<PAGE> 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)
<TABLE>
<S> <C> <C>
ILLINOIS 4832 36-4159663
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
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:
<TABLE>
<S> <C>
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
</TABLE>
------------------------------------
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
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A common stock, par
value $0.01 per share......... 4,600,000 shares (2) $33.9375 $156,112,500 $43,399 (3)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 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
------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS CUMULUS SHAREHOLDERS
-------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share................ $ $ $ $
Total.................... $ $ $ $
</TABLE>
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
<PAGE> 3
2 PAGE GATE FOLD
Cover page of gate fold: collage of logos of radio stations owned by us.
<PAGE> 4
Inside of gate fold: U.S. map and to the bottom right a Caribbean map
showing the locations of our radio stations.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
STATION PORTFOLIO
---------------------------------
MSA CLUSTER 12+ OWNED PENDING PRO FORMA
MARKET RANKING BY AUDIENCE --------- --------- ---------
MARKET RANK REVENUE SHARE SHARE FM AM FM AM FM AM
------ ------ ------------- -------- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
STATION PORTFOLIO
---------------------------------
MSA CLUSTER 12+ OWNED PENDING PRO FORMA
MARKET RANKING BY AUDIENCE --------- --------- ---------
MARKET RANK REVENUE SHARE SHARE FM AM FM AM FM AM
------ ------ ------------- -------- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C>
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)
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30,
-------------------- ---------------------------
PRO FORMA
AS ADJUSTED
1997 1998 1999 1999
-------- -------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
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
</TABLE>
- ------------
(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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
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
========
</TABLE>
- ------------
(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.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
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
</TABLE>
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
<PAGE> 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.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------
PRO FORMA
AS
ACTUAL ADJUSTED
-------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
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
======== ========
</TABLE>
24
<PAGE> 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
<PAGE> 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
<PAGE> 29
CUMULUS MEDIA INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
(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
---------- ------------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
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)
======== ======= ======= ======== ========
<CAPTION>
(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)
--------------- ---------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
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)
======= ======== ======= ======= ========
</TABLE>
See accompanying notes to the unaudited pro forma statement of operations.
27
<PAGE> 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:
<TABLE>
<S> <C>
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
========
</TABLE>
(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
<PAGE> 31
<TABLE>
<S> <C>
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
========
</TABLE>
(9) Adjustment to reflect increased interest expense resulting from:
<TABLE>
<S> <C> <C>
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
========
</TABLE>
(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:
<TABLE>
<S> <C>
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
========
</TABLE>
(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
<PAGE> 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:
<TABLE>
<S> <C>
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
========
</TABLE>
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
<PAGE> 33
CUMULUS MEDIA INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
(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
---------- ---------------- --------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
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)
======== ===== ======= ===== ========
<CAPTION>
(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)
--------------- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
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)
====== ======== ======= ======= ========
</TABLE>
See accompanying notes to the unaudited pro forma statement of operations.
31
<PAGE> 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:
<TABLE>
<S> <C>
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)
========
</TABLE>
(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.
<TABLE>
<S> <C>
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
=======
</TABLE>
32
<PAGE> 35
(8) Adjustment to reflect increased interest expense resulting from:
<TABLE>
<S> <C> <C>
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
========
</TABLE>
(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:
<TABLE>
<S> <C> <C>
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
========
</TABLE>
(10) Adjustment to reflect the elimination of $533 of interest expense recorded
by sellers related to debt which was not assumed by Cumulus.
33
<PAGE> 36
(11) Adjustment recorded to eliminate the non-recurring gain on the sale of
assets recorded by Centroplex Communications Inc.
<TABLE>
<S> <C>
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
========
</TABLE>
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
<PAGE> 37
CUMULUS MEDIA INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
(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
---------- ------------------ --------------- -----------------------
<S> <C> <C> <C> <C>
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
======== ========= ========= ========
<CAPTION>
(E) (F)
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS (E)+(F)=(G)
FOR THE FOR THE PENDING PRO FORMA
CURRENT OFFERING(3) ACQUISITIONS(4) COMBINED
------------------- --------------- -----------
<S> <C> <C> <C>
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
======= ========= ========
</TABLE>
See accompanying notes to the unaudited pro forma balance sheet.
35
<PAGE> 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.
<TABLE>
<S> <C> <C>
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
========
</TABLE>
(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:
<TABLE>
<S> <C> <C>
Property and equipment.......................... $ 10,205
Intangible assets, principally broadcast
licenses...................................... 98,325
Deferred tax liability.......................... (6,480)
---------
$ 102,050
=========
</TABLE>
(3) To reflect: (i) the net proceeds of Current Offering to Cumulus of
$101,820, net of $6,341 in issuance costs
<TABLE>
<S> <C>
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
========
</TABLE>
36
<PAGE> 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:
<TABLE>
<S> <C> <C>
Property and equipment.......................... $ 14,460
Intangible assets, principally broadcast
licenses...................................... 131,022
Deferred taxes.................................. (887)
---------
$ 144,595
=========
</TABLE>
37
<PAGE> 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.
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------- AS OF
1997 1998 JUNE 30, 1999
-------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
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
</TABLE>
- ------------
(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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
STATION PORTFOLIO
---------------------------------
MSA CLUSTER 12+ OWNED PENDING PRO FORMA
MARKET RANKING BY AUDIENCE --------- --------- ---------
MARKET RANK REVENUE SHARE SHARE FM AM FM AM FM AM
- ------ ------ ------------- -------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
STATION PORTFOLIO
---------------------------------
MSA CLUSTER 12+ OWNED PENDING PRO FORMA
MARKET RANKING BY AUDIENCE --------- --------- ---------
MARKET RANK REVENUE SHARE SHARE FM AM FM AM FM AM
- ------ ------ ------------- -------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<S> <C> <C>
- - Automotive - Telecommunications - Movies
- - Retail - Fast Food - Entertainment
- - Healthcare - Beverage - Services
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
HEIGHT
ABOVE POWER
AVERAGE (IN KILOWATTS)
EXPIRATION TERRAIN --------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE (IN FEET) DAY NIGHT
------ ---------- ------------------- --------- ---------------- --------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
56
<PAGE> 59
<TABLE>
<CAPTION>
HEIGHT
ABOVE POWER
AVERAGE (IN KILOWATTS)
EXPIRATION TERRAIN --------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE (IN FEET) DAY NIGHT
------ ---------- ------------------- --------- ---------------- --------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
57
<PAGE> 60
<TABLE>
<CAPTION>
HEIGHT
ABOVE POWER
AVERAGE (IN KILOWATTS)
EXPIRATION TERRAIN --------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE (IN FEET) DAY NIGHT
------ ---------- ------------------- --------- ---------------- --------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
58
<PAGE> 61
<TABLE>
<CAPTION>
HEIGHT
ABOVE POWER
AVERAGE (IN KILOWATTS)
EXPIRATION TERRAIN --------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE (IN FEET) DAY NIGHT
------ ---------- ------------------- --------- ---------------- --------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
59
<PAGE> 62
<TABLE>
<CAPTION>
HEIGHT
ABOVE POWER
AVERAGE (IN KILOWATTS)
EXPIRATION TERRAIN --------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE (IN FEET) DAY NIGHT
------ ---------- ------------------- --------- ---------------- --------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
60
<PAGE> 63
<TABLE>
<CAPTION>
HEIGHT
ABOVE POWER
AVERAGE (IN KILOWATTS)
EXPIRATION TERRAIN --------------
MARKET STATIONS CITY OF LICENSE FREQUENCY DATE OF LICENSE (IN FEET) DAY NIGHT
------ ---------- ------------------- --------- ---------------- --------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- ------------
(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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 69
MANAGEMENT
The following table sets forth certain information with respect to our
directors, executive officers and managers:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
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
</TABLE>
- ------------
(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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
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)
- ---- --------- --- --------- --- --------- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
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% -- --
<CAPTION>
CLASS B COMMON STOCK(1) CLASS C COMMON STOCK(1)(2)
-------------------- -----------------------------------
AFTER PRIOR TO AFTER
OFFERING OFFERING OFFERING
---------------- ---------------- ----------------
NAME NUMBER % NUMBER % NUMBER %
- ---- --------- ---- --------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C>
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%
</TABLE>
- ------------
* 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
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
=========
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 96
[LOGO]
94
<PAGE> 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):
<TABLE>
<S> <C>
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................................................ $ *
==========
</TABLE>
- ------------
* 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:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
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.
</TABLE>
II-1
<PAGE> 98
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
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.
</TABLE>
- ------------
* 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/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
</TABLE>
II-4
<PAGE> 101
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
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.
</TABLE>
- ---------------
* 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
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
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
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
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
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
</TABLE>
<PAGE> 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.
<PAGE> 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:
<PAGE> 7
3
<TABLE>
<CAPTION>
Base Rate Eurodollar
Loans Loans
--------- ----------
<S> <C> <C>
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%
</TABLE>
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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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;
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
Installment Percentage
----------- ----------
<S> <C>
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%
</TABLE>
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
<PAGE> 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:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
December 31, 2001 $187,500
March 31, 2002 $187,500
</TABLE>
<PAGE> 41
37
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
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
</TABLE>
(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:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
November 30, 2007 $25,000,000
February 28, 2008 $25,000,000
</TABLE>
(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:
<PAGE> 42
38
<TABLE>
<CAPTION>
Installment Percentage
----------- ----------
<S> <C>
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%
</TABLE>
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
<PAGE> 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.
<PAGE> 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
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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).
<PAGE> 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,
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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).
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
Test Period Consolidated
----------- Leverage Ratio
--------------
<S> <C>
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
</TABLE>
<PAGE> 79
75
<TABLE>
<CAPTION>
Test Period Consolidated
----------- Leverage Ratio
--------------
<S> <C>
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
</TABLE>
(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:
<TABLE>
<CAPTION>
Test Period Consolidated
----------- Senior Debt Ratio
-----------------
<S> <C>
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
</TABLE>
(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:
<TABLE>
<CAPTION>
Test Period Consolidated Interest
----------- Coverage Ratio
---------------------
<S> <C>
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
</TABLE>
<PAGE> 80
76
<TABLE>
<CAPTION>
Test Period Consolidated Interest
----------- Coverage Ratio
---------------------
<S> <C>
October 1, 2001 and thereafter 2.20 to 1.00
</TABLE>
(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:
<TABLE>
<CAPTION>
Test Period Consolidated Fixed Charge
----------- Coverage Ratio
-------------------------
<S> <C>
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
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 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);
<PAGE> 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
<PAGE> 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);
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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,
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 108
ANNEX A
PRICING GRID FOR LOANS
<TABLE>
<CAPTION>
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
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
> 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%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
<PAGE> 109
ANNEX B
<TABLE>
<CAPTION>
================================================================================
Commitment Fee Rate
Utilization Seven-Year Revolving 364-Day Revolving
Percentage Credit Facility Credit Facility
<S> <C> <C>
> 66.700% 0.500% 0.375%
- -
> 33.300% and 0.625% 0.500%
- -
< 66.700%
< 33.300% 0.750% 0.625%
================================================================================
</TABLE>
<PAGE> 110
SCHEDULE 1.1A
ACQUISITION AGREEMENTS
<PAGE> 111
SCHEDULE 1.1B
MORTGAGED PROPERTY
<PAGE> 112
SCHEDULE 1.1C
EXISTING LETTERS OF CREDIT
<PAGE> 113
SCHEDULE 4.4
CONSENTS, AUTHORIZATIONS, FILINGS AND NOTICES
<PAGE> 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.
<PAGE> 115
SCHEDULE 4.19(a)
UCC FILING JURISDICTIONS
<PAGE> 116
SCHEDULE 4.19(b)
MORTGAGE FILING JURISDICTIONS
<PAGE> 117
SCHEDULE 4.23
LICENSES
<PAGE> 118
SCHEDULE 7.2(e)
EXISTING INDEBTEDNESS
<PAGE> 119
SCHEDULE 7.3(f)
EXISTING LIENS
<PAGE> 120
SCHEDULE 7.8(i)
EXISTING INVESTMENTS
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 7
determination of benefits under any other employee benefit plan, contract or
similar arrangement, unless the Committee expressly determines otherwise.
7
<PAGE> 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
<PAGE> 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
<PAGE> 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
