UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

SCHEDULE 14A INFORMATION

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

þ  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

CUMULUS MEDIA INC.

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

Class A Common Stock, par value $0.01 per share, Class B Common Stock par value $0.01 per share and Class C Common Stock, par value $0.01 per share

 

 

The filing fee was determined based upon the sum of (a) the product of the per share merger consideration of $11.75 and 43,289,712 (which represents the total number of shares of the registrant’s common stock outstanding, less 5,106,383 shares to be delivered by certain of our stockholders to the acquiring entity immediately prior to the effective time of the merger and canceled with no merger consideration being paid thereon), plus (b) $9,293,926 expected to be paid in connection with the cancellation of outstanding options, and (c) $13,101,250 expected to be paid in connection with certain to-be-issued shares of the registrant’s common stock (such sum, the “Total Consideration”). In all cases the shares have been valued at $11.75 per share. In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, the filing fee was determined by multiplying 0.00003070 by the Total Consideration.

 

 

N/A

 

 

$471,049,292

 

 

$14,461

 

 

 

 

 

 

 

 

 

 

 

SUBJECT TO COMPLETION, DATED [    l    ], 2007

 

 

[•], 2007

 

Dear Fellow Stockholder:

 

On July 23, 2007, we entered into an Agreement and Plan of Merger (the “merger agreement”) with Cloud Acquisition Corporation, referred to in the accompanying proxy statement as Parent, and Cloud Merger Corporation, a wholly owned subsidiary of Parent. Parent is owned by an investment group consisting of Lewis W. Dickey Jr., our Chairman, President and Chief Executive Officer, his brother John W. Dickey, our Executive Vice President and Co-Chief Operating Officer, other members of their family, and an affiliate of Merrill Lynch Global Private Equity. Under the terms of the merger agreement, Cloud Merger Corporation will be merged with and into us, and we will continue as the surviving corporation. If the merger is completed, you will be entitled to receive $11.75 in cash, without interest, for each share of our common stock that you own.

 

A special meeting of our stockholders will be held on [•], 2007, at [•], local time, to vote on a proposal to adopt the merger agreement. The special meeting will be held at 3280 Peachtree Road, N.W., Suite 2300, Atlanta, GA 30305. Notice of the special meeting and the related proxy statement is enclosed.

 

The accompanying proxy statement gives you detailed information about the special meeting and the merger and includes a copy of the merger agreement as Annex A. We encourage you to read the proxy statement and the merger agreement carefully.

 

Your vote is very important. We cannot complete the merger unless we receive the affirmative vote of a majority of the votes entitled to be cast on the proposal to adopt the merger agreement. Our board of directors recommends that you vote “FOR” the proposal to adopt the merger agreement, as well as “FOR” the proposal to adjourn the special meeting, if necessary. The failure of any stockholder to vote on the proposal to adopt the merger agreement will have the same effect as a vote against the adoption of the merger agreement.

 

Whether or not you plan to attend the special meeting, please complete, date, sign and return, as promptly as possible, the enclosed proxy in the accompanying reply envelope. Stockholders who attend the meeting may revoke their proxies and vote in person.

 

Our board of directors and management appreciate your continuing support of Cumulus, and we urge you to support this transaction.

 

Sincerely,

 

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

 

The proxy statement is dated [•], 2007, and is first being mailed to stockholders on or about [•], 2007.

 

CUMULUS MEDIA INC.
3280 Peachtree Road, N.W.
Suite 2300
Atlanta, Georgia 30305
(404) 949-0700

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held On [ • ], 2007

 

To the Stockholders of Cumulus Media Inc.:

 

A special meeting of the stockholders of Cumulus Media Inc., a Delaware corporation (the “Company”), will be held on [ • ], 2007, at [ • ] a.m. local time, at 3280 Peachtree Road, N.W., Suite 2300, Atlanta, GA 30305, for the following purposes:

 

1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of July 23, 2007, among the Company, Cloud Acquisition Corporation, a Delaware corporation, and Cloud Merger Corporation, a Delaware corporation and a wholly owned subsidiary of Cloud Acquisition Corporation, as such agreement may be amended from time to time.

 

2. To approve the adjournment of the special meeting, if necessary, in order to solicit additional proxies if there are insufficient votes at the time of the meeting to adopt the Agreement and Plan of Merger.

 

3. To act upon such other business as may properly come before the special meeting and any and all adjourned or postponed sessions thereof.

 

The record date for the special meeting is [ • ], 2007. Accordingly, only stockholders of record of our Class A Common Stock or our Class C Common Stock at the close of business on that date are entitled to notice of and to vote at the special meeting or, unless a new record date is established, any adjournment or postponement thereof. A list of our stockholders will be available at our principal executive offices at 3280 Peachtree Road, N.W., Suite 2300, Atlanta, GA 30305 during ordinary business hours for ten days prior to the special meeting.

 

We urge you to read the accompanying proxy statement carefully as it sets forth details of the proposed merger and other important information related to the merger.

 

Your vote is important, regardless of the number of shares of our common stock you own. The adoption of the merger agreement requires the affirmative vote of a majority of the aggregate voting power of the issued and outstanding shares of our Class A Common Stock and Class C Common Stock, voting together as a single class. The adjournment proposal requires the affirmative vote of a majority of the aggregate voting power of the issued and outstanding shares of our Class A Common Stock and Class C Common Stock, voting as a single class, present or represented by proxy at the special meeting and entitled to vote on the matter. Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return the enclosed proxy prior to the special meeting and thus ensure that your shares will be represented at the special meeting if you are unable to attend. If you fail to return your proxy card, your shares will not be counted for purposes of determining whether a quorum is present at the meeting and will have the same effect as a vote against the adoption of the merger agreement, but will not affect the outcome of the vote regarding the adjournment proposal.

 

If you attend, please note that you may be asked to present valid picture identification. “Street name” holders who wish to attend must bring a copy of a brokerage statement reflecting stock ownership as of the record date.

 

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY IN THE ACCOMPANYING REPLY ENVELOPE. STOCKHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON.

 

By Order of the Board of Directors,

 

Richard S. Denning

Secretary

 

Atlanta, Georgia

[ • ], 2007

SUBJECT TO COMPLETION, DATED [    •    ], 2007

 

CUMULUS MEDIA INC.
3280 Peachtree Road, N.W.
Suite 2300
Atlanta, Georgia 30305
(404) 949-0700
[ • ], 2007

 

PROXY STATEMENT

 

SUMMARY

 

This Summary, together with “Questions and Answers About the Special Meeting and the Merger,” summarizes the material information contained in this proxy statement. You should carefully read this entire proxy statement and the other documents to which this proxy statement refers you for a more complete understanding of the matters being considered at the special meeting. In addition, this proxy statement incorporates by reference important business and financial information about us. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions in “Where You Can Find More Information” beginning on page 66 of this proxy statement.

 

References to “Cumulus,” “we,” “our” or “us” in this proxy statement refer to Cumulus Media Inc. and its subsidiaries unless otherwise indicated by context.

 

 

Cumulus Media Inc., a Delaware corporation, is the second-largest radio company in the United States based on the number of stations owned or operated.

 

Cloud Acquisition Corporation, a Delaware corporation, referred to in this proxy statement as Parent, was formed solely for the purpose of effecting the merger of Merger Sub (as defined below) with and into Cumulus, referred to in this proxy statement as the merger, and the transactions related to the merger. Parent is owned by Cloud Holding Company, LLC, a Delaware limited liability company, referred to in this proxy statement as Holdings. Holdings, in turn, is owned by an investor group consisting of Lewis W. Dickey Jr., who also serves as our Chairman, President and Chief Executive Officer, his brother John W. Dickey, who also serves as our Executive Vice President and Co-Chief Operating Officer, certain other members of their family and MLGPE Fund US Alternative, L.P., referred to in this proxy statement as the sponsor, a Delaware partnership. The sponsor was formed by Merrill Lynch Global Private Equity, referred to in this proxy statement as MLGPE, which is the private equity arm of Merrill Lynch & Co., Inc., referred to in this proxy statement as Merrill Lynch. In this proxy statement, we refer to Lew Dickey and John Dickey and the other members of their family participating in the merger as the Dickeys, and we refer to the Dickeys and the sponsor, collectively, as the investor group.

 

Cloud Merger Corporation, a Delaware corporation and a direct wholly owned subsidiary of Parent, referred to in this proxy statement as Merger Sub (and with Holdings and Parent, collectively as the “Cloud Entities”), was formed solely for the purpose of effecting the merger.

 

 

 

 

 

 

 

Although obtaining financing is not a condition to the completion of the merger, the failure to obtain sufficient financing on terms acceptable to the investor group could result in the failure to complete the merger.

 

 

 

 

 

Approval of the transactions by a majority of the unaffiliated stockholders is not a condition to the merger.

 

 

 

 

 

 

 

 

 

 

An affiliate of the sponsor has agreed to guarantee the obligation of Parent to pay a reverse termination fee to us, if any. See “The Merger Agreement — Termination Fees” beginning on page 50.

 

 

 

 

 

 

In addition, under the Communications Act of 1934, referred to in this proxy statement as the Communications Act, we and Parent may not complete the merger unless we have first obtained the approval of the FCC to transfer control of our FCC licenses to Parent or its affiliates. FCC approval is sought through the filing of applications with the FCC, which are subject to public comment and objections from third parties. Pursuant to the merger agreement, the parties must, by September 25, 2007, file all applications necessary to obtain such FCC approval. The timing or outcome of the FCC approval process cannot be predicted.

 

Furthermore, we and Parent are not obligated to complete the merger unless certain regulatory conditions relating to Merrill Lynch and its affiliates have been satisfied or waived by the sponsor.

 

 

 

and abetted the actions of our directors in breaching such fiduciary duties. The complaints seek, among other relief, an injunction preventing completion of the merger.

 

In order to resolve one of the lawsuits, we have reached an agreement along with the individual defendants in that lawsuit, without admitting any wrongdoing, to extend the statutory period in which holders of our common stock may exercise their appraisal rights and to make certain further disclosures in this proxy statement as requested by counsel for the plaintiff in that litigation. It is anticipated that after further discovery all parties will cooperate in seeking dismissal of that lawsuit. Such dismissal, including an anticipated request by plaintiff’s counsel for attorneys’ fees, will be subject to court approval. We intend to vigorously defend the remaining two lawsuits.

 

 

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

 

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers do not address all questions that may be important to you as a Cumulus stockholder. Please refer to the “Summary” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, which you should read carefully.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This proxy statement, and the documents to which we refer you in this proxy statement, contain forward-looking statements based on estimates and assumptions. Forward-looking statements include information concerning our possible or assumed future results of operations, the expected completion and timing of the merger and other information relating to the merger. There are forward-looking statements throughout this proxy statement, including, without limitation, under the headings “Summary,” “Special Factors,” “Important Information About Cumulus — Projected Financial Information” and in statements containing the words “believes,” “plans,” “expects,” “anticipates,” “intends,” “estimates” or other similar expressions. You should be aware that forward-looking statements involve known and unknown risks and uncertainties. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the actual results or developments we anticipate will be realized, or even if realized, that they will have the expected effects on our business or operations. These forward-looking statements speak only as of the date on which the statements were made and we undertake no obligation to publicly update or revise any forward-looking statements made in this proxy statement or elsewhere as a result of new information, future events or otherwise, except as required by law. In addition to other factors and matters contained or incorporated in this document, we believe the following factors could cause actual results to differ materially from those discussed in the forward-looking statements:

 

 

and other risks detailed in our current filings with the SEC, including our most recent filings on Form 10-Q and Form 10-K. See “Where You Can Find More Information” beginning on page 66. Many of the factors that will determine our future results are beyond our ability to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. We cannot guarantee any future results, levels of activity, performance or achievements. The statements made in this proxy statement represent our views as of the date of this proxy statement, and it should not be assumed that the statements made herein remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons that actual results could differ materially from those anticipated in forward-looking statements, except as required by law.

 

TABLE OF CONTENTS

 

 

THE PARTIES TO THE MERGER

 

Cumulus Media Inc.

 

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, referred to in this proxy statement as CMP, we also operate radio station clusters serving large-sized markets throughout the United States. We are the second largest radio broadcasting company in the United States based on the number of stations owned or operated. As of September 30, 2007, we owned and operated 313 radio stations in 60 mid-sized U.S. media markets and operated the 34 radio stations in 8 markets, including San Francisco, Dallas, Houston and Atlanta, that are owned by CMP.

 

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. For more information about us, please visit our website at www.cumulus.com. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference. Our Class A Common Stock is publicly traded on the NASDAQ under the symbol “CMLS.”

 

Cloud Acquisition Corporation

 

Cloud Acquisition Corporation, referred to in this proxy statement as Parent, is a Delaware corporation that was formed solely for the purpose of effecting the merger and the transactions related to the merger. Parent has not engaged in any business except as contemplated by the merger agreement. The principal office address of Parent is c/o Lewis W. Dickey, Jr., 3280 Peachtree Road, N.W., Suite 2300, Atlanta, Georgia 30305. The telephone number of the principal office is (404) 949-0700. Parent is a wholly owned subsidiary of Holdings. Holdings, in turn, is owned by the investor group, which consists of the Dickeys and the sponsor.

 

Cloud Merger Corporation

 

Cloud Merger Corporation, referred to in this proxy statement as Merger Sub, is a Delaware corporation, and a direct wholly owned subsidiary of Parent, that was formed solely for the purpose of effecting the merger. Upon the completion of the merger, Merger Sub will cease to exist and we will continue as the surviving corporation. Merger Sub is wholly owned by Parent and has not engaged in any business except as contemplated by the merger agreement. The principal office address of Merger Sub is Lewis W. Dickey, Jr., 3280 Peachtree Road, N.W., Suite 2300, Atlanta, Georgia 30305. The telephone number of the principal office is (404) 949-0700.

 

Additional information concerning these transaction participants is set forth on Annex D to this proxy statement.

 

THE SPECIAL MEETING

 

This proxy statement is furnished in connection with the solicitation of proxies by our board in connection with the special meeting of our stockholders relating to the merger.

 

Date, Time and Place of the Special Meeting

 

The special meeting is scheduled to be held as follows:

 

Date:   [ • ], 2007

 

Time:  [ • ] a.m., local time

 

Place:  3280 Peachtree Road, N.W., Suite 2300, Atlanta, Georgia 30305

 

Proposals to be Considered at the Special Meeting

 

At the special meeting, you will be asked to vote on a proposal to adopt the merger agreement and, if necessary, to approve the adjournment of the special meeting in order to solicit additional proxies if there are insufficient votes at the time of the meeting to adopt the merger agreement. A copy of the merger agreement is attached as Annex A to this proxy statement.

 

Record Date

 

We have fixed the close of business on [ • ] as the record date for the special meeting, and only holders of record of our Class A Common Stock and Class C Common Stock on the record date are entitled to vote at the special meeting. On the record date, there were [ • ] shares of our Class A Common Stock and 644,871 shares of our Class C Common Stock outstanding and entitled to vote.

 

Voting Rights; Quorum; Vote Required for Approval

 

Holders of our Class A Common Stock are entitled to one vote for each share of our Class A Common Stock held as of the record date, and holders of our Class C Common Stock are entitled to ten votes for each share of our Class C Common Stock held as of the record date. The presence, in person or by proxy, of holders of a majority of the aggregate voting power represented by the issued and outstanding shares of our Class A Common Stock and Class C Common Stock is required to constitute a quorum for the purpose of considering the proposals. Shares of our Class A Common Stock and Class C Common Stock represented at the special meeting but not voted, including shares of our Class A Common Stock and Class C Common Stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business. In the event that a quorum is not present at the special meeting, it is expected that the meeting will be adjourned or postponed to solicit additional proxies.

 

Adoption of the merger agreement requires the affirmative vote of a majority of the aggregate voting power of the issued and outstanding shares of our Class A Common Stock and Class C Common Stock, voting as a single class. For the proposal to adopt the merger agreement, you may vote FOR, AGAINST or ABSTAIN. Abstentions will not be counted as votes cast or shares voting on the proposal to adopt the merger agreement, but will count for the purpose of determining whether a quorum is present. If you abstain, it will have the same effect as if you vote against the adoption of the merger agreement. In addition, if your shares are held in the name of a broker, bank or other nominee, your broker, bank or other nominee will not be entitled to vote your shares in the absence of specific instructions. These broker non-votes will be counted for purposes of determining a quorum, but will have the same effect as a vote against the adoption of the merger agreement. Your broker, bank or nominee will vote your shares only if you provide instructions on how to vote by following the instructions provided to you by your broker, bank or nominee.

 

A proposal to adjourn the special meeting, if necessary, to solicit additional proxies requires the affirmative vote of a majority of the aggregate voting power of the issued and outstanding shares of our Class A Common Stock and Class C Common Stock, voting as a single class, present or represented by proxy

at the special meeting and entitled to vote on the matter. For the proposal to adjourn the special meeting, if necessary, to solicit additional proxies, you may vote FOR, AGAINST or ABSTAIN. Abstentions and broker non-votes will count for the purpose of determining whether a quorum is present. If you abstain, it will have the same effect as if you vote against the adjournment of the special meeting. In addition, if your shares are held in the name of a broker, bank or other nominee, your broker, bank or other nominee will not be entitled to vote your shares in the absence of specific instructions. These broker non-votes will be counted for purposes of determining a quorum, but will have no effect on the proposal to adjourn the special meeting. Your broker, bank or nominee will vote your shares only if you provide instructions on how to vote by following the instructions provided to you by your broker, bank or nominee.

 

As of [ • ], 2007, the record date, our directors and executive officers (other than Lew Dickey and John Dickey) held and are entitled to vote, in the aggregate, [ • ] shares of Class A Common Stock, representing approximately [ • ]% of the outstanding voting power of our common stock. These directors and executive officers have informed us that they currently intend to vote all of their shares of our Class A Common Stock “FOR” the adoption of the merger agreement and “FOR” the adjournment proposal. In addition, the Dickeys have agreed to vote the shares of Class A Common Stock and Class C Common Stock they beneficially own, representing approximately [ • ]% of the outstanding voting power of our common stock as of the record date, to adopt the merger agreement. Separately, the two BOA affiliates have agreed to vote their shares of Class A Common Stock to adopt the merger agreement. If all of these stockholders vote their shares in favor of adopting the merger agreement, [ • ]% of the outstanding voting power of our common stock as of the record date will have voted for the proposal to adopt the merger agreement. This means that holders of an additional approximately [ • ]% of the voting power entitled to vote at the special meeting would need to vote for the proposal to adopt the merger agreement in order for it to be adopted. Furthermore, one of the affiliates of BOA, whose consent is required under our certificate of incorporation in order for us to complete the merger, has provided its express written consent to the merger.

 

Voting and Revocation of Proxies

 

Stockholders of record may submit proxies by mail. Stockholders who wish to submit a proxy by mail should mark, date, sign and return the proxy card in the envelope furnished. Stockholders who hold shares beneficially through a nominee (such as a bank or broker) may be able to submit a proxy by mail, or by telephone or the Internet if those services are offered by the nominee.

 

Proxies received at any time before the special meeting, and not revoked or superseded before being voted, will be voted at the special meeting. Where a specification is indicated by the proxy, it will be voted in accordance with the specification. If you sign your proxy card without indicating your vote, your shares will be voted “FOR” the adoption of the merger agreement and “FOR” the adjournment of the special meeting, if necessary, to solicit additional proxies, and in accordance with the recommendations of our board on any other matters properly brought before the special meeting for a vote.

 

You have the right to revoke your proxy at any time before the vote taken at the special meeting by:

 

 

 

 

Please do not send in your stock certificates with your proxy card.  When the merger is completed, a separate letter of transmittal will be mailed to you that will enable you to receive the merger consideration.

 

Appraisal Rights

 

Holders of our common stock are entitled to appraisal rights under Delaware law in connection with the merger. This means that you are entitled to have the value of your shares determined by the Delaware Court of Chancery and to receive payment based on that valuation. The amount you ultimately receive as a dissenting stockholder in an appraisal proceeding may be more than, the same as or less than the amount you would have received under the merger agreement.

 

To exercise your appraisal rights, you must submit a written demand for appraisal to us prior to 5:00 p.m., Atlanta time, on the 30th day following the vote on the merger agreement, and you must not vote, or otherwise submit a proxy, in favor of the adoption of the merger agreement. Your failure to deliver the written demand by the deadline, or to follow exactly the other procedures specified under Delaware law, will result in the loss of your appraisal rights. See “Appraisal Rights” beginning on page 53 and the text of the Delaware appraisal rights statute, reproduced in its entirety as Annex C.

 

Solicitation of Proxies

 

We will bear the cost of the solicitation of proxies. We will solicit proxies initially by mail. Further solicitation may be made by our directors, officers and employees personally, by telephone, facsimile, e-mail or otherwise, but they will not be compensated specifically for these services. We may solicit proxies through the use of a third-party proxy solicitor. If we do, we estimate the cost will be approximately $9,000. Upon request, we will reimburse brokers, dealers, banks or similar entities acting as nominees for their reasonable expenses incurred in forwarding copies of the proxy materials to the beneficial owners of the shares of common stock they hold of record.

 

Other Business

 

We are not currently aware of any business to be acted upon at the special meeting other than the matters discussed in this proxy statement. Under our bylaws, business transacted at the special meeting is limited to the purposes stated in the notice of the special meeting, which is provided at the beginning of this proxy statement. If other matters do properly come before the special meeting, or at any adjournment or postponement of the special meeting, we intend that shares of our common stock represented by properly submitted proxies will be voted in accordance with the recommendations of our board.

 

Questions and Additional Information

 

If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact us in writing at our principal executive offices: 3280 Peachtree Road, N.W., Suite 2300, Atlanta, Georgia 30305; Attention: Richard S. Denning, Corporate Secretary, or by telephone at (404) 949-0700.

 

Availability of Documents

 

The reports, opinions or appraisals referenced in this proxy statement and filed as exhibits to the Schedule 13E-3 that we are filing with the SEC concurrently with this proxy statement will be made available for inspection and copying at our principal executive offices during our regular business hours by any interested holder of our common stock.

 

SPECIAL FACTORS

 

This discussion is qualified by reference to the merger agreement, which is attached to this proxy statement as Annex A. You should read the entire agreement carefully as it is the legal document that governs the merger.

 

Background of the Merger

 

We regularly review and evaluate our business strategy in an effort to enhance stockholder value. As part of those efforts, over the past several years we have pursued various strategic opportunities, including the formation of and investment in CMP, which we believed at the time represented an acquisition opportunity that would enable us to participate in the next phase of consolidation in the radio industry and be accretive to our earnings, as well as open market stock repurchase programs and a “modified Dutch auction” self-tender offer completed in June 2006, which we believed at the time represented an optimal use of our free cash flow. At the time our board approved the repurchase programs, including the self-tender offer, our board believed that our Class A Common Stock represented an attractive investment opportunity for us when compared to the other acquisition opportunities existing at the time, and that the repurchase programs, including the self-tender offer, served as an efficient mechanism for us to return cash to those stockholders electing to participate at a premium over then-prevailing trading prices without the usual costs associated with open-market transactions.

 

In light of what our board and members of our management, including Lew Dickey, our Chairman, President and Chief Executive Officer, believed to be a continuing undervaluation of terrestrial radio by the public markets, as well as the increasing interest by private equity sponsors in pursuing acquisitions of radio broadcasting companies, in late 2006 our management began to consider whether it might make sense to explore the feasibility of a going-private transaction or, in the alternative, additional share repurchases or another self-tender offer.

 

At various times between September and December 2006, Lew Dickey engaged in separate, informal discussions with each of Robert H. Sheridan, III, Holcombe T. Green, Jr. and Eric Robison, three of the four independent members of our board, in which Lew Dickey indicated a potential interest in exploring the feasibility of an acquisition of Cumulus in which he might participate. Consistent with those discussions, commencing in September 2006, Lew Dickey contacted various potential equity sources to determine whether they might have an interest in considering such a transaction. In identifying possible investors that might have a potential interest in such discussions, Lew Dickey focused only on institutional and private equity investors because, in light of his experience in the broadcasting industry and desire to continue his investment in Cumulus, among other things, he was primarily interested in exploring a potential arrangement with financial, rather than strategic, partners. As a result, from October 2006 through May 2007, Lew Dickey held discussions with representatives of various institutional investors and private equity sponsors, by telephone and in face-to-face meetings, in an effort to explore potential interest in, and the feasibility of, an acquisition of Cumulus in which Lew Dickey might participate. Twenty of the parties contacted executed confidentiality agreements, which contained customary standstill provisions, and were permitted access to certain of our nonpublic information. One of those parties was MLGPE, which executed such a confidentiality agreement in March 2007. Lew Dickey commenced preliminary discussions regarding the feasibility of an acquisition of Cumulus with certain of those parties, including MLGPE, shortly after those parties executed confidentiality agreements. As part of such discussions, Lew Dickey and those parties explored structuring alternatives for a potential acquisition, including those parties’ interest in pursuing an acquisition through, or as co-investors with, an investment entity that would be formed and controlled by Lew Dickey. None of the parties contacted as part of those discussions ever gave any indication to Lew Dickey that they were considering, or had any interest in, any transaction involving Cumulus in which he was not a participant in the buyer group. During this period, at regularly scheduled board meetings, our board continued to review and evaluate our operating and business strategies in the ordinary course, though it did not consider any specific strategic options.

 

At a special meeting of our board of directors, held by telephone on May 24, 2007, Lew Dickey informed the full board that, based upon the preliminary discussions he had held up to that point in time, he was interested in exploring the feasibility of forming an investor group in order to pursue an acquisition of

Cumulus and that, consistent with his earlier discussions with members of our board, he had commenced exploratory discussions regarding such a transaction. The board meeting was convened at the request of Lew Dickey because, after engaging in the various preliminary, exploratory discussions, he had determined that while he had not developed any firm view on a valuation range or on whether a transaction would be viable from an economic perspective, and had not made any decision on whether he would in fact be interested in proceeding with a transaction at all, he did wish to explore, in a more detailed manner, the feasibility of such a transaction and he wanted to ensure that the other members of the board could begin to assess and implement an appropriate process in the event that he ultimately did make a decision to proceed with such a transaction. Following a discussion of various strategic opportunities available to us, as well as an executive session of the board in which Lew Dickey did not participate, our board authorized Lew Dickey to explore further the feasibility of such an acquisition, and confirmed their approval of the exploratory efforts he had undertaken prior to that meeting, as well as the due diligence arrangements that had been established to enable potentially interested partners to review various information about Cumulus. While neither our board nor Lew Dickey had made any determination regarding the merits of such an acquisition nor taken any definitive steps in that regard, because Lew Dickey was, on the one hand, a member of our senior management and chairman of our board and, on the other hand, a potential member of an investor group that might determine to pursue such an acquisition, the members of our board other than Lew Dickey, collectively referred to in this proxy statement as the independent directors, decided to engage separate legal counsel as well as an independent financial advisor to advise the independent directors and to further consider the process and actions that would be required if such an acquisition proposal were made. The independent directors also determined, and Lew Dickey agreed, that he would be excluded from any discussions, meetings or deliberations by our board regarding such a potential acquisition.

 

Subsequent to the May 24, 2007 meeting, Lew Dickey continued to engage in preliminary discussions with potential sources of equity for a possible acquisition, including MLGPE. During this period, MLGPE continued its due diligence review of Cumulus. In early May 2007, MLGPE retained Debevoise & Plimpton LLP, referred to in this proxy statement as Debevoise, as its outside legal advisor.

 

In early June 2007, the independent directors retained Sutherland Asbill & Brennan LLP, referred to in this proxy statement as Sutherland, as its legal counsel, and Richards, Layton & Finger, P.A., referred to in this proxy statement as RLF, as special Delaware legal counsel.

 

At a meeting held telephonically on June 12, 2007, the independent directors discussed with their legal advisors various procedural and legal considerations, including formally appointing a special committee comprised of the independent directors to evaluate a potential acquisition proposal and any alternatives to such a proposal and selecting a financial advisor for the special committee. Among other items, the independent directors discussed Lew Dickey’s request that they formally approve his representation by Jones Day, our principal outside counsel, in connection with the exploration of the feasibility, and potential negotiation of, such an acquisition. In this regard, the independent directors considered that they had engaged their own legal counsel and that other qualified attorneys would be available to consult with the independent directors, including our regular FCC counsel and Richard S. Denning, our Vice President, Secretary and General Counsel, who has extensive knowledge of our legal affairs and who was not expected to participate in any investor group. Based on those considerations, the independent directors granted Lew Dickey’s request.

 

Also, in early June 2007, as part of their continued exploration of the feasibility of an acquisition of Cumulus, Lew Dickey and MLGPE commenced discussions with MLCC and MLPF&S as possible sources of debt financing for an acquisition. In addition, during June 2007, Lew Dickey and MLGPE, which was the only potential equity partner that had indicated a willingness and an ability to provide the amount of the equity commitment, and within the time frame, that Lew Dickey believed would be necessary to successfully acquire Cumulus, began to develop a potential framework within which they might consider forming the investor group. The discussions between Lew Dickey and MLGPE continued during July 2007 and ultimately were memorialized in the interim investors agreement, as described in detail under “Interests of Our Directors and Executive Officers in the Merger.”

At telephonic meetings on June 12, 2007 and June 22, 2007, the independent directors discussed with their legal counsel the independence of each of the independent directors and confirmed the prior determination that all such individuals were independent and disinterested. Accordingly, on June 25, 2007, the full board formally established a special committee of the board, comprised of Ralph B. Everett, Holcombe T. Green, Jr., Eric P. Robison and Robert H. Sheridan, III (chairman).

 

In late June 2007, the special committee considered two internationally recognized investment banks, Banc of America Securities and Credit Suisse, for retention as the special committee’s financial advisor. The special committee discussed, among other things, that both investment banks had extensive experience in mergers and acquisition transactions and in advising special committees. It also discussed that two affiliates of Banc of America Securities are Cumulus stockholders, beneficially owning 100% of our nonvoting Class B Common Stock and, as of August 28, 2007, an aggregate of 1,766,818 shares, or approximately 4.8%, of our Class A Common Stock, that affiliates of Banc of America Securities serve as the joint lead arranger and joint book runner, administrative agent and lender under our current credit facility, and that Mr. Sheridan serves on our board as the designee of BA Capital pursuant to a 1998 voting agreement between BA Capital and the holders of our Class C Common Stock, whereas Credit Suisse had no such pre-existing relationships with us. Following this discussion, the special committee determined to retain Credit Suisse as its financial advisor.

 

During late June and early July 2007, in accordance with the directives of their respective clients, representatives of Merrill Lynch, which had begun to provide preliminary financial advisory services to Lew Dickey and which was formally engaged as financial advisor to Parent effective July 20, 2007, and representatives of the special committee’s financial advisor engaged in various discussions regarding the procedural aspects of any proposal that might be made by a potential investor group, should one be formed and determine to pursue an acquisition of Cumulus.

 

In connection with such discussions and at the request of the special committee, representatives of Merrill Lynch, on behalf of Lew Dickey and MLGPE, delivered to the special committee’s financial advisor a proposal solely as to certain deal protection and other terms that Lew Dickey and MLGPE would expect to be reflected in a merger agreement for a potential acquisition. These terms included a 25-day go-shop period, which would commence upon the execution of a merger agreement, an additional 15-day period to negotiate with any parties identified during the go-shop period who proposed a superior offer, and a bifurcated termination fee of $36 million and $18 million, with the reduced fee payable if the merger agreement were terminated during the 25-day go-shop period or the additional 15-day period and the larger fee payable thereafter. These terms also included a right in favor of the potential investor group to match any superior proposal that might be made following the execution of such a merger agreement.

 

At its July 2, 2007 telephonic meeting, the special committee discussed with its legal and financial advisors various matters pertaining to the strategy for responding to a potential acquisition proposal should one be made. The special committee also discussed the possibility of Cumulus not pursuing a sale and instead remaining a public company. In light of, among other things, the depressed stock performance of public companies in the terrestrial radio industry and our forecasted profitability, the special committee believed that, at an appropriate price, our sale at this time would be the best alternative for our stockholders.

 

The special committee also discussed, at the July 2, 2007 meeting, the advisability of entering into a merger agreement prior to conducting a formal auction, but containing a go-shop provision. In this regard, the special committee discussed concerns of possible customer and employee disruption as a result of announcement of an offer without a definitive agreement and the possibility that a pre-signing market check, whether directed at potential strategic or financial buyers, might discourage Lew Dickey or the potential investor group from continuing to consider participating in a possible acquisition. The special committee also discussed that, even if conducting a formal auction did not discourage Lew Dickey or the potential investor group from pursuing an acquisition of Cumulus, a lack of competition in an auction could result in Lew Dickey or the potential investor group lowering the price that they would be willing to pay for Cumulus. The special committee then discussed concerns regarding the level of interest a formal auction would likely elicit among other potential strategic and financial buyers.

On July 9, 2007, at the request of Sutherland, Jones Day delivered to Sutherland a draft merger agreement that did not include a price and various other material terms.

 

At a telephonic meeting of the special committee on July 10, 2007, the special committee discussed with its legal and financial advisors potential alternative transactions, including another self-tender offer and the possible acquisition of the 75% of CMP that we do not already own. The special committee’s financial advisor discussed with the special committee the various forecasts for Cumulus and CMP that it had received from our management. The special committee also reviewed with its legal advisors the major issues presented in the draft merger agreement and, following this discussion, authorized its legal advisors to prepare a redraft.

 

The special committee met telephonically with its legal and financial advisors on July 12, 2007 to review the redraft of the merger agreement prepared by its legal advisors. The special committee concluded that the proposed go-shop provisions outlined by Merrill Lynch would not be acceptable. Although the special committee had previously discussed the possibility of signing a merger agreement prior to conducting a formal auction and had determined that this approach might be appropriate under certain circumstances, the special committee considered the proposed length of the go-shop period too short and the proposed termination fee too high. Following discussion of the redraft, the special committee’s legal advisors transmitted a version of the redraft that reflected these views to Lew Dickey’s and MLGPE’s respective legal counsel. The special committee met with its advisors again on July 17, 2007 and continued to review the status of the discussions concerning the draft merger agreement with its legal advisors as well as the status of the financial review of Cumulus by the special committee’s financial advisor.

 

During its July 10 and July 17 meetings, the special committee also continued to consider whether including a go-shop provision in the merger agreement might be the best option to allow the special committee to conduct a market check. At these meetings, the special committee determined that this approach would only be advisable if negotiations with the potential investor group resulted in an appropriate price and appropriate go-shop terms, and that if the potential investor group was unwilling to agree to an appropriate price and appropriate go-shop terms, the special committee could open the process to outside bidders prior to signing a merger agreement or could stop the process entirely.

 

On July 18, 2007, at the request of Sutherland, Jones Day delivered to the special committee’s legal advisors drafts of several ancillary transaction documents relating to a possible acquisition, including a draft of a limited guarantee to secure any reverse termination fee that might become payable by the potential investor group, a draft of a cooperation agreement pursuant to which, in the event the parties ultimately were to pursue and enter into a definitive merger agreement, Lew Dickey would agree to cooperate with the special committee in connection with any acquisition proposals from third parties, and draft voting agreements to be signed by Lew Dickey and any other members of his family who might participate in a potential investor group, as well as by the two BOA affiliates that hold shares of our Class A Common Stock and all of the shares of our Class B Common Stock. The draft voting agreements delivered by Jones Day did not provide that any of the Dickeys would agree to vote in favor of any superior proposals that might emerge and be accepted by the special committee. Later on July 18, 2007, Jones Day distributed a revised draft of the merger agreement to the special committee’s legal advisors.

 

On July 19, 2007, Sutherland requested, on behalf of the special committee, that the proposed voting agreement for the Dickeys be revised to include a provision that would require the Dickeys to vote in favor of a superior proposal that might emerge and be accepted by the special committee.

 

After having continued their discussions regarding the feasibility of an acquisition of Cumulus during July, on July 20, 2007, Lew Dickey and MLGPE reached agreement on certain of the principal terms of the proposed arrangements between the Dickeys and MLGPE, as further described under “Special Factors — Interests of Our Directors and Executive Officers in the Merger,” although they continued to negotiate a number of the terms thereof until July 27, 2007. On July 20, 2007, they also completed a series of discussions in which they reached a consensus on a valuation range for Cumulus assuming the availability of certain levels of debt financing.

 

Later on July 20, 2007, following the closing of the market, the newly formed investor group organized a conference call in which Lew Dickey and MLGPE, all members of the special committee, and their respective legal and financial advisors participated. On this call, Lew Dickey indicated that he and MLGPE had formed

an investor group to pursue an acquisition of Cumulus and presented an offer to purchase Cumulus in a cash merger transaction in which the public stockholders would receive $10.65 per share. Shortly thereafter, the investor group delivered to the special committee a letter summarizing the investor group’s offer, together with a revised draft of the merger agreement (with all key economic terms included), a draft of an equity commitment letter to be issued by the sponsor, a draft form of equity rollover agreement to be executed by the Dickeys and draft debt commitment papers from MLCC and MLPF&S.

 

The special committee held a telephonic meeting with its legal and financial advisors on July 20, 2007 immediately following the conference call with the investor group. The special committee discussed financial and other aspects of the offer in detail. After further discussion, the special committee unanimously agreed that the offer of $10.65 per share was inadequate, and discussed potential responses to the offer.

 

At a telephonic meeting on the morning of July 21, 2007, the special committee continued to discuss issues raised by the proposed redraft of the merger agreement and valuation considerations with its legal and financial advisors. The special committee’s financial advisor reviewed with the special committee financial forecasts for Cumulus and CMP provided to it by our management, together with a version of these forecasts as supplemented with estimates of the special committee. The special committee further discussed potential alternatives, including maintaining the status quo, instituting another self-tender offer and a potential buyout of the interests of the other owners of CMP. Given the special committee’s view that the $10.65 offer was inadequate, it instructed its financial advisor to further evaluate aspects of maintaining the status quo and a potential buyout of the interests of the other owners of CMP. Also at this meeting, the special committee instructed its legal advisors to suspend negotiations on the proposed draft merger agreement unless and until progress was made on price negotiations.

 

Thereafter on July 21, 2007, the special committee informed the investor group that the special committee had determined the $10.65 offer to be inadequate.

 

Later on July 21, 2007, the investor group increased its offer to $11.25 per share. The special committee considered this increased offer at a meeting during the morning of July 22, 2007. The special committee’s financial advisor reviewed a preliminary financial analysis of Cumulus based on forecasts for Cumulus and CMP that the special committee believed to be the most appropriate and on which it had directed its financial advisor to rely. The special committee’s financial advisor also discussed the current state of the financial markets, the rates of return generally required by financial buyers in a leveraged acquisition and related matters. The special committee also considered the increased offer in the context of the other alternatives it considered to be available to us. After this discussion, the special committee determined that the $11.25 offer was not acceptable.

 

After the meeting, Robert H. Sheridan, III, the Chairman of the special committee, informed the investor group that the special committee had determined the $11.25 per share offer was not acceptable and that if the investor group was interested in increasing its offer, the special committee would like to receive the offer before it reconvened at 12:30 p.m. on July 22, 2007. In an effort to encourage continued movement by the investor group with respect to price, the special committee instructed its legal advisors to resume negotiations on the merger agreement with Jones Day and Debevoise.

 

Shortly before the special committee’s 12:30 p.m. meeting, the investor group increased its offer to $11.55 per share.

 

At its 12:30 p.m. telephonic meeting, the special committee discussed the revised $11.55 offer and the transaction terms and conditions included with the revised offer. At this meeting, the special committee also discussed maintaining the status quo and an acquisition of the interests of the other owners of CMP. However, the special committee determined that a buyout of the other CMP owners, even if it were feasible, was not in the interest of our stockholders, because, among other things, to effectuate such a buy-out under our existing capital structure, we would have to issue additional shares of our common stock for such a transaction, and doing so would likely be dilutive to the holdings of our existing stockholders. Still, after further discussion, the special committee determined that the $11.55 offer was not acceptable.

Following the special committee’s July 22, 2007 12:30 p.m. meeting, Mr. Sheridan informed the investor group that the special committee had determined the $11.55 per share offer was not acceptable and encouraged the investor group to again increase its offer.

 

During the afternoon and early evening of July 22, 2007, the respective legal advisors of the investor group and the special committee continued to negotiate other outstanding terms of the merger agreement and the ancillary transaction documents.

 

Later on July 22, 2007, the investor group informed Mr. Sheridan that the investor group was raising its offer to $11.75 per share. The investor group also proposed revisions to certain terms of the draft merger agreement, including a 45-day go-shop period with a matching right for the investor group, an additional 15-day period to negotiate with parties identified during the go-shop period who proposed a superior offer, and a bifurcated termination fee of $15 million and $7.5 million, with the reduced fee payable if the merger agreement were terminated during the 45-day go-shop period or the additional 15-day period. The investor group also stated that it was prepared to accept the revisions to the voting agreement for the Dickeys that the special committee had proposed on July 19, 2007.

 

The special committee met at 5:00 p.m. on July 22, 2007 to discuss the $11.75 per share offer and the other terms proposed by the investor group. The special committee informed the investor group that it would be prepared to agree to the terms offered by the investor group, including the proposed matching right in favor of the investor group should a superior proposal emerge, if the offer were increased to $12.00 per share and that, alternatively, it would be prepared to agree to a transaction at $11.75 per share if the matching right in favor of the investor group was eliminated.

 

The investor group declined to increase its offer to $12.00, and instead proposed to eliminate the matching right during the 45-day go-shop period while retaining a right of the investor group to be notified of any superior proposal that the special committee was considering during such period, including the material terms of any such proposal.

 

At a telephonic meeting in the evening of July 22, 2007, the special committee discussed these developments with its legal and financial advisors. Following this meeting, Mr. Sheridan communicated to the investor group that the special committee was prepared to accept a transaction at $11.75 per share and the investor group’s proposal to substitute the matching right with information rights during the 45-day go-shop period, subject to satisfactory negotiation of the remaining terms of the merger agreement and the other ancillary transaction documents.

 

Following that telephonic meeting, Sutherland transmitted a redraft of the merger agreement to Jones Day and Debevoise, and representatives of Sutherland, RLF, Jones Day and Debevoise continued to negotiate the terms of this draft merger agreement and the other ancillary transaction documents.

 

The special committee next met telephonically late in the evening on July 22, 2007, at which meeting Mr. Sheridan informed the special committee that the parties’ legal advisors were engaged in negotiations related to the draft merger agreement and the ancillary transaction documents.

 

On the morning of Monday, July 23, 2007, the special committee held a telephonic meeting to review the final terms of the proposed merger agreement and the acquisition financing. At this meeting, representatives of RLF again reviewed in detail the special committee’s fiduciary duties in connection with the proposed transaction. Representatives of Sutherland then reviewed in detail the key terms of the proposed merger agreement and the ancillary transaction documents, focusing on the conditions to the closing of the proposed merger, the terms of the post-signing go-shop period, the acquisition financing, termination fees and expense reimbursement provisions as well as the parties’ respective obligations between signing and closing. Also at this meeting, Credit Suisse reviewed with the special committee its financial analysis of the merger consideration and rendered to the special committee an oral opinion, confirmed by delivery of a written opinion, dated July 23, 2007, to the effect that, as of that date and based on and subject to the matters described in the opinion, the merger consideration to be received by holders of our Class A Common Stock was fair, from a financial point of view, to such holders (other than excluded holders and their respective affiliates).

 

After considering the proposed terms of the merger agreement and other transaction agreements and the acquisition financing, the special committee unanimously resolved to recommend the merger agreement and the transactions contemplated thereby to our board of directors and that our board recommend that our stockholders adopt the merger agreement. Immediately thereafter, our board met, with all members being present. The board unanimously determined that the merger agreement and the transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Cumulus and our unaffiliated stockholders, approved the merger agreement and the other transactions contemplated by the merger agreement, including the merger, and recommended that our stockholders vote in favor of the adoption of the merger agreement. Our certificate of incorporation requires unanimous approval of the board to approve the merger agreement. In light of this and his interest in the transaction, Lew Dickey stated that he voted to approve the merger agreement based solely on the unanimous recommendation of the special committee. Lew Dickey’s participation in the board meeting was otherwise limited to answering several questions about the sources and uses of funds related to the debt commitment letter obtained by the investor group.

 

Thereafter, Cumulus, Parent and Merger Sub, and the parties to the ancillary transaction documents executed and delivered the merger agreement and the ancillary transaction documents, including the limited guarantee, the cooperation agreement, the voting agreements and the equity, rollover and debt commitment letters. Subsequently, we issued a press release announcing the execution of the merger agreement and related transaction documents as well as the start of a 45-day go-shop period. In authorizing its financial advisor to seek potential superior proposals on its behalf during the go-shop period, the special committee placed no restrictions on the parties the special committee’s financial advisor was authorized to contact, including with respect to those parties previously contacted by Lew Dickey that had executed confidentiality agreements with standstill provisions.

 

During the go-shop period (July 23, 2007 through September 6, 2007) and at the direction of the special committee, the special committee’s financial advisor contacted 18 potential buyers, including eight potential strategic buyers and 10 potential financial buyers. Of these potential buyers, four potential financial buyers expressed preliminary interest and were sent a form of confidentiality agreement. However, of those four potential buyers, only one executed and returned the confidentiality agreement. This potential buyer met with management and was granted access to a data room established by Cumulus. After conducting further diligence, this potential buyer indicated that it was not interested in continuing discussions given that it did not believe that it would be willing to pay more than the consideration provided for in the merger agreement with the investor group. As of the date of this proxy statement, no party (other than the investor group) has submitted a proposal to pursue a transaction to acquire Cumulus.

 

Reasons for the Merger; Recommendation of the Special Committee and of Our Board of Directors

 

The Special Committee

 

The special committee, with the advice and assistance of its independent legal and financial advisors, evaluated and negotiated the terms and conditions of the merger with the investor group. At a meeting held on July 23, 2007, the special committee unanimously (1) determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to and in the best interests of us and our unaffiliated stockholders, (2) declared it to be advisable for us to enter into the merger agreement and to consummate the transactions contemplated thereby, including the merger, and (3) recommended to our board of directors that (a) our board of directors approve and declare advisable the merger agreement and the transactions contemplated thereby, including the merger and (b) our board of directors recommend the adoption by our stockholders of the merger agreement.

 

In the course of reaching its decision to recommend that our board of directors approve the merger agreement and the merger, the special committee considered a number of substantive factors and potential benefits of, the merger that it believed supported its decision to enter into the merger agreement, and to enter into the merger agreement at this time, including the following:

 

stockholders if we remained independent in light of our business, operations, financial condition, strategy and prospects (taking into account internal financial projections of our future financial performance and earnings (see “Important Information About Cumulus — Projected Financial Information”); recent industry trends; the nature of the industry in which we compete, and general industry, economic, market and regulatory conditions, on both an historical and a prospective basis;

 

 

 

 

 

 

 

 

 

 

 

 

 

The special committee also believed that sufficient procedural safeguards were and are present to ensure the fairness of the proposed merger and to permit the special committee to represent effectively the interests of our stockholders (other than those affiliated with the investor group). The special committee considered a number of factors relating to these procedural safeguards, including those discussed below, each of which it believed supported its decision and provided assurance of the fairness of the merger to our unaffiliated stockholders:

 

 

 

 

 

 

 

 

 

 

In the course of its deliberations, the special committee also considered a variety of risks and other countervailing factors related to entering into the merger agreement and the merger, including the following:

 

 

 

The special committee also considered the following risks and countervailing factors, some of which are of general applicability with respect to merger transactions:

 

 

 

 

 

 

reimburse Parent’s out-of-pocket expenses incurred in connection with the transactions contemplated by the merger agreement;

 

 

 

The special committee considered the benefits and detriments of the transaction to Cumulus and to its unaffiliated stockholders. The special committee believed that the merger will benefit Cumulus as a private corporation allowing it to eliminate regulatory costs associated with being a public company and allowing management to focus on long-term strategies rather than short-term results. The transaction will benefit the unaffiliated stockholders by allowing them to realize cash for their investment in Cumulus in the short term. The special committee believed that the detriments to the unaffiliated stockholders are that (1) they will no longer have an equity stake in Cumulus and will therefore not participate in any of our future earnings or growth or benefit from any increase in the price of our common stock, and (2) they may also be required to pay U.S. and other income taxes (see “Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders” beginning on page 37).

 

In evaluating the proposed merger, the special committee did not consider liquidation value as relevant because we are a viable going concern. In addition, due to the fact that we are being sold as a going concern, the special committee did not consider our liquidation value as relevant to a determination as to whether the proposed merger is fair to our unaffiliated stockholders as it believed liquidation would deliver less value. Further, the special committee did not consider book value a relevant indicator of our value because the special committee believes it understates its value as a going concern, and is instead indicative of historical costs.

 

The foregoing discussion of the factors considered by the special committee is not intended to be exhaustive but does set forth the principal factors it considered. The special committee reached the conclusion to approve the merger agreement and the proposed merger in light of the various factors described above and other factors that the members of the special committee believed were appropriate. In view of the wide variety of factors considered by the special committee and the complexity of these matters, the special committee did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision. Similarly, it did not undertake to make any specific determination as to whether any particular factor was favorable or unfavorable to the ultimate determination of the special committee. Rather, the special committee made its recommendation based on the totality of information presented to it and the investigation conducted by it. In considering the factors discussed above, individual directors may have given different weights to different factors.

 

Other than as described in this proxy statement, we are not aware of any firm offers by any other person during the two years prior to the date of the July 23, 2007 merger agreement for a merger or consolidation of Cumulus with another company, the sale or transfer of all or substantially all of our assets or a purchase of our securities that would enable such person to exercise control of Cumulus.

 

It should also be noted that no proposal has been made after July 23, 2007 to acquire us at or above $11.75 per share other than from the investor group, despite the fact that, during the go-shop period, eight potential strategic buyers and ten potential financial buyers were contacted in order to seek one or more superior proposals. Only one of these potential buyers executed a confidentiality agreement and met with management. This potential buyer thereafter indicated that it was not interested in continuing discussions.

Recommendation of Our Board of Directors

 

Our board of directors, adopting the special committee’s reasons for the merger and its analysis of the substantive and procedural fairness of the merger, and acting upon the unanimous recommendation of the special committee, at the July 23, 2007 meeting described above:

 

 

 

In light of his affiliation with the investor group, Lew Dickey voted in favor of the foregoing based solely upon the recommendation of the special committee.

 

Our board of directors recommends that our stockholders vote “FOR” adoption of the merger agreement.

 

Purpose and Reasons for the Merger of the Investor Group and Cloud Entities

 

The proposed merger is a “going-private” transaction. If the proposed merger is completed, we will become a direct wholly owned subsidiary of Parent and an indirect wholly owned subsidiary of Holdings, which will be owned by the investor group. For Lew Dickey and John Dickey, the primary purpose of the merger is to immediately realize in cash the value of a portion of their respective holdings of our common stock and, through their contribution of a portion of their shares of our common stock to Parent in exchange for an equity interest in Holdings, to benefit from any of our future earnings and growth after our Class A Common Stock ceases to be publicly traded. Lew Dickey would also participate in such future earnings and growth through his economic interest in the investment entity, should such an investment entity be formed and become part of the investor group, as further described under “Special Factors — Interests of Our Directors and Executive Officers in the Merger.” For the sponsor and the Cloud Entities the primary purpose of the merger is to benefit from any of our future earnings and growth after our Class A Common Stock ceases to be publicly traded.

 

The investor group and the Cloud Entities believe that as a privately held entity, we will have the flexibility to focus on long-term growth without the constraints and distractions that can be caused by the public equity market’s valuation of our common stock and to pursue alternatives that we might not have as a public company. Although they also believe that there will be significant opportunities associated with their investment in us, and thus believe that the transaction should be undertaken at this time, they realize that there also are substantial risks (including the risks and uncertainties relating to our prospects, including the prospects described in management’s projections summarized under “Important Information About Cumulus — Projected Financial Information”) that such opportunities may not ever be fully realized and that other circumstances could erode our value in the future.

 

The investor group and the Cloud Entities believe that structuring the transaction as a “going-private” merger transaction is preferable to other transaction structures because it will enable Parent to acquire all of the outstanding shares of our common stock at the same time and it represents an opportunity for our unaffiliated stockholders to receive fair value for their shares (and, for the Dickeys, while also allowing the Dickeys to maintain a significant portion of their investment in Cumulus).

 

Opinion of the Special Committee’s Financial Advisor

 

We retained Credit Suisse to act as the special committee’s financial advisor in connection with the merger. In connection with Credit Suisse’s engagement, the special committee requested that Credit Suisse evaluate the fairness, from a financial point of view, of the merger consideration to be received by holders of our Class A Common Stock (other than excluded holders and their respective affiliates). On July 23, 2007, at a meeting of the special committee held to evaluate the proposed merger, Credit Suisse rendered to the special committee an oral opinion, which opinion was confirmed by delivery of a written opinion dated July 23, 2007, to the effect that, as of that date and based on and subject to the matters described in its opinion, the merger consideration was fair, from a financial point of view, to holders of our Class A Common Stock (other than excluded holders and their respective affiliates).

 

The full text of Credit Suisse’s written opinion, dated July 23, 2007, to the special committee, which sets forth, among other things, the procedures followed, assumptions made, matters considered and limitations on the scope of review undertaken by Credit Suisse in rendering its opinion, is attached as Annex B and is incorporated into this proxy statement by reference in its entirety. Holders of our Class A Common Stock are encouraged to read this opinion carefully in its entirety. Credit Suisse’s opinion was provided to the special committee for its information in connection with its evaluation of the merger consideration and relates only to the fairness of the merger consideration from a financial point of view. Credit Suisse’s opinion does not address any other aspect of the proposed merger and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to any matters relating to the merger. The summary of Credit Suisse’s opinion in this proxy statement is qualified in its entirety by reference to the full text of the opinion.

 

In arriving at its opinion, Credit Suisse reviewed the merger agreement and certain related documents as well as certain publicly available business and financial information relating to Cumulus. Credit Suisse also reviewed certain other information relating to Cumulus, including financial forecasts, provided to or discussed with Credit Suisse by Cumulus’s management and the special committee, and met with Cumulus’s management and members of the special committee to discuss the business and prospects of Cumulus. Credit Suisse also considered certain Cumulus financial and stock market data, and compared that data with similar data for other publicly held companies in businesses Credit Suisse deemed similar to that of Cumulus, and considered, to the extent publicly available, the financial terms of certain other business combinations and other transactions effected or announced. Credit Suisse also considered such other information, financial studies, analyses and investigations and financial, economic and market criteria that it deemed relevant.

 

In connection with its review, Credit Suisse did not assume any responsibility for independent verification of any of the foregoing information and relied on such information being complete and accurate in all material respects. With respect to the financial forecasts for Cumulus that Credit Suisse reviewed and was directed by the special committee to utilize for purposes of Credit Suisse’s analyses, Credit Suisse was advised, and assumed, that such forecasts were reasonably prepared on bases reflecting the best currently available estimates and judgments of the special committee as to the future financial performance of Cumulus. Credit Suisse also assumed, with the special committee’s consent, that, in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Cumulus or the merger and that the merger would be consummated in accordance with the terms of the merger agreement without waiver, modification or amendment of any material term, condition or agreement. Credit Suisse was not requested to, and did not, make an independent evaluation or appraisal of the assets or liabilities, contingent or otherwise, of Cumulus nor was Credit Suisse furnished with any such evaluations or appraisals. Credit Suisse’s opinion addressed only the fairness, from a financial point of view and as of the date of its opinion, of the merger consideration to be received by holders of our Class A Common Stock (other than excluded holders and their respective affiliates) and did not address any other aspect or implication of the merger or any other agreement, arrangement or understanding entered into in connection with the merger or otherwise, including the relative fairness among the holders of our Class A Common Stock and other classes of our common stock of the merger consideration to be received by such holders. Credit Suisse evaluated the merger consideration without giving effect to specific attributes (including, without limitation, liquidity, voting or control) of our Class A

Common Stock relative to other classes of our common stock, and was advised by representatives of the special committee that the certificate of incorporation of Cumulus requires identical treatment (except with respect to voting and conversion rights) for our Class A Common Stock and such other classes in the event of a merger or consolidation of Cumulus. Credit Suisse was not requested to, and did not, solicit third party indications of interest in the possible acquisition of all or any part of Cumulus; however, Credit Suisse was requested to solicit third party indications of interest from potential buyers for a limited period after the date of the merger agreement as permitted under its provisions. Credit Suisse’s opinion was necessarily based upon information made available to it as of the date of its opinion and financial, economic, market and other conditions as they existed and could be evaluated on the date of its opinion. Credit Suisse’s opinion did not address the relative merits of the merger as compared to alternative transactions or strategies that might be available to Cumulus, nor did it address the underlying business decision of Cumulus to proceed with the merger. Except as described above, the special committee imposed no other limitations on Credit Suisse with respect to the investigations made or procedures followed in rendering its opinion.

 

In preparing its opinion to the special committee, Credit Suisse performed a variety of financial and comparative analyses, including those described below. The summary of Credit Suisse’s analyses described below is not a complete description of the analyses underlying Credit Suisse’s opinion. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. Credit Suisse arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Credit Suisse believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

 

In its analyses, Credit Suisse considered industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond our control. No company, transaction or business used in Credit Suisse’s analyses is identical or directly comparable to Cumulus or the proposed merger, and an evaluation of the results of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions analyzed. The estimates contained in Credit Suisse’s analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, the estimates used in, and the results derived from, Credit Suisse’s analyses are inherently subject to substantial uncertainty.

 

Credit Suisse was not requested to, and it did not, recommend the specific consideration payable in the proposed merger, which consideration was determined through negotiations between the special committee and the investor group, and the decision to enter into the merger agreement was solely that of the special committee. Credit Suisse’s opinion and financial analyses were only one of many factors considered by the special committee in its evaluation of the proposed merger and should not be viewed as determinative of the views of the special committee or management with respect to the merger or the merger consideration.

 

The following is a summary of the material financial analyses reviewed with the special committee on July 23, 2007 in connection with Credit Suisse’s opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand Credit Suisse’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Credit Suisse’s financial analyses. For each of the financial analyses summarized below, Credit Suisse derived implied per

share equity reference ranges for Cumulus, both with and without taking into account Cumulus’s minority investment in CMP, an entity in which Cumulus holds a 25% equity interest, in order to illustrate the incremental impact of Cumulus’s minority investment in CMP on the results of such financial analyses.

 

Selected Public Companies Analysis

 

Credit Suisse performed separate selected public companies analyses of Cumulus and CMP in order to derive implied per share equity reference ranges for Cumulus, both with and without taking into account Cumulus’s minority investment in CMP, and then compared these implied per share equity reference ranges with the per share merger consideration. In this analysis, Credit Suisse reviewed Cumulus financial and stock market information, CMP and the following nine selected companies. These companies were selected because they were publicly traded companies in the radio broadcasting industry, which is the industry in which Cumulus operates:

 

 

Credit Suisse reviewed, among other things, enterprise values of the selected companies, calculated as equity value based on closing stock prices on July 20, 2007, plus debt, less cash and other adjustments, as a multiple of calendar years 2007 and 2008 estimated earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA. Credit Suisse then applied a selected range of calendar years 2007 and 2008 estimated EBITDA multiples derived from the selected companies to corresponding data of Cumulus and CMP. Estimated financial data of the selected companies were based on publicly available research analysts’ estimates. Estimated financial data of Cumulus and CMP were based on internal estimates of Cumulus’s management for calendar year 2007 as approved by the special committee and internal estimates of the special committee for calendar year 2008. This analysis indicated the following implied per share equity reference ranges for Cumulus with and without taking into account Cumulus’s minority investment in CMP, as compared to the per share merger consideration:

 

 

Selected Precedent Transactions Analysis

 

Credit Suisse performed a selected precedent transactions analysis of Cumulus in order to derive implied per share equity reference ranges for Cumulus, both with and without taking into account Cumulus’s minority investment in CMP, and then compared these implied per share equity reference ranges with the per share merger consideration. In this analysis, Credit Suisse reviewed the following nine transactions involving

companies in the radio broadcasting industry publicly announced since 2001 with announced transaction values in excess of $300 million:

 

 

Credit Suisse reviewed transaction values in the selected transactions, calculated as the purchase prices paid in the selected transactions, plus debt and minority interests, less cash and investments, as a multiple of forward 12 months estimated EBITDA. Credit Suisse then applied a selected range of forward 12 months estimated EBITDA multiples derived from the selected transactions to Cumulus’s calendar year 2007 estimated EBITDA without taking into account Cumulus’s minority investment in CMP, and to Cumulus’s calendar year 2007 estimated EBITDA after adjustment to reflect 25% of CMP’s calendar year 2007 estimated net income, which we refer to as Cumulus’s calendar year 2007 estimated CMP-adjusted EBITDA. Estimated financial data of the selected transactions were based on publicly available information at the time of announcement of the relevant transaction. Estimated Cumulus financial data were based on internal estimates of Cumulus’s management as approved by the special committee. After adjustment for the estimated net present value of Cumulus’s net operating losses that Cumulus’s management anticipated Cumulus would utilize, this analysis indicated the following implied per share equity reference ranges for Cumulus with and without taking into account Cumulus’s minority investment in CMP, as compared to the per share merger consideration:

 

 

Discounted Cash Flow Analysis

 

Credit Suisse performed separate discounted cash flow analyses of Cumulus and CMP in order to derive implied per share equity reference ranges for Cumulus, both with and without taking into account Cumulus’s minority investment in CMP, and then compared these implied per share equity reference ranges with the per share merger consideration. In this analysis, Credit Suisse calculated the estimated present value of the standalone unlevered, after-tax free cash flows that Cumulus and CMP could each generate during fiscal years 2008 through 2011 based on internal estimates of the special committee. Credit Suisse calculated terminal values for Cumulus and CMP by applying to Cumulus’s and CMP’s calendar year 2012 estimated EBITDA based on internal estimates of the special committee a range of terminal value EBITDA multiples of 10.0x to 12.0x. This range of terminal value multiples was derived taking into consideration, among other things, calendar years 2007 and 2008 estimated EBITDA multiples of the selected companies referred to above under “Selected Public Companies Analysis” and forward 12 months estimated EBITDA multiples of the selected precedent transactions referred to above under “Selected Precedent Transactions Analysis” which were announced in 2006 and 2007. The present value of the cash flows and terminal values was then calculated using discount rates ranging from 7.0% to 8.0%, which discount rates were based on a weighted average cost

of capital calculation. After adjustment for the estimated present value of the net operating losses of Cumulus that Cumulus’s management anticipated Cumulus would utilize, this analysis indicated the following implied per share equity reference ranges for Cumulus with and without taking into account Cumulus’s minority investment in CMP, as compared to the per share merger consideration:

 

 

Miscellaneous

 

The special committee selected Credit Suisse based on Credit Suisse’s qualifications, experience and reputation. Credit Suisse is an internationally recognized investment banking firm and is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes.

 

We have agreed to pay Credit Suisse for its financial advisory services in connection with the merger an aggregate fee currently estimated to be approximately $2.1 million, a portion of which was payable to Credit Suisse upon rendering its opinion and approximately $1.1 million of which is contingent on the completion of the merger. In addition, we have agreed to reimburse Credit Suisse for its reasonable expenses, including reasonable fees and expenses of legal counsel, and to indemnify Credit Suisse and related parties against certain liabilities and other items, including liabilities under the federal securities laws, arising out of its engagement.

 

From time to time, Credit Suisse and its affiliates in the past have provided investment banking and other financial services to the sponsor and certain affiliates of the sponsor, and in the future may provide such services to the sponsor and its affiliates, for which services Credit Suisse and its affiliates have received, and may receive, compensation. In addition, certain private investment funds affiliated or associated with Credit Suisse have invested in private equity funds affiliated or associated with the sponsor. Credit Suisse is a full service securities firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, Credit Suisse and its affiliates may acquire, hold or sell, for its and its affiliates’ own accounts and the accounts of customers, our equity, debt and other securities and financial instruments (including bank loans and other obligations), certain affiliates of Parent and any other entities that may be involved in the merger, as well as provide investment banking and other financial services to such companies.

 

Position of the Investor Group and the Cloud Entities as to Fairness

 

Under a potential interpretation of the rules governing “going private” transactions, the members of the investor group and the Cloud Entities may be considered affiliates of Cumulus engaged in a “going-private” transaction and therefore may be required to express their beliefs as to the fairness of the merger to our unaffiliated stockholders. The members of the investor group and the Cloud Entities are making the statements included in this section solely for the purpose of complying with such requirements.

 

The views of the investor group and the Cloud Entities as to the fairness of the merger should not be construed as a recommendation to any stockholder as to how that stockholder should vote on the proposal to approve the merger agreement. The members of the investor group and the Cloud Entities have interests in the merger different from, and in addition to, those of our other stockholders. Certain of these interests are described under “— Interests of Our Directors and Executive Officers in the Merger.”

 

The members of the investor group and the Cloud Entities attempted to negotiate the terms of a transaction that would be most favorable to them, and not to our unaffiliated stockholders, and, accordingly, did not negotiate the merger agreement with the goal of obtaining terms that were fair to our unaffiliated stockholders. Neither the sponsor nor any of the Cloud Entities believes that it has or had any fiduciary duty to Cumulus or its stockholders, including with respect to the merger and its terms. Our unaffiliated

stockholders were, as described elsewhere in this proxy statement, represented by the special committee that negotiated with the investor group on their behalf, with the assistance of independent legal and financial advisors.

 

No member of the investor group or the Cloud Entities participated in the deliberation process of the special committee, or in the conclusions of the special committee that the merger was fair to our unaffiliated stockholders, nor did they undertake any independent evaluation of the fairness of the merger. Although the members of the investor group consulted with Merrill Lynch, its financial advisor, regarding certain structural and financial aspects of the merger, neither Merrill Lynch nor any other financial advisor provided them with any analysis or opinion with respect to the fairness of the merger consideration.

 

However, based upon the same factors considered by, and the findings of, the special committee and the board of directors with respect to the fairness of the merger to our unaffiliated stockholders as set forth in this proxy statement (see “ — Reasons for the Merger; Recommendation of the Special Committee and of Our Board of Directors”), which factors, findings and related analyses, as set forth in this proxy statement, the members of the investor group and the Cloud Entities adopt (except that the members of the investor group and the Cloud Entities are not entitled to rely on the opinion received by the special committee from its financial advisor), the members of the investor group and the Cloud Entities believe that the merger agreement and the merger are substantively and procedurally fair to the unaffiliated stockholders. In addition, notwithstanding the fact that they are not entitled to rely thereon, the members of the investor group and the Cloud Entities considered the fact that the special committee received an opinion from its financial advisor as to the fairness, from a financial point of view, of the merger consideration to be received by the holders of Class A Common Stock (other than excluded holders and their respective affiliates).

 

Further, the members of the investor group and the Cloud Entities believe that the merger is substantively fair to the unaffiliated stockholders based on the following factors:

 

 

 

 

In addition, the members of the investor group and the Cloud Entities believe that the merger is procedurally fair to the unaffiliated stockholders based on the following factors:

 

 

 

 

The foregoing discussion of the information and factors considered and given weight by the members of the investor group and the Cloud Entities in connection with the fairness of the merger agreement and the merger is not intended to be exhaustive but, together with the factors identified by the special committee in this proxy statement, is believed to include all material factors considered by the members of the investor group and the Cloud Entities. None of them found it practicable to, and did not, quantify or otherwise attach relative weights to the foregoing factors in reaching their position as to the fairness of the merger agreement and the merger. The members of the investor group and the Cloud Entities believe that these factors provide a reasonable basis for their position that the merger is fair to the unaffiliated stockholders.

 

Plans for Cumulus After the Merger

 

Upon completion of the merger, the investor group anticipates that we will continue to conduct operations substantially as currently conducted, except that we will cease to have publicly traded equity securities and will instead be a wholly owned subsidiary of Parent. The members of the investor group have informed us that they have no current plans or proposals for, or negotiations that relate to or would result in, an extraordinary corporate transaction involving our corporate structure, business or management, such as a merger, reorganization, liquidation, relocation of any operations, or the sale or transfer of a material amount of assets, the incurrence of any indebtedness or any other material changes in our business, except as described in this proxy statement. We expect, however, that both before and following the completion of the merger, the members of the investor group will continue to assess our operations, assets, corporate and capital structure, capitalization, operations, business, properties and personnel to determine what changes, if any, might be desirable following the merger to enhance the business and operations of the surviving corporation and may cause the surviving corporation to engage in the types of transactions set forth above if the management or board of directors of the surviving corporation decides that such transactions are in the best interest of the surviving corporation upon such assessment. The surviving corporation expressly reserves the right to make any changes it deems appropriate in light of such evaluation and review or in light of any future developments.

 

Effects of the Merger on Cumulus

 

If the merger agreement is adopted by our stockholders and certain other conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into us, and we will be the surviving corporation.

 

Upon the completion of the merger, each share of our common stock issued and outstanding immediately prior to the effective time of the merger (other than shares held in our treasury, shares owned by Parent immediately prior to the effective time of the merger or shares held by stockholders who are entitled to and who properly exercise appraisal rights under Delaware law) will be converted into the right to receive $11.75 in cash (or $11.75 plus certain additional consideration if the merger is not completed on or before July 23, 2008), without interest and less any applicable withholding taxes.

 

Upon completion of the merger, each outstanding option to acquire our common stock shall be entitled to receive in exchange for such option a cash payment equal to the number of shares of our common stock underlying such option multiplied by the amount (if any) by which $11.75 (or $11.75 plus certain additional consideration if the merger is not completed on or before July 23, 2008) exceeds the option exercise price, without interest and less any applicable withholding taxes. In addition, unless otherwise agreed between a holder and Parent, each outstanding share of restricted stock that is subject to vesting or other lapse restrictions will vest and become free of restriction and will be canceled and converted into the right to receive $11.75 (or $11.75 plus certain additional consideration if the merger is not completed on or before July 23, 2008), without interest and less any applicable withholding taxes. We are required to use our reasonable best efforts to obtain any required consents from holders of outstanding options and take any other actions necessary to give effect to the foregoing and to cause all options, including those with option exercise prices that are less than $11.75 per share, to terminate as of the effective date of the merger. As of the date of this proxy statement, we have received such consents from all of our executive officers and directors.

 

Following the merger, the entire equity in the surviving corporation will ultimately be owned through Parent by the investor group and any additional investors that the members of the investor group may permit to invest in Parent. If the merger is completed, the members of the investor group and any such additional

investors will be the sole beneficiaries of our future earnings and growth, if any, and will be entitled to vote on corporate matters affecting us following the merger. Similarly, the investor group and any such additional investors will also bear the risks of ongoing operations, including the risks of any decrease in our value after the merger and the operational and other risks related to the incurrence by the surviving corporation of significant additional debt in connection with the merger as described below under “— Financing of the Merger.”

 

If the merger is completed, the unaffiliated stockholders will have no interest in our net book value or net earnings. In addition, our directors and stockholders holding at least 5% of our outstanding common stock (except for Lew Dickey and John Dickey) will have no interest in our net book value or net earnings after the completion of the merger. The table below sets forth the direct and indirect interests in the our net book value and net earnings of Lew Dickey, John Dickey and the sponsor, including its affiliates, prior to and immediately after the merger, based upon our net book value at September 30, 2007 and our net income for the nine months ended September 30, 2007.

 

 

 

 

 

In connection with the merger, the investor group will receive benefits and be subject to obligations that are different from, or in addition to, the benefits and obligations of our stockholders generally, as described in more detail under “— Interests of Our Directors and Executive Officers in the Merger.”

 

Our Class A Common Stock is currently listed on the NASDAQ under the symbol “CMLS.” Following the completion of the merger, we will cease to be a publicly traded corporation and will instead become a wholly owned subsidiary of Parent, which is indirectly owned by the investor group. Following completion of the merger, the registration of our Class A Common Stock and our reporting obligations under the Exchange Act will be terminated upon application to the SEC. In addition, upon completion of the merger, our Class A Common Stock will no longer be listed on any exchange or quotation system, including the NASDAQ, and price quotations will no longer be available.

 

Upon completion of the merger, our certificate of incorporation and bylaws will be amended pursuant to exhibits to the merger agreement.

 

Effects on Cumulus if the Merger is not Completed

 

If the merger agreement is not adopted by our stockholders or if the merger is not completed for any other reason, stockholders will not receive any payment for their shares in connection with the merger. Instead, we will remain an independent public company and our Class A Common Stock will continue to be listed and traded on the NASDAQ. In addition, if the merger is not completed, we expect that our management will operate the business in a manner similar to that in which it is being operated today and that our stockholders will continue to be subject to the same risks and opportunities as they currently are, including, among other things, the nature of the radio broadcast industry on which our business largely depends, and general industry,

economic, regulatory and market conditions. Accordingly, if the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of our common stock. From time to time, our board of directors will evaluate and review, among other things, our business operations, properties, dividend policy and capitalization and make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance stockholder value. If the merger agreement is not adopted by our stockholders or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to us will be offered, or that our business, prospects or results of operations will not be adversely impacted.

 

In addition, under the circumstances described under “The Merger Agreement — Termination Fees,” we may be required to pay Parent a termination fee of up to $15 million or reimburse its out-of-pocket expenses for the transaction of up to $7.5 million.

 

Financing of the Merger

 

Parent estimates that the total amount of funds necessary to complete the proposed merger and the related transactions is approximately $1.3 billion, which includes approximately $448.7 million to be paid to our stockholders (other than the Dickeys to the extent they reinvest shares of our common stock), with the remaining funds to be used, among other things, to refinance certain existing indebtedness, and to pay customary fees and expenses in connection with the proposed merger, the financing arrangements and the related transactions.

 

Pursuant to the merger agreement, Parent is obligated to use its reasonable best efforts to obtain the debt and equity financing described below on the terms and conditions described below or terms that would not adversely impact, in any material respect, the ability of Parent or Merger Sub to consummate the merger. We have agreed to use our reasonable best efforts to cooperate in connection with these financings. Parent has also agreed to notify us promptly if at any time prior to the closing date of the merger, (1) the financing commitments contemplated expire or are terminated for any reason; (2) the financing source that is a party to the financing commitments notifies Parent that such source no longer intends to provide financing to Parent; or (3) Parent, in good faith, believes that it will not be able to obtain all or a portion of the financing commitments. Parent has further agreed to notify us promptly upon becoming aware of any material breach by any party to the financing commitments or of any termination of the financing commitments.

 

Both the equity and debt financings are subject to conditions, including conditions that do not relate directly to the merger agreement. Although obtaining financing is not a condition to the completion of the merger, the failure to obtain sufficient financing on terms that are acceptable to the investor group could result in the failure to complete the merger.

 

The debt financing described in this proxy statement is not subject to a due diligence or typical “market out” provision (i.e., a provision allowing lenders not to fund their commitments if certain conditions in the financial markets prevail). Nonetheless, such financing may not be considered assured. As of the date of this proxy statement, no alternative financing arrangements or alternative financing plans have been made in the event the debt financing described in this proxy statement is not available as anticipated.

 

The following arrangements are intended to provide the necessary financing for the merger:

 

Equity Financing

 

Parent has received an equity commitment letter from the sponsor, pursuant to which the sponsor has committed to contribute $286 million in cash to Parent in connection with the proposed merger, in exchange for equity interests in Holdings. As described in more detail under “— Interests of Our Directors and Executive Officers in the Merger,” the Dickeys have the right to assume an amount of up to $20 million of such commitment through the contribution to Parent of shares of our common stock, the investment entity has the right to assume an amount of up to the investment entity target amount of such commitment and the sponsor has the right to assign up to 100% of the amounts it committed to one or more of its affiliates. The obligation of the sponsor to fund commitments under the equity commitment letter is subject to (1) the completion of the merger following the satisfaction or waiver of the required conditions of the merger agreement, (2) the terms of the equity commitment letter, and (3) the substantially contemporaneous funding

of the debt financing with the equity financing, and will occur contemporaneously with the completion of the merger.

 

In addition, the Dickeys have committed to contribute an aggregate of 5,106,383 shares of our common stock, equal to approximately $60 million based upon the merger consideration of $11.75 per share, to Parent in exchange for equity interests in Holdings. The Dickeys may assign their equity interests in Holdings in connection with (i) certain transfers for estate planning purposes and (ii) transfers within the Dickey family (provided that Lew Dickey and John Dickey may not transfer any equity interests in Holdings to other members of the Dickey family). The shares contributed will be canceled and retired, and will not be entitled to receive any merger consideration upon completion of the merger. The obligation to contribute the shares is subject to (1) the completion of the merger following the satisfaction or waiver of the required conditions to Parent’s and Merger Sub’s obligations set forth in the merger agreement, (2) the terms of the equity rollover letters, and (3) the substantially contemporaneous funding of the debt and equity financing, and will occur contemporaneously with the completion of the merger.

 

The equity commitments of the sponsor and each of the Dickeys will terminate automatically and immediately upon the earlier of (1) termination of the merger agreement and (2) we or any of our affiliates asserting in any litigation or other proceeding any claim against the sponsor or the Dickeys. In addition, the equity commitments of the sponsor and each of the Dickeys will terminate automatically and immediately if any person, other than Parent (acting through its board of directors), seeks to enforce or cause Parent to enforce any provision of the equity commitment letter or their respective equity rollover letters, as the case may be.

 

Debt Financing

 

Parent has received a debt commitment letter, dated as of July 23, 2007, from MLCC and MLPF&S. Pursuant to the debt commitment letter, MLCC has committed to provide up to $1.02 billion of senior secured credit facilities, for the purpose of paying the merger consideration, repaying or refinancing certain of our and our subsidiaries’ existing indebtedness, paying fees and expenses incurred in connection with the merger and related transactions and providing ongoing working capital and for other general corporate purposes of the surviving corporation and its subsidiaries. MLPF&S will act as lead arranger and bookrunner for the senior secured credit facilities. MLCC will serve as the administrative agent.

 

General.  The borrower under the senior secured credit facilities will be Merger Sub, whose obligations thereunder will be assumed by us upon completion of the closing. The senior secured credit facilities will be comprised of (1) $880 million first lien senior secured facilities consisting of a $780 million term loan facility and a $100 million revolving credit facility (with letter of credit and swing line sub-facilities) and (2) a $140 million second lien senior secured term loan facility. Pursuant to an incremental facilities feature, the senior secured credit facilities may be increased from time to time by an additional $200 million in the aggregate plus amounts available at the time of incurrence under leverage-based incurrence tests, subject to terms and conditions consistent with documentation for affiliates of the sponsor, provided we are able to obtain additional commitments from existing lenders or other financial institutions.

 

The commitments under the first lien revolving credit facility expire on the sixth anniversary of the closing date of the merger. The first lien term loan facility will mature on the seventh anniversary of the closing date. The first lien term loan facility will amortize at a rate of 1.00% per year of the original principal amount thereof on a quarterly basis for the first six years and nine months of the term of the loan, with the balance paid in full on the seventh anniversary of the closing date. The second lien term loan facility will mature on the eighth anniversary of the closing date, and will not have any scheduled amortization.

 

Conditions.  The debt commitments expire on February 9, 2009. The documentation governing the senior secured credit facilities has not been finalized and, accordingly, the actual terms of such facilities may differ from those described in this proxy statement. The availability of the senior secured credit facilities is subject to documentary and other customary closing conditions, including, among other things, completion of the merger in accordance with the terms of the merger agreement without giving any effect to any amendments, modifications or waivers thereto (including to the definition of “Company Material Adverse Effect” therein

and the provisions incorporating such term) that are materially adverse to the interests of the lenders and not approved by the arranger of the credit facilities, repayment of all amounts under our existing credit facility, receipt of the equity financing by Parent, the receipt of specified financial statements and other financial data, the receipt of customary closing documents and deliverables (including a certificate as to solvency) and the payment of fees and expenses.

 

Interest Rate and Fees.  Loans under the first lien facilities are expected to bear interest, at our option, at (1) a rate equal to Adjusted LIBOR (the London interbank offered rate for dollars, adjusted for statutory reserve requirements) plus an applicable margin to be set initially at 2.25% or (2) the “ABR Rate,” a rate equal to the higher of (a) the prime rate of MLCC and (b) the federal funds effective rate plus 0.50%, plus an applicable margin to be set initially at 1.25%; provided, however, that after the date of delivery of financial statements covering a period of at least the first three full months following the closing date, the applicable margin with respect to the revolving credit facility will be subject to step-downs based upon achievement of certain leverage ratios. Loans under the second lien facility are expected to bear interest, at our option, at (1) a rate equal to Adjusted LIBOR plus 4.25% or (2) the ABR Rate, plus 3.25%.

 

In addition, there are commitment fees (subject to decreases based on leverage) based upon the undrawn portion of the revolving credit facility and customary letter of credit fees.

 

Prepayments.  We will be permitted to make voluntary prepayments on the first lien facilities at any time, without premium or penalty (other than LIBOR breakage costs, if applicable). We will be permitted to make voluntary prepayments on the second lien facility at any time, provided that in addition to any LIBOR breakage costs, we must pay a prepayment premium equal to 2% for any prepayment made during the first year following the closing date, 1% for any prepayment made during the second year following the closing date, and 0% thereafter.

 

The loans under each of the first lien term loan facility and second lien facility are subject to mandatory prepayment with:

 

 

The second lien facility is also subject to a mandatory offer to purchase the loans outstanding thereunder upon a change of control for a price equal to 100% of the principal outstanding, plus a premium of 1% if the change of control occurs within two years of the closing date and 0% thereafter.

 

Guarantors.  All of our obligations under the senior secured credit facilities will be unconditionally guaranteed by Parent and each of our domestic restricted subsidiaries, subject to exceptions (including with respect to immaterial subsidiaries and domestic subsidiaries of foreign subsidiaries).

 

Security.  Our obligations under the senior secured credit facilities will be secured by a perfected first priority security interest in substantially all of our and the guarantors’ assets, whether owned on the closing date or thereafter acquired, including but not limited to: (a) all of our non-voting equity interests and the non-voting equity interests in our subsidiaries (65% in the case of foreign subsidiaries) and (b) perfected security interests in substantially all of our and the subsidiary guarantors’ material owned tangible and intangible assets. Our obligations under the second lien credit facility will be secured by a perfected second priority security interest in the same assets securing the first lien credit facility.

 

Other Terms.  The senior secured credit facilities are expected to contain representations and warranties and affirmative and negative covenants consistent with documentation for affiliates of the sponsor, including, among other things, restrictions on indebtedness, liens, fundamental changes, investments, sales of assets, sale

and leaseback transactions, hedging agreements, restricted payments and certain payments of specified indebtedness, affiliate transactions, restrictive agreements, FCC licenses and license subsidiaries and amendments to material documents. The financial covenants will consist of a minimum consolidated interest coverage ratio and a maximum total leverage ratio. The senior secured facilities will also include events of defaults consistent with documentation for affiliates of the sponsor, provided that a change of control shall not constitute an event of default with respect to the second lien facilities.

 

Alternative Debt Financing.  We have also agreed, pursuant to the merger agreement, to use our reasonable best efforts to obtain the commitment of Bank of America, N.A., the administrative agent under our current credit facility, or its affiliates, to provide for incremental facilities in an amount not less than $180 million, upon the request and on terms as directed and negotiated by Parent for the purpose of substituting such commitment in place of the existing debt commitment from MLCC and MLPF&S. Parent may elect to use this alternative source of debt financing in its sole discretion, provided that (1) Cumulus shall not be required to pay any commitment or other similar fee or incur any other liability prior to the effective time and (2) the conditions precedent to this alternative source of debt financing may not in the aggregate expand upon the conditions precedent to the existing debt financing in any material respect.

 

Regulatory Approvals

 

Under the HSR Act and the rules promulgated thereunder by the FTC, the merger cannot be completed until we and Parent file a notification and report form under the HSR Act and the applicable waiting period has expired or been terminated. At any time before or after completion of the merger, notwithstanding the early termination of the waiting period under the HSR Act, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of us or Parent. At any time before or after the completion of the merger, and notwithstanding the early termination of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of us or Parent. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

 

While there can be no assurance that the merger will not be challenged by a governmental authority or private party on antitrust grounds, based on a review of information provided by Parent relating to the businesses in which it and its affiliates are engaged, we believe that the merger can be effected in compliance with federal and state antitrust laws. The term “antitrust laws” means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other Federal and state statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade.

 

In addition, under the Communications Act, we and Parent may not complete the merger unless we have first obtained the approval of the FCC to transfer control of our FCC licenses to Parent and Merger Sub. FCC approval is sought through the filing of applications with the FCC, which are subject to public comment and objections from third parties. Pursuant to the merger agreement, the parties must file by September 25, 2007, all applications necessary to obtain the FCC’s consent. The timing or outcome of the FCC approval process cannot be predicted.

 

The parties have agreed to take promptly any and all steps necessary to avoid or eliminate any impediment (including any impediment under the FCC’s media ownership rules) to obtaining the FCC’s consent so as to enable the parties to close the transactions contemplated by the merger agreement as promptly as practicable.

 

In addition, the obligation of Parent and Merger Sub to effect the merger is subject to the fulfillment or waiver of the following conditions: (a) the SEC has (1) approved the application of each investment advisory or broker-dealer affiliate of Merrill Lynch pursuant to Section 9(c) of the Investment Company Act regarding our exemption (and that of any person that may become affiliated with us following the closing) from any of

the prohibitions set forth in Section 9(a) of the Investment Company Act and (2) granted waivers of disqualifications under Regulation A, Rule 505 of Regulation D, and Regulation E promulgated under the Securities Act with respect to Merrill Lynch and its affiliates, in each case as applicable as a result of the final judgment and order of permanent injunction against us in the U.S. District Court for Northern District of Illinois Eastern Division, entered on January 22, 2004, and (b) no self-regulatory organization in which a broker-dealer affiliated with Merrill Lynch is a member shall have objected to such broker-dealer becoming affiliated or associated with us.

 

Accounting

 

For financial reporting purposes, the merger will be accounted for using purchase accounting.

 

Interests of Our Directors and Executive Officers in the Merger

 

In considering the recommendation of our board of directors with respect to the merger agreement, holders of our common stock should be aware that certain of our executive officers and directors have interests in the merger that may be different from, or in addition to, those of our stockholders generally. These interests may create potential conflicts of interest. Our board was aware of these potential conflicts of interest, as was the special committee, which considered these interests, among other matters, in reaching its decision to approve the merger agreement and to recommend that our stockholders vote in favor of adopting the merger agreement. See “— Background of the Merger.” Our directors and executive officers will receive $11.75 per share (or $11.75 plus certain additional consideration if the merger is not completed on or before July 23, 2008) for each share they own immediately prior to the completion of the merger in the same manner as our other stockholders, subject to certain exceptions, as described below under the caption “— Investment by Certain Members of Our Boards of Directors and Management in Holdings.”

 

Executive Officer and Director Compensation Arrangements

 

Lewis W. Dickey, Jr.

 

Lew Dickey currently holds options to purchase shares of our Class A Common Stock and Class C Common Stock granted between 1998 and 2004, none of which have exercise prices below $11.75. As a result, he will not receive any payment in respect of those options, and Lew Dickey has consented in writing that all such options will be canceled upon completion of the merger, with his consent to the extent necessary.

 

Lew Dickey also currently holds 320,000 restricted shares of our Class A Common Stock, pursuant to a restricted stock agreement entered into as of March 1, 2007. Pursuant to his current employment agreement, in the event of a change of control, these shares, together with any other shares of restricted stock that are awarded prior to such change of control, would automatically vest in full. In addition, Lew Dickey is entitled to receive a change-of-control grant of up to 430,000 shares of Class A Common Stock in the event that a change of control occurs during the term of his current employment agreement. If the merger is completed before the date upon which Lew Dickey’s 2008 annual restricted stock award is made, he would be entitled to receive the full 430,000 shares. If the merger is completed after such date, but in 2008, Lew Dickey’s change-in-control grant would be reduced to 360,000 shares, and would thereafter continue to be reduced by 70,000 shares per year, to a minimum of 80,000 shares. Additionally, if the merger is completed prior to December 20, 2007, Lew Dickey will receive an accelerated issuance of 685,000 shares of Class A Common Stock in respect of deferred shares granted to him as a signing bonus pursuant to his current employment agreement, which would otherwise be issued to him on December 20, 2007 pursuant to such employment agreement.

 

Under the terms of Lew Dickey’s current employment agreement, the completion of the merger would also terminate his obligation under the retention plan set forth in that agreement, which would otherwise require him to pay Cumulus up to $6,500,000 (such amount decreasing during the term) should he voluntarily terminate his employment or should his employment be terminated for cause.

 

Finally, under the terms of Lew Dickey’s current employment agreement, he is entitled to payment of excise taxes, if any, imposed under Section 4999 of the Internal Revenue Code of 1986, and interest and

penalties related thereto, as well as a gross-up payment in the amount of any other taxes incurred in connection with our payment of such excise taxes, interest and penalties.

 

Martin R. Gausvik, John G. Pinch and John W. Dickey

 

Each of Marty Gausvik, John Pinch and John Dickey holds options to purchase shares of our Class A Common Stock, some of which have exercise prices below $11.75. Upon completion of the merger, these “in-the-money” options held by Marty Gausvik, John Pinch and John Dickey will be canceled and converted into the right to receive $3,051,250, $573,258 and $2,785,625, respectively, without interest and less any applicable withholding taxes. Marty Gausvik, John Pinch and John Dickey have each consented in writing that all other options held by them will be canceled upon the completion of the merger without any further payoff.

 

Each of Marty Gausvik, John Pinch and John Dickey also currently holds 63,333, 65,000 and 186,667 restricted shares of our Class A Common Stock, respectively, the vesting of which is governed by restricted stock agreements entered into in 2005, 2006 and 2007. Pursuant to the terms of those restricted stock agreements, those shares will automatically vest in full in the event of the merger.

 

In addition, pursuant to the terms of their current employment agreements, each of Marty Gausvik and John Dickey will be entitled to one year’s base salary in the event of their respective voluntary termination of employment within one year following the merger.

 

Members of Our Board of Directors (other than Lew Dickey)

 

Each of Ralph Everett, Holcombe Green, Eric Robison and Robert Sheridan holds options to purchase shares of our Class A Common Stock, some of which have exercise prices below $11.75. Upon completion of the merger, these “in-the-money” options held by Ralph Everett, Holcombe Green, Eric Robison and Robert Sheridan will be converted into the right to receive $392,550, $160,550, $293,615 and $94,000, respectively, without interest and less any applicable withholding taxes. Ralph Everett, Holcombe Green, Eric Robison and Robert Sheridan have each consented in writing that any options held by them will be canceled upon the completion of the merger.

The table below sets forth the total amount in cash that each executive officer and director is expected to receive, based on the merger consideration of $11.75 per share and assuming, for purposes of these tables only, that the merger is completed by February 1, 2008, in respect of (1) each share of common stock held without restriction as of August 28, 2007 (excluding, in the case of Lew Dickey and John Dickey, shares of our common stock to be contributed to Parent), (2) each stock option such individual holds as of August 28, 2007 that would be vested as of the date the merger is completed, absent any option acceleration, (3) each stock option such individual holds as of August 28, 2007 that would be accelerated as of the date the merger is completed, and (4) each restricted share such individual holds that would be accelerated as of the date the merger is completed. Actual amounts may be higher or lower depending on the actual date that the merger is completed. The values below are based on the assumption that all outstanding equity awards will be cashed out in connection with the merger, and that no additional equity awards are made prior to the merger.

 

 

 

 

For information regarding beneficial ownership of our common stock by each of our current directors and executive officers and all directors and executive officers as a group, including shares subject to stock options and restricted stock awards, the vesting of which is expected, at least in part, to accelerate as a result of the merger, see the section captioned “Important Information About Cumulus — Security Ownership of Certain Beneficial Owners and Management.”

 

Benefit Arrangements Following the Merger

 

Parent has agreed to provide or cause to be provided, for a period of one year after the effective time of the merger, for each of our employees who are employed at the effective time, base compensation and incentive compensation opportunities (excluding equity-based compensation) and benefits that are no less favorable in the aggregate than those provided to our employees prior to the effective time. Parent has also agreed that following the merger we will recognize certain service of such employees with us prior to the completion of the merger for purposes of eligibility and vesting with respect to any benefit plan, program or arrangement (except to the extent such recognition of service would result in a duplication of benefits), and to waive certain limitations as to pre-existing conditions or eligibility limitations for any new health plans for such employees instituted after the effective time of the merger, and give effect, for the applicable plan year in which the merger is completed, in determining any deductible, co-insurance and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, employees under similar plans maintained by us immediately prior to the effective time of the merger, as if such amounts had been paid in accordance with any new plan instituted after the effective time of the merger. In addition, Parent has agreed that all current rights of indemnification currently provided for our current and former directors, officers and employees will survive the merger and continue in full force and effect and that it will take no actions to adversely affect such rights for a period of six years from the date of the merger agreement.

As of July 23, 2007, the date the merger agreement was executed, employees may no longer increase their payroll deductions in our Employee Stock Purchase Plan. In addition, no further offering periods under our Employee Stock Purchase Plan will be commenced, and each participant’s right to purchase shares of our common stock will terminate on the earlier of (1) January 1, 2008 or (2) the day immediately prior to the effective time of the merger. Upon completion of the merger, our Employee Stock Purchase Plan will be terminated and all outstanding unexercised rights to purchase shares of our common stock will be canceled and the contributions in respect of such rights returned to the holder thereof.

 

Employment Agreements

 

We anticipate that, and the interim investors agreement among the members of the investor group described below provides that, we or Holdings will enter into a new employment agreement with Lew Dickey, having substantially the terms described below:

 

 

We also anticipate that, and the interim investors agreement described below provides that, we will enter into a new employment agreement with John Dickey, having substantially the terms described below:

 

 

Finally, we expect that all of our other current executive officers will continue to serve in their respective positions after completion of the merger. We anticipate that the terms of their employment going forward will be on substantially similar terms as they are currently.

 

Participation in Equity Incentive Plans and Other Equity Awards

 

Pursuant to the interim investors agreement entered into between the members of the investor group, the members have agreed to cause Holdings (or a subsidiary) to adopt a management incentive plan that would consist of an option pool equal to 13% of the total equity of Holdings (or the subsidiary) concurrently with completion of the merger. The exercise price of those options would be priced at the subscription price for a unit of Holdings as of the completion date of the merger, adjusted accordingly for follow-on investments. Half of the option pool will be reserved for grants to Lew Dickey, and the other half will be reserved for grants to other key employees (including our other executive officers), with the specific employees and amounts to be determined by the board of directors based upon the recommendation of the chief executive officer.

 

Options awarded under this equity incentive plan will be a combination of time-vested awards and performance-based awards, with performance criteria to be established by Holdings. The vesting of time-vested

options will accelerate upon a change of control, and all performance-based options will automatically vest if we are sold for a specified return on the original equity investment.

 

In addition to the options set aside for the management incentive program, as of the completion of the merger, an additional pool of options, representing 2% of the total equity of Holdings will be granted to Lew Dickey and certain other participants (including our other executive officers) at the completion of the merger. These options will be fully vested upon grant and will have an exercise price equal to 2.5 times the subscription price for a unit of Holdings as of the completion date of the merger. Half of this option pool will be reserved for Lew Dickey.

 

The amount of equity that may be awarded to our executive officers and employees, other than Lew Dickey and John Dickey, has not been determined at this time, and will be subject to such various factors as the investor group, or the board of directors, as the case may be, may determine from time to time. Any such equity, or other compensation, that may be provided to these individuals will not have any impact on the consideration payable to the unaffiliated stockholders pursuant to the merger.

 

Investment by Certain Members of Our Board of Directors and Management in Holdings

 

Lew Dickey and John Dickey have agreed to make equity contributions to Parent immediately prior to the merger in exchange for an equity stake in Holdings. Lew Dickey has committed to contribute 1,282,449 shares of our Class A Common Stock and 644,871 shares of our Class C Common Stock to Parent and John Dickey has committed to contribute 1,500,000 shares of our Class A Common Stock to Parent.

 

Certain other members of the investor group, namely Michael W. Dickey and David W. Dickey, who are brothers of Lew Dickey and John Dickey, and their father, Lewis W. Dickey, Sr., have also agreed to contribute an aggregate of 1,679,063 shares of our Class A Common Stock immediately prior to the merger in exchange for an equity stake in Holdings.

 

Parent currently contemplates that certain additional members of our management will be permitted to participate by making similar equity investments in Holdings, although Parent has agreed not to discuss with members of our management any such investment until five business days prior to the completion of the merger. Parent has not yet determined the aggregate amount of the equity investment that management participants will be permitted to make or the specific investment opportunities that will be made available to any particular management participant.

 

By virtue of these investments, unlike our other stockholders, these members of management, along with the members of the investor group, will have an opportunity to share in our future economic growth after the merger.

 

Relationship of Members of Investor Group under Interim Investors Agreement Prior to the Merger

 

The members of the investor group entered into an interim investors agreement with Holdings and Parent on July 27, 2007 but effective as of the date of the merger agreement. The interim investors agreement, among other things, sets forth certain terms governing the relationship among the members of the investor group (including, as described below, the investment entity, should such an investment entity be formed and become part of the investor group) and Holdings prior to the completion of the merger, including the following:

 

 

 

 

 

 

 

Right to Designate Directors and Officers of Parent.  Under the interim investors agreement, prior to the completion of the merger, unless the sponsor and Lew Dickey otherwise agree, Lew Dickey (or another person selected by Lew Dickey in his sole discretion) and Robert F. End (or another person selected by the sponsor in its sole discretion) shall be the officers and directors of Parent, Merger Sub and Holdings.

 

Relationship of Members of Investor Group under Interim Investors Agreement Following the Merger

 

The interim investors agreement also sets forth certain terms that, if the merger is consummated, would be reflected in definitive documents governing the relationship among the members of the investor group (including the investment entity, should such an investment entity be formed and become part of the investor group) and Holdings after the completion of the merger, including the following:

 

 

Arrangements with Respect to the Investment Entity

 

In the event that Lew Dickey successfully forms the investment entity:

 

 

 

Transaction and Management Fee Arrangements

 

Under the interim investors agreement, the members of the investor group (including, the investment entity, should such an investment entity be formed and become part of the investor group) are entitled to various fees following completion of the merger:

 

 

 

The foregoing summary of the interim investors agreement does not purport to be complete and is qualified in its entirety by reference to the copy of such agreement attached as an exhibit to the Schedule 13E-3, filed with the SEC in connection with the merger, and incorporated herein by reference.

 

Voting Agreements

 

We and Parent have entered into voting agreements regarding the merger with the Dickeys and with the two BOA affiliates. Under the terms of both agreements, the Dickeys and the two BOA affiliates have each agreed to the following:

 

 

 

Each of the voting agreements terminates upon the termination of the merger agreement in accordance with its terms.

 

The foregoing summary of the voting agreements does not purport to be complete and is qualified in its entirety by reference to the copy of such agreements attached as an exhibit to the Schedule 13E-3 filed with the SEC in connection with the merger and incorporated herein by reference.

 

Cooperation Agreement

 

We have entered into a cooperation agreement with Lew Dickey regarding his cooperation with respect to our efforts to obtain company acquisition proposals prior to the no-shop date. See “The Merger Agreement — Restrictions on Solicitation of Other Offers.” Under the cooperation agreement, Lew Dickey has agreed to cooperate with, and not take any action that reasonably would be expected to frustrate or delay, our efforts to initiate or solicit company acquisition proposals during the period prior to the earlier of the termination of the voting agreement described above and the termination of his employment with us. Such cooperation includes:

 

 

The foregoing summary of the cooperation agreement does not purport to be complete and is qualified in its entirety by reference to the copy of such agreement attached as an exhibit to the Schedule 13E-3, filed with the SEC in connection with the merger, and incorporated herein by reference.

 

Special Committee Fees; Indemnification

 

We have agreed to pay each member of the special committee $1,500 per meeting (whether held in person or by telephone) for serving on the special committee. The special committee members are entitled to such fees regardless of whether any acquisition proposal was made or thereafter approved. In addition, in accordance with our bylaws, we have agreed to indemnify each member of the special committee in respect of liabilities for acts or omissions arising out of such member’s acts as a special committee member.

 

Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders

 

The following is a summary of the material U.S. federal income tax consequences of the merger to holders of our common stock whose shares of our common stock are converted into the right to receive solely cash pursuant to the merger. This summary does not purport to consider all aspects of U.S. federal income taxation that might be relevant to our stockholders. For purposes of this discussion, we use the term “U.S. holder” to mean a beneficial owner of shares of our common stock that is, for U.S. federal income tax purposes:

 

 

 

A “non-U.S. holder” is a person (other than a partnership) that is not a U.S. holder.

 

If a partnership holds our common stock, the tax treatment of a partner will generally depend on the status of the partners and the activities of the partnership. A partner of a partnership holding our common stock should consult its tax advisor.

 

This discussion is based on current law, which is subject to change, possibly with retroactive effect. It applies only to beneficial owners who hold shares of our common stock as capital assets, and may not apply to beneficial owners who hold shares of our common stock received in connection with the exercise of employee stock options or otherwise as compensation, stockholders who hold an equity interest, directly or indirectly through constructive ownership or otherwise, in Parent or us after the merger, or to certain types of beneficial owners who may be subject to special rules (such as insurance companies, banks, tax-exempt organizations, financial institutions, broker-dealers, partnerships or other pass-through entities, S corporations, retirement plans, regulated investment companies, real estate investment trusts, traders or dealers in securities or currencies, stockholders subject to the alternative minimum tax, stockholders that have a functional currency other than the U.S. dollar, or stockholders who hold our common stock as part of a hedge, straddle or a constructive sale or conversion transaction). This discussion does not address the receipt of cash in connection with the cancellation of shares of restricted stock or options to purchase shares of our common stock, or any other matters relating to equity compensation or benefit plans. This discussion also does not address any aspect of state, local or foreign tax laws.

 

U.S. Holders

 

The exchange of shares of our common stock for cash pursuant to the merger will be a taxable transaction to U.S. Holders for U.S. federal income tax purposes. In general, a U.S. Holder whose shares of our common stock are converted into the right to receive cash pursuant to the merger will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received with respect to such shares (determined before the deduction of any applicable withholding taxes) and the stockholder’s adjusted tax basis in such shares. Gain or loss will be determined separately for each block of shares (i.e., shares acquired at the same cost in a single transaction). Such gain or loss will be long-term capital gain or loss provided that a stockholder’s holding period for such shares is more than 12 months at the time of the completion of the merger. Long-term capital gains of individuals are eligible for reduced rates of taxation. There are limitations on the deductibility of capital losses.

 

Backup withholding of tax may apply to cash payments to which a non-corporate stockholder is entitled under the merger agreement, unless the stockholder or other payee provides a taxpayer identification number (social security number, in the case of individuals, or employer identification number, in the case of other stockholders), certifies that such number is correct, and otherwise complies with the backup withholding rules. Each of our stockholders should complete and sign the Substitute Form W-9 included as part of the letter of transmittal and return it to the paying agent, in order to provide the information and certification necessary to avoid backup withholding, unless an exemption applies and is established in a manner satisfactory to the paying agent.

 

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowable as a refund or a credit against a stockholder’s U.S. federal income tax liability provided the required information is timely furnished to the Internal Revenue Service. Cash received pursuant to the merger will also be subject to information reporting unless an exemption applies.

Non-U.S. Holders

 

Any gain realized on the receipt of cash in the merger by a non-U.S. holder generally will not be subject to United States federal income tax unless:

 

 

An individual non-U.S. holder described in the first bullet point immediately above will be subject to tax on the net gain derived from the merger under regular graduated U.S. federal income tax rates. If a non-U.S. holder that is a foreign corporation falls under the first bullet point immediately above, it will be subject to tax on its net gain in the same manner as if it were a U.S. person as defined under the U.S. Internal Revenue Code of 1986, as amended, and, in addition, may be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty. An individual non-U.S. holder described in the second bullet point immediately above will be subject to a flat 30% tax on the gain derived from the merger, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States.

 

We intend to deliver a certificate at closing providing that our common stock is not a U.S. real property interest. If such certificate is properly completed and complies with the relevant provisions of the Code, subject to the rules below we do not expect for there to be withholding of tax on cash received by a non-U.S. holder in the merger.

 

Backup withholding of tax may apply to the cash received by a non-corporate stockholder in the merger, unless the stockholder or other payee certifies under penalty of perjury that it is a non-U.S. holder in a manner satisfactory to the relevant withholding agent (and the relevant withholding agent does not have actual knowledge or reason to know that the beneficial owner is a U.S. person as defined under the Code). Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any, provided that such non-U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner. Cash received pursuant to the merger will also be subject to information reporting, unless an exemption applies.

 

The U.S. federal income tax consequences set forth above are not intended to constitute a complete description of all tax consequences relating to the merger. Because individual circumstances may differ, each stockholder should consult the stockholder’s tax advisor regarding the applicability of the rules discussed above to the stockholder and the particular tax effects to the stockholder of the merger in light of such stockholder’s particular circumstances, the application of state, local and foreign tax laws, and, if applicable, the tax consequences of the receipt of cash in connection with the cancellation of restricted shares or options to purchase shares of our common stock, including the transactions described in this proxy statement relating to our other equity compensation and benefit plans.

 

Litigation Related to the Merger

 

We are aware of three purported class action lawsuits related to the merger: Jeff Michelson, on behalf of himself and all others similarly situated v. Cumulus Media Inc., et al. (Case No. 2007CV137612, filed July 27, 2007) was filed in the Superior Court of Fulton County, Georgia against us, Lew Dickey, the other directors and the sponsor, Patricia D. Merna, on behalf of herself and all others similarly situated v. Cumulus Media Inc., et al. (Case No. 3151, filed August 8, 2007) was filed in the Chancery Court for the State of Delaware, New Castle County, against us, Lew Dickey, the other directors, the sponsor, Parent and Merger Sub, and Paul Cowles v.

Cumulus Media Inc., et al. (Case No. 2007-CV-139323, filed August 31, 2007) was filed in the Superior Court of Fulton County, Georgia against us, Lew Dickey, the other directors and the sponsor.

 

The complaints in each of these lawsuits allege, among other things, that the merger is the product of an unfair process, that the consideration to be paid to our stockholders pursuant to the merger is inadequate, and that the defendants breached their fiduciary duties to our stockholders. The complaints further allege that we and the sponsor (and Parent and Merger Sub) aided and abetted the actions of our directors in breaching such fiduciary duties. The complaints seek, among other relief, an injunction preventing completion of the merger.

 

We believe that we have committed no breaches of fiduciary duties, disclosure violations or any other breaches or violations whatsoever, including in connection with the merger, the merger agreement or this proxy statement. In addition, we have been advised that the other defendants named in the complaints similarly believe the allegations of wrongdoing in the complaints to be without merit, and deny any breach of duty to or other wrongdoing with respect to the purported plaintiff classes.

 

In order to resolve one of the lawsuits, we have reached an agreement along with the individual defendants in that lawsuit, without admitting any wrongdoing, pursuant to a memorandum of understanding dated November 13, 2007, to extend the statutory period in which holders of our common stock may exercise their appraisal rights and to make certain further disclosures in this proxy statement as requested by counsel for the plaintiff in that litigation. It is anticipated that after further discovery all parties will cooperate in seeking dismissal of that lawsuit. Such dismissal, including an anticipated request by plaintiff’s counsel for attorneys’ fees, will be subject to court approval. We intend to vigorously defend the remaining two lawsuits.

 

Fees and Expenses of the Merger

 

We estimate that we will incur, and will be responsible for paying, transaction-related fees and expenses, consisting primarily of financial, legal, accounting and tax advisory fees, SEC filing fees and other related charges, totaling approximately $3.4 million. This amount includes the following estimated fees and expenses:

 

 

THE MERGER AGREEMENT

 

(PROPOSAL NO. 1)

 

This section of the proxy statement describes the material provisions of the merger agreement but does not purport to describe all of the terms of the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the merger agreement, which is attached as Annex A to this proxy statement and incorporated into this proxy statement by reference. We urge you to read the full text of the merger agreement because it is the legal document that governs the merger. It is not intended to provide you with any other factual information about us. Such information can be found elsewhere in this proxy statement and in the public filings we make with the SEC, as described in the section entitled “Where You Can Find More Information” below.

 

The Merger

 

The merger agreement provides for the merger of Merger Sub with and into us upon the terms, and subject to the conditions, of the merger agreement. The merger will be effective at the time the certificate of

merger is filed with the Secretary of State of the State of Delaware (or at a later time, if agreed upon by the parties and specified in the certificate of merger). We expect to complete the merger as promptly as practicable, but in any event no later than five business days following, satisfaction or waiver (to the extent permitted by law) of the conditions to closing described in “— Conditions to the Merger.”

 

As the surviving corporation, we will continue to exist following the merger. Upon completion of the merger, our officers will be the initial officers of the surviving corporation, and will hold their positions until their successors are duly elected and qualified or until the earlier of their resignation or removal.

 

We or Parent may terminate the merger agreement prior to the completion of the merger in some circumstances, whether before or after the approval of the merger agreement by stockholders. Additional details on termination of the merger agreement are described in “— Termination of the Merger Agreement.”

 

Merger Consideration

 

Each share of our common stock issued and outstanding immediately before the merger will automatically be canceled and will cease to exist and will be converted into the right to receive $11.75 in cash, without interest and less any applicable withholding taxes, other than:

 

 

After the merger is effective, each holder of a certificate representing any shares of our common stock (other than shares for which appraisal rights have been properly demanded and perfected) will no longer have any rights with respect to the shares, except for the right to receive the merger consideration. See “Appraisal Rights.”

 

If the merger has not occurred by July 23, 2008, then the per share merger consideration will begin on that date to include interest at a rate of 7.5% per year, compounded quarterly.

 

Treatment of Options and Other Awards

 

Upon completion of the merger, each outstanding option to acquire our common stock shall be entitled to receive in exchange for such option a cash payment equal to the number of shares of our common stock underlying such option multiplied by the amount (if any) by which $11.75 (or $11.75 plus certain additional consideration if the merger is not completed on or before July 23, 2008) exceeds the option exercise price, without interest and less any applicable withholding taxes. In addition, unless otherwise agreed between a holder and Parent, each outstanding share of restricted stock that is subject to vesting or other lapse restrictions will vest and become free of restriction and will be canceled and converted into the right to receive $11.75 (or $11.75 plus certain additional consideration if the merger is not completed on or before July 23, 2008), without interest and less any applicable withholding taxes. We are required to use our reasonable best efforts to obtain any required consents from holders of outstanding options and take any other actions necessary to give effect to the foregoing and to cause all options, including those with option exercise prices that are less than $11.75 per share, to terminate as of the effective date of the merger. As of the date of this proxy statement, we have received such consents from all of our executive officers and directors. The effect of the merger upon our employee stock purchase plan and certain other employee benefit plans is described below under “— Employee Benefits.”

 

Payment for the Shares

 

Before the merger, Parent will designate a paying agent reasonably satisfactory to us to make payment of the merger consideration. At or prior to the effective time of the merger, Parent will deposit, or cause to be deposited, in trust with the paying agent the funds appropriate to pay the aggregate merger consideration to our stockholders.

As promptly as practicable after the completion of the merger, we will cause the paying agent to send you a letter of transmittal and instructions advising you how to surrender your certificates in exchange for the merger consideration. The paying agent will pay you your merger consideration after you have (1) surrendered your certificates to the paying agent and (2) provided to the paying agent your signed letter of transmittal and any other items specified by the letter of transmittal. Interest will not be paid or accrue in respect of the merger consideration. The surviving corporation will reduce the amount of any merger consideration paid to you by any applicable withholding taxes. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.

 

If any cash deposited with the paying agent is not claimed within 12 months following the effective time of the merger, such cash will be returned to us upon demand subject to any applicable unclaimed property laws. Any unclaimed amounts remaining immediately prior to when such amounts would escheat to or become property of any governmental authority will, to the extent permitted by law, be returned to us free and clear of any prior claims or interest.

 

If the paying agent is to pay some or all of your merger consideration to a person other than you, as the registered owner of a stock certificate, you must have your certificates properly endorsed or otherwise in proper form for transfer, and you must pay any transfer or other taxes payable by reason of the transfer or establish to the paying agent’s reasonable satisfaction that the taxes have been paid or are not required to be paid.

 

The transmittal instructions will tell you what to do if you have lost your certificate, or if it has been stolen or destroyed. You will have to provide an affidavit to that fact and, if required by us or the paying agent, post a bond in an amount that the surviving corporation or the paying agent reasonably directs as indemnity against any claim that may be made against it in respect of the certificate.

 

Representations and Warranties

 

The merger agreement contains representations and warranties made by us to Parent and Merger Sub and representations and warranties made by Parent and Merger Sub to us. The assertions embodied in those representations and warranties were made solely for purposes of the merger agreement and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating its terms. Moreover, some of those representations and warranties may not be accurate or complete as of any particular date because they are subject to a contractual standard of materiality or material adverse effect or used for the purpose of allocating risk between the parties to the merger agreement rather than establishing matters of fact. For the foregoing reasons, you should not rely on the representations and warranties contained in the merger agreement as statements of factual information.

 

Pursuant to the merger agreement, each party made representations and warranties relating to, among other things:

 

 

Pursuant to the merger agreement, Parent and Merger Sub also each made representations and warranties relating to the availability of the funds necessary to perform its obligations under the merger agreement, the equity rollover commitments of the Dickeys described in this proxy statement, the guarantee of ML IBK Positions, Inc., ownership of Merger Sub, operations of Parent and Merger Sub, the non-applicability of certain state takeover statutes and our solvency after giving effect to the transactions contemplated by the merger agreement.

 

We also made representations and warranties relating to:

 

 

Many of our representations and warranties are qualified by materiality qualifications or “a material adverse effect” standard. For purposes of the merger agreement, “material adverse effect” for us means any effect that, individually or in the aggregate with all other effects (1) has, or would be reasonably expected to have, a material adverse effect on our or our subsidiaries’ business, results of operation or financial condition taken as a whole, or (2) prevents or materially delays or impairs our ability to consummate the merger, except that no adverse effect resulting from certain specified matters, alone or in combination, will be deemed to constitute, or be taken into account in determining whether there has been, a material adverse effect.

 

Conduct of Business Pending the Merger

 

We have agreed pursuant to the merger agreement that, until the completion of the merger, except as expressly contemplated or permitted by the merger agreement, required by applicable law or expressly consented to in writing by Parent (which consent shall not be unreasonably withheld, conditioned or delayed), we will, and we will, cause each of our subsidiaries to:

 

 

We have also agreed that, until the completion of the merger, except as expressly contemplated or permitted by the merger agreement, required by applicable law or consented to in writing by Parent (which consent may not be unreasonably withheld, conditioned or delayed), we will not, and will not permit any of our subsidiaries to:

 

 

 

Efforts to Complete the Merger

 

Subject to the terms and conditions set forth in the merger agreement, each of the parties to the merger agreement has agreed to use its reasonable best efforts to take, or cause to be taken, all actions, to file, or cause to be filed, all documents, and to do or cause to be done all things necessary, proper or advisable to consummate the merger, including preparing and filing as promptly as practicable all documentation to effect all necessary filings, consents, waivers, approvals, authorizations, permits or orders from all governmental authorities or other persons. The parties have also agreed that, if any state takeover statute or regulation becomes applicable, to take all action necessary to ensure that the merger may be consummated as promptly as practicable on the terms contemplated by the merger agreement and otherwise eliminate or minimize the effect of such statute or regulation on the merger agreement or merger.

 

The parties agreed pursuant to the merger agreement to use their respective reasonable best efforts to consummate the merger, including, (1) in the case of the Parent, the obtaining of all necessary approvals under any applicable communications laws required in connection with the merger, (2) obtaining all necessary actions or non-actions, consents and approvals from governmental authorities or other persons and making all necessary registrations and filings and taking all reasonable steps as may be necessary to obtain an approval from, or to avoid an action or proceeding by, governmental authorities or other person necessary to consummate the merger, (3) defending any lawsuits or legal proceedings challenging the merger, including

seeking to have any stay or temporary restraining order vacated or reversed, and (4) executing and delivering any additional instruments necessary to consummate the merger.

 

The parties have agreed to promptly take any and all steps necessary to avoid or eliminate every impediment and obtain all consents under any antitrust, competition or communications or broadcast law (including the FCC media ownership rules), that may be required by any governmental authority to enable the parties to consummate the merger as promptly as practicable, including committing to or effecting, by consent decree, hold separate order, trust or otherwise, the divestiture of such assets or businesses as are required to be divested in order to obtain the FCC’s consent or to avoid the entry of, or to effect the dissolution of or vacate or lift any order, that would otherwise have the effect of preventing or materially delaying the completion of the merger.

 

Parent has also agreed to notify us promptly if at any time prior to the closing date of the proposed merger, the financing commitments contemplated: (1) expire or are terminated for any reason; (2) the financing source that is a party to the financing commitments notifies Parent that such source no longer intends to provide financing to Parent; or (3) Parent, in good faith, believes that it will not be able to obtain all or a portion of the financing commitments. Parent has further agreed to notify us promptly upon becoming aware of any material breach by any party to the financing commitments.

 

Unless otherwise agreed by the parties to the merger agreement, the parties are required to close the merger after the satisfaction or waiver of the conditions described under “— Conditions to the Merger” below.

 

Conditions to the Merger

 

Conditions to Each Party’s Obligations.  Each party’s obligation to complete the merger is subject to the satisfaction or waiver of the following conditions:

 

 

Conditions to Parent’s and Merger Sub’s Obligations.  The obligation of Parent and Merger Sub to complete the merger is subject to the satisfaction or waiver of the following additional conditions:

 

 

 

 

 

 

Conditions to Our Obligations.  Our obligation to complete the merger is subject to the satisfaction or waiver of the following further conditions:

 

 

If a failure to satisfy one of our conditions to the merger is not considered by our board to be material to our stockholders, the board (acting through the special committee) could waive compliance with that condition. Our board is not aware of any condition to the merger that cannot be satisfied. Under Delaware law, after the merger agreement has been adopted by our stockholders, the merger consideration cannot be changed and the merger agreement cannot be altered in a manner adverse to our stockholders without re-submitting the revisions to our stockholders for their approval.

 

Restrictions on Solicitations of Other Offers

 

The merger agreement provides that, until 11:59 p.m. on the no-shop date, we were permitted to:

 

 

 

From and after the no-shop date, we have agreed not to:

 

 

In addition, as of the no-shop date, we have agreed to terminate all solicitations, encouragements, discussions or negotiations with third parties existing at such time, except with respect to those persons, referred to in this proxy statement as excluded persons, who have submitted company acquisition proposals we have identified as of the no-shop date as having met the following criteria (and only for so long as there is not a continuous period greater than five business days that such proposal fails to meet these criteria): (1) our board (acting through the special committee) believes in good faith to be bona fide; (2) our board (acting through the special committee) determines in good faith, after consultation with financial advisors and outside legal counsel, that the company acquisition proposal constitutes or could reasonably be expected to result in a superior proposal (as defined below); and (3) after consultation with outside legal counsel, our board (acting through the special committee) determines in good faith that the failure to take such action could violate its fiduciary duties under applicable law.

 

Notwithstanding the aforementioned restrictions, at any time prior to the approval of the merger agreement by our stockholders, we are permitted to engage in discussions or negotiations with, or provide any non-public information to any party to the extent that:

 

 

In such cases, we (1) will not, and will not allow our representatives to, disclose any non-public information to such person without entering into an acceptable confidentiality agreement, and (2) will promptly provide to Parent any non-public information provided to the third party that we have not already provided to Parent.

 

From and after the no-shop date, we will promptly (within one business day) notify Parent in the event we receive a company acquisition proposal from a third party of the identity of the third party and the material terms and conditions of the proposal, and are required to keep Parent apprised as to the status of such proposal.

 

A “ company acquisition proposal” means any inquiry, proposal or offer from any person or group of persons other than Parent, Merger Sub or their respective affiliates relating to any direct or indirect acquisition

or purchase of a business that constitutes 20% or more of the net revenues, net income or assets of us and our subsidiaries, taken as a whole, or 20% or more of any class or series of our securities, any tender offer or exchange offer that if consummated would result in any person or group of persons beneficially owning 20% or more of any class or series of our capital stock, or any merger, reorganization, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving us (or any of our subsidiaries whose business constitutes 20% or more of our and our subsidiaries’ net revenues, net income or assets, taken as a whole).

 

A “superior proposal” means a company acquisition proposal for us which our board (acting through the special committee), in good faith determines would, if consummated, result in a transaction that is more favorable from a financial point of view to the stockholders than the merger, after (1) receiving the advice of outside counsel and a financial advisor, (2) taking into account the likelihood of consummation of such transaction on the terms set forth therein, and (3) taking into account all legal, financial, regulatory or other aspects of such proposal and any other factors that our board (acting through the special committee) deems relevant. For purposes of the definition of “superior proposal” all references in the definition of “company acquisition proposal” above to “20% or more” shall be deemed to be references to “50% or more.”

 

Recommendation Withdrawal/Termination in Connection with a Superior Proposal

 

Our board (acting through the special committee) may also, at any time prior to the adoption of the merger agreement by our stockholders, withdraw (or modify or qualify in a manner adverse to Parent or Merger Sub), or publicly propose to withdraw (or modify or qualify in a manner adverse to Parent or Merger Sub), its recommendation that our stockholders adopt the merger agreement or take any other action or make any other public statement in connection with the special meeting inconsistent with such recommendation or terminate the merger agreement and enter into a definitive agreement with respect to a superior proposal if it concludes in good faith (after consultation with its legal advisors) that failure to do so could reasonably be expected to result in a breach of its fiduciary duties under applicable law, and only after (1) giving written notice to Parent and Merger Sub at least three business days in advance of its intention to do so that specifies the material terms and conditions of any such superior proposal, (2) to the extent notice is given on or after the no-shop date, prior to effecting such action or terminating the merger agreement to enter into a definitive agreement with respect to such superior proposal, we, during such three business day period, negotiate with Parent and Merger Sub in good faith (to the extent Parent and Merger Sub desire to negotiate), and cause our financial and legal advisors to do the same, to make such adjustments in the terms and conditions of the merger agreement so that such acquisition proposal ceases to constitute a superior proposal, and (3) we pay to Parent either a $15 million or $7.5 million termination fee as described in further detail below in “— Termination Fees.”

 

Termination of the Merger Agreement

 

The merger agreement may be terminated at any time prior to the completion of the merger, whether before or after stockholder approval has been obtained:

 

 

 

 

 

 

 

 

Termination Fees

 

Payable by Cumulus

 

We have agreed to reimburse Parent’s reasonably incurred out-of-pocket expenses, up to a limit of $7.5 million, if Parent terminates the merger agreement due to a material breach of our representations, warranties, covenants or other agreements under the merger agreement such that the closing conditions would not be satisfied and such breach has not been cured within the specified time (provided that Parent is not also in material breach of its representations, warranties, covenants or agreements).

In addition, we have agreed to pay Parent a cash termination fee of $15 million less any amount of Parent’s expenses already reimbursed by us, if:

 

 

 

The termination fee referred to above to be paid by us shall only be $7.5 million, however, if the merger agreement is terminated in accordance with its terms, and based on the submission of a company acquisition proposal by an excluded person, as defined above under “— Restrictions on Solicitations of Other Offers,” prior to 11:59 p.m., New York time, on September 21, 2007, either (1) by us in order to enter into a definitive agreement relating to a superior proposal; or (2) by Parent because our board has adversely changes its recommendation to our stockholders regarding adoption of the merger agreement, we fail to include our recommendation to our stockholders regarding adoption of the merger agreement in our proxy related to the merger, we enter into a definitive agreement relating to a company acquisition proposal, we fail to reaffirm our recommendation for the merger upon request by parent following a company acquisition proposal, or we fail to recommend against the acceptance of a tender or exchange offer.

 

Payable by Parent

 

Parent has agreed to reimburse our reasonably incurred out-of-pocket expenses, up to a limit of $7.5 million, if the certain regulatory conditions to completing the merger relating to Merrill Lynch and its affiliates or the closing conditions relating to objections by self-regulatory organizations in which broker-dealers affiliated with Merrill Lynch are members, both described below, are not satisfied or waived by February 7, 2008. In addition, Parent has agreed to pay us a cash reverse termination fee, payable on the date of termination in the following amounts and under the following circumstances:

 

 

Company Act or Securities Act exemptions or self-regulatory organization rules governing broker-dealers have not been satisfied or waived, then Parent must pay us a reverse termination fee of $7.5 million, less any amount of our expenses for which Parent has already reimbursed us, plus interest, calculated at an annual rate of 7.5%, compounded quarterly, from April 23, 2008 until the date paid.

 

 

Employee Benefits

 

Parent has agreed to maintain, for a period of one year after the effective time, for each employee employed at the effective time, base compensation and incentive compensation opportunities (excluding equity-based compensation) and benefits that are no less favorable in the aggregate than those provided to our employees prior to the effective time. Parent has agreed that following the merger we will recognize certain service of such employees with us prior to the completion of the merger for purposes of eligibility and vesting with respect to any benefit plan, program or arrangement (except to the extent such recognition of service would result in a duplication of benefits), and to waive certain limitations as to pre-existing conditions or eligibility limitations for any new health plans for such employees instituted after the effective time of the merger, and give effect, for the applicable plan year in which the merger is completed, in determining any deductible, co-insurance and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, employees under similar plans maintained by us immediately prior to the effective time of the merger, as if such amounts had been paid in accordance with any new plan instituted after the effective time of the merger.

 

As of July 23, 2007, the date the merger agreement was executed, employees may no longer increase their payroll deductions in our Employee Stock Purchase Plan. In addition, no further offering periods under our Employee Stock Purchase Plan will be commenced, and each participant’s right to purchase shares of our common stock will terminate on the earlier of (1) January 1, 2008 or (2) the day immediately prior to the effective time of the merger. Upon completion of the merger, our Employee Stock Purchase Plan will be terminated and all outstanding unexercised rights to purchase shares of our common stock will be canceled and the contributions in respect of such rights returned to the holder thereof.

 

Indemnification and Insurance

 

Under the terms of the merger agreement, Parent and Merger Sub have agreed that all current rights of indemnification we provide for our current and former directors, officers, and employees will survive the merger and continue in full force and effect, and Parent and we have further agreed not to amend, repeal or modify any indemnification provisions of our, or our subsidiaries’ certificates of incorporation and by-laws in effect immediately prior to the effective time of the merger, or in any indemnification agreements in effect as of July 23, 2007, for a period of six years after July 23, 2007 in any manner that would adversely affect the indemnification rights thereunder of any persons who at the effective time of the merger were our or our subsidiaries’ current or former directors, officers or employees.

 

Additionally, we and Parent will indemnify and hold harmless each of our current and former directors, officers or employees from any costs or expenses paid in connection with any claim, action or proceeding arising out of or related to any action or omission occurring or alleged to have occurred whether before or at the effective time of the merger in connection with such person’s serving as an officer, director or other fiduciary if such service was at our request of or for our benefit.

 

In addition, we and Parent will either maintain current policies for a period of six years from the effective time of the merger or obtain substitute policies or purchase a “tail” policy with a claims period of at least six years from the effective time of the merger with respect to directors’ and officers’ liability insurance and

fiduciary liability insurance that provides coverage for events occurring on or before the effective time of merger. The terms of the policies will be no less favorable than our existing policies, unless the annual premiums of the policies would exceed 300% of the current policy’s premium, in which case the coverage will be the greatest amount available for an amount not exceeding 300% of the current premium.

 

Amendment, Extension and Waiver

 

The parties may amend the merger agreement at any time; provided, however, that after we have obtained our stockholders’ approval of the merger, there shall be no amendment that by law or the rules of the NASDAQ requires further approval by our stockholders without such approval having been obtained. All amendments to the merger agreement must be in writing signed by us, Parent and Merger Sub. The parties may also waive any provision of the merger agreement, provided such waiver is in writing and signed by the party against whom the waiver is to be effective.

 

APPRAISAL RIGHTS

 

Under the General Corporation Law of the State of Delaware, or the DGCL, you have the right to receive payment in cash for the fair value of your common stock as determined by the Delaware Court of Chancery, together with a fair rate of interest, if any, as determined by the court, in lieu of the consideration you would otherwise be entitled to pursuant to the merger agreement. These rights are known as appraisal rights. Our stockholders electing to exercise appraisal rights must comply with the provisions of Section 262 of the DGCL in order to perfect their rights. We will require strict compliance with the statutory procedures.

 

The following is intended as a brief summary of the material provisions of the Delaware statutory procedures required to be followed by a stockholder in order to perfect appraisal rights. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Section 262 of the DGCL, the full text of which appears in Annex C to this proxy statement. Failure to precisely follow any of the statutory procedures set forth in Section 262 of the DGCL may result in a termination or waiver of your appraisal rights.

 

Section 262 requires that stockholders be notified that appraisal rights will be available not less than 20 days before the stockholders’ meeting to vote on the merger. A copy of Section 262 must be included with such notice. This proxy statement constitutes our notice to our stockholders of the availability of appraisal rights in connection with the merger in compliance with the requirements of Section 262. If you wish to consider exercising your appraisal rights, you should carefully review the text of Section 262 contained in Annex C since failure to timely and properly comply with the requirements of Section 262 will result in the loss of your appraisal rights under the DGCL.

 

If you elect to demand appraisal of your shares, you must satisfy each of the following conditions:

 

 

 

All demands for appraisal should be addressed to Cumulus Media Inc., 3280 Peachtree Road, N.W., Suite 2300, Atlanta, Georgia 30305, Attention: Richard S. Denning, Corporate Secretary, and must be delivered by 5:00 p.m., Atlanta time, on the 30th day following the vote on the merger agreement, and should be executed

by, or on behalf of, the record holder of the shares of our common stock. The demand must reasonably inform us of the identity of the stockholder and the intention of the stockholder to demand appraisal of his, her or its shares.

 

To be effective, a demand for appraisal by a holder of our common stock must be made by, or in the name of, such registered stockholder, fully and correctly, as the stockholder’s name appears on his or her stock certificate(s). Beneficial owners who do not also hold the shares of record may not directly make appraisal demands to us. The beneficial holder must, in such cases, have the registered owner, such as a broker or other nominee, submit the required demand in respect of those shares. If shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal should be made by or for the fiduciary; and if the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or for all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner. A record owner, such as a broker, who holds shares as a nominee for others, may exercise his or her right of appraisal with respect to the shares held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares as to which appraisal is sought. Where no number of shares is expressly mentioned, the demand will be presumed to cover all shares held in the name of the record owner.

 

If you hold your shares of our common stock in a brokerage account or in other nominee form and you wish to exercise appraisal rights, you should consult with your broker or the other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee.

 

Within 10 days after the effective time of the merger, the surviving corporation must give written notice that the merger has become effective to each of our stockholders who has properly filed a written demand for appraisal and who did not vote in favor of the merger agreement. At any time within 60 days after the effective time, any stockholder who has demanded an appraisal has the right to withdraw the demand and to accept the cash payment specified by the merger agreement for his or her shares of our common stock. Within 120 days after the effective date of the merger, any stockholder who has complied with Section 262 shall, upon written request to the surviving corporation, be entitled to receive a written statement setting forth the aggregate number of shares not voted in favor of the merger agreement and with respect to which demands for appraisal rights have been received and the aggregate number of holders of such shares. Such written statement will be mailed to the requesting stockholder within 10 days after such written request is received by the surviving corporation or within 10 days after expiration of the period for delivery of demands for appraisal, whichever is later. Within 120 days after the effective time, either the surviving corporation or any stockholder who has complied with the requirements of Section 262 may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares held by all stockholders entitled to appraisal. Upon the filing of the petition by a stockholder, service of a copy of such petition shall be made upon the surviving corporation. The surviving corporation has no obligation to file and has no intention to file such a petition in the event there are dissenting stockholders. Accordingly, the failure of a stockholder to file such a petition within the period specified could nullify the stockholder’s previously written demand for appraisal.

 

If a petition for appraisal is duly filed by a stockholder and a copy of the petition is delivered to the surviving corporation, the surviving corporation will then be obligated, within 20 days after receiving service of a copy of the petition, to provide the Chancery Court with a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached by the surviving corporation. After notice to dissenting stockholders who demanded appraisal of their shares, the Chancery Court is empowered to conduct a hearing upon the petition, and to determine those stockholders who have complied with Section 262 and who have become entitled to the appraisal rights provided thereby. The Chancery Court may require the stockholders who have demanded payment for their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with that direction, the Chancery Court may dismiss the proceedings as to that stockholder.

After determination of the stockholders entitled to appraisal of their shares of our common stock, the Chancery Court will appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any. When the value is determined, the Chancery Court will direct the payment of such value, with interest thereon accrued during the pendency of the proceeding, if the Chancery Court so determines, to the stockholders entitled to receive the same, upon surrender by such holders of the certificates representing those shares.

 

In determining fair value, the Chancery Court is required to take into account all relevant factors. You should be aware that the fair value of your shares as determined under Section 262 could be more than, the same as, or less than the value that you are entitled to receive under the terms of the merger agreement. You also should be aware that investment banking opinions as to the fairness, from a financial point of view, of the consideration payable in a merger are not opinions as to fair value under Section 262.

 

Costs of the appraisal proceeding (which do not include attorneys’ fees or the fees or expenses of experts) may be imposed upon the surviving corporation and the stockholders participating in the appraisal proceeding by the Chancery Court as the Chancery Court deems equitable in the circumstances. Upon the application of a stockholder, the Chancery Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, to be charged pro rata against the value of all shares entitled to appraisal. Any stockholder who had demanded appraisal rights will not, after the effective time of the merger, be entitled to vote shares subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares, other than with respect to payment as of a record date prior to the effective time. If no petition for appraisal is filed within 120 days after the effective time of the merger, or if the stockholder delivers a written withdrawal of his or her demand for appraisal and an acceptance of the terms of the merger within 60 days after the effective time of the merger, then the right of that stockholder to appraisal will cease and that stockholder will be entitled to receive the cash payment for his, her or its shares of our common stock pursuant to the merger agreement. Any withdrawal of a demand for appraisal made more than 60 days after the effective time of the merger may only be made with the written approval of the surviving corporation. In addition, no appraisal petition filed in the Chancery Court may be dismissed as to any stockholder without the approval of the court, which approval may be conditioned on such terms as the court deems just.

 

In view of the complexity of Section 262, our stockholders who may wish to pursue appraisal rights should consult their legal advisors.

 

IMPORTANT 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 CMP, we also operate radio station clusters serving large-sized markets throughout the United States. We are the second largest radio broadcasting company in the United States based on the number of stations owned or operated. As of September 30, 2007, we owned and operated 313 radio stations in 60 mid-sized U.S. media markets and operated the 34 radio stations in 8 markets, including San Francisco, Dallas, Houston and Atlanta that are owned by CMP.

 

For more information about us, please visit our website at www.cumulus.com. Information contained on our website is not incorporated by reference into, and does not constitute any part of, this proxy statement. Our Class A Common Stock is publicly traded on the NASDAQ under the symbol “CMLS.”

 

Selected Historical Financial Data

 

The selected consolidated historical financial data presented below has been derived from our audited consolidated financial statements contained in our annual report on the Form 10-K, as of and for the years ended December 31, 2006, 2005, 2004, 2003 and 2002, and our unaudited financial statements contained in our quarterly report on Form 10-Q for the quarterly periods ended September 30, 2007 and 2006. This data

should be read in conjunction with the audited and unaudited consolidated financial statements and other financial information contained in the Form 10-K and the Form 10-Q, respectively, including the notes thereto. More comprehensive financial information is included in such reports (including management’s discussion and analysis of financial condition and results of operations) and the following summary is qualified in its entirety by reference to such reports and all of the financial information and notes contained therein. Copies of such reports may be obtained from the SEC’s website (www.sec.gov) and our website (www.cumulus.com). See “Where You Can Find More Information” below.

SELECTED HISTORICAL FINANCIAL DATA