FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-12404
JACOR COMMUNICATIONS, INC.
An Ohio Corporation Employer Identification
No. 31-0978313
1300 PNC Center Telephone (513) 621-1300
201 East Fifth Street
Cincinnati, Ohio 45202
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
Common Stock Purchase Warrants
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock held by nonaffiliates of
Registrant as of March 15, 1995 was $90,924,000.
The number of common shares outstanding as of March 15, 1995 was
19,603,079.
Documents Incorporated By Reference
Portions of Registrant's definitive Proxy Statement to be filed during April
1995 in connection with the Annual Meeting of Shareholders presently scheduled
to be held on May 17, 1995 are incorporated by reference into Part III of this
Form 10-K.
There are 167 pages in this document.
The index of exhibits appears on page 74.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
PART I
Item 1. Business
(a) General Development of Business
Jacor Communications, Inc. ("Jacor" or the "Company"), headquartered in
Cincinnati, Ohio, was incorporated under Ohio law in December 1979 and began
operations in January 1981. The Company is a holding company engaged primarily
in the radio broadcasting business. During 1994, Jacor entities owned and
operated fifteen radio stations located across the United States in six markets:
Atlanta, Cincinnati, Denver, Tampa, Jacksonville and Knoxville. The Company has
local marketing agreements ("LMAs") to operate two radio stations, one in
Atlanta and one in Cincinnati. The Company has an agreement to acquire the
Cincinnati station upon FCC approval. In addition, the Company sells the
advertising time for three radio stations in Cincinnati through joint sales
agreements ("JSAs"). LMAs and JSAs represent emerging alternatives to
outright station ownership. In addition, Jacor also owns and operates the
Georgia Radio News Service, a radio news service which provides news, sports,
and public affairs programming to more than 140 stations.
Effective January 1, 1994, a subsidiary of the Company and a corporation wholly
owned by Mr. Michaels, the Company's president, formed a limited partnership
(the "Partnership") in a transaction whereby the Partnership now owns all of
the stock of Critical Mass Media, Inc. ("CMM"). CMM is engaged in the market
research and radio consulting business.
In March 1994, the Company entered into an agreement to acquire the assets of
radio station WPPT(FM) (formerly WIMJ) in Cincinnati, Ohio for $9.5 million in
cash. The asset purchase is subject to FCC approval and the satisfaction of
certain other conditions. Pending consummation of the transaction, the Company
has entered into a LMA which will expire on the earlier of the purchase date or
June 30, 1995.
In 1994, the Company acquired the call letters, programming and certain
contracts of radio station KBPI(FM) in Denver, Colorado and then changed the
call letters of its FM broadcast station KAZY to KBPI; the Company acquired the
call letters, programming and certain contracts of radio station WCKY(AM) in
Cincinnati, Ohio and then changed the call letters of its AM broadcast station
WLWA to WCKY; the Company acquired radio station KTLK(AM) (formerly KRZN) in
Denver, Colorado; and the Company acquired radio station WWST(FM) (formerly
WWZZ) in Knoxville, Tennessee. The aggregate cash purchase price for these
acquisitions was approximately $9.5 million.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
Also in 1994, the Company completed the sale of the business and substantially
all the assets of its wholly-owned subsidiary, Telesat Cable TV, Inc. under a
contract dated December 1993. The Company received approximately $2.0 million
in cash for this sale.
(b) Financial Information About Industry Segments
The Company considers its operations to be comprised entirely of one business
segment.
(c) Narrative Description of Business
The following table sets forth certain information about the radio stations
owned by the Company and those stations for which the Company has LMAs and JSAs:
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
<TABLE>
<CAPTION>
1994 Market Date of
Station Call Letters Rank By Acquisition/
and Market Radio Revenue LMA / JSA Format
<S> <C> <C> <C>
OWNED:
WPCH(FM)
Atlanta, GA 11 August 1985 Soft Adult
Contemporary
WGST(AM)(2)
Atlanta, GA 11 August 1985 News, Sports,
Talk
KRFX(FM)
Denver, CO 16 August 1987 Classic Rock
KBPI(FM)(3)
Denver, CO 16 July 1993 Album Oriented
Rock
KOA(AM)
Denver, CO 16 August 1987 News, Sports,
Talk
KTLK(AM)
Denver, CO 16 September 1994 News, Sports,
Talk
WEBN(FM)
Cincinnati, OH 21 May 1986 Album Oriented
Rock
WLW(AM)
Cincinnati, OH 21 December 1986 News, Sports,
Talk
WCKY(AM)(4)
Cincinnati, OH 21 June 1993 News, Sports,
Talk
WFLZ(FM)
Tampa, FL 19 April 1988 Contemporary Hit
Radio
WFLA(AM)
Tampa, FL 19 April 1988 News, Talk
WQIK(FM)
Jacksonville, FL 49 May 1984 Country
WJGR(AM)
Jacksonville, FL 49 May 1984 Talk
WMYU(FM)
Knoxville, TN 72 December 1986 60's, 70's
Oldies
WWST(FM)(5)
Knoxville, TN 72 November 1994 Adult Hits
LMAs:
WGST(FM)(2)
Atlanta, GA 11 October 1993 News, Sports,
Talk
WPPT(FM)(6)
Cincinnati, OH 21 March 1994 Rock & Roll
Oldies
JSAs:
WAQZ(FM)
Cincinnati, OH 21 December 1991 Album Oriented
Rock
WAOZ(AM)(7)
Cincinnati, OH 21 January 1994 Children's Radio
WSAI(AM)(9)
Cincinnati, OH 21 March 1994 Adult Standards
<FN>
(1) Total number of stations in the market is derived from the Fall 1994
Arbitron.
(2) Radio stations WGST(AM) and WGST(FM) are currently simulcast.
(3) Formerly KAZY.
(4) Formerly WLWA.
(5) Formerly WWZZ.
(6) The Company has agreed to acquire WPPT(FM) (formerly WIMJ). Pending FCC
approval of the acquisition, the Company is operating WPPT(FM)
pursuant to a LMA effective April l7, 1994.
(7) Formerly WSAI.
(8) Not rated as Arbitron does not measure listening levels for children below
12 years of age.
(9) Formerly WKRC.
</TABLE>
<TABLE>
<CAPTION>
Overall
Station's Audience Rank Total
Primary In Primary Number of
Station Call Letters Demographic Demographic In Stations
and Market Target Target Market in Market(1)
<S> <C> <C> <C> <C>
OWNED:
WPCH(FM)
Atlanta, GA Adults 25-54 3 3 21
WGST(AM)(2)
Atlanta, GA Men 25-54 7 13 21
KRFX(FM)
Denver, CO Men 25-54 2 5 28
KBPI(FM)(3)
Denver, CO Men 18-34 1 4 28
KOA(AM)
Denver, CO Men 25-54 1 1 28
KTLK(AM)
Denver, CO Men 25-54 21 (TIE) 18 28
WEBN(FM)
Cincinnati, OH Men 18-34 1 3 32
WLW(AM)
Cincinnati, OH Men 25-54 1 1 32
WCKY(AM)(4)
Cincinnati, OH Men 25-54 7 4 32
WFLZ(FM)
Tampa, FL Women 18-34 2 (TIE) 6 26
WFLA(AM)
Tampa, FL Men 25-54 4 3 26
WQIK(FM)
Jacksonville, FL Adults 25-54 2 2 23
WJGR(AM)
Jacksonville, FL Adults 25-54 20 (TIE) 19 (TIE) 23
WMYU(FM)
Knoxville, TN Adults 25-54 4 (TIE) 7 20
WWST(FM)(5)
Knoxville, TN Women 18-34 4 (TIE) 8 20
LMAs:
WGST(FM)(2)
Atlanta, GA Men 25-54 8 (TIE) 15 (TIE) 21
WPPT(FM)(6)
Cincinnati, OH Men 25-54 6 12 32
JSAs:
WAQZ(FM)
Cincinnati, OH Men 18-34 9 14 32
WAOZ(AM)(7)
Cincinnati, OH Children 2-10 NR (8) NR (8) 32
WSAI(AM)(9)
Cincinnati, OH Adults 35-64 6 6 32
</TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
Company Strategy
The Company's business strategy focuses upon developing the operations of
its existing stations to their potential and acquiring new radio groups and/or
radio stations primarily in the nation's top 25 radio markets.
Operations
The Company uses a variety of techniques to maximize the performance of
its radio stations. Jacor's operating strategy is to aggressively manage its
portfolio of stations to maximize operating performance and to dominate each
market by being the market leader in revenues and ratings. The Company's
general operational objective is to heighten a station's recognition in its
market and to capitalize on this recognition by generating significant shares
of each market's radio advertising dollars. Specifically, the Company's
operating strategies center upon:
Dominating Individual Markets. The Company strives to dominate the
ratings and revenues in each market in which it competes. The Company seeks to
maximize its share of advertising revenue in each of the six markets in which
it competes through the operation of multiple radio stations in each of these
local markets.
A station's ability to maintain market leadership status depends in part
upon the strength of its broadcasting delivery system. The Company believes its
stations' broadcasting signals are among the strongest in their respective
markets, which reinforces the Company's leadership positions in each of the
Company's existing markets.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
Developing Strong Station Personality. The Company engages in a number of
creative programming and promotional efforts designed to create listener loyalty
and generate station brand awareness. Through these efforts, management seeks
to cultivate a distinct personality for each station based upon the unique
characteristics of each local market. The Company hires dynamic on-air
personalities for key morning and afternoon "drive-times," and provides
comprehensive news, traffic and weather reports to create active listening by
the audience. This commitment to "foreground" or "high impact" programming has
generated significant audience share.
One of the key ways the Company develops the personality of its AM radio
stations is through the broadcast of professional sports. Presently, the
Company has the broadcast rights for the Atlanta Hawks, Cincinnati Reds,
Cincinnati Bengals, Colorado Rockies, Denver Nuggets and Denver Broncos.
Sports broadcasts serve as a "magnet" for attracting audiences and then
introducing them to other programming features, such as local and national
news, entertaining talk, and weather and traffic reports.
Another method the Company uses to create personality for its stations is
to sponsor highly visible promotions for the local communities in which they
serve. Through high profile station promotions and community events, management
believes it can maximize recognition by, and appeal to, the listening audience.
Operating Multiple Formats. The Company utilizes sophisticated research
techniques to identify opportunities within each market and to tailor each
station's programming to maximize its market position. The Company's radio
stations employ a variety of programming formats, each of which is designed to
appeal to a specific demographic target audience.
Management believes that a significant portion of the Company's operating
success stems from its ability to successfully program both FM and AM stations.
The Company programs its FM stations, whose high fidelity signals are preferred
for music transmission, with music of various formats supplemented by unique
on-air personalities. The Company believes that its AM stations generate
greater audience share as vehicles for news, sports and information.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
Emphasizing Local Sales Effort.
Each station owned by the Company has its own advertising sales staff. To
achieve greater control over advertising revenues, the Company's sales staff
focuses on establishing strong direct relationships with local advertisers. The
Company is able to generate significant direct local sales by understanding
advertisers' needs and by more effectively delivering the desired demographic
audience. The Company's radio stations also offer a complete range of creative
production services to its advertising clientele. Given the Company's ratings
and sales position in its markets, Jacor is able to attract and retain a highly
talented, experienced sales force.
Acquisitions
The new Federal Communications Commission ("FCC") rules permitting
ownership of more than one FM and more than one AM radio station in the same
market have created opportunities for the Company to expand its presence in its
existing markets and may allow certain synergies to be achieved. For example,
jointly-owned stations may be able to increase their revenues by delivering
larger, combined audiences to advertisers and by engaging in joint promotional
efforts. In addition, jointly-owned stations may be able to reduce operating
expenses by combining studios and offices.
The Company's acquisition strategy is to acquire complementary stations in
existing markets, radio groups with a significant presence in the top 25 radio
markets and/or individual radio stations in such markets. The Company believes
that its unique combination of financial resources, committed controlling
shareholder and skilled management will enable the Company to successfully
pursue such a strategy. The Company has considerable financial resources. In
contrast to many radio groups with whom Jacor competes for acquisitions, the
Company has no outstanding debt. In addition, the Company has approximately
$97.7 million of committed bank borrowing availability to pursue acquisitions.
Jacor also believes that the expertise and resources of Zell/Chilmark will
enhance the Company's ability to successfully complete attractive acquisitions.
The Company believes that Zell/Chilmark's expertise in identifying attractive
opportunities, negotiating favorable acquisitions and obtaining capital will
be valuable in implementing Jacor's acquisition strategy.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
Advertising
The primary source of the Company's revenues is the sale of broadcasting
time for local and national advertising. During the year ended December 31,
1994, approximately 85% of the Company's broadcast revenue was generated from
the sale of local advertising and approximately 15% from the sale of national
advertising. The Company believes that radio is one of the most efficient,
cost-effective means for advertisers to reach specific demographic groups. The
advertising rates charged by the Company's radio stations are based primarily on
(i) the station's ability to attract audiences in the demographic groups
targeted by its advertisers (as measured principally by quarterly Arbitron
ratings surveys that quantify the number of listeners tuned to the station at
various times), (ii) the number of stations in the market that compete for the
same demographic group and (iii) the supply of and demand for radio advertising
time. Advertising rates generally are the highest during morning and afternoon
"drive-time" hours.
Depending on the format of a particular station, there are predetermined
numbers of advertisements that are broadcast each hour. The Company determines
the number of advertisements broadcast hourly that can maximize available
revenue dollars without jeopardizing listening levels. Although the number of
advertisements broadcast during a given time period may vary, the total number
of advertisements broadcast on a particular station generally does not vary
significantly from year to year. Most advertising contracts are short-term and
run only for a few weeks.
The Company emphasizes an aggressive local sales effort because local
advertising represents the large majority of the Company's revenues and the
Company has greater control over the local advertising market. The major
categories of the Company's local advertisers include automotive, retail,
financial institutions and services, and health care. Each station's local
sales staff solicits advertising, either directly from the local advertiser or
through an advertising agency for the local advertiser. The Company pays a
higher commission rate to the sales staff for generating direct sales because
the Company believes that through a strong relationship directly with the
advertiser, it can better understand the advertiser's business needs and more
effectively design an advertising campaign to help the advertiser sell its
product. The Company employs personnel
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
at each radio station to produce commercials for the advertisers. National
advertising sales for each of the Company's stations are made by the Company's
national sales managers in conjunction with the efforts of an independent
advertising representative who specializes in national sales and is compensated
on a commission-only basis.
The Company also participates in barter transactions, contracts under
which the Company provides commercial air time in exchange for goods and
services. This is a business practice typical to the broadcast industry. The
Company minimizes its use of trade agreements and in each of the last three
years has sold approximately 95% or more of its advertising time for cash. The
Company's involvement relative to barter transactions is discussed in Note 14
of Notes to Consolidated Financial Statements.
Competition; Changes in the Broadcasting Industry
The radio broadcasting industry is a highly competitive business. The
success of each of the Company's stations depends significantly upon its
audience ratings and its share of the overall advertising revenue within its
market. The Company's stations compete for listeners and advertising revenue
directly with other radio stations within their respective markets. Radio
stations compete for listeners primarily on the basis of program content and
by hiring high-profile talent that appeals to a particular demographic group.
By building in each of its markets a strong listener base comprised of a
specific demographic group, the Company is able to attract advertisers seeking
to reach those listeners.
In addition to management experience, factors which are material to
competitive position include the station's rank in its market, transmitter
power, assigned frequency, audience characteristics, local program acceptance
and the number and characteristics of other stations in the market area. The
Company attempts to improve its competitive position with promotional campaigns
aimed at the demographic groups targeted by its stations and by sales efforts
designed to attract advertisers. Recent changes in the FCC's policies and rules
permit increased joint ownership and joint operation of local radio stations.
Those stations taking advantage of these joint arrangements may in certain
circumstances have lower operational costs and may be able to offer advertisers
more attractive rates and services.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
The Company's audience ratings and market share are subject to change, and
any adverse change in a particular market could have a material adverse effect
on the revenue of the Company's stations in that market. Although the Company
believes that each of its stations can compete effectively in the market, there
can be no assurance that any one of the Company's stations will be able to
maintain or increase its current audience ratings and advertising revenue market
share.
Although the radio broadcasting industry is highly competitive, some
barriers to entry exist. The operation of a radio broadcast station requires a
license from the FCC and the number of radio stations that can operate in a
given market is limited by the availability of the FM and AM radio frequencies
that the FCC will license in that market.
The Company's stations also compete for advertising revenues with other
media, including broadcast television, cable television, newspapers, magazines,
direct mail, coupons and billboard advertising. In addition, the radio
broadcasting industry is subject to competition from new media technologies that
are being developed or introduced, such as the delivery of audio programming by
cable television systems and by digital audio broadcasting. The radio
broadcasting industry historically has grown despite the introduction of new
technologies for the delivery of entertainment and information, such as
television broadcasting, cable television, audio tapes and compact disks.
Greater population and greater availability of radios, particularly car and
portable radios, have contributed to this growth. There can be no assurance,
however, that the development or introduction in the future of any new media
technology will not have an adverse effect on the radio broadcasting industry.
The Company also competes with other radio station groups to purchase additional
stations.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
The FCC has allocated spectrum for a new technology, satellite digital
audio radio services ("DARS"), to deliver audio programming. The FCC still must
undertake to establish licensing and operating rules for DARS, so that the
allocated spectrum is not yet available for service. The Company cannot predict
when and in what form such rules will be adopted. DARS may provide a medium for
the delivery by satellite or terrestrial means of multiple new audio programming
formats to local and national audiences. This technology also may be used in
the future by terrestrial radio broadcast stations either on existing or
alternate broadcasting frequencies. In addition, the FCC has authorized an
additional 100 Khz of band width for the AM band and will soon allocate
frequencies in this new band to certain existing AM station licensees. At the
end of a transition period to be determined by the FCC, those licensees will
be required to return to the FCC either the license for their existing AM
band station or the license for the expanded AM band station.
The Company cannot predict what other matters might be considered in the
future, nor can it judge in advance what impact, if any, the implementation of
any of these proposals or changes might have on its business.
Federal Regulation of Radio Broadcasting
The ownership, operation and sale of radio stations are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act of 1934, as amended (the "Communications Act"). Among other
things, the FCC assigns frequency bands for broadcasting; determines the
particular frequencies, locations and power of stations; issues, renews,
revokes and modifies station licenses; determines whether to approve changes in
ownership or control of station licenses; regulates equipment used by stations;
adopts and implements regulations and policies that directly or indirectly
affect the ownership, operation and employment practices of stations; and has
the power to impose penalties for violations of its rules or the Communications
Act.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
Radio stations in the United States operate either by Amplitude Modulation
(AM), conducted on 107 different frequencies located between 540 and 1600
kilohertz (KHz) (plus 10 frequencies between 1610-1710 KHz on the newly expanded
AM band) in the low frequency band of the electromagnetic spectrum, or by
Frequency Modulation (FM), conducted on approximately 100 different frequencies
located between 88 and 108 megahertz (MHz) at the very high frequency band of
the electromagnetic spectrum.
License Grants and Renewals. The Communications Act provides that a
broadcast station license may be granted to an applicant if the grant would
serve the public interest, convenience and necessity, subject to certain
limitations referred to below. In making licensing determinations, the FCC
considers the legal, technical, financial and other qualifications of the
applicant, including compliance with the Communications Act's limitations on
alien ownership, compliance with various rules limiting common ownership of
broadcast, cable and newspaper properties, and the "character" of the licensee
and those persons holding "attributable" interests in the licensee. Broadcast
station licenses are granted for specific periods of time and, upon application,
are renewable for additional terms. Under the Communications Act, radio
station licenses may be granted for a maximum term of seven years and, upon
application, may be renewed for additional terms of up to seven years.
Generally, the FCC renews licenses without a hearing. The Communications
Act authorizes the filing of petitions to deny and competing applications
against license renewal applications during particular periods of time following
the filing of renewal applications. Petitions to deny can be used by interested
parties, including members of the public, to raise issues concerning the
qualifications of the renewal applicant, whereas competing applications seek to
gain a new license from the FCC for the frequency being used by the renewal
applicant. If a competing application is granted by the FCC, the renewal
application will be denied and the incumbent licensee will lose its right to
operate on the contested broadcast frequency.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
If a competing application is filed against a renewal application, or if
a substantial and material question of fact concerning an application is raised
by the FCC or other interested parties, or if for any reason the FCC is unable
to determine that the grant of a renewal or other application would serve the
public interest, convenience and necessity, the FCC is required to hold an
evidentiary hearing on the application. The filing of a competing application
may require a comparative evidentiary hearing between the incumbent licensee and
the competing applicant; however, the FCC may recognize a "renewal expectancy"
for an
incumbent licensee if it has provided substantial service to its listeners
during the preceding license term. The broadcasting licenses of all of the
Company's stations expire in 1996 and 1997. The Company does not anticipate any
material difficulty in obtaining license renewals in the future.
The following table sets forth the date of acquisition by the Company (or
one of its predecessor entities) of its radio stations, or the date of
commencement of a LMA/JSA in the case of stations not owned by the Company, the
frequency of each such station, and the date of expiration of such station's
main FCC broadcast license:
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
<TABLE>
<CAPTION>
Date of Expiration Date
Acquisition/ of
Station Market LMA/JSA Frequency FCC License
<S> <C> <C> <C> <C>
OWNED:
WPCH(FM) Atlanta, GA August 1985 94.9 MHz 04/01/96
WGST(AM) Atlanta, GA August 1985 640 KHz 04/01/96
KRFX(FM) Denver, CO August 1987 103.5 MHz 04/01/97
KOA(AM) Denver, CO August 1987 850 KHz 04/01/97
KBPI(FM) Denver, CO July 1993 106.7 MHz 04/01/97
KTLK(AM) Denver, CO November 1993 760 Khz 04/01/97
WEBN(FM) Cincinnati, OH May 1986 102.7 MHz 10/01/96
WLW(AM) Cincinnati, OH December 1986 700 KHz 10/01/96
WCKY(AM) Cincinnati, OH June 1993 550 KHz 10/01/96
WFLZ(FM) Tampa, FL April 1988 93.3 MHz 02/01/96
WFLA(AM) Tampa, FL April 1988 970 KHz 02/01/96
WQIK(FM) Jacksonville, FL May 1984 99.1 MHz 02/01/96
WJGR(AM) Jacksonville, FL May 1984 1320 KHz 02/01/96
WMYU(FM) Knoxville, TN December 1986 102.1 MHz 08/01/96
WWST(FM) Knoxville, TN November 1994 93.1 Mhz 08/01/96
LMAs:
WGST(FM) Atlanta, GA October 1993 105.7 MHz 04/01/96
WPPT(FM) Cincinnati, OH April 1994 92.5 MHz 10/01/96
JSAs:
WAQZ(FM) Cincinnati, OH December 1991 107.1 MHz 10/01/96
WAOZ(AM) Cincinnati, OH January 1994 1360 KHz 10/01/96
WSAI(AM) Cincinnati, OH March 1994 1530 KHz 10/01/96
</TABLE>
License Assignments and Transfers of Control. The Communications Act also
prohibits the assignment of a license or the transfer of control of a
corporation holding such a license without the prior approval of the FCC.
Applications to the FCC for such assignments or transfers are subject to
petitions to deny by interested parties and must satisfy requirements similar
to those for renewal and new station applicants.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
Under the Communications Act, broadcast licenses may not be granted,
transferred or assigned to any corporation of which any officer or director is
a non-U.S. citizen (including non-U.S. corporations) or of which more than
one-fifth of the capital stock is owned of record or voted by non-U.S. citizens
or foreign governments or their representatives (collectively, "Aliens"). In
addition, the Communications Act provides that no broadcast license may be held
by any corporation directly or indirectly controlled by any other corporation
any officer of which is an Alien, or more than one-fourth of the directors of
which are Aliens, or more than one-fourth of the capital stock of which is owned
of record or voted by Aliens, without an FCC public interest finding (which has
never been granted in the case of broadcast licenses). The FCC has issued
interpretations of existing law under which these restrictions in modified form
apply to other forms of business organizations, including general and limited
partnerships. The FCC also prohibits a licensee from continuing to control
broadcast licenses if the licensee otherwise falls under Alien influence or
control in a manner determined by the FCC to be in violation of the
Communications Act or contrary to the public interest. No officers,
directors or significant shareholders of the Company are known by the Company to
be Aliens.
Ownership Rules. Rules of the FCC limit the number and location of radio
stations in which one licensee (or any party with a control position or
cognizable ownership interest therein) may have a cognizable interest. The
"national ownership rule" generally prohibits any one non-minority individual or
entity from having a control position or cognizable ownership interest in more
than 20 AM or more than 20 FM radio stations nationwide. The national ownership
rule allows minority individuals or corporations controlled by minorities to
have a controlling position or cognizable ownership interest in 25 AM and 25 FM
stations. A non-minority licensee may own an additional three non-controlling
interests in each service (AM and FM) in stations controlled by minorities or
qualifying as small businesses, where "control" is defined as more than 50%
ownership and "small business" defined as one which had, including all
affiliated entities under common control,
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
annual revenues of less than $0.5 million and assets of less than $1
million. The "local ownership rule" limits the number of stations in a radio
market in which any one individual or entity may have a control position or
cognizable ownership interest. In radio markets with fewer than 15 commercial
stations, the limit is three radio stations, no more than two of which may be in
the same service (AM or FM), provided that the number of co-owned stations
represents less than 50% of the commercial stations in the market. For markets
with 15 or more radio stations, the limit is two AMs and two FMs provided
generally that the combined audience shares of the co-owned stations do not
exceed 25% of the radio ratings market at the time of acquisition. In addition,
the FCC has a "cross interest" policy that may prohibit a party with a
cognizable interest in one station in a market from also holding either a
"meaningful" non-attributable equity interest (e.g., non-voting stock, voting
stock, limited partnership interests) or key management position in another
station in the same market, or which may prohibit local stations from combining
to build or acquire another local station. The FCC is presently evaluating its
cross interest policy as well as its policy for insulating limited partnership
interests. The Company cannot predict whether the FCC will adopt any changes
in these policies.
The rules also generally prohibit the acquisition of an ownership or
control position in a television station and either an AM or an FM radio station
serving the same market, a rule which is currently under review by the FCC.
There are also prohibitions relating to ownership or control position in a daily
newspaper and a broadcast station in the same market and limitations on the
extent to which Aliens may own interests or hold control positions in broadcast
stations.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
For the purpose of the above rules, a control position is considered to be
held by an officer or director of a corporation or any general partner of a
partnership or any person serving in a management capacity. Also, under these
rules, an individual or other entity owning or having voting control of 5% or
more of a corporation's voting stock is considered to have a cognizable interest
in the corporation and its stations, except that banks holding such stock in
their trust accounts, investment companies, and certain other passive interests
are not considered to have a cognizable interest unless they own or have voting
control over 10% or more of such stock. The FCC is currently evaluating whether
to raise the benchmarks to 10% and 20%, respectively. The Company cannot
predict whether the FCC will adopt this or any other proposal. Under the
current rules, Zell/Chilmark is considered a single majority shareholder of
the Company, and minority shareholders are not considered to have cognizable
interests in the Company's stations. The FCC has asked for comments as to
whether it should continue the single majority shareholder exemption.
Holders of non-voting stock generally will not be attributed an interest
in the issuing entity, and holders of debt and instruments such as warrants,
convertible debentures, options, or other non-voting interests with rights of
conversion to voting interests generally will not be attributed such an interest
unless and until such conversion is effected. The FCC is currently considering
whether it should attribute non-voting stock, or perhaps non-voting stock
interests when combined with other rights, such as voting shares or contractual
relationships.
Regulation of Radio Operations. In order to retain licenses, broadcasters
are obligated, under the Communications Act, to serve the "public interest."
Since the late 1970's, the FCC gradually has relaxed or eliminated many of the
more formalized regulatory procedures and requirements developed to promote the
broadcast of certain types of programming responsive to the problems, needs, and
interests of a station's community of license.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
The regulatory changes have provided stations with increased flexibility
to design their program formats and have provided relief from some recordkeeping
and FCC filing requirements. However, licensees continue to be required to
present programming that is responsive to significant community issues and to
maintain certain records demonstrating such responsiveness. Complaints from
listeners concerning a station's programming will be considered by the FCC when
evaluating licensee renewal applications and at other times.
Stations still are required to follow various rules promulgated under the
Communications Act that regulate political broadcasts, political advertisements,
sponsorship identifications, technical operations and other matters. "Equal
Opportunity" and affirmative action requirements also exist. Failure to observe
these or other rules can result in the imposition of monetary forfeitures or in
the grant of a "short" (less than seven-year) renewal term or license
revocation. In some instances, licenses have been denied because of serious
rule violations.
In 1985, the FCC adopted rules regarding human exposure to levels of radio
frequency ("RF") radiation. These rules require applicants for new broadcast
stations, renewals of broadcast licenses or modification of existing licenses to
inform the FCC at the time of filing such applications whether a new or existing
broadcast facility would expose people to RF radiation in excess of certain
guidelines. In March 1993, the FCC proposed adopting more restrictive radiation
limits. The Company cannot predict whether the FCC will adopt this or any other
proposal.
Agreements With Other Broadcasters. Over the past several years a
significant number of radio broadcast licensees, including certain of the
Company's subsidiaries, have entered into cooperative agreements with other
stations in their market. These agreements may take varying forms, subject to
compliance with the requirements of antitrust laws and with the FCC's rules and
policies. Typically, separately-owned stations may agree to function
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
cooperatively in terms of programming, advertising sales, etc., subject to the
licensee of each station maintaining independent control over the programming
and station operations of its own station. One typical example is a LMA between
two separately owned radio stations serving a common service area, whereby the
licensee of one station programs substantial portions of the broadcast day on
the other licensee's station, subject to ultimate editorial and other controls
being exercised by the latter licensee, and sells advertising time during such
program segments for its own account. Another is a JSA pursuant to which one
station sells advertising time in combination, both on itself and on a station
under separate ownership.
In the past, the FCC has determined that issues of joint advertising sales
should be left to antitrust enforcement and has specifically exempted LMAs from
its "cross-interest" policy. Furthermore, the FCC and the staff of the FCC's
Mass Media Bureau have held that LMAs do not per se constitute a transfer of
control and are not contrary to the Communications Act provided that the
licensee of the station maintains complete responsibility for and control over
operations of its broadcast station (including, specifically, control over
station finances, personnel and programming) and complies with applicable FCC
rules and with antitrust laws. At present, the FCC is considering whether it
should treat as cognizable multiple business arrangements among local stations,
such as joint sales accompanied by debt financing.
Under certain circumstances, the FCC will consider a station brokering
time on another station serving the same market to have an attributable
ownership interest in the brokered station for purposes of the FCC's radio
multiple ownership rules. In particular, a broadcast station is not permitted
to enter into a LMA giving it the right to program more than 15% of the
broadcast time, on a weekly basis, of another local station which it could not
own under the FCC's revised local radio "duopoly" multiple ownership rules.
However, LMAs entered into prior to September 16, 1992, are generally
grandfathered, with certain restrictions.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
The FCC's rules also prohibit a broadcast licensee from simulcasting more
than 25% of its programming on another station in the same broadcast service
(i.e., AM-AM or FM-FM) whether it owns both stations or operates both through a
LMA where the brokered and brokering stations serve substantially the same
geographic area.
Proposed Changes. The Congress and the FCC have under consideration, and
may in the future consider and adopt, new laws, regulations and policies
regarding a wide variety of matters that could, directly or indirectly, (i)
affect the operation, ownership and profitability of the Company and its radio
broadcast stations, (ii) result in the loss of audience share and advertising
revenues of the Company's radio broadcast stations and (iii) affect the ability
of the Company to acquire additional radio broadcast stations or
finance such acquisitions. Such matters include, for example, changes to the
license authorization and renewal process; proposals to expand the FCC's equal
employment opportunity rules and other matters relating to minority and female
involvement in broadcasting; proposals to alter the benchmarks or thresholds
for attributing ownership interest in broadcast media; proposals to change
rules or policies relating to political broadcasting; changes to technical
and frequency allocation matters, including those relative to the
implementation of digital audio broadcasting on both a satellite and terrestrial
basis; proposals to permit expanded use of FM translator stations; proposals
to restrict or prohibit the advertising of beer, wine and other alcoholic
beverages on radio; changes in the FCC's cross-interest, multiple ownership,
alien ownership and cross-ownership policies; proposals to allow greater
telephone company participation in the delivery of audio and video programming;
and proposals to limit the tax deductibility of advertising expenses by
advertisers.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 1. Business, Continued
(c) Narrative Description of Business, Continued
Although the Company believes the foregoing discussion is sufficient to
provide the reader with a general understanding of all material aspects of FCC
regulations that affect the Company, it does not purport to be a complete
summary of all provisions of the Communications Act or FCC rules and policies.
Reference is made to the Communications Act, FCC rules and the public notices
and rulings of the FCC for further information.
Energy and Environmental Matters
The Company's source of energy used in its broadcasting operations is
electricity. No limitations have been placed on the availability of electrical
power, and management believes its energy sources are adequate.
Management believes that the Company is in compliance with all statutory
and administrative requirements as related to environmental quality and
pollution control. The Company's business is not a source of pollution.
Employees
The Company has no direct employees. The Company's subsidiaries
employ 844 persons, 568 on a full-time and 276 on a part-time basis. Each
station has its own complement of employees which generally include a general
manager, sales manager, operations manager, business manager, advertising sales
staff, on-air personalities and clerical personnel. No employee is represented
by a union.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 2. Property Holdings
The Company owns the office and studio facilities for its AM/FM combination
stations in Jacksonville, Florida (6,875 square feet) and its FM stations in
Knoxville, Tennessee (6,500 square feet). The Company leases space for the
office and studio facilities at its other station locations in Atlanta (15,500
square feet); Denver (22,000 square feet); Cincinnati (20,200 square feet) and
Tampa (14,800 square feet). The Atlanta and Denver leases expire in 1996 and
1999, respectively. Both the Cincinnati and Tampa leases expire in 1998 and
each lease has two five-year renewal options. The Company has entered into a
twelve-year lease for new combined facilities for its Atlanta stations. This
lease covers approximately 19,500 square feet in a mixed-use commercial/retail
building. The Company will move into the new facilities as soon as they are
ready for occupancy. Any remaining financial obligations under the existing
lease will be assumed by the lessor of the new facilities. The Company leases
approximately 10,000 square feet for its corporate offices in Cincinnati under
a lease expiring in 1996 with a five-year renewal option. In conjunction with
the Company's proposed acquisition of radio station WPPT(FM) in Cincinnati, the
Company has also agreed to purchase for approximately $1.6 million the building
from which such station previously operated.
Expansion of the Company's operations generally comes from the acquisition
of stations and their facilities and ordinarily does not create a need for
additional space at existing locations, although the emergence of LMAs and JSAs
with other stations in the Company's existing markets could create such a need.
Any future need for additional office and studio space at existing locations
will be satisfied by the construction of additions to Company-owned facilities
and, in the case of leased facilities, the lease of additional space or the
relocation of the office and studio. The Company's office and studio facilities
are all located in downtown or suburban office buildings and are capable of
being relocated in any suitable office facility in the station market area.
The Company owns the towers and tower site locations for its AM stations
in Atlanta, Denver, Jacksonville, Tampa and WLW(AM) in Cincinnati. The Company
owns the tower which serves one of its FM stations in Knoxville which is
located on property leased by the Company under a lease expiring in 2005. For
the tower site at WCKY(AM), Cincinnati, and for all its other FM stations, the
Company leases tower space for its FM antennae under leases expiring from 1996
to 2013.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 2. Property Holdings, Continued
The Company owns substantially all of its equipment, consisting principally
of transmitting antennae, transmitters, studio equipment and general office
equipment. The towers, antennae and other transmission equipment used by the
Company's stations are in generally good condition. In management's opinion,
the quality of the signals range from good to excellent, and the Company is
committed to maintaining and updating its equipment and transmission facilities
in order to achieve the best possible signal in the market area.
Although the Company believes its properties are generally adequate for its
operations, opportunities to upgrade facilities are continuously reviewed.
See Notes 8 and 13 of Notes to Consolidated Financial Statements included
elsewhere herein for a description of encumbrances against the Company's
properties and the Company's rental obligations.
Item 3. Legal Proceedings
The Company is a party to various legal proceedings. In the opinion of
management, all such matters are adequately covered by insurance or if not so
covered, are without merit or are of such kind, or involve such amounts, which
would not have a significant effect on the financial position or results of
operations of the Company.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth
quarter of the calendar year covered by this report.
Executive Officers of the Registrant
Pursuant to General Instruction G(3) of Form 10-K, the following list is
included as an unnumbered Item in Part I of this Report in lieu of being
included in the Proxy Statement to be filed during April 1995 for the Annual
Meeting of Shareholders presently scheduled to be held on May 17, 1995.
The following is a list of names and ages of all of the executive officers of
Registrant indicating all positions and offices with Registrant held by each
person as of March 15, 1995. All such persons have been elected to serve until
the next annual election of officers and their successors are elected, or until
their earlier resignation or removal.
Age as of First
March 15, Offices and Elected
Name 1995 Positions Held an Officer
David M. Schulte 48 Chairman of the Board 6/07/93
Randy Michaels 42 President and Co-Chief
Operating Officer 12/29/86
Robert L. Lawrence 42 Co-Chief Operating
Officer 12/29/86
R. Christopher Weber 39 Senior Vice President and
Chief Financial Officer 12/29/86
Jon M. Berry 48 Senior Vice President and
Treasurer 11/01/82
Except for Mr. Schulte, each of the executive officers listed above has served
Registrant in various executive capacities throughout the past five years.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
During all of 1994, the Company's Common Stock was traded on The Nasdaq Market
under the symbol "JCOR". The following table reflects the high and low sale
prices in dollars per share for the Common Stock as reported on The Nasdaq
National Market since January 1, 1994.
Price Range of
Common Stock
1994 High Low
1st Quarter........................ $17.00 $12.00
2nd Quarter........................ 15.75 11.25
3rd Quarter........................ 15.00 12.25
4th Quarter........................ 14.75 10.50
The following table reflects the high and low sale prices in dollars per share
for the Common Stock as reported on The Nasdaq Stock Market since July 13, 1993
(on The Nasdaq National Market from November 19, 1993); and the high and low bid
prices for the Common Stock as quoted on the OTC Bulletin Board (with such
quotes reported in the pink sheets of the National Quotation Bureau, Inc.) from
February 17, 1993 (the first date quotes were available for the Common Stock
after the Restructuring) through July 12, 1993. The Company is not aware of
any quotes for the Common Stock from January 1, 1993 through February 17, 1993.
Such prices represent inter-dealer quotations without adjustment for retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions. Trading in the Company's Common Stock, both on the OTC Bulletin
Board and in The Nasdaq Stock Market, was limited and sporadic during much of
1993. Accordingly, the market price information below may not accurately
reflect the value of the Common Stock had a more active public trading market
existed.
Price Range of
Common Stock
1993 High Low
1st Quarter (from February 17)........ $ 8.00 $ 7.00
2nd Quarter........................... 9.13 7.75
3rd Quarter (through July 12, 1993)... 8.13 7.50
3rd Quarter (from July 13, 1993)...... 12.00 8.00
4th Quarter........................... 19.50 11.75
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters,
Continued
At March 15, 1995, there were 1,586 record holders of Common Stock including
shares held in nominee name and the last reported sale price on the Nasdaq
National Market was $13.38 per share.
The Company has neither declared nor paid any dividends on its Common Stock to
date. The Company's existing agreements with its lenders restrict the payment
of dividends. It is the Company's present policy to retain all earnings for the
requirements of the business.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1994(1) 1993(1) 1992(1) 1991(1) 1990(1)
<S> <C> <C> <C> <C> <C>
For the year:
Net revenue $107,010,448 $89,932,200 $70,505,959 $64,237,752 $80,036,270
Broadcast operating
expense 80,468,077 69,520,397 55,782,048 48,206,072 60,436,931
Station operating
income excluding
depreciation and
amortization 26,542,371 20,411,803 14,723,911 16,031,680 19,599,339
Depreciation and
amortization 9,698,030 10,222,844 6,399,093 7,287,879 10,294,334
Reduction in carrying
value of assets to
net realizable value 8,600,000
Corporate general and
administrative
expenses 3,361,263 3,563,800 2,926,075 2,681,672 2,811,625
Operating income (loss) 13,483,078 6,625,159 (3,201,257) 6,062,129 6,493,380
Net interest income
(expense) 684,317 (2,475,820) (13,443,318) (16,226,234) (17,727,828)
Gain on sale of radio
stations 13,013,527
Other non-operating
expense net (2,079) (10,895) (7,056,771) (301,897) (8,431,714)
Income (loss) before
income tax and
extraordinary item 14,165,316 4,138,444 (23,701,346) 2,547,525 (19,666,162)
Net income (loss) $ 7,851,516 $ 1,438,444 $(23,701,346) $ 1,467,525 $(20,746,162)
Net income (loss) per
common share: (2)
Primary and fully
diluted $ 0.37 $ 0.10 $(61.50) $ 2.32 $(47.10)
Weighted average shares
outstanding: (2)
Primary and fully
diluted 21,409,177 14,504,527 381,430 405,927 422,672
Other Financial Data:
Broadcast cash flow (3) $26,542,371 $20,411,803 $14,723,911 $16,031,680 $19,599,339
At year end:
Working capital
(deficit) $ 44,637,439 $38,658,756 $(140,547,337)(4) $(128,455,248)$6,230,189
Intangible assets
(net of accumulated
amortization) 89,543,301 84,991,361 70,037,759 (4) 81,738,386 92,026,575
Total assets 173,579,355 159,908,529 122,000,391 (4) 125,487,201 152,717,141
Long-term debt
(including current
portion) 140,541,948 (4) 137,666,850 151,436,233
Redeemable common
stock 6,278,800
Common stock purchase
warrants 390,167 390,397 487,000 (4) 1,257,084 1,708,144
Shareholders' equity
(deficit) 148,793,980 140,413,191 (50,840,346)(4) (27,383,036)(28,774,289)
</TABLE>
NOTES:
(1) The comparability of the information reflected in this selected financial
data is affected by the purchase of radio station KBPI-FM (formerly KAZY-FM), in
Denver, Colorado (July 1993); the pending purchase and interim operation of
radio station WPPT-FM (formerly WIMJ-FM) under a LMA in Cincinnati, Ohio (April
1994); the sale of Eastman Radio, Inc. (August 1990); the sale of radio stations
WMJI(FM), in Cleveland, Ohio and WYHY(FM), in Nashville, Tennessee (January
1991), the sale of Telesat Cable TV (May 1994), and the Restructuring and the
Refinancing. For information related to acquisitions in 1993 and 1994 see Note
4 of Notes to Consolidated Financial Statements and "Managements' Discussion and
Analysis of Financial Condition and Results of Operations". For information
related to the disposition during 1994, see Note 5 of Notes to Consolidated
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations". For information related to the
Restructuring and the Refinancing see Notes 1, 2 and 8 of Notes to Consolidated
Financial Statements.
(2) Income (loss) per common share for the three years ended December 31, 1992
is based on the weighted average number of shares of Common Stock outstanding
and gives consideration to the dividend requirements of the convertible
preferred stock and accretion of the change in redemption value of certain
common stock warrants. The Company's stock options and convertible preferred
stock were anti-dilutive and, therefore, were not included in the computations.
The redeemable common stock warrants were anti-dilutive for 1992 and 1990 and
were not included in the computations. Such warrants were dilutive in 1991
using the "equity method" under Emerging Issues Task Force Issue No. 88-9 and,
therefore, the common shares issuable upon conversion were included in the 1991
computation. Income per share for the two years ended December 31, 1994 is
based on the weighted average number of common shares outstanding and gives
effect to both dilutive stock options and dilutive stock purchase warrants
during the periods. Income (loss) per common share and weighted average shares
outstanding for the three years ended December 31, 1992 are adjusted to
reflect the 0.0423618 reverse stock split in the Company's Common Stock effected
by the Restructuring.
(3) The term broadcast cash flow means operating income before reduction in
carrying value of assets, depreciation, amortization and corporate general and
administrative expenses. Broadcast cash flow is not intended to represent cash
flow or any other measure of performance in accordance with generally accepted
accounting principles. Broadcast cash flow is included herein because
management believes that it is widely used in the broadcasting industry as a
measure of a radio broadcasting company's operating performance and that
certain investors find it to be a useful tool in evaluating such an investment.
See the Consolidated Statements of Cash Flows included on pages 42 and 43 in
this annual report for a description of the Company's cash flows presented in
accordance with generally accepted accounting principles and page 37 in this
annual report for a further discussion of the Company's cash flows.
(4) Pro forma amounts as of December 31, 1992, to give effect to the 1993
Restructuring and change in control (see Note 1 of Notes to Consolidated
Financial Statements):
Working capital $ 15,933,304
Intangible assets (net of
accumulated amortization) 82,856,512
Total assets 142,085,313
Long-term debt 64,177,962
Common stock purchase warrants 402,805
Shareholders' equity 50,889,751
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
GENERAL
The performance of a radio station group, such as Jacor, is customarily measured
by its ability to generate broadcast cash flow. The primary source of the
Company's revenues is the sale of broadcasting time on its radio stations for
advertising. The Company's significant operating expenses are employee
salaries, sports broadcasting rights fees, programming expenses, advertising
and promotion expenses, rental of premises for studios and transmitting
equipment and music license royalty fees. The Company strives to control these
expenses by working closely with local station management.
The Company's revenues are affected primarily by the advertising rates the
Company's radio stations are able to charge. These rates are in large part
based on a station's ability to attract audiences in the demographic groups
targeted by its advertisers, as measured principally by quarterly Arbitron
Metro Area Ratings Surveys. In the broadcasting industry, radio stations often
use trade (or barter) agreements to generate advertising time sales in exchange
for goods or services (such as travel and lodging), instead of for cash. The
Company minimizes its use of trade agreements and in each of the last three
years has sold approximately 95% or more of its advertising time for cash.
Sports broadcasting and the full-service programming features play an integral
part in the Company's operating strategy. As a result, the Company's broadcast
cash flow margins are typically lower than its competitors' because of the
rights fees and related costs of broadcasting professional baseball, football
and basketball, as well as the costs related to the full-service programming
features of its AM radio stations.
Most advertising contracts are short-term and run only for a few weeks. Most of
the Company's revenue is generated from local advertising, which is sold by the
station's sales staff. In 1994, approximately 85% of the Company's gross
revenues was from local advertising and approximately 15% was from national
advertising. The station's local sales staff solicits advertising, either
directly from the local advertiser or through an advertising agency for the
local advertiser. National advertising sales for each of the Company's stations
are made by the Company's national sales managers in conjunction with the
efforts of an independent advertising representative who specializes in
national sales and is compensated on a commission-only basis.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
GENERAL, Continued
The Company's first calendar quarter historically produces the lowest revenues
for the year, and the second and third quarters historically produce the highest
revenues for the year, due in part to revenues received during the summer months
related to the broadcast of Major League Baseball games. During 1994, however,
the Company recorded comparable third and fourth quarter broadcast revenue and
broadcast operating expenses. This aberration was due to the Major League
Baseball strike. As a result of the strike, third quarter revenues and
operating expenses were lower. However, fourth quarter revenues and operating
expenses were higher because the Company was successful in rescheduling some
of the advertiser's baseball commitments into its football broadcasts. For the
entire twelve months of 1994, the strike did not have a material impact on the
Company's station operating income (broadcast revenue less broadcast operating
expenses). Should the strike continue through the 1995 baseball season with
no games being played, it is anticipated that there would not be a material
impact on the Company's station operating income. However, if replacement
players were to play, advertisers would probably seek to renegotiate their
commitments to the Company and the Company would pursue a reduction in the
broadcast rights' fees. The extent to which either of these possibilities
would be successful is unknown and, accordingly, the potential impact of the
baseball strike on the Company's station operating income cannot be currently
quantified.
The Company's operating results in any period may be affected by the incurrence
of advertising and promotion expenses that do not produce commensurate revenues
in the period in which the expenses are incurred. As a result of Arbitron's
quarterly reporting of ratings, the Company's ability to realize revenues as a
result of increased advertising and promotional expenses may be delayed for
several months.
The comparability of financial information for the years ended December 31,
1994, 1993 and 1992 is affected by the January 1993 Restructuring; the March
1993 Refinancing; the July 1993 purchase of radio station KBPI(FM), Denver,
Colorado; and the April 1994 pending purchase and interim operation of radio
station WPPT(FM), Cincinnati, Ohio under a LMA.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
The Company began 1994 with no outstanding debt and $28.6 million in cash and
cash equivalents. The Company used the net proceeds (approximately $60 million)
from the public offering during the fourth quarter of 1993 to repay all of its
indebtedness and the remaining net proceeds (in the form of cash and cash
equivalents) are available to finance acquisitions of radio groups and/or radio
stations and for general corporate purposes.
The Company's Credit Agreement provides for a senior secured reducing revolving
credit facility with a commitment of $45 million ($42.7 million at December 31,
1994 - see following paragraph) that expires on December 31, 2000 (the
"Revolver") and a senior secured acquisition facility with a commitment of $55
million (the "Acquisition Facility") that expires on September 30, 1996. The
Credit Agreement contains restrictive covenants, and the indebtedness thereunder
is collateralized by liens on substantially all of the assets of the Company and
its operating subsidiaries and by a pledge of the operating subsidiaries' stock.
The indebtedness under the Credit Agreement is guaranteed by those subsidiaries.
Both facilities may be used for acquisitions permitted under conditions set
forth in the Credit Agreement. Interest under the Credit Agreement is payable,
at the option of the Company, at alternative rates equal to the Eurodollar rate
plus 1.25% to 2.25% or the base rate announced by Banque Paribas plus 0.25% to
1.25%.
The Credit Agreement requires that the commitment under the Revolver be reduced
in the quarter commencing January 1, 1994 and continuing quarterly thereafter
(reduced by $2.3 million as of December 31, 1994). After the Acquisition
Facility commitment terminates on September 30, 1996, the Credit Agreement
requires 17 equal quarterly amortization payments. The Credit Agreement further
requires that, with certain exceptions, the Company prepay the loans and reduce
the commitments under the Credit Agreement with excess cash flow and the net
proceeds from certain sales of assets and capital stock.
The Company entered into an interest rate protection agreement in March 1993 on
a notional amount of $22.5 million for a three-year term for a cost of $0.1
million. This agreement provided protection against the rise in the three-month
LIBOR interest rate beyond a level of 7.25%. The current three-month LIBOR
interest rate is 6.44%.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES, Continued
During 1994 the Company, through its subsidiaries, made acquisitions, loans and
capital expenditures of approximately $16.9 million. The Company is currently
committed to expend approximately $15.1 million for pending acquisitions and
loans. The Company would anticipate making these expenditures during the first
half of 1995. In addition, the Company contemplates making capital expenditures
for existing properties of approximately $3.2 million during 1995, including
relocation of the Atlanta offices and studios. All of these expenditures will
be funded with cash on hand.
The Company has been authorized by its Board of Directors to purchase up to one
million shares of its Common Stock from time-to-time in open-market or
negotiated transactions. As of December 31, 1994 the Company had not acquired
any shares under this authorization.
Management believes that its existing cash balances, cash generated from
operations and the availability of borrowings under the Credit Agreement will be
sufficient to meet its liquidity and capital needs for the foreseeable future.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
1994 Compared to 1993
Broadcast revenue for 1994 was $119.6 million, an increase of $18.9 million or
18.8% from $100.7 million during 1993. This increase resulted from an increase
in advertising rates in both local and national advertising and from the revenue
generated at those properties owned or operated during 1994 but not during the
comparable 1993 period. On a "same station" basis - reflecting results from
stations operated for the entire twelve months of both 1994 and 1993 - broadcast
revenue for the 1994 period was $110.7 million, an increase of $11.6 million or
11.6% from $99.1 million for the 1993 period.
Agency commissions for 1994 were $12.6 million, an increase of $1.8 million or
16.8% from $10.8 million during 1993 due to the increase in broadcast revenue.
Agency commissions increased at a lesser rate than broadcast revenue due to a
greater proportion of direct sales.
Broadcast operating expenses for 1994 were $80.5 million, an increase of $11.0
million or 15.7% from $69.5 million during 1993. These expenses increased as a
result of expenses incurred at those properties owned or operated during 1994
but not during the comparable 1993 period and, to a lesser extent, increased
selling and other payroll costs and programming costs. On a "same station"
basis, broadcast operating expenses for 1994 were $72.0 million, an increase
of $4.1 million or 6.1% from $67.9 million for 1993.
Depreciation and amortization for 1994 and 1993 was $9.7 million and $10.2
million, respectively.
Operating income for 1994 was $13.5 million, an increase of $6.9 million or
103.5% from an operating income of $6.6 million for 1993.
Interest expense for 1994 was $0.5 million, a decrease of $2.2 million or 80.5%
from $2.7 million for 1993. Interest expense declined due to the reduction in
outstanding debt.
Net income for 1994 was $7.9 million, compared to net income of $1.4 million
reported by the Company for 1993. The 1993 period includes income tax expense
of $2.7 million while the 1994 period includes $6.3 million of income tax
expense.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
1993 Compared to 1992
Broadcast revenue for 1993 was $100.7 million, an increase of $21.4 million or
27.1% from $79.3 million during 1992. This increase resulted from an increased
customer base and an increase in advertising rates in both local and national
advertising, an increase in revenue generated from the broadcast of Major League
Baseball games (primarily due to the broadcast of the Colorado Rockies' baseball
games in 1993 for the first time) and from the revenue generated at those
stations operated under a LMA during 1993 but not during the 1992 period.
Agency commissions for 1993 were $10.8 million, an increase of $2.0 million or
23.6% from $8.8 million during 1992 due to the increase in broadcast revenue.
Agency commissions increased at a lesser rate than broadcast revenue due to a
greater proportion of direct sales.
Broadcast operating expenses for 1993 were $69.5 million, an increase of $13.7
million or 24.6% from $55.8 million during 1992. These expenses increased as a
result of an increase in broadcast rights' fees for Major League Baseball games
(primarily due to the broadcast of the Colorado Rockies' baseball games in 1993
for the first time), expenses incurred at the stations which were operated under
a LMA during 1993 but not during the 1992 period and, to a lesser extent,
increased selling and other payroll costs and programming costs.
Depreciation and amortization for 1993 was $10.2 million, an increase of $3.8
million or 59.8% from $6.4 million during 1992, primarily as a result of the
implementation of the Restructuring effective January 1, 1993 using the push-
down method of accounting. In accordance with the push-down method of
accounting, the Company's net assets were restated to reflect current
replacement value. Because the aggregate current replacement values were in
excess of book value, this restatement resulted in a higher depreciable and
amortizable basis for the Company's property and equipment and intangible
assets.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS, Continued
Operating income for 1993 was $6.6 million, an increase of $9.8 million from an
operating loss of $3.2 million during 1992. The 1992 period, however, includes
a charge of $8.6 million primarily relating to a reduction in carrying value of
assets to net realizable value for the Tampa stations. Absent this expense,
operating income increased $1.2 million or 22.7% during the 1993 period compared
to 1992.
Interest expense for 1993 was $2.7 million, a decrease of $11.0 million or 80.0%
from $13.7 million during 1992. Interest expense declined due to the reduced
debt outstanding and a decrease in interest rates as a result of the
Restructuring effective January 1, 1993 and the Refinancing in March 1993.
Net income for 1993 was $1.4 million, compared to a net loss of $23.7 million
reported by the Company for 1992. The 1992 period includes an interest rate
protection agreement termination expense of $7.1 million in addition to the $8.6
million charge for reduction in carrying value of assets to net realizable
value. Excluding the effect of these expenses in 1992, net income for 1993
improved $9.4 million over 1992.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CASH FLOW
Cash flows provided by operating activities, inclusive of working capital, were
$11.3 million, $9.0 million and $6.8 million for 1994, 1993 and 1992,
respectively. Cash flows provided by operating activities in 1994 resulted
primarily from net income of $7.9 million generated during the year. The
additional $3.4 million results from principally the excess of the sum of the
depreciation and amortization add-back of $9.7 million together with the add-
back of $1.4 million for provision for losses on accounts and notes receivable
over the net change in working capital of ($7.6) million.
Cash flows provided by operating activities in 1993 resulted primarily from the
excess of the sum of the depreciation and amortization add-back of $10.1 million
together with the $1.4 million of net income generated during the year over the
net change in working capital of ($2.3) million.
In 1992, cash flows provided by operating activities resulted primarily from the
add-back of (a) depreciation and amortization of $6.3 million; (b) non-cash
interest of $2.6 million; (c) a non-cash expense related to the termination of
an interest rate protection agreement of $7.1 million; and (d) a reduction in
carrying value of assets to net realizable value of $8.6 million to the loss of
($23.7) million generated during 1992. The 1992 amount also includes a net
change in working capital of $5.3 million.
Cash flows used by investing activities were ($13.7) million, ($5.5) million and
($1.7) million for 1994, 1993 and 1992, respectively. Investing activities
include capital expenditures of $2.2 million, $1.5 million and $0.9 million in
1994, 1993 and 1992, respectively. Investing activities in 1994 include
expenditures of $14.6 million for acquisitions, the purchase of intangible
assets and loans. In addition, 1994 investing activities are net of $3.2
million of payments received on notes and from the sale of assets. Investing
activities in 1993 include expenditures of $3.9 million relating to the purchase
of radio station assets. Investing activities in 1992 include a $1.0 million
expenditure relating to the investment in the Colorado Rockies baseball
franchise.
Cash flows provided by financing activities were $0.7 million and $12.8 million
for 1994 and 1993. Cash flows from financing activities in 1994 results
primarily from the proceeds received from the issuance of Common Stock upon the
exercise of outstanding stock options. The cash provided by financing
activities in 1993 is principally due to the refinancing of the Company's
senior debt in March 1993 plus the issuance of additional Common Stock, and the
payment of Restructuring expenses in 1993.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Jacor Communications, Inc.
We have audited the accompanying consolidated balance sheets of Jacor
Communications, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, shareholders' equity (deficit),
and cash flows for each of the three years in the period ended December 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Jacor
Communications, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note 2 to the financial statements, in 1993 the Company
implemented the push-down method of accounting in connection with the financial
restructuring and change in control described in Note 1.
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
February 13, 1995
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<CAPTION>
1994 1993
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 26,974,838 $ 28,617,599
Accounts receivable, less allowance for
doubtful accounts of $1,348,000 in
1994 and $1,082,000 in 1993 24,500,652 19,449,289
Prepaid expenses 3,419,719 1,228,917
Other current assets 1,230,582 768,232
Total current assets 56,125,791 50,064,037
Property and equipment 22,628,841 23,072,887
Intangible assets 89,543,301 84,991,361
Other assets 5,281,422 1,780,244
Total assets $173,579,355 $159,908,529
LIABILITIES
Current liabilities:
Accounts payable $ 2,723,717 $ 2,011,460
Accrued payroll 3,274,902 3,218,239
Accrued federal, state and
local income tax 2,092,616 2,025,485
Other current liabilities 3,397,117 4,150,097
Total current liabilities 11,488,352 11,405,281
Other liabilities 3,869,567 190,057
Deferred tax liability 9,177,456 7,900,000
Total liabilities 24,535,375 19,495,338
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred Stock, authorized and unissued
4,000,000 shares - -
Common Stock, no par value, $0.10 per share
stated value; authorized 100,000,000
shares, issued shares: 19,590,373 in
1994 and 19,499,812 in 1993 1,959,038 1,949,982
Additional paid-in capital, Common Stock 137,404,815 136,634,368
Common stock warrants 390,167 390,397
Retained earnings 9,289,960 1,438,444
Total shareholders' equity 149,043,980 140,413,191
Total liabilities and
shareholders' equity $173,579,355 $159,908,529
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Broadcast revenue $119,635,308 $100,745,089 $ 79,256,543
Less agency commissions 12,624,860 10,812,889 8,750,584
Net revenue 107,010,448 89,932,200 70,505,959
Broadcast operating expenses 80,468,077 69,520,397 55,782,048
Depreciation and amortization 9,698,030 10,222,844 6,399,093
Corporate general and
administrative expenses 3,361,263 3,563,800 2,926,075
Reduction in carrying value
of assets to net realizable
value 8,600,000
Operating income (loss) 13,483,078 6,625,159 (3,201,257)
Interest expense (533,862) (2,734,677) (13,701,483)
Interest income 1,218,179 258,857 258,165
Interest rate protection
agreement termination
expense (7,082,263)
Other income (expense), net (2,079) (10,895) 25,492
Income (loss) before
income taxes 14,165,316 4,138,444 (23,701,346)
Income tax expense (6,313,800) (2,700,000)
Net income (loss) 7,851,516 1,438,444 (23,701,346)
Preferred stock dividends (526,048)
Decrease in redemption value
of redeemable common stock
warrants 770,084
Amount applicable to
income (loss) per
common share $ 7,851,516 $ 1,438,444 $(23,457,310)
Net income (loss) per
common share $ 0.37 $ 0.10 $ (61.50)
Number of common shares used
in per share calculation 21,409,177 14,504,527 381,430
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
for the years ended December 31, 1994, 1993 and 1992
<CAPTION>
Common Stock Preferred Stock
Shares Stated Value Shares Par Value
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances,
December 31,
1991 428,015 $ 42,802 683,181 $ 68,318
Decrease in
redemption value
of redeemable
common stock
warrants
Expiration of
warrants
Preferred stock
dividend
Net loss
------------------------------------------------------------------------------
Balances,
December 31,
1992 428,015 42,802 683,181 68,318
To give effect
to the restruct-
uring and to the
application of
push down
accounting 8,710,655 871,065 (683,181) (68,318)
------------------------------------------------------------------------------
Balances,
January 1, 1993 9,138,670 913,867 0 0
Retirement of
treasury stock (46,586) (4,659)
Issuance of
Common Stock:
Public offering 5,462,500 546,250
Sale to Parent 3,484,321 348,432
1993 rights
offering 345,476 34,548
Directors'
subscription 80,000 8,000
Purchase of
KAZY(FM) 964,006 96,401
Exercise of
stock options 52,886 5,289
Other 18,539 1,854
Net income
------------------------------------------------------------------------------
Balances,
December 31,
1993 19,499,812 1,949,982 0 0
Exercise of
stock options 89,310 8,931
Other 1,251 125
Net income
------------------------------------------------------------------------------
Balances,
December 31,
1994 19,590,373 $1,959,038 0 $ -0-
==============================================================================
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Additional Common
Paid-In Capital Stock
Common Preferred Warrants
------------------------------------------------------------------------------
<S> <C> <C> <C>
Balances,
December 31,
1991 $ 18,538,054 $5,789,977 $1,085,199
Decrease in
redemption value
of redeemable
common stock
warrants 770,084
Expiration of
warrants 189,399 (189,399)
Preferred stock
dividend (526,048)
Net loss
------------------------------------------------------------------------------
Balances,
December 31,
1992 19,497,537 5,263,929 895,800
To give effect
to the restruct-
uring and to the
application of
push down
accounting 36,994,455 (5,263,929) (492,995)
------------------------------------------------------------------------------
Balances,
January 1, 1993 56,491,992 0 402,805
Retirement of
treasury stock (6,923,254)
Issuance of
Common Stock:
Public offering 59,390,937
Sale to Parent 19,651,571
1993 rights
offering 1,703,287
Directors'
subscription 451,200
Purchase of
KAZY(FM) 5,436,993
Exercise of
stock options 275,914
Other 155,728 (12,408)
Net income
------------------------------------------------------------------------------
Balances,
December 31,
1993 136,634,368 0 390,397
Exercise of
stock options 760,215
Other 10,232 (230)
Net income
------------------------------------------------------------------------------
Balances,
December 31,
1994 $137,404,815 $ -0- $ 390,167
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
Retained
Earnings Treasury Stock
(Deficit) Shares Amount Total
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances,
December 31,
1991 $(45,979,473) 46,586 $(6,927,913) $(27,383,036)
Decrease in
redemption value
of redeemable
common stock
warrants 770,084
Expiration of
warrants
Preferred stock
dividend (526,048)
Net loss (23,701,346) (23,701,346)
------------------------------------------------------------------------------
Balances,
December 31,
1992 (69,680,819) 46,586 (6,927,913) (50,840,346)
To give effect
to the restruct-
uring and to the
application of
push down
accounting 69,680,819 101,721,097
------------------------------------------------------------------------------
Balances,
January 1, 1993 0 46,586 (6,927,913) 50,880,751
Retirement of
Treasury Stock (46,586) 6,927,913
Issuance of
Common Stock:
Public offering 59,937,187
Sale to Parent 20,000,003
1993 rights
offering 1,737,835
Directors'
subscription 459,200
Purchase of
KAZY(FM) 5,533,394
Exercise of
stock options 281,203
Other 145,174
Net income 1,438,444 1,438,444
------------------------------------------------------------------------------
Balances,
December 31,
1993 1,438,444 0 0 140,413,191
Exercise of
stock options 769,146
Other 10,127
Net income 7,851,516 7,851,516
------------------------------------------------------------------------------
Balances,
December 31,
1994 $ 9,289,960 -0- $ -0- $149,043,980
==============================================================================
</TABLE>
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,851,516 $ 1,438,444 $(23,701,346)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 2,506,661 2,258,818 3,091,854
Amortization of intangible assets 7,191,369 7,840,064 3,175,995
Non-cash interest expense 2,600,223
Termination of interest rate
protection agreement 7,082,263
Reduction in carrying value of
assets to net realizable value 8,600,000
Provision for losses on accounts
and notes receivable 1,441,925 957,749 741,926
Refinancing fees (2,455,770)
Deferred income tax provision
(benefit) (355,000) 1,400,000
Gain on sale of properties (7,502)
Other (477,825) (131,418) (169,492)
Change in current assets and
current liabilities net of
effects of acquisitions
and disposals:
Increase in accounts
receivable (5,765,899) (5,677,825) (2,692,159)
(Increase) decrease in
other current assets (2,008,159) 1,487,404 (3,277,830)
Increase (decrease) in
accounts payable 371,913 (268,903) 966,739
Increase in accrued payroll
and other current
liabilities 591,389 2,119,153 10,341,295
Net cash provided by
operating activities 11,347,890 8,960,214 6,759,468
</TABLE>
(Continued)
The accompanying notes are an integral
part of the consolidated financial statements.
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993 and 1992
(Continued)
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Cash flows from investing activities:
Payment received on notes receivable $ 1,300,000
Capital expenditures (2,221,140) $(1,495,317) $ (915,270)
Investment in baseball franchise (1,000,000)
Cash paid for acquisitions (4,904,345) (3,871,910)
Purchase of intangible assets (6,261,520)
Proceeds from sale of assets 1,919,189
Loans originated and other (3,482,379) (160,158) 192,870
Net cash used by investing
activities (13,650,195) (5,527,385) (1,722,400)
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 48,000,000
Proceeds from issuance of Common Stock 779,273 88,301,704
Reduction in long-term debt (118,484,583) (25,126)
Payment of restructuring expenses (119,729) (5,061,925)
Net cash provided (used) by
financing activities 659,544 12,755,196 (25,126)
Net increase (decrease) in cash
and cash equivalents (1,642,761) 16,188,025 5,011,942
Cash and cash equivalents at
beginning of year 28,617,599 12,429,574 4,145,441
Cash and cash equivalents at
end of year $ 26,974,838 $28,617,599 $ 9,157,383
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. RESTRUCTURING AND CHANGE IN CONTROL
On January 11, 1993, the Company completed a recapitalization plan that
substantially modified its debt and capital structure (the "Restructuring").
Such Restructuring was accounted for as if it had been completed January 1,
1993. The Restructuring consisted of the following five basic parts:
(1) An infusion of equity by Zell/Chilmark Fund L.P. (hereinafter,
"Zell/Chilmark") by way of a merger (the "Merger") of a corporation wholly owned
by Zell/Chilmark with and into the Company, which resulted in an equity
restructuring of the Company, including:
(i) the conversion of every share of the Company's common stock
outstanding prior to the Merger into 0.0423618 shares of a new class of capital
stock, the Class A Common Stock (the "New Class A Common Stock"), and warrants
("Warrants") to purchase 0.1611234 additional shares of a new class of non-
voting common stock, the Class B Common Stock (the "New Class B Common Stock");
(ii) the conversion of every share of the Company's preferred stock
outstanding prior to the Merger, together with any accumulated and unpaid
dividends thereon, into 0.2026505 shares of New Class B Common Stock, and
Warrants to purchase 0.7707796 shares of New Class B Common Stock;
(iii) the distribution of cash, at the rate of $5.74 per share and
$0.20 per Warrant, in lieu of New Common Stock and Warrants to those
shareholders of record who so elected, and to all holders in lieu of any
fractional shares of New Common Stock or fractional Warrants; and
(iv) the issuance to Zell/Chilmark of 1,032,060 shares of New Class
B Common Stock and 593,255 Warrants to purchase that number of shares of New
Class B Common Stock.
(2) A concurrent issuance of equity securities by the Company in
exchange for the cancellation of approximately $81,500,000 of debt held by the
Company's senior lenders and various subordinated creditors;
(3) The sale to Zell/Chilmark of most of the equity securities issued in
exchange for such cancellation of debt and Zell/Chilmark's reoffer of Warrants
acquired by Zell/Chilmark under the Restructuring to those senior lenders who
retain equity securities;
(4) The offering of rights (the "Rights") to (i) Zell/Chilmark, (ii) the
Company's creditors who retained New Common Stock acquired in the Restructuring
and (iii) other holders of New Common Stock who were also shareholders on
November 27, 1992, to acquire in the aggregate 1,000,000 shares of New Common
Stock at a price of $5.74 per share; and
(5) An increase in the authorized capital stock to 44,000,000 shares and
the reservation of 1,519,218 shares of New Common Stock for issuance after the
Restructuring pursuant to a proposed new management stock option plan
("Management Options").
As a result of the Company's restructuring and merger, the Company's Amended and
Restated Articles of Incorporation were amended to (i) increase the authorized
capital shares of the Company to 44,000,000, (ii) authorize two classes of no
par value common stock, designated the "New Class A Common Stock" and the "New
Class B Common Stock", each with 20,000,000 shares authorized for the class,
(collectively, the "New Common Stock"), and (iii) create two classes of no par
value preferred stock, designated the "New Class A Preferred Stock" and the "New
Class B Preferred Stock", each with 2,000,000 shares authorized (collectively,
the "New Preferred Stock"). No New Preferred Stock has been issued.
Upon the grant by the Federal Communications Commission ("FCC") on April 23,
1993 of approval of a transfer of control of the Company to Zell/Chilmark, the
New Class B Common Stock automatically converted into Class A Common Stock, the
Class A Common Stock was designated "Common Stock" and shares formerly
authorized as Class B Common Stock were added to increase the authorized shares
of such Common Stock to 40,000,000 shares.
The dilution to those who were shareholders prior to the Restructuring and the
resultant impact of the Restructuring on the Company's Common Stock ownership
are as follows:
<TABLE>
Equity Distribution After Restructuring(1)
<CAPTION>
Common Stock
Received
Common Stock Pursuant to
Common Purchase the 1992
Shares Warrants Rights Percent
Received Received Offering Primary(2) Diluted(3)
<S> <C> <C> <C> <C> <C>
Zell/Chilmark 7,288,931 657,668 983,344 91.44% 80.74%
Senior Creditors 402,431 -0- -0- 4.45% 3.64%
Other Creditors 10,000 30,710 -0- 0.11% 0.37%
Preferred Shareholders
prior to the
Restructuring 6,416 38,355 -0- 0.07% 0.40%
Common Shareholders
prior to the
Restructuring 338,505 1,287,501 16,656 3.93% 14.85%
8,046,283 2,014,234 1,000,000 100.00% 100.00%
</TABLE>
[FN]
(1) Does not give effect to (a) the 3,484,321 shares of Common Stock issued to
Zell/Chilmark in March 1993 as part of a refinancing; (b) the 964,006 shares of
Common Stock issued to Zell/Chilmark in July 1993 for the purchase of radio
station KAZY(FM) (see Note 4); or (c) the sale of 5,462,500 shares of Common
Stock by the Company in November 1993 through a public offering.
(2) Before exercise of Warrants and Management Options.
(3) After giving effect to the exercise of Warrants but not Management
Options.
2. BASIS OF PRESENTATION
The Company implemented the Restructuring described in Note 1 using the
push-down method of accounting as if the Restructuring were consummated on
January 1, 1993. Push-down accounting is a procedure whereby subsidiaries use
their parent companies' purchase accounting principles in preparing their
financial statements. In accordance with the push-down method of accounting,
the Company's net assets were restated generally at current replacement value,
the restructured debts were stated at amounts supported by the underlying
documents and the accumulated deficit was adjusted to a zero balance.
Coincident with the implementation of the aforementioned push-down
accounting, the Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes". Such change resulted in the establishment
of a deferred income tax liability of $6,500,000.
A reconciliation of the Company's historical shareholders' deficit as of
December 31, 1992 with shareholders' equity at January 1, 1993 as reflected in
the accompanying Consolidated Statement of Shareholders' Equity for the year
ended December 31, 1993 is set forth below. Such reconciliation gives effect to
the Restructuring and to the application of push-down accounting.
<TABLE>
($000)
<CAPTION>
Additional
Redeemable Paid-In
Common Convertible Capital, Additional Common
Dividends Stock Preferred Preferred Common Paid-In Stock
Transaction Payable Warrants Stock Stock Stock Capital Warrants
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
December 31, 1992 $ 1,030 $ 487 $ 68 $ 5,264 $ 43 $ 19,497 $ 896
Adjustments:
Exchange of
redeemable
common stock
warrants for
New Common
Stock (487) 2 485
Exchange of old
common stock for
New Common (43)
Stock 43
Issuance of New
Common Stock
to Zell/Chilmark 87 4,913
Issuance of New
Common Stock
in rights
offering 100 5,640
Issuance of New
Common Stock
to creditors 665 37,499
Cancellation of
common stock
warrants 896 (896)
</TABLE>
<TABLE>
<CAPTION>
Additional
Redeemable Paid-In
Common Convertible Capital Additional Common
Dividends Stock Preferred Preferred Common Paid-In Stock
Transaction Payable Warrants Stock Stock Stock Capital Warrants
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of New
Common Stock
to preferred
shareholders and
others and
other preferred
stock purchases (1,030) (68) (5,264) 17 6,202
Issuance of New
Common Stock
Warrants (387) 403*
Costs of issuance
of New Common
Stock and rights
offering (1,125)
Forgiveness of
indebtedness
Equity effects of
push-down
accounting:
Adjustment of net
asset carrying
values 10,064
Restructuring
costs
Elimination of
accumulated
deficit (27,193)
Net adjustments (1,030) (487) (68) (5,264) 871 36,994 (493)
Balances,
January 1, 1993 $ 0 $ 0 $ 0 $ 0 $ 914 $ 56,491 $ 403
* Includes 79,275 Warrants at $0.20 each issued in connection with cancellation
of indebtedness.
</TABLE>
<TABLE>
<CAPTION>
Accumulated Treasury
Transaction Deficit Stock
<S> <C> <C>
Balances,
December 31, 1992 $ (69,681) $(6,928)
Adjustments:
Exchange of
redeemable
common stock
warrants for
New Common
Stock
Exchange of old
common stock for
New Common
Stock
Issuance of New
Common Stock
to Zell/Chilmark
Issuance of New
Common Stock
in rights
offering
Issuance of New
Common Stock
to creditors
Cancellation of
common stock
warrants
</TABLE>
<TABLE>
<CAPTION>
Accumulated Treasury
TRANSACTION Deficit Stock
<S> <C> <C>
Issuance of New
Common Stock
to preferred
shareholders and
others and
other preferred
stock purchases
Issuance of New
Common Stock
Warrants
Costs of issuance
of New Common
Stock and rights
offering
Forgiveness of
indebtedness 47,031
Equity effects of
push-down
accounting:
Adjustment of net
asset carrying
values
Restructuring
costs (4,543)
Elimination of
accumulated
deficit 27,193
Net adjustments 69,681 0
Balances,
January 1, 1993 $ 0 $(6,928)
</TABLE>
The effect of the Restructuring discussed above and the March 11, 1993
Refinancing together with the Zell/Chilmark private placement has been reflected
in the accompanying December 31, 1993 Consolidated Balance Sheet.
Pro forma results of operations, assuming the Restructuring, and the Refinancing
together with the Zell/Chilmark private placement occurred on the first day of
the periods shown below, are as follows (amounts in thousands, except per share
amounts):
<TABLE>
<CAPTION>
For the Year Ended December 31, 1993
Historical Refinancing Total Pro
As Reported Adjustment Forma
<S> <C> <C> <C>
Broadcast revenue............................. $ 100,745 $ 100,745
Less agency commissions..................... 10,813 10,813
Net revenue............................... 89,932 89,932
Broadcast operating expenses.................. 69,520 69,520
Depreciation and amortization................. 10,223 10,223
Corporate general and administrative expenses. 3,564 3,564
Operating income.......................... 6,625 6,625
Interest expense.............................. (2,735) $ 485 (a) (2,250)
Other income, net............................. 248 248
Income before income tax.................. 4,138 485 4,623
Income tax expense............................ (2,700) (194)(b) (2,894)
Net income................................ $ 1,438 $ 291 $ 1,729
Net income per common share................... $ 0.10 $ 0.11
Number of common shares used in per share
calculation................................. 14,505 659 (c) 15,164
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1992
Historical Restructuring Pro Forma to Total
As Pro Forma give effect to Refinancing Pro
Reported Adjustments Restructuring Adjustment Forma
<S> <C> <C> <C> <C> <C>
Broadcast revenue............ $ 79,257 $ 79,257 $ 79,257
Less agency commissions..... 8,751 8,751 8,751
Net revenue................ 70,506 70,506 70,506
Broadcast operating expenses. 55,782 55,782 55,782
Depreciation and amortization 6,399 $ 2,635 (d) 9,034 9,034
Corporate general and
administrative expenses..... 2,926 2,926 2,926
Reduction in carrying value of
assets to net realizable
value........................ 8,600 (8,600)(e)
Operating income (loss)..... (3,201) 5,965 2,764 2,764
Interest expense.............. (13,701) 8,871 (f) (4,830) $ 2,580(a) (2,250)
Interest rate protection
agreement termination
expense...................... (7,082) 7,082 (g)
Other income, net............. 283 283 283
Income (loss) before
income taxes............... (23,701) 21,918 (1,783) 2,580 797
Income tax expense............ (319)(b) (319)
Net income (loss)...........$ (23,701) $21,918 $ (1,783) $ 2,261 $ 478
Amount applicable to income
(loss) per common share...$ (23,457) $ (244)(h) $ (1,783) $ 478
Net income (loss) per
common share..............$ (61.50) $ (0.20) $ 0.04
Number of common shares used
in per share calculation..... 381 8,712(c) 9,093 3,484(c) 12,577
</TABLE>
Adjustments to the pro forma results of operations are explained as follows:
(a) To reflect the elimination of the interest associated with the restructuring
debt facility and record the interest associated with the new refinancing debt
facility as follows:
($000)
Year Ended
December 31,
1993 1992
Restructuring debt interest
included in historical financial
statements......................... $ (2,735) $ (4,830)
Interest on new refinancing
debt facility ($45,000 x 5%)....... 2,250 2,250
Pro forma adjustment................ $ (485) $ (2,580)
(b) To provide for the tax effect of pro forma adjustments using an estimated
statutory rate of 40%.
(c) To provide for the change in the weighted average outstanding common
shares.
(d) To adjust depreciation and amortization expense to reflect the revised
expense related to the new asset bases for property and equipment and intangible
assets.
Property and Equipment
Property and equipment are depreciated on the straight-line basis over the
estimated useful lives of the assets as follows:
Land improvements..................... 20 years
Buildings............................. 25 years
Equipment............................. 3 to 20 years
Furniture and fixtures................ 5 to 12 years
Leasehold improvements................ Life of lease
Intangible Assets
Intangible assets are amortized on the straight-line basis over the
following lives:
Goodwill.............................. 40 years
Other intangibles..................... 1 to 25 years
(e) To eliminate the write down of intangible assets due to the revaluation of
assets.
(f) To reflect the elimination of the interest associated with the restructured
debt and record the interest associated with the restructuring debt facility as
follows:
($000)
Year Ended
December 31,
1992
Restructured debt interest included
in historical statements............... $ (13,701)
Interest on restructuring debt facility
($69,000 x 7%)......................... 4,830
Pro forma adjustment..................... $ (8,871)
(g) To eliminate the expense associated with the termination of the interest
rate protection agreement in 1992, which termination fee was eliminated as part
of the Restructuring.
(h) To eliminate the dividend and redemption premium requirement on preferred
stock and redeemable common stock warrants exchanged in the Restructuring Plan.
All common share and per share data included in the financial statements and
footnotes have been restated to reflect the conversion of every share of the
Company's common stock outstanding prior to the Merger into 0.0423618 shares of
New Common Stock as discussed above. The conversion was accounted for as a
reverse stock split. The New Common Stock was recorded at its stated value of
$0.10 per share. The difference between the stated values of common stock and
the New Common Stock was credited to additional paid-in capital, common.
The basis for the application of push-down accounting is set forth below. The
financial statements only include the resulting revaluations pursuant to
Zell/Chilmark's 91.44% ownership of the Company. There were no revaluations
recorded for the minority interest ownership of the Company.
The allocation of consideration given for the purchase of 91.44% of the Company
by Zell/Chilmark is as follows (amounts in thousands):
8,272,276 Common Shares
at $5.74 per share $ 47,483
629,117 New Common Stock Warrants
at $0.20 per Warrant 126
New debt obligations 62,345
Assumption of certain current
liabilities 14,918
Assumption of other liabilities 6,130
$131,002
Current assets $ 33,146
Property and equipment 19,845
Intangible assets (primarily
goodwill) 76,577
Notes receivable and other assets 1,434
$131,002
3. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS
Description of Business
The Company owns and operates radio stations throughout the
United States.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Jacor Communications, Inc. and its subsidiaries. All
significant intercompany accounts and transactions have been
eliminated.
Revenues
Revenues for commercial broadcasting advertisements are
recognized when the commercial is broadcast.
Barter Transactions
Revenue from barter transactions (advertising provided in
exchange for goods and services) is recognized as income when
advertisements are broadcast, and merchandise or services received
are charged to expense when received or used. If merchandise or
services are received prior to the broadcast of the advertising, a
liability (deferred barter revenue) is recorded. If the advertising
is broadcast before the receipt of the goods or services, a receivable
is recorded.
Consolidated Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with a maturity of three
months or less, when purchased, to be cash equivalents. Income taxes
aggregating $5,545,000, $100,000, and $384,000 were paid during 1994, 1993
and 1992, respectively. Interest paid was $381,000,
$3,107,000, and $2,136,000 during 1994, 1993, and 1992, respectively.
The effect of barter transactions has been eliminated (see Note
14).
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk, consist principally of
temporary cash investments and accounts receivable. The Company
places its temporary cash investments ($21,835,000 at December 31, 1994)
with two financial institutions. Concentrations of credit risk
with respect to accounts receivable are limited due to the large
number of customers comprising the Company's customer base and their
dispersion across many different geographic areas of the country.
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation; depreciation is provided on the straight-line basis over
the estimated useful lives of the assets as follows:
Land improvements 20 Years
Buildings 25 Years
Equipment 3 to 20 Years
Furniture and fixtures 5 to 12 Years
Leasehold improvements Life of lease
Intangible Assets
Intangible assets are stated at cost less accumulated
amortization; amortization is provided principally on the
straight-line basis over the following lives:
Goodwill 40 Years
Other intangibles 5 to 25 Years
The carrying value of intangible assets is reviewed by the
Company when events or circumstances suggest that the
recoverability of an asset may be impaired.
Per Share Data
Income per share for the years ended December 31, 1994 and 1993
is based on the weighted average number of common shares outstanding and
gives effect to both dilutive stock options and dilutive stock purchase
warrants during the year. Fully diluted income per share is not presented
since it approximates income per share.
Loss per share for the year ended December 31, 1992 is based on the
weighted average number of shares of common stock outstanding
(adjusted to reflect the conversion of each share of the average number of
shares outstanding into 0.0423618 shares of New Common Stock as a result
of the 1993 Restructuring) and gives consideration to
the dividend requirements of the convertible preferred stock and
accretion of the change in redemption value of certain common stock
warrants. The Company's stock options, redeemable common
stock warrants and convertible preferred stock were
anti-dilutive and, therefore, were not included in the
computation.
4. ACQUISITIONS
In June 1993, the Company acquired the FCC license and certain
contracts of radio station WLWA(AM) (formerly WKRC) in
Cincinnati, Ohio for $1,600,000 in cash.
In July 1993, the Company completed the acquisition of radio
station KAZY(FM) in Denver, Colorado from Zell/Chilmark.
Zell/Chilmark had purchased that station for $5,500,000.
Zell/Chilmark sold the station to the Company in consideration of the
issuance of shares of the Company's Common Stock having a value, at
$5.74 per share, equal to Zell/Chilmark's cost for the station plus related
acquisition costs. In connection with the acquisition, 964,006 shares of
the Company's Common Stock was issued to Zell/Chilmark.
Effective January 1, 1994, the Company acquired an interest
in Critical Mass Media, Inc. ("CMM") from the Company's
President. In connection with the transaction, the President
has the right to put the remaining interest to the Company
between January 1, 1999 and January 1, 2000 for 300,000 shares
of the Company's Common Stock. If the put is not exercised by
January 1, 2000, the Company has the right to acquire the
remaining interest prior to 2001 in exchange for 300,000
shares of the Company's Common Stock. CMM is included in the
1994 consolidated financial statements of the Company. In
connection with the acquisition, the Company recorded
$3,017,000 in goodwill and a $2,400,000 obligation included in other
liabilities.
In March 1994, the Company entered into an agreement to acquire
the assets of radio station WPPT(FM) (formerly
WIMJ) in Cincinnati, Ohio for $9,500,000 in cash. The asset
purchase is subject to FCC approval and the satisfaction
of certain other conditions. Pending consummation of the
transaction, the Company has entered into a Local Marketing
Agreement which commenced April 7, 1994, and will expire
on the earlier of the purchase date or June 30, 1995.
In 1994, the Company acquired the call letters, programming and
certain contracts of radio station KBPI(FM) in Denver, Colorado
and then changed the call letters of its FM broadcast station KAZY to
KBPI; the Company acquired the call letters, programming and certain
contracts of radio station WCKY(AM) in Cincinnati, Ohio and then changed
the call letters of its AM broadcast station WLWA to WCKY; the Company
acquired radio station KTLK(AM) (formerly KRZN) in Denver, Colorado; and
the Company acquired radio station WWST(FM) (formerly WWZZ) in Knoxville,
Tennessee. The aggregate cash purchase price for these acquisitions was
approximately $9.5 million.
5. DISPOSITION
In May 1994, the Company completed the sale of the business and
substantially all the assets of its wholly-owned
subsidiary, Telesat Cable TV, Inc. under a contract dated
December 1993. The Company received approximately $2,000,000 in cash
for this sale.
6. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1994 and 1993 consist of the
following:
1994 1993
Land and land
improvements $ 1,999,002 $ 1,920,388
Buildings 1,912,432 1,838,571
Equipment 18,725,970 17,357,880
Furniture and fixtures 2,346,041 2,278,263
Leasehold improvements 2,116,548 1,932,925
27,099,993 25,328,027
Less accumulated
depreciation (4,471,152) (2,255,140)
$22,628,841 $23,072,887
7. INTANGIBLE ASSETS
Intangible assets at December 31, 1994 and 1993 consist of the
following:
1994 1993
Goodwill $ 78,621,918 $ 73,140,129
Other 25,952,816 19,691,296
104,574,734 92,831,425
Less accumulated amortization (15,031,433) (7,840,064)
$ 89,543,301 $ 84,991,361
8. DEBT AGREEMENT
Following completion of the Restructuring in January 1993 (see Note 1), the
Company refinanced its senior debt in March 1993 and entered into a Credit
Agreement with a group of lenders agented by Banque Paribas, with The First
National Bank of Boston and Continental Bank N.A. acting as co-agents. The
Credit Agreement, as amended, provides for a senior secured reducing revolving
credit facility with a commitment of $42,700,000 at December 31, 1994 that
expires on December 31, 2000 (the "Revolver") and a senior secured acquisition
facility with a commitment of $55,000,000 that expires on September 30, 1996
(the "Acquisition Facility"). Both facilities are available for acquisitions
permitted under conditions set forth in the Credit Agreement.
The Credit Agreement requires that the commitment under the Revolver be reduced
by $787,500 quarterly during 1995 and by increasing quarterly amounts
thereafter, and, under certain circumstances, requires mandatory prepayments
of any outstanding loans and further commitment reductions under the Credit
Agreement. Amounts outstanding under the Acquisition Facility at September 30,
1996 are payable in 17 equal quarterly installments.
The indebtedness of the Company under the Credit Agreement is collateralized by
liens on substantially all of the assets of the Company and its operating
subsidiaries and by a pledge of the operating subsidiaries' stock, and is
guaranteed by those subsidiaries. The Credit Agreement contains restrictions
pertaining to maintenance of financial ratios, capital expenditures, payment of
dividends or distributions of capital stock and incurrence of additional
indebtedness.
Interest under the Credit Agreement is payable, at the option of the Company, at
alternative rates equal to the Eurodollar rate plus 1.25% to 2.25% or the base
rate announced by Banque Paribas plus 0.25% to 1.25%. The spreads over the
Eurodollar rate and such base rate vary from time to time, depending upon the
Company's financial leverage. The Company will pay quarterly commitment fees
equal to 3/8% per annum on the aggregate unused portion of the aggregate
commitment on both facilities. The Company also is required to pay certain
other fees to the agent and the lenders for the administration of the facilities
and the use of the Acquisition Facility.
In accordance with the terms of the Credit Agreement, the Company entered into
an interest rate protection agreement in March 1993 on the notional amount of
$22,500,000 for a three-year term. This agreement provides protection against
the rise in the three-month LIBOR interest rate beyond a level of 7.25%. The
current three-month LIBOR interest rate is 6.44%.
9. CAPITAL STOCK
Under the Restructuring, 2,014,233 warrants to purchase 2,014,233 shares
of Common Stock at $8.30 were issued and recorded at their estimated fair value
of $0.20 per warrant. The warrants may be exercised at any time prior to
January 14, 2000, at which time the warrants expire. During the year ended
December 31, 1994, 1,151 warrants were exercised.
10. REDUCTION IN CARRYING VALUE
In the third quarter of 1992, the Company determined that there had been
a permanent impairment in the carrying value of its investment in certain of its
radio properties due to a continuing decline in operating income and operating
cash flows at those stations and deteriorating market conditions during the nine
months ended September 30, 1992. Accordingly, based on the results of a
third-party appraisal, goodwill was reduced by $8,600,000 and charged as an
expense in the accompanying 1992 Consolidated Statement of Operations.
11. INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The
new accounting standard was adopted on January 1, 1993, as required. Such
change was included in the new basis of accounting established as of January 1,
1993 through the application of push-down accounting principles and resulted in
the establishment of a deferred income tax liability of approximately
$6,500,000.
Income tax expense for the years ended December 31, 1994 and 1993 is
summarized as follows. (There was no income tax expense for the year ended
December 31, 1992):
Federal State Total
1994:
Current $ 5,593,800 $1,075,000 $6,668,800
Deferred (300,000) (55,000) (355,000)
$ 5,293,800 $1,020,000 $6,313,800
1993:
Current $ 900,000 $ 400,000 $1,300,000
Deferred 1,300,000 100,000 1,400,000
$ 2,200,000 $ 500,000 $2,700,000
The provisions for income tax differ from the amount computed by applying
the statutory federal income tax rate due to the following:
1994 1993 1992
Federal income taxes
at the statutory rate $ 4,957,861 $ 1,407,071 $(8,058,458)
Amortization not deductible 606,137 404,660 3,635,143
State income taxes, net of any
current federal income tax
benefit 663,000 330,000
Net operating loss carried
forward to future years 4,028,554
Other 86,802 558,269 394,761
$6,313,800 $2,700,000 $ 0
The tax effects of the significant temporary differences which comprise the
deferred tax liability at December 31, 1994 and 1993 are as follows:
1994 1993
Property and equipment $ 11,062,121 $11,172,498
Intangibles (860,566) (1,445,854)
Accrued expenses (2,183,592) (740,790)
Reserve for pending sale
of assets (1,458,396)
Other 1,159,493 372,542
Net Liability $ 9,177,456 $ 7,900,000
12. STOCK OPTIONS
1993 Stock Option Plan
Under the Company's 1993 stock option plan, options to acquire up to
1,519,218 shares of Common Stock can be granted to officers and key employees at
no less than the fair market value of the underlying stock on the date of grant.
The plan permits the granting of non-qualified stock options as well as
incentive stock options. The options vest 30% upon grant, 30% upon the first
anniversary of the grant date and 20% per year for each of the next two years
thereafter and expire 10 years after grant. The plan will terminate no later
than February 7, 2003. Information pertaining to the plan for the years ended
December 31, 1994 and 1993 is as follows:
Number of Option Price
Shares Per Share
1994:
Outstanding at beginning of year 1,365,620 $ 5.74 - $ 6.46
Granted 10,000 $13.50 - $15.18
Exercised (89,310) $ 5.74 - $ 5.97
Outstanding at end of year 1,286,310 $ 5.74 - $15.18
Exercisable at end of year 734,670 $ 5.74 - $13.50
Available for grant at end of year 87,618
1993:
Outstanding at beginning of year 0
Granted 1,535,910 $5.74 - $6.46
Exercised (55,980) $5.74
Surrendered (114,310) $5.97 - $6.46
Outstanding at end of year 1,365,620 $5.74 - $6.46
Exercisable at end of year 370,500 $5.74
Available for grant at end of year 97,618
Directors' Stock Options
The Company has granted nonqualified stock options to purchase up to 65,000
shares of the Company's Common Stock to certain members of the Company's Board
of Directors. These options vest 30% upon grant, 30% upon the first anniversary
of the grant date and 20% per year for each of the next two years thereafter.
Options to purchase up to 40,000 shares must be exercised in full prior to May
28, 1998 while the remaining options must be exercised in full prior to December
15, 2004. The exercise price of these options range from $5.74 per share to
$14.34 per share.
13. COMMITMENTS AND CONTINGENCIES
Lease Obligations
The Company and its subsidiaries lease certain land and facilities used in
their operations, including local marketing agreements for certain radio
stations. Future minimum rental payments under all noncancellable
operating leases as of December 31, 1994 are payable as follows:
1995 $ 2,786,000
1996 2,503,000
1997 2,551,000
1998 2,228,000
1999 1,126,000
Thereafter 4,856,000
$16,050,000
Rental expense was approximately $3,336,000, $2,991,000, and $2,379,000 for
the years ended December 31, 1994, 1993 and 1992, respectively.
Legal Proceedings
The Company is a party to various legal proceedings. In the opinion of
management, all such matters are adequately covered by insurance or if not so
covered, are without merit or are of such kind, or involve such amounts, which
would not have a significant effect on the financial position or results of
operations of the Company.
14. BARTER TRANSACTIONS
Barter revenue was approximately $4,647,000, $5,061,000 and $3,905,000 in
1994, 1993 and 1992, respectively. Barter expense was approximately $4,164,000,
$4,941,000 and $3,572,000 in 1994, 1993 and 1992, respectively.
Included in accounts receivable and accounts payable in the accompanying
consolidated balance sheets for 1994 and 1993 are barter accounts receivable
(merchandise or services due the Company) of approximately $1,372,000 and
$1,040,000, respectively, and barter accounts payable (air time due supplier of
merchandise or service) of approximately $1,000,000 and $874,000, respectively.
15. RETIREMENT PLAN
The Company maintains a defined contribution retirement plan covering
substantially all employees who have met eligibility requirements. The Company
matches 50% of participating employee contributions, subject to a maximum
contribution by the Company of 1 1/2% of such employee's annual compensation.
Total expense related to this plan was $289,487, $237,875 and $228,851 in 1994,
1993 and 1992, respectively.
<TABLE>
Supplementary Data
Quarterly Financial Data
for the years ended December 31, 1994 and 1993 (Unaudited)
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
1994
Net revenue $19,782,029 $30,010,219 $28,498,476 $28,719,724
Operating income (loss) (519,163) 4,364,512 4,784,215 4,853,514
Net income (loss) (220,443) 2,374,259 2,629,384 3,068,316
Net income (loss) per
common share (1) (0.01) 0.11 0.12 0.14
1993
Net revenue $15,082,834 $24,696,266 $26,306,483 $23,846,617
Operating income (loss) (1,723,332) 2,561,201 3,353,970 2,433,320
Net income (loss) (1,067,101) 735,732 893,318 876,495
Net income (loss) per
common share (1) (0.10) 0.05 0.06 0.05
</TABLE>
[FN]
NOTES:
(1) The sum of the quarterly net income (loss) per share amounts does not
equal the annual amount reported as per share amounts are computed independently
for each quarter.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
PART III
Item 10. Directors and Executive Officers of Registrant
The information set forth under the captions "Election of Directors," "Board of
Directors, Its Committees, Meetings and Functions," and "Security Ownership of
Certain Beneficial Owners and Management-Reports of Changes in Beneficial
Ownership" contained in the Company's definitive Proxy Statement to be filed
during April 1995 for the Annual Meeting of Shareholders presently scheduled to
be held on May 17, 1995, is incorporated herein by reference. Certain
information with respect to the executive officers of Registrant is set forth
under the caption "Executive Officers of Registrant" appearing at the end of
Part I of this Report.
Item 11. Executive Compensation
The information set forth under the caption "Executive Compensation" contained
in the Company's definitive Proxy Statement to be filed during April 1995 for
the Annual Meeting of Shareholders presently scheduled to be held on May 17,
1995, is incorporated herein by reference, except that the information required
by Items 402(k) and (l) of Regulation S-K which appear within such caption under
the sub-headings "Compensation Committee Report" and "Stock Performance" are
specifically not incorporated by reference into this Form 10-K or into any other
filing by the Company under the Securities Act of 1993 or the Securities
Exchange Act of 1934.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management," contained in the Company's definitive Proxy
Statement to be filed during April 1995 for the Annual Meeting of Shareholders
presently scheduled to be held on May 17, 1995, is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
The information set forth under the caption "Certain Relationships and Related
Transactions" contained in the Company's definitive Proxy Statement to be filed
during April 1995 for the Annual Meeting of Shareholders presently scheduled to
be held on May 17, 1995, is incorporated herein by reference.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) List of Documents filed as part of this Report:
(1) Financial Statements
The financial statements of Registrant as set
forth under Item 8 of this Report on Form 10-K
Page Number
(2) Financial Statement Schedules
Report of Coopers & Lybrand,
Independent Accountants 73
Schedule VIII - Valuation and Qualifying
Accounts and Reserves 167
Schedules other than those listed
above are omitted for the reason
that they are not applicable or are
not required or the information is
included in the financial statements
or notes thereto.
(3) Exhibits
Reference is made to the exhibit index
commencing on page 74 hereof, listing
the exhibits included as part of this
Report
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K,
Continued
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the last
quarter of the period covered by this report.
JACOR COMMUNICATIONS, INC, AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
JACOR COMMUNICATIONS, INC.
(The Company)
Date March 29, 1995 By /s/ R. Christopher Weber
R. Christopher Weber,
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
Date March 29, 1995 /s/ Randy Michaels
Randy Michaels,
President, Co-Chief
Operating Officer and Director
(Principal Executive Officer)
Date March 29, 1995 /s/ Robert L. Lawrence
Robert L. Lawrence,
Co-Chief Operating Officer
and Director
Date March 29, 1995 /s/ David M. Schulte
David M. Schulte,
Chairman and Director
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
SIGNATURES, Continued
Date March 29, 1995 /s/ John W. Alexander
John W. Alexander,
Director
Date March 29, 1995 /s/ Rod F. Dammeyer
Rod F. Dammeyer,
Director
Date March 29, 1995 /s/ F. Philip Handy
F. Philip Handy,
Director
Date March 29, 1995 /s/ Marc Lasry
Marc Lasry,
Director
Date March 29, 1995 /s/ Sheli Z. Rosenberg
Sheli Z. Rosenberg,
Director
Date March 29, 1995 /s/ Samuel Zell
Samuel Zell,
Director
Date March 29, 1995 /s/ R. Christopher Weber
R. Christopher Weber
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Jacor Communications, Inc.
Our report on the consolidated financial statements of Jacor Communications,
Inc. and Subsidiaries is included on page 38 of this Form 10-K. In connection
with our audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 69 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
February 13, 1995
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Name and Description/Location
2.1 Asset Purchase Agreement dated December 17, 1993 between Jacor Cable,
Inc. and Crisler Capital Company, Limited Partnership (excluding exhibits and
schedules not deemed material). Incorporated by reference to Exhibit 2.7 to the
Annual Report on Form 10-K dated March 29, 1994. *
2.2 Jacor - CMM Limited Partnership Agreement of Limited
Partnership dated January 1, 1994, by and between Jacor Cable, Inc., Up
Your Ratings, Inc. and Jacor Communications, Inc. See pages 81 through 115.
2.3 Amendment No. 1 to Jacor - CMM Limited Partnership Agreement of Limited
Partnership dated July 22, 1994, by and between Jacor Cable, Inc., Up Your
Ratings, Inc. and Jacor Communications, Inc. to amend the Jacor - CMM Limited
Partnership Agreement of Limited Partnership dated January 1, 1994. See pages
116 through 119.
2.4 Amendment No. 2 to Jacor - CMM Limited Partnership Agreement of Limited
Partnership with an effective date as of January 1, 1994, by and between Jacor
Cable, Inc., Up Your Ratings, Inc. and Jacor Communications, Inc. to amend the
Jacor - CMM Limited Partnership Agreement of Limited Partnership dated January
1, 1994. See pages 120 through 123.
3.1 Amended and Restated Articles of Incorporation of the Registrant.
Incorporated by reference to Exhibit 4 to the Registration Statement on Form
8-A, effective January 22, 1993. *
3.2 Amended and Restated Code of Regulations of the Registrant.
Incorporated by reference to Exhibit 3 to Quarterly Report on Form 10-Q dated
July 29, 1994. *
4.1 Specimen Common Stock Certificate. Incorporated by reference to
Exhibit 2.1 to the Registrant's Form 8-A, dated January 12, 1993. *
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Name and Description/Location
4.2 Credit Agreement dated as of March 5, 1993, among the Registrant; the
Banks named therein; Banque Paribas, as Agent; and The First National Bank of
Boston and Continental Bank N.A., as Co-Agents (omitting exhibits not deemed
material or filed separately in executed form). Incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K dated March 11, 1993. *
4.3 Pledge Agreement dated as of March 5, 1993, by and between the
Registrant and Banque Paribas, as Agent. Incorporated by reference to Exhibit
4.2 to the Current Report on Form 8-K dated March 11, 1993. *
4.4 Security Agreement dated as of March 5, 1993, by and between the
Registrant and Banque Paribas, as Agent (omitting exhibits not deemed material).
Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K dated
March 11, 1993. *
4.5 Consolidated Amended and Restated Intercompany Demand Note issued to
the order of the Registrant by Jacor Broadcasting of Atlanta, Inc. dated March
11, 1993. (1) Incorporated by reference to Exhibit 4.4 to the Current Report on
Form 8-K dated March 11, 1993. *
4.6 Amended and Restated Intercompany Security Agreement and Financing
Statement, dated as of March 5, 1993, among the Registrant and various of its
subsidiaries (omitting exhibits not deemed material). Incorporated by reference
to Exhibit 4.5 to the Current Report on Form 8-K dated March 11, 1993. *
4.7 Subsidiary Guaranty, dated as of March 5, 1993, by various
subsidiaries, and their affiliates, of the Registrant, in favor of Banque
Paribas, as Agent. Incorporated by reference to Exhibit 4.6 to the Current
Report on Form 8-K dated March 11, 1993. *
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Name and Description/Location
4.8 Subsidiary Security Agreement, dated as of March 5, 1993, by and
among various subsidiaries, and their affiliates, of the Registrant and Banque
Paribas, as Agent (omitting exhibits not deemed material). Incorporated by
reference to Exhibit 4.7 to the Current Report on Form 8-K dated March 11,
1993. *
4.9 Pledge Agreement, dated as of March 5, 1993, by and between Jacor
Broadcasting of Atlanta, Inc. and Banque Paribas, as Agent. Incorporated by
reference to Exhibit 4.8 to the Current Report on Form 8-K dated March 11,
1993. *
4.10 Deed to Secure Debt and Security Agreement, dated as of March 5, 1993, by
and between Jacor Broadcasting of Atlanta, Inc. and Banque Paribas, as Agent.
Incorporated by reference to Exhibit 4.9 to the Current Report on Form 8-K dated
March 11, 1993. *
4.11 Deed of Trust and Security Agreement, dated as of March 5, 1993, between
Jacor Broadcasting of Colorado, Inc. and the Public Trustee in the County of
Douglas and the State of Colorado. Incorporated by reference to Exhibit 4.10 to
the Current Report on Form 8-K dated March 11, 1993. *
4.12 Open-End Mortgage, Assignment of Rents and Leases and Security Agreement,
dated March 5, 1993, by and between Jacor Broadcasting Corporation and Banque
Paribas, as Agent. (2) Incorporated by reference to Exhibit 4.11 to the Current
Report on Form 8-K dated March 11, 1993. *
4.13 Revolving Note issued by the Registrant to Banque Paribas, dated March 11,
1993 in the principal amount of $9,000,000.00. (3) Incorporated by reference to
Exhibit 4.12 to the Current Report on Form 8-K dated March 11, 1993. *
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Name and Description/Location
4.14 Acquisition Note issued by the Registrant to Banque Paribas, dated March
11, 1993 in the principal amount of $11,000,000.00. (4) Incorporated by
reference to Exhibit 4.13 to the Current Report on Form 8-K dated March 11,
1993. *
4.15 Trademark Security Agreement, dated as of March 5, 1993, by Registrant in
favor of Banque Paribas, as Agent. Incorporated by reference to Exhibit 4.14 to
the Current Report on Form 8-K dated March 11, 1993. *
4.16 Subsidiary Trademark Security Agreement, dated as of March 5, 1993, by
Jacor Broadcasting of Tampa Bay, Inc. in favor of Banque Paribas, as Agent.
Incorporated by reference to Exhibit 4.15 to the Current Report on Form 8-K
dated March 11, 1993. *
4.17 (+) Restricted Stock Agreement dated as of June 23, 1993 by and between
the Registrant and Rod F. Dammeyer. (5) Incorporated by reference to Exhibit 4.2
to the Quarterly Report on Form 10-Q dated August 13, 1993. *
4.18 (+) Stock Option Agreement dated as of June 23, 1993 between the
Registrant and Rod F. Dammeyer covering 10,000 shares of the Registrant's common
stock. (6) Incorporated by reference to Exhibit 4.3 to the Quarterly Report on
Form 10-Q dated August 13, 1993.*
4.19 First Amendment to Credit Agreement dated as of November 15, 1993 among
the Registrant; the Banks named therein; Banque Paribas, as Agent, The First
National Bank of Boston and Continental Bank N.A. as co-agents (omitting exhibit
filed separately in executed form), to amend the Credit Agreement dated as of
March 5, 1993. Incorporated by reference to Exhibit 4.3 to Amendment No. 2 to
Form S-1 Registration Statement filed on November 16, 1993. *
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Name and Description/Location
4.20 First Amendment to Subsidiary Guaranty, dated as of November 15,
1993, by various subsidiaries, and their affiliates, of the Registrant, in favor
of Banque Paribas, as Agent, to amend the Subsidiary Guaranty dated as of March
5, 1993. Incorporated by reference to Exhibit 4.20 to Amendment No. 2 to Form
S-1 Registration Statement filed on November 16, 1993. *
4.21 Second Amendment to Credit Agreement dated as of March
7, 1994 among the Registrant; the Banks named therein; Banque
Paribas, as Agent, The First National Bank of Boston and Continental Bank N.A.
as co-agents, to amend the Credit Agreement dated as of March 5, 1993. See
pages 124 through 136.
4.22 Third Amendment to Credit Agreement dated as of October 1, 1994 among
the Registrant; the Banks named therein; Banque Paribas, as Agent, The First
National Bank of Boston and Bank of America-Illinois (formerly known as
Continental Bank N.A.) as co-agents, to amend the Credit Agreement dated as of
March 5, 1993. See pages 137 through 152.
4.23 (+) Stock Option Agreement dated as of December 15, 1994 between the
Registrant and Rod F. Dammeyer covering 5,000 shares of the Registrant's common
stock. (7) See pages 153 through 160.
10.1 (+) Consulting Agreement between Terry S. Jacobs and the Registrant dated
July 28, 1993. Incorporated by reference to Exhibit 10.9 to the Registration
Statement on Form S-1, filed on October 18, 1993. *
10.2 (+) Jacor Communications, Inc. 1993 Stock Option Plan. Incorporated by
reference to Exhibit 99 to the Quarterly Report on Form 10-Q dated August 13,
1993. *
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Name and Description/Location
10.3 (+) Jacor Communications, Inc. 1995 Employee Stock Purchase Plan.
Incorporated by reference to Exhibit 4.01 to the Registration Statement on Form
S-8, filed on November 9, 1994. *
11 Statement re computation of per share earnings. See page 161.
21 Subsidiaries of Registrant. See page 162.
23.1 Consent of Independent Accountants. See page 163.
27 Financial Data Schedule. See page 164.
99.1 Press Release dated February 14, 1995. See pages
165 and 166.
* Incorporated by reference as indicated.
+ Management Contracts and Compensatory Arrangements.
(1) Identical notes were issued by the following subsidiaries:
Jacor Broadcasting of Colorado, Inc.
Jacor Broadcasting of Florida, Inc.
Jacor Broadcasting of Knoxville, Inc.
Jacor Broadcasting of Tampa Bay, Inc.
Jacor Cable, Inc.
Jacor Broadcasting Corporation
Georgia Network Equipment, Inc.
Broadcast Finance, Inc.
(2) A substantially similar document was entered into by Jacor
Broadcasting of Florida, Inc. relating to real property
located in the State of Florida.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Name and Description/Location
(3) Substantially identical notes were issued to the following
payees in the following principal amounts:
Payee Amount
The First National Bank of Boston..... $ 9,000,000.00
Continental Bank N.A.................. $ 9,000,000.00
Society National Bank................. $ 9,000,000.00
Union Bank............................ $ 9,000,000.00
(4) Substantially identical notes were issued to the following
payees in the following principal amounts:
Payee Amount
The First National Bank of Boston..... $11,000,000.00
Continental Bank N.A.................. $11,000,000.00
Society National Bank................. $11,000,000.00
Union Bank............................ $11,000,000.00
(5) Substantially identical documents were entered into with
John W. Alexander, F. Philip Handy and Marc Lasry covering
20,000, 30,000 and 10,000 shares of common stock,
respectively.
(6) Identical documents were entered into with John W. Alexander,
F. Philip Handy and Marc Lasry.
(7) Identical documents were entered into with John W. Alexander,
F. Philip Handy, Marc Lasry and Sheli Z. Rosenberg.
JACOR - CMM LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of January 1, 1994
TABLE OF CONTENTS
1. FORMATION OF PARTNERSHIP 1
1.1 Formation 1
1.2 Term 2
1.3 Name 3
1.4 Principal Office 3
2. CERTAIN DEFINITIONS 3
2.1 "Act" 3
2.2 "Affiliate" 3
2.3. "Agreement" 3
2.4 "Capital Cash Flow" 3
2.5 "Closing Date" 3
2.6 "Code" 3
2.7 "Defaulting Partner" 3
2.8 "Depreciation" 4
2.9 "FPAA" 4
2.10 "General Partner" 4
2.11 "General Partner's Initial Contribution" 4
2.12 "General Partner's Initial Contribution Account" 4
2.13 "GP Interest" 4
2.14 "IRS" 4
2.15 "Jacor Stock" 4
2.16 "Limited Partner" 4
2.17 "LP Interest" 4
2.18 "Management Fee" 4
2.19 "Michaels" 4
2.20 "Non-Contributing Partner" 4
2.21 "Non-Defaulting Partner" 4
2.22 "Omitted Contribution" 5
2.23 "Operating Cash Flow" 5
2.24 "Operating Profit Before General Partner Management Fee" 5
2.25 "Partnership" 5
2.26 "Preferred Return Rate" 5
2.27 "Preferred Return" 5
2.28 "Prime Rate" 5
2.29 "Regulatory Allocation" 5
2.30 "Stock" 5
2.31 "TMP" 5
2.32 "Z/C" 5
3. PURPOSE AND POWERS OF PARTNERSHIP 5
3.1 Purpose 5
3.2 Powers 6
4. CAPITAL ACCOUNTS 6
4.1 Capital Accounts 6
4.2 Interest on and Return of Capital 7
4.3 Negative Accounts 8
5. CAPITAL 8
5.1 Initial Capital 8
5.2 Additional Funds 8
5.3 Limit on Contributions and Obligations of Limited Partner 10
6. TAX ITEMS 10
6.1 Profits, Losses and Distributive Shares of Tax Items 10
6.2 Investment Tax Credit 12
6.3 Installment Note Interest 12
6.4 Distribution In Kind 12
7. CASH AVAILABLE FOR DISTRIBUTION 13
7.1 Operating Cash Flow 13
7.2 Capital Cash Flow 14
7.3 Consent to Distributions 14
8. MANAGEMENT OF THE PARTNERSHIP 14
8.1 General Partner 14
8.2 Management Fee 16
8.3 Limitations on Powers and Authorities of Partners 16
8.4 Limited Partners 17
8.5 Liability of General Partner 17
8.6 Indemnity 17
8.7 Other Activities of Partners and Agreements with Related Parties
17
8.8 Other Matters Concerning the General Partner 18
8.9 Default by Partners 18
9. BANKING 18
10. ACCOUNTING 19
10.1 Fiscal Year 19
10.2 Books of Account 19
10.3 Method of Accounting 19
10.4 Section 754 Election 19
10.5 Tax Matters Partner 20
10.6 Administrative Adjustments 20
11. TRANSFERS OF PARTNERSHIP INTERESTS/ADDITIONAL LIMITED PARTNERS
20
11.1 Prohibited Transfer of a Partner's Interest 20
11.2 Buy-Sell Agreement 21
12. BANKRUPTCY OF A PARTNER 23
13. LIQUIDATION AND DISSOLUTION OF PARTNERSHIP 23
13.1 Dissolution Events 23
13.2 Method of Liquidation 24
13.3 Date of Termination 25
14. MISCELLANEOUS 26
14.1 Notices 26
14.2 Modifications 26
14.3 Successors and Assigns 26
14.4 Duplicate Originals 27
14.5 Construction 27
14.6 Governing Law 27
14.7 Other Instruments 27
14.8 General Partner with Interest as Limited
Partner 27
14.9 Legal Construction 27
14.10 Gender 27
14.11 Prior Agreements Superseded 27
14.12 Adjustment of Asset Value 27
14.13 No Third Party Beneficiary 28
14.14 Waiver of Right of Partition and Dissolution 28
14.15 Purchase for Investment 28
JACOR - CMM LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
This AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement") is made and
entered into as of this 1st day of January, 1994, by and between Jacor Cable,
Inc., a Kentucky corporation (the "General Partner"), Up Your Ratings, Inc., an
Ohio corporation (the "Limited Partner") and Jacor Communicaitons, Inc., an Ohio
corporaton ("Jacor Communications"). The General Partner and the Limited
Partner are sometimes referred to in this Agreement individually as a "Partner"
and collectively as the "Partners".
RECITALS
A. General Partner and Limited Partner desire to form an Illinois
limited partnership (the "Partnership") for the purpose of owning all of the
issued and outstanding common stock, no par value (the "Stock") of Critical Mass
Media, Inc., an Ohio corporation (the "Company").
B. The Partners also desire to have the Partnership governed by the
Illinois Revised Uniform Limited Partnership Act (the "Act").
C. Jacor Communications, as the sole shareholder of Jacor will derive
an indirect benefit from this Agreement and, in addition, Jacor Communications
is a party to this Agreement solely with respect to Section 11.2 hereof.
THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Partners agree as follows:
1. FORMATION OF PARTNERSHIP
1.1 Formation. The General Partner and the Limited Partner do hereby
form and enter into an Illinois limited partnership (being the "Partnership")
according to all of the terms and provisions of this Agreement. Each Partner
has an interest in the Partnership which is expressed in terms of a percentage
of the whole, with the present "Percentage Interest" of each Partner being set
forth opposite its signature hereto. No Partner has any interest in specific
Partnership property but the interests of all Partners in the Partnership are,
for all purposes, personal property.
1.2 Term. The term of the Partnership shall continue until terminated
or dissolved pursuant to the terms of Section 13.1 below.
1.3 Name. The Partnership name shall be "Jacor-CMM Limited Partnership"
but the General Partner may from time to time change the name of the Partnership
or may adopt such trade or fictitious names as it may determine. The General
Partner shall execute and file any assumed or fictitious name certificates
required by law to be filed in connection with the formation and operation of
the Partnership. The Partners shall execute and deliver such additional
documents and perform such additional acts consistent with the terms of this
Agreement as may be necessary to comply with the requirements of law for the
formation, qualification and operation of a partnership in each jurisdiction
in which the Partnership conducts business.
1.4 Principal Office. The principal office of the Partnership shall be
located c/o Jacor Cable, Inc., 1300 PNC Center, 201 East Fifth Street,
Cincinnati, Ohio 45202, or at such other place as the General Partner may
designate after giving written notice of such designation to the other
Partners. The General Partner may also establish additional offices for the
Partnership.
2. CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the meaning ascribed
in this
Section 2:
2.1 "Act" shall have the meaning provided in Recital B hereof.
2.2 "Affiliate" shall mean, as to a person: (i) any partner or officer
of such person; (ii) any corporation, partnership, trust or other entity
controlling, controlled by or under common control with such person; and (iii)
any officer, director, trustee, general partner, or holder of 10% or more of the
outstanding voting securities of any corporation, partnership, trust or other
entity controlling, controlled by or under common control with such person.
2.3. "Agreement" shall mean this Agreement of Limited Partnership, as
amended, modified or supplemented from time to time.
2.4 "Capital Cash Flow" shall the meaning provided in Section 7.2
hereof.
2.5 "Closing Date" shall have the meaning provided in Section 11.2F
hereof.
2.6 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.7 "Defaulting Partner" shall have the meaning provided in Section 8.9
hereof.
2.8 "Depreciation" shall mean, for each fiscal year or other period, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to property for such year or other period, except that if
the fair market value of any of the Company's property differs from its adjusted
basis for federal income tax purposes at the beginning of such year or other
period, Depreciation shall be an amount which bears the same ratio to such
beginning fair market value as the federal income tax depreciation, amortization
or other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis. "Preferred Return" shall have the meaning provided
in Section 4.2 hereof. "Preferred Return Rate" shall have the meaning provided
in Section 4.2 hereof. "Prime Rate" shall have the meaning provided in Section
4.2 hereof.
2.9 "FPAA" shall have the meaning provided in Section 10.6 hereof.
2.10 "General Partner" shall have the meaning provided in the preamble
hereof.
2.11 "General Partner's Initial Contribution" shall have the meaning
provided in Section 5.2(A) hereof.
2.12 "General Partner's Initial Contribution Account" shall have the
meaning provided in Section 5.2(D) hereof.
2.13 "GP Interest" shall have the meaning provided in Section 11.2C(a)
hereof.
2.14 "IRS" shall have the meaning provided in Section 10.6 hereof.
2.15 "Jacor Stock" shall have the meaning provided in Section 11.2
hereof.
2.16 "Limited Partner" shall have the meaning provided in the preamble
hereof.
2.17 "LP Interest" shall have the meaning provided in the Section 11.2
hereof.
2.18 "Management Fee" shall have the meaning provided in Section 8.2
hereof.
2.19 "Michaels" shall have the meaning provided in Section 11.2C hereof.
2.20 "Non-Contributing Partner" shall have the meaning provided in
Section 5.2(B) hereof.
2.21 "Non-Defaulting Partner" shall have the meaning provided in Section
8.9 hereof.
2.22 "Omitted Contribution" shall have the meaning provided in Section
5.2(B)(ii) hereof.
2.23 "Operating Cash Flow" shall have the meaning provided in Section 7.1
hereof.
2.24 "Operating Profit Before General Partner Management Fee" shall have
the meaning provided in Section 8.2 hereof.
2.25 "Partnership" shall have the meaning provided in Section 1.1 hereof.
2.26 "Preferred Return Rate" shall have the meaning provided in Section
4.2 hereof.
2.27 "Preferred Return" shall have the meaning provided in Section 4.2
hereof.
2.28 "Prime Rate" shall have the meaning provided in Section 4.2 hereof.
2.29 "Regulatory Allocation" shall have the meaning provided in Section
6.1(F).
2.30 "Stock" shall have the meaning provided in Recital A hereof.
2.31 "TMP" shall have the meaning provided in Section 10.5 hereof.
2.32 "Z/C" shall have the meaning provided in Section 11.2(C) hereof.
3. PURPOSE AND POWERS OF PARTNERSHIP
3.1 Purpose. The purpose of the Partnership is to engage in the business
of acquiring, owning, holding, developing, improving, operating, managing,
leasing, financing, selling and otherwise dealing with the Stock and the assets
of the Company, whether directly or indirectly, alone or in association with
others. The purposes of the Partnership include, but are not limited to:
(i) developing, operating, leasing and managing the assets of the
Company and conducting any other lawful business relating thereto;
(ii) pledging, exchanging or otherwise encumbering or disposing of
all or any part of the Stock or the Company's assets or any interest therein;
and
(iii) in general, the making of any investments or expenditures, the
borrowing of money and the taking of any and all other actions which, as
determined by the General Partner, are incidental or reasonably related to any
of the purposes recited above.
It is agreed that each of the foregoing and the sale or other disposition of all
or any part of the Stock or the assets of the Company or the Partnership, or any
interest therein, are an ordinary part of the Partnership's business and
affairs. Property may be acquired subject to, or by assuming, the liens,
encumbrances, and other title exceptions which affect such property. The
Partnership may also be a partner, general or limited, in partnerships, general
or limited, and joint ventures created to accomplish all or any of the
foregoing. The Partnership may also engage in such other activities as the
Partners may mutually agree upon.
3.2 Powers. The Partnership purposes may be accomplished by taking any
action which is not prohibited under the Act and which is customary or
reasonably related to the acquisition, ownership, development, improvement,
operation, management, financing, leasing, exchanging or otherwise encumbering,
disposing of or dealing with all or any part of the Stock, the Company's assets
or other Partnership assets, or any interest therein.
4. CAPITAL ACCOUNTS
4.1 Capital Accounts.
A. A separate capital account shall be maintained for each
Partner. Each Partner's capital account shall be (a) credited with (i) the
amount of money contributed by such Partner, (ii) the fair market value of
property contributed by such Partner (net of liabilities secured by such
contributed property that the Partnership is considered to assume or take
subject to, under Section 752 of the Code), and (iii) allocations to such
Partner pursuant to Section 6 below of Partnership income and gain (or items
thereof) (including income and gain exempt from tax and income and gain
described in Treasury Regulation Section 1.704-1(b)(2)(iv)(g), but excluding
income and gain described in Treasury Regulation Section 1.704-1(b)(4)(i)); and
(b) debited with (i) the amount of money distributed to such Partner, (ii) the
fair market value of property distributed to such Partner (net of liabilities
secured by such distributed property that such Partner is considered to assume
or take subject to under Section 752 of the Code), (iii) allocations to such
Partner of expenditures described in Section 705(a)(2)(B) of the Code (including
expenditures deemed to be Code Section 705(a)(2)(B) expenditures under Treasury
Regulation Section 1.704-1(b)(2)(iv)(i), and (iv) allocations to such Partner
pursuant to Section 6 below of Partnership loss and deduction (or item thereof)
(including loss and deduction described in Treasury Regulation Section
1.704-1(b)(2)(iv)(g), but excluding: (A) items described in (b)(iii) above, and
(B) loss or deduction described in Treasury Regulations Sections 1.704-1(b)(4)
(i) or (iii). In the event the fair market value of property contributed to the
Partnership is adjusted (other than for Depreciation), the capital accounts of
all Partners shall be adjusted simultaneously to reflect the aggregate net
adjustments as if the Partnership recognized gain from the sale of such property
or loss from the sale of such property equal to the amount of such adjustment.
B. The foregoing provisions of this Section 4.1 and the other
provisions of this Agreement relating to the maintenance of capital accounts are
intended to comply with Treasury Regulation Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Treasury Regulation.
In the event it is determined that it is prudent to modify the manner in which
the capital accounts, or any increases or decreases thereto, are computed in
order to comply with such Treasury Regulation, the General Partner may make such
modification, provided that it is not likely to have a material effect on the
amounts distributable to any Partner upon the dissolution of the Partnership.
The General Partner also may make any appropriate modifications in the event
that unanticipated events might otherwise cause this Agreement not to comply
with Treasury Regulation Section 1.704-1(b).
4.2 Interest on and Return of Capital. Except as specifically provided
for herein, no Partner shall be entitled to any interest on his capital account
or on his contributions to the capital of the Partnership. The General Partner
shall earn and, as provided for in Sections 7.1, 7.2 and 13.2 below, receive, a
preferred return (the "Preferred Return") in an amount equal to the product
arrived at by multiplying the aggregate balance outstanding from time to time of
the General Partner's Initial Contribution Account (as defined in Section 5.2(D)
hereof) plus any additional future capital contributions made by the General
Partner without a prorata contribution from the Limited Partner times the
"Preferred Return Rate". The "Preferred Return Rate" shall be a rate per annum
equal to the "Prime Rate" plus one percent (1%). The "Prime Rate" at any time
shall be the rate of interest then most recently announced by Continental Bank
N.A. ("CBNA") as its "Prime Rate". If CBNA shall cease to announce a Prime
Rate, then for purposes of this Section 4.2, the "Prime Rate" at any time shall
be deemed to be the average prime interest rate of the three largest (measured
by total assets) banking institutions in the continental United States then
announcing a prime interest rate. The Preferred Return shall accrue and be
earned daily and, effective the first day of each calendar month throughout the
term of this Agreement, that portion which has accrued and not been paid during
the preceding month shall be added to and be deemed a part of the General
Partner's Initial Contribution Account. The Preferred Return (whether or not
added to the General Partner's Initial Contribution Account as aforesaid) shall
be deemed a part of the General Partner's Initial Contribution Account for
purposes of distributions made to the General Partner pursuant to Sections 7.1,
7.2 and 13.2(e) below as provided for therein. No Partner shall have the right
to demand or to receive the return of all or any part of his capital account in
the Partnership except as expressly provided for in this Agreement. No Partner
shall have the right to demand or receive property other than cash in return for
the contribution of such Partner to the Partnership except as expressly provided
for in this Agreement.
4.3 Negative Accounts. No Partner shall be required to pay to the
Partnership any deficit or negative balance which may then exist in its capital
account.
5. CAPITAL
5.1 Initial Capital. As their initial capital contribution to the
Partnership:
A. the General Partner is contributing the sum of $126,315.70
(the "General Partner's Initial Contribution"); and
B. the Limited Partner is contributing the Stock pursuant to that
certain Stock Contribution Agreement, dated as of January 1, 1994 between the
Limited Partner, and the General Partner.
5.2 Additional Funds. Any additional funds required by the Partnership
to meet its cash requirements shall be contributed by the Partners as follows:
A. Each Partner shall contribute from time to time its prorata
share (based on the then applicable Percentage Interests) of funds required by
the Partnership as determined by the General Partner.
B. If a Partner (such Partner, for purposes of this Section
5.2(B), being referred to as the "Non-Contributing Partner" as to the
contribution in question) fails or refuses to fund its share of additional funds
as required pursuant to Section 5.2(A) above, the other Partner, provided it is
ready, willing and able to fund its share, shall be entitled to do any one of
the following:
(i) withdraw its offer to advance its share of such funds and
either borrow the money necessary to fund the deficit from a third party on a
non-recourse (as to the Non-Contributing Partner) basis but otherwise upon such
terms as the Partner in question may, in its discretion, deem desirable in which
event the Partner in question shall be entitled to cause the Stock or the
Company's assets and other Partnership assets to be encumbered to secure such
debt, and all Partners covenant and agree to cooperate, in all respects, in
putting such encumbrance in place; or
(ii) provided it also makes its own contribution, make the capital
contribution (the "Omitted Contribution") not made by the Non-Contributing
Partner, in which event the Percentage Interest of the Non-Contributing Partner
in the Partnership shall be decreased, and that of the other Partner shall be
increased, by a percentage calculated as follows:
2 X the Omitted Contribution divided by the total
contributions to date under Sections 5.1 and 5.2 including the Omitted
Contribution; or
(iii) loan to the Partnership an amount equal to the total capital
contribution required to be made to the Partnership (including such Partner's
own prorata share thereof) with interest accruing on such loan equal to ten
percent (10%) per annum; or
(iv) withdraw its offer to advance its share of the required
additional funds and make no provision for such funds.
C. If the General Partner elects to borrow funds from a third
party instead of requesting prorata contributions or loaning the sum to the
Partnership itself under Section 5.2(B) above, the Stock or the Company's assets
and other Partnership assets may be encumbered to secure such borrowings. The
General Partner is hereby expressly authorized to borrow funds on behalf of the
Partnership pursuant to the terms of Section 5.2(B) above.
D. As used in this Agreement, the "General Partner's Initial
Contribution Account" shall be a memorandum account separate and apart from the
General Partner's capital account which shall consist of the General Partner's
Initial Contribution plus the "Preferred Return" provided for in Section 4.2
above, and decreased by an amount equal to cash distributions to the General
Partner pursuant to Sections 7.1(iii) and 7.2(iii) below.
5.3 Limit on Contributions and Obligations of Limited Partner. Except
as provided for in this Agreement, the Partners shall not be required to make
any additional advances or contributions to the capital of the Partnership or to
endorse any obligations of the Partnership.
6. TAX ITEMS
6.1 Profits, Losses and Distributive Shares of Tax Items. The
Partnership's net profit or net loss, as the case may be, for each fiscal year
of the Partnership, as determined in accordance with such method of accounting
as may be adopted for the Partnership by the General Partner pursuant to Section
10 below, shall be allocated to the Partners for both financial accounting and
income tax purposes, except as otherwise provided for herein or unless all the
Partners agree otherwise, as set forth in this Section 6.
A. Profits shall be credited to the Partners as follows:
(i) first, profits shall be allocated between the Partners
in the
manner and in the amount that cash is distributed or
available for distribution to each Partner pursuant to Sections 7.1 and 7.2
below; and
(ii) the balance, if any, shall be allocated between the
Partners according to their respective Percentage Interests in the Partnership.
B. Losses shall be borne by the Partners as follows:
(i) first, losses should be allocated to the Partners
proportionately until the Capital Account balance of
each Partner equals zero; and
(ii) the balance, if any, shall be allocated between the
Partners according to their respective Percentage Interests in the Partnership.
C. Notwithstanding anything to the contrary in Sections 6.1(A) and
(B) above, any net profit or net loss recognized in connection with the sale of
the Stock (or all or substantially all of the assets of the Partnership) shall
be allocated as follows:
(i) All net profits of the Partnership shall be allocated:
(a) first, to eliminate any deficit balance in the
Capital Account of any Partners in proportion to such deficit Capital Account
balances;
(b) then, net profits shall be allocated between the
Partners until the positive Capital Account balance of each Partner equals the
amount of proceeds, if any, that would be distributed or available for
distribution to such Partner if the distribution were to be made pursuant to
Section 7.2 below; and
(c) the balance, if any, shall then be allocated
between the Partners according to their respective Percentage Interests in the
Partnership.
(ii) All net losses of the Partnership shall be allocated:
(a) first, net losses shall be allocated between the
Partners until the positive Capital Account balance of each Partner equals the
proceeds, if any, that would be distributed or available for distribution to
such Partner if the distribution were to be made pursuant to Section 7.2 below;
and
(b) the balance, if any, shall be allocated between the
Partners according to their respective Percentage Interests in the Partnership.
D. For purposes of this Agreement, profits and losses shall be the
difference between: (i) the gross income of the Partnership (excluding proceeds
of Partnership borrowings), and (ii) all deductible costs and expenses of the
Partnership (including depreciation, but excluding principal payments upon
Partnership borrowings), in each instance as finally determined for Federal
income tax purposes. If such difference shall be greater than zero, the amount
by which it exceeds zero shall be profits; and if such difference shall be less
than zero, the amount by which it is less than zero shall be losses.
E. Notwithstanding any other provision of this Agreement to the
contrary, no Partner shall be allocated any loss for any year to the extent that
such allocation would, as of the end of such year, create or increase a deficit
in such Partner's Capital Account, after the same has been reduced for any items
of loss or expense described in Section 1.704-1(b)(2) (ii)(d)(4), (5) or (6) of
the Treasury Regulations and increased for such Partner's share of minimum gain,
determined in accordance with Section 1.704-1(b)(4) (iv) of the Treasury
Regulations. In the event that, during any fiscal year, any Partner
unexpectedly receives an allocation or distribution described in Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury Regulations, or the
Partnership's minimum gain is reduced, so as to create or increase a deficit in
such Partner's Capital Account (as hereinabove adjusted), such Partner shall be
allocated items of income and gain for such fiscal year (and, if necessary, for
subsequent fiscal years), as and to the extent necessary to eliminate such
deficit as quickly as possible. This Section 6(E) is intended to comply with
the "qualified income offset" and "minimum gain chargeback" provisions contained
in Sections 1.704-1(b)(2)(ii)(d) and 1.704-1(b) (4)(iv), respectively, of the
Treasury Regulations, and shall be interpreted consistently therewith.
F. Any special allocations set forth in Section 6(E) above (the
"Regulatory Allocations") are intended to comply with certain requirements of
Section 1.704-1(b) of the Treasury Regulations. Notwithstanding any other
provisions or subsections of this Section 6 (other than the Regulatory
Allocations), the Regulatory Allocations shall be taken into account in
allocating other profits, losses and items of income, gain, loss and deduction
among the Partners so that, to the extent possible, the net amount of such
allocations of other profits, losses and other items and the Regulatory
Allocations to each Partner shall be equal to the net amount that would have
been allocated to each such Partner if the Regulatory Allocations had not
occurred.
6.2 Investment Tax Credit. All investment tax credits available to the
Partnership pursuant to Section 38 of the Code shall be allocated to the
Partners pro rata in proportion to their then respective Percentage Interests.
6.3 Installment Note Interest. Any interest income realized in
connection with any promissory notes received by the Partnership in connection
with a sale of the Stock, net of any interest expense accrued by the Partnership
on any underlying obligations, shall be allocated to the Partners pro rata in
accordance with the remaining amount to be distributed to them upon receipt of
the principal payment made on such promissory notes.
6.4 Distribution In Kind. In the event all or part of the Partnership
assets are distributed in kind at the time of liquidation of the Partnership,
for purposes of determining the balance in any Partner's capital account, any
such Partnership asset shall be deemed sold by the Partnership for the amount
of such asset's fair market value, and any gain or loss deemed realized on such
deemed sale shall be properly charged to the capital accounts of the Partners
according to Section 6.1 above.
7. CASH AVAILABLE FOR DISTRIBUTION
7.1 Operating Cash Flow. "Operating Cash Flow" shall mean and be defined
as all cash receipts of the Partnership from whatever source (but excluding
capital events, such as the sale of assets, condemnation awards and financing
and refinancing proceeds) during the period in question in excess of all items
of Partnership expense and other cash needs of the Partnership, including,
without limitation, amounts paid by the Partnership as principal on debts and
advances during such period (including repayment of loans made by Partners
pursuant to Section 4.2(B) above) and any reserves for such purposes established
or increased by the General Partner during such period. Operating Cash Flow
shall be distributed to or for the benefit of the Partners at the sole
discretion of the General Partner, and shall be distributed as follows:
(i) First, to those Partners who have made contributions on behalf
of the other Partner pursuant to Section 5.2(B)(ii) in an amount equal to the
total of all such contributions under Section 5.2(B)(ii) (but less the amount of
previous distributions under this Section 7.1(i) and Section 7.2(i) above),
prorata in accordance with the ratio of the respective unreturned Section
5.2(B)(ii) contributions of each Partner to the whole of all such contributions;
(ii) Next, prorata to the Partners according to the ratios of the
respective contributions of the Partners pursuant to Section 5.2(B) above (after
reduction of the Section 5.2(B) contributions of the Partner to reflect
distributions under Section 7.1(i) and Section 7.2(i) above), until such time as
the Partners have each received aggregate distributions pursuant to this Section
7.1(ii) equal to the contributions theretofore made by it pursuant to Section
5.2(B);
(iii) Next, to the General Partner in an amount equal to the then
current balance of the General Partner's Initial Contribution Account in excess
of the General Partner's Initial Contribution; and
(iv) Lastly, to the Partners in proportion to their then respective
Percentage Interests.
7.2 Capital Cash Flow. "Capital Cash Flow" shall mean and be defined as
all cash receipts of the Partnership from capital events during the period in
question (subject to the provisions of Section 13.2 below, if applicable) in
excess of all items of partnership expense and other cash needs of the
Partnership as provided for in Section 7.1 above (including the repayment of
loans made by Partners pursuant to Section 5.2(B) above and reserves). Capital
Cash Flow shall be distributed to or for the benefit of the Partners at the sole
discretion of the General Partner after the occurrence of the event giving rise
thereto and shall be distributed as follows:
(i) First, to those Partners who have made contributions on behalf
of the other Partner pursuant to Section 5.2(B)(ii) in an amount equal to the
total of all such contributions under Section 5.2(B)(ii) (but less the amount of
previous distributions under this Section 7.2(i) and Section 7.1(i) above),
prorata in accordance with the ratio of the respective unreturned Section
5.2(B)(ii) contributions of each Partner to the whole of all such contributions;
(ii) Next, prorata to the Partners according to the ratios of the
respective contributions of the Partners pursuant to Section 5.2(B) above (after
reduction of the Section 5.2(B) contributions of the Partner to reflect
distributions under Sections 7.2(i) and 7.1(i) above), until such time as the
Partners have each received aggregate distributions;
(iii) Next, to the General Partner in an amount equal to the then
current balance of the General Partner's Initial Contribution Account; and
(iv) Lastly, to the Partners in proportion to their then respective
Percentage Interests.
7.3 Consent to Distributions. Each of the Partners hereby consents to the
distributions provided for in this Agreement.
8. MANAGEMENT OF THE PARTNERSHIP
8.1 General Partner. The General Partner shall be the sole manager of
the Partnership business, and shall have the right and power to make all
decisions and take any and every action with respect to the Stock, the business
and affairs of the Company and the Partnership and shall have all the rights,
power and authority generally conferred by law, or necessary, advisable or
consistent with accomplishing the purposes of the Partnership. The General
Partner shall have all of the rights and powers of a managing general partner,
and a partner in a partnership without limited partners, and any action taken by
the General Partner shall constitute the act of, and serve to bind, the
Partnership without the consent or approval of, any Limited Partner. In dealing
with the General Partner acting on behalf of the Partnership, no person shall be
required to inquire into the authority of the General Partner to bind the
Partnership. The powers of the General Partner to manage the Partnership
business shall include, without limitation, the power and authority to:
(i) operate any business normal, customary or desirable (as
determined by the General Partner) for the owner of a Company similar to the
Company;
(ii) perform any and all acts necessary or appropriate to the
operation or ownership of the Company;
(iii) procure and maintain with responsible companies such insurance
as may be available in such amounts and covering such risks as are deemed
appropriate by the General Partner;
(iv) take and hold all real, personal and mixed property of the
Company and the Partnership in the name of the Partnership or the name of an
agent or nominee of the Partnership;
(v) execute and deliver leases on behalf of and in the name of the
Partnership;
(vi) coordinate all accounting and clerical functions of the
Partnership and employ such accountants, lawyers, property managers, leasing
agents and other management or service personnel as may from time to time be
required to carry on the business of the Partnership;
(vii) sell, lease or otherwise dispose of all or any part of the
Stock (provided that the Limited Partner has consented to such sale, lease or
other disposition of the Stock, which consent shall not be unreasonably
withheld) or the Company;
(viii) borrow money and as security therefor to encumber all or
any part of the Company and/or the Stock, provided that such indebtedness
benefits the Company;
(ix) construct, alter, improve, repair, raze, replace or rebuild
all or any part of the Company's properties; and
(x) do any and all of the foregoing at such price, rental or
amount, for cash, securities or other property or consideration, and upon such
other terms as the General Partner deems appropriate, and to execute,
acknowledge and deliver any and all instruments and other documents to
effectuate any and all of the foregoing.
Whenever in this Agreement the General Partner is granted discretion or the
right of approval, consent or determination as to a matter, such matter shall be
subject to the General Partner's sole and absolute discretion.
8.2 Management Fee. As compensation for its services hereunder, the
General Partner shall receive a Management Fee (the "Management Fee") equal to
Five Hundred Fifty Thousand Dollars ($550,000) per year, plus twenty percent
(20%) of the amount by which the Operating Profit Before General Partner
Management Fee of the Company exceeds $300,000. For purposes of this Agreement,
the term "Operating Profit Before General Partner Management Fee" shall as
determined by reference to the financial statements prepared by the Company's
certified public accountant. The Management Fee shall be paid at the sole
discretion of the General Partner. In addition, the General Partner shall be
reimbursed for all reasonable expenses incurred by it in connection with its
obligations pursuant to this Agreement.
8.3 Limitations on Powers and Authorities of Partners. Notwithstanding
the powers of the General Partner set forth in Section 8.1 above, without the
consent of all of the Partners, no Partner shall have the right or power to do
any of the following:
(a) do any act in contravention of this Agreement, or any
amendment hereto;
(b) do any act which would make it impossible to carry on the
ordinary business of the Partnership, except to the extent that such act is
specifically permitted by the terms hereof; or
(c) confess a judgment against the Partnership.
8.4 Limited Partners. The Limited Partners shall have no right or
authority to act for or to bind the Partnership and shall not participate in the
conduct or control of the Partnership's affairs or business.
8.5 Liability of General Partner. The General Partner shall not be
liable or accountable, in damages or otherwise, to the Partnership or to any
other Partner for any error of judgment or for any mistakes of fact or law or
for anything which it may do or refrain from doing hereafter in connection with
the business and affairs of the Partnership except in the case of fraud, willful
misconduct or gross negligence. The General Partner shall not have any
liability for the return of the Limited Partner's capital.
8.6 Indemnity. The Partnership shall indemnify and shall hold each
Partner (and the officers, directors and partners of such Partners) acting
consistently with this Agreement, harmless from any loss or damage, including
without limitation reasonable legal fees and court costs, incurred by it by
reason of anything it may do or refrain from doing hereafter for and on behalf
of the Partnership or in connection with its business or affairs; provided,
however, that (i) the Partnership shall not be required to indemnify a Partner
(or any officer, director or partner thereof) for any loss or damage which that
Partner might incur as a result of its fraud or willful misconduct or its gross
negligence in the performance of its duties hereunder, and (ii) this
indemnification shall not relieve any Partner of its proportionate part of the
obligations of the Partnership as a Partner. The right of indemnification set
forth in this Section 8.6 shall be in addition to any rights to which the person
or entity seeking indemnification may otherwise be entitled and shall inure to
the benefit of the successors and assigns or any such person or entity. No
Partner shall be personally liable with respect to any claim for indemnification
pursuant to this Section 8.6, but such claim shall be satisfied solely out of
assets of the Partnership.
8.7 Other Activities of Partners and Agreements with Related Parties.
The General Partner and its partners shall devote only a portion of their time
to the Partnership business, it being expressly understood that the General
Partner and its partners may have other businesses and that each shall be free
to engage in, to conduct or to participate in any business or activity
whatsoever, including, without limitation, the acquisition, development,
management and exploitation of real and personal property, without any
accountability, liability or obligation whatsoever to the Partnership or to any
other Partner, even if such business or activity competes with or is enhanced by
the business of the Partnership. Further, the General Partner, in the exercise
of its power and authority under this Agreement, may contract and otherwise deal
with or otherwise obligate the Partnership to Affiliates of the General Partner,
provided only that the fee or other compensation payable pursuant to any such
contract(s) or obligation(s) shall not exceed then market rates for same.
8.8 Other Matters Concerning the General Partner.
A. The General Partner shall be protected in relying, acting or
refraining from acting on any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
B. The General Partner may execute any of the powers granted or
perform any of the duties imposed by this Agreement either directly or through
agents, including, without limitation, any Affiliates of the General Partner.
The General Partner may consult with counsel, accountants, appraisers,
management consultants, investment bankers and other consultants selected by
it, each of whom may serve as consultants for the Partnership. An opinion by
any consultant on a matter which the General Partner believes to be within its
professional or expert competence shall be full and complete protection as to
any action taken or omitted by the General Partner based on the opinion and
taken or omitted in good faith. The General Partner shall not be responsible
for the misconduct, negligence, acts or omissions of any consultant or
contractor of the Partnership or the General Partner, and shall assume no
obligations other than to use due care in the selection of all consultants and
contractors.
8.9 Default by Partners. If either Partner defaults (thereby becoming
a "Defaulting Partner") by failing to perform any of its obligations under this
Agreement, then the other Partner (the "Nondefaulting Partner") shall have the
right to give the Defaulting Partner a notice of default. The notice of default
shall set forth in reasonable detail a description of the obligation that the
Defaulting Partner has not performed. If such default shall continue for more
than thirty (30) days (or such longer period as may be required to cure such
default), then the Non-defaulting Partner shall be entitled to all legal and
equitable remedies and to recover on behalf of the Partners any monies required
by or due to the Partnership from the Defaulting Partner by reason of the
default in question. The 30-day period for curing a default or commencing to
cure a default as aforesaid shall commence upon receipt by the Defaulting
Partner of notice of default from the Non-defaulting Partner.
9. BANKING
The funds of the Partnership shall be kept in accounts designated by the
General Partner. All such funds shall be separately accounted for and, at the
discretion of the General Partner, invested in interest bearing accounts with
the Partnership receiving the benefit of interest accruing on its funds. All
withdrawals therefrom shall be made on such signature or signatures as shall be
designated by the General Partner.
10. ACCOUNTING
10.1 Fiscal Year. The fiscal year of the Partnership shall end on the
last day of December of each year, unless another fiscal year end is selected by
the General Partner.
10.2 Books of Account. The Partnership books of account shall be
maintained at the principal office designated in Section 1.4 above or at such
other locations and by such person or persons as may be designated by the
General Partner. The Partnership shall pay (in amounts not to exceed reasonable
commercial rates) the expense of maintaining its books of account. Each Partner
shall have, during reasonable business hours and upon reasonable notice, access
to the books of the Partnership and in addition, each Partner shall have, at its
expense, the right to copy such books and records. The General Partner, at the
expense of the Partnership, shall cause to be prepared and distributed to each
Partner the following:
(a) annual financial data reasonably sufficient to reflect the
status and operations of the Partnership and its assets (to be delivered on or
before March 31 of each year); and
(b) the annual Federal income tax return of the Partnership (to be
delivered on or before March 31 of each year).
10.3 Method of Accounting. The Partnership books of account shall be
maintained and kept, and its income, gains, losses and deductions shall be
accounted for, in accordance with generally accepted accounting principles
consistently applied, or such other method of accounting as may be adopted
hereafter by the General Partner.
10.4 Section 754 Election. In case of a distribution of property made in
the manner provided in Section 734 of the Code (or any similar provision enacted
in lieu thereof), or in the case of a transfer of any interest in the
Partnership permitted by this Agreement made in the manner provided in Section
743 of the Code (or any similar provision enacted in lieu thereof), the General
Partner, on behalf of the Partnership, may (but shall not be obligated to) file
an election under Section 754 of the Code (or any similar provision enacted in
lieu thereof) in accordance with the procedures set forth in the applicable
Treasury regulations.
10.5 Tax Matters Partner. The General Partner is hereby designated the
Tax Matters Partner (hereinafter referred to as the "TMP") of the Partnership
and shall have all the rights and obligations of the TMP under the Code. If at
any time the General Partner shall not be a general partner, the remaining
general partner shall be the TMP or, if there is more than one remaining general
partner, they shall designate which one of them shall be the TMP.
10.6 Administrative Adjustments. If the TMP receives notice of a Final
Partnership Administrative Adjustment (the "FPAA") or if a request for an
administrative adjustment made by the TMP is not allowed by the United States
Internal Revenue Service (the "IRS") and the IRS does not notify the TMP of the
beginning of an administrative proceeding with respect to the Partnership's
taxable year to which such request relates (or if the IRS so notifies the TMP
but fails to mail a timely notice of an FPAA), the TMP may, but shall not be
obligated to, petition a Court for readjustment of partnership items. In the
case of notice of an FPAA, if the TMP determines that the United States District
Court or Court of Claims is the most appropriate forum for such a petition, the
TMP shall notify each person who was a Partner at any time during the
Partnership's taxable year to which the IRS notice relates of the approximate
amount by which his tax liability would be increased (based on such assumptions
as the TMP may in good faith make) if the treatment of partnership items on his
return were made consistent with the treatment of partnership items on the
Partnership's return, as adjusted by the FPAA. Unless each such person deposits
with the TMP, for deposit with IRS, the approximate amount of his increased tax
liability, together with a written agreement to make additional deposits if
required to satisfy the jurisdictional requirements of the Court, within thirty
days after the TMP's notice to such person, the TMP shall not file a petition in
such Court. Instead, the TMP may, but shall not be obligated to, file a
petition in the United States Tax Court.
11. TRANSFERS OF PARTNERSHIP INTERESTS/ADDITIONAL LIMITED PARTNERS
11.1 Prohibited Transfer of a Partner's Interest.
A. The Partnership interest of any Partner may not be assigned (in
whole or in part, whether for collateral purposes or otherwise) without the
prior written consent of the General Partner.
B. Any transfer of a Partnership interest shall be void and of no
effect unless and until (i) the consent required by Section 11.1(A) above has
been obtained; and (ii) the transferring Partner and its transferee execute,
acknowledge and deliver to the General Partner instruments of transfer and
assignment and furnish to the General Partner such assurances as the General
Partner may request, including, without limitation, an opinion of counsel
satisfactory to the General Partner stating that the transfer of such interest
in the Partnership has been registered under all applicable securities laws or
that such registration under applicable securities laws is not required.
Further, no transfer shall be effective if it would result in the "termination"
of the Partnership for federal income tax purposes unless all Partners consent
to the transfer.
11.2 Buy-Sell Agreement.
A. The Limited Partner shall have the right to sell its 95%
limited partnership interest in the Partnership (the "LP Interest") to the
General Partner, and the General Partner is obligated to purchase the LP
Interest from the Limited Partner in exchange for Three Hundred Thousand
(300,000) shares of the common stock, no par value, of Jacor Communications,
Inc. (the "Jacor Stock") at any time from and after the fifth anniversary of
the date of this Agreement, until the sixth anniversary of the date of this
Agreement, provided that such Limited Partner is not in default hereunder
(which default has not been cured after expiration of any grace period
applicable thereto).
B. If the option granted to the Limited Partner in Section 11.2(A)
hereof is not exercised, then the General Partner shall have the right to
purchase the LP Interest from the Limited Partner, and the Limited Partner is
obligated to sell the LP Interest to the General Partner, in exchange for the
Jacor Stock, at any time from and after the sixth anniversary of the date of
this Agreement, until the seventh anniversary of the date of this Agreement,
provided that such General Partner is not in default hereunder (which default
has not been cured after expiration of any grace period applicable thereto).
C. From the date of this Agreement until the fifth anniversary of
such date, if (i) the employment of Benjamin Homel, a/k/a Randy Michaels, the
President of the General Partner ("Michaels"), is terminated by the Board of
Directors without cause; (ii) Michaels' job responsibilities are significantly
reduced; (iii) Michaels' annual base salary is reduced by more than ten percent
(10%); or (iv) a Trigger Event (as defined below) occurs, then the Limited
Partner shall have the right for a period of sixty (60) days following the date
of any event set forth in clauses (i); (ii); (iii) or (iv) above either to (a)
purchase the General Partner's five percent (5%) general partnership interest in
the Partnership (the "GP Interest") from the General Partner, and the General
Partner is obligated to sell its GP Interest to the Limited Partner at a price
equal to the amount of the then current General Partner's Initial Contribution
Account; or (b) sell its LP Interest to the General Partner, and the General
Partner is obligated to purchase the LP Interest from the Limited Partner in
exchange for the Jacor Stock. For purposes of this Section 11.2(C), the term
"Trigger Event" shall mean the following events:
a) Any Person or group (as defined for purposes of Regulation 13D
promulgated pursuant to The Securities Exchange Act of 1934, as amended), other
than Zell Chilmark Fund, L.P. ("Z/C") or its Affiliates, shall acquire or become
the beneficial owner of more than 30% of the outstanding voting securities of
the General Partner or if the General Partner has entered into a letter of
intent relating to, or has publicly proposed to enter into, a transaction such
as a merger, consolidation or acquisition of all or substantially all of the
assets of the General Partner, or other similar business combination
transactions.
b) Z/C, at any time shall, on or prior to September 30, 1995, fail
to hold stock record and beneficial ownership of 30% or more of the outstanding
voting securities of the General Partner.
c) Z/C, shall, at any time prior to September 30, 1995, fail to
have its designees constitute at least a majority in number of the members of
the General Partner's board of directors or shall thereafter fail to have its
designees constitute at least 30% in number of the General Partner's board of
directors.
D. From the date of this Agreement until the fifth anniversary of
such date, if Michaels voluntarily resigns as an officer of the General Partner
or is terminated by the General Partner with cause, the General Partner shall
have the right for a period of sixty (60) days following the date of such
resignation either to (i) have its GP Interest redeemed by the Partnership for
an amount equal to the General Partner's Initial Contribution plus the greater
of (x) the Preferred Return on the General Partner's Initial Capital
Contribution or (y) fifty percent (50%) of the cumulative aggregate of
Operating Cash Flow plus the Capital Cash Flow of the Company from the date of
this Agreement until the "Closing Date" as defined below, or (ii) purchase the
LP Interest from the Limited Partner and the Limited Partner is obligated to
sell its LP Interest in exchange for the Jacor Stock.
E. Either party may elect to invoke the provisions of this Section
11.2 by giving not less than forty-five (45) days' prior written notice to the
other Partner stating that such Partner wishes to apply the provisions of this
Section 11.2.
F. The Closing shall take place on or before the fifteen (15th)
day following the expiration of the forty- five (45) day period set forth above
for giving notice of an election by a Partner (the "Closing Date"), on which
date the selling Partner shall convey, transfer and assign to the purchasing
Partner, by deed, bill of sale, assignment of partnership interests, and such
other instruments of transfer as shall be reasonably requested by the purchasing
Partner, the selling Partner's entire right and interest in and to the
Partnership and all assets thereof, and shall, to the extent reasonably
requested by the purchasing Partner, cooperate to effect a smooth and efficient
continuation of the affairs of the Partnership, including, without limitation,
the preservation of relationships with contractors, suppliers, laborers, vendors
and others with whom the Partnership transacts business.
G. On the Closing Date, if (i) the General Partner is to deliver
the Jacor Stock to the Limited Partner, then it shall convey, transfer and
assign to the Limited Partner by stock power and such other instruments of
transfer as shall either be reasonably requested by the Limited Partner the
General Partner's entire right and interest in the Jacor Stock or (ii) if the
Limited Partner is to make a payment, then it shall pay to the General Partner
the amount which the General Partner would receive pursuant to Sections 11.2(C)
or 11.2(D) of this Agreement. The closing shall occur at the Partnership's
office which is located at such address as is set forth in Section 14.1 hereof
on the Closing Date. Upon transfer of the Jacor Stock, the General Partner
shall have no further right or interest in or to such Jacor Stock.
H. Upon the terms and subject to the conditions of this Agreement,
each of the parties hereto will use its best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable consistent with applicable law to consummate and make effective in
the most expeditious manner practicable the transactions contemplated hereby as
a tax-free reorganization.
12. BANKRUPTCY OF A PARTNER
The bankruptcy of a Partner shall not dissolve or terminate the
Partnership. Upon the dissolution of the General Partner, the Limited Partner
may become the General Partner or designate a substitute general partner who
shall be admitted to the Partnership as such, with the full authority and power
without the joinder of any other general partner to exercise the rights and
duties granted to the General Partner hereunder and the interest of the former
General Partner shall thereupon be recast as a limited partner interest.
13. LIQUIDATION AND DISSOLUTION OF PARTNERSHIP
13.1 Dissolution Events. The Partnership shall be dissolved in the
manner hereinafter provided upon the earliest to occur of the following events:
(a) the close of business on the last day of the fiscal year of the
Partnership during which the fiftieth anniversary of the date of this Agreement
occurs; or
(b) the agreement of the Partners determining that the Partnership
should be dissolved; or
(c) the entry of a final judgment, order or decree of a court of
competent jurisdiction adjudicating the Partnership to be a bankrupt, and the
expiration without appeal of the period, if any, allowed by applicable law to
appeal therefrom; or
(d) the sale of all or substantially all of the Stock or the
assets of the Partnership and payment of any notes received by the Partnership
from such sale.
13.2 Method of Liquidation. Upon the happening of any of the events
specified in Section 13.1 above, the General Partner shall immediately commence
to wind up the Partnership's affairs and shall liquidate the assets of the
Partnership as promptly as possible, unless the General Partner, or such
person(s) winding up the Partnership affairs, shall determine that an immediate
sale of Partnership assets would cause undue loss to the Partnership, in which
event the liquidation may be deferred for a reasonable time. The Partners shall
continue to share net cash flow, profits and losses during the period of
liquidation in the same proportions as before dissolution. The proceeds from
liquidation of the Partnership, including repayment of any debts of Partners to
the Partnership, shall be applied in the order of priority as follows:
(a) Debts of the Partnership, including repayment of principal and
interest on loans and advances made by the General Partner pursuant to Section
5.2 above; then
(b) To the establishment of any reserves deemed reasonably
necessary or appropriate by the General Partner, or by the person(s) winding up
the affairs of the Partnership in the event there is no remaining General
Partner of the Partnership, for any contingent or unforeseen liabilities or
obligations of the Partnership. Such reserves established hereunder shall be
held for the purpose of paying any such contingent or unforeseen liabilities
or obligations and, at the expiration of such period as the General Partner,
or such person(s) reasonably deems advisable, the balance of such reserves shall
be distributed in the manner provided hereinafter in this Section as though
such reserves had been distributed contemporaneously with the other funds
distributed hereunder; then
(c) To those Partners who have made contributions on behalf of the
other Partners pursuant to Section 5.2(B)(ii) above, in an amount equal to (but
not in excess of the positive balance, if any, of the capital account of the
Partner to whom the distribution is to be made as such capital account has been
adjusted to reflect the allocation of gains and losses pursuant to Section 6)
the excess of (i) the total of all such contributions under Section 5.2(B)(ii)
over (ii) the aggregate distributions to the Partner in question pursuant to
Sections 7.1(i) and 7.2(i) above pro rata to each Partner in accordance with
the ratio of such excesses.
(d) Prorata to the Partners until the Partners have each received
an amount equal to (but not in excess of the aggregate positive balances, if
any, of the capital accounts of such Partners as such accounts have been
adjusted to reflect the allocation of gains and losses pursuant to Section 6
and the distributions made to the General Partner and/or the Limited Partner,
as the case may be pursuant to Section 13.2(c)) the excess of (i) Section 5.2(B)
contributions, over (ii) the aggregate distributions to such Partner under
Sections 7.1(i), 7.2(i), 7.1(ii), 7.2(ii) and 13.2(c) above; then
(e) To the General Partner in an amount equal to (but not in excess
of the positive balance, if any, of the capital account of the General Partner
as such account has been adjusted to reflect the allocation of gains and losses
pursuant to Section 6 and the distributions made to the General Partner pursuant
to Sections l3.2(c) and 13.2(d)) the then outstanding balance of the General
Partner's Initial Contribution Account (to the extent not previously repaid
under Section 7.2(iii) above), if any; then
(f) Prorata to the Partners based upon the ratio of the positive
capital account balances of the Partners (but not in excess of the positive
balance, if any, of each Partner as such account has been adjusted to reflect
the allocation of gains and losses pursuant to Section 6 and distributions made\
to the General Partner and/or the Limited Partner, as the case may be, pursuant
to Sections l3.2(c), l3.2(d) and l3.2(e)).
13.3 Date of Termination. The Partnership shall be terminated when all
notes received in connection with such disposition have been paid and all of the
cash or property available for application and distribution under Section 13.2
above shall have been applied and distributed in accordance with such Section.
The establishment of any reserves in accordance with the provisions of Section
13.2 above shall not have the effect of extending the term of the Partnership,
but any such reserve shall be distributed in the manner provided in such Section
upon expiration of the period of such reserve.
14. MISCELLANEOUS
14.1 Notices. Any notice, election or other communication provided for
or required by this Agreement shall be in writing and shall be deemed to have
been given when delivered by hand or by telecopy or other facsimile
transmission, the first business day after sent by overnight courier (such as
Federal Express), or on the second business day after deposit in the United
States Mail, certified or registered, return receipt requested, postage prepaid,
properly addressed to the Partner to whom such notice is intended to be given
at the address for the Partner set forth on the signature pages of this
Agreement, or at such other address as such person may have previously
furnished in writing to the Partnership and each Partner with copies to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza
Suite 700
Chicago, Illinois 60606
Attention: Sheli Z. Rosenberg
14.2 Modifications. No change or modification of this Agreement shall
be valid or binding upon the Partners, nor shall any waiver of any term or
condition in the future, unless such change or modification or waiver shall be
in writing and signed by all of the Partners, except as provided to the contrary
in this Agreement.
14.3 Successors and Assigns. Any entity acquiring or claiming an
interest in the Partnership, in any manner whatsoever, shall be subject to and
bound by all of the terms, conditions and obligations of this Agreement to which
its predecessor-in-interest was subject or bound, without regard to whether such
an entity has executed a counterpart hereof or any other document contemplated
hereby. No entity shall have any rights or obligations greater than those set
forth in this Agreement, and no entity shall acquire an interest in the
Partnership or become a Partner thereof except as expressly permitted by and
pursuant to the terms of this Agreement. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the Partners and
their respective successors and assigns.
14.4 Duplicate Originals. For the convenience of the Partners, any
number of counterparts hereof may be executed, and each such counterpart shall
be deemed to be an original instrument, and all of which taken together shall
constitute one agreement.
14.5 Construction. The titles of the Sections and subsections herein
have been inserted as a matter of convenience of reference only and shall not
control or affect the meaning or construction of any of the terms or provisions
herein.
14.6 Governing Law. This Agreement shall be governed by the laws of the
State of Illinois. Except to the extent the Act is inconsistent with the
provisions of this Agreement, the provisions of such Act shall apply to and
govern the Partnership created hereby and the respective rights and liabilities
of the Partners.
14.7 Other Instruments. The parties hereto covenant and agree that they
will execute such other and further instruments and documents as are or may
become necessary or reasonably convenient to effectuate and carry out the
Partnership created by this Agreement.
14.8 General Partner with Interest as Limited
Partner. If a General Partner also has an interest as a Limited Partner in the
Partnership, the General Partner shall, with respect to such interest, enjoy all
of the rights and be subject to all of the obligations and duties of a Limited
Partner.
14.9 Legal Construction. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
14.10 Gender. Whenever the context shall so require, all words herein in
any gender shall be deemed to include the masculine, feminine or neuter gender,
all singular words shall include the plural, and all plural words shall include
the singular.
14.11 Prior Agreements Superseded. This Agreement supersedes any prior
understandings or written or oral agreements between General Partner and Limited
Partner respecting the within subject matter and contains the entire
understanding between the parties with respect thereto.
14.12 Adjustment of Asset Value. The fair market values of all
Partnership properties shall be adjusted to their respective gross fair market
values (determined in accordance with Section 7701(g)) of the Code as of the
following times: (i) the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimus capital contribution; (ii) the distribution by the Partnership to a
Partner of more than a de minimus amount of Partnership property other than
money, unless all Partners receive simultaneous distributions of undivided
interests in the distributed property in proportion to their interests in the
Partnership; and (iii) the termination of the Partnership for federal income
tax purposes pursuant to Section 708(b)(1)(B) of the Code. If the fair market
value of an asset has been determined or adjusted pursuant to the foregoing,
such fair market value shall thereafter be adjusted by the Depreciation taken
into account with respect to such asset for purposes of computing net profit,
net gain and net loss.
14.13 No Third Party Beneficiary. The terms and provisions of this
Agreement are for the exclusive use and benefit of General Partner and Limited
Partner and shall not inure to the benefit of any other person or entity.
14.14 Waiver of Right of Partition and Dissolution. Having previously
been advised that it may have a right to bring an action for partition, each of
the Partners does hereby agree to and does hereby irrevocably waive for the
duration of this Agreement any right or power any such Partner might have to
cause the Partnership or any of its assets to be partitioned, to cause the
appointment of a receiver for the assets of the Partnership, to compel any sale
of all or any portion of the assets of the Partnership pursuant to any
applicable law or laws, or to file a complaint or to institute any proceeding
at law or in equity to cause the termination or dissolution of the Partnership
except as expressly provided for in this Agreement. Each of the Partners hereby
acknowledges and agrees that such Partner has been induced to enter into this
Agreement in reliance upon the mutual waivers set forth in this Section 14.14
and without such waivers, no Partner would have entered into this Agreement.
14.15 Purchase for Investment. The Limited Partner represents, warrants
and agrees that it is acquiring its interest in the Partnership for its own
account for investment only and not for the purpose of, or with a view toward,
the resale or distribution of all or any part thereof, nor with a view toward
selling or otherwise distributing such interest or any part thereof at any
particular time or under any predetermined circumstances. The Limited Partner
further represents and warrants that it is a sophisticated investor, able and
accustomed to handling sophisticated financial matters for itself, and that it
has a sufficiently high net worth that it does not anticipate a need for the
funds it has invested in the Partnership in what it understands to be a highly
speculative and illiquid investment.
IN WITNESS WHEREOF, this Agreement has been executed and sworn to as of the
day and year first above written by the General Partner and Limited Partner,
whose respective addresses and percentage interests are set forth opposite their
respective signatures.
PERCENTAGE INTEREST: GENERAL PARTNER:
5% JACOR CABLE, INC., a Kentucky
corporation
By:
Title:
Address:
1300 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
LIMITED PARTNER:
95% UP YOUR RATINGS, INC., an Ohio corporation
By:
Title:
Address:
JACOR COMMUNICATIONS, INC., an Ohio
corporation
By:
Title:
STATE OF )
) SS:
COUNTY OF )
I, , a Notary Public in and for
the County and State aforesaid, do hereby certify that
, appeared before me this day and did say that he is the
of , a
, who is personally known to me to be the same person whose
name is subscribed to the foregoing instrument as such limited partner and
acknowledged that he signed and delivered the said instrument as the free and
voluntary act of said partnership for the uses and purposes therein set forth.
Given my hand and notarial seal this day of , 1994.
Notary Public
My Commission Expires: (SEAL)
STATE OF )
) SS:
COUNTY OF )
I, , a Notary Public in and for said
County in the State aforesaid, do hereby certify that
, the of
, a , personally known to me to be the
same person whose name is subscribed to the foregoing instrument as such general
partner, appeared before me this day in person and acknowledged that he signed
and delivered said instrument as his own free and voluntary act, and as the free
and voluntary act of said partnership, for the uses and purposes therein set
forth.
Given under my hand and notarial seal this day of
, 1994.
Notary Public
My Commission Expires: (SEAL)
AMENDMENT NO. 1
TO
JACOR-CMM LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
This Amendment No. 1 to the Jacor-CMM Limited Partnership Agreement of
Limited Partnership is entered into by and among Jacor Cable, Inc. ("General
Partner"), Up Your Ratings, Inc. ("Limited Partner") and Jacor Communications,
Inc. ("Jacor Communications") effective as of this ____ day of ____________,
1994.
WHEREAS, the General Partner and the Limited Partner entered into that
certain Jacor-CMM Limited Partnership Agreement of Limited Partnership dated as
of January 1, 1994 (the "Agreement") with Jacor Communications being a party to
that Agreement solely for purposes of Section 11.2 thereof; and
WHEREAS, Section 11.2 set forth certain events in which Limited Partner and
the General Partner would have the ability to sell or acquire the limited
partnership interest of the Limited Partner, which events were intended to
relate in significant part to actions that could be taken by or that would
affect Jacor Communications; and
WHEREAS, Section 11.2 as currently contained in the Agreement makes certain
references to the General Partner that all parties had intended to refer to
Jacor Communications and the parties therefore now mutually desire to amend the
Agreement to correct all such references.
NOW, THEREFORE, in consideration of the promises contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Except as otherwise defined herein, capitalized terms used and not
defined herein shall have the meanings assigned to them in the Agreement as
amended hereby.
2. Sections 11.2(C) and 11.2(D) of the Agreement are hereby deleted and
replaced in their entirety by the following new Sections 11.2(C) and 11.2(D):
"C. From the date of this Agreement until the fifth anniversary of such
date, if (i) the employment by Jacor Communications of Benjamin Homel, a/k/a
Randy Michaels, its President ("Michaels"), is terminated by the Board of
Directors without cause; (ii) Michaels' job responsibilities are significantly
reduced; (iii) Michaels' annual base salary is reduced by more than ten percent
(10%); or (iv) a Trigger Event (as defined below) occurs, then the Limited
Partner shall have the right for a period of sixty (60) days following the date
of any event set forth in clauses (i); (ii); (iii) or (iv) above either to (a)
purchase the General Partner's five percent (5%) general partnership interest in
the Partnership (the "GP Interest") from the General Partner, and the General
Partner is obligated to sell its GP Interest to the Limited Partner at a price
equal to the amount of the then current General Partner's Initial Contribution
Account; or (b) sell its LP Interest to the General Partner, and the General
Partner is obligated to purchase the LP Interest from the Limited Partner in
exchange for the Jacor Stock. For purposes of this Section 11.2(C), the term
"Trigger Event" shall mean the following events:
a) Any Person or group (as defined for purposes of Regulation 13D
promulgated pursuant to The Securities Exchange Act of 1934, as amended), other
than Zell Chilmark Fund, L.P. ("Z/C") or its Affiliates, shall acquire or become
the beneficial owner of more than 30% of the outstanding voting securities of
Jacor Communications or if Jacor Communications has entered into a letter of
intent relating to, or has publicly proposed to enter into, a transaction such
as a merger, consolidation or acquisition of all or substantially all of the
assets of Jacor Communications or other similar business combination
transactions.
b) Z/C, at any time shall, on or prior to September 30, 1995, fail to
hold stock record and beneficial ownership of 30% or more of the outstanding
voting securities of Jacor Communications.
c) Z/C, shall, at any time prior to September 30, 1995, fail to have its
designees constitute at least a majority in number of the members of Jacor
Communication's board of directors or shall thereafter fail to have its
designees constitute at least 30% in number of Jacor Communication's board of
directors."
"D. From the date of this Agreement until the fifth anniversary of such
date, if Michaels voluntarily resigns as an officer of Jacor Communications or
is terminated by Jacor Communications with cause, the General Partner shall have
the right for a period of sixty (60) days following the date of such resignation
either to (i) have its GP Interest redeemed by the Partnership for an amount
equal to the General Partner's Initial Contribution plus the greater of (x) the
Preferred Return on the General Partner's Initial Capital Contribution or (y)
fifty percent (50%) of the cumulative aggregate of Operating Cash Flow plus the
Capital Cash Flow of the Company from the date of this Agreement until the
"Closing Date" as defined below, or (ii) purchase the LP Interest from the
Limited Partner and the Limited Partner is obligated to sell its LP Interest in
exchange for the Jacor Stock."
3. The parties hereby agree that except for this Amendment No. 1, all
provisions of the Agreement remain in full force and effect.
4. This Amendment No. 1 is an instrument in writing as contemplated by
Section 14.2 of the Agreement and, as such, is effective to modify the Agreement
as set forth herein effective as of the date hereof.
5. From and after the effective date of this Amendment No.1, all
references to the Agreement in the Agreement shall be deemed to be references to
the Agreement as amended pursuant to this Amendment No. 1.
6. This Amendment No. 1 shall be binding upon and inure to the benefit of
the respective legal representatives, successors and assigns of the parties
hereto.
IN WITNESS WHEREOF, this Amendment No. 1 has been executed and sworn to as
of the day and year first above written by the parties hereto.
JACOR CABLE, INC.
By:_____________________________
Title:__________________________
UP YOUR RATINGS, INC.
By:_____________________________
Title:__________________________
JACOR COMMUNICATIONS, INC.
By:_____________________________
Title:__________________________
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
BEFORE ME, a Notary Public in and for said County and State, personally
appeared __________________, the ____________ of JACOR CABLE, INC., a Kentucky
corporation, who acknowledged that he did sign the foregoing instrument and that
the same is his free act and deed as such officer and is the free act and deed
of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this
_____ day of ____________, 1994.
________________________________
Notary Public
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
BEFORE ME, a Notary Public in and for said County and State, personally
appeared _________________, the ____________ of UP YOUR RATINGS, INC., an Ohio
corporation, who acknowledged that he did sign the foregoing instrument and that
the same is his free act and deed as such officer and is the free act and deed
of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this
_____ day of ____________, 1994.
________________________________
Notary Public
STATE OF OHIO )
) ss:
COUNTY OF HAMILTON )
BEFORE ME, a Notary Public in and for said County and State, personally
appeared _________________, the ____________ of JACOR COMMUNICATIONS, INC., an
Ohio corporation, who acknowledged that he did sign the foregoing instrument and
that the same is his free act and deed as such officer and is the free act and
deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this
_____ day of ____________, 1994.
________________________________
Notary Public
AMENDMENT NO. 2
TO
JACOR-CMM LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
This Amendment No. 2 to the Jacor-CMM Limited Partnership Agreement of
Limited Partnership is entered into by and among Jacor Cable, Inc. ("General
Partner") , Up Your Ratings, Inc. ("Limited Partner") and Jacor Communications,
Inc. ("Jacor Communications") and is effective as of the first (1st) day of
January, 1994. The General Partner, the Limited Partner, and Jacor
Communications shall be collectively referred to hereinafter as the "parties".
WHEREAS, the parties entered into that certain Jacor-CMM Limited
Partnership Agreement of Limited Partnership dated as of January 1, 1994
("Agreement"), forming Jacor-CMM Limited Partnership ("Partnership"); and
WHEREAS, Jacor Communications became a party to that Agreement solely for
the purposes of Section 11.2 thereof; and
WHEREAS, the parties amended the Agreement effective as of July 22, 1994;
and
WHEREAS, the parties desire to amend to the Agreement again to change the
state of formation and the governing law of the Partnership from Illinois to
Ohio;
NOW, THEREFORE, in consideration of the promises contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Recitals. Paragraph A of the Agreement, in the "Recitals" section,
is hereby deleted in its entirety with the following sentence inserted in its
place:
"A. General Partner and Limited Partner desire to form an Ohio
limited partnership (the "Partnership") for the purpose of owning all of the
issued and outstanding common stock, no par value (the "Stock") of Critical Mass
Media, Inc., an Ohio corporation (the "Company")."
2. Recitals. Paragraph B of the Agreement, in the "Recitals" section,
is hereby deleted in its entirety with the following sentence inserted in its
place:
"B. The Partners also desire to have the Partnership governed by
Ohio's limited partnership act (Chapter 1782 of the Ohio Revised Code).
3. Formation. Paragraph 1.1 of the Agreement, in the "Formation of
Partnership" section, is hereby deleted in its entirety with the following
paragraph inserted in its place:
"1.1 Formation. The General Partner and the Limited Partner do
hereby form and enter into an Ohio limited partnership (being the "Partnership")
according to all of the terms and provisions of this Agreement. Each Partner
has an interest in the Partnership which is expressed in terms of a percentage
of the whole, with the present "Percentage Interest" of each Partner being set
forth opposite its signature hereto. No Partner has any interest in specific
Partnership property but the interests of all Partners in the Partnership are,
for all purposes, personal property."
4. Governing Law. Paragraph 14.6 of the Agreement, in the
"Miscellaneous" section, is hereby deleted in its entirety with the following
paragraph inserted in its place:
"14. Governing Law. This Agreement shall be governed by the laws
of the State of Ohio. Except to the extent the Act is inconsistent with the
provisions of this Agreement, the provisions of such Act shall apply to and
govern the Partnership created hereby and the respective rights and liabilities
of the Partners."
5. The parties hereby agree that except for Amendment No. 1 and
Amendment No. 2 to the Agreement, all provisions thereof remain in full force
and effect.
6. This Amendment No. 2 is an instrument in writing as contemplated by
Section 14.2 of the Agreement and, as such, is effective as of the date hereof.
7. From and after the effective date of this Amendment No. 2, all
references to the Agreement shall be deemed to be references to the Agreement as
amended pursuant to Amendment No. 1 and Amendment No. 2.
8. This Amendment No. 2 shall be binding upon and inure to the benefit
of the respective legal representatives, successors and assigns of the parties
hereto.
IN WITNESS WHEREOF, this Amendment No. 2 has been executed and sworn to
as of the day and year first above written by the parties hereto.
JACOR CABLE. INC.
By:
Its:
UP YOUR RATINGS, INC.
By:
Its:
JACOR COMMUNICATIONS, INC.
By:
Its:
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BEFORE ME, a Notary Public in and for said County and State, personally
appeared ____________________, the _______________ of JACOR CABLE, INC., a
Kentucky corporation, who acknowledged that he did sign the foregoing instrument
and that the same is his free act and deed as such officer and is the free act
and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this
_____ day of __________, 1994.
Notary Public
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BEFORE ME, a Notary Public in and for said County and State, personally
appeared ____________________, the _______________ of UP YOUR RATINGS, INC., an
Ohio corporation, who acknowledged that he did sign the foregoing instrument and
that the same is his free act and deed as such officer and is the free act and
deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this
_____ day of __________, 1994.
Notary Public
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BEFORE ME, a Notary Public in and for said County and State, personally
appeared ____________________, the _______________ of JACOR COMMUNICATIONS, INC.
a Kentucky corporation, who acknowledged that he did sign the foregoing
instrument and that the same is his free act and deed as such officer and is the
free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this
_____ day of __________, 1994.
Notary Public
SECOND AMENDMENT
TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT ("Amendment") is entered
into as of March 7, 1994 among Jacor Communications, Inc., an Ohio corporation
(the "Company"), Banque Paribas, individually and as Agent (in such capacity,
the "Agent"), and each of The First National Bank of Boston, Continental Bank,
N.A., Society National Bank and Union Bank.
R E C I T A L S:
WHEREAS, the Company, the banks party thereto from time to time (the
"Banks"), the Agent and each Co-Agent are parties to that certain Credit
Agreement dated as of March 5, 1993, as amended by that certain First Amendment
to Credit Agreement dated as of November 15, 1993 (as so amended, the "Credit
Agreement"; capitalized terms used and not defined herein shall have the
meanings assigned to them in the Credit Agreement as amended hereby);
WHEREAS, the Company has requested that the Banks and the Agent
consent to an amendment to the Credit Agreement as more fully described herein;
and
WHEREAS, the Banks and the Agent have granted their consent to such
amendment upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
Amendment. Immediately upon the satisfaction of each of the conditions
precedent set forth in Section 2 of this Amendment, the Credit Agreement is
amended as follows:
Section 6.15(g) of the Credit Agreement is hereby amended by deleting the
figure "$5,000,000" as it appears therein, and by inserting in its stead the
figure "$11,000,000".
Conditions to Effectiveness of Amendment. The effectiveness of this
Amendment is subject to the satisfaction of the following conditions precedent:
Documents.
) Amendment. The Company shall have duly executed and
delivered this Amendment.
) Guaranty Amendment. Each Subsidiary (other than the
Excluded Subsidiaries) (collectively, the "Subject Subsidiaries") shall have
executed and delivered a Reaffirmation with respect to the Subsidiary Guaranty
in the form of Exhibit A hereto (the "Reaffirmation").
Good Standing. The Agent shall have received a good-standing certificate with
respect to the Company (dated a date not more than ten Business Days prior to
the effectiveness of this Amendment) from the Secretary of State of Ohio.
Certified Resolutions, etc. The Agent shall have received (in sufficient
copies for each Bank) a certificate in form and substance satisfactory to the
Agent of the secretary or assistant secretary (or comparable officer) of the
Company dated the effective date of this Amendment (the "Effective Date"),
certifying (i) the resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance by it of this Amendment and
the continued effectiveness thereof, (ii) that there have been no changes in its
certificate of incorporation or by-laws since the Closing Date, or if there have
been changes in its certificate of incorporation or by-laws since the Closing
Date, certifying its certificate of incorporation and/or by-laws, as the case
may be, as in effect on the Effective Date and (iii) specimen signatures of its
officers authorized to sign this Amendment.
Consents, Licenses, Approval, etc. All consents, licenses and approvals, if
any, required in connection with the execution, delivery and performance by the
Company and its Subsidiaries of this Amendment and the Reaffirmation
(collectively, the "Documents"), or the validity or enforceability thereof, or
in connection with any of the transactions effected pursuant to the Documents,
shall be in full force and effect.
No Default; etc. The Agent shall have received a certificate of an Authorized
Officer of the Company dated the Effective Date, certifying as to matters set
forth in Sections 3.2 and 3.8 of this Amendment.
No Injunction. No law or regulation shall have been adopted, no order,
judgment or decree of any governmental authority shall have been issued, and no
litigation shall be pending or threatened, which in the reasonable judgment of
the Agent would enjoin, prohibit or restrain, or impose or result in the
imposition of any material adverse condition upon, the execution, delivery or
performance by the Company or any of its Subsidiaries of the Documents, the
making or repayment of the Loans or the consummation of the transactions
effected pursuant to the terms of the Loan Documents.
No Material Adverse Change. No event, act or condition shall have occurred
since September 30, 1992 that, in the reasonable judgment of the Agent, has had
or could have a material adverse effect on the business, properties, financial
condition or results of operations of the Company and its Subsidiaries.
Legal Opinions. The Agent and each Bank shall have received favorable legal
opinions, dated the Effective Date, of Graydon, Head & Ritchey, Ohio counsel to
the Company and its Subsidiaries, in each case in form and substance
satisfactory to the Agent and the Banks.
Fees and Expenses. The Agent and the Banks shall have received all fees and
expenses payable by the Company under the Credit Agreement in connection with
the preparation, execution or delivery of the Documents (including, without
limitation, the reasonable fees and expenses accrued through the Effective Date
of counsel to the Agent); and the Company hereby agrees to pay, and to hold the
Agent, each Bank and each Co-Agent harmless against all documentary, stamp,
transfer and similar taxes paid or payable in connection with the execution,
delivery or performance of the Documents.
Additional Matters. The Agent shall have received such other certificates,
opinions, documents and instruments relating to the Obligations or the
transactions contemplated hereby, by the Documents and by the Loan Documents as
may have been reasonably requested by the Agent, and all corporate and other
proceedings and all other documents (including, without limitation, all
documents referred to herein and not appearing herein and exhibits hereto) and
all legal matters in connection with the transactions contemplated hereby, by
the Documents and by the Loan Documents shall be reasonably satisfactory in
form and substance to the Agent.
Representations and Warranties. In order to induce the Agent and the Banks
to enter into this Amendment, the Company represents and warrants to the Agent
and each Bank, upon the effectiveness of this Amendment, which representations
and warranties shall survive the execution and delivery of this Amendment, that:
Due Incorporation; etc. Each of the Company and each Subject Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all requisite authority to
conduct its business in each jurisdiction in which its business is conducted.
No Default; etc. No Default or Event of Default has occurred and is continuing
after giving effect to this Amendment or would result from the execution or
delivery of this Amendment or the Reaffirmation or the consummation of the
transactions contemplated hereby or thereby.
Corporate Power and Authority; Authorization. Each of the Company and each
Subject Subsidiary has the corporate power and authority to execute, deliver and
carry out the terms and provisions of the Documents to which it is a party and
the execution and delivery by the Company and each Subject Subsidiary of the
Documents to which it is a party and the performance by the Company and each
Subject Subsidiary of its obligations hereunder and thereunder have been duly
authorized by all requisite corporate action by the Company and each Subject
Subsidiary.
Execution and Delivery. The Company and each Subject Subsidiary has duly
executed and delivered each Document to which it is a party.
Enforceability. Each Document, the Credit Agreement, as amended by this
Amendment, and each other Loan Document constitutes the legal, valid and binding
obligation of the Company and each Subject Subsidiary party thereto, as the
case may be, enforceable against such Person in accordance with its respective
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' right generally, and by general principles of equity.
No Conflicts; etc. Neither the execution, delivery or performance by the
Company or any Subject Subsidiary of the Documents to which it is a party, nor
compliance by any of them with the terms and provisions hereof and thereof, (i)
will contravene any applicable provision of any law, statute, rule, regulation,
order, writ, injunction or decree of any court or governmental instrumentality
or (ii) will conflict or be inconsistent with, or result in any breach of, any
of the terms, covenants, conditions or provisions of, or constitute a default
under, or result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any property or assets owned by it pursuant to the
terms of any indenture, mortgage, deed of trust, agreement or other instrument
to which it is a party or by which it or any of its property or assets is bound
or to which it may be subject, or (iii) will violate any provision of its
certificate of incorporation or by-laws.
Consents; etc. No order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption by, any
governmental or public body or authority, or any subdivision thereof, is
required to authorize, or is required in connection with the execution,
delivery and performance of the Documents or the consummation of any of the
transactions contemplated hereby or thereby.
Representations and Warranties. All of the representations and warranties
contained in the Credit Agreement and in the other Loan Documents (other than
those which speak expressly only as of a different date) and in the Documents
are true and correct as of the date hereof after giving effect to this
Amendment and the other Documents and the transactions contemplated hereby
and thereby.
Miscellaneous.
Effect; Ratification. The amendment set forth herein is effective solely for
the purposes set forth herein and shall be limited precisely as written, and
shall not be deemed to (i) be a consent to any amendment, waiver or modification
of any other term or condition of the Credit Agreement or of any other Loan
Document or (ii) prejudice any right or rights that the Agent, the Co-Agents or
the Banks may now have or may have in the future under or in connection with the
Credit Agreement or any other Loan Document. Each reference in the Credit
Agreement to "this Agreement", "herein", "hereof" and words of like import and
each reference in the other Loan Documents to the "Credit Agreement" shall mean
the Credit Agreement as amended hereby. This Amendment shall be construed in
connection with and as part of the Credit Agreement and all terms, conditions,
representations, warranties, covenants and agreements set forth in the Credit
Agreement and each other Loan Document, except as herein amended or waived, are
hereby ratified and confirmed and shall remain in full force and effect.
Effectiveness. This Amendment shall immediately become effective as of the
date first written above upon (i) the receipt by the Agent of duly executed
counterparts of this Amendment from the Company and the Required Banks and (ii)
the satisfaction of each condition precedent contained in Section 2 hereof.
Counterparts. This Amendment may be executed in any number of counterparts,
each such counterpart constituting an original but all together one and the same
instrument.
Severability. Any provision contained in this Amendment which that is held to
be inoperative, unenforceable or invalid in any jurisdiction shall, as to that
jurisdiction, be inoperative, unenforceable or invalid without affecting the
remaining provisions of this amendment in that jurisdiction or the operation,
enforceability or validity of that provision in any other jurisdiction.
GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
JACOR COMMUNICATIONS, INC.
By
Title:
By
Title:
BANQUE PARIBAS, individually and
as Agent
By
Title:
By
Title:
THE FIRST NATIONAL BANK OF BOSTON
By
Title:
CONTINENTAL BANK, N.A.
By
Title:
SOCIETY NATIONAL BANK
By
Title:
UNION BANK
By
Title:
EXHIBIT A
REAFFIRMATION
[Attached]
REAFFIRMATION OF
SUBSIDIARY GUARANTY
This REAFFIRMATION OF SUBSIDIARY GUARANTY ("Reaffirmation") is entered into as
of March 7, 1994 by each of the parties listed on the signature pages hereof
(collectively, the "Guarantors") in favor of and for the benefit of Banque
Paribas, as agent (in such capacity, the "Agent") for itself, the co-agents and
the Banks party to the Credit Agreement and any Interest Rate Providers.
Capitalized terms used and not defined herein shall have the meanings assigned
to such terms in the Subsidiary Guaranty referenced below.
R E C I T A L S:
WHEREAS, Jacor Communications, Inc., an Ohio corporation (the "Company"),
the Banks, the Agent and each Co-Agent are parties to that certain Credit
Agreement dated as of March 5, 1993, as amended by that certain First Amendment
to Credit Agreement dated as of November 15, 1993 (the "Original Credit
Agreement");
WHEREAS, the Company, the Banks, the Agent and each Co-Agent are entering
into that certain Second Amendment to Credit Agreement dated as of the date
hereof (the "Credit Agreement Amendment"; and the Original Credit Agreement as
amended by the Credit Agreement Amendment being referred to herein as the
"Credit Agreement"); and
WHEREAS, each of the Guarantors is a party to that certain Subsidiary
Guaranty dated as of March 5, 1993, as amended by that certain First Amendment
to Subsidiary Guaranty dated as of November 15, 1993 (the "Subsidiary
Guaranty"), pursuant to which each Guarantor has jointly and severally
guaranteed the Guaranteed Debt, which term includes, inter alia, all Obligations
of the Company under and as defined in the Credit Agreement.
Section 1. Reaffirmation. Each of the Guarantors hereby (i) acknowledges
that the Company, the Banks and the Agent have entered into the Credit Agreement
Amendment, which Credit Agreement Amendment has been made available to and has
been reviewed by such Guarantor and (ii) reaffirms that its obligations under
the Subsidiary Guaranty and each other Collateral Document to which it is a
party continues in full force and effect with respect to the Original Credit
Agreement as amended by the Credit Agreement Amendment.
Section 2. Counterparts. This Reaffirmation may be executed in any number
of counterparts, each such counterpart constituting an original but all together
one and the same instrument.
Section 6. GOVERNING LAW. THIS REAFFIRMATION SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS.
IN WITNESS WHEREOF, each of the Guarantors hereto has caused this
Reaffirmation to be executed and delivered by a duly authorized officer thereof
as of the date first above written.
JACOR BROADCASTING CORPORATION
By:___________________________
Title:
JACOR BROADCASTING OF FLORIDA, INC.
By:___________________________
Title:
JACOR BROADCASTING OF ATLANTA, INC.
By:___________________________
Title:
JACOR BROADCASTING OF KNOXVILLE, INC.
By:___________________________
Title:
JACOR BROADCASTING OF COLORADO, INC.
By:___________________________
Title:
JACOR BROADCASTING OF TAMPA BAY, INC.
By:___________________________
Title:
JACOR CABLE, INC.
By:___________________________
Title:
GEORGIA NETWORK EQUIPMENT, INC.
By:___________________________
Title:
BROADCAST FINANCE, INC.
By:___________________________
Title:
Acknowledged:
BANK PARIBAS, individually,
as Agent and on behalf of the
Co-Agents and each Bank
By
Title:
By
Title:
THIRD
AMENDMENT
TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT ("Amendment") is entered
into as of October 1, 1994 among Jacor Communications, Inc., an Ohio corporation
(the "Company"), Banque Paribas, individually and as Agent (in such capacity,
the "Agent"), and each of The First National Bank of Boston, Bank of America-
Illinois (formerly known as Continental Bank, N.A.), Society National Bank and
Union Bank.
R E C I T A L S:
WHEREAS, the Company, the banks party thereto from time to time (the
"Banks"), the Agent and each Co-Agent are parties to that certain Credit
Agreement dated as of March 5, 1993, as amended by that certain First Amendment
to Credit Agreement dated as of November 15, 1993 and that certain Second
Amendment to Credit Agreement dated as of March 7, 1994 (as so amended, the
"Credit Agreement"; capitalized terms used and not defined herein shall have the
meanings assigned to them in the Credit Agreement as amended hereby);
WHEREAS, the Company has requested that the Banks and the Agent
consent to an amendment to the Credit Agreement as more fully described herein;
and
WHEREAS, the Banks and the Agent have granted their consent to such
amendment upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
Amendment. Immediately upon the satisfaction of each of the conditions
precedent set forth in Section 2 of this Amendment, the Credit Agreement is
amended, effective as of the date hereof, as follows:
Article I of the Credit Agreement is hereby amended by adding the following
definition thereto in proper alphabetical order:
"Applicable Rate" shall mean, at any time of determination, a
rate per annum equal to (i) if the Leverage Ratio is greater than or equal to
4.0 to 1.0 at such time, 0.50% and (i) if the Leverage Ratio is less than 4.0
to 1.0 at such time, 0.375%. The Applicable Rate shall be subject to adjustment
(upwards or downwards, as appropriate) based on the Leverage Ratio at the end of
each of the first three fiscal quarters and the fiscal year of the Company. For
purposes of determining the Applicable Rate, the Leverage Ratio shall be
determined (i) in the case of determinations made with respect to the first
three fiscal quarters of the Company's fiscal year, by reference to the monthly
financial statements for the month ending on the last day of such fiscal quarter
and the Compliance Certificate for such fiscal quarter delivered pursuant to
Sections 6.1(b) and (d) and (ii) in the case of determinations made with respect
to the last fiscal quarter of the Company's fiscal year, by reference to the
financial statements and Compliance Certificate delivered by the Company
pursuant to Sections 6.1(a) and (d). The adjustment, if any, to the Applicable
Rate shall be effective commencing on the fifth Business Day after the delivery
of such quarterly or annual financial statements and Compliance Certificate
and shall be effective only for the period subsequent to such date. In the
event that the Company shall at any time fail to furnish to the Banks the
financial statements and Compliance Certificate required to be delivered
pursuant to Section 6.1(a), (b) or (d), the maximum Applicable Rate shall
apply until such time as such financial statements and Compliance Certificate
are so delivered.
Subsections 2.11(b) and (c) of the Credit Agreement are hereby amended and
restated in their entirety as follows:
(b) The Company agrees to pay to the Agent for the
pro-rata account of the Banks in accordance with their respective Commitments a
commitment fee, computed at the Applicable Rate on the average daily unused
portion of the Aggregate Commitment until the Aggregate Commitments have been
terminated, payable quarterly in arrears and on the Acquisition Loan Termination
Date or such earlier date, if any, on which the Aggregate Commitments shall
terminate in accordance with the terms hereof and calculated on the basis of a
360-day year for the number of actual days elapsed.
(c) The Company agrees to pay to the Agent for its own
account an agency fee of $100,000 per annum, payable in advance on the on each
anniversary of the Closing Date until the Obligations have been paid and
performed in full (the "Agency Fee"). The Agency Fee shall be fully earned on
each anniversary of the Closing Date for each succeeding year.
Conditions to Effectiveness of Amendment. The effectiveness of this
Amendment is subject to the satisfaction of the following conditions precedent:
Documents.
) Amendment. The Company shall have duly executed and
delivered this Amendment.
) Guaranty Amendment. Each Subsidiary (other than the
Excluded Subsidiaries) (collectively, the "Subject Subsidiaries") shall have
executed and delivered a Reaffirmation with respect to the Subsidiary Guaranty
in the form of Exhibit A hereto (the "Reaffirmation").
Good Standing. The Agent shall have received a good-standing certificate with
respect to the Company (dated a date not more than ten Business Days prior to
the Effective Date (as defined below) from the Secretary of State of Ohio.
Certified Resolutions, etc. The Agent shall have received (in sufficient
copies for each Bank) a certificate in form and substance satisfactory to the
Agent of the secretary or assistant secretary (or comparable officer) of the
Company dated the effective date of this Amendment (the "Effective Date"),
certifying (i) the resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance by it of this Amendment and
the continued effectiveness thereof, (ii) that there have been no changes in its
certificate of incorporation or by-laws since the Closing Date, or if there have
been changes in its certificate of incorporation or by-laws since the Closing
Date, certifying its certificate of incorporation and/or by-laws, as the case
may be, as in effect on the Effective Date and (iii) specimen signatures of its
officers authorized to sign this Amendment.
Consents, Licenses, Approval, etc. All consents, licenses and approvals, if
any, required in connection with the execution, delivery and performance by the
Company and its Subsidiaries of this Amendment and the Reaffirmation
(collectively, the "Documents"), or the validity or enforceability thereof, or
in connection with any of the transactions effected pursuant to the Documents,
shall be in full force and effect.
No Default; etc. The Agent shall have received a certificate of an Authorized
Officer of the Company dated the Effective Date, certifying as to matters set
forth in Sections 3.2 and 3.8 of this Amendment.
No Injunction. No law or regulation shall have been adopted, no order,
judgment or decree of any governmental authority shall have been issued, and no
litigation shall be pending or threatened, which in the reasonable judgment of
the Agent would enjoin, prohibit or restrain, or impose or result in the
imposition of any material adverse condition upon, the execution, delivery or
performance by the Company or any of its Subsidiaries of the Documents, the
making or repayment of the Loans or the consummation of the transactions
effected pursuant to the terms of the Loan Documents.
No Material Adverse Change. No event, act or condition shall have occurred
since September 30, 1992 that, in the reasonable judgment of the Agent, has had
or could have a material adverse effect on the business, properties, financial
condition or results of operations of the Company and its Subsidiaries.
Fees and Expenses. The Agent and the Banks shall have received all fees and
expenses payable by the Company under the Credit Agreement in connection with
the preparation, execution or delivery of the Documents (including, without
limitation, the reasonable fees and expenses accrued through the Effective Date
of counsel to the Agent); and the Company hereby agrees to pay, and to hold the
Agent, each Bank and each Co-Agent harmless against all documentary, stamp,
transfer and similar taxes paid or payable in connection with the execution,
delivery or performance of the Documents.
Additional Matters. The Agent shall have received such other certificates,
opinions, documents and instruments relating to the Obligations or the
transactions contemplated hereby, by the Documents and by the Loan Documents as
may have been reasonably requested by the Agent, and all corporate and other
proceedings and all other documents (including, without limitation, all
documents referred to herein and not appearing herein and exhibits hereto) and
all legal matters in connection with the transactions contemplated hereby, by
the Documents and by the Loan Documents shall be reasonably satisfactory in
form and substance to the Agent.
Representations and Warranties. In order to induce the Agent and the Banks
to enter into this Amendment, the Company represents and warrants to the Agent
and each Bank, upon the effectiveness of this Amendment, which representations
and warranties shall survive the execution and delivery of this Amendment, that:
Due Incorporation; etc. Each of the Company and each Subject Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all requisite authority to
conduct its business in each jurisdiction in which its business is conducted.
No Default; etc. No Default or Event of Default has occurred and is continuing
after giving effect to this Amendment or would result from the execution or
delivery of this Amendment or the Reaffirmation or the consummation of the
transactions contemplated hereby or thereby.
Corporate Power and Authority; Authorization. Each of the Company and each
Subject Subsidiary has the corporate power and authority to execute, deliver and
carry out the terms and provisions of the Documents to which it is a party and
the execution and delivery by the Company and each Subject Subsidiary of the
Documents to which it is a party and the performance by the Company and each
Subject Subsidiary of its obligations hereunder and thereunder have been duly
authorized by all requisite corporate action by the Company and each Subject
Subsidiary.
Execution and Delivery. The Company and each Subject Subsidiary has duly
executed and delivered each Document to which it is a party.
Enforceability. Each Document, the Credit Agreement, as amended by this
Amendment, and each other Loan Document constitutes the legal, valid and binding
obligation of the Company and each Subject Subsidiary party thereto, as the
case may be, enforceable against such Person in accordance with its
respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' right generally, and by general principles of equity.
No Conflicts; etc. Neither the execution, delivery or performance by the
Company or any Subject Subsidiary of the Documents to which it is a party, nor
compliance by any of them with the terms and provisions hereof and thereof, (i)
will contravene any applicable provision of any law, statute, rule, regulation,
order, writ, injunction or decree of any court or governmental instrumentality
or (ii) will conflict or be inconsistent with, or result in any breach of, any
of the terms, covenants, conditions or provisions of, or constitute a default
under, or result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any property or assets owned by it pursuant to the
terms of any indenture, mortgage, deed of trust, agreement or other instrument
to which it is a party or by which it or any of its property or assets is bound
or to which it may be subject, or (iii) will violate any provision of its
certificate of incorporation or by-laws.
Consents; etc. No order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption by, any
governmental or public body or authority, or any subdivision thereof,
is required to authorize, or is required in connection with the execution,
delivery and performance of the Documents or the consummation of any of the
transactions contemplated hereby or thereby.
Representations and Warranties. All of the representations and warranties
contained in the Credit Agreement and in the other Loan Documents (other than
those which speak expressly only as of a different date) and in the Documents
are true and correct as of the date hereof after giving effect to this
Amendment and the other Documents and the transactions contemplated hereby and
thereby.
Miscellaneous.
Effect; Ratification. The amendments set forth herein are effective solely for
the purposes set forth herein and shall be limited precisely as written, and
shall not be deemed to (i) be a consent to any amendment, waiver or modification
of any other term or condition of the Credit Agreement or of any other Loan
Document or (ii) prejudice any right or rights that the Agent, the Co-Agents or
the Banks may now have or may have in the future under or in connection with the
Credit Agreement or any other Loan Document. Each reference in the Credit
Agreement to "this Agreement", "herein", "hereof" and words of like import and
each reference in the other Loan Documents to the "Credit Agreement" shall mean
the Credit Agreement as amended hereby. This Amendment shall be construed in
connection with and as part of the Credit Agreement and all terms, conditions,
representations, warranties, covenants and agreements set forth in the Credit
Agreement and each other Loan Document, except as herein amended or waived, are
hereby ratified and confirmed and shall remain in full force and effect.
Effectiveness. This Amendment shall immediately become effective as of the
date first written above upon (i) the receipt by the Agent of duly executed
counterparts of this Amendment from the Company and each Banks and (ii) the
satisfaction of each condition precedent contained in Section 2 hereof.
Counterparts. This Amendment may be executed in any number of counterparts,
each such counterpart constituting an original but all together one and the same
instrument.
Severability. Any provision contained in this Amendment which that is held to
be inoperative, unenforceable or invalid in any jurisdiction shall, as to that
jurisdiction, be inoperative, unenforceable or invalid without affecting the
remaining provisions of this amendment in that jurisdiction or the operation,
enforceability or validity of that provision in any other jurisdiction.
GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
JACOR COMMUNICATIONS, INC.
By
Title:
By
Title:
BANQUE PARIBAS, individually and
as Agent
By
Title:
By
Title:
THE FIRST NATIONAL BANK OF BOSTON
By
Title:
BANK OF AMERICA-ILLINOIS (formerly known as Continental Bank, N.A.)
By
Title:
SOCIETY NATIONAL BANK
By
Title:
UNION BANK
By
Title:
EXHIBIT A
REAFFIRMATION
[Attached]
REAFFIRMATION OF
SUBSIDIARY GUARANTY
This REAFFIRMATION OF SUBSIDIARY GUARANTY ("Reaffirmation") is
entered into as of October 1, 1994 by each of the parties listed on the
signature pages hereof (collectively, the "Guarantors") in favor of and for
the benefit of Banque Paribas, as agent (in such capacity, the "Agent") for
itself, the co-agents and the Banks party to the Credit Agreement and any
Interest Rate Providers. Capitalized terms used and not defined herein shall
have the meanings assigned to such terms in the Subsidiary Guaranty referenced
below.
R E C I T A L S:
WHEREAS, Jacor Communications, Inc., an Ohio corporation (the
"Company"), the Banks, the Agent and each Co-Agent are parties to that certain
Credit Agreement dated as of March 5, 1993, as amended by that certain First
Amendment to Credit Agreement dated as of November 15, 1993 and that certain
Second Amendment to Credit Agreement dated as of March 7, 1994 (the "Original
Credit Agreement");
WHEREAS, the Company, the Banks, the Agent and each Co-Agent
are entering into that certain Third Amendment to Credit Agreement dated as of
the date hereof (the "Credit Agreement Amendment"; and the Original Credit
Agreement as amended by the Credit Agreement Amendment being referred to herein
as the "Credit Agreement"); and
WHEREAS, each of the Guarantors is a party to that certain
Subsidiary Guaranty dated as of March 5, 1993, as amended by that certain First
Amendment to Subsidiary Guaranty dated as of November 15, 1993 (the "Subsidiary
Guaranty"), pursuant to which each Guarantor has jointly and severally
guaranteed the Guaranteed Debt, which term includes, inter alia, all
Obligations of the Company under and as defined in the Credit Agreement.
Section 1. Reaffirmation. Each of the Guarantors hereby (i)
acknowledges that the Company, the Banks and the Agent have entered into the
Credit Agreement Amendment, which Credit Agreement Amendment has been made
available to and has been reviewed by such Guarantor and (ii) reaffirms that its
obligations under the Subsidiary Guaranty and each other Collateral Document to
which it is a party continues in full force and effect with respect to the
Original Credit Agreement as amended by the Credit Agreement Amendment.
Section 2. Counterparts. This Reaffirmation may be executed in any
number of counterparts, each such counterpart constituting an original but all
together one and the same instrument.
Section 6. GOVERNING LAW. THIS REAFFIRMATION SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF ILLINOIS.
IN WITNESS WHEREOF, each of the Guarantors hereto has caused this
Reaffirmation to be executed and delivered by a duly authorized officer thereof
as of the date first above written.
JACOR BROADCASTING CORPORATION
By:___________________________
Title:
JACOR BROADCASTING OF FLORIDA, INC.
By:___________________________
Title:
JACOR BROADCASTING OF ATLANTA, INC.
By:___________________________
Title:
JACOR BROADCASTING OF KNOXVILLE, INC.
By:___________________________
Title:
JACOR BROADCASTING OF COLORADO, INC.
By:___________________________
Title:
JACOR BROADCASTING OF TAMPA BAY, INC.
By:___________________________
Title:
JACOR CABLE, INC.
By:___________________________
Title:
GEORGIA NETWORK EQUIPMENT, INC.
By:___________________________
Title:
BROADCAST FINANCE, INC.
By:___________________________
Title:
Acknowledged:
BANK PARIBAS, individually,
as Agent and on behalf of the
Co-Agents and each Bank
By
Title:
By
Title:
STOCK OPTION AGREEMENT
December 19, 1994
CONFIDENTIAL
Rod F. Dammeyer
Itel Corporation
Two N. Riverside Plaza
19th Floor
Chicago, IL 60606
Dear Rod:
You are hereby notified that the Board of Directors of Jacor
Communications, Inc. (the "Company") has decided to grant to you a stock option
(the "Option"). This grant is conditioned upon your signing and returning a
copy of this Agreement to Jon M. Berry, Treasurer, at the Company's offices,
1300 PNC Center, 20l East Fifth Street, Cincinnati, Ohio 45202.
The Option granted to you is a right to purchase a total of 5,000 shares
of the common stock of the Company ("Common Stock") in the manner and subject to
the conditions provided in this Agreement. The "Grant Date" of the Option is
December 15, 1994.
The price per share of Common Stock under the Option (referred to as the
"Exercise Price" or the "Option Exercise Price") as well as the Vesting Schedule
of the Option is set forth below. The base option price of $12.75 represents
100% of the fair market value of a share of Common Stock on the Grant Date. The
fair market value of a share of Common Stock for purposes of the preceding
sentence was the last trade price of the Common Stock as reported on the Nasdaq
National Market on the Grant Date.
NUMBER
DATES ON OF OPTIONS OPTION EXERCISE
WHICH THAT VEST ON PRICE FOR OPTIONS
OPTIONS EACH RESPECTIVE VESTING ON EACH
VEST DATE RESPECTIVE DATE
12/15/94 1,500 $ 12.75
12/15/95 1,500 $ 13.26
12/15/96 1,000 $ 13.79
12/15/97 1,000 $ 14.34
TOTAL 5,000
An Inflation Factor was added to the base option price to provide for some
measure of future inflation. The Compensation Committee feels that stock price
appreciation due to general inflationary effects should not totally inure to the
benefit of the option holder. Rather, enjoyment of stock price appreciation
should be based on real growth in the value of Jacor, which hopefully will be
inherent in the future values of the Company's stock. The Inflation Factor is
a 4% factor, compounded annually, and is triggered at each of the annual vesting
dates. There is no further price accretion after the vesting dates.
You are urged to review this Agreement carefully. If after reviewing this
Agreement you have any questions whatsoever, you should contact Jon M. Berry,
Treasurer of the Company, at (513) 621-1300.
This Option is a nonqualified stock option and, as such, is not intended
to qualify for the favorable tax treatment afforded under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). You are advised to
consult with your personal tax advisor regarding the tax consequences of the
exercise of this Option and the disposition of any shares received upon
exercise.
You may not sell or in any way transfer this Option. You may not exercise
your Option until and unless: a) six months has elapsed since the Grant Date; b)
unless an exemption is available, the Common Stock underlying the Option is
first registered for sale to you with the U.S. Securities and Exchange
Commission and you have been provided a copy of a current Prospectus; and c)
unless an exemption is available, the Common Stock underlying this Option is
first registered, qualified, or approved for sale to you under the securities
laws of the State of Ohio and such other jurisdictions, securities exchanges,
or other governmental authorities which the Company determines to be necessary
or desirable. Until such time as such conditions are met and continue to be
met, you shall have no right to exercise the Option, and until the Option is
validly exercised, you shall have no property rights in the Common Stock which
underlies the Option. In the event such registrations, qualifications, or
approvals have not been effected at the time the Company receives written
notice of your desire to exercise your Option, the Company will in due course
commence the process necessary to effect, and will use its best efforts to
accomplish, such registrations, qualifications, or approvals.
Resale of shares of Common Stock acquired upon exercise of this Option is
subject to certain restrictions under the Securities Act of 1933, with which you
agree to comply. Furthermore, acquisition of this Option, the exercise of this
Option and the disposition of the shares acquired may be subject to the
reporting and profit recapture provisions of Section 16 of the Securities
Exchange Act of 1934.
Subject to the provisions of this Agreement, you may exercise this Option,
in whole or in part, at any time and from time to time prior to its expiration.
This option is considered outstanding until it is exercised in full or expires.
Shares which may be delivered pursuant to the exercise of Options under
this Agreement may consist, either in whole or in part, of the Company's
authorized but unissued Common Stock or shares of the Company's authorized and
issued Common Stock reacquired by the Company and held in its Treasury, as may
from time to time be determined by the Company.
This Option must be exercised in full by no later than 5:00 P.M., December
14, 2004. All the rights granted under the Option expire at that date.
Fractional shares may not be purchased. No exercise will be made for less than
1,000 shares of Common Stock at any one time unless there is less than 1,000
shares remaining under the Option, in which event the exercise shall be for no
less than the remaining shares. Subject to the provisions herein, you may
exercise this Option by completing either one of or both of the attached Option
Exercise Notices depending upon method of exercise. The completed Notice(s)
should be submitted along with payment of the Exercise Price for such shares by
(a) cash or check payable to the Company; (b) delivery of shares of Common
Stock; or (c) a combination of the preceding two methods, to Jon M. Berry,
Treasurer, at the Company's offices, 1300 PNC Center, 201 East Fifth Street,
Cincinnati, Ohio 45202. Payment by delivery of shares of Common Stock may
include (i) the delivery of Common Stock already owned by you; or (ii) the
exchange, in successive steps, or Common Stock to be received from the exercise
of the Option, with the result that you will receive from the exercise a net
number of shares of Common Stock represented by the difference between the total
number of shares with respect to which the Option is being exercised and that
number of shares, the fair market value of which is equal to the full Exercise
Price for all shares of Common Stock with respect to which the Option is
exercised. Shares of Common Stock delivered in payment of the Option Exercise
Price will be valued at their fair market value as of the date of exercise.
The "fair market value" of a share of Common Stock for purposes of the
preceding sentence shall be determined as follows:
(i) if the Common Stock is traded on a national securities exchange or
the Nasdaq Stock Market, the average of the highest and lowest selling price of
a share of Common Stock on the exercise date, or if there were no sales on such
date, then on the next prior business day on which there were sales;
(ii) if the Common Stock is traded other than on a national securities
exchange, the average between the closing bid and asked price on the exercise
date, as reported by the National Association of Securities Dealers Automated
Quotation System or such other source of quotations for, or reports of trading
or, the Common Stock as the Company may reasonably select from time to time, or
if there is no bid and asked price on said date, then on the next prior business
day on which there was a bid and asked price; and
(iii) if neither of the methods described in (i) and (ii) next above is
available or accurately reflects fair market value, then the Company shall make
a good faith determination of the fair market value using any reasonable method
of valuation.
In the event there is any change in the Common Stock of the Company through
the declaration of stock dividends, or through recapitalization resulting in
stock split-ups, or combinations or exchanges of shares, or otherwise, the
exercise price per share and the number of shares subject to option under this
Agreement shall be appropriately adjusted by the Board of Directors of the
Company.
Your Option is in all respects subject to the following conditions:
(a) Except for paragraphs (b), (c) and (d) immediately below, your Option
is personal and to you and may be exercised only by you and only while you are
a member of the Board of Directors of the Company or one of its subsidiaries.
(b) In the event of your death while you are a Director of the Company or
one of its subsidiaries, to the extent that you are entitled to exercise your
Option on your date of death, the Option may be exercised within six (6) months
of the date of death by the person or persons to whom your rights shall pass by
will duly admitted to probate or, in absence of any provision by will duly
admitted to probate, by the executor or administrator of your estate duly
qualified and appointed under the laws of your domicile at the time of your
death.
(c) In the event you become disabled (as defined in Section 22(e)(3) of the
Code) while you are a Director of the Company or one of its subsidiaries and
your service on the Board of Directors is terminated for that reason, you may
within a one-year period thereafter, exercise your Option to the extent the
Option was exercisable by you on the date of termination of service on the
Board.
(d) In the event you cease to be a Director of the Company or one of its
subsidiaries for any reason other than your death or disability or your
voluntary resignation or removal for cause, to the extent that you are entitled
to exercise your Option on the date of such cessation, the Option may be
exercised within three (3) months after the date you cease to be a Director of
the Company or one of its subsidiaries.
(e) Your Option may only be held by you, personally -- it is absolutely
nontransferable except by will or under the laws of descent and distribution. By
signing in the place provided below, you agree that you will not attempt to
sell, assign, transfer, pledge, or in any other way alienate or dilute your
ownership of this Option. Any attempt to do so will constitute an automatic
termination of all of your rights under the Plan and this Agreement.
By accepting the Option and by signing in the space provided below, you
hereby agree, in consideration of the grant of this Option, that: (a) you will
hold and exercise your Option subject to all of the terms and conditions herein;
(b) you release any and all claims against the Company, its officers, directors,
employees, consultants, attorneys, and agents (i) in connection with the
obtaining of the requisite approvals or clearances to permit the exercise of
this Option, (ii) in the event there is no market for the Common Stock or with
respect to any representations, estimates, or projections made by all or any of
them, and (iii) in the event applicable laws or authorities either prevent the
Option from being exercised, prevent the
underlying Common Stock from being sold (or make either event less desirable);
and (c) you acknowledge that you have perused this Agreement granting the Option
and are familiar with and understand their provisions.
This Agreement may not be modified or amended orally and shall be construed
and interpreted according to the law of the State of Ohio, United States of
America.
If you agree to all of the terms and conditions set forth above, please
sign both copies of this letter where indicated and return one copy to Jon M.
Berry, keeping the other in your files.
JACOR COMMUNICATIONS, INC.
BY:
Jon M. Berry, Senior Vice President
and Treasurer
Understood and Accepted:
Optionee's Signature (Date)
JACOR COMMUNICATIONS, INC.
STOCK OPTION AGREEMENT
DATED , 19
OPTION EXERCISE NOTICE
(Payment with Cash)
The undersigned, the holder of an Option to purchase
shares of the Company's Common Stock, hereby
elects to exercise such Option as follows:
Number of Shares to be Purchased
Option Exercise Price per Share $
Payment Enclosed $
Dated this day of , 19 .
Option Holder
JACOR COMMUNICATIONS, INC.
STOCK OPTION AGREEMENT
DATED , 19
OPTION EXERCISE NOTICE
(Payment with Stock)
The undersigned, the holder of an Option to purchase
shares of the Company's Common Stock, hereby certifies as follows:
1. That I hereby elect to exercise such Option to purchase
shares of the Company's Common Stock at the Option Exercise Price of
per share, for an aggregate Option Exercise Price of $ .
2. That in partial payment of the aggregate Option Exercise Price, I
hereby deliver to the Company, Stock Certificate No. accompanied
by a stock power duly executed in blank, with any signature guaranteed,
representing shares of the Company's Common Stock, which stock
has a fair market value of $ per share ("Fair Market Value"),
determined as provided in the Stock Option Agreement dated , 19
.
3. That I wish to surrender back to the Company in repeated exchanges,
if necessary, such shares to which I am entitled from the exercise of this
Option as are necessary to pay the full aggregate Option Exercise Price and to
complete the exercise of the Option in full, with the end result that I
ultimately receive certificates for shares of the Company's
Common Stock (that number of shares equal to the number of shares delivered to
the Company herewith plus that whole number of shares, without rounding, that
has a Fair Market Value equal to the spread between the Fair Market Value of
the number of shares specified in paragraph 1 above and the aggregate Option
Exercise Price thereof).
Dated: , 19 .
Option Holder
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT 11
Computation of Consolidated Income (Loss) Per Common Share
for the Years ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Income (loss) for primary
computation:
Income (loss) $ 7,851,516 $ 1,438,443 $(23,701,346)
Add:
Dividends on preferred stock (526,048)
Decrease in redemption value
of redeemable common stock
warrants 770,084
Income (loss) applicable
to common shares $ 7,851,516 $ 1,438,443 $(23,457,310)
Primary (1):
Weighted average common shares
and dilutive common stock
equivalents:
Common stock outstanding 19,572,652 13,163,264 381,430(2)
Stock purchase warrants 797,529 611,879 (3)
Stock options 738,996 729,384 (3)
Contingently issuable
common shares 300,000
7% cumulative convertible
preferred stock - - (4)
21,409,177 14,504,527 381,430
Net income (loss) per common share: $ 0.37 $ 0.10 $(61.50)
</TABLE>
[FN]
NOTES:
1. Fully diluted earnings per share is not presented since it approximates
primary income per share.
2. Adjusted to reflect the conversion of the average number of shares
outstanding into 0.0423618 shares of New Class A Common Stock as a result of the
1993 Restructuring. See Note 1 to Consolidated Financial Statements.
3. The effect on primary and fully diluted earnings (loss) per share of
outstanding common stock equivalents was antidilutive.
4. The convertible preferred stock was not assumed to be converted because it
would be antidilutive due to the impact of adding back preferred stock
dividends.
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT 21
The following is a list of the subsidiaries of the Company as of December 31,
1994. All of these subsidiaries are included in the Consolidated Financial
Statements which are a part of this report.
Percentage
State of of Equity
Name of Company Relationship Incorporation Ownership
Jacor Broadcasting Subsidiary Florida 100%
of Florida, Inc.
Jacor Broadcasting Subsidiary Georgia 100%
of Atlanta, Inc.
Jacor Broadcasting Subsidiary Delaware 100%
of Knoxville,Inc.
Jacor Broadcasting
of Colorado, Inc. Subsidiary Colorado 100%
Jacor National Corp. Subsidiary Delaware 100%
Jacor Broadcasting
of Tampa Bay, Inc. Subsidiary Florida 100%
Jacor Cable, Inc. Subsidiary Kentucky 100%
Jacor Broadcasting
Corporation Subsidiary Ohio 100%
Broadcast Finance, Inc. Subsidiary Ohio 100%
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Jacor Communications, Inc. on Forms S-8 (File No. 33-65126, File No. 33-10329,
and File No. 33-56385) and on Form S-3 (File No. 33-53612) of our reports dated
February 13, 1995 on our audits of the consolidated financial statements and
financial statement schedule of Jacor Communications, Inc. and Subsidiaries as
of December 31, 1994 and 1993 and for the years ended December 31, 1994, 1993
and 1992, which reports are included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
March 27, 1995
JACOR REPORTS CONTINUED IMPROVEMENTS IN
BROADCAST CASH FLOW
CINCINNATI, FEBRUARY 14 - Jacor Communications, Inc. (NASDAQ: JCOR), owner and
operator of radio stations in six U.S. markets, today reported 30-percent
increases in broadcast cash flow for both the twelve months ended December 31,
1994 and the fourth quarter of 1994.
Jacor's broadcast cash flow for the 1994 twelve-month period rose 30 percent to
$26.5 million from $20.4 million in the same twelve-month period of 1993.
Fourth quarter broadcast cash flow rose 30 percent to $8.2 million in 1994 from
$6.3 million in the same quarter of 1993. Net revenues for the twelve-month
period rose 19 percent to $107.0 million from $89.9 million in the 1993 period.
Fourth quarter 1994 net revenues rose 20 percent to $28.7 million from $23.8
million in the 1993 period.
On a "same station" basis - reflecting results from stations operated in the
twelve months of both 1994 and 1993 - Jacor's broadcast cash flow rose 29
percent to $26.4 million for the twelve months of 1994 from $20.4 million in
the same period last year. Broadcast cash flow on the "same station" basis for
the fourth quarter of 1994 rose 24 percent to $8.0 million from $6.5 million
for the fourth quarter of 1993.
The company reported net income of $7.9 million or 37 cents per share, during
the twelve months of 1994. Results for the same period last year reflected net
income of $1.4 million, or 10 cents per share. Net income for the fourth
quarter of 1994 was $3.1 million or 14 cents per share, an increase of 250
percent from the net income of $0.9 million or 5 cents per share reported by
the Company for the fourth quarter of 1993.
Randy Michaels, Jacor president and co-chief operating officer said, "Our
managers have delivered another phenomenal year of rating and revenue
performances. We witnessed explosive growth as our Denver duopolies matured and
we are excited about the further potential of our Cincinnati consolidations.
These successes, combined with our deep bench of talented station managers,
gives us tremendous confidence as we move into the future."
Jacor Communications, Inc., headquartered in Cincinnati, is the nation's eighth
largest radio group. The Company plans to pursue growth through continued
acquisitions of complementary stations in its existing markets, and radio groups
or individual stations with significant presence in the top 25 markets.
CONTACT: Chris Weber
513/621-1300
or
Kirk Brewer
312/466-4096
<TABLE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and twelve months ended December 31, 1994 and 1993
(In thousands, except per share amounts)
(UNAUDITED)
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Broadcast revenue $ 32,091 $ 26,673 $ 119,635 $ 100,745
Less agency commissions 3,372 2,827 12,625 10,813
Net revenue 28,719 23,846 107,010 89,932
Broadcast operating expenses 20,548 17,573 80,468 69,520
Broadcast cash flow (1) 8,171 6,273 26,542 20,412
Depreciation and amortization 2,463 2,811 9,698 10,223
Corporate general and
administrative expenses 855 1,029 3,361 3,564
Operating income 4,853 2,433 13,483 6,625
Interest expense (105) (381) (534) (2,735)
Other income, net 418 124 1,216 248
Income before
income taxes 5,166 2,176 14,165 4,138
Income tax expense (2,098) (1,300) (6,313) (2,700)
Net income $ 3,068 $ 876 $ 7,852 $ 1,438
Income per common share $ 0.14 $ .05 $ 0.37 $ .10
Number of common shares used
in per share computations 21,334 17,976 21,409 14,505
</TABLE>
[FN]
(1) Operating income before depreciation and amortization, reduction in carrying
value of assets and corporate general and administrative expenses.
<TABLE>
JACOR COMMUNICATIONS,INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
for the years ended December 31, 1994, 1993 and 1992
<CAPTION>
Additions
Balance at Charged to Operating
Beginning Costs and Companies
Description of Period Expenses Acquired
<S> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful trade
accounts receivable $ 1,082,302 $ 1,441,925
Allowance for uncollectible
notes receivable $ 700,000 $ (150,000)
Year ended December 31, 1993:
Allowance for doubtful trade
accounts receivable $ 959,117 $ 957,749
Allowance for uncollectible
notes receivable -0- $ 700,000
Year ended December 31, 1992:
Allowance for doubtful trade
accounts receivable $ 1,380,365 $ 741,926
Allowance for uncollectible
notes receivable $ 1,462,504
</TABLE>
<TABLE>
JACOR COMMUNICATIONS,INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
Deductions
Accounts Operating Balance
Written off, Companies at End
Description Net Disposed of Period
<S> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful trade
accounts receivable $(1,175,936) $ 1,348,291
Allowance for uncollectible
notes receivable $ 550,000
Year ended December 31, 1993:
Allowance for doubtful trade
accounts receivable $ (834,564) $ 1,082,302
Allowance for uncollectible
notes receivable -0- $ 700,000
Year ended December 31, 1989:
Allowance for doubtful trade
accounts receivable $(1,163,174) $ 959,117
Allowance for uncollectible
notes receivable $(1,462,504) $ -0-
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 26,975
<SECURITIES> 0
<RECEIVABLES> 25,849
<ALLOWANCES> 1,348
<INVENTORY> 0
<CURRENT-ASSETS> 56,126
<PP&E> 27,100
<DEPRECIATION> 4,471
<TOTAL-ASSETS> 173,579
<CURRENT-LIABILITIES> 11,488
<BONDS> 0
<COMMON> 1,959
0
0
<OTHER-SE> 147,085
<TOTAL-LIABILITY-AND-EQUITY> 173,579
<SALES> 0
<TOTAL-REVENUES> 119,635
<CGS> 0
<TOTAL-COSTS> 93,093
<OTHER-EXPENSES> 13,059
<LOSS-PROVISION> 1,442
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,165
<INCOME-TAX> 6,314
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,852
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
