Exhibit (a)(1)
CUMULUS
MEDIA INC.
Offer to
Exchange Outstanding Options for
Restricted Shares of Class A Common Stock and
Options Exercisable for Shares of Class A Common
Stock
THE OFFER AND WITHDRAWAL
RIGHTS EXPIRE AT 5:00 P.M., ATLANTA TIME ON
DECEMBER 30, 2008, UNLESS THE OFFER IS EXTENDED.
We are offering our employees and non-employee directors the
opportunity to exchange their outstanding options to purchase
shares of our Class A Common Stock (old
options) that were granted on or after October 2,
2000 for a combination of restricted shares of our Class A
Common Stock (restricted shares) and replacement
options to purchase our Class A Common Stock (new
options). Eligible old options may be exchanged for
restricted shares and new options pursuant to the formulas set
forth in this Offer to Exchange. The offer is subject to the
terms and conditions set forth in this Offer to Exchange and the
related Letter of Transmittal, which, together with any
amendments or supplements to either, collectively constitute the
Offer.
You are eligible to participate in the Offer if, on
November 30, 2008, you are one of our (or our
subsidiaries) active employees (full-time or part-time),
or a non-employee member of our board of directors (or a
delegated affiliate of one of the foregoing), you continue to be
so as of the expiration of the Offer, and you hold outstanding
old options that were granted on or after October 2, 2000.
We refer to those old options as eligible options.
Upon the terms and subject to the conditions set forth in this
Offer to Exchange, we will issue restricted shares and new
options to those eligible persons who elect to participate in
the Offer promptly after the date on which we accept and cancel
the eligible options tendered for exchange. We will not accept
eligible options unless they are properly elected for exchange
and not validly withdrawn before the Offer expires on the
expiration date, expected to be December 30, 2008, unless
extended.
Your Participant Statement, which is being sent to you under
separate cover, contains information about your eligible
options, including the number of restricted shares and shares
underlying new options that you will receive in respect of your
eligible options if you elect to participate in the Offer.
The restricted shares and new options issued in exchange for
tendered eligible options will be issued under our 2008 Equity
Incentive Plan (the 2008 Plan). Except under limited
circumstances, the exercise price of the new options will be as
follows: for the first one-third of the new options you receive,
the exercise price will the closing price of our Class A
Common Stock on the date of grant, for the second one-third, the
exercise price will be 115% of the closing price on the date of
grant, and for the final one-third, the exercise price will be
130% of the closing price on the date of grant. To the extent
allowable under federal tax law, new options will be designated
incentive stock options, or ISOs. The restricted
shares and new options will be subject to forfeiture and other
restrictions until they vest under the terms of a restricted
share award certificate and new option award certificate, copies
of which are included with the materials accompanying this Offer
to Purchase and which are referred to as the award
certificates.
By properly tendering for exchange your
eligible options, you will be deemed to have accepted the terms
of, and agreed to be bound by, the 2008 Plan and those award
certificates.
Your old options may be fully vested. The restricted shares and
new options to be issued in connection with the Offer, however,
will not be vested. Assuming you continue to meet the
requirements for vesting specified in the award certificates,
the restricted shares and new options will vest at the rate of
(1) 50% on the second anniversary of the date of grant and
(2) 25% on each of the two succeeding anniversaries
thereafter. Unless you have an employment agreement that
provides otherwise, if you are an employee and you cease to be
employed before your restricted shares and new options vest,
those restricted shares and new options will be forfeited. If
you are a non-employee director and you cease to serve as a
director before your restricted
shares and new options vest, those restricted shares and new
options will be forfeited. Other restrictions regarding the
restricted shares and new options are set forth in the award
certificates.
You are not required to exchange any old options. In order to
participate, however, you must exchange all of your eligible
options. You may not elect to only exchange a portion of your
eligible options. All eligible options properly tendered and not
validly withdrawn before the expiration date will be exchanged
for restricted shares and new options, upon the terms and
subject to the conditions set forth in this Offer to Exchange.
The Offer is not conditioned upon a minimum number of old
options being exchanged, but is subject to the conditions
described in Section 6 of this Offer to Exchange.
Although our board of directors has approved the Offer, neither
we nor our board make any recommendation as to whether you
should exchange or refrain from exchanging your eligible
options. You must make your own decision whether to elect to
exchange your eligible options.
Our executive officers and directors will be eligible to
participate in the Offer. As of the date of this Offer to
Exchange, our executive officers and directors hold old options
to purchase approximately 4.9 million shares, or 82.1% of
the shares underlying the eligible options, of which Lewis W.
Dickey, Jr., our Chairman, President and Chief Executive
Officer, holds eligible options to purchase
1,350,000 shares, or 22.7% of the shares underlying the
eligible options. We expect that our executive officers and
directors, including Mr. L. Dickey, will participate
in the Offer and will receive their pro rata portions of the
restricted shares and new options.
Shares of our Class A Common Stock are quoted on the NASDAQ
Global Select Market under the symbol CMLS. On
November 28, 2008, the closing price of our Class A
Common Stock was $0.88 per share.
We recommend that you
obtain current market quotations for our Class A Common
Stock before deciding whether to elect to exchange your old
options.
You should direct questions about this Offer or requests for
assistance to Ray Perlock, Corporate Controller, at
(404) 260-6714.
We have not authorized any person to make any recommendation
on our behalf as to whether you should tender or refrain from
tendering your eligible options pursuant to the Offer. You
should rely only on the information contained in this Offer to
Exchange or in documents to which we have referred you.
Neither the Securities and Exchange Commission (the
SEC) nor any state securities commission has
approved or disapproved of the Offer, passed upon the merits or
fairness of the Offer, passed upon the adequacy or accuracy of
the disclosure in or incorporated by reference in this Offer to
Exchange, or determined if this Offer to Exchange is truthful or
complete. Any representation to the contrary is a criminal
offense.
A Summary Term Sheet describing the principal
terms of the offer follows the Table of Contents. You should
read this entire Offer to Exchange and the enclosed Letter of
Transmittal carefully before deciding whether or not to tender
your eligible options for exchange. You may want to consult with
your personal financial advisor or other professional advisor
regarding your individual circumstances.
The date of this Offer to Exchange is December 1, 2008.
ii
SUMMARY
TERM SHEET
This Section contains answers to some of the questions that you
may have about the Offer. We urge you to read this entire Offer
to Exchange carefully because the information in this summary is
not complete. Where appropriate, we have included references to
the relevant sections of this Offer to Exchange to help you find
a more complete description of the topics in this summary.
General
Questions about the Offer
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Q1.
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What are we offering to exchange?
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We are offering eligible participants the opportunity to receive
restricted shares and new options in exchange for outstanding
old options that were granted on or after October 2, 2000.
We refer to these options as eligible options. Your
Participant Statement, which is being sent to you under separate
cover, contains information about your eligible options,
including the number of restricted shares and shares underlying
new options that you will receive in respect of your eligible
options if you elect to participate in the Offer. See
Section 1 of this Offer to Exchange.
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Q2.
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Why are we making the Offer?
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The Offer is intended to accomplish a number of important
objectives. First, by providing long-term incentives in the form
of both restricted shares and new options, we hope to reinforce
the ownership culture among our employees and more
closely align employees interests with those of our
stockholders. Second, by reintroducing vesting restrictions on
restricted shares and new options, where today the vast majority
of old options are fully vested, we expect to significantly
improve the retention effects of our long-term incentives to
ensure the continuity of our employees. Finally, we intend, upon
completion of the Offer, to terminate all remaining share
availability under our currently existing equity incentive plans
(other than the 2008 Plan), and not make any further awards
under those plans. As a result, we expect that the Offer will
significantly reduce overhang and decrease the potential
dilution that could result from the exercise of currently
outstanding or future awards of equity incentive grants.
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Q3.
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Can we amend the Offer?
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Yes. We may amend the Offer, as long as we comply with
applicable law. In certain circumstances, we will be required to
extend the period during which you may tender eligible options
if we amend the terms of the Offer. See Section 14 of this
Offer to Exchange.
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Q4.
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What do we and our board of directors think of the Offer?
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Although our board of directors (upon the recommendation of its
compensation committee) has authorized the Offer, our board
recognizes that the decision to tender eligible options is an
individual one that should be based on a variety of factors.
Neither we nor our board (or its compensation committee) is
making any recommendation as to whether you should or should not
participate in the Offer. You must make your own decision
whether to participate in the Offer. You should consult with
your personal advisors if you have questions about your
financial or tax situation or whether you should participate in
the Offer.
Eligibility
Matters
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Q5.
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Who is eligible to participate in the Offer?
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You are eligible to participate in the Offer if, on
November 30, 2008, you are one of our (or our
subsidiaries) active employees (full-time or part-time),
or a non-employee member of our board of directors (or a
delegated affiliate of one of the foregoing), you continue to be
so as of the expiration of the Offer, and you hold outstanding
old options that were granted on or after October 2, 2000.
See Section 1 of this Offer to Exchange.
1
Questions
Regarding the Restricted Shares and New Options
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Q6.
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How many restricted shares and new options will I receive in
exchange for eligible options that I tender?
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Our board (upon the recommendation of its compensation
committee) has determined that we will issue a maximum of
300,000 restricted shares and new options exercisable for an
aggregate of 1,000,000 shares of our Class A Common
Stock in exchange for the eligible options to purchase an
aggregate of 5,941,553 shares. The number of restricted
shares and shares underlying new options that you will receive
is calculated by applying certain formulas to each of your
outstanding awards of old options, which are designed so that
you will receive your pro rata portion of the 300,000 restricted
shares based on the number of shares underlying your eligible
options as compared to the total outstanding eligible options
(which amounts to one restricted share for each approximately
19.8 shares underlying eligible options), and you will
receive your pro rata portion of new options exercisable for
1,000,000 shares based on the attributed value of your
eligible options, calculated using the Black-Scholes option
pricing model, as compared to the attributed value of the total
outstanding eligible options. See Section 1 of this Offer
to Exchange.
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Q7.
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What will the exercise price of the new options be?
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The exercise price of the new options will be as follows: for
the first one-third of the new options you receive, the exercise
price will the closing price of our Class A Common Stock on
the date of grant, for the second one-third, the exercise price
will be 115% of the closing price on the date of grant, and for
the final one-third, the exercise price will be 130% of the
closing price on the date of grant. However, for certain options
granted to eligible participants who beneficially own 10% or
more of the voting power of our common stock, the exercise price
for the first one-third of the new options will be 110% of the
closing price, in accordance with federal tax law. See
Sections 1 and 8 of this Offer to Exchange.
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Q8.
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When will restricted shares and new options vest?
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The restricted shares and new options you receive in the Offer
will vest at the rate of (1) 50% on the second anniversary
of the date of grant and (2) 25% on each of the two
succeeding anniversaries thereafter. Unless you have an
employment agreement that provides otherwise, if you are an
employee and you cease to be employed before your restricted
shares and new options vest, those restricted shares and new
options will be forfeited. If you are a non-employee director
and you cease to serve as a director before your restricted
shares and new options vest, those restricted shares and new
options will be forfeited. Other restrictions regarding the
restricted shares and new options, and their vesting, are set
forth in the award certificates. See Section 1 of this
Offer to Exchange.
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Q9.
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Why will the restricted shares and new options I receive in
the Offer be subject to vesting even if the eligible options I
tender are already fully vested?
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One of the important objectives of the Offer is to provide
eligible employees with incentives to remain employed with us
and our subsidiaries. Our board of directors (including its
compensation committee) has made the judgment that this
objective is best served by making all restricted shares and new
options awarded in the Offer subject to a vesting requirement,
even if the eligible options that you tender are already fully
vested.
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Q10.
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What happens if my employment or board service terminates
before my restricted shares or new options have vested or before
I have exercised my vested new options? How is this different
than what would happen to my old options?
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Unless you have an employment agreement that provides otherwise,
you will forfeit all of your unvested restricted shares or
unvested new options if your employment or board service with us
or our subsidiaries terminates for any reason. Termination of
employment or board service will not affect your rights in any
restricted shares that have vested, or in any shares of
Class A Common Stock that you receive upon the exercise of
vested new options, before your employment or board service
terminates. Unless you have an employment agreement that
provides otherwise, your ability to exercise new options after
termination of employment or board service depends on the reason
for termination: if termination is for death or disability,
2
you or your estate will have one year after termination to
exercise any vested new options; if termination is a
Termination for Cause (as defined in the option
award certificate) you will forfeit the ability to exercise
vested new options; and if termination is for any other reason,
you will have 90 days after termination to exercise any
vested new options.
Similar to the 2008 Plan, under the incentive plans under which
the old options were issued, you will forfeit all of your
unvested options if your employment or board service terminates
for any reason. However, under those incentive plans, your
ability to exercise old options after termination will depend on
the specific terms of your award agreement and may be up to one
year following termination. You should refer to your award
agreement to confirm the specific conditions under which you may
exercise your old options upon any termination of employment.
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Q11.
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What happens to the restricted shares and new options if we
undergo a change in control? How is this different than what
would happen to my old options?
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In the event of (1) any stock dividend, stock split,
combination of shares, recapitalization or other change in our
capital structure, (2) any merger, consolidation, spin-off,
split-off, spin-out,
split-up,
reorganization, partial or complete liquidation or other
distribution of assets, issuance of rights or warrants to
purchase securities, or (3) any other corporate transaction
or event having an effect similar to any of the foregoing, our
board of directors (or its compensation committee) has the
authority to make such adjustments, if any, to the restricted
shares and new options as it deems appropriate in connection
with any such event. Unless you have an employment agreement
that provides otherwise, the terms of restricted shares and new
options will not otherwise provide for any automatic special
treatment in the event that we undergo a change in control. In
particular, there is no provision for automatic early vesting in
this circumstance. See Section 8 of this Offer to Exchange.
However, under certain of the incentive plans under which the
old options were issued, you may have a right to immediate
vesting of options upon a change of control. You should refer to
your award agreement to confirm whether or not your old options
are subject to early vesting upon a change of control.
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Q12.
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When will the new options I receive in the Offer expire?
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Except in certain limited circumstances, your new options will
expire ten years from the date of grant. The grant date for new
options will be promptly after the date on which we accept and
cancel the eligible options tendered for exchange. See
Item 8 of this Offer to Exchange.
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Q13.
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What are the other material differences between the old
options and the restricted shares and new options?
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The restricted shares are different from the old options
primarily because immediately upon issuance of the restricted
shares, you are the record holder of those shares, and can
exercise full voting rights and receive dividends, if declared,
with respect to those shares, without having to make payment of
an exercise price. The old options, on the other hand, require
payment of an exercise price in order to receive the underlying
shares of our Class A Common Stock before you can exercise
voting rights and receive dividends, if declared, with respect
to the underlying shares. Further, the old options expire ten
years after issuance; if you fail to exercise the old options
before their expiration, you will lose the right to receive the
shares of Class A Common Stock underlying those old options.
The new options are different from the old options primarily
because they will have an exercise price that may be different
from the exercise price of the old options. The exercise price
of the new options will be as follows: except under limited
circumstances, for the first one-third of the new options you
receive, the exercise price will the closing price of our
Class A Common Stock on the date of grant, for the second
one-third, the exercise price will be 115% of the closing price
on the date of grant, and for the final one-third, the exercise
price will be 130% of the closing price on the date of grant.
The date of grant will be promptly after the date on which we
accept and cancel the eligible options tendered for exchange.
Also, your old options may have been fully or partially vested,
and thus may be fully or partially immediately exercisable for
shares of our Class A Common Stock. The new options will
only will vest at the rate of (1) 50% on the second
anniversary
3
of the date of grant and (2) 25% on each of the two
succeeding anniversaries thereafter. Until they vest, you may
not exercise your new options. Finally, to the extent allowable
under federal tax law, new options will be designated incentive
stock options, or ISOs. Your old options may not
qualify as ISOs, and thus they would not be subject to the same
favorable tax treatment as the new options. See Item 13 to
this Offer to Exchange.
Procedures
for Participating in the Offer
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Q14.
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How do I tender my eligible options?
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You may tender your eligible options by completing the Letter of
Transmittal that is included with this Offer to Exchange (or
obtaining a copy from your local business manager), signing it
and sending the properly completed and signed form to us by one
of three methods described below. For your tender to be
effective, we must receive your properly completed and signed
Letter of Transmittal before the expiration of the Offer.
Tender by
e-mail.
You
may tender your eligible options by
e-mail
by
sending the properly completed and signed Letter of Transmittal
by
e-mail
as
an attachment in Adobe PDF format to the following
e-mail
address: offer@cumulus.com. You may tender eligible options
through
e-mail
24 hours a day, 7 days a week, at any time until the
expiration of the Offer.
Tender by facsimile (fax).
You may also tender
your eligible options by transmitting the properly completed and
signed Letter of Transmittal to us by facsimile (fax) to the
following number:
(404) 260-6914.
You may tender eligible options by fax 24 hours a day,
7 days a week, at any time until the expiration of the
Offer.
Tender in person.
You may also tender your
eligible options in person by delivering the properly completed
and signed Letter of Transmittal to your local business manager
in person (interoffice mail is
not
acceptable). Your
local business manager will be available to accept your tender
from 9:00 A.M. to 5:00 P.M., local time, Monday
through Friday (except for the Christmas holiday on Thursday,
December 25, 2008), at any time until the expiration of the
Offer.
See Section 3 of this Offer to Exchange.
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Q15.
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If I decide to tender my eligible options, do I have to
tender all of my eligible options or can I tender just some of
them?
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You are not required to exchange any old options. In order to
participate, however, you must exchange all of your eligible
options. You may not elect to only exchange a portion of your
eligible options.
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Q16.
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May I exercise my vested eligible options before the
expiration of the Offer?
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In general, yes. Assuming that you are not otherwise subject to
legal requirements or policies that restrict your ability to
exercise eligible options (in which case you will have received
communications to that effect), you may exercise any or all of
your vested eligible options at any time before the Offer
expires, whether or not you have already tendered eligible
options. To the extent that you exercise any of your eligible
options before the Offer expires, the value attributed to, and
the number of shares of our Class A Common Stock
underlying, those eligible options, as reflected on your
Participant Statement, will be taken into account if you tender
your remaining eligible options and will reduce the number of
restricted shares and new options that you receive in exchange
for your properly tendered eligible options. See Section 3
of this Offer to Exchange.
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Q17.
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May I withdraw options after I have tendered them?
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Yes. You may withdraw your previous tender of eligible options
at any time before the expiration of the Offer, which is
currently scheduled for 5:00 P.M., Atlanta time, on
December 30, 2008. To withdraw previously tendered eligible
options, you must use the same method you used to tender your
eligible options. In addition, if we have not accepted your
tendered eligible options by January 29, 2009, you are
permitted by law to withdraw your tendered eligible options from
the Offer. A Withdrawal Letter is included in the materials
accompanying this Offer to Exchange. You may also obtain a
Withdrawal Letter by contacting your local business manager. See
Section 4 of this Offer to Exchange.
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Q18.
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Will we accept all eligible options tendered in the Offer?
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Subject to the conditions of the Offer set forth in
Section 6 of this Offer to Exchange, we will accept all
eligible options that are properly tendered by, and not validly
withdrawn before, the expiration of the Offer. However, we
reserve the right to reject any or all tenders of old options
that we determine are not in appropriate form or that it would
be unlawful for us to accept. In addition, we will not be
required to accept tendered eligible options if, prior to the
expiration of the Offer, certain events occur or fail to occur,
such that, in our reasonable judgment, it would be inadvisable
for us to proceed with the Offer. These events include, among
other things:
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changes in applicable law or regulations;
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changes in accounting principles;
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third-party tender offers for our Class A Common Stock or
other acquisition proposals;
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adverse changes in market conditions; and
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lawsuits challenging the Offer.
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These and various other events are more fully described in
Section 6 of this Offer to Exchange.
The Offer is not conditioned on participation by a minimum
number of eligible participants or the tender of a minimum
number of eligible options.
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Q19.
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How will you know if we have accepted eligible options
tendered in the Offer?
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Promptly after the expiration of the Offer, and assuming that we
accept eligible options tendered for exchange, we will send all
eligible participants in the Offer an
e-mail
stating that the Offer expired and that we are accepting all
eligible options that were properly tendered. This
e-mail
will
constitute notice to you that we have accepted the eligible
options that you properly tendered. See Sections 5 and 6 of
this Offer to Exchange.
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Q20.
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When will we issue the restricted shares and new options?
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If you properly tender your eligible options and we accept all
eligible options properly tendered, we will issue your
restricted shares and grant your new options promptly after the
expiration of the Offer. Your restricted shares and new options
will be evidenced by the award certificates, which include the
terms and conditions applicable to your restricted shares and
new options. See Sections 5 and 8 of this Offer to Exchange.
You will be the record holder of your restricted shares and they
will be registered in your name on the books and records
maintained for us by the transfer agent for our Class A
Common Stock (currently Computershare). Upon vesting, you will
receive a statement from Computershare that will instruct you as
to how you may have your vested shares electronically deposited
into an account that you maintain with a bank or broker or how
you may have a certificate representing the vested shares issued
directly to you.
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Q21.
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What will happen to my eligible options if I decide not to
participate in the Offer?
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If you choose not to participate in the Offer, you will retain
your eligible options without change to the exercise price, the
number of shares or the terms and conditions of each award as
currently in effect. These terms and conditions are set forth in
the relevant stock option award agreements for those awards.
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Q22.
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Is there anything I need to do if I decide not to tender my
options?
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No.
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Q23.
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Will I have to pay taxes when I tender my options in the
Offer?
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If you are a U.S. taxpayer, you should incur no immediate
tax consequences when you tender your eligible options and
receive restricted shares and new options in exchange. We
believe that the exchange will be treated as a non-taxable
exchange. See Section 13 of this Offer to Exchange. We
recommend that you
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consult a professional tax advisor if you have questions
concerning the tax consequences to you of participating in the
Offer.
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Q24.
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Will I have to pay taxes when my restricted shares or new
options vest or when I exercise my new options?
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If you are a U.S. taxpayer, you will receive restricted
shares and new options in exchange for your properly tendered
eligible options. You will recognize ordinary income when any of
your restricted shares vest, in an amount equal to the fair
market value of the vesting shares on the vesting date (plus the
amount of any dividends that accrued on your restricted shares
prior to vesting). We will determine the fair market value of
the shares based on the closing price of our Class A Common
Stock on the NASDAQ Global Select Market (or other principal
stock exchange on which our Class A Common Stock is then
listed) on the relevant vesting date. The ordinary income
resulting from the vesting of restricted shares and distribution
of accrued dividends on the vested shares will be subject to
income and payroll withholding tax and will be reflected in the
Form W-2
reported to the Internal Revenue Service for the year in which
vesting occurs. For more information, see Section 13 of
this Offer to Exchange.
If you are a U.S. taxpayer, you will not recognize income
when your new options vest. However, upon exercise of your new
options, you may recognize ordinary income in an amount equal to
the spread (the difference between fair market value of the
underlying shares and the exercise price) on the date of
exercise, depending on the classification of your new options as
ISOs or non-qualified stock options. For more information, see
Section 13 of this Offer to Exchange.
If you have any questions about taxes, we recommend that you
consult a professional tax advisor to determine the tax
consequences of participating in the Offer.
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Q25.
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When will the Offer expire? Can it be extended, and if so,
how will I be notified if it is extended?
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The Offer will expire at 5:00 P.M., Atlanta time, on
December 30, 2008, unless we extend it. We may, in our
discretion, extend the Offer at any time. If we extend the
Offer, we will make a public announcement of the extension no
later than 9:00 A.M., Atlanta time, on the next business
day after the last previously scheduled or announced expiration
of the Offer. See Section 14 of this Offer to Exchange.
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Q26.
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Is there any information about Cumulus that I should be aware
of?
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Before making your decision, you should carefully review the
information in this Offer to Exchange, including the information
about us set forth and referred to in Section 9 of this
Offer to Exchange.
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Q27.
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Who can I talk to if I have questions about the Offer?
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We have not authorized anyone to make any recommendation as
to whether you should tender or refrain from tendering your
eligible options pursuant to the Offer. If anyone makes any such
recommendation, you must not rely upon that recommendation as
having been authorized by us. You should rely only on the
information contained in this Offer to Exchange or in documents
to which we have referred you.
You should direct questions about this Offer or requests for
assistance to Ray Perlock, Corporate Controller, at
(404) 260-6714.
You may request additional copies of any documents referred to
in this Offer to Exchange (including the Letter of Transmittal
and the Withdrawal Letter) from your local business manager.
6
RISK
FACTORS
Risks of
Participating in the Offer
Participating in the Offer involves a number of potential risks,
including those described below. This list highlights some of
the risks and is not exhaustive. Eligible participants should
carefully consider these and other risks and are encouraged to
speak with their investment and tax advisors as necessary before
deciding whether to participate in the Offer. In addition, we
urge you to read this Offer to Exchange and the enclosed Letter
of Transmittal carefully and in their entirety before you decide
whether to participate in the Offer.
If
your employment or service as a director terminates for any
reason before the restricted shares and new options that you
receive in the Offer vest or before you exercise your vested new
options, you will forfeit the unvested restricted shares and
unvested new options or forfeit the ability to exercise vested
new options.
If you elect to participate in the Offer, the restricted shares
and new options that you receive in exchange for your tendered
eligible options will be subject to vesting. Subject to your
continued employment or service as a director with us or one of
our subsidiaries, the restricted shares and new options will
vest 50% on the second anniversary of the date of grant and 25%
on each anniversary thereafter. Unless you have an employment
agreement that provides otherwise, if your employment or service
as a director terminates for any reason before your restricted
shares or new options have vested in full, you will forfeit any
unvested restricted shares or new options.
Unless you have an employment agreement that provides otherwise,
your ability to exercise new options after termination of
employment or board service depends on the reason for
termination: if termination is for death or disability, you or
your estate will have one year after termination to exercise any
vested new options; if termination is a Termination for
Cause (as defined in the option award certificate) you
will forfeit the ability to exercise vested new options; and if
termination is for any other reason, you will have 90 days
after termination to exercise any vested new options.
You should note that, subject to any employment agreement you
may have with us, your employment with us and our subsidiaries
is at will and may be terminated at any time, and
your participation in the Offer does not constitute a guarantee
that your employment will be continued through the vesting
date(s) of your restricted shares or new options. In addition,
we can give no assurance that there will be no reductions in
force or other terminations of employees in the future.
If you
forfeit restricted shares or new options that you receive in the
Offer because your employment or service as a director
terminates, you could be worse off than if you had not
participated in the Offer.
The terms and conditions of your eligible options may provide
for more favorable treatment in the event of your termination of
employment or service as a director than do the terms and
conditions of the restricted shares and new options awarded in
the Offer. For example, some eligible options may remain
exercisable for a specified period following certain types of
termination of employment that is longer than the periods
provided for pursuant to the terms of new options. As a result,
you could be worse off than if you had kept your old options.
You should consider the consequences of a termination of
employment on both your old options and on the restricted shares
or new options you would receive in the Offer before deciding
whether to tender your eligible options.
If the
trading price of our Class A Common Stock increases after
the date your tendered eligible options are canceled pursuant to
the Offer, you could end up worse off than if you had not
participated in the Offer.
If you choose to tender your eligible options in the Offer, the
number of restricted shares or new options you will receive will
be less than the number of shares of our Class A Common
Stock underlying your tendered eligible options. As a result,
there is an amount of potential appreciation of our Class A
Common Stock that, if achieved, would result in it being to your
economic benefit to have chosen not to tender your
7
eligible options in the Offer. The amount by which our
Class A Common Stock would have to appreciate in order for
this result to occur depends on the exercise prices of your
eligible options, the number of options in each of your awards
of eligible options, the number of restricted shares and new
options that you receive in exchange for your tendered eligible
options and the exercise price of the new options. We can give
no assurance that over time the value of your restricted shares
or new options will be equal to or greater than the gain you
might have been able to realize upon exercise of the eligible
options you tender in the Offer.
The
value attributed to your eligible options was determined using
the Black-Scholes option pricing model. Other option pricing
models, or assumptions different from those used to value your
eligible options, might result in a different attributed
value.
The value of your eligible options, as reflected on your
Participant Statement, was determined using the Black-Scholes
option pricing model, which is a commonly used model for valuing
stock options. The Black-Scholes model uses various assumptions
in determining the value of stock options including, expected
life, volatility, the risk-free rate and the dividend yield.
You should be aware that option valuation is not an exact
science. Although Black-Scholes is a standard and accepted model
for determining the value of options, there are other option
pricing models in use. If we had used a different option pricing
model, the value attributed to your eligible options might have
been different and might have resulted in your being entitled to
receive a larger number of new options.
In addition, the utilization of different assumptions in the
Black-Scholes option pricing model can produce significantly
different results for the value of an option. Even experts can
disagree on the correct assumptions to use for any particular
option valuation exercise. The assumptions used in order to
value your eligible options may not be the same as those that
would have been used by others and, therefore, the valuation of
your eligible options may not be consistent with that obtained
using other input assumptions.
Business
and Other Risks
For a description of risks related to our business, our
indebtedness and our Class A Common Stock, please see the
information under the heading Item 1A
Risk Factors in our annual report on
Form 10-K
for the year ended December 31, 2007, as amended, and our
subsequent quarterly reports on
Form 10-Q,
each filed with the SEC and incorporated herein by reference.
8
THE
OFFER
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1.
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Number
of Restricted Shares and New Options; Expiration Date
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We are offering our employees and non-employee directors the
opportunity to exchange their outstanding options to purchase
shares of our Class A Common Stock (old
options) that were granted on or after October 2,
2000 under our existing equity incentive plans other than our
2008 Equity Incentive Plan (the 2008 Plan) for a
combination of restricted shares of our Class A Common
Stock (restricted shares) and replacement options to
purchase our Class A Common Stock (new
options). Pursuant to the terms and conditions of this
Offer, there are old options to purchase 5,941,553 shares
issued under those plans that are eligible to be surrendered for
exchange pursuant to the Offer. Eligible old options may be
exchanged for restricted shares and new options pursuant to the
formulas set forth in this Offer to Exchange, rounded up or down
to the nearest whole number of shares. The offer is subject to
the terms and conditions set forth in this Offer to Exchange and
the related Letter of Transmittal, which, together with any
amendments or supplements to either, collectively constitute the
Offer.
You are eligible to participate in the Offer if, on
November 30, 2008, you are one of our (or our
subsidiaries) active employees (full-time or part-time),
or a non-employee member of our board of directors (or a
delegated affiliate of one of the foregoing), you continue to be
so as of the expiration of the Offer, and you hold outstanding
old options that were granted on or after October 2, 2000.
We refer to those old options as eligible options.
You will be eligible to participate if you are on an approved
leave of absence as of the expiration of the Offer and you
otherwise meet the eligibility requirements of this paragraph.
Upon the terms and subject to the conditions set forth in this
Offer to Exchange, we will issue restricted shares and new
options to those eligible persons who elect to participate in
the Offer promptly after the date on which we accept and cancel
the eligible options tendered for exchange. We will not accept
eligible old options unless they are properly elected for
exchange and not validly withdrawn in accordance with
Section 4 of this Offer to Exchange before the Offer
expires on the expiration date (as defined below).
Our Board of Directors (upon the recommendation of its
compensation committee) has determined that we will issue a
maximum of 300,000 restricted shares and new options exercisable
for an aggregate of 1,000,000 shares of our Class A
Common Stock in exchange for eligible options to purchase an
aggregate of 5,941,553 shares. The number of restricted
shares and shares underlying new options that you will receive
is calculated by applying the following formulas to each of your
outstanding awards of old options (in each case rounded up or
down to the nearest whole number):
RS = ( OS
/ TOS ) x 300,000; and
NOS = (
OAV / AAV ) x 1,000,000
In these formulas:
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RS
is the number of restricted shares that
you will receive in exchange for the particular eligible option
award for which the calculation is made.
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OS
is the number of shares underlying the
particular eligible option award for which the calculation is
made.
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TOS
is the total number of shares underlying
eligible options, which is 5,941,553.
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NOS
is the number of shares underlying new
options that you will receive in respect of the particular
eligible option award for which the calculation is made.
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OAV
is the attributed value of
the eligible option award for which the calculation is made,
calculated using the Black-Scholes option pricing model, which
is a commonly used model for valuing stock options.
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9
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AAV
is the aggregate attributed
value of all outstanding eligible options, calculated
using the Black-Scholes option pricing model.
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Your Participant Statement, which is being sent to you under
separate cover, contains information about your eligible
options, including the number of restricted shares and shares
underlying new options that you will receive in respect of your
eligible options if you elect to participate in the Offer.
Another way of describing what you will receive in the Offer is
as follows: you will receive your pro rata portion of 300,000
restricted shares based on the number of shares underlying your
eligible options as compared to the total outstanding eligible
options (which amounts to one restricted share for each
approximately 19.8 shares underlying eligible options), and
you will receive your pro rata portion of new options
exercisable for 1,000,000 shares based on the attributed
value of your eligible options, calculated using the
Black-Scholes option pricing model, as compared to the
attributed value of the total outstanding eligible options.
If you exercise any of your eligible options before the Offer
expires, the number of restricted shares and shares underlying
new options that you will receive if you participate in the
Offer will be reduced to reflect your exercise.
The restricted shares and the new options issued in exchange for
tendered eligible options will be issued under the 2008 Plan.
Except under limited circumstances, the exercise price of the
new options will be as follows: for the first one-third of the
new options you receive, the exercise price will the closing
price of our Class A Common Stock on the date of grant, for
the second one-third, the exercise price will be 115% of the
closing price on the date of grant, and for the final one-third,
the exercise price will be 130% of the closing price on the date
of grant. To the extent allowable under federal tax law, new
options will be designated incentive stock options, or
ISOs. The restricted shares and new options will be
subject to forfeiture and other restrictions until they vest
under the terms of a restricted share award certificate and new
option award certificate, copies of which are included with the
materials accompanying this Offer to Purchase and referred to as
the award certificates.
By properly tendering for
exchange your eligible options, you will be deemed to have
accepted the terms of, and agreed to be bound by, the 2008 Plan
and those award certificates.
You will not be required to pay cash for the restricted shares
you will receive. You will, however, be required to pay the
exercise price for the new options you will receive, if you wish
to exercise those new options for shares of Class A Common
Stock. In addition, you will be required to satisfy any
withholding tax liability upon each vesting date of the
restricted shares and upon the exercise of any new options.
Unless otherwise permitted by the compensation committee of our
board of directors, you must satisfy this obligation by paying
us funds in satisfaction of the withholding obligation.
Your old options may be fully vested. The restricted shares and
new options to be issued in connection with the Offer, however,
will not be vested. Assuming you continue to meet the
requirements for vesting specified in the award certificates,
the restricted shares and new options will vest at the rate of
(1) 50% on the second anniversary of the date of grant and
(2) 25% on each of the two succeeding anniversaries
thereafter. Unless you have an employment agreement that
provides otherwise, you will forfeit all of your unvested
restricted shares or unvested new options if your employment or
board service with us or our subsidiaries terminates for any
reason. Termination of employment or board service will not
affect your rights in any restricted shares that have vested, or
in any shares of Class A Common Stock that you receive upon
the exercise of vested new options, before your employment or
board service terminates. Unless you have an employment
agreement that provides otherwise, your ability to exercise new
options after termination of employment or board service depends
on the reason for termination: if termination is for death or
disability, you or your estate will have one year after
termination to exercise any vested new options; if termination
is a Termination for Cause (as defined in the option
award certificate) you will forfeit the ability to exercise
vested new options; and if termination is for any other reason,
you will have 90 days after termination to exercise any
vested new options. Other restrictions regarding the restricted
shares and new options are set forth in the award certificates.
10
You are not required to exchange any old options. In order to
participate, however, you must exchange all of your eligible
options. You may not elect to only exchange a portion of your
eligible options. All old options properly tendered and not
validly withdrawn before the expiration date will be exchanged
for restricted shares and new options, upon the terms and
subject to the conditions set forth in this Offer to Exchange.
The Offer is not conditioned upon a minimum number of old
options being exchanged, but is subject to the conditions
described in Section 6 of this Offer to Exchange.
The term expiration date means 5:00 P.M.,
Atlanta time, on December 30, 2008, unless and until we, in
our sole discretion, extend the period of time during which the
Offer will remain open. If we extend the period of time during
which the Offer remains open, the terms expiration
date will refer to the latest time and date at which the
Offer expires. See Section 14 of this Offer to Exchange for
a description of our rights to extend, delay, terminate and
amend the Offer and Section 6 of this Offer to Exchange for
a description of our rights to accept all of the properly
tendered eligible options or to reject them all.
The Offer is intended to accomplish a number of important
objectives. First, by providing long-term incentives in the form
of both restricted shares and new options, we hope to reinforce
the ownership culture among our employees and more
closely align employees interests with those of our
stockholders. Second, by reintroducing vesting restrictions on
restricted shares and new options, where today the vast majority
of old options are fully vested, we expect to significantly
improve the retention effects of our long-term incentives to
ensure the continuity of our employees. Finally, we intend, upon
completion of the Offer, to terminate all remaining share
availability under our currently existing equity incentive plans
(other than the 2008 Plan), and not make any further awards
under those plans. As a result, we expect that the Offer will
significantly reduce overhang and decrease the potential
dilution that could result from the exercise of currently
outstanding or future awards of equity incentive grants.
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3.
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Procedures;
Acceptance of Old Options
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You may tender your eligible options by completing the Letter of
Transmittal that is included with this Offer to Exchange (or
obtaining a copy from your local business manager), signing it
and sending the properly completed and signed form to us by one
of three methods described below. For your tender to be
effective, we must receive your properly completed and signed
Letter of Transmittal before the expiration of the Offer.
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Tender by
e-mail.
You
may tender your eligible options by
e-mail
by
sending the properly completed and signed Letter of Transmittal
by
e-mail
as
an attachment in Adobe PDF format to the following
e-mail
address: offer@cumulus.com. You may tender eligible options
through
e-mail
24 hours a day, 7 days a week, at any time until the
expiration of the Offer. If you decide to tender by
e-mail,
you
will need to access a scanner that will generate an image of
your properly completed and signed Letter of Transmittal in
Adobe PDF format, so that you can attach the PDF file to your
e-mail.
We
will
e-mail
a confirmation to your Cumulus
e-mail
address, within two business days of our receipt of your tender.
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Tender by facsimile (fax).
You may also tender
your eligible options by transmitting the properly completed and
signed Letter of Transmittal to us by facsimile (fax) to the
following number:
(404) 260-6914.
You may tender eligible options by fax 24 hours a day,
7 days a week, at any time until the expiration of the
Offer. We will
e-mail
a
confirmation to your Cumulus
e-mail
address, within two business days of our receipt of your tender.
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Tender in person.
You may also tender your
eligible options in person by delivering the properly completed
and signed Letter of Transmittal to your local business manager
in person (interoffice mail is
not
acceptable). Your
local business manager will be available to accept your tender
from 9:00 A.M. to 5:00 P.M., local time, Monday
through Friday (except for the Christmas holiday on Thursday,
December 25, 2008), at any time until the expiration of the
Offer. We will
e-mail
a
confirmation to your Cumulus
e-mail
address, within two business days of our receipt of your tender.
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11
Regardless of the method you use to tender your eligible
options, you must indicate that you tender all of the eligible
options you hold. You do not need to return your option
agreements governing your eligible options to effectively tender
eligible options into the Offer. Your option agreements will be
null and void when we accept the eligible options that you
properly tender.
We will be deemed to have accepted eligible options that are
validly tendered and not properly withdrawn if and when we send
all eligible participants in the Offer an
e-mail
stating that the Offer expired and that we are accepting all
eligible options that were properly tendered. This
e-mail
will
constitute notice to you that we have accepted the eligible
options that you properly tendered.
You should carefully review this Offer to Exchange and the
Letter of Transmittal before deciding whether to tender your
eligible options. You also may wish to discuss whether to tender
your eligible options with your financial, tax or other personal
advisors.
Determination of Validity; Rejection of Options; Waiver of
Defects; No Obligation to Give Notice of
Defects.
We will determine all questions as to
who is an eligible participant, the number of shares subject to
eligible options, whether an eligible participant who has chosen
to tender eligible options has tendered all eligible options (as
is required by the terms of the Offer) and the validity, form,
eligibility (including time of receipt) and acceptance of any
tender of eligible options. The determination of these matters
by us will be final and binding on all parties.
We may reject any eligible options tendered to the extent we
determine that the eligible options were not properly tendered
or that it would be unlawful to accept the tendered eligible
options. We may waive any defect or irregularity in any tender
or withdrawal with respect to any particular eligible options or
any particular eligible participant. No eligible options will be
properly tendered until the eligible participant tendering the
eligible options has cured all defects or irregularities or we
have waived them. Neither we nor any other person is obligated
to give notice of any defects or irregularities involved in the
exchange of any eligible options, and no one will be liable for
failing to give notice of any defects or irregularities.
Our Acceptance Constitutes an Agreement.
Your
tender of eligible options pursuant to the procedures described
in this Offer to Exchange constitutes your acceptance of the
terms and conditions of the Offer. Subject to the conditions set
forth in Section 6 of this Offer to Exchange, our
acceptance of eligible options that are properly tendered will
form a binding agreement between us and you on the terms and
subject to the conditions of this Offer effective as of the
expiration of the Offer.
Effect on Existing Options.
If you decide not
to tender your eligible options, you will retain your
outstanding eligible options without change to the exercise
price, the number of shares, or the terms and conditions of each
award as currently in effect, and the option agreements
evidencing these old options will continue in effect in
accordance with their existing terms and conditions. If you
tender eligible options, but no longer are an eligible
participant when the Offer expires, your tender will be
automatically withdrawn and the option agreements evidencing
your outstanding eligible options will continue in effect in
accordance with their existing terms and conditions. If you
properly tender eligible options, upon our acceptance of
eligible options tendered in the Offer, the option agreements
evidencing the grant of those options will be deemed null and
void and those options will be canceled.
Exercises of Eligible Options Prior to Expiration of the
Offer.
Assuming that you are not otherwise
subject to legal requirements or policies that restrict your
ability to exercise eligible options (in which case you will
have received communications to that effect), you may exercise
any or all of your vested eligible options at any time before
the Offer expires, whether or not you have already tendered
eligible options. To the extent that you exercise any of your
eligible options before the Offer expires, the value attributed
to, and the number of shares of our Class A Common Stock
underlying, those eligible options, as reflected on your
Participant Statement, will be taken into account if you tender
your remaining eligible options and will reduce the number of
restricted shares and new options that you receive in exchange
for your properly tendered eligible options.
12
Questions About the Offer.
You should direct
questions about the Offer to Ray Perlock, Corporate Controller,
at
(404) 260-6714.
We will address your questions during regular business hours
(Atlanta time), Monday through Friday for so long as the Offer
is open. Also see the question and answer section at the front
of this Offer to Exchange for answers to some of the questions
you may have about the Offer.
Data Privacy.
By submitting a Letter of
Transmittal to us, you acknowledge that all information you
provide in the Letter of Transmittal is being given with your
consent for the express purpose of participating in the Offer.
You further acknowledge that we may share any such information
with third parties to the extent necessary to effect your
participation in the Offer, including, without limitation, the
grant of restricted shares or new options to you in exchange for
your tendered eligible options.
We have not authorized any person to make any recommendation
on our behalf as to whether you should tender or refrain from
tendering your eligible options pursuant to the Offer. You
should rely only on the information contained in this Offer to
Exchange or in documents to which we have referred you.
You may withdraw eligible options you previously have tendered
by following the procedures described in this Section 4.
The procedures described in this Section 4 are the only
procedures you may use to withdraw previously tendered eligible
options. You may withdraw your eligible options at any time
before the expiration of the Offer, which is currently scheduled
for 5:00 P.M., Atlanta time, on December 30, 2008.
If the Offer is extended by us beyond its currently scheduled
expiration, you may withdraw your tendered eligible options at
any time until the extended expiration of the Offer. In
addition, if we have not accepted your tendered eligible options
by January 29, 2009, you are permitted by law to withdraw
your tendered eligible options from the Offer.
To withdraw previously tendered eligible options, you must
use the same method you used to tender your eligible
options
. If you tendered options by sending a Letter of
Transmittal to us by
e-mail
or by
fax, then to withdraw your tender you must send us a properly
completed and signed Withdrawal Letter by
e-mail
or
fax, as applicable. The same
e-mail
address and fax numbers that are available for tenders are
available for withdrawals. If you tendered eligible options in
person, then to withdraw your tender, you must deliver a
complete and signed Withdrawal Letter in person to your local
business manager before the expiration of the Offer. For your
withdrawal to be effective, we must receive your properly
completed and signed Withdrawal Letter before the expiration of
the Offer. A Withdrawal Letter is included in the materials
accompanying this Offer to Exchange. You may also obtain a
Withdrawal Letter by contacting your local business manager.
If you withdraw previously tendered eligible options, regardless
of method, you will receive an
e-mail
message confirming your withdrawal within two business days of
our receipt of your Withdrawal Letter.
In order to withdraw your tender of any of your eligible
options, you must withdraw your tender of all of your eligible
options.
If you have withdrawn your tender of eligible options, and
before the expiration of the Offer you want to re-tender into
the Offer with respect to all eligible options, you must
properly re-tender all the eligible options, in accordance with
the procedures set forth in Section 3. You may choose to
re-tender your eligible options any time before the expiration
of the Offer. You are not required to use the same tender method
(e-mail,
fax
or in person) that you used for your original tender.
Neither we nor any other person is obligated to give notice
of any defects or irregularities in any withdrawal, and no one
will be liable for failing to give notice of any defects or
irregularities. We will determine, in our discretion, all
questions as to the form and validity, including time of
receipt, of withdrawals. Our determinations of these matters
will be final and binding.
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5.
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Acceptance
of Options for Cancellation; Issuance of Restricted Shares and
New Options
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On the terms and subject to the conditions of the Offer, if we
accept all properly tendered eligible options in accordance with
Section 6 of this Offer to Exchange, we will accept for
exchange and will cancel all
13
eligible options that were properly tendered and were not
validly withdrawn before the Offer expires. We will issue the
restricted shares and new options promptly following the
expiration of the Offer. By properly tendering for exchange your
eligible options, you will be deemed to have accepted the terms
of, and agreed to be bound by, the 2008 Plan and the award
certificates, and the option agreements evidencing your tendered
eligible options will be deemed null and void.
We will send all eligible participants in the Offer an
e-mail
stating that the Offer has expired and we are accepting all
eligible options that were properly tendered. This
e-mail
will
constitute notice to you that we have accepted eligible options
that you properly tendered.
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6.
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Conditions
of the Offer
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Promptly following the expiration of the Offer (which will be
5:00 P.M., Atlanta time, on December 30, 2008, unless
we extend the Offer), subject to satisfaction of conditions set
forth below, we will accept all eligible options that are
properly tendered. If the conditions set forth below are not
satisfied, we may reject all (but not less than all) eligible
options that are properly tendered. If we reject all eligible
options that are properly tendered, we will promptly communicate
such rejection to all holders of eligible options by
e-mail
announcement. Following such a rejection, all of your current
options will remain subject to their current terms and
conditions and you will not receive any restricted shares or new
options.
We will not be required to accept for exchange any eligible
options tendered and may terminate the Offer, subject to
applicable securities laws, if at any time on or after the
commencement of the Offer and before the expiration of the
Offer, we determine that any of the following events shall have
occurred and, in our reasonable judgment, the occurrence of the
event makes it inadvisable for us to proceed with the Offer or
to accept eligible options tendered for exchange:
(a) any action or proceeding by any government or
governmental, regulatory or administrative agency, authority or
tribunal or any other person, domestic or foreign, before any
court, authority, agency or tribunal, is threatened (in
writing), instituted or pending that directly or indirectly:
(i) challenges the making of the Offer, the acquisition of
any or all of the eligible options pursuant to the Offer, the
exchange of restricted shares or new options for such eligible
options, or otherwise relates in any manner to the Offer; or
(ii) in our reasonable judgment, could materially and
adversely affect our business, condition (financial or
otherwise), income, operations or prospects, or otherwise
materially impair in any way the contemplated future conduct of
our business or materially impair the contemplated benefits of
the Offer to us;
(b) any action threatened (in writing), pending or taken,
or any approval, exemption or consent s withheld, or any
statute, rule, regulation, judgment, order or injunction
threatened (in writing), proposed, sought, promulgated, enacted,
entered, amended, enforced or deemed to be applicable to the
Offer or us by any court or any authority, agency or tribunal
that, in our reasonable judgment, would or might directly or
indirectly:
(i) make the acceptance for exchange of any or all of the
eligible options illegal or otherwise restrict or prohibit
consummation of the Offer or that otherwise relates in any
manner to the Offer;
(ii) delay or restrict our ability, or render us unable, to
accept for exchange any or all of the eligible options;
(iii) materially impair the contemplated benefits of the
Offer to us; or
(iv) materially and adversely affect our business,
condition (financial or other), income, operations or prospects
of our subsidiaries, taken as whole, or otherwise materially
impair in any way the contemplated future conduct of our
business;
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(c) there shall have occurred:
(i) any general suspension of trading in, or limitation on
prices for, securities on any national securities exchange or in
the
over-the-counter
market;
(ii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States
(whether or not mandatory);
(iii) the commencement or material escalation of a war,
armed hostilities or other international or national crisis
directly or indirectly involving the United States;
(iv) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or authority
on, or any event that, in our reasonable judgment, might affect
the extension of credit by banks or other lending institutions
in the United States;
(v) any significant decrease or increase in the market
price of the shares of our Class A Common Stock;
(vi) any change in the general political, market, economic
or financial conditions in the United States or abroad that
could, in our reasonable judgment, have a material adverse
effect on our business, condition (financial or other),
operations or prospects or on the trading in the our
Class A Common Stock;
(vii) any change in the general political, market, economic
or financial conditions in the United States or abroad that
could have a material adverse effect on our business, condition
(financial or other), operations or prospects or that, in our
reasonable judgment, makes it inadvisable to proceed with the
Offer; or
(viii) in the case of any of the foregoing existing at the
time of the commencement of the Offer, a material acceleration
or worsening thereof;
(d) a tender or exchange offer with respect to some or all
of our common stock, or a merger or acquisition proposal for us,
is proposed, announced or made by another person or entity or
shall have been publicly disclosed, or we shall have learned
that:
(i) any person, entity or group (within the
meaning of Section 13(d)(3) of the Exchange Act) shall have
acquired or proposed to acquire beneficial ownership of more
than 5% of the outstanding shares of any class of our common
stock, or any new group shall have been formed that beneficially
owns more than 5% of the outstanding shares of any class of our
common stock (other than any such person, entity or group who
has filed a Schedule 13D or Schedule 13G with the SEC
on or before the date we commence the Offer); or
(ii) any person, entity or group shall have filed a
Notification and Report Form under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, or made a public
announcement reflecting an intent to acquire us or any of our
assets or securities (other than in connection with a
transaction to which we have agreed); or
(e) any change or changes shall have occurred in our
business, condition (financial or other), assets, income,
operations, prospects or stock ownership that, in our reasonable
judgment, is or may be material to us or may materially impair
or impact the benefits that we believe we will receive from the
Offer.
The conditions to the Offer are for our benefit. We may assert
them in our discretion regardless of the circumstances giving
rise to them prior to the expiration of the Offer. We may waive
them, in whole or in part, at any time and from time to time
prior to the expiration of the Offer, in our discretion, whether
or not we waive any other condition to the Offer. In the event
that we waive a condition for any particular eligible
participant, we will waive that condition for all eligible
participants. Our failure at any time to exercise any of these
rights will not be deemed a waiver of any such rights. The
waiver of any of these rights with respect to particular facts
and circumstances will not be deemed a waiver with respect to
any other. Any determination
15
that we make concerning the events described in this
Section 6 will be final and binding upon all interested
persons, including you.
|
|
7.
|
Price
Range of Our Class A Common Stock
|
As of November 28, 2008, the closing price of our
Class A Common Stock, as reported on the NASDAQ Global
Select Market, was $0.88 per share. There are approximately
36,032,903 shares of our Class A Common Stock
outstanding. The following chart sets for the high and low
prices of our Class A Common Stock for the periods set
forth below:
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
FISCAL YEAR ENDED DECEMBER 31, 2006
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
$
|
11.55
|
|
|
$
|
9.36
|
|
FISCAL YEAR ENDED DECEMBER 31, 2007
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
10.64
|
|
|
$
|
9.14
|
|
Second Quarter
|
|
$
|
10.37
|
|
|
$
|
9.19
|
|
Third Quarter
|
|
$
|
11.12
|
|
|
$
|
8.37
|
|
Fourth Quarter
|
|
$
|
10.51
|
|
|
$
|
7.23
|
|
FISCAL YEAR ENDED DECEMBER 31, 2008
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
7.82
|
|
|
$
|
4.90
|
|
Second Quarter
|
|
$
|
6.76
|
|
|
$
|
3.93
|
|
Third Quarter
|
|
$
|
4.85
|
|
|
$
|
2.00
|
|
Fourth Quarter (to date)
|
|
$
|
4.24
|
|
|
$
|
0.33
|
|
We recommend that you obtain current market quotations for our
Class A Common Stock before deciding whether to tender your
eligible options for exchange. At the same time, you should
consider that the current market price of our Class A
Common Stock may provide little or no basis for predicting what
the market price of our Class A Common Stock will be on the
vesting dates of the restricted shares or new options or any
time in the future.
Because the fluctuating share price could affect your decision
of whether to tender your eligible options for exchange in the
Offer, you may wish to discuss its effect on the value of your
eligible options with a personal financial advisor.
|
|
8.
|
Source
and Amount of Consideration; Terms of Restricted Shares and New
Options
|
Consideration
If you properly tender eligible options, you will receive
restricted shares and new options as set forth in Section 1
of this Offer to Exchange. Eligible participants will not have a
choice between receiving restricted shares and new options in
exchange for properly tendered eligible options.
Restricted shares and new options will be issued under the 2008
Plan.
The grant to you of restricted shares and new options
under the 2008 Plan in connection with the Offer does not
entitle you to any future awards under the 2008 Plan
.
Pursuant to the terms and conditions of the Offer, there are
eligible options to purchase 5,941,553 shares of our
Class A Common Stock. Were all of these eligible options
are properly tendered and accepted by us, we would issue an
aggregate of 300,000 restricted shares and options to purchase
1,000,000 shares in connection with the Offer.
Terms
of Restricted Shares and New Options
Issuance Under the 2008 Plan.
Restricted
shares and new options granted upon cancellation of properly
tendered eligible options will be subject to all the terms and
conditions of the 2008 Plan. Our statements in this Offer to
Exchange concerning the 2008 Plan and the restricted shares and
new options are merely
16
summaries and do not purport to be complete. The statements are
subject to, and are qualified in their entirety by reference to,
all provisions of the 2008 Plan and the award certificates. The
2008 Plan is attached as an exhibit to the proxy statement for
the 2008 Annual Meeting of Cumulus Stockholders, which we filed
with the SEC on October 17, 2008. See Section 16 of
this Offer to Exchange for instructions as to how you can view
or obtain a copy of the proxy statement.
If you properly tender your eligible options and we accept all
eligible options properly tendered, we will issue your
restricted shares and grant your new options promptly after the
expiration of the Offer.
Your restricted shares or new options will be evidenced by a
restricted share award certificate or new option award
certificate, which includes terms and conditions of the grant.
Copies of the award certificates are included in the materials
accompanying this Offer to Purchase.
By properly tendering
for exchange your eligible options, you will be deemed to have
accepted the terms of, and agreed to be bound by, the 2008 Plan
and those award certificates.
Restricted Shares.
Restricted shares are
issued and outstanding shares of our Class A Common Stock
that are subject to forfeiture and restrictions on transfer
prior to vesting. Restricted shares may not be sold,
transferred, pledged, or assigned until they vest. After
restricted shares have vested, you will have the right to
transfer or sell the shares, subject to applicable securities
laws. Shares of our Class A Common Stock have voting rights.
You will be the record holder of your restricted shares and they
will be registered in your name on the books and records
maintained for us by the transfer agent for our Class A
Common Stock (currently Computershare). Upon vesting, you will
receive a statement from Computershare that will instruct you as
to how you may have your vested shares electronically deposited
into an account that you maintain with a bank or broker or how
you may have a certificate representing the vested shares issued
directly to you.
New Options.
New options are issued and
outstanding options exercisable for shares of our Class A
Common Stock that are subject to forfeiture and restriction on
transfer prior to vesting. New options may not be sold,
transferred, pledged, or assigned, except by will or laws of
descent and distribution. Upon vesting, you will have the
ability to exercise your new options to purchase shares of our
Class A Common Stock at the exercise price of the new
options. To the extent allowable under federal tax law, new
options will be designated incentive stock options, or
ISOs. Except under limited circumstances described
below, the new options will expire on the tenth anniversary of
the grant date and the exercise price will be as follows: for
the first one-third of the new options you receive, the exercise
price will the closing price of our Class A Common Stock on
the date of grant, for the second one-third, the exercise price
will be 115% of the closing price on the date of grant, and for
the final one-third, the exercise price will be 130% of the
closing price on the date of grant. For ISOs granted to eligible
participants who beneficially own 10% or more of the voting
power of our common stock, the new options will expire on the
fifth anniversary of the grant date and the exercise price will
be the same, except for the first one-third of the new options,
which will be 110% of the closing price, all in accordance with
federal tax law. Upon exercise of new options, you will have the
right to transfer and sell the underlying shares of our
Class A Common Stock, subject to applicable securities
laws. Shares of our Class A Common Stock have voting rights.
You will be the record holder of your restricted shares and they
will be registered in your name on the books and records
maintained for us by the transfer agent for our Class A
Common Stock (currently Computershare). Upon vesting, you will
receive a statement from Computershare that will instruct you as
to how you may have your vested shares electronically deposited
into an account that you maintain with a bank or broker or how
you may have a certificate representing the vested shares issued
directly to you.
Vesting, forfeiture.
Even if your eligible
options are now partially or fully vested, the restricted shares
or new options you receive in the Offer will be subject to
vesting. You will not be given credit for vesting as a result of
service with us prior to the date the restricted shares or new
options are granted.
Assuming you continue to meet the
requirements for vesting specified in the award certificates,
the restricted shares and new options will vest at the rate of
(1) 50% on the second anniversary of the date of grant and
(2) 25% on each of the two succeeding anniversaries
thereafter. Unless you have an employment agreement
17
that provides otherwise, you will forfeit all of your unvested
restricted shares or unvested new options if your employment or
board service with us or our subsidiaries terminates for any
reason. Termination of employment or board service will not
affect your rights in any restricted shares that have vested, or
in any shares of Class A Common Stock that you receive upon
the exercise of vested new options, before your employment or
board service terminates. Unless you have an employment
agreement that provides otherwise, your ability to exercise new
options after termination of employment or board service depends
on the reason for termination: if termination is for death or
disability, you or your estate will have one year after
termination to exercise any vested new options; if termination
is a Termination for Cause (as defined in the option
award certificate) you will forfeit the ability to exercise
vested new options; and if termination is for any other reason,
you will have 90 days after termination to exercise any
vested new options.
Change in Control and Adjustment of
Awards.
Our board of directors (or its
compensation committee) may make or provide for such adjustments
in the numbers of shares covered by outstanding new options
granted under the 2008 Plan, in the exercise price of the new
options, and in the kind of shares covered thereby, as our
board, in its sole discretion, exercised in good faith, may
determine is equitably required to prevent dilution or
enlargement of the rights of holders of new options that
otherwise would result from (1) any stock dividend, stock
split, combination of shares, recapitalization or other change
in our capital structure, (2) any merger, consolidation,
spin-off, split-off, spin-out,
split-up,
reorganization, partial or complete liquidation or other
distribution of assets, issuance of rights or warrants to
purchase securities, or (3) any other corporate transaction
or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event or in
the event of a Change in Control (as defined in the 2008 Plan),
our board, in its discretion, may provide in substitution for
any or all outstanding awards under the 2008 Plan such
alternative consideration (including cash), if any, as it, in
good faith, may determine to be equitable in the circumstances
and may require in connection therewith the surrender of all
awards so replaced in a manner that complies with
Section 409A of the Internal Revenue Code of 1986, as
amended. In addition, for each new option exercise price greater
than the consideration offered in connection with any such
termination or event or Change in Control, our board may in its
sole discretion elect to cancel the new options without any
payment to the persons holding the new options.
Except as described in the preceding paragraph, the restricted
shares and new options will not otherwise provide for any
special treatment in the event that we undergo a change in
control. In particular, there is no provision for automatic
early vesting in this circumstance. However, if you have an
existing employment agreement with us or one of our
subsidiaries, your employment agreement may contain provisions
related to accelerated vesting of restricted shares or new
options that will apply upon a change in control.
Tax Consequences.
You should refer to
Section 13 of this Offer to Exchange for a discussion of
the material U.S. federal income tax consequences of the
acquisition, vesting and, as applicable, exercise, of restricted
shares and new options for eligible participants. In all cases,
we recommend that you consult with a professional tax advisor to
determine the tax consequences of your participation in the
Offer. As a condition to participating in the Offer, if you are
a U.S. taxpayer, you agree not to file a Section 83(b)
election with respect to restricted shares granted to you in
exchange for your tendered eligible options.
Registration of Shares.
All shares to be
distributed when restricted shares and new options vest will
have been registered under the United States Securities Act of
1933, as amended, on registration statements on
Form S-8
filed with the SEC. In addition, you may request a hard copy of
the prospectus/summary plan description, which we will send you
free of charge, by contacting your Human Resources officer.
Unless you are considered one of our affiliates
under U.S. federal securities laws, upon vesting of your
restricted shares or upon exercise of your new options, you will
be able to sell your shares of our Class A Common Stock
free of any transfer restrictions under applicable securities
laws.
|
|
9.
|
Information
About Cumulus
|
We own and operate FM and AM radio station clusters serving
mid-sized markets throughout the United States. Through our
investment in Cumulus Media Partners, LLC, or CMP, we also
operate radio station clusters serving large-sized markets
throughout the United States. As of November 30, 2008, we
owned and
18
operated 307 radio stations in 57 U.S. markets, provided
sales and marketing services under local marketing, management
and consulting agreements (pending FCC approval of acquisition)
to seven radio stations in three U.S. markets and as a result of
our investment in CMP, manage an additional 33 radio stations in
9 markets, making us the second largest radio broadcasting
company in the United States based on number of stations. We
believe that, including the stations we manage through CMP, we
are the third largest radio broadcasting company based on net
revenues.
Our principal executive offices are located at 3280 Peachtree
Road N.W., Suite 2300, Atlanta, Georgia 30305, and our
telephone number is
(404) 949-0700.
Summarized
Financial Information
The following table sets forth audited summarized consolidated
historical financial data as of and for the years ended
December 31, 2006 and December 31, 2007 and unaudited
summarized consolidated historical financial data as of and for
the nine months ended September 30, 2008. The information
presented below has been derived from the consolidated financial
statements included in our annual report on
Form 10-K
for the fiscal year ended December 31, 2007 (the
Annual Report) and the unaudited consolidated
financial statements included in our quarterly report on
Form 10-Q
for the period ended September 30, 2008 (the
Quarterly Report), each of which are incorporated
herein by reference. The information presented below should be
read together with those consolidated financial statements and
the notes related thereto in the Annual Report and Quarterly
Report, as well as the sections of the Annual Report and
Quarterly Report entitled Managements Discussion and
Analysis of Financial Condition and Results of Operations.
See Section 16 for instructions on how you may obtain
copies of the Annual Report and the Quarterly Report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Year Ended
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2007
|
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share data)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
236,478
|
|
|
$
|
243,922
|
|
|
$
|
328,327
|
|
|
$
|
334,321
|
|
Station operating expenses, excluding depreciation, amortization
and LMA fees
|
|
|
154,920
|
|
|
|
157,469
|
|
|
|
210,640
|
|
|
|
214,089
|
|
Net income (loss)
|
|
|
32,048
|
|
|
|
(69,805
|
)
|
|
|
(223,804
|
)
|
|
|
(44,181
|
)
|
Basic income (loss) per common share
|
|
$
|
0.75
|
|
|
$
|
(1.63
|
)
|
|
$
|
(5.18
|
)
|
|
$
|
(0.88
|
)
|
Diluted income (loss) per common share
|
|
$
|
0.75
|
|
|
$
|
(1.63
|
)
|
|
$
|
(5.18
|
)
|
|
$
|
(0.88
|
)
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
116,618
|
|
|
|
|
|
|
$
|
90,617
|
|
|
$
|
62,882
|
|
Noncurrent assets
|
|
$
|
968,615
|
|
|
|
|
|
|
$
|
969,925
|
|
|
$
|
1,270,265
|
|
Current liabilities
|
|
$
|
33,728
|
|
|
|
|
|
|
$
|
37,406
|
|
|
$
|
38,326
|
|
Noncurrent liabilities
|
|
$
|
904,284
|
|
|
|
|
|
|
$
|
903,858
|
|
|
$
|
957,814
|
|
Book value per share.
The book value per share
of our Class A Common Stock as of September 30, 2008
was $3.46.
Ratio of earnings to fixed charges.
The ratio
of earnings to fixed charges for the nine months ended
September 30, 2008 was 2.59. We had net losses for the nine
months ended September 30, 2007 as well as for the years
ended December 31, 2007 and 2006. Therefore, our earnings
were insufficient to cover our fixed charges for such periods,
and we are unable to calculate the ratios of earnings to fixed
charges for such periods. The dollar amounts of the deficiencies
are $79.8 million, $212.3 million and
$44.8 million, respectively.
19
|
|
10.
|
Interests
of Directors and Officers; Transactions and Arrangements About
the Options
|
Our executive officers and directors will be eligible to
participate in the Offer. We expect that our executive officers
and directors will participate in the Offer and will receive
their pro rata portions of the restricted shares and new options.
The following table sets forth, for each of our executive
officers and directors, their titles, the number of eligible
options they currently hold, the percentage of all eligible
options, and the number of restricted shares and new options
they will receive should they participate in the Offer. The
business address and telephone number of each of our executive
officers and directors is
c/o Cumulus
Media Inc., 3280 Peachtree Street, Suite 2300, Atlanta,
Georgia 30305,
(404) 949-0700.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
# of
|
|
|
|
|
|
|
# Eligible
|
|
|
Eligible
|
|
|
Restricted
|
|
|
# of New
|
|
Name
|
|
Options
|
|
|
Options
|
|
|
Shares
|
|
|
Options
|
|
|
Lewis. W. Dickey,
|
|
|
1,350,000
|
|
|
|
22.7
|
|
|
|
68,164
|
|
|
|
199,943
|
|
Chairman, President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin R. Gausvik,
|
|
|
1,050,000
|
|
|
|
17.7
|
|
|
|
53,016
|
|
|
|
164,623
|
|
Executive Vice President, Treasurer and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jon G. Pinch,
|
|
|
398,377
|
|
|
|
6.7
|
|
|
|
20,115
|
|
|
|
61,768
|
|
Executive Vice President and Co-Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John W. Dickey,
|
|
|
1,150,000
|
|
|
|
19.4
|
|
|
|
58,066
|
|
|
|
182,129
|
|
Executive Vice President and Co-Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ralph B. Everett,
|
|
|
230,000
|
|
|
|
3.9
|
|
|
|
11,613
|
|
|
|
44,615
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holcombe T. Green, Jr.,
|
|
|
200,000
|
|
|
|
3.4
|
|
|
|
10,098
|
|
|
|
38,215
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric P. Robison,
|
|
|
234,905
|
|
|
|
4.0
|
|
|
|
11,861
|
|
|
|
46,202
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Sheridan,
|
|
|
265,000
|
|
|
|
4.5
|
|
|
|
13,380
|
|
|
|
51,315
|
|
III, Director(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes eligible options to purchase 65,000 shares of
Class A Common Stock held in the name of BA Capital
Company, L.P. These grants were awarded in connection with BA
Capitals designation of Mr. Sheridan to serve on our
board. Mr. Sheridan is a Senior Vice President and Managing
Director of BA Capital and a Managing Director of Bank of
America Capital Investors, one of the principal investment
groups within Bank of America Corporation. He has an economic
interest in the entity comprising the general partner of BA
Capital. As BA Capitals designee to our Board,
Mr. Sheridan disclaims beneficial ownership of the options
except to the extent of his pecuniary interest therein.
|
Neither we nor any of our directors or executive officers
engaged in transactions involving the eligible options during
the 60 days prior to the commencement of the Offer, other
than the forfeiture of options by departing employees in the
ordinary course of business. For more detailed information
concerning our executive officers and directors and their
beneficial ownership of our common stock, you can consult our
proxy statement for the 2008 Annual Meeting of Cumulus
Stockholders, which we filed with the SEC on October 17,
2008. See Section 16 of this Offer to Exchange for
instructions as to how you can view or obtain a copy of the
proxy statement.
Except as otherwise described in this Offer to Exchange or in
our filings with the SEC, neither we nor, to our knowledge, any
of our named executive officer, members of our board or any
person holding a controlling interest in us is a party to any
agreement, arrangement or understanding with respect to any of
our securities.
20
|
|
11.
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Status
of Options We Acquire in the Offer; Accounting Consequences of
the Offer
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Eligible options surrendered in connection with this Offer will
be canceled. Assuming that we accept eligible options tendered
for exchange, we will terminate all remaining share availability
under our currently existing equity incentive plans (other than
the 2008 Plan), and not make any further awards under those
plans.
We have adopted the provisions of Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 123
(Revised), or FAS 123(R), regarding accounting for
share-based payments. Under FAS 123(R), we will recognize
the incremental compensation cost of new options. The
incremental compensation cost will be measured as the excess, if
any, of the fair value of new options granted in exchange for
surrendered eligible options, measured as of the date new
options are granted, over the fair value of eligible options
surrendered in exchange for new options, measured immediately
prior to the cancellation. This incremental compensation cost
will be recognized ratably over the vesting period of new
options. As would be the case with to-be-surrendered eligible
options, in the event that any of new options are forfeited
prior to their vesting due to termination of service, the
compensation cost for forfeited new options will not be
recognized. The amount of this charge may depend on a number of
factors, including, but not limited to:
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the exercise price per share of new options;
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the estimated time of exercise of new options;
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the volatility of our Class A Common Stock;
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the annual interest rate;
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the level of participation by eligible participants in the
Offer; and
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the value of eligible options to be canceled.
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Since these factors cannot be predicted with any certainty at
this time and will not be known until the expiration of the
Offer, we cannot predict the exact amount of the charge that
would result from the Offer.
The fair value of a restricted share will be equal to the
closing price of our Class A Common Stock on the date of
grant. Stock compensation expense for the awards of restricted
shares will be recognized on a straight-line basis over each
awards vesting period.
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12.
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Legal
Matters; Regulatory Approvals
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We are not aware of any license or regulatory permit that
appears to be material to our business that might be adversely
affected by the Offer, or of any approval or other action by any
government or regulatory authority or agency that is required
for the acquisition or ownership of the eligible options as
described in this Offer to Exchange. If any approval or action
should be required, we presently intend to seek the approval or
take the action. This could require us to delay the acceptance
of eligible options tendered pursuant to the Offer. We cannot
assure you that we would be able to obtain any required approval
or take any other required action. Our failure to obtain any
required approval or take any required action might result in
harm to our business. Our obligation under the Offer to accept
properly tendered eligible options and to issue restricted
shares and new options is subject to the conditions described in
Section 6 of this Offer to Exchange.
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13.
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Material
United States Tax Consequences
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The following is a general summary of the material
U.S. federal tax consequences of the Offer to eligible
participants who are U.S. taxpayers. We have based this
discussion on the Internal Revenue Code of 1986, as amended, its
legislative history, Treasury Regulations thereunder and
administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change, possibly on a
retroactive basis. This summary does not discuss all the federal
tax consequences that may be relevant to you in light of your
particular circumstances and is not intended to be complete.
We recommend that you consult a professional tax advisor with
respect to your individual tax consequences of tendering into
the Offer.
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Exchange.
Eligible participants who tender
options and receive restricted shares and new options should not
be required to recognize income for U.S. federal income tax
purposes at the time of the exchange. We believe that the
exchange will be treated as a non-taxable exchange.
Grant of Restricted Shares and New
Options.
You generally will not have taxable
income at the time you receive an award of unvested restricted
shares or new options.
Vesting of Restricted Shares.
Whenever any of
your restricted shares vest, you will recognize ordinary income.
The amount of ordinary income you recognize will equal the fair
market value on the date of vesting of the shares that vest. We
intend to determine the fair market value of the shares based on
the closing price of our Class A Common Stock on the NASDAQ
Global Select Market (or other principal stock exchange on which
our Class A Common Stock is then listed) on the date the
restricted shares vest or, if no sales are reported on that
date, on the most recent date on which sales were reported. In
the case of eligible employees, we must withhold on the ordinary
income recognized.
When your restricted shares vest, we generally will be entitled
to a deduction equal to the amount of ordinary income that you
recognize.
Section 83(b).
An eligible participant
who acquires restricted property in connection with the
performance of services is generally permitted to make an
election under Section 83(b) of the Internal Revenue Code
to include in his or her gross income, for the taxable year in
which the property is transferred to the employee, the excess of
the fair market value of the property at the time of transfer
(determined without regard to any lapse restriction)
over the amount paid for the property. Such election must be
made no later than 30 days after the date of the transfer.
By tendering eligible options in the Offer, you automatically
waive any right you otherwise would have to make an election
under Section 83(b) of the Internal Revenue Code with
respect to the restricted shares you acquire in exchange for
your tendered eligible options. Should you attempt to make such
an election under Section 83(b), your restricted shares
will be forfeited.
Tax Obligations for Restricted Shares.
At the
time you recognize ordinary income due to the vesting of
restricted shares, you will have a tax obligation with respect
to that income. You will be responsible for paying such a tax
obligation at the time your restricted shares vest. You should
consult with a professional tax advisor to determine whether you
should make estimated tax payments for the year in which your
restricted shares vest.
Sale of the Shares of Our Class A Common Stock Received
in the Offer.
Your tax basis in the shares of our
Class A Common Stock that you receive in the Offer will be
equal to the fair market value of the shares at the time they
vest. As noted above, we intend to determine the fair market
value of the shares based on the closing price of our
Class A Common Stock on the NASDAQ Global Select Market (or
other principal stock exchange on which our Class A Common
Stock is then listed) on the date the restricted shares vest or,
if no sales are reported on that date, on the most recent date
on which sales were reported. Upon subsequent sale of shares of
our Class A Common Stock, you will realize a capital gain
or loss equal to the difference between the sale price and your
tax basis. Any capital gain or loss will be taxed as long-term
capital gain or loss provided you have held the shares for more
than one year after you acquired them.
Possible Change in Tax Status of Incentive Stock
Options.
Some of your eligible options may be
incentive stock options for federal income tax
purposes. Other eligible options, however, are nonqualified
stock options. The documentation relating to your new options
will indicate whether your new options are intended to qualify
as incentive stock options. To the extent allowable under
federal tax law, new options will be designated ISOs.
Stock Options Generally.
If you tender
eligible options in the Offer, your tendered eligible options
will be exchanged for restricted shares and new options. So that
you are able to compare the tax consequences of restricted
shares and new options to those of your eligible options, we
have included the following summary as a reminder of the tax
consequences generally applicable to options under
U.S. federal income tax law. These tax consequences will
apply to your eligible options, as well as the new options to be
exchanged for in this Offer.
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Nonqualified Stock Options.
An individual does
not recognize taxable income upon the grant of a nonqualified
stock option. Upon exercise of nonqualified stock options, the
option holder recognizes ordinary income in an amount equal to
the spread (the difference between fair market value of the
underlying shares and the exercise price) on the date of
exercise. In the case of eligible employees, we must withhold on
the ordinary income the option holder recognizes, similar to if
the option holder were paid an additional cash bonus. When an
option holder exercises a nonqualified stock option, we are
generally entitled to a deduction in an amount equal to the
ordinary income the option holder recognizes.
An option holders tax basis in the shares acquired from
exercising a nonqualified stock option is the exercise price
plus the amount of ordinary income recognized upon exercise.
Upon subsequent sale or other disposition, the option holder
will recognize capital gain or loss depending on whether the
sale proceeds are greater than or less than his or her tax basis
in the shares sold. The capital gain or loss will be long-term
if the option shares have been held for more than one year
following exercise of the nonqualified stock options.
Incentive Stock Options.
An individual does
not recognize taxable income upon the grant of an incentive
stock option. In addition, an option holder generally will not
recognize taxable income upon the exercise of an incentive stock
option. However, the spread (the difference between fair market
value of the underlying shares and the exercise price) on the
date of exercise is a preference item for alternative minimum
tax purposes. Except in the case of an option holders
death or disability, if an option is exercised more than three
months after the option holders termination of employment,
the option ceases to be treated as an incentive stock option and
is subject to taxation under the rules that apply to
nonqualified stock options.
If an option holder sells the option shares acquired upon
exercise of an incentive stock option, the tax consequences of
the disposition depend upon whether the disposition is
qualifying or disqualifying. The disposition of the option
shares is qualifying if it is made:
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more than two years after the date the incentive stock option
was granted; and
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more than one year after the date the incentive stock option was
exercised.
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If the disposition of the option shares is qualifying, any
excess of the sale price of the option shares over the exercise
price of the option will be treated as long-term capital gain
taxable to the option holder at the time of the sale. Any such
capital gain will be taxed at the long-term capital gain rate in
effect at the time of sale. If the disposition is not qualifying
(a disqualifying disposition), the excess of the
fair market value of the option shares on the date the option
was exercised (or, if less, the amount realized on the
disposition of the shares) over the exercise price generally
will be recognized as ordinary income by the option holder at
the time of disposition, and any additional gain will be
long-term or short-term capital gain, depending upon whether or
not the shares were sold more than one year after the option was
exercised.
Unless an option holder engages in a disqualifying disposition,
we will not be entitled to a deduction with respect to an
incentive stock option. If an option holder engages in a
disqualifying disposition, we will be entitled to a deduction
equal to the amount of ordinary income recognized by the option
holder.
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14.
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Extension
of Offer; Termination; Amendment
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At any time and from time to time, we may extend the period of
time during which the Offer is open and delay accepting any
eligible options properly tendered for exchange by publicly
announcing the extension and giving notice of the extension to
eligible participants. If we extend the Offer beyond
December 30, 2008, we will announce the extension by
e-mail
announcement no later than 9:00 A.M., Atlanta time, on the
next business day after the last previously scheduled or
announced expiration of the Offer.
We expressly reserve the right, in our sole discretion, to
terminate or amend the Offer upon the occurrence of any of the
conditions specified in Section 6 of this Offer to
Exchange, by giving notice thereof to eligible participants,
including by means of a public announcement thereof. Our right
to delay accepting and canceling eligible options is limited by
applicable securities laws, which require that we must pay the
consideration offered or return any eligible options properly
tendered promptly after we terminate or withdraw the Offer.
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In addition, as long as we comply with applicable law, we may
amend the Offer in any way, including by revising the value we
attribute to any of your eligible options or by amending the
consideration you will receive in exchange for the eligible
options you properly tender.
If we materially change the terms of the Offer or the
information about the Offer, or if we waive a material condition
of the Offer, we will extend the Offer to the extent required by
Rule 13e-4
under the Securities Exchange Act of 1934, as amended, and will
notify eligible participants (such notice will be by company
e-mail
announcement). Under these rules, the minimum period the Offer
must remain open, following material changes in the terms of the
Offer or in the information about the Offer, will depend on the
facts and circumstances.
We will not pay any fees or commissions to any broker, dealer or
other person to solicit tenders of options pursuant to the Offer.
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16.
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Additional
Information
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We have filed with the SEC a tender offer statement on
Schedule TO, of which this Offer to Exchange is a part,
with respect to the Offer. This Offer to Exchange does not
contain all of the information contained in the Schedule TO
and the exhibits to the Schedule TO. We recommend that you
review the Schedule TO, including its exhibits, and the
following materials, which we have filed with the SEC, before
making a decision on whether to tender your eligible options:
(a) our annual report on
Form 10-K,
filed with the SEC on March 17, 2008, as amended on
April 29, 2008;
(b) our quarterly reports on
Form 10-Q
filed with the SEC on May 9, 2008, August 11, 2008 and
November 9, 2008, respectively;
(c) our current reports on
Form 8-K
filed with the SEC on February 14, 2008, March 5,
2008, March 13, 2008, March 17, 2008, April 4,
2008, May 12, 2008, May 22, 2008, May 27, 2008
and June 23, 2008, respectively; and
(d) our proxy statement for the 2008 Annual Meeting of
Stockholders, filed with the SEC on October 17, 2008.
We incorporate by reference the foregoing documents and any
additional documents that it may file with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
between the date of this Offer to Exchange and the expiration of
the Offer.
Our filings are also available to the public through the
SECs internet site at
http://www.sec.gov
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In addition, you may read and copy these filings, and our other
annual, quarterly and current reports, its proxy statements and
its other SEC filings, at the SECs public reference room:
Public
Reference Room
100 F Street, N.E.
Washington, D.C. 20549
Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
room.
We will provide, without charge to each person to whom a copy of
this Offer to Exchange is delivered, upon the written or oral
request of any such person, a copy of any or all of the
documents to which we have has referred you. Requests should be
directed to Ray Perlock, Corporate Controller, at
(404) 260-6714.
As you read the documents listed in this Section 16, you
may find some inconsistencies in the information from one
document to another. Should you find inconsistencies between the
documents, or between a document and this Offer to Exchange, you
should rely on the statements made in the most recent
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document. The information contained in this Offer to Exchange
about us should be read together with the information contained
in the documents to which we have referred you.
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17.
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Forward-Looking
Statements
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Your decision whether or not to participate in the Offer should
take into account the factors described in this Offer to
Exchange as well as the various risks inherent in our business.
We have described risks, including risks concerning us, in the
information we have incorporated by reference into this Offer to
Exchange.
This Offer to Exchange and the documents incorporated by
reference into this Offer to Exchange contain both historical
and forward-looking statements. These forward-looking statements
generally can be identified by the use of statements that
include words such as believe, expect,
anticipate, intend, plan,
foresee, likely, will or
other similar words or phrases. Similarly, statements that
describe our objectives, plans or goals are or may be
forward-looking statements. These forward-looking statements are
not guarantees of future performance and involve known and
unknown risks, uncertainties and other factors that are
difficult to predict and which may cause our actual results,
performance or achievements to be different from any future
results, performance and achievements expressed or implied by
these statements. More information about risks, uncertainties
and factors is included in our filings with the SEC including,
but not limited, to the Annual Report. There may be additional
risks, uncertainties and factors that we do not currently view
as material or that are not necessarily known. We cannot make
any assurance that projected results or events will be achieved.
The forward-looking statements included in this Offer to
Exchange or in any of the documents that are incorporated by
reference in this Offer to Exchange are only made as of the date
of this Offer to Exchange or the respective incorporated
document. We expressly disclaim any intent or obligation to
update any forward-looking statement to reflect subsequent
events or circumstances.
We are not aware of any jurisdiction where the making of the
Offer is not in compliance with applicable law. If we become
aware of any jurisdiction where the making of the Offer is not
in compliance with any valid applicable law, we will make a good
faith effort to comply with such law. If, after such good faith
effort, we cannot comply with such law, the Offer will not be
made to, nor will tenders be accepted from or on behalf of,
eligible participants residing in such jurisdiction.
We have not authorized any person to make any recommendation
on our behalf as to whether you should tender or refrain from
tendering your eligible options pursuant to the Offer. You
should rely only on the information contained in this Offer to
Exchange or in documents to which we have referred you.
CUMULUS
MEDIA INC.
December 1,
2008
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