed and delivered by a duly authorized officer of the Borrower. (b) Pro Forma Balance Sheet; Financial Statements. The Lenders shall have received (i) the Pro Forma Balance Sheet, (ii) the audited consolidated financial statements of the Borrower and its consolidated Subsidiaries for the two most recent fiscal years ended prior to the Closing Date and (iii) the unaudited interim consolidated financial statements of the Borrower and its consolidated Subsidiaries for each quarterly period ended subsequent to the date of the latest applicable financial statements delivered pursuant to clause (ii) of this paragraph as to which such financial statements are available; and such Pro Forma Balance Sheet and financial statements shall be satisfactory to the Lenders. (c) Approvals. All governmental and third party approvals (including landlords' and other consents) necessary or, in the discretion of the Administrative Agent, advisable in connection with the continuing operations of the Borrower and its Subsidiaries and the transactions contemplated hereby shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the financing contemplated hereby. (d) Related Agreements. The Administrative Agent shall have received (in a form reasonably satisfactory to the Administrative Agent), with a copy for each Lender, true and correct copies, certified as to authenticity by the Borrower, of the Senior Subordinated Note Indenture, the form of Subordinated Exchange Debenture Indenture, each Acquisition Agreement and such other documents or instruments as may be reasonably requested by the Administrative Agent, including, without limitation, a copy of any debt instrument, security agreement or other material contract to which the Loan Parties may be a party. (e) Repayment of Existing Credit Agreement. The Administrative Agent shall have received evidence satisfactory to it that (i) simultaneously with the making of the initial Loans on the Closing Date, the Borrower will have repaid in full all amounts outstanding under the Existing Credit Agreement and (ii) all letters of credit (other than any Existing Letter of Credit) and other contingent obligations in connection with the Existing Credit Agreement shall have been terminated. (f) Fees. The Lenders, the Administrative Agent and the Arranger shall have received all fees required to be paid, and all expenses for which invoices have been presented, on or before the Closing Date; all such amounts will be paid with the proceeds of the Loans made on the Closing Date and will be reflected in the funding instructions given by the Borrower to the Administrative Agent on or prior to the Closing Date. (g) Business Plan. The Lenders shall have received a satisfactory business plan for fiscal years 1999 through 2008 and a satisfactory written analysis of the business and 68 64 prospects of the Borrower and its Restricted Subsidiaries for the period from the Closing Date through the Final Maturity Date. (h) Lien Searches. The Administrative Agent shall have received the results of a recent lien search in each of the jurisdictions where assets of the Loan Parties are located, and such search shall reveal no liens on any of the assets of the Borrower or its Subsidiaries except for liens permitted by Section 7.3. (i) Environmental Audit. The Lenders shall be satisfied with the environmental affairs of the Borrower and its Subsidiaries. (j) Closing Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each Loan Party, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments. (k) Legal Opinions. The Administrative Agent shall have received the following executed legal opinions: (i) the legal opinion of Godfrey & Kahn, S.C., counsel to the Borrower and its Subsidiaries, substantially in the form of Exhibit F; (ii) the legal opinion of Paul, Hastings, Janofsky & Walker, LLP, special FCC counsel to the Borrower and its Restricted Subsidiaries; and (iii) the legal opinion of local counsel in each of Illinois and Nevada and of such other special and local counsel as may be required by the Administrative Agent. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require. (l) Pledged Stock; Stock Power; Pledged Notes. The Administrative Agent shall have received (i) the certificates representing the shares of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note pledged to the Administrative Agent pursuant to the Guarantee and Collateral Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank satisfactory to the Administrative Agent) by the pledgor thereof. (m) Filings, Registrations and Recordings. Except as provided in Section 6.13, each document (including, without limitation, any Uniform Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of 69 65 the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 7.3), shall have been filed, registered or recorded or shall have been delivered to the Administrative Agent in proper form for filing, registration or recordation. (n) Title Insurance; Flood Insurance. Subject to Section 6.13: (i) if requested by the Administrative Agent with respect to any Mortgaged Property for which the survey available to the Borrower is dated as of a date more than two years prior to the date on which the related Mortgage is being executed, the Administrative Agent shall have received, and the title insurance company issuing the policy referred to in clause (ii) below (the "Title Insurance Company") shall have received, maps or plats of an as-built survey of the sites of the Mortgaged Properties certified to the Administrative Agent and the Title Insurance Company in a manner satisfactory to them, dated a date satisfactory to the Administrative Agent and the Title Insurance Company by an independent professional licensed land surveyor satisfactory to the Administrative Agent and the Title Insurance Company, which maps or plats and the surveys on which they are based shall be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1992, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: (A) the locations on such sites of all the buildings, structures and other improvements and the established building setback lines; (B) the lines of streets abutting the sites and width thereof; (C) all access and other easements appurtenant to the sites; (D) all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the site, whether recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor; (E) any encroachments on any adjoining property by the building structures and improvements on the sites; (F) if the site is described as being on a filed map, a legend relating the survey to said map; and (G) the flood zone designations, if any, in which the Mortgaged Properties are located. (ii) The Administrative Agent shall have received, in respect of each Mortgaged Property, a mortgagee's title insurance policy (or policies) or marked up unconditional binder for such insurance. Each such policy shall (A) be in an amount satisfactory to the Administrative Agent; (B) be issued at ordinary rates; (C) insure that the Mortgage insured thereby creates a valid first Lien on such Mortgaged Property free and clear of all defects and encumbrances, except as disclosed therein; (D) name the Administrative Agent for the benefit of the Lenders as the insured thereunder; (E) be in the form of ALTA Loan Policy - 1970 (Amended 10/17/70 and 10/17/84) (or equivalent policies); (F) contain such endorsements and affirmative coverage as the Administrative Agent may reasonably request; and (G) be issued by title companies satisfactory to the Administrative Agent (including any such title companies acting as co-insurers or reinsurers, at the option of the Administrative Agent). The Administrative Agent shall 70 66 have received evidence satisfactory to it that all premiums in respect of each such policy, all charges for mortgage recording tax, and all related expenses, if any, have been paid. (iii) If requested by the Administrative Agent, the Administrative Agent shall have received (A) a policy of flood insurance which (1) covers any parcel of improved real property which is encumbered by any Mortgage, (2) is written in an amount not less than the outstanding principal amount of the Indebtedness secured by such Mortgage which is reasonably allocable to such real property or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less, and (3) has a term ending not later than the maturity of the Indebtedness secured by such Mortgage and (B) confirmation that the Borrower has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board. (iv) The Administrative Agent shall have received a copy of all recorded documents referred to, or listed as exceptions to title in, the title policy or policies referred to in clause (ii) above and a copy of all other material documents affecting the Mortgaged Properties. (o) Landlord Consents. Subject to Section 6.13, if requested by the Administrative Agent, the Administrative Agent shall have received any consents or estoppels reasonably deemed necessary or advisable by the Administrative Agent in connection with the Mortgages, each of the foregoing in form and substance reasonably satisfactory to the Administrative Agent. (p) Insurance. The Administrative Agent shall have received insurance certificates satisfying the requirements of Section 5.3 of the Guarantee and Collateral Agreement. (q) Leverage Ratio. As of the Closing Date, the Borrower's Leverage Ratio (as defined in each of the Indentures, and determined in accordance with Section 4.9 of each of the Indentures), after giving effect to the incurrence of Indebtedness hereunder and under the other Loan Documents and the use of proceeds thereof, shall be less than 7.0 to 1.0. The Lenders shall have received a certificate from the Borrower containing all information and calculations necessary for determining compliance with the foregoing requirement. 5.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit requested to be made by it on any date (including, without limitation, its initial extension of credit) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct on and as of such date as if made on and as of such date, except those representations and 71 67 warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties were true and correct as of such earlier date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date. Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the conditions contained in this Section 5.2 have been satisfied. 6. SECTION AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to any Lender or any Agent hereunder, the Borrower shall and shall cause each of its Subsidiaries to: 6.1 Financial Statements. Furnish to the Administrative Agent for delivery to each Lender (and the Administrative Agent agrees to make and deliver such copies): (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated and consolidating balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated and consolidating statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by Price Waterhouse or other independent certified public accountants of nationally recognized standing; and (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated and consolidating balance sheets of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated and consolidating statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 72 68 6.2ab Certificates; Other Information. Furnish to the Administrative Agent for delivery to each Lender (and the Administrative Agent agrees to make and deliver such copies), or, in the case of clause (h), to the relevant Lender: (a) concurrently with the delivery of the financial statements referred to in Section 6.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of any financial statements pursuant to Section 6.1, (i) a certificate of a Responsible Officer stating that, to the best of each such Responsible Officer's knowledge, each Loan Party during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) in the case of quarterly or annual financial statements, (x) a Compliance Certificate containing all information necessary for determining compliance by the Borrower and its Restricted Subsidiaries with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be, and (y) to the extent not previously disclosed to the Administrative Agent, a listing of any county or state within the United States where any Loan Party keeps inventory or equipment and of any Intellectual Property acquired by any Loan Party since the date of the most recent list delivered pursuant to this clause (y) (or, in the case of the first such list so delivered, since the Closing Date); (c) as soon as available, and in any event no later than 45 days after the end of each fiscal year of the Borrower, a detailed consolidated budget for the following fiscal year (including projected consolidated and consolidating balance sheets of the Borrower and its Restricted Subsidiaries as of the end of the following fiscal year, and the related consolidated and consolidating statements of projected cash flow, projected changes in financial position and projected income), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such fiscal year (collectively, the "Projections"), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on reasonable estimates, information and assumptions and that such Responsible Officer has no reason to believe that such Projections are incorrect or misleading in any material respect; (d) within 45 days after the end of each fiscal quarter of the Borrower, a narrative discussion and analysis of the financial condition and results of operations of the Borrower and its Restricted Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared 73 69 to the portion of the Projections covering such periods and to the comparable periods of the previous year; (e) no later than ten Business Days prior to the effectiveness thereof, copies of substantially final drafts of the Subordinated Exchange Debenture Indenture and, no later than five Business Days prior to the effectiveness thereof, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification with respect to any Indenture or any Acquisition Agreement; (f) within five days after the same are sent, copies of all financial statements and reports which the Borrower sends to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports which the Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; (g)ab promptly upon receipt thereof, a copy of any other report or "management letter" submitted by independent certified public accountants to the Borrower or any of its Subsidiaries in connection with any annual, interim or special audit of the Borrower or any of its Subsidiaries; and (h) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all obligations of whatever nature that are material to the Borrower and its Restricted Subsidiaries, taken as a whole, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Restricted Subsidiaries, as the case may be. 6.4 Conduct of Business and Maintenance of Existence, etc. (i) Preserve, renew and keep in full force and effect its corporate existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 7.4 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.5 Maintenance of Property; Insurance. With respect to each of the Borrower and the Restricted Subsidiaries, keep all Property useful and necessary in its business in good working order and condition, taken as a whole, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its Property in at least such amounts and against at least such risks (but including in any event public liability, product 74 70 liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business. 6.6 Inspection of Property; Books and Records; Discussions. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records upon reasonable advance notice to the Borrower (which notice shall not be required to be given during the continuance of a Default or an Event of Default) and at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants. 6.7 Notices. Promptly give to the Administrative Agent for delivery to each Lender (and the Administrative Agent agrees to make and so deliver such copies) notice of: (a)ab the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is $1,000,000 or more and not covered by insurance or in which injunctive or similar relief is sought; (d) the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan; and (e) any development or event which has had or could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower or the relevant Subsidiary proposes to take with respect thereto. 75 71 6.8 Environmental Laws. (a) Comply in all respects with, and, to the extent it has the capability to do so, ensure compliance in all respects by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all respects with and maintain, and, to the extent it has the capability to do so, ensure that all tenants and subtenants obtain and comply in all respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws. For purposes of this Section 6.8(a), noncompliance by the Borrower or any Subsidiary with any applicable Environmental Law or environmental permit shall be deemed not to constitute a breach of this covenant provided that, upon learning of any actual or suspected noncompliance, the Borrower shall promptly undertake all reasonable efforts to achieve compliance, and provided further that, in any case, such noncompliance, and any other noncompliance with Environmental Law, individually or in the aggregate could not reasonably be expected to result in the payment of a Material Environmental Amount. (b) Promptly comply with all orders and directives of all Governmental Authorities regarding Environmental Laws, other than such orders and directives as to which appropriate proceedings have been timely and properly taken in good faith, and provided that the pendency of any and all such proceedings could not reasonably be expected to have a Material Adverse Effect. 6.9 Interest Rate Protection. In the case of the Borrower, within 45 days after the Closing Date, enter into Hedge Agreements to the extent necessary to provide that at least 50% of the aggregate principal amount of the Borrower's Funded Debt as of such date is subject to either a fixed interest rate or interest rate protection for a period of not less than three years, which Hedge Agreements shall have terms and conditions satisfactory to the Administrative Agent. 6.10 Additional Collateral, etc. (a) With respect to any Property acquired after the Closing Date by the Borrower or any of its Restricted Subsidiaries (other than (x) any Property of an Excluded Foreign Subsidiary, (y) any Property described in paragraph (b), (c) or (d) below and (z) any Property subject to a Lien expressly permitted by Section 7.3(g) or 7.3(h)) as to which the Administrative Agent, for the benefit of the Lenders, does not have a perfected Lien, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, subject to the limitations contained in Section 6.11(b), a security interest in such Property and (ii) take all actions necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, subject to the limitations contained in Section 6.11(b), a perfected first priority security interest in such Property, including without limitation, the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent. (b) To the extent requested by the Agents, with respect to any fee interest in any real property having a fair market value in excess of $500,000 acquired after the Closing Date by 76 72 the Borrower or any of its Restricted Subsidiaries (other than (x) any such real property of an Excluded Foreign Subsidiary and (y) any such real property subject to a Lien expressly permitted by Section 7.3(g) or 7.3(h)), promptly (i) execute and deliver a first priority Mortgage in favor of the Administrative Agent, for the benefit of the Lenders, covering such real property, (ii) if requested by the Administrative Agent, provide the Lenders with (x) title and extended coverage insurance covering such real property in an amount at least equal to the purchase price of such real estate (or such other amount as shall be reasonably specified by the Administrative Agent) as well as a current ALTA survey thereof, together with a surveyor's certificate and (y) any consents or estoppels reasonably deemed necessary or advisable by the Administrative Agent in connection with such mortgage or deed of trust, each of the foregoing in form and substance reasonably satisfactory to the Administrative Agent and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. (c) With respect to any new Subsidiary (other than an Excluded Foreign Subsidiary) created or acquired after the Closing Date (which, for the purposes of this paragraph, shall include any existing Subsidiary that ceases to be an Excluded Foreign Subsidiary or an Unrestricted Subsidiary), by the Borrower or any of its Restricted Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary which is owned by the Borrower or any of its Restricted Subsidiaries, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Borrower or such Restricted Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement and (B) to take such actions necessary or advisable to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary, including, without limitation, the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent, and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent; provided that the Borrower and its Restricted Subsidiaries shall not be required to comply with the requirements of this Section 6.10(c) if the Administrative Agent, in its sole discretion, determines that the cost of such compliance is excessive in relation to the value of the collateral security to be afforded thereby. (d) With respect to any new Excluded Foreign Subsidiary created or acquired after the Closing Date by the Borrower or any of its Restricted Subsidiaries (other than any Excluded Foreign Subsidiaries), promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the 77 73 Administrative Agent deems necessary or advisable in order to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary which is owned by the Borrower or any of its Restricted Subsidiaries (other than any Excluded Foreign Subsidiaries) (provided that in no event shall more than 65% of the total outstanding Capital Stock of any such new Excluded Foreign Subsidiary be required to be so pledged), (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Borrower or such Restricted Subsidiary, as the case may be, and take such other action as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the Lien of the Administrative Agent thereon, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. 6.11 Further Assurances. (a) From time to time hereafter, execute and deliver, such additional instruments, certificates or documents, and take all such actions, as the Administrative Agent may reasonably request, for the purposes of implementing or effectuating the provisions of this Agreement and the other Loan Documents, or of more fully perfecting or renewing the rights of the Administrative Agent and the Lenders with respect to the Collateral (or with respect to any additions thereto or replacements or proceeds thereof or with respect to any other property or assets hereafter acquired by the Borrower or any Restricted Subsidiary which may be deemed to be part of the Collateral) pursuant hereto or thereto. Upon the exercise by the Administrative Agent or any Lender of any power, right, privilege or remedy pursuant to this Agreement or the other Loan Documents which requires any consent, approval, recording, qualification or authorization of any Governmental Authority, including, without limitation, the FCC, the Borrower will execute and deliver, or will cause the execution and delivery of, all applications, certifications, instruments and other documents and papers that the Administrative Agent or such Lender may be required to obtain from the Borrower or any of its Subsidiaries for such governmental consent, approval, recording, qualification or authorization. (b) Notwithstanding anything herein or in the Security Documents to the contrary, to the extent this Agreement or any other Loan Document purports to require any Loan Party to grant to the Administrative Agent, on behalf of the Lenders, a security interest in the FCC Licenses of any Loan Party now owned or hereafter acquired, as the case may be, the Administrative Agent, on behalf of the Lenders, shall only have a security interest in such FCC Licenses at such times and to the extent that a security interest in such licenses is permitted under applicable law. Notwithstanding anything to the contrary contained herein or in the other Loan Documents, the Administrative Agent will not take any action pursuant to this Agreement or any other Loan Document, including, without limitation, the voting of any shares of stock pledged to the Administrative Agent pursuant to the Guarantee and Collateral Agreement, that would constitute or result in any assignment of any FCC License or any change of control of any Loan Party without first obtaining the prior approval of the FCC or other state or Governmental Authority, if, under then existing law, such assignment of any FCC License or change of control would require the prior approval of the FCC or other state or Governmental Authority. Prior to 78 74 the exercise by the Administrative Agent of any power, right, privilege or remedy pursuant to this Agreement which requires any consent, approval, recording, qualification or authorization of any Governmental Authority or instrumentality, the Borrower will execute and deliver, or will cause the execution and delivery of, all applications, certificates, instruments and other documents and papers that the Administrative Agent may be required to obtain for such governmental consent, approval, recording, qualification or authorization. Without limiting the generality of the foregoing, the Borrower will use its best efforts upon the reasonable request of the Administrative Agent to obtain from the appropriate governmental authorities the necessary consents and approvals, if any, for the assignment or transfer of such authorizations, licenses and permits to the Administrative Agent or its designee upon or following acceleration of the payment of the Loans in accordance with the provisions hereof. 6.12 Transfer of FCC Licenses. Use its best efforts to obtain as soon as practicable consent from the FCC to transfer any FCC Licenses from time to time owned or acquired by it to the License Subsidiary and upon receipt of such consent will promptly transfer such FCC Licenses to the License Subsidiary. 6.13 Post-Closing Events. Notwithstanding the provisions of paragraphs (a)(iii), (m) (but solely to the extent such paragraph (m) relates to real property Collateral), (n) and (o) of Section 5.1, the actions specified in such provisions shall not be conditions precedent to the Closing Date, but the Borrower shall take such actions on or before the date which is 30 days after the Closing Date. SECTION 7. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to any Lender or any Agent hereunder, the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: 7.1 Financial Condition Covenants. (a) Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending during any test period set forth below to exceed the ratio set forth below opposite such test period:
Test Period Consolidated ----------- Leverage Ratio -------------- October 1, 1999 to December 31, 1999 7.25 to 1.00 January 1, 2000 to March 31, 2000 7.00 to 1.00 April 1, 2000 to June 30, 2000 6.75 to 1.00 July 1, 2000 to September 30, 2000 6.50 to 1.00
79 75
Test Period Consolidated ----------- Leverage Ratio -------------- October 1, 2000 to December 31, 2000 6.25 to 1.00 January 1, 2001 to March 31, 2001 6.00 to 1.00 April 1, 2001 to June 30, 2001 5.75 to 1.00 July 1, 2001 to September 30, 2001 5.50 to 1.00 October 1, 2001 and thereafter 5.25 to 1.00
(b) Consolidated Senior Debt Ratio. Permit the Consolidated Senior Debt Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending during any test period set forth below to exceed the ratio set forth below opposite such test period:
Test Period Consolidated ----------- Senior Debt Ratio ----------------- October 1, 1999 to December 31, 1999 3.75 to 1.00 January 1, 2000 to December 31, 2000 3.50 to 1.00 January 1, 2001 to September 30, 2001 3.25 to 1.00 October 1, 2001 and thereafter 3.00 to 1.00
(c) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending during any test period set forth below to be less than the ratio set forth below opposite such test period:
Test Period Consolidated Interest ----------- Coverage Ratio --------------------- October 1, 1999 to December 31, 1999 1.40 to 1.00 January 1, 2000 to March 31, 2000 1.50 to 1.00 April 1, 2000 to June 30, 2000 1.60 to 1.00 July 1, 2000 to September 30, 2000 1.70 to 1.00 October 1, 2000 to December 31, 2000 1.80 to 1.00 January 1, 2001 to March 31, 2001 1.90 to 1.00 April 1, 2001 to June 30, 2001 2.00 to 1.00 July 1, 2001 to September 30, 2001 2.10 to 1.00
80 76
Test Period Consolidated Interest ----------- Coverage Ratio --------------------- October 1, 2001 and thereafter 2.20 to 1.00
(d) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending during any test period set forth below to be less than the ratio set forth below opposite such test period:
Test Period Consolidated Fixed Charge ----------- Coverage Ratio ------------------------- October 1, 1999 to September 30, 2000 1.10 to 1.00 October 1, 2000 to September 30, 2001 1.15 to 1.00 October 1, 2001 and thereafter 1.20 to 1.00
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness of any Loan Party pursuant to any Loan Document; (b) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary Guarantor (other than Cumulus Wireless and, from and after the date of acquisition thereof, BSI) to the Borrower or any other Subsidiary; (c) Indebtedness of Cumulus Wireless to the Borrower or any other Subsidiary in an aggregate principal amount not to exceed, together with (without duplication) the aggregate amount of obligations guaranteed as permitted by Section 7.2(f)(ii) and outstanding Investments permitted pursuant to Section 7.8(j), $2,000,000 at any one time outstanding; (d) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted by Section 7.3(g) or 7.3(h) in an aggregate principal amount not to exceed $15,000,000 at any one time outstanding; (e) Indebtedness outstanding on the date hereof and listed on Schedule 7.2(e) and any refinancings, refundings, renewals or extensions thereof (without any increase in the principal amount thereof or any shortening of the maturity of any principal amount thereof); (f) Guarantee Obligations made in the ordinary course of business by the Borrower or any of its Restricted Subsidiaries of (i) obligations of the Borrower or any 81 77 Subsidiary Guarantor (other than Cumulus Wireless and, from and after the date of acquisition thereof, BSI), (ii) obligations of Cumulus Wireless in an aggregate amount not to exceed, together with (without duplication) the aggregate principal amount of outstanding Indebtedness as permitted by Section 7.2(c) and the aggregate amount of outstanding Investments permitted pursuant to Section 7.8(j), $2,000,000 at any one time outstanding and (iii) from and after the date of acquisition thereof, obligations of BSI in an aggregate amount not to exceed, together with (without duplication) the aggregate principal amount of outstanding Indebtedness of BSI as permitted by Section 7.2(k) and the aggregate amount of outstanding Investments in BSI permitted pursuant to Section 7.8(l), $2,500,000 at any one time outstanding; (g) Indebtedness of the Borrower in respect of (i) the Exchangeable Preferred Stock having an aggregate liquidation preference not in excess of $250,000,000 or (ii) the Subordinated Exchange Debentures in an aggregate principal amount not to exceed $250,000,000, so long as the Borrower shall have furnished to the Administrative Agent a certificate of a Responsible Officer to the effect that on the date of issuance of the Subordinated Exchange Debentures no Default or Event of Default shall have occurred and be continuing or would result from the issuance thereof and demonstrating that after giving effect to such issuance the Borrower shall be in pro forma compliance with the financial covenants set forth in Section 7.1 and is projected to be in compliance with such financial covenants through the Final Maturity Date; (h) additional Indebtedness of the Borrower or any of its Restricted Subsidiaries, on terms and conditions reasonably satisfactory to the Administrative Agent, issued to a seller of the stock or assets of a radio broadcast station in connection with any Permitted Acquisition, provided that the aggregate principal amount (for the Borrower and all Restricted Subsidiaries) of such seller financing shall not exceed $20,000,000 at any one time outstanding; (i) Indebtedness of the Borrower in respect of shares of Preferred Stock issued after the date hereof on terms and conditions reasonably satisfactory to the Administrative Agent; (j) Guarantee Obligations of any Subsidiary which is a Subsidiary Guarantor or a guarantor party to another guarantee acceptable to the Administrative Agent, in respect of the obligations of the Borrower under the Senior Subordinated Notes, provided that such Guarantee Obligations are subordinated on the same terms as the obligations of the Borrower in respect of the Senior Subordinated Notes are subordinated; (k) Indebtedness of the Unrestricted Subsidiaries and, from and after the date of acquisition thereof, BSI to the Borrower or any other Subsidiary in an aggregate principal amount not to exceed, together with the amount of outstanding Investments permitted pursuant to Section 7.8(l), $7,500,000 at any one time outstanding; and 82 78 (l) Indebtedness of any Unrestricted Subsidiary consisting entirely of Non-Recourse Debt, provided that if any such Indebtedness ceases to be Non-Recourse Debt of such Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary that was not permitted by this Section 7.2(l). 7.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its Property, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the Property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (f) Liens in existence on the date hereof listed on Schedule 7.3(f), securing Indebtedness permitted by Section 7.2(e), provided that no such Lien is spread to cover any additional Property after the Closing Date and that the amount of Indebtedness secured thereby is not increased; (g) Liens securing Indebtedness of the Borrower or any other Restricted Subsidiary incurred pursuant to Section 7.2(d) to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any Property other than the Property financed by such Indebtedness and (iii) the amount of Indebtedness secured thereby is not increased; (h) Liens on real property acquired in a Permitted Acquisition securing Indebtedness permitted by Section 7.2(d), provided that (i) such Liens existed at the time 83 79 of such Permitted Acquisition and were not created in anticipation thereof, (ii) such Liens do not at any time encumber any Property other than the real Property financed by such Indebtedness and (iii) the amount of the Indebtedness secured thereby is not increased; (i) Liens created pursuant to the Security Documents; (j) any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased; and (k) Liens on the assets or Capital Stock of any Unrestricted Subsidiary securing the obligations of such Unrestricted Subsidiary. 7.4 Limitation on Fundamental Changes. With respect to each of the Borrower and the Restricted Subsidiaries, enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all or substantially all of its Property or business, except that: (a) any Restricted Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any Subsidiary Guarantor (other than Cumulus Wireless and, from and after the date of acquisition thereof, BSI) (provided that such Subsidiary Guarantor shall be the continuing or surviving corporation); and (b) any Restricted Subsidiary of the Borrower may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any Subsidiary Guarantor (other than Cumulus Wireless and, from and after the date of acquisition thereof, BSI). 7.5 Limitation on Disposition of Property. With respect to each of the Borrower and the Restricted Subsidiaries, Dispose of any of its Property (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Restricted Subsidiary, issue or sell any shares of such Restricted Subsidiary's Capital Stock to any Person, except: (a) the Disposition of obsolete or worn out property in the ordinary course of business; (b) the sale of inventory in the ordinary course of business; (c) Dispositions permitted by Section 7.4(b); 84 80 (d) the sale or issuance of any Subsidiary's Capital Stock to the Borrower or any Subsidiary Guarantor (other than Cumulus Wireless and, from and after the date of acquisition thereof, BSI); (e) the Disposition of other assets having a fair market value not to exceed $5,000,000 in the aggregate for any fiscal year of the Borrower; and (f) any Asset Sale or Recovery Event, provided, that (i) the requirements of Section 2.11(b) are complied with in connection therewith and (ii) the fair market value of all assets that are the subject of such Asset Sales and Recovery Events shall not exceed $30,000,000 in the aggregate for any fiscal year of the Borrower, provided, further, that with respect to the foregoing clause (ii), if the aggregate fair market value of all assets that are the subject of Asset Sales and Recovery Events in the Borrower's 1999 fiscal year is less than $30,000,000, the excess of $30,000,000 over the aggregate fair market value of such assets may be carried over into the Borrower's 2000 fiscal year. 7.6 Limitation on Restricted Payments. With respect to each of the Borrower and the Restricted Subsidiaries, declare or pay any dividend (other than dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of the Borrower or any Subsidiary, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary (collectively, "Restricted Payments"), except that (a) any Restricted Subsidiary may make Restricted Payments to the Borrower or any Subsidiary Guarantor (other than Cumulus Wireless and, from and after the date of acquisition thereof, BSI), (b) after June 30, 2003, the Borrower may pay cash dividends on the shares of Exchangeable Preferred Stock, so long as (i) no Default or Event of Default shall have occurred and be continuing or would result from the payment of such dividend and (ii) after giving effect to the payment of such dividend (A) the Borrower shall be in pro forma compliance with the financial covenants set forth in Section 7.1 and (B) the Consolidated Leverage Ratio shall be less than 5.00 to 1.00, (c) the Borrower may pay dividends in additional shares of Preferred Stock in respect of the shares of Preferred Stock and (d) the Borrower may redeem up to 35% of the Exchangeable Preferred Stock with the proceeds of Common Stock issued and sold by the Borrower. 7.7 Limitation on Capital Expenditures. With respect to each of the Borrower and the Restricted Subsidiaries, make or commit to make any Capital Expenditure, except (a) Capital Expenditures of the Borrower and its Restricted Subsidiaries in the ordinary course of business not exceeding in any fiscal year of the Borrower the sum of (i) Maintenance CapEx for such year and (ii) up to $5,000,000 expended to obtain, and build pursuant to, construction permits in the markets in which the Borrower and its Restricted Subsidiaries operate radio broadcast stations, (b) Capital Expenditures by the Borrower and its Restricted Subsidiaries consisting of one-time technology investments of up to $50,000 for each radio broadcast station owned by the Borrower and its Restricted Subsidiaries, (c) Capital Expenditures for the one-time 85 81 consolidation of physical facilities within a radio market, including remodelings, relocations, expansions and new building construction in an aggregate amount of up to $15,000,000 in any fiscal year (provided, that such Capital Expenditures in respect of any radio market shall be made not later than two years after the date of acquisition by the Borrower or any Restricted Subsidiary of the fifth radio station in such market) and (d) Capital Expenditures made with the proceeds of any Reinvestment Deferred Amount. 7.8 Limitation on Investments. With respect to each of the Borrower and the Restricted Subsidiaries, make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting an ongoing business from, or make any other investment in, any other Person (all of the foregoing, "Investments"), except: (a) extensions of trade credit in the ordinary course of business; (b) Investments in Cash Equivalents; (c) Investments arising in connection with the incurrence of Indebtedness permitted by Section 7.2(b); (d) loans and advances to employees of the Borrower or any Restricted Subsidiaries of the Borrower in the ordinary course of business (including, without limitation, for travel, entertainment and relocation expenses) in an aggregate amount for the Borrower and Restricted Subsidiaries of the Borrower not to exceed at any one time outstanding the lesser of (i) $10,000 multiplied by the number of radio broadcast stations owned by the Borrower and its Restricted Subsidiaries as at the date of determination and (ii) $5,000,000; (e) the Acquisition; (f) Investments in assets useful in the Borrower's business made by the Borrower or any of its Restricted Subsidiaries with the proceeds of any Reinvestment Deferred Amount; (g) Investments (other than those relating to the incurrence of Indebtedness permitted by Section 7.8(c)) by the Borrower or any of its Restricted Subsidiaries in the Borrower or any Person (other than Cumulus Wireless and, from and after the date of acquisition thereof, BSI) that, prior to such investment, is a Subsidiary Guarantor; (h) Permitted Acquisitions; (i) Investments in existence on the date hereof and listed on Schedule 7.8(i); 86 82 (j) Investments by the Borrower or any of its Restricted Subsidiaries (i) to purchase real estate and other assets used by Cumulus Broadcasting, Inc. and Cumulus Licensing Corp. in the operation of their radio station business (provided, that such Investments are in connection with a Permitted Acquisition) or (ii) in Cumulus Wireless in an aggregate amount not to exceed, together with (without duplication) the aggregate principal amount of outstanding Indebtedness permitted pursuant to Section 7.2(c) and the aggregate amount of obligations guaranteed as permitted by Section 7.2 (f)(ii) (but excluding the Investments permitted by the foregoing clause (i)), $2,000,000 at any one time outstanding; (k) the purchase by the Borrower of BSI for an aggregate purchase price not to exceed $500,000 in cash and 156,000 shares of common stock of the Borrower; (l) Investments by the Borrower or any of its Subsidiaries in the Unrestricted Subsidiaries and, from and after the date of acquisition thereof, BSI in an aggregate amount not to exceed, together with (without duplication) the aggregate principal amount of outstanding Indebtedness permitted pursuant to Section 7.2(k) and the aggregate amount of obligations of BSI guaranteed as permitted by Section 7.2 (f)(iii) (but excluding the Investments permitted by the foregoing clause 7.8(k)), $7,500,000 at any one time outstanding; and (m) in addition to Investments otherwise expressly permitted by this Section, Investments by the Borrower or any of its Restricted Subsidiaries in an aggregate amount (valued at cost) not to exceed $3,000,000 during the term of this Agreement. 7.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc. (a) Make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of or otherwise voluntarily or optionally defease, the Senior Subordinated Notes or the Subordinated Exchange Debentures, or segregate funds for any such payment, prepayment, repurchase, redemption or defeasance, (b) amend, modify or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Senior Subordinated Notes or the Subordinated Exchange Debentures (in each case, other than any such amendment, modification, waiver or other change which (i) would extend the maturity or reduce the amount of any payment of principal thereof, reduce the rate or extend the date for payment of interest thereon or relax any covenant or other restriction applicable to the Borrower or any of its Subsidiaries and (ii) does not involve the payment of a consent fee), (c) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Exchangeable Preferred Stock (other than any such amendment, modification, waiver or other change that (i) would extend the scheduled redemption date or reduce the amount of any scheduled redemption payment or reduce the rate or extend any date for payment of dividends thereon and (ii) does not involve the payment of a consent fee), (d) designate any Indebtedness (other than the Obligations) as "Designated Senior Debt" for the purposes of the Senior Subordinated Note Indenture, (e) designate any Indebtedness (other than the Obligations and the Senior Subordinated Notes) as "Designated Exchange Debenture Senior 87 83 Debt" for the purposes of the Subordinated Exchange Debenture Indenture or (f) amend its certificate of incorporation in any manner determined by the Administrative Agent to be adverse to the Lenders. 7.10 Limitation on Transactions with Affiliates. With respect to each of the Borrower and the Restricted Subsidiaries, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (including any Unrestricted Subsidiary, Cumulus Wireless and, from and after the date of acquisition thereof, BSI but excluding the Borrower and any other Subsidiary Guarantor) unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of business of the Borrower or such Restricted Subsidiary, as the case may be, and (c) upon fair and reasonable terms no less favorable to the Borrower or such Restricted Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate or an Unrestricted Subsidiary. 7.11 Limitation on Sales and Leasebacks. With respect to each of the Borrower and the Restricted Subsidiaries, enter into any arrangement with any Person providing for the leasing by the Borrower or any Restricted Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Restricted Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Restricted Subsidiary. 7.12 Limitation on Changes in Fiscal Periods. Permit the fiscal year of the Borrower to end on a day other than December 31 or change the Borrower's method of determining fiscal quarters. 7.13 Limitation on Negative Pledge Clauses. Enter into or suffer to exist or become effective any agreement which prohibits or limits the ability of the Borrower or any of its Restricted Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its Property or revenues, whether now owned or hereafter acquired, to secure the Obligations or, in the case of any guarantor, its obligations under the Guarantee and Collateral Agreement, other than (a) this Agreement and the other Loan Documents, (b) the Indentures and (c) any agreements governing any purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby). 7.14 Limitation on Restrictions on Subsidiary Distributions. Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) make Restricted Payments in respect of any Capital Stock of such Restricted Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Restricted Subsidiary of the Borrower, (b) make Investments in the Borrower or any other Restricted Subsidiary or (c) transfer any of its assets to the Borrower or any other Restricted Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) any 88 84 restrictions existing under the Loan Documents, (ii) any restrictions existing under the Indentures and (iii) any restrictions with respect to a Restricted Subsidiary imposed pursuant to an agreement which has been entered into in connection with the Disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary. 7.15 Limitation on Lines of Business. With respect to each of the Borrower and the Restricted Subsidiaries, enter into any business, either directly or through any Restricted Subsidiary, except for those businesses in which the Borrower and its Restricted Subsidiaries are engaged on the date of this Agreement (after giving effect to the Acquisition) or which are reasonably related thereto. 7.16 Limitation on License Subsidiary. Permit the License Subsidiary to engage in any business or to incur any liability except that the License Subsidiary may (a) hold the FCC Licenses, (b) execute and deliver the Guarantee and Collateral Agreement and any guarantee referred to in Section 7.2(j) and (c) incur obligations as a purchaser under any purchase agreement executed in connection with any Permitted Acquisition. 7.17 Limitation on Hedge Agreements. With respect to each of the Borrower and the Restricted Subsidiaries, enter into any Hedge Agreement other than Hedge Agreements entered into in the ordinary course of business, and not for speculative purposes, to protect against changes in interest rates or foreign exchange rates. SECTION 8. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan or Reimbursement Obligation when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation, or any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof; or (b) Any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or (c) (i) Any Loan Party shall default in the observance or performance of any agreement contained in clause (i) or (ii) of Section 6.4(a) (with respect to the Borrower only), Section 6.7(a), Section 7 or Section 5 of the Guarantee and Collateral Agreement or (ii) an "Event of Default" under and as defined in any Mortgage shall have occurred and be continuing; or 89 85 (d) Any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days; or (e) The Borrower or any of its Restricted Subsidiaries shall (i) default in making any payment of any principal of any Indebtedness (including, without limitation, any Guarantee Obligation, but excluding the Loans and Reimbursement Obligations) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or to become subject to a mandatory offer to purchase by the obligor thereunder or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $5,000,000; or (f) (i) The Borrower or any of its Restricted Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Restricted Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Restricted Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any of its Restricted Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any of its Restricted Subsidiaries shall take any action in 90 86 furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its Restricted Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could, in the sole judgment of the Required Lenders, reasonably be expected to have a Material Adverse Effect; or (h) One or more judgments or decrees shall be entered against the Borrower or any of its Restricted Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $5,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or (i) Any of the Security Documents shall cease, for any reason (other than by reason of the express release thereof pursuant to Section 10.16), to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or (j) The guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason (other than by reason of the express release thereof pursuant to Section 10.16), to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or (k) (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") shall 91 87 become, or obtain rights (whether by means of warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of securities of the Borrower having at least 35% of the ordinary voting power for the election of directors of the Borrower; or (ii) the board of directors of the Borrower shall cease to consist of a majority of Continuing Directors; or (iii) a Specified Change of Control shall occur; or (l) The Senior Subordinated Notes or any guarantees thereof shall cease, for any reason, to be validly subordinated to the Obligations or the obligations of the Subsidiary Guarantors under the Guarantee and Collateral Agreement, as the case may be, as provided in the Senior Subordinated Note Indenture, or any Loan Party, any Affiliate of any Loan Party, the trustee in respect of the Senior Subordinated Notes or the holders of at least 25% in aggregate principal amount of the Senior Subordinated Notes shall so assert; or (m) The Subordinated Exchange Debentures or any guarantees thereof shall cease, for any reason, to be validly subordinated to the Obligations or the obligations of the Subsidiary Guarantors under the Guarantee and Collateral Agreement, as the case may be, as provided in the Subordinated Exchange Debenture Indenture, or any Loan Party, any Affiliate of any Loan Party, the trustee in respect of the Subordinated Exchange Debentures or the holders of at least 25% in aggregate principal amount of the Subordinated Exchange Debentures shall so assert; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, any of the following actions may be taken: (i) with the consent of the Majority 364-Day Revolving Credit Facility Lenders, the Administrative Agent may, or upon the request of the Majority 364-Day Revolving Credit Facility Lenders, the Administrative Agent shall, by notice to the Borrower declare the 364-Day Revolving Credit Commitments to be terminated forthwith, whereupon the 364-Day Revolving Credit Commitments shall immediately terminate; (ii) with the consent of the Majority Seven-Year Revolving Credit Facility Lenders, the Administrative Agent may, or upon the request of the Majority Seven-Year Revolving Credit Facility Lenders, the Administrative Agent shall, by notice to the Borrower declare the Seven-Year Revolving Credit Commitments to be terminated forthwith, whereupon the Seven-Year Revolving Credit Commitments shall immediately terminate; and (iii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of 92 88 the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto). SECTION 9. THE AGENTS 9.1 Appointment. Each Lender hereby irrevocably designates and appoints the Agents as the agents of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes each Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent. 9.2 Delegation of Duties. Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 9.3 Exculpatory Provisions. Neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document 93 89 or in any certificate, report, statement or other document referred to or provided for in, or received by any Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or thereunder. No Agent shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. 9.4 Reliance by the Agents. Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Loan Parties), independent accountants and other experts selected by such Agent. The Agents may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. Each Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 9.5 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, 94 90 agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereinafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender. Each Lender represents to each Agent that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party which may come into the possession of such Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 9.7 Indemnification. The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Aggregate Exposure Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Aggregate Exposure Percentages immediately prior to such date), for, and to save each Agent harmless from and against, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements which are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section 9.7 shall survive the payment of the Loans and all other amounts payable hereunder. 9.8 Agent in Its Individual Capacity. Each Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though such Agent was not an Agent. With respect to its Loans made or renewed by it and 95 91 with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include each Agent in its individual capacity. 9.9 Successor Agents . The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default under Section 8(a) or Section 8(f) with respect to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 10 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. The Syndication Agent may, at any time, by notice to the Lenders and the Administrative Agent, resign as Syndication Agent hereunder, whereupon the duties, rights, obligations and responsibilities of the Syndication Agent hereunder shall automatically be assumed by, and inure to the benefit of, the Administrative Agent, without any further act by the Syndication Agent, the Administrative Agent or any Lender. After any retiring Agent's resignation as Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents. 9.10 Authorization to Release Liens and Guarantees . The Administrative Agent is hereby irrevocably authorized by each of the Lenders to effect any release of Liens or guarantee obligations contemplated by Section 10.16. 9.11 The Arranger and the Syndication Agent . The Arranger and the Syndication Agent, in their respective capacities as such, shall have no duties or responsibilities, and shall incur no liability, under this Agreement and the other Loan Documents. SECTION 10. MISCELLANEOUS 10.1 Amendments and Waivers . Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 10.1. The Required Lenders and each Loan Party 96 92 party to the relevant Loan Document may, or (with the written consent of the Required Lenders) the Administrative Agent and each Loan Party party to the relevant Loan Document may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents (including amendments and restatements hereof or thereof) for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders, or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall: (i) forgive the principal amount or extend the final scheduled date of maturity of any Loan or Reimbursement Obligation, extend the scheduled date of any amortization payment in respect of any Loan, reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Commitment of any Lender, in each case without the consent of each Lender directly affected thereby; (ii) amend, modify or waive any provision of this Section or reduce any percentage specified in the definition of Required Lenders or Required Prepayment Lenders, consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral or release all or substantially all of the Subsidiary Guarantors from their obligations under the Guarantee and Collateral Agreement, in each case without the consent of all Lenders; (iii) reduce the percentage specified in the definition of Majority Facility Lenders with respect to any Facility, or reduce the percentage specified in the definition of Majority Seven-Year Revolving Credit Facility Lenders or in the definition of Majority 364-Day Revolving Credit Facility Lenders, without the consent of all Lenders under such Facility; (iv) amend, modify or waive any provision of Section 9 without the consent of each Agent directly affected thereby; (v) amend, modify or waive any provision of paragraph (a), (b), (c), (d) or (g) of Section 2.11 without the consent of the Required Prepayment Lenders; (vi) amend, modify or waive any provision of Section 2.17 without the consent of each Lender directly affected thereby; (vii) require any Lender to make Loans having an Interest Period of longer than six months without the written consent of such Lender; or 97 93 (viii) amend, modify or waive any provision of Section 3 without the consent of each Issuing Lender directly affected thereby. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Agents and all future holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. Any such waiver, amendment, supplement or modification shall be effected by a written instrument signed by the parties required to sign pursuant to the foregoing provisions of this Section; provided, that delivery of an executed signature page of any such instrument by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof. For the avoidance of doubt, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and each Loan Party to each relevant Loan Document (x) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof (collectively, the "Additional Extensions of Credit") to share ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans and Total Revolving Extensions of Credit and the accrued interest and fees in respect thereof and (y) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders, Required Prepayment Lenders and Majority Seven-Year Revolving Credit Facility Lenders (or Majority 364-Day Revolving Credit Facility Lenders, as applicable); provided, however, that no such amendment shall permit the Additional Extensions of Credit to share ratably with or with preference to the Term Loans in the application of mandatory prepayments without the consent of the Required Prepayment Lenders or otherwise to share ratably with or with preference to the Total Revolving Extensions of Credit without the consent of the Majority Seven-Year Revolving Credit Facility Lenders and the Majority 364-Day Revolving Credit Facility Lenders. 10.2 Notices . All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed (a) in the case of the Borrower, the Syndication Agent, the Administrative Agent and the Issuing Lender, as follows and (b) in the case of the Lenders, as set forth on Schedule I to the Lender Addendum to which such Lender is a party or, in the case of a Lender which becomes a party to this Agreement pursuant to an Assignment and Acceptance, in such Assignment and Acceptance or (c) in the case of any party, to such other address as such party may hereafter notify to the other parties hereto: The Borrower: Cumulus Media Inc. 111 East Kilbourn Avenue 98 94 Milwaukee, Wisconsin 53202 Attention: Richard Weening Telecopy: (414) 615-2880 Telephone: (414) 615-2800 The Administrative Agent and Lehman Commercial Paper Inc. the Existing Issuing Lender: 3 World Financial Center New York, New York 10285 Attention: Michael O'Brien Telecopy: (212) 526-7691 Telephone: (212) 526-0437 The Syndication Agent: Barclays Capital 388 Market Street Suite 1700 San Francisco, California 94111 Attention: Daniele Iacovone Telecopy: (415) 765-4760 Telephone: (415) 765-4737 Issuing Lender: As notified by such Issuing Lender to the Administrative Agent and the Borrower provided that any notice, request or demand to or upon any Agent or any Lender shall not be effective until received. 10.3 No Waiver; Cumulative Remedies . No failure to exercise and no delay in exercising, on the part of the either Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 Survival of Representations and Warranties . All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder. 10.5 Payment of Expenses . The Borrower agrees (a) to pay or reimburse the Administrative Agent and the Arranger for all their reasonable out-of-pocket costs and expenses incurred in connection with the syndication of the Facilities and the development, preparation 99 95 and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Agents, (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Lender and of counsel to the Agents, (c) to pay, indemnify, or reimburse each Lender, each Agent and the Arranger for, and hold each Lender, each Agent and the Arranger harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify or reimburse each Lender, each Agent and the Arranger and their respective officers, trustees, advisors, directors, employees, affiliates, agents and controlling persons (each, an "Indemnitee") for, and hold each Indemnitee harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including, without limitation, any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower, any of its Subsidiaries or any of the Properties and the fees and disbursements and other charges of legal counsel in connection with claims, actions or proceedings by any Indemnitee against the Borrower hereunder (all the foregoing in this clause (d), collectively, the "Indemnified Liabilities"), provided, that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries so to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have by statute or otherwise against any Indemnitee. All amounts due under this Section shall be payable not later than 30 days after written demand therefor. Statements for amounts payable by the Borrower pursuant to this Section shall be submitted to Daniel O'Donnell (Telephone No. 414-615-2800) (Telecopy No. 414-615-2880), at the address of the Borrower set forth in Section 10.2, or to such other Person or address as may be hereafter designated by the Borrower in a written notice to the Administrative Agent. The agreements in this Section shall survive repayment of the Loans and all other amounts payable hereunder. 100 96 10.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agents, all future holders of the Loans and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agents and each Lender. (b) Any Lender may, without the consent of the Borrower, the Issuing Lender or the Administrative Agent, in accordance with applicable law, at any time sell to one or more banks, financial institutions or other entities (each, a "Participant") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Agents shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. In no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would require the consent of all Lenders pursuant to Section 10.1. The Borrower agrees that if amounts outstanding under this Agreement and the Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 10.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.18, 2.19 and 2.20 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; provided that, in the case of Section 2.19, such Participant shall have complied with the requirements of said Section and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender (an "Assignor") may, in accordance with applicable law and upon written notice to the Administrative Agent, at any time and from time to time assign to any Lender, any affiliate or Control Investment Affiliate thereof or a Related Fund of any Lender or, with the consent of the Borrower, the Issuing Lender (in the case of any assignment of Seven-Year Revolving Credit Commitments) and the Administrative Agent (which, in each case, shall not be unreasonably withheld or delayed) (provided (i) that no such consent need be obtained by any Lehman Entity and (ii) the consent of the Borrower need not be obtained with respect to any 101 97 assignment of Term Loans), to an additional bank, financial institution or other entity (an "Assignee") all or any part of its rights and obligations under this Agreement pursuant to an Assignment and Acceptance, substantially in the form of Exhibit E, executed by such Assignee and such Assignor (and, where the consent of the Borrower, the Administrative Agent or the Issuing Lender is required pursuant to the foregoing provisions, by the Borrower and such other Persons) and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that no such assignment to an Assignee (other than any Lender, any affiliate or Control Investment Affiliate thereof or a Related Fund of any Lender) shall be in an aggregate principal amount of less than $5,000,000 (other than in the case of an assignment of all of a Lender's interests under this Agreement), and, after giving effect thereto, the Assignor (together with its affiliates, Control Investment Affiliates and Related Funds), if it shall retain any Loans or Commitments, shall have Commitments and Loans aggregating at least $5,000,000, in each case unless otherwise agreed by the Borrower and the Administrative Agent. Any such assignment need not be ratable as among the Facilities. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment and/or Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of an Assignor's rights and obligations under this Agreement, such Assignor shall cease to be a party hereto, except as to Sections 2.18, 2.19, 2.20 and 10.5 in respect of the period prior to such effective date). Notwithstanding any provision of this Section, the consent of the Borrower shall not be required for any assignment which occurs at any time when any Event of Default shall have occurred and be continuing. (d) The Administrative Agent shall maintain at its address referred to in Section 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agents and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loans and any Notes evidencing such Loans recorded therein for all purposes of this Agreement. Any assignment of any Loan, whether or not evidenced by a Note, shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of a Loan evidenced by a Note shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Loan, accompanied by a duly executed Assignment and Acceptance; thereupon one or more new Notes in the same aggregate principal amount shall be issued to the designated Assignee, and the old Notes shall be returned by the Administrative Agent to the Borrower marked "cancelled". The Register shall be available for inspection by the Borrower or any Lender with respect to any entry relating to such Lender's Loans at any reasonable time and from time to time upon reasonable prior notice. 102 98 (e) Upon its receipt of an Assignment and Acceptance executed by an Assignor and an Assignee (and, in any case where the consent of any other Person is required by Section 10.6(c), by each such other Person) together with payment to the Administrative Agent of a registration and processing fee of $3,500 (except that no such registration and processing fee shall be payable (y) in connection with an assignment by any Lehman Entity or (z) in the case of an Assignee which is already a Lender, is an affiliate or Control Investment Affiliate of a Lender or is a Related Fund of a Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders, the Agents and the Borrower. On or prior to such effective date, the Borrower, at its own expense, upon request, shall execute and deliver to the Administrative Agent (in exchange for the applicable Revolving Credit Note and/or applicable Term Notes, as the case may be, of the assigning Lender) a new applicable Revolving Credit Note and/or applicable Term Notes, as the case may be, to the order of such Assignee in an amount equal to the applicable Revolving Credit Commitment and/or applicable Term Loans, as the case may be, assumed or acquired by it pursuant to such Assignment and Acceptance and, if the Assignor has retained a Revolving Credit Commitment and/or Term Loans, as the case may be, upon request, a new applicable Revolving Credit Note and/or applicable Term Notes, as the case may be, to the order of the Assignor in an amount equal to the applicable Revolving Credit Commitment and/or applicable Term Loans, as the case may be, retained by it hereunder. Such new Note or Notes shall be dated the Closing Date and shall otherwise be in the form of the Note or Notes replaced thereby. (f) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. 10.7 Adjustments; Setoff. (a) Except to the extent that this Agreement provides for payments to be allocated to a particular Lender or to the Lenders under a particular Facility, if any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Obligations, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Obligations, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. 103 99 (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application. 10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement 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 Agreement or of a Lender Addendum by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 10.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.10 Integration. This Agreement and the other Loan Documents represent the agreement of the Borrower, the Agents, the Arranger and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by any Agent, the Arranger or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.12 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally: (a) submits for itself and its Property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general 104 100 jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 10.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 10.13 Acknowledgments . The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Arranger, any Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Arranger, the Agents and the Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of creditor and debtor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Arranger, the Agents and the Lenders or among the Borrower, the Arranger, the Agents and the Lenders. 10.14 WAIVERS OF JURY TRIAL . THE BORROWER, THE AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 105 101 10.15 Confidentiality. Each of the Arranger, the Agents and the Lenders agrees to keep confidential all non-public information provided to it by any Loan Party pursuant to this Agreement that is designated by such Loan Party as confidential; provided that nothing herein shall prevent the Arranger, any Agent or any Lender from disclosing any such information (a) to the Arranger, any Agent, any other Lender or any affiliate of any Lender, (b) to any Participant or Assignee (each, a "Transferee") or prospective Transferee which agrees to comply with the provisions of this Section, (c) to any of its employees, directors, agents, attorneys, accountants and other professional advisors, (d) upon the request or demand of any Governmental Authority having jurisdiction over it, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) which has been publicly disclosed other than in breach of this Section 10.15, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender or (i) in connection with the exercise of any remedy hereunder or under any other Loan Document. 10.16 Release of Collateral and Guarantee Obligations. (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, upon request of the Borrower in connection with any Disposition of Property permitted by the Loan Documents, the Administrative Agent shall (without notice to, or vote or consent of, any Lender, or any affiliate of any Lender that is a party to any Specified Hedge Agreement) take such actions as shall be required to release its security interest in any Collateral being Disposed of in such Disposition, and to release any guarantee obligations under any Loan Document of any Person being Disposed of in such Disposition, to the extent necessary to permit consummation of such Disposition in accordance with the Loan Documents. (b) Notwithstanding anything to the contrary contained herein or any other Loan Document, when all Obligations (other than obligations in respect of any Specified Hedge Agreement) have been paid in full, all Commitments have terminated or expired and no Letter of Credit shall be outstanding, upon request of the Borrower, the Administrative Agent shall (without notice to, or vote or consent of, any Lender, or any affiliate of any Lender that is a party to any Specified Hedge Agreement) take such actions as shall be required to release its security interest in all Collateral, and to release all guarantee obligations under any Loan Document, whether or not on the date of such release there may be outstanding Obligations in respect of Specified Hedge Agreements. Any such release of guarantee obligations shall be deemed subject to the provision that such guarantee obligations shall be reinstated if after such release any portion of any payment in respect of the Obligations guaranteed thereby shall be rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Subsidiary Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Subsidiary Guarantor or any substantial part of its property, or otherwise, all as though such payment had not been made. 106 102 10.17 Delivery of Lender Addenda. Each initial Lender shall become a party to this Agreement by delivering to the Administrative Agent a Lender Addendum duly executed by such Lender, the Borrower and the Administrative Agent. 107 IN WITNESS WHEREOF, the parties hereto have caused this Agreement 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 LEHMAN BROTHERS INC., as Arranger By: /s/ William Gallagher ----------------------------------------- Name: William Gallagher Title: Authorized Signatory LEHMAN COMMERCIAL PAPER INC., as Administrative Agent and as Existing Issuing Lender By: /s/ William Gallagher ----------------------------------------- Name: William Gallagher Title: Authorized Signatory BARCLAYS BANK PLC, as Syndication Agent By: /s/ Andrew Wynn ----------------------------------------- Name: Andrew Wynn Title: Managing Director 108 ANNEX A PRICING GRID FOR LOANS
Applicable Applicable Applicable Margin for Margin Applicable Applicable Applicable Margin for Base Rate for Margin Margin for Margin for Eurodollar Loans - Consolidated Leverage Eurodollar for Base Rate Eurodollar Base Rate Loans - Revolving Ratio Loans - Loans - Loans - Loans - Revolving Credit Loans Tranche B Tranche B Tranche C Tranche C Credit Loans and Term Loans Term Loans Term Loans Term Loans and Conversion Conversion Term Loans Term Loans - ---------------------------------------------------------------------------------------------------------------------------- > 7.00 to 1.00 3.000% 2.000% 3.125% 2.125% 3.000% 2.000% - - ---------------------------------------------------------------------------------------------------------------------------- > 6.50 to 1.00 and 3.000% 2.000% 3.125% 2.125% 2.750% 1.750% - < 7.00 to 1.00 - ---------------------------------------------------------------------------------------------------------------------------- > 5.50 to 1.00 and 3.000% 2.000% 3.125% 2.125% 2.500% 1.500% - < 6.50 to 1.00 - ---------------------------------------------------------------------------------------------------------------------------- > 5.00 to 1.00 2.750% 1.750% 2.875% 1.875% 2.250% 1.250% - and < 5.50 to 1.00 - ---------------------------------------------------------------------------------------------------------------------------- > 4.00 to 1.00 2.750% 1.750% 2.875% 1.875% 2.000% 1.000% - and < 5.00 to 1.00 - ---------------------------------------------------------------------------------------------------------------------------- < 4.00 to 1.00 2.500% 1.500% 2.625% 1.625% 1.500% 0.500% - ----------------------------------------------------------------------------------------------------------------------------
Changes in the Applicable Margin with respect to Loans resulting from changes in the Consolidated Leverage Ratio shall become effective on each date (each, an "Adjustment 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. 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 Pricing Grid be deemed to be greater than 7.00 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 Pricing Grid be deemed to be greater than 7.00 to 1.00. Each determination of the Consolidated Leverage Ratio pursuant to this Pricing Grid 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. 109 ANNEX B
================================================================================ Commitment Fee Rate Utilization Seven-Year Revolving 364-Day Revolving Percentage Credit Facility Credit Facility > 66.700% 0.500% 0.375% - - > 33.300% and 0.625% 0.500% - - < 66.700% < 33.300% 0.750% 0.625% ================================================================================
110 SCHEDULE 1.1A ACQUISITION AGREEMENTS 111 SCHEDULE 1.1B MORTGAGED PROPERTY 112 SCHEDULE 1.1C EXISTING LETTERS OF CREDIT 113 SCHEDULE 4.4 CONSENTS, AUTHORIZATIONS, FILINGS AND NOTICES 114 SCHEDULE 4.15 SUBSIDIARIES Cumulus Broadcasting, Inc. Cumulus Licensing Corp. Cumulus Internet Services Inc. Cumulus Telecommunications Inc. Cumulus Wireless Services Inc. Caribbean Communications Company Limited GEM Radio Five Ltd. 115 SCHEDULE 4.19(a) UCC FILING JURISDICTIONS 116 SCHEDULE 4.19(b) MORTGAGE FILING JURISDICTIONS 117 SCHEDULE 4.23 LICENSES 118 SCHEDULE 7.2(e) EXISTING INDEBTEDNESS 119 SCHEDULE 7.3(f) EXISTING LIENS 120 SCHEDULE 7.8(i) EXISTING INVESTMENTS EX-10.2 5 1999 EMPLOYEE STOCK INCENTIVE PLAN 1 Exhibit 10.2 CUMULUS MEDIA INC. 1999 STOCK INCENTIVE PLAN 1. Objectives. The Cumulus Media Inc. 1999 Stock Incentive Plan is designed to attract and retain certain selected officers, key employees, non-employee directors and consultants whose skills and talents are important to the Company's operations, and reward them for making major contributions to the success of the Company. These objectives are accomplished by making awards under the Plan, thereby providing Participants with a proprietary interest in the growth and performance of the Company. 2. Definitions. (a) "Award" shall mean the grant of any form of stock option or stock award to a Plan Participant pursuant to such terms, conditions, performance requirements, and limitations as the Board or Committee may establish in order to fulfill the objectives of the Plan. (b) "Award Agreement" shall mean an agreement between Cumulus Media Inc. and a Participant that sets forth the terms, conditions, performance requirements, and limitations applicable to an Award. (c) "Board" shall mean the Board of Directors of Cumulus Media Inc. (d) "Cause" shall mean termination of a Participant's employment with the Company for (i) any failure of the Participant to substantially perform his duties with the Company (other than by reason of illness) which occurs after the Company has delivered to the Participant a demand for performance which specifically identifies the manner in which the Company believes the Participant has failed to perform his duties, and the Participant fails to resume performance of his duties on a continuous basis within 14 days after receiving such demand, (ii) the commission by the Participant of any act of dishonesty or disloyalty involving the Company or its business, or (iii) the conviction of the Participant of a felony or misdemeanor which, in the reasonable judgment of the Committee, is substantially related to the employee's position with the Company or substantially impairs the Participant's ability to perform his duties with the Company. (e) "Change in Control" shall mean any of the following events: (i) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a "Person"), after the date hereof, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (a) the then outstanding shares of common stock of Cumulus Media Inc. (the "Outstanding Company Common Stock") or (b) the combined voting power of the then outstanding voting securities of Cumulus Media Inc. entitled to vote generally in the election of directors 2 (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (a) any acquisition directly from Cumulus Media Inc., (b) any acquisition by the Company, (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or (d) any acquisition by any corporation pursuant to a transaction which complies with clauses (a), (b) and (c) of subsection (iii) of this Section 2(e); or (ii) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Cumulus Media Inc.'s shareholders, was approved by a vote of at least a majority of the directors then constituting the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company for which approval of the shareholders of Cumulus Media Inc. is required (a "Business Combination"), in each case, unless, immediately following such Business Combination, (a) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns Cumulus Media Inc. or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (b) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (c) at least a majority of the members of the Board of Directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of he initial agreement, or of the action of the Board, providing for such Business Combination; or iv) approval by the shareholders of Cumulus Media Inc. of a complete liquidation 2 3 or dissolution of Cumulus Media Inc. (f) "Class A Common Stock" shall mean the authorized and issued or unissued $.01 par value Class A common stock of Cumulus Media Inc. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (h) "Committee" shall mean the Compensation Committee of the Board of Directors of Cumulus Media Inc. which shall be comprised of at least two non-employee directors. (i) "Company" shall mean Cumulus Media Inc. and its subsidiaries including subsidiaries of subsidiaries and partnerships and other business ventures in which Cumulus Media Inc. has a significant equity interest, as determined in the sole discretion of the Committee. (j) "Fair Market Value" shall mean the closing sale price of the Class A Common Stock on the Nasdaq National Market as reported in the Midwest Edition of the Wall Street Journal for the date in question, provided that, if no sales of Class A Common Stock were made on said exchange on that date, "Fair Market Value" shall mean the closing sale price of Class A Common Stock as reported for the most recent preceding day on which sales of Class A Common Stock were made on such exchange, or, failing any such sales, such other price as the Committee may determine in conformity with pertinent law and regulations of the Treasury Department. Notwithstanding the foregoing, in the case of Awards which are effective on the date the Company sells shares of Class A Common Stock in an underwritten public offering, Fair Market Value shall mean the price per share at which the Class A Common Stock is initially sold to the public pursuant to the offering. (k) "Participant" shall mean a current or prospective employee, non-employee director or consultant of the Company to whom an Award has been made under the Plan. Notwithstanding the foregoing, if a director is serving on the Board to represent the interests of a corporate shareholder of the Company, the option which otherwise would be awarded to the director may be awarded to the director's employer. (l) "Plan" shall mean the Cumulus Media Inc. 1999 Stock Incentive Plan. (m) "Retirement" shall mean termination of employment with the Company or service as a member of the Board on or after the attainment of age 65. (n) "Stock Option" shall have the meaning set forth in Section 7(a) hereof. 3. Eligibility. Current and prospective employees, non-employee directors and consultants of the Company eligible for an Award under the Plan are those who hold, or will hold, positions of responsibility and whose performance, in the judgment of the Board, the 3 4 Committee or the management of the Company (if such responsibility is delegated pursuant to Section 6 hereof), can have a significant effect on the success of the Company, other than Messrs. Richard W. Weening and Lewis W. Dickey, Jr. 4. Common Stock Available for Awards. Subject to adjustment as provided in Section 14 hereof, the number of shares that may be issued under the Plan for Awards during the term of the Plan is 750,000 shares of Class A Common Stock, provided that not more than 750,000 shares of Class A Common Stock may be subject to incentive stock options and 100,000 shares of Class A Common Stock may be awarded as Restricted Stock Awards under Section 7(b) hereof. Any shares subject to an Award which are used in settlement of tax withholding obligations shall be deemed not to have been issued for purposes of determining the maximum number of shares available for issuance under the Plan. Likewise, if any Stock Option is exercised by tendering shares, either actually or by attestation, to the Company as full or partial payment for such exercise under this Plan, only the number of shares issued net of the shares tendered shall be deemed issued for purposes of determining the maximum number of shares available for issuance under the Plan. No individual shall be eligible to receive Awards aggregating more than 300,000 shares of Class A Common Stock reserved under the Plan in any one calendar year, subject to adjustment as provided in Section 14 hereof. Furthermore, the maximum payment that can be made for Awards granted to any one individual pursuant to Section 7(b) (relating to Restricted Stock Awards) is $500,000.00 in any one calendar year. The value of shares of Class A Common Stock for purposes of determining the maximum individual payment amount will be the Fair Market Value of a share of Class A Common Stock on the date of grant multiplied by the number of shares of Class A Common Stock granted. Cumulus Media Inc. shall take whatever actions are necessary to file required documents with the U.S. Securities and Exchange Commission and any other appropriate governmental authorities and stock exchanges to make shares of Class A Common Stock available for issuance pursuant to Awards. 5. Administration. The Plan shall be administered by the Committee, which shall have full and exclusive power to interpret the Plan, to determine which current and prospective employees, non-employee directors and consultants are Plan Participants, to grant waivers of Award restrictions, to determine the provisions of Award Agreements and to adopt such rules, regulations and guidelines for carrying out the Plan as it may deem necessary or proper, all of which powers shall be executed in the best interests of the Company and in keeping with the objectives of the Plan. Notwithstanding the foregoing, any Award made to a non-employee director must be approved by the Board. 6. Delegation of Authority. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may delegate to the chief executive officer and to other senior officers of the Company its duties under the Plan pursuant to such conditions or limitations as the Committee may establish. Any such delegation may be revoked by the Committee at any time. 7. Awards. The Committee shall determine the type or types of Award(s) to be made to each Participant and shall set forth in the related Award Agreement the terms, conditions, performance requirements, and limitations applicable to each Award including, but not limited to, continuous service with the Company, conditions under which acceleration of 4 5 vesting will occur and achievement of specific business objectives. (a) Stock Option. A Stock Option is the grant of a right to purchase a specified number of shares of Class A Common Stock the purchase price of which shall be not less than 100% of Fair Market Value on the date of grant, as determined by the Committee (a "Stock Option"). A Stock Option may be in the form of a nonqualified stock option or an incentive stock option ("ISO"). A nonqualified stock option is a Stock Option that does not meet the criteria of an ISO. An ISO, in addition to being subject to applicable terms, conditions and limitations established by the Committee, complies with Section 422 of the Code which, among other limitations, provides that the aggregate Fair Market Value (determined at the time the option is granted) of Class A Common Stock for which ISOs are exercisable for the first time by a Participant during any calendar year shall not exceed $100,000; that ISOs shall be priced at not less than 100% of the Fair Market Value on the date of the grant (110% in the case of a Participant who is a 10% shareholder of the Company within the meaning of Section 422 of the Code); and that ISOs shall be exercisable for a period of not more than ten years (five years in the case of a Participant who is a 10% shareholder of the Company). (b) Restricted Stock Award. A restricted stock award is an Award of shares of Class A Common Stock for such consideration as the Committee may specify which may contain transferability or forfeiture provisions including a requirement of future services and such other restrictions and conditions as may be established by the Committee and set forth in the Award Agreement. 8. Deferred Payment of Awards. The Committee may permit selected Participants to elect to defer payments of some or all types of Awards in accordance with procedures established by the Committee which are intended to permit such deferrals to comply with applicable requirements of the Code including, at the choice of Participants, the capability to make further deferrals for payment after retirement. Dividends or dividend equivalent rights may be extended to and made part of any Award denominated in stock, subject to such terms, conditions and restrictions as the Committee may establish. The Committee may also establish rules and procedures for the crediting of dividend equivalents for deferred payments denominated in stock. 9. Stock Option Exercise. The price at which shares of Class A Common Stock may be purchased under a Stock Option shall be paid in full at the time of the exercise in cash or, if permitted by the Committee, by means of tendering shares of Class A Common Stock, which have been held by the Participant for more than six months and have not been used within the prior six-month period to exercise an option, either directly or by attestation, valued at Fair Market Value on the date of exercise, or any combination thereof. 10. Tax Withholding. The Company shall have the right to deduct applicable taxes from any Award payment and withhold, at the time of delivery or vesting of shares under the Plan, an appropriate number of shares for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The Company may defer making delivery with respect to Class A 5 6 Common Stock obtained pursuant to an Award hereunder until arrangements satisfactory to it have been made with respect to any such withholding obligation. If Class A Common Stock is used to satisfy tax withholding, such stock shall be valued based on the Fair Market Value when the tax withholding is required to be made. 11. Amendment or Termination of the Plan. The Board may, at any time, but only with unanimous consent or approval, amend or terminate the Plan; provided, however, that (a) subject to Section 14 hereof, no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any Award granted under the Plan prior to the date such amendment is adopted by the Board; and (b) without further approval of the shareholders of the Company, no amendment shall increase the number of shares of Class A Common Stock which may be delivered pursuant to Awards hereunder, except for increases resulting from Section 14 hereof. 12. Termination of Employment. If the employment of a Participant terminates, or a non-employee director no longer serves on the Board, other than pursuant to paragraphs (a) through (c) of this Section 12, all unvested Awards shall immediately terminate and all vested but unexercised, deferred or unpaid Awards shall terminate 90 days after such termination of employment or service, unless the Award Agreement provides otherwise, and during such 90-day period shall be exercisable only to the extent provided in the Award Agreement. Notwithstanding the foregoing, if a Participant's employment is terminated for Cause, to the extent the Award is not effectively exercised or has not vested prior to such termination, it shall lapse or be forfeited to the Company immediately upon termination. In all events, an Award will not be exercisable after the end of its term as set forth in the Award Agreement. (a) Retirement. When a Participant's employment or service terminates as a result of Retirement, or early retirement with the consent of the Committee, the Committee (in the form of an Award Agreement or otherwise) may permit Awards to continue in effect beyond the date of Retirement, or early retirement, and/or the exercisability and vesting of any Award may be accelerated. (b) Resignation in the Best Interests of the Company. When a Participant resigns from the Company or the Board and, in the judgment of the Committee, the acceleration and/or continuation of outstanding Awards would be in the best interests of the Company, the Committee may (i) authorize, where appropriate, the acceleration and/or continuation of all or any part of Awards granted prior to such termination and (ii) permit the exercise, vesting and payment of such Awards for such period as may be set forth in the applicable Award Agreement. (c) Death or Disability of a Participant. 6 7 (i) In the event of a Participant's death, the Participant's estate or beneficiaries shall have a period specified in the Award Agreement within which to receive or exercise any outstanding Award held by the Participant under such terms, and to the extent, as may be specified in the applicable Award Agreement. Rights to any such outstanding Awards shall pass by will or the laws of descent and distribution in the following order: (a) to beneficiaries so designated by the Participant; if none, then (b) to a legal representative of the Participant; if none, then (c) to the persons entitled thereto as determined by a court of competent jurisdiction. Subject to subparagraph (iii) below, Awards so passing shall be exercised or paid out at such times and in such manner as if the Participant were living. (ii) In the event a Participant is deemed by the Company to be disabled within the meaning of Cumulus Media Inc.'s group long-term disability plan, or if Cumulus Media Inc. does not have such a plan, Section 22(e)(3) of the Code, the Award shall be exercisable for the period, and to the extent, specified in the Award Agreement. Awards and rights to any such Awards may be paid to or exercised by the Participant, if legally competent, or a legally designated guardian or representative if the Participant is legally incompetent by virtue of such disability. (iii) After the death or disability of a Participant, the Committee may in its sole discretion at any time (1) terminate restrictions in Award Agreements and (2) accelerate any or all installments and rights. (iv) In the event of uncertainty as to interpretation of or controversies concerning this paragraph (c) of Section 12, the Committee's determinations shall be binding and conclusive. (d) No Employment Rights. The Plan shall not confer upon any Participant any right with respect to continuation of employment by the Company or service on the Board, nor shall it interfere in any way with the right of the Company to terminate any Participant's employment or service on the Board at any time. 13. Nonassignability. Except as provided in subsection (c) of Section 12 and this Section 13, no Award under the Plan shall be assignable or transferable, or payable to or exercisable by anyone other than the Participant to whom it was granted. Notwithstanding the foregoing, the Committee (in the form of an Award Agreement or otherwise) may permit Awards, other than incentive stock options within the meaning of Section 422 of the Code, to be transferred to members of the Participant's immediate family, to trusts for the benefit of the Participant and/or such immediate family members, and to partnerships or other entities in which the Participant and/or such immediate family members own all the equity interests. For purposes of the preceding sentence, "immediate family" shall mean a Participant's spouse, issue, and spouses of his issue. 14. Adjustments. In the event of any change in the outstanding Class A Common 7 8 Stock of the Company by reason of a stock split, stock dividend, combination or reclassification of shares, recapitalization, merger, or similar event, the Committee may adjust proportionally (a) the number of shares of Class A Common Stock (i) reserved under the Plan, (ii) available for ISOs, (iii) for which Awards may be granted to an individual Participant, and (iv) covered by outstanding Awards denominated in stock; (b) the stock prices related to outstanding Awards; and (c) the appropriate Fair Market Value and other price determinations for such Awards. In the event of any other change affecting the Class A Common Stock or any distribution (other than normal cash dividends) to holders of Class A Common Stock, such adjustments as may be deemed equitable by the Committee, including adjustments to avoid fractional shares, shall be made to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Committee shall be authorized to issue or assume Stock Options, whether or not in a transaction to which Section 424(a) of the Code applies, by means of substitution of new Stock Options for previously issued Stock Options or an assumption of previously issued Stock Options. 15. Notice. Any notice to the Company required by any of the provisions of the Plan shall be addressed to the director of finance of the Company in writing, and shall become effective when it is received by his office. 16. Unfunded Plan. The Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are entitled to cash, Class A Common Stock or rights thereto under the Plan, any such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that may at any time be represented by cash, Class A Common Stock or rights thereto, nor shall the Plan be construed as providing for such segregation, nor shall the Company nor the Board nor the Committee be deemed to be a trustee of any cash, Class A Common Stock or rights thereto to be granted under the Plan. Any liability of the Company to any Participant with respect to a grant of cash, Class A Common Stock or rights thereto under the Plan shall be based solely upon any contractual obligations that may be created by the Plan and any Award Agreement; no such obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by the Plan. 17. Governing Law. The Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Wisconsin, without giving effect to principles of conflicts of laws, and construed accordingly. 18. Effective and Termination Dates. The effective date of the Plan is August 30, 1999. The Plan shall terminate on August 30, 2009 subject to earlier termination by the Board pursuant to Section 11, after which no Awards may be made under the Plan, but any such termination shall not affect Awards then outstanding or the authority of the Committee to continue to administer the Plan. 19. Other Benefit and Compensation Programs. Payments and other benefits 8 9 received by a Participant pursuant to an Award shall not be deemed a part of such Participant's regular, recurring compensation for purposes of the termination, indemnity or severance pay law of any country and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan, contract or similar arrangement, unless the Committee expressly determines otherwise. 9 EX-10.3 6 1999 EXECUTIVE STOCK INCENTIVE PLAN 1 EXHIBIT 10.3 CUMULUS MEDIA INC. 1999 EXECUTIVE STOCK INCENTIVE PLAN 1. Objectives. The Cumulus Media Inc. 1999 Executive Stock Incentive Plan is designed to be a plan which governs the stock options to be granted to Richard W. Weening ("Mr. Weening") and Lewis W. Dickey, Jr. ("Mr. Dickey"). 2. Definitions. (a) "Award" shall mean the grant of a Stock Option to a Participant pursuant to such terms, conditions, performance requirements, and limitations as the Committee may establish in order to fulfill the objectives of the Plan. (b) "Award Agreement" shall mean an agreement between Cumulus Media Inc. and a Participant that sets forth the terms, conditions, performance requirements, and limitations applicable to an Award. (c) "Board" shall mean the Board of Directors of Cumulus Media Inc. (d) "Cause" shall have the same meaning as in Section 6(c) of the Employment Agreements. (e) "Change of Control" shall have the same meaning as in Section 8 of the Employment Agreements. (f) "Class A Common Stock" shall mean the authorized and issued or unissued $.01 par value Class A common stock of Cumulus Media Inc. (g) "Class C Common Stock" shall mean the authorized and issued or unissued $.01 par value Class C common stock of Cumulus Media Inc. (h) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (i) "Committee" shall mean the Compensation Committee of the Board of Directors of Cumulus Media Inc. comprised of at least two non-employee directors. (j) "Company" shall mean Cumulus Media Inc. and its subsidiaries including subsidiaries of subsidiaries and partnerships and other business ventures in which Cumulus Media Inc. has a significant equity interest, as determined in the sole discretion of the Committee. 2 (k) "Employment Agreements" shall mean the employment agreements between the Company and Mr. Weening and Mr. Dickey,respectively, dated as of July 1, 1998. (l) "Fair Market Value", as regards the Class A Common Stock shall mean the closing sale price of the Class A Common Stock on the Nasdaq National Market as reported in the Midwest Edition of the Wall Street Journal for the date in question, provided that, if no sales of Class A Common Stock were made on said exchange on that date, "Fair Market Value" shall mean the closing sale price of Class A Common Stock as reported for the most recent preceding day on which sales of Class A Common Stock were made on such exchange, or, failing any such sales, such other price as the Committee may determine in conformity with pertinent law and regulations of the Treasury Department. Notwithstanding the foregoing, in the case of Awards which are effective on the date the Company sells shares of Class A Common Stock in an underwritten public offering, Fair Market Value shall mean the price per share at which the Class A Common Stock is initially sold to the public pursuant to the offering. "Fair Market Value" as regards the Class C Common Stock from time to time, shall mean the Fair Market Value of the Class A Common Stock at such same time unless the Committee determines otherwise because of a determination that the Fair Market Value of the Class A Common Stock is not indicative of the Fair Market Value of the Class C Common Stock. In the event of such a determination, the Committee shall determine the Fair Market Value of the Class C Common Stock in conformity with pertinent law and regulations of the Treasury Department. (m) "Participant" shall mean Mr. Weening and/or Mr. Dickey. (n) "Plan" shall mean the Cumulus Media Inc. 1999 Executive Stock Incentive Plan. (o) "Stock Option" shall mean a grant of a right to purchase a specified number of shares of Class C Common Stock the purchase price of which shall be not less than 100% of Fair Market Value on the date of grant, as determined by the Committee. A stock option may be in the form of a nonqualified stock option or an incentive stock option ("ISO"). A nonqualified stock option is an option that does not meet the criteria of an ISO. An ISO, in addition to being subject to applicable terms, conditions and limitations established by the Committee, complies with Section 422 of the Code which, among other limitations, provides that the aggregate Fair Market Value (determined at the time the option is granted) of Class C Common Stock for which ISOs are exercisable for the first time by a Participant during any calendar year shall not exceed $100,000; that ISOs shall be priced at not less than 100% of the Fair Market Value on the date of the grant (110% in the case of a Participant who is a 10% shareholder of the Company within the meaning of Section 422 of the Code); and that ISOs shall be exercisable for a period of not more than ten years (five years in the case of a Participant who is a 10% shareholder of the Company). 2 3 3. Eligibility. Mr. Weening and Mr. Dickey are the only employees eligible to participate in the Plan. 4. Common Stock Available for Awards. Subject to adjustment as provided in Section 14 hereof, the number of shares that may be issued under the Plan for Awards during the term of the Plan is 1,000,000 shares of Class C Common Stock, provided that not more than 300,000 shares of Class C Common Stock may be subject to incentive stock options. Any shares subject to an Award which are used in settlement of tax withholding obligations shall be deemed not to have been issued for purposes of determining the maximum number of shares available for issuance under the Plan. Likewise, if any Stock Option is exercised by tendering shares, either actually or by attestation, to the Company as full or partial payment for such exercise under this Plan, only the number of shares issued net of the shares tendered shall be deemed issued for purposes of determining the maximum number of shares available for issuance under the Plan. No individual shall be eligible to receive Awards aggregating more than 500,000 shares of Class C Common Stock reserved under the Plan in any one calendar year, subject to adjustment as provided in Section 14 hereof. Cumulus Media Inc. shall take whatever actions are necessary to file required documents with the U.S. Securities and Exchange Commission and any other appropriate governmental authorities and stock exchanges to make shares of Class C Common Stock available for issuance pursuant to Awards." 5. Administration. The Plan shall be administered by the Committee, which shall have full and exclusive power to interpret the Plan, to determine which persons are Participants, to grant waivers of Award restrictions, to determine the provisions of Award Agreements and to adopt such rules, regulations and guidelines for carrying out the Plan as it may deem necessary or proper, all of which powers shall be executed in the best interests of the Company and in keeping with the objectives of the Plan. 6. Delegation of Authority. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may delegate to the chief executive officer and to other senior officers of the Company its duties under the Plan pursuant to such conditions or limitations as the Committee may establish. Any such delegation may be revoked by the Committee at any time. 7. Awards. The Committee shall set forth in the related Award Agreement the terms, conditions, performance requirements, and limitations applicable to each Award including, but not limited to, continuous service with the Company, conditions under which acceleration of vesting will occur and achievement of specific business objectives. 8. Deferred Payment of Awards. The Committee may permit selected Participants to elect to defer payments of some or all types of Awards in accordance with procedures established by the Committee which are intended to permit such deferrals to comply with applicable requirements of the Code including, at the choice of Participants, the capability to make further deferrals for payment after retirement. Dividends or dividend equivalent rights 3 4 may be extended to and made part of any Award denominated in stock, subject to such terms, conditions and restrictions as the Committee may establish. The Committee may also establish rules and procedures for the crediting of dividend equivalents for deferred payments denominated in stock. 9. Stock Option Exercise. The price at which shares of Class C Common Stock may be purchased under a Stock Option shall be paid in full at the time of the exercise in cash or, if permitted by the Committee, by means of tendering shares of Class A Common Stock or Class C Common Stock which have been held by the Participant for more than six months and have not been used within the prior six-month period to exercise an option, either directly or by attestation, valued at Fair Market Value on the date of exercise, or any combination thereof. 10. Tax Withholding. The Company shall have the right to deduct applicable taxes from any Award payment and withhold, at the time of delivery or vesting of shares under the Plan, an appropriate number of shares for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The Company may defer making delivery with respect to Class C Common Stock obtained pursuant to an Award hereunder until arrangements satisfactory to it have been made with respect to any such withholding obligation. If Class C Common Stock is used to satisfy tax withholding, such stock shall be valued based on the Fair Market Value when the tax withholding is required to be made. 11. Amendment or Termination of the Plan. The Board may, at any time, but only by unanimous consent or approval, amend or terminate the Plan; provided, however, that (a) subject to Section 14 hereof, no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under any Award granted under the Plan prior to the date such amendment is adopted by the Board; and (b) without further approval of the shareholders of the Company, no amendment shall increase the number of shares of Class C Common Stock which may be delivered pursuant to Awards hereunder, except for increases resulting from Section 14 hereof. 12. Termination of Employment. (a) Termination of Options. The impact of a Participant's termination of employment on the vesting and exercisability of a Stock Option shall be governed by the Award Agreement. 4 5 (b) Death or Disability of a Participant. (i) In the event of a Participant's death, the Participant's estate or beneficiaries shall have a period specified in the Award Agreement within which to receive or exercise any outstanding Award held by the Participant under such terms, and to the extent, as may be specified in the applicable Award Agreement. Rights to any such outstanding Awards shall pass by will or the laws of descent and distribution in the following order: (a) to beneficiaries so designated by the Participant; if none, then (b) to a legal representative of the Participant; if none, then (c) to the persons entitled thereto as determined by a court of competent jurisdiction. Subject to subparagraph (iii) below, Awards so passing shall be exercised or paid out at such times and in such manner as if the Participant were living. (ii) In the event a Participant suffers a Disability as defined in Section 6(e) of the Employment Agreements, the Award shall be exercisable for the period, and to the extent, specified in the Award Agreement. Awards and rights to any such Awards may be paid to or exercised by the Participant, if legally competent, or a legally designated guardian or representative if the Participant is legally incompetent by virtue of such disability. (iii) In the event of uncertainty as to interpretation of or controversies concerning this paragraph (b) of Section 12, the Committee's determinations shall be binding and conclusive. (c) No Employment Rights. The Plan shall not confer upon any Participant any right with respect to continuation of employment by the Company nor shall it interfere in any way with the right of the Company to terminate any Participant's employment at any time. 13. Nonassignability. Except as provided in Section 12(b) and this Section 13, no Award under the Plan shall be assignable or transferable, or payable to or exercisable by anyone other than the Participant to whom it was granted, except that Awards, other than incentive stock options, within the meaning of Section 422 of the Code, may be transferred to members of the Participant's immediate family, to trusts for the benefit of the Participant and/or such immediate family members, and to partnerships or other entities in which the Participant and/or such immediate family members own all the equity interests. For purposes of the preceding sentence, "immediate family" shall mean a Participant's spouse, issue, and spouses of his issue. 14. Adjustments. In the event of any change in the outstanding Class C Common Stock of the Company by reason of a stock split, stock dividend, combination or reclassification of shares, recapitalization, merger, or similar event, the Committee may adjust proportionally (a) the number of shares of Class C Common Stock (i) reserved under the Plan, (ii) available for 5 6 ISOs, (iii) for which Awards may be granted to an individual Participant, and (iv) covered by outstanding Awards denominated in stock; (b) the stock prices related to outstanding Awards; and (c) the appropriate Fair Market Value and other price determinations for such Awards. In the event of any other change affecting the Class C Common Stock or any distribution (other than normal cash dividends) to holders of Class C Common Stock, such adjustments as may be deemed equitable by the Committee, including adjustments to avoid fractional shares, shall be made to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Committee shall be authorized to issue or assume Stock Options, whether or not in a transaction to which Section 424(a) of the Code applies, by means of substitution of new Stock Options for previously issued Stock Options or an assumption of previously issued Stock Options. 15. Notice. Any notice to the Company required by any of the provisions of the Plan shall be addressed to the director of finance of the Company in writing, and shall become effective when it is received by his office. 16. Unfunded Plan. The Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are entitled to Class C Common Stock under the Plan, any such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that may at any time be represented by Class C Common Stock , nor shall the Plan be construed as providing for such segregation, nor shall the Company nor the Board nor the Committee be deemed to be a trustee of any Class C Common Stock granted under the Plan. Any liability of the Company to any Participant with respect to a grant of Class C Common Stock under the Plan shall be based solely upon any contractual obligations that may be created by the Plan and any Award Agreement; and no such obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by the Plan. 17. Governing Law. The Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Wisconsin, without giving effect to principles of conflicts of laws, and construed accordingly. 18. Effective and Termination Dates. The effective date of the Plan is August 30, 1999. The Plan shall terminate on August 30, 2009 subject to earlier termination by the Board pursuant to Section 11, after which no Awards may be made under the Plan, but any such termination shall not affect Awards then outstanding or the authority of the Committee to continue to administer the Plan. 19. Other Benefit and Compensation Programs. Payments and other benefits received by a Participant pursuant to an Award shall not be deemed a part of such Participant's regular, recurring compensation and shall not be included in, nor have any effect on, the 6 7 determination of benefits under any other employee benefit plan, contract or similar arrangement, unless the Committee expressly determines otherwise. 7 EX-23.1 7 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in this Amendment No. 1 to the Registration Statement on Form S-3 (No. 333-89825) 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. We hereby consent to the incorporation by reference in this Amendment No. 1 to the Registration Statement on Form S-3 (No. 333-89825) of Cumulus Media Inc. of our report dated February 28, 1999, except for Note 8 which is dated September 15, 1999, relating to the financial statements of HMH Broadcasting, Inc., which appears in the Current Report on Form 8-K of Cumulus Media Inc. filed November 3, 1999. We hereby consent to the incorporation by reference in this Amendment No. 1 to the Registration Statement on Form S-3 (No. 333-89825) of Cumulus Media Inc. of our report dated October 27, 1999 relating to the financial statements of Cape Fear Broadcasting Company, which appears in the Current Report on Form 8-K of Cumulus Media Inc. filed November 3, 1999. We hereby consent to the incorporation by reference in this Amendment No. 1 to the Registration Statement on Form S-3 (No. 333-89825) of Cumulus Media Inc. of our report dated October 27, 1999 relating to the financial statements of C.F. Radio, Inc., which appears in the Current Report on Form 8-K of Cumulus Media Inc. filed November 3, 1999. We hereby consent to the incorporation by reference in this Amendment No. 1 to the Registration Statement on Form S-3 (No. 333-89825) of Cumulus Media Inc. of our report dated February 28, 1999 relating to the financial statements of Coast Radio L.L.C., which appears in the Current Report on Form 8-K of Cumulus Media Inc. filed November 3, 1999. We also consent to reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP Chicago, Illinois November 4, 1999 EX-23.3 8 CONSENT OF WIPFLI ULLRICH BERTELSON LLP 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Amendment 1 of Form S-3 (No. 333-89825) of Cumulus Media of our report dated February 25, 1999 relating to the financial statements balance sheet of Broadcasting Company, Inc. Which appears in the Current Report on Form 8-K of Cumulus Media Inc. filed November 3, 1999. Wipfli Ullrich Bertelson LLP November 4, 1999 Eau Claire, Wisconsin EX-23.4 9 CONSENT OF KPMG LLP 1 EXHIBIT 23.4 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the incorporation by reference herein and to the reference to our firm under the heading "Experts" in the Registration Statement (No. 333-89825) on Form S-3 of Cumulus Media Inc. of our report dated April 2, 1999, except as to note 13, which is as of November 1, 1999, with respect to the consolidated balance sheet of Calendar Broadcasting, Inc. and subsidiaries as of December 31, 1998 and the related consolidated statements of operations, stockholder's equity, and cash flows for the year ended December 31, 1998, which report appears in the Form 8-K of Cumulus Media Inc. dated November 3, 1999. /s/ KPMG LLP Short Hills, New Jersey November 4, 1999 -----END PRIVACY-ENHANCED MESSAGE-----