<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4 , 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
JACOR COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 4832 31-0978313
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
--------------------------
50 EAST RIVERCENTER BOULEVARD
12TH FLOOR
COVINGTON, KENTUCKY 41011
(606) 655-2267
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
--------------------------
R. CHRISTOPHER WEBER
JACOR COMMUNICATIONS, INC.
50 E. RIVERCENTER BOULEVARD, 12TH FLOOR
COVINGTON, KENTUCKY 41011
(606) 655-2267
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
COPIES OF COMMUNICATIONS TO:
Richard G. Schmalzl, Esq.
Jonathan D. Niemeyer, Esq.
Graydon, Head & Ritchey
1900 Fifth Third Center
Cincinnati, Ohio 45202
(513) 621-6464
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and upon the
effective time of the merger ("Merger") of Regent Communications, Inc.
("Regent") with and into Jacor Communications, Inc. ("Jacor") pursuant to the
Agreement and Plan of Merger dated as of October 8, 1996, as amended (the
"Merger Agreement"), by and between Jacor and Regent as described in the
enclosed Prospectus/Information Statement included as Part I of this
Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE
<S> <C> <C> <C>
Common Stock.................................................... 4,461,539 N/A(1) N/A(1)
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Common Stock Purchase Warrants.................................. 4,596,694 N/A(1) N/A(1)
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Common Stock issuable upon exercise of the warrants............. 500,000 N/A(1) N/A(1)
<CAPTION>
TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTRATION FEE
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Common Stock....................................................
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Common Stock Purchase Warrants.................................. $12,916.51(2)
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Common Stock issuable upon exercise of the warrants.............
</TABLE>
(1) Pursuant to the Merger Agreement, each share of Common Stock and Preferred
Stock of Regent ("Regent Stock") is to be converted into (i) shares of Jacor
common stock ("Jacor Common Stock") at an exchange ratio to be determined
under the formulas set forth in the Merger Agreement, and (ii) a warrant to
purchase a fractional share of Jacor Common Stock ("Merger Warrant").
Alternatively, at Jacor's election for each share of Regent Stock held, the
holder may receive cash in an amount to be determined. This Registration
Statement also covers any distribution of Jacor Common Stock and Merger
Warrants by Regent stockholders that are investment funds to the owners
thereof.
(2) Estimated solely for the purpose of calculating the registration fee. In
accordance with Rule 457(f)(2) under the Securities Act of 1933, as amended,
the registration fee for the shares of Jacor Common Stock and the Merger
Warrants to be issued in the Merger was computed on the basis of the book
value of the Regent Stock to be exchanged in the Merger as of September 30,
1996, which value was $42,624,497. No additional filing fee for the shares
of Jacor Common Stock issuable upon exercise of the Merger Warrants is
required pursuant to the last sentence of Rule 457(g).
------------------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE>
JACOR COMMUNICATIONS, INC.
CROSS REFERENCE SHEET
FOR
REGISTRATION STATEMENT ON FORM S-4 AND PROSPECTUS/INFORMATION STATEMENT
PURSUANT TO ITEM 501(B) OF REGULATION S-K
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<CAPTION>
FORM S-4--ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS/INFORMATION STATEMENT
- -------------------------------------------------------------- --------------------------------------------------
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A. INFORMATION ABOUT THE TRANSACTION
Item 1. Forepart of the Registration Statement and Outside Facing Page of the Registration Statement;
Front Cover Page of Prospectus/ Information Cross-Reference Sheet; Outside Front Cover Page
Statement....................................... Prospectus/Information Statement
Item 2. Inside Front and Outside Back Cover Pages of Available Information; Table of Contents
Prospectus/Information Statement................
Item 3. Risk Factors, Ratio of Earnings to Fixed Charges, Prospectus/Information Statement Summary; Selected
and Other Information........................... Historical Financial Data; Market Price Data;
Risk Factors; Selected Pro Forma Financial Data
Item 4. Terms of the Transaction.......................... Prospectus/Information Statement Summary; The
Merger--Certain Terms of the Merger Agreement
and Related Agreements; The Merger--Reasons for
the Merger; The Merger--Exchange of Regent
Certificates in the Merger; The Merger--Effect
of Conversion of Regent Stock; Description of
Merger Warrants; Comparison of Corporate
Charters; The Merger--Certain Federal Income Tax
Consequences; Description of Capital Stock
Item 5. Pro Forma Financial Information................... Prospectus/Information Statement Summary;
Unaudited Pro Forma Financial Information
Item 6. Material Contracts With the Company Being Prospectus/Information Statement Summary; The
Acquired........................................ Merger
Item 7. Additional Information Required for Reoffering by Not Applicable
Persons and Parties Deemed to be Underwriters...
Item 8. Interests of Named Experts and Counsel............ Legal Matters; Experts
Item 9. Disclosure of Commission Position on Not Applicable
Indemnification For Securities Act
Liabilities.....................................
</TABLE>
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<TABLE>
<CAPTION>
FORM S-4--ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS/INFORMATION STATEMENT
- -------------------------------------------------------------- --------------------------------------------------
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B. INFORMATION ABOUT THE REGISTRANT
Item 10. Information With Respect to S-3 Registrants....... Not Applicable
Item 11. Incorporation of Certain Information by Not Applicable
Reference.......................................
Item 12. Information With Respect to S-2 or S-3 Not Applicable
Registrants.....................................
Item 13. Incorporation of Certain Information by Not Applicable
Reference.......................................
Item 14. Information With Respect to Registrants Other Than Business of Jacor; Prospectus/Information
S-2 or S-3 Registrants.......................... Statement Summary; Management's Discussion and
Analysis of Financial Condition and Results of
Operations of Jacor
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
Item 15. Information With Respect to S-3 Companies......... Not Applicable
Item 16. Information With Respect to S-2 or S-3 Not Applicable
Companies.......................................
Item 17. Information With Respect to Companies Other Than Prospectus/Information Statement Summary; Business
S-2 or S-3 Companies............................ of Regent; The Merger; Security Ownership of
Certain Beneficial Owners of Regent;
Management's Discussion and Analysis of
Financial Condition and Results of Operations of
Regent
D. VOTING AND MANAGEMENT INFORMATION
Item 18. Information if Proxies, Consents or Authorizations Not Applicable
Are to be Solicited.............................
Item 19. Information if Proxies, Consents or Authorizations Prospectus/Information Statement Summary; The
Are Not to be Solicited or in an Exchange Merger--Authorization by Stockholders and Boards
Offer........................................... of Directors; The Merger; Certain Relationships
and Related Transactions
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 4, 1997
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/INFORMATION STATEMENT, AND IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROSPECTUS/INFORMATION STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS PROSPECTUS/INFORMATION STATEMENT, IN ANY
JURISDICTION, TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER, OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS/INFORMATION STATEMENT NOR ANY DISTRIBUTION OF SECURITIES PURSUANT TO
THIS PROSPECTUS/ INFORMATION STATEMENT SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN
SINCE THE DATE OF THIS PROSPECTUS/INFORMATION STATEMENT.
<PAGE>
PROSPECTUS OF JACOR COMMUNICATIONS, INC.
INFORMATION STATEMENT OF REGENT COMMUNICATIONS, INC.
--------------------------
This Prospectus/Information Statement relates to the proposed merger (the
"Merger") of Regent Communications, Inc., a Delaware corporation ("Regent"),
with and into Jacor Communications, Inc., a Delaware corporation ("Jacor"),
pursuant to the Agreement and Plan of Merger dated as of October 8, 1996, by and
between Jacor and Regent, as amended (the "Merger Agreement").
This Prospectus/Information Statement is part of a Registration Statement on
Form S-4 (the "Registration Statement") filed by Jacor with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to up to 4,461,539 shares of Jacor
Common Stock, $.01 par value (the "Jacor Common Stock") and up to 4,596,694
Common Stock purchase warrants to acquire shares of Jacor Common Stock to be
issued in the Merger pursuant to the Merger Agreement. If all such Merger
Warrants were exercised in full, 500,000 shares of Jacor Common Stock would be
issued to the holders of such Merger Warrants.
The Merger Agreement provides that Regent stockholders will have the right
to receive in the Merger, without any action on the part of holders thereof, in
exchange for each issued and outstanding share of Regent's Class A Common Stock,
par value $.01 per share, and Class B Common Stock, par value $.01 per share
("Regent Common Stock") and Regent's Preferred Stock, par value $.01 per share
(the "Regent Preferred Stock," and together with the Regent Common Stock, the
"Regent Stock"): (i) the Conversion Number (as defined herein) of a fully paid
and nonassessable share of Jacor Common Stock (the "Stock Consideration") and/or
any cash payable due to downward fluctuations in the market price of Jacor
Common Stock which trigger certain payment options for Jacor, as described below
(the "Cash Consideration") plus (ii) a warrant to acquire a fractional share of
Jacor Common Stock (a "Merger Warrant") on the terms described in the Warrant
Agreement, which fractional share is anticipated to be .10877 of a share of
Jacor Common Stock (the "Warrant Consideration," and together with the Stock
Consideration and the Cash Consideration, the "Merger Consideration"). The
Conversion Number shall mean the number (rounded to the nearest 1/100,000) equal
to the quotient of (i) 3.55 million, and (ii) the aggregate number of shares of
Regent Stock equal to the sum of (x) the aggregate number of shares of Regent
Common Stock outstanding on the closing date of the Merger ("Closing Date")
after the exercise of all outstanding options to purchase Regent Common Stock
granted under Regent's stock option plan and agreements exercised on or prior to
such date, (y) the aggregate number of shares of Regent Preferred Stock
outstanding on the Closing Date and (z) 480,000.
Holders of Regent Stock may receive Cash Consideration in addition to the
Stock Consideration, or in lieu of the Stock Consideration if, on the third
business day preceding the Closing Date, the "Average Value of Jacor Common
Stock" (as defined herein), multiplied by 3.55 million (the "Aggregate Average
Value of Jacor Common Stock"), is less than $116.0 million. If this should
occur, then Jacor has the option with respect to the Stock Consideration to: (a)
issue additional shares of Jacor Common Stock by adjusting the Conversion Number
by a fraction (y) the numerator of which is equal to $32.67606, and (z) the
denominator of which is the Average Value of Jacor Common Stock; (b) pay
additional Merger Consideration in the form of cash, in an amount equal to the
difference between $116.0 million and the Aggregate Average Value of Jacor
Common Stock; or (c) pay no Stock Consideration and instead pay, as part of the
Merger Consideration, $116.0 million in cash (the "Cash Election"). The amount
of the Merger Consideration is subject to adjustment in certain other
circumstances, including (i) based on the amount of Regent's long-term debt and
certain other liabilities and (ii) to take account of the simultaneous closing
of the acquisition by Jacor of Southwest Radio Las Vegas, Inc. ("SRLV"). If no
adjustment provisions are applied, the Stock Consideration would consist of
3,550,000 shares of Jacor Common Stock.
Since the last reported sale price of Jacor Common Stock on January 31, 1997
was less than $32.67606, Jacor expects that the foregoing adjustment provisions,
including the Cash Election, are likely to be applicable to the Merger. As such,
Jacor has informed Regent that it intends to exercise the Cash Election and pay
Cash Consideration in the amount of approximately $103.9 million in lieu of the
Stock Consideration to holders of Regent Stock. Pursuant to the Cash Election,
each holder of Regent Stock would be entitled to receive $25.23553 in cash in
exchange for the tender of each share of Regent Stock in the Merger (assuming
all outstanding exercisable options to purchase Regent Stock are exercised).
Notwithstanding a Cash Election by Jacor, pursuant to the KWNR Letter Agreement
(as defined herein), the sole stockholder of SRLV will be entitled to receive
the Stock Consideration, subject to certain adjustments. Such Stock
Consideration payable to the SRLV stockholder would amount to 457,104 shares of
Jacor Common Stock (assuming an average value of $26.50 for a share of Jacor
Common Stock on the third day preceding the Closing Date (the "Determination
Date"). For further information regarding the Merger and the merger of SRLV with
and into Jacor, see "THE MERGER."
SEE "RISK FACTORS" AT PAGE 16 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY THE REGENT STOCKHOLDERS.
---------------------
REGENT IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND A
PROXY TO REGENT. THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF REGENT
STOCK HAVE APPROVED THE MERGER AGREEMENT AND THE MERGER. NO ADDITIONAL ACTION BY
THE STOCKHOLDERS OF REGENT WILL BE REQUIRED TO EFFECT THE MERGER. REGENT
STOCKHOLDERS WILL HAVE APPRAISAL RIGHTS UNDER DELAWARE LAW IN CONNECTION WITH
THE MERGER. THE MERGER AGREEMENT AND THE MERGER DO NOT REQUIRE THE APPROVAL OF
JACOR'S STOCKHOLDERS UNDER DELAWARE LAW AND, THEREFORE, JACOR'S STOCKHOLDERS
WILL NOT HAVE APPRAISAL RIGHTS OR RIGHTS AS DISSENTING STOCKHOLDERS WITH RESPECT
TO THE MERGER.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/
INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
--------------------------
THE DATE OF THIS PROSPECTUS/INFORMATION STATEMENT IS , 1997.
THIS PROSPECTUS/INFORMATION STATEMENT IS FIRST BEING MAILED TO
REGENT STOCKHOLDERS ON OR ABOUT , 1997.
<PAGE>
AVAILABLE INFORMATION
Jacor is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and accordingly files
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information filed with the Commission are
available for inspection and copying at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and at 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such documents may also be obtained from the Public Reference Room of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Jacor files its reports, proxy statements and other
information with the Commission electronically, and the Commission maintains a
Web site located at http://www.sec.gov containing such information.
Jacor has filed a Registration Statement on Form S-4 together with all
amendments and exhibits thereto with the Commission under the Securities Act.
This Prospectus/Information Statement does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. The Registration
Statement, including any amendments, schedules and exhibits thereto, is
available for inspection and copying as set forth above. Statements contained in
this Prospectus/Information Statement as to the contents of any contract or
other document referred to herein include all material terms of such contracts
or other documents but are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
Jacor Common Stock is traded on the Nasdaq National Market. Reports, proxy
and information statements and other information concerning Jacor are available
for inspection and copying at the offices of The Nasdaq Stock Market at 1735 K
Street, N.W., Washington, D.C. 20006-1506. Pursuant to the Merger Agreement,
Jacor has filed an application with the Nasdaq National Market seeking approval
for quotations on the Nasdaq National Market of the Jacor Common Stock and the
Merger Warrants to be issued in connection with the Merger.
Regent is a privately held company and is not subject to the information
requirements or proxy rules contained in or adopted pursuant to the Exchange
Act.
All information contained in this Prospectus/Information Statement relating
to Jacor has been supplied by Jacor and all such information relating to Regent
has been supplied by Regent, and neither Jacor nor Regent assumes any
responsibility for the accuracy or completeness of the information provided by
the other.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
AVAILABLE INFORMATION...................................................................................... 2
PROSPECTUS/INFORMATION STATEMENT SUMMARY................................................................... 5
Parties to the Merger.................................................................................... 5
Authorization by Stockholders and Boards of Directors.................................................... 6
The Merger............................................................................................... 6
Merger Consideration..................................................................................... 7
Reasons for the Merger................................................................................... 8
Termination of the Merger Agreement; Termination Fees.................................................... 9
Financing Arrangements................................................................................... 9
Interests of Certain Persons in the Merger............................................................... 9
Regulatory Matters....................................................................................... 10
Nasdaq Approval.......................................................................................... 10
Certain Federal Income Tax Consequences.................................................................. 10
Accounting Treatment..................................................................................... 11
Appraisal or Dissenters' Rights.......................................................................... 11
Recent Developments...................................................................................... 11
Summary Pro Forma Financial Data......................................................................... 12
Summary Historical Financial Data........................................................................ 13
Comparative Per Share Data............................................................................... 14
Market Prices and Dividends.............................................................................. 14
RISK FACTORS............................................................................................... 16
THE MERGER................................................................................................. 19
Authorization by Stockholders and Boards of Directors.................................................... 19
Reasons for the Merger................................................................................... 19
Closing Date; Effective Time of the Merger............................................................... 21
Regent Transactions...................................................................................... 21
Conversion of Regent Stock for the Merger Consideration.................................................. 22
Effect of Conversion of Regent Stock..................................................................... 25
Exchange of Regent Certificates in the Merger............................................................ 25
Certain Terms of the Merger Agreement and Related Agreements............................................. 26
Description of Merger Warrants........................................................................... 31
Financing Arrangements................................................................................... 33
Interests of Certain Persons in the Merger............................................................... 35
Regulatory Matters....................................................................................... 37
Nasdaq Approval.......................................................................................... 38
Certain Federal Income Tax Consequences.................................................................. 38
Accounting Treatment..................................................................................... 40
Federal Securities Law Consequences...................................................................... 40
Appraisal or Dissenters' Rights.......................................................................... 41
Related Material Contracts............................................................................... 43
UNAUDITED PRO FORMA FINANCIAL INFORMATION.................................................................. 44
SELECTED HISTORICAL FINANCIAL DATA......................................................................... 56
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF JACOR............. 60
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF REGENT............ 66
BUSINESS OF JACOR.......................................................................................... 70
</TABLE>
3
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<TABLE>
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PAGE
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF JACOR.................................... 90
BUSINESS OF REGENT......................................................................................... 92
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF REGENT................................... 93
DESCRIPTION OF JACOR CAPITAL STOCK......................................................................... 95
Common Stock............................................................................................. 95
Class A and Class B Preferred Stock...................................................................... 95
Citicasters Warrants..................................................................................... 95
Registrar and Transfer Agent............................................................................. 97
DESCRIPTION OF OTHER JACOR INDEBTEDNESS.................................................................... 98
1996 10 1/8% Notes....................................................................................... 98
1994 9 3/4% Notes........................................................................................ 99
Liquid Yield Option-TM- Notes............................................................................ 100
COMPARISON OF CORPORATE CHARTERS........................................................................... 101
LEGAL MATTERS.............................................................................................. 102
EXPERTS.................................................................................................... 102
INDEX OF DEFINED TERMS..................................................................................... 104
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-1
</TABLE>
<TABLE>
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ANNEX I AGREEMENT AND PLAN OF MERGER DATED AS OF OCTOBER 8, 1996, AMONG JACOR
AND REGENT, AS AMENDED................................................ A-I-1
ANNEX II FORM OF WARRANT AGREEMENT BETWEEN JACOR AND KEYCORP SHAREHOLDER
SERVICES, INC......................................................... A-II-1
ANNEX III ESCROW AGREEMENT DATED OCTOBER 8, 1996, AMONG JACOR, REGENT AND PNC
BANK.................................................................. A-III-1
ANNEX IV SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW................... A-IV-1
ANNEX V REGISTRATION RIGHTS AGREEMENT DATED OCTOBER 8, 1996, AMONG JACOR,
REGENT AND CERTAIN REGENT SHAREHOLDERS................................ A-V-1
</TABLE>
4
<PAGE>
PROSPECTUS/INFORMATION STATEMENT SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN MATTERS DISCUSSED ELSEWHERE IN THIS
PROSPECTUS/INFORMATION STATEMENT. THIS SUMMARY SETS FORTH ALL MATERIAL ELEMENTS
OF SUCH MATTERS BUT DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION APPEARING IN THIS
PROSPECTUS/ INFORMATION STATEMENT AND THE ANNEXES HERETO. STOCKHOLDERS OF REGENT
ARE URGED TO READ THIS PROSPECTUS/ INFORMATION STATEMENT AND THE ANNEXES HERETO
IN THEIR ENTIRETY.
PARTIES TO THE MERGER
JACOR. Jacor is a holding company engaged primarily in the radio
broadcasting business. As of January 15, 1997, Jacor entities owned and/or
operated 57 radio stations located in across the United States in 15 broadcast
areas: Los Angeles, Atlanta, Denver, San Diego, St. Louis, Cincinnati, Tampa,
Portland, Columbus, Kansas City, Jacksonville, Toledo, Lexington,
Venice/Englewood, Florida and Casper, Wyoming, and one television station
located in the Cincinnati broadcast area. Jacor also has joint sales agreements
to sell advertising time for three stations in Cincinnati, one station in
Denver, one station in Salt Lake City and one station in Louisville. Jacor
further provides programming to and sells air time for two stations in Baja
California, Mexico under an exclusive sales agency agreement.
Jacor also has entered into agreements to acquire an additional 53 radio
stations (including stations to be acquired in the Merger), which will expand
its presence in San Diego, Columbus, Kansas City, Toledo, Lexington,
Venice/Englewood and Lima, Ohio, and allow Jacor to enter the Salt Lake City,
Las Vegas, Louisville, Rochester, Des Moines, Charleston, S.C., Boise, Cedar
Rapids, Sarasota/Bradenton and Fort Collins/Greeley, Co. broadcast areas.
The mailing address and telephone number of the principal executive offices
of Jacor are 50 East RiverCenter Boulevard, 12th Floor, Covington, Kentucky
41011 and (606) 655-2267. See "BUSINESS OF JACOR."
Regent. Regent is a holding company engaged in the ownership of radio
stations. As of January 15, 1997, Regent owned 15 radio stations located across
the United States in five broadcast areas: Kansas City, Salt Lake City, Las
Vegas, Louisville and Charleston, S.C. (collectively, the "Regent Stations").
Pursuant to the Time Brokerage Agreement, dated October 8, 1996, as amended,
between Citicasters Co., a wholly-owned subsidiary of Jacor ("CitiCo") and
Regent, CitiCo is time brokering the Regent Stations (the "TBA"), and KBGO-FM,
Las Vegas, which Regent has the right to acquire pursuant to the KBGO Option
Agreement (as defined below) (which option Regent has exercised, with
consummation subject to prior approval of the Federal Communications Commission
("FCC")). See "THE MERGER--Related Material Contracts." The mailing address and
telephone number of the principal executive offices of Regent is 50 East
RiverCenter Boulevard, Suite 180, Covington, Kentucky 41011 and (606) 292-0030.
Prior to the execution of the Merger Agreement, Regent had entered into
certain purchase, sale and option agreements regarding the disposition and
acquisition of various broadcast radio stations. The intent of Regent and Jacor
is that Jacor would acquire, pursuant to the Merger Agreement, the Regent
Stations, plus all broadcast radio stations which are the subject of the
following purchase and option agreements entered into by Regent. On July 19,
1996, Regent entered into an agreement with Southwest Florida Enterprises, Inc.
("SFE") and SRLV pursuant to which SRLV would merge with and into Regent (the
"KWNR Reorganization Agreement"). SRLV owns KWNR-FM, Las Vegas, Nevada, but
KWNR-FM is currently time brokered by CitiCo pursuant to a time brokerage
agreement. Simultaneous with the execution of the Merger Agreement, Jacor,
Regent, SRLV and SFE entered into a letter agreement (the "KWNR Letter
Agreement"), which provides that: (i) if the Merger is consummated, immediately
following the Merger SRLV would merge with and into Jacor, with Jacor as the
surviving corporation, and Jacor would pay consideration to SFE, as the sole
stockholder of SRLV, an amount equal to the number of shares of Jacor Common
Stock and Merger Warrants that a holder of 480,000 shares of Regent Stock would
be entitled to receive in the Merger, plus any additional consideration that SFE
would be entitled to under the Merger Agreement, plus $9.0 million in cash
(which amount is included within the $64 million in Regent Liabilities (as
defined herein) to be assumed by Jacor in the Merger) or (ii) if the Merger
5
<PAGE>
Agreement is terminated prior to the Closing Date, SRLV would merge with and
into Regent pursuant to the terms and conditions of the KWNR Reorganization
Agreement. See "THE MERGER--Conversion of Regent Stock for the Merger
Consideration." The KWNR Letter Agreement requires Jacor to continue existing
indemnification rights in favor of directors, officers, employees and agents of
SRLV for six years following the time and date when the Merger becomes
effective. Other such agreements include: the WSJW Option Agreement and the KBGO
Option Agreement, each as defined herein. Regent has consummated the
transactions which are the subject of the KURR Purchase Agreement, the KZHT
Purchase Agreement and the KKDD Sale Agreement, all as defined herein. See
"BUSINESS OF REGENT," and "THE MERGER--Certain Terms of the Merger Agreement and
Related Agreements."
AUTHORIZATION BY STOCKHOLDERS AND BOARDS OF DIRECTORS
On October 8, 1996 the Regent Board of Directors unanimously approved the
Merger Agreement and concluded that its terms are fair to and in the best
interests of its stockholders. Under the Delaware General Corporation Law
("DGCL"), the affirmative vote of the holders of a majority of the outstanding
Regent Stock is required to approve the Merger. The holders of more than a
majority of the voting power represented by all outstanding shares of Regent
Stock, acting by written consent in lieu of a meeting and voting as a single
class, have approved the Merger and approved and adopted the Merger Agreement.
Therefore, no further action by the stockholders of Regent is necessary to
approve the Merger Agreement or consummate the Merger, and no such approval will
be sought. ACCORDINGLY, REGENT IS NOT ASKING ANY REGENT STOCKHOLDER FOR A PROXY
AND REGENT STOCKHOLDERS ARE REQUESTED NOT TO SEND A PROXY. NO MEETING OF REGENT
STOCKHOLDERS WILL BE HELD TO CONSIDER APPROVAL OF THE MERGER.
The Merger Agreement also has been approved by the Jacor Board of Directors.
The Merger Agreement and the Merger do not require the approval of the Jacor
stockholders under Delaware law. No additional corporate action by Jacor will be
required to effect the Merger.
THE MERGER
If the conditions to the Merger as set forth in the Merger Agreement are
satisfied or waived (where permissible under the terms of the Merger Agreement
or under applicable law) and the Merger Agreement is not earlier terminated as
provided for in the Merger Agreement, the Merger will be consummated and will
become effective at the time at which the Certificate of Merger is accepted for
filing by the Secretary of State of the State of Delaware (the "Effective
Time"). See "THE MERGER--Certain Terms of the Merger Agreement." It is expected
that the Effective Time will promptly follow the receipt of all regulatory
approvals. See "THE MERGER--Regulatory Matters." At the Effective Time, Regent
will be merged with and into Jacor, with Jacor being the surviving entity.
Regent's subsidiary corporations or other legal entities of which Regent or any
of its subsidiaries controls or owns, directly or indirectly, more than 50% of
its stock or other equity interest ("Subsidiaries") will then become direct,
wholly-owned subsidiaries of Jacor's direct, wholly-owned subsidiary, Jacor
Communications Company (formerly known as Citicasters Inc.) ("JCC").
In the event a New Merger Event occurs, instead of merging Regent into
Jacor, a wholly-owned subsidiary of Jacor (to be designated by Jacor), shall
merge into Regent and Regent shall be the surviving corporation. For purposes of
the Merger Agreement, a "New Merger Event" occurs if the Tax Continuity Level
determined on the day before the Closing Date is less than 45%. "Tax Continuity
Level" means the product of A/B and (C+D), where (1) A equals the value of the
Stock Consideration, (2) B equals the value of the Merger Consideration as
reasonably agreed by Regent and Jacor, (3) C equals the percentage of shares of
Regent Stock held by holders each owning less than 1% of the total number of
such shares, including holders indirectly owning less than 1% of such shares
through an entity that has represented that it will distribute the holder's
share of Stock Consideration received by such entity to such holder, and (4) D
equals the percentage of shares of Regent Stock held by holders (other than
persons or entities described in clause (3)) that provide tax representations
that they have no plan to dispose of such shares. Tax counsel of Regent and
Jacor may agree to modify this definition if they jointly deem it appropriate to
reflect
6
<PAGE>
"continuity of interest" in the Merger in accordance with the Federal tax rules
as developed under the Internal Revenue Code of 1986, as amended (the "Code").
A New Merger Event will occur if Jacor makes the Cash Election. Absent such
a Cash Election, the likelihood of a New Merger Event depends (among other
things) upon the amount of non-stock consideration (the Cash Consideration and
the value of the Warrant Consideration) as compared to the value of the Stock
Consideration, and the percentage of Regent stockholders owning 1% or more of
Regent Stock who make the necessary tax representations.
In the event of a Merger subsequent to the occurrence of a New Merger Event,
the Merger will not constitute a reorganization within the meaning of Section
368(a) of the Code. Rather, such a Merger would be a taxable event to
stockholders of Regent. Regent stockholders will have taxable gain or loss equal
to the difference between the value of the total consideration received for
their Regent Stock (whether in the form of Stock Consideration, Cash
Consideration or Warrant Consideration) and their tax basis for their Regent
Stock. Such gain or loss would be capital gain or loss if the Regent Stock was
held as a capital asset.
MERGER CONSIDERATION
In the Merger, each issued and outstanding share of the Regent Stock at the
Effective Time will be converted into the right to receive the Merger
Consideration (as defined above). Holders of Regent Stock may receive Cash
Consideration in addition to the Stock Consideration, or in lieu of the Stock
Consideration if, on the third business day preceding the Closing Date, the (i)
the average of the closing bid and asked prices quoted on the Nasdaq National
Market for the ten consecutive full Nasdaq National Market trading days ending
on the third full trading day immediately preceding the Closing Date (the
"Average Value of Jacor Common Stock") multiplied by 3.55 million (the
"Aggregate Average Value of Jacor Common Stock"), is less than $116.0 million.
If this should occur, then Jacor has the option with respect to the Stock
Consideration to: (a) issue additional shares of Jacor Common Stock by adjusting
the Conversion Number by a fraction (y) the numerator of which is equal to
$32.67606, and (z) the denominator of which is the Average Value of Jacor Common
Stock; (b) pay additional Merger Consideration in the form of cash, in an amount
equal to the difference between $116.0 million and the Aggregate Average Value
of Jacor Common Stock; or (c) pay no Stock Consideration and instead pay, as
part of the Merger Consideration, $116.0 million in cash (the "Cash Election").
The amount of the Merger Consideration is subject to adjustment in certain other
circumstances, including (i) based on the amount of Regent's long-term debt and
certain other liabilities and (ii) to take account of the simultaneous closing
of the acquisition by Jacor of SRLV. If no adjustment provisions are applied,
the Stock Consideration would consist of 3,550,000 shares of Jacor Common Stock.
Since the last reported sale price of Jacor Common Stock on January 31, 1997
was less than $32.67606, Jacor expects that the foregoing adjustment provisions,
including the Cash Election, are likely to be applicable to the Merger. As such,
Jacor has informed Regent that it intends to exercise the Cash Election and pay
Cash Consideration in the amount of approximately $103.9 million in lieu of the
Stock Consideration to holders of Regent Stock. Pursuant to the Cash Election,
each holder of Regent Stock would be entitled to receive $25.23553 in cash in
exchange for the tender of each share of Regent Stock in the Merger (assuming
all outstanding exercisable options to purchase Regent Stock are exercised).
Notwithstanding a Cash Election by Jacor, pursuant to the KWNR Letter Agreement,
the sole stockholder of SRLV will be entitled to receive the Stock
Consideration, subject to certain adjustments. Such Stock Consideration payable
to the SRLV stockholder would amount to 457,104 shares of Jacor Common Stock
(assuming an average value of $26.50 for a share of Jacor Common Stock on the
Determination Date). See "THE MERGER--Conversion of Regent Stock for the Merger
Consideration."
The Warrant Consideration shall consist of a warrant to acquire a fractional
share of Jacor Common Stock, the numerator of which is 500,000 and the
denominator of which is the aggregate number of shares of Regent Stock equal to
the sum of (i) the aggregate number of shares of Regent Common Stock outstanding
on the Closing Date after the exercise of all Options (as defined herein)
exercised on or prior
7
<PAGE>
to such date, (ii) the aggregate number of shares of Regent Preferred Stock
outstanding on the Closing Date and (iii) 480,000 (the "Regent Fully Diluted
Share Number"), which fractional share is anticipated to be .10877 of a share of
Jacor Common Stock. Each Merger Warrant will have an exercise price of $40.00
per full share of Jacor Common Stock. The Merger Warrants are to be issued under
the Warrant Agreement, to be dated as of the Effective Date between Jacor and
KeyCorp Shareholder Services, Inc., as Warrant Agent (the "Warrant Agent"). At
the time of the exercise of any Merger Warrant the holder of such Merger Warrant
will receive, in lieu of any fractional share of Jacor Common Stock, the fair
market value of such fractional share determined at the time of the exercise of
the Merger Warrant. Each Merger Warrant may be exercised until 5:00 p.m.,
Eastern Time, on the fifth anniversary of the Effective Time, unless Jacor
redeems the Merger Warrants prior to the Effective Time, which option may be
exercised on or after the third anniversary of the Effective Time. The Warrant
Consideration may become subject to antidilution or exercise price adjustments,
as provided in the Warrant Agreement. The form of the Warrant Agreement is
attached hereto as Annex II. See "THE MERGER--Description of Merger Warrants."
AT THE EFFECTIVE TIME, ALL OUTSTANDING SHARES OF REGENT STOCK WILL CEASE TO
BE OUTSTANDING AND CERTIFICATES REPRESENTING SHARES OF REGENT STOCK WILL
REPRESENT THE RIGHT TO RECEIVE THE MERGER CONSIDERATION. AS SOON AS POSSIBLE
AFTER THE EFFECTIVE TIME, KEYCORP SHAREHOLDER SERVICES, INC. (THE "EXCHANGE
AGENT") WILL MAIL TRANSMITTAL INSTRUCTIONS TO EACH HOLDER OF RECORD OF SHARES OF
REGENT COMMON STOCK AT THE EFFECTIVE TIME, ADVISING THEM OF THE PROCEDURE FOR
SURRENDERING CERTIFICATES. HOLDERS OF REGENT COMMON STOCK SHOULD NOT SEND IN ANY
STOCK CERTIFICATES AT THIS TIME.
REASONS FOR THE MERGER
Since 1993, Jacor has been actively seeking to expand through acquisitions
and has identified numerous potential acquisition and merger candidates. Since
the enactment of the Telecommunications Act of 1996 (the "Telecom Act") on
February 8, 1996, Jacor has acquired 42 radio stations, two television stations
(one of which has subsequently been disposed of) and entered into an exclusive
agency agreement to provide programming to and sell air time for two radio
stations located in Baja California, Mexico. Jacor has also disposed of three
radio stations. Throughout 1996, Jacor further continued to negotiate for
additional acquisitions in its existing locations and in new locations.
During the summer of 1996, the Board of Directors of Regent determined that
it would be appropriate to evaluate the possibility of a sale of Regent's
business. Regent was aware of the significant
consolidation that has been taking place in the broadcasting industry and
concluded that it would be advantageous for Regent to combine its operations
with those of a larger operator of broadcast properties. Regent also believed
that it would be an attractive merger partner because of its success in managing
radio station properties. Accordingly, Regent engaged Goldman, Sachs & Co., an
investment banking firm ("Goldman Sachs"), to assist in the process of
soliciting and negotiating with one or more potential merger partners.
During August and September of 1996, Regent received proposals from several
parties, including Jacor, and entered into discussions with those parties to
evaluate the relative merits of those proposals. In connection with that
evaluation, Regent also concluded that it would be desirable to enter into a
transaction which would potentially be tax free and would potentially provide
the Regent stockholders the opportunity to continue to participate in the
broadcast business through the receipt of stock in a merger.
In August 1996, Jacor commenced preliminary discussions with Goldman Sachs
in connection with possible merger or sale opportunities. Jacor management
believed that Regent's operations and growth philosophies were consistent with
Jacor's and determined that more detailed discussions were warranted. Jacor
management also received authorization from the Jacor Board of Directors to
proceed with negotiations.
In late August 1996, Jacor submitted its initial bid to acquire Regent
through a merger. The bid was submitted in accordance with the procedures
established by Regent through Goldman Sachs. Jacor
8
<PAGE>
believed that Regent was an attractive acquisition candidate and that a merger
could create numerous synergies and operating advantages for both companies.
Additional discussions then ensued between Randy Michaels and R. Christopher
Weber, Jacor's chief executive officer and chief financial officer,
respectively, and Goldman Sachs, primarily concerning the economic terms of a
possible merger between Jacor and Regent. In late September 1996, the parties
reached general agreement on the amount and form of the merger consideration,
$116.0 million in Jacor common stock, warrants to acquire 500,000 shares of
Jacor common stock and the payment by Jacor of $64.0 million in cash to cover
certain liabilities of Regent, subject to Jacor's satisfactory completion of due
diligence and the preparation of the definitive merger agreement and related
acquisition documents.
The respective legal counsel for each of Jacor and Regent then proceeded to
engage in intensive negotiations and drafting of documents. Through their
respective legal counsel and, in the case of Regent, Goldman Sachs, in the
course of numerous telephone conferences, the parties negotiated key terms and
conditions of the proposed acquisition. Jacor's legal counsel consulted
frequently with Messrs. Michaels and Weber as to unresolved issues during the
course of these negotiations.
On September 27, 1996, the Jacor Board of Directors authorized Messrs.
Michaels and Weber to enter into a definitive merger agreement with Regent. On
October 8, 1996, the Regent Board of Directors authorized Terry Jacobs to enter
into the definitive merger agreement. The terms of the merger agreement and
related acquisition documents were then finalized, approved by the Regent Board
of Directors and executed by both Jacor and Regent after the close of business
on October 8, 1996. On October 9, 1996, Jacor delivered its $10.0 million letter
of credit to PNC Bank, Ohio, N.A., the escrow agent (the "Escrow Agent"), and
Jacor then publicly announced the pending Merger. See "THE MERGER--Reasons for
the Merger."
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEES
The Merger Agreement may be terminated before the consummation of the Merger
by either Jacor or Regent under various circumstances, including the failure to
consummate the Merger on or before October 8, 1997. If Regent terminates the
Merger Agreement upon the occurrence of certain triggering events, Regent may
draw upon a direct pay letter of credit in the amount of $10.0 million obtained
by Jacor and issued to PNC Bank, as escrow agent and beneficiary, on behalf of
Regent, pursuant to an Escrow Agreement dated October 8, 1996 among Jacor and
PNC Bank, Ohio, N.A. as the escrow agent (the "Escrow Agreement," a copy of
which is attached hereto as Annex III). Except in certain circumstances, the
right to terminate the Merger Agreement and receive a maximum of $10.0 million
pursuant to a draw on such letter of credit is Regent's exclusive remedy upon
the occurrence of a triggering event. See "THE MERGER--Certain Terms of the
Merger Agreement--Termination; Termination Fee."
FINANCING ARRANGEMENTS
Jacor expects that the funds necessary to pay any required cash
consideration and to consummate the Merger will be paid from cash held by Jacor,
borrowings under its June 1996 credit facility (the "Credit Facility") and/or
proceeds from the sale by JCC in December 1996 of $170.0 million aggregate
principal amount of 9 3/4% Senior Subordinated Notes (the "1996 9 3/4% Notes").
See "THE MERGER--Financing Arrangements."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
REGENT STOCK OPTIONS. Pursuant to the Merger Agreement, Regent will take
all necessary steps (i) to cause all outstanding options issued pursuant to
Regent's Employee Stock Option Plan and stock option agreements between Regent
and (x) William L. Stakelin, dated October 25, 1995, (y) Terry S. Jacobs, dated
October 22, 1993, and (z) Terry S. Jacobs dated November 15, 1994 (together, the
"Options"), in each case to become fully vested and exercisable, and (ii) to
terminate any Options not exercised on or prior to the Closing Date. See "THE
MERGER--Interests of Certain Persons in the Merger."
9
<PAGE>
REGISTRATION RIGHTS AGREEMENT. In connection with the Merger, Jacor entered
into a Registration Rights Agreement dated October 8, 1996, (the "Registration
Rights Agreement") providing for the shelf registration for resale of the Jacor
Common Stock, the Merger Warrants and the shares of Jacor Common Stock
underlying the Merger Warrants. The Registration Rights Agreement is attached
hereto as Annex V. See "THE MERGER--Interests of Certain Persons in the Merger."
EMPLOYEE BENEFITS. Jacor has agreed in the Merger Agreement to provide the
same compensation and benefits to the current, former and retired salary
employees of Regent and the Subsidiaries as those provided to similarly situated
current, former and retired salaried employees of Jacor, provided that Jacor is
not prevented from terminating any employee. See "THE MERGER--Interests of
Certain Persons in the Merger."
INDEMNIFICATION. The Merger Agreement requires Jacor to continue existing
indemnification rights in favor of directors, officers, employees and agents of
Regent and the Subsidiaries for not less than six years following the Effective
Time. See "THE MERGER--Interests of Certain Persons in the Merger."
REGULATORY MATTERS
The receipt of certain federal and state governmental or regulatory
approvals is required in order to consummate the Merger, including approvals or
waivers from the FCC and the expiration or termination of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"). Jacor and Regent have made the applications for all
necessary regulatory approvals and to prosecute the application to be filed with
the FCC in good faith and with due diligence. Jacor and Regent also made the
necessary HSR Act filings. The HSR Act waiting period expired on November 22,
1996, and the FCC granted its initial approval of the Merger on December 13,
1996. There can be no assurance as to when or if a final order of the FCC
approving the Merger will be obtained. See "THE MERGER--Regulatory Matters."
NASDAQ APPROVAL
Pursuant to the Merger Agreement, Jacor has filed an application with the
Nasdaq Stock Market seeking approval for quotation on the Nasdaq National Market
of the Merger Warrants and of the shares of Jacor Common Stock to be issued in
connection with the Merger and upon exercise of the Merger Warrants. See "THE
MERGER--Nasdaq Approval."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
If Jacor does not exercise the Cash Election, it is a condition to the
consummation of the Merger of Regent into Jacor that Regent and Jacor receive an
opinion from their respective tax counsel to the effect that, among other
things, the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code , and no gain or loss will be recognized by Jacor or
Regent as a result of the Merger. See "THE MERGER AGREEMENT--Conditions
Precedent to the Merger."
Provided the Merger qualifies as such a reorganization, then for federal
income tax purposes, no gain or loss will be recognized by non-dissenting
shareholders of Regent upon the receipt of the Merger Consideration in exchange
for Regent Stock, except that gain would be recognized to the extent of the
value of the Warrant Consideration and the Cash Consideration received, and gain
or loss may be recognized on the receipt of cash in lieu of fractional shares.
If Jacor does exercise the Cash Election or if a New Merger Event otherwise
occurs, a wholly-owned subsidiary of Jacor will merge into Regent. In this case,
the Merger will not be a tax free reorganization, and will be a fully taxable
transaction to stockholders of Regent. Regent stockholders will have taxable
gain or loss equal to the difference between the value of the total
consideration received for their Regent Stock (whether in the form of Stock
Consideration, Cash Consideration or Warrant Consideration) and their tax basis
for their Regent Stock.
10
<PAGE>
ALL REGENT STOCKHOLDERS SHOULD READ CAREFULLY THE DISCUSSION IN THE "THE
MERGER--CERTAIN FEDERAL INCOME TAX CONSEQUENCES" AND THE OTHER SECTIONS OF THIS
PROSPECTUS/INFORMATION STATEMENT REFERRED TO THEREIN AND ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO SPECIFIC CONSEQUENCES TO THEM OF THE MERGER UNDER
FEDERAL, STATE, LOCAL OR ANY OTHER APPLICABLE TAX LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase," as such term is used under
generally accepted accounting principles. See "THE MERGER--Accounting
Treatment."
APPRAISAL OR DISSENTERS' RIGHTS
In connection with the Merger, holders of shares of Regent Stock will be
entitled to demand appraisal rights in respect of such shares of Regent Stock
under Section 262 of the DGCL ("Section 262"), subject to satisfaction by such
stockholder of the conditions for appraisal rights established by Section 262.
Failure to take any of the steps required under Section 262 on a timely basis
may result in the loss of appraisal rights. Section 262 is set forth in full in
Annex IV to this Prospectus/Information Statement. See "THE MERGER--Appraisal or
Dissenters' Rights" and "THE MERGER--Termination; Termination Fee."
RECENT DEVELOPMENTS
Since the enactment of the Telecom Act on February 8, 1996, Jacor has
acquired 42 radio stations, two television stations (one of which has
subsequently been disposed of) and entered into an exclusive sales agency
agreement to provide programming to and sell air time for two radio stations
located in Baja California, Mexico. The aggregate consideration provided by
Jacor in these transactions was approximately $1.2 billion. Jacor has also
disposed of three radio stations for approximately $7.0 million.
In addition, Jacor has entered into a number of binding agreements for
transactions that are currently pending. Jacor has contracted for the exchange
of its two radio stations in Phoenix for two radio stations in San Diego. Jacor
also has entered into a binding agreement with American Radio Systems
Corporation and American Radio Systems License Corp. to exchange WKRQ-FM in
Cincinnati for three stations located in or around Rochester, New York, and an
option to purchase a station in South Bristol, New York, which Jacor has
exercised, subject to prior FCC approval. Jacor has also entered into binding
agreements to purchase an additional 30 radio stations for approximately $218.1
million (including $31.8 million already advanced by Jacor to fund various
escrow deposits). Jacor has also entered into the Merger Agreement pursuant to
which it will acquire the 15 Regent Stations from Regent, and the right to
acquire KWNR-FM from SRLV pursuant to the KWNR Reorganization Agreement, and the
right to acquire KBGO-FM pursuant to the KBGO Option Agreement. Jacor has also
entered into a binding agreement to sell two radio stations for approximately
$45.0 million in cash. Finally, Jacor has entered into a letter of intent with
EXCL Communications, Inc. ("EXCL") for the sale of KCBQ-AM in San Diego, but has
not executed definitive agreements in connection with this transaction.
Jacor is currently negotiating for additional acquisitions in its existing
locations and in new locations. Jacor is also engaged in preliminary discussions
with owners of numerous other radio stations, which may or may not result in
negotiations for additional acquisitions. Such transactions, if any, may involve
the payment of cash, shares of Jacor Common Stock and/or the exchange of Jacor's
other broadcast properties. However, there can be no assurance that Jacor will
successfully complete all or any such transactions or what the consequences
thereof would be. For more information about Jacor's recent acquisitions and
dispositions. See "BUSINESS OF JACOR."
11
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following sets forth summary unaudited pro forma combined financial
information derived from the Unaudited Pro Forma Financial Information included
elsewhere in this Prospectus. The unaudited pro forma condensed consolidated
statements of operations for the year ended December 31, 1995, and for the nine
months ended September 30, 1996, give effect to each of the following
transactions as if such transactions had been completed January 1, 1995: (i) the
Merger, (ii) the Citicasters Merger (as defined herein), (iii) the Noble
Acquisition (as defined herein), (iv) Jacor's, Regent's, Citicasters Inc.'s
("Citicasters") and Noble Broadcast Group, Inc.'s ("Noble") completed 1995 and
January 1996 radio station acquisitions, (v) Jacor's February 1996 radio station
disposition, (vi) the related financing transactions completed in June 1996 and
(vii) Jacor's acquisition of the Selected Gannett Radio Stations (as defined
herein) from a subsidiary of Gannett Co., Inc. ("Gannett"). The pro forma
condensed consolidated balance sheet as of September 30, 1996 has been prepared
as if the Regent Merger and the acquisition of the Selected Gannett Radio
Stations had occurred on that date.
The Summary Unaudited Pro Forma Financial Information does not purport to
present the actual financial position or results of operations of the Company
had the transactions and events assumed therein in fact occurred on the dates
specified, nor are they necessarily indicative of the results of operations that
may be achieved in the future. The Summary Unaudited Pro Forma Financial
Information is based on certain assumptions and adjustments described in the
notes to the Unaudited Pro Forma Financial Information and should be read in
conjunction therewith. See Consolidated Financial Statements and the Notes
thereto for each of Jacor, Citicasters, Noble and the Selected Gannett Radio
Stations included herein.
PRO FORMA
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Net revenue.............................................................. $ 343,197 $ 272,112
Broadcast operating expenses............................................. 230,927 190,555
Depreciation and amortization............................................ 50,818 38,235
Corporate general and administrative expenses............................ 6,655 5,559
Operating income......................................................... 54,797 37,763
Net loss................................................................. (12,650) (6,904)
OTHER FINANCIAL DATA
Broadcast cash flow...................................................... $ 112,270 $ 81,557
Broadcast cash flow margin............................................... 32.7% 30.0%
EDITDA................................................................... $ 105,615 $ 75,998
Capital expenditures..................................................... 20,436 13,801
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1996
------------------
<S> <C>
BALANCE SHEET DATA:
Working capital............................................................................. $ 85,043
Intangible assets........................................................................... 1,509,791
Total assets................................................................................ 1,894,515
Long-term debt.............................................................................. 709,734
LYONS....................................................................................... 117,090
Total shareholders' equity.................................................................. 583,627
</TABLE>
12
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following sets forth summary historical financial data for Jacor and
Regent for the three years ended December 31, 1995 and the nine month periods
ended September 30, 1995 and 1996. The comparability of the historical
consolidated financial data has been significantly impacted by acquisitions and
dispositions. The information presented below is qualified in its entirety by,
and should be read in conjunction with, Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Consolidated Financial
Statements and the Notes thereto included herein.
HISTORICAL
JACOR
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- ---------------------
1993 1994 1995 1995 1996
--------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net revenue............................................... $ 89,932 $ 107,010 $ 118,891 $ 87,176 $ 127,520
Broadcast operating expenses.............................. 69,520 80,468 87,290 65,241 91,694
Depreciation and amortization............................. 10,223 9,698 9,483 6,783 10,601
Corporate general and administrative expenses............. 3,564 3,361 3,501 2,564 4,080
Operating income.......................................... 6,625 13,483 18,617 12,588 21,145
Net income................................................ 1,438 7,852 10,965 7,768 4,737
OTHER FINANCIAL DATA
Broadcast cash flow....................................... $ 20,412 $ 26,542 $ 31,601 $ 21,935 $ 35,826
Broadcast cash flow margin................................ 22.7% 24.8% 26.6% 25.2% 28.1%
EBITDA.................................................... $ 16,848 $ 23,181 $ 28,100 $ 19,371 $ 31,746
Capital expenditures...................................... 1,495 2,221 4,969 3,664 7,506
</TABLE>
REGENT
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- ---------------------
1993(1) 1994 1995 1995 1996
--------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net revenue............................................... $ 7,325 $17,257 $ 10,641 $23,198
Broadcast operating expenses.............................. 7,737 14,660 9,458 19,070
Depreciation and amortization............................. 1,125 3,316 1,689 4,226
Time brokerage agreement termination expense.............. 125
Corporate general and administrative expenses............. 89 670 740 482 1,177
Operating income (loss)................................... (89) (2,331) (1,460) (988) (1,274)
Net income (loss)......................................... (76) (2,812) (3,087) (1,845) 513
OTHER FINANCIAL DATA
Broadcast cash flow....................................... $ (412) $ 2,596 $ 1,183 $ 4,128
Broadcast cash flow margin................................ (5.6%) 15.0% 11.1% 17.8%
EBITDA.................................................... $(89) $(1,206) $ 1,856 $ 701 $ 2,952
Capital expenditures...................................... 21 635 1,017 759 1,365
</TABLE>
- ------------------------
(1) Regent Communications, Inc. began operations on September 24, 1993.
13
<PAGE>
COMPARATIVE PER SHARE DATA
Set forth below are historical earnings (loss) per share before
extraordinary items, cash dividends per share and book value per share data of
Jacor and Regent and unaudited pro forma per share data of the combined
companies. The data set forth below should be read in conjunction with the Jacor
and Regent audited financial statements, including the notes thereto, which are
included in this Prospectus/Information Statement. The data should also be read
in conjunction with the unaudited pro forma combined condensed financial
statements, including the notes thereto, included elsewhere in this Prospectus/
Information Statement.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER NINE MONTHS ENDED
31, 1995 SEPTEMBER 1996
--------------------- ---------------------
JACOR REGENT JACOR REGENT
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
HISTORICAL:
Earnings (Loss) Per Share..................... $ 0.52 $ (103.35) $ 0.31 $ (39.91)
Cash Dividends Per Share...................... -- -- -- --
Book Value Per Share.......................... $ 7.66 $ (184.72) $ 15.43 $ (221.87)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 1996
----------------- -------------------
<S> <C> <C>
PRO FORMA:
Loss Per Share................................ $ (0.41) $ (0.27)
Cash Dividends Per Share...................... -- --
Book Value Per Share.......................... N/A $ 16.77
</TABLE>
MARKET PRICES AND DIVIDENDS
Jacor Common Stock is quoted on the Nasdaq National Market under the symbol
"JCOR." The table below sets forth, for the calendar quarters indicated, the
reported high and low per share sales prices of Jacor Common Stock as reported
on the Nasdaq National Market.
<TABLE>
<CAPTION>
JACOR COMMON STOCK
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
1995
First Quarter........................................................... 14.50 12.00
Second Quarter.......................................................... 17.00 13.00
Third Quarter........................................................... 19.25 15.00
Fourth Quarter.......................................................... 17.50 15.00
1996
First Quarter........................................................... 22.25 16.00
Second Quarter.......................................................... 31.25 19.50
Third Quarter........................................................... 35.00 24.75
Fourth Quarter.......................................................... 36.38 23.75
1997
First Quarter (through January 31, 1997)................................ 28.75 25.75
</TABLE>
On October 8, 1996, the last full trading day prior to the public
announcement of the execution and delivery of the Merger Agreement, the closing
price per share of Jacor Common Stock was $34.125. On , 1997, the most
recent date for which it was practicable to obtain market price data prior to
the printing of this Prospectus/Information Statement, the closing price per
share of Jacor Common Stock was $ .
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Jacor has not declared any cash dividend on its common stock since its
inception. Jacor intends to retain future earnings for use in its business and
does not anticipate paying any dividends on Jacor Common Stock in the
foreseeable future. Under Jacor's credit facility, Jacor is prohibited from
paying cash dividends on Jacor Common Stock except as may be provided therein.
See "THE MERGER--Financing Arrangements."
The holders of shares of the 1993 Series of Regent Preferred Stock shall be
entitled to receive, when, as and if declared by the Regent Board of Directors
out of funds legally available for such purpose, cumulative dividends payable
quarterly in cash on the first business day of January, April, July and October,
accruing commencing with the date of issue of such shares, on shares of the 1993
Series at the rate of $0.70 per share per annum. No interest shall be paid on
accrued but unpaid dividends. The holders of shares of the 1994 Series of Regent
Preferred Stock shall be entitled to receive, when, as and if declared by the
Regent Board of Directors out of funds legally available for such purpose,
cumulative dividends payable quarterly in cash on the first business day of
January, April, July and October, accruing commencing with the date of issue of
such shares, on shares of the 1994 Series at the rate of $0.875 per share per
annum. No interest shall be paid on accrued but unpaid dividends. The holders of
shares of the 1995 Series of Regent Preferred Stock shall be entitled to receive
when, as and if declared by the Board of Directors of Regent out of funds
legally available for such purpose, cumulative dividends payable quarterly in
cash on the first business day of January, April, July and October, accruing
commencing with the date of issue of such shares, on shares of the 1995 Series
at the rate of $1.05 per share per annum. No interest shall be paid on accrued
but unpaid dividends. So long as dividends on the 1993 Series, the 1994 Series
or the 1995 Series are in arrears, Regent may not pay dividends on any stock
ranking on a parity with such series, except dividends paid ratably on such
series and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled.
As of December 31, 1996, no dividends have been declared by Regent.
Presently, Regent intends to declare payable cumulative unpaid dividends
aggregating approximately $6.5 million to be paid immediately prior to the
Closing of the Merger. Regent expects to fund the payment of dividends through
borrowings under the Credit Agreement, dated October 25, 1995, among the Bank of
Montreal, as Co-Agent, General Electric Capital, as Co-Agent, the Lenders named
therein and Regent, as amended (the "Regent Credit Agreement"), which will
require an amendment to such agreement. However, there can be no assurances that
such dividends will be paid.
The amount of Merger Consideration has been calculated based on the
assumption that the Regent Liabilities (as defined herein) shall not exceed
$64.0 million on the Closing Date. To the extent that dividends are paid on the
Regent Preferred Stock, it is likely that the amount of the Regent Liabilities
shall exceed $64.0 million and the aggregate amount of Merger Consideration
shall be reduced to the extent of such excess (which reduction may be made by
reducing the amount of Stock Consideration or the amount of cash, if any, that
Jacor would otherwise have paid). In addition, pursuant to the terms of the KWNR
Letter Agreement, Regent is not allowed to pay any dividends on the Regent
Preferred Stock if, or to the extent that, the payment of such dividends would
result in the Aggregate Average Value of Jacor Common Stock to be received by
SRLV's shareholders being less than $12.0 million.
Neither Regent Common Stock nor Regent Preferred Stock is traded in an
established public market.
On December 31, 1996, there were approximately 1,500 holders of record of
Jacor Common Stock and one and 52 holders of record, respectively, of Regent
Common Stock and Regent Preferred Stock.
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RISK FACTORS
PENDING TRANSACTIONS. The consummation of each of the pending transactions
which are the subject of Jacor's executed purchase, sale or merger agreements
(the "Pending Transactions") requires FCC approval with respect to the transfer
of the associated broadcast licenses. Jacor has filed or will file in the
ordinary course applications seeking FCC approval for the Pending Transactions.
In addition, the consummation of certain of the Pending Transactions is subject
to the expiration or termination of the applicable waiting periods under the HSR
Act. Jacor recently received a second request for information from the Antitrust
Division of the Department of Justice (the "Antitrust Division") relating to the
Stanford Transaction (as defined herein) which focuses on Jacor's acquisition of
radio stations in Lexington. The applicable waiting period under the HSR Act for
the Stanford Transaction will expire 20 days after all of the parties to the
transaction substantially comply with the second request, (i) unless the parties
agree to extend the waiting period or the Antitrust Division seeks to, and is
successful in its efforts to, enjoin the transaction or, (ii) unless otherwise
terminated by the Antitrust Division. The parties have not yet completed
compliance with the recently-received second request. Jacor also has received
recently a Civil Investigative Demand from the Antitrust Division investigating
the New Wave Transaction (as defined herein). Consummation of the New Wave
Transaction may be subject to the resolution of this investigation.
There can be no assurance that (i) the FCC will approve the transfer of the
broadcast licenses in connection with the Pending Transactions; (ii) the FCC or
a court would affirm the FCC consent to the Pending Transactions if such review
is undertaken; (iii) the HSR Act waiting periods with respect to the various
Pending Transactions will expire without objections being raised by either the
Federal Trade Commission ("FTC") or the Antitrust Division that would not be
eliminated without substantial changes to the terms of the applicable Pending
Transactions; or (iv) Jacor will be successful in consummating the various
Pending Transactions in a timely manner or on the terms described herein. See
"THE MERGER--Regulatory Matters."
RISKS OF ACQUISITION STRATEGY. Jacor intends to pursue growth through the
opportunistic acquisition of broadcasting companies, radio station groups,
individual radio stations and entities that provide services to radio station
groups or individual radio stations. In this regard, Jacor routinely reviews
such acquisition opportunities. Jacor believes that currently there are
available a number of acquisition opportunities that would be complementary to
its business. Other than with respect to the Pending Transactions and as
described in "BUSINESS OF JACOR," Jacor currently has no binding commitments to
acquire any specific business or other material assets. Jacor cannot predict
whether it will be successful in pursuing such acquisition opportunities or what
the consequences of any such acquisition would be.
The Pending Transactions will increase Jacor's broadcast station portfolio
by 53 radio stations. Jacor's acquisition strategy involves numerous risks,
including difficulties in the integration of operations and systems, the
diversion of management's attention from other business concerns and the
potential loss of key employees of acquired stations. There can be no assurance
that Jacor's management will be able to manage effectively the resulting
business or that such acquisitions will benefit Jacor.
In addition to the expenditure of capital relating to the Pending
Transactions (see "THE MERGER-- Financing Arrangements"), future acquisitions
also may involve the expenditure of significant funds. Depending upon the
nature, size and timing of future acquisitions, Jacor may be required to raise
additional financing. There is no assurance that such additional financing will
be available to Jacor on acceptable terms.
INCREASED ANTITRUST SCRUTINY. Subsequent to the passage of the Telecom Act,
the radio broadcast industry has been subject to an increased amount of scrutiny
by the Antitrust Division. Such scrutiny caused Jacor to experience delays in
closing both its Merger with Citicasters (now known as JCC) (the "Citicasters
Merger") and its acquisition of Noble (the "Noble Acquisition") and to incur
increased transaction costs. Jacor could experience similar delays and increased
costs in connection with future transactions, including one or more of the
Pending Transactions.
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The Antitrust Division or the FTC could also compel changes in the proposed
terms of acquisitions. This is evidenced by Jacor's agreement with the Antitrust
Division in connection with the Citicasters Merger pursuant to which Jacor
agreed to divest WKRQ-FM in Cincinnati by February 1997 and to inform the
Antitrust Division of certain transactions in Cincinnati that would not
otherwise be reportable under the HSR Act. Antitrust Division scrutiny also
resulted in Jacor terminating its agreement to finance the acquisition of
WGRR-FM in Cincinnati by Tsunami Communications, Inc., the entity with whom
Jacor has a joint sales agreement ("JSA") for a Denver radio station. Subsequent
to such termination, Jacor received from the Antitrust Division a civil
investigative demand relating to the proposed transaction. In November 1996, the
Antitrust Division suspended Jacor's obligation to respond to this civil
investigative demand.
In addition, Jacor has received an industry-wide civil investigative demand
relating to JSAs pursuant to which the Antitrust Division is examining the
antitrust implications of such arrangements. Jacor anticipates that the
Antitrust Division's determinations of the permissibility of JSAs will depend on
the specific characteristics of the markets, stations and relationships being
reviewed. Jacor believes that its existing JSAs are appropriate under applicable
antitrust laws and that its JSAs are not material to its business as such
arrangements only account for approximately 1.0% of Jacor's net revenues. Jacor
has essentially completed its response to the civil investigative demand
relating to JSAs received from the Antitrust Division, although the
investigation is still pending.
Although Jacor does not believe that antitrust considerations will adversely
affect Jacor's ability to successfully implement its business strategy, the
effects of the Antitrust Division's heightened level of scrutiny on the radio
broadcast industry and on Jacor are uncertain. There can be no assurance that
these concerns will not negatively impact Jacor. See "THE MERGER--Regulatory
Matters."
FCC REGULATION OF BROADCASTING INDUSTRY. The broadcasting industry is
subject to extensive regulation by the FCC which, among other things, requires
approval for the issuance, renewal, transfer and assignment of broadcasting
station operating licenses, limits the number of broadcasting properties Jacor
may acquire and regulates the operations of broadcasting stations. Additionally,
in certain circumstances, the Communications Act of 1934, as amended (the
"Communications Act"), and FCC rules will operate to impose limitations on alien
ownership and voting of the capital stock of Jacor. The FCC is considering
changes to its rules in response to the Telecom Act and other industry
developments. There can be no assurance that any such rule changes will not
negatively impact Jacor's operations in the future. See "THE MERGER--Regulatory
Matters."
Jacor's business will be dependent upon maintaining its broadcasting
licenses issued by the FCC, which are issued currently for a maximum term of
eight years. Many of Jacor's operating licenses expire at various times in 1997.
Although it is rare for the FCC to deny a renewal application, there can be no
assurance that the pending or future renewal applications will be approved, or
that such renewals will not include conditions or qualifications that could
adversely affect Jacor's operations. Moreover, governmental regulations and
policies may change over time and there can be no assurance that such changes
would not have a material adverse impact upon Jacor's business, financial
condition and results of operations. See "THE MERGER--Regulatory Matters."
COMPETITION; BUSINESS RISKS. Broadcasting is a highly competitive business.
Jacor's radio and television stations compete for audiences and advertising
revenues with other radio and television stations, as well as with other media,
such as newspapers, magazines, cable television, outdoor advertising and direct
mail, within their respective geographic areas. Audience ratings and revenue
shares are subject to change and any adverse change in a particular geographic
area could have a material and adverse effect on the revenue of stations located
in that geographic area. Future operations are further subject to many variables
which could have an adverse effect upon Jacor's financial performance. These
variables include economic conditions, both generally and relative to the
broadcasting industry; shifts in population and other demographics; the level of
competition for advertising dollars with other radio stations, television
stations and other entertainment and communications media; fluctuations in
operating costs; technological changes and innovations; changes in labor
conditions; and changes in governmental regulations and policies and actions of
federal regulatory bodies. Although Jacor believes that each of its stations
will be able to
17
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compete effectively in its respective broadcast area, there can be no assurance
that any such station will be able to maintain or increase its current audience
ratings and advertising revenues.
SUBSTANTIAL LEVERAGE AND LIMITED FINANCIAL FLEXIBILITY. The Pending
Transactions (including the Merger) may result in a higher level of indebtedness
for Jacor. Jacor's outstanding indebtedness may have the following important
consequences: (i) significant interest expense and principal repayment
obligations resulting in substantial annual fixed charges; (ii) significant
limitations on Jacor's ability to obtain additional debt financing; and (iii)
increased vulnerability to adverse general economic and industry conditions. In
addition, the Credit Facility has a number of financial covenants, including
interest coverage, debt service coverage and a maximum ratio of debt to earnings
before other expenses (income), interest, expenses, taxes, depreciation and
amortization. See "UNAUDITED PRO FORMA FINANCIAL INFORMATION."
SHARE OWNERSHIP BY ZELL/CHILMARK. Zell/Chilmark Fund L.P. ("Zell/Chilmark")
currently holds approximately 42.7% of the outstanding Jacor Common Stock. The
large share ownership of Zell/ Chilmark may have the effect of discouraging
certain types of transactions involving an actual or potential change of control
of Jacor, including transactions in which the holders of Common Stock might
otherwise receive a premium for their shares over then-current market prices.
By virtue of its current control of Jacor, Zell/Chilmark could sell large
amounts of Jacor Common Stock by causing Jacor to file a registration statement
with respect to such stock. In addition, Zell/Chilmark could sell its shares of
Jacor Common Stock without registration pursuant to Rule 144 under the
Securities Act. Jacor can make no prediction as to the effect, if any, that such
sales of shares of Jacor Common Stock would have on the prevailing market price.
Sales of substantial amounts of Jacor Common Stock, or the availability of such
shares for sale, could adversely affect prevailing market prices. Sales or
transfers of Jacor Common Stock by Zell/Chilmark could result in another person
or entity becoming the controlling shareholder of Jacor.
KEY PERSONNEL. Jacor's business is dependent upon the performance of
certain key employees, including its Chief Executive Officer and its President.
Jacor employs several on-air personalities with significant loyal audiences in
their respective broadcast areas. Jacor generally enters into long-term
employment agreements with its key on-air talent to protect its interests in
those relationships, but there can be no assurance that all such on-air
personalities will remain with Jacor.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK. Jacor has shares of Jacor
Common Stock which are authorized but unissued (assuming no exercise of options)
and 4,000,000 shares of Preferred Stock authorized but unissued for future
issuance, without additional stockholder approval. These additional shares may
be utilized for a variety of corporate purposes, including future offerings to
raise additional capital or to facilitate corporate acquisitions.
One of the effects of the existence of unissued and unreserved Jacor Common
Stock or Preferred Stock may be to enable the Jacor Board of Directors to issue
shares to persons friendly to current management which could render more
difficult or discourage an attempt to obtain control of Jacor by means of a
merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of management. Such additional shares also could be used to dilute
the stock ownership of persons seeking to obtain control of Jacor.
The issuance of Preferred Stock could have the effect of delaying or
preventing a change in control of Jacor. The issuance of Preferred Stock could
decrease the amount of earnings and assets available for distribution to the
holders of Jacor Common Stock or could adversely effect the rights and powers,
including voting rights of the holders of the Jacor Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Jacor Common Stock. Jacor does not currently have any plans to
issue additional shares of Jacor Common Stock or Preferred Stock other than
shares of Jacor Common Stock which may be issued upon the exercise of options
and stock units which have been granted or which may be granted in the future to
directors, officers, and employees of Jacor or shares of
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Jacor Common Stock issuable upon conversion of the LYONs, the Citicasters
Warrants and the Merger Warrants, all as defined herein.
FORWARD-LOOKING STATEMENTS. This Prospectus/Information Statement sets
forth or incorporates by reference forward-looking statements within the meaning
of Section 27A of the Securities Act. Discussions containing such
forward-looking statements may be found in the material set forth under
"Prospectus/ Information Statement Summary," as well as within the
Prospectus/Information Statement generally. In addition, when used in this
Prospectus/Information Statement, the words "believes," "anticipates," "expects"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to a number of risks and uncertainties. Actual
results in the future could differ materially from those described in the
forward-looking statements as a result of the risk factors set forth above and
the matters set forth or incorporated by reference in this
Prospectus/Information Statement generally. Jacor undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
that may be made to reflect any future events or circumstances. Jacor cautions
the reader, however, that this list of risk factors may not be exhaustive.
RISK OF TAXABLE MERGER. If Jacor makes the Cash Election or if a New Merger
Event otherwise occurs, the Merger will be fully taxable to holders of Regent
Stock, even though all or a significant portion of the Merger Consideration may
be in the form of Stock Consideration or Warrant Consideration. See "THE
MERGER--Certain Federal Income Tax Consequences".
THE MERGER
The description of the Merger Agreement set forth in this Section includes
all material terms of the Merger Agreement but does not purport to be complete
and is qualified in its entirety by reference to the Merger Agreement which is
attached as Annex I to this Prospectus/Information Statement and is incorporated
by reference herein.
AUTHORIZATION BY STOCKHOLDERS AND BOARDS OF DIRECTORS
On October 8, 1996, the Regent Board of Directors unanimously approved the
Merger Agreement and concluded that the terms of the Merger are fair to, and in
the best interests of, the holders of Regent Stock. Under the DGCL, the
affirmative vote of the holders of a majority of the voting power represented by
the outstanding Regent Stock is required to approve the Merger.
The holders of more than a majority of the voting power represented by all
outstanding shares of Regent Stock, acting by written consent in lieu of a
meeting and voting as a single class, have approved the Merger and approved and
adopted the Merger Agreement. The Merger Agreement also has been approved by the
Jacor Board of Directors. The Merger Agreement and the Merger do not require the
approval of the Jacor stockholders under the DGCL. No additional corporate
action by Jacor or Regent, and no further action of the Regent stockholders,
will be required to effect the Merger. ACCORDINGLY, REGENT IS NOT ASKING ANY
REGENT STOCKHOLDER FOR A PROXY AND REGENT STOCKHOLDERS ARE REQUESTED NOT TO SEND
A PROXY. NO MEETING OF REGENT STOCKHOLDERS WILL BE HELD TO CONSIDER APPROVAL OF
THE MERGER.
REASONS FOR THE MERGER
Since 1993, Jacor has been actively seeking to expand through acquisitions
and has identified numerous potential acquisition and merger candidates. Since
the enactment of the Telecom Act on February 8, 1996, Jacor has acquired 42
radio stations, two television stations (one of which has subsequently been
disposed of) and entered into an exclusive agency agreement to provide
programming to and sell air time for two radio stations located in Baja
California, Mexico. Jacor has also disposed of three radio stations. Throughout
1996, Jacor further continued to negotiate for additional acquisitions in its
existing locations and in new locations. Jacor identified Regent as a potential
acquisition candidate in June 1996 and began to review information regarding
Regent at that time.
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During the summer of 1996, the Board of Directors of Regent determined that
it would be appropriate to evaluate the possibility of a sale of Regent's
business. Regent was aware of the significant consolidation that has been taking
place in the broadcasting industry and concluded that it would be advantageous
for Regent to combine its operations with those of a larger operator of
broadcast properties. Regent also believed that it would be an attractive merger
partner because of its success in managing radio station properties.
Accordingly, Regent engaged Goldman Sachs to assist in the process of soliciting
and negotiating with one or more potential merger partners.
During August and September of 1996, Regent received proposals from several
parties, including Jacor, and entered into discussions with those parties to
evaluate the relative merits of those proposals. In connection with that
evaluation, Regent also concluded that it would be desirable to enter into a
transaction which would potentially be tax free and would potentially provide
the Regent stockholders the opportunity to continue to participate in the
broadcast business through the receipt of stock in a merger.
In August 1996, Jacor commenced preliminary discussions with Goldman Sachs
in connection with possible merger or sale opportunities. Jacor management
believed that Regent's operations and growth philosophies were consistent with
Jacor's and determined that more detailed discussions were warranted. Jacor
management also received authorization from the Jacor Board of Directors to
proceed with negotiations.
In late August 1996, Jacor submitted its initial bid to acquire Regent
through a merger. The bid was submitted in accordance with the procedures
established by Regent through its investment banker. Jacor believed that Regent
was an attractive acquisition candidate and that a merger could create numerous
synergies and operating advantages for both companies.
Additional discussions then ensued between Randy Michaels and R. Christopher
Weber, Jacor's chief executive officer and chief financial officer,
respectively, and Goldman Sachs, primarily concerning the economic terms of a
possible merger between Jacor and Regent. In late September 1996, the parties
reached general agreement on the amount and form of the merger consideration,
$116.0 million in Jacor common stock, warrants to acquire 500,000 shares of
Jacor common stock and the payment by Jacor of $64.0 million in cash to cover
certain liabilities of Regent, subject to Jacor's satisfactory completion of due
diligence and the preparation of the definitive merger agreement and related
acquisition documents.
The respective legal counsel for each of Jacor and Regent then proceeded to
engage in intensive negotiations and drafting of documents. Through their
respective legal counsel and, in the case of Regent, Goldman Sachs, in the
course of numerous telephone conferences, the parties negotiated key terms and
conditions of the proposed acquisition. Jacor's legal counsel consulted
frequently with Messrs. Michaels and Weber as to unresolved issues during the
course of these negotiations.
On September 27, 1996, the Jacor Board of Directors authorized Messrs.
Michaels and Weber to enter into the definitive merger agreement with Regent.
The terms of the Merger Agreement and related acquisition documents were then
finalized and approved by the Board of Directors of Regent, The Merger Agreement
was executed by Jacor and Regent after the close of business on October 8, 1996.
In approving the Merger, the Regent Board of Directors considered a wide variety
of factors, including those described herein. In view of the wide variety of
factors assessed, the Regent Board of Directors did not consider it practicable
to, and did not attempt to, quantify or otherwise assign relative weights to the
specific factors it considered in reaching its determination.
In evaluating the Merger, the Regent Board of Directors considered
information with respect to the financial condition, results of operations,
assets, liabilities, business strategy and prospects of Regent. In reviewing
Regent's business affairs and prospects, the Regent Board of Directors also
considered the current state and prospects of the radio industry generally,
including competitive proposals.
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The Regent Board of Directors also considered public information with
respect to the financial condition, results of operations, assets, liabilities,
business strategy and prospects of Jacor. In addition, the Regent Board of
Directors evaluated the historical market price and recent trading activity of
the Jacor Common Stock.
On October 9, 1996, Jacor delivered its $10.0 million letter of credit to
the Escrow Agent, and Jacor then publicly announced the pending Merger.
CLOSING DATE; EFFECTIVE TIME OF THE MERGER
Pursuant to the Merger Agreement, the Closing of the Merger shall occur
within ten days after the date on which the last of the conditions precedent to
the Merger have been satisfied (excluding conditions that by their terms cannot
be satisfied until the closing date), or at such other date as Regent and Jacor
may agree in writing (the "Closing Date"). The Merger Agreement further provides
that upon satisfaction or waiver of all of the conditions precedent to the
Merger and provided the Merger Agreement has not been earlier terminated, the
parties shall execute and file on the Closing Date a certificate of merger or
other appropriate documents with the Secretary of State of the State of
Delaware. The Merger shall become effective as of the time of filing of a
properly executed certificate of merger. For purposes of this
Prospectus/Information Statement, the date and time when the Merger becomes
effective is herein referred to as the Effective Time.
REGENT TRANSACTIONS
Prior to the execution of the Merger Agreement, Regent had entered into
certain purchase, sale and option agreements regarding the disposition and
acquisition of various broadcast radio stations. On July 19, 1996, Regent, SFE
and SRLV entered into the Reorganization Agreement whereby SRLV would merge with
and into Regent. SRLV operates KWNR-FM, Las Vegas, Nevada. Simultaneous with the
execution of the Merger Agreement, Jacor, Regent, SRLV and SFE entered into the
KWNR Letter Agreement, which provides that: (i) if the Merger is consummated,
immediately following the Merger SRLV would merge with and into Jacor, with
Jacor as the surviving corporation, and Jacor would pay consideration to SFE, as
the sole stockholder of SRLV, in an amount equal the number of shares of Jacor
Common Stock and Merger Warrants that a holder of 480,000 shares of preferred
stock of Regent would be entitled to receive in the Merger, plus any additional
consideration that SFE would be entitled to under the Merger Agreement, plus
$9.0 million in cash (which amount is included within the $64.0 million in
Regent Liabilities (as defined herein) to be assumed by Jacor in the Merger)
(the "Jacor-KWNR Acquisition"), or (ii) if the Merger Agreement is terminated
prior to the Closing Date, SRLV would merge with and into Regent pursuant to the
terms and conditions of the KWNR Reorganization Agreement (the "Regent-KWNR
Acquisition"). CitiCo is currently supplying programming for KWNR-FM pursuant to
the a time brokerage agreement with SRLV, dated October 8, 1996, as amended (the
"KWNR TBA"). The KWNR Letter Agreement requires Jacor to continue existing
indemnification rights in favor of directors, officers, employees and agents of
SRLV for six years following the Effective Time.
Other such agreements include: (i) the Purchase Agreement between Regent
Broadcasting of Las Vegas, Inc. and Regent Licensee of Las Vegas, Inc., dated
July 8, 1996, with Las Vegas Radio Co., Inc. pursuant to which Regent sold
substantially all of the assets used or useful in the operation of KKDD-AM, Las
Vegas, Nevada, in October 1996 for $0.6 million (the "KKDD Sale Agreement"),
(ii) the Stock Purchase Agreement, dated August 2, 1996, by and between Regent
Broadcasting of Salt Lake City, Inc. ("Regent Salt Lake") and Starley D. Bush
and others, pursuant to which Regent Salt Lake acquired all of the outstanding
stock of Bountiful Broadcasting, Inc., which owned the assets of KURR-FM
(formerly KUTQ-FM in Salt Lake City, Utah, in November 1996 for $6.0 million
(the "KURR Purchase Agreement"), (iii) the Asset Purchase Agreement, dated
August 2, 1996, by and between Regent Salt Lake and Bountiful Broadcasting II,
LLC, whereby Regent acquired substantially all of the assets used or useful in
the operation of KZHT-FM, Salt Lake City, Utah, in November 1996 for $5.0
million (the "KZHT Purchase Agreement"), (iv) the Option Agreement, effective
January 23, 1995, by and between the Owen Company and Regent Broadcasting of
Louisville, Inc., as amended, for the purchase of WSJW-FM,
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Louisville, Kentucky (the "WSJW Option Agreement"), and (v) the Option
Agreement, dated as of July 1, 1994, as amended, by and between Broadcast
Associates, Inc. and Regent Broadcasting of Las Vegas, Inc., for the purchase of
KBGO-FM, Las Vegas, Nevada (the "KBGO Option Agreement," together with the WSJW
Option Agreement and the KBGO Option Agreement, the "Regent Purchase and Option
Agreements"). In December 1996, Regent gave the notice required to exercise the
option to purchase KGBO-FM in Las Vegas pursuant to the KBGO Option Agreement,
and FCC approval has been sought. Other notable Regent transactions include: (i)
the purchase of WVEZ-FM in Louisville, Kentucky in October 1996, and (ii) the
sale of WHKW-AM in Louisville, Kentucky in October 1996.
CONVERSION OF REGENT STOCK FOR THE MERGER CONSIDERATION
As of the Effective Time of the Merger, by virtue of the Merger and without
any action on the part of the holder of any shares of Regent Stock or any shares
of capital stock of Jacor: (i) subject to provisions for a "Minimum Price
Adjustment," "Maximum Price Adjustment," "Anti-Dilution Adjustment," "KWNR
Acquisition Adjustment," "Long-Term Debt Adjustment" and "Rights of Dissenting
Shares" (collectively the "Adjustments," each of which are respectively set
forth below), each issued and outstanding share of Regent Stock shall be
converted into the right to receive (i) the Conversion Number (as defined
herein) of a fully paid and nonassessable share of Jacor Common Stock (the
"Stock Consideration") and/or any cash payable (the "Cash Consideration") due to
downward fluctuations in the market price of Jacor Common Stock which trigger
certain payment options for Jacor, as described below plus (ii) a warrant to
acquire a fractional share of Jacor Common Stock (a "Merger Warrant") on the
terms described in the Warrant Agreement, which fractional share is anticipated
to be .10877 of a share of Jacor Common Stock (the "Warrant Consideration,"
together with the Stock Consideration and Cash Consideration, the "Merger
Consideration"). The Merger Warrants will expire on the fifth anniversary of the
Closing Date and shall each have an exercise price of $40.00 per full share of
Jacor Common Stock. Regent stockholders that are investment funds may distribute
to the owners of such funds the Jacor Common Stock and Merger Warrants received
as Merger Consideration.
The term "Conversion Number" means the number (rounded to the nearest
1/100,000) equal to the quotient of (i) 3.55 million (the "Base Share Number")
and (ii) the aggregate number of shares of Regent Stock outstanding on the
Closing Date plus 480,000 (the "Regent Fully Diluted Share Number"); provided,
however, that the Conversion Number shall be adjusted (x) pursuant to the
"Minimum Price Adjustment," by multiplying the Conversion Number by the fraction
set forth in sub-paragraph (a) of the Minimum Price Adjustment (as defined
herein), (y) pursuant to the "Maximum Price Adjustment" and the "Long-Term Debt
Adjustment" (each as defined herein and subject to Jacor's selection of the
Long-Term Debt Adjustment option to reduce the Stock Consideration), by reducing
the Base Share Number by an amount equal to the aggregate amount of Jacor Common
Stock determined in accordance with such Maximum Price Adjustments or Long-Term
Debt Adjustment, as the case may be or (z) pursuant to the Long-Term Debt
Adjustment (as defined herein and subject to Jacor's selection of the Long-Term
Debt Adjustment option to increase Stock Consideration), by increasing the Base
Share Number by an amount equal to the aggregate amount of Jacor Common Stock
determined in accordance with such Long-Term Debt Adjustment provision.
MINIMUM PRICE ADJUSTMENT. If, on the Determination Date, the Aggregate
Average Value of Jacor Common Stock is less than $116.0 million (which is
equivalent to 3,550,000 shares at Jacor Common Stock at $32.67606 per share),
then Jacor has the option with respect to the Stock Consideration to: (a) adjust
the Conversion Number by a fraction (y) the numerator of which is equal to
$32.67606, and (z) the denominator of which is the Average Value of Jacor Common
Stock; (b) pay additional Merger Consideration in the form of cash pro rata
among the holders of Regent Stock, in an amount equal to the difference between
$116.0 million and the Aggregate Average Value of Jacor Common Stock; or (c) pay
no Stock Consideration and instead pay, as part of the Merger Consideration, pro
rata among the holders of Regent Stock, the Cash Election.
In the event that on the Determination Date a Minimum Price Adjustment to
the Merger Consideration must be made as set forth above, Jacor shall inform
Regent in writing no later than 12:00 noon on the second business day preceding
the Closing Date, as to which of the three options set forth above that Jacor
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has selected. Since the last reported sale price of the Jacor Common Stock on
January 31, 1997 was less than $32.67606, Jacor expects that the foregoing
Minimum Price Adjustment provisions, including the Cash Election, are likely to
be applicable to the Merger. As such, Jacor has informed Regent that it intends
to exercise the Cash Election and pay Cash Consideration in the amount of
approximately $103.9 million in lieu of the Stock Consideration to holders of
Regent Stock. Pursuant to the Cash Election, each holder of Regent Stock would
be entitled to receive $25.23553 in cash in exchange for the tender of each
share of Regent Stock in the Merger (assuming all outstanding exercisable
options to purchase Regent Stock are exercised). Notwithstanding a Cash Election
by Jacor, pursuant to the KWNR Letter Agreement, the sole stockholder of SRLV
will be entitled to receive the Stock Consideration, subject to certain
adjustments. Such Stock Consideration payable to the SRLV stockholder would
amount to 457,104 shares of Jacor Common Stock (assuming an average value of
$26.50 for a share of Jacor Common Stock on the Determination Date).
MAXIMUM PRICE ADJUSTMENT. If, on the Determination Date, the Aggregate
Average Value of Jacor Common Stock exceeds $156.2 million (which is equivalent
to 3,550,000 shares at Jacor Common Stock at $44.00 per share), then, the
aggregate amount of Stock Consideration is reduced, pro rata among the holders
of Regent Stock, by the aggregate amount of Jacor Common Stock equal to the
quotient of (i) the amount equal to one-half of the difference between (y) the
Aggregate Average Value of Jacor Common Stock on the Determination Date and (z)
$156.2 million; and (ii) the Average Value of Jacor Common Stock on the
Determination Date.
LONG-TERM DEBT ADJUSTMENT. On the Determination Date, Regent shall prepare
and deliver to Jacor a statement, certified by the chief financial officer of
Regent, setting forth Regent Liabilities (as defined herein) as of the close of
business on the Determination Date, together with (i) a reasonably detailed
calculation thereof and (ii) a letter from Coopers & Lybrand L.L.P., stating
that based on the procedures set forth in such letter, they concur in the
calculation of Regent Liabilities. In the event that the amount of Regent
Liabilities on the Determination Date is greater than the Maximum Aggregate
Regent Liabilities (as defined herein), then the aggregate amount of Merger
Consideration to be received by the holders of Regent Stock will be reduced pro
rata among the holders of Regent Stock, at Jacor's sole option, by either (i)
reducing the aggregate amount of Jacor Common Stock equal to the quotient of (y)
the difference between the amount of Regent Liabilities on the Determination
Date and the Maximum Aggregate Regent Liabilities and (z) the Average Value of
Jacor Common Stock on the Determination Date, or (ii) to the extent of the
amount of any Cash Election, reducing the amount of such cash consideration by
the amount of cash equal to the difference between the amount of Regent
Liabilities on the Determination Date and the Maximum Aggregate Regent
Liabilities. In the event that the amount of Regent Liabilities on the
Determination Date is less than the Maximum Aggregate Regent Liabilities (as
defined herein), then the aggregate amount of Merger Consideration to be
received by the holders of Regent Stock will be increased pro rata among the
holders of Regent Stock, at Jacor's sole option, by either (i) increasing the
aggregate amount of Jacor Common Stock equal to the quotient of (y) the
difference between the amount of Regent Liabilities on the Determination Date
and the Maximum Aggregate Regent Liabilities and (z) the Average Value of Jacor
Common Stock on the Determination Date, or (ii) increasing the Merger
Consideration by the amount of cash equal to the difference between the Maximum
Aggregate Regent Liabilities and the amount of Regent Liabilities on the
Determination Date.
The term "Regent Liabilities" means (i) the amount of Regent long-term debt
(including the current portion thereof) on such date, PLUS (ii) to the extent
not included in (i) above, the aggregate amount of any dividends paid or to be
paid prior to the Closing Date to the holders of Regent Preferred Stock (other
than dividends paid in Regent Stock), PLUS (iii) to the extent not included in
(i) above, the aggregate amount of all of Regent's expenses (including legal and
other fees) incurred in connection with the Merger ("Regent Expenses"), MINUS
(iv) to the extent included in (i) above, the amount equal to one-half of the
Regent Expenses, which shall not exceed $1.5 million, MINUS (v) to the extent
included in (i) above, the amount of debt outstanding on the Determination Date
under the line of credit extended by Broadcast Finance, Inc. ("BFI") to Regent
in the amount of $2.0 million (the "BFI Credit Line"), for the purpose of
providing Regent with sufficient funds to remain in compliance with certain
financial covenants under the Regent Credit Agreement and MINUS (vi) any amounts
due but not yet received under the KKDD Sale Agreement.
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The term "Maximum Aggregate Regent Liabilities" means the amount equal to (i)
$64.0 million MINUS (ii) the amount of debt outstanding, if any, under the BFI
Credit Line and MINUS (iii) to the extent that the KWNR Reorganization Agreement
or any of the Regent Purchase and Option Agreements has not closed prior to the
Closing Date, the aggregate cash committed to be paid under such transactions
that have not closed.
ANTI-DILUTION ADJUSTMENT. If, prior to the Effective Time, any event occurs
which requires an adjustment to the Merger Warrants as provided for by the
Warrant Agreement, then the Stock Consideration shall be adjusted in the same
manner as the Merger Warrants under the Warrant Agreement in order to preserve
the value of the Merger Consideration. See "THE MERGER--Description of Merger
Warrants."
KWNR PURCHASE ADJUSTMENT. In order to adjust the aggregate amount of Merger
Consideration payable to holders of Regent Stock in the event of the concurrent
closing of the Jacor-KWNR Acquisition, (i) the per share amount of the Merger
Consideration payable to SFE shall be determined as if 480,000 additional shares
of Regent Stock were outstanding, (ii) the aggregate amount of Merger
Consideration payable in respect of such 480,000 shares of Regent Stock (the
"KWNR Stock Consideration") shall be payable to SFE, as the sole stockholder of
Southwest Radio Las Vegas, Inc., in connection with the Jacor-KWNR Acquisition,
rather than to holders of Regent Stock pursuant to the Merger Agreement;
provided, however, that in the event that all or any portion of the KWNR Stock
Consideration would otherwise be payable in cash, (i) such portion (the "KWNR
Cash Adjustment") shall instead be payable to SFE in Jacor Common Stock, valued
based on the Average Value of Jacor Common Stock on the Determination Date (the
"KWNR Stock Adjustment") and (ii) (x) the aggregate amount of Stock
Consideration, if any, payable as part of the Merger Consideration to holders of
Regent Stock (the "Regent Stock Consideration") shall be reduced by a number of
shares equal to the KWNR Stock Adjustment (or, if the shares constituting the
Regent Stock Consideration are less than the shares constituting the KWNR Stock
Adjustment, the number of shares constituting the Regent Stock Consideration)
and (y) the aggregate amount of cash payable as part of the Merger Consideration
shall be increased by an amount equal to the KWNR Cash Adjustment to the holders
of the Regent Stock (the "Regent Cash Consideration"), provided, however, that
if the number of shares of Jacor Common Stock equal to the KWNR Stock Adjustment
exceeds the number of shares of Jacor Common Stock equal to the Regent Stock
Consideration, then the Regent Cash Consideration shall be increased, if at all,
in an amount equal to the Average Value of Jacor Common Stock on the
Determination Date multiplied by the number of shares of Jacor Common Stock
equal to the Regent Stock Consideration.
In the event that, after giving effect to the foregoing paragraph, the
payment of net Regent Expenses (the aggregate amount of Regent Expenses less
one-half thereof up to a maximum of $1.5 million) would result in the KWNR Stock
Consideration having an aggregate value (based on the Average Value of Jacor
Common Stock on the Determination Date) of less than $12.0 million on the
Determination Date, then (i) an amount of Jacor Common Stock equal to the
shortfall (the "Regent Expenses Adjustment") shall be added to the amount of
KWNR Stock Consideration payable by Jacor under the previous paragraph and (ii)
the amount of Regent Stock Consideration shall be further reduced by the amount
of Jacor Common Stock equal to the Regent Expenses Adjustment; provided,
however, that to extent that the number of shares of Jacor Common Stock equal to
the Regent Expenses Adjustment exceeds the number of shares of Jacor Common
Stock equal to the Regent Stock Consideration, as adjusted pursuant to clause
(ii)(x) in the preceding paragraph (such excess number of shares, the "Excess
Number"), then (a) SFE shall receive the amount of cash equal to the Average
Value of Jacor Common Stock on the Determination Date multiplied by the Excess
Number (the "Adjustment Amount") and (b) the Regent Cash Consideration, as
adjusted pursuant to clause (ii)(y) in the preceding paragraph, to be paid by
Jacor hereunder shall be reduced by the Adjustment Amount; provided, however,
that if the Adjustment Amount exceeds such adjusted Regent Cash Consideration,
then the holders of Regent Stock will pay Jacor an amount of cash equal to such
excess.
Jacor has informed Regent that it intends to exercise the Cash Election and
pay Cash Consideration to holders of Regent Stock. Notwithstanding a Cash
Election by Jacor, pursuant to the KWNR Letter Agreement, the sole stockholder
of SRLV will be entitled to receive the Stock Consideration, which would
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amount to 457,104 shares of Jacor Common Stock (assuming an average value of
$26.50 for a share of Jacor Common Stock on the Determination Date).
RIGHTS OF DISSENTING SHARES. The Merger Agreement provides for Rights of
Dissenting Shares to the extent that appraisal rights are available under
Delaware Law. The shares of Regent Stock that are issued and outstanding
immediately prior to the Effective Time and that have not been voted for
adoption of the Merger and with respect to which appraisal rights have been
properly demanded in accordance with Delaware Law ("Dissenting Shares") shall
not be converted into the right to receive the Merger Consideration at or after
the Effective Time unless and until the holder of such shares becomes ineligible
for such appraisal. If a holder of Dissenting Shares becomes ineligible for such
appraisal, then, as of the Effective Time or the occurrence of such event
whichever later occurs, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the Merger Consideration. If any holder of Regent Stock shall assert the right
to be paid the fair value of such Regent Stock as described above, Regent shall
give Jacor notice thereof and Jacor shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Regent shall not,
except with the prior written consent of Jacor, voluntarily make any payment
with respect to, or settle or offer to settle, any such demand for payment.
Payment for Dissenting Shares shall be made as required by Delaware Law. See
"THE MERGER--Appraisal and Dissenters' Rights."
EFFECT OF CONVERSION OF REGENT STOCK
As of the Effective Time of the Merger, all shares of Regent Stock shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such shares of
Regent Stock shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration and any cash in lieu of fractional
shares of Jacor Common Stock to be issued or paid in consideration therefor upon
surrender of such certificate in accordance with the Merger Agreement, without
interest.
EXCHANGE OF REGENT CERTIFICATES IN THE MERGER
As of the Effective Time of the Merger, Jacor shall deposit with the
Exchange Agent, for the benefit of the holders of shares of Regent Stock, for
exchange in accordance with the Merger Agreement, through the Exchange Agent,
certificates representing the shares of Jacor Common Stock and Merger Warrants
issuable in exchange for outstanding shares of Regent Stock. In the event that
Jacor makes any Cash Election, at the Effective Time of the Merger, Jacor shall
also deliver to the Exchange Agent for deposit into an escrow fund the amount of
cash necessary to satisfy its obligations under such Cash Election. As of the
Effective Time, holders of Regent Stock (other than holders of Dissenting
Shares) shall become holders of record of Jacor Common Stock.
Promptly after the Effective Time, the Exchange Agent shall make available
to each record holder who, as of the Effective Time, was a holder of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented shares of Regent Stock (the "Certificate" or "Certificates"), a
form of letter of transmittal and instructions for use in effecting the
surrender of the Certificates for payment therefor and conversion thereof.
Delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and,
the form of letter of transmittal shall so reflect. REGENT STOCKHOLDERS ARE
REQUESTED NOT TO SURRENDER THEIR REGENT CERTIFICATES FOR EXCHANGE UNTIL AFTER
THE EFFECTIVE TIME WHEN THE TRANSMITTAL FORM AND INSTRUCTIONS ARE MAILED BY THE
EXCHANGE AGENT AND RECEIVED BY THEM. Upon surrender to the Exchange Agent of a
Certificate, together with such letter of transmittal duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor one or
more certificates as requested by the holder (properly issued, executed and
countersigned, as appropriate) representing that number of whole shares of Jacor
Common Stock to which such holder of Regent Stock shall have become entitled
pursuant to the Merger Agreement as well as any cash due to such holder pursuant
to any Cash Election, and the Certificate so surrendered shall forthwith be
canceled. No interest will be paid or accrued on any cash payable upon the
surrender of the Certificates.
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From the Effective Time until surrender in accordance with the provisions of the
Merger Agreement, each Certificate shall represent for all purposes only the
right to receive the Merger Consideration. All payments in respect of shares of
Regent Stock that are made in accordance with the terms hereof shall be deemed
to have been made in full satisfaction of rights pertaining to such securities.
No certificates or scrip representing fractional shares of Jacor Common
Stock shall be issued upon the surrender for exchange of Certificates. No
dividend or other distribution by Jacor and no stock split shall relate to any
such fractional share, and no such fractional share shall entitle the record or
beneficial owner thereof to vote or to any other rights of a stockholder of
Jacor. In lieu of any such fractional share, each holder of Regent Stock who
would otherwise have been entitled thereto upon the surrender of Certificates
for exchange will be paid an amount in cash (without interest) rounded to the
nearest whole cent, determined by multiplying (i) the per share closing price on
the Nasdaq National Market of Jacor Common Stock on the date on which the
Effective Time shall occur (or, if the Jacor Common Stock shall not trade on the
Nasdaq National Market on such date, the first day of trading in Jacor Common
Stock on the Nasdaq National Market thereafter) by (ii) the fractional share to
which such holder would otherwise be entitled.
CERTAIN TERMS OF THE MERGER AGREEMENT AND RELATED AGREEMENTS
REPRESENTATIONS, WARRANTIES AND COVENANTS. The Merger Agreement contains
various representations and warranties of the parties, none of which survive the
consummation of the Merger, including, among other things, representations from
the parties, as of the date of the Merger Agreement and, except in certain
cases, as of the Effective Time, relating to (i) each party's organization and
similar corporate matters, (ii) the authorization, execution, delivery and
enforceability of the Merger Agreement and related matters, (iii) the absence of
conflicts with material contracts and other instruments and the absence of
violations of applicable law which would have a material adverse effect on the
party making the representation, (iv) each party's capital structure, (v) the
accuracy of financial statements and compliance with other accounting and
financial reporting related matters, (vi) good and marketable title to the
Regent's material tangible and intangible properties and assets, (vii) the
absence of material litigation, (viii) certain environmental matters, (ix) the
compliance with the FCC licenses for each of the Stations and all laws by
Regent; (x) employee benefit plan and labor arrangements, (xi) insurance matters
(xii) certain tax matters related to the Merger, (xiii) the lack of knowledge of
Jacor of any fact which would disqualify or prevent the consummation by Jacor of
the Merger, and (xiv) the accuracy of Jacor's information (other than
information concerning Regent) included in or incorporated by reference in the
registration statement to be filed with the Commission in connection with the
Merger Agreement and the compliance of such registration statement as to form
with applicable federal and state securities laws.
COVENANTS. The Merger Agreement obligates Jacor and Regent to (i) proceed
expeditiously and cooperate fully in making application for all necessary
regulatory approvals, in the procurement of any other consents and approvals,
and in the taking of any other action and the satisfaction of all other
requirements prescribed by law or otherwise, necessary for consummation of the
Merger; and (ii) use all commercially reasonable efforts to take, or cause to be
taken, all actions necessary to comply promptly with all legal requirements
which may be imposed on such party with respect to the Merger and to consummate
the transactions contemplated by the Merger Agreement and the Plan of Merger and
to obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any governmental
entity or any other public or private third party which is required to be
obtained or made by such party in connection with the Merger and the
transactions contemplated by the Merger Agreement and the Plan of Merger.
Pursuant to the Merger Agreement, Regent has agreed that prior to the
Effective Time, it will, (i) cause its Subsidiaries to broadcast programming
supplied by CitiCo over the Regent Stations pursuant to the TBA, and (ii) except
(a) for actions or inactions taken by Regent reasonably contemplated by the TBA,
(b) as required in connection with the Merger and the other transactions
contemplated by the Merger Agreement, (c) as disclosed by Regent to Jacor in the
Regent Disclosure Letter or the Merger Agreement or consented to in writing by
Jacor, or (d) as permitted by the Merger Agreement: (1) carry on
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its business in the ordinary course in substantially the same manner as
conducted in the past and not engage in any new line of business, make material
changes to the operation of its business or enter into any agreement,
transaction or activity or make any commitment except those in the ordinary
course of business and not otherwise prohibited by the Merger Agreement; (2)
neither change nor amend (or propose to amend) its certificate of incorporation
or bylaws, without the prior written consent of Jacor; (3) except in connection
with the Jacor-KWNR Acquisition or any stock dividend made to the holders of
Regent Stock (as provided for in the following item (4)), not issue, sell or
grant options, warrants or rights to purchase or subscribe to, or enter into any
arrangement or contract with respect to the issuance or sale of any of the
capital stock of Regent or rights or obligations convertible into or
exchangeable for any shares of the capital stock of Regent and, except with
respect to Dissenting Shares, not alter the terms of any presently outstanding
options or make any changes in the capital structure of Regent; (4) not declare,
pay or set aside for payment any dividend or other distribution in respect of
the capital stock or other equity securities of Regent and not, directly or
indirectly, redeem, purchase or otherwise acquire any shares of the capital
stock or other securities of Regent or rights or obligations convertible into or
exchangeable for any shares of the capital stock or other securities of Regent
or obligations convertible into such, or any options, warrants or other rights
to purchase or subscribe to any of the foregoing, except that Regent may (aa)
declare and pay cash dividends, including accrued dividends, on any outstanding
Regent Preferred Stock at or prior to the Closing in accordance with the
certificate of designation for such preferred stock or (bb) in lieu thereof,
declare and pay dividends on such preferred stock in additional shares of
capital stock of Regent; (5) not acquire or enter into an agreement to acquire,
by merger, consolidation or purchase of stock or assets, any business or entity
except pursuant to the KKDD Sale Agreement and the Regent Purchase and Option
Agreements; (6) use its reasonable efforts to preserve intact the corporate
existence, good will and business organization of Regent, to keep the officers
and employees of Regent available to Jacor and to preserve the relationships of
Regent, with customers, suppliers and others having business relations with
Regent; (7) except in connection with its rights and obligations under the KKDD
Sale Agreement and the Regent Purchase and Option Agreements, not (aa) create,
incur or assume any long-term debt including obligations in respect of capital
leases which individually involve annual payments in excess of $50,000 and
$250,000 in the aggregate (except for drawdowns up to the maximum availability
under the revolving credit facility under the Regent Credit Agreement,
consistent with past practices and for borrowings under the BFI Credit Line),
(bb) create, incur or assume any short-term debt for borrowed money except in
the ordinary course of business consistent with past practices under existing
lines of credit, (cc) pay or retire any long-term debt other than for scheduled,
amortized debt repayments, for payments of interest on any indebtedness whenever
it is due or with the proceeds of the sales of the Stations or the exercise of
the Options, (dd) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, except in the ordinary course of business and consistent with
industry practice, (ee) make any loans or advances to any other person, except
in the ordinary course of business and consistent with industry practice, (ff)
make any capital contributions to, or investments in, any person other than a
Regent Subsidiary, except in the ordinary course of business and consistent with
industry practices with respect to investments, or (gg) make any capital
expenditure involving in excess of $250,000 in the case of any single
expenditure or $250,000 in the case of all capital expenditures, provided,
however, that notwithstanding the foregoing, between the Determination Date and
the Closing Date, Regent shall not incur any additional Regent Liabilities other
than the payment of accrued dividends on Regent Preferred Stock and the payment
of Regent Expenses, in each case to the extent included in the calculations of
Regent Liabilities on the Determination Date, without the prior consent of
Jacor; (8) not enter into, modify or extend the terms of any employment,
severance or similar agreements with officers and directors of Regent and its
Subsidiaries, nor grant any increase in the compensation of officers, directors
or employees of Regent and its Subsidiaries, other than increases in the
ordinary course of business consistent with past practices and consistent with
industry practices; provided that, Regent may (aa) hire new employees for the
Regent Stations in the ordinary course of business (except that the hiring of
any employee with an aggregate annual compensation in excess of $50,000 requires
the prior approval of Jacor and that the annual aggregate compensation for all
such new employees may not exceed $200,000), and (bb) grant increases in the
annual compensation of employees of not more than four percent, the effect of
which would not materially increase the aggregate
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compensation payable or to become payable to employees of Regent or its
Subsidiaries; (9) perform in all material respects its obligations under all
Regent Material Contracts (as defined in the Merger Agreement) (except those
being contested in good faith) and not enter into, assume or amend any contract
or commitment that would be a Regent Material Contract other than contracts to
provide services entered into in the ordinary course of business consistent with
past practices; (10) use its reasonable efforts to maintain in full force and
effect and in the same amounts policies of insurance comparable in amount and
scope of coverage to that maintained by Regent on the date of the Merger
Agreement; (11) use its reasonable efforts to continue to collect its accounts
receivable in the ordinary course of business and consistent with past
practices; (12) not adopt any new employee benefit plan or make any change in or
to any existing plans other than any such change that is permitted under the
Merger Agreement, required by law, in the opinion of counsel is necessary or
advisable to maintain the tax qualified status of any such plan, or would not
materially increase, in the aggregate, the employee benefit plan liabilities of
Regent and its Subsidiaries taken as a whole; (13) not sell, lease or otherwise
dispose of any of its assets (including capital stock of the Regent
Subsidiaries) or acquire any business or assets except in connection with the
KKDD Sale Agreement and the Regent Purchase and Option Agreements or in the
ordinary course of business, where any sale, lease or other disposition for an
amount exceeding $50,000 individually or $250,000 in the aggregate is deemed not
to be in the ordinary course of business; (14) not mortgage or otherwise
encumber or subject to any lien any material amount of properties or assets
owned by Regent or any Regent Subsidiaries as of the date of this Agreement
except in the normal course of business; (15) not make any material change to
its accounting (including tax accounting) methods or principles, except as may
be required by generally accepted accounting principles or the Internal Revenue
Service; (16) not make any material tax election or settle or compromise any
material tax liability for an amount greater than reflected on Regent's
Financial Statements; (17) not pay or agree to pay in settlement or compromise
of any suits or claims of liability against Regent, its directors, officers,
employees or agents, more than an aggregate of $100,000 for all such suits and
claims except for liabilities accrued on the books of Regent as of the date of
the Merger Agreement; (18) not enter into any agreement providing for the
acceleration or payment or performance or other consequence as a result of a
change in control of Regent; (19) except in connection with the KKDD Sale
Agreement and the Regent Purchase and Option Agreements, not purchase any radio
stations, enter into any local marketing arrangements, joint sales agreement or
similar agreements; or (20) commit to any of the foregoing.
The Merger Agreement further provides that Jacor cause BFI to extend to
Regent the BFI Credit Line to enable Regent to comply with its financial
covenants under the Regent Credit Agreement. Regent has the ability to borrow
funds under the BFI Credit Line at any time it is not in compliance with such
financial covenants, and may only use borrowings under the BFI Credit Line to
make payments on its obligations under the Regent Credit Agreement. The BFI
Credit Line is evidenced by the BFI Note, which is guaranteed by all present and
future Regent Subsidiaries and is secured by liens in all collateral now or
hereafter securing Regent's obligations under the Regent Credit Agreement. No
monies have been borrowed to date under the BFI Credit Line.
CONDITIONS PRECEDENT TO THE MERGER. In addition to the approval and
adoption of the Merger Agreement and the terms of the Merger by the majority of
the outstanding shares of Regent's stockholders, the obligations of Jacor and
Regent to effect the merger are subject to the fulfillment or waiver of certain
conditions specified in the Merger Agreement.
Such conditions specified with respect to Jacor's obligations to close
include, among others: (i) the representations and warranties of Regent
contained in Merger Agreement shall be true and correct as of the date of the
Merger Agreement and as of the Effective Time except (a) for any such
representations and warranties made as of a specified date, which shall be true
and correct as of such date, (b) to the extent that the aggregate effect of the
inaccuracies in such representations and warranties as of the applicable times
(each considered without any exclusions for lack of Material Adverse Effect (as
defined herein) set forth in the individual representation or warranty) does not
constitute a Material Adverse Effect on Regent when compared to the state of
facts which would exist if all such representations and warranties were true in
all respects as of the applicable times, (c) to the extent that such
representations and
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warranties of Regent are not true and correct by reason of any action or
inaction by CitiCo (or any successor) as the broker of the Regent Stations
pursuant to the TBA and (d) after the effective date of the TBA (the "TBA
Effective Date"), the failure by Regent to comply with any of its financial
covenants under the Regent Credit Agreement due to insufficient Broadcast Cash
Flow (as defined in the TBA) shall not constitute a breach of any representation
or warranty hereunder; (ii) except for actions or inactions by Regent reasonably
contemplated by the TBA, each of the agreements and covenants of Regent to be
performed and complied with by Regent pursuant to this Agreement prior to the
Effective Time shall have been duly performed and complied with except to the
extent that the aggregate effect of any nonperformance or noncompliance by
Regent (each considered without any exclusions for lack of Material Adverse
Effect set forth in the individual covenant or agreement) does not constitute a
Material Adverse Effect on Regent when compared to the state of facts which
would exist if all such agreements and covenants had been performed and complied
with by Regent; provided, however, that after the TBA Effective Date, the
failure by Regent to comply with any of its financial covenants under the Regent
Credit Agreement due to insufficient Broadcast Cash Flow shall not constitute a
failure to perform or comply with its obligations under the Merger Agreement;
(iii) all consents of the FCC to the transactions contemplated by the Merger
Agreement shall have been obtained, be in effect and have become final orders;
provided that (a) Jacor shall have performed its obligations related to
cooperating with Regent and filing all required applications with the FCC as set
forth in the Merger Agreement and (b) fifteen calendar days prior to the first
anniversary of the date of the Merger Agreement, Jacor shall waive its right to
final orders in the event that initial FCC consents shall have been received and
the reason that final orders have not been issued is attributable solely to
Jacor; (iv) not more than ten percent (10%) of the outstanding shares of Regent
Stock shall constitute Dissenting Shares; (v) Jacor shall have received a
written opinion from its tax counsel concerning certain federal tax consequences
of the Merger, provided, however, that the Tax Continuity Level (defined in the
Merger Agreement) determined on the day preceding the Closing Date is less than
45% (a "New Merger Event") has occurred, such tax opinion shall not be required;
and (vi) concurrently with the Effective Time of the Merger, the closing of the
Jacor-KWNR Acquisition shall have occurred.
The conditions subject to fulfillment or waiver as specified in the Merger
Agreement with respect to Regent's obligations to close include, among others:
(i) the Registration Statement and the shelf registration contemplated by the
Registration Rights Agreement shall be effective under the Securities Act and no
stop order suspending the effectiveness of the Registration Statement shall be
in effect and no proceedings for such purpose, or under the proxy rules of the
Commission pursuant to the applicable securities laws and with respect to the
transactions contemplated under the Merger Agreement, shall be pending before or
threatened by the Commission; (ii) all applicable state securities laws shall
have been complied with in connection with the issuance of Jacor Common Stock
and the Merger Warrants, and no stop order suspending the effectiveness of any
qualification or registration of such Jacor Common Stock or Merger Warrants
under such state securities laws shall have been issued and pending or
threatened by the authorities of any such state; (iii) the shares of Jacor
Common Stock and the Merger Warrants issuable to Regent's stockholders pursuant
to the Merger Agreement and the shares of Jacor Common Stock issuable upon
exercise of the Merger Warrants shall have been approved for quotation on the
Nasdaq National Market, subject to notice of issuance; (iv) Regent shall have
received a written opinion of its tax counsel concerning certain federal income
tax consequences of the Merger, provided, however, that if a New Merger Event
has occurred, such tax opinion shall not be required; (v) the representations
and warranties of Jacor set forth in the Merger Agreement shall be true and
correct in all respects as of the date of the Merger Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (a) except for any such
representations and warranties made as of specified date, which shall be true
and correct in all respects as of such date and (b) to the extent that the
aggregate effect of the inaccuracies in such representations and warranties as
of the applicable times (each considered without any exclusions for lack of
Material Adverse Effect set forth in the individual representation or warranty)
does not constitute a Material Adverse Effect on Jacor when compared to the
state of facts which would exist if all such representations and warranties were
true in all respects as of the applicable times; (vi) each of the agreements and
covenants of Jacor to be performed and complied with by Jacor pursuant to this
Agreement prior to the Effective Time shall have been duly performed and
complied with except to the extent that the aggregate effect of any
nonperformance or
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noncompliance by Jacor (each considered without any exclusions for lack of
Material Adverse Effect set forth in the individual covenant or agreement) does
not constitute a Material Adverse Effect on Jacor when compared to the state of
facts which would exist if all such agreements and covenants had been performed
and complied with by Jacor; (vii) all consents of the FCC to the transactions
contemplated by the Merger Agreement shall have been obtained, be in effect and
have become final orders; provided that (a) Regent shall have performed its
obligations related to cooperating with Jacor and filing all required
applications with the FCC as set forth in the Merger Agreement and (b) fifteen
calendar days prior to the first anniversary of the date of the Merger
Agreement, Regent shall waive its right to final orders in the event that
initial FCC consents shall have been received and the reason that final orders
have not been issued is attributable solely to Regent; (viii) the Registration
Rights Agreement shall be in full force and effect and all parties thereto shall
have complied with the terms thereof; and (ix) all out-of-pocket fees and
expenses incurred or to be incurred by or on behalf of Regent or any Regent
Subsidiaries in connection with the Merger or the consummation of any of the
transactions contemplated by the Merger Agreement and the negotiation,
preparation, review and delivery of the agreements contemplated by the Merger
Agreement shall have been paid. All conditions may be waived in writing at the
discretion of the party in whose favor the condition would apply.
For purposes of the Merger Agreement, "Material Adverse Effect" shall mean
with respect to Regent or Jacor, as the context may require, a material adverse
effect on the business, assets, liabilities, financial condition or results of
operations of such party and its Subsidiaries, taken as a whole, or a material
adverse effect on the ability of such party to perform its obligations under the
Merger Agreement; provided, however, that (i) results of operations of Regent
and its Subsidiaries, taken as a whole, shall not be a component of Material
Adverse Effect for events that occur after the TBA Effective Date; (ii) after
the TBA Effective Date, no Material Adverse Effect shall be deemed to have
occurred if such Material Adverse Effect can be attributed to any action or
inaction by CitiCo (or any successor) as the broker of the Regent Stations under
the TBA; and (iii) no Material Adverse Effect shall be deemed to have occurred
by reason of a general deterioration in the economy or events or conditions in
the broadcasting industry.
TERMINATION; TERMINATION FEE. The Merger Agreement may be terminated at any
time prior to the Closing Date: (i) by the mutual written consent of Jacor and
Regent; (ii) by Jacor or Regent if the Closing shall not have occurred on or
before the first anniversary of the date of the Merger Agreement unless such
failure to close shall be due to the failure of the party seeking such
termination to perform or observe in all material respects the covenants and
agreements to be performed or observed by such party; (iii) by Jacor or Regent
if the FCC application is rejected and not appealed within the applicable time
period or all appeals therefrom have been unsuccessfully exhausted, upon fifteen
days written notice to the other, provided that the party seeking to terminate
the Merger Agreement has prosecuted the FCC application diligently and in good
faith and has satisfied any and all requests by the FCC for additional
information with respect to the FCC application; (iv) by Jacor, if Regent
breaches any of the representations or warranties of Regent set forth in the
Merger Agreement which breach has a Material Adverse Effect on Regent and shall
not have been cured within thirty days after written notice thereof from Jacor
to Regent, in which case Jacor shall have only the remedy set forth in the next
paragraph; (v) by Jacor, if Regent breaches any of its covenants contained in
the Merger Agreement, which breach has a Material Adverse Effect on Regent and
shall not have been cured within thirty days after written notice thereof from
Jacor to Regent; and (vi) by Regent, if Jacor breaches any of its
representations, warranties or covenants contained in the Merger Agreement,
which breach has a Material Adverse Effect on Jacor and shall not have been
cured within thirty days after written notice thereof from Regent to Jacor, in
which case Regent shall have the remedy set forth in the next paragraph.
In the event Jacor is entitled to terminate the Merger Agreement pursuant to
item (iv) in the preceding paragraph, Jacor's sole and exclusive remedies, if
any, shall be (x) to terminate the Merger Agreement or (y) specific performance
as provided for in the Merger Agreement and, in any event, Jacor has waived
under the terms of the Merger Agreement any right to sue or otherwise recover
damages from Regent except to the extent such termination results from Regent's
wilful and material breach of any of its representations and warranties. In the
event that (x) Jacor fails to close the transaction contemplated by
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the Merger Agreement and the conditions to Jacor's obligations to close are
satisfied or (y) Regent is entitled to terminate this Agreement pursuant to item
(vi) in the preceding paragraph, Regent shall be entitled to be paid a
termination fee in the amount of $10.0 million by drawing on the Letter of
Credit (as defined herein) pursuant to the terms of the Escrow Agreement (as
defined in the Prospectus/Information Statement Summary) or shall be entitled to
specific performance as provided for in the Merger Agreement, and in any event,
Regent may sue or recover other damages if such termination results from Jacor's
willful and material breach of any of its representations and warranties.
Pursuant to the terms of an Escrow Agreement, dated October 8, 1996, by and
among Jacor, Regent and the Escrow Agent, Regent and Jacor deposited with the
Escrow Agent an executed copy of the Agreement and Plan of Merger dated October
8, 1996 between Jacor and Regent. Jacor also deposited an irrevocable letter of
credit in the principal amount of $10.0 million (the "Letter of Credit"), with
the Escrow Agent named as beneficiary, with the Escrow Agent as a deposit to be
held in escrow under the Escrow Agreement. The Letter of Credit expires on
October 8, 1997, and if ten days prior to such date the Letter of Credit shall
not have been replaced with a substitute letter of credit with an expiration
date no earlier than October 8, 1997, the Escrow Agent shall immediately draw on
the Letter of Credit and the proceeds shall be payable to the Escrow Agent and
shall become the escrow deposit under the Escrow Agreement. Escrow Agent will
invest the proceeds in federally insured interest bearing money market accounts
or certificates of deposits.
AMENDMENT; WAIVER. The Merger Agreement may not be changed orally, but only
in a writing signed by the parties thereto. The waiver of a breach of any term
or condition of the Merger Agreement must be in writing signed by the party
sought to be charged with such waiver and such waiver shall not be deemed to
constitute the waiver of any other breach of the same or any other term or
condition of the Merger Agreement.
EXPENSES. Except with respect to (i) the charges and expenses in connection
with the exchange of shares of Jacor Common Stock for the Certificates,
including those of the Exchange Agent, and certain expenses incurred in
connection with the registration of shares of Jacor Common Stock pursuant to the
Registration Rights Agreement, which will be paid by Jacor, and (ii) certain
filing fees required under the HSR Act and the FCC, which will be shared equally
by Jacor and Regent, the Merger Agreement provides that each party shall pay any
and all fees and expenses that such party may incur in connection with the
negotiation, execution, or Closing of the Merger Agreement and the other
transactions contemplated by the Merger Agreement.
DESCRIPTION OF MERGER WARRANTS
GENERAL. The Merger Warrants are to be issued under the Warrant Agreement.
The description of the Warrant Agreement set forth below includes all material
elements of the Warrant Agreement but does not purport to be complete and is
qualified in its entirety by reference to the Warrant Agreement which is
attached as Annex II to this Prospectus/Information Statement and is
incorporated by reference herein.
Each Merger Warrant will entitle the holder thereof to purchase a fractional
share of Jacor Common Stock (which fraction, the numerator of which is 500,000
and the denominator of which is the Regent Fully Diluted Share Number (the
"Fraction")), (which is currently anticipated to be approximately .10877), at a
price of $40.00 per full share of Jacor Common Stock (the "Warrant Price"). The
Warrant Price and the number of shares of Jacor Common Stock issuable upon the
exercise of each Merger Warrant will be subject to adjustment if certain events
described below occur. The Warrant Price and the number of shares of Common
Stock issuable upon the exercise of each Merger Warrant are subject to
adjustment in certain events described below. Each Merger Warrant may be
exercised on or after the issuance thereof and until 5:00 pm., Eastern Time, on
the fifth anniversary of the date of the Effective Time (the "Expiration Date")
in accordance with the terms of the Merger Warrants and the Warrant Agreement;
provided, however, if any of the Merger Warrants are called for redemption by
Jacor, at a price per Merger Warrant equal to $12.00 multiplied by the Fraction,
as adjusted from time to time under the terms of the Warrant Agreement, on or
after the third anniversary of the Effective Time as provided for in the Warrant
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Agreement, the right of the Warrants to be so redeemed shall expire at the close
of business, New York time, on such redemption date. To the extent that any
Merger Warrant remains outstanding after such time, such unexercised Merger
Warrant will automatically terminate.
EXERCISE. Merger Warrants may be exercised by surrendering to the Warrant
Agent a signed Merger Warrant certificate together with the form of election to
purchase on the reverse thereof indicating the Merger Warrant holder's election
to exercise all or a portion of the Merger Warrants evidenced by such
certificate. Surrendered certificates must be accompanied by payment of the
aggregate Warrant Price in respect of the Merger Warrants to be exercised, which
payment may be made in cash or by certified or bank cashier's check drawn on a
banking institution chartered by the government of the United States or any
state thereof payable to the order of Jacor. No adjustments as to cash dividends
with respect to the Jacor Common Stock will be made upon any exercise of Merger
Warrants.
If fewer than all the Merger Warrants evidenced by any certificate are
exercised, the Warrant Agent will deliver to the exercising warrant holder a new
Merger Warrant certificate representing the unexercised Merger Warrants. Jacor
will not be required to issue fractional shares of Jacor Common Stock upon
exercise of any Merger Warrant and in lieu thereof will pay in cash an amount
equal to the closing price per share of Jacor Common Stock on the trading day
immediately preceding the date the Merger Warrant is presented for exercise,
multiplied by such fraction, determined as provided in the Warrant Agreement.
Jacor has reserved for issuance a number of shares of Jacor Common Stock
sufficient to provide for the exercise of the rights of purchase represented by
the Merger Warrants.
A Merger Warrant may not be exercised in whole or in part if in the
reasonable opinion of counsel to Jacor the issuance of Jacor Common Stock upon
such exercise would cause Jacor to be in violation of the Communications Act, or
the rules and regulations in effect thereunder.
CALL OF WARRANTS BY JACOR. On or after the third anniversary of the
Effective Time, Jacor has the right to redeem any or all of the Merger Warrants
at a price of $12.00 per Warrant multiplied by the Fraction, as adjusted from
time to time as set forth below.
ANTIDILUTION AND EXERCISE PRICE ADJUSTMENTS. The number of shares of Jacor
Common Stock purchasable upon the exercise of each Merger Warrant and the
Warrant Price are subject to adjustment in connection with (i) the issuance of a
stock dividend or distribution to holders of Jacor Common Stock, a combination
or subdivision or issuance by reclassification of Jacor Common Stock; (ii) the
issuance of rights, options or warrants to all holders of Jacor Common Stock
without charge to such holders to subscribe for or purchase shares of Jacor
Common Stock at a price per share which is lower than the then current market
price; and (iii) certain distributions by Jacor to the holders of Jacor Common
Stock of evidences of indebtedness or of its assets (excluding cash dividends or
distributions pursuant to an announced policy of the Company payable out of
earnings or out of surplus legally available for dividends) or of convertible
securities, all as set forth in the Warrant Agreement. Notwithstanding the
foregoing, no adjustment in the number of Warrant Shares will be required until
such adjustment would require an increase or decrease of at least one percent
(1%) in the number of Warrant Shares purchasable upon the exercise of each
Merger Warrant. In addition, Jacor may at its option reduce the Warrant Price to
any amount deemed appropriate by the Jacor Board.
In case of any consolidation or merger of Jacor with or into another
corporation, or any sale, transfer or lease to another corporation of all or
substantially all the property of Jacor, the Warrant Agreement will require that
effective provisions will be made so that each holder of an outstanding Merger
Warrant will have the right thereafter to exercise the Merger Warrant for the
kind and amount of securities and property receivable in connection with such
consolidation, merger, sale, transfer or lease by a holder of the number of
shares of Jacor Common Stock for which such Merger Warrant were exercisable
immediately prior thereto. In addition, pending execution of the Warrant
Agreement, the Merger Agreement provides that, if after the date of the Merger
Agreement and prior to the issuance of the Merger Warrants, Jacor takes any
action which, if the Merger Warrants had been issued and outstanding as of such
date, would have required an adjustment in the exercise price of the Merger
Warrants or in the number of shares purchasable upon exercise of the Merger
Warrants, then the exercise price of the Merger Warrants or such
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number of shares will be adjusted upon issuance of the Merger Warrants to give
effect to the adjustment which would have been required as a result of such
action.
MODIFICATION OF WARRANT AGREEMENT. The Warrant Agreement may be amended or
supplemented without the consent of the holders of Merger Warrants to cure any
ambiguity or to correct or supplement any defective or inconsistent provision
contained therein, or to make such other necessary or desirable changes which
shall not adversely affect the interests of the warrant holders. Any other
amendment to the Warrant Agreement shall require the consent of warrant holders
representing not less than 50% of the Merger Warrants then outstanding provided
that no change in the number or nature of the securities purchasable upon the
exercise of any Merger Warrant, or the Warrant Price therefor, or the
acceleration of the Expiration Date, and no change in the antidilution
provisions which would adversely affect the interests of the holders of Merger
Warrants, shall be made without the consent of the holder of such Merger
Warrant, other than such changes as are specifically prescribed by the Warrant
Agreement or are made in compliance with applicable law.
FORM AND DENOMINATIONS. The certificates representing the Merger Warrants
will be in registered form. Any Merger Warrant certificate may be transferred,
split up, combined or exchanged for another Merger Warrant certificate or
certificates entitling the holder thereof to purchase a like number of shares of
Jacor Common Stock on the same terms as the Merger Warrant certificate or
certificates surrendered.
OFFICE FOR PRESENTATION. Merger Warrants may be presented upon exercise, or
for registration of transfer or exchange, at the office of the Warrant Agent
maintained for such purpose, which office is currently located at 4900 Tiedeman
Road, Cleveland, Ohio 44144.
CERTAIN TAXES. Jacor will bear the cost of all documentary stamp taxes
payable in connection with the initial issuance of Warrant Shares (as defined in
the Warrant Agreement) upon the exercise of Merger Warrants, but will not be
responsible for the payment of any such taxes in respect of any transfer
involved in the issue or delivery of any Merger Warrants or certificates for
Warrant Shares in a name other than that of the registered holder of Merger
Warrants in respect of which such Warrant Shares are issued.
MISCELLANEOUS. No holder of Merger Warrants shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Jacor Common Stock
until the Merger Warrants are properly exercised as provided in the Warrant
Agreement.
FINANCING ARRANGEMENTS
Jacor expects that the funds necessary to pay any Cash Consideration and to
consummate the Merger shall be paid from cash held by Jacor, borrowings under
the Credit Facility and proceeds from the sale by JCC of the 1996 9 3/4% Notes.
CREDIT FACILITY. The Credit Facility provides availability of $600.0
million of loans to JCC in three components: (i) a revolving credit facility of
up to $200.0 million with mandatory semi-annual commitment reductions beginning
March 18, 1999 and a final maturity date of September 18, 2003; (ii) a term loan
of $300.0 million with scheduled semi-annual reductions beginning March 18, 1998
and a final maturity date of September 18, 2003; and (iii) a tranche B term loan
of $100.0 million with scheduled semi-annual reductions beginning March 18, 1999
and a final maturity date of September 18, 2004.
The Credit Facility bears interest at a rate that fluctuates with a bank
base rate and/or the Eurodollar rate per annum.
In November 1996, Jacor entered into discussions to expand the availability
under the Credit Facility from up to $600.0 million to up to $750.0 million,
among other things. Jacor is discussing with the lenders that the components of
the increased Credit Facility consist of a revolving credit facility with an
availability of up to $450.0 million, a $200.0 million seven-year amortizing
term loan and a $100.0 million up to eight-year amortizing term loan. There can
be no assurance that the availability under the Credit Facility will be
increased or that the components of the Credit Facility will be revised.
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The loans under the Credit Facility are guaranteed by each of Jacor's direct
and indirect subsidiaries other than certain immaterial subsidiaries. Jacor's
obligations with respect to the Credit Facility and each guarantor's obligations
with respect to the related guaranty are secured by substantially all of their
respective assets, including, without limitation, inventory, equipment, accounts
receivable, intercompany debt and, in the case of Jacor's subsidiaries, capital
stock. JCC's obligations under the Credit Facility are secured by a first
priority lien on the capital stock of JCC's subsidiaries and by the guarantee of
JCC's parent, Jacor.
The Credit Facility contains covenants and provisions that restrict, among
other things, JCC's ability to: (i) incur additional indebtedness; (ii) incur
liens on its property; (iii) make investments and advances; (iv) enter into
guarantees and other contingent obligations; (v) merge or consolidate with or
acquire another person or engage in other fundamental changes; (vi) engage in
certain sales of assets; (vii) make capital expenditures; (viii) enter into
leases; (ix) engage in certain transactions with affiliates; and (x) make
restricted junior payments. The Credit Facility also requires the satisfaction
of certain financial performance criteria (including a consolidated interest
coverage ratio, a leverage-to-operating cash flow ratio and a consolidated
operating cash flow available for fixed charges ratio) and the repayment of
loans under the Credit Facility with proceeds of certain sales of assets and
debt issuances, and with 50% of JCC's Consolidated Excess Cash Flow (as defined
in the Credit Facility).
Events of default under the Credit Facility include various events of
default customary for such type of agreement, such as failure to pay scheduled
payments when due, cross defaults on other indebtedness, change of control
events under other indebtedness (including the LYONs, the 1994 9 3/4% Notes, the
1996 10 1/8% Notes and the 1996 9 3/4% Notes, all as defined herein) and certain
events of bankruptcy, insolvency and reorganization. In addition, the Credit
Facility includes events of default for JCC and the cessation of any lien on any
of the collateral under the Credit Facility as a perfected first priority lien
and the failure of Zell/Chilmark appointees to represent at least 30% of the
Jacor Board of Directors.
For purposes of the Credit Facility, a change of control includes the
occurrence of any event that triggers a change of control under the LYONs, the
1994 9 3/4% Notes, the 1996 10 1/8% Notes or the 1996 9 3/4% Notes. Such change
of control under the Credit Facility would constitute an event of default which
would give the syndicate the right to accelerate the unpaid principal amounts
due under the Credit Facility. Upon such acceleration, there is no assurance
that JCC will have funds available to fund such repayment or that such funds
will be available or terms acceptable to JCC.
THE 1996 9 3/4% NOTES. In December 1996, JCC conducted an offering (the
"1996 9 3/4% Notes Offering") whereby JCC issued and sold the 1996 9 3/4% Notes.
The 1996 9 3/4% Notes have interest payment dates of June 15 and December 15,
commencing on June 15, 1997, and mature on December 15, 2006.
The 1996 9 3/4% Notes were issued pursuant to an indenture between JCC and
The Bank of New York, as Trustee (the "1996 9 3/4% Note Indenture"). The 1996
9 3/4% Note Indenture contains certain covenants which impose certain
limitations and restrictions on the ability of Jacor to incur additional
indebtedness, pay dividends or make other distributions, make certain loans and
investments, apply the proceeds of asset sales (and use the proceeds thereof),
create liens, enter into certain transactions with affiliates, merge,
consolidate or transfer substantially all its assets and make investments in
unrestricted subsidiaries.
If a change of control occurs, JCC will be required to offer to repurchase
all outstanding 1996 9 3/4% Notes at a price equal to 101% of their principal
amount, plus accrued and unpaid interest, if any, to the date of repurchase.
There can be no assurance that JCC will have sufficient funds to purchase all of
the 1996 9 3/4% Notes in the event of a change of control offer or that JCC
would be able to obtain financing for such purpose on favorable terms, if at
all. In addition, the Credit Facility restricts JCC's ability to repurchase the
1996 9 3/4% Notes, including pursuant to a change of control offer. Furthermore,
a change of control under the 1996 9 3/4% Note Indenture will result in a
default under the Credit Facility.
As used herein, (a) prior to the earlier of (x) the maturity of the 1994
9 3/4% Notes, (y) the date upon which defeasance of the 1994 9 3/4% Notes
becomes effective, and (z) the date on which there are no longer any 1994 9 3/4%
Notes outstanding under the terms of the governing indenture (each a "1994
9 3/4% Note
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Event"), a "Change of Control" means any transaction or series of transactions
in which any of the following occurs: (i) any person or group (within the
meaning of Rule 13d-3 under the Exchange Act and Sections 13(d) and 14(d) of the
Exchange Act, other than Zell/Chilmark or any of its Affiliates, becomes the
direct or indirect "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of (A) greater than 50% of the total voting power (on a fully
diluted basis as if all convertible securities had been converted) entitled to
vote in the election of directors of JCC or CitiCo, or the surviving person (if
other than Jacor), or (B) greater than 20% of the total voting power (on a fully
diluted basis as if all convertible securities had been converted) entitled to
vote in the election of directors of JCC or CitiCo, or the surviving person (if
other than JCC), and such person or group has the ability to elect, directly or
indirectly, a majority of the members of the Board of Directors of JCC; or (ii)
JCC or CitiCo consolidates with or merges into another person, another person
consolidates with or merges into JCC or CitiCo, JCC or CitiCo issues shares of
its Capital Stock or all or substantially all of the assets of JCC or CitiCo are
sold, assigned, conveyed, transferred, leased or otherwise disposed of to any
person as an entirety or substantially as an entirety in one transaction or a
series of related transactions and the effect of such consolidation, merger,
issuance or sale is as described in clause (i) above. Notwithstanding the
foregoing, no Change of Control shall be deemed to have occurred by virtue of
(I) JCC or any of its employee benefit or stock plans filing (or being required
to file after the lapse of time) a Schedule 13D or 14D-1 (or any successor or
similar schedule, form or report under the Exchange Act) or (II) the purchase by
one or more underwriters of Capital Stock of JCC in connection with a Public
Offering; and (b) upon and following a 1994 9 3/4% Note Event, a "Change of
Control" will mean (i) any merger or consolidation of JCC with or into any
person or any sale, transfer or other conveyance, whether direct or indirect, of
all or substantially all of any of the assets of JCC, on a consolidated basis,
in one transaction or a series of related transactions, if, immediately after
giving effect to such transaction(s), any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) (other than an Excluded Person) is or becomes the "beneficial
owner," directly or indirectly, of more than 50% of the total voting power in
the aggregate normally entitled to vote in the election of directors, managers,
or trustees, as applicable, of the transferee(s) or surviving entity or
entities, (ii) any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) (other
than an Excluded Person) is or becomes the "beneficial owner," directly or
indirectly, of more than 50% of the total voting power in the aggregate of all
classes of Capital Stock of JCC then outstanding normally entitled to vote in
elections of directors, or (iii) during any period of 12 consecutive months
after the Issue Date, individuals who at the beginning of any such 12-month
period constituted the Board of Directors of JCC (together with any new
directors whose election by such Board or whose nomination for election by the
shareholders of JCC was approved by a vote of a majority of the directors then
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of JCC then in
office.
The events of default under the 1996 9 3/4% Note Indenture include various
events of default customary for such type of agreement, including the failure to
pay principal and interest when due on the 1996 9 3/4% Notes, cross defaults on
other indebtedness for borrowed monies in excess of $5.0 million (which
indebtedness would therefore include the Credit Facility, the LYONs and the 1996
10 1/8% Notes) and certain events of bankruptcy, insolvency and reorganization.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
REGENT STOCK OPTIONS. Pursuant to the Merger Agreement, Regent will take
all necessary steps to (i) cause the Options to purchase Regent Stock to vest
and become immediately exercisable, and (ii) terminate any Options not exercised
on or prior to the Closing Date.
The Options were granted as incentive compensation for executive officers
and other employees pursuant to stock option agreements with exercise prices
ranging from $10.00 per share to $15.00 per share, as applicable, which Regent
deemed to be the fair market value of Regent Common Stock at the time of grant.
It is anticipated that all of the Options will be exercised for cash immediately
prior to Closing. To the extent not exercised for cash, the Options will be
exercised immediately prior to Closing in
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consideration of the receipt of shares of Regent Common Stock equal to the
aggregate spread between the exercise price of the Options and the fair market
value of Regent Common Stock. It is anticipated that the Option holders will
tender the Regent Common Stock received upon the exercise of the Options in
exchange for Jacor Common Stock in accordance with the Merger Agreement.
REGISTRATION RIGHTS AGREEMENT. In connection with the Merger Agreement,
Jacor entered into the Registration Rights Agreement providing for the shelf
registration for resale of the Jacor Common Stock and the Merger Warrants and
shares of Jacor Common Stock underlying the Merger Warrants.
Pursuant to the terms of the Registration Rights Agreement, Jacor must file
with the Commission a "shelf" registration statement under the Securities Act to
register for issuance (i) the Jacor Common Stock issued to Regent's "affiliates"
for purposes of Rule 145 under the Securities Act (the "Regent Affiliates"),
(ii) the Jacor Common Stock issuable upon the exercise of the Merger Warrants,
(iii) the Merger Warrants, and (iv) any securities issued or distributed in
respect of any such Jacor Common Stock or Merger Warrants by way of stock
dividend or split or in connection with a combination, recapitalization,
reorganization, merger, consolidation or otherwise (together, the "Registrable
Securities") which shelf registration statement must be effective not later than
the Effective Time. Jacor has agreed to use its best efforts to keep the
registration statement effective until the earlier of (i) the Registration
Statement becomes effective and the Registrable Securities have been disposed of
pursuant thereto, the Registrable Securities are distributed to the public under
Rule 144 under the Securities Act, the Registrable Securities have otherwise
been transferred without a restrictive legend, the Registrable Securities are no
longer outstanding, or in the written opinion of Jacor's counsel, all
Registrable Securities may be transferred pursuant to Rule 144 without
restriction; or (ii) the later of the third anniversary of the Closing Date and
the first anniversary of the date on which the last Merger Warrant was exercised
(the "Effective Period"). Jacor will pay all expenses associated with the
registration of the Registrable Securities.
However, Jacor may elect that the registration statement may not be usable
for any reasonable period not to exceed sixty (60) days (a "Blackout Period") if
Jacor determines in good faith that the registration and distribution of the
Registrable Securities (or the use of the registration statement or related
prospectus) would interfere with any pending financing, acquisition, corporate
reorganization or any other corporate development involving Jacor or it
Subsidiaries, or would require premature disclosure thereof. Jacor must give the
holders of the Registrable Securities notice of the same, and the aggregate
number of days included in all Blackout Periods during any consecutive twelve
(12) months during the Effective Period shall not exceed 120 days.
Jacor must also use reasonable efforts to cause the Registrable Securities
to be listed on any securities exchange on which the Jacor Common Stock is then
listed, or approved for trading through the Nasdaq National Market or any other
inter-dealer quotation system through which the Jacor Common Stock is then
traded.
The Registration Rights Agreement further provides that Jacor will indemnify
each holder of the Registrable Securities, its officers and directors, and each
person who controls such holder, and any agent or investment adviser against all
losses, claims, damages, liabilities and expenses (including reasonable
attorneys' fees and expenses of investigation) ("Damages") incurred by such
party pursuant to any actual or threatened action or proceeding arising out of
or based upon any untrue or alleged untrue statement of material fact contained
in the registration statement, any prospectus or preliminary prospectus, or any
amendment thereto, or any omission or alleged omission to state a material fact
required to be stated in the registration statement, prospectus or preliminary
prospectus, or necessary to make the statements therein not misleading. The
holders of the Registrable Securities will provide any necessary information
required by Jacor for use in the registration statement or related prospectus
and agrees to indemnify and hold harmless Jacor, all other holders or any
underwriter, and any of their respective affiliates, directors, officers and
controlling persons against any Damages resulting from any untrue or alleged
untrue statement of material fact contained in the registration statement, any
prospectus or preliminary prospectus, or any amendment thereto, or any omission
or alleged omission to state a material fact required to be stated in the
registration statement, prospectus or preliminary prospectus, or necessary to
make the
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statements therein not misleading, but only to the extent such statement or
omission is made in reliance on and in conformity with information with respect
to such holder furnished in writing to Jacor.
The Registration Rights Agreement may not be amended unless Jacor has
obtained the written consent of the holders of a majority of the Registrable
Securities then outstanding; provided that, if the amendment solely affects the
rights of the Regent Affiliates, the amendment requires the written consent of a
majority of the holders who are Regent Affiliates.
EMPLOYEE BENEFITS. The Merger Agreement requires Jacor to (i) provide, and
cause each Regent Subsidiary and their successors (if any) to provide the same
compensation and benefit arrangements, plans and programs to current, former and
retired salaried employees of Regent, each Regent Subsidiary and their
predecessors as those provided by Jacor to Jacor's similarly situated current,
former and retired salaried employees; provided that Jacor is not prohibited
from terminating the employment of any employee; (ii) cause any salaried
employee of Regent or any Regent Subsidiary that becomes a participant in any
employee benefit plan, practice or policy of Jacor or its affiliates or their
successors, to receive credit under such plan, practice or policy for all
service prior to the Effective Time with Regent and Regent's Subsidiaries, or
any predecessor employer, for all purposes (including eligibility, vesting and
determination of benefits) for which such service is either taken into account
or recognized; and (iii) following the Effective Time, honor the terms of all
consulting, employment and similar agreements that were in effect immediately
prior to the date of the Merger Agreement and disclosed to Jacor.
INDEMNIFICATION. The Merger Agreement provides that Jacor will, for not
less than six years following the Effective Time, indemnify and hold harmless
each present and former director, officer, agent and employee of Regent and its
Subsidiaries ("Indemnified Parties") from and against any and all claims,
actions, suits, proceedings or investigations (a "Claim" or "Claims") arising
out of or in connection with activities in such capacity, or on behalf of, or at
the request of, Regent, its Subsidiaries or their affiliates, and will advance
expenses incurred with respect to the foregoing, as they are incurred, to the
fullest extent permitted by applicable law; provided, however, that if any Claim
or Claims are asserted or made within such six-year period, all rights to
indemnification in respect of such Claims will continue until the final
disposition of any and all such Claims.
Jacor is further obligated by the Merger Agreement to keep in effect
provisions in its certificate of incorporation and bylaws providing for
exculpation of director and officer liability and its indemnification of or
advancement of expenses to the Indemnified Parties to the fullest extent
permitted under the DGCL, which provisions shall not be amended except as
required by applicable law or except to make changes permitted by law that would
enhance the Indemnified Parties' right of indemnification or advancement of
expenses. If, after the Effective Time, Jacor or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers all or substantially all of its property and assets to
any person, then, in each such case, proper provision shall be made so that the
successors and assigns of Jacor assume all of Jacor's foregoing indemnity
obligations.
REGULATORY MATTERS
The receipt of certain federal and state governmental or regulatory
approvals are required in order to consummate the Merger, including approvals or
waivers from the FCC and the expiration of the waiting period under the HSR Act.
Jacor and Regent agreed in the Merger Agreement to cooperate fully in making,
and have filed, the applications for all necessary regulatory approvals,
including the application to be filed with FCC. Jacor and Regent also each
agreed in the Merger Agreement to make the necessary filings, and have made such
filings, under the HSR Act. The waiting period under the HSR Act expired on
November 22, 1996, and the initial order of the FCC approving the Merger was
issued on December 13, 1996. There can be no assurance as to when or if a final
order from the FCC approving the Merger will be obtained.
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FCC APPROVALS. On October 16, 1996, Jacor filed joint applications
("Transfer of Control Applications") with the FCC requesting the FCC's consent
to transfer control of the Regent Subsidiaries, which are the FCC licensees or
proposed licensees of the Stations. The Mass Media Bureau of the FCC, acting
pursuant to delegated authority, granted its initial approval of the Transfer of
Control Applications on December 13, 1996, and public notice of the grants was
issued by the FCC on December 18, 1996. No party filed a petition to deny, as
permitted pursuant to Section 309(d) of the Communications Act, or, to Jacor's
knowledge, other objection to the Transfer of Control Applications prior to
grant.
Within thirty days following FCC public notice of such a grant (in this
case, January 17, 1997), parties in interest may file a petition for
reconsideration requesting that the FCC (or the FCC's staff in the case of a
staff grant), reconsider its action. Alternatively in the case of a staff grant,
parties in interest may within the same thirty day period file an "Application
for Review" requesting that the FCC review and set aside the staff grant. In the
event of a staff grant, a party in interest could take both actions, by first
filing a petition for reconsideration with the staff and later, within thirty
days following public notice of the denial of that petition, filing an
Application for Review. To Jacor's knowledge, no party filed a petition for
reconsideration, nor had the FCC staff undertaken reconsideration by the
reconsideration deadline. In the case of a staff grant (as here), the FCC may
also review the staff action on its own motion within forty days following
public notice of the staff's action (in this case, January 27, 1997). The FCC
may review any of its own actions on its own motion within thirty days following
public notice of the action and may review actions taken by the FCC staff within
forty days following public notice of the action. No such actions have been
taken to Jacor's knowledge.
Within thirty days of public notice of an action by the FCC (i) granting the
Transfer of Control Application, (ii) denying a petition for reconsideration of
such a grant or (iii) denying an Application for Review of a staff grant,
parties in interest may appeal the FCC's action to the U. S. Court of Appeals
for the District of Columbia Circuit. No such actions have been taken to Jacor's
knowledge.
Because no petitions for reconsideration were filed, the staff did not
reconsider its action and the FCC did not on its own motion review the staff
grant within the time periods set forth above, and the action by the staff
granting the Transfer of Control Applications has become final. The Merger
Agreement provides that the parties are obligated to consummate the Merger if
all other conditions to the Merger are satisfied or waived, and all consents of
the FCC to the transactions contemplated by the Merger Agreement shall have been
obtained, be in effect and have become final orders; provided that Regent (i)
shall have performed its obligations related to cooperating with Regent and
filing all required applications with the FCC as set forth in the Merger
Agreement, and (ii) fifteen days prior to the first anniversary of the date of
the Merger Agreement, Regent shall waive its right to final orders in the event
that initial FCC consents shall have been received and the reason that final
orders have not been issued is attributable solely to Regent.
NASDAQ APPROVAL
Under the Merger Agreement, Jacor agreed to use its reasonable good faith
efforts to cause the Jacor Common Stock, Merger Warrants and the shares of Jacor
Common Stock issuable upon exercise of the Merger Warrants to be approved for
quotation on the Nasdaq National Market. Jacor has applied to the Nasdaq Stock
Market for approval of such shares of Jacor Common Stock and the Merger Warrants
to be listed for quotation on the Nasdaq National Market.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
TAX OPINIONS. In the event Jacor does not exercise the Cash Election and a
New Merger Event does not otherwise occur, it is a condition to the consummation
of the Merger of Regent into Jacor that Jacor receive an opinion from its tax
counsel, Graydon, Head & Ritchey, and that Regent receive an opinion from its
tax counsel, Cravath, Swaine & Moore, substantially to the effect that for
federal income tax purposes: (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, and Jacor and Regent will each
be a party to such reorganization within the meaning of Section 368(b) of
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the Code; and (ii) no gain or loss will be recognized by, in the case of the
opinion of Graydon, Head & Ritchey, Jacor, and, in the case of the opinion of
Cravath, Swaine and Moore, Regent, as a result of the Merger.
In rendering such opinions, if required, Graydon, Head & Ritchey and
Cravath, Swaine & Moore will rely upon representations contained in letters from
Jacor and Regent delivered for purposes of the opinions, and upon letters from
certain shareholders of Regent which contain, among other things,
representations that as of the Effective Time, such shareholder (i) is not bound
by any agreement, understanding or contract to sell, transfer or otherwise
dispose of the Jacor Stock to be received by it pursuant to the Agreement and
(ii) has no current plan or intention to sell, transfer or otherwise dispose of
the Jacor Stock to be received pursuant to the Merger Agreement. The opinions of
tax counsel will also be based on the assumption that the Merger will be
consummated in the manner described above in accordance with the provisions of
the Merger Agreement.
CERTAIN CONSEQUENCES OF REORGANIZATION STATUS. Provided that the Merger
constitutes a reorganization within the meaning of Section 368(a) of the Code,
for federal income tax purposes: (i) no gain or loss will be recognized by the
non-dissenting stockholders of Regent upon the receipt of the Merger
Consideration in exchange for Regent Stock in the Merger, except that any gain
will be recognized to the extent of the sum of (a) the fair market value at the
Effective Time, if any, of the Warrant Consideration received, and (b) the
amount of any Cash Consideration received, which gain will be treated for
federal income tax purposes as capital gain or as dividend income based on the
holder's particular circumstances; (ii) the aggregate adjusted tax basis of the
shares of Jacor Common Stock to be received by a stockholder of Regent in the
Merger will be the same as the aggregate adjusted tax basis in the shares of
Regent Stock surrendered in exchange therefor, decreased by the value of the
Warrant Consideration and the amount of any Cash Consideration received in the
exchange and increased by any gain recognized and the amount of any dividend
income recognized in the exchange; (iii) the holding period of the shares of
Jacor Common Stock received by a stockholder of Regent in exchange for Regent
Stock will include the holding period of the shares of Regent Stock surrendered
in exchange therefor, provided that such shares of Regent Stock are held as
capital assets at the Effective Time; (iv) the adjusted tax basis of the Merger
Warrant to be received by a stockholder of Regent in the Merger will equal the
fair market value of the Merger Warrant at the Effective Time; and (v) a
stockholder of Regent who receives cash in lieu of a fractional share of Jacor
Common Stock should generally recognize gain or loss equal to the difference, if
any, between the amount of cash received and such stockholder's adjusted tax
basis in the fractional share interest.
CASH RECEIVED BY REGENT STOCKHOLDERS WHO DISSENT. A stockholder of Regent
who perfects dissenters rights with respect to shares of Regent Common Stock
should, in general, treat the difference between the basis of the shares of
Regent Common Stock held by such person with respect to which such dissenters
rights are perfected and the amount received in payment therefor as capital gain
or loss. However, depending on the holder's particular circumstances, such
amount might be treated for federal income tax purposes as dividend income. See
"THE MERGER--Appraisal or Dissenters' Rights," and "THE MERGER--Dissenting
Shares."
NEW MERGER EVENT. Notwithstanding the foregoing, in the event Jacor
exercises the Cash Election, or if a New Merger Event otherwise occurs, instead
of Regent merging into Jacor, a wholly-owned subsidiary of Jacor (to be
designated by Jacor) shall merge into Regent with Regent as the surviving
corporation. Absent such a Cash Election, the likelihood of a New Merger Event
depends (among other things) upon the amount of non-stock consideration (the
Cash Consideration and the value of the Warrant Consideration) as compared to
the value of the Stock Consideration, and the percentage of Regent stockholders
owning 1% or more of Regent Stock who make the necessary tax representations.
In the event a New Merger Event occurs, no opinion of tax counsel to Jacor
or Regent is required as a condition to the consummation of the Merger, and no
opinions will be provided. In the event of a Merger subsequent to the occurrence
of a New Merger Event, the Merger will not constitute a reorganization within
the meaning of Section 368(a) of the Code. Rather, such a Merger would be a
taxable event to stockholders of Regent. Regent stockholders will have taxable
gain or loss equal to the difference between
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the value of the total consideration received for their Regent Stock (whether in
the form of Stock Consideration, Cash Consideration or Warrant Consideration)
and their tax basis for their Regent Stock. Such gain or loss would be capital
gain or loss if the Regent Stock was held as a capital asset.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL TAX EFFECTS OF THE MERGER. IN
ADDITION, THE DISCUSSION DOES NOT ADDRESS ALL OF THE TAX CONSEQUENCES THAT MAY
BE RELEVANT TO PARTICULAR TAXPAYERS IN LIGHT OF THEIR PERSONAL CIRCUMSTANCES OR
TO TAXPAYERS SUBJECT TO SPECIAL TREATMENT UNDER THE CODE (FOR EXAMPLE, INSURANCE
COMPANIES, FINANCIAL INSTITUTIONS, DEALERS IN SECURITIES, TAX-EXEMPT
ORGANIZATIONS, FOREIGN CORPORATIONS, FOREIGN PARTNERSHIPS OR OTHER FOREIGN
ENTITIES AND INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES).
NO INFORMATION IS PROVIDED HEREIN WITH RESPECT TO THE TAX CONSEQUENCES, IF
ANY, OF THE MERGER UNDER APPLICABLE FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
THE FOREGOING DISCUSSION IS BASED UPON THE PROVISIONS OF THE CODE, APPLICABLE
TREASURY REGULATIONS THEREUNDER, INTERNAL REVENUE SERVICE RULINGS AND JUDICIAL
DECISIONS, AS IN EFFECT AS OF THE DATE HEREOF. THERE CAN BE NO ASSURANCE THAT
FUTURE LEGISLATIVE, ADMINISTRATIVE OR JUDICIAL CHANGES OR INTERPRETATIONS WILL
NOT AFFECT THE ACCURACY OF THE STATEMENTS OR CONCLUSIONS SET FORTH HEREIN. ANY
SUCH CHANGE COULD APPLY RETROACTIVELY AND COULD AFFECT THE ACCURACY OF SUCH
DISCUSSION. NO RULINGS HAVE OR WILL BE SOUGHT FROM THE INTERNAL REVENUE SERVICE
CONCERNING THE TAX CONSEQUENCES OF THE MERGER.
EACH STOCKHOLDER OF REGENT IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE MERGER,
INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase," as such term is used under
generally accepted accounting principles. Accordingly, from and after the
Effective Date, Regent's consolidated results of operations will be included in
Jacor's consolidated results of operations. For purposes of preparing Jacor's
consolidated financial statements, Jacor will establish a new accounting basis
for Regent's assets and liabilities based upon the fair market values thereof
and Jacor's purchase price, including the costs of the acquisition. accordingly,
the purchase accounting adjustments made in connection with the development of
the pro forma condensed financial information appearing elsewhere in this
Prospectus/Information Statement are preliminary and have been made solely for
purposes of developing such pro forma consolidated financial information to
comply with disclosure requirements of the Commission. Although final allocation
will differ, the pro forma consolidated financial information reflects
management's best estimate based upon currently available information. See
"UNAUDITED PRO FORMA FINANCIAL INFORMATION."
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of Jacor Common Stock, Merger Warrants and Jacor Common Stock
issuable upon exercise of the Merger Warrants received by Regent's stockholders
in the Merger will be freely transferable, except that Jacor Common Stock,
Merger Warrants and Jacor Common Stock issuable upon exercise of the Merger
Warrants which is received by Regent Affiliates prior to the Merger may be
resold by them only in transactions permitted by the resale provisions of Rule
145 promulgated under the Securities Act (or Rule 144 in the case of such
persons who become affiliates of Jacor) or as otherwise permitted under the
Securities Act. Persons deemed to be Regent Affiliates or affiliates of Jacor
generally include individuals or entities that control, are controlled by, or
are under common control with, such party and may include certain officers and
directors of such party as well as principal stockholders of such party. The
Merger Agreement requires Regent to use its best efforts to cause each of the
Regent Affiliates to execute a written agreement to the effect that such Regent
Affiliate will not offer or sell or otherwise dispose of any Jacor Common Stock,
Merger Warrants, or the shares of the Jacor Common Stock issued upon exercise of
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a Merger Warrant, issued to such Regent Affiliate in or pursuant to the Merger
in violation of the Securities Act or the rules and regulations promulgated by
the Commission thereunder.
Pursuant to the terms of the Registration Rights Agreement, not later than
the Effective Time, Jacor must file with the Commission a "shelf" registration
statement under the Securities Act to register for issuance (i) the Jacor Common
Stock issued to Regent Affiliates, (ii) the Jacor Common Stock issuable upon the
exercise of the Merger Warrants, (iii) the Merger Warrants, and (iv) any
securities issued or distributed in respect of any such Jacor Common Stock or
Merger Warrants by way of stock dividend or split or in connection with a
combination, recapitalization, reorganization, merger, consolidation or
otherwise. Jacor must also use reasonable efforts to cause such securities to be
listed on any securities exchange on which the Jacor Common Stock is then
listed, or approved for trading through the Nasdaq National Market or any other
inter-dealer quotation system through which the Jacor Common Stock is then
traded. See "THE MERGER--Interests of Certain Persons in the Merger."
APPRAISAL OR DISSENTERS' RIGHTS
THE FOLLOWING DISCUSSION IS A SUMMARY OF THE PROCEDURES THAT A HOLDER OF
REGENT STOCK MUST FOLLOW TO EXERCISE DISSENTERS' RIGHTS UNDER THE DGCL. THIS
SUMMARY SETS FORTH ALL MATERIAL ELEMENTS OF SECTION 262, BUT DOES NOT PURPORT TO
BE A COMPLETE STATEMENT OF SECTION 262, AND IT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH SECTION OF THE DGCL (SEE ANNEX IV) AND TO ANY AMENDMENTS TO
SUCH SECTION ADOPTED AFTER THE DATE OF THIS PROSPECTUS/INFORMATION STATEMENT.
Section 262 of the DGCL, which is reprinted as Annex IV to this
Prospectus/Information Statement, entitles any holder of Regent Stock who
dissents from the Merger and who follows the procedures set forth therein to
receive in cash the "fair value" of their Regent Stock, which fair value shall
be determined exclusive of any appreciation or depreciation in anticipation of
the Merger, in lieu of the Merger Consideration. In determining "fair value" of
such Dissenting Shares, the Delaware Chancery Court (the "Court") shall take
into account all relevant factors. The Delaware Supreme Court has stated that
such factors include "market value, asset value, dividends, earnings prospects,
the nature of the enterprise and any other facts which were known or which could
be ascertained as of the date of merger which throw any light on future
prospects of the merged corporation." In Weinberger v. UOP, Inc., the Delaware
Supreme Court stated, among other things, that "proof of value by any techniques
or methods generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in an appraisal proceeding.
The value so determined for the Dissenting Shares could be more or less than, or
the same as, the Merger Consideration. The Court may also order that all or a
portion of the expenses incurred by any holder of Dissenting Shares in
connection with an appraisal proceeding, including without limitation,
reasonable attorneys' fees and the fees and expenses of experts utilized in the
appraisal proceeding, be charged pro rata against the value of all the
Dissenting Shares.
A holder of Regent Stock who makes the demand described below with respect
to such shares, who continuously is the record holder of such shares through the
Effective Time and who otherwise complies with the statutory requirements of
Section 262 will be entitled to an appraisal by the Court of the fair value of
his or her Regent Stock. Jacor must, within 10 days after the Merger is
effected, send by certified or registered mail to any such dissenting holder of
Regent Stock written notice of the Effective Date and that appraisal rights are
available (the "Notice"). To properly exercise dissenters' rights, a written
demand for appraisal setting forth information which reasonably informs Jacor of
the identity of the stockholder (such as the name and address and the number of
shares of Regent Stock owned by the holder of the Regent Stock) and a statement
that he or she intends to demand the appraisal of his shares, must be delivered
by the dissenting holder of Regent Stock to Jacor at its principal executive
offices at 50 East RiverCenter Boulevard, 12th Floor, Covington, Kentucky 41011
within 20 days after the date of mailing of the Notice.
A demand for appraisal must be executed by or on behalf of the holder of
record, fully and correctly, as such Regent stockholder's name appears on the
certificate or certificates representing Regent Stock. A
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person having a beneficial interest in Regent Stock that is of record in the
name of another person such as a broker, fiduciary or other nominee, must act
promptly to cause the record holder to follow the steps summarized herein
properly and in a timely manner to perfect whatever Appraisal Rights are
available. If Regent Stock is owned of record by a person other than the
beneficial owner, including a broker, fiduciary (such as a trustee, guardian or
custodian) or other nominee, such demand must be executed by or for the record
owner. If Regent Stock is owned of record by more than one person, as in a joint
tenancy or tenancy in common, such demand must be executed by or for all joint
owners. An authorized agent, including an agent for two or more joint owners,
may execute the demand for appraisal for a stockholder of record; however, the
agent must identify the record owner and expressly disclose the fact that, in
exercising the demand, such person is acting as agent for the record owner.
A record owner, such as a broker, fiduciary or other nominee, who holds
Regent Stock as a nominee for others, may exercise Appraisal Rights with respect
to the shares held for all or less than all beneficial owners of shares as to
which such person is the record owner. In such case, the written demand must set
forth the number of shares covered by such demand. Where the number of shares is
not expressly stated, the demand will be presumed to cover all Regent Stock
outstanding in the name of such record owner.
Within 120 days after the Effective Time of the Merger, Jacor or a
dissenting holder of Regent Stock who has complied with the DGCL and who is
otherwise entitled to appraisal rights, may file a petition in the Court
demanding a determination of the fair value of the Regent Stock. Notwithstanding
the foregoing, at any time within 60 days after the Effective Time of the
Merger, any holder of Regent Stock shall have the right to withdraw his demand
for appraisal and to accept the Merger Consideration. Within 120 days after the
Effective Time of the Merger, any holder of Regent Stock who has complied with
DGCL shall, upon written request, be entitled to receive from Jacor a statement
setting forth that aggregate number of shares not voted in favor of the Merger
with respect to which demands for appraisal have been received and the aggregate
number of holders of such shares. Such statement shall be mailed to such Regent
stockholder within 10 days after his or her written request for the statement is
received by Jacor or within 10 days after the expiration of the period for
delivery of demands for appraisal.
Upon the filing of the petition with the Court, service of a copy shall be
made upon Jacor which shall within 20 days after such service file in the office
of the Register of Chancery a duly verified list of the names and addresses of
the Regent stockholders demanding appraisal and with whom agreements as to the
value of their shares have not been reached. The Register of Chancery shall give
notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the Regent stockholders demanding appraisal and
to Jacor. Notice shall also be given by at least one publication at least one
week before the day of the hearing. At the hearing, the Court will determine the
Regent stockholders who have complied with the DGCL and who have become entitled
to appraisal rights. After determining the Regent stockholders entitled to an
appraisal, the Court will appraise the Regent Stock, determining its fair value
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with the fair rate of interest, if any, to be paid upon
the amount determined to be fair value. In determining such fair value, the
Court will take into consideration all relevant factors. The Court will direct
the payment of the fair value of the shares together with any interest to the
Regent stockholders entitled thereto. The costs of any appraisal proceeding may
be determined by the Court and assessed to the parties as the Court deems
equitable in the circumstances.
A holder of Regent Stock who has exercised his appraisal rights will not be
entitled to vote, to receive dividends or to exercise any other rights of a
Regent stockholder, other than the right to receive payment for his or her
Regent Stock under the DGCL, and his or her Regent Stock shall not be considered
issued and outstanding for the purposes of any subsequent vote of Regent
stockholders. If Jacor complies with the requirements of the DGCL, any Regent
stockholder who fails to comply with the requirements of the DGCL will not be
entitled to bring suit for the recovery of the value of his shares or money
damages.
The right of any dissenting Regent stockholder to be paid the fair value of
his or her Regent Stock will cease and his status as a holder of Regent Stock
will be restored if: (i) a written withdrawal by the dissenting Regent
stockholder is sent to Jacor at any time within 60 days after the Effective Time
of the
42
<PAGE>
Merger; or (ii) a court of competent jurisdiction determines that the
stockholder is not entitled to exercise dissenters' rights. After the
consummation of the Merger, if the right of the Regent stockholder to be paid
the fair value of his shares of Regent Stock has ceased and his rights as a
Regent stockholder have been restored, such rights will consist solely of the
right to receive the Merger Consideration pursuant to the terms of the Merger
Agreement.
RELATED MATERIAL CONTRACTS
On October 8, 1996, CitiCo entered into the TBA with Regent, and entered
into the KWNR TBA with SRLV (together, the TBA and KWNR TBA may be hereinafter
referred to as the "CitiCo TBAs"). Pursuant to the CitiCo TBAs, effective
December 1, 1996, CitiCo began supplying broadcast programming to the Regent
Stations and KWNR-FM, respectively, in return for a monthly fee.
The TBA expires as of the Closing Date of the Merger, or ten (10) days
following the termination of the Merger Agreement, whichever shall first occur.
The KWNR TBA expires as of the earlier to occur of (i) the earlier to occur of
(a) the Closing Date of the Merger, (b) ten (10) days following the termination
of the Merger prior to the Closing of the Merger, (c) three business days prior
to the expiration of the FCC final order related to the Regent-KWNR Acquisition,
(d) April 30, 1997, and (e) at such other date as Regent, Jacor, SFE and SRLV
shall agree upon in writing; and (ii) the termination of the Letter Agreement.
43
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") is based on the historical financial statements of
Jacor, Regent, Citicasters (now known as JCC), Noble and the Selected Gannett
Radio Stations (as defined herein) and has been prepared to illustrate the
effects of the acquisitions described below and the related financing
transactions.
The unaudited pro forma condensed consolidated statements of operations for
the year ended December 31, 1995, and for the nine months ended September 30,
1996, give effect to each of the following transactions as if such transactions
had been completed January 1, 1995: (i) the Regent Merger, (ii) the Citicasters
Merger, (iii) the Noble Acquisition, (iv) Jacor's, Regent's, Citicasters' and
Noble Broadcast Group, Inc.'s completed 1995 and January 1996 radio station
acquisitions, (v) Jacor's February 1996 radio station dispositions, (vi) the
related financing transactions completed in June 1996 and (vii) Jacor's
acquisition of the Selected Gannett Radio Stations. The pro forma condensed
consolidated balance sheet as of September 30, 1996 has been prepared as if the
Regent Merger and the acquisition of the Selected Gannett Radio Stations had
occurred on that date.
The Unaudited Pro Forma Financial Information does not purport to present
the actual financial position or results of operations of Jacor had the
transactions and events assumed therein in fact occurred on the dates specified,
nor are they necessarily indicative of the results of operations that may be
achieved in the future. The Unaudited Pro Forma Financial Information is based
on certain assumptions and adjustments described in the notes to the Unaudited
Pro Forma Financial Information and should be read in conjunction therewith. See
Consolidated Financial Statements and the Notes thereto for each of Jacor,
Regent, Citicasters, Noble and the Selected Gannett Radio Stations included
herein.
44
<PAGE>
JACOR COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------------
JACOR NOBLE PRO JACOR/NOBLE
HISTORICAL PRO FORMA JACOR PRO HISTORICAL FORMA COMBINED
JACOR ADJUSTMENTS FORMA NOBLE ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net revenue......................................... $ 118,891 $ (678)(a) $118,213 $41,902 $ 87(b) $160,202
Broadcast operating expenses........................ 87,290 (1,425)(a) 85,865 31,445 (429)(b) 116,881
Depreciation and amortization....................... 9,483 400(a) 9,883 4,107 2,710(c) 16,700
Corporate general and administrative expenses....... 3,501 3,501 2,285 (1,388)(d) 4,398
---------- ----------- --------- ---------- ----------- -----------
Operating income................................ 18,617 347 18,964 4,065 (806) 22,223
Interest expense.................................... (1,444) (1,444) (9,913) (3,143)(e) (14,500)
Interest and investment income...................... 1,260 (854)(a) 406 406
Other income (expense), net......................... (168) 6(a) (162) 2,619 (2,619)(f) (162)
---------- ----------- --------- ---------- ----------- -----------
Income (loss) before income taxes and
extraordinary items........................... 18,265 (501) 17,764 (3,229) (6,568) 7,967
Income tax expense.................................. (7,300) 200(g) (7,100) (63) 2,100(g) (5,063)
---------- ----------- --------- ---------- ----------- -----------
Income (loss) before extraordinary items........ $ 10,965 $ (301) $ 10,664 $(3,292) $(4,468) $ 2,904
---------- ----------- --------- ---------- ----------- -----------
---------- ----------- --------- ---------- ----------- -----------
Income per common share......................... $ 0.52 $ 0.51 $ 0.14
---------- --------- -----------
---------- --------- -----------
Number of common shares used in per share
computations...................................... 20,913 20,913 20,913
---------- --------- -----------
---------- --------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Financial Information
45
<PAGE>
JACOR COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------
JACOR/NOBLE CITICASTERS
COMBINED HISTORICAL PRO FORMA
PRO FORMA CITICASTERS ADJUSTMENTS
----------- ----------- ------------
<S> <C> <C> <C>
Net revenue.................................................... $160,202 $ 136,414 $ 6,853(h)
Broadcast operating expenses................................... 116,881 80,929 4,366(h)
(1,322)(i)
(5,110)(j)
Depreciation and amortization.................................. 16,700 14,635 14,351(k)
Corporate general and administrative expenses.................. 4,398 4,303 1,322(i)
(3,368)(l)
----------- ----------- ------------
Operating income........................................... 22,223 36,547 (3,386)
Interest expense............................................... (14,500) (13,854) (32,084)(m)
Interest and investment income................................. 406 1,231 (767)(h)
Other income (expense), net.................................... (162) (607) 175(h)
----------- ----------- ------------
Income (loss) before income taxes and extraordinary
items.................................................... 7,967 23,317 (36,062)
Income tax expense............................................. (5,063) (9,000) 11,100(n)
----------- ----------- ------------
Income (loss) before extraordinary items................... $ 2,904 $ 14,317 $(24,962)
----------- ----------- ------------
----------- ----------- ------------
Income (loss) per common share............................. $ 0.14
-----------
-----------
Number of common shares used in per share computations......... 20,913
-----------
-----------
<CAPTION>
JACOR/NOBLE/CITICASTERS
COMBINED PRO FORMA
-----------------------
<S> <C>
Net revenue.................................................... $303,469
Broadcast operating expenses................................... 195,744
Depreciation and amortization.................................. 45,686
Corporate general and administrative expenses.................. 6,655
--------
Operating income........................................... 55,384
Interest expense............................................... (60,438)
Interest and investment income................................. 870
Other income (expense), net.................................... (594)
--------
Income (loss) before income taxes and extraordinary
items.................................................... (4,778)
Income tax expense............................................. (2,963)
--------
Income (loss) before extraordinary items................... $ (7,741)
--------
--------
Income (loss) per common share............................. $ (0.26)
--------
--------
Number of common shares used in per share computations......... 30,158(o)
--------
--------
</TABLE>
See Notes to Unaudited Pro Forma Financial Information
46
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JACOR/NOBLE/CITICASTERS
JACOR/NOBLE/CITICASTERS SELECTED TAMPA ACQUISITION SELECTED GANNETT
COMBINED GANNETT TELEVISION PRO FORMA COMBINED
PRO FORMA STATIONS DIVESTITURE ADJUSTMENTS PRO FORMA
----------------------- -------- ----------- ----------- -----------------------
<S> <C> <C> <C> <C> <C>
Net revenue..................... $303,469 $ 38,103 $(34,803) $ $306,769
Broadcast operating expenses.... 195,744 26,924 (19,421) 203,247
Depreciation and amortization... 45,686 964 (5,870) 4,119(p) 44,899
Corporate general and
administrative expenses....... 6,655 1,246 (1,246)(q) 6,655
-------- -------- ----------- ----------- --------
Operating income.............. 55,384 8,969 (9,512) (2,873) 51,968
Interest expense................ (60,438) (60,438)
Interest and investment
income........................ 870 870
Other income (expense), net..... (594) 6 (174) (762)
-------- -------- ----------- ----------- --------
Income (loss) before income
taxes and extraordinary
items....................... (4,778) 8,975 (9,686) (2,873) (8,362)
Income tax (expense) credit..... (2,963) (3,858) 3,874 1,150(r) (1,797)
-------- -------- ----------- ----------- --------
Income (loss) before
extraordinary items......... $ (7,741) $ 5,117 $ (5,812) $(1,723) $(10,159)
-------- -------- ----------- ----------- --------
-------- -------- ----------- ----------- --------
Income per common share....... $ (0.26) $ (0.34)
Number of common shares used in
per share computations........ 30,158 30,158
</TABLE>
See Notes to Unaudited Pro Forma Financial Information.
47
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JACOR/NOBLE/ REGENT ACQUISITION TOTAL
CITICASTERS/GANNETT REGENT PRO FORMA PRO FORMA COMBINED PRO
COMBINED PRO FORMA HISTORICAL ADJUSTMENTS ADJUSTMENTS FORMA
------------------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net revenue................... $306,769 $17,257 $19,171(s) $ -- $343,197
Broadcast operating
expenses.................... 203,247 14,660 13,020(s) -- 230,927
Depreciation and
amortization................ 44,899 3,316 4,278(s) (1,675)(t) 50,818
Corporate general and
administrative expenses..... 6,655 740 563(s) (1,303)(u) 6,655
-------- ---------- ----------- ----------- ------------
Operating income........ 51,968 (1,459) 1,310 2,978 54,797
Interest expense.............. (60,438) (1,399) (3,743)(s) (1,328)(v) (66,908)
Interest and investment
income...................... 870 -- -- -- 870
Other income (expense), net... (762) -- -- -- (762)
-------- ---------- ----------- ----------- ------------
Income (loss) before income
taxes and extraordinary
items..................... (8,362) (2,858) (2,433) 1,650 (12,003)
Income tax (expense) credit... (1,797) -- -- 1,150(w) (647)
-------- ---------- ----------- ----------- ------------
Income (loss) before
extraordinary items....... $(10,159) $(2,858) $(2,433) $ 2,800 $(12,650)
-------- ---------- ----------- ----------- ------------
-------- ---------- ----------- ----------- ------------
Income per common share..... $ (0.34) $(0.38)
Number of common shares used
in per share computations... 30,158 33,708(x)
</TABLE>
See Notes to Unaudited Pro Forma Financial Information.
48
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JACOR/
JACOR/ NOBLE/
NOBLE/ HISTORICAL CITICASTERS/
CITICASTERS CITICASTERS SELECTED TAMPA ACQUISITION GANNETT
HISTORICAL NOBLE COMBINED GANNETT TELEVISION PROFORMA COMBINED
JACOR ADJUSTMENTS PRO FORMA STATIONS DIVESTITURE ADJUSTMENTS PRO FORMA
---------- ------------- ----------- -------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue.............. $ 127,520 $112,521(bb) $ 240,041 $27,060 ($24,502) $242,599
Broadcast operating
expenses................ 91,694 71,255(bb) 162,949 19,128 (14,645) 167,432
Depreciation and
amortization............ 10,601 23,572(bb) 34,173 713 (4,403) 3,299(p) 34,648
Corporate general and
administrative
expenses................ 4,080 1,479(bb) 5,559 893 893(q) 5,559
---------- ------------- ----------- -------- ----------- ------------ ---------
Operating income....... 21,145 16,215 37,360 6,326 (5,454) (2,406) 35,826
Interest expenses........ (13,397) (31,448)(bb) (44,845) (44,845)
Interest and investment
income.................. 2,539 2,539 2,539
Other income (expense),
net..................... 4,701 (4,363) 338 10 348
---------- ------------- ----------- -------- ----------- ------------ ---------
Income (loss) before
income taxes and
extraordinary
items................ 14,988 (19,596) (4,608) 6,336 (5,454) (2,406) (6,132)
Income tax (expense)
credit.................. (7,285) 8,265(w) 980 (2,724) 2,182 882(r) 1,320
---------- ------------- ----------- -------- ----------- ------------ ---------
Income (loss) before
extraordinary
items................ $ 7,703 $(11,331) $ (3,628) $ 3,612 $ (3,272) $(1,524) $ (4,812)
---------- ------------- ----------- -------- ----------- ------------ ---------
---------- ------------- ----------- -------- ----------- ------------ ---------
Income per common
share................ $ 0.31 $ (0.19)
Number of common shares
used in per share
computations............ 24,880 24,880
</TABLE>
See Notes to Unaudited Pro Forma Financial Information.
49
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JACOR/NOBLE/ REGENT ACQUISITION TOTAL
CITICASTERS/GANNETT REGENT PRO FORMA PRO FORMA COMBINED
COMBINED PRO FORMA HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------------- ---------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net revenue.......................... $242,599 $23,198 $ 6,315(s) $ -- $ 272,112
Broadcast operating expenses......... 167,432 19,069 4,054(s) -- 190,555
Depreciation and amortization........ 33,782 4,226 1,483(s) (1,256)(t) 38,235
Corporate general and administrative
expenses........................... 5,559 1,177 -- (1,177)(u) 5,559
-------- ---------- ------- ----------- ----------
Operating income................... 35,826 (1,274) 778 2,433 37,763
Interest expense..................... (44,845) (2,274) (1,582)(s) (996)(v) (49,697)
Interest and investment income....... 2,539 -- -- -- 2,539
Other income (expense), net.......... 348 4,060 (4,237)(s) -- 171
-------- ---------- ------- ----------- ----------
Income (loss) before income taxes and
extraordinary items................ (6,132) 512 (5,041) 1,437 (9,224)
Income tax (expense) credit.......... 1,320 -- -- 1,000(w) 2,320
-------- ---------- ------- ----------- ----------
Income (loss) before extraordinary
items............................ $ (4,812) $ 512 $(5,041) $ 2,437 $ (6,904)
-------- ---------- ------- ----------- ----------
-------- ---------- ------- ----------- ----------
Income per common share............ $ (0.19) $(0.24)
Number of common shares used in per
share computations................. 24,880 28,430(x)
</TABLE>
See Notes to Unaudited Pro Forma Financial Information.
50
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
SELECTED TAMPA JACOR/GANNETT
JACOR GANNETT TELEVISION COMBINED
HISTORICAL STATIONS DIVESTITURE PRO FORMA
---------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............................... $ 52,821 $ 52,821
Accounts receivable..................................... 70,782 70,782
Other current assets.................................... 12,897 12,897
---------- ------------- -------------- -------------
Total current assets.................................. 136,500 0 0 136,500
Property and equipment, net............................. 141,259 11,072(aa) (21,573) (aa) 130,758
Intangible assets, net.................................. 1,295,286 158,928(aa) (148,427) (aa) 1,305,787
Other assets............................................ 98,032 98,032
---------- ------------- -------------- -------------
$1,671,077 $170,000 $(170,000) $1,671,077
---------- ------------- -------------- -------------
---------- ------------- -------------- -------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current
liabilities........................................... $ 51,898 $ 51,898
---------- ------------- -------------- -------------
Total current liabilities............................. 51,898 0 0 51,898
Long-term debt.......................................... 626,250 626,250
5.5% Liquid Yield Option Notes.......................... 117,090 117,090
Deferred taxes and other liabilities 393,728 393,728
Shareholders' equity:
Common stock, $.01 par value............................ 312 312
Additional paid-in capital.............................. 430,307 430,307
Common stock warrants................................... 26,500 26,500
Retained earnings....................................... 24,992 24,992
---------- ------------- -------------- -------------
TOTAL SHAREHOLDERS' EQUITY............................ 482,111 0 0 482,111
---------- ------------- -------------- -------------
$1,671,077 $ 0 $ 0 $1,671,077
---------- ------------- -------------- -------------
---------- ------------- -------------- -------------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
51
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JACOR/GANNETT REGENT PRO ACQUISITION TOTAL
COMBINED PRO REGENT FORMA PRO FORMA COMBINED
FORMA HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------- ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................ $ 52,821 $ 1,237 -- -- $ 54,058
Accounts receivable...................... 70,782 6,353 350(y) -- 77,485
Other current assets..................... 12,897 319 (10)(y) -- 13,206
------------- ----------- ------------- ------------- ------------
Total current assets................... 136,500 7,909 340 -- 144,749
Property and equipment, net.............. 130,758 9,710 1,275(y) -- 141,743
Intangible assets, net................... 1,305,787 61,597 34,145(y) 108,262(y) 1,509,791
Other assets............................. 98,032 200 -- -- 98,232
------------- ----------- ------------- ------------- ------------
$ 1,671,077 $ 79,416 $ 35,760 $ 108,262 $ 1,894,515
------------- ----------- ------------- ------------- ------------
------------- ----------- ------------- ------------- ------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and
other current liabilities.............. $ 51,898 $ 7,278 $ 530(y) -- $ 59,706
------------- ----------- ------------- ------------- ------------
Total Current Liabilities.............. 51,898 7,278 530 -- 59,706
Long-term debt........................... 626,250 29,514 34,486(y) 19,484(y) 709,734
5.5% Liquid Yield Option Notes........... 117,090 117,090
Deferred taxes and other liabilities 393,728 -- -- 30,630(y) 424,358
Shareholders' equity:
Common stock, $.01 par value including
Additional paid-in capital............. 430,619 48,087 -- 48,429(y) 527,135
Common stock warrants.................... 26,500 -- -- 5,000(z) 31,500
Retained earnings........................ 24,992 (5,463) 744(y) 4,719(y) 24,992
------------- ----------- ------------- ------------- ------------
TOTAL SHAREHOLDERS' EQUITY............. 482,111 42,624 744 58,148 583,627
------------- ----------- ------------- ------------- ------------
$ 1,671,077 $ 79,416 $ 35,760 $ 108,262 $ 1,894,515
------------- ----------- ------------- ------------- ------------
------------- ----------- ------------- ------------- ------------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
52
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
(a) These adjustments reflect additional revenues and expenses for Jacor's
acquisitions of radio stations WDUV-FM and WBRD-AM in Tampa Bay and WJBT-FM,
WSOL-FM, and WZAZ-AM in Jacksonville, which were completed at various dates
in 1995, net of the elimination of 1995 revenues and expenses for radio
stations WMYU-FM and WWST-FM in Knoxville, which were sold in February 1996.
(b) These adjustments reflect additional revenues and expenses for Noble's
acquisition of radio stations WRVF-FM (formerly WLQR-FM) and WSPD-FM in
Toledo, and the elimination of revenues and expenses for the sale of radio
stations KBEQ-FM and KBEQ-AM in Kansas City, and other miscellaneous
non-recurring expenses related to dispositions of properties in 1995. The
acquisitions were completed in August 1995 and the dispositions were
completed in March 1995.
(c) The adjustment reflects the additional depreciation and amortization expense
resulting from the allocation of Jacor's purchase price to the assets
acquired including an increase in property and equipment and identifiable
intangible assets, to their estimated fair market values and the recording
of goodwill associated with the acquisition of Noble. See Note (u). Goodwill
is amortized over 40 years.
(d) The adjustment represents $1,513 of corporate overhead savings for the
elimination of redundant management costs and other expenses resulting from
the combination of the Jacor and Noble entities, net of $125 additional
corporate expenses associated with the purchase of the Toledo stations.
(e) The adjustment represents additional interest expense associated with
Jacor's borrowings under the Existing Credit Facility to finance the Noble
acquisition and refinance existing outstanding borrowings. The assumed
interest rate is 7.3%, which represents the current rate as of May 1996 on
outstanding borrowings.
(f) The adjustment reflects the elimination of the gain on the sale of radio
stations KBEQ-FM and AM in Kansas City, and WSSH-AM in Boston, which were
sold in March 1995 and January 1995, respectively.
(g) To provide for the tax effect of pro forma adjustments using an estimated
statutory rate of 40%. The Noble pro forma adjustments include
non-deductible amortization of goodwill estimated to be approximately $1,300
for the year ended December 31, 1995.
(h) The adjustments represent additional revenue and expenses associated with
Citicasters' June 1995 acquisition of KKCW-FM in Portland and the January
1996 acquisition of WHOK-FM, WLLD-FM, and WLOH-AM in Columbus, including
adjustments to investment income related to cash expended in the
acquisitions and miscellaneous non-recurring costs.
(i) Adjustments to reclassify miscellaneous broadcast operating expenses to
conform with Jacor's presentation.
53
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
(j) The adjustment reflects $5,110 of cost savings for the year ended December
31, 1995 resulting from the elimination of redundant broadcast operating
expenses arising from the operation of multiple stations in certain markets.
Such pro forma cost savings are expected to be as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Programming and promotion.................................................. $ 2,220
News....................................................................... 970
Technical and engineering.................................................. 360
General and administrative................................................. 1,560
------
$ 5,110
------
------
</TABLE>
(k) The adjustment reflects the additional depreciation and amortization expense
resulting from the allocation of Jacor's purchase price to the assets
acquired including an increase in property and equipment and identifiable
intangible assets to their estimated fair market values and the recording
goodwill associated with the acquisition of Citicasters. Goodwill is
amortized over 40 years.
(l) The adjustment represents $3,368 of corporate overhead savings for the year
ended December 31, 1995 for the elimination of redundant management costs
and other expenses resulting from the combination with Citicasters.
(m) Represents the adjustment to interest expense associated with the 1994
9 3/4% Notes, the 1996 10 1/8% Notes, LYONs and borrowings under the Credit
Facility with an assumed blended rate of 8.336%. The adjustment reflects
additional interest expense on borrowings necessary to complete the
Citicasters Merger, and refinance outstanding borrowings under the Existing
Credit Facility incurred in connection with the Noble Acquisition. A change
of .125% in interest rates would result in a change in interest expense and
income (loss) before extraordinary items of approximately $900 and $540,
respectively.
(n) To provide for the tax effect of pro forma adjustments using an estimated
statutory rate of 40%. The Citicasters pro forma adjustments include
nondeductible amortization of goodwill estimated to be approximately $9,540
for the year ended December 31, 1995.
(o) The pro forma weighted average shares outstanding includes all shares of
Common Stock outstanding prior to the 1996 Stock Offering and shares issued
in the 1996 Stock Offering. The pro forma weighted average shares of Jacor
do not reflect any options and warrants outstanding prior to the 1996 Stock
Offering or warrants to be issued to the Citicasters' shareholders to
consummate the Merger as they are antidilutive. The LYONs are not common
stock equivalents and are therefore, excluded from the computation.
(p) Represents additional amortization and depreciation expense resulting from
allocation of the value exchanged to the Selected Gannett Radio Stations. In
December 1996, Jacor acquired six radio stations from Gannett in exchange
for its Tampa television station. Amortization is calculated on a straight
line basis over 40 years. The property and equipment is depreciated over an
average depreciable life of 10 years.
(q) Represents additional savings as Gannett corporate overhead will be absorbed
by the current Jacor corporate structure.
(r) Represents additional tax savings on the pro forma adjustments using an
effective rate of 40%.
(s) Reflects the 1995 and 1996 purchases and dispositions of radio properties by
Regent as if they had occurred on January 1, 1995.
54
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
(t) Represents the adjustment to depreciation and amortization expense resulting
from allocation of Jacor's purchase price to the assets acquired to their
estimated fair market values and the recording of goodwill associated with
the acquisition of Regent. Goodwill is amortized over 40 years.
(u) Represents the elimination of Regent corporate overhead for redundant costs.
(v) Represents the adjustment to interest expense associated with the borrowings
under a bank credit facility necessary to complete the acquisition of Regent
using an assumed rate of 8%.
(w) To provide for the tax effect of pro forma adjustments using an estimated
statutory rate of 40%. The acquisition pro forma adjustments include
non-deductible amortization of goodwill.
(x) Reflects the additional shares of Jacor common stock issued in the
acquisition.
(y) The adjustments to record the allocation of Jacor's purchase price of Regent
and Regent's pending acquisitions to the estimated fair value of the assets
acquired and the liabilities assumed and the recording of goodwill
associated with the acquisition as if they occurred on September 30, 1996
are as follows:
<TABLE>
<CAPTION>
Property and equipment............................................ $ 10,985
<S> <C>
Contracts, broadcasting licenses and other intangibles............ 204,004
Cash.............................................................. 1,237
Deferred charges and other assets................................. 7,212
Long-term debt issuance........................................... (19,484)
Long-term debt assumed............................................ (64,000)
3.55 million shares of Common stock issued........................ (96,516)
Common stock warrants............................................. (5,000)
Deferred taxes.................................................... (30,630)
Other liabilities................................................. (7,808)
</TABLE>
(z) Adjustment represents the value assigned to the warrants to be issued to
Regent stockholders in connection with the acquisition. The warrants will be
exercisable for 500,000 shares of common stock at an exercise price of $40
per full share.
(aa) The adjustments to record the allocation of the purchase price of the
Selected Gannett Radio Stations to the estimated fair value of the assets
acquired, and to record the disposition of the assets of the Tampa
television station as if they occurred on September 30, 1996.
(bb) The adjustments reflect additional revenues, broadcast operating expenses,
depreciation and amortization, corporate expenses and interest expense
related to the acquisition of Noble (July 1996) and Citicasters (September
1996). The depreciation and amortization adjustment reflects Jacor's
allocation of the purchase price to the estimated fair value of the assets
acquired and the recording of goodwill associated with the acquisitions.
Goodwill is amortized over 40 years. The additional interest expense
reflects Jacor's borrowings to finance the acquisitions (see notes (e) and
(m)).
55
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JACOR
The selected consolidated financial data for Jacor presented below for, and
as of the end of each of the years in the five-year period ended December 31,
1995, is derived from Jacor's Consolidated Financial Statements which have been
audited by Coopers & Lybrand L.L.P., independent accountants. The consolidated
financial statements at December 31, 1994 and 1995 and for each of the three
years in the period ended December 31, 1995 and the auditors' report thereon are
included elsewhere in this Prospectus/Information Statement. The selected
financial data as of September 30, 1996 and for the nine months ended September
30, 1995 and 1996 are unaudited. In the opinion of Jacor's management, the
unaudited financial statements from which such data have been derived include
all adjustments (consisting only of normal, recurring adjustments) which are
necessary for a fair presentation of results of operations for such periods.
This selected consolidated financial data should be read in conjunction with the
"Unaudited Pro Forma Financial Information." Comparability of Jacor's historical
consolidated financial data has been significantly impacted by acquisitions,
dispositions and the recapitalization and refinancing completed in the first
quarter of 1993.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- ------------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:(1)
Net revenue.............................. $ 64,238 $ 70,506 $ 89,932 $ 107,010 $ 118,891 $ 87,176 $ 127,520
Broadcast operating expenses............. 48,206 55,782 69,520 80,468 87,290 65,241 91,694
--------- --------- --------- --------- --------- --------- -------------
Station operating income excluding
depreciation and amortization.......... 16,032 14,724 20,412 26,542 31,601 21,935 35,826
Depreciation and amortization............ 7,288 6,399 10,223 9,698 9,483 6,783 10,601
Reduction in carrying value of assets to
net realizable value................... 8,600
Corporate general and administrative
expenses............................... 2,682 2,926 3,564 3,361 3,501 2,564 4,080
--------- --------- --------- --------- --------- --------- -------------
Operating income (loss).................. 6,062 (3,201) 6,625 13,483 18,617 12,588 21,145
Net interest income (expense)............ (16,226) (13,443) (2,476) 684 (184) (593) (13,397)
Gain on sale of radio stations........... 13,014 -- 2,539
Other non-operating expenses, net........ (302) (7,057) (11) (2) (168) 1,052 4,701
--------- --------- --------- --------- --------- --------- -------------
Income (loss) from continuing operations
before income tax and extraordinary
item................................... $ 2,548 $ (23,701) $ 4,138 $ 14,165 $ 18,265 $ 13,047 $ 14,988
--------- --------- --------- --------- --------- --------- -------------
--------- --------- --------- --------- --------- --------- -------------
Income (loss) from continuing operations
after income tax but before
extraordinary items and the cumulative
effect of accounting changes........... $ (364) $ (23,701) $ 1,438 $ 7,852 $ 10,965 $ 7,768 $ 7,703
--------- --------- --------- --------- --------- --------- -------------
--------- --------- --------- --------- --------- --------- -------------
Net income (loss)........................ $ 1,468 $ (23,701) $ 1,438 $ 7,852 $ 10,965 $ 7,768(2) $ 4,737
--------- --------- --------- --------- --------- --------- -------------
--------- --------- --------- --------- --------- --------- -------------
Net income (loss) per common share:(3)
primary and fully diluted............ $ 2.32 $ (61.50) $ 0.10 $ 0.37 $ 0.52 $ 0.37 $ 0.19
--------- --------- --------- --------- --------- --------- -------------
--------- --------- --------- --------- --------- --------- -------------
Weighted average shares outstanding:(3)
Primary and fully diluted............ 406 381 14,505 21,409 20,913 21,136 24,080
--------- --------- --------- --------- --------- --------- -------------
--------- --------- --------- --------- --------- --------- -------------
OTHER FINANCIAL DATA:(1)
Broadcast cash flow(4)................... $ 16,032 $ 14,724 $ 20,412 $ 26,542 $ 31,601 $ 21,935 $ 35,826
--------- --------- --------- --------- --------- --------- -------------
--------- --------- --------- --------- --------- --------- -------------
Broadcast cash flow margin(5)............ 25.0% 20.9% 22.7% 24.8% 26.6% 25.2% 28.1%
EBITDA(4)................................ $ 13,350 $ 11,798 $ 16,848 $ 23,181 $ 28,100 $ 19,371 $ 31,746
Capital expenditures..................... 1,181 915 1,495 2,221 4,969 3,664 7,506
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
----------------------------------------------------- SEPTEMBER 30,
1991 1992(6) 1993 1994 1995 1996
--------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:(1)
Working capital (deficit)................ $(128,455) $(140,547) $ 38,659 $ 44,637 $ 24,436 $ 84,602
Intangible assets (net of accumulated
amortization).......................... 81,738 70,038 84,991 89,543 127,158 1,295,286
Total assets............................. 125,487 122,000 159,909 173,579 208,839 1,671,077
Total long-term debt (including current
portion)............................... 137,667 140,542 45,500 626,250
Common stock purchase warrants........... 2,342 1,383 390 390 388 26,500
Shareholders' equity (deficit)........... (27,383) (50,840) 140,413 149,044 139,073 482,111
</TABLE>
56
<PAGE>
- ------------------------------
(1) The comparability of the information reflected in this selected financial
data is affected by Jacor's purchase of radio station KBPI-FM (formerly
KAZY-FM), in Denver (July 1993); the purchase and interim operation of radio
station WOFX-FM (formerly WPPT-FM) under a local marketing agreement in
Cincinnati (April 1994); the purchase of radio stations WJBT-FM, WZAZ-AM,
and WSOL-FM (formerly WHJX-FM) in Jacksonville (August 1995); the purchase
of radio stations WDUV-FM and WBRD-AM in Tampa (August 1995); the purchase
of Noble's operating assets in San Diego (February 1996); acquisition of
Noble (July 1996); the merger with Citicasters (September 1996); the sale of
radio stations WMJI-FM, in Cleveland and WYHY(FM), in Nashville (January
1991), the sale of Telesat Cable TV (May 1994), the January 11, 1993
recapitalization plan, that substantially modified Jacor's debt and capital
structure (such recapitalization was accounted for as if it had been
completed January 1, 1993) and the March 1993 refinancing. For information
related to acquisitions in 1993, 1994 and 1995 see Notes 2 and 3 of Notes to
Consolidated Financial Statements. For information related to the
disposition during 1994, see Note 4 of Notes to Consolidated Financial
Statements.
(2) Net income for the nine months ended September 30, 1996 includes, as an
extraordinary item, a loss of approximately $3.0 million for the write-off
of unamortized costs associated with former credit agreements.
(3) Income (loss) per common share for the two 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. Jacor's stock options and convertible preferred stock
were antidilutive and, therefore, were not included in the computations. The
redeemable common stock warrants were antidilutive for 1992 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 three years ended December 31,
1995 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 two years ended December 31, 1992 are
adjusted to reflect the 0.0423618 reverse stock split in Common Stock
effected by the January 1993 recapitalization.
(4) "Broadcast cash flow" means operating income before reduction in carrying
value of assets, depreciation and amortization and corporate general and
administrative expenses. "EBITDA" means operating income before reduction in
carrying value of assets, depreciation and amortization. Broadcast cash flow
and EBITDA should not be considered in isolation from, or as a substitute
for, operating income, net income or cash flow and other consolidated income
or cash flow statement data computed in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity. Although this measure of performance is not calculated in
accordance with generally accepted accounting principles, it is widely used
in the broadcasting industry as a measure of a company's operating
performance because it assists in comparing station performance on a
consistent basis across companies without regard to depreciation and
amortization, which can vary significantly depending on accounting methods
(particularly where acquisitions are involved) or non-operating factors such
as historical cost bases. Broadcast cash flow also excludes the effect of
corporate general and administrative expenses, which generally do not relate
directly to station performance.
(5) Broadcast cash flow margin equals broadcast cash flow as a percentage of net
revenue.
(6) Pro forma amounts as of December 31, 1992, to give effect to the January 11,
1993 recapitalization plan that substantially modified Jacor's debt and
capital structure (in 000s):
<TABLE>
<S> <C>
Working capital................................................................ $15,933
Intangible assets (net of accumulated amortization)............................ 82,857
Total assets................................................................... 142,085
Long-term debt................................................................. 64,178
Common stock purchase warrants................................................. 403
Shareholders' equity........................................................... 50,890
</TABLE>
57
<PAGE>
REGENT
The selected consolidated financial data for Regent presented below for, and
as of the end of each of the years ended December 31, 1993, 1994 and 1995, and
as of and for the nine months ended September 30, 1996, is derived from Regent's
Consolidated Financial Statements which have been audited by Coopers & Lybrand
L.L.P., independent accountants. The consolidated financial statements as of
December 31, 1995 and September 30, 1996 and for the years ended December 31,
1994 and 1995 and for the nine months ended September 30, 1996 and the auditors'
report thereon are included elsewhere in this Prospectus. The selected financial
data as of September 30, 1995 and for the nine months ended September 30, 1995
are unaudited. In the opinion of Regent's management, the unaudited financial
statements from which such data have been derived include all adjustments
(consisting of normal, recurring adjustments) which are necessary for a fair
presentation of results of operations for such periods. This selected
consolidated financial data should be read in conjunction with the "Unaudited
Pro Forma Financial Information." Comparability of Regent's historical
consolidated financial data has been significantly impacted by acquisitions.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- --------------------
1993(2) 1994 1995 1995 1996
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:(1)
Net revenue.......................................................... 7,325 17,257 10,641 23,198
Broadcast operating expenses......................................... 7,737 14,660 9,458 19,070
----------- --------- --------- --------- ---------
Station operating income excluding depreciation and amortization..... (412) 2,596 1,183 4,129
Depreciation and amortization........................................ 1,125 3,316 1,689 4,226
Time brokerage agreement termination expense......................... 125
Corporate general and administrative expenses........................ 89 670 740 482 1,177
----------- --------- --------- --------- ---------
Operating loss....................................................... (89) (2,331) (1,460) (988) (1,274)
Net interest (expense) income........................................ 12 (355) (1,399) (856) (2,274)
Gain on sale of radio station and format............................. 4,437
Other non-operating expenses, net.................................... (377)
----------- --------- --------- --------- ---------
Income (loss) from continuing operations before income tax and
extraordinary item................................................. (76) (2,687) (2,859) (1,845) 513
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Income (loss) from continuing operations after income tax but before
extraordinary items and the cumulative effect of accounting
changes............................................................ (76) (2,687) (2,859) (1,845) 513
Extraordinary loss on early retirement of debt....................... -- (126) (228)
----------- --------- --------- --------- ---------
Net income (loss).................................................... (76) (2,812) (3,087) (1,845) 513
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Net loss per common share:(3)
Primary and fully diluted
Before extraordinary item........................................ -- (70.27) (98.79) (69.31) (39.91)
Extraordinary item............................................... -- (2.52) (4.56)
----------- --------- ---------
Loss per common share............................................ -- (72.79) (103.35) (69.31) (39.91)
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Weighted average shares outstanding:(3)
Primary and fully diluted........................................ 50,000 50,000 50,000 50,000
OTHER FINANCIAL DATA:(1)
Broadcast cash flow(4)............................................... N/A (412) 2,596 1,183 4,129
--------- --------- --------- ---------
--------- --------- --------- ---------
Broadcast cash flow margin(5)........................................ N/A 5.6% 15.0% 11.1% 17.8%
EBITDA(4)............................................................ (89) 1,206 1,856 701 2,952
Capital expenditures................................................. 21 635 1,017 759 1,365
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER
------------------------------- 30,
1993 1994 1995 1996
--------- --------- --------- ---------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................................... 10,022 6,449 3,629 631
Intangible assets (net of accumulated amortization)...................... 131 25,814 59,566 61,598
Total assets............................................................. 10,204 38,318 78,382 79,417
Total long-term debt (including current portion)......................... -- 13,350 32,650 31,553
Shareholders' equity..................................................... 10,174 23,132 41,415 42,624
</TABLE>
58
<PAGE>
- ------------------------------
(1) The comparability of the information in this selected financial data is
affected by Regent's April 1994 purchase of radio station WLQT-FM in Dayton;
May 1994 purchases of radio stations WDJX-FM and WHKW-AM and operation of
radio station WSJW-FM under a time brokerage agreement, each located in
Louisville; July 1994 time brokerage agreement with radio station KBGO-FM in
Las Vegas; August 1994 purchase of radio stations KSNE-FM in Las Vegas and
WDOL-FM in Dayton, and interim operation of WDOL-FM from May 1994 to August
1994 under a time brokerage agreement; September 1994 purchase of radio
station WSFR-FM in Louisville, and interim operation of such station from
May 1994 to August 1994 under a time brokerage agreement; October 1994
purchases of radio stations KFMS-FM and KKDD-AM in Las Vegas and interim
operation of such stations from July 1994 to September 1994 under a time
brokerage agreement; January 1995 purchase of radio station WFIA-AM in
Louisville; October 1995 purchases of radio stations KUDL-FM and KMXV-FM in
Kansas City and radio stations KKAT-FM, KODJ-FM and KALL-AM and an
advertising sales agreement with KBKK-FM, each located in Salt Lake City;
April 1996 purchase of radio stations WEZL-FM and WXLY-FM in Charleston,
S.C.; April 1996 sale of WLQT-FM and WDOL-FM in Dayton; May 1996 sale of a
station format in Louisville; operation of KURR-FM and KZHT-FM effective
August 1996, each located in Salt Lake City under a time brokerage
agreement; operation of WVEZ-FM effective September 1996 in Louisville under
a time brokerage agreement.
(2) Regent had no radio station operations for the period September 24, 1993
(date of inception) through December 31, 1993.
(3) Loss per common share is based on the weighted average number of common
shares outstanding and gives consideration to the dividend requirements of
the convertible preferred stock. Regent's common stock options and
convertible preferred stock were anti-dilutive and, therefore, were not
included in the computation.
(4) "Broadcast cash flow" means operating income before reduction in carrying
value of assets, depreciation and amortization and corporate general and
administrative expenses. "EBITDA" means operating income before reduction in
carrying value of assets, depreciation and amortization. Broadcast cash flow
and EBITDA should not be considered in isolation from, or as a substitute
for, operating income, net income or cash flow and other consolidated income
or cash flow statement data computed in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity. Although this measure of performance is not calculated in
accordance with generally accepted accounting principles, it is widely used
in the broadcasting industry as a measure of a company's operating
performance because it assists in comparing station performance on a
consistent basis across companies without regard to depreciation and
amortization, which can vary significantly depending on accounting methods
(particularly where acquisitions are involved) or non-operating factors such
as historical cost bases. Broadcast cash flow also excludes the effect of
corporate general and administrative expenses, which generally do not relate
directly to station performance.
(5) Broadcast cash flow margin equals broadcast cash flow as a percentage of net
revenue.
59
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF JACOR
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
Jacor's revenue is the sale of broadcasting time on its radio stations for
advertising. Jacor'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. Jacor works closely with local station management to
implement cost control measures.
Jacor's revenue is affected primarily by the advertising rates Jacor'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 principally measured by Arbitron Metro Area Ratings Surveys.
Most advertising contracts are short-term and run only for a few weeks. Most
of Jacor's revenue is generated from local advertising, which is sold by the
station's sales staff. In 1995, approximately 85% of Jacor's gross revenue was
from local advertising and approximately 15% was from national advertising. A
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 most of Jacor's stations are made by Jacor'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.
Sports broadcasting and full-service programming features play an integral
part in Jacor's operating strategy. As a result, because of the rights fees and
related costs of broadcasting professional baseball, football and hockey, as
well as the costs related to the full-service programming features of its AM
radio stations, Jacor's broadcast cash flow margins are typically lower than its
competitors'.
Jacor's first calendar quarter historically produces the lowest revenue for
the year, and the second and third quarters historically produce the highest
revenue for the year, due in part to revenue received during the summer months
related to the broadcast of Major League Baseball games. During 1995, however,
Jacor recorded higher broadcast revenue and broadcast operating expenses during
the third and fourth quarters than those recorded during the second quarter due
to the Major League Baseball strike. As a result of the strike, second quarter
revenue and operating expenses were lower. For the entire twelve months of 1995,
the strike did not have a material impact on Jacor's station operating income
(broadcast revenue less broadcast operating expenses).
Jacor's operating results in any period may be affected by the incurrence of
advertising and promotion expenses that do not produce commensurate revenue in
the period in which the expenses are incurred. As a result of Arbitron's
quarterly reporting of ratings, Jacor's ability to realize revenue 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,
1993, 1994 and 1995 is affected by the July 1993 purchase of radio station
KBPI-FM (formerly KAZY-FM) in Denver; the May 1994 sale of Telesat Cable TV; the
June 1995 purchase of radio station WOFX-FM (formerly WPPT-FM) in Cincinnati,
and interim operation of such station from April 1994 to June 1995 under a local
marketing agreement ("LMA"); the August 1995 purchases of radio stations
WJBT-FM, WZAZ-AM, and WSOL-FM (formerly WHJX-FM), each located in Jacksonville,
and WDUV-FM and WBRD-AM, each located in Tampa. With these acquisitions, Jacor
expects to realize certain cost savings and increased ratings through format
modifications and thereby improve operating results in these markets.
The acquisitions discussed above and the Pending Transactions will increase
Jacor's net revenue, broadcast operating expenses, depreciation and
amortization, corporate general and administrative expenses, and interest
expense. Accordingly, past financial performance should not be considered a
60
<PAGE>
reliable indicator of future performance, and investors should not use
historical trends to anticipate results or trends in future periods.
General economic conditions have an impact on Jacor's business and financial
results. From time to time the markets in which Jacor operates experience weak
economic conditions that may negatively affect revenue of Jacor. However,
management believes that this impact will be somewhat softened by Jacor's
diverse geographical presence.
In the following analysis, management discusses the broadcast cash flow of
Jacor. "Broadcast cash flow" means operating income before reduction in carrying
value of assets, depreciation and amortization and corporate general and
administrative expenses. Broadcast cash flow should not be considered in
isolation from, or as a substitute for, operating income, net income or cash
flow and other consolidated income or cash flow statement data computed in
accordance with generally accepted accounting principles or as a measure of a
company's profitability or liquidity. Although this measure of performance is
not calculated in accordance with generally accepted accounting principles, it
is widely used in the broadcasting industry as a measure of a company's
operating performance because it assists in comparing station performance on a
consistent basis across companies without regard to depreciation and
amortization, which can vary significantly depending on accounting methods
(particularly where acquisitions are involved) or non-operating factors such as
historical cost bases. Broadcast cash flow also excludes the effect of corporate
general and administrative expenses, which generally do not relate directly to
station performance.
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
BROADCAST REVENUE for the first nine months of 1996 was $142.2 million, an
increase of $44.5 million or 45.6% from $97.6 million during the first nine
months of 1995. This increase resulted from the revenue generated at those
properties owned or operated during the first nine months of 1996 but not during
the comparable 1995 period and, to a lesser extent, from an increase in
advertising rates in both local and national advertising. On a "same station"
basis--reflecting results from stations operated in the first nine months of
both 1996 and 1995--broadcast revenue for the 1996 period was $104.9 million, an
increase of $10.7 million or 11.3% from $94.2 million for the 1995 period.
AGENCY COMMISSIONS for the first nine months of 1996 were $14.7 million, an
increase of $4.2 million or 40.0% from $10.5 million during the first nine
months of 1995 due primarily to the increase in broadcast revenue.
BROADCAST OPERATING EXPENSES for the first nine months of 1996 were $91.7
million, an increase of $26.5 million or 40.5% from $65.2 million during the
first nine months of 1995. These expenses increased primarily as a result of
expenses incurred at those properties owned or operated during the first nine
months of 1996 but not during the comparable 1995 period and, to a lesser
extent, increased selling and other payroll costs and programming costs. On a
"same station" basis, broadcast operating expenses for the 1996 period were
$66.3 million, an increase of $4.1 million or 6.6% from $62.2 million for the
1995 period.
STATION OPERATING INCOME excluding depreciation and amortization for the
nine months ended September 30, 1996 was $35.8 million, an increase of $13.9
million or 63.3% from the $21.9 million for the nine months ended September 30,
1995. On a "same station" basis, station operating income excluding depreciation
and amortization for the 1996 period was $27.4 million, an increase of $5.6
million or 25.6% from $21.8 million for the 1995 period.
DEPRECIATION AND AMORTIZATION for the nine months of 1996 and 1995 was $10.6
million and $6.8 million, respectively. The increase from period-to-period
resulted primarily from the acquisitions made by Jacor during the last quarter
of 1995 and the first nine months of 1996.
OPERATING INCOME for the first nine months of 1996 was $21.1 million, an
increase of $8.5 million or 68.0% from an operating income of $12.6 million
during the nine months of 1995.
61
<PAGE>
INTEREST EXPENSE for the first nine months of 1996 and 1995 was $13.4
million and $0.6 million, respectively. The increase in interest expense
resulted principally from the increase in Jacor's outstanding long-term debt and
the issuance of the 1996 10 1/8% Notes (as defined herein) and LYONs (as defined
herein) which are primarily related to Jacor's acquisition activity.
THE GAIN ON SALE of radio stations in the first nine months of 1996 resulted
from Jacor's February sale of two FM radio stations in Knoxville.
THE EXTRAORDINARY ITEM in the first nine months of 1996 represented the
write-off of unamortized costs associated with Jacor's 1993 credit agreement
which was replaced in February 1996 by a new credit facility and the write-off
of unamortized costs associated with the February 1996 credit facility, which
was replaced by Jacor's existing Credit Facility in June 1996.
NET INCOME for the first nine months of 1996 and 1995 was $4.7 and $7.8
million, respectively.
THE YEAR ENDED 1995 COMPARED TO THE YEAR ENDED 1994
BROADCAST REVENUE for 1995 was $133.1 million, an increase of $13.5 million
or 11.3% from $119.6 million during 1994. 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 1995 but not
during the comparable 1994 period. On a "same station" basis--reflecting results
from stations operated for the entire twelve months of both 1995 and
1994--broadcast revenue for 1995 was $125.3 million, an increase of $8.4 million
or 7.2% from $116.9 million for 1994.
AGENCY COMMISSIONS for 1995 were $14.2 million, an increase of $1.6 million
or 12.6% from $12.6 million during 1994 due to the increase in broadcast
revenue. Agency commissions increased at a greater rate than broadcast revenue
due to a greater proportion of agency sales.
BROADCAST OPERATING EXPENSES for 1995 were $87.3 million, an increase of
$6.8 million or 8.5% from $80.5 million during 1994. These expenses increased as
a result of increased selling and other payroll costs, programming costs and
expenses incurred at those properties owned or operated during 1995 but not
during the comparable 1994 period. On a "same station" basis, broadcast
operating expenses for 1995 were $81.3 million, an increase of $4.2 million or
5.5% from $77.1 million for 1994.
DEPRECIATION AND AMORTIZATION for 1995 and 1994 was $9.5 million and $9.7
million, respectively.
OPERATING INCOME for 1995 was $18.6 million, an increase of $5.1 million or
38.1% from an operating income of $13.5 million for 1994.
INTEREST EXPENSE for 1995 was $1.4 million, an increase of $0.9 million or
170.1% from $0.5 million for 1994. Interest expense increased due to an increase
in outstanding debt that was incurred in connection with acquisitions and stock
repurchases.
NET INCOME for 1995 was $11.0 million, compared to net income of $7.9
million reported by Jacor for 1994. The 1994 period includes income tax expense
of $6.3 million, while the 1995 period includes $7.3 million of income tax
expense.
THE YEAR ENDED 1994 COMPARED TO THE YEAR ENDED 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 1994 was $110.7 million, an increase of $11.6
million or 11.6% from $99.1 million for 1993.
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.
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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, such debt having been retired from the proceeds of Jacor's
November 1993 equity offering.
NET INCOME for 1994 was $7.9 million, compared to net income of $1.4 million
reported by Jacor 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.
LIQUIDITY AND CAPITAL RESOURCES
Jacor began 1995 with no outstanding debt and $27.0 million in cash and cash
equivalents. During 1995, Jacor used $59.8 million in cash for acquisitions of
radio stations and licenses and for loans made in connection with Jacor's JSAs
and $21.7 million in cash to purchase shares of Jacor Common Stock. These funds
came from cash on hand together with cash provided from operating activities and
draws under Jacor's 1993 credit agreement aggregating $45.5 million.
During 1995, Jacor made capital expenditures of approximately $5.0 million.
Jacor estimates that capital expenditures for 1996 will be approximately $6.0
million which includes approximately $2.5 million to purchase the building
currently housing the offices and studios of its Tampa radio stations and to
complete the relocation of the offices and studios of its Atlanta radio
stations. Jacor estimates that capital expenditures for the properties acquired
in the Citicasters Merger and Noble Acquisition will be approximately $4.0
million in the 12-month period following the consummation of the Acquisitions.
The actual level of spending will depend on a variety of factors, including
general economic conditions and Jacor's business.
COMPLETED ACQUISITIONS
During 1996, Jacor completed a number of acquisitions as described under
"BUSINESS OF JACOR--Recently Completed Acquisitions and Dispositions." The
completed acquisitions were funded as follows: (i) $303.6 million in proceeds
from the public offering of 11.25 million shares of Jacor Common Stock, (ii)
$115.2 million in proceeds from the LYONs (as defined herein) public offering,
(iii) $100.0 million from the offering of the 1996 10 1/8% Notes (as defined
herein), (iv) $400.0 million in borrowings under the Credit Facility, and (v)
cash on hand.
PENDING ACQUISITIONS
In October 1996, Jacor entered into the Merger Agreement with Regent whereby
Regent will merge with and into Jacor. Jacor also has acquisitions pending in
the following markets: (i) in Sarasota, Florida, (ii) Toledo, Ohio, (iii) San
Diego, California, (iv) Des Moines and Cedar Rapids, Iowa, (v) Boise, Idaho,
(vi) Louisville, Kentucky, (vii) Lexington, Kentucky, (viii) Rochester, New
York, and (ix) Lima, Ohio, all as described under "BUSINESS OF JACOR--Pending
Transactions." The net cash to be paid for these acquisitions after giving
effect to escrow deposits of $27.1 million, totals approximately $172.0 million.
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CREDIT FACILITIES AND OTHER
In June 1996, Jacor entered into the Credit Facility which provides for
availability of $600.0 million pursuant to a $200.0 million reducing revolving
facility under which the aggregate commitments would reduce on a semi-annual
basis commencing in December 1998; a $300.0 million amortizing term loan that
would reduce on a semi-annual basis commencing in December 1997; and a $100.0
million amortizing term loan that would reduce on a semi-annual basis commencing
in December 1998. The Credit Facility bears interest at floating rates based on
a Eurodollar rate or a bank base rate. The Credit Facility also provides Jacor
with additional credit for future acquisitions as well as working capital and
other general corporate purposes. As of December 31, 1996 Jacor had incurred
$400.0 million of outstanding indebtedness under the Credit Facility.
The pending acquisitions will be primarily funded by the remaining $200.0
million available under the Credit Facility and excess cash on hand. Jacor
believes that various sources are available for the additional funds required to
complete the acquisitions and is currently exploring those alternatives. Such
alternatives include increased availability under Jacor's credit facilities as
well as the possible issuance of additional equity and/or debt securities of
Jacor.
The issuance of additional debt will negatively impact Jacor's
debt-to-equity ratio and its results of operations and cash flows due to higher
amounts of interest expense, although the issuance of additional equity will
soften this impact to some extent.
CASH FLOWS
Cash flows provided by operating activities, inclusive of working capital,
were $17.7 million and $17.0 million for the nine months ended September 30,
1996 and 1995, respectively. Cash flows provided by operating activities for the
first nine months of 1996 resulted primarily from the add-back of $10.6 million
of depreciation and amortization together with the add-back of $3.0 million for
the extraordinary loss net of ($2.5) million from the gain on sale of radio
stations to net income of $4.7 million for the period. The additional $3.1
million resulted principally from the add-back of $0.6 million net change in
deferred taxes and $2.5 million of non-cash interest. Cash flows provided by
operating activities for the comparable 1995 period resulted primarily from the
add-back of $6.8 million of depreciation and amortization together with the net
change in working capital of $2.8 million to net income of $7.8 million for the
period. The additional ($0.4) million resulted from the deferral income tax
benefit.
Cash flows used by investing activities were ($836.0) million and ($56.6)
million for the nine months ended September 30, 1996 and 1995, respectively.
Investing activities include capital expenditures of $7.5 million and $3.7
million for the first nine months of 1996 and 1995, respectively. Investing
activities during the first nine months of 1996 include expenditures of $827.9
million and $7.1 million, respectively, for acquisitions, loans made in
connection with Jacor's JSAs and other. Additionally, investing activities for
the 1996 period includes $6.6 million of proceeds from the sale of radio
stations WMYU-FM and WWST-FM in Knoxville. Investing activities during the first
nine months of 1995 include expenditures of $48.5 million and $4.4 million,
respectively for acquisitions and loans made in connection with Jacor's joint
sales agreements.
Cash flows provided by financing activities were $863.7 million and $18.3
million for the nine months ended September 30, 1996 and 1995, respectively.
Cash flows provided by financing activities during the first nine months of 1996
resulted primarily from the $818.2 million of proceeds from the issuance of
public debt, LYONs and borrowings under the Credit Facility, together with
$317.1 million in proceeds received from the issuance of Jacor Common Stock net
of the $248.5 million repayment of long-term debt and $21.3 million of paid debt
related finance costs. Cash flows used from financing activities during the
comparable 1995 nine-month period resulted primarily from the $15.1 million
repurchase of Jacor Common Stock net of the $33.5 million in borrowings under
Jacor's February 1996 credit agreement.
Cash flows provided by operating activities, inclusive of working capital,
were $20.6 million, $11.3 million and $9.0 million for 1995, 1994 and 1993,
respectively. Cash flows provided by operating activities
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in 1995 resulted primarily from the add-back of $9.5 million of depreciation and
amortization expense to net income of $11.0 million for the period. 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 resulted
principally from 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.
Cash flows used by investing activities were ($64.3) million, ($13.7)
million and ($5.5) million for 1995, 1994 and 1993, respectively. Investing
activities include capital expenditures of $5.0 million, $2.2 million and $1.5
million in 1995, 1994 and 1993, respectively. Investing activities in 1995 and
1994 include expenditures of $59.8 million and $14.6 million, respectively, for
acquisitions, the purchase of intangible assets and loans made in connection
with Jacor's JSAs. In addition, 1994 investing activities were net of $3.2
million of payments received on notes and from the sale of assets. Investing
activities in 1993 included expenditures of $3.9 million relating to the
purchase of radio station assets.
Cash flows provided by financing activities were $24.2 million, $0.7 million
and $12.8 million for 1995, 1994 and 1993, respectively. Cash flows provided by
financing activities in 1995 resulted primarily from the $45.5 million in
borrowings under the 1993 credit agreement, together with $0.8 million in
proceeds received from the issuance of Jacor Common Stock to Jacor's employee
stock purchase plan and upon the exercise of outstanding stock options net of
the $21.7 million used to repurchase Jacor Common Stock. Cash flows from
financing activities in 1994 resulted primarily from the proceeds received from
the issuance of Jacor Common Stock upon the exercise of outstanding stock
options. The cash provided by financing activities in 1993 principally was due
to the refinancing of Jacor's senior debt in March 1993 plus the issuance of
additional Jacor Common Stock, and the payment of restructuring expenses in
1993.
NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("FAS") No. 123 "Accounting for
Stock-Based Compensation." Jacor will continue to apply APB Opinion No. 25 in
accounting for its plans as permitted by this statement. This statement,
however, requires that a company's financial statements include certain
disclosures about stock-based employee compensation arrangements regardless of
the method used to account for them. Pro forma disclosures required by a company
that elects to continue to measure compensation cost using APB Opinion No. 25
will be made by Jacor for the year ended December 31, 1996.
In March 1995, the FASB issued FAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement
requires Jacor to review for possible impairment of long-lived assets and
certain identifiable intangibles when circumstances indicate that the carrying
value of these assets may not be recoverable. Jacor will adopt the statement in
the first quarter of 1996, the effect of which will be immaterial to Jacor's
Consolidated Financial Statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF REGENT
GENERAL
The comparability of financial information for the nine months ended
September 30, 1996 and 1995 and for the years ended December 31, 1995 and 1994
is affected by the April 1994 purchase of radio station WLQT-FM in Dayton; the
May 1994 purchases of radio stations WDJX-FM and WHKW-AM and operation of radio
station WSJW-FM under a time brokerage agreement each located in Louisville, KY;
the July 1994 time brokerage agreement with radio station KBGO-FM in Las Vegas;
the August 1994 purchase of radio stations KSNE-FM in Las Vegas and WDOL-FM in
Dayton, and interim operation of WDOL-FM from May 1994 to August 1994 under a
time brokerage agreement; the September 1994 purchase of radio station WSFR-FM
in Louisville, and interim operation of such station from May 1994 to August
1994 under a time brokerage agreement; the October 1994 purchases of radio
stations KFMS-FM and KKDD-AM in Las Vegas and interim operation of such stations
from July 1994 to September 1994 under a time brokerage agreement; the January
1995 purchase of radio station WFIA-AM in Louisville; the October 1995 purchases
of radio stations KUDL-FM and KMXV-FM in Kansas City and radio stations KKAT-FM,
KODJ-FM and KALL-AM and an advertising sales agreement with KBKK-FM each located
in Salt Lake City; the April 1996 purchase of radio stations WEZL-FM and WXLY-FM
in Charleston, S.C.; the April 1996 sale of WLQT-FM and WDOL-FM in Dayton; the
May 1996 sale of a station format in Louisville; the operation of KURR-FM and
KZHT-FM effective August 1996 each located in Salt Lake City under a time
brokerage agreement; the operation of WVEZ-FM effective September 1996 in
Louisville under a time brokerage agreement.
In the following analysis, management discusses station operating income
excluding depreciation and amortization. Station operating income excluding
depreciation and amortization should not be considered in isolation from, or a
substitute for, operating income, net income (loss) or cash flow and other
consolidated income or cash flow statement data computed in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity. Although this measure of performance is not
calculated in accordance with generally accepted accounting principles, it is
widely used in the broadcasting industry as a measure of a company's operating
performance because it assists in comparing station performance on a consistent
basis across companies without regard to depreciation and amortization, which
can vary significantly depending on accounting methods (particularly where
acquisitions are involved) or non-operating factors such as historical cost
bases. Station operating income excluding depreciation and amortization also
excludes the effect of corporate general and administrative expenses, which
generally do not relate directly to station performance, and time brokerage
agreement termination expense.
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
Broadcast revenue for the first nine months of 1996 was $26.2 million, an
increase of $14.1 million or 116.7% from $12.1 million during the first nine
months of 1995. This increase resulted primarily from the revenue generated at
those properties owned or operated during the 1996 first nine months but not
during the comparable 1995 period, and to a lesser extent, from an increase in
advertising rates in both local and national advertising. On a "same station
basis"--reflecting results from stations operated in the first nine months of
both 1996 and 1995--broadcast revenue for the 1996 period was $10.1 million, an
increase of $0.7 million or 7.7% from $9.4 million for the 1995 period.
Agency commissions for the first nine months of 1996 were $3.0 million, an
increase of $1.6 million or 107% from $1.5 million during the first nine months
of 1995 due to the increase in broadcast revenue.
Broadcast operating expenses for the first nine months of 1996 were $19.1
million, an increase of $9.6 million or 102% from $9.5 million during the first
nine months of 1995. These expenses increased as a result of expenses incurred
at those properties owned or operated during the 1996 first nine months but not
during the comparable 1995 period and, to a lesser extent, increased selling and
other payroll costs and
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programming costs. On a "same station" basis, broadcast operating expenses for
the 1996 period were $7.9 million, an increase of $0.5 million or 6.3% from $7.4
million for the 1995 period.
Station operating income excluding depreciation and amortization for the
nine months ended September 30, 1996 was $4.1 million, an increase of $2.9
million or 249% from the $1.2 million for the nine months ended September 30,
1995. On a "same station" basis, station operating income excluding depreciation
and amortization for the 1996 period was $0.9 million, an increase of $0.1
million or 12.1% from the $0.8 million for the 1995 period.
Depreciation and amortization for the first nine months of 1996 and 1995 was
$4.2 million and $1.7 million, respectively. The increase from period-to-period
resulted primarily from the acquisitions made by Regent during the last quarter
of 1995 and the first nine months of 1996.
Operating loss for the first nine months of 1996 was $1.3 million, an
increase of $0.3 million or 28.9% from an operating loss of $1.0 million during
the first nine months of 1995.
Interest expense for the first nine months of 1996 and 1995 was $2.3 million
and $0.9 million, respectively. Interest expense increased due to an increase in
outstanding debt that was incurred in connection with acquisitions.
The gain on the sale of radio stations and format in the first nine months
of 1996 resulted from Regent's sale of two FM radio stations in Dayton and a
station format in Louisville.
The other expense in the first nine months of 1996 resulted from costs
associated with the merger with Jacor.
Net income for the first nine months of 1996 was $0.5 million, compared to a
net loss of $1.8 million reported by the Company for the first nine months of
1995.
THE YEAR ENDED 1995 COMPARED TO YEAR ENDED 1994
Broadcast revenue for 1995 was $19.6 million, an increase of $11.2 million
or 134.7% from $8.4 million during 1994. This increase resulted primarily from
the revenue generated at those properties owned or operated during 1995 but not
during the comparable 1994 period, and to a lesser extent, from an increase in
advertising rates in both local and national advertising.
Agency commissions for 1995 were $2.3 million, an increase of $1.3 million
or 128% from $1.0 million during 1994 due to the increase in broadcast revenue.
Broadcast operating expenses for 1995 were $14.7 million, an increase of
$6.9 million or 89% from $7.8 million during 1994. These expenses increased as a
result of expenses incurred at those properties owned or operated during 1995
but not during the comparable 1994 period and, to a lesser extent, increased
selling and other payroll costs and programming costs.
Station operating income excluding depreciation and amortization for 1995
was $2.6 million, an increase of $3.0 million from the $0.4 million station
operating loss in 1994.
Depreciation and amortization for 1995 and 1994 was $3.3 million and $1.1
million, respectively. The increase resulted primarily from the acquisitions
made by Regent during 1995.
Operating loss for 1995 was $1.5 million, compared to an operating loss of
$2.3 million in 1994.
Interest expense for 1995 and 1994 was $1.4 million and $0.4 million,
respectively. Interest expense increased due to an increase in outstanding debt
that was incurred in connection with acquisitions.
The extraordinary loss on early retirement of debt in 1995 and 1994
represents the write-off of unamortized costs associated with Regent's former
credit agreements.
Net loss for 1995 was $3.1 million, compared to a net loss of $2.8 million
reported by the Company for 1994.
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LIQUIDITY AND CAPITAL RESOURCES
Regent began 1995 with outstanding debt of $13.3 million and $0.1 million in
cash. During 1995, Regent used $34.5 million in cash for acquisitions of radio
stations and made capital expenditures of $1.0 million. These funds came from
(i) $26.4 million of proceeds from the issuance of Regent Preferred Stock, (ii)
a $5.0 million seller note and (iii) borrowings under a new Regent Credit
Agreement,
subsequently amended, comprised of a $25 million term loan and a $40 million
revolving loan commitment.
During the first nine months of 1996, Regent used $11.4 million in cash for
acquisitions of radio stations and made capital expenditures of $1.4 million.
These funds came from (i) $11.4 million of net proceeds from the sale of WLQT-FM
and WDOL-FM in Dayton, (ii) $1.0 million of proceeds from the sale of a station
format in Louisville, (iii) $0.3 million of proceeds from the issuance of Regent
Preferred Stock and (iv) $0.4 million from the collection of note receivable.
In October 1996, Regent acquired radio station WVEZ-FM in Louisville for
$12.2 million in cash. In November 1996, Regent acquired KZHT-FM and KURR-FM in
Salt Lake City for $11.0 million in cash. These acquisitions were funded with
additional borrowings under the Credit Agreement and proceeds from the sale of
KKDD-AM in Las Vegas and WHKW-AM in Louisville aggregating $1.6 million.
In connection with the merger agreement with Jacor, Regent entered into a
Limited Consent and Amendment to the Regent Credit Agreement (the "Consent")
whereby Regent's senior lenders approved the merger. Pursuant to the Consent,
all of Regent's debt obligations outstanding under the Regent Credit Agreement
must be paid in full prior to or concurrent with the consummation of the Merger
Agreement. If the Merger Agreement terminates for any reason, or if the TBA is
in effect after October 9, 1997, Regent will be required to prepay the debt
outstanding under the Regent Credit Agreement in an amount not less than the
greatest of (a) $10.0 million; (b) an amount sufficient when applied to prepay
the debt to reduce the Consolidated Total Debt Ratio to not more than 4:0 to
1:0; or (c) the aggregate amount of all payments received by Regent from any
person due to the termination of the merger agreement.
CASH FLOWS
Cash flows used by operating activities, inclusive of working capital, were
$0.3 million and $0.7 million for the nine months ended September 30, 1996 and
1995 respectively. The use of cash in 1996 was primarily due to a net use of
cash of $0.6 million from an increase working capital investment to support an
increase in sales. In 1995, the use of cash was primarily due to a net loss,
adjusted for non cash items, of $0.2 million and a net use of cash of $0.5
million from an increase working capital investment to support an increase in
sales. Cash flows used by investing activities were $0.7 million and $12.6
million in the first nine months of 1996 and 1995, respectively. In addition to
capital expenditures of $1.4 million and $0.8 million in the first nine months
of 1996 and 1995, respectively, investing activities in the first nine months of
1996 and 1995 include expenditures of $11.5 million and $11.9 million,
respectively, related to the purchase of radio station assets. Additionally,
investing activities for the 1996 period includes $11.4 million of net proceeds
from the sale of two FM stations in Dayton and $1.0 million of proceeds from the
sale of a station format in Louisville. Cash flows used by financing activities
were $0.6 million for the first nine months of 1996, principally due to net debt
repayments of $1.1 million partially offset by $0.4 of proceeds from a
shareholder note receivable. For the first nine months of 1995, cash flows
provided by financing activities were $13.4 million principally due to $16.8
million in proceeds from the issuance of Regent Preferred Stock less $2.9
million in net debt repayments.
Cash flows used by operating activities, inclusive of working capital, were
$0.2 million and $2.7 million for the years ended December 31, 1995 and 1994,
respectively. The use of cash in 1995 was primarily due to a net use of cash of
$0.5 million from an increase working capital investment to support an increase
in sales. In 1994, the use of cash was primarily due to a net loss, adjusted for
non cash items, of $1.5 million and a net use of cash of $1.1 million from an
increase working capital investment to support an increase in sales. Cash flows
used by investing activities were $35.5 million and $27.5 million for the years
ended December 31, 1995 and 1994, respectively. In addition to capital
expenditures of $1.0 million and
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$0.6 million in 1995 and 1994, respectively, investing activities in 1995 and
1994 include expenditures of $34.5 million and $26.9 million, respectively,
related to the purchase of radio station assets. Cash flows from financing
activities were $38.4 million and $28.2 million for 1995 and 1994, respectively.
In addition to $26.4 million and $15.1 million of proceeds from the issuance of
Regent Preferred Stock during 1995 and 1994, respectively, cash flows provided
by financing activities resulted from $30.8 million and $13.3 million of
borrowings under the Regent Credit Agreement and seller notes during 1995 and
1994, respectively, net of the $16.5 million repayment of long-term debt during
1995.
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BUSINESS OF JACOR
Jacor is a holding company engaged primarily in the radio broadcasting
business. As of January 15, 1997, Jacor entities owned and operated 57 radio
stations located in across the United States in 15 broadcast areas: Los Angeles,
Atlanta, Denver, San Diego, St. Louis, Cincinnati, Tampa, Portland, Columbus,
Kansas City, Jacksonville, Toledo, Lexington, Venice/Englewood, Florida and
Casper, Wyoming, and one television station located in the Cincinnati broadcast
area. Jacor also has joint sales agreements to sell advertising time for three
stations in Cincinnati, one station in Denver, one station in Salt Lake City and
one station in Louisville. Jacor further provides programming for and sells air
time to two stations in Baja California, Mexico pursuant to an exclusive sales
agency agreement.
Jacor also has entered into agreements to acquire an additional 53 radio
stations (including stations to be acquired in the Merger), which will expand
its presence in San Diego, Columbus, Kansas City, Toledo, Lexington,
Venice/Englewood and Lima, Ohio, and allow Jacor to enter the Salt Lake City,
Las Vegas, Louisville, Rochester, Des Moines, Charleston, S.C., Boise, Cedar
Rapids, Sarasota/Bradenton and Fort Collins/Greeley, Co. broadcast areas.
RECENTLY COMPLETED ACQUISITIONS AND DISPOSITIONS. In February 1996, Jacor
entered into an agreement to acquire Citicasters (now known as JCC) through a
merger of Citicasters with and into a wholly owned Jacor subsidiary. Citicasters
owned 19 radio stations, located in Atlanta, Phoenix, Tampa, Portland, Kansas
City, Cincinnati, Sacramento, Columbus and two television stations, one located
in Tampa and one in Cincinnati. The Citicasters Merger enhanced Jacor's existing
station portfolios in Atlanta, Tampa and Cincinnati and created new multiple
radio station platforms in Phoenix, Portland, Kansas City, Sacramento and
Columbus. Jacor consummated the Citicasters Merger in September 1996 for an
approximate aggregate value of $801.2 million, which included the purchase of
all outstanding shares of Citicasters common stock, the assumption of
Citicasters outstanding indebtedness and the issuance of warrants to purchase an
aggregate of 4,400,000 shares of Jacor Common Stock at an exercise price of
$28.00 per full share (the "Citicasters Warrants"). In order to complete the
Citicasters Merger, Jacor agreed with the Antitrust Division to divest WKRQ-FM
in Cincinnati no later than February 1997 (See "Pending Transactions" below).
Also, in February 1996, Jacor entered into an agreement to acquire Noble,
which owned ten radio stations serving Denver, St. Louis and Toledo, and the
right to provide programming to and sell the air time for one AM and one FM
station located in Baja California, Mexico. The Noble Acquisition enhanced
Jacor's existing portfolio in Denver where it now owns eight stations, in
addition to creating new multiple station platforms in St. Louis and Toledo.
Jacor consummated the Noble Acquisition in July 1996 for an aggregate
consideration of approximately $160.0 million in cash.
In February 1996, Jacor sold the business and certain operating assets of
radio stations WMYU-FM and WWST-FM in Knoxville. Jacor received approximately
$6.5 million in cash for this sale, generating a gain of approximately $2.5
million. In March 1996, Jacor entered into an agreement for the sale of the
assets of WBRD-AM in Tampa for approximately $0.5 million in cash. The sale of
WBRD-AM was completed in June 1996.
In March 1996, Jacor entered into an agreement to acquire the FCC licenses
of WCTQ-FM and WAMR-AM in Venice, Florida and to purchase certain real estate
and transmission facilities necessary to operate the stations. In June 1996,
Jacor consummated this acquisition for a purchase price of approximately $4.4
million.
In June 1996, Jacor entered into an agreement to acquire the FCC licenses of
WLAP-AM,
WMXL-FM and WWYC-FM servicing Lexington, Kentucky and to purchase real estate
and transmission facilities necessary to operate the stations. In August 1996,
Jacor consummated this acquisition for a purchase price of approximately $14.0
million.
Also, in June 1996, Jacor agreed to finance the purchase by Critical Mass
Media, Inc. ("CMM") of a 40% interest in a newly formed limited liability
company that agreed to purchase for approximately $0.5 million the assets of
Duncan American Radio, Inc. CMM is a marketing research and radio consulting
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business which is owned by a limited partnership of which Jacor is the 5%
general partner and a corporation wholly owned by Randy Michaels, the Chief
Executive Officer of Jacor, is the 95% limited partner. This transaction was
completed by Jacor in June 1996.
In September 1996, Jacor entered into a binding agreement with a subsidiary
of Gannett to effect an exchange of Jacor's Tampa television station, WTSP-TV,
acquired by Jacor in the Citicasters Merger, for six of Gannett's radio stations
(the "Gannett Exchange"). In December 1996, Jacor and Gannett consummated the
Gannett Exchange subject only to a possible unwinding of the transaction in the
event a final order from the FCC cannot be obtained. The stations Jacor acquired
are KIIS-FM and KIIS-AM in Los Angeles, KSDO-AM and KKBH-FM in San Diego and
WUSA-FM and WDAE-AM in Tampa-St. Petersburg (the "Selected Gannett Radio
Stations"). The Company has renamed WUSA-FM to
WUKS-FM, as Gannett retained the WUSA-FM call letters. The Gannett Exchange
enhanced Jacor's existing station portfolios in San Diego and Tampa and created
a new multiple radio station platform in the Los Angeles broadcast area. In
connection with the closing of the Gannett Exchange, Jacor and Gannett agreed
that they will value the exchanged assets at $170.0 million for tax purposes.
Jacor believes that this transaction constituted a tax-free like-kind exchange.
In October 1996, Jacor entered into a binding agreement with Clear Channel
Radio, Inc. ("Clear Channel") to purchase KTWO-AM, KMGW-FM and the Wyoming Radio
Network in Casper, Wyoming for a purchase price of $1.9 million. In December
1996, Jacor and Clear Channel consummated the transaction.
PENDING TRANSACTIONS. In addition to the Merger Agreement, Jacor has
entered into other Pending Transactions which are the subject of executed
purchase, sale or merger agreements. In May 1996, Jacor entered into an
agreement with Enterprise Media of Toledo, L.P. to acquire the FCC licenses of
WIOT-FM and WCWA-AM in Toledo, Ohio and to purchase real estate and transmission
facilities necessary to operate the stations. The purchase price for the assets
is $13.0 million which amount has been placed in escrow pending the closing of
the transaction. Jacor has entered into a time brokerage agreement with respect
to these stations. These stations will enhance Jacor's existing radio station
portfolio in the Toledo broadcast area.
In July 1996, Jacor entered into an agreement with New Wave Communications,
L.P. and New Wave Broadcasting, Inc. to acquire the FCC licenses of WSPB-AM,
WSRZ-FM and WYNF-FM in Sarasota, Florida and to purchase leasehold interests in
real estate and transmission facilities necessary to operate the stations (the
"New Wave Transaction"). The purchase price for the assets is $12.5 million,
subject to a maximum purchase price of $15.0 million based upon the timing of
the closing. See "RISK FACTORS-- Pending Transactions."
In August 1996, Jacor entered into agreements with Sarasota-Charlotte
Broadcasting Corporation to acquire certain assets, a construction permit and
related real estate for unconstructed radio station WEDD-FM in Englewood,
Florida for an aggregate of $0.8 million.
In October 1996, Jacor also entered into binding agreements with Par
Broadcasting Company, Inc. and Par Broadcasting Company (collectively, "Par") to
purchase four radio stations in San Diego,
KOGO-AM, KCBQ-AM, KIOZ-FM and KKLQ-FM, for $72.0 million in cash (the "Par
Transaction") and with Entertainment Communications, Inc. ("Entercom") to sell
two radio stations in Sacramento, KSEG-FM and KRXQ-FM, for $45.0 million in cash
(the "Entercom Transaction"). Although these transactions are not directly
contingent upon each other, Jacor anticipates that these transactions will occur
in a manner that permits the transactions to be treated as a tax-free like-kind
exchange. Jacor received early termination of the HSR Act waiting period with
respect to the Par Transaction on January 28, 1997. The HSR Act waiting period
with respect to the Entercom Transaction expired on December 1, 1996, and the
FCC staff granted its initial approval of the Entercom Transaction on January 7,
1997. Jacor has entered into a time brokerage agreement with Entercom such that
Entercom commenced the activities contemplated by the time brokerage agreement
with regard to the Sacramento stations on January 1, 1997. Par has entered into
a time brokerage agreement with Jacor such that Jacor may commence the
activities
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contemplated by the time brokerage agreement with regard to the San Diego
stations prior to the consummation of the Par Transaction.
In October 1996, Jacor entered into a binding agreement with Nationwide
Communications, Inc. ("Nationwide") whereby Jacor will exchange the assets of
its two radio stations in Phoenix, KSLX-AM and KSLX-FM, for the assets of
Nationwide's two radio stations in San Diego, KGB-FM and KPOP-AM (the
"Nationwide Exchange"). The assets to be exchanged are valued by Jacor and
Nationwide at approximately $45.0 million. Jacor anticipates that this
transaction will constitute a tax-free like-kind exchange. Jacor has entered
into a time brokerage agreement with Nationwide such that prior to the
consummation of the Nationwide Exchange Nationwide may commence the activities
contemplated by the time brokerage agreement with regard to the Phoenix
stations, and Jacor may commence the activities contemplated by the time
brokerage agreement with regard to the San Diego stations. The FCC staff granted
its initial approval of the Nationwide Exchange on December 23, 1996. Jacor
received early termination of the HSR Act waiting period with respect to the
Nationwide Exchange on January 23, 1997. In connection with entering into the
agreements with Nationwide, Jacor also announced that it intends to sell KCBQ-AM
in San Diego, upon its acquisition from Par, to EXCL. No binding agreement has
yet been entered into with EXCL. Together, the Par Transaction, the Nationwide
Exchange and the contemplated sale of KCBQ-AM will enhance Jacor's existing
radio station portfolio in San Diego, where Jacor will then own eight stations.
In October 1996, Jacor entered into two separate binding agreements with two
unaffiliated radio broadcast companies whereby Jacor will acquire the FCC
licenses and assets of a total of seven radio stations. These agreements are
with Palmer Broadcasting Limited Partnership to acquire WHO-AM and KLYF-FM in
Des Moines and WMT-AM and WMT-FM in Cedar Rapids for a purchase price of $52.5
million in cash (the "Palmer Transaction"); and with Colfax Communications
("Colfax") to acquire KIDO-AM and KLTB-FM in Boise, Idaho and KARO-FM in
Caldwell, Idaho for a purchase price of $11.0 million in cash (the "Colfax
Transaction"). Jacor received early termination of the HSR Act waiting period
with respect to the Palmer Transaction on November 18, 1996. The FCC staff
granted its initial consent to the Colfax Transaction on December 23, 1996, and
granted its initial consent to the Palmer Transaction on December 11, 1996. The
Palmer Transaction consent is conditioned on the transaction not being
consummated until the Palmer station licenses are renewed.
In November 1996, Jacor entered into a binding agreement with Stanford
Capital Communications, Inc. ("Stanford") to acquire the FCC licenses and
operating assets of radio stations WKQQ-FM in Lexington, Kentucky and WXZZ-FM
and WTKT-AM in Georgetown, Kentucky (the "Stanford Transaction"). The purchase
price for the assets is $24.0 million in cash, of which $1.2 million has been
placed in escrow pending the closing of the transaction. In addition, Jacor was
assigned an option to purchase certain real estate for $0.1 million in cash. The
Stanford Transaction is contingent upon the successful closing of Stanford's
agreement to purchase WKQQ-FM, WXZZ-FM and WTKT-AM. Stanford has assigned to
Jacor its rights under a time brokerage agreement with Village such that Jacor
will commence the activities contemplated by the time brokerage agreement upon
the expiration or termination of the applicable waiting period under the HSR
Act. FCC applications were filed in December 1996. See "RISK FACTORS--Pending
Transactions."
In December 1996, Jacor entered into four separate binding agreements with
unaffiliated parties whereby Jacor will acquire the FCC licenses and assets of a
total of six radio stations. Jacor will acquire (i) WAZU-FM (formerly WAHC-FM),
licensed to Circleville, Ohio, and WAKS-FM, licensed to Marysville, Ohio, from
Tel Lease, Inc.; (ii) KGLL-FM in Greeley, Colorado from Duchossois
Communications Company of Colorado, Inc. (the "Duchossois Transaction"); (iii)
KCOL-AM and KPAW-FM in Fort Collins, Colorado from University Broadcasting
Company, L.P. (the "University Transaction"); and (iv) WJCM-AM in Sebring,
Florida from Rumbuat Management, Inc. Jacor intends to relocate
WJCM-AM. The aggregate purchase price for the six radio stations is
approximately $15.7 million, of which approximately $4.0 million has been placed
in escrow pending the closing of the transactions. The closing of each of the
Duchossois Transaction and the University Transaction is contingent upon the
closing of the other of such two transactions. Jacor has entered into a time
brokerage agreement with Tel Lease, Inc. such that Jacor commenced the
activities contemplated by the time brokerage agreement with
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regard to WAZU-FM and WAKS-FM on December 7, 1996. FCC applications for these
transactions were filed in December 1996 and January 1997, respectively.
Also in December 1996, Jacor entered into a binding agreement with American
Radio Systems Corporation and American Radio Systems License Corp. (together,
"ARS") whereby Jacor will exchange the assets of WKRQ-FM, licensed to
Cincinnati, for the assets of WVOR-FM, WHAM-AM and
WHTK-AM, licensed to Rochester, New York, and an option to purchase WNVE-FM,
licensed to South Bristol, New York, from The Great Lakes Wireless Talking
Machine, LLP ("Great Lakes") (the "ARS Transaction"). Jacor anticipates that the
transfer of assets will constitute a tax free like kind exchange. FCC
applications were filed with respect to this exchange in January 1997.
In January 1997, Jacor entered into three separate binding agreements with
entities affiliated with James E. Champlin whereby Jacor will acquire the FCC
licenses and assets of four radio stations. Jacor will acquire (i) WLKT-FM,
licensed to Lexington, Kentucky; (ii) WLRS-FM, licensed to Louisville, Kentucky
and (iii) WMCC-FM and WLOC-AM, licensed to Munfordville, Kentucky. The aggregate
purchase price for the four radio stations is $10.5 million. FCC applications
were filed in January 1997. Also in January 1997, Jacor entered into a binding
agreement to acquire (i) WIMA-AM and WIMT-FM, licensed in Lima, Ohio; (ii)
WBUK-FM, licensed to Ft. Shawnee, Ohio; and (iii) the construction permit for
WLVZ-FM, licensed to St. Marys, Ohio, from Lima Broadcasting Co. for an
aggregate purchase price of $6.5 million. Jacor also exercised the option
acquired in the ARS Transaction to purchase WNVE-FM, licensed to South Bristol,
New York, and entered into a binding agreement to acquire WNVE-FM from Great
Lakes for $5.5 million. An FCC application for the WNVE-FM assignment was filed
in January 1997.
All of the Pending Transactions are subject to various conditions, including
approval by the FCC. The Stanford Transaction is further subject to termination
or expiration of the applicable waiting periods under the HSR Act. See "RISK
FACTORS--Pending Transactions" and "--Increased Antitrust Scrutiny." See
"AVAILABLE INFORMATION."
BUSINESS STRATEGY
Jacor's strategic objective is to be a leading radio broadcaster in each of
its broadcast areas. Jacor intends to acquire individual radio stations or radio
groups that strengthen its strategic position and that maximize the operating
performance of its broadcast properties. Specifically, Jacor's business strategy
centers upon:
REVENUE LEADERSHIP. Jacor strives to maximize the audience ratings in each
of its broadcast areas in order to capture the largest share of the radio
advertising revenue and attract advertising away from other media in that
broadcast area. Jacor focuses on those locations where it believes it has the
potential to be a leading radio group. By operating multiple radio stations in
its broadcast areas, Jacor is able to operate its stations at lower costs,
supply more diverse programming and provide advertisers with the greatest access
to targeted demographic groups.
ACQUISITION AND DEVELOPMENT OF BROADCAST PROPERTIES. Jacor's acquisition
strategy focuses on acquiring both developed, cash flow producing stations and
underdeveloped "stick" properties (i.e., stations with insignificant ratings and
little or no positive broadcast cash flow) that complement its existing
portfolio and strengthen its overall strategic position. Jacor has been able to
improve the ratings of "stick" properties with increased marketing and focused
programming that complements its existing radio station formats. Additionally,
Jacor increases the revenues and cash flow of "stick" properties by encouraging
advertisers to buy advertising in a package with its more established stations.
Jacor may enter new locations through acquisitions of radio groups that have
multiple station ownership in their respective broadcast areas. Jacor may also
seek to acquire individual stations in new locations that it believes are
fragmented and where a revenue-leading position can be created through
additional acquisitions. Jacor may exit locations it views as having limited
strategic appeal by selling or exchanging existing stations for stations in
other locations where Jacor operates, or for stations in new locations.
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Additionally, Jacor may enter new locations situated near Jacor's core
broadcast areas. Jacor believes that it will be able to leverage the costs
associated with the delivery of high quality, high cast programming of topical
interest throughout these geographical regions, which programming would not
otherwise be economically viable in such smaller broadcast areas. Utilizing this
strategy, Jacor has recently entered into agreements or closed transactions to
acquire radio stations in Venice/Englewood, Florida; Louisville, Kentucky;
Lexington, Kentucky; Sarasota/Bradenton, Florida; Casper, Wyoming; Fort
Collins/Greeley, Colorado and Lima, Ohio.
DIVERSE FORMAT EXPERTISE. Jacor management has developed programming
expertise over a broad range of radio formats. This management expertise enables
Jacor to specifically tailor the programming of each station in a broadcast area
in order to maximize Jacor's overall strategic position. Jacor utilizes
sophisticated research techniques to identify opportunities within each
broadcast area and programs its stations to provide complete coverage of a
demographic or format type. This strategy allows Jacor to deliver highly
effective access to a target demographic and to capture a higher percentage of
advertising revenues.
DISTINCT STATION PERSONALITIES. Jacor engages in a number of creative
programming and promotional efforts designed to create listener loyalty and
station brand awareness. Through these efforts, management seeks to cultivate a
distinct personality for each station based upon the unique characteristics of
each broadcast area. Jacor 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 successfully generated significant
audience share.
One of the methods Jacor utilizes to develop the personality of its AM radio
stations is by broadcasting professional sporting events and related
programming. Currently, Jacor has the broadcast rights for the Cincinnati Reds,
Colorado Rockies, Denver Broncos, Los Angeles Kings, Portland Trail Blazers, San
Diego Chargers and Tampa Bay Devil Rays. Sports broadcasting serves as a key
"magnet" for attracting audiences to a station and then introducing them to
other programming features, such as local and national news, entertaining talk,
and weather and traffic reports.
STRONG AM STATIONS. Jacor is an industry leader in successfully operating
AM stations. While many radio groups primarily utilize network or simulcast
programming on their AM stations, Jacor also develops unique programming for its
AM stations to build strong listener loyalty and awareness. Utilizing this
operating focus and expertise, Jacor has developed its AM stations in Denver and
Cincinnati into the revenue and ratings leaders among both AM and FM stations in
their respective broadcast areas. Jacor's targeted AM programming adds to
Jacor's ability to increase its revenues and results in more complete coverage
of the listener base.
Although the cost structure of a large-scale AM station generally results in
lower operating margins than typical music-based FM stations, the majority of
Jacor's AM stations generate substantial levels of broadcast cash flow.
Historically, most other radio broadcast companies have not focused on their AM
operations to the same extent as Jacor. Accordingly, most of the AM stations to
be acquired meaningfully underperform Jacor's AM stations, and management
believes such stations have the potential to generate significant incremental
cash flow.
POWERFUL BROADCAST SIGNALS. A station's ability to maintain a leadership
position depends in part upon the strength of its broadcasting delivery system.
A powerful broadcast signal enhances delivery range and clarity, thereby
influencing listener preference and loyalty. Many of Jacor's stations'
broadcasting signals are among the strongest in their respective broadcast
areas, reinforcing its leadership position. Jacor opportunistically upgrades the
power and quality of the signals of stations it acquires. Following the
consummation of the Pending Transactions, Jacor expects that relatively
inexpensive technical upgrades in certain broadcast areas will provide for
significantly greater signal presence.
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RADIO STATION OVERVIEW
The following table sets forth certain information regarding the 122 radio
stations that will be owned and/or operated by Jacor upon completion of the
Pending Transactions.
<TABLE>
<CAPTION>
TARGET
1995 COMBINED DEMOGRAPHIC
BROADCAST PENDING RADIO REVENUE TARGET SHARE %/
AREA/STATION ACQUISITION (P) RANK FORMAT DEMOGRAPHIC RANK
- ---------------------- ------------------- ----------------- ---------------------------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
LOS ANGELES 5
KIIS-FM Contemporary Hit Radio Adults 18-34 4.5/6
KIIS-AM Contemporary Hit Radio Adults 18-34 --
ATLANTA 1
WPCH-FM Adult Contemporary Women 25-54 9.2/3
WGST-AM News Talk Men 25-54 5.0/8
/FM(1)
WKLS-FM Album Oriented Rock Men 18-34 13.0/1
DENVER(2) 1
KOA-AM News Talk Men 25-54 10.9/2
KRFX-FM Classic Rock Men 25-54 12.4/1
KBPI-FM Rock Alternative Men 18-34 13.4/2
KTLK-AM Talk Adults 35-64 2.4/13
KHIH-FM Jazz Adults 25-54 4.9/8
KHOW-AM Talk Adults 25-54 2.2/13
KBCO-AM Talk Adults 25-54 --
KBCO-FM Album Oriented Rock Adults 25-54 5.7/7
SAN DIEGO(3)(4)(8) 1
KHTS-FM Rhythmic Hits Adults 18-34 2.5/11
KSDO-AM News Talk Men 25-54 4.5/8
KKBH-FM Adult Contemporary Women 25-54 2.8/9
KOGO-AM P Talk Adults 25-54 1.4/22
KKLQ-FM P Contemporary Hit Radio Adults 18-34 4.0/7
KIOZ-FM P Album Oriented Rock Men 18-34 7.9/3
KGB-FM P Classic Rock Men 25-54 5.9/1
KPOP-AM P Nostalgia Adults 35-64 1.5/20
ST. LOUIS 5
KMJM-FM Urban Adult Contemporary Adults 25-54 5.3/6
KATZ-FM Black Oldies Adults 25-54 2.1/16
KATZ-AM Urban Talk Adults 35-64 1.6/19
CINCINNATI(2)(4) 1
WLW-AM News Talk Men 25-54 13.5/2
WEBN-FM Album Oriented Rock Men 18-34 28.2/1
WOFX-FM Classic Rock Men 25-54 5.7/5
WCKY-AM Talk Adults 35-64 6.8/4
WWNK-FM Adult Contemporary Women 25-54 5.8/5
TAMPA 1
WFLA-AM News Talk Adults 35-64 6.6/5
WFLZ-FM Contemporary Hit Radio Adults 18-34 15.2/1
WDUV-FM Beautiful/EZ Adults 35+ 9.4/1
WXTB-FM Album Oriented Rock Men 18-34 19.2/1
WTBT-FM Classic Rock Men 18-34 5.3/6
WUKS-FM(5) Hot Adult Contemporary Women 18-34 10.3/2
WDAE-AM Hot Adult Contemporary Women 18-34 --
</TABLE>
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<TABLE>
<CAPTION>
TARGET
1995 COMBINED DEMOGRAPHIC
BROADCAST PENDING RADIO REVENUE TARGET SHARE %/
AREA/STATION ACQUISITION (P) RANK FORMAT DEMOGRAPHIC RANK
- ---------------------- ------------------- ----------------- ---------------------------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
PORTLAND 1
KEX-AM News Talk Adults 35-64 5.3/6
KKCW-FM Adult Contemporary Women 25-54 12.1/1
KKRZ-FM Contemporary Hit Radio Women 18-34 14.6/1
COLUMBUS 1
WTVN-AM Adult Contemporary/Talk Adults 35-64 8.3/3
WLVQ-FM Album Oriented Rock Men 18-34 13.0/2
WAKS-FM(5) Country Adults 25-54 3.8/9
WZAZ-FM Alternative Adults 18-34 --
WLOH-AM Nostalgic Adults 35-64 --
WHQK-FM P Country Adult 25-54 3.2/10
WAZU-FM P Rock Men 18-34 --
KANSAS CITY 1
WDAF-AM Country Adults 35-64 7.7/3
KYYS-FM Album Oriented Rock Men 18-34 11.4/3
KMXV-FM P Contemporary Hit Radio Adults 18-34 9.1/4
KUDL-FM P Adult Contemporary Women 25-54 8.9/1
SALT LAKE CITY(2) 1
KALL-AM P Talk Adults 35-64 5.5/5
KODJ-FM P Oldies Women 25-54 10.9/2
KKAT-FM P Country Adults 25-54 4.8/7
KURR-FM P New Rock Men 18-34 5.5/5
KZHT-FM P Contemporary Hit Radio Women 18-34 5.3/8
LAS VEGAS 1
KFMS-FM P Country Adults 25-54 6.2/4
KWNR-FM P Country Adults 25-54 7.5/1
KBGO-FM P Oldies Women 25-54 4.6/8
KSNE-FM P Adult Contemporary Women 25-54 10.8/1
LOUISVILLE 2
WDJX-FM P Contemporary Hit Radio Adults 18-34 11.6/2
WFIA-AM P Religion Adults 25-54 --
WVEZ-FM P Adult Contemporary Women 25-54 7.7/2
WSFR-FM P Classic Rock Men 25-54 6.4/4
WLRS-FM P Adult Contemporary Women 25-54 4.4/11
JACKSONVILLE 2
WJBT-FM Urban Adults 18-34 10.5/3
WQIK-FM Country Adults 25-54 9.5/2
WSOL-FM Adult Urban Adults 25-54 5.6/8
WZAZ-AM Urban Talk Adults 35-64 2.9/12
WJGR-AM Talk Adults 25-54 0.9/18
ROCHESTER 2
WVOR-FM P Adult Contemporary Adults 25-54 9.1/4
WHAM-AM P News Talk Adults 25-54 8.7/3
WHTK-AM P Talk Adults 35-64 1.2/14T
WNVE-FM P New Rock Men 18-34 --
DES MOINES 1
WHO-AM P News Talk Men 25-54 17.7/1
KLYF-FM P Adult Contemporary Women 25-54 11.5/2
</TABLE>
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<TABLE>
<CAPTION>
TARGET
1995 COMBINED DEMOGRAPHIC
BROADCAST PENDING RADIO REVENUE TARGET SHARE %/
AREA/STATION ACQUISITION (P) RANK FORMAT DEMOGRAPHIC RANK
- ---------------------- ------------------- ----------------- ---------------------------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
TOLEDO 1
WSPD-AM News Talk Adult 35-64 7.4/5
WVKS-FM Contemporary Hit Radio Adults 18-34 17.4/1
WRVF-FM Adult Contemporary Women 25-54 12.2/3
WIOT-FM P Album Oriented Rock Men 18-34 21.5/1
WCWA-AM P Nostalgia Adults 35-64 2.5/10
LEXINGTON(6)(8) 1
WMXL-FM Hot Adult Contemporary Women 18-34 13.9/3
WWYC-FM Country Adults 25-54 7.9/4
WLAP-AM Sports Men 25-54 2.5/10
WKQQ-FM P Album Oriented Rock Men 18-34 24.5/1
WXZZ-FM P Rock Alternative Men 18-34 11.8/2T
WTKT-AM P Rhythm and Blues Adults 35-64 2.6/11
WLKT-FM P Contemporary Hit Radio Adults 18-34 --
CHARLESTON, S.C. 2
WEZL-FM P Country Adults 25-54 9.0/1
WXLY-FM P Oldies Women 25-54 8.7/1
BOISE(6) 2
KIDO-AM P News Talk Adults 25-54 8.1/2
KARO-FM P Classic Rock Men 25-54 4.8/7
KLTB-FM P Oldies Adults 25-54 5.8/6
CEDAR RAPIDS(6) 1
WMT-AM P Full Service Adults 35-64 11.3/4
WMT-FM P Adult Contemporary Women 25-54 17.7/3
SARASOTA/ 1
BRADENTON(6)
WSRZ-FM P Oldies Women 25-54 7.1/2
WYNF-FM P Classic Rock Men 25-54 11.1/1
WSPB-AM P Business News Men 35-64 --
CASPER(6) 3
KTWO-AM Full Service/Country Adults 35-64 14.6/3
KMGW-FM Adult Contemporary Women 25-54 12.0/2
FORT COLLINS/ N/A
GREELEY(7)
KCOL-AM P News Talk Adults 35-64 --
KPAW-FM P Oldies/Adult Contemporary Adults 25-54 --
KGLL-FM P Country Adults 25-54 --
LIMA, OHIO(6) 1
WIMA-AM P News Talk Adults 35-64 7.4/3
WIMT-FM P Country Adults 25-54 19.8/1
WBUK-FM P Oldies Adults 25-54 10.3/3(T)
WLVZ-FM(9) P -- -- --
VENICE/ N/A
ENGLEWOOD(7)(8)
WAMR-AM Talk Adults 25-54 --
WCTQ-FM Country Adults 25-54 --
WEDD-FM(9) P -- -- --
</TABLE>
- ------------------------
(1) Jacor provides programming and sells air time for the FM station pursuant to
a TBA.
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(2) Excludes stations WAQZ-FM, WJZU-AM and WSAI-AM in Cincinnati, KTCL-FM in
Denver, WSJW-FM in Louisville and KBKK-FM in Salt Lake City for which Jacor
sells advertising time pursuant to JSAs.
(3) Excludes XETRA-FM and XETRA-AM, stations Jacor provides programming to and
sells air time for under an exclusive sales agency agreement.
(4) Excludes KCBQ-AM in San Diego and WKRQ-FM in Cincinnati which the Company
will divest (see "Pending Transactions").
(5) WUKS-FM was formerly known as WUSA-FM. Jacor acquired the licenses and
operating assets of WUSA-FM in the Gannett Exchange while Gannett retained
the call letters. The call letters of WAKS-FM are in the process of being
changed to WHOK-FM. The FCC application is pending.
(6) Share and rank information is derived from the Spring 1996 Arbitron.
(7) The Fort Collins/Greeley, Co. and Venice/Englewood, Fl. broadcast areas do
not have Arbitron ranks.
(8) Jacor also owns or has the right to purchase insignificant stations in
Munfordville, Ky. and Sebring, Fl. and Morro Bay, Ca.
(9) WEDD-FM and WLVZ-FM are unconstructed stations and, as such, are not yet
operating.
All rankings by revenue or billings that are contained in the above table
are based on 1995 information contained in Duncan's Radio Market Guide (1996
ed.), Duncan's American Radio (Small Market Edition 1996), Duncan's American
Radio (Spring 1996). Duncan's Radio Group Directory (1996-1997 ed.) and/or
Broadcast Investment Analyst: Radio '96 Market Report. All information
concerning ratings and audience listening information is derived from the Spring
1996 Arbitron Metro Area Ratings Survey (the "Spring 1996 Arbitron") and the
Summer 1996 Arbitron Metro Area Ratings Survey (the "Summer 1996 Arbitron").
TELEVISION
Jacor owns a television station in the Cincinnati broadcast area where it
currently owns and operates multiple radio stations. By operating a television
station in the broadcast area where Jacor has a significant radio presence,
Jacor expects to realize significant operating efficiencies including shared
news departments and reduction of administrative overhead. Jacor currently
operates this television station under a temporary waiver of an FCC rule that
restricts ownership of television and radio stations in the same market. This
waiver will continue until at least six months after the FCC completes a pending
rulemaking proceeding in which it is considering whether to substantially
liberalize this rule.
The following table sets forth certain information regarding the Cincinnati
television station and the broadcast area in which it operates:
<TABLE>
<CAPTION>
COMMERCIAL
STATION RANK (1) STATIONS IN
------------------------------ BROADCAST AREA
NATIONAL TV HOUSEHOLDS ADULTS
BROADCAST AREA IN DMA(1) AGED -------------
BROADCAST AREA/STATION RANK(1) (000S) TV HOUSEHOLDS 25-54 VHF UHF
- --------------------------------- ------------------- --------------- ----------------- ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Cincinnati/WKRC.................. 29 793 3 1T 3 2
<CAPTION>
CABLE NETWORK
BROADCAST AREA/STATION SUBSCRIBER % AFFILIATION
- --------------------------------- ----------------- -----------
<S> <C> <C>
Cincinnati/WKRC.................. 61 CBS
</TABLE>
- ------------------------
(1) Rankings for Designated Market Area ("DMA"), 6:00 a.m. to 2:00 a.m.,
Sunday-Saturday for "TV Households" and "Adults aged 25-54." "T" designates
tied. This market information is from Nielsen.
ADVERTISING
Radio stations generate the majority of their revenue from the sale of
advertising time to local and national spot advertisers and national network
advertisers. Radio serves primarily as a medium for local advertising. The
growth in total radio advertising revenue tends to be fairly stable and has
generally grown
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at a rate faster than the Gross National Product ("GNP"). Advertising revenue
has risen more rapidly during the past 10 years than either inflation or the
GNP. Total advertising revenue in 1994 of $10.6 billion, as reported by RAB, was
its highest level in the industry's history.
During the year ended December 31, 1995, approximately 82% of Jacor's
broadcast revenue (adjusted to include the effect of Jacor's acquisitions),
would have been generated from the sale of local advertising and approximately
18% from the sale of national advertising. Jacor believes that radio is one of
the most efficient, cost-effective means for advertisers to reach specific
demographic groups. The advertising rates charged by Jacor's radio stations are
based primarily on (i) the station's ability to attract an audience in the
demographic groups targeted by its advertisers (as measured principally by
quarterly Arbitron rating 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, (iii) the supply of and demand for radio
advertising time and (iv) the supply and pricing of alternative advertising
media.
Jacor emphasizes an aggressive local sales effort because local advertising
represents a large majority of Jacor's revenues. Jacor'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 advertisers.
Jacor pays a higher commission rate to the sales staff for generating direct
sales because Jacor 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. Jacor employs personnel in each market to produce commercials for the
advertisers. National advertising sales for most of Jacor's stations are made by
Jacor'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 believes that sports broadcasting, absent unusual circumstances, is a
stable source of advertising revenues. There is less competition for the sports
listener, since only one radio station can offer a particular game. In addition,
due to the higher degree of audience predictability, sports advertisers tend to
sign contracts which are generally longer term and more stable than Jacor's
other advertisers. Jacor's sales staffs are particularly skilled in sales of
sports advertising.
According to the Radio Advertising Bureau Radio Marketing Guide and Fact
Book for Advertisers, 1994-1995, each week, radio reaches approximately 76.7% of
all Americans over the age of 12. More than one-half of all radio listening is
done outside the home, in contrast to other advertising mediums, and three out
of four adults are reached by car radio each week. The average listener spends
approximately three hours and 20 minutes per day listening to radio. The highest
portion of radio listenership occurs during the morning, particularly between
the time a listener wakes up and the time the listener reaches work. This
"morning drive time" period reaches more than 85% of people over 12 years of age
and, as a result, radio advertising sold during this period achieves premium
advertising rates.
Jacor believes operating multiple stations in a market gives it significant
opportunities in competing for advertising dollars. Each multiple station
platform better positions Jacor to access a significant share of a given
demographic segment making Jacor stations more attractive to advertisers seeking
to reach that segment of the population.
COMPETITION; CHANGES IN THE BROADCASTING INDUSTRY
The radio broadcasting industry is a highly competitive business. The
success of each of Jacor's stations will depend significantly upon its audience
ratings and its share of the overall advertising revenue within its market.
Jacor's stations will compete for listeners and advertising revenue directly
with other radio stations as well as many other advertising media 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, Jacor will be able to
attract advertisers seeking to reach those listeners.
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In addition to management experience, factors which are material to
competitive position include the station's rank among radio stations in its
market, transmitter power, assigned frequency, audience characteristics, local
program acceptance and the number and characteristics of other stations in the
market area, and other advertising media in that market. Jacor 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's audience ratings and competitive position will be subject to change,
and any adverse change in a particular market could have a material adverse
effect on the revenue of Jacor's stations in that market. Although Jacor
believes that each of its stations will be able to compete effectively in the
market, there can be no assurance that any one of its stations will be able to
maintain or increase its current audience ratings and advertising revenue.
Although the radio broadcasting industry is highly competitive, some legal
restrictions on 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.
Jacor's stations also compete directly 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 the Internet 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.
Jacor also competes with other radio station groups to purchase additional
stations.
The FCC has allocated spectrum for a new technology, satellite digital audio
radio services ("DARS"), to deliver audio programming. The FCC has proposed, but
not yet adopted licensing and operating rules for DARS, so that the allocated
spectrum is not yet available for service. Jacor cannot predict when and in what
form such rules will be adopted. The FCC granted a waiver in September 1995 to
permit one potential DARS operator to commence construction of a DARS satellite
system, with the express notice that the FCC might not license such operator to
provide DARS, nor would such waiver prejudge the ongoing rule making proceeding.
DARS may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats to local and/or national audiences.
Digital technology also may be used in the future by terrestrial radio broadcast
stations either on existing or alternate broadcasting frequencies, and the FCC
has stated that it will consider making changes to its rules to permit AM and FM
radio stations to offer digital sound following industry analysis of technical
standards. 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 that applied for migration prior to the
FCC's cut-off date. At the end of a transition period, 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. None of the stations to
be affiliated with the Company have sought authorizations for operations on the
expanded AM band, because such signals operate at a lower power and have less
coverage and thereby are not consistent with Jacor's strategic objectives.
Television stations compete for audiences and advertising revenues with
radio and other television stations and multichannel video delivery systems in
their market areas and with other advertising media such as newspapers,
magazines, outdoor advertising and direct mail. Competition for sales of
television
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advertising time is based primarily on the anticipated and actually delivered
size and demographic characteristics of audiences as determined by various
services, price, the time of day when the advertising is to be broadcast,
competition from other television stations, including affiliates of other
television broadcast networks, cable television systems and other media and
general economic conditions. Competition for audiences is based primarily on the
selection of programming, the acceptance of which is dependent on the reaction
of the viewing public, which is often difficult to predict. Additional elements
that are material to the competitive position of television stations include
management experience, authorized power and assigned frequency. The broadcasting
industry is continuously faced with technical changes and innovations, the
popularity of competing entertainment and communications media, changes in labor
conditions, and governmental restrictions or actions of Federal regulatory
bodies, including the FCC, any of which could possibly have a material effect on
a television station's operations and profits. There are sources of video
service other than conventional television stations, the most common being cable
television, which can increase competition for a broadcasting television station
by bringing into its market distant broadcasting signals not otherwise available
to the station's audience, serving as a distribution system for national
satellite-delivered programming and other non-broadcast programming originated
on a cable system and selling advertising time to local advertisers. Other
principal sources of competition include home video exhibition, direct-to-home
broadcast satellite television ("DBS") entertainment services and multichannel
multipoint distribution services ("MMDS"). Moreover, technology advances and
regulatory changes affecting programming delivery through fiber optic telephone
lines and video compression could lower entry barriers for new video channels
and encourage the development of increasingly specialized "niche" programming.
The Telecom Act permits telephone companies to provide video distribution
services via radio communication, on a common carrier basis, as "cable systems"
or as "open video systems," each pursuant to different regulatory schemes. Jacor
is unable to predict the effect that technological and regulatory changes will
have on the broadcast television industry and on the future profitability and
value of a particular broadcast television station.
Recent acquisitions of, or investments in, cable multiple-system operators
("MSOs") by large exchange carriers ("LECs") by Regional Bell Operating
Companies ("RBOCs") in the United States, market tests by both LECs and cable
MSOs in various states, and major infrastructure upgrades announced by both LECs
and cable MSOs, presage major expansion of wired communications networks and
consequently their capacities to deliver video programming. The Telecom Act
repealed the "telephone company/cable television cross-ownership prohibition,"
thereby enabling LECs, including the RBOCs, to provide cable television service
in their telephone service areas. LECs may not, however, acquire more than a 10
percent ownership interest in, or enter into joint ventures with, cable systems
in their telephone service areas. The Telecom Act also gives LECs the option to
provide video programming services over an "open video system," or OVS, in which
programming on no more than one-third of the system's channels may be selected
by the LEC or its affiliates. The OVS model may be attractive to LECs because it
is not subject to many of the regulatory requirements applicable to traditional
cable systems, such as the requirement to obtain a local cable television
franchise. In addition, a number of LECs have announced their intention to
provide video programming services over MMDS "wireless cable" systems.
In addition, the FCC authorizes DBS services throughout the United States.
Currently, two FCC permittees, DirecTv and United States Satellite Broadcasting,
provide subscription DBS services via high power communications satellites and
small dish receivers, and other companies provide direct-to-home video service
using lower powered satellites and larger receivers. Additional companies are
expected to commence direct-to-home operations in the near future. DBS and MMDS,
as well as other new technologies, will further increase competition in the
delivery of video programming.
Jacor 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 BROADCASTING
The ownership, operation and sale of stations are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act. Among other things, the FCC assigns frequency
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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. On February 8,
1996, the President signed the Telecom Act. The Telecom Act, among other
measures, directs the FCC to (a) eliminate the national radio ownership limits;
(b) increase the local radio ownership limits as specified in the Telecom Act;
(c) issue broadcast licenses for periods of eight years; (d) eliminate the
opportunity for the filing of competing applications against broadcast renewal
applications; and (e) modify the rules governing in-market radio-television
ownership. Certain of these measures have been adopted by the FCC. Other
provisions of the Telecom Act will be acted upon by the FCC through rule-making
proceedings.
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.
Television stations in the United States operate as either Very High
Frequency (VHF) stations (channels 2 through 13) or Ultra High Frequency (UHF)
stations (channels 14 through 69). UHF stations in many cases have a weaker
signal and therefore do not achieve the same coverage as VHF stations.
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. The Telecom Act amends the Communications
Act to provide that broadcast station licenses be granted, and thereafter
renewed, for a term not to exceed eight years, if the FCC finds that the public
interest, convenience, and necessity would be served. The FCC has not yet
implemented the change in license terms provided in the Telecom Act.
Generally, the FCC renews licenses without a hearing. The Telecom Act amends
the Communications Act to require the FCC to grant an application for renewal of
a broadcast station license if: (1) the station has served the public interest,
convenience and necessity; (2) there have been no serious violations by the
licensee of the Communications Act or the rules and regulations of the FCC; and
(3) there have been no other violations by the licensee of the Communications
Act or the rules and regulations of the FCC which, taken together, would
constitute a pattern of abuse. Pursuant to the Telecom Act, competing
applications against broadcast renewal applications will no longer be
entertained. The Telecom Act provides that if the FCC, after notice and an
opportunity for a hearing, decides that the requirements for renewal have not
been met and that no mitigating factors warrant lesser sanctions, it may deny a
renewal application. Only thereafter may the FCC accept applications by third
parties to operate on the frequency of the former licensee. The Communications
Act continues to authorize the filing of petitions to deny 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.
License renewals (expiring in 2003) were granted in 1996 for Jacor's
Florida, Georgia, Kentucky and certain of its Ohio radio stations. Presently
pending are renewal applications for six of Jacor's Ohio radio stations, two St.
Louis radio stations and four Kansas City radio stations. The six Ohio radio
stations are subject to a petition challenging the renewal of their licenses and
those of certain other broadcasters for
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alleged failure to comply with equal employment opportunity policies. Jacor has
responded to that petition and anticipates obtaining license renewals for full
terms for these Ohio stations. Renewal applications will be filed in 1997 for
the remainder of Jacor's station licenses that are currently due to expire in
1997. Jacor does not anticipate any material difficulty in obtaining license
renewals for full terms in the future.
Regent has obtained renewals for full terms (expiring in 2002) for its South
Carolina radio stations and (expiring 2003) for its Kentucky and Indiana
stations. Regent has renewal applications pending before the FCC for its Kansas
City, Missouri, radio station. Regent's renewal applications for WFIA-AM and
WDJX-FM, Louisville, are the subject of a petition to deny filed by a former
employee against whom a non-compete provision was enforced. Renewal applications
will be filed for the remainder of the Regent stations in 1997. The Gannett
radio station renewal applications will be filed in 1997. Regarding other
proposed acquisitions, renewal applications are presently pending for WCWA-AM
and WIOT-FM, Toledo (also subject to a petition to deny on EEO grounds), and for
the Palmer stations in Cedar Rapids and Des Moines. Renewal applications will be
filed in 1997 for the licenses of the other stations to be acquired.
When the FCC considers a proposed transfer of control of an FCC licensee
that holds multiple FCC licenses, some of which licenses are subject to pending
renewal applications, the FCC's past policy has been either to defer action on
the transfer application until the pending renewals have been granted or to
grant the transfer application conditioned on the transfer not being consummated
until the renewals have been granted. The FCC has recently modified that policy
to provide that so long as there are no unresolved issues pertaining to the
qualifications of the transferor or the transferee and so long as the transferee
is willing to substitute itself as the renewal applicant, the FCC will grant a
transfer application for a licensee holding multiple licenses and permit
consummation of the transfer notwithstanding the pendency of renewal
applications for one or several of the licensee's stations. This policy should
permit the parties to consummate the Regent Merger (assuming satisfaction or
waiver of all other conditions and the FCC's grant of the subject application)
during those periods when renewal applications are pending for one or more of
the subject stations. To date, the FCC has not extended this policy to
transactions where all the stations being sold are subject to renewal
applications, such as involving WCWA-AM/WIOT-FM and the Palmer stations, and it
is not expected that the FCC will allow the assignment of these stations to
Jacor until the renewals for these stations are issued.
LICENSE ASSIGNMENTS AND TRANSFERS OF CONTROL. The Communications Act
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.
OWNERSHIP RULES. Rules of the FCC limit the number and location of
broadcast stations in which one licensee (or any party with a control position
or attributable ownership interest therein) may have an attributable interest.
The FCC, pursuant to the Telecom Act, eliminated the "national radio ownership
rule." Consequently, there now is no limit imposed by the FCC to the number of
radio stations one party may own nationally.
The "local radio ownership rule" limits the number of stations in a radio
market in which any one individual or entity may have a control position or
attributable ownership interest. Pursuant to the Telecom Act, the FCC revised
its rules to increase the local radio ownership limits as follows: (a) in
markets with 45 or more commercial radio stations, a party may own up to eight
commercial radio stations, no more than five of which are in the same service
(AM or FM); (b) in markets with 30-44 commercial radio stations, a party may own
up to seven commercial radio stations, no more than four of which are in the
same service; (c) in markets with 15-29 commercial radio stations, a party may
own up to six commercial radio stations, no more than four of which are in the
same service; and (d) in markets with 14 or fewer commercial radio stations, a
party may own up to five commercial radio stations, no more than three of which
are in the same service, provided that no party may own more than 50% of the
commercial stations in the market. In addition, the FCC has a "cross interest"
policy that may prohibit a party with an attributable 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
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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 policies governing attributable ownership
interests. Jacor cannot predict whether the FCC will adopt any changes in these
policies or, if so, what the new policies will be.
Under the current 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 an attributable 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 an attributable
interest unless they own or have voting control over 10% or more of such stock.
The FCC is currently evaluating whether to raise the foregoing benchmarks to 10%
and 20%, respectively. An officer or director of a corporation or any general
partner of a partnership also is deemed to hold an attributable interest in the
media license. Jacor cannot predict whether the FCC will adopt these or any
other proposals.
Under current FCC rules, shareholders of the Company with 5% or more of the
outstanding votes (except for qualified institutional investors, for which the
10% benchmark is applicable), if any, are considered to hold attributable
interests in the Company. Such holders of attributable interests must comply
with or obtain waivers of the FCC's multiple and cross ownership limits. Other
than Zell/Chilmark Fund L.P. (the holder of approximately 42% of Jacor's Common
Stock), no individuals or entity has reported to the SEC that it has acquired 5%
or more of the outstanding stock of Jacor; however certain qualified investors
need not submit such a report until 45 days after the end of the calendar year.
In the event that Jacor learns of a new attributable shareholder and if such
shareholder holds interests that exceed the FCC limits on media ownership, Jacor
has the corporate power to redeem stock of its shareholder to the extent
necessary to be in compliance with FCC and Communications Act requirements,
including limits on media ownership by attributable parties and alien ownership.
The rules also generally prohibit the acquisition of an ownership or control
position in a television station and one or more radio stations serving the same
market (termed the "one-to-a-market" rule). Current FCC policy looks favorably
upon waiver requests relating to television and AM/FM radio combinations in the
top 25 television markets where at least 30 separately owned broadcast stations
will remain after the combination. One-to-a-market waiver requests in other
markets, as well as those in the top 25 television markets that involve the
combination of a television station and more than one same service (AM or FM)
radio station, presently are evaluated by the FCC pursuant to a fact-based,
five-part, case-by-case review. The FCC also has an established policy for
granting waivers that involve "failed" stations. The FCC currently is
considering changes to its one-to-a-market waiver standards in a pending
rule-making proceeding. The FCC also plans to review and possibly modify its
current prohibitions relating to ownership or control positions in a daily
newspaper and a broadcast station in the same market. In conjunction with
Jacor's acquisition of the Citicasters stations, the FCC granted Jacor's request
for waivers of the one-to-a-market rule to permit common ownership of radio
stations and a television station in each of Cincinnati and Tampa-St.
Petersburg, subject to the outcome in the pending rule-making proceeding. The
FCC waiver directed that should divestiture be required as a result of that
rule-making proceeding, Jacor will be required to file an application for FCC
consent to sell the necessary stations within six months from the release of the
FCC order in the rule-making proceeding. The Company disposed of WTSP-TV, St.
Petersburg in December 1996. The sale of that station rendered moot the
one-to-a-market waiver granted Jacor for radio and television ownership in
Tampa-St. Petersburg. There can be no assurance that the FCC will adopt a
revised one-to-a-market policy in its rule-making proceeding that would permit
the Company to continue to own WKRC-TV, Cincinnati, along with all of its
current Cincinnati-area radio stations. If divestitures are required, there can
be no assurance that Jacor would be able to obtain full value for such stations
or that such sales would not have a material adverse impact upon Jacor's
business, financial condition or results of operations. In such event, Jacor's
intention would be to seek reconsideration and/or appellate court review of the
FCC's decision.
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
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or contractual relationships, along with its review of its other attribution
policies. Jacor cannot predict whether the FCC will adopt these or other changes
in its attribution policies.
Under the Communications Act, broadcast licenses may not be granted,
transferred or assigned to any corporation 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 of which more than one-fourth of the capital stock is owned of
record or voted by Aliens, without an FCC public interest finding. 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 Jacor are known by Jacor to be Aliens.
REGULATION OF BROADCAST OPERATIONS. In order to retain licenses,
broadcasters are obligated, under the Communications Act, to serve the "public
interest." Since the late 1970s, 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.
The regulatory changes have provided broadcast stations with increased
flexibility to design their program formats and have provided relief from some
record keeping 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 have been
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 full term) license term or license revocation.
The Telecom Act states that the FCC may deny, after a hearing, the renewal of a
broadcast license for serious violations of the Communications Act or the FCC's
rules or where there have been other violations which together constitute a
pattern of abuse.
The FCC has 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.
AGREEMENTS WITH OTHER BROADCASTERS. Over the past several years a
significant number of broadcast licensees, including certain of Jacor'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 the FCC's rules and policies and other laws. One
typical example is a TBA or LMA between two separately owned 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 a licensee sells advertising time on both its
own station or stations and on another separately owned station.
The FCC has 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
attributable multiple business arrangements among local stations, such as joint
sales accompanied by debt financing. Jacor cannot predict whether the FCC would
require the termination or restructuring of Jacor's JSAs or other arrangements
in the future.
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Under certain circumstances, the FCC will consider a radio station brokering
time on another radio 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 radio 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 radio station which it could not own
under the FCC's local radio ownership rules.
The FCC's rules also prohibit a radio licensee from simulcasting more than
25% of its programming on another radio 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 both stations serve substantially the same geographic area.
LEGISLATION AND REGULATION OF TELEVISION OPERATIONS. Television stations
are regulated by the FCC pursuant to provisions of the Communications Act and
the FCC rules that are in many instances the same or similar to those applicable
to radio stations. Besides technical differences between television and radio,
principal variances in regulation relate to limits on national and local
ownership, LMAs and simulcasts, children's programming requirements, advanced
television service, signal carriage rights on cable systems, license terms,
"V-chip" technology and network/affiliate relations.
The current FCC rules prohibit combined local ownership or control of
television stations with overlapping "Grade B" service contours (unless
established waiver standards are met). An FCC rule-making proceeding is in
process to determine whether to retain, modify or eliminate these local
television ownership rules. The current FCC rules permit an entity to have an
attributable interest in an unlimited number of television stations so long as
such stations do not reach in the aggregate more than 35% of the national
television audience. Additionally, the rules prohibit (with certain
qualifications) the holder of an attributable interest in a television station
from also having an attributable interest in a radio station, daily newspaper or
cable television system serving a community located within the relevant coverage
area of that television station. As noted above, the radio/television
one-to-a-market rule is under review and the FCC also plans to review and
possibly modify its current broadcast/daily newspaper restriction. Pursuant to
the Telecom Act, the FCC eliminated the restriction of network ownership of
cable systems. The FCC will monitor the response to this change to determine if
additional rule changes are necessary to ensure nondiscriminatory carriage and
channel positioning of nonaffiliated broadcast stations by network-owned cable
systems.
Presently, LMAs between television stations are not treated as attributable
interests and there is no restriction on same-market television simulcasts. The
FCC is considering in a pending rule-making proceeding whether to treat
television LMAs similar to radio LMAs for multiple ownership rule purposes.
Jacor's television station is not a participant in any LMAs.
On August 8, 1996, the FCC amended its rules implementing the Children's
Television Act of 1990 (the "CTA") to establish for broadcast television renewal
applications filed after August 31, 1997, a "processing guideline" of at least
three hours per week of educational and informational programming for children.
A television station will receive FCC staff-level approval of the portion of its
license renewal application pertaining to the CTA if it satisfied the processing
guideline by broadcasting at least three weekly hours of "Core Programming,"
which is defined as education and informational programming that, among other
things, (a) has serving the educational and informational needs of children "as
a significant purpose," (b) has a specified educational and informational
objective and a specified target child audience, (c) is regularly scheduled,
weekly programming, (d) is at least 30 minute in length, and (e) airs between
7:00 a.m. and 10:00 p.m. Alternatively, a station may qualify for staff-level
approval even if it broadcasts "somewhat less" than three hours per week of Core
Programing by demonstrating that it has aired a weekly package of different
types of educational and informational programming that it "at least equivalent"
to three hours of Core Programming. A licensee that does not meet the processing
guideline under either of these alternatives will be referred by the FCC's staff
to the Commissioners of the FCC, who will evaluate the licensee's compliance
with CTA on the basis of both its programming and its other efforts related to
children's educational and informational programming. A television station
ultimately found not to have complied with the CTA could face sanctions
including monetary fines and the possible non-renewal of its broadcast license.
The FCC is conducting a rule-making proceeding to devise a table of channel
allotments in connection with the introduction of "advanced" or "high
definition" television service ("DTV"). The FCC has preliminarily decided to
allot a second broadcast channel to each full-power commercial television
station
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for DTV operation. According to this preliminary decision, stations would be
permitted to phase in their DTV operations over a period of several years
following adoption of a final table of allotments, after which they would be
required to surrender their non-DTV channel. The FCC has proposed allotting all
full-service television stations a second broadcast channel for digital
operation that substantially replicates the service areas of their existing
stations. Under this proposal, most stations, including Jacor's station, would
receive a digital channel assignment in the "core spectrum" between channels 7
and 51. This proposal is open for public comment. During the past year, Congress
has considered proposals that would require incumbent broadcasters to bid at
auctions for the additional spectrum required to effect a transition to DTV, or
alternatively, would assign additional DTV spectrum to incumbent broadcasters
and require the early surrender of their non-DTV channel for sale by public
auction. It is not possible to predict if, or when, any of these proposals will
be adopted or the effect, if any, adoption of such proposals would have on
Jacor's television station.
FCC regulations implementing the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") require each television
broadcaster to elect, at three-year intervals beginning June 17, 1993, either to
(a) require carriage of its signal by cable systems in the station's market
("must-carry") or (b) negotiate the terms on which such broadcast station would
permit transmission of its signal by the cable systems within its market
("retransmission consent"). In a 2-1 decision issued on December 13, 1995, a
special three-judge panel of the U.S. District Court for the District of
Columbia upheld the constitutionality of the must-carry provisions. The District
Court's decision has been appealed to the U.S. Supreme Court, which will hear
the appeal during its 1996-1997 term, with a decision expected in the second
calendar quarter of 1997. In the meantime, the FCC's must-carry regulations
implementing the Cable Act remain in effect. Jacor cannot predict the outcome of
the Supreme Court review of the case.
Until the passage of the Telecom Act, television licenses were granted and
renewed for a maximum of five years. The Telecom Act amends the Communications
Act to provide that broadcast station licenses be granted, and thereafter
renewed, for a term not to exceed eight years, if the FCC finds that the public
interest, convenience, and necessity would be served. The FCC has not yet
implemented the change in license terms provided in the Telecom Act. The Telecom
Act also requires the broadcast and cable industries to develop and transmit an
encrypted rating that would permit the blocking of violent or indecent video
programming and allow telephone companies to operate cable television systems in
their own service areas.
Jacor's Cincinnati television station is a CBS-network affiliate and a VHF
station. The FCC currently is reviewing certain of its rules governing the
relationship between broadcast television networks and their affiliated
stations. The FCC is conducting a rule-making proceeding to examine its rules
prohibiting broadcast television networks from representing their affiliated
stations for the sale of non-network advertising time and from influencing or
controlling the rates set by their affiliates for the sale of such time.
Separately, the FCC is conducting a rule-making proceeding to consider the
relaxation or elimination of its rules prohibiting broadcast networks from (a)
restricting their affiliates' right to reject network programming; (b) reserving
an option to use specified amounts of their affiliates' broadcast time; and (c)
forbidding their affiliates from broadcasting the programming of another
network; and to consider the relaxation of its rule prohibiting
network-affiliated stations from preventing other stations from broadcasting the
programming of their network.
PROPOSED CHANGES. The FCC has not yet implemented formally certain of the
changes to its rules necessitated by the Telecom Act. Moreover, 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
Jacor and its broadcast stations, (ii) result in the loss of audience share and
advertising revenues of Jacor's radio broadcast stations, (iii) affect the
ability of Jacor to acquire additional broadcast stations or finance such
acquisitions, (iv) affect current cooperative agreements and/or financing
arrangements with other radio broadcast licensees, or (v) affect Jacor's
competitive position in relationship to other advertising media in its markets.
Such matters include, for example, changes to the license authorization and
renewal process; proposals to revise 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
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audio broadcasting on both a satellite and terrestrial basis; 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; proposals
to limit the tax deductibility of advertising expenses by advertisers; potential
auctions for DTV or non-DTV television spectrum; the implementation of "V-chip"
technology; and changes to children's television programming requirements,
signal carriage rights on cable systems and network affiliate relations.
Although Jacor believes the foregoing discussion is sufficient to provide
the reader with a general understanding of all material aspects of FCC
regulations that affect Jacor, 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.
ANTITRUST CONSIDERATIONS. Certain acquisitions by Jacor of broadcasting
companies, radio station groups or individual radio stations will be subject to
review by the Antitrust Division and the FTC pursuant to the provisions of the
HSR Act. Generally, acquisitions involving assets valued at $15.0 million or
more, and certain acquisitions of voting securities, come within the purview of
the HSR Act. Although it is likely that many proposed acquisitions will not
require the parties to the transaction to comply with the HSR Act, or if such
compliance is required, will result in rapid clearance by the antitrust
agencies, in certain instances, the antitrust agencies may choose to investigate
the proposed acquisition, particularly if it appears that such acquisition will
result in substantial concentration within a specific market. Any decision by an
antitrust agency to challenge a proposed acquisition could affect the ability of
Jacor to consummate the proposed acquisition, or to consummate the acquisition
on the proposed terms.
The Antitrust Division and the FTC determine between themselves which agency
is to take a closer look at a proposed transaction. The Antitrust Division or
the FTC, as the case may be, may then issue a formal request for additional
information ("the Second Request"). Under the HSR Act, if a Second Request is
issued, the waiting period then would be extended and would expire at 11:59
p.m., on the twentieth calendar day after the date of substantial compliance by
both parties with such Second Request. Only one extension of the waiting period
pursuant to a request for additional information is authorized by the HSR Act.
Thereafter, such waiting period may be extended only by court order or with the
consent of the parties. In practice, complying with a request for additional
information or material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with a
proposed transaction, the parties frequently engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue.
CORPORATE HISTORY
Jacor began operations in January 1981 with the acquisition of three small
religious-format radio stations. Through 1986, Jacor expanded its operations
into progressively larger and more competitive markets purchasing twelve
stations in seven markets for an aggregate purchase price in excess of $94.0
million. These acquisitions were financed primarily through borrowings.
In January 1993, Jacor completed the restructuring of approximately $140.0
million of indebtedness. The restructuring principally consisted of (i) an
initial equity infusion of approximately $6.0 million by Zell/Chilmark, (ii) a
conversion of approximately $81.5 million of debt into equity (iii) a conversion
of every share of Jacor's common stock outstanding prior to the restructuring
into a fewer number of shares and warrants, (iv) a conversion of every share of
Jacor's preferred stock outstanding prior to the restructuring into a fewer
number of shares and warrants, and (v) an increase in the authorized capital
stock to 44,000,000 shares.
In July 1993, Jacor completed the acquisition of radio station KAZY-FM in
Denver, Colorado. Effective January 1, 1994, Jacor acquired an interest in
Critical Mass Media, Inc. ("CMM") from Jacor's President. In March 1994, Jacor
entered into an agreement to acquire the assets of radio station WPPT-FM
(formerly WIMJ) in Cincinnati, Ohio. In May 1994, Jacor completed the sale of
the business and substantially all the assets of its wholly owned subsidiary,
Telesat Cable TV, Inc. In 1994, Jacor acquired the call letters, programming and
certain contracts of radio station KBPI-FM in Denver,
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Colorado, the call letters, programming and certain contracts of radio stations
WCKY-AM in Cincinnati, Ohio, radio station KTLK-AM in Denver, Colorado and radio
station WWST-FM in Knoxville, Tennessee. In August 1995, Jacor acquired certain
operating assets of radio stations WDUV-FM and WBRD-AM in Tampa, Florida. In
1995, Jacor acquired the call letters, programming and certain contracts of
radio station WOFX-FM in Cincinnati, Ohio, and acquired radio stations WSOL-FM,
WJBT-FM and WZAZ-AM in Jacksonville, Florida. See Notes 3 and 4 of the Notes to
Jacor's Consolidated Financial Statements.
ENERGY AND ENVIRONMENTAL MATTERS
Jacor'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
Jacor is currently in material compliance with all statutory and administrative
requirements as related to environmental quality and pollution control.
EMPLOYEES
As of December 31, 1996, Jacor employed approximately 3,500 persons, 2,500
on a full-time and 1,000 on a part-time basis. Each Jacor 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.
PROPERTIES/FACILITIES
Jacor leases approximately 16,244 square feet for its corporate offices in
Covington, Kentucky under a lease expiring in 2008 with a five-year renewal
option. Jacor also owns and leases space for the office and studio facilities at
its radio station locations throughout the United States. The same is true for
Jacor's tower sites and antennae.
Expansion of Jacor'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 Jacor'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 the Jacor-owned facilities and, in
the case of leased facilities, the lease of additional space or the relocation
of the office and studio. Jacor's office and studio facilities are all located
in downtown or suburban office buildings and are capable of being relocated to
any suitable office facility in the station market area. Similarly, although
many of Jacor's tower sites are strategically located, all are capable of being
relocated to suitable sites in their particular station market areas.
Jacor 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 Jacor's
stations are in generally good condition. In management's opinion, the quality
of the signals range from good to excellent, and Jacor is committed to
maintaining and updating its equipment and transmission facilities in order to
achieve the best possible signal in the market area.
Although Jacor believes its properties are generally adequate for its
operations, opportunities to upgrade facilities are continuously reviewed.
See Notes 7 and 11 of Notes to Jacor's Consolidated Financial Statements
included elsewhere herein for a description of encumbrances against Jacor's
properties and Jacor's rental obligations.
LITIGATION
From time to time, Jacor becomes involved in various claims and lawsuits
that are incidental to its business. In the opinion of Jacor's management, there
are no material legal proceedings pending against Jacor.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF JACOR
The following table sets forth, as of December 31, 1996, the number of
shares and percentage of Common Stock beneficially owned by each person who is
known to Jacor to be the beneficial owner of more than 5% of Jacor Common Stock,
by each of Jacor's directors, and by all of Jacor's executive officers and
directors as a group.
BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF PERCENT OF
OF BENEFICIAL CLASS(2) CLASS(2)
NAME OF BENEFICIAL OWNER OWNERSHIP(1) PRIOR TO MERGER AFTER MERGER
- ------------------------------------------------------------- ------------------- --------------- ------------
<S> <C> <C> <C>
5% OR MORE BENEFICIAL OWNERS
Zell/Chilmark Fund L.P....................................... 13,349,720(3) 42.7% 38.3%
David M. Schulte............................................. 13,349,720(4) 42.7% 38.3%
Samuel Zell.................................................. 13,349,720(4) 42.7% 38.3%
American Financial Group, Inc. and related reporting 2,182,589(5)
persons.................................................... 6.5% 5.9%
MANAGEMENT
John W. Alexander............................................ 40,000(6) * *
Rod F. Dammeyer.............................................. 13,366,720(4)(7) 42.7% 38.4%
F. Philip Handy.............................................. 60,100(8) * *
Marc Lasry................................................... 27,000(6) * *
Robert L. Lawrence........................................... 501,275(9) 1.6% 1.4%
Randy Michaels............................................... 642,022(10)(11) 2.1% 1.8%
Sheli Z. Rosenberg........................................... 13,360,270(4)(12) 42.7% 38.3%
All executive officers and directors as a group (16 15,032,720(13)
persons)................................................... 48.0% 43.1%
</TABLE>
- ------------------------
* Less than 1%
(1) The Commission has defined beneficial ownership to include sole or shared
voting or investment power with respect to a security or the right to
acquire beneficial ownership of a security within 60 days. The number of
shares indicated is owned with sole voting and investment power unless
otherwise noted and includes certain shares held in the name of family
members, trusts and affiliated companies as to which beneficial ownership
may be disclaimed. The number of shares indicated includes shares of Jacor
Common Stock issuable pursuant to options granted under Jacor's 1993 Stock
Option Plan and which have vested.
(2) Under rules promulgated by the Commission, any securities not outstanding
that are subject to options or warrants exercisable within 60 days are
deemed to be outstanding for the purpose of computing the percentage of the
class owned by such person but are not deemed to be outstanding for the
purpose of computing the percentage of the class owned by any other person.
Percentages have been calculated based upon 31,294,338 shares of Jacor
Common Stock outstanding prior to the Merger and 34,844,338 shares
outstanding after the Merger, assuming that 3,550,000 shares are issued in
the Merger.
(3) The address of Zell/Chilmark is Two North Riverside Plaza, Suite 600,
Chicago, Illinois 60606. Zell/ Chilmark is a Delaware limited partnership
controlled by Samuel Zell and David M. Schulte, former directors of the
Company, as follows: the sole general partner of Zell/Chilmark is ZC Limited
Partnership ("ZC Limited"); the sole general partner of ZC Limited is ZC
Partnership; the sole
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general partners of ZC Partnership are ZC, Inc. and CZ, Inc.; Mr. Zell is
the sole shareholder of ZC, Inc.; and Mr. Schulte is the sole shareholder of
CZ, Inc.
(4) All shares beneficially owned by Zell/Chilmark (see Note (3) above) are
included in the shares beneficially owned by Messrs. Zell, Schulte and
Dammeyer and Mrs. Rosenberg, who constitute all of the members of the
management committee of Z/C Limited. The address of Mr. Schulte is 875 North
Michigan Avenue, Suite 2100, Chicago, Illinois 60606. The address of Mr.
Zell is Two North Riverside Plaza, Suite 600, Chicago, Illinois 60611. Mr.
Schulte indirectly shares beneficial ownership of a 20% limited partnership
interest in ZC Limited, and Mr. Zell indirectly shares beneficial ownership
of an 80% limited partnership interest in ZC Limited.
(5) On September 20, 1996, American Financial Group, Inc., American Financial
Corporation, American Enterprises, Inc., Carl H. Lindner, Carl H. Lindner
III, S. Craig Lindner and Keith E. Lindner filed, as a group, a Schedule 13D
reporting beneficial ownership as of September 18, 1996 of 2,182,589 shares
of Jacor Common Stock issuable upon the exercise of 10,723,949 warrants
issued to such entities and persons in the Citicasters Merger. The address
of such entities and persons in One East Fourth Street, Cincinnati, Ohio
45202.
(6) Includes vested options to purchase 17,000 shares.
(7) Includes vested options to purchase 17,000 shares. Mr. Dammeyer indirectly
shares beneficial ownership of an 80% limited partnership interest in ZC
Limited. See Note (3) above.
(8) Includes vested options to purchase 17,000 shares. Of the shares indicated,
100 shares are held by Mr. Handy's spouse, as to which Mr. Handy disclaims
beneficial ownership. Also includes 13,000 shares held by H.H. Associates
Trust of which Mr. Handy is co-trustee.
(9) Includes vested options to purchase 491,060 shares. Of the shares
indicated, 397 shares are owned by members of Mr. Lawrence's family.
(10) Includes vested options to purchase 431,000 shares. The number of shares
indicated includes shares held as co-trustee under the Jacor Communications,
Inc. Retirement Plan (the "Retirement Plan"). See Note (10) below. Also
includes 15 shares owned by Mr. Michaels' wife, as to which Mr. Michaels
disclaims beneficial ownership. Does not include 300,000 shares subject to a
contingent right of acquisition held by a corporation owned by Mr. Michaels.
(11) Includes 199,654 shares held under the Retirement Plan with respect to
which Mr. Michaels and two other executive officers of Jacor, as
co-trustees, share voting and investment power. Of these 199,654 shares,
3,420 shares are beneficially owned by Mr. Michaels.
(12) Includes vested options to purchase 7,000 shares. Mrs. Rosenberg indirectly
shares beneficial ownership of an 80% limited partnership interest in ZC
Limited. See Note (3) above.
(13) Includes 55,340 shares issuable pursuant to warrants, vested options to
purchase 1,359,947 shares and 199,654 shares held under the Retirement Plan.
Does not include an aggregate of 18,700 stock units granted in July 1996 to
Jacor's five non-employees directors (3,740 stock units to each director) in
lieu of cash director fees and a special bonus. Such units are convertible
into Jacor Common Stock upon the earlier of such a director no longer
serving as a director or, except for units issued to Mr. Dammeyer, when the
value of Jacor Common Stock equals or exceeds $53.50 per share for five
consecutive trading days. Also does not include an aggregate of 22,487 stock
units granted in November 1996 to certain executive officers of Jacor (9,569
stock units to each of Messrs. Michaels and Lawrence). Such units are
convertible into Jacor Common Stock at the earlier of the executive
officer's retirement, death, permanent disability or separation from service
or upon a change in control of Jacor.
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BUSINESS OF REGENT
Regent, founded in September 1993, is in the business of owning radio
stations. As of December 31, 1996, Regent entities owned 15 radio stations
located in five broadcast areas in the United States: Kansas City, Salt Lake
City, Las Vegas, Louisville and Charleston, S.C. Effective December 1, 1996,
Regent entered into the TBA with CitiCo whereby CitiCo provides programming for
the Regent Stations.
RECENTLY COMPETED ACQUISITIONS AND DISPOSITIONS. In April 1996, Regent sold
substantially all of the assets (excluding cash and accounts receivable) of
WLQT-FM and WDOL-FM in Dayton for $12.0 million in cash. Also, Regent acquired
radio stations WEZL-FM and WXLY-FM in Charleston, S.C. for $11.1 million in
cash.
In October 1996, Regent acquired substantially all of the assets of WVEZ-FM
in Louisville for $12.1 million in cash. In addition, Regent sold radio stations
WHKW-AM in Louisville and KKDD-AM in Las Vegas for $1.0 million and $0.6
million, respectively, in cash.
In November 1996, Regent acquired substantially all of the assets of radio
station KZHT-FM in Salt Lake City for $5.0 million in cash. Regent also
purchased all of the stock of Bountiful Broadcasting, Inc., owner of KURR-FM in
Salt Lake City, for $6.0 million in cash.
PENDING REGENT TRANSACTIONS. In addition to the Merger Agreement, Regent in
July 1996 entered into the KWNR Reorganization Agreement whereby Regent would
purchase all of the outstanding stock of SRLV, owner of KWNR-FM in Las Vegas,
for $9.0 million in cash and 480,000 shares of a new series of convertible
preferred stock. Simultaneous with the execution of the Merger Agreement,
Regent, Jacor, SRLV and SFE, the sole shareholder of SRLV, entered into the KWNR
Letter Agreement, which provides that: (i) if the Merger is consummated,
immediately following the Merger SRLV would merge with and into Jacor, with
Jacor as the surviving corporation, and Jacor would pay consideration to SFE an
amount equal to the number of shares of Jacor Common Stock and Merger Warrants
that a holder of 480,000 shares of preferred stock of Regent would be entitled
to receive in the Merger, plus any additional consideration the SFE would be
entitled to under the Merger Agreement, or (ii) if the Merger Agreement is
terminated prior to the Closing Date, SRLV would merge with and into Regent
pursuant to the terms and conditions of the KWNR Reorganization Agreement. Jacor
has informed Regent that it intends to exercise the Cash Election and pay Cash
Consideration to holders of Regent Stock. Notwithstanding a Cash Election by
Jacor, pursuant to the KWNR Letter Agreement, the sole stockholder of SRLV will
be entitled to receive the Stock Consideration, which would amount to 457,104
shares of Jacor Common Stock (assuming an average value of $26.50 for a share of
Jacor Common Stock on the Determination Date). See "THE MERGER--Conversion of
Regent Stock for the Merger Consideration."
In December 1996, Regent entered into an agreement to acquire substantially
all of the assets of radio station KBGO-FM in Las Vegas for $3.0 million in
cash.
Regent's pending transactions are subject to various conditions, including
approval by the FCC.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF REGENT
The following table sets forth, as of December 31, 1996, the number of
shares and percentage of Regent Common Stock beneficially owned by each person
who is known to Regent to be the beneficial owner of more than 5% of the Regent
outstanding Capital Stock by each of Regent's directors and nominees for
election as directors, by Regent's executive officers and by all of Regent's
executive officers and directors as a group.
BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF ALL
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2) CLASSES(3)
- --------------------------------------------------------------------- ------------------ ---------------
<S> <C> <C>
5% OR MORE BENEFICIAL OWNERS
Arthur S. DeMoss Foundation.......................................... 274,666 7.2%
Electra Investment Trust PLC......................................... 666,667 17.4%
JG Partnership, Ltd.................................................. 301,000 7.9%
LN Investment Capital Limited Partnership............................ 245,907 6.4%
Richland Ventures, L.P............................................... 233,333 6.1%
South Atlantic Venture Fund II, Limited Partnership.................. 320,000 8.4%
Southwest Florida Enterprises, Inc................................... 480,000(4) 11.2%
MANAGEMENT
Donald W. Burton..................................................... 490,000(5) 12.8%
Michael J. Connelly.................................................. 256,478(6) 6.7%
J. David Grissom..................................................... 346,000 9.1%
Terry S. Jacobs...................................................... 222,000(7) 5.4%
David A. Jones, Jr................................................... 350,000(8) 9.2%
William H. Lomicka................................................... 64,000 1.7%
W. Patrick Ortale, III............................................... 423,333(9) 11.1%
William L. Stakelin.................................................. 136,733(10) 3.3%
George E. Willett.................................................... 20,000(11) *
John L. Pouschine.................................................... * *
All executive officers and directors as a group (persons)............ 2,308,544(12) 56.1%
</TABLE>
- ------------------------
* Less than 1%
(1) Regent stockholders that are investment funds may distribute to the owners
of such funds the Jacor Common Stock and Merger Warrants received as Merger
Consideration.
(2) The Commission has defined beneficial ownership to include sole or shared
voting or investment power with respect to a security or the right to
acquire beneficial ownership of a security within 60 days. The number of
shares indicated is owned with sole voting and investment power unless
otherwise noted and includes certain shares held in the name of family
members, trusts and affiliated companies as to which beneficial ownership
may be disclaimed. The number of shares indicated also includes shares of
Regent Class A common stock and Class B common stock issuable pursuant to
options granted to management which will have vested prior to the merger.
(3) Under the rules promulgated by the Commission, any securities not
outstanding that are subject to the options or warrants exercisable within
60 days are deemed to be outstanding for the purpose of computing the
percentage of the classes owned by such person but are not deemed to be
outstanding for the purpose of computing the percentage of the class owned
by any other person.
(4) These shares consist of the Regent Preferred Stock to be received by SRLV
under the KWNR Reorganization Agreement in the event the Merger is not
consummated. However, if the Merger is
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consummated, SRLV will not receive any shares of Regent Preferred Stock;
instead, under the KWNR Letter Agreement, SRLV would merge with and into
Jacor, with Jacor as the surviving corporation, and would receive the amount
of Jacor Common Stock that a holder of 480,000 shares of Regent Stock would
be entitled to receive under the Merger.
(5) All shares owned by South Atlantic Venture Fund II, Limited Partnership and
South Atlantic Venture Fund III, Limited Partnership are included in the
shares owned by Mr. Burton. Mr. Burton is a director of the Company and
managing general partner of South Atlantic Venture Partners II, Limited
Partnership, the general partner of South Atlantic Venture Fund II, Limited
Partnership, a stockholder of Regent, and managing general partner of South
Atlantic Venture Partners III, Limited Partnership, the general partner of
South Atlantic Venture Fund III, Limited Partnership, a stockholder of the
Company.
(6) All shares owned by LN Investment Capital Limited Partnership are included
in the shares owned by Mr. Connelly. Mr. Connelly is a director of Regent
and managing general partner of LN Investment Capital Limited Partnership, a
stockholder of Regent.
(7) Includes vested options to purchase 50,000 shares of Class B common stock
and 75,000 shares of Class A common stock.
(8) All shares owned by Chrysalis Ventures Limited Partnership and JG
Partnership, Ltd. are included in the shares owned by Mr. Jones. Mr. Jones
is a director of Regent and Secretary/Director of Chrysalis Ventures, Inc.,
the general partner of Chrysalis Ventures Limited Partnership, a stockholder
of Regent which also has investment power for JG Partnership, Ltd. pursuant
to a management agreement.
(9) All shares owned by Richland Ventures, L.P. and Lawrence, Tyrrell, Ortale &
Smith, II, L.P. are included in the shares owned by Mr. Ortale. Mr. Ortale
is a director of Regent and general partner of Richland Partners, the sole
general partner of Richland Ventures, L.P., a stockholder of Regent, and
general partner of LTOS II Partners, the general partner of Lawrence,
Tyrrell, Ortale & Smith, II, L.P., a stockholder of Regent.
(10) Includes vested options to purchase 100,000 shares of Class A common stock.
(11) Includes vested options to purchase 20,000 shares of Class A common stock.
(12) Includes vested options to purchase 195,000 shares of Class A common stock
and 50,000 Class B common stock.
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DESCRIPTION OF JACOR CAPITAL STOCK
Jacor's Certificate of Incorporation authorizes 104,000,000 shares of
capital stock, of which 100,000,000 shares are Common Stock, 2,000,000 shares
are Class A Preferred Stock, $.01 par value and 2,000,000 shares are Class B
Preferred Stock, $.01 par value (together with the Class A Preferred Stock, the
"Preferred Stock"). As of December 31, 1996, 31,294,338 shares of Common Stock
were issued and outstanding.
COMMON STOCK
Under Jacor's Certificate of Incorporation and Delaware law, the holders of
Common Stock have no preemptive rights and the Common Stock has no redemption,
sinking fund, or conversion privileges. The holders of Common Stock are entitled
to one vote for each share held on any matter submitted to the stockholders and
do not have the right to cumulate their votes in the election of director. All
corporate action requiring stockholder approval, unless otherwise required by
law, Jacor's Certificate of Incorporation or its Bylaws, must be authorized by a
majority of the votes cast. Approval of only a majority of the outstanding
voting shares is required to effect (i) an amendment to Jacor's Certificate of
Incorporation, (ii) a merger or consolidation, and (iii) a disposition of all or
substantially all of Jacor's assets. A majority of the directors on the Jacor
Board, as well as a majority of the outstanding voting shares, have the ability
to amend the Jacor Bylaws.
In the event of liquidation, each share of Common Stock is entitled to share
ratably in the distribution of remaining assets after payment of all debts,
subject to the prior rights in liquidation of any share of preferred stock
issued. Holders of shares of Common Stock are entitled to share ratably in such
dividends as the Jacor Board of Directors, in its discretion, may validly
declare from funds legally available therefor, subject to the prior rights of
holders of shares of Jacor's preferred stock as may be outstanding from time to
time. Certain restrictions on the payment of dividends are imposed under the
Credit Facility. See "Risk Factors--Lack of Dividends; Restrictions on Payments
of Dividends."
CLASS A AND CLASS B PREFERRED STOCK
No shares of Preferred Stock have been issued. The Class A Preferred Stock
has full voting rights. The Class B Preferred Stock has no voting rights except
as otherwise provided by law or as lawfully fixed by the Board of Directors with
respect to a particular series.
Jacor's Certificate of Incorporation authorizes the Jacor Board to provide
from time to time for the issuance of the shares of Preferred Stock and by
resolution to establish the terms of each such series, including (i) the number
of shares of the series and the designation thereof, (ii) the rights in respect
of dividends on the shares, (iii) liquidation rights, (iv) redemption rights,
(v) the terms of any purchase, retirement or sinking fund to be provided for the
shares of the series, (vi) terms of conversion, if any, (vii) restrictions,
limitations and conditions, if any, on issuance of indebtedness of Jacor, (viii)
voting rights; and (ix) any other preferences and other rights and limitations
not inconsistent with law, the Certificate of Incorporation, or any resolution
of the Jacor Board.
The issuance of Preferred Stock, while providing flexibility in connection
with the possible acquisitions and other corporate purposes, could among other
things adversely affect the rights of holders of Common Stock, and, under
certain circumstances, make it more difficult for a third party to gain control
of Jacor. In the event that shares of Preferred Stock are issued and convertible
into shares of Common Stock the holders of Common Stock may experience dilution.
CITICASTERS WARRANTS
Jacor issued the Citicasters Warrants pursuant to the terms of the
Citicasters Merger agreement. If all of the Citicasters Warrants are exercised,
4,400,000 shares of Jacor Common Stock would be issued. Each Citicasters Warrant
initially entitles the holder thereof to purchase .2035247 of a share of Jacor
Common Stock at a price of $28.00 per full share (the "Citicasters Price"). The
Citicasters Price and the number of
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shares of Jacor Common Stock issuable upon the exercise of each Citicasters
Warrant are subject to adjustment in certain events described below. Each
Citicasters Warrant may be exercised until 5:00 p.m., Eastern Time, on September
18, 2001 (the "Citicasters Expiration Date") in accordance with the terms of the
Citicasters Warrants and Citicasters warrant agreement. To the extent that any
Citicasters Warrant remains outstanding after such time, such unexercised
Citicasters Warrant will automatically terminate.
Citicasters Warrants may be exercised by surrendering to the warrant agent a
signed Citicasters Warrant certificate together with the form of election to
purchase on the reverse thereof indicating the warrantholder's election to
exercise all or a portion of the Citicasters Warrants evidenced by such
certificate. Surrendered certificates must be accompanied by payment of the
aggregate Citicasters Price in respect of the Citicasters Warrant to be
exercised, which payment may be made in cash or by certified or bank cashier's
check drawn on a banking institution chartered by the government of the United
States or any state thereof payable to the order of Jacor. No adjustments as to
cash dividends with respect to the Jacor Common Stock will be made upon any
exercise of Citicasters Warrants.
If fewer than all of the Citicasters Warrants evidenced by any certificate
are exercised, the warrant agent will deliver to the exercising warrantholder a
new Citicasters Warrant certificate representing the unexercised Citicasters
Warrants. Jacor will not be required to issue fractional shares of Jacor Common
Stock upon exercise of any Citicasters Warrant and in lieu thereof will pay in
cash an amount equal to the same fraction of the closing price per share of the
Jacor Common Stock, determined as provided in the Citicasters warrant agreement.
Jacor has reserved for issuance a number of shares of Jacor Common Stock
sufficient to provide for the exercise of the rights of purchase represented by
the Citicasters Warrants.
A Citicasters Warrant may not be exercised in whole or in part if in the
reasonable opinion of counsel to Jacor the issuance of Jacor Common Stock upon
such exercise would cause Jacor to be in violation of the Communications Act or
the rules and regulations in effect thereunder.
The number of shares of Jacor Common Stock purchasable upon the exercise of
each Citicasters Warrant and the Citicasters Price are subject to the adjustment
in connection with (i) the issuance of a stock dividend to holders of Jacor
Common Stock, a combination or subdivision or issuance by reclassification of
Jacor Common Stock; (ii) the issuance of rights, options or warrants to all
holders of Jacor Common Stock without charge to such holders to subscribe for or
purchase shares of Jacor Common Stock at a price per share which is lower than
the current market price; and (iii) certain distributions by Jacor to the
holders of Jacor Common Stock of evidences of indebtedness or of its assets
(excluding cash dividends, or distributions out of earnings or out of surplus
legally available for dividends) or of convertible securities, all as set forth
in the Citicasters Warrant Agreement. Notwithstanding the foregoing, no
adjustment in the number of shares of Jacor Common Stock issuable upon the
exercise of Citicasters Warrants will be required until such adjustment would
require an increase or decrease of at least one percent (1%) in the number of
shares of Jacor Common Stock purchasable upon the exercise of each Citicasters
Warrant. In addition, Jacor may at its option reduce the Citicasters Price.
In case of any consolidation or merger of Jacor with or into another
corporation, or any sale, transfer or lease to another corporation of all or
substantially all of the property of Jacor, the Citicasters warrant agreement
requires that effective provisions be made so that each holder of an outstanding
Citicasters Warrant will have the right thereafter to exercise the Citicasters
Warrant for the kind and amount of securities and property receivable in
connection with such consolidation, merger, sale, transfer or lease by a holder
of the number of shares of Jacor Common Stock for which such Citicasters Warrant
were exercisable immediately prior thereto. In addition, if Jacor takes any
action prior to the issuance of the Citicasters Warrants that would have
required an adjustment in the exercise price of the Citicasters Warrants or in
the number of shares purchasable upon exercise of the Citicasters Warrants, then
the exercise price of the Citicasters Warrants or such number of shares will be
adjusted upon issuance of the Citicasters Warrants to give effect to the
adjustment which would have been required as a result of such action.
The Citicasters warrant agreement may be amended or supplemented without the
consent of the holders of Citicasters Warrants to cure any ambiguity or to
correct or supplement any defective or
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inconsistent provision contained therein, or to make such other necessary or
desirable changes which shall not adversely affect interest of the
warrantholders. Any other amendment to the Citicasters warrant agreement
requires the consent of warrantholders representing not less than 50% of the
Citicasters Warrants then outstanding provided that no change in the number or
nature of the securities purchasable upon the exercise of any Citicasters
Warrant, or the Citicasters Price therefor, or the acceleration of the
Citicasters Expiration Date, and no change in the antidilution provisions which
would adversely affect the interest of the holders of Citicasters Warrants,
shall be made without the consent of the holder of such Citicasters Warrant,
other than such changes as are specifically prescribed by the Citicasters
warrant agreement or are made in compliance with the applicable law.
No holder of Citicasters Warrants is entitled to vote or receive dividends
or be deemed for any purpose the holder of Jacor Common Stock until the
Citicasters Warrants are properly exercised as provided in the Warrant
Agreement.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Jacor Common Stock is KeyCorp
Shareholder Services, Inc.
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DESCRIPTION OF OTHER JACOR INDEBTEDNESS
Jacor expects that the funds necessary to pay any Cash Consideration and to
consummate the Merger will be paid from cash held by Jacor, borrowings under the
Credit Facility and proceeds from the sale by JCC of the 1996 9 3/4% Notes. In
addition to this indebtedness, Jacor has the following debt securities
outstanding.
1996 10 1/8% NOTES
In June 1996, Jacor and JCAC, Inc., a Florida corporation ("JCAC") and
wholly-owned subsidiary of Jacor which was merged with and into Citicasters (now
known as JCC) in September 1996, consummated the sale by JCAC of $100.0 million
aggregate principal amount of 10 1/8% Senior Subordinated Notes due 2006 (the
"1996 10 1/8% Notes"). JCAC loaned the net proceeds of the sale of the 1996
10 1/8% Notes (the "1996 10 1/8% Notes Offering") to Jacor in connection with
the financing for the Citicasters Merger. Upon the consummation of that merger,
the 1996 10 1/8% Notes became obligations of Citicasters.
The 1996 10 1/8% Notes will mature on June 15, 2006. The 1996 10 1/8% Notes
bear interest at the rate per annum of 10 1/8% from the date of issuance or from
the most recent interest payment date to which interest has been paid or
provided for, payable semi-annually on June 15 and December 15 of each year,
commencing December 15, 1996, to the persons in whose names such 1996 10 1/8%
Notes are registered at the close of business on the June 1 or December 1
immediately preceding such interest payment date. Interest will be calculated on
the basis of a 360-day year consisting of twelve 30-day months. The trustee
under the indenture for the 1996 10 1/8% Notes (the "1996 10 1/8% Note
Indenture") authenticated and delivered the Notes for original issue in an
aggregate principal amount of $100.0 million.
The 1996 10 1/8% Notes are not redeemable at JCC's option before June 15,
2001. Thereafter, the 1996 10 1/8% Notes are subject to redemption at the option
of JCC, at redemption prices declining from 105.063% of the principal amount for
the twelve months commencing June 15, 2001 to 100% on and after June 15, 2004,
plus in each case, accrued and unpaid interest thereon to the applicable
redemption date.
The 1996 10 1/8% Note Indenture contains certain covenants which impose
certain limitations and restrictions on the ability of JCC to incur additional
indebtedness, pay dividends or make other distributions, make certain loans and
investments, apply the proceeds of asset sales (and use the proceeds thereof),
create liens, enter into certain transactions with affiliates, merge,
consolidate or transfer substantially all its assets and make investments in
unrestricted subsidiaries.
If a change of control occurs, JCC is required to offer to repurchase all
outstanding 1996 10 1/8% Notes at a price equal to 101% of their principal
amount, plus accrued and unpaid interest, if any, to the date of repurchase.
There can be no assurance that JCC will have sufficient funds to purchase all of
the 1996 10 1/8% Notes in the event of a change of control offer or that JCC
would be able to obtain financing for such purchase on favorable terms, if at
all. In addition, the Credit Facility restricts JCC's ability to repurchase the
1996 10 1/8% Notes, including pursuant to a change of control offer.
Furthermore, a change of control under the 1996 10 1/8% Note Indenture will
result in a default under the Credit Facility.
A Change of Control under the indenture governing the 1996 10 1/8% Notes
means any transaction or series of transactions in which any of the following
occurs: (i) any person or group (within the meaning of Rule 13d-3 under the
Exchange Act and Sections 13(d) and 14(d) of the Exchange Act), other than Zell/
Chilmark or any of its Affiliates, becomes the direct or indirect beneficial
owner (as defined in Rule 13d-3 under the Exchange Act) of (A) greater than 50%
of the total voting power (on a fully diluted basis as if all convertible
securities had been converted) entitled to vote in the election of directors of
JCC, or the surviving person (if other than JCC), or (B) greater than 20% of the
total voting power (on a fully diluted basis as if all convertible securities
had been converted) entitled to vote in the election of directors of JCC, or the
surviving person (if other than JCC), and such person or group has the ability
to elect, directly or indirectly, a majority of the members of the Board of
Directors of JCC; or (ii) JCC consolidates with or merges into another person,
another person consolidates with or merges into JCC, JCC issues shares of its
Capital Stock or all or substantially all of the assets of JCC are sold,
assigned, conveyed, transferred, leased
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or otherwise disposed of to any person as an entirety or substantially as an
entirety in one transaction or a series of related transactions and the effect
of such consolidation, merger, issuance or sale is as described in clause (i)
above.
Events of default under the 1996 10 1/8% Note Indenture include various
events of default customary for such type of agreement, including the failure to
pay principal and interest when due on the Notes, cross defaults on other
indebtedness for borrowed monies in excess of $5.0 million (which indebtedness
therefore includes the Credit Facility, the LYONs (as defined herein) and the
1996 9 3/4% Notes) and certain events of bankruptcy, insolvency and
reorganization.
1994 9 3/4% NOTES
The 9 3/4% Senior Subordinated Notes due 2004 (the "1994 9 3/4% Notes") are
general unsecured obligations of JCC and are subordinated in rights of payment
to all Senior Indebtedness (as defined in the 1994 9 3/4% Note Indenture). The
1994 9 3/4% Notes were issued pursuant to an Indenture between Citicasters (now
known as JCC) and Shawmut Bank Connecticut, National Association, as Trustee
(the "1994 9 3/4% Note Indenture").
Following Jacor's repurchase of $15.0 million of the 1994 9 3/4% Notes
subsequent to the 1996 9 3/4% Notes Offering, the December 31, 1996 aggregate
outstanding principal amount of the 1994 9 3/4% Notes was $3.1 million. The 1994
9 3/4% Notes mature on February 15, 2004, and accrue interest at the rate of
9 3/4% per annum.
The 1994 9 3/4% Notes are not redeemable at JCC's option before February 15,
1999 (other than in connection with certain public offerings of JCC Common
Stock, as described below). Thereafter, the 1994 9 3/4% Notes are subject to
redemption at the option of JCC, at redemption prices declining from 104.875% of
the principal amount for the twelve months commencing February 15, 1999 to
100.00% on and after February 15, 2002, plus, in each case, accrued and unpaid
interest thereon to the applicable redemption date.
In addition, at any time on or before February 15, 1999, (i) up to 25% of
the aggregate principal amount of the 1994 9 3/4% Notes may be redeemed at a
redemption price of 108.75% of the principal amount thereof, plus accrued and
unpaid interest, out of the net proceeds of public offerings of primary shares
of JCC Common Stock, and after giving effect to such redemption at least $100.0
million in 1994 9 3/4% Notes remain outstanding and (ii) upon a Change of
Control (as defined in the 1994 9 3/4% Note Indenture), the 1994 9 3/4% Notes
can be redeemed provided at least $100.0 million of 1994 9 3/4% Notes remain
outstanding and such redemption occurs within 180 days of the date of a Change
of Control. In addition, prior to December 31, 1996, JCC can redeem the 1994
9 3/4% Notes from the proceeds of Asset Sales (as defined in the 1994 9 3/4%
Note Indenture) subject to certain restrictions.
Within 60 days after any Change of Control, JCC or its successors must make
an offer to purchase the 1994 9 3/4% Notes at a purchase price equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest to the
date of purchase. The 1994 9 3/4% Note Indenture contains certain covenants
which impose certain limitations and restrictions on the ability of JCC to incur
additional indebtedness, pay dividends or make other distributions, make certain
loans and investments, apply the proceeds of Asset Sales (and use the proceeds
thereof), create liens, enter into certain transactions with affiliates, merge,
consolidate or transfer substantially all its assets, and make investments in
unrestricted subsidiaries. The 1994 9 3/4% Note Indenture includes various
events of default customary for such type of agreements, such as failure to pay
principal and interest when due on the 1994 9 3/4% Notes, cross defaults on
other indebtedness and certain events of bankruptcy, insolvency and
reorganization.
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LIQUID YIELD OPTION-TM- NOTES
In June 1996, Jacor consummated the issuance and sale of Liquid Yield
Option-TM- Notes due June 12, 2011 (the "LYONs") in the aggregate principal
amount at maturity of $226.0 million (excluding $33.9 million aggregate
principal amount at maturity subject to the over-allotment option) (the "LYONs
Offering"). Each LYON had an Issue Price of $443.14 and has a principal amount
at maturity of $1,000.
Each LYON is convertible, at the option of the holder, at any time on or
prior to maturity, unless previously redeemed or otherwise purchased, into Jacor
Common Stock at a conversion rate of 13.412 shares per LYON. The conversion rate
will not be adjusted for accrued original issue discount, but is subject to
adjustment upon the occurrence of certain events affecting the Common Stock.
Upon conversion, the holder will not receive any cash payment representing
accrued original issue discount; such accrued original issue discount will be
deemed paid by the Common Stock received by the holder on conversion.
The LYONs are not redeemable by Jacor prior to June 12, 2001. Thereafter,
the LYONs are redeemable for cash at any time at the option of Jacor, in whole
or in part, at redemption prices equal to the issue price plus accrued original
issue discount to the date of redemption.
The LYONs will be purchased by Jacor, at the option of the holder, on June
12, 2001 and on June 12, 2005 for a Purchase Price of $581.25 and $762.39
(representing issue price plus accrued original issue discount to each date),
respectively, representing a 5.50% yield per annum to the holder on such date,
computed on a semiannual bond equivalent basis. Jacor, at its option, may elect
to pay the purchase price on any such purchase date in cash or Jacor Common
Stock, or any combination thereof. In addition, as of 35 business days after the
occurrence of a change in control of Jacor occurring on or prior to June 12,
2001, each LYON will be purchased for cash, by Jacor, at the option of the
holder, for a change in control purchase price equal to the issue price plus
accrued original issue discount to the change in control purchase date set for
such purchase. The change in control purchase feature of the LYONs may in
certain circumstances have an anti-takeover effect.
Under the indenture for the LYONs (the "LYONs Indenture"), a "Change in
Control" of Jacor is deemed to have occurred at such time as (i) any person (as
the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) other than Zell/Chilmark, Jacor, any subsidiary of Jacor, or any
employee benefit plan of either Jacor or any subsidiary of Jacor, files a
Schedule 13D or 14D-1 under the Exchange Act (or any successor schedule, form or
report) disclosing that such person has become the beneficial owner of 50% or
more of the Jacor Common Stock or other capital stock of Jacor into which such
Jacor Common Stock is reclassified or changed, with certain exceptions, or (ii)
there shall be consummated any consolidation or merger of Jacor (a) in which
Jacor is not the continuing or surviving corporation or (b) pursuant to which
the Jacor Common Stock would be converted into cash, securities or other
property, in each case, other than a consolidation or merger of Jacor in which
the holders of Jacor Common Stock immediately prior to the consolidation or
merger own, directly or indirectly, at least a majority of Jacor Common Stock of
the continuing or surviving corporation immediately after the consolidation or
merger. A Change of Control under the LYONs Indenture constitutes an event of
default under the Credit Facility.
The LYONs Indenture includes various events of default customary for such
type of agreement, such as cross defaults on other indebtedness for borrowed
monies in excess of $10.0 million (which indebtedness therefore includes the
Credit Facility, the 1996 10 1/8% Notes and the 1996 9 3/4% Notes) and certain
events of bankruptcy, insolvency and reorganization.
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COMPARISON OF CORPORATE CHARTERS
Jacor is incorporated under the laws of the State of Delaware, and Jacor's
stockholders' rights are governed by Delaware law, Jacor's Certificate of
Incorporation ("Jacor Certificate") and Jacor's Bylaws (the "Jacor Bylaws").
Regent is incorporated under the laws of the State of Delaware, and Regent's
stockholders' rights are governed by Delaware law, Regent's Certificate of
Incorporation (the "Regent Certificate") and Regent's Bylaws (the "Regent
Bylaws"). Upon consummation of the Merger and receipt of the Merger
Consideration, Regent stockholders will become security holders of Jacor and,
accordingly, their rights will be governed by Delaware law, the Jacor
Certificate and the Jacor Bylaws.
The following is a summary of the material differences in the rights of
Jacor stockholders and in the rights of Regent stockholders under the Jacor
Certificate and Jacor Bylaws, and the Regent Certificate and Regent Bylaws. The
following comparison does not purport to be a complete statement of the rights
of Jacor stockholders or of the rights of Regent's stockholders under applicable
Delaware law, or a complete summary of the Jacor Certificate, Jacor Bylaws,
Regent Certificate or Regent Bylaws. The following comparison is qualified in
its entirety by reference to the Jacor Certificate, the Jacor Bylaws, the Regent
Certificate and the Regent Bylaws.
CAPITAL STOCK. As described under "DESCRIPTION OF CAPITAL STOCK," the Jacor
Certificate authorizes 104,000,000 shares of capital stock, of which 100,000,000
shares are Common Stock, 2,000,000 shares are Class A Preferred Stock, $.01 par
value and 2,000,000 shares are Class B Preferred Stock, $.01 par value. The
Jacor Certificate permits the Jacor Board of Directors to exercise broad
discretion in fixing the terms of series of the Preferred Stock, which is
subject to Delaware law and the terms of the Jacor Certificate. The Preferred
Stock is senior to the Jacor Common Stock, and so long as any Preferred Stock is
outstanding, no dividend shall be declared or paid on the Jacor Common Stock or
any other class of shares junior to the Preferred Stock. The holders of the
Jacor Common Stock and the Class A Preferred Stock have full voting rights
(provided that the Jacor Common Stock and the Class A Preferred Stock vote
together, and not separately). The holders of the Class B Preferred Stock are
not entitled to vote at meetings of stockholders, except as required by law or
as lawfully fixed by the Board of Directors.
The Regent Certificate authorizes 9,650,000 shares of capital stock, of
which 5,000,000 shares are Class A Common Stock, $.01 par value, 150,000 shares
are Class B Common Stock, $.01 par value (together, the "Regent Common Stock")
and 4,500,000 shares are Preferred Stock, $.01 par value, consisting of
1,000,000 shares convertible preferred stock, having a stated value of $10 per
share, 2,000,000 shares of convertible preferred stock, having a stated value of
$12.50 per share (1994 Series) and 1,500,000 shares of convertible preferred
stock, having a stated value of $15.00 per share (1995 Series) (the "Regent
Preferred Stock"). The Class A Common Stock and the Class B Common Stock are
identical in all respects and have equal rights and privileges, except that the
Class A Common Stockholders will receive preferential payments in the case of
any liquidation, dissolution or winding up. The Regent Certificate permits the
Regent Board of Directors to exercise broad discretion in fixing the terms of
series of the Regent Preferred Stock, which is subject to Delaware law and the
terms of the Regent Certificate. The holders of the Regent Common Stock and
Preferred Stock have full voting rights to vote together as one class on all
matters submitted to a vote of Regent stockholders.
BOARD OF DIRECTORS; COMMITTEES. The Jacor Bylaws provide that the Board of
Directors shall be composed of such number of members as the Board of Directors
shall from time to time designate, except in the absence of such designation,
the number of members shall be seven. The Regent Bylaws provide that the number
of members of the Board of Directors shall be not less than five nor more than
fifteen, as fixed by the Board of Directors. The number of initial directors was
set at six pursuant to the Regent Bylaws. The Jacor Board of Directors currently
consists of seven members.
Under both Jacor's Bylaws and Regent's Bylaws, the Board of Directors may
designate, by a vote of a majority of the directors, one or more committees to
consist of one or more members of the board of directors. The Jacor Bylaws
provide that, to the extent provided by the Board of Directors, any committee
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designated by the Board of Directors may exercise the power and authority of the
Board of Directors to declare dividends, authorize the issuance of stock or to
adopt a certificate of ownership pursuant to Section 253 of the DGCL. One-third
of a committee's members constitute a quorum, unless the committee consists of
one or two members, in which case one member constitutes a quorum. Each
committee may adopt its own rules regarding the conduct of meetings, except as
required by law or in the Jacor Bylaws. The Regent Bylaws provide that any such
committee designated may exercise all the powers of the Regent Board of
Directors in the management of the business and affairs of Regent, subject to
applicable law and resolutions of the Regent Board of Directors. The Regent
Bylaws also expressly provide that the Board of Directors may establish an
Executive Committee, which as the full power to manage the business and affairs
of Regent, in between the regular or any special meeting of the Regent Board of
Directors, except that it may not: (i) amend the Regent Certificate, (ii)
approve a merger or consolidation of Regent, (iii) recommend to Regent's
stockholders the sale, lease or exchange of substantially all of Regent's
assets, (iv) recommend to the Regent stockholders a dissolution or the
revocation of a dissolution of Regent, (v) amend the Regent Bylaws, (vi) declare
dividends, (vii) authorize the issuance of stock, or (viii) adopt a certificate
of ownership and merger. A majority of the members of the Executive Committee of
Regent constitutes a quorum, and each Regent committee may adopt its own rules
regarding conducting meetings, unless otherwise provided by the Regent Board of
Directors.
PREEMPTIVE RIGHTS. The Jacor Certificate provides that no stockholder shall
have preemptive rights to purchase shares. Regent's Certificate does not address
preemptive rights, but under Delaware law, preemptive rights are only available
if expressly granted in a corporation's certificate of incorporation.
CUMULATIVE VOTING. Neither the Jacor Certificate and the Jacor Bylaws, nor
the Regent Certificate and Regent Bylaws provide for cumulative voting in the
election of directors.
AMENDMENTS TO BYLAWS. Under both the Jacor Certificate and the Regent
Certificate, the directors are granted the power to amend or repeal the existing
bylaws or adopt new bylaws, although such power does not preempt or otherwise
affect the power of the stockholders also to amend the bylaws.
INDEMNIFICATION; LIMITS ON DIRECTOR LIABILITY. Both the Jacor Certificate
and the Regent Certificate provide for indemnification of directors, officers,
employees and agents of the company to the fullest extent permitted by Delaware
law. Also, both the Jacor Certificate and the Regent Certificate limit the
personal liability of directors, except for a breach of a director's duty of
loyalty to the corporation or its shareholders or for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, for willful or negligent conduct in paying dividends or repurchasing stock
out of other than legally available funds, or for any transaction from which a
director derived an improper personal benefit.
COMPROMISE WITH CREDITORS AND STOCKHOLDERS. Delaware law provides that a
certificate of incorporation may contain a provision allowing for a compromise
or arrangement between a corporation and its creditors or stockholders. Under
such a provision, whenever such a compromise or arrangement is proposed, a
Delaware court may order a meeting for the purpose of eliciting an agreement to
the compromise or the arrangement which would be binding on all such creditors
and/or stockholders and the corporation. The Jacor Certificate contains such a
provision, but the Regent Certificate does not contain such a provision.
LEGAL MATTERS
The legality of the Jacor Common Stock and the Merger Warrants to be issued
in connection with the Merger is being passed upon for Jacor by Graydon, Head &
Ritchey, Cincinnati, Ohio.
EXPERTS
The consolidated balance sheets of Jacor Communications, Inc. and
Subsidiaries as of December 31, 1995 and 1994 and the consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1995; and the combined balance sheets of the
102
<PAGE>
Selected Gannett Radio Stations as of December 31, 1995 and September 29, 1996
and the combined statements of operations, changes in Gannett's investment in
radio stations and cash flows for the years ended December 25, 1994 and December
31, 1995 and the nine month period ended September 29, 1996; and the
consolidated balance sheets of Regent Communications, Inc. and Subsidiaries as
of December 31, 1995 and September 30, 1996 and the consolidated statements of
operations, shareholders' equity and cash flows for the years ended December 31,
1994 and 1995 and the nine months ended September 30, 1996, have been included
herein in reliance on the reports of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The consolidated balance sheets of Citicasters Inc. as of December 31, 1995
and 1994 and the consolidated statements of operations, changes in shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1995 included in this Registration Statement, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon (which
contains an explanatory paragraph with respect to Citicasters' emergence from
bankruptcy and subsequent adoption of "fresh-start reporting" as of December 31,
1993, as more fully described in Note B to the consolidated financial
statements) appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Noble Broadcast Group, Inc. as of
December 31, 1995 and December 25, 1994 and for each of the three years in the
period ended December 31, 1995, included in this prospectus have been so
included in reliance on the report (which includes an explanatory paragraph
relating to Jacor's agreement to purchase Noble Broadcast Group, Inc. as
described in Note 2 to the consolidated financial statements) of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
103
<PAGE>
INDEX OF DEFINED TERMS
Set forth below is a list of defined terms used in this
Prospectus/Information Statement/Information Statement and the page on which
such term is defined.
<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------------------------------------------------------------------------- ---------
<S> <C>
1996 9 3/4% Note Indenture............................................................................... 34
1996 9 3/4% Notes........................................................................................ 9
1996 9 3/4% Notes Offering............................................................................... 34
1996 10 1/8% Notes Offering.............................................................................. 98
1996 10 1/8% Note Indenture.............................................................................. 98
1996 10 1/8% Notes....................................................................................... 98
1992 Cable Act........................................................................................... 87
1994 9 3/4% Note Event................................................................................... 34
1994 9 3/4% Note Indenture............................................................................... 99
1994 9 3/4% Notes........................................................................................ 99
Adjustment Amount........................................................................................ 24
Adjustments.............................................................................................. 22
Aggregate Average Value of Jacor Common Stock............................................................ 1, 7
Aliens................................................................................................... 95
Antidilution Adjustment.................................................................................. 23
Antitrust Division....................................................................................... 16
ARS...................................................................................................... 73
ARS Transaction.......................................................................................... 73
Average Value of Jacor Common Stock...................................................................... 7
Base Share Number........................................................................................ 21
BFI...................................................................................................... 23
BFI Credit Line.......................................................................................... 23
Blackout Period.......................................................................................... 36
Broadcast cash flow...................................................................................... 57, 59
Cash Consideration....................................................................................... 1, 21
Cash Election............................................................................................ 1, 7
Certificate.............................................................................................. 25
Citicasters.............................................................................................. 12
Citicasters Expiration Date.............................................................................. 96
Citicasters Merger....................................................................................... 16
Citicasters Price........................................................................................ 95
Citicasters Warrants..................................................................................... 70
CitiCo................................................................................................... 5
CitiCo. TBAs............................................................................................. 43
Claim.................................................................................................... 37
Clear Channel............................................................................................ 71
Closing Date............................................................................................. 1, 21
CMM...................................................................................................... 70, 88
Code..................................................................................................... 7
Colfax Transaction....................................................................................... 72
Commission............................................................................................... 1
Communications Act....................................................................................... 17
Consent.................................................................................................. 68
Conversion Number........................................................................................ 22
Court.................................................................................................... 41
Credit Facility.......................................................................................... 9
CTA...................................................................................................... 86
</TABLE>
104
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------------------------------------------------------------------------- ---------
<S> <C>
Damages.................................................................................................. 36
DARS..................................................................................................... 80
DBS...................................................................................................... 82
Determination Date....................................................................................... 22
DGCL..................................................................................................... 6
Dissenting Shares........................................................................................ 25
DMA...................................................................................................... 78
DTV...................................................................................................... 86
Duchossois Transaction................................................................................... 73
EBITDA................................................................................................... 55
Effective Period......................................................................................... 36
Effective Time........................................................................................... 6
Entercom................................................................................................. 72
Entercom Transaction..................................................................................... 72
Escrow Agent............................................................................................. 9
Escrow Agreement......................................................................................... 9
Excess Number............................................................................................ 24
Exchange Act............................................................................................. 2
Exchange Agent........................................................................................... 8
EXCL..................................................................................................... 11
Expiration Date.......................................................................................... 31
FAS...................................................................................................... 65
FASB..................................................................................................... 65
FCC...................................................................................................... 5
Fraction................................................................................................. 31
FTC...................................................................................................... 16
Gannett.................................................................................................. 12
Gannett Exchange......................................................................................... 72
Goldman Sachs............................................................................................ 8
GNP...................................................................................................... 79
Great Lakes.............................................................................................. 73
HSR Act.................................................................................................. 10
Indemnified Parties...................................................................................... 37
Jacor.................................................................................................... 1
Jacor Bylaws............................................................................................. 102
Jacor Certificate........................................................................................ 102
Jacor Common Stock....................................................................................... 1, 102
Jacor-KWNR Acquisition................................................................................... 21
JCAC..................................................................................................... 99
JCC...................................................................................................... 6
JSA...................................................................................................... 17
KBGO Option Agreement.................................................................................... 22
KKDD Sale Agreement...................................................................................... 21
KURR Purchase Agreement.................................................................................. 21
KWNR Purchase Adjustment................................................................................. 24
KWNR Cash Adjustment..................................................................................... 24
KWNR Letter Agreement.................................................................................... 5
KWNR Reorganization Agreement............................................................................ 5
KWNR Stock Adjustment.................................................................................... 24
KWNR Stock Consideration................................................................................. 24
KWNR TBA................................................................................................. 21
KZHT Purchase Agreement.................................................................................. 21
</TABLE>
105
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------------------------------------------------------------------------- ---------
<S> <C>
LECs..................................................................................................... 81
Letter of Credit......................................................................................... 30
LMA...................................................................................................... 60
Long-Term Debt Adjustment................................................................................ 23
LYONs.................................................................................................... 100
LYONs Indenture.......................................................................................... 100
LYONs Offering........................................................................................... 100
Material Adverse Effect.................................................................................. 29
Maximum Aggregate Regent Liabilities..................................................................... 24
Maximum Price Adjustment................................................................................. 23
Merger................................................................................................... 1
Merger Agreement......................................................................................... 1
Merger Consideration..................................................................................... 1, 22
Merger Warrant........................................................................................... 21
Minimum Price Adjustment................................................................................. 22
MMDS..................................................................................................... 81
MSOs..................................................................................................... 81
Nasdaq National Market................................................................................... 1
Nationwide............................................................................................... 72
New Merger Event......................................................................................... 6
New Wave Transaction..................................................................................... 71
Noble.................................................................................................... 12
Noble Acquisition........................................................................................ 16
Notice................................................................................................... 41
Options.................................................................................................. 9
Palmer Transaction....................................................................................... 72
Par...................................................................................................... 71
Par Transaction.......................................................................................... 71
Pending Transactions..................................................................................... 16
Preferred Stock.......................................................................................... 95
Pro Forma Financial Information.......................................................................... 44
RBOCs.................................................................................................... 81
Regent................................................................................................... 1
Regent Affiliates........................................................................................ 36
Regent Bylaws............................................................................................ 101
Regent Cash Consideration................................................................................ 24
Regent Certificate....................................................................................... 101
Regent Common Stock...................................................................................... 1, 101
Regent Credit Agreement.................................................................................. 15
Regent Expenses.......................................................................................... 23
Regent Expenses Adjustment............................................................................... 24
Regent Fully Diluted Share Number........................................................................ 8, 22
Regent Liabilities....................................................................................... 23
Regent Preferred Stock................................................................................... 1, 101
Regent Purchase and Option Agreements.................................................................... 22
Regent Salt Lake......................................................................................... 21
Regent Stations.......................................................................................... 5
Regent Stock............................................................................................. 1
Regent Stock Consideration............................................................................... 23
Regent-KWNR Acquisition.................................................................................. 21
Registrable Securities................................................................................... 36
Registration Rights Agreement............................................................................ 10
</TABLE>
106
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------------------------------------------------------------------------- ---------
<S> <C>
Registration Statement................................................................................... 1
Retirement Plan.......................................................................................... 91
RF....................................................................................................... 85
Rights of Dissenting Shares.............................................................................. 24
Second Request........................................................................................... 88
Section 262.............................................................................................. 11
Securities Act........................................................................................... 1
Selected Gannett Radio Stations.......................................................................... 71
SFE...................................................................................................... 5
Spring 1996 Arbitron..................................................................................... 78
SRLV..................................................................................................... 1
Stanford................................................................................................. 72
Stanford Transaction..................................................................................... 72
Stock Consideration...................................................................................... 1, 22
Subsidiaries............................................................................................. 6
Summer 1996 Arbitron..................................................................................... 78
Tax Continuity Level..................................................................................... 6
TBA...................................................................................................... 5
TBA Effective Date....................................................................................... 28
Telecom Act.............................................................................................. 8
Transfer of Control Applications......................................................................... 38
University Transaction................................................................................... 72
Warrant Agent............................................................................................ 8
Warrant Consideration.................................................................................... 1, 22
Warrant Price............................................................................................ 31
WSJW Option Agreement.................................................................................... 22
ZC Limited............................................................................................... 90
Zell/Chilmark............................................................................................ 18
</TABLE>
107
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
AUDITED--
Report of Independent Accountants........................................................................ F-3
Consolidated Balance Sheets at December 31, 1994 and 1995................................................ F-4
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and 1995............... F-5
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995..... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995............... F-7
Notes to Consolidated Financial Statements............................................................... F-8
UNAUDITED--
Condensed Consolidated Balance Sheets at December 31, 1995 and September 30, 1996........................ F-18
Condensed Consolidated Statements of Operations for the three months and nine months ended September 30,
1995 and 1996.......................................................................................... F-19
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1995 and 1996.... F-20
Notes to Condensed Consolidated Financial Statements..................................................... F-21
CITICASTERS INC. AND SUBSIDIARIES
Report of Independent Auditors........................................................................... F-27
Balance Sheets at December 31, 1994 and 1995............................................................. F-28
Statements of Operations for the years ended December 31, 1993, 1994 and 1995............................ F-29
Statements of Changes in Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995....... F-30
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995............................ F-31
Notes to Financial Statements............................................................................ F-33
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
Report of Independent Accountants........................................................................ F-43
Consolidated Balance Sheet at December 25, 1994 and December 31, 1995.................................... F-44
Consolidated Statement of Operations for the years ended December 26, 1993, December 25, 1994 and
December 31, 1995...................................................................................... F-45
Consolidated Statement of Changes in Stockholders' Deficit for the years ended December 26, 1993,
December 25, 1994 and December 31, 1995................................................................ F-46
Consolidated Statement of Cash Flows for the years ended December 26, 1993, December 25, 1994 and
December 31, 1995...................................................................................... F-47
Notes to Consolidated Financial Statements............................................................... F-48
SELECTED GANNETT RADIO STATIONS:
Report of Independent Accountants........................................................................ F-61
Combined Balance Sheets as of December 31, 1995 and September 29, 1996................................... F-62
Combined Statements of Operations for the years ended December 25, 1994 and December 31, 1995 and for the
nine month period ended September 29, 1996............................................................. F-63
Combined Statements of Changes in Parent Company's Investment in Radio Stations for the years ended
December 25, 1994 and December 31, 1995 and the nine month period ended September 29, 1996............. F-64
Combined Statements of Cash Flows for the years ended December 25, 1994 and December 31, 1995 and the
nine month period ended September 29, 1996............................................................. F-65
Notes to Financial Statements............................................................................ F-66
</TABLE>
F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
PAGE
---------
REGENT COMMUNICATIONS, INC.
<S> <C>
Report of Independent Accountants........................................................................ F-69
Consolidated Balance Sheets as of December 31, 1995 and September 30, 1996............................... F-70
Consolidated Statements of Operations for the years ended December 31, 1994 and 1995, and for the nine
month periods ended September 30, 1995 (unaudited) and 1996............................................ F-71
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1994 and 1995, and for
the nine month period ended September 30, 1996......................................................... F-72
Consolidated Statements of Cash Flows for the years ended December 31, 1994 and 1995, December 31, 1994
and for the nine month periods ended September 30, 1995 (unaudited) and 1996........................... F-73
Notes to Consolidated Financial Statements............................................................... F-74
</TABLE>
F-2
<PAGE>
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 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. 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 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
February 12, 1996 except for Note 14,
as to which the date
is March 13, 1996
F-3
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
ASSETS
<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................................... $ 26,974,838 $ 7,436,779
Accounts receivable, less allowance for doubtful accounts of $1,348,000 in 1994
and $1,606,000 in 1995....................................................... 24,500,652 25,262,410
Prepaid expenses............................................................... 3,419,719 2,491,140
Other current assets........................................................... 1,230,582 1,425,000
-------------- --------------
Total current assets......................................................... 56,125,791 36,615,329
Property and equipment......................................................... 22,628,841 30,801,225
Intangible assets.............................................................. 89,543,301 127,157,762
Other assets................................................................... 5,281,422 14,264,775
-------------- --------------
Total assets................................................................. $ 173,579,355 $ 208,839,091
-------------- --------------
-------------- --------------
LIABILITIES
Current liabilities:
Accounts payable............................................................... $ 2,723,717 $ 2,312,691
Accrued payroll................................................................ 3,274,902 3,177,945
Accrued federal, state and local income tax.................................... 2,092,616 3,225,585
Other current liabilities...................................................... 3,397,117 3,463,344
-------------- --------------
Total current liabilities.................................................... 11,488,352 12,179,565
Long-term debt................................................................... -- 45,500,000
Other liabilities................................................................ 3,869,567 3,468,995
Deferred tax liability........................................................... 9,177,456 8,617,456
-------------- --------------
Total liabilities............................................................ 24,535,375 69,766,016
-------------- --------------
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 and outstanding shares: 19,590,373 in 1994 and 18,157,209 in
1995........................................................................... 1,959,038 1,815,721
Additional paid-in capital....................................................... 137,404,815 116,614,230
Common stock warrants............................................................ 390,167 388,055
Retained earnings................................................................ 9,289,960 20,255,069
-------------- --------------
Total shareholders' equity................................................... 149,043,980 139,073,075
-------------- --------------
Total liabilities and shareholders' equity................................... $ 173,579,355 $ 208,839,091
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Broadcast revenue............................................... $ 100,745,089 $ 119,635,308 $ 133,103,137
Less agency commissions....................................... 10,812,889 12,624,860 14,212,306
-------------- -------------- --------------
Net revenue................................................. 89,932,200 107,010,448 118,890,831
Broadcast operating expenses.................................... 69,520,397 80,468,077 87,290,409
Depreciation and amortization................................... 10,222,844 9,698,030 9,482,883
Corporate general and administrative expenses................... 3,563,800 3,361,263 3,500,518
-------------- -------------- --------------
Operating income............................................ 6,625,159 13,483,078 18,617,021
Interest expense................................................ (2,734,677) (533,862) (1,443,836)
Interest income................................................. 258,857 1,218,179 1,259,696
Other expense, net.............................................. (10,895) (2,079) (167,772)
-------------- -------------- --------------
Income before income taxes.................................. 4,138,444 14,165,316 18,265,109
Income tax expense.............................................. (2,700,000) (6,313,800) (7,300,000)
-------------- -------------- --------------
Net income.................................................. $ 1,438,444 $ 7,851,516 $ 10,965,109
-------------- -------------- --------------
-------------- -------------- --------------
Net income per common share................................. $ 0.10 $ 0.37 $ 0.52
-------------- -------------- --------------
-------------- -------------- --------------
Number of common shares used in per share calculation........... 14,504,527 21,409,177 20,912,705
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK
-------------------- ADDITIONAL COMMON
STATED PAID-IN STOCK RETAINED
SHARES VALUE CAPITAL WARRANTS EARNINGS TOTAL
--------- --------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1993............. 9,092,084 $ 909,208 $49,568,738 $ 402,805 $ 0 $50,880,751
Issuance of common stock:
Public offering..................... 5,462,500 546,250 59,390,937 59,937,187
Sale to Majority Shareholder........ 3,484,321 348,432 19,651,571 20,000,003
1993 rights offering................ 345,476 34,548 1,703,287 1,737,835
Directors' subscription............. 80,000 8,000 451,200 459,200
Purchase of KAZY(FM)................ 964,006 96,401 5,436,993 5,533,394
Exercise of stock options........... 52,886 5,289 275,914 281,203
Other............................... 18,539 1,854 155,728 (12,408) 145,174
Net income............................ 1,438,444 1,438,444
--------- --------- ----------- ----------- ---------- -----------
Balances, December 31, 1993........... 19,499,812 1,949,982 136,634,368 390,397 1,438,444 140,413,191
Exercise of stock options............. 89,310 8,931 760,215 769,146
Other................................. 1,251 125 10,232 (230) 10,127
Net income............................ 7,851,516 7,851,516
--------- --------- ----------- ----------- ---------- -----------
Balances, December 31, 1994........... 19,590,373 1,959,038 137,404,815 390,167 9,289,960 149,043,980
Purchase and retirement of stock...... (1,515,300) (151,530) (21,542,302) (21,693,832)
Purchase of stock by employee stock
purchase plan....................... 43,785 4,378 470,251 474,629
Exercise of stock options............. 27,790 2,779 192,754 195,533
Other................................. 10,561 1,056 88,712 (2,112) 87,656
Net income............................ 10,965,109 10,965,109
--------- --------- ----------- ----------- ---------- -----------
Balances, December 31, 1995........... 18,157,209 $1,815,721 $116,614,230 $ 388,055 $20,255,069 $139,073,075
--------- --------- ----------- ----------- ---------- -----------
--------- --------- ----------- ----------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................... $ 1,438,444 $ 7,851,516 $ 10,965,109
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation................................................ 2,258,818 2,506,661 3,251,360
Amortization of intangible assets........................... 7,840,064 7,191,369 6,231,523
Provision for losses on accounts and notes receivable....... 957,749 1,441,925 1,136,887
Refinancing fees............................................ (2,455,770)
Deferred income tax provision (benefit)..................... 1,400,000 (355,000) (560,000)
Other....................................................... (138,920) (477,825) 237,418
Changes in operating assets and liabilities, net of effects
of acquisitions and disposals:
Accounts receivable....................................... (5,677,825) (5,765,899) (2,343,943)
Other current assets...................................... 1,487,404 (2,008,159) 1,029,161
Accounts payable.......................................... (268,903) 371,913 (424,306)
Accrued payroll and other current liabilities............. 2,119,153 591,389 1,102,239
-------------- -------------- --------------
Net cash provided by operating activities....................... 8,960,214 11,347,890 20,625,448
-------------- -------------- --------------
Cash flows from investing activities:
Payment received on notes receivable.......................... 1,300,000 392,500
Capital expenditures.......................................... (1,495,317) (2,221,140) (4,969,027)
Cash paid for acquisitions.................................... (3,871,910) (4,904,345) (34,007,857)
Purchase of intangible assets................................. (6,261,520) (15,535,809)
Proceeds from sale of assets.................................. 1,919,189
Loans originated and other.................................... (160,158) (3,482,379) (10,220,300)
-------------- -------------- --------------
Net cash used by investing activities........................... (5,527,385) (13,650,195) (64,340,493)
-------------- -------------- --------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt...................... 48,000,000 45,500,000
Purchase of common stock...................................... (21,693,832)
Proceeds from issuance of common stock........................ 88,301,704 779,273 757,818
Reduction in long-term debt................................... (118,484,583)
Payment of restructuring expenses............................. (5,061,925) (119,729) (387,000)
-------------- -------------- --------------
Net cash provided by financing activities....................... 12,755,196 659,544 24,176,986
-------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents............ 16,188,025 (1,642,761) (19,538,059)
Cash and cash equivalents at beginning of year.................. 12,429,574 28,617,599 26,974,838
-------------- -------------- --------------
Cash and cash equivalents at end of year........................ $ 28,617,599 $ 26,974,838 $ 7,436,779
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS
The Company owns and operates 23 radio stations in seven metropolitan
markets throughout the United States. On January 11, 1993, the Company completed
a recapitalization plan that substantially modified its debt and capital
structure. Such recapitalization was accounted for as if it had been completed
January 1, 1993.
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 $100,000,
$5,545,000, and $6,662,000 were paid during 1993, 1994 and 1995, respectively.
Interest paid was $3,107,000, $381,000, and $1,378,000 during 1993, 1994, and
1995, respectively. The effect of barter transactions has been eliminated (see
Note 12).
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. 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:
<TABLE>
<S> <C>
Land improvements............................................. 20 Years
Buildings..................................................... 25 Years
3 to 20
Equipment..................................................... Years
5 to 12
Furniture and fixtures........................................ Years
Life of
Leasehold improvements........................................ lease
</TABLE>
F-8
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS (CONTINUED)
INTANGIBLE ASSETS
Intangible assets are stated at cost less accumulated amortization;
amortization is provided principally on the straight-line basis over the
following lives:
<TABLE>
<S> <C>
Goodwill...................................................... 40 Years
5 to 25
Other intangibles............................................. Years
</TABLE>
Other intangible assets consist primarily of various contracts and purchased
intellectual property.
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. If this review indicates that goodwill and licenses will not be
recoverable, as determined based on the undiscounted cash flows of the entity
over the remaining amortization period, the carrying value of the goodwill and
licenses will be reduced accordingly.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities, at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
PER SHARE DATA
Income per share for the three years ended December 31, 1995 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.
2. ACQUISITION OF LICENSES
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 September 1995, the Company exercised its purchase option to acquire
ownership of the FCC license of radio station KHTS-FM (formerly KECR-FM) in San
Diego, California for approximately $13,875,000 in cash.
3. ACQUISITIONS
In July 1993, the Company completed the acquisition of radio station
KAZY(FM) in Denver, Colorado from its majority shareholder. The majority
shareholder had purchased that station for $5,500,000 and then 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 the majority
shareholder's cost for the station plus related acquisition costs. In connection
with the acquisition, 964,006 shares of the Company's common stock were issued
to the majority shareholder.
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
F-9
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS (CONTINUED)
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. 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. Pending consummation of the transaction (which occurred in June 1995), the
Company operated the station under a Local Marketing Agreement which commenced
April 7, 1994, and expired upon completion of the purchase.
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.
In August 1995, the Company acquired certain operating assets of radio
stations WDUV(FM) and WBRD(AM) in Tampa, Florida for approximately $14,000,000
in cash.
In 1995, the Company acquired the call letters, programming and certain
contracts of radio station WOFX(FM) in Cincinnati, Ohio and then changed the
call letters of its FM broadcast station WPPT to WOFX. The Company also acquired
radio stations WSOL(FM) (formerly WHJX), WJBT(FM) and WZAZ(AM) in Jacksonville,
Florida. The aggregate cash purchase price for these acquisitions was
approximately $9,750,000.
All of the above acquisitions have been accounted for as purchases. The
excess cost over the fair value of net assets acquired is being amortized over
40 years. The results of operations of the acquired businesses are included in
the Company's financial statements since the respective dates of acquisition.
Assuming each of the 1994 and 1995 acquisitions had taken place at the beginning
of 1994, unaudited pro forma consolidated results of operations would have been
as follows:
<TABLE>
<CAPTION>
PRO FORMA (UNAUDITED)
YEAR ENDED DECEMBER 31,
------------------------------
1994 1995
-------------- --------------
<S> <C> <C>
Net broadcasting revenue..................................... $ 111,232,000 $ 121,214,000
Net income................................................... 7,115,000 10,423,000
Net income per share......................................... 0.33 0.50
</TABLE>
4. 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.
F-10
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1994 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Land and land improvements..................................... $ 1,999,002 $ 2,575,224
Buildings...................................................... 1,912,432 2,584,556
Equipment...................................................... 18,725,970 26,673,912
Furniture and fixtures......................................... 2,346,041 3,505,363
Leasehold improvements......................................... 2,116,548 3,184,683
------------- -------------
27,099,993 38,523,738
Less accumulated depreciation.................................. (4,471,152) (7,722,513)
------------- -------------
$ 22,628,841 $ 30,801,225
------------- -------------
------------- -------------
</TABLE>
6. INTANGIBLE ASSETS
Intangible assets at December 31, 1994 and 1995 consist of the following:
<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
Goodwill..................................................... $ 78,621,918 $ 120,947,774
Other........................................................ 25,952,816 27,488,624
-------------- --------------
104,574,734 148,436,398
Less accumulated amortization................................ (15,031,433) (21,278,636)
-------------- --------------
$ 89,543,301 $ 127,157,762
-------------- --------------
-------------- --------------
</TABLE>
7. DEBT AGREEMENT
The Company's debt obligations at December 31, 1995 consist of the
following:
<TABLE>
<S> <C>
Indebtedness under the Bank Credit Agreement (described
below)--
Senior reducing revolving facility......................... $38,500,000
Senior acquisition facility................................ 7,000,000
----------
$45,500,000
----------
----------
</TABLE>
The Company has an agreement with a group of lenders, as amended (the "1993
Credit Agreement"), which provides for a senior reducing revolving credit
facility with a commitment of $39,550,000 at December 31, 1995 that expires on
December 31, 2000 (the "Revolver") and a senior 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 1993 Credit Agreement.
The 1993 Credit Agreement requires that the commitment under the Revolver be
reduced by $900,000 quarterly during 1996 and by increasing quarterly amounts
thereafter, and, under certain circumstances, requires mandatory prepayments of
any outstanding loans and further commitment reductions under the 1993 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 1993 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
F-11
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. DEBT AGREEMENT (CONTINUED)
operating subsidiaries' stock, and is guaranteed by those subsidiaries. The 1993
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 1993 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 1993 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 5.3125%.
8. CAPITAL STOCK
During 1995, the Company purchased and retired 1,515,300 shares of its own
common stock at a cost of $21,693,832. The Company's Board of Directors has
authorized the Company to purchase up to an additional 1,000,000 shares of its
own common stock from time to time in open-market or negotiated transactions.
The Company issued 2,014,233 warrants on January 1, 1993 to purchase
2,014,233 shares of common stock at $8.30 which were 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, 1995, 10,561 warrants were exercised.
9. INCOME TAXES
Income tax expense for the years ended December 31, 1993, 1994 and 1995 is
summarized as follows:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
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
------------ ------------ ------------
------------ ------------ ------------
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
------------ ------------ ------------
------------ ------------ ------------
1995:
Current............................................................. $ 6,600,000 $ 1,260,000 $ 7,860,000
Deferred............................................................ (500,000) (60,000) (560,000)
------------ ------------ ------------
$ 6,100,000 $ 1,200,000 $ 7,300,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-12
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
The provisions for income tax differ from the amount computed by applying
the statutory federal income tax rate due to the following:
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Federal income taxes at the statutory rate.............................. $ 1,407,071 $ 4,957,861 $ 6,392,788
Amortization not deductible............................................. 404,660 606,137 606,137
State income taxes, net of any current federal income tax benefit....... 330,000 663,000 780,000
Other................................................................... 558,269 86,802 (478,925)
------------ ------------ ------------
$ 2,700,000 $ 6,313,800 $ 7,300,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The tax effects of the significant temporary differences which comprise the
deferred tax liability at December 31, 1993, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Property and equipment.............................................. $ 11,172,498 $ 11,062,121 $ 12,208,187
Intangibles......................................................... (1,445,854) (860,566) (1,456,567)
Accrued expenses.................................................... (740,790) (2,183,592) (1,992,093)
Reserve for pending sale of assets.................................. (1,458,396)
Other............................................................... 372,542 1,159,493 (142,071)
------------- ------------- -------------
Net liability................................................. $ 7,900,000 $ 9,177,456 $ 8,617,456
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
10. STOCK-BASED COMPENSATION PLANS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation". The Company will continue to apply APB Opinion No. 25 in
accounting for its plans as permitted by this statement. This statement however,
requires that a company's financial statements include certain disclosures about
stock-based employee compensation arrangements regardless of the method used to
account for them. Pro forma disclosures required by a company that elects to
continue to measure compensation cost using Opinion No. 25 will be made by the
Company for the year ended December 31, 1996.
At December 31, 1995, the Company has three stock-based compensation plans,
which are described below. The Company applies APB Opinion 25 in accounting for
its plans. Accordingly, no compensation cost has been recognized for its fixed
stock option plans and its stock purchase plan.
1993 STOCK OPTION PLAN
Under the Company's 1993 stock option plan, options to acquire up to
2,769,218 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
F-13
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK-BASED COMPENSATION PLANS (CONTINUED)
no later than February 7, 2003. Information pertaining to the plan for the years
ended December 31, 1993, 1994 and 1995 is as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE PER
SHARES SHARE
---------- -----------------
<S> <C> <C>
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
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
1995:
Outstanding at beginning of year.............................................. 1,286,310 $ 5.74-$15.18
Granted....................................................................... 245,000 $13.88-$15.60
Exercised..................................................................... (27,790) $ 5.74-$ 6.46
Outstanding at end of year.................................................... 1,503,520 $ 5.74-$15.60
Exercisable at end of year.................................................... 1,046,340 $ 5.74-$14.04
Available for grant at end of year............................................ 1,092,618
</TABLE>
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 ranges from $5.74 per share to
$14.34 per share.
EMPLOYEE STOCK PURCHASE PLAN
Under the 1995 Employee Stock Purchase Plan, the Company is authorized to
issue up to 200,000 shares of common stock to its full-time and part-time
employees, all of whom are eligible to participate. Under the terms of the Plan,
employees can choose each year to have up to 10 percent of their annual base
earnings withheld to purchase the Company's common stock. The purchase price of
the stock is 85 percent of the lower of its beginning-of-year or end-of-year
market price. Under the Plan, the Company sold 43,785 shares to employees in
1995 at a purchase price of $10.84 per share.
F-14
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. 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, 1995 are payable as follows:
<TABLE>
<S> <C>
1996........................................................... $2,958,000
1997........................................................... 2,681,000
1998........................................................... 2,340,000
1999........................................................... 1,208,000
2000........................................................... 1,106,000
Thereafter..................................................... 4,273,000
----------
$14,566,000
----------
----------
</TABLE>
Rental expense was approximately $2,991,000, $3,336,000, and $3,471,000 for
the years ended December 31, 1993, 1994 and 1995, respectively.
The Company has a real estate lease for office space for its Atlanta
operations with an affiliate of its majority shareholder. The annual rental rate
is approximately $330,000.
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, as
would not have a significant effect on the financial position or results of
operations of the Company.
12. BARTER TRANSACTIONS
Barter revenue was approximately $5,061,000, $4,647,000, and $4,976,000 in
1993, 1994 and 1995, respectively. Barter expense was approximately $4,941,000,
$4,164,000, and $5,166,000 in 1993, 1994 and 1995, respectively.
Included in accounts receivable and accounts payable in the accompanying
consolidated balance sheets for 1994 and 1995 are barter accounts receivable
(merchandise or services due the Company) of approximately $1,372,000 and
$927,000, respectively, and barter accounts payable (air time due supplier of
merchandise or service) of approximately $1,000,000 and $1,012,000,
respectively.
13. 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 up
to $150,000 of such compensation. Total expense related to this plan was
$237,875, $289,487, and $334,253 in 1993, 1994 and 1995, respectively.
F-15
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. SUBSEQUENT EVENTS
ACQUISITIONS
In February 1996, the Company entered into an agreement to acquire Noble
Broadcast Group, Inc. ("Noble"), for $152,000,000 in cash. Noble owns 10 radio
stations, 4 of which serve Denver, Colorado, with 3 each serving St. Louis,
Missouri and Toledo, Ohio; and provides programming to and sells air time for
two stations serving the San Diego market. The broadcast signals for the
stations serving the San Diego market originate from Mexico. The agreement is
subject to the approval of the Federal Communications Commission and the
satisfaction of certain other conditions. Pending consummation of the
transaction, the Company entered into Time Brokerage Agreements for the stations
in St. Louis and Toledo which began February 21, 1996, and will expire on the
purchase date. The Company will finance this acquisition from the proceeds of a
new credit facility discussed below.
In February 1996, the Company signed an agreement and plan of merger to
acquire Citicasters Inc. ("Citicasters"), owner of 19 radio stations in eight
U.S. markets as well as two network-affiliated television stations. Citicasters'
radio stations serve Atlanta, Georgia; Cincinnati and Columbus, Ohio; Kansas
City, Kansas and Missouri; Phoenix, Arizona; Portland, Oregon; Sacramento,
California; and Tampa, Florida. The television stations serve Cincinnati, Ohio
and Tampa, Florida. The agreement is subject to the approval of the Federal
Communications Commission and the satisfaction of certain other conditions. In
conjunction with this agreement, the Company has delivered to the seller a
$75,000,000 nonrefundable deposit in the form of a letter of credit. The letter
of credit requires annual fees of 1.25% and can be drawn upon by Citicasters if
the merger agreement is terminated.
Jacor will pay $29.50 in cash, plus, in the event that the closing does not
occur prior to October 1, 1996, for each full calendar month ending prior to the
merger commencing with October 1996, an additional amount of $.22125 in cash. In
addition, for each share of Citicasters common stock held, Citicasters
shareholders will receive one Jacor warrant to purchase a fractional share of
Jacor common stock (which fraction is anticipated to be .2035247) at a price of
$28.00 per full share of Jacor common stock. If the merger is not consummated by
October 1, 1996, the exercise price for the warrants to purchase 4,400,000
shares of Jacor stock will be reduced to $26.00 per share. The cash purchase
price, which is approximately $630,000,000, will increase by approximately
$5,000,000 for each full month subsequent to October 1996 but prior to the
merger.
NEW CREDIT AGREEMENT
On February 20, 1996 the Company entered into a new credit facility. The
Company's new senior debt consists of two facilities (the "Facilities") provided
under an agreement (the "Existing Credit Facility") with ten banks: a
$190,000,000 reducing revolving credit facility ("Revolving A Loans") and a
$110,000,000 reducing revolving credit facility ("Revolving B Loans"). Both
Facilities mature on December 31, 2003. The indebtedness of the Company under
the Facilities 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 Revolving A Loans will be used primarily to refinance existing debt and
to complete the Noble acquisition. The Revolving B Loans will be used to finance
acquisitions, stock repurchases and for working capital and other general
corporate purposes.
The commitment under the Revolving A Loans will be reduced by $2,500,000
each quarter commencing January 1, 1997 and by increasing quarterly amounts in
each succeeding year. The commitment under the Revolving B Loans will be reduced
by $5,000,000 for each quarter commencing January 1, 1998.
The Company is required to make mandatory prepayments of the Facilities
equal to (i) net proceeds from any debt offerings, (ii) 50% of net proceeds from
any equity offerings to bring the Company's
F-16
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. SUBSEQUENT EVENTS (CONTINUED)
leverage ratio down to 5 to 1, (iii) 50% of excess cash flow, as defined,
beginning in 1997, and (iv) net after tax proceeds received from asset sales or
other dispositions.
Interest under the Facilities is payable, at the option of the Company, at
alternative rates equal to the Eurodollar rate plus 1% to 2 3/4% or the base
rate announced by Banque Paribas plus up to 1 1/2%. 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 of
3/8% to 1/2% per annum on the unused portion of the commitment on both
Facilities depending on the Company's financial leverage. The Company also is
required to pay certain other fees to the agent and the lenders for the
administration of the Facilities.
The Existing Credit Facility contains a number of covenants which, among
other things, require the Company to maintain specified financial ratios and
impose certain limitations on the Company with respect to (i) the incurrence of
additional indebtedness; (ii) investments and acquisitions, except under
specified conditions; (iii) the incurrence of additional liens; (iv) the
disposition of assets; (v) the payment of cash dividends; (vi) capital
expenditures; and (vii) mergers, changes in business, and transactions with
affiliates.
SUPPLEMENTARY DATA
Quarterly Financial Data for the years ended December 31, 1994 and 1995
(Unaudited)
<TABLE>
<CAPTION>
SECOND FOURTH
FIRST QUARTER QUARTER THIRD 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
1995
Net revenue....................................... $ 24,016,183 $ 30,866,300 $ 32,293,562 $ 31,714,786
Operating income.................................. 1,060,526 5,628,006 5,899,472 6,029,017
Net income........................................ 751,314 3,528,561 3,488,305 3,196,929
Net income per common share(1).................... 0.04 0.17 0.17 0.16
</TABLE>
- ------------------------
(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.
F-17
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................................... $ 7,437 $ 52,821
Accounts receivable, less allowance for doubtful accounts of $1,606 in 1995 and
$3,877 in 1996.................................................................. 25,262 70,782
Other current assets.............................................................. 3,916 12,897
------------ -------------
Total current assets............................................................ 36,615 136,500
Property and equipment, net....................................................... 30,801 141,259
Intangible assets, net............................................................ 127,158 1,295,286
Other assets...................................................................... 14,265 98,032
------------ -------------
Total assets.................................................................... $ 208,839 $ 1,671,077
------------ -------------
------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities.................. $ 12,180 $ 51,898
------------ -------------
Total current liabilities....................................................... 12,180 51,898
Long-term debt...................................................................... 45,500 626,250
5.5% Liquid Yield Option Notes...................................................... -- 117,090
Deferred taxes and other liabilities................................................ 12,086 393,728
Shareholders' equity:
Common stock, $.01 par value...................................................... 182 312
Additional paid-in capital........................................................ 118,248 430,307
Common stock warrants............................................................. 388 26,500
Retained earnings................................................................. 20,255 24,992
------------ -------------
Total shareholders' equity...................................................... 139,073 482,111
------------ -------------
Total liabilities and shareholders' equity...................................... $ 208,839 $ 1,671,077
------------ -------------
------------ -------------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-18
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ----------------------
1995 1996 1995 1996
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Broadcast revenue.................................................. $ 36,116 $ 60,143 $ 97,648 $ 142,176
Less agency commissions.......................................... 3,822 5,817 10,472 14,656
--------- --------- ---------- ----------
Net revenue.................................................... 32,294 54,326 87,176 127,520
Broadcast operating expenses....................................... 23,129 38,273 65,241 91,694
Depreciation and amortization...................................... 2,442 5,166 6,783 10,601
Corporate general and administrative expenses...................... 824 1,658 2,564 4,080
--------- --------- ---------- ----------
Operating income............................................... 5,899 9,229 12,588 21,145
Interest expense................................................... (384) (6,844) (593) (13,397)
Gain on sale of radio stations..................................... -- -- -- 2,539
Other income, net.................................................. 348 3,160 1,052 4,701
--------- --------- ---------- ----------
Income before income taxes and extraordinary loss.............. 5,863 5,545 13,047 14,988
Income taxes....................................................... 2,375 3,445 5,279 7,285
--------- --------- ---------- ----------
Income before extraordinary loss............................... 3,488 2,100 7,768 7,703
Extraordinary loss, net of income tax credit................... -- (2,015) -- (2,966)
--------- --------- ---------- ----------
Net income......................................................... $ 3,488 $ 85 $ 7,768 $ 4,737
--------- --------- ---------- ----------
--------- --------- ---------- ----------
NET INCOME PER COMMON SHARE:
Before extraordinary loss.......................................... $ 0.17 $ 0.06 $ 0.37 $ 0.31
Extraordinary loss................................................. -- (0.06) -- (0.12)
--------- --------- ---------- ----------
Net income per common share........................................ $ 0.17 $ 0.00 $ 0.37 $ 0.19
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Number of common shares used in per share computations............. 21,009 33,303 21,136 24,880
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-19
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................................. $ 7,768 $ 4,737
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation......................................................................... 2,306 3,989
Amortization of intangibles.......................................................... 4,476 6,612
Extraordinary loss................................................................... 2,966
Non-cash interest expense............................................................ 2,525
Deferred income tax provision (benefit).............................................. (352) 636
Gain on sale of radio stations....................................................... (2,539)
Other................................................................................ 197 (201)
Change in current assets and current liabilities net of effects of acquisitions and
disposals:
Accounts receivable................................................................ (1,146) (7,769)
Other current assets............................................................... (265) (2,556)
Accounts payable, accrued expenses and other current liabilities................... 3,976 9,256
---------- -----------
Net cash provided by operating activities................................................ 16,960 17,656
---------- -----------
Cash flows from investing activities:
Capital expenditures................................................................... (3,664) (7,506)
Cash paid for acquisitions............................................................. (33,338) (827,941)
Purchase of intangible assets.......................................................... (15,183) --
Proceeds from sale of radio stations................................................... -- 6,595
Loans originated and other............................................................. (4,397) (7,147)
---------- -----------
Net cash used by investing activities.................................................... (56,582) (835,999)
---------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt............................................... 33,500 703,000
Proceeds from issuance of LYONs........................................................ -- 115,172
Proceeds from issuance of common stock................................................. 254 317,109
Repayment of long-term debt............................................................ (248,500)
Repurchase of common stock............................................................. (15,076) --
Repurchase of warrants................................................................. -- (1,379)
Payment of finance costs............................................................... -- (21,342)
Other.................................................................................. (375) (333)
---------- -----------
Net cash provided by financing activities................................................ 18,303 863,727
Net increase (decrease) in cash and cash equivalents..................................... (21,319) 45,384
Cash and cash equivalents at beginning of period......................................... 26,975 7,437
---------- -----------
Cash and cash equivalents at end of period............................................... $ 5,656 $ 52,821
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-20
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS
The December 31, 1995 consolidated balance sheet data was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. The financial statements included
herein have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Although certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, the Company
believes that the disclosures are adequate to make the information presented not
misleading and reflect all adjustments (consisting only of normal recurring
adjustments) which are necessary for a fair presentation of results of
operations for such periods. Results for interim periods may not be indicative
of results for the full year. It is suggested that these financial statements be
read in conjunction with the consolidated financial statements for the year
ended December 31, 1995 and the notes thereto.
2. ACQUISITIONS
COMPLETED ACQUISITIONS
In February 1996, the Company agreed to acquire Noble Broadcast Group, Inc.
("Noble"), for approximately $152 million in cash plus related costs and
expenses. Noble owned ten radio stations serving Denver (two AM and two FM), St.
Louis (one AM, two FM) and Toledo (one AM, two FM). The Company entered into an
agreement with the stockholders of Noble to acquire all of the outstanding
capital stock of Noble for approximately $12.5 million. At the same time, the
Company also purchased a warrant for approximately $52.8 million entitling the
Company to acquire a 79.1% equity interest in Noble (the "Noble Warrant"). On
July 15, 1996, the Company consummated the purchase of the outstanding Noble
capital stock from the Noble stockholders and exercised the Noble Warrant,
resulting in the Company owning 100% of the equity interests in Noble.
Also, in February 1996, a wholly owned subsidiary of the Company purchased
for approximately $47 million certain assets from Noble relating to Noble's San
Diego operations. As part of Noble's San Diego operations, Noble provided
programming to and sold the air time for two radio stations serving San Diego
(one AM, one FM), which programming and air time is now provided and sold by the
Company. In addition, another wholly owned subsidiary of the Company provided a
credit facility to Noble in the amount of $41 million of which $40 million was
drawn down. Such amount became part of the purchase consideration upon
consummation of the transaction on July 15, 1996.
In February 1996, the Company entered into an agreement to acquire
Citicasters Inc. ("Citicasters") through a merger of Citicasters with and into a
wholly owned Jacor subsidiary (the "Citicasters Merger"). Citicasters owned
and/or operated 19 radio stations, located in Atlanta, Phoenix, Tampa, Portland,
Kansas City, Cincinnati, Sacramento, Columbus and two television stations, one
located in Tampa and one in Cincinnati. The Company consummated the Citicasters
Merger in September 1996 for an approximate aggregate value of $847.3 million,
which included the purchase of all outstanding shares of Citicasters common
stock, the assumption of Citicasters outstanding indebtedness and the issuance
of warrants to purchase an aggregate of 4,400,000 shares of Common Stock. Each
Citicasters Warrant is exercisable for .2035247 of a share of the Company's
common stock at an exercise price of $28.00 per full share.
In March 1996, the Company entered into an agreement to acquire the FCC
licenses of WCTQ-FM and WAMR-AM in Venice, Florida and to purchase certain real
estate and transmission facilities necessary to operate the stations. In June
1996, the Company consummated this acquisition for a purchase price of
approximately $4.4 million.
F-21
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. ACQUISITIONS (CONTINUED)
In June 1996, the Company entered into an agreement to acquire the FCC
licenses of WLAP-AM, WMXL-FM and WWYC-FM in Lexington, Kentucky and to purchase
real estate and transmission facilities necessary to operate the stations. In
August 1996, the Company consummated this acquisition for a purchase price of
approximately $14.0 million.
In June 1996, the Company financed the purchase by Critical Mass Media, Inc.
("CMM") of a 40% interest in a newly formed limited liability company which
purchased for $540,000 the assets of Duncan American Radio, Inc. CMM is a
marketing research and radio consulting business which is owned by a limited
partnership of which the Company is the 5% general partner and a corporation
wholly owned by Randy Michaels, the Chief Executive Officer of the Company, is
the 95% limited partner.
The completed acquisitions are accounted for as purchases. The excess cost
over the fair value of identifiable net assets acquired will be amortized over
40 years. Assuming each of these acquisitions had taken place at the beginning
of 1995 and 1996, respectively, unaudited pro forma consolidated results of
operations would have been as follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ----------------------
1995 1996 1995 1996
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenue.................................... $ 79,171 $ 85,887 $ 225,259 $ 242,548
Loss before extraordinary items................ (846) (1,817) (7,234) (4,487)
Net loss per share............................. $ (0.03) $ (0.06) $ (0.23) $ (0.14)
</TABLE>
PENDING ACQUISITIONS
In May 1996, the Company entered into an agreement to acquire the FCC
licenses and certain operating assets of WIOT-FM and WCWA-AM in Toledo, Ohio for
$13 million in cash, which funds have been placed in escrow pending the closing
of the transaction. Subject to certain conditions, pending the closing of this
transaction, the Company has entered into a time brokerage agreement with
respect to these stations.
In July 1996, the Company entered into an agreement with New Wave
Communications, L.P. and New Wave Broadcasting, Inc. to acquire the FCC licenses
of WSPB-AM, WSRZ-FM and WYNF-FM in Sarasota, Florida and to purchase certain
real estate and transmission facilities necessary to operate the stations. The
purchase price for the assets is $12.5 million, of which $3 million has been
placed in escrow, subject to a maximum purchase price of $15.0 million based on
the timing of the closing.
In September 1996, the Company entered into a binding agreement with a
subsidiary of Gannett Co., Inc. ("Gannett") to effect an exchange of the
Company's Tampa television station, WTSP-TV, acquired by the Company in the
Citicasters Merger, for six of Gannett's radio stations (the "Gannett
Exchange"). The stations to be acquired by the Company are KIIS-FM and KIIS-AM
in Los Angeles, KSDO-AM and KKBH-FM in San Diego and WDAE-AM in Tampa-St.
Petersburg. The Company will also acquire the licenses and operating assets of
WUSA-FM in Tampa-St. Petersburg while Gannett will retain the call letters. The
assets to be exchanged are valued by the Company and Gannett at approximately
$190.0 million. The Company anticipates that this transaction will constitute a
tax-free like-kind exchange.
In October 1996, the Company entered into a definitive merger agreement with
Regent Communications, Inc. ("Regent") whereby Regent will merge with and into
the Company (the "Regent Merger"). Regent owns, operates or represents 20 radio
stations located in Kansas City, Salt Lake City, Las Vegas,
F-22
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. ACQUISITIONS (CONTINUED)
Louisville and Charleston, S.C. The merger consideration to be paid by the
Company to the Regent stockholders consists of 3.55 million shares of Common
Stock, subject to adjustment pursuant to the terms of the merger agreement, up
to $64.0 million in cash to be used to repay outstanding Regent indebtedness,
and warrants to acquire an aggregate of 500,000 shares of Common Stock at an
exercise price of $40 per full share. In the event that the value of the Common
Stock to be received by the Regent stockholders is less than $116.0 million, at
the Company's option: (a) Jacor may make up the difference by the delivery of
additional shares of Common Stock; (b) pay the difference in cash; or (c) pay
all of the merger consideration in cash.
In October 1996, the Company also entered into binding agreements with Par
Broadcasting Company ("Par") to purchase four radio stations in San Diego,
KOGO-AM, KCBQ-AM, KIOZ-FM and KKLQ-FM, for $72.0 million in cash and with
Entertainment Communications, Inc. ("Entercom") to sell the Company's two radio
stations in Sacramento, KSEG-FM and KRXQ-FM, for $45.0 million in cash.
Approximately $3.7 million of the purchase price has been placed in escrow.
Although these transactions are not directly contingent upon each other, the
Company anticipates that these transactions will occur in a manner that permits
the transactions to be treated as a tax-free like-kind exchange. Par has entered
into a Local Marketing Agreement ("LMA") with the Company such that the Company
will commence operating the San Diego stations upon the expiration or
termination of the applicable waiting periods under the Hart Scott Rodino
Antitrust Improvements Act of 1976, as amended ("HSR Act"). The Company has
entered into an LMA with Entercom such that Entercom will commence operating the
Sacramento stations upon the expiration or termination of the applicable waiting
periods under the HSR Act.
In October 1996, the Company entered into a binding exchange agreement with
Nationwide Communications, Inc. ("Nationwide") whereby the Company will exchange
the assets of its two radio stations in Phoenix, KSLX-AM and KSLX-FM, for the
assets of Nationwide's two radio stations in San Diego, KGB-FM and KPOP-AM. The
assets to be exchanged are valued by the Company and Nationwide at approximately
$45.0 million. The Company anticipates that this transaction will constitute a
tax-free like-kind exchange. This transaction is contingent upon the successful
closing of Nationwide's agreement to purchase KGB-FM and KPOP-AM from KGB, Inc.
Nationwide has assigned to the Company its rights under an LMA with KGB, Inc.
such that the Company will commence operating the San Diego stations upon the
expiration or termination of the applicable waiting periods under the HSR Act.
The Company has entered into an LMA with Nationwide such that Nationwide will
commence operating the Phoenix stations upon the expiration or termination of
the applicable waiting periods under the HSR Act. In connection with entering
into the exchange agreement with Nationwide, the Company also announced that it
intends to sell KCBQ-AM in San Diego, upon its acquisition from Par, to EXCL
Communications, Inc. ("EXCL") for $6.0 million in cash. No binding agreement has
yet been entered into with EXCL.
In addition, in October 1996, Jacor entered into three separate binding
agreements with three unaffiliated radio broadcast companies whereby the Company
will acquire the FCC licenses and assets of a total of nine radio stations.
These agreements are with Palmer Broadcasting Limited Partnership ("Palmer") to
acquire WHO-AM and KLYF-FM in Des Moines and WMT-AM and WMT-FM in Cedar Rapids
for a purchase price of $52.5 million, providing the Company with a leading
position with four powerful broadcast signals; with Clear Channel Radio, Inc. to
purchase KTWO-AM, KMGW-FM and the Wyoming Radio Network, in Casper, Wyoming for
a purchase price of $1.9 million; and with Colfax Communications to acquire
KIDO-AM and KLTB-FM in Boise, Idaho and KARO-FM in Caldwell, Idaho for a
purchase price of $11.0 million in cash. An aggregate of $5.9 million has been
placed in escrow in connection with these acquisitions.
F-23
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. OTHER ASSETS
The Company's other assets at December 31, 1995 and September 30, 1996
consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
New World Warrants.............................................. $ -- $ 39,800
Hanna Barbera Escrow............................................ -- 13,700
Acquisition escrows............................................. -- 16,000
Other........................................................... 14,265 28,532
------------ -------------
$ 14,265 $ 98,032
------------ -------------
------------ -------------
</TABLE>
The New World Warrants and Hanna Barbera Escrow were included in the
Citicasters acquisition. The Hanna Barbera Escrow is expected to be received in
December 1996. Terms of the New World Warrants allow the Company to purchase 5
million shares of New World Common Stock at $16.00 per share until September
1999.
4. LONG-TERM DEBT
The Company's debt obligations at December 31, 1995 and September 30, 1996
consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Credit facility borrowings...................................... $ 45,000 $ 400,000
9 3/4% Senior Subordinated Notes................................ 126,250
10 1/8% Senior Subordinated Notes, due 2006..................... -- $ 100,000
------------ -------------
$ 45,000 $ 626,250
------------ -------------
------------ -------------
</TABLE>
FORMER CREDIT FACILITY
On February 20, 1996 the Company entered into a credit facility (the "Former
Credit Facility") with a group of banks. The Company borrowed approximately $200
million under the facility in conjunction with the Noble and other acquisitions.
In June 1996, outstanding borrowings were repaid from a portion of the proceeds
from public debt and common stock offerings (see notes 4, 5 and 6).
NEW CREDIT FACILITY
In June 1996, the Company entered into a new credit facility (the "New
Credit Facility"). The New Credit Facility is with a syndicate of banks and
other financial institutions. The New Credit Facility provides availability of
up to $600 million of loans in three components: (i) a revolving credit facility
of up to $200 million with mandatory semi-annual commitment reductions beginning
in December 1998 and a final maturity date of October 21, 2003; (ii) a term loan
of up to $300 million with scheduled semi-annual reductions beginning December
1997 and a final maturity date of September 18, 2003; and (iii) a term loan of
up to $100 million with scheduled semi-annual reductions beginning December 1998
and a final maturity date of September 18, 2004.
Borrowings under the New Credit Facility bear interest at rates that
fluctuate with a bank base rate and/or the Eurodollar rate. The weighted average
interest rate at September 30, 1996 was 7.73%.
F-24
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. LONG-TERM DEBT (CONTINUED)
Loans under the New Credit Facility are guaranteed by the Company and each
of the Company's direct and indirect subsidiaries other than certain immaterial
subsidiaries. The Company's obligations with respect to the New Credit Facility
and each guarantor's obligations with respect to the related guaranty is
collateralized by substantially all of their respective assets, and, in the case
of the Company's subsidiaries, capital stock.
The New Credit Facility contains covenants and provisions that restrict,
among other things, the Company's ability to: (i) incur additional indebtedness;
(ii) incur liens on its property; (iii) make investments and advances; (iv)
enter into guarantees and other contingent obligations; (v) merge or consolidate
with or acquire an other person or engage in other fundamental changes; (vi)
engage in certain sales of assets; (vii) make capital expenditures; (viii) enter
into leases; (ix) engage in certain transactions with affiliates; and (x) make
restricted junior payments. The New Credit Facility also requires satisfaction
of certain financial performance criteria (including a consolidated interest
coverage ratio, a leverage-to-operating cash flow ratio and a consolidated
operating cash flow available for fixed charges ratio) and the repayment of
loans under the New Credit Facility with proceeds of certain sales of assets and
debt issuances, and with 50% of the Company's Consolidated Excess Cash Flow (as
defined in the New Credit Facility).
10 1/8% SENIOR SUBORDINATED NOTES DUE 2006
In June 1996, the Company completed an offering of $100 million of its
10 1/8% Senior Subordinated Notes (the "Notes"). The Notes will mature on June
15, 2006. Interest on the Notes is payable semi-annually on June 15 and December
15 of each year, commencing December 15, 1996. The Company will not be required
to make any mandatory redemption or sinking fund payment with respect to the
Notes prior to maturity. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after June 15, 2001. The
redemption prices commence at 105.063% and are reduced by 1.688% annually until
June 15, 2004 when the redemption price is 100%.
The Notes are general, unsecured obligations of the Company subordinated in
right of payment to all senior debt of the Company including the New Credit
Facility.
The Note Indenture contains certain covenants which impose certain
limitations and restrictions on the ability of the Company to incur additional
indebtedness, pay dividends or make other distributions, make certain loans and
investments, apply the proceeds of asset sales (and use the proceeds thereof),
create liens, enter into certain transactions with affiliates, merge,
consolidate or transfer substantially all its assets and make investments in
unrestricted subsidiaries.
9 3/4% SENIOR SUBORDINATED NOTES
In September 1996, as a result of the merger with Citicasters, the Company
assumed obligations of Citicasters' outstanding 9 3/4% Senior Subordinated notes
due 2004 (the "9 3/4% Notes"). As a result of a change of control covenant in
the 9 3/4% Notes, the holders had the option to cause the Company to purchase
the 9 3/4% Notes at 101%, and in October 1996, approximately $107 million par
value of the 9 3/4% Notes were put to the Company pursuant to this covenant.
5. LIQUID YIELD OPTION NOTES
In June 1996, the Company issued 5.5% Liquid Yield Option Notes ("LYONs")
due 2011 in the aggregate principal amount at maturity of $259,900,000. Each
LYON had an issue price of $443.14 and a
F-25
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. LIQUID YIELD OPTION NOTES (CONTINUED)
principal amount at maturity of $1,000. At September 30, 1996 the accreted value
of the LYONs was $117.1 million which included $1.6 million of accretion during
the third quarter.
Each LYON is convertible, at the option of the Holder, at any time on or
prior to maturity, unless previously redeemed or otherwise purchased, into
Common Stock at a conversion rate of 13.412 shares per LYON.
The LYONs are not redeemable by the Company prior to June 12, 2001.
Thereafter, the LYONs are redeemable for cash at any time at the option of the
Company, in whole or in part, at redemption prices equal to the issue price plus
accrued original issue discount to the date of redemption.
The LYONs will be purchased by the Company, at the option of the Holder, on
June 12, 2001 and June 12, 2006, for a Purchase Price of $581.25 and $762.39
(representing issue price plus accrued original issue discount to each date),
respectively, representing a 5.50% yield per annum to the Holder on such date,
computed on a semiannual bond equivalent basis. The Company, at its option, may
elect to pay the purchase price on any such purchase date in cash or Common
Stock, or any combination thereof.
6. CAPITAL STOCK
ISSUANCE OF ADDITIONAL COMMON STOCK
In June 1996, the Company issued pursuant to a public offering (the "1996
Stock Offering"), 11,250,000 shares of its Common Stock at a price of $28.00 per
share. Net proceeds to the Company from this 1996 Offering were approximately
$303.6 million. The Company used a portion of the net proceeds to repay all of
its indebtedness under the Former Credit Facility (approximately $196.5
million).
1993 WARRANTS
In connection with the 1996 Stock Offering, the Company determined that it
would convert the 1,983,605 outstanding 1993 Warrants into the right to receive
the Fair Market Value (as defined in the 1993 Warrant) calculated to be $19.70
per Warrant. This resulted in the issuance by the Company of an additional
1,726,004 shares of Common Stock with proceeds aggregating approximately $14.3
million. The Company used approximately $5.1 million of these proceeds to fund
the conversion of the remaining 1993 Warrants presented for redemption.
CITICASTERS WARRANTS
The Company issued the Citicasters Warrants pursuant to the terms of the
Citicasters Merger Agreement. If all of the Citicasters Warrants are exercised,
4,400,000 shares of Common Stock would be issued. Each Citicasters Warrant
initially entitles the holder thereof to purchase .2035247 of a share of Common
Stock at a price of $28.00 per full share through September 18, 2001.
F-26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Citicasters Inc.
We have audited the accompanying balance sheets of Citicasters Inc. and
subsidiaries (formerly Great American Communications Company) as of December 31,
1994 and 1995, and the related statements of operations, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1995. 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.
As more fully described in Note B to the financial statements, effective
December 28, 1993, the Company emerged from bankruptcy pursuant to a plan of
reorganization confirmed by the Bankruptcy Court on December 7, 1993. In
accordance with an American Institute of Certified Public Accountants Statement
of Position, the Company has adopted "fresh-start reporting" whereby its assets,
liabilities, and new capital structure have been adjusted to reflect estimated
fair values as of December 31, 1993. As a result, the statements of operations,
shareholders' equity and cash flows for the years ended December 31, 1994 and
December 31, 1995 reflect the Company's new basis of accounting and,
accordingly, are not comparable to the Company's pre-reorganization statements
of operations, shareholders' equity and cash flows for the year ended December
31, 1993.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Citicasters Inc. and
subsidiaries at December 31, 1994 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Cincinnati, Ohio
February 23, 1996
F-27
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
---------- ----------
<S> <C> <C>
Current assets:
Cash and short-term investments......................................................... $ 46,258 $ 3,572
Trade receivables, less allowance for doubtful accounts of $1,244 and $1,643............ 31,851 32,495
Broadcast program rights................................................................ 5,488 5,162
Prepaid and other current assets........................................................ 2,635 3,059
---------- ----------
Total current assets.................................................................. 86,232 44,288
Broadcast program rights, less current portion.......................................... 4,466 3,296
Property and equipment, net............................................................. 25,083 33,878
Contracts, broadcasting licenses and other intangibles, net............................. 274,695 312,791
Deferred charges and other assets....................................................... 13,016 22,093
---------- ----------
$ 403,492 $ 416,346
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities........................ $ 33,673 $ 17,061
Broadcast program rights fees payable................................................... 5,041 5,298
---------- ----------
Total current liabilities............................................................. 38,714 22,359
Broadcast program rights fees payable, less current portion............................... 3,666 2,829
Long-term debt............................................................................ 122,291 132,481
Deferred income taxes..................................................................... 44,486 44,822
Other liabilities......................................................................... 43,398 54,163
---------- ----------
Total liabilities..................................................................... 252,555 256,654
Shareholders' equity:
Class A Common Stock, $.01 par value, including additional paid-in capital, 500,000,000
shares authorized; 20,203,247 and 19,976,927 shares
outstanding........................................................................... 87,831 82,936
Retained earnings from January 1, 1994.................................................. 63,106 76,756
---------- ----------
Total shareholders' equity............................................................ 150,937 159,692
---------- ----------
$ 403,492 $ 416,346
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
F-28
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
PREDECESSOR
1993 1994 1995
----------- ---------- ----------
<S> <C> <C> <C>
Net revenues:
Television broadcasting................................................... $ 139,576 $ 130,418 $ 61,592
Radio broadcasting........................................................ 65,592 66,625 74,822
----------- ---------- ----------
205,168 197,043 136,414
----------- ---------- ----------
Costs and expenses:
Operating expenses........................................................ 71,730 60,682 37,416
Selling, general and administrative....................................... 61,340 57,036 43,513
Corporate, general and administrative expenses............................ 3,996 4,796 4,303
Depreciation and amortization............................................. 28,119 22,946 14,635
----------- ---------- ----------
165,185 145,460 99,867
----------- ---------- ----------
Operating income............................................................ 39,983 51,583 36,547
Other income (expense):
Interest expense, (contractual interest for 1993 was $69,806)............. (64,942) (31,979) (13,854)
Minority interest......................................................... (26,776) -- --
Investment income......................................................... 305 1,216 1,231
Gain on sale of television stations....................................... -- 95,339 --
Miscellaneous, net........................................................ (494) 447 (607)
----------- ---------- ----------
(91,907) 65,023 (13,230)
----------- ---------- ----------
Earnings (loss) before reorganization items and income taxes................ (51,924) 116,606 23,317
Reorganization items........................................................ (14,872) -- --
----------- ---------- ----------
Earnings (loss) before income taxes and extraordinary items................. (66,796) 116,606 23,317
Income taxes................................................................ -- 53,500 9,000
----------- ---------- ----------
Earnings (loss) before extraordinary items.................................. (66,796) 63,106 14,317
Extraordinary items, net of tax............................................. 408,140 -- --
----------- ---------- ----------
Net earnings................................................................ $ 341,344 $ 63,106 $ 14,317
----------- ---------- ----------
----------- ---------- ----------
Share data:
Primary and Fully Diluted:
Net earnings............................................................ * $ 2.55 $ .68
Average common shares................................................... * 24,777 21,017
</TABLE>
- ------------------------
*Share amounts are not relevant due to the effects of the reorganization.
See notes to financial statements.
F-29
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
PREDECESSOR
1993 1994 1995
----------- ---------- ----------
<S> <C> <C> <C>
Common stock, including additional paid-in capital:
Beginning balance......................................................... $ 270,891 $ 138,588 $ 87,831
Common stock issued:
Exercise of stock options............................................... -- -- 273
Stock bonus awarded..................................................... 350 297 --
Common stock repurchased and retired...................................... -- (51,054) (5,168)
Effect of restructuring................................................... (132,653) -- --
----------- ---------- ----------
Balance at end of period $ 138,588 $ 87,831 $ 82,936
----------- ---------- ----------
----------- ---------- ----------
Retained earnings:
Beginning balance......................................................... $(609,920) $ -- $ 63,106
Net earnings.............................................................. 341,344 63,106 14,317
Application of fresh-start accounting..................................... 268,576 -- --
Cash dividends............................................................ -- -- (667)
----------- ---------- ----------
Balance at end of period.................................................. $ -- $ 63,106 $ 76,756
----------- ---------- ----------
----------- ---------- ----------
Total Shareholders' Equity.................................................. $ 138,588 $ 150,937 $ 159,692
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
See notes to financial statements.
F-30
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
PREDECESSOR
1993 1994 1995
----------- ----------- ----------
<S> <C> <C> <C>
Operating Activities:
Net earnings.............................................................. $ 341,344 $ 63,106 $ 14,317
Adjustments:
Depreciation and amortization........................................... 28,119 22,946 14,635
Non-cash interest expense............................................... 8,780 198 190
Other non-cash adjustments (primarily non-cash dividends on the
preferred stock of a former subsidiary)............................... 26,941 -- --
Reorganization items.................................................... 14,872 -- --
Realized gains on sales of assets....................................... (1,871) (51,218) --
Extraordinary gains on retirements and refinancing of long-term debt.... (408,140) -- --
Decrease (increase) in trade receivables................................ (1,635) 16,443 (644)
Decrease (increase) in broadcast program rights, net of fees payable.... 201 (146) 916
Increase (decrease) in accounts payable, accrued expenses and other
liabilities........................................................... 9,514 (2,891) (5,885)
Increase (decrease) in deferred taxes................................... -- (6,559) 336
Other................................................................... 306 (4,389) (634)
----------- ----------- ----------
18,431 37,490 23,231
----------- ----------- ----------
Investing Activities:
Deposits on broadcast stations to be acquired............................. -- -- (7,500)
Purchases of:
Broadcast stations...................................................... -- (16,000) (50,598)
Real estate, property and equipment..................................... (5,967) (7,569) (11,857)
Sales of:
Broadcast stations...................................................... 1,600 381,547 --
Entertainment businesses:
Cash proceeds received................................................ -- 5,000 --
Cash expenses related to sale......................................... (6,021) (813) (22)
Investments and other subsidiaries...................................... -- 2,841 --
Other..................................................................... (1,131) 204 (378)
----------- ----------- ----------
(11,519) 365,210 (70,355)
----------- ----------- ----------
Financing Activities:
Retirements and refinancing of long-term debt............................. (370,150) (505,824) (3,500)
Additional long-term borrowings........................................... 355,339 195,350 13,500
Financing costs........................................................... (13,549) -- --
Common shares repurchased................................................. -- (51,054) (5,168)
Cash dividends paid on common stock....................................... -- -- (667)
Proceeds from the sale of common stock.................................... 1,161 -- --
Other..................................................................... -- 297 273
----------- ----------- ----------
(27,199) (361,231) 4,438
----------- ----------- ----------
Net Increase (Decrease) in Cash and Short-Term Investments.................. (20,287) 41,469 (42,686)
Cash and short-term investments at beginning of period...................... 25,076 4,789 46,258
----------- ----------- ----------
Cash and short-term investments at end of period............................ $ 4,789 $ 46,258 $ 3,572
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See notes to financial statements.
F-31
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
SUPPLEMENTARY SCHEDULE TO THE STATEMENT
OF CASH FLOWS--REORGANIZATION ITEMS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993
PREDECESSOR
------------
<S> <C>
Effects of Reorganization Activities:
Cash Items:
Operating activities:
Professional fees and other expenses related to bankruptcy proceedings and consummation of the
reorganization.............................................................................. $ (10,633)
------------
------------
Financing activities:
Long-term debt issued for cash................................................................ $ 6,339
Common stock issued for cash.................................................................. 1,161
------------
$ 7,500
------------
------------
Non Cash Items:
Increase in long-term debt (primarily reduction in original issue discount)..................... $ 25,967
Net adjustment of accounts to fair value........................................................ (15,961)
Decrease in liabilities subject to exchange..................................................... (40,423)
Increase in accrued liabilities (professional fees and other expenses related to consummation of
the reorganization)........................................................................... 1,438
Decrease in long-term debt through the issuance of common stock................................. (221,541)
Elimination of minority interest (preferred stock of subsidiary) through the issuance of common
stock......................................................................................... (274,932)
Common stock issued in reorganization........................................................... 134,762
------------
$ (390,690)
------------
------------
</TABLE>
See notes to financial statements.
F-32
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
ORGANIZATION. Citicasters is engaged in the ownership and operation of
radio and television stations and derives substantially all of its revenue from
the sale of advertising time. The amount of broadcast advertising time available
for sale by Citicasters' stations is relatively fixed, and by its nature cannot
be stockpiled for later sale. Therefore, the primary variables affecting revenue
levels are the demand for advertising time, the viewing or listening audience of
the station and the entry of new stations in the marketplace. The major variable
costs of operation are programming (news, sports and entertainment), sales costs
related to revenues and promotional costs. The success of the programming
determines the audience levels and therefore affects revenue.
BASIS OF PRESENTATION. The accompanying financial statements include the
accounts of Citicasters Inc. and its subsidiaries. For purposes of the financial
statements and notes hereto the term "Predecessor" refers to Great American
Communications Company and its subsidiaries prior to emergence from chapter 11
bankruptcy. Significant intercompany balances and transactions have been
eliminated.
On December 28, 1993, the Predecessor completed its comprehensive financial
restructuring through a prepackaged plan of reorganization under chapter 11 of
the Bankruptcy Code (see Note B for a description of the reorganization).
Pursuant to the reporting principles of AICPA Statement of Position No. 90-7
entitled "Financial Reporting by Entities in Reorganization under the Bankruptcy
Code" ("SOP 90-7"), Predecessor adjusted its assets and liabilities to their
estimated fair values upon consummation of the reorganization. The adjustments
to reflect the consummation of the reorganization as of December 31, 1993,
including, among other things, the gain on debt discharge and the adjustment to
record assets and liabilities at their fair values, have been reflected in the
accompanying financial statements. The Statements of Operations, Changes in
Shareholders' Equity and Cash Flows for the year ended December 31, 1993 are
presented on a historical cost basis without giving effect to the
reorganization. Therefore, the Statements of Operations, Changes in
Shareholders' Equity and Cash Flows for periods after December 31, 1993 are
generally not comparable to prior periods and are separated by a line (see Note
B).
All acquisitions have been treated as purchases. The accounts and results of
operations of companies since their formation or acquisition are included in the
consolidated financial statements.
American Financial Group, Inc. and its Subsidiaries ("American Financial")
owned 7,566,889 shares (37.8%) of Citicasters' outstanding Common Stock at March
1, 1996. At that date, American Financial's Chairman, Carl H. Lindner, owned an
additional 3,428,166 shares (17.1%) of Citicasters' outstanding Common Stock.
USE OF ESTIMATES. The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Changes in circumstances could cause actual
results to differ materially from those estimates.
BROADCAST PROGRAM RIGHTS. The rights to broadcast non-network programs on
Citicasters' television stations are stated at cost, less accumulated
amortization. These costs are charged to operations on a straight-line basis
over the contract period or on a per-showing basis, whichever results in the
greater aggregate amortization.
PROPERTY AND EQUIPMENT. Property and equipment are based on cost and
depreciation is calculated primarily using the straight-line method. Depreciable
lives are: land improvements, 8-20 years; buildings and improvements, 8-40
years; operating and other equipment, 3-20 years; and leasehold improvements,
over the life of the lease.
F-33
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A. ACCOUNTING POLICIES (CONTINUED)
CONTRACTS, BROADCASTING LICENSES AND OTHER INTANGIBLES. Contracts,
broadcasting licenses and other intangibles represent the excess of the value of
the broadcast station over the values of their net tangible assets, and is
attributable to FCC licenses, network affiliation agreements and other
contractual or market related factors. Reorganization value in excess of amounts
allocable to identifiable assets represents the excess of the estimated fair
value of Citicasters at the time of the reorganization over the estimated fair
value allocated to its net identifiable assets. Intangible assets are being
amortized on a straight-line basis over an average of 34 years. On an ongoing
basis, Citicasters reviews the carrying value of its intangible assets. If this
review indicates that intangible assets will not be recoverable, as determined
based on undiscounted cash flows of broadcast stations over the remaining
amortization period, Citicasters' carrying value of intangible assets are
reduced by the amount of the estimated shortfall of cash flows.
INCOME TAXES. Citicasters files a consolidated Federal income tax return
which includes all 80% or more owned subsidiaries. Deferred income tax assets
and liabilities are determined based on differences between financial reporting
and tax bases and are measured using enacted tax rates. Deferred tax assets are
recognized if it is more likely than not that a benefit will be realized.
EARNINGS PER SHARE. Primary and fully diluted earnings per share in 1994
and 1995 are based upon the weighted average number of common shares and gives
effect to common equivalent shares (dilutive options) outstanding during the
respective periods. As a result of the effects of the reorganization, per share
data for the year ended December 31, 1993 has been rendered meaningless and,
therefore, per share information for this period has been omitted from the
accompanying financial statements.
STOCK BASED COMPENSATION. The Company grants stock options for a fixed
number of shares to employees with an exercise price equal to the fair value of
the shares at the date of grant. The Company accounts for stock option grants in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees,
and, accordingly, recognizes no compensation expense for the stock option
grants.
STATEMENT OF CASH FLOWS. For cash flow purposes, "investing activities" are
defined as making and collecting loans and acquiring and disposing of debt or
equity instruments and property and equipment. "Financing activities" include
obtaining resources from owners and providing them with a return on their
investments, borrowing money and repaying amounts borrowed. All other activities
are considered "operating." Short-term investments for purposes of the financial
statements are those which had a maturity of three months or less when acquired.
B. REORGANIZATION
On December 28, 1993, Citicasters completed its comprehensive financial
restructuring that was designed to enhance its long-term viability by adjusting
its capitalization to reflect current and projected operating performance
levels. The Predecessor accomplished the reorganization of its debt and
preferred stock obligations through "prepackaged" bankruptcy filings made under
chapter 11 of the Bankruptcy Code by the Predecessor and two of its former
non-operating subsidiaries. The Predecessor's primary operating subsidiary,
Great American Television and Radio Company, Inc., was not a party to any such
filings under the Bankruptcy Code.
Acceptances for a prepackaged plan of reorganization were solicited in
October and early November 1993. The plan of reorganization described below was
overwhelmingly approved by the creditors and shareholders. The Predecessor filed
its bankruptcy petition with the Bankruptcy Court on November 5, 1993. The plan
was confirmed on December 7, 1993 and became effective on December 28, 1993.
Under the terms of the plan the following occurred:
- Predecessor effected a reverse stock split; issuing 2.25 shares of a new
class of common stock for each 300 shares of common stock outstanding
prior to the reorganization.
F-34
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
B. REORGANIZATION (CONTINUED)
- Debt with a carrying value of $634.8 million was exchanged for 23,256,913
shares of common stock and $426.6 million in debt.
- Preferred stock of a subsidiary was exchanged for 1,515,499 shares of
common stock.
- American Financial fulfilled a commitment to contribute $7.5 million in
cash for which it received approximately $6.3 million principal amount of
14% Notes and 213,383 shares of common stock.
- The net expense incurred as a result of the chapter 11 filings and
subsequent reorganization has been segregated from ordinary operations in
the Statement of Operations. Reorganization items for 1993 include the
following (in thousands):
<TABLE>
<S> <C>
Financing costs.................................................... $ 25,967
Adjustments to fair value.......................................... (15,961)
Professional fees and other expenses related to bankruptcy......... 4,914
Interest income.................................................... (48)
---------
$ 14,872
---------
---------
</TABLE>
Financing costs consist of the unamortized portion of original issue
discount and deferred financing costs relating to debt subject to exchange as of
the date the petition for bankruptcy was filed (November 5, 1993). Adjustments
to fair value reflect the net change to state assets and liabilities at
estimated fair value as of December 31, 1993. Interest income is attributable to
the accumulation of cash and short-term investments after commencement of the
chapter 11 cases.
Pursuant to the fresh-start reporting provisions of SOP 90-7, the
Predecessor's assets and liabilities were revalued and a new reporting entity
was created with no retained earnings or accumulated deficit as of the effective
date. The period from the effective date to December 31, 1993 was considered
immaterial thus, December 31, 1993 was used as the effective date for recording
the fresh-start adjustments. Predecessor's results of operations for the period
from the effective date of the restructuring to December 31, 1993 have been
reflected in the Statement of Operations for the year ended December 31, 1993.
The reorganization values of the assets and liabilities were determined
based upon several factors including: prices and multiples of broadcast cash
flow (operating income before depreciation and amortization) paid in purchase
and business combination transactions, projected operating results of the
broadcast stations, market values of publicly traded broadcast companies,
economic and industry information and the reorganized capital structure. The
foregoing factors resulted in a range of reorganization values between $75 and
$200 million. Based upon an analysis of all of this data, management determined
that the reorganization value of the company would be $138.6 million.
The gain on debt discharge is summarized as follows (in thousands):
<TABLE>
<S> <C>
Carrying value of debt securities subject to exchange, including
accrued interest................................................ $ 318,447
Carrying value of preferred stock of subsidiary, including accrued
dividends....................................................... 309,608
Aggregate principal amount of 14% Senior Extendable Notes issued
in exchanges, including accrued interest since June 30, 1993.... (71,236)
Aggregate value of common stock issued in exchanges............... (134,762)
Expenses attributable to consummation of the reorganization....... (7,573)
---------
Total gain on debt discharge (See Note J)......................... $ 414,484
---------
---------
</TABLE>
F-35
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
C. ACQUISITIONS AND DISPOSITIONS
During June 1995, Citicasters acquired its second FM station in Portland
(KKCW) for $30 million. During August 1995, Citicasters acquired a second FM
radio station in Tampa (WTBT) for $5.5 million. The purchase price for WTBT-FM
could increase to $8 million depending on the satisfaction of certain
conditions. Citicasters began operating WTBT-FM during March 1995. In December
1995, the Company began operating WHOK-FM, WLLD-FM and WLOH-AM in Columbus under
a local marketing agreement and acquired the stations in January 1996 for $24
million.
During 1994, Citicasters sold one AM and three FM radio stations and
acquired or commenced the operation of two FM radio stations. The following
table sets forth certain information regarding these radio station transactions:
<TABLE>
<CAPTION>
ACQUISITION
DATE OPERATIONS DATE OF PRICE/ SALES
COMMENCED/CEASED CLOSING PRICE
------------------- ---------------------- ----------------
<S> <C> <C> <C>
Acquisitions:
Sacramento (KRXQ-FM)............................ January 1, 1994 May 27, 1994 $ 16 million
Cincinnati (WWNK-FM)............................ April 25, 1994 April 21, 1995 $ 15 million
Dispositions:
Detroit (WRIF-FM)............................... January 23, 1994 September 23, 1994 $ 11.5 million
Milwaukee (WLZR-FM&AM).......................... April 14, 1994 April 14, 1994 $ 7 million
Denver (KBPI-FM)................................ April 19, 1994 August 5, 1994 $ 8 million
</TABLE>
In the aggregate, the purchases and sales of radio stations completed in
1994 and 1995 did not have a material effect on Citicasters' results. No gain or
loss was recognized on the radio stations sold during 1994, because those
stations were valued at their respective sales price under the fresh-start
reporting provision of SOP 90-7.
During September and October 1994, Citicasters sold four of its network
affiliated television stations to entities affiliated with New World
Communications Group Incorporated ("New World"). The stations sold included KSAZ
in Phoenix, WDAF in Kansas City, WBRC in Birmingham and WGHP in
Greensboro/Highpoint. Citicasters received $355.5 million in cash and a warrant
to purchase, for five years, 5,000,000 shares of New World Common Stock at $15
per share. The warrant was valued at $10 million and is included in the balance
sheet caption "Deferred charges and other assets." Citicasters recorded a pretax
gain of $95.3 million ($50.1 million after tax) on these sales. Proceeds from
the sales were used to retire long-term debt and to repurchase shares of the
Company's Common Stock. During 1995, the terms of the warrant were amended to
modify the registration rights relating to the underlying shares. In
consideration for such modification, the exercise price was increased from $15
to $16 per share.
The following unaudited proforma financial information is based on the
historical financial statements of Citicasters, adjusted to reflect the
television station sales, retirement of long-term debt, the effects of the
December 1993 reorganization and the February 1994 refinancing of subordinated
debt (in thousands except per share data).
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1993 1994
---------- ----------
<S> <C> <C>
Net revenues.......................................................... $ 119,597 $ 128,375
---------- ----------
---------- ----------
Operating income...................................................... $ 20,142 $ 30,624
---------- ----------
---------- ----------
Net earnings.......................................................... $ 4,244 $ 11,582
---------- ----------
---------- ----------
Net earnings per share................................................ $ .16 $ .47
---------- ----------
---------- ----------
</TABLE>
F-36
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
D. PROPERTY AND EQUIPMENT
Property and equipment at December 31, consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1995
---------- ---------
<S> <C> <C>
Land and land improvements............................................. $ 5,305 $ 5,883
Buildings and improvements............................................. 10,710 15,458
Operating and other equipment.......................................... 13,873 22,771
---------- ---------
29,888 44,112
Accumulated depreciation............................................... (4,805) (10,234)
---------- ---------
$ 25,083 $ 33,878
---------- ---------
---------- ---------
</TABLE>
Pursuant to the fresh-start reporting principles of SOP 90-7, the carrying
value of property and equipment was adjusted to estimated fair value as of the
effective date of the reorganization, which included the restarting of
accumulated depreciation. Depreciation expense relating to property and
equipment was $11.6 million in 1993; $8.7 million in 1994; and $5.4 million in
1995.
E. CONTRACTS, BROADCASTING LICENSES AND OTHER INTANGIBLES
Contracts, broadcasting licenses and other intangibles at December 31,
consisted of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Licenses, network affiliation agreements and other market related
intangibles......................................................... $ 275,629 $ 322,749
Reorganization value in excess of amounts allocable to identifiable
assets.............................................................. 7,998 7,998
---------- ----------
283,627 330,747
Accumulated amortization.............................................. (8,932) (17,956)
---------- ----------
$ 274,695 $ 312,791
---------- ----------
---------- ----------
</TABLE>
Citicasters' carrying value of its broadcasting assets was adjusted to
estimated fair value as of the effective date of the reorganization pursuant to
the reporting principles of SOP 90-7. This adjustment included, among other
things, the restarting of accumulated amortization related to intangibles.
Amortization expense relating to contracts, broadcasting licenses and other
intangibles was $16.5 million in 1993; $14.2 million in 1994; and $9.3 million
in 1995.
F-37
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
F. LONG-TERM DEBT
Long-term debt at December 31, consisted of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Citicasters:
9 3/4% Senior Subordinated Notes due February 2004, less unamortized
discount of $2,709 and $2,519 (imputed interest rate 10.13%)...... $ 122,291 $ 122,481
Subsidiaries:
Bank credit facility................................................ -- 10,000
---------- ----------
Total long-term debt.............................................. $ 122,291 $ 132,481
---------- ----------
---------- ----------
</TABLE>
At December 31, 1995, the only sinking fund or other scheduled principal
payments due during the next five years is $10 million, due in 1998.
Cash interest payments were $45.1 million in 1993; $27.1 million in 1994;
and $12.9 million in 1995.
In February 1994, Citicasters refinanced its 14% Notes and the 13% Senior
Subordinated Notes due 2001 through the issuance of $200 million principal
amount of 9 3/4% Senior Subordinated Notes due 2004 ("9 3/4% Notes"). The 9 3/4%
Notes were issued at a discount; the net proceeds were $195.4 million. No gain
or loss was recognized on these transactions. A portion of the proceeds from the
sale of the four television stations ($305 million) was used to retire long-term
debt including $75 million principal amount of the 9 3/4% Notes.
In October 1994, Citicasters entered into a bank credit agreement with a
group of banks providing two revolving credit facilities: a $125 million
facility to fund future acquisitions and a $25 million working capital facility.
The acquisition facility is available through December 31, 2001. The maximum
amount available under this facility will be reduced by $7.5 million per quarter
beginning in the first quarter of 1998. The working capital facility is
available through December 31, 1997. Citicasters is required to use excess cash
flow to reduce amounts outstanding under the facilities if leverage ratios
exceed certain levels.
The interest rate under the facilities varies depending on Citicasters'
leverage ratio. In the case of the base rate option, the rate ranges from the
base rate to the base rate plus .75%. In the case of the eurodollar rate option,
the rate ranges from 1% to 2% over the eurodollar rate. The weighted average
interest rate on Citicasters outstanding bank debt as of December 31, 1995 was
6.84%. The bank credit facilities are secured by substantially all the assets of
Citicasters. As of March 1, 1996, Citicasters had $26 million outstanding under
the acquisition facility.
Citicasters' 9 3/4% Notes require a prepayment of the 9 3/4% Notes in the
event of certain changes in the control of Citicasters and further require the
proceeds from certain asset sales to be used to partially redeem 9 3/4% Notes.
At December 31, 1995 the market of the 9 3/4% Notes exceeded carrying value
by approximately $1.5 million.
G. SHAREHOLDERS' EQUITY
Citicasters is authorized to issue 500 million shares of Class A Common
Stock, $.01 par value, 125 million shares of Class B Common Stock, $.01 par
value and 9.5 million shares of Serial Preferred Stock, $.01 par value. The
preferred stock may have such preferences and other rights and limitations as
the Board of Directors may designate with respect to each series.
F-38
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
G. SHAREHOLDERS' EQUITY (CONTINUED)
During 1994 and 1995, Citicasters acquired 2,354,475 and 254,760 shares of
its common stock from several unaffiliated institutions for $51.1 million and
$5.2 million, respectively. Under the most restrictive provision of Citicasters'
debt covenants, Citicasters may acquire an additional $8.7 million of its common
stock.
During 1995, Citicasters' Board of Directors twice declared three-for-two
stock splits of its outstanding common stock. All share and per share data have
been restated to reflect both stock splits.
The Company's debt instruments contain certain covenants which limit the
amount of dividends which Citicasters is able to pay on its common stock. Under
the most restrictive provision of Citicasters' debt covenants, dividends are
limited to a maximum of $2.5 million annually. Citicasters paid a dividend of
$.03 per common share in 1995. Under the merger agreement with Jacor (see Note
M), Citicasters will not be permitted to pay dividends without the prior consent
of Jacor.
Changes in the number of shares of common stock are shown in the following
table:
<TABLE>
<S> <C>
Predecessor:
Outstanding at January 1, 1993................................ 56,729,434
Effect of reverse stock split in restructuring................ (56,303,963)
Issued in restructuring for exchanges of securities........... 24,772,412
Issued for cash............................................... 213,383
Citicasters:
Stock bonuses awarded to employees............................ 52,425
----------
Outstanding at December 31, 1993.............................. 25,463,691
Stock bonuses awarded to employees............................ 37,125
Stock repurchased and retired................................. (5,297,569)
----------
Outstanding at December 31, 1994.............................. 20,203,247
Exercise of stock option...................................... 29,812
Stock repurchased and retired................................. (256,132)
----------
Outstanding at December 31, 1995.............................. 19,976,927
----------
----------
</TABLE>
Following the consummation of the reorganization, the Board of Directors
established the 1993 Stock Option Plan. The Plan provides for granting both
non-qualified and incentive stock options to key employees. There are 1,800,000
common shares reserved for issuance under the 1993 Plan. During 1994, the Board
of Directors established the 1994 Directors Stock Option Plan. The Plan provides
for the granting of options to non-employee directors of Citicasters. There are
450,000 common shares reserved for issuance under the 1994 Plan. Options under
both plans become exercisable at the rate of 20% per year commencing one year
after grant and expire at the earlier of 10 years from the date of grant, three
months after termination of employment or retirement as a director, or one year
after the death or disability of the holder.
F-39
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
G. SHAREHOLDERS' EQUITY (CONTINUED)
Stock option data for Citicasters' stock option plans are as follows:
<TABLE>
<CAPTION>
1994 1995
-------------------------- ---------------------------
OPTION PRICE OPTION PRICE
SHARES PER SHARE SHARES PER SHARE
---------- -------------- ---------- ---------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period....................... 1,307,250 $ 6.67 1,614,375 $ 6.67-$10.33
Granted................................................ 498,375 $ 9.77-$10.33 57,500 $ 18.00-$25.50
Exercised.............................................. -- -- (29,812) $ 6.67
Terminated............................................. (191,250) $ 6.67 -- --
---------- -------------- ---------- ---------------
Outstanding, December 31............................... 1,614,375 $ 6.67-$10.33 1,642,063 $ 6.67-$25.50
---------- -------------- ---------- ---------------
---------- -------------- ---------- ---------------
Exercisable, December 31............................... 223,200 $ 6.67 516,263 $ 6.67-$10.33
---------- -------------- ---------- ---------------
---------- -------------- ---------- ---------------
Available for grant December 31........................ 635,625 607,937
---------- ----------
---------- ----------
</TABLE>
H. INCOME TAXES
Deferred income taxes reflect the impact of temporary differences between
the carrying amounts of assets and liabilities recognized for financial
reporting purposes and the amounts recognized for income tax purposes.
Significant components of Citicasters' deferred tax assets and liability as of
December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Accrued expenses and other............................................ $ 8,190 $ 8,409
Deferred tax liability:
Book over tax basis of depreciable assets............................... 52,676 53,231
--------- ---------
Net deferred tax liability.............................................. $ 44,486 $ 44,822
--------- ---------
--------- ---------
</TABLE>
The following is a reconciliation of Federal income taxes at the "statutory"
rate of 35% in 1993, 1994 and 1995 and as shown in the Statement of Operations
(in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
1993 1994 1995
----------- ---------- ----------
<S> <C> <C> <C>
Earnings (loss) from continuing operations before income taxes.............. $ (66,796) $ 116,606 $ 23,317
Extraordinary items......................................................... 408,140 -- --
----------- ---------- ----------
Adjusted earnings before income taxes....................................... $ 341,344 $ 116,606 $ 23,317
----------- ---------- ----------
----------- ---------- ----------
Income taxes at the statutory rate.......................................... $ 119,470 $ 40,812 $ 8,161
Effect of:
Book basis over tax basis of stations sold................................ -- 8,472 --
Goodwill.................................................................. (630) 599 74
Minority interest......................................................... 9,372 -- --
Certain reorganization items.............................................. (127,606) -- --
State taxes net of Federal income tax benefit............................. -- 3,575 650
Other..................................................................... (606) 42 115
----------- ---------- ----------
Income taxes as shown in the Statement of Operations...................... $ -- $ 53,500 $ 9,000
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
F-40
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
H. INCOME TAXES (CONTINUED)
Income tax provision as applied to continuing operations consists of (in
thousands):
<TABLE>
<CAPTION>
PREDECESSOR
1993 1994 1995
------------- --------- ---------
<S> <C> <C> <C>
Current taxes............................................... $ -- $ 42,800 $ 7,300
Deferred taxes.............................................. -- 5,200 700
State taxes................................................. -- 5,500 1,000
----- --------- ---------
$ -- $ 53,500 $ 9,000
----- --------- ---------
----- --------- ---------
</TABLE>
Federal income taxes of $7 million and $8.4 million were paid in cash during
1994 and 1995, respectively.
I. DISCONTINUED OPERATIONS
During 1994, Citicasters received an additional $5 million related to the
1991 sale of its entertainment businesses. The after-tax proceeds were credited
to reorganization intangibles. A final distribution is scheduled to occur in
December 1996. It is not possible to quantify the amount of the distribution
Citicasters will receive at that time.
J. EXTRAORDINARY ITEMS
Predecessor's extraordinary items in 1993 consisted of a loss of $6.3
million from the retirement of debt prior to the reorganization and a gain of
$414.5 million on debt discharge in the reorganization.
K. PENDING LEGAL PROCEEDINGS
Management, after review and consultation with counsel, considers that any
liability from litigation pending against Citicasters and any of its
subsidiaries would not materially affect the consolidated financial position or
results of operations of Citicasters and its subsidiaries.
L. ADDITIONAL INFORMATION
Quarterly Operating Results (Unaudited)--The following are quarterly results
of consolidated operations for 1994 and 1995 (in thousands except per share
data).
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER TOTA1
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1994
Net revenues............................................ $ 48,449 $ 60,423 $ 50,908 $ 37,263 $ 197,043
Operating income........................................ 7,193 18,321 13,386 12,683 51,583
Net earnings (loss)..................................... (1,752) 5,161 44,851 14,846 63,106
Net earnings (loss) per share........................... $ (.07) $ .20 $ 1.75 $ .67 $ 2.55
1995
Net revenues............................................ $ 29,045 $ 36,886 $ 34,126 $ 36,357 $ 136,414
Operating income........................................ 4,724 11,588 8,910 11,325 36,547
Net earnings............................................ 1,278 5,242 3,282 4,515 14,317
*Net earnings per share.................................. $ .06 $ .25 $ .15 $ .21 $ .68
</TABLE>
- ------------------------
* The sum of the quarterly earnings per share does not equal the earnings per
share computed on a year-to-date basis due to rounding.
F-41
<PAGE>
CITICASTERS INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
L. ADDITIONAL INFORMATION (CONTINUED)
Citicasters' financial results are seasonal. Revenues are higher in the
second and fourth quarter and lower in the first and third quarter; the first
quarter is the lowest of the year.
During the third and fourth quarters of 1994, Citicasters recorded net
earnings of $41.7 million and $8.4 million, respectively, attributable to the
sale of the four television stations.
Included in selling, general and administrative expenses in 1993, 1994 and
1995 are charges of $6.6 million, $7.2 million and $5.8 million, respectively,
for advertising and charges of $2.4 million, $2.2 million and $1.3 million,
respectively, for repairs and maintenance.
M. SUBSEQUENT EVENT
On February 12, 1996, Citicasters and Jacor Communications, Inc. entered
into a merger agreement by which Jacor will acquire Citicasters. Under the
agreement, for each share of Citicasters' stock, Jacor will pay cash of $29.50
plus a five-year warrant to purchase approximately .2 shares of Jacor common
stock at $28 per share. If the closing occurs after September 1996 the exercise
price of the warrant would be reduced to $26 per share and the per share cash
price would increase at the rate of $.2215 per month. American Financial and
certain of its affiliates have agreed to execute irrevocable consents in favor
of the Jacor transaction on March 13, 1996. The closing of the transaction is
conditioned on, among other things, receipt of FCC and other regulatory
approvals. Upon consummation of the merger, holders of the 9 3/4% Notes have the
right to put their notes to the Company at 101% of principal.
F-42
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Noble Broadcast Group, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholders' deficit and
of cash flows present fairly, in all material respects, the financial position
of Noble Broadcast Group, Inc. and its subsidiaries at December 25, 1994 and
December 31, 1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, in February
1996 the Company entered into an agreement to be purchased by Jacor
Communications, Inc.
PRICE WATERHOUSE LLP
San Diego, California
March 21, 1996
F-43
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 25, DECEMBER 31,
1994 1995
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................................... $ 2,134,000 $ 447,000
Accounts receivable, less allowance for doubtful accounts of $515,000 and
$455,000..................................................................... 12,401,000 9,094,000
Prepaid expenses and other..................................................... 2,084,000 2,290,000
-------------- --------------
Total current assets......................................................... 16,619,000 11,831,000
Property, plant and equipment, net............................................... 7,623,000 9,333,000
Intangible assets, less accumulated amortization of $33,718,000 and
$25,734,000.................................................................... 89,849,000 50,730,000
Other assets..................................................................... 1,932,000 5,333,000
-------------- --------------
$ 116,023,000 $ 77,227,000
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable............................................................... $ 3,537,000 $ 2,867,000
Accrued interest............................................................... 6,477,000 1,674,000
Accrued payroll and related expenses........................................... 1,720,000 1,077,000
Other accrued liabilities...................................................... 4,364,000 3,081,000
Current portion of long-term debt.............................................. 167,209,000 3,611,000
Unamortized carrying value of subordinated debt................................ 19,445,000
-------------- --------------
Total current liabilities.................................................... 202,752,000 12,310,000
Long-term debt, less current portion............................................. 232,000 78,000,000
Deferred income taxes............................................................ 8,568,000
Other long-term liabilities...................................................... 683,000 640,000
-------------- --------------
Total liabilities................................................................ 203,667,000 99,518,000
-------------- --------------
Mandatorily redeemable Class A-1 common stock, $.01 par value; 1,580,285 shares
authorized; 249,931 shares issued and outstanding in 1994...................... 35,066,000
-------------- --------------
Stockholders' deficit:
Class A common stock, $.000001 par value; 1,569,514 shares authorized, 49,904
shares issued and outstanding in 1995........................................ -- --
Class B common stock, $.01 par value and $.000001 par value in 1994 and 1995,
respectively; 2,293,235 and 254,018 shares authorized in 1994 and 1995,
respectively; 254,018 shares issued and outstanding.......................... 3,000 --
Paid-in capital................................................................ 662,000 44,231,000
Accumulated deficit............................................................ (123,375,000) (66,522,000)
-------------- --------------
Total stockholders' deficit.................................................. (122,710,000) (22,291,000)
Commitments (Note 11)
-------------- --------------
$ 116,023,000 $ 77,227,000
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-44
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
--------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
------------- -------------- -------------
<S> <C> <C> <C>
Broadcast revenue.................................................. $ 53,860,000 $ 56,154,000 $ 47,061,000
Less agency commissions............................................ (6,351,000) (6,552,000) (5,159,000)
------------- -------------- -------------
Net revenue...................................................... 47,509,000 49,602,000 41,902,000
------------- -------------- -------------
Expenses:
Broadcast operating expenses..................................... 36,944,000 37,892,000 31,445,000
Corporate general and administrative............................. 2,702,000 2,621,000 2,285,000
Depreciation and amortization.................................... 6,916,000 6,311,000 4,107,000
Write-down of intangibles and other assets....................... 7,804,000
------------- -------------- -------------
46,562,000 54,628,000 37,837,000
------------- -------------- -------------
Income (loss) from operations...................................... 947,000 (5,026,000) 4,065,000
Interest expense................................................... (7,602,000) (10,976,000) (9,913,000)
Net gain on sale of radio stations................................. 7,909,000 2,619,000
------------- -------------- -------------
Income (loss) before provision for income taxes, extraordinary gain
and cumulative effect of change in accounting principle.......... 1,254,000 (16,002,000) (3,229,000)
Provision for income taxes......................................... (378,000) (36,000) (63,000)
------------- -------------- -------------
Income (loss) before extraordinary gain and cumulative effect of
change in accounting principle................................... 876,000 (16,038,000) (3,292,000)
Extraordinary gain on forgiveness of debt, net of income taxes..... 12,222,000 60,145,000
------------- -------------- -------------
Income (loss) before cumulative effect of change in accounting
principle........................................................ 13,098,000 (16,038,000) 56,853,000
Cumulative effect of change in accounting principle................ 354,000
------------- -------------- -------------
Net income (loss).................................................. $ 13,452,000 $ (16,038,000) $ 56,853,000
------------- -------------- -------------
------------- -------------- -------------
Primary earnings (loss) per share:
Before extraordinary item and cumulative effect of change in
accounting principle........................................... $ 1.96 $ (31.82) $ (1.80)
Extraordinary item............................................... 9.35 47.23
Cumulative effect of change in accounting principle.............. .27
------------- -------------- -------------
Total.......................................................... $ 11.58 $ (31.82) $ 45.43
------------- -------------- -------------
------------- -------------- -------------
Fully diluted earnings (loss) per share:
Before extraordinary item and cumulative effect of change in
accounting principle........................................... $ 1.96 $ (31.82) $ (1.83)
Extraordinary item............................................... 9.35 47.23
Cumulative effect of change in accounting principle.............. .27
------------- -------------- -------------
Total.......................................................... $ 11.58 $ (31.82) $ 45.40
------------- -------------- -------------
------------- -------------- -------------
Common equivalent shares:
Primary.......................................................... 1,307,541 503,949 1,273,569
Fully diluted.................................................... 1,307,541 503,949 1,273,569
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-45
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
------------------------ ---------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------- ----------- --------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 27, 1992...... 254,018 $ 3,000 $ 662,000 $(120,789,000) $(120,124,000)
Net income...................... 13,452,000 13,452,000
----------- ----------- --------- ----------- ---------- ------------ ------------
Balance at December 26, 1993...... 254,018 3,000 662,000 (107,337,000) (106,672,000)
Net loss........................ (16,038,000) (16,038,000)
----------- ----------- --------- ----------- ---------- ------------ ------------
Balance at December 25, 1994...... 254,018 3,000 662,000 (123,375,000) (122,710,000)
Cancellation of Class A-1
Mandatorily Redeemable Common
Stock......................... 26,562,000 26,562,000
Exchange of Class A-1
Mandatorily Redeemable Common
Stock......................... 49,904 -- 8,504,000 8,504,000
Change in par value of Class B
Common Stock from $.01 per
share to $.000001 per share... (3,000) 3,000
Issuance of warrant to purchase
common stock.................. 8,500,000 8,500,000
Net income...................... 56,853,000 56,853,000
----------- ----------- --------- ----------- ---------- ------------ ------------
Balance at December 31, 1995...... 49,904 $ -- 254,018 $ -- $44,231,000 $(66,522,000) $(22,291,000)
----------- ----------- --------- ----------- ---------- ------------ ------------
----------- ----------- --------- ----------- ---------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-46
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-----------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................. $ 13,452,000 $ (16,038,000) $ 56,853,000
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Cumulative effect of change in accounting principle......... (354,000)
Interest expense added to long-term debt.................... 2,309,000 2,465,000 3,631,000
Depreciation and amortization............................... 6,916,000 6,311,000 4,107,000
Amortization of debt issuance costs and unamortized carrying
value of subordinated debt................................ (1,002,000) (1,312,000) 392,000
Net (revenue) expense on barter transactions................ 81,000 (288,000) (210,000)
(Gain) loss on disposition of assets........................ (7,930,000) 138,000 (2,287,000)
Extraordinary gain on forgiveness of debt................... (12,222,000) (60,145,000)
Write-down of intangibles and other assets.................. 9,297,000
Changes in assets and liabilities, net of effects of
acquisitions:
Accounts receivable....................................... (1,318,000) (2,367,000) 3,698,000
Prepaid expenses and other................................ 233,000 (14,000) 4,000
Other assets.............................................. (610,000) 732,000 (224,000)
Accounts payable.......................................... 679,000 1,360,000 (670,000)
Accrued interest.......................................... (223,000) 2,070,000 (1,674,000)
Other accrued liabilities................................. (888,000) 924,000 (1,926,000)
Other long-term liabilities............................... 2,577,000 (107,000) (43,000)
-------------- -------------- ---------------
Net cash provided by (used in)
operating activities.................................... 1,700,000 3,171,000 1,506,000
-------------- -------------- ---------------
Cash flows from investing activities:
Proceeds from disposition of assets........................... 35,002,000 6,000 47,650,000
Acquisition of property, plant and equipment.................. (3,009,000) (1,124,000) (2,851,000)
Acquisition of radio stations................................. (6,834,000)
-------------- -------------- ---------------
Net cash flows provided by (used in) investing
activities.............................................. 31,993,000 (1,118,000) 37,965,000
-------------- -------------- ---------------
Cash flows from financing activities:
Payments on long-term debt.................................... (34,036,000) (2,534,000) (126,450,000)
Borrowings.................................................... 90,500,000
Payments related to financing costs........................... (5,208,000)
-------------- -------------- ---------------
Net cash used in financing activities..................... (34,036,000) (2,534,000) (41,158,000)
-------------- -------------- ---------------
Net decrease in cash and cash equivalents....................... (343,000) (481,000) (1,687,000)
Cash and cash equivalents at beginning of period................ 2,958,000 2,615,000 2,134,000
-------------- -------------- ---------------
Cash and cash equivalents at end of period...................... $ 2,615,000 $ 2,134,000 $ 447,000
-------------- -------------- ---------------
-------------- -------------- ---------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-47
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--THE COMPANY
Noble Broadcast Group, Inc. (the Company), a privately held Delaware
corporation, owned and operated the following radio stations during 1995:
WSSH-AM serving Boston, Massachusetts; KBEQ-FM and AM, serving Kansas City,
Missouri; KMJQ-FM and KYOK-AM serving Houston, Texas; KBCO-FM and AM and KHIH-FM
and KHOW-AM, serving Denver, Colorado; KMJM-FM, KNJZ-FM and KATZ-AM, serving St.
Louis, Missouri; WVKS-FM, WRVF-FM and WSPD-AM, serving Toledo, Ohio. Four of
these stations were sold and two stations were purchased during 1995 (Note 8).
In addition, the Company also provided programming for and had exclusive rights
to sell advertising time on two radio stations located in Baja California,
Mexico, XETRA-FM and XETRA-AM, which primarily serve the metropolitan San Diego
area broadcasting as XTRA-FM and AM.
NOTE 2--SUBSEQUENT EVENT-SALE OF THE COMPANY
In February 1996, the Company entered into a Stock Purchase and Stock and
Warrant Redemption Agreement (the Agreement) whereby Jacor Communications, Inc.
(Jacor) agreed to purchase both the Company's outstanding Class B common stock
and a newly-issued warrant allowing Jacor to purchase the Company's Class A
common stock. This transaction is subject to Federal Communications Commission
approval and certain other conditions. Simultaneously, the Company entered into
an Asset Purchase Agreement and sold the assets of certain subsidiaries of the
Company to a wholly-owned subsidiary of Jacor and assigned to this subsidiary
its rights and obligations under certain contracts including the Exclusive Sales
Agency Agreement (Note 10). The aggregate value of the above transactions, when
fully consummated, is $152,000,000 plus certain closing costs. At that time,
Jacor will own 100% of the equity interests in the Company. The Company also
entered into time brokerage agreements with Jacor for the stations in St. Louis
and Toledo. The Company received approximately $99,000,000 in February 1996 in
conjunction with the transactions.
In connection with this transaction, the Company entered into a Credit
Agreement with another wholly-owned subsidiary of Jacor providing for a
$40,000,000 Term Loan Facility, which was borrowed in full in February 1996, and
a $1,000,000 Revolving Loan Facility. The loans bear interest at the Prime rate,
payable quarterly. Both facilities are to be repaid on February 1, 2002 or upon
occurrence of certain ownership changes, whichever occurs earlier.
The Company used the total proceeds received in February 1996 to repay the
outstanding indebtedness under the Senior Secured Term Loan, the Senior
Revolving Credit Facility and the Subordinated Notes, to redeem and retire the
warrant held by the subordinated debtholder, and to redeem and retire all of the
Company's Class A shares outstanding (Notes 5 and 6). In the event that the
transaction cannot be consummated, none of the proceeds previously paid to the
Class A stockholders or the warrant holders shall be returned. If the
transaction is terminated by the buyer, the Class B stockholders shall be
entitled to the balance of the amounts due under the Agreement; if terminated by
the Company, the buyer shall be entitled only to the amounts previously paid to
the Class B stockholders as well as certain other amounts.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Significant intercompany balances and
transactions have been eliminated.
F-48
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL STATEMENT PREPARATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
FISCAL YEAR
The Company's fiscal year ends on the last Sunday of December to coincide
with the standard broadcast year.
REVENUES
Revenues for commercial broadcasting advertisements are recognized when the
commercial is broadcast.
CASH AND CASH EQUIVALENTS
Cash equivalents are highly liquid investments (money market funds) with
original maturities of three months or less. Included in cash and cash
equivalents at December 25, 1994 is $1,600,000 of restricted cash. Restricted
cash of $1,500,000 was released to the Company on December 31, 1994 in
conjunction with its sale of KMJQ-FM and KYOK-AM (Note 8). The remaining
$100,000 of restricted cash was released to the Company in January 1995 in
conjunction with the sale of WSSH-AM (Note 8).
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.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash investments and
accounts receivable. The Company places its cash and temporary cash investments
in money market funds with high quality 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 United States.
EARNINGS (LOSS) PER COMMON SHARE
Primary earnings (loss) per common share are calculated on the basis of the
weighted average number of common shares outstanding plus (in periods in which
they have a dilutive effect) the effect of common equivalent shares arising from
Senior Subordinated Convertible Notes, using the if-converted method, and the
effect of warrants to purchase common stock using the treasury stock method. The
calculation of fully diluted earnings per common share also includes the effect
of the assumed conversion of Senior Subordinated Convertible Notes and exercise
of warrants to purchase common stock in periods in which such conversion would
cause dilution.
F-49
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Purchases of property, plant and equipment, including additions and
improvements and expenditures for repairs and maintenance that significantly add
to productivity or extend the economic lives of the assets, are capitalized at
cost and depreciated on the straight-line basis over their estimated useful
lives as follows:
<TABLE>
<S> <C>
Technical and office equipment.................................. 5-8 years
10-30
Buildings and building improvements............................. years
Furniture and fixtures.......................................... 10 years
Leasehold improvements.......................................... 10 years
Land improvements............................................... 8 years
Automobiles..................................................... 3 years
</TABLE>
Maintenance and repairs are expensed as incurred.
INTANGIBLE ASSETS
Intangible assets represents the aggregate excess purchase cost over the
fair market value of radio station net assets acquired. Intangible assets are
stated at the lower of cost or net realizable value and are being amortized
using the straight-line method over periods not exceeding 40 years. The Company
evaluates the realizability of intangible assets by comparing the asset carrying
amount to future anticipated undiscounted cash flows.
In 1994, the Company determined that intangibles related to its Houston
stations were impaired and, accordingly, it recorded a $7,450,000 loss (Note 8).
Additionally, in 1994, the Company determined that $354,000 in other assets
would not be realized, and recorded a loss.
DEBT ISSUANCE COSTS
Debt issuance costs incurred in connection with executing long-term debt
agreements are amortized over the term of associated debt to interest expense.
FINANCIAL INSTRUMENTS
Interest rate swaps are entered into as a hedge against interest exposure of
variable rate debt. The differences to be paid or received on the swaps are
included in interest expense. Gains and losses are recognized when the swaps are
settled. The interest rate swaps are subject to market risk as interest rates
fluctuate.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107, "Disclosures about
Fair Value of Financial Instruments," (FAS 107) requires disclosure of fair
value information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. Fair values
are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used. The carrying
amount of all financial instruments on the consolidated balance sheet are
considered reasonable estimates of fair value, with the exception of long-term
debt as of December 25, 1994, of which $50,301,000 was forgiven in August 1995
(Note 5) and the interest rate swap agreement (Note 5).
F-50
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
<TABLE>
<CAPTION>
DECEMBER 25, DECEMBER 31,
1994 1995
-------------- --------------
<S> <C> <C>
Property, plant and equipment
Technical and office equipment.................................................. $ 12,295,000 $ 10,196,000
Land and land improvements...................................................... 978,000 1,067,000
Buildings and building improvements............................................. 2,880,000 2,517,000
Furniture and fixtures.......................................................... 1,531,000 1,244,000
Leasehold improvements.......................................................... 1,640,000 1,057,000
Automobiles..................................................................... 327,000 314,000
-------------- --------------
19,651,000 16,395,000
Less accumulated depreciation and amortization.................................. (12,028,000) (7,062,000)
-------------- --------------
$ 7,623,000 $ 9,333,000
-------------- --------------
-------------- --------------
Other non-current assets
Debt issuance costs............................................................. $ 646,000 $ 4,267,000
Other........................................................................... 1,286,000 1,066,000
-------------- --------------
$ 1,932,000 $ 5,333,000
-------------- --------------
-------------- --------------
</TABLE>
Statement of Cash Flows Information
Schedule of certain non-cash financing activities:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
----------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
------------ --------------- ---------------
<S> <C> <C> <C>
Acquisition of assets in exchange for debt.................... $ 463,000 $ -- $ --
------------ ----- -----
------------ ----- -----
</TABLE>
NOTE 5--LONG-TERM DEBT
Long-term debt is comprised of:
<TABLE>
<CAPTION>
DECEMBER 25, DECEMBER 31,
1994 1995
--------------- -------------
<S> <C> <C>
Senior Secured Term Loan..................................... $ 45,000,000
Senior Revolving Credit Facility............................. 7,050,000
Subordinated Notes........................................... 29,325,000
Tranche A Notes.............................................. $ 87,364,000
Tranche B Notes.............................................. 11,587,000
Series A Senior Subordinated Notes........................... 29,617,000
Series B Senior Subordinated Convertible Notes............... 37,000,000
Other........................................................ 1,873,000 236,000
--------------- -------------
167,441,000 81,611,000
Less current portion......................................... (167,209,000) (3,611,000)
--------------- -------------
$ 232,000 $ 78,000,000
--------------- -------------
--------------- -------------
</TABLE>
Interest paid during 1993, 1994 and 1995 aggregated $4,354,000, $6,152,000
and $3,673,000, respectively.
F-51
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--LONG-TERM DEBT (CONTINUED)
TRANCHE A NOTES AND TRANCHE B NOTES--The Tranche A and Tranche B Notes,
which were outstanding as of December 25, 1994, were extinguished in conjunction
with the Company's August 1995 debt restructuring (see Debt Restructuring
below). The Tranche A Notes bore interest at the 30-day LIBOR rate plus an
applicable margin. The Tranche B Notes bore interest at 4 percent. The senior
debt agreement provided for principal prepayments at the option of the Company
and called for mandatory principal prepayments from the net proceeds of sales of
certain radio station properties or from 50 percent of the net proceeds of sales
by the Company of any stock or warrants issued by the Company or from the
exercise of any such warrants or from excess operating cash, as defined.
During 1993, the Company sold certain radio station properties and other
assets (Note 8) and utilized resultant net proceeds of $32,960,000 to repay
Tranche A Notes of $18,498,000 and Tranche B Notes of $14,462,000. Pursuant to
agreements with the senior debtholders, $12,222,000 of the Tranche A Notes was
forgiven, resulting in an extraordinary gain during the year ended December 26,
1993.
The Company's agreement with the Senior debtholders contained, among other
things, certain covenants as to the maintenance of certain financial ratios and
cash flows, as well as restrictions on additional indebtedness, property sales
and liens, mergers and acquisitions, contingent liabilities, certain lease
transactions, investments, transactions with affiliates, corporate overhead,
capital expenditures, prepaid expenditures, and employment and certain other
contracts.
Based on agreements between the Company and the holders of the Tranche A
Notes and Tranche B Notes, the outstanding debt was to be repaid as of August
18, 1995 and the Company classified the debt as current as of December 25, 1994.
SENIOR SUBORDINATED NOTES AND SENIOR SUBORDINATED CONVERTIBLE NOTES--The
Series A Senior Subordinated Notes (Subordinated Notes) and Series B Senior
Subordinated Convertible Notes (Convertible Notes), which were outstanding as of
December 25, 1994, were extinguished in conjunction with the Company's 1995 debt
restructuring (see Debt Restructuring below).
In fiscal year 1991 the Company restructured its debt with the subordinated
debtholders by modifying certain terms. The $24,423,000 excess of the carrying
amount of the old subordinated debt instruments over the principal amount of the
Subordinated and Convertible Notes was recorded as unamortized carrying value of
subordinated debt in 1991 and was being amortized against future interest
expense over the term of the restructured Subordinated and Convertible Notes.
The Subordinated Notes bore interest at an annual rate of 9%; interest was added
to principal semiannually. During 1993, 1994 and 1995, approximately $2,309,000,
$2,465,000 and $3,631,000 of interest was added to the principal, respectively.
The Convertible Notes bore interest at the non-compounding annual rate of 5
percent and such interest was due and payable at such time as the principal
became payable. The Convertible Notes were convertible as to both principal and
accrued interest into 803,592 shares of Mandatorily Redeemable Class A-1 common
stock at the option of the holders after April 30, 1994.
The Subordinated Notes and Convertible Notes were subordinated to the
Tranche A and B Notes and contained, among other things, covenants as to the
maintenance of certain financial ratios and cash flows, and certain restrictions
as to additional indebtedness, amounts and types of payments and investments,
dividends, liens and encumbrances, sale and leaseback transactions, equity
interests of subsidiaries, sales of assets, mergers, corporate overhead, capital
expenditures, prepayment of expenses, and employment contracts.
F-52
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--LONG-TERM DEBT (CONTINUED)
Based on agreements between the Company and the holders of Subordinated
Notes and Convertible Notes, the outstanding debt was to be repaid as of August
18, 1995 and the Company classified the debt and associated unamortized carrying
value of subordinated debt as current as of December 25, 1994.
DEBT RESTRUCTURING--In August 1995, the Company completed a restructuring of
its debt, resulting in the extinguishment of $175,301,000 of Tranche A Notes,
Tranche B Notes, Subordinated Notes and Convertible Notes plus accrued interest
for an aggregate amount of $125,000,000 in cash. Additionally, the Company
repurchased or exchanged the shares of Class A-1 common stock held by the
holders of these debt instruments. The Company sold its Houston, Boston and
Kansas City stations in 1995 and utilized the resultant net proceeds of
$47,650,000, along with $1,500,000 restricted cash released to the Company (Note
3), to repay outstanding debt prior to the completion of the restructuring (Note
8), entered into a new senior $60,000,000 Credit Agreement and obtained new
subordinated debt for $37,000,000. The former debtholders forgave $50,301,000 of
principal and accrued interest which has been recognized as an extraordinary
gain in 1995. Also included in the extraordinary gain for 1995 is $18,412,000,
representing the remaining unamortized carrying value of subordinated debt as of
the date of the related debt extinguishment.
SENIOR SECURED TERM LOAN AND SENIOR REVOLVING CREDIT FACILITY--In August
1995, the Company and its wholly-owned subsidiaries entered into a $60,000,000
Credit Agreement with a consortium of banks, consisting of a $45,000,000 Senior
Secured Term Loan (the Term Loan) and a $15,000,000 Senior Revolving Credit
Facility (the Revolver). The Company borrowed all of the $45,000,000 Term Loan
and $7,500,000 of the Revolver and paid transaction costs of approximately
$4,700,000. Under the Term Loan and the Revolver, principal payments were due in
varying amounts through 2001. As discussed in Note 2, the outstanding debt under
the Credit Agreement was paid in full and cancelled in February 1996.
Borrowings under the Credit Agreement bore interest, at the option of the
Company, at either the London Interbank Offered Rate (LIBOR) plus an applicable
margin of up to 2.625%, or at a base rate (defined as the higher of the Federal
Funds Rate plus .5% or the bank's Prime rate) plus an applicable margin of up to
1.375% per annum. The Term Loan and the Revolver were secured by substantially
all of the Company's assets, including the common stock and tangible and
intangible assets and major lease rights of the Company's operating
subsidiaries.
In conjunction with entering into the Credit Agreement, the Company issued a
warrant to purchase 10% of the common stock of the Company's primary operating
subsidiary, exercisable only in the event of certain specified occurrences
through June 30, 1996, for an exercise price of $1.00. The Company determined
that the value of the warrant was de minimus because of the nature of the
specified events required for warrant exercise. As discussed in Note 2, the
warrant was cancelled in February 1996.
INTEREST RATE SWAP AGREEMENT--In accordance with the terms of the Credit
Agreement, the Company entered into a three year interest rate swap agreement in
September 1995 on a notional principal amount of $30,000,000. Under the interest
rate swap agreement, on a quarterly basis the Company pays the counterparty
interest at a fixed rate of 5.87%, and the counterparty pays the Company
interest at a variable rate based on the LIBOR.
As of December 31, 1995, the interest rate swap agreement had a nominal
carrying value and a ($425,000) fair value. The fair value was estimated by
obtaining a quotation from the counterparty. In February 1996, the Company
terminated the interest rate swap agreement in conjunction with its debt
extinguishment, and realized a loss of $686,000 upon termination.
SUBORDINATED NOTES--In August 1995, the Company entered into an Investment
Agreement with a new subordinated debtholder, consisting of $37,000,000 in
subordinated notes. The subordinated notes bore
F-53
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--LONG-TERM DEBT (CONTINUED)
interest at a rate of 8.108% per annum compounded quarterly, of which 50% was to
be paid annually with the remainder being added to principal. The notes were due
in August 2002. As discussed in Note 2, the debt was paid in full and cancelled
in February 1996.
Under the Investment Agreement, the Company issued a warrant for 75% of the
Company's Class A common stock, exercisable through August 2005, with an
exercise price of $1.00. Management has determined that the fair value of the
warrant on the date of issuance was approximately $8,500,000, which has been
recorded as a discount on the related debt and was being amortized to interest
expense over the term of the debt. As discussed in Note 2, the Company
repurchased the warrant in February 1996.
COVENANTS--The Credit Agreement and the Investment Agreement required the
Company to comply with certain financial and operating covenants, including,
among others, limitations on: capital expenditures, acquisitions and additional
indebtedness, engaging in a business other than radio broadcasting, paying cash
dividends, corporate overhead levels, the use of borrowings, and requirements to
maintain certain financial ratios.
NOTE 6--COMMON STOCK
In conjunction with the August 1995 refinancing, the Company entered into an
agreement with its former debtholders providing for the repurchase or exchange
of all of their Class A-1 shares of common stock. Under the agreement, 189,321
Class A-1 shares were repurchased by the Company for a de minimus amount and the
remaining 60,610 shares were exchanged for 49,904 shares of Class A common
stock. There were 249,931 shares of Mandatorily Redeemable Class A-1 common
stock outstanding in 1993 and 1994.
The Company's authorized capital stock subsequent to the August 1995
restructuring consists of 1,569,514 shares of Class A common stock, $.000001 par
value, of which 49,904 shares are issued and outstanding, and 254,018 shares of
Class B voting common stock, $.000001 par value, all of which are issued and
outstanding. Prior to August 1995, the Class B common stock had a par value of
$.01. Class B common stock is voting common stock, while Class A common stock
has no right to vote with respect to the election of directors, or other
corporate actions other than certain major events set forth in the Company's
Restated Certificate of Incorporation. The holders of Class B common stock,
voting as a class, are entitled to elect six members of the Board of Directors.
Class B common stock may convert their shares into stock that is registered
pursuant to certain firm commitment underwritten public offerings, as defined.
Shares of Class A common stock are convertible into an equal number of
shares of Class B common stock subsequent to a public offering, as described in
the Restated Certificate of Incorporation, upon certain events as defined in the
Company's agreements with the subordinated debtholders, or as of August 18,
2000. In addition, holders of both Class A and Class B common stock may convert
their shares into stock that is registered pursuant to a public offering.
Holders of Class A common stock are entitled to participate on a pro rata basis
with the holders of Class B common stock with respect to dividends, when and as
declared by the Board of Directors, provided there are funds legally available
for such purpose, and with respect to any redemption or repurchase by the
Company of any Class B common stock.
The Mandatorily Redeemable Class A-1 common stock contained a liquidation
preference over Class B common stock in an amount equal to a prescribed formula
value solely in the event of a liquidation resulting from bankruptcy, insolvency
or other similar proceeding. Such liquidation preference was zero at December
25, 1994. The Mandatorily Redeemable Class A-1 common stock was not entitled to
vote except for the right, voting as a separate class, to elect one member of
the Company's Board of Directors and
F-54
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--COMMON STOCK (CONTINUED)
except that certain transactions specified in the Company's Restated Certificate
of Incorporation required the consent of the majority of the then-outstanding
shares of Mandatorily Redeemable Class A-1 common stock. Holders of Mandatorily
Redeemable Class A-1 common stock were entitled to participate on a pro rata
basis with the holders of Class B common stock upon any redemption or repurchase
by the Company of any Class B common stock or other equity securities of the
Company.
Shares of Class A-1 common stock were convertible into an equal number of
shares of Class B common stock subsequent to a public offering, or under certain
specified circumstances. In addition, holders of Class A-1 common stock were
entitled to convert their shares into stock registered pursuant to certain firm
commitment underwritten public offerings, as defined. Prior to an initial public
offering (IPO), holders of Class A-1 common stock were entitled to, in the event
of a defined change of voting control of the Company, require the Company to
repurchase their shares of Class A-1 common stock in accordance with specified
formula prices. In addition, if the Company had not effected an IPO by December
2002, then holders of a majority of the then-outstanding Class A-1 common stock,
on or after December 31, 2003, could require the Company to repurchase the Class
A-1 common stock owned by them at a specified formula repurchase price.
The Mandatorily Redeemable Class A-1 common stock was recorded at an "issue
price" equivalent to the carrying value of the equity instruments exchanged
therefor. No subsequent adjustment to the valuation of the Mandatorily
Redeemable Class A-1 common stock was required prior to its repurchase and
exchange in August 1995.
NOTE 7--STOCK OPTIONS
The Company had two stock option plans, the Executive Stock Option Plan
(Executive Plan) and the 1991 Stock Option Plan (1991 Plan). No options were
granted under the Executive Plan or the 1991 Plan. In conjunction with the
August 1995 debt restructuring, the Company cancelled the 1991 Plan and the
Executive Plan.
NOTE 8--STATION TRANSACTIONS
In August 1995, concurrent with the debt restructuring, the Company
purchased substantially all of the assets and certain liabilities of WSPD-AM and
WRVF-FM, Toledo, Ohio, for $6,660,000 using cash proceeds obtained through the
August 1995 debt restructuring. The acquisition has been accounted for using the
purchase method. The assets acquired were comprised of accounts receivable of
$391,000 and property, plant and equipment of $1,525,000. The excess of the
purchase price over the fair value of the assets and liabilities acquired was
$4,744,000, which is attributable to intangible assets and is being amortized
over 40 years using the straight-line method. The results of operations are
included in the results of operations of the Company since their acquisition.
The following unaudited pro forma summary information presents the results
of operations of the Company as if the acquisition of WSPD-AM and WRVF-FM had
occurred on December 27, 1993, after giving effect to certain adjustments,
principally intangible amortization and interest. These pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of what
F-55
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--STATION TRANSACTIONS (CONTINUED)
would have occurred had the acquisition been effected as of December 27, 1993 or
of the results which may occur in the future.
<TABLE>
<CAPTION>
(UNAUDITED)
YEAR ENDED
-----------------------------
DECEMBER 25, DECEMBER 31,
1994 1995
-------------- -------------
<S> <C> <C>
Net revenue.................................................... $ 59,455,000 $ 47,945,000
Loss before extraordinary item................................. $ (16,230,000) $ (4,015,000)
Net income (loss).............................................. $ (16,230,000) $ 57,576,000
Earnings (loss) per share before extraordinary item............ $ (32.21) $ (3.15)
Earnings (loss) per share...................................... $ (32.21) $ 45.21
</TABLE>
In March 1995, the Company sold substantially all of the assets (excluding
cash and accounts receivable) and certain liabilities of Noble Broadcast of
Kansas City, Inc. (KBEQ-FM and KBEQ-AM) for $7,650,000. The sale of these assets
resulted in a gain of approximately $1,982,000 and has been reflected in the
Company's 1995 results of operations.
In January 1995, the Company sold substantially all of the assets (excluding
cash and accounts receivable) and certain liabilities of Noble Broadcast of
Ballybunion, Inc. (WSSH-AM) for $1,500,000. The sale of these assets resulted in
a gain of approximately $637,000 and has been reflected in the Company's 1995
results of operations.
On December 31, 1994, the Company sold substantially all of the non-cash
assets and certain liabilities of Noble Broadcast of Houston, Inc. (KMJQ-FM and
KYOK-AM) for $38,500,000 and released restricted cash of $1,500,000 (Note 3).
The sale of these assets resulted in a loss on the sale of $7,450,000. This loss
was considered to result from permanent impairment of intangible assets as of
December 25, 1994 and has been reflected in the Company's results of operations
in 1994.
In March 1993, the Company sold substantially all of the assets of Noble
Broadcast of New York, Inc. (WBAB-FM and WGBB-AM) for $16,000,000. Net proceeds
from this sale of $15,000,000 were used to reduce the Tranche A and Tranche B
Notes (Note 5) resulting in the forgiveness of $5,562,000 of Tranche A Notes.
The sale of these assets resulted in a gain on the sale of $6,555,000.
In April 1993, the Company sold substantially all of the assets of WSSH-FM
Boston, Massachusetts, for $18,500,000. Net proceeds from this sale of
$15,250,000 were used to reduce the Tranche A and Tranche B Notes (Note 5)
resulting in the forgiveness of $5,655,000 of the Notes. The sale of these
assets resulted in a gain of $1,354,000.
In May 1993, the Company purchased substantially all of the assets of
KATZ-AM and KNJZ-FM in St. Louis for $2,750,000. The Company paid $2,250,000 in
cash and issued a non-interest bearing promissory note for $500,000. The note is
payable in equal installments of $250,000 in May 1994 and May 1996. The
acquisition has been accounted for using the purchase method. The assets and
liabilities acquired were comprised entirely of intangible assets which are
being amortized over 40 years using the straight-line method. The results of
operations are included in the results of operations of the Company since their
acquisition.
NOTE 9--INCOME TAXES
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
109 on a prospective basis, effective January 1, 1993. SFAS 109 requires
recognition of deferred tax assets and
F-56
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--INCOME TAXES (CONTINUED)
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under the SFAS 109 asset
and liability method, deferred tax assets and liabilities are determined based
upon the difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Upon implementation of SFAS 109, the
Company recorded a cumulative effect (benefit) of a change in accounting
principle of $354,000, which represented the future tax benefits expected to be
realized upon utilization of the Company's state tax loss carryforwards. The
benefit of these loss carryforwards was realized during 1993.
The following is a summary of the provision for income taxes, for the years
ended December 26, 1993, December 25, 1994 and December 31, 1995:
<TABLE>
<CAPTION>
1993 1994 1995
---------- --------- ---------
<S> <C> <C> <C>
Current:
Federal................................................... $ -- $ -- $ --
State..................................................... 24,000 36,000 63,000
Deferred:
Federal................................................... -- --
State..................................................... 354,000 -- --
---------- --------- ---------
Provision................................................... $ 378,000 $ 36,000 $ 63,000
---------- --------- ---------
---------- --------- ---------
</TABLE>
A reconciliation of the provision for income taxes to the amount computed by
applying the statutory Federal income tax rate to income before income taxes
follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31,
1993 1994 1995
------------ ------------- -------------
<S> <C> <C> <C>
Federal statutory rate......................................... $ 439,000 $ (5,601,000) $ (1,176,000)
State income taxes, net of federal benefit..................... 57,000 (728,000) (153,000)
Amortization and write down of intangibles..................... (496,000) 3,348,000 1,329,000
Losses for which no current benefit is available............... -- 2,847,000 --
State net operating loss utilization........................... 354,000 -- --
Other.......................................................... 24,000 170,000 63,000
------------ ------------- -------------
$ 378,000 $ 36,000 $ 63,000
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
F-57
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--INCOME TAXES (CONTINUED)
The components of deferred income taxes at December 25, 1994 and December
31, 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
-------------- -------------
<S> <C> <C>
Deferred tax assets:
Available net operating loss carryforwards for financial reporting
purposes........................................................... $ 30,060,000 $ --
Charitable contribution carryovers................................... 250,000 250,000
Book and tax amortization differences................................ 12,530,000 --
Accrued liabilities and reserves..................................... 200,000 180,000
-------------- -------------
43,040,000 430,000
Deferred tax liabilities:
Book and tax basis differences....................................... (14,272,000) (7,256,000)
Book and tax depreciation and amortization differences............... (4,458,000) (1,312,000)
-------------- -------------
Net deferred tax assets (liabilities)................................ 24,310,000 (8,138,000)
Valuation allowance.................................................. (24,310,000) (430,000)
-------------- -------------
$ -- $ (8,568,000)
-------------- -------------
-------------- -------------
</TABLE>
The Company recorded a provision for income taxes in 1993, 1994 and 1995 due
to taxable income for state tax reporting purposes related to entities in the
consolidated group which were subject to state income tax. The Company recorded
a valuation allowance for those deferred tax assets for which the Company's
management determined that the realization of such future tax benefits is not
more likely than not. Taxes paid during 1993, 1994 and 1995 aggregated $24,000,
$36,000 and $63,000, respectively.
At December 31, 1995, the Company had available Federal net operating losses
of approximately $46,000,000 for tax reporting purposes. Additionally, the
Company had available net operating losses of approximately $41,000,000 for
state income tax purposes. The net operating losses for tax purposes expire
between 2001 and 2009. In certain circumstances, as specified in the Internal
Revenue Code, a 50 percent or more ownership change by certain combinations of
the Company's stockholders during any three year period would result in
limitations on the Company's ability to utilize its net operating loss
carryforwards. The value of the Company's stock at the time of the ownership
change is the primary factor in determining the limit on the Company's ability
to utilize its net operating loss carryforwards. As a result of the August 1995
debt and equity restructuring, an ownership change occurred, and consequently
the Company's net operating loss carryforwards generated prior to the ownership
change are limited. The purchase of the Company by Jacor (Note 2) will also
result in an ownership change as specified in the Internal Revenue Code. As a
result of the August 1995 debt and equity restructuring, certain deferred tax
assets were reduced for financial reporting purposes. The increase in deferred
tax liabilities of $8,568,000 that occurred in conjunction with the August 1995
debt and equity restructuring was recorded as a component of the extraordinary
gain resulting from the August 1995 restructuring.
NOTE 10--BROADCAST LICENSE AGREEMENT
The Company's consolidated net sales for 1993, 1994 and 1995, include
XTRA-FM and XTRA-AM sales of approximately $13,346,000, $14,087,000 and
$15,613,000, respectively, pursuant to an Exclusive Sales Agency Agreement (the
Agreement) with the broadcast licensee expiring in 2015. Under the Agreement,
the Company acts as the agent for the sale of advertising time on XTRA-FM and
XTRA-AM for all areas outside Mexico. The Company operated a broadcasting tower
under a month-to-month lease until February 1996 when it moved to a new location
in Mexico owned by the Company. The broadcast
F-58
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--BROADCAST LICENSE AGREEMENT (CONTINUED)
licenses for these stations from the Ministry of Communications of the Republic
of Mexico are scheduled to expire on July 3, 2004. The Company is not aware of
any information which would lead it to believe that any specific risks exist
which threaten the continuance of the Company's relationship with the broadcast
licensee.
Pursuant to the terms of the Agreement, as amended, the Company provides
programming for and purchases advertising time directly from the broadcast
licensee and resells such time to United States advertisers and agencies. The
Company incurred $555,000, $584,000 and $415,000 in expenses under the Agreement
during 1993, 1994 and 1995.
NOTE 11--BARTER TRANSACTIONS
Barter revenue was approximately $2,956,000, $2,551,000 and $2,461,000, in
1993, 1994 and 1995, respectively. Barter expense was approximately $3,037,000,
$2,263,000 and $2,251,000, in 1993, 1994 and 1995, respectively.
Included in prepaid expenses and other current assets and accrued
liabilities in the accompanying consolidated balance sheets for 1995 and 1994
are barter receivables (merchandise or services due to the Company) of
approximately $1,640,000 and $1,540,000, respectively and barter accounts
payable (air time due to suppliers of merchandise or services) of approximately
$1,384,000 and $1,385,000, respectively.
NOTE 12--COMMITMENTS
BROADCAST COMMITMENTS
The Company has agreements to broadcast a series of professional sports
games and related events through 1998. The Company incurred total expenses of
$2,142,000, $2,744,000 and $3,757,000 during 1993, 1994 and 1995, respectively,
in accordance with the agreements. Future minimum annual payments under the
agreements become due and payable as follows:
<TABLE>
<S> <C>
1996............................................ $2,765,000
1997............................................ 1,172,000
1998............................................ 385,000
---------
$4,322,000
---------
---------
</TABLE>
LEASE COMMITMENTS
The Company incurred total rental expenses of $1,389,000, $1,378,000 and
$538,000 in 1993, 1994 and 1995, respectively, under operating leases for
facilities and equipment. Future annual rental commitments expected under such
leases at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996............................................ $ 489,000
1997............................................ 406,000
1998............................................ 415,000
1999............................................ 404,000
2000............................................ 368,000
Thereafter...................................... 1,038,000
---------
$3,120,000
---------
---------
</TABLE>
F-59
<PAGE>
NOBLE BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--COMMITMENTS (CONTINUED)
TIME BROKERAGE AGREEMENTS
The Company, through various subsidiaries, previously provided programming
through time brokerage agreements. These agreements, which were terminated in
August 1995, allowed the Company to purchase a specified amount of broadcast
time per week in exchange for the rights to all advertising revenues. The
Company incurred related total expenses of $1,294,000, $1,517,000 and $479,000
during 1993, 1994 and 1995, respectively.
NOTE 13--LITIGATION
The Company is involved in litigation on certain matters arising in the
ordinary course of business. Management has consulted with legal counsel and
does not believe that the resolution of such matters will have a material
adverse effect on the Company's financial position, results of operations, or
cash flows.
F-60
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Jacor Communications, Inc.
We have audited the accompanying combined balance sheets of the Selected
Gannett Radio Stations as of December 31, 1995 and September 29, 1996 and the
related combined statements of operations, changes in Parent Company's
investment in radio stations and cash flows for the years ended December 25,
1994 and December 31, 1995 and the nine month period ended September 29, 1996.
These financial statements are the responsibility of the Station'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 combined financial position of the Selected
Gannett Radio Stations as of December 31, 1995 and September 29, 1996 and the
combined results of their operations and their cash flows for the years ended
December 25, 1994 and December 31, 1995 and the nine month period ended
September 29, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
November 15, 1996
F-61
<PAGE>
SELECTED GANNETT RADIO STATIONS
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND SEPTEMBER 29, 1996
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 29,
1995 1996
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................ $ 4,694 $ 2,229
Accounts receivable, less allowance for doubtful accounts of $213,648 in 1995 and
$251,851 in 1996............................................................... 7,888,111 8,217,358
Prepaid expenses................................................................. 20,713 384,732
Other current assets............................................................. 73,973 86,277
------------- -------------
Total current assets........................................................... 7,987,491 8,690,596
Property and equipment, net........................................................ 3,302,726 3,044,042
Intangible assets, net............................................................. 8,622,503 8,349,482
------------- -------------
Total assets................................................................... $ 19,912,720 $ 20,084,120
------------- -------------
------------- -------------
Current liabilities:
Accounts payable................................................................. $ 148,283 $ 482,380
Accrued payroll.................................................................. 510,467 422,787
Accrued income tax payable to Parent Company..................................... 3,902,670 2,788,727
Other current liabilities........................................................ 175,950 461,002
------------- -------------
Total current liabilities...................................................... 4,737,370 4,154,896
Commitments and contingencies
Parent Company's investment in radio stations...................................... 15,175,350 15,929,224
------------- -------------
Total liabilities and Parent Company's investment in radio stations............ $ 19,912,720 $ 20,084,120
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-62
<PAGE>
SELECTED GANNETT RADIO STATIONS
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 25, 1994 AND DECEMBER 31, 1995
AND FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 29, 1996
<TABLE>
<CAPTION>
NINE MONTHS
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Broadcast revenue................................................... $ 43,137,949 $ 44,427,284 $ 31,509,536
Less agency commissions........................................... 5,993,617 6,324,614 4,449,021
------------- ------------- -------------
Net revenue..................................................... 37,144,332 38,102,670 27,060,515
Broadcast operating expenses........................................ 28,242,877 26,924,177 19,128,146
Depreciation and amortization....................................... 947,251 963,840 713,218
Corporate general and administrative expenses....................... 891,118 1,245,388 892,997
------------- ------------- -------------
Operating income................................................ 7,063,086 8,969,265 6,326,154
Other income, net................................................... 95,485 5,848 9,556
------------- ------------- -------------
Income before income taxes...................................... 7,158,571 8,975,113 6,335,710
Income tax expense.................................................. 3,067,652 3,858,422 2,724,355
------------- ------------- -------------
Net income...................................................... $ 4,090,919 $ 5,116,691 $ 3,611,355
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-63
<PAGE>
SELECTED GANNETT RADIO STATIONS
COMBINED STATEMENTS OF CHANGES IN
PARENT COMPANY'S INVESTMENT IN RADIO STATIONS
FOR THE YEARS ENDED DECEMBER 25, 1994 AND DECEMBER 31, 1995
AND FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 29, 1996
<TABLE>
<CAPTION>
NINE MONTHS
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Balance, beginning of year.......................................... $ 16,641,431 $ 15,852,782 $ 15,175,350
Net funds remitted to Parent Company................................ (4,879,568) (5,794,123) (2,857,481)
Net income from operations.......................................... 4,090,919 5,116,691 3,611,355
------------- ------------- -------------
Balance, end of year................................................ $ 15,852,782 $ 15,175,350 $ 15,929,224
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-64
<PAGE>
SELECTED GANNETT RADIO STATIONS
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 25, 1994 AND DECEMBER 31, 1995
AND FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 29, 1996
<TABLE>
<CAPTION>
NINE MONTHS
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income......................................................... $ 4,090,919 $ 5,116,691 $ 3,611,355
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation..................................................... 583,223 599,812 440,197
Amortization of intangible assets................................ 364,028 364,028 273,021
Change in allowance for doubtful accounts........................ 44,360 (38,600) 38,203
Changes in operating assets and liabilities:
Accounts receivable............................................ (746,724) 385,183 (367,450)
Prepaid expenses............................................... 1,753 (6,037) (364,019)
Other current assets........................................... 45,391 (32,674) (12,304)
Accounts payable............................................... (5,861) (482,568) 334,097
Accrued payroll and other current liabilities.................. 177,662 (245,530) 197,372
Accrued income tax payable to Parent Company................... 1,302,686 806,021 (1,113,943)
------------- ------------- -------------
Net cash provided by operating activities............................ 5,857,437 6,466,326 3,036,529
------------- ------------- -------------
Cash flows from investing activities:
Capital expenditures............................................... (951,545) (702,595) (181,513)
------------- ------------- -------------
Cash flow from financing activities:
Funds remitted to Parent Company................................... (4,879,568) (5,794,123) (2,857,481)
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents................. 26,324 (30,392) (2,465)
Cash and cash equivalents at beginning of year....................... 8,762 35,086 4,694
------------- ------------- -------------
Cash and cash equivalents at end of year............................. $ 35,086 $ 4,694 $ 2,229
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-65
<PAGE>
SELECTED GANNETT RADIO STATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS
a. DESCRIPTION OF BUSINESS: The combined financial statements include the
operations of six radio stations, KIIS-FM and KIIS-AM in Los Angeles, KSDO-AM
and KKBH-FM in San Diego and WDAE-AM and WUSA-FM in Tampa-St. Petersburg, (the
"Selected Gannett Radio Stations" or the "Stations") owned and operated by
Pacific and Southern Company Inc., a subsidiary of Gannett Co., Inc. (the
"Parent Company" or "Gannett"). In September 1996, Jacor Communications, Inc.
("Jacor") entered into an agreement to acquire the Selected Gannett Radio
Stations in exchange for Jacor's Tampa television station, WTSP-TV.
The Stations' fiscal years end on the last Sunday of the calendar year. The
Stations' 1995 fiscal year ended on December 31, 1995, and encompassed a 53-week
period. The Stations' 1994 fiscal year encompassed a 52-week period.
b. REVENUES: Revenues for commercial broadcasting advertisements are
recognized when the commercial is broadcast.
c. CONCENTRATIONS OF CREDIT RISK: Financial instruments which potentially
subject the Stations to concentrations of credit risk consist principally of
accounts receivable. Concentrations of credit risk associated with accounts
receivable are limited due to the large number of customers comprising the
Stations' customer base.
d. 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:
<TABLE>
<S> <C>
Land improvements.................... 15 years
Buildings............................ 30 to 40 years
Machinery and equipment.............. 5 to 20 years
Furniture and fixtures............... 7 to 10 years
Leasehold improvements............... Remaining life of the lease
</TABLE>
e. INTANGIBLE ASSETS: Intangible assets are stated at cost less
accumulated amortization; amortization is provided principally on the
straight-line basis over the following lives:
<TABLE>
<S> <C>
FCC Licenses and goodwill............ 40 years
</TABLE>
f. USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the dates
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
g. INCOME TAXES: The Stations' operating results are included in the
consolidated federal income tax return of Gannett. The income tax provision is
computed at Gannett's effective income tax rate of 43%, for federal and state
income tax purposes, which approximates the rate as if a separate provision for
the Stations was computed on a stand-alone basis.
2. RELATED PARTY TRANSACTIONS
Corporate general and administrative expenses, primarily related to
management and accounting, are allocated to the Stations as determined by the
Parent Company. General and administrative costs totaling
F-66
<PAGE>
SELECTED GANNETT RADIO STATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. RELATED PARTY TRANSACTIONS (CONTINUED)
$891,118, $1,245,388 and $892,997 were allocated to the Stations for the years
ended December 1994 and 1995 and nine months ended September 1996, respectively.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and September 29, 1996 consist
of the following:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Land............................................................ $ 218,089 $ 218,089
Building and improvements....................................... 1,317,842 1,364,883
Machinery and equipment......................................... 6,436,658 6,019,835
Furniture and fixtures.......................................... 1,414,153 1,301,582
Leasehold improvements.......................................... 93,053 93,053
Construction in progress........................................ 94,305 246,898
------------- -------------
Less accumulated depreciation................................... (6,271,374) (6,200,298)
------------- -------------
$ 3,302,726 $ 3,044,042
------------- -------------
------------- -------------
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets at December 31, 1995 and September 29, 1996 consist of the
following:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
FCC Licenses and goodwill...................................... $ 14,561,131 $ 14,561,131
Less accumulated amortization.................................. (5,938,628) (6,211,649)
------------- -------------
$ 8,622,503 $ 8,349,482
------------- -------------
------------- -------------
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
a. LEASE AND EMPLOYMENT AGREEMENT OBLIGATIONS: The Stations lease certain
land and facilities used in their operations. The Stations also have various
employment agreements with selected radio personalities that provide for, among
other things, base compensation, incentive bonuses and various production
support. Future minimum payments under lease and employment agreements are as
follows:
<TABLE>
<S> <C>
1996 (3 months)................................................ $1,513,423
1997........................................................... 5,701,582
1998........................................................... 5,337,481
1999........................................................... 5,784,929
2000 and thereafter............................................ 4,191,058
----------
Total commitments.......................................... $22,528,473
----------
----------
</TABLE>
b. LEGAL PROCEEDINGS: The Stations are party to various legal proceedings.
In the opinion of management, the ultimate resolution of such proceedings will
not have a significant effect on the financial position or results of operations
of the Stations.
In August of 1996, the Stations entered into an agreement with a third party
to settle a contract dispute. Under terms of the settlement agreement, KSDO-AM
and KKBH-FM in San Diego will provide
F-67
<PAGE>
SELECTED GANNETT RADIO STATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
the third party with approximately 7,600 minutes of advertising time to be run
over a period of two years. Station management can preempt any advertising spot
to be provided to the third party for a fee of $50 per ten second spot.
6. RETIREMENT PLAN
Employees of the Stations are eligible for various retirement and profit
sharing plans, provided by Gannett, under which substantially all full-time
employees are covered. The Gannett Retirement Plan, a defined benefit pension
plan, is the Stations' principal retirement plan and covers eligible employees
of the Stations. Benefits under the Gannett Retirement Plan are based on years
of service and final average pay. The Stations' pension cost was approximately
$360,000, $367,000 and $386,000 for 1994, 1995 and 1996, respectively. Since the
Stations' employees are not specifically identified within the pension fund, the
actuarial present value of benefit obligations and net assets available for
benefits are not determinable.
F-68
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Regent Communications, Inc.
We have audited the accompanying consolidated balance sheets of Regent
Communications, Inc. and Subsidiaries as of December 31, 1995 and September 30,
1996 and the related consolidated statements of operations, shareholders'
equity, and cash flows for the years ended December 31, 1994 and 1995 and for
the nine month period ended September 30, 1996. 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 Regent
Communications, Inc. and Subsidiaries as of December 31, 1995 and September 30,
1996, and the consolidated results of their operations and their cash flows for
the years ended December 31, 1994 and 1995 and for the nine month period ended
September 30, 1996, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P
Cincinnati, Ohio
November 8, 1996
F-69
<PAGE>
REGENT COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................ $ 2,787,337 $ 1,236,952
Accounts receivable, less allowance for doubtful accounts of $290,800 in 1995 and
$474,400 in 1996............................................................... 5,420,081 6,353,396
Other current assets............................................................. 252,120 319,213
------------- -------------
Total current assets........................................................... 8,459,538 7,909,561
Property and equipment, net........................................................ 10,156,229 9,709,828
Intangible assets, net............................................................. 59,565,917 61,597,501
Note receivable.................................................................... 200,000 200,000
------------- -------------
Total assets................................................................... $ 78,381,684 $ 79,416,890
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................................ $ 513,929 $ 2,038,216
Accounts payable................................................................. 2,122,129 1,440,351
Accrued expenses................................................................. 2,194,637 3,799,542
------------- -------------
Total current liabilities...................................................... 4,830,695 7,278,109
Long-term debt..................................................................... 32,136,071 29,514,284
------------- -------------
Total liabilities.............................................................. 36,966,766 36,792,393
------------- -------------
Commitments and contingencies
Shareholders' equity:
1993 Series convertible preferred stock, $.01 par value; 1,000,000 shares
authorized; 1,000,000 shares issued and outstanding............................ 10,000 10,000
1994 Series convertible preferred stock, $.01 par value; 2,000,000 shares
authorized; 1,337,907 shares issued and outstanding............................ 13,379 13,379
1995 Series convertible preferred stock, $.01 par value; 1,500,000 shares
authorized; 1,399,554 and 1,436,287 shares issued and outstanding at December
31, 1995 and September 30, 1996, respectively.................................. 13,996 14,363
Class A common stock, $.01 par value; 5,000,000 shares authorized; 50,000 shares
issued and outstanding......................................................... 500 500
Class B common stock, $.01 par value; 150,000 shares authorized..................
Additional paid-in capital....................................................... 47,752,128 48,298,756
Deficit.......................................................................... (5,975,085) (5,462,501)
Shareholder notes receivable..................................................... (400,000) (250,000)
------------- -------------
Total shareholders' equity..................................................... 41,414,918 42,624,497
------------- -------------
Total liabilities and shareholders' equity..................................... $ 78,381,684 $ 79,416,890
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-70
<PAGE>
REGENT COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTH PERIOD ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- ----------------------------
1994 1995 1996
------------- ------------- 1995 -------------
-------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Broadcast revenue.................................... $ 8,354,070 $ 19,604,948 $ 12,107,992 $ 26,237,925
Less agency commissions.............................. 1,029,153 2,348,183 1,467,379 3,039,514
------------- ------------- ------------- -------------
Net revenue...................................... 7,324,917 17,256,765 10,640,613 23,198,411
Broadcast operating expenses......................... 7,736,618 14,660,414 9,457,652 19,069,612
Depreciation and amortization........................ 1,124,669 3,315,899 1,689,404 4,226,001
Time brokerage agreement termination expense......... 125,000
Corporate general and administrative expenses........ 669,849 740,337 481,854 1,176,861
------------- ------------- ------------- -------------
Operating loss................................... (2,331,219) (1,459,885) (988,297) (1,274,063)
Interest expense, net................................ 355,417 1,398,914 856,494 2,273,581
Gain on sale of radio station and format............. 4,436,915
Other expense........................................ (376,687)
------------- ------------- ------------- -------------
(Loss) income before extraordinary item.......... (2,686,636) (2,858,799) (1,844,791) 512,584
Extraordinary loss on early retirement of debt....... 125,844 227,752
------------- ------------- ------------- -------------
Net (loss) income................................ $ (2,812,480) $ (3,086,551) $ (1,844,791) $ 512,584
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Loss applicable to common shares:
Net (loss) income.................................. $ (2,812,480) $ (3,086,551) $ (1,844,791) $ 512,584
Preferred stock dividend requirements.............. (826,936) (2,080,997) (1,620,725) (2,507,964)
------------- ------------- ------------- -------------
Loss applicable to common shares................. $ (3,639,416) $ (5,167,548) $ (3,465,516) $ (1,995,380)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Loss per common share:
Before extraordinary item.......................... $ (70.27) $ (98.79) $ (69.31) $ (39.91)
Extraordinary item................................. (2.52) (4.56) -- --
------------- ------------- ------------- -------------
Loss per common share............................ $ (72.79) $ (103.35) $ (69.31) $ (39.91)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Number of common shares used in per share
calculation........................................ 50,000 50,000 50,000 50,000
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-71
<PAGE>
REGENT COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND FOR THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
CLASS 1993 SERIES 1994 SERIES 1995 SERIES
A PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
COMMON ------------------ ------------------ ------------------
STOCK SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993........ $500 200,000 $ 2,000
Issuance of preferred stock at $10
per share in March and April
1994............................. 800,000 8,000
Issuance of preferred stock at
$12.50 per share in August 1994,
net of issuance costs of
$53,746.......................... 606,000 $ 6,060
Issuance of preferred stock at
$12.50 per share for a station
acquisition...................... 245,907 2,459
Shareholder note receivable........
Preferred stock subscription at
$12.50 per share.................
Net loss...........................
------ --------- ------- --------- ------- --------- -------
Balances, December 31, 1994........ 500 1,000,000 10,000 851,907 8,519
Issuance of preferred stock at
$12.50 per share for a station
acquisition...................... 40,000 400
Issuance of preferred stock at
$12.50 per share in May 1995..... 446,000 4,460
Issuance of preferred stock at
$15.00 per share in October 1995,
net of issuance costs of
$123,408......................... 1,399,554 $13,996
Net loss...........................
------ --------- ------- --------- ------- --------- -------
Balances, December 31, 1995........ 500 1,000,000 10,000 1,337,907 13,379 1,399,554 13,996
Issuance of preferred stock at
$15.00 per share in July 1996,
net of stock issuance costs of
$4,000........................... 36,733 367
Shareholder note receivable........
Payments of shareholder notes
receivable.......................
Net income.........................
------ --------- ------- --------- ------- --------- -------
Balances, September 30, 1996....... $500 1,000,000 $10,000 1,337,907 $13,379 1,436,287 $14,363
------ --------- ------- --------- ------- --------- -------
------ --------- ------- --------- ------- --------- -------
<CAPTION>
PREFERRED STOCK
SUBSCRIPTION ADDITIONAL SHAREHOLDER
--------------------- PAID-IN NOTES
SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE TOTAL
-------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993........ 800,000 $ 8,000,000 $ 2,247,500 $ (76,054) $10,173,946
Issuance of preferred stock at $10
per share in March and April
1994............................. (800,000) (8,000,000) 7,992,000
Issuance of preferred stock at
$12.50 per share in August 1994,
net of issuance costs of
$53,746.......................... 7,515,194 7,521,254
Issuance of preferred stock at
$12.50 per share for a station
acquisition...................... 3,071,388 3,073,847
Shareholder note receivable........ $(400,000) (400,000)
Preferred stock subscription at
$12.50 per share................. 446,000 5,575,000 5,575,000
Net loss........................... (2,812,480) (2,812,480)
-------- ----------- ----------- ----------- ----------- -----------
Balances, December 31, 1994........ 446,000 5,575,000 20,826,082 (2,888,534) (400,000) 23,131,567
Issuance of preferred stock at
$12.50 per share for a station
acquisition...................... 499,600 500,000
Issuance of preferred stock at
$12.50 per share in May 1995..... (446,000) (5,575,000) 5,570,540
Issuance of preferred stock at
$15.00 per share in October 1995,
net of issuance costs of
$123,408......................... 20,855,906 20,869,902
Net loss........................... (3,086,551) (3,086,551)
-------- ----------- ----------- ----------- ----------- -----------
Balances, December 31, 1995........ -- -- 47,752,128 (5,975,085) (400,000) 41,414,918
Issuance of preferred stock at
$15.00 per share in July 1996,
net of stock issuance costs of
$4,000........................... 546,628 546,995
Shareholder note receivable........ (550,000) (550,000)
Payments of shareholder notes
receivable....................... 700,000 700,000
Net income......................... 512,584 512,584
-------- ----------- ----------- ----------- ----------- -----------
Balances, September 30, 1996....... -- $ -- $48,298,756 $(5,462,501) $(250,000) $42,624,497
-------- ----------- ----------- ----------- ----------- -----------
-------- ----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-72
<PAGE>
REGENT COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTH PERIOD ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -----------------------------
1994 1995 1996
-------------- -------------- 1995 -------------
--------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income............................... $ (2,812,480) $ (3,086,551) $ (1,844,791) $ 512,584
Adjustments to reconcile net (loss) income to
net cash used in operating activities:
Extraordinary loss on early retirement of
debt........................................ 125,844 227,752
Depreciation.................................. 292,945 855,601 461,140 805,809
Amortization of intangibles................... 831,724 2,460,298 1,228,264 3,420,192
Net barter expense (revenue).................. 30,469 (19,960) (22,869) 7,592
Debt prepayment costs......................... (128,890)
Gain on sale of station....................... (4,236,915)
Gain on sale of format........................ (200,000)
Loss on disposal of assets.................... 4,675
Changes in operating assets and liabilities, net
of acquisitions and disposition:
Accounts receivable............................. (2,067,146) (2,627,327) (533,395) (870,209)
Prepaid expenses and other current assets....... (106,572) (137,799) (126,745) (67,092)
Accounts payable................................ 269,069 1,203,919 (191,235) (791,027)
Accrued expenses................................ 785,646 1,037,936 290,476 1,160,587
-------------- -------------- -------------- -------------
Net cash used in operating activities............. (2,650,501) (215,021) (739,155) (253,804)
-------------- -------------- -------------- -------------
Cash flows from investing activities:
Cash paid for station acquisitions.............. (26,908,750) (34,537,858) (11,859,555) (11,432,241)
Capital expenditures............................ (634,595) (1,016,599) (758,511) (1,364,762)
Proceeds from disposal of assets................ 88,956 11,442,786
Proceeds from sale of station format............ 1,000,000
Payments related to change in station format.... (327,878)
-------------- -------------- -------------- -------------
Net cash used in investing activities............. (27,543,345) (35,465,501) (12,618,066) (682,095)
-------------- -------------- -------------- -------------
Cash flows from financing activities:
Proceeds from the issuance of preferred stock... 15,121,253 26,444,902 16,825,000 296,995
Note receivable................................. (200,000) (200,000) 400,000
Payments on long-term debt...................... (16,451,335) (8,420,121) (2,097,500)
Proceeds from the issuance of long-term debt.... 13,349,749 30,751,586 5,519,206 1,000,000
Other financing costs........................... (269,374) (2,133,116) (278,954) (213,981)
-------------- -------------- -------------- -------------
Net cash provided by (used in) financing
activities...................................... 28,201,628 38,412,037 13,445,131 (614,486)
-------------- -------------- -------------- -------------
Net (decrease) increase in cash and cash
equivalents..................................... (1,992,218) 2,731,515 87,910 (1,550,385)
Cash and cash equivalents, beginning of period.... 2,048,040 55,822 55,822 2,787,337
-------------- -------------- -------------- -------------
Cash and cash equivalents, end of period.......... $ 55,822 $ 2,787,337 $ 143,732 $ 1,236,952
-------------- -------------- -------------- -------------
-------------- -------------- -------------- -------------
</TABLE>
The accompanying notes are integral part of the consolidated financial
statements.
F-73
<PAGE>
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUBSEQUENT EVENTS:
On October 9, 1996 Regent Communications, Inc. (the "Company") and Jacor
Communications, Inc., ("Jacor"), entered into a merger agreement by which Jacor
will acquire the Company. In exchange for all of the outstanding stock of the
Company, Jacor will issue 3.55 million shares of Jacor common stock, warrants to
purchase 500,000 shares of Jacor's common stock at an exercise price of $40 per
share and assume up to $64 million of the Company's debt, subject to adjustment
pursuant to terms of the merger agreement. In the event that the value of
Jacor's common stock to be received by the Company's shareholders is less than
$116.0 million at Jacor's option: (a) Jacor may make up the difference by the
delivery of additional shares of common stock equal to that difference; (b) pay
the difference in cash; or (c) pay all of the merger consideration in cash. The
Company has also entered into a time brokerage agreement with Jacor such that
Jacor will commence operating the Company's stations upon the expiration or
termination of the applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. In addition, Jacor has committed to provide
the Company with a $2,000,000 line of credit, accruing interest at 12% per
annum, the proceeds of which shall be used to ensure compliance with the Credit
Agreement (see Note 8) while the time brokerage agreement is in effect. The
holders of more than a majority of the outstanding shares of the Company's
capital stock delivered to the Company irrevocable written consents approving
the merger agreement. The closing of the transaction is conditioned on, among
other things, receipt of Federal Communications Commission and other regulatory
approvals.
In connection with the merger agreement, the Company entered into a Limited
Consent and Agreement to the Credit Agreement, (the "Consent") whereby the
Company's senior lenders approved the merger. Pursuant to the Consent, all of
the Company's debt obligations outstanding under the Credit Agreement must be
paid in full prior to or concurrent with the consummation of the merger
agreement. If the merger agreement terminates for any reason, or if the time
brokerage agreement is in effect after October 9, 1997, the Company will be
required to prepay the debt outstanding under the Credit Agreement in an amount
not less than the greatest of (a) $10,000,000; (b) an amount sufficient when
applied to prepay the debt to reduce the Consolidated Total Debt Ratio to not
more than 4:0 to 1:0; or (c) the aggregate amount of all payments received by
the Company from any person due to the termination of the merger agreement.
In October 1996, the Company acquired substantially all of the assets of
WVEZ(FM) in Louisville, Kentucky for $12,163,000 in cash. In November 1996, the
Company acquired substantially all of the assets of radio station KZHT(FM) in
Salt Lake City, Utah for $5,000,000 in cash. The Company also purchased all of
the stock of Bountiful Broadcasting, Inc., owner of KURR(FM) in Salt Lake City,
Utah, for $6,000,000 in cash. In addition, the Company sold radio stations
WHKW(AM) in Louisville, Kentucky and KKDD(AM) in Las Vegas, Nevada for
$1,000,000 and $600,000, respectively, in cash.
2. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS:
a. ORGANIZATION: The Company, a Delaware corporation, owns and/or operates
radio stations located in Louisville, Kentucky; Las Vegas, Nevada; Kansas City,
Missouri; Salt Lake City, Utah; and Charleston, South Carolina.
b. BASIS OF PRESENTATION: The accompanying consolidated financial
statements include the accounts of Regent Communications, Inc. and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
The consolidated statements of operations and cash flows for the nine month
period ended September 30, 1995, included herein, have been prepared by the
Company, without audit. The Company believes that the disclosures presented
herein with respect to the unaudited period are adequate to make the
F-74
<PAGE>
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS: (CONTINUED)
information presented not misleading and reflect all adjustments (consisting
only of normal recurring adjustments) which are necessary for a fair
presentation of results of operations for such periods.
c. BROADCAST REVENUE: Broadcast revenue for commercial broadcasting
advertisements is recognized when the commercial is broadcast.
d. 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 advertising is broadcast before the receipt of the goods or
services, a receivable is recorded.
e. CONSOLIDATED STATEMENTS OF CASH FLOWS: For purposes of the consolidated
statement of cash flows, the Company considers all highly liquid investments
with an original maturity of three months or less, when purchased, to be cash
equivalents. Interest paid for the years ended December 31, 1994 and 1995 and
for the nine month periods ended September 30, 1995 and 1996 was $315,814,
$1,071,551, $915,960 and $1,899,461, respectively.
f. CONCENTRATIONS OF CREDIT RISK: Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
accounts receivable. The credit risk is limited due to the large number of
customers comprising the Company's customer base and their dispersion across
several different geographic areas of the country.
g. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost and
depreciated on the straight-line basis over the estimated useful lives of the
assets as follows:
<TABLE>
<S> <C>
Land improvements........................... 20 years
Buildings................................... 40 years
Equipment................................... 4-13 years
Furniture and fixtures...................... 10 years
Leasehold Improvements...................... Life of Lease
</TABLE>
h. INTANGIBLE ASSETS: Intangible assets are stated at cost and amortized on
the straight-line basis over the following lives:
<TABLE>
<S> <C>
Broadcast intangibles and goodwill.......... 15 years
Other intangibles........................... 5 to 7 years
</TABLE>
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. If this review indicates that goodwill and licenses will not be
recoverable, as determined based on the undiscounted cash flows of the entity
over the remaining amortization period, the carrying value of the goodwill and
licenses will be reduced accordingly.
i. USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-75
<PAGE>
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS: (CONTINUED)
j. INCOME TAXES: Income taxes are provided based on the asset and liability
method of accounting pursuant to Statement of Financial Accounting Standards
(SFAS) 109, "Accounting for Income Taxes". Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes.
k. PER SHARE DATA: Loss per common share for the years ended December 31,
1994 and 1995 and for the nine month periods ended September 30, 1995 and 1996
is based on the weighted average number of common shares outstanding and gives
consideration to the dividend requirements of the convertible preferred stock.
The Company's common stock options and convertible preferred stock were
anti-dilutive and, therefore, were not included in the computation.
3. STATION TRANSACTIONS:
In April 1994, the Company acquired substantially all of the assets of radio
station WLQT(FM) in Dayton, Ohio for $5,500,000 in cash.
In May 1994, the Company acquired substantially all of the assets of radio
stations WDJX(FM) and WHKW(AM), each of which is located in Louisville, Kentucky
for $5,500,000 in cash. Pursuant to the WDJX(FM) purchase agreement, the Company
was assigned a time brokerage agreement with respect to radio station WSJW(FM)
in Louisville, Kentucky.
In July 1994, the Company entered into an advertising sales agreement with
KBGO(FM) located in Las Vegas, Nevada. The advertising sales agreement was
changed to a time brokerage agreement during 1996.
In August 1994, the Company acquired substantially all of the assets of
radio station WDOL(FM) in Dayton, Ohio for $1,500,000 in cash and a $650,000
subordinated promissory note. A time brokerage agreement effective May 1, 1994
with WDOL(FM) was terminated upon completion of the purchase.
In August 1994, the Company acquired all of the stock of Wescom Holdings,
Inc., owner of radio station KSNE(FM) in Las Vegas, Nevada in exchange for the
issuance of 245,907 shares of the 1994 series of convertible preferred stock
(see Note 6) valued at approximately $3,073,000 and $2,677,000 in cash.
In September 1994, the Company acquired substantially all of the assets of
radio station WSFR(FM) in Corydon, Indiana for $2,600,000 in cash. A time
brokerage agreement effective May 1, 1994 with WSFR(FM) was terminated upon
completion of the purchase.
In October 1994, the Company acquired substantially all of the assets of
radio stations KFMS(FM) and KKDD(AM) located in Las Vegas, Nevada for $5,750,000
in cash and a $2,000,000 subordinated promissory note. A time brokerage
agreement with KFMS(FM) and KKDD(AM) effective July 1, 1994 was terminated upon
completion of the purchase.
In January 1995, the Company purchased substantially all of the assets of
radio station WFIA(AM) in Louisville, Kentucky for $500,000. The consideration
for this purchase was 40,000 shares of the 1994 series convertible preferred
stock.
In October 1995, the Company acquired radio stations KUDL(FM) and KMXV(FM)
in Kansas City, Missouri and KALL(AM), KODJ(FM) and KKAT(FM) in Salt Lake City,
Utah for $33,950,000 in cash and a $5,000,000 subordinated seller note. The
Company also entered into an advertising sales agreement with KBKK(FM) in Salt
Lake City, Utah.
F-76
<PAGE>
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. STATION TRANSACTIONS: (CONTINUED)
In April 1996, the Company sold substantially all of the assets (excluding
cash and accounts receivable) of WLQT(FM) and WDOL(FM) in Dayton, Ohio for
$12,000,000 in cash.
In April 1996, the Company acquired radio stations WEZL(FM) and WXLY(FM) in
Charleston, South Carolina for $11,050,000 in cash.
All of the above acquisitions have been accounted for as purchases. The
excess cost over the fair value of net assets acquired is being amortized over
15 years. The results of operations of the acquired businesses are included in
the Company's financial statements since the respective dates of acquisition.
Assuming each of the 1995 and 1996 acquisitions and 1996 disposition had taken
place at the beginning of 1995, unaudited pro forma consolidated results of
operations would have been as follows:
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
--------------- ----------------
<S> <C> <C>
Net broadcasting revenue.................................. $ 27,720,848 $ 23,309,275
Net loss.................................................. (4,976,017) (3,669,547)
Net loss per share........................................ (166.32) (123.55)
</TABLE>
During May 1996, the Company sold the intellectual assets of WHKW(FM) in
Louisville, Kentucky for $1,000,000 in cash.
In July 1996, the Company entered into an agreement to purchase all of the
outstanding stock of Southwest Radio Las Vegas, Inc., owner of KWNR(FM) in Las
Vegas, Nevada, for $9,000,000 in cash and 480,000 shares of a new series of
convertible preferred stock. Pursuant to the merger agreement with Jacor, the
Company assigned all of its rights under this agreement to Jacor.
4. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
--------------- ----------------
<S> <C> <C>
Land and land improvements................................ $ 380,993 $ 783,342
Buildings................................................. 112,215 423,285
Equipment................................................. 9,981,902 7,997,251
Furniture and fixtures.................................... 388,460 848,562
Leasehold improvements.................................... 436,441 1,224,826
--------------- ----------------
11,300,011 11,277,266
Less accumulated depreciation............................. (1,143,782) (1,567,438)
--------------- ----------------
$ 10,156,229 $ 9,709,828
--------------- ----------------
--------------- ----------------
</TABLE>
F-77
<PAGE>
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INTANGIBLE ASSETS:
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
--------------- ----------------
<S> <C> <C>
Broadcast intangibles and goodwill........................ $ 60,423,164 $ 64,821,432
Other..................................................... 2,409,266 2,602,405
--------------- ----------------
62,832,430 67,423,837
Less accumulated amortization............................. (3,266,513) (5,826,336)
--------------- ----------------
$ 59,565,917 $ 61,597,501
--------------- ----------------
--------------- ----------------
</TABLE>
6. CAPITAL STOCK:
The Company's Amended Certificate of Incorporation authorizes 5,000,000
shares of the Company's Class A common stock, 150,000 shares of Class B common
stock, 4,500,000 shares of preferred stock and designates 1,500,000 shares as
the 1995 Series Convertible Preferred Stock ("1995 Series"), 2,000,000 shares as
the 1994 Series Convertible Preferred Stock ("1994 Series") and 1,000,000 shares
as the 1993 Series Convertible Preferred Stock ("1993 Series").
The preferred shares have the same voting rights as common stock and may be
converted into one share of Class A common stock. The 1993 Series, 1994 Series,
and 1995 Series have equal rights for the payment of dividends and the
distribution of assets and rights upon liquidation, dissolution or winding up of
the Company. The stated value of the 1993 Series, 1994 Series, and 1995 Series
is $10 per share, $12.50 per share and $15 per share, respectively.
Upon any liquidation of the Company, no distribution shall be made (a) to
the holders of stock ranking junior to the convertible preferred stock unless
the holders of the convertible preferred stock have received the stated value
per share, plus an amount equal to all unpaid dividends or (b) to the holders of
stock ranking on a parity with the convertible preferred stock, except
distributions made ratably on the convertible preferred and all other such
parity stock. Dividends accrue on the 1993 Series, 1994 Series, and 1995 Series
at a cumulative annual rate of $.70, $.875, and $1.05 per share, respectively.
Undeclared dividends in arrears amounted to $2,933,750 at December 31, 1995 and
$5,450,000 at September 30, 1996. The Company may redeem the convertible
preferred stock at the stated value, plus an amount equal to all unpaid
dividends to the date of redemption, whether or not declared.
During 1995, the Company adopted the Regent Communications, Inc. 1995
Employee Stock Option Plan ("Plan"). Under the Plan, options to acquire up to
200,000 shares of Class A common stock can be granted to officers and key
employees at no less than the fair market value of the stock on the date of
grant. The Plan permits the granting of non-qualified stock options as well as
incentive stock options. Options are exercisable in five equal annual
installments commencing on the second anniversary of the
F-78
<PAGE>
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. CAPITAL STOCK: (CONTINUED)
date of grant. The Plan will terminate no later than September 19, 2004.
Information pertaining to the Plan for the year ended December 31, 1995 and the
nine month period ended September 30, 1996 is as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION
SHARES PRICE
------------- ---------
<S> <C> <C>
1995:
Outstanding at beginning of year................................. --
Granted.......................................................... 59,500 $ 10
Exercised........................................................ --
Surrendered...................................................... (8,000)
Outstanding at end of year....................................... 51,500 $ 10
Exercisable at end of year....................................... --
Available for grant at end of year............................... 148,500
1996:
Outstanding at beginning of year................................. 51,500 $ 10
Granted.......................................................... 61,000 $ 15
Exercised........................................................ --
Surrendered...................................................... (20,000) $ 10 - 15
Outstanding at end of year....................................... 92,500 $ 10 - 15
Exercisable at end of year....................................... --
Available for grant at September 30, 1996........................ 107,500
</TABLE>
In 1995, a key employee of the Company was granted options to purchase
100,000 shares of Class A stock at a price of $15 per share. Options vest in
five equal annual installments and the full grant may be exercised five years
after the date of grant.
Options to purchase 50,000 shares of Class A common stock at $10 per share
any time after September 1, 1996 and before September 1, 1999 and options to
purchase 50,000 shares of Class B stock at $.011 per share on October 1, 2003
have been granted to the Company's president. If certain performance criteria
are met, the options to purchase Class B shares may be exercised in 1997.
7. INCOME TAXES:
The Company recorded no income tax expense or benefit for the years ended
December 31, 1994 and 1995 and for the nine month periods ended September 30,
1995 and September 30, 1996.
F-79
<PAGE>
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES: (CONTINUED)
The provisions for income tax differs from the amount computed by applying
the statutory federal income tax rate due to the following:
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
--------------- --------------- ----------------
<S> <C> <C> <C>
Federal income taxes benefit (expense) at
the statutory rate..................... $ 984,368 $ 1,080,293 $ (179,404)
Amortization not deductible.............. (33,776) (108,484) (80,213)
Other.................................... (12,243) (18,256) (13,951)
Change in valuation allowance............ (938,349) (953,553) 273,568
--------------- --------------- ----------------
$ 0 $ 0 $ 0
--------------- --------------- ----------------
--------------- --------------- ----------------
</TABLE>
Components of the Company's deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
--------------- ----------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward......................... $ 2,065,000 $ 3,045,000
Intangible assets....................................... 77,237 111,670
Allowance for doubtful accounts......................... 101,782 166,038
Other................................................... 76,333
--------------- ----------------
2,244,019 3,399,041
Deferred tax liabilities:
Property and equipment.................................. 235,672 1,744,747
Other..................................................... 89,857 9,372
--------------- ----------------
325,529 1,754,119
Valuation allowance....................................... (1,918,490) (1,644,922)
--------------- ----------------
Net..................................................... $ 0 $ 0
--------------- ----------------
--------------- ----------------
</TABLE>
The Company has cumulative tax loss carryforwards of approximately
$5,900,000 and $8,700,000 at December 31, 1995 and September 30, 1996,
respectively. The loss carryforwards will expire in the years 2008 through 2011.
F-80
<PAGE>
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------- -------------
<S> <C> <C>
Variable rate Term Loan (7.875% and 8.117% at December 31, 1995
and September 30, 1996, respectively)........................ $ 25,000,000 $ 24,000,000
7.5% Seller Note............................................... 650,000 552,500
Variable rate Subordinated Seller Note......................... 2,000,000 2,000,000
11.0% Subordinated Seller Note................................. 5,000,000 5,000,000
------------- -------------
32,650,000 31,552,500
Less current maturities........................................ (513,929) (2,038,216)
------------- -------------
Total long-term debt........................................... $ 32,136,071 $ 29,514,284
------------- -------------
------------- -------------
</TABLE>
Future maturities of long-term debt at September 30, 1996 are as follows:
<TABLE>
<S> <C>
1996 (three months)............................................ $ 403,929
1997........................................................... 2,455,716
1998........................................................... 3,585,716
1999........................................................... 4,635,716
2000........................................................... 10,871,423
Thereafter..................................................... 9,600,000
</TABLE>
F-81
<PAGE>
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LONG-TERM DEBT: (CONTINUED)
On October 25, 1995, the Company entered into a $65,000,000 credit
agreement, subsequently amended (the "Credit Agreement"), comprised of a
$25,000,000 Term Loan and a $40,000,000 Revolving Loan Commitment. The Company
made a $1,000,000 prepayment of the Term Loan in May 1996 and is required to
make quarterly payments of $300,000 on the Term Loan beginning December 31, 1996
that increase quarterly beginning December 31, 1997 through September 30, 2002.
The Revolving Loan Commitment will be reduced on December 31, 1996 by $62,500
and will be reduced by increasing quarterly amounts thereafter through September
30, 2002. Loans under the Credit Agreement bear interest at the option of the
Company at a rate equal to either (i) a base rate, defined as the higher of US
prime rate and the overnight Federal Funds rate plus 1/2 of 1% per annum, plus
the applicable margin (as defined below) or (ii) the adjusted London interbank
offered rate ("LIBOR") plus the applicable margin. Applicable margin means a
percentage per annum determined by reference to the consolidated total debt
ratio, ranging from 3/4% to 2.00% for base rate advances and from 1.75% to 3.00%
for LIBOR rate advances.
The applicable margin for the Credit Agreement is adjusted each quarter to
the extent required. At December 31, 1995 and September 30, 1996, the applicable
margin was 2.00% and 2.25%, respectively, for the Company's LIBOR rate advance.
The Company is required to pay commitment fees equal to 1/2% per annum on the
aggregate unused portion of the aggregate commitment on the Term Loan and the
Revolving Loan Commitment. The Company may prepay the Credit Agreement at any
time without premium or penalty.
Indebtedness 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, among
other things, the maintenance of certain financial ratios, capital expenditures,
payment of dividends and incurrence of additional indebtedness. Restrictions
pertaining to financial ratios include maintenance of total debt (as defined) to
adjusted operating cash flow (as defined) less than 6.00 to 1 for the quarter
ended September 30, 1996. Such ratio will be reduced to 4.5 to 1 at December 31,
1997 and 3.5 to 1 beginning September 30, 1998 and thereafter.
In connection with the Credit Agreement, the Company recorded an
extraordinary loss on the early retirement of debt in the amount of $227,752 for
the year ended December 31, 1995.
The Company entered into an interest rate protection agreement as required
by the Credit Agreement on the notional amount of $25,000,000 for a three year
period ending October 30, 1998. This agreement provides protection against the
rise in the LIBOR rate beyond a level of 7%. The agreement requires the Company
to make quarterly payments of $18,631 which are recognized as a component of
interest expense.
In 1995, in connection with the acquisition of stations, the Company issued
to the seller a subordinated promissory note for $5,000,000. The note bears
interest at a fixed rate of 11% and requires annual payments of principal and
interest beginning no earlier than March 31, 1997, subject to borrowing
availability under the Credit Agreement. A key employee of the Company holds a
5% interest in the note.
In 1994, in connection with a station acquisition, the company issued to the
seller a subordinated promissory note, as amended, for $650,000. The note bears
interest at a fixed rate of 7.5% and requires quarterly interest payments until
February 28, 1997. Quarterly principal payments of $32,500 began on February 1,
1996, with the final principal payment due February 28, 1997.
In 1994, in connection with a station acquisition, the Company issued to the
seller a subordinated promissory note for $2,000,000. The note bears interest at
the prime rate plus 2%, however, the rate will
F-82
<PAGE>
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LONG-TERM DEBT: (CONTINUED)
not be less than 8% nor more than 10.5%. Principal payments are due in quarterly
installments of $71,428 beginning November 1996 until December 31, 2000, at
which time all outstanding principal is due and payable.
Based on the borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the fair values of the
Company's long-term debt and interest rate protection agreement approximate
current carrying value.
9. EMPLOYMENT AGREEMENTS:
The Company has employment agreements with its president and its chief
operating officer, which provide, among other things, base salary and an
incentive cash bonus determined at the discretion of the board of directors. In
the event employment of the president is terminated prior to expiration of this
agreement, all shares of the Company common stock held by the president shall be
repurchased by the Company at fair market value.
10. EMPLOYEE BENEFIT PLAN:
During 1994, the Company adopted a 401 (k) plan which covers all eligible
employees. The Company may make a matching contribution in any year at the
discretion of the board of directors. Company contributions to the plan were
$6,205 and $34,655 for the years ended December 31, 1994 and 1995 and $26,590
and $58,300 for the nine month periods ended September 30, 1995 and September
30, 1996, respectively.
11. RELATED PARTY TRANSACTIONS:
A director of the Company is associated with a private investment firm that
rendered financial advisory services in connection with the Credit Facility and
the 1995 Series offering. For such services, the company paid $266,665 in cash
and issued 8,889 shares of the 1995 Series of preferred stock.
In August 1994, the Company received a promissory note for $400,000 from the
Company's president for the purchase of 32,000 shares of the 1994 Series of
preferred stock. The note bears interest at the prime rate and was paid in full
during 1996.
The Company incurred fees in connection with the organization of the Company
and subsequent stock offerings for services provided by a private investment
firm owned by two of the Company's directors. Total fees for these services were
$20,000 in 1994. The firm also provided financial advisory services to the
Company for $40,000 per year in 1994 and 1995 and $30,000 for the nine month
periods ended September 30, 1995 and 1996.
F-83
<PAGE>
REGENT COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. COMMITMENTS AND CONTINGENCIES:
The Company and its subsidiaries lease certain land and facilities used in
their operations. Future minimum rentals under all noncancelable operating
leases as of September 30, 1996 are payable as follows:
<TABLE>
<S> <C>
1996 (three months)..................................... $ 224,261
1997.................................................... 953,594
1998.................................................... 776,427
1999.................................................... 628,209
2000.................................................... 583,566
Thereafter.............................................. 2,370,636
</TABLE>
Rental expense was approximately $837,000 and $1,039,000 for the years ended
December 31, 1994 and 1995 and $692,000 and $1,341,000 for the nine month
periods ended September 30, 1995 and 1996, respectively, including payments
under time brokerage agreements and joint sales agreements.
13. BARTER TRANSACTIONS:
For the years ended December 31, 1994 and 1995 and for the nine month
periods ended September 30, 1995 and 1996, barter revenue was approximately
$537,000, $1,150,000, $761,000 and $897,000, respectively and barter expense was
approximately $567,000, $1,131,000, $738,000 and $905,000, respectively.
Included in accounts receivable and accounts payable in the consolidated
balance sheet at December 31, 1995 and September 30, 1996 are barter accounts
receivable (merchandise or services due the Company) of approximately $413,000
and $476,000 and barter accounts payable (air time due supplier of merchandise
or service) of approximately $419,000 and $529,000, respectively.
F-84
<PAGE>
ANNEX I
AGREEMENT AND PLAN OF MERGER DATED AS OF OCTOBER 8, 1996,
AMONG JACOR AND REGENT, AS AMENDED
A-I-1
<PAGE>
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF
OCTOBER 8, 1996
BETWEEN JACOR COMMUNICATIONS, INC.,
AND
REGENT COMMUNICATIONS, INC.
A-I-2
<PAGE>
TABLE OF CONTENTS
SECTION 1
DEFINITIONS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
1.1 Defined Terms.................................................................................... A-I-6
1.2 Other Defined Terms.............................................................................. A-I-6
SECTION 2
THE MERGER
2.1 Surviving Corporation............................................................................
2.2 Certificate of Incorporation..................................................................... A-I-10
2.3 Bylaws........................................................................................... A-I-10
2.4 Directors........................................................................................ A-I-10
2.5 Officers......................................................................................... A-I-10
2.6 Effective Time................................................................................... A-I-10
2.7 Effect on Capital Stock.......................................................................... A-I-11
2.8 Long Term Debt Adjustment........................................................................ A-I-13
2.9 Dissenting Shares................................................................................ A-I-14
2.10 Treatment of Regent Employee Stock Options....................................................... A-I-14
2.11 Exchange of Regent Stock......................................................................... A-I-14
2.12 Closing.......................................................................................... A-I-16
SECTION 3
REPRESENTATION AND WARRANTIES OF REGENT
3.1 Corporate Standing............................................................................... A-I-16
3.2 Power and Authority of Regent; Authorization..................................................... A-I-16
3.3 Absence of Restrictions and Conflict............................................................. A-I-17
3.4 Capitalization of Regent and Regent Subsidiaries................................................. A-I-17
3.5 Financial Statements............................................................................. A-I-18
3.6 Title To and Condition of Assets................................................................. A-I-18
3.7 Trademarks, Etc.................................................................................. A-I-19
3.8 Legal Proceedings................................................................................ A-I-19
3.9 Environmental Matters............................................................................ A-I-19
3.10 FCC Authorization; Compliance with Laws.......................................................... A-I-20
3.11 Employee Benefit Plans........................................................................... A-I-20
3.12 Labor Relations.................................................................................. A-I-21
3.13 Regent Material Contracts........................................................................ A-I-22
3.14 Good Standing of Contracts....................................................................... A-I-23
3.15 Major Customers.................................................................................. A-I-23
3.16 Absence of Certain Changes and Events............................................................ A-I-23
3.17 Insurance........................................................................................ A-I-23
3.18 Tax Matters...................................................................................... A-I-24
3.19 Information Supplied for Registration Statement.................................................. A-I-24
3.20 Brokers' and Finders' Fees....................................................................... A-I-24
3.21 Takeover Statutes................................................................................ A-I-24
3.22 Tax Requirements................................................................................. A-I-24
3.23 Stations to be Acquired.......................................................................... A-I-24
</TABLE>
A-I-3
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
SECTION 4
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
4.1 Corporate Standing............................................................................... A-I-25
4.2 Power and Authority of Acquiror; Authorization................................................... A-I-25
4.3 Absence of Restrictions and Conflict............................................................. A-I-25
4.4 Capitalization of Acquiror....................................................................... A-I-25
4.5 Acquiror Commission Reports and Financial Statements............................................. A-I-26
4.6 Information Supplied for Registration Statement.................................................. A-I-26
4.7 Qualification.................................................................................... A-I-26
4.8 Brokers' and Finders' Fees....................................................................... A-I-27
4.9 Tax Requirements................................................................................. A-I-27
SECTION 5
COVENANTS
5.1 Cooperation...................................................................................... A-I-27
5.2 FCC Consent and HSR Filing....................................................................... A-I-27
5.3 Conduct of Business by Regent.................................................................... A-I-28
5.4 Inspection and Access to Information............................................................. A-I-30
5.5 Registration Statement........................................................................... A-I-31
5.6 Regent Stockholder Matters....................................................................... A-I-31
5.7 Stock Market Additional Shares Notification...................................................... A-I-31
5.8 Regent Affiliates................................................................................ A-I-31
5.9 Public Announcements............................................................................. A-I-31
5.10 Financial Statements and SEC Reports............................................................. A-I-31
5.11 Rule 144 Information............................................................................. A-I-32
5.12 Indemnification.................................................................................. A-I-32
5.13 Employee Benefits................................................................................ A-I-32
5.14 Tax Treatment.................................................................................... A-I-33
5.15 Environmental Inspection......................................................................... A-I-33
5.16 Escrow Agreement; Registration Rights Agreement.................................................. A-I-33
5.17 Notification..................................................................................... A-I-34
5.18 Regent Accountant's Letter....................................................................... A-I-34
5.19 Acquiror Accountant's Letter..................................................................... A-I-34
5.20 Purchase, Sale and Option Agreements............................................................. A-I-34
5.21 Time Brokerage Agreement......................................................................... A-I-34
5.22 [Intentionally Left Blank]....................................................................... A-I-34
5.23 FM Translator Stations........................................................................... A-I-34
5.24 BFI Credit Line.................................................................................. A-I-35
SECTION 6
CONDITIONS
6.1 Conditions to Each Party's Obligations........................................................... A-I-35
6.2 Conditions to Acquiror's Obligations............................................................. A-I-35
6.3 Conditions to Regent's Obligation................................................................ A-I-36
SECTION 7
NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES
</TABLE>
A-I-4
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
SECTION 8
TERMINATION
8.1 Termination...................................................................................... A-I-38
SECTION 9
MISCELLANEOUS
9.1 Confidentiality.................................................................................. A-I-39
9.2 Notices.......................................................................................... A-I-39
9.3 Third Party Rights............................................................................... A-I-40
9.4 Parties in Interest; Assignment.................................................................. A-I-40
9.5 Construction; Governing Law...................................................................... A-I-40
9.6 Entire Agreement; Amendment and Waiver........................................................... A-I-40
9.7 Severability..................................................................................... A-I-40
9.8 Counterparts..................................................................................... A-I-40
9.9 Expenses......................................................................................... A-I-40
9.10 Time of Essence.................................................................................. A-I-41
9.11 Knowledge........................................................................................ A-I-41
9.12 Acknowledgement.................................................................................. A-I-41
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
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<S> <C> <C>
Exhibit A -- Plan of Merger
Exhibit B -- Form of Warrant Agreement
Exhibit C -- Regent Shareholders' Tax Representations
Exhibit D -- Regent Tax Representations
Exhibit E -- Acquiror Tax Representations
Exhibit F -- Form of Stockholders' Consent
Exhibit G -- Form of Rule 145 Affiliate Letter
Exhibit H -- Escrow Agreement (Letter of Credit)
Exhibit I -- Form of Registration Rights Agreement
Exhibit J -- Regent Time Brokerage Agreement
Exhibit K -- TBA Consents
Exhibit L -- Form of Credit Facility
Exhibit M -- Opinions of Tax Counsel
Exhibit N -- SRLV Time Brokerage Agreement
Exhibit O -- Promissory Note
</TABLE>
A-I-5
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of October 8, 1996,
between JACOR COMMUNICATIONS, INC., a Delaware corporation ("Acquiror"), and
Regent Communications, Inc., a Delaware corporation ("Regent").
WITNESSETH:
The respective Boards of Directors of Acquiror and Regent have approved, and
deem it advisable and in their respective shareholders' best interests to
consummate, the business combination transaction (the "Merger") provided for
herein and in the Plan of Merger between Regent and Acquiror. A copy of the Plan
of Merger is attached to this Agreement as Exhibit A and incorporated by
reference herein as if fully set out herein (the "Plan of Merger" or the
"Plan").
Acquiror and Regent are willing to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe various
conditions to the Merger.
For federal income tax purposes, it is intended that the Merger qualify as a
reorganization under the provisions of Section 368 of the Internal Revenue Code
of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations and warranties herein contained, and intending to be legally
bound, Acquiror and Regent agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms below shall have the
following meanings:
"Assigned Contracts" shall mean all contracts assigned to Citicasters
Co., as broker, under the TBA.
"Cash Election" shall mean any election by Acquiror to make any
adjustment to the Merger Consideration required pursuant to Sections 2.7(B)
or 2.8(D) by making a payment in cash to the holders of Regent Stock in lieu
of additional shares of Acquiror Common Stock.
"Closing" shall mean the closing of the transactions contemplated herein
and in the Plan of Merger.
"Closing Date" shall mean the date and time specified pursuant to
Section 2.12 hereof as the date of the Closing.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Credit Agreement" shall mean the Credit Agreement dated October 25,
1995, among the Bank of Montreal, as Co-Agent, General Electric Capital, as
Co-Agent, the Lenders named therein and Regent, as amended.
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"FCC" shall mean the Federal Communications Commission.
"FCC Authorizations" shall mean the radio broadcast licenses issued to
the applicable Regent Subsidiary by the FCC authorizing the operation of the
Stations.
"Final Order" shall mean action by the FCC (i) which has not been
vacated, reversed, stayed, set aside, annulled or suspended,(ii) with
respect to which no timely appeal, request for stay, or petition for
rehearing, reconsideration or review by any party or by the FCC on its own
motion under the
A-I-6
<PAGE>
express provisions of the Federal Communications Act or the FCC's rules is
pending, and (iii) as to which the time for filing any such appeal, request,
petition or similar document, or for the reconsideration or review by the
FCC on its own motion, has expired.
"Governmental Authority" shall mean any governmental,
quasi-governmental, judicial, quasi-judicial or regulatory authority.
"Hazardous Wastes" shall include, without limitation: (i) hazardous
substances or hazardous wastes, as those terms are defined by the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 ET SEQ., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 ET SEQ., and any other applicable federal, state or
local law, rule, regulation, ordinance or requirement, all as amended or
hereafter amended; (ii) petroleum, including without limitation crude oil or
any fraction thereof which is liquid at standard conditions of temperature
and pressure (60 degrees Fahrenheit and 14.7 pounds per square inch
absolute); (iii) any radioactive material, including without limitation any
source, special nuclear, or by-product material as defined in 42 U.S.C.
Section 2011 ET SEQ.; (iv) asbestos, asbestos-containing materials or any
asbestiform minerals in any form or condition; (v) urea formaldehyde and
polychlorinated biplenyls; and (vi) any other material or substance
regulated as toxic or hazardous or as a pollutant or contaminant.
"KWNR" shall mean KWNR(FM) in Las Vegas, Nevada.
"KWNR Purchase" shall mean either (i) the pending purchase by Regent of
KWNR(FM) in Las Vegas, Nevada, pursuant to a Plan and Agreement of
Reorganization (the "Reorganization Agreement") dated July 19, 1996, among
Regent, as the buyer, and Southwest Radio Las Vegas, Inc. and Southwest
Florida Enterprises, Inc., as the sellers, pursuant to which Regent is
required to issue a 1996 series of convertible preferred stock to the
sellers or (ii) the acquisition of KWNR by Jacor pursuant to the
Reorganization Agreement, as amended by the agreement dated as of October 8,
1996, as the context shall require.
"Material Adverse Effect" shall mean with respect to Regent, the
Surviving Corporation or Acquiror, as the context may require, a material
adverse effect on the business, assets, liabilities, financial condition or
results of operations of such party and its Subsidiaries, taken as a whole,
or a material adverse effect on the ability of such party to perform its
obligations hereunder; PROVIDED, HOWEVER, that (i) results of operations of
Regent and its Subsidiaries, taken as a whole, shall not be a component of
Material Adverse Effect for events that occur after the TBA Effective Date;
(ii) after the TBA Effective Date, no Material Adverse Effect shall be
deemed to have occurred if such Material Adverse Effect can be attributed to
any action or inaction by Citicasters (or any successor) as the broker of
the Stations under the TBA; and (iii) no Material Adverse Effect shall be
deemed to have occurred by reason of a general deterioration in the economy
or events or conditions in the broadcasting industry.
"NASDAQ" shall mean the NASDAQ Stock Market's National Market System.
"Permitted Liens" shall mean the liens under the Credit Agreement and
certain liens related to certain seller financing provided in connection
with the acquisition of certain Stations, all as described in the Regent
Disclosure Letter, and (i) liens for taxes not yet due and payable or which
in good faith are being contested or litigated and are not material to the
business or operations of Regent, the Regent Subsidiaries and the Stations,
taken as a whole; (ii) statutory liens of landlords; (iii) deposits or
pledges to secure payments of workers' compensation, unemployment insurance
or other social security benefits; (iv) mechanics', carriers', workmens',
landlords' or other like liens arising in the ordinary course of business
securing obligations which are not delinquent; (v) zoning, building or other
restrictions, variances, covenants, rights-of-way, encumbrances, easements
and other minor irregularities in title; and (vi) purchase money security
interests entered into in the ordinary course of business, none of which,
individually or in the aggregate, (A) interfere with the present use or
occupancy of any property by Regent or any Regent Subsidiary, (B) have more
than an immaterial
A-I-7
<PAGE>
effect on the value thereof or its present use, or (C) would impair the
ability of Acquiror or the Surviving Corporation to use such property for
its present use.
"Person" shall mean any individual, corporation, partnership, limited
liability corporation, joint venture, trust, association, unincorporated
organization, other entity, group or Governmental Authority.
"Regent Expenses" shall mean all out-of-pocket fees and expenses
incurred or to be incurred by or on behalf of Regent or any of its
Subsidiaries in connection with the Merger or the consummation of any of the
transactions contemplated by this Agreement and the negotiation,
preparation, review and delivery of the agreements contemplated hereby,
including all fees and expenses incurred or to be incurred by Coopers &
Lybrand, Goldman, Sachs & Co., Wyatt, Tarrant & Combs, Cravath, Swaine &
Moore and any other advisors to Regent and Media Venture Partners.
"Regent Fully Diluted Share Number" shall mean the aggregate number of
shares of Regent Common Stock equal to the sum of (i) the aggregate number
of shares of Regent Common Stock outstanding on the Closing Date after the
exercise of all Options exercised on or prior to such date, (ii) the
aggregate number of shares of Regent Preferred Stock outstanding on the
Closing Date and (iii) 480,000 (which represents the number of shares of
preferred stock that would have been outstanding if Regent had completed the
KWNR Purchase).
"Regent Material Contracts" shall mean the contracts set forth in
Schedule 3.13A to the Regent Disclosure Letter; PROVIDED, HOWEVER, that on
and after the TBA Effective Date, the term "Regent Material Contracts" shall
no longer include the Assigned Contracts.
"Regent Stock" shall mean Regent Common Stock and Regent Preferred
Stock.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Laws" shall mean (i) the Securities Act; the Exchange Act;
the Investment Company Act of 1940, as amended; the Trust Indenture Act of
1939, as amended; and the rules and regulations of the SEC promulgated
thereunder, and (ii) all applicable state securities laws.
"Stations" shall mean the radio broadcasting stations identified in the
Regent Disclosure Letter, owned and operated by a Regent Subsidiary pursuant
to a license issued by the FCC.
"Subsidiary" shall mean any corporation or other legal entity of which
such party or any of its subsidiaries controls or owns, directly or
indirectly, more than 50% of the stock or other equity interest entitled to
vote for the election of directors or similar governing body.
"TBA Effective Date" shall mean the date the term of the TBA commences
pursuant to Section 5.21.
"Transaction Expense Schedule" shall mean a true and complete schedule
of all Regent Expenses for which invoices have been submitted (with a copy
of such invoices attached thereto). To the extent practicable, Regent shall
cause third parties to submit to Regent not later than two business days
prior to the Closing Date final bills for all Regent Expenses.
A-I-8
<PAGE>
1.2 OTHER DEFINED TERMS. The following terms shall have the meanings given
such terms in the Sections set forth below:
<TABLE>
<CAPTION>
TERM SECTION
- --------------------------------------------------------------------------------- -------------
<S> <C>
Acquiror Common Stock............................................................ 2.7
Acquiror Disclosure Letter....................................................... 4
Acquiror Financial Statements.................................................... 4.5
Application...................................................................... 5.2
Aggregate Average Value.......................................................... 2.7
Average Value of Acquiror Common Stock........................................... 2.7
Base Share Number................................................................ 2.7
Benefit Plans.................................................................... 3.11
BFI.............................................................................. 5.24
BFI Credit Line.................................................................. 5.24
BFI Note......................................................................... 5.24
Cash Election.................................................................... 2.7
Certificate...................................................................... 2.10
Citicasters...................................................................... 5.21
Conversion Number................................................................ 2.7
Delaware Certificate of Merger................................................... 2.6
Determination Date............................................................... 2.7
Dissenting Shares................................................................ 2.8
Effective Time................................................................... 2.6
Exchange Agent................................................................... 2.10
Financial Covenants.............................................................. 5.24
GAAP............................................................................. 2.9
HSR Act.......................................................................... 3.3
Information Statement............................................................ 3.19
KWNR............................................................................. 6.2
KWNR Cash Adjustment............................................................. 2.7
KWNR Stock Adjustment............................................................ 2.7
KWNR Stock Consideration......................................................... 2.7
Maximum Aggregate Regent Liabilities............................................. 2.7
Merger........................................................................... Preamble
Merger Consideration............................................................. 2.7
1996 Balance Sheet............................................................... 3.5
New Merger Event................................................................. 2.7
Notice of Disagreement........................................................... 2.8
Options.......................................................................... 2.10
Pension Plan..................................................................... 3.11
Plan of Merger or Plan........................................................... Preamble
Property......................................................................... 3.6
Purchase and Sale Transaction.................................................... 2.7
Regent Affiliates................................................................ 5.8
Regent Common Stock.............................................................. 3.4
Regent Expenses.................................................................. 2.12
Regent Financial Statements...................................................... 3.5
Regent Information............................................................... 3.19
Regent Liabilities............................................................... 2.9
Regent Preferred Stock........................................................... 3.4
Registration Rights Agreement.................................................... 5.16
Registration Statement........................................................... 3.19
</TABLE>
A-I-9
<PAGE>
<TABLE>
<CAPTION>
TERM SECTION
- --------------------------------------------------------------------------------- -------------
<S> <C>
Senior Credit Obligations........................................................ 5.24
Stock Consideration.............................................................. 2.7
Stock Market Additional Shares................................................... 5.7
Notification.....................................................................
SRLV............................................................................. 6.2
Surviving Corporation............................................................ 2.1
Tax Continuity Level............................................................. 2.7
TBA.............................................................................. 5.21
TBA Stations..................................................................... 5.21
Transaction Expense Schedule..................................................... 2.12
Warrant.......................................................................... 2.7
Warrant Agreement................................................................ 2.7
Warrant Consideration............................................................ 2.7
</TABLE>
SECTION 2
THE MERGER
2.1 SURVIVING CORPORATION. Subject to Section 2.7(H), the other provisions
of this Agreement and the DGCL, at the Effective Time, Regent shall be merged
with and into Acquiror, and the separate corporate existence of Regent shall
cease. Acquiror shall be the surviving corporation in the Merger (hereinafter
sometimes called the "Surviving Corporation") and shall continue its corporate
existence with all its rights, privileges, powers and franchises under the laws
of the State of Delaware unaffected and unimpaired by the Merger. The Merger
shall have the effects set forth in Section 259 of the DGCL.
2.2 CERTIFICATE OF INCORPORATION. The certificate of incorporation of
Acquiror shall be the certificate of incorporation of the Surviving Corporation
until thereafter duly amended in accordance with its terms and the DGCL.
2.3 BYLAWS. The bylaws of Acquiror shall be the bylaws of the Surviving
Corporation until thereafter duly amended in accordance with their terms and the
DGCL.
2.4 DIRECTORS. The directors of the Surviving Corporation shall consist of
the directors of Acquiror immediately prior to the Effective Time, such
directors to hold office from the Effective Time until their respective
successors are duly elected and qualified or until the earlier of their death,
resignation or removal in accordance with the Surviving Corporation's
certificate of incorporation and bylaws.
2.5 OFFICERS. The officers of the Surviving Corporation shall consist of
the officers of Acquiror immediately prior to the Effective Time, such officers
to hold office from the Effective Time until their respective successors are
duly elected and qualified or until the earlier of their death, resignation or
removal in accordance with the Surviving Corporation's certificate of
incorporation and bylaws.
2.6 EFFECTIVE TIME. If all the conditions set forth in Section 6 shall
have been fulfilled or waived in accordance with the terms hereof and this
Agreement shall not have been terminated in accordance with Section 8 hereof,
the parties hereto shall cause a certificate of merger or other appropriate
documents (in any such case, the "Delaware Certificate of Merger") to be
properly executed and filed on the Closing Date according to the relevant
provisions of the DGCL with the Secretary of State of the State of Delaware. The
Merger shall become effective as of the time of filing of a properly executed
Delaware Certificate of Merger. The date and time when the Merger becomes
effective is herein referred to as the effective time (the "Effective Time").
A-I-10
<PAGE>
2.7 EFFECT ON CAPITAL STOCK. As of the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the holder of any
shares of Regent Stock or any shares of capital stock of Acquiror:
A. REGENT STOCK. Subject to Sections 2.7(B), 2.7(C), 2.7(G), 2.7(I),
2.8, and 2.9, each issued and outstanding share of Regent Stock shall be
converted into the right to receive (i) the Conversion Number (as defined
below) of a fully paid and nonassessable share of Acquiror Common Stock (the
"Stock Consideration") plus (ii) a warrant (a "Warrant") to acquire a
fractional share (determined as provided below in Section 2.7(D)) (the
"Warrant Consideration") of the Acquiror Common Stock on the terms described
in the Warrant Agreement to be executed at Closing substantially in the form
attached hereto as Exhibit B (the "Warrant Agreement").
The term "Conversion Number" shall mean the number (rounded to the
nearest 1/100,000) equal to the quotient of (i) 3.55 million (the "Base
Share Number") and (ii) the Regent Fully Diluted Share Number; PROVIDED,
HOWEVER, that the Conversion Number shall be adjusted (x) pursuant to
Section 2.7(B), by multiplying the Conversion Number by the fraction set
forth in Section 2.7(B)(a), (y) pursuant to Sections 2.7(C) and 2.8(C) (to
the extent Acquiror selects the 2.8(C) option to reduce Stock
Consideration), by reducing the Base Share Number by an amount equal to the
aggregate amount of Acquiror Common Stock determined in accordance with such
Sections or (z) pursuant to Section 2.8(D) (to the extent Acquiror selects
the 2.8(D) option to increase Stock Consideration), by increasing the Base
Share Number by an amount equal to the aggregate amount of Acquiror Common
Stock determined in accordance with such Section.
B. STOCK CONSIDERATION ADJUSTMENT FOR MINIMUM PRICE. If, on the third
business day preceding the Closing Date (which shall be a date on which
Acquiror Common Stock shall trade on NASDAQ) (the "Determination Date"), the
amount equal to (i) the Average Value of Acquiror Common Stock (as defined
below) MULTIPLIED by (ii) 3.55 million (such amount, the "Aggregate Average
Value") is less than $116 million, then, at Acquiror's sole option, with
respect to the Stock Consideration only:
(a) the Conversion Number determined pursuant to Section 2.7(A) shall
be adjusted by multiplying such Conversion Number by a fraction (i) the
numerator of which is equal to $32.67606 and (ii) the denominator of
which is the Average Value of Acquiror Common Stock on such Determination
Date; or
(b) the Conversion Number shall remain the same and Acquiror shall
pay, as additional Merger Consideration, pro rata among the holders of
Regent Stock, an aggregate amount in cash equal to the difference between
(i) $116 million and (ii) the Aggregate Average Value on such
Determination Date; or
(c) no Stock Consideration shall be paid and Acquiror shall instead
pay, as part of the Merger Consideration, pro rata among the holders of
Regent Stock, in lieu of the Stock Consideration, $116 million in cash.
In the event that on the Determination Date an adjustment to the Merger
Consideration must be made under this paragraph (B), Acquiror shall inform
Regent in writing no later than 12:00 noon on the second business day
preceding the Closing Date as to which of the three options set forth in the
preceding sentence Acquiror has selected under this Section 2.7(B) to
satisfy its obligations hereunder.
The term "Average Value of Acquiror Common Stock" shall mean the amount
equal to the average of the average of the closing bid and asked prices
quoted on NASDAQ for the ten consecutive full NASDAQ trading days ending on
the third full NASDAQ trading day immediately preceding the Closing Date.
C. STOCK CONSIDERATION ADJUSTMENT FOR MAXIMUM PRICE. If, on the
Determination Date, the Aggregate Average Value exceeds $156.2 million,
then, the aggregate amount of Stock Consideration shall be reduced, pro rata
among the holders of Regent Stock, by the aggregate amount of Acquiror
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Common Stock equal to the quotient of (i) the amount equal to one-half of
the difference between (x) the Aggregate Average Value on the Determination
Date and (y) $156.2 million and (ii) the Average Value of Acquiror Common
Stock on the Determination Date.
D. THE WARRANT CONSIDERATION. Subject to adjustment pursuant to
Section 10 of the Warrant Agreement, the Warrant Consideration shall consist
of a warrant to acquire a fractional share of Acquiror Common Stock the
numerator of which is 500,000 and the denominator of which is the Regent
Fully Diluted Share Number. Subject to the terms of the Warrant Agreement
(including Section 10 thereof), the Warrants shall expire on the fifth
anniversary of the Closing Date and shall have an exercise price of $40.
E. THE MERGER CONSIDERATION. The "Merger Consideration" shall mean the
Stock Consideration, any cash consideration to be paid pursuant to Sections
2.7(B) or 2.8(C) and the Warrant Consideration, as further adjusted pursuant
to Sections 2.7(C), 2.7(G), 2.7(I), 2.8(D) and 2.9.
F. EFFECT OF CONVERSION. As of the Effective Time of the Merger, all
such shares of Regent Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares of Regent Stock shall
cease to have any rights with respect thereto, except the right to receive
the Merger Consideration and any cash in lieu of fractional shares of
Acquiror Common Stock to be issued or paid in consideration therefor upon
surrender of such certificate in accordance with this Section 2.7, without
interest.
G. ANTI-DILUTION. If, prior to the Effective Time, any event occurs
that would require an adjustment to the Warrants under Section 10 of the
Warrant Agreement, then the Stock Consideration shall be adjusted in the
same manner as the Warrants under the Warrant Agreement in order to preserve
the value of the Merger Consideration.
H. TAX STRUCTURE. In the event that the Tax Continuity Level
determined on the day before the Closing Date is less than 45% (such an
event, the "New Merger Event"), then instead of merging Regent into Acquiror
as provided for herein, a wholly owned subsidiary of Acquiror (to be
designated by Acquiror) shall be merged into Regent and Regent shall be the
surviving corporation with the certificate of incorporation, by-laws,
directors and officers as shall be designated solely by Acquiror. Acquiror
and Regent hereby agree that in the event of a New Merger Event, Acquiror
and Regent shall execute, if necessary, an appropriate amendment to this
Agreement in order to reflect the foregoing. For this purpose, the Tax
Continuity Level shall mean the product of A/B and (C+D), where (1) A equals
the value of the Stock Consideration, (2) B equals the value of the Merger
Consideration as reasonably agreed by Regent and Acquiror, (3) C equals the
percentage of shares of Regent Stock held by holders each owning less than
1% of the total number of such shares, including holders indirectly owning
less than 1% of such shares through an entity that has represented that it
will distribute the holder's share of Stock Consideration received by such
entity to such holder, and (4) D equals the percentage of shares of Regent
Stock held by holders (other than persons or entities described in clause
(3)) that provide the representation described in Exhibit C with respect to
such shares. Tax counsel for Acquiror and Regent may jointly agree to modify
this definition if they jointly deem it appropriate to reflect "continuity
of interest" in the Merger in accordance with the Federal tax rules as
developed under the rules of the Code.
I. ADJUSTMENT FOR KWNR ACQUISITION. In order to adjust the aggregate
amount of Merger Consideration payable hereunder to holders of Regent Stock
in the event of the concurrent closing of the acquisition of KWNR by
Acquiror, (i) the per share amount of the Merger Consideration payable to
Southwest Florida Enterprises, Inc. ("SFE") shall be determined as if
480,000 additional shares of Regent Stock were outstanding, (ii) the
aggregate amount of Merger Consideration payable in respect of such 480,000
shares of Regent Stock (the "KWNR Stock Consideration") shall be payable to
SFE, as the sole stockholder of Southwest Radio Las Vegas, Inc., in
connection with the KWNR Purchase, rather than to holders of Regent Stock
pursuant to this Agreement; PROVIDED, HOWEVER, that in the event that all or
any portion of the KWNR Stock Consideration would otherwise be payable in
cash, (i) such portion (the "KWNR Cash Adjustment") shall instead be payable
to SFE in Acquiror
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Common Stock, valued based on the Average Value of Acquiror Common Stock on
the Determination Date (the "KWNR Stock Adjustment") and (ii) (x) the
aggregate amount of Stock Consideration, if any, payable as part of the
Merger Consideration hereunder to holders of Regent Stock (the "Regent Stock
Consideration") shall be reduced by a number of shares equal to the KWNR
Stock Adjustment (or, if the shares constituting the Regent Stock
Consideration are less than the shares constituting the KWNR Stock
Adjustment, the number of shares constituting the Regent Stock
Consideration) and (y) the aggregate amount of cash payable hereunder as
part of the Merger Consideration shall be increased by an amount equal to
the KWNR Cash Adjustment to the holders of the Regent Stock (the "Regent
Cash Consideration"), PROVIDED, HOWEVER, that if the number of shares of
Acquiror Common Stock equal to the KWNR Stock Adjustment exceeds the number
of shares of Acquiror Common Stock equal to the Regent Stock Consideration,
then the Regent Cash Consideration shall be increased, if at all, in an
amount equal to the Average Value of Acquiror Common Stock on the
Determination Date multiplied by the number of shares of Acquiror Common
Stock equal to the Regent Stock Consideration.
In the event that, after giving effect to the foregoing paragraph, the
payment of net Regent Expenses (the aggregate amount of Regent Expenses less
one-half thereof (up to a maximum of $1.5 million)) would result in the KWNR
Stock Consideration having an aggregate value (based on the Average Value of
Acquiror Common Stock on the Determination Date) of less than $12 million on
the Determination Date, then (i) an amount of Acquiror Common Stock equal to
the shortfall (the "Regent Expenses Adjustment") shall be added to the
amount of KWNR Stock Consideration payable by Acquiror under the previous
paragraph and (ii) the amount of Regent Stock Consideration shall be further
reduced by the amount of Acquiror Common Stock equal to the Regent Expenses
Adjustment; PROVIDED, HOWEVER, that to extent that the number of shares of
Acquiror Common Stock equal to the Regent Expenses Adjustment exceeds the
number of shares of Acquiror Common Stock equal to the Regent Stock
Consideration, as adjusted pursuant to clause (ii)(x) in the foregoing
paragraph (such excess number of shares, the "Excess Number"), then (x) SFE
shall receive the amount of cash equal to the Average Value of Acquiror
Common Stock on the Determination Date multiplied by the Excess Number (the
"Adjustment Amount") and (y) the Regent Cash Consideration, as adjusted
pursuant to clause (ii)(y) in the foregoing paragraph, to be paid by
Acquiror hereunder shall be reduced by the Adjustment Amount; PROVIDED,
HOWEVER, that if the Adjustment Amount exceeds such adjusted Regent Cash
Consideration, then the holders of Regent Stock will pay Acquiror an amount
of cash equal to such excess.
2.8 LONG TERM DEBT ADJUSTMENT.
A. On the Determination Date, Regent shall prepare and deliver to Acquiror a
statement (the "Statement"), certified by the chief financial officer of Regent,
setting forth Regent Liabilities (as defined below) as of the close of business
on the Determination Date, together with (i) a reasonably detailed calculation
thereof and (ii) a letter from Coopers & Lybrand, L.L.P., stating that based on
the procedures set forth in such letter, they concur in the calculation of
Regent Liabilities.
B. The term "Regent Liabilities" shall mean, as of any date, (i) the amount
of long term debt of Regent (including the current portion thereof) on such
date, calculated in the same way, using the same methods, as the line items on
the 1996 Balance Sheet PLUS (ii) to the extent not already included pursuant to
clause (i), the aggregate amount of any dividends paid or to be paid prior to
Closing to the holders of Regent Preferred Stock (other than for dividends paid
in Regent Stock) PLUS (iii) to the extent not already included pursuant to
clause (i), the aggregate amount of all the Regent Expenses, MINUS (iv) to the
extent included pursuant to clause (i), the amount equal to one-half of all the
Regent Expenses, which deduction shall not in any event exceed $1.5 million,
MINUS (v) to the extent included pursuant to clause (i), the amount of debt
outstanding on the Determination Date under the BFI Credit Line and MINUS (vi)
any amounts due but not yet received under the sale contract set forth on
Schedule 5.3A to the Regent Disclosure Letter, to the extent it is still in full
force and effect.
C. In the event that the amount of Regent Liabilities on the Determination
Date is greater than the Maximum Aggregate Regent Liabilities (as defined
below), then the aggregate amount of Merger
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Consideration to be received by the holders of Regent Stock shall be reduced,
pro rata among the holders of Regent Stock, at Acquiror's sole option by either
(i) reducing the aggregate amount of such Stock Consideration by the aggregate
amount of Acquiror Common Stock equal to the quotient of (x) the difference
between the amount of Regent Liabilities on the Determination Date and the
Maximum Aggregate Regent Liabilities and (y) the Average Value of Acquiror
Common Stock on the Determination Date or (ii) to the extent of the amount of
any Cash Election, reducing the amount of such cash consideration by the amount
of cash equal to the difference between the amount of Regent Liabilities on the
Determination Date and the Maximum Aggregate Regent Liabilities.
"Maximum Aggregate Regent Liabilities" shall mean the amount equal to (i)
$64 million MINUS (ii) the amount of debt outstanding, if any, under the BFI
Credit Line and MINUS (iii) to the extent that any purchase or option
transaction listed on Schedule 5.3A to the Regent Disclosure Letter (each, a
"Purchase or Option Transaction") has not closed prior to the Closing, the
aggregate cash committed to be paid under such Purchase or Option Transactions
that have not yet closed.
D. In the event that the amount of Regent Liabilities on the Determination
Date is less than the Maximum Aggregate Regent Liabilities, then the aggregate
amount of Merger Consideration to be received by the holders of Regent Stock
shall be increased, pro rata among the holders of Regent Stock, at Acquiror's
sole option by either (i) increasing the aggregate amount of Stock Consideration
by the aggregate amount of Acquiror Common Stock equal to the quotient of (x)
the difference between the Maximum Aggregate Regent Liabilities and the amount
of Regent Liabilities on the Determination Date and (y) the Average Value of
Acquiror Common Stock on the Determination Date or (ii) increasing the Merger
Consideration by the amount of cash equal to the difference between the Maximum
Aggregate Regent Liabilities and the amount of Regent Liabilities on the
Determination Date.
E. In the event that an adjustment to Merger Consideration must be made
under paragraphs (C) or (D) above, Acquiror shall inform Regent in writing no
later than 12:00 noon on the second business day preceding the Closing Date as
to which option Acquiror has selected to make such adjustment.
2.9 DISSENTING SHARES. To the extent that appraisal rights are available
under Section 262 of DGCL, shares of Regent Stock that are issued and
outstanding immediately prior to the Effective Time and that have not been voted
for adoption of the Merger and with respect to which appraisal rights have been
properly demanded in accordance with Section 262 of the DGCL ("Dissenting
Shares") shall not be converted into the right to receive the consideration
provided for in Section 2.7 hereof at or after the Effective Time unless and
until the holder of such shares becomes ineligible for such appraisal. If a
holder of Dissenting Shares becomes ineligible for such appraisal, then, as of
the Effective Time or the occurrence of such event whichever later occurs, such
holder's Dissenting Shares shall cease to be Dissenting Shares and shall be
converted into and represent the right to receive the consideration provided for
in Section 2.7 hereof. If any holder of Regent Stock shall assert the right to
be paid the fair value of such Regent Stock as described above, Regent shall
give Acquiror notice thereof and Acquiror shall have the right to participate in
all negotiations and proceedings with respect to any such demands. Regent shall
not, except with the prior written consent of Acquiror, voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
payment. Payment for Dissenting Shares shall be made as required by the DGCL.
2.10 TREATMENT OF REGENT EMPLOYEE STOCK OPTIONS. At or prior to the
Closing Date, Regent will take all necessary steps to cause (i) the outstanding
options under the stock option plan and agreements listed on Schedule 3.11A to
the Regent Disclosure Letter (any options granted under such plan and
agreements, the "Options"), to vest and become immediately exercisable and (ii)
to terminate any Options not exercised on or prior to the Closing Date.
2.11 EXCHANGE OF REGENT STOCK.
A. EXCHANGE AGENT. As of the Effective Time of the Merger, Parent shall
deposit with Key Corp Shareholder Services, Inc., a Delaware corporation, or
such other bank or trust company as may be designated by Acquiror (the "Exchange
Agent"), for the benefit of the holders of shares of Regent Stock, for exchange
in accordance with this Section 2.11, through the Exchange Agent, certificates
representing the shares of Acquiror Common Stock issuable pursuant to Section
2.7 in exchange for outstanding shares
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of Regent Stock. In the event that Acquiror makes any Cash Election, at the
Effective Time of the Merger, Acquiror shall also deliver to the Exchange Agent
for deposit into an escrow fund the amount of cash necessary to satisfy its
obligations under such Cash Election. As of the Effective Time, holders of
Regent Stock (other than holders of Dissenting Shares) shall become holders of
record of Acquiror Common Stock.
B. EXCHANGE PROCEDURES. Promptly after the Effective Time, the Exchange
Agent shall make available to each record holder who, as of the Effective Time,
was a holder of an outstanding certificate or certificates which immediately
prior to the Effective Time represented shares of Regent Stock (the
"Certificate" or "Certificates"), a form of letter of transmittal and
instructions for use in effecting the surrender of the Certificates for payment
therefor and conversion thereof. Delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and, the form of letter of transmittal shall
so reflect. Upon surrender to the Exchange Agent of a Certificate, together with
such letter of transmittal duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor one or more certificates as
requested by the holder (properly issued, executed and countersigned, as
appropriate) representing that number of whole shares of Acquiror Common Stock
to which such holder of Regent Stock shall have become entitled pursuant to the
provisions of Section 2.7 hereof as well as any cash due to such holder pursuant
to any Cash Election, and the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or accrued on any cash payable upon the
surrender of the Certificates. If any portion of the consideration to be
received pursuant to Section 2.7 hereof, upon exchange of a Certificate, is to
be issued or paid to a Person other than the Person in whose name the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such issuance and payment that the Certificate so surrendered shall
be properly endorsed or otherwise be in proper form for transfer. From the
Effective Time until surrender in accordance with the provisions of this Section
2.11, each Certificate shall represent for all purposes only the right to
receive the consideration provided in Section 2.7 hereof. All payments in
respect of shares of Regent Stock that are made in accordance with the terms
hereof shall be deemed to have been made in full satisfaction of rights
pertaining to such securities.
In the case of any lost, mislaid, stolen or destroyed Certificate, the
holder thereof may be required, as a condition precedent to delivery to such
holder of the consideration described in Section 2.7, to deliver to the Exchange
Agent an affidavit and satisfactory indemnity agreement as Acquiror may direct
as indemnity against any claim that may be made against Acquiror, the Exchange
Agent or the Surviving Corporation with respect to the Certificate alleged to
have been lost, mislaid, stolen or destroyed.
C. UNEXCHANGED REGENT STOCK. After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of the shares
of Regent Stock that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for transfer, they shall be cancelled and exchanged for the
consideration described in Section 2.7 hereof.
D. FRACTIONAL SHARES. No certificates or scrip representing fractional
shares of Acquiror Common Stock shall be issued upon the surrender for exchange
of Certificates pursuant to this Section 2.11; no dividend or other distribution
by Acquiror and no stock split shall relate to any such fractional share; and no
such fractional share shall entitle the record or beneficial owner thereof to
vote or to any other rights of a stockholder of Acquiror. In lieu of any such
fractional share, each holder of Regent Stock who would otherwise have been
entitled thereto upon the surrender of Certificates for exchange pursuant to
this Section 2.11 will be paid an amount in cash (without interest) rounded to
the nearest whole cent, determined by multiplying (i) the per share closing
price on NASDAQ of Acquiror Common Stock on the date on which the Effective Time
shall occur (or, if the Acquiror Common Stock shall not trade on NASDAQ on such
date, the first day of trading in Acquiror Common Stock on NASDAQ thereafter) by
(ii) the fractional share to which such holder would otherwise be entitled. As
promptly as practicable after the Effective Time, the Exchange Agent shall
determine the aggregate amount of cash necessary to pay holders of Regent Stock
cash in lieu of fractional shares and notify the Acquiror of such aggregate
amount. On the second business day following notification from the Exchange
Agent, Acquiror shall deliver to the
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Exchange Agent such aggregate amount of cash to be deposited into an escrow fund
until paid to the holders of Regent Stock pursuant to this Section 2.11.
E. RETURN OF UNCLAIMED ACQUIROR COMMON STOCK AND CASH. One hundred and
eighty days following the Effective Time, Acquiror shall be entitled to cause
the Exchange Agent to deliver to it any shares of Acquiror Common Stock and cash
for fractional shares and any Cash Election (including any interest, dividends,
earnings or distributions received with respect thereto which shall be paid as
directed by Acquiror) made available to the Exchange Agent by Acquiror which
have not been disbursed, and thereafter holders of Certificates who have not
theretofore complied with the instructions for exchanging their Certificates
shall be entitled to look only to the Acquiror for payment, as general creditors
thereof, of shares of Acquiror Common Stock and any cash in lieu of fractional
shares of Acquiror Common Stock or to be distributed pursuant to any Cash
Election and any dividends or distributions with respect to Acquiror Common
Stock.
F. EXPENSES. Acquiror shall pay all charges and expenses, including those
of the Exchange Agent, in connection with the exchange of shares of Acquiror
Common Stock for Certificates.
G. NO LIABILITY. Notwithstanding anything to the contrary in this Section
2.10, none of the Exchange Agent, Acquiror, Regent or the Surviving Corporation
shall be liable to a holder of a Certificate formerly representing Regent Stock
for any amount properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
2.12 CLOSING. The Closing shall take place at 10:00 a.m. at the offices of
Wyatt, Tarrant & Combs, Louisville, Kentucky, within ten days after the date on
which the last of the conditions have been satisfied (excluding conditions that
by their terms cannot be satisfied until the Closing Date) set forth in Section
6 hereof, or at such other date, time and place as Regent and Acquiror may agree
in writing.
SECTION 3
REPRESENTATION AND WARRANTIES OF REGENT
With and subject to such exceptions and disclosures as are set forth in a
letter delivered by Regent to Acquiror contemporaneous with the execution hereof
(the "Regent Disclosure Letter") Regent hereby represents and warrants to
Acquiror as set forth below. Notwithstanding any other provision to the contrary
in this Agreement, Regent shall be deemed not to have breached any of the
representations and warranties set forth below to the extent that any breach
that would otherwise be claimed to have occurred is attributable to any action
or inaction by Citicasters (or any successor) as the broker of the Stations
under to the TBA.
3.1 CORPORATE STANDING. Regent and each Regent Subsidiary are corporations
duly organized, validly existing, and in good standing under the laws of the
State of Delaware. Regent and each Regent Subsidiary have all requisite power
and authority to own, lease and operate their properties and to carry on their
business as now being conducted and are duly qualified and in good standing to
do business in each jurisdiction in which the ownership or leasing of their
properties makes such qualification necessary, except where the failure to so
qualify would not have a Material Adverse Effect on Regent. Regent has
heretofore made available to Acquiror true and accurate copies of the
certificate of incorporation, bylaws and minute books, as amended through the
date hereof (containing the records of meetings and written consents of the
stockholders, the board of directors and any committees of the board of
directors), of Regent and each Regent Subsidiary. Such certificates of
incorporation and bylaws are in full force and effect and no other
organizational documents are applicable to or binding upon Regent. The Regent
Disclosure Letter contains a true and correct list of the jurisdictions in which
Regent and each Regent Subsidiary are qualified to do business as a foreign
corporation.
3.2 POWER AND AUTHORITY OF REGENT; AUTHORIZATION. Regent has all requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Plan. The execution and delivery of this
Agreement and the Plan and the consummation of the transactions contemplated by
both documents have been duly authorized by all necessary corporate action on
the part
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of Regent. This Agreement has been duly executed and delivered by Regent, and
constitutes the legal, valid and binding obligation of Regent enforceable
against Regent in accordance with its terms subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally, general equitable principles and the discretion of courts in granting
equitable remedies. As of the Closing Date, the Plan will be duly executed and
delivered by Regent and will constitute the legal, valid and binding obligation
of Regent enforceable against Regent in accordance with its terms subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally, general equitable principles and the
discretion of courts in granting equitable remedies.
3.3 ABSENCE OF RESTRICTIONS AND CONFLICT. Subject to Regent's receipt of
the consents set forth in Regent's Disclosure Letter, the execution, delivery
and performance of this Agreement and the Plan, the consummation of the Merger
and the other transactions contemplated by this Agreement and the fulfillment of
and compliance with the terms and conditions of this Agreement do not and will
not, with the passing of time or the giving of notice or both, violate or
conflict with, constitute a breach of or default under, result in the loss of
any material benefit under, or permit the acceleration of any obligation under,
(i) any term or provision of the certificate of incorporation or bylaws of
Regent or any Regent Subsidiary, (ii) any Regent Material Contract, (iii) any
judgment, decree or order of any court or Governmental Authority or agency to
which Regent or any Regent Subsidiary is a party or by which Regent or any
Regent Subsidiary, or any of their properties is bound, (iv) any lease,
mortgage, indenture, contract, license, permit, instrument, trust agreement or
other agreement to which Regent or any Regent Subsidiary is a party or by which
Regent or any Regent Subsidiary or any of their properties may be bound, or (v)
any statute, law, regulation or rule applicable to Regent or any Regent
Subsidiary, so as to have in the case of subsections (ii) through (v) above, a
Material Adverse Effect on Regent. Except for compliance with the applicable
requirements of the FCC, Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), the Securities Laws and filing and recordation of
the Delaware Certificate of Merger as required by the DGCL, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any governmental agency or public or regulatory unit, agency, body or
authority with respect to Regent is required in connection with the execution,
delivery or performance of this Agreement by Regent or the consummation of the
transactions contemplated by this Agreement by Regent, the failure of which to
obtain would have a Material Adverse Effect on Regent.
3.4 CAPITALIZATION OF REGENT AND REGENT SUBSIDIARIES.
A. The authorized capital stock of Regent consists of Nine Million Six
Hundred Fifty Thousand (9,650,000) shares, consisting of Five Million
(5,000,000) shares of Class A Common Stock, par value of $.01 per share, One
Hundred Fifty Thousand (150,000) shares of Class B Common Stock, par value of
$.01 per share ("Regent Common Stock"), and Four Million Five Hundred Thousand
(4,500,000) Shares of Preferred Stock, par value of $.01 per share ("Regent
Preferred Stock"), of which, as of the date hereof, Fifty Thousand (50,000)
shares of Class A Common Stock, Zero (0) shares of Class B Common Stock and
Three Million Seven Hundred Seventy-Four Thousand, One Hundred Ninety-Four
(3,774,194) shares of Preferred Stock are issued and outstanding. Except as set
forth in the Regent Disclosure Letter, all of such issued and outstanding shares
of capital stock of Regent are validly issued, fully paid, nonassessable and
free of preemptive rights. Except for the Two Hundred Ninety-Two Thousand Five
Hundred (292,500) Options outstanding and its obligations in connection with the
KWNR Purchase, Regent does not have outstanding, nor is it bound by, any
subscriptions, options, warrants, calls, commitments or agreements requiring
Regent to issue or entitling any Person to acquire any additional shares of
capital stock or any other equity security, including any right of conversion or
exchange under any outstanding security or other instrument, and Regent is not
obligated to issue any shares of its capital stock for any purpose. There are no
outstanding obligations of Regent to repurchase, redeem or otherwise acquire any
outstanding shares of stock of Regent. There are no shares of capital stock held
in the treasury of Regent and no preemptive rights exist with respect to the
Regent Stock.
B. Schedule 3.1A to the Regent Disclosure Letter lists all subsidiaries of
Regent as of the date hereof. All of the outstanding shares of capital stock of
each subsidiary are owned by Regent either directly or indirectly through
another subsidiary. No equity securities of any subsidiary may be required to be
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issued (other than to the Company or another Subsidiary) for shares of the
capital stock of any Subsidiary. There are no contracts, commitments,
understandings or arrangements by which Regent or any Subsidiary is or may be
obligated to transfer any shares of the capital stock of any Subsidiary. Except
as set forth in the Regent Disclosure Letter, all of the outstanding shares of
capital stock of each Subsidiary held by Regent or any Subsidiary are fully paid
and nonassessable and are owned by Regent or such Subsidiary free and clear of
any claim, lien or encumbrance.
C. Except for interests in the Subsidiaries, neither Regent nor any of the
Subsidiaries owns, directly or indirectly, any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, business, trust
or entity, other than (i) investments of less than $1,000,000 in the aggregate,
(ii) promotional activities undertaken in the ordinary course of business and
(iii) accounts receivables produced in the ordinary course of business.
3.5 FINANCIAL STATEMENTS. Regent has made available to Acquiror: (i) the
audited consolidated balance sheets of Regent and the Regent Subsidiaries as of
December 31, 1993, 1994 and 1995, and the related audited consolidated
statements of income, stockholders' equity and cash flows for the respective
fiscal years then ended, including the notes thereto, examined by and
accompanied by the report of Coopers & Lybrand, L.L.P., independent public
accountants with respect to Regent; and (ii) the unaudited consolidated balance
sheet of Regent and the Regent Subsidiaries as of June 30, 1996 and the related
unaudited consolidated statement of income and stockholders' equity for the
period then ended. All of the foregoing financial statements are hereinafter
collectively referred to as the "Regent Financial Statements" and the balance
sheet as of June 30, 1996, is hereinafter referred to as the "1996 Balance
Sheet." The Regent Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis (except as disclosed in the audited year-end
financial statements) and fairly present, in all material respects, the
consolidated financial position and the consolidated results of operations,
changes in shareholders' equity and cash flows of Regent and the consolidated
Regent Subsidiaries as of the dates and for the periods indicated (subject, in
the case of interim financial statements, to normal recurring year-end
adjustments, none of which are expected to be material, and the absence of
footnote disclosure). As of the date hereof, Regent does not have any material
liabilities or material obligations or commitments except those disclosed in the
Regent Financial Statements, those entered into in the ordinary course of
business since June 30, 1996, consistent with past practices and which
individually and in the aggregate do not have a Material Adverse Effect on
Regent, those disclosed in or permitted by other sections or provisions of this
Agreement or the Regent Disclosure Letter, and those incurred in connection with
the transactions contemplated hereby.
3.6 TITLE TO AND CONDITION OF ASSETS.
A. Except as set forth in the Regent Disclosure Letter, Regent and all
Regent Subsidiaries have good and valid title to or valid leasehold interests in
(and with respect to real property owned in fee estate only, good, valid and
marketable title to) their material properties and assets, tangible and
intangible, reflected in the 1996 Balance Sheet or acquired after the date
thereof (other than properties sold or otherwise disposed of in the ordinary
course of business) (the "Property"), and all such Property is held free and
clear of all title defects, liens, encumbrances and restrictions, except, with
respect to all such properties, Permitted Liens. The Property comprises all the
material tangible and intangible assets owned or used and necessary in the
business of Regent and the Regent Subsidiaries, as currently operated.
B. The Regent Disclosure Letter sets forth as of the date hereof a true and
complete list of all real property leases and agreements of Regent and all
Regent Subsidiaries granting possession of or rights to real property and all
Regent Material Contracts with respect to personal property (collectively, the
"Scheduled Leases"). All such Scheduled Leases and all other leases entered into
after the date hereof (the "Post-Signing Leases") are in full force and effect
and constitute the legal, valid, binding and enforceable obligations of Regent
or any Regent Subsidiary, as applicable, and, to Regent's knowledge, are legal,
valid, binding and enforceable in accordance with their respective terms with
respect to each other party thereto, in each case to the extent material to the
business and operations of Regent or any Regent Subsidiary and subject, in each
case, to applicable bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally, general equitable principles and the
discretion of courts in
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granting equitable remedies. There are no existing material defaults of Regent
or any Regent Subsidiary with respect to such Scheduled Leases or Post-Signing
Leases or, to the knowledge of Regent, of any of the other parties thereto (or
events or conditions which, with notice or lapse of time, or both, would
constitute a material default). Except as disclosed in the Regent Disclosure
Letter, none of the Scheduled Leases or the Post-Signing Leases are with an
affiliate of Regent or contain any material terms or conditions which make any
such lease commercially unreasonable.
C. All tangible personal property leased, owned or used in the business of
Regent and the Regent Subsidiaries as presently conducted is in good working
condition, has been properly maintained, is suitable for the purposes for which
it is used, and conforms to the requirements of all material laws, ordinances
and regulations applicable to its use and ownership or lease by the Company and
each Subsidiary where the failure to so conform will have a Material Adverse
Effect.
D. All real property, buildings and structures (including but not limited to
towers) owned or leased by Regent and all Regent Subsidiaries are in good
operating condition and repair except for ordinary wear and tear; are adequate
and suitable in accordance with general industry practices for the purposes for
which they are currently used and intended to be used; materially comply with
applicable zoning laws; have reasonable access thereto and there is no action
pending, or, to the knowledge of Regent or any Regent Subsidiary, threatened
that would impair or result in the termination of such access; and there are no
easements or rights of way or rights of ingress or egress on, over or through
the real property that are not of record which could materially interfere with
the use of the real property, buildings and structures as presently utilized.
3.7 TRADEMARKS, ETC. Except as described in the Regent Disclosure Letter,
as of the date hereof and the TBA Effective Date, and thereafter, subject to the
exclusive license granted to Acquiror by Regent in the TBA, Regent and the
Regent Subsidiaries do not have any intellectual property, trademarks, service
marks, slogans, logos, jingles, trademark registrations or applications
therefor, trade names, copyrights, copyright registrations or applications
therefor, trademark or trade name licenses, or assignments material to any of
their respective assets or properties, taken as a whole. The Regent Disclosure
Letter contains a complete list or general description of all such trademarks
and any other intangible assets owned by Regent or any Regent Subsidiary or used
in the operation of the Stations, other than any such trademarks and other
intangible assets, the loss of which would not have a Material Adverse Effect on
Regent. Except as set forth in the Regent Disclosure Letter, to Regent's
knowledge, (i) neither Regent nor any Regent Subsidiary is infringing in any
material respect on any trademark, trade name or copyright, nor has Regent or
any Regent Subsidiary received any notice alleging that it is infringing on any
trademark, trade name or copyright, and, (ii) to conduct its business as such
business is currently being conducted, Regent does not require rights under any
trademark, trade name, or copyright (or any application or registration
respecting any thereof).
3.8 LEGAL PROCEEDINGS. Except as set forth in Regent's Disclosure Letter:
(i) there are no actions, suits, proceedings, arbitrations or investigations
pending or, to the knowledge of Regent, threatened against Regent or any Regent
Subsidiary, or against any property, asset, interest or right of any of them,
that involve more than $100,000 in controversy, or that seek relief other than
money damages; (ii) none of the actions, suits, proceedings, arbitrations or
investigations, individually or in the aggregate, would have a Material Adverse
Effect on Regent if adversely decided; and (iii) neither Regent, nor any Regent
Subsidiary, is subject to any judgment, order, writ, injunction, or decree that
would have a Material Adverse Effect on it.
3.9 ENVIRONMENTAL MATTERS. Except as disclosed in the Regent Disclosure
Letter or insofar as inaccuracies in the following statements would not have a
Material Adverse Effect on Regent: (i) the properties owned or leased by Regent
or any Subsidiary and properties formerly owned or leased by Regent or any
Subsidiary for which Regent has liability (the "Regent Properties") are in
compliance with all applicable federal, state and local environmental and
Hazardous Waste laws and regulations; no enforcement actions are pending or
threatened against Regent or any Subsidiary, and no notice of potential
liability or any administrative or judicial proceeding (including notices
regarding clean up of off-
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site third party Hazardous Waste sites) which, in either case, has not been
fully and finally resolved, has been received; the Regent Properties contain no
underground storage tank the presence or operation of which is a violation of
any environmental law; neither Regent nor any Subsidiary has knowledge of any
disposal or release of any Hazardous Wastes at, on or under the Regent
Properties, in violation of any applicable environmental law; all broadcast
facilities operated by Regent or any Subsidiary are, and at all times prior
hereto were, in compliance with all enforceable rules and regulations relating
to RF radiation produced by a broadcast station; and neither Regent nor any
Subsidiary has (A) given any release or waiver of liability relating to any
claim based on Hazardous Wastes to any current or prior tenant or owner of any
real property owned or leased at any time by either Regent or any Subsidiary or
to any party who may be potentially responsible for the presence of Hazardous
Wastes on any such real property; or (B) made any promise of indemnification to
any party regarding Hazardous Wastes that may be located on any real property
owned or leased at any time by either Regent or any Subsidiary. The Regent
Disclosure Letter contains a description of environmental indemnities of which,
as of the date hereof and the TBA Effective Date, either Regent or any
Subsidiary is a beneficiary.
3.10 FCC AUTHORIZATION; COMPLIANCE WITH LAWS. As of the date hereof, the
Regent Disclosure Letter describes for each of the Stations all of the
applicable FCC Authorizations. Complete and correct copies of the FCC
Authorizations have heretofore been made available to Acquiror. To Regent's
knowledge, except as set forth in the Regent Disclosure Letter, the applicable
Regent Subsidiary is operating the applicable Station in compliance in all
material respects with each FCC Authorization and has fulfilled and performed in
all material respects its obligations under each FCC Authorization, no event has
occurred and no condition or state of facts exists which constitutes, or after
notice or lapse of time or both would constitute, a material breach or default
thereof which would have a Material Adverse Effect on Regent, and no notice of
cancellation or default concerning any such FCC Authorization, or of any event,
condition or state of facts described in the preceding sentence has been
received by Regent, or is known to Regent. Regent and all Regent Subsidiaries
have complied in all material respects with and are not in any material default
under (and have not been charged with or received notice with respect to, nor
are threatened with or under investigation with respect to, any charge
concerning any material violation of any provision of) any federal, state or
local law, regulation, ordinance, rule or order (whether executive, judicial,
legislative or administrative) or any order, writ, injunction or decree of any
court, agency or instrumentality and no action, suit, proceeding, or
investigation has been filed or commenced against Regent or any Regent
Subsidiary alleging any failures to comply, which would have a Material Adverse
Effect on Regent.
Except as set forth in the Regent Disclosure Letter, there is no reason
related to Regent why the FCC would not approve the transfer of control of
Regent to Acquiror or any of its Subsidiaries and the renewal of the FCC
Authorizations upon the expiration of the current term of each such FCC
Authorization. Except as set forth in the Regent Disclosure Letter, all reports,
forms and statements required to be filed by Regent with the FCC with respect to
the Stations since the grant of the last renewal of the FCC Authorizations have
been timely filed and are complete and accurate, except where the failure to so
file or where the failure to be complete and accurate would, individually or in
the aggregate, not have a Material Adverse Effect on Regent.
3.11 EMPLOYEE BENEFIT PLANS.
A. Except as specified in the Regent Disclosure Letter, neither Regent nor
any Subsidiary has an "employee pension benefit plan" as defined in Section 3(2)
of ERISA, including any "multiemployer plan" as defined in Section 3(37) of
ERISA (such plans so noted shall be referred to as the "Retirement Plans"),
"employee welfare benefit plan" as defined in Section 3(1) of ERISA including
without limitation post-employment benefit and retiree medical plans, funds and
programs ("Benefit Plans") or a "specified fringe benefit plan" as defined in
Section 6039D of the Code ("SFB Plans") (together, the Retirement Plans, Benefit
Plans and SFB Plans noted in the Regent Disclosure Letter shall be referred to
collectively as the "Plans" and individually as a "Plan"). All Plans (with the
exception of any multiemployer plan) are maintained by Regent.
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B. Each Plan is, and has been at all times, operated in material compliance
with all statutes, orders or governmental rules or regulations, including but
not limited to ERISA and the Code, any and all collective bargaining agreements
and other contracts applicable thereto.
C. Except as specified in the Regent Disclosure Letter, each Retirement
Plan and related trust that is intended to be tax-qualified under the Code has
received a favorable determination letter from the Internal Revenue Service with
respect to the qualification and tax-exempt status of the Retirement Plan and
nothing has occurred (or failed to occur) since the receipt of such
determination letter to cause a loss of the Retirement Plan's qualification and
tax-exempt status.
D. All material required reports for the Plans (including IRS Form 5500)
have been appropriately filed. All material descriptions (including Summary Plan
Descriptions and Summary Annual Reports) have been appropriately distributed
except where any failure to so distribute would not have a Material Adverse
Effect on Regent.
E. All material notices required by ERISA, the Code or any other state or
federal law, ruling or regulation with respect to the Plans have been
appropriately filed.
F. All contributions due to the Plans on or before the Closing Date will be
made prior to the Closing Date by Regent and each Subsidiary and except as
specified in the Regent Disclosure Letter, no Retirement Plans are currently or
shall be unfunded or underfunded as of the Closing Date.
G. With respect to the Plans, no prohibited transactions (as defined in
Section 406 of ERISA or Section 4975 of the Code) that would result in material
liability to Regent have occurred and no reportable events (as defined in
Section 4043 of ERISA) have occurred.
H. No material action, suit, grievance, arbitration or other manner of
litigation, or claim with respect to the Plans or the assets thereof (other than
routine claims for benefits made in the ordinary course of plan administration)
are pending, threatened against or with respect to the Plans, Regent, any
Subsidiary or any fiduciaries (as defined in Section 3(21) of ERISA) of the
Plans (including any action, suit, grievance, arbitration or other manner of
litigation, or claim regarding conduct which allegedly interferes with the
attainment of rights under a Plan).
I. Except as set forth in the Regent Disclosure Letter, neither Regent nor
any Subsidiary is required to contribute to any "multiemployer plans" (as
defined in Section 3(37) of ERISA) and neither Regent nor any Subsidiary has or
will incur any material withdrawal liability with respect to any such plans.
J. Except as set forth in the Regent Disclosure Letter, neither Regent nor
any Subsidiary has any stock purchase plan, stock option plan, phantom stock
plan, stock appreciation rights plan, bonus plan or any severance, deferred
compensation or retirement plans or similar agreements (whether or not subject
to ERISA).
K. Regent and each Subsidiary has complied with COBRA in all material
respects.
L. All insurance premiums (including premiums to the Pension Benefit
Guaranty Corporation) due and payable relating to the Plans have been paid in
full in a timely manner.
M. There is not, and has not been, an accumulated funding deficiency with
respect to the Retirement Plans subject to the minimum funding requirements of
Section 412 of the Code or Section 302 of ERISA that has resulted in any
material liability to Regent that has not been satisfied in full.
N. None of Regent or its Subsidiaries has any post-employment plans required
to be reported under FAS 106.
3.12 LABOR RELATIONS.
A. To Regent's knowledge, Regent and all Regent Subsidiaries (i) are in
compliance in all material respects with all federal and state laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours, and (ii) are not engaged in any unfair labor or unlawful employment
practice, which would have a Material Adverse Effect on Regent. Except as set
forth in the
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Regent Disclosure Letter, there is no (i) unlawful employment practice
discrimination charge involving Regent or any Regent Subsidiary pending before
the Equal Employment Opportunity Commission ("EEOC"), any EEOC recognized state
"referral agency" or any other governmental agency, (ii) unfair labor practice
charge or complaint against Regent or any Regent Subsidiary pending before the
National Labor Relations Board ("NLRB"), (iii) labor strike, dispute, slowdown
or stoppage actually pending or, to the knowledge of Regent, threatened against
or involving or affecting Regent or any Regent Subsidiary, and no NLRB
representation question exists respecting any of their employees, or (iv)
collective bargaining agreement that is binding on Regent or any Regent
Subsidiary.
B. Except as disclosed in the Regent Disclosure Letter, there is no
employment agreement, employee benefit or incentive compensation plan or program
or severance policy or program to which Regent or any Subsidiary is a party (i)
that is or could, pursuant to its terms, be triggered or accelerated by reason
of or in connection with the execution of this Agreement or the consummation of
the transactions contemplated by this Agreement or (ii) which contains "change
in control" provisions pursuant to which the payment, vesting or funding of
compensation or benefits is or by reason of or in connection with the execution
of or consummation of the transactions contemplated by this Agreement or the
transactions contemplated by this Agreement.
3.13 REGENT MATERIAL CONTRACTS. Except as set forth in the Regent
Disclosure Letter or disclosed in the Regent Financial Statements or any other
section or provision hereof, or as may be entered into or incurred in the
ordinary course of business or consistent with industry practice, as of the date
hereof, neither Regent nor any Regent Subsidiary is a party to any of the
following:
(1) any bonds, debentures, notes, mortgages, indentures, letters of
credit, guarantees or similar agreements to which Regent or any Regent
Subsidiary is an obligor or by which any of Regent's or Regent's
Subsidiaries, properties or assets are bound;
(2) any agreement for the lease of personal property to or from any
Person providing for lease payments in excess of $25,000 during any
twelve-month period;
(3) any agreement for the purchase or sale of supplies, products, or
other personal property, or the furnishing or receipt of services, which
involve consideration in excess of $25,000 during any twelve-month period;
(4) any agreement concerning a partnership or joint venture;
(5) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on Regent;
(6) any collective bargaining agreement or other agreement with any
labor union or labor organization;
(7) any agreement, contract or commitment containing any covenant
materially limiting the freedom of Regent or any Regent Subsidiary to engage
in any line of business in any geographic area or to compete with any
Person, other than governmental restrictions applicable to the broadcasting
industry generally;
(8) except for employment agreements, any agreement for loans or the
provision, purchase or sale of goods, services or property, or other
contract or commitment with any director, officer, shareholder or employee
of Regent or any Regent Subsidiary involving payments in excess of $25,000;
(9) any contract or agreement requiring Regent to register its capital
stock or securities under Securities Laws;
(10) any management, consulting, employment, severance or similar
agreement requiring the payment of compensation in excess of $150,000
annually, other than agreements with on-air talent;
(11) any agreement with any national sales representatives; or
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(12) to the extent not already included pursuant to clauses (1) through
(11) above, any agreement for the purchase or sale of any assets, properties
or rights for a price in excess of $100,000 in the aggregate, whether or not
in the ordinary course of business, other than sales of broadcast time in
the ordinary course of business.
3.14 GOOD STANDING OF CONTRACTS. The Regent Material Contracts are, to
Regent's knowledge, valid, binding and enforceable against each party thereto in
accordance with their respective terms subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally, general equitable principles and the discretion of courts in granting
equitable remedies. Regent has made available to Acquiror true and correct
copies of all of the Regent Material Contracts. To the knowledge of Regent, no
event or condition has occurred or exists, or is alleged by any of the other
parties thereto to have occurred or existed, which constitutes, or with lapse of
time or giving of notice or both might constitute, a default or breach under any
of the Regent Material Contracts to which Regent or any Regent Subsidiary is a
party, which default or breach is reasonably likely to result in a Material
Adverse Effect on Regent; PROVIDED, HOWEVER, that Regent shall make this
representation and warranty hereunder only with respect to events or conditions
prior to the TBA Effective Date.
3.15 MAJOR CUSTOMERS. To Regent's knowledge, neither Regent nor any Regent
Subsidiary is engaged in any material dispute with any customers whom Regent or
any Regent Subsidiary billed on a net cash basis in the aggregate more than
$100,000 during the 12-month period ended December 31, 1995, except as may be
set forth in the Regent Disclosure Letter; PROVIDED, HOWEVER, that Regent shall
make this representation and warranty hereunder only with respect to events or
conditions prior to the TBA Effective Date.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth or
disclosed in the Regent Disclosure Letter, the Regent Financial Statements or in
any section or provision of this Agreement or as otherwise contemplated by this
Agreement, since July 1, 1996, to the date of this Agreement, Regent has
conducted its business only in the ordinary course, and has not:
(1) Suffered any casualty loss or destruction which is not covered by
insurance, which would have a Material Adverse Effect on Regent;
(2) Made any declaration, setting aside or payment of any dividend or
other distribution of assets (whether in cash, stock or property) with
respect to the capital stock of Regent or any direct or indirect redemption,
purchase or other acquisition of such stock; PROVIDED that Regent may
declare and pay dividends on any outstanding Regent Preferred Stock at or
prior to the Closing;
(3) Materially increased the aggregate compensation payable or to become
payable to employees of Regent or any Regent Subsidiary or materially
increased any bonus, insurance, pension or other employee benefit plan,
payment or arrangement for such employees or entered into or amended any
employment, consulting, severance or similar agreement other than increases
and bonuses in the ordinary course of Regent's business or consistent with
industry practice;
(4) Paid, discharged or satisfied any claim, liability or obligation
which had a Material Adverse Effect on Regent;
(5) Sold, transferred or otherwise disposed of any of its assets which
had a Material Adverse Effect on Regent;
(6) Entered into any commitment or transaction which had a Material
Adverse Effect on Regent; or
(7) Agreed in writing, or otherwise, to take any action described in
this Section 3.16.
3.17 INSURANCE. The Regent Disclosure Letter sets forth as of the date
hereof all material insurance policies, including property, casualty, liability
and other insurance maintained with respect to the assets or businesses of
Regent and the Regent Subsidiaries. To the knowledge of Regent, all such
policies and bonds are legal, valid and enforceable and in full force and effect
and Regent is not in breach or default in any material respect (including with
respect to the payment of premiums or the giving of notices) and no event
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has occurred which, with notice or the lapse of time, would constitute such a
material breach or default, or permit termination, modification or acceleration
under the policy by the insurer.
3.18 TAX MATTERS. Each member of the consolidated group of which Regent is
a member or has ever been a member (the "Group") has filed or caused to be filed
all federal and material state income tax returns required to be filed and in
which the filing included or was required to include Regent ("Income Tax
Returns"), and all such Income Tax Returns were correct and complete in all
material respects. Each member of the Group has filed or caused to be filed all
other material tax returns, including franchise, gross receipts, payroll, sales,
use, withholding, occupancy, excise, real and personal property, and employment,
required to be filed in which the filing included or was required to include
Regent or any Regent Subsidiary (the "Other Tax Returns") and all such Other Tax
Returns are correct and complete in all material respects, except for
inaccuracies or omissions which do not and will not have a Material Adverse
Effect on Regent. With respect to the Income Tax Returns and the Other Tax
Returns, each member of the Group has paid, or made adequate provisions for the
payment of, all material taxes, interest payments, penalties and additions shown
on such returns to be owed by it. The Income Tax Returns of Regent have not been
audited during its existence, and, to the knowledge of Regent, except as set
forth in the Regent Disclosure Letter, no audit, examination or investigation is
threatened against Regent by any taxing authority. No unpaid tax deficiencies or
additional liabilities have been proposed by any governmental representative
which have not been resolved as set forth in the Regent Disclosure Letter; and
no agreements for the extension of time for the assessment of any amounts of tax
have been entered into at the present time by or on behalf of any member of the
Group.
3.19 INFORMATION SUPPLIED FOR REGISTRATION STATEMENT. The information
supplied or to be supplied by Regent with respect to Regent, its officers,
directors and affiliates specifically to be included in the Registration
Statement (the "Regent Information") on Form S-4 relating to the shares of
Acquiror Common Stock and the Warrants to be issued in connection with the
Merger (the "Registration Statement") will not, at the time it becomes effective
and at the Effective Time, as such Registration Statement is then amended or
supplemented, contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
3.20 BROKERS' AND FINDERS' FEES. Except as set forth in the Regent
Disclosure Letter, neither Regent, any Regent Subsidiary nor any of their
respective officers, directors, stockholders or employees, has employed any
broker or finder or incurred any liability for fees or commissions payable to
any broker or finder in connection with the negotiations relating to or the
transactions contemplated by this Agreement.
3.21 TAKEOVER STATUTES. No "fair price", "moratorium", "control share
acquisition" or other similar anti-takeover statute or regulation enacted under
any federal or state or other foreign law, applicable to Regent is applicable to
the Merger or the other transactions contemplated hereby.
3.22 TAX REQUIREMENTS. Regent (a) believes that items C and D in the
definition of "Tax Continuity Level" will together exceed 50%, (b) believes that
in the absence of a New Merger Event, it will be able to provide the tax
representations required by it pursuant to Section 5.14, and (c) has consulted
with its tax counsel and received assurance that, based upon the representations
to be provided by Regent (substantially in the form of Exhibit D), Acquiror
(substantially in the form of Exhibit E), and (to the extent necessary to
prevent a New Merger Event) shareholders of Regent (substantially in the form of
Exhibit C), such counsel will (in the absence of a New Merger Event) be able to
provide on the Closing Date the opinions required by Section 6.3(C).
3.23 STATIONS TO BE ACQUIRED. The Schedules to the Regent Disclosure
Letter marked with a "B" set forth for the stations to be acquired under the
purchase and option agreements listed on Schedule 5.3 to the Regent Disclosure
Letter (the "To Be Acquired Stations") the disclosure information required
pursuant to Sections 3.1, 3.3, 3.4(B) and (C) and 3.6 to 3.18 with respect to
Regent's existing Stations. Regent hereby represents and warrants that the
representations and warranties set forth in such sections are true and correct
or will be true and correct upon the consummation of the purchases contemplated
by
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such purchase and option agreements. Regent represents that it has made
available the written information and documents in its possession in connection
with the To Be Acquired Stations and hereby agrees to make available upon
request all information and documentation obtained about the To Be Acquired
Stations hereafter.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
With and subject to such exceptions as are set forth in a letter delivered
by Acquiror to Regent prior to or simultaneously with Acquiror's execution and
delivery of this Agreement (the "Acquiror Disclosure Letter"), Acquiror hereby
represents and warrants to Regent as follows:
4.1 CORPORATE STANDING. Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Acquiror and
each Acquiror Subsidiary are duly qualified and in good standing to do business
in each jurisdiction in which the ownership or leasing of their properties make
such qualification necessary, except where the failure to so qualify would not
have a Material Adverse Effect on Acquiror. Acquiror has furnished to Regent
true and accurate copies of the certificate or articles of incorporation and
bylaws of Acquiror, and all amendments thereto, through the date hereof. Such
certificate of incorporation and bylaws are in full force and effect and no
other organizational documents are applicable to or binding upon acquiror.
4.2 POWER AND AUTHORITY OF ACQUIROR; AUTHORIZATION. Acquiror has all
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the Plan and the consummation of the transactions contemplated by
both documents have been duly authorized by all necessary corporate action on
the part of Acquiror. This Agreement has been duly executed and delivered by
Acquiror, and constitutes the legal, valid and binding obligation of Acquiror
enforceable in accordance with its terms. As of the Closing Date, the Plan will
be duly executed and delivered by Acquiror and will constitute the legal, valid
and binding obligation of Acquiror enforceable against Acquiror in accordance
with its terms subject to applicable bankruptcy, insolvency and other similar
laws affecting the enforcement of creditors' rights generally, general equitable
principles and the discretion of courts in granting equitable remedies.
4.3 ABSENCE OF RESTRICTIONS AND CONFLICT. Subject to Acquiror's receipt of
the consents set forth on Schedule 4.3 to the Acquiror Disclosure Letter, the
execution, delivery and performance of this Agreement, the consummation of the
Merger and the other transactions contemplated by this Agreement, and the
fulfillment of and compliance with the terms and conditions of this Agreement do
not and will not, with the passing of time or the giving of notice or both,
violate or conflict with, constitute a breach of or default under, result in the
loss of any material benefit under, or permit the acceleration of any obligation
under, (i) any term or provision of the articles or certificate of incorporation
or bylaws of Acquiror or any Acquiror Subsidiary, (ii) any judgment, decree or
order of any court or Governmental Authority or agency to which Acquiror or any
Acquiror Subsidiary is a party or by which Acquiror, any Acquiror Subsidiary or
any of their respective properties are bound, or (iii) any statute, law,
regulation or rule applicable to Acquiror, or any of its Subsidiaries, so as to
have, in the case of subsections (ii) through (iii) above, a Material Adverse
Effect on Acquiror. Except for compliance with the applicable requirements of
the FCC, the HSR Act, the Securities Laws and filing and recordation of the
Delaware Certificate of Merger as required by the DGCL, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
government agency or public or regulatory unit, agency, body or authority with
respect to Acquiror or any Acquiror Subsidiary is required in connection with
the execution, delivery or performance of this Agreement by Acquiror or the
consummation of the transactions contemplated by this Agreement by Acquiror, the
failure to obtain which would have a Material Adverse Effect on Acquiror.
4.4 CAPITALIZATION OF ACQUIROR. The number of authorized, issued and
outstanding shares of capital stock (both common and preferred) of Acquiror and
all outstanding subscriptions, options, warrants, calls, convertible debt and
other securities and any other rights or agreements to acquire any capital stock
or
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options, warrants, convertible debt or other securities of Acquiror as of the
date hereof are set forth in the Acquiror Disclosure Letter and the rights and
benefits with respect thereto are set forth in Acquiror's certificate or
articles of incorporation, as amended, and no other documents except those set
forth in the Acquiror Disclosure Letter. All of such issued and outstanding
shares of capital stock of Acquiror are validly issued, and, except as set out
in the Acquiror Disclosure Letter, are fully paid, nonassessable and free of
preemptive rights. The shares of Acquiror Common Stock to be issued in
connection with the Merger will be validly issued, fully paid, nonassessable and
free of preemptive rights.
4.5 ACQUIROR COMMISSION REPORTS AND FINANCIAL STATEMENTS. Acquiror has
heretofore made available to Regent (i) Acquiror's annual report on Form 10-K
for the year ended December 31, 1995, including all exhibits thereto and items
incorporated therein by reference, (ii) Acquiror's quarterly report on Form 10-Q
for the quarter ended June 30, 1996, including all exhibits thereto and items
incorporated therein by reference, (iii) the proxy statement relating to
Acquiror's most recent annual meeting of stockholders, and (iv) all current
reports on Form 8-K filed by Acquiror with the SEC since December 31, 1995,
including all exhibits thereto and items incorporated therein by reference
(items (i) through (iv) in this sentence being referred to herein collectively
as the "Acquiror Commission Reports"). Until the Effective Time, Acquiror will
promptly make available to Regent all reports that it files with the SEC. As of
their respective dates, the Acquiror Commission Reports did not, and all reports
filed with the SEC after the date hereof will not, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since December 31,
1995, Acquiror has filed all forms, reports and documents with the SEC required
to be filed by it pursuant to the Securities Laws each of which complied as to
form, at the time such form, document or report was filed, in all material
respects with the applicable requirements of the Securities Laws, including, but
not limited to, Regulation S-X.
The consolidated balance sheets of Acquiror and Acquiror Subsidiaries as of
December 31, 1994 and December 31, 1995 and the related statements of
operations, changes in shareholders' equity and cash flows for the year ended
December 31, 1995, together with the notes thereto, are included in Acquiror's
annual reports on Form 10-K for the fiscal years ended December 31, 1994 and
December 31, 1995, respectively, as filed with the SEC, and the unaudited
consolidated balance sheets of Acquiror and Acquiror Subsidiaries as of March
31, 1996 and June 30, 1996, and the related unaudited statements of operations,
changes in shareholders' equity and cash flows for the periods then ended are
included in Acquiror's quarterly reports on Form 10-Q for the quarters ended
March 31, 1996 and June 30, 1996, respectively, as filed with the SEC (together,
the "Acquiror Financial Statements"). The Acquiror Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis (except as
disclosed therein) and fairly present, in all material respects, the
consolidated financial position and the consolidated results of operations,
changes in shareholders' equity and cash flows of Acquiror and consolidated
Acquiror Subsidiaries as of the dates and for the periods indicated (subject, in
the case of interim financial statements, to normal recurring year-end
adjustments, none of which are expected to be material, and the absence of
footnote disclosure). Acquiror and Acquiror Subsidiaries do not have any
material liabilities or material obligations, except those disclosed in the
Acquiror Financial Statements, those entered into in the ordinary course of
business since June 30, 1996, those disclosed or permitted by other sections or
provisions of this Agreement or the Acquiror Disclosure Letter and those
incurred in conjunction with the transactions contemplated hereby.
4.6 INFORMATION SUPPLIED FOR REGISTRATION STATEMENT. The information
included or incorporated by reference in the Registration Statement (other than
the Regent Information), will not, at the time it becomes effective and at the
Effective Time, as such Registration Statement is then amended or supplemented,
contain any untrue statement of a material fact, or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Registration Statement will comply as to form with the
applicable Securities Laws.
4.7 QUALIFICATION. Acquiror has no knowledge of any facts that would,
without giving effect to any potential waiver, under present law (including the
Communications Act of 1934, as amended) and present
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rules, regulations and written policies of the FCC, disqualify or prevent
Acquiror from consummating the Merger at Closing, and Acquiror will not take or
fail to take any action which Acquiror knows will cause such disqualification or
prevention. To the knowledge of Acquiror, there are no pending FCC inquiries,
complaints or proceedings which are likely to impair Acquiror's ability to
consummate the transactions contemplated by this Agreement with respect to any
other radio stations owned or controlled by Acquiror or under common control
with Acquiror or otherwise.
4.8 BROKERS' AND FINDERS' FEES. Except as set forth in Acquiror's
Disclosure Letter, neither Acquiror, the Acquiror Subsidiaries nor any of their
officers, directors or employees has employed any broker or finder or incurred
any liability for fees or commissions payable to any broker or finder in
connection with the negotiations relating to or the transactions contemplated by
this Agreement.
4.9 TAX REQUIREMENTS. Acquiror (a) believes that in the absence of a New
Merger Event, it will be able to provide the tax representations required by it
pursuant to Section 5.14, and (b) has consulted with its tax counsel and
received assurance that, based upon the representations to be provided by Regent
(substantially in the form of Exhibit D), Acquiror (substantially in the form of
Exhibit E), and (to the extent necessary to prevent a New Merger Event)
shareholders of Regent (substantially in the form of Exhibit C), such counsel
will (in the absence of a New Merger Event) be able to provide on the Closing
Date the opinions required by Section 6.2(F).
SECTION 5
COVENANTS
5.1 COOPERATION. Each of Acquiror and Regent shall proceed expeditiously
and cooperate fully in making application for all necessary regulatory
approvals, in the procurement of any other consents and approvals, and in the
taking of any other action and the satisfaction of all other requirements
prescribed by law or otherwise, necessary for consummation of the Merger on the
terms provided herein and in the Plan. Each of Acquiror and Regent shall use all
commercially reasonable efforts (i) to take, or cause to be taken, all actions
necessary to comply promptly with all legal requirements which may be imposed on
such party with respect to the Merger and to consummate the transactions
contemplated by this Agreement and the Plan and (ii) to obtain (and to cooperate
with the other party to obtain) any consent, authorization, order or approval
of, or any exemption by, any governmental entity or any other public or private
third party which is required to be obtained or made by such party in connection
with the Merger and the transactions contemplated by this Agreement and the
Plan. Notwithstanding any provision of this Agreement to the contrary, each of
Regent and Acquiror shall obtain all consents required by contracts with third
parties, as disclosed in the Regent Disclosure Letter or the Acquiror Disclosure
Letter, respectively, prior to the TBA Effective Date except in the case of
Regent, as specified in Section 5.21, and except for the consents listed in
items 1 and 2 on Schedule 3.3A of the Regent Disclosure Letter, which consents
must be obtained on or prior to the date hereof. Regent and Acquiror shall not,
and shall not permit any of their respective subsidiaries to, take any action
that would, or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions to the Merger set forth in
Section 6 not being satisfied.
5.2 FCC CONSENT AND HSR FILING.
A. Acquiror and Regent shall each cooperate and use their respective best
efforts to prepare and file with the FCC or cause to be prepared and filed with
the FCC, within five business days after execution of this Agreement, all
requisite applications, together with related information, data and exhibits,
necessary to request issuance of an order by the FCC granting said application
(the "Application"). Each party to this Agreement will bear responsibility for
the preparation of its respective portion of the Application. The parties agree
to prosecute the Application and file any amendments or additional information
requested by the FCC in good faith and with due diligence.
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<PAGE>
B. Regent and Acquiror shall each make the necessary filings under the HSR
Act with respect to the Merger and the other transactions contemplated by this
Agreement within ten business days of the date hereof and shall supply, as
promptly as practicable to the appropriate Governmental Authority any additional
information and documentary material that may be requested pursuant to the HSR
Act.
C. In the event that after the date hereof the Acquiror shall acquire an
interest in a radio station or other media property (or enter into a time
brokerage or joint sales agreement or similar arrangement with respect to a
radio station or other media property) ("Acquisition Event") which operates in
the same market or has a relevant signal contour overlap with radio stations or
other media properties in (i) Kansas City, MO; (ii) Charleston, SC; (iii) Las
Vegas, NV; (iv) Louisville, KY; and (v) Salt Lake City, UT; and such Acquisition
Event has the effect (whether direct or indirect, intended or unintended) of
materially impairing the likelihood that the conditions specified in Sections
6.1(A) and (B) and 6.2(C) will be satisfied, Acquiror shall take such actions as
shall be necessary to remove any such impediment, including any divestiture or
other arrangement that may be necessary in connection therewith.
D. The filing fees payable in connection with the foregoing filings shall be
paid one-half by Acquiror and one-half by Regent.
5.3 CONDUCT OF BUSINESS BY REGENT. From the date hereof to the Effective
Time, Regent will, subject to the provisions of the TBA and except (i) for
actions or inactions taken by Regent which are reasonably contemplated by the
TBA, (ii) as required in connection with the Merger and the other transactions
contemplated by this Agreement, (iii) as otherwise disclosed in the Regent
Disclosure Letter or under the provisions of this Agreement or consented to in
writing by Acquiror and (iv) as permitted under this Agreement, including under
Section 5.22:
A. Carry on its business in the ordinary course in substantially the
same manner as heretofore conducted and not engage in any new line of
business, make material changes to the operation of its business or enter
into any agreement, transaction or activity or make any commitment except
those in the ordinary course of business and not otherwise prohibited under
this Section 5.3;
B. Neither change nor amend (or propose to amend) its certificate of
incorporation or bylaws, without the prior written consent of Acquiror;
C. Except in connection with the KWNR Purchase or any stock dividend
made pursuant to paragraph D below, not issue, sell or grant options,
warrants or rights to purchase or subscribe to, or enter into any
arrangement or contract with respect to the issuance or sale of any of the
capital stock of Regent or rights or obligations convertible into or
exchangeable for any shares of the capital stock of Regent and, except as
contemplated by Section 2.9, not alter the terms of any presently
outstanding Options or make any changes (by split-up, combination,
reorganization or otherwise) in the capital structure of Regent;
D. Not declare, pay or set aside for payment any dividend or other
distribution in respect of the capital stock or other equity securities of
Regent and not, directly or indirectly, redeem, purchase or otherwise
acquire any shares of the capital stock or other securities of Regent or
rights or obligations convertible into or exchangeable for any shares of the
capital stock or other securities of Regent or obligations convertible into
such, or any options, warrants or other rights to purchase or subscribe to
any of the foregoing, provided that Regent may either (i) declare and pay
cash dividends, including accrued dividends, on any outstanding Regent
Preferred Stock at or prior to the Closing in accordance with the
certificate of designation for such preferred stock or (ii) in lieu thereof,
declare and pay dividends on such preferred stock in additional shares of
capital stock of Regent (and make the appropriate amendments to Regent's
Preferred Stock certificate of designations and charter documents to allow
such a stock dividend);
E. Not acquire or enter into an agreement to acquire, by merger,
consolidation or purchase of stock or assets, any business or entity except
pursuant to the purchase, sale and option agreements set forth on Schedule
5.3A to the Regent Disclosure Letter;
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<PAGE>
F. Use its reasonable efforts to preserve intact the corporate
existence, goodwill and business organization of Regent, to keep the
officers and employees of Regent available to Acquiror and to preserve the
relationships of Regent, with customers, suppliers and others having
business relations with Regent;
G. Except in connection with its rights and obligations under the
purchase, sale and option agreements set forth on Schedule 5.3A to the
Regent Disclosure Letter, not (i) create, incur or assume any long term debt
(including obligations in respect of capital leases which individually
involve annual payments in excess of $50,000 and $250,000 in the aggregate),
except for (x) drawdowns up to the maximum availability under the revolving
credit facility under the Credit Agreement consistent with past practices
and (y) borrowings under the BFI Credit Line, (ii) except in the ordinary
course of business consistent with past practices under existing lines of
credit, create, incur or assume any short-term debt for borrowed money,
(iii) pay or retire any long term debt other than (x) for scheduled,
amortized debt repayments, (y) payments of interest on any indebtedness
whenever it is due and (z) with the proceeds of the sales of Stations listed
on Exhibit K or the exercise of the Options, (iv) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person, except in the ordinary
course of business and consistent with industry practice, (v) make any loans
or advances to any other Person, except in the ordinary course of business
and consistent with industry practice, (vi) make any capital contributions
to, or investments in, any Person other than a Regent Subsidiary, except in
the ordinary course of business and consistent with industry practices with
respect to investments, or (vii) make any capital expenditure involving in
excess of $250,000 in the case of any single expenditure or $250,000 in the
case of all capital expenditures; PROVIDED, HOWEVER, that notwithstanding
the foregoing, between the Determination Date and the Closing Date Regent
shall not incur any additional Regent Liabilities (including long term or
short term debt) other than the payment of accrued dividends on Regent
Preferred Stock and the payment of Regent Expenses, in each case to the
extent included in the calculation of Regent Liabilities on the
Determination Date without the prior consent of Acquiror;
H. Not enter into, modify or extend in any manner the terms of any
employment, severance or similar agreements with officers and directors of
Regent and its Subsidiaries nor grant any increase in the compensation of
officers, directors or employees of Regent and its Subsidiaries, whether now
or hereafter payable, including any such increase pursuant to any option,
bonus, stock purchase, pension, profit-sharing, deferred compensation,
retirement or other plan, arrangement, contract or commitment other than
increases in the ordinary course of business consistent with past practices
and consistent with industry practices; PROVIDED, HOWEVER, that Regent shall
be permitted hereunder to (i) hire new employees for the Stations in the
ordinary course of business except that (x) the hiring of any employee with
an aggregate annual compensation in excess of $50,000 shall require the
prior approval of Acquiror and (y) the annual aggregate compensation for all
such new employees shall not exceed $200,000 and (ii) grant increases in the
annual compensation of employees at not more than four percent, the effect
of which would not materially increase the aggregate compensation payable or
to become payable to employees of Regent or Regent Subsidiaries;
I. Perform in all material respects all of its obligations under all
Regent Material Contracts (except those being contested in good faith) and
not enter into, assume or amend any contract or commitment that would be a
Regent Material Contract other than contracts to provide services entered
into in the ordinary course of business consistent with past practices;
J. Use its reasonable efforts to maintain in full force and effect and
in the same amounts policies of insurance comparable in amount and scope of
coverage to that now maintained by Regent;
K. Use its reasonable efforts to continue to collect its accounts
receivable in the ordinary course of business and consistent with past
practices;
L. Not adopt any new employee benefit plan or make any change in or to
any existing Plans other than any such change that is permitted under this
Agreement, required by law, in the opinion of counsel is necessary or
advisable to maintain the tax qualified status of any such plan, or would
not
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<PAGE>
materially increase, in the aggregate, the employee benefit plan liabilities
of Regent and the Subsidiaries, taken as a whole;
M. Not sell, lease or otherwise dispose of any of its assets (including
capital stock of Subsidiaries) or acquire any business or assets except in
connection with the purchase, sale and option agreements set forth on
Schedule 5.3A to the Regent Disclosure Letter or in the ordinary course of
business (any sale, lease or other disposition for an amount exceeding
$50,000 individually or $250,000 in the aggregate shall be deemed not in the
ordinary course of business);
N. Not mortgage or otherwise encumber or subject to any Lien any
material amount of properties or assets owned by Regent or any of the
Subsidiaries as of the date of this Agreement except for such of the
foregoing as are in the normal course of business;
O. Not make any material change to its accounting (including tax
accounting) methods or principles, except as may be required by GAAP or the
Internal Revenue Service;
P. Not make any material tax election or settle or compromise any
material tax liability for an amount greater than reflected on Regent's
Financial Statements;
Q. Except as to liabilities accrued on the books of Regent as of the
date of this Agreement, not pay or agree to pay in settlement or compromise
of any suits or claims of liability against Regent, its directors, officers,
employees or agents, more than an aggregate of $100,000 for all such suits
and claims;
R. Not enter into any agreement providing the acceleration or payment or
performance or other consequence as a result of a change in control of
Regent;
S. Except in connection with the purchase, sale and option agreements
set forth on Schedule 5.3A to the Regent Disclosure Letter, not purchase any
radio stations, enter into any local marketing arrangements, joint sales
agreement or similar agreements; or
T. Commit to any of the foregoing.
Notwithstanding any provision of this Section 5.3, (i) nothing in this
Section 5.3 shall prohibit Regent from paying any Regent Expenses and incurring
indebtedness in connection therewith and (ii) no breach of this Section 5.3
shall arise as a result of any action or inaction of Citicasters (or any
successor) as the broker of the Stations under the TBA.
5.4 INSPECTION AND ACCESS TO INFORMATION.
A. Between the date of this Agreement and the Effective Time, each party
hereto will provide each other party and its accountants, counsel and other
authorized representatives full access, during reasonable business hours and
under reasonable circumstances to any and all of its premises, properties,
contracts, commitments, books, records and other information (including tax
returns filed and those in preparation) and will cause their respective officers
to furnish to the other party and its authorized representatives any and all
financial, technical and operating data and other information pertaining to its
business, as each other party shall from time to time reasonably request.
B. All non-public information obtained by Acquiror or Regent or any of
their representatives pursuant to this Agreement (including in connection with
any environmental assessments conducted pursuant to Section 5.14) or in
connection with the matters contemplated hereby concerning the business,
operations or affairs of the other will be kept confidential and will not be
used for any purpose other than the consummation of the transactions
contemplated hereby, or be disclosed to any other Person, except for such
disclosure to its employees, agents and representatives who have a need to know
the same and who have been advised of the confidential nature of such
information and who agree to abide by the terms hereof and except for such
disclosure as may be required by applicable law, court order or governmental
agency request. In the event this Agreement is terminated in accordance with its
terms, any non-public information furnished by any party to any other party
hereto will be promptly returned upon the written request of the party seeking
such return.
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<PAGE>
5.5 REGISTRATION STATEMENT.
A. Acquiror shall prepare and file with the SEC as soon as is reasonably
practicable the Registration Statement and shall use all reasonable efforts to
have the Registration Statement declared effective by the SEC as promptly as
practicable after such filing. Regent shall cooperate with Acquiror to make such
filing. Acquiror also shall take any action required to be taken under state
blue sky or securities laws in connection with the issuance of the Acquiror
Common Stock in connection with the Merger. Acquiror and Regent will furnish
each other with all information concerning themselves, their subsidiaries,
directors, officers and stockholders and such other matters as may be necessary
or advisable for the Registration Statement, the Stock Market Additional Shares
Notification, filings under applicable blue sky laws, and any other statement or
application made by or on behalf of Acquiror or Regent to any governmental body
in connection with the Merger and the other transactions contemplated by this
Agreement.
5.6 REGENT STOCKHOLDER MATTERS. Regent, through its Board of Directors,
shall recommend to its stockholders approval of this Agreement and the
transactions contemplated by this Agreement. Simultaneously with the execution
of the Agreement, Regent shall deliver to Acquiror irrevocable written consents
from the holders of at least a majority of the shares of Regent Stock
outstanding and entitled to consent to the approval and adoption of the
Agreement and consummation of the Merger and other transactions contemplated
hereby substantially in the form of Exhibit F, and Regent shall take all actions
(including obtaining new consents if necessary) prior to the Closing Date
necessary to keep such consents in full force and effect under the DGCL. As
promptly as practicable after the date of this Agreement and in any event within
any time period specified by the DGCL, Regent shall send any notice or other
documents required by the DGCL with respect to the Merger to any holder of
Regent Stock that has not already received such notice or other documents.
5.7 STOCK MARKET ADDITIONAL SHARES NOTIFICATION. Acquiror will file an
additional shares notification with NASDAQ to approve for quotation on NASDAQ
the shares of Acquiror Common Stock to be issued in connection with the Merger
and upon exercise of the Warrants (the "Stock Market Additional Shares
Notification") and the Warrants. Acquiror shall exercise reasonable good faith
efforts to cause such shares of Acquiror Common Stock and Warrants to be
approved for quotation on NASDAQ prior to the Effective Time.
5.8 REGENT AFFILIATES. Regent shall deliver to Acquiror a letter
identifying all Persons who are, at the time the Merger is submitted to the
stockholders of Regent for approval, "affiliates" of Regent for purposes of Rule
145 under the Securities Act (the "Regent Affiliates") . Regent shall cause each
Person who is identified as a Regent Affiliate in such letter to deliver to
Acquiror on or prior to the Effective Time a written agreement substantially in
the form attached hereto as Exhibit G. Acquiror shall be entitled to place
legends on any certificates of Acquiror Common Stock issued to such Regent
Affiliates to restrict transfer of such shares as set forth above; PROVIDED,
HOWEVER, such legends shall be removed at the request of a Regent Affiliate not
earlier than two years after the Closing Date.
5.9 PUBLIC ANNOUNCEMENTS. The timing and content of all announcements
regarding any aspect of this Agreement or the Merger to the financial community,
government agencies, employees or the general public shall be mutually agreed
upon in advance (unless Acquiror or Regent is advised by counsel that any such
announcement or other disclosure not mutually agreed upon in advance is required
to be made by law or applicable rule of NASDAQ and then only after making a
reasonable attempt to comply with the provisions of this Section 5.9).
5.10 FINANCIAL STATEMENTS AND SEC REPORTS. Prior to the Effective Time,
each party hereto shall deliver to the other, as soon as available but in no
event later than forty-five days after the end of each fiscal quarter, a
consolidated balance sheet as of the last day of such fiscal period and the
consolidated statements of income, stockholder's equity and cash flows of such
party and its subsidiaries for the fiscal period then ended prepared in
accordance with generally accepted accounting principles with such exceptions as
are noted on such financial statements, and in the case of Acquiror, the
requirements of Form 10-Q (or Form 10-K as the case may be) under the Exchange
Act. Prior to the Effective Time, Acquiror shall deliver to Regent as soon as
available all forms, reports and other documents filed by
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Acquiror with the SEC. Prior to the Effective Time, Regent also shall deliver to
Acquiror, as soon as available but in no event later than thirty days after the
end of each month, an unaudited balance sheet as of the last day of such month
and the related statements of income of Regent for the year-to-date period then
ended.
5.11 RULE 144 INFORMATION. Acquiror (or any successor thereto) shall
comply with the public information requirements set forth in Rule 144(c) under
the Securities Act for a period of three (3) years following the Closing Date or
such shorter period as may be necessary until all shares of Acquiror Common
Stock issued to affiliates of Regent have become freely transferable or are no
longer held by such affiliates.
5.12 INDEMNIFICATION.
A. For not less than six years following the Effective Time, Acquiror shall
indemnify and hold harmless each present and former employee, agent, director or
officer of Regent and the Regent Subsidiaries ("Indemnified Parties") from and
against any and all claims, actions, suits, proceedings or investigations (as
used in this Section A "Claim" or "Claims") arising out of or in connection with
activities in such capacity, or on behalf of, or at the request of, Regent,
Regent Subsidiaries or their affiliates, and shall advance expenses incurred
with respect to the foregoing, as they are incurred, to the fullest extent
permitted under applicable law; PROVIDED, HOWEVER, that if any Claim or Claims
are asserted or made within such six-year period, all rights to indemnification
in respect of such Claims shall continue until the final disposition of any and
all such Claims.
B. Acquiror shall cause the Surviving Corporation to keep in effect
provisions in its certificate of incorporation, as amended, and bylaws providing
for exculpation of director and officer liability and its indemnification of or
advancement of expenses to the Indemnified Parties to the fullest extent
permitted under the DGCL, which provisions shall not be amended except as
required by applicable law or except to make changes permitted by law that would
enhance the Indemnified Parties' right of indemnification or advancement of
expenses.
C. If, after the Effective Time, Acquiror or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers all or substantially all of its property and assets to
any Person, then, in each such case, proper provision shall be made so that the
successors and assigns of Acquiror assume all of the obligations set forth in
this Section 5.12. The provisions of this Section 5.12 are intended to be for
the benefit of, and shall be enforceable by each Person who is now, or has been
at any time prior to the date of this Agreement, or who becomes prior to the
Effective Time, an officer, director, employee or agent of Regent or any Regent
Subsidiary (and their heirs and representatives).
5.13 EMPLOYEE BENEFITS.
A. Acquiror shall cause the Surviving Corporation, each Regent Subsidiary
and each successor thereto (if any) to provide the same compensation and benefit
arrangements, plans and programs to current, former and retired salaried
employees of Regent, each Regent Subsidiary and their respective predecessors as
those provided by Acquiror to Acquiror's similarly situated current, former and
retired salaried employees; PROVIDED, HOWEVER, that nothing in this Agreement
shall preclude or restrict the Surviving Corporation from terminating the
employment of any employee.
B. Acquiror shall cause any salaried employee of Regent or any Regent
Subsidiary that becomes a participant in any employee benefit plan, practice or
policy of Acquiror, any of its affiliates, the Surviving Corporation or any of
their respective successors, to be given credit under such plan, practice or
policy for all service prior to the Effective Time with Regent and Regent's
Subsidiaries, or any predecessor employer, for all purposes (including
eligibility, vesting and determination of benefits) for which such service is
either taken into account or recognized.
C. Following the Effective Time, Acquiror shall, or shall cause the
Surviving Corporation to, honor the terms of all consulting, employment and
similar agreements set forth in the Regent Disclosure Letter that were in effect
immediately prior to the date hereof.
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D. At least 30 days prior to the Effective Time, the board of directors of
Regent shall have adopted a resolution ceasing further contributions and benefit
accruals under each tax-qualified retirement plan providing for contributions
described in Section 401(k) of the Code sponsored or maintained by Regent or any
Subsidiary (collectively, the "401(k) Plans") and terminating the 401(k) Plans
effective as of a date prior to the Effective Time. Such resolution shall (i) be
expressly contingent upon the ability to distribute benefits in accordance with
Section 401(k) of the Code, and (ii) require that prior to the Effective Time,
the termination of each of the 401(k) Plans shall be submitted to the Internal
Revenue Service for a determination letter and shall provide for the
distribution of benefits to participants as soon as administratively feasible
after the receipt of a favorable determination letter. Regent shall provide
Acquiror's counsel with a copy of the board resolution and shall also provide
Acquiror's counsel with copies of the applications for such determination
letters for its review at least 5 days prior to the date such applications are
to be filed with the Internal Revenue Service. Individuals who receive an
"eligible rollover distribution," as defined in Section 401(a)(31) of the Code,
from any of the 401(k) Plans shall be permitted to rollover all or any part of
that distribution to the Jacor Communications, Inc. Retirement Plan.
5.14 TAX TREATMENT. In order to permit tax counsel to Acquiror and Regent
to provide the opinions required by Sections 6.2(F) and 6.3(C), (a) Regent and
Acquiror shall provide representations to each such counsel substantially in the
form of Exhibits D and E, respectively, and (b) Regent shall use its best
efforts to cause a sufficient number of its shareholders to provide
representations to such tax counsel, substantially in the form of Exhibit C, to
the extent necessary to prevent a New Merger Event (and, to the extent feasible,
to cause the Tax Continuity Level to equal or exceed 50%). Neither Acquiror nor
Regent shall take or cause to be taken any action, whether before or after the
Effective Time, that would disqualify the Merger as a "reorganization" within
the meaning of Section 368(a) of the Code or cause such representations to be
false.
5.15 ENVIRONMENTAL INSPECTION. Subject to Section 5.4, within twenty-one
calendar days of the date of this Agreement, Acquiror shall have the right, at
their own expense and risk, to commence a Phase I environmental assessment of
the properties of Regent and Regent Subsidiaries to verify the accuracy of
Regent's representations and warranties in Section 3.9. The Phase I
environmental assessment consultant must be reasonably acceptable to Regent (and
shall be deemed reasonably acceptable to Regent if Regent makes no objection
within three calendar days of receiving notice of who such consultant shall be),
and all Phase I environmental assessments must be completed within sixty days
from the date of this Agreement. In the event that any Phase I environmental
assessment shows reasonable cause to conduct a Phase II environmental
assessment, Acquiror shall have the right to cause such environmental assessment
at its own expense and risk; PROVIDED, HOWEVER, that (i) any such Phase II
environmental assessment shall be commenced as promptly as practicable after the
completion of the related Phase I environmental assessments and, in any event,
shall be completed within 120 calendar days of the date of this Agreement, (ii)
the scope of such assessment shall be subject to the reasonable and prompt
approval of Regent and (iii) such assessment shall be subject to Section 5.4(B).
Regent shall be given access to all information obtained by Acquiror through
such assessments.
5.16 ESCROW AGREEMENT; REGISTRATION RIGHTS AGREEMENT.
A. Simultaneously with the execution and delivery of this Agreement, Regent
and Acquiror shall enter into an Escrow Agreement, substantially in the form
attached hereto as Exhibit H (the "Escrow Agreement"). Pursuant to the Escrow
Agreement, Acquiror will deliver or cause to be delivered to Escrow Agent, as
defined in the Escrow Agreement, an irrevocable letter of credit in the amount
of $10 million issued by an issuer reasonably acceptable to Regent (the "Letter
of Credit") or $10 million cash. The Letter of Credit or cash shall be held,
drawn on and paid only as provided in Section 8.1(B) of this Agreement and in
the Escrow Agreement.
B. Simultaneously with the execution and delivery of this Agreement, a
Registration Rights Agreement substantially in the form of Exhibit I (the
"Registration Rights Agreement"), shall be executed by Acquiror. Acquiror shall,
as promptly as practicable after the date hereof, perform its obligations under
such Registration Rights Agreement. As promptly as practicable after the date
hereof, Regent shall cause the Regent Affiliates to execute such Registration
Rights Agreement.
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5.17 NOTIFICATION. Each of Regent and Acquiror shall, after obtaining
knowledge of the occurrence, non-occurrence or threatened occurrence or
non-occurrence of any fact or event that would cause or constitute a material
breach or failure of any of the representations and warranties, covenants or
conditions set forth herein, or that would constitute or result in a Material
Adverse Effect to such party, notify the other parties in writing thereof with
reasonable promptness.
5.18 REGENT ACCOUNTANT'S LETTER. Regent shall use its reasonable best
efforts to cause to be delivered to Acquiror a letter of Coopers & Lybrand,
L.L.P., Regent's independent auditors, dated the date on which the Registration
Statement becomes effective and addressed to Acquiror, in form and substance
reasonably satisfactory to Acquiror for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
5.19 ACQUIROR ACCOUNTANT'S LETTER. Acquiror shall use its reasonable best
efforts to cause to be delivered to Regent a letter of Coopers & Lybrand,
L.L.P., Acquiror's independent auditors, dated the date on which the
Registration Statement becomes effective and addressed to Regent, in form and
substance reasonably satisfactory to Regent for letters delivered by independent
public accountants in connection with registration statements similar to the
Registration Statement.
5.20 PURCHASE, SALE AND OPTION AGREEMENTS. Regent shall not terminate any
of the purchase, sale or option contracts set forth on Schedule 5.3A to the
Regent Disclosure Letter without the prior written consent of Acquiror and shall
exercise the options under the option contracts set forth on Schedule 5.3A to
the Regent Disclosure Letter prior to the Closing Date.
5.21 TIME BROKERAGE AGREEMENT.
A. Simultaneously with the execution hereof, Citicasters Co., a wholly owned
subsidiary of Acquiror ("Citicasters"), Regent and the Regent Subsidiaries shall
enter into a Time Brokerage Agreement in the form of Exhibit J hereto (the
"TBA") pursuant to which Regent or its Subsidiaries shall broadcast programming
supplied by Citicasters over the broadcasting transmission facilities of the
Stations and Citicasters shall make certain payments to Regent during the period
and in accordance with the terms and conditions set forth therein; PROVIDED,
HOWEVER, that the terms of the TBA, except for Attachment C thereto, shall not
be applicable to any Station listed on Exhibit K (the "TBA Stations"). As
promptly as practicable after the date hereof, Regent shall obtain consents to
assign the existing time brokerage agreements and joint sales agreements for the
TBA Stations and once obtained, Regent or the Regent Subsidiary shall, on or
after the TBA Effective Date, assign to Citicasters, and Citicasters shall
assume, such time brokerage agreements. Regent knows of no reason why it will be
unable to obtain such consents. In the event that Regent is unable to obtain
such consents to the TBA with respect to any Station, Regent hereby agrees to
enter into an equitable assignment to Acquiror of the rights, benefits and
obligations of brokering such TBA Station in a form and manner as shall be
mutually agreed upon. The term of the TBA shall commence within 3 business days
of the expiration or earlier termination of the waiting period under the HSR
Act.
B. Regent shall, and Jacor shall cause Citicasters Co. to, perform their
respective obligations under the TBA.
C. Simultaneously with the execution hereof, Citicasters and SRLV shall
enter into a Time Brokerage Agreement in the form of Exhibit N hereto pursuant
to which SRLV shall broadcast programming supplied by Citicasters over the
broadcasting transmission facilities of KWNR and Citicasters shall make certain
payments to SRLV during the period and in accordance with the terms and
conditions set forth therein.
5.22 [Intentionally Left Blank]
5.23 FM TRANSLATOR STATIONS. At or prior to the Effective Time of the
Merger, Regent shall use commercially reasonable efforts to seek the transfer or
assignment by Apollo Radio of Salt Lake City of the FCC licenses of FM
translator stations K257AA, K285AB, K221AC and K288AA to a third party
acceptable to Acquiror, in Acquiror's sole discretion, and qualified under the
applicable FCC rules and regulations.
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5.24 BFI CREDIT LINE. Acquiror shall cause Broadcast Finance, Inc., an
Ohio corporation ("BFI"), to extend to Regent a line of credit substantially in
the form of Exhibit L (the "BFI Credit Line") in the amount of $2,000,000, for
the purpose of providing to Regent sufficient funds to enable Regent to remain
in compliance with the three financial covenants (the "Financial Covenants") set
forth in Section 7.6 of the Credit Agreement, as such Financial Covenants are in
effect on the date of this Agreement. Regent shall (i) have the right to borrow
funds under the BFI Credit Line at any time it is not in compliance with any
Financial Covenant and (ii) have the obligation to use such borrowings only for
the purpose of making payments on its "obligations" (as defined in the "Credit
Agreement") under the Credit Agreement.
The BFI Credit Line shall be evidenced by the promissory note attached
hereto as Exhibit O (the "BFI Note"), and shall be governed by the terms
thereof. In connection with the BFI Credit Line, Regent shall pay the fees set
forth in the BFI Note.
The BFI Note shall be guaranteed by all present and future subsidiaries of
Regent and shall be secured by Liens (as that term is defined in the Credit
Agreement) ("Liens") in all collateral now or hereafter securing the
"Obligations" (as defined in the Credit Agreement) (the "Senior Credit
Obligations"), pursuant to security agreements, mortgages, deeds of trust and
other collateral documents comparable to those securing the Credit Obligations,
all as more fully set forth in the BFI Note. The BFI note shall be subordinated
to the Senior Credit Obligations as set forth in the BFI Note and the
subordination document referenced therein.
SECTION 6
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each party to effect the Merger shall be subject to the fulfillment at or prior
to the Closing of each of the following conditions:
A. INJUNCTION. There shall be no effective injunction, writ or
preliminary restraining order or any order of any nature issued by a court
or governmental agency of competent jurisdiction to the effect that the
Merger may not be consummated as herein provided, no proceeding or lawsuit
shall have been commenced and be continuing by any Federal or state
governmental or regulatory agency for the purpose of obtaining any such
injunction, writ or preliminary restraining order and no written notice
directed to either Regent or Acquiror shall have been received from any such
Federal or state agency indicating an intent to restrain, prevent,
materially delay or restructure the transactions contemplated by this
Agreement; PROVIDED, HOWEVER, that (i) each of Regent and Acquiror shall
have used all its commercially reasonable efforts to prevent the entry of
any such injunction or other order and to appeal as promptly as possible any
such injunction or other order that may be entered and (ii) Acquiror shall
be in compliance with Section 5.2.
B. HSR ACT. The applicable waiting periods shall have expired or been
terminated under the HSR Act.
C. REGENT STOCKHOLDER APPROVAL. This Agreement shall have been
approved and adopted by the affirmative vote or consent of the holders of a
majority of the outstanding shares of Regent's stockholders in accordance
with applicable law and Regent's Certificate of Incorporation, which vote or
consent shall remain in full force and effect as of the Effective Time.
6.2 CONDITIONS TO ACQUIROR'S OBLIGATIONS. The obligation of Acquiror to
consummate on the Closing Date the transactions contemplated by this Agreement
will be subject to the satisfaction of each of the following conditions on or
prior to the Closing Date, unless expressly waived in writing by Acquiror:
A. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Regent set forth in this Agreement shall be true and correct in all
respects as of the date of this Agreement and as of the Effective Time with
the same effect as though all such representations and warranties had been
made on and as of the Effective Time except (i) for any such representations
and warranties made as of a specified date, which shall be true and correct
in all respects as of such date, (ii) to the extent that the
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aggregate effect of the inaccuracies in such representations and warranties
as of the applicable times (each considered without any exclusions for lack
of Material Adverse Effect set forth in the individual representation or
warranty) does not constitute a Material Adverse Effect on Regent when
compared to the state of facts which would exist if all such representations
and warranties were true in all respects as of the applicable times, (iii)
to the extent that such representations and warranties are not true and
correct by reason of any action or inaction by Citicasters (or any
successor) as the broker of the Stations pursuant to the TBA and (iv) after
the TBA Effective Date, the failure by Regent to comply with any of its
financial covenants under the Credit Agreement due to insufficient Broadcast
Cash Flow (as defined in the TBA) shall not constitute a breach of any
representation or warranty hereunder.
B. PERFORMANCE OF THIS AGREEMENT. Except for actions or inactions by
Regent reasonably contemplated by the TBA, each of the agreements and
covenants of Regent to be performed and complied with by Regent pursuant to
this Agreement prior to the Effective Time shall have been duly performed
and complied with except to the extent that the aggregate effect of any
nonperformance or noncompliance by Regent (each considered without any
exclusions for lack of Material Adverse Effect set forth in the individual
covenant or agreement) does not constitute a Material Adverse Effect on
Regent when compared to the state of facts which would exist if all such
agreements and covenants had been performed and complied with by Regent;
PROVIDED, HOWEVER, that after the TBA Effective Date, the failure by Regent
to comply with any of its financial covenants under the Credit Agreement due
to insufficient Broadcast Cash Flow (as defined in the TBA) shall not
constitute a failure to perform or comply with its obligations hereunder.
C. CONSENTS. All consents of the FCC to the transactions contemplated
by this Agreement shall have been obtained, are in effect and have become
Final Orders; PROVIDED that (i) Acquiror shall have performed their
obligations under Sections 5.1 and 5.2 and (ii) fifteen calendar days prior
to the first anniversary of the date hereof, Acquiror shall waive its right
to Final Orders in the event that initial FCC consents shall have been
received and the reason that Final Orders have not been issued is
attributable solely to Acquiror.
D. DELIVERY OF CERTIFICATES. Regent shall have delivered to Acquiror a
certificate dated the Closing Date and signed by the chief executive officer
and the chief financial officer of Regent certifying as to the matters set
forth in Sections 6.2(A) and 6.2(B).
E. DISSENTING SHARES. Not more than 10% of the outstanding shares of
Regent Stock shall constitute Dissenting Shares.
F. TAX OPINION. Acquiror shall have received a written opinion of
Acquiror's tax counsel concerning certain federal tax consequences of the
Merger, substantially in the form attached hereto as Exhibit M; PROVIDED,
HOWEVER, that if a New Merger Event has occurred, such tax opinion shall no
longer be required.
G. CLOSING OF KWNR PURCHASE. Concurrently with the Effective Time of
the Merger, the closing of the KWNR Purchase shall have occurred on the
terms set forth in Plan and Agreement of Reorganization dated July 19, 1996,
among Regent, Southwest Radio Las Vegas, Inc. and Southwest Florida
Enterprises, Inc., as amended by that letter agreement between such parties
and Jacor dated October 8, 1996 or as such terms may be amended or waived
with the prior written approval of Acquiror.
6.3 CONDITIONS TO REGENT'S OBLIGATION. The obligation of Regent to
consummate, on the Closing Date, the transactions contemplated by this Agreement
will be subject to the satisfaction of each of the following conditions on or
prior to the Closing Date, unless expressly waived, in writing, by Regent:
A. REGISTRATION STATEMENT. The Registration Statement and the shelf
registration contemplated by the Registration Rights Agreement (which may
form part of the Registration Statement) shall be effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such
purpose, or under the proxy rules of the SEC
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<PAGE>
pursuant to the applicable Securities Laws and with respect to the
transactions contemplated hereby, shall be pending before or threatened by
the SEC. All applicable state securities laws shall have been complied with
in connection with the issuance of Acquiror Common Stock and the Warrants to
be issued in connection with the Merger, and no stop order suspending the
effectiveness of any qualification or registration of such Acquiror Common
Stock or Warrants under such state securities laws shall have been issued
and pending or threatened by the authorities of any such state.
B. NASDAQ LISTING. The shares of Acquiror Common Stock and the
Warrants issuable to Regent's stockholders pursuant to this Agreement and
the shares of Acquiror Common Stock issuable upon exercise of the Warrants
shall have been approved for quotation on NASDAQ, subject to notice of
issuance.
C. TAX OPINION. Regent shall have received a written opinion of
Regent's tax counsel concerning certain federal income tax consequences of
the Merger, substantially in the form attached hereto as Exhibit M;
PROVIDED, HOWEVER, that if a New Merger Event has occurred, such tax opinion
shall no longer be required.
D. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Acquiror set forth in this Agreement shall be true and correct in all
respects as of the date of this Agreement and as of the Effective Time with
the same effect as though all such representations and warranties had been
made on and as of the Effective Time (i) except for any such representations
and warranties made as of specified date, which shall be true and correct in
all respects as of such date and (ii) to the extent that the aggregate
effect of the inaccuracies in such representations and warranties as of the
applicable times (each considered without any exclusions for lack of
Material Adverse Effect set forth in the individual representation or
warranty) does not constitute a Material Adverse Effect on Acquiror when
compared to the state of facts which would exist if all such representations
and warranties were true in all respects as of the applicable times.
E. PERFORMANCE OF THIS AGREEMENT. Each of the agreements and covenants
of Acquiror to be performed and complied with by Acquiror pursuant to this
Agreement prior to the Effective Time shall have been duly performed and
complied with except to the extent that the aggregate effect of any
nonperformance or noncompliance by Acquiror (each considered without any
exclusions for lack of Material Adverse Effect set forth in the individual
covenant or agreement) does not constitute a Material Adverse Effect on
Acquiror when compared to the state of facts which would exist if all such
agreements and covenants had been performed and complied with by Acquiror.
F. CONSENTS. All consents of the FCC to the transactions contemplated
by this Agreement shall have been obtained, are in effect and have become
Final Orders; PROVIDED that (i) Regent shall have performed its obligations
under Sections 5.1 and 5.2 and (ii) fifteen calendar days prior to the first
anniversary of the date hereof, Regent shall waive its right to Final Orders
in the event that initial FCC consents shall have been received and the
reason that Final Orders have not been issued is attributable solely to
Regent.
G. DELIVERY OF CERTIFICATE. Acquiror shall have delivered to Regent a
certificate dated as of the Closing Date and signed by the chief executive
officer and chief financial officer of Acquiror certifying as to the matters
set forth in Sections 6.3(D) and 6.3(E).
H. REGISTRATION RIGHTS AGREEMENT. The Registration Rights Agreement
executed by Acquiror on the date hereof shall be in full force and effect
and all the parties thereto shall have complied with the terms thereof.
I. REGENT EXPENSES. All the Regent Expenses set forth on the
Transaction Expense Schedule shall have been paid.
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<PAGE>
SECTION 7
NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties contained in this Agreement by any party
hereto or set forth in any certificate or other instrument delivered by or on
behalf of the parties pursuant to this Agreement shall expire at the Effective
Time.
SECTION 8
TERMINATION
8.1 TERMINATION.
A. Anything contained in this Agreement to the contrary notwithstanding,
this Agreement may be terminated at any time prior to the Closing Date:
(1) by the mutual written consent of Acquiror and Regent;
(2) by Acquiror or Regent if the Closing shall not have occurred on or
before the first anniversary of the date hereof unless such failure to close
shall be due to the failure of the party seeking such termination to perform
or observe in all material respects the covenants and agreements hereof to
be performed or observed by such party;
(3) by Acquiror or Regent if the Application is rejected and not
appealed within the applicable time period or all appeals therefrom have
been unsuccessfully exhausted, upon fifteen days written notice to the
other, PROVIDED that the party seeking to terminate has prosecuted the
Application diligently and in good faith and has satisfied any and all
requests by the FCC for additional information with respect to the
Application;
(4) by Acquiror, if Regent breaches any of the representations or
warranties of Regent set out in Section 3 of this Agreement which breach has
a Material Adverse Effect on Regent and shall not have been cured within
thirty days after written notice thereof from Acquiror to Regent, in which
case Acquiror shall have only the remedy set forth in Section 8.1(B) hereof;
(5) by Acquiror, if Regent breaches any of its covenants contained in
this Agreement, which breach has a Material Adverse Effect on Regent and
shall not have been cured within thirty days after written notice thereof
from Acquiror to Regent;
(6) by Regent, if Acquiror breaches any representation, warranty or
covenant of Acquiror contained in this Agreement which breach has a Material
Adverse Effect on Acquiror and shall not have been cured within thirty days
after written notice thereof from Regent to Acquiror, in which case Regent
shall have the remedy set forth in Section 8.1(B) hereof.
B. Except as otherwise expressly provided herein, no termination of this
Agreement on the grounds of a material breach of any covenant contained herein
shall relieve the breaching party from any liability for such breach of any
covenant or agreement contained herein giving rise to such termination. As a
material inducement for Regent to enter into this Agreement, Acquiror and Regent
agrees (i) that in the event Acquiror is entitled to terminate this Agreement
pursuant to Section 8.1(A) (4) hereof, Acquiror's sole and exclusive remedies,
if any, shall be (x) to terminate this Agreement or (y) specific performance
pursuant to Section 8.1(c) and, in any event, Acquiror hereby waives any right
to sue or otherwise recover damages from Regent except to the extent such
termination results from Regent's wilful and material breach of any of its
representations and warranties and (ii) in the event that (x) the Acquiror fails
to close the transaction contemplated by this Agreement and the conditions to
Acquiror's obligations to close provided in Sections 6.1 and 6.2 are satisfied
or (y) Regent is entitled to terminate this Agreement pursuant to Section
8.1(A)(6) hereof, Regent shall be entitled to be paid a termination fee in the
amount of $10 million by drawing on the Letter of Credit pursuant to the terms
of the Escrow Agreement or shall be entitled to specific performance pursuant to
Section 8.1(C), and in any event, Regent may sue or
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<PAGE>
recover other damages if such termination results from Acquiror's willful and
material breach of any of its representations and warranties.
C. ENFORCEMENT. Regent and Acquiror agree that irreparable damage would
occur and that neither Regent nor Acquiror would have any adequate remedy at law
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. If any action
is brought by either party to enforce this Agreement, the other party shall
waive the defense that there is an adequate remedy at law. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any federal court located in the State of
Delaware or in Delaware state court, this being in addition to any other remedy
to which they are entitled at law or in equity.
SECTION 9
MISCELLANEOUS
9.1 CONFIDENTIALITY.
A. PRIOR TO CLOSING. Unless and until the Closing has occurred, and except
as may be otherwise required by applicable law, each party hereto shall, and
shall cause its employees, agents, and representatives to, maintain in
confidence and not otherwise use information, documents, data furnished to it,
or to any Person on its behalf, by any other party in connection herewith.
B. FAILURE TO CLOSE. If the Closing does not occur on the Closing Date,
each of Acquiror and Regent shall return all written information, documents, and
data furnished to the other party or to any Person on its behalf and all copies
thereof. Notwithstanding anything else in this Agreement to the contrary, if the
transactions contemplated by this Agreement are not closed, the agreement of
each party to maintain in confidence all information received by it and not to
use such information in competition with the other shall continue in perpetuity
and none of such information shall be used by any party, its employees, agents,
or representatives or affiliates thereof in the business operations of any such
Person, except to the extent that such information was: (i) possessed by such
party prior to the disclosure thereof by the other party; (ii) disclosed to such
party by an independent third party without a violation of any obligation of
confidentiality on the part of such third party; or (iii) ascertainable from
public or published information or trade sources.
9.2 NOTICES. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be mailed by first class,
registered, or certified mail, postage prepaid, or sent via overnight reputable
courier service, or delivered personally or via facsimile with copy sent by mail
as provided above:
<TABLE>
<S> <C>
If to Regent, to: Copy to:
Regent Communications, Inc. Wyatt, Tarrant & Combs
50 E. RiverCenter Boulevard 2800 Citizens Plaza
Suite 180 Louisville, Kentucky 40202
Covington, Kentucky 41011 Attn: Stewart E. Conner, Esq.
Facsimile No.: (606) 292-0352 Facsimile No.: (502) 589-0309
and
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attn: William P. Rogers, Jr.
Facsimile No.: (212) 474-3700
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
If to Acquiror, to: Copy to:
Jacor Communications, Inc. Graydon, Head & Ritchey
1300 PNC Center 1900 Fifth Third Center
201 East Fifth Street P.O. Box 6464
Cincinnati, Ohio 45202 Attn: John J. Kropp, Esq.
Facsimile No.: (513) 651-3836
</TABLE>
or to such other address of which the addressee shall have notified the sender
in writing. Notices mailed in accordance with its situation shall be deemed
given three days after being mailed, and notices sent by overnight courier
service shall be deemed given one day after placed in the hands of a
representative of such service and notice given by facsimile shall be deemed
given on the date of transmission subject to sender's receipt of a confirmation
copy.
9.3 THIRD PARTY RIGHTS. Except as contemplated by Sections 9.4 and 5.13,
it is the intention of the parties that nothing in this Agreement shall be
deemed to create any right with respect to any Person not a party to this
Agreement.
9.4 PARTIES IN INTEREST; ASSIGNMENT. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties to this
Agreement shall bind and inure to the benefit of their respective heirs,
executors, successors, and assigns, whether so expressed or not. No party to
this Agreement may assign its rights or delegate its obligations under this
Agreement to any other Person without the express prior written consent of the
other parties, except that (i) Acquiror may assign its rights and delegate its
obligations to one or more subsidiary or affiliated corporation of Acquiror and
(ii) in the event that Acquiror finds it necessary under its existing bank
credit facilities (or under any refinancing related thereto) to provide to its
lenders a collateral assignment of Acquiror's interest in this Agreement or any
related documents, Regent will cooperate with Acquiror and such lenders
requesting such assignment including but not limited to signing a consent and
acknowledgement of such assignment; PROVIDED, HOWEVER, that Acquiror shall
remain fully liable as to all of its obligations and agreements whether or not
delegated or assigned.
9.5 CONSTRUCTION; GOVERNING LAW. The section headings contained in this
Agreement are inserted as a matter of convenience and shall not affect in any
way the construction of the terms of this Agreement. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of
Delaware.
9.6 ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement, including the
Exhibits hereto and the Regent Disclosure Letter and documents and instruments
executed and delivered at the Closing in connection herewith, the Escrow
Agreement, constitute and contain the entire Agreement among the parties hereto
with respect to the transactions contemplated hereby and supersede any prior
writing by the parties. The waiver of a breach of any term or condition of this
Agreement must be in writing signed by the party sought to be charged with such
waiver and such waiver shall not be deemed to constitute the waiver of any other
breach of the same or any other term or condition of this Agreement. This
Agreement may not be changed orally, but only in a writing signed by the parties
hereto.
9.7 SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the remaining
provisions.
9.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party but all of which taken together shall constitute one and the same
Agreement. Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
9.9 EXPENSES. Except as otherwise specifically provided in this Agreement,
each party to this Agreement shall pay any and all fees and expenses that such
party may incur in connection with the negotiation, execution, or closing of
this Agreement and the other transactions contemplated by this Agreement.
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9.10 TIME OF ESSENCE. Time is of the essence to the performance of the
obligations set forth in this Agreement.
9.11 KNOWLEDGE. Notwithstanding anything to the contrary contained herein,
the use of the word "knowledge", "known" or words of similar import in this
Agreement shall mean the "actual knowledge" of the particular party hereto. In
the case of Regent, "knowledge", "known" or words of similar import shall mean
the actual personal knowledge of Terry S. Jacobs, William E. Stakelin or George
E. Willett, each director and officer of Regent and each Station manager of
Regent and each Regent Subsidiary who would reasonably be expected to have
knowledge of the matter.
9.12 ACKNOWLEDGEMENT. The parties hereto acknowledge that the lenders
under the Credit Agreement have a security interest in this Agreement, the TBA
and any other documents contemplated hereby.
IN WITNESS WHEREOF, Acquiror and Regent have caused this Plan and Agreement
of Merger to be executed by their duly authorized officers as of the day and
year first written above.
JACOR COMMUNICATIONS, INC.,
by /s/ R. Christopher Weber
------------------------------------
Name: R. Christopher Weber
Title: Senior Vice President and
Chief Financial Officer
REGENT COMMUNICATIONS, INC.,
by /s/ Terry S. Jacobs
------------------------------------
Name: Terry S. Jacobs
Title: President
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<PAGE>
PLAN OF MERGER
THIS PLAN OF MERGER ("Plan of Merger") dated as of , 199 ,
between REGENT COMMUNICATIONS, INC., a Delaware corporation having an address of
50 East RiverCenter Boulevard, Suite 180, Covington, Kentucky 41011 ("Regent"),
and JACOR COMMUNICATIONS, INC., a Delaware corporation having an address of 201
East Fifth Street, Suite 1300, Cincinnati, OH 45202 ("Acquiror").
WHEREAS, Acquiror has an authorized capital stock consisting of (i)
100,000,000 shares of Common Stock, par value $0.01 per share, of which
31,242,758 shares have been duly issued and are now outstanding; (ii) 2,000,000
shares of Class A Preferred Stock, $0.01 par value per share, none of which have
been issued or are now outstanding; and (iii) 2,000,000 shares of Class B
Preferred Stock, $0.01 par value per share, none of which have been issued or
are now outstanding,
WHEREAS, Regent has an authorized capital stock consisting of (i) 5,000,000
shares of Class A Common Stock, par value $0.01 per share, of which 50,000
shares ("Class A Shares") have been duly issued and are now outstanding, (ii)
150,000 shares of Class B Common Stock, par value $0.01 per share, none of which
(collectively with the Class A shares, "Regent Common Stock") have been issued
and are now outstanding, and (iii) 4,500,000 shares of Preferred Stock, par
value $0.01 per share, of which 3,774,194 shares ("Regent Preferred Stock") have
been duly issued and are now outstanding, and
WHEREAS, the Board of Directors of Acquiror and Regent, respectively, deem
it advisable and generally to the advantage and welfare of the two corporate
parties and their respective shareholders to effect a Plan and Agreement of
Merger (the "Agreement"), for the general welfare and advantage of their
respective shareholders, under which plan Regent would be merged with and into
Acquiror, in accordance with the terms of the Agreement and this Plan, pursuant
to the provisions of the General Corporation Law of the State of Delaware (the
"GCL").
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and of the mutual benefits hereby provided, it is
agreed by and between the parties hereto as follows:
1. THE MERGER. Upon the terms and conditions set forth in this Plan of
Merger, at the Effective Time, as hereinafter defined, Regent shall be
merged with and into Acquiror (the "Merger") in accordance with the
provisions of and with the effect provided in the GCL. The terms of the
Merger shall be as set forth in the Agreement and in this Plan of Merger.
2. EFFECTIVE TIME OF MERGER. Upon the terms and conditions set forth
in the Agreement and this Plan of Merger, a Certificate of Merger (the
"Delaware Certificate of Merger") shall be duly prepared and executed by
Regent and Acquiror, and thereafter delivered to the Secretary of State of
the State of Delaware for filing on the Closing Date. The Merger shall
become effective upon the filing of a properly executed Delaware Certificate
of Merger with the Delaware Secretary of State (the "Effective Time").
3. SURVIVING CORPORATION. Acquiror shall survive the Merger (the
"Surviving Corporation") and shall continue to be governed by the laws of
the State of Delaware, but the separate corporate existence of Regent shall
cease forthwith upon the Effective Time.
4. CONVERSION OF SHARES OF REGENT CAPITAL STOCK. Shares of Regent
Common Stock and Regent Preferred Stock will be converted into the Merger
Consideration (as defined in the Agreement) pursuant to Section 2.7 and 2.8
of the Agreement.
5. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Acquiror as it exists on the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation following the Effective Time
unless and until the same shall be amended or repealed in accordance with
the provisions thereof, which power to amend or repeal is hereby expressly
reserved, and all rights or powers of whatsoever nature conferred in such
Certificate of Incorporation or herein upon any
A-I-42
<PAGE>
shareholder or director or officer of the Surviving Corporation or upon any
other persons whomsoever are subject to the reserve power. Such Certificate
of Incorporation shall constitute the Certificate of Incorporation of
Acquiror separate and apart from this Plan of Merger and may be separately
certified as the Certificate of Incorporation of Acquiror.
6. BYLAWS. The Bylaws of Acquiror as they exist on the Effective Time
shall be the Bylaws of the Surviving Corporation following the Effective
Time unless and until the same shall be amended or repealed in accordance
with the provisions thereof.
7. BOARD OF DIRECTORS AND OFFICERS. The members of the Board of
Directors and the officers of the Surviving Corporation immediately after
the Effective Time of the Merger shall be those persons who were the members
of the Board of Directors and the officers, respectively, of Acquiror
immediately prior to the Effective Time of the Merger, and such persons
shall serve in such offices, respectively, for the terms provided by law or
in the Bylaws, or until their respective successors are elected and
qualified.
8. RIGHTS AND LIABILITIES OF REGENT. At and after the Effective Time
of the Merger, Acquiror shall succeed to and possess, without further act or
deed, all of the estate, rights, privileges, powers, and franchises, both
public and private and all of the property, real, personal, and mixed of
each of the parties hereto; all debts due to Regent on whatever account
shall be vested in Acquiror; all claims, demands, property, rights,
privileges, powers and franchises and every other interest of either of the
parties hereto shall be as effectively the property of Acquiror as they were
of the respective parties hereto; the title to any real estate vested by
deed or otherwise in Regent shall not revert or be in any way impaired by
reason of the Merger, but shall be vested in Acquiror; all rights of
creditors and all liens upon any properly of either of the parties hereto
shall be preserved unimpaired, limited in lien to the property affected by
such lien at the effective time of the Merger; and all debts, liabilities,
and duties of the respective parties hereto shall thenceforth attach to
Acquiror and may be enforced against it to the same extent as if such debts,
liabilities, and duties had been incurred or contracted by it.
9. LAW AND SECTION HEADINGS. This Plan of Merger shall be construed
and interpreted in accordance with the laws of the State of Delaware.
Section headings are used in this Plan of Merger for convenience only and
are to be ignored in the construction of the terms of this Plan of Merger.
10. TERMINATION. Anything contained in this Plan of Merger
notwithstanding and notwithstanding adoption hereof by the shareholders of
Regent or Acquiror, this Plan of Merger may be terminated and the Merger
abandoned as provided in the Agreement.
11. CONDITIONS PRECEDENT. The obligations of Acquiror and Regent to
effect the Merger as herein provided shall be subject to satisfaction,
unless duly waived, of the conditions set forth in the Agreement.
12. MODIFICATIONS. The parties hereto may amend, modify or supplement
this Plan of Merger, before or after approval thereof by the shareholders of
Regent or Acquiror, in such manner as may be agreed by them in writing.
13. DEFINITIONS. Capitalized terms not otherwise defined herein shall
have the meaning ascribed to them in the Agreement.
A-I-43
<PAGE>
IN WITNESS WHEREOF each of the corporate parties hereto, pursuant to
authority duly granted by the Board of Directors, has caused this Plan of Merger
to be executed by its authorized officer.
JACOR COMMUNICATIONS, INC.
By:
-----------------------------------
Title:
---------------------------------
REGENT COMMUNICATIONS, INC.
By:
-----------------------------------
Terry S. Jacobs, President
A-I-44
<PAGE>
AMENDMENT
AMENDMENT, dated as November 22, 1996, to Agreement and Plan of Merger,
dated as of October 8, 1996 (the "Merger Agreement"), by and among REGENT
COMMUNICATIONS, INC., a Delaware corporation ("Regent"), and JACOR
COMMUNICATIONS, INC., a Delaware corporation ("Jacor").
RECITALS:
WHEREAS, Section 9.6 of the Merger Agreement requires that any and all
amendments to the Merger Agreement be in a writing signed by the parties to the
Merger Agreement;
WHEREAS, Section 5.21A of the Merger Agreement provides that the Time
Brokerage Agreement ("TBA"), pursuant to which Regent shall broadcast
programming on the Stations (as defined in the Merger Agreement) supplied by
Citicasters Co., is to commence within three (3) business days after the
applicable waiting periods expire or terminate under the HSR Act (as defined in
the Merger Agreement);
WHEREAS, all applicable waiting periods under the HSR Act (as defined in the
Merger Agreement) expire as of the date hereof; and
WHEREAS, the parties desire to amend the Merger Agreement to provide for a
later commencement date for the TBA.
NOW, THEREFORE, the parties agree as follows:
1. The last sentence of Section 5.21A of the Merger Agreement is hereby
amended in its entirety to read as follows:
"The term of the TBA shall commence on December 1, 1996."
2. Except as specifically amended hereby, the terms and provisions of
the Merger Agreement remain in full force and effect.
3. This Amendment may be executed in one or more counterparts, each of
which will be deemed an original and all of which together will constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date set forth above.
REGENT COMMUNICATIONS, INC.
By: /s/ Terry S. Jacobs
-----------------------------------
Name: Terry S. Jacobs
Title: President
JACOR COMMUNICATIONS, INC.
By: /s/ R. Christopher Weber
-----------------------------------
Name: R. Christopher Weber
Title: Senior Vice President
A-I-45
<PAGE>
SECOND AMENDMENT
SECOND AMENDMENT, dated as January 9, 1997, to Agreement and Plan of Merger,
dated as of October 8, 1996, (the "Merger Agreement"), by and among REGENT
COMMUNICATIONS, INC., a Delaware corporation ("Regent"), and JACOR
COMMUNICATIONS, INC., a Delaware corporation ("Jacor").
RECITALS:
WHEREAS, Section 9.6 of the Merger Agreement requires that any and all
amendments to the Merger Agreement be in a writing signed by the parties to the
Merger Agreement;
WHEREAS, Section 2.8.C of the Merger Agreement defines the term "Maximum
Aggregate Regent Liabilities;"
WHEREAS, Section 5.20 of the Merger Agreement provides that the Regent shall
exercise the options set forth on Schedule 5.3A to the Regent Disclosure Letter
prior to the Closing Date;
WHEREAS, the parties desire to amend the Merger Agreement to exclude the
Option Agreement, effective January 23, 1995, by and between The Owen Company
and Regent Broadcasting of Louisville from the operation of Section 5.20 of the
Merger Agreement.
NOW, THEREFORE, the parties agree as follows:
1. The definition of "Maximum Aggregate Regent Liabilities" in Section
2.8.C of the Merger Agreement is hereby amended to include the following
sentence at the end of such definition:
"Notwithstanding the foregoing, with respect to any adjustment
required pursuant to clause (iii) relating to that certain Option
Agreement described in the Regent Disclosure Letter, effective
January 23, 1995, by and between The Owen Company ("Owen") and Regent
Broadcasting of Louisville, Inc. ("Regent Louisville"), as such
Option Agreement was first amended effective January 23, 1995 (the
"Owen Option"), such adjustment shall be based upon the aggregate
cash committed to be paid to Owen pursuant to the Owen Option without
regard to the effect, if any, on such aggregate cash commitment
resulting from that certain Second Amendment to Option Agreement
dated January 7, 1997 by and between Regent, Regent Louisville,
Acquiror and Owen."
2. Section 5.20 of the Merger Agreement is hereby amended to include
the following sentence at the end of the section:
"The requirement that Regent exercise the above referenced Option
Contracts shall not apply to the Owen Option."
3. Except as specifically amended hereby, the terms and provisions of
the Merger Agreement remain in full force and effect.
4. This Amendment may be executed in one or more counterparts, each of
which will be deemed an original and all of which together will constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date set forth above.
REGENT COMMUNICATIONS, INC.
By: /s/ Terry S. Jacobs
-----------------------------------
Name: Terry S. Jacobs
Title: President and CEO
JACOR COMMUNICATIONS, INC.
By: /s/ Jerome L. Kersting
-----------------------------------
Name: Jerome L. Kersting
Title: Senior Vice President
A-I-46
<PAGE>
ANNEX II
FORM OF WARRANT AGREEMENT BETWEEN
JACOR AND KEYCORP SHAREHOLDER SERVICES, INC.
A-II-1
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of , 1997 (the "Agreement") between
JACOR COMMUNICATIONS, INC., a Delaware corporation (the "Company"), and KEYCORP
SHAREHOLDER SERVICES, INC., a Delaware corporation, as Warrant Agent (the
"Warrant Agent") ("Agreement").
The Company proposes to issue warrants, as hereinafter described (the
"Warrants"), to purchase up to an aggregate of 500,000 shares of its common
stock, $0.01 par value per share ("Common Stock") (the shares of Common Stock
issuable on exercise of the Warrants being referred to herein as the "Warrant
Shares"), pursuant to the Agreement and Plan of Merger (the "Merger Agreement")
between the Company and Regent Communications, Inc., dated as of October ,
1996, pursuant to which the Company will issue the Warrants, each Warrant
entitling the holder thereof to purchase of a share of Common Stock (the
"Fraction").
The Company wishes the Warrant Agent to act on behalf of the Company and the
Warrant Agent is willing to act in connection with the issuance, division,
transfer, exchange and exercise of Warrants.
In consideration of the foregoing and for the purpose of defining the terms
and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered holders of the Warrants (the
"Holders"), the Company and the Warrant Agent hereby agree as follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the
Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 2. TRANSFERABILITY AND FORM OF WARRANT.
SECTION 2.01. REGISTRATION. The Warrants shall be numbered and shall
be registered in a Warrant Register as they are issued. The Company and the
Warrant Agent shall be entitled to treat the Holder of any Warrant as the
owner in fact thereof for all purposes and shall not be bound to recognize
any equitable or other claim to or interest in such Warrant on the part of
any other person, and shall not be liable for any registration of transfer
of Warrants which are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary unless made with the actual
knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration of transfer, or with such knowledge of such
acts that its participation therein amounts to bad faith.
SECTION 2.02. TRANSFER. The Warrants shall be transferable only on the
books of the Company maintained at the principal office of the Warrant Agent
upon delivery thereof duly endorsed by the Holder or by his duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer, which endorsement shall be guaranteed
by a firm which is a member of a registered national securities exchange or
the National Association of Securities Dealers, Inc. or by a commercial bank
or trust company having an office or correspondent in the United States
which is a participant in an approved Signature Guarantee Medallion Program
(each of the foregoing sometimes hereinafter referred to as an "Eligible
Institution"). In all cases of transfer by an attorney, the original power
of attorney, duly approved, or a copy thereof, duly certified, shall be
deposited and remain with the Warrant Agent. In case of transfer by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be
required to be deposited and remain with the Warrant Agent in its
discretion. Upon any registration of transfer, the Warrant Agent shall
countersign and deliver a new Warrant or Warrants to the persons entitled
thereto.
SECTION 2.03. FORM OF WARRANT. The text of the Warrant and of the
Purchase Form shall be substantially as set forth in Exhibit A attached
hereto. The price per Warrant Share and the number of Warrant Shares
issuable upon exercise of each Warrant are subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The Warrants
shall be executed on behalf of the Company by its Chief Executive Officer,
its President or one of its Vice Presidents, under its corporate
A-II-2
<PAGE>
seal reproduced thereon attested by its Secretary or an Assistant Secretary.
The signature of any such officers on the Warrants may be manual or
facsimile.
Warrants bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any one of them shall have ceased
to hold such offices prior to the delivery of such Warrants or did not hold
such offices on the date of this Agreement.
Warrants shall be dated as of the date of countersignature thereof by
the Warrant Agent either upon initial issuance or upon division, exchange,
substitution or transfer.
SECTION 3. COUNTERSIGNATURE OF WARRANTS. The Warrants shall be
countersigned by the Warrant Agent (or any successor to the Warrant Agent then
acting as warrant agent under this Agreement) and shall not be valid for any
purpose unless so countersigned. Warrants may be countersigned, however, by the
Warrant Agent (or by its successor as warrant agent hereunder) and may be
delivered by the Warrant Agent, notwithstanding that the persons whose manual or
facsimile signatures appear thereon as proper officers of the Company shall have
ceased to be such officers at the time of such countersignature, issuance or
delivery. The Warrant Agent shall, upon written instructions of the Chairman of
the Board, the President, a Vice-President, the Treasurer or the Secretary of
the Company, countersign, issue and deliver Warrants entitling the Holders
thereof to purchase not more than 500,000 Warrant Shares (subject to adjustment
pursuant to Section 10 hereof) and shall countersign and deliver Warrants as
otherwise provided in this Agreement.
SECTION 4. EXCHANGE OF WARRANT CERTIFICATES. Each Warrant certificate may
be exchanged for another certificate or certificates entitling the Holder
thereof to purchase a like aggregate number of Warrant Shares as the certificate
or certificate surrendered then entitle such Holder to purchase. Any Holder
desiring to exchange a Warrant certificate or certificates shall make such
request in writing delivered to the Warrant Agent, and shall surrender, properly
endorsed, the certificate or certificates to be so exchanged. Thereupon, the
Warrant Agent shall countersign and deliver to the person entitled thereto a new
Warrant certificate or certificates, as the case may be, as so requested.
SECTION 5. TERM OF WARRANTS; EXERCISE OF WARRANTS.
SECTION 5.01. TERM OF WARRANTS. Subject to the terms of this
Agreement, each Holder shall have the right, which may be exercised
commencing the date of issuance of the Warrants and until 5:00 P.M. Eastern
Time, on [ ], [2002] the fifth anniversary of the date of the
Effective Time (as defined in the Merger Agreement) (the "Expiration Date"),
to purchase from the Company the number of fully paid and nonassessable
Warrant Shares which the Holder may at the time be entitled to purchase on
exercise of such Warrants; PROVIDED, HOWEVER, if any or all of the Warrants
shall be called for redemption pursuant to Section 8.03 hereof, the right to
exercise the Warrants so to be redeemed shall expire at the close of
business, New York time, on the redemption date.
SECTION 5.02. EXERCISE OF WARRANTS. A Warrant may be exercised upon
surrender to the Warrant Agent, at its principal office, of the certificate
or certificates evidencing the Warrants to be exercised, together with the
form of election to purchase on the reverse thereof duly filled in and
signed, which signature shall be guaranteed by an Eligible Institution, and
upon payment to the Warrant Agent for the account of the Company of the
Warrant Price (as defined in and determined in accordance with the
provisions of Sections 9 and 10 hereof), for the number of Warrant Shares in
respect of which such Warrants are then exercised. Payment of the aggregate
Warrant Price shall be made in cash or by certified or bank cashier's check
drawn on a banking institution chartered by the government of the United
States or any state thereof.
Subject to Section 6 hereof, upon such surrender of Warrants and payment
of the Warrant Price as aforesaid, the Warrant Agent shall cause to be
issued and delivered with all reasonable dispatch to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so
purchased upon the exercise of such Warrants, together with cash, as
provided in Section 11 hereof, in respect of any fractional Warrant
A-II-3
<PAGE>
Shares otherwise issuable upon such surrender. Such certificate or
certificates shall be deemed to have been issued and any person so
designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such
Warrants and payment of the Warrant Price, as aforesaid. The right of
purchase represented by the Warrants shall be exercisable, at the election
of the Holders thereof, either in full or from time to time in part and, in
the event that a certificate evidencing Warrants is exercised in respect of
less than all of the Warrant Shares purchasable on such exercise at any time
prior to the date of expiration of the Warrants, a new certificate
evidencing the remaining Warrant or Warrants will be issued, and the Warrant
Agent is hereby irrevocably authorized to countersign and to deliver the
required new Warrant certificate or certificates pursuant to the provisions
of this Section and of Section 3 hereof, and the Company, whenever required
by the Warrant Agent, will supply the Warrant Agent with Warrant
certificates duly executed on behalf of the Company for such purpose.
SECTION 5.03. RESTRICTION ON EXERCISES. A Warrant may not be exercised
in whole or in part if in the reasonable opinion of counsel to the Company
the issuance of the Common Stock upon such exercise would cause the Company
to be in violation of the Telecommunications Act of 1996 or the rules and
regulations in effect thereunder. A Holder desiring to exercise Warrants
shall, if requested by the Company, furnish to the Company such additional
information as the Company deems reasonably necessary in order to determine
if exercise of a Warrant may cause the Company to be in said violation. In
the event the Company's counsel determines that, in such counsel's opinion
after review of such information, if any, requested by and delivered to, the
Company, the exercise of a Warrant would cause the Company to be in
violation of the broadcast multiple ownership provisions of the
Communications Act of 1934, as amended, or the rules and regulations in
effect thereunder, the Company shall notify such Holder and the Warrant
Agent to that effect. Upon receipt of said notice, such Holder may take such
steps, at its own expense, as it reasonably determines necessary so that the
exercise of the Warrant would not cause such a violation; PROVIDED, that
upon completion of said steps, such Holder shall notify the Company and the
provisions of this Section 5.03 shall then apply with respect to the
proposed revised transaction; PROVIDED, FURTHER that if after such proposed
revised transaction such Warrant would still not be exercisable pursuant to
this Section 5.03, the Company shall within five business days make an offer
to purchase such Warrant at a price equal to the excess of (x) the current
market price (as defined in Section 10.01(d)) on the date of such offer over
(y) the Exercise Price thereof.
SECTION 5.04. LEGEND ON CERTIFICATE. The certificates evidencing the
Warrants may, in the sole discretion of the Company, bear a legend relating
to certain limitations on the ownership of Common Stock imposed by the
Telecommunications Act of 1996.
SECTION 6. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; PROVIDED, HOWEVER, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue or delivery of any Warrants or certificates for Warrant Shares in a
name other than that of the registered Holder of Warrants in respect of which
such Warrant Shares are issued.
SECTION 7. MUTILATED OR MISSING DOCUMENTS. In case any of the certificates
evidencing the Warrants shall be mutilated, lost, stolen or destroyed, the
Company shall issue, and the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
certificate, or in lieu of and substitution for the Warrant certificate lost,
stolen or destroyed, a new Warrant certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant and indemnity or bond, if requested, also satisfactory to them. An
applicant for such a substitute Warrant certificate shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company or the Warrant Agent may prescribe.
SECTION 8. RESERVATION OF WARRANT SHARES; PURCHASE, CALL AND CANCELLATION
OF WARRANTS.
A-II-4
<PAGE>
SECTION 8.01. RESERVATION OF WARRANT SHARES. There have been reserved,
and the Company shall at all times keep reserved, out of its authorized
Common Stock, a number of shares of Common Stock sufficient to provide for
the exercise of the rights of purchase represented by the outstanding
Warrants. The Transfer Agent for the Common Stock and every subsequent
transfer agent for any shares of the Company's capital stock issuable upon
the exercise of any of the rights of purchase aforesaid will be irrevokably
authorized and directed at all times to reserve such number of shares as
shall be required for such purpose. The Company will keep a copy of this
Agreement on file with the Transfer Agent for the Common Stock and with
every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by
the Warrants. The Warrant Agent is hereby irrevocably authorized to
requisition from time to time from such Transfer Agent the stock
certificates required to honor outstanding Warrants upon exercise thereof in
accordance with the terms of this Agreement. The Company will supply such
Transfer Agent with duly executed stock certificates for such purposes and
will provide or otherwise make available any cash which may be payable as
provided in Section 11 hereof. All Warrants surrendered in the exercise of
the rights thereby evidenced shall be canceled by the Warrant Agent and
shall thereafter be delivered to the Company.
SECTION 8.02. PURCHASE OF WARRANTS BY THE COMPANY. The Company shall
have the right, except as limited by law, other agreements or herein, to
purchase or otherwise acquire Warrants at such times, in such manner and for
such consideration as it may deem appropriate.
SECTION 8.03. CALL OF WARRANTS BY THE COMPANY. The Company shall have
the right to redeem any or all of the Warrants at a price per Warrant equal
to $12.00 multiplied by the Fraction, as adjusted from time to time as
provided in Section 10 hereof (the "Call Price") on or after the third
anniversary of the Effective Time.
If fewer than all the Warrants are to be redeemed, the Company shall
select by lot the Warrants so to be redeemed in such manner as shall be
prescribed by the Board of Directors of the Company. The Company shall give
the Warrant Agent written notice of the aggregate number of Warrants to be
redeemed and the prescribed manner of redemption.
Notice of the redemption shall be mailed to the Holders of record not
more than 45 days nor less than 15 days prior to the date scheduled for
redemption (the "Call Date") and shall be given by the Company to the
Warrant Agent prior to or concurrently with the mailing of notice of the
redemption to such Holders, all in accordance with the provisions of Section
18 hereof. The notice of redemption also shall be given not more than 45
days nor less than 15 days prior to the Call Date, by publishing it once in
The Wall Street Journal (national edition), and such notice shall state the
date, place and price of such redemption. Each Holder shall continue to have
the right to exercise the Warrant until the close of business, New York
time, on the Call Date. No less than one business day prior to the Call
Date, the Company shall deposit with the Warrant Agent funds sufficient to
purchase all of the Warrants to be redeemed on the Call Date which have not
theretofore been exercised.
SECTION 8.04. CANCELLATION OF WARRANTS. In the event the Company shall
purchase or otherwise acquire Warrants, the same shall thereupon be
delivered to the Warrant Agent and be canceled by it and retired. The
Warrant Agent shall cancel any Warrant surrendered for exchange,
substitution, transfer or exercise in whole or in part, and shall thereafter
deliver any such cancelled Warrants to the Company.
SECTION 9. WARRANT PRICE. The price per share at which Warrant Shares
shall be purchasable upon exercise of Warrants shall be $40 (the "Warrant
Price"), subject to adjustment pursuant to Section 10 hereof.
SECTION 10. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES. The
number and kind of securities purchasable upon the exercise of each Warrant and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter defined, that occur subsequent to
the date of the Merger Agreement.
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<PAGE>
SECTION 10.01. MECHANICAL ADJUSTMENTS. The number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant Price shall be
subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock or
(iv) issue by reclassification of its shares of Common Stock other
securities of the Company (including any such reclassification in
connection with a consolidation or merger in which the Company is
surviving corporation), the number of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be adjusted so
that the Holder of each Warrant shall be entitled to receive the kind and
number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive after the happening of
any of the events described above, had such Warrant been exercised
immediately prior to the happening of such event or any record date with
respect thereto. An adjustment made pursuant to this paragraph (a) shall
become effective immediately after the effective date of such event
retroactive to the record date, if any, of such event.
(b) In case the Company shall issue rights, options or warrants to
all holders of its outstanding Common Stock, without any charge to such
holders, entitling them (for a period within 45 days after the record
date mentioned below) to subscribe for or purchase shares of Common Stock
at a price per share which is lower at the record date mentioned below
than the then current market price per share of Common Stock (as defined
in paragraph (d) below) the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon
exercise of each Warrant by a fraction, of which the numerator shall be
the number of shares of Common Stock outstanding on the date of issuance
of such rights, options or warrants plus the number of additional shares
of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights, options or warrants plus the number
of shares which the aggregate offering price of the total number of
shares of Common Stock so offered would purchase at the then current
market price per share of Common Stock. Such adjustment shall be made
whenever such rights, options or warrants are issued, and shall become
effective retroactively immediately after the record date of the
determination of stockholders entitled to receive such rights, options or
warrants.
(c) In case the Company shall distribute to all holders of its shares
of Common Stock evidences of its indebtedness or assets (excluding (x)
regular periodic cash dividends pursuant to an announced policy of the
Company payable out of consolidated earnings or surplus legally available
for dividends and (y) dividends or distributions referred to in paragraph
(a)) or rights, options or warrants, or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of
Common Stock (excluding those referred to in paragraph (b) above), then
in each case the number of Warrant Shares thereafter purchasable upon the
exercise of each Warrant shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon the exercise of each Warrant,
by a fraction, of which the numerator shall be the then current market
price per share of Common Stock (as defined in paragraph (d) below) on
the date of such distribution, and of which the denominator shall be the
then current market price per share of Common Stock, less the then fair
value (as determined by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the assets or
evidences of indebtedness so distributed or of such subscription rights,
options or warrants, or of such convertible or exchangeable securities
applicable to one share of Common Stock. Such adjustment shall be made
whenever any such distribution is made, and shall become effective on the
date of distribution retroactive to the record date for the determination
of shareholder entitled to receive such distribution.
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In the event of a distribution by the Company to all holders of its
shares of Common Stock of the capital stock of a subsidiary or securities
convertible into or exercisable for such stock, then in lieu of an
adjustment in the number of Warrant Shares purchasable upon the exercise
of each Warrant, the Holder of each Warrant, upon the exercise thereof at
any time after such distribution shall be entitled to receive the stock
or other securities to which such Holder would have been entitled if such
Holder had exercised such warrant immediately prior thereto, all subject
to further adjustment as provided in this Section 10.1; PROVIDED,
HOWEVER, that no adjustment in respect of dividends or interest on such
stock or other securities shall be made during the term of a Warrant of
upon the exercise of a Warrant.
(d) For the purpose of any computation under paragraphs (b) and (c)
of this Section, the current market price per share of Common Stock at
any date shall be average of the daily closing prices for 20 consecutive
trading days commencing 30 trading days before the date of such
computation. The closing price for each day shall be the last reported
sales price regular way or, in case no reported sale takes place on such
day, the average of the closing bid and asked prices regular way for such
day, in each case on the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading or, if not
listed or admitted to trading, the average of the closing bid and asked
prices of the Common Stock in the over-the-counter market as reported by
NASDAQ or any comparable system. In the absence of one or more such
quotations, the Company shall determine the current market price on the
basis of such quotations as it considers appropriate.
(e) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless and until such adjustment would
require an increase or decrease of at least one percent (1%) in the
number of Warrant Shares purchasable upon the exercise of each Warrant;
PROVIDED, HOWEVER, that any adjustments which by reason of this paragraph
(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations shall be make to
the nearest one thousandth of a share.
(f) Whenever the number of shares purchasable upon the exercise of
each Warrant is adjusted as provided in paragraphs (a), (b) and (c)
above, the Warrant Price payable upon exercise of each Warrant and the
Call Price shall be adjusted by multiplying such Warrant Price and Call
Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the
exercise of each Warrant immediately prior to such adjustment, and of
which the denominator shall be the number of Warrant Shares purchasable
immediately thereafter.
(g) No adjustment in the number of Warrant Shares purchasable upon
the exercise of each Warrant need be made under paragraphs (b) and (c) if
the Company issues or distributes to each Holder of Warrants the rights,
options, warrants, or convertible or exchangeable securities, or evidence
of indebtedness or assets referred to in those paragraphs which each
Holder of Warrants would have been entitled to receive had the Warrants
been exercised prior to the happening of such event or the record date
with respect thereto. No adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant need be made for sales of
Warrant Shares pursuant to a Company plan for reinvestment of dividends
or interest. No adjustment need be made for a change in the par value of
the Warrant Shares.
(h) For the purpose of this Section 10.1, the term "shares of Common
Stock" shall mean (i) the class of stock designated as the Common Stock
of the Company at the date of this Agreement, or (ii) any other class of
stock resulting from successive changes or reclassification of such
shares consisting solely of changes in par value, or from par value to no
par value, or from no par value to par value. In the event that at any
time, as a result of an adjustment made pursuant to paragraph (a) above,
the Holders shall become entitled to purchase any shares of the Company
other than shares of Common Stock, thereafter the number of such other
shares so purchasable upon exercise of each Warrant and the Warrant Price
of such shares shall be subject
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to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant
Shares contained in paragraph (a) through (g), inclusive, above, and the
provisions of Section 5 and Sections 10.02 through 10.04, inclusive, with
respect to the Warrant Shares, shall apply on like terms to any such
other shares.
(i) Upon the expiration of any rights, options, warrants or
conversion or exchange privileges, if any thereof shall not have been
exercised, the Warrant Price and the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall, upon such
expiration, be readjusted and shall thereafter be such as it would have
been had it been originally adjusted (or had the original adjustment not
been required, as the case may be) as if (A) the only shares of Common
Stock so issued were the shares of Common Stock, if any, actually issued
or sold upon the exercise of such rights, options, warrants or conversion
or exchange rights and (B) such shares of Common Stock, if any, were
issued or sold for the consideration, if any, actually received by the
Company for the issuance, sale or grant of all such rights, options,
warrants or conversion or exchange rights whether or not exercised;
PROVIDED, FURTHER, that no such readjustment shall have the effect of
increasing the Warrant Price by an amount in excess of the amount of the
adjustment initially made in respect to the issuance, sale or grant of
such rights, options, warrants or conversion or exchange rights.
SECTION 10.02. DETERMINATION OF CONSIDERATION. Upon any issuance or
sale for a consideration other than cash, or a consideration part of which
is other than cash, of any shares of Common Stock or any rights or options
to subscribe for, purchase or otherwise acquire any shares of Common Stock,
the amount of the consideration other than cash received by the Company
shall be deemed to be the fair value of such consideration or as determined
in good faith by the Board of Directors of the Company. In case any shares
of Common Stock or any rights, options or warrants to subscribe for,
purchase or otherwise acquire any shares of Common Stock shall be issued or
sold together with other shares, stock or securities or other assets of the
Company for a consideration which covers both, the consideration for the
issue or sale of such shares of Common stock or such rights or options shall
be deemed to be the portion of such consideration allocated thereto in good
faith by the Board of Directors of the Company.
SECTION 10.03. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may,
at its option, at any time during the term of the Warrants, reduce the then
current Warrant Price to any amount deemed appropriate by the Board of
Directors of the Company.
SECTION 10.04. NOTICE OF ADJUSTMENT. (a) Whenever the number of
Warrant Shares purchasable upon the exercise of each Warrant or the Warrant
Price of such Warrant Shares is adjusted, as herein provided, the Company
shall cause the Warrant Agent promptly to mail by first class mail, postage
prepaid, to each Holder notice of such adjustment or adjustments and shall
deliver to the Warrant Agent a certificate of a firm of independent public
accountants selected by the Board of Directors of the Company (who may be
the regular accountants employed by the Company) to complete such adjustment
in accordance with the terms of this Agreement and prepare a certificate
setting forth the number of Warrant Shares purchasable upon the exercise of
each Warrant and the Warrant Price of such Warrant Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made.
Such certificate shall be conclusive evidence of the correctness of such
adjustment. The Warrant Agent shall be entitled to rely on any such
certificate delivered pursuant to this Section 10.04 and shall be under no
duty or responsibility with respect to any such certificate, except to
exhibit the same, from time to time, to any Holder desiring an inspection
thereof during reasonable business hours. The Warrant Agent shall not at any
time be under any duty or responsibility to any Holders to determine whether
any facts exist which may require any adjustment of the Warrant Price or the
number of Warrant Shares or other stock or property purchasable on exercise
thereof, or with respect to the
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nature or extent of any such adjustment when made, or with respect to the
method employed in making such adjustment.
(b) Notwithstanding the foregoing, whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Warrant Price of such
shares is adjusted, as herein provided, to an extent that such adjustment is
equal to or greater than 1% of the Warrant Price in effect prior to such
adjustment, but is less than 5% of the Warrant Price in effect prior to such
adjustment, the Company shall deliver to the Warrant Agent a certificate
setting forth the number of Warrant Shares purchasable upon the exercise of
each Warrant and the Warrant Price of such Warrant Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made. Notice of any such adjustment or adjustments shall be given to each
Holder but a certificate of a firm of independent accountants shall not be
required. At the time that such adjustments shall, in the aggregate, be
equal to or greater than 5% of the Warrant Price in effect prior to all such
adjustments, the aggregate of such adjustments shall be treated in the
manner provided in Section 10.04(a).
SECTION 10.05. NO ADJUSTMENT OF DIVIDENDS. Except as provided in
Section 10.01, no adjustment in respect of any dividends shall be made
during the term of a Warrant or upon the exercise of a Warrant.
SECTION 10.06. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or
merger of the Company into another corporation or in case of any sale,
transfer or lease to another corporation of all or substantially all the
property of the Company, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Warrant Agent an
agreement that (i) each Holder shall have the right thereafter upon payment
of the Warrant Price in effect immediately prior to such action to purchase
upon exercise of each Warrant the kind and amount of shares and other
securities and property (including cash) which he would have owned or have
been entitled to receive after the happening of such consolidation, merger,
sale, transfer or lease had such Warrant been exercised immediately prior to
such action, or (ii) in the event that all of the property to which a Holder
would be entitled to receive in such an action had such Warrant been
exercised immediately prior to such action is cash, then upon surrender of a
certificate representing Warrants each Holder shall be entitled to receive
cash in the amount of the difference between the amount which such Holder
would have paid to exercise such Warrants in full at the Warrant Price in
effect immediately prior to such action and the amount of cash which he
would have been entitled to receive after the happening of such
consolidation, merger, sale, transfer or lease had such Warrant been
exercised immediately prior to such action; PROVIDED, HOWEVER, that no
adjustment in respect of dividends, interest or other income on or from such
shares or other securities and property shall be made during the term of a
Warrant or upon the exercise of a Warrant. The Company shall mail by first
class mail, postage prepaid, to each Holder, notice of the execution of any
such agreement. Such agreement shall provide for adjustments, which shall be
as nearly equivalent as may be practicable to the adjustments provided for
in this Section 10. The provisions of this Section 10.06 shall similarly
apply to successive consolidations, mergers, sales, transfers or leases. The
Warrant Agent shall be under no duty or responsibility to determine the
correctness of any provisions contained in any such agreement relating to
the kind or amount of shares of stock or other securities or property
receivable upon exercise of Warrants or with respect to the method employed
and provided therein for any adjustments and shall be entitled to rely upon
the provisions contained in any such agreement.
SECTION 10.07. STATEMENT ON WARRANTS. Irrespective of any adjustments
in the Warrant Price or the number or kind of shares purchasable upon the
exercise of the Warrants, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are
stated in the Warrants initially issuable pursuant to this Agreement.
SECTION 11. FRACTIONAL INTERESTS. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the
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same time by the same Holder, the number of full Warrant Shares which shall be
issuable upon the exercise thereof shall be computed on the basis of the
aggregate number of Warrant Shares purchasable on exercise of the Warrants so
presented. If any fraction of a Warrant Share would, except for the provisions
of this Section 11, be issuable on the exercise of any Warrant (or specified
portion thereof), the Warrant Agent shall pay, upon receipt of good funds from
the Company, an amount in cash equal to the closing price for one share of the
Common Stock, as defined in paragraph (d) of Section 10.01, on the trading day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such fraction.
SECTION 12. NO RIGHTS AS STOCKHOLDERS; NOTICES TO HOLDERS. Nothing
contained in this Agreement or in any of the Warrants shall be construed as
conferring upon the Holders or their transferees the right to vote or to receive
dividends or to consent or to receive notice as stockholders in respect of any
meeting of stockholders for the election of directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company. If,
however, at any time prior to the expiration of the Warrants and prior to their
exercise, any of the following events shall occur:
(a) the Company shall declare any dividend payable in any securities
upon its shares of Common Stock or make any distribution (other than a cash
dividend as to which no adjustment in the Warrant Price is to be made as
herein provided) to the holders of its shares of Common Stock; or
(b) the Company shall offer to the holders of its shares of Common Stock
any additional shares of Common Stock or securities convertible into shares
of Common Stock or any right to subscribe thereof; or
(c) a dissolution, liquidation or winding up of the Company (other than
in connection with a consolidation, merger, transfer or lease of all or
substantially all of its property, assets, and business as an entirety)
shall be proposed;
then in any one or more of said events the Company shall (a) give notice in
writing of such event to the Warrant Agent and the Holders as provided in
Section 18 hereof and (b) cause notice of such event to be published once in THE
WALL STREET JOURNAL, such giving of notice and publication to be completed at
least 20 days prior to the date fixed as a record date or the date of closing
the transfer books for the determination of the stockholders entitled to such
dividend, distribution, or subscription rights, or for the determination of
stockholders entitled to vote on such proposed dissolution, liquidation or
winding up. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to publish or mail such notice
or any defect therein or in the publication or mailing thereof shall not affect
the validity of any action taken in connection with such dividend, distribution
or subscription rights, or such proposed dissolution, liquidation or winding up.
SECTION 13. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS; INSPECTION OF
WARRANT AGREEMENT. The Warrant Agent shall account to the Company with respect
to Warrants exercised two business days thereafter and concurrently pay to the
Company all monies received by the Warrant Agent for the purchase of the Warrant
Shares through the exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any notices given
or received hereunder available for inspection by the Holders during normal
business hours at its principal office. The Company shall supply the Warrant
Agent from time to time with such numbers of copies of this Agreement as the
Warrant Agent may request.
SECTION 14. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT
AGENT. Any corporation into which the Warrant Agent may be merged or with which
it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the shareholder services business of the Warrant Agent, shall be
the successor to the Warrant Agent hereunder without the execution or filing of
any paper or any further act on the part of any of the parties hereto, provided
that such corporation would be eligible for appointment as a successor Warrant
Agent under the provisions of Section 16 hereof. In case at the time such
successor to the Warrants Agent shall succeed to the agency created by this
Agreement, any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original
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Warrant Agent and deliver such Warrants so countersigned; and in case at that
time any of the Warrants shall not have been so countersigned, any successor to
the Warrant Agent may countersign such Warrants either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant Agent; and in
all such cases Warrants shall have the full force provided in the Warrants and
in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrants shall have been countersigned but not delivered,
the Warrant Agent may adopt the countersignatures under its prior name and
deliver such Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, the Warrant Agent may countersign
such Warrants whether in its prior name or in its changed name; and all such
Warrants shall have the full force provided in the Warrants and in this
Agreement.
SECTION 15. CONCERNING THE WARRANT AGENT. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders, by their acceptance of
Warrants, shall be bound.
SECTION 15.01. CORRECTNESS OF STATEMENTS. The statements contained
herein and in the Warrants shall be taken as statements of the Company and
the Warrant Agent assumes no responsibility for the correctness of any of
the same except such as describe the Warrant Agent or action taken by it.
The Warrant Agent assumes no responsibility with respect to the distribution
of the Warrants except as herein otherwise provided. The Warrant Agent will
have no obligation to make payment with respect to any Warrants presented
unless it shall have been provided by the Company with the necessary funds
to pay in full all amounts payable with respect thereto.
SECTION 15.02. BREACH OF COVENANTS. The Warrant Agent shall not be
responsible for any failure of the Company to comply with any of the
covenants contained in this Agreement or in the Warrant to be complied with
by the Company.
SECTION 15.03. PERFORMANCE OF DUTIES. The Warrant Agent may execute
and exercise any of the rights or powers hereby vested in it or perform any
duty hereunder either itself or by or through its attorneys or agents (which
shall not include its employees) and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
SECTION 15.04. RELIANCE ON COUNSEL. The Warrant Agent may consult at
any time with legal counsel satisfactory to it and the Company (who may be
counsel for the Company) and the Warrant Agent shall incur no liability or
responsibility to the Company or to any Holder in respect of any action
taken, suffered or omitted by it hereunder in good faith and in accordance
with the opinion or the advice of such counsel.
SECTION 15.05. PROOF OF ACTIONS TAKEN. Whenever in the performance of
its duties under this Agreement the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed)
may be deemed conclusively to be proved and established by a certificate
signed by the Chairman of the Board, Chief Executive Officer or President, a
Vice President, the Treasurer or the Secretary of the Company and delivered
to the Warrant Agent; and such certificate shall be full authorization to
the Warrant Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
SECTION 15.06. COMPENSATION; INDEMNITY. The Company agrees to pay the
Warrant Agent reasonable compensation for all services rendered by the
Warrant Agent in the performance of its duties under this Agreement in
accordance with the fee schedule agreed to from time to time by the Company
and the Warrant Agent, to reimburse the Warrant Agent for all expenses,
taxes and governmental charges and other charges of any kind and nature
reasonably incurred by the Warrant Agent in the performance of its duties
under this Agreement. The Company further agrees to indemnify and hold the
Warrant Agent harmless against costs, expenses (including reasonable
expenses of legal counsel), losses or damages, which, without gross
negligence, willful misconduct or
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bad faith on the part of the Warrant Agent, may be paid, incurred or
suffered by, or to which the Warrant Agent may become subject by reason of
or as a result of the administration of its duties hereunder or by reason of
or as a result of its compliance with the instructions set forth herein or
with any written or oral instructions delivered to the Warrant Agent
pursuant hereto, or as a result of defending its actions as Warrant Agent
hereunder, including any claim against the Warrant Agent by any Holder.
SECTION 15.07. LEGAL PROCEEDINGS. The Warrant Agent shall be under no
obligation to institute any action, suit or legal proceeding or to take any
other action likely to involve expense unless the Company or one or more
Holders shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this
provision shall not affect the power of the Warrant Agent to take such
action as the Warrant Agent may consider proper, whether with or without any
such security or indemnity. All rights of action under this Agreement or
under any of the Warrants or the production thereof at any trial or other
proceedings relative thereto, any such action, suit or proceeding instituted
by the Warrant Agent shall be brought in its name as Warrant Agent, and any
recovery of judgment shall be for the ratable benefit of the Holders, as
their respect rights or interests may appear.
SECTION 15.08. OTHER TRANSACTIONS IN SECURITIES OF COMPANY. The
Warrant Agent and any stockholder, director, officer or employee of the
Warrant Agent may buy, sell or deal in any of the Warrants, or other
securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested or contract with or lend
money to the Company or otherwise act as fully and freely as though it were
not Warrant Agent under this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the Company or for any
other legal entity.
SECTION 15.09. LIABILITY OF WARRANT AGENT. The Warrant Agent shall act
hereunder solely as agent, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which
it may do or refrain from doing in connection with this Agreement except for
its own negligence or bad faith.
SECTION 15.10. RELIANCE ON DOCUMENTS. The Warrant Agent will not incur
any liability or responsibility to the Company or to any Holder for any
action taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, documents or instrument reasonably believed by
it to be genuine and to have been signed, set or presented by the proper
party or parties.
SECTION 15.11. VALIDITY OF AGREEMENT. The Warrant Agent shall not be
under any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the
Warrant Agent) or in respect of the validity or execution of any Warrant
(except its countersignature thereof); nor shall the Warrant Agent by any
act hereunder be deemed to make any representations or warranty as to the
authorization or reservation of any Warrant Shares (or other stock) to be
issued pursuant to this Agreement or any Warrant, or as to whether any
Warrant Shares (or other stock) will, when issued, be validly issued, fully
paid and nonassessable, or as to the Warrant Price or the number or amount
of Warrant Shares or other securities or other property issuable upon
exercise of any Warrant.
SECTION 15.12. INSTRUCTIONS FROM COMPANY. The Warrant Agent is hereby
authorized and directed to accept instructions with respect to the
performance of its duties hereunder from the Chairman of the Board, the
Chief Executive Officer, the President, a Vice President, the Secretary or
the Treasurer of the Company, and to apply to such officer for advice or
instructions in connection with its duties, and shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer or officers.
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SECTION 16. CHANGE OF WARRANT AGENT. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company 30 days
notice in writing. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company. If the Warrant Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by any Holder (who shall with such notice submit
his Warrant for inspection of the Company), then any Holder may apply to any
court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Any successor warrant agent, whether appointed by the Company or
such a court, shall be a bank or trust company, in good standing, incorporated
under the laws of the United States of America or any state thereof and having
at the time of its appointment as warrant agent a combined capital and surplus
of at least $100,000,000. After appointment, the successor warrant agent shall
be vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent without further act or deed, but the
former Warrant Agent shall deliver and transfer to the successor warrant agent
any property at the time held by it hereunder, and execute and deliver for
further assurance, conveyance, act or deed necessary for the purpose. Failure to
file any notice provided for in this Section 16, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Warrant Agent or the appointment of the successor warrant agent, as the case may
be. In the vent of such resignation or removal, the successor warrant agent
shall mail, by first class mail, postage prepaid, to each Holder, written notice
of such removal or resignation and the name and address of such successor
warrant agent.
SECTION 17. IDENTITY OF TRANSFER AGENT. Forthwith upon the appointment of
any subsequent transfer agent for the Common Stock, or any other shares of the
Company's capital stock issuable upon the exercise of the Warrants, the Company
will file with the Warrant Agent, a statement setting forth the name and address
of such subsequent transfer agent.
SECTION 18. NOTICES. Any notice pursuant to this Agreement by the Company
or by any Holder to the Warrant Agent, or by the Warrant Agent or by any Holder
to the Company, shall be in writing and shall be delivered in person or by
facsimile transmission, or mailed first class, postage prepaid (a) to the
Company, at its offices at 1300 PNC Center, 201 East Fifth Street, Cincinnati,
Ohio 45202; or (b) the Warrant Agent, at its offices at 127 Public Square,
Fifteenth Floor, Cleveland, Ohio 44114. Each party hereto may from time to time
change the address to which notices to it are to be delivered or mailed
hereunder by notice to the other party.
Any notice mailed pursuant to this Agreement by the Company or the Warrant
Agent to the Holders shall be in writing and shall be mailed first class,
postage prepaid, or otherwise delivered to such Holders at their respective
addresses on the books of the Warrant Agent.
SECTION 19. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant Agent
may from time to time supplement or amend this Agreement without the approval of
any Holder, in order to cure and ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Warrant Agent may deem
necessary or desirable and which shall not be inconsistent with the provisions
of the Warrants and which shall not adversely affect the interests of the
Holders.
This Agreement shall not otherwise be modified, supplemented or altered in
any respect except with the consent in writing of the Holders of Warrants
representing not less than 50% of the Warrants then outstanding; and PROVIDED,
FURTHER, that no change in (i) the number or nature of the securities
purchasable upon the exercise of any Warrant, (ii) the Warrant Price or Call
Price therefor, (iii) the Expiration Date or Call Date (if such change would
have the effect of accelerating either such date), or (iv) the anti-dilution
provisions of Section 10 hereof which would adversely affect the interests of
any Holder shall be made without, in each case, the consent in writing of the
Holder of the certificate representing such Warrant,
A-II-13
<PAGE>
other than such changes as are specifically prescribed by this Agreement as
originally executed or are made in compliance with applicable law.
SECTION 20. SUCCESSORS. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns hereunder.
SECTION 21. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not
merge or consolidate with or into, or sell, transfer or lease all or
substantially all of its property to, any other corporation unless the successor
or purchasing corporation, as the case may be (if not the Company), shall
expressly assume, by supplemental agreement satisfactory in form to the Warrant
Agent and executed and delivered to the Warrant Agent, the due and punctual
performance and observance of each and every covenant and condition of this
Agreement to be performed and observed by the Company.
SECTION 22. APPLICABLE LAW. This Agreement and each Warrant issued
hereunder shall be governed by and construed in accordance with the laws of the
State of Ohio, without giving effect to principles of conflict of laws.
SECTION 23. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent, and the Holders any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Warrant Agent and the Holders of the Warrants.
SECTION 24. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 25. CAPTIONS. The captions of the Sections of this Agreement have
been inserted for convenience only and shall have no substantive effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, all as of the day and year first above written.
JACOR COMMUNICATIONS, INC.,
by ___________________________________
Title:
[Seal]
Attest:
______________________________________
Secretary
A-II-14
<PAGE>
KEYCORP SHAREHOLDER SERVICES, INC.,
by ___________________________________
Title:
[Seal]
Attest:
______________________________________
Corporate Trust Officer
A-II-15
<PAGE>
EXHIBIT A TO THE WARRANT AGREEMENT
VOID AFTER 5:00 P.M. EASTERN TIME, , 2002
NO. [ ] WARRANTS
JACOR COMMUNICATIONS, INC.
COMMON STOCK PURCHASE WARRANTS
This certifies that, for value received, or registered assigns (the
"Holder"), is entitled to purchase from Jacor Communications, Inc., a Delaware
corporation (the "Company"), at any time, at the purchase price of $40.00 per
share (the "Warrant Price"), the number of shares of Common Stock, $0.01 par
value per share, of the Company ("Common Stock"), equal to the number of
Warrants shown above multiplied by the fraction [ ] (the "Fraction"). The
Fraction, the number of shares purchasable upon exercise of the Warrants and the
Warrant Price are subject to adjustment from time to time as set forth in the
Warrant Agreement referred to below.
Warrants may be exercised in whole or in part by presentation of this
Warrant Certificate with the Purchase Form on the reverse side hereof duly
executed, which signature shall be guaranteed by a firm which is a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc. or by a commercial bank or trust company having an
office or correspondent in the United States which is a participant in an
approved Signature Guarantee Medallion Program, and simultaneous payment of the
Warrant Price at the principal office of KeyCorp Shareholder Services, Inc.,
(the "Warrant Agent") in the City of Cleveland. Payment of such price shall be
made at the option of the Holder hereof in cash or by certified or bank
cashier's check drawn upon a bank chartered by the government of the United
States or any state thereof.
The Company shall have the right to redeem any or all of the Warrants at a
price per Warrant equal to $12.00 multiplied by the Fraction, as adjusted from
time to time as set forth in the Warrant Agreement, on or after three years
after the Effective Time as defined in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a Warrant
Agreement dated as of , 1997, between the Company and the Warrant Agent and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which the Holder of this Warrant Certificate by acceptance hereof consents. A
copy of the Warrant Agreement may be obtained by the Holder hereof upon written
request to the Company.
Upon any partial exercise of the Warrants evidenced by this Warrant
Certificate, there shall be countersigned and issued to the Holder hereof a new
Warrant Certificate for the shares of Common Stock as to which the Warrants
evidenced by this Warrant Certificate shall not have been exercised. This
Warrant Certificate may be exchanged at the office of the Warrant Agent by
surrender of this Warrant Certificate properly endorsed either separately or in
combination with one or more other Warrant Certificates for one or more new
Warrant Certificates evidencing the right of the Holder thereof to purchase the
same aggregate number of shares as were purchasable on exercise of the Warrants
evidenced by the Warrant Certificate or Certificates exchanged. No fractional
shares will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement. This
Warrant Certificate is transferable at the office of the Warrant Agent in the
manner and subject to the limitations set forth in the Warrant Agreement.
The Holder hereof may be treated by the Company, the Warrant Agent, and all
other persons dealing with this Warrant Certificate as the absolute owner hereof
for any purpose and as the person entitled to exercise the rights represented
hereby, or to the transfer hereof on the books of the Company any notice to the
contrary notwithstanding, and until such transfer on such books, the Company may
treat the Holder thereof as the owner for all purposes.
A-II-16
<PAGE>
Neither the Warrants nor this Warrant Certificate entitle any Holder hereof
to any of the rights of a stockholder of the Company.
This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.
DATED:
JACOR COMMUNICATIONS, INC.,
by ___________________________________
Title:
[Seal]
Attest:
______________________________________
Secretary
COUNTERSIGNED:
KEYCORP SHAREHOLDER SERVICES, INC.,
as Warrant Agent
by ___________________________________
Authorized Signature
A-II-17
<PAGE>
JACOR COMMUNICATIONS, INC.
PURCHASE FORM
(TO BE EXECUTED UPON EXERCISE OF WARRANT)
WARRANT AGENT:
The undersigned hereby irrevocably elects to exercise the right to purchase
__________ shares of Common Stock evidenced by the within Warrant Certificate,
according to the terms and conditions thereof, and herewith makes payment of the
purchase price n full by tendering cash or certified or bank cashier's check
drawn upon a bank chartered by the government of the United States or any state
thereof in the aggregate amount of $______. The undersigned requests that
certificates for such shares of Common Stock shall be issued in the name of
________________________________________________________________________________
(Please print Name, Address and Social Security No.)
________________________________________________________________________________
________________________________________________________________________________
and, if said number of shares shall not be all the shares purchasable
thereunder, that a New Warrant Certificate for the balance remaining of the
shares purchasable under the within Warrant Certificate be issued in the name of
the undersigned Warrantholder or his Assignee as below indicated and delivered
to the address stated below.
Dated: _________, ____
Name of Warrantholder or Assignee: _______________ _________________________
(Please Print)
Address: _______________________________________________________________________
_________________________________________________________________________
Signature: _______________________________________________________
Signature Guaranteed: (The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement or
any change whatever, unless this Warrant Certificate has
been assigned.)
A-II-18
<PAGE>
ASSIGNMENT
(TO BE SIGNED ONLY UPON ASSIGNMENT OF WARRANT CERTIFICATE)
FOR VALUED RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________________________________________________
________________________________________________________________________________
(Name and Address of Assignee Must be Printer or Typewritten)
the within Warrant Certificate, irrevocably constituting and appointing
________________________ ,
Attorney to transfer said Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
DATED:
Signature Guaranteed: Signature: ____________________________________________
(The above signature must correspond with the
name as written on the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change
whatever.)
A-II-19
<PAGE>
ANNEX III
ESCROW AGREEMENT DATED OCTOBER 8, 1996,
AMONG JACOR, REGENT AND PNC BANK
A-III-1
<PAGE>
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") made as of October 8, 1996, by
and among JACOR COMMUNICATIONS, INC., a Delaware corporation ("Acquiror"),
REGENT COMMUNICATIONS, INC., a Delaware corporation ("Regent") and PNC BANK,
OHIO, N.A., a national banking association ("Escrow Agent").
W I T N E S S E T H:
1. MERGER AGREEMENT. Regent and Acquiror hereby jointly deposit with
Escrow Agent an executed copy of an Agreement and Plan of Merger dated as of
even date herewith, by and between Regent and Acquiror (the "Agreement"). All
capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Agreement.
2. ESCROW DEPOSIT. Acquiror hereby deposits an irrevocable letter of
credit in the principal amount of $10 million, with Escrow Agent named as
beneficiary (the "Letter of Credit"), with Escrow Agent as a deposit to be held
in escrow hereunder (the "Escrow Deposit"). Escrow Agent acknowledges that it
holds the Letter of Credit for the benefit of Regent and, subject to the
provisions contained in Section 4 hereof, Escrow Agent shall hold the Escrow
Deposit to fund the obligations under Section 5.16 and 8.1 of the Agreement.
3. LETTER OF CREDIT. The Letter of Credit is due to expire on the first
anniversary of the date hereof (the "Expiration Date"). If ten days prior to the
Expiration Date (or the expiration date of any subsequent letter of credit) the
Letter of Credit shall not have been replaced with a substitute letter of credit
having an expiration date no earlier than the Expiration Date, then Escrow Agent
shall immediately draw on the Letter of Credit and the proceeds thereof (the
"Cash Escrow") shall be payable to Escrow Agent and become the Escrow Deposit
hereunder. The Escrow Agent shall invest the Cash Escrow in federally insured
interest-bearing money market accounts or certificates of deposit.
4. DISPOSITION OF ESCROW FUND. The Escrow Agent shall disburse the Escrow
Deposit and any accrued interest thereon as follows:
A. Should the Escrow Agent be served with a notice from the Acquiror and
Regent specifying the Closing Date under the Agreement, then the Escrow
Agent shall return the Escrow Deposit to Acquiror at the Closing, and Regent
and Escrow Agent shall deliver instructions to Banque Paribas (or other
issuing bank) that the Letter of Credit be cancelled (if not previously
converted to the Cash Escrow).
B. Should the Escrow Agent receive a notice from Acquiror ("Acquiror's
Notice") stating that the Agreement is to be terminated prior to or on the
Closing Date pursuant to Section 8.1(A) (2), (3), (4) or (5) of the
Agreement, then the Escrow Agent shall send a copy of Acquiror's Notice to
Regent and return the Escrow Deposit, together with any interest earned on
the Cash Escrow, to the Acquiror, as of the date of termination of the
Agreement and Regent and Escrow Agent shall deliver instructions to Banque
Paribas (or other issuing bank) that the Letter of Credit be cancelled (if
not previously converted to the Cash Escrow), PROVIDED, HOWEVER, that Escrow
Agent shall not disburse the Escrow Deposit until twenty days shall have
elapsed after the date on which the Escrow Agent sent a copy of Acquiror's
Notice to Regent. If the Escrow Agent receives during such twenty day period
a conflicting notice from Regent stating that the Acquiror is not entitled
to the Escrow Deposit, then Escrow Agent shall make no distribution of the
Escrow Deposit unless and until it is instructed by an arbitrator or a court
of competent jurisdiction which has resolved the dispute between the
parties.
C. Should the Escrow Agent be served with notice from Regent ("Regent's
Notice") specifying that (i) the Acquiror has failed to close the
transaction contemplated by the Agreement and the conditions to Acquiror's
obligations to close provided in Section 6.1 and Section 6.2 of the
Agreement are satisfied, or (ii) Regent is entitled to terminate the
Agreement pursuant to Section 8.1(A)(6) thereof, then the Escrow Agent shall
send a copy of Regent's Notice to Acquiror. On the fifth business day after
Regent's Notice is given to Escrow Agent, Escrow Agent will, upon Regent's
request, draw
A-III-2
<PAGE>
on the Letter of Credit, and the proceeds thereof shall be payable to Escrow
Agent and become the Escrow Deposit (if not previously converted to the Cash
Escrow). Escrow Agent shall pay the Escrow Deposit, including any interest
earned on the Cash Escrow, to Regent, as a termination fee, PROVIDED,
HOWEVER, that Escrow Agent shall not disburse the Escrow Deposit until
twenty days shall have elapsed after the date on which the Escrow Agent sent
a copy of Regent's Notice to Acquiror. If the Escrow Agent receives during
such twenty day period a conflicting notice from Acquiror stating that
Regent is not entitled to the Escrow Deposit, then Escrow Agent shall make
no distribution of the Escrow Deposit unless and until it is instructed by
an arbitrator or a court of competent jurisdiction which has resolved the
dispute between the parties.
D. Notwithstanding the foregoing, the Escrow Agent shall comply with any
instructions signed by both Acquiror and Regent concerning disposition of
the Escrow Deposit.
5. CONFLICTING NOTICE. In the event conflicting notice is served upon the
Escrow Agent pursuant to Section 4(B) or 4(C) above, then the Escrow Agent may,
at its sole option, (a) continue to hold the Escrow Deposit and collect and
deposit all interest earned on the Cash Escrow until such time as joint
instructions are received from both parties or (b) advise all parties of the
filing of an interpleader action in the United States District Court for the
Southern District of Ohio, whereupon the Escrow Agent shall then promptly file
the interpleader action and place the Escrow Deposit in the registry of the
Court. Acquiror and Regent jointly and severally agree to pay the Escrow Agent's
costs, including reasonable attorney's fees, which the Escrow Agent may expend
or incur in such interpleader suit, the amount of such costs to be fixed and
judgment therefor to be rendered by the Court in such suit. Upon the filing of
the interpleader action and the payment of the Escrow Deposit into the registry
of the United States District Court, the Escrow Agent shall be fully released
and discharged from all obligations imposed on it in this Escrow Agreement.
6. RESPONSIBILITIES OF ESCROW AGENT. Escrow Agent's duties and
responsibilities shall be limited to those expressly set forth in this Escrow
Agreement. Escrow Agent is acting hereunder as a depository only and shall not
be responsible or liable in any manner whatsoever for the sufficiency,
correctness, genuineness or validity of any instrument which Escrow Agent in
good faith believes to be genuine, or for the identity, authority or rights of
any person executing or delivering such instrument. Notwithstanding any
provision herein incorporating other instruments by reference, except as
expressly set forth in Sections 2 and 4 hereof, Escrow Agent shall not be
charged with notice of the terms of any such instruments and its duties and
responsibilities shall be determined solely by reference to this Escrow
Agreement.
7. NO PERSONAL LIABILITY OF ESCROW AGENT. In performing any of its duties
hereunder, Escrow Agent shall not incur any liability to anyone for any damages,
losses, or expenses except for actions taken or not taken in bad faith, willful
default or gross negligence, and it shall accordingly not incur any such
liability with respect (i) to any action taken or omitted in good faith upon
advice of its counsel given with respect to any questions relating to the duties
and responsibilities of Escrow Agent under this Escrow Agreement, or (ii) to any
action taken or omitted in reliance upon any instrument, including, but not
limited to Acquiror's Notice, Regent's Notice or other written instructions
contemplated herein, not only as to due execution of such instrument and the
validity and effectiveness of its provisions but also as to the truth and
accuracy of any information contained therein, which Escrow Agent shall in good
faith believe to be genuine, to have been signed or presented by a proper person
or persons and to conform with the provisions of this Escrow Agreement.
8. EMPLOYMENT OF COUNSEL. Regent and Acquiror, jointly and severally,
hereby agree to indemnify and hold harmless Escrow Agent against any and all
losses, claims, damages, liabilities and expenses, including reasonable costs of
investigation and counsel fees and disbursements, which may be imposed upon
Escrow Agent or incurred by Escrow Agent in connection with its acceptance of
appointment as Escrow Agent hereunder, or the performance of its duties
hereunder, including any litigation arising from this Escrow Agreement or
involving the subject matter hereof, except that there shall be no
indemnification for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the bad faith, willful misconduct or gross negligence of the
Escrow Agent.
A-III-3
<PAGE>
9. RESIGNATION OF ESCROW AGENT. Escrow Agent may resign by giving thirty
days prior written notice to Regent and Acquiror; and thereafter, subject to the
right of Escrow Agent to be paid its reasonable fees for services and to be
compensated for its proper expenses and costs, the resignation of Escrow Agent
shall become effective and it shall deliver any remaining money held by it in
connection therewith upon the joint written order of the parties hereto, and,
upon the delivery of such money against the written receipt thereof by the party
so designated, Escrow Agent shall be fully released and acquitted of any further
obligation and responsibility under the Escrow Agreement.
Within 30 days after receiving such notice, Acquiror and Regent jointly will
appoint a successor escrow agent to which Escrow Agent may distribute the
property then held hereunder, less Escrow Agent's accrued fees and reasonable
costs and expenses. Escrow Agent hereby agrees to use commercially reasonable
efforts to comply with the issuing bank's conditions for transfer of the Letter
of Credit to a successor escrow agent. If a successor escrow agent has not been
appointed or has not accepted such appointment by the end of such 30-day period,
Escrow Agent may apply to a court of competent jurisdiction for the appointment
of a successor escrow agent, and Acquiror and Regent will pay the reasonable
costs, expenses and attorneys' fees which are incurred in connection with such
proceeding. Notwithstanding the above, if a transfer of the Letter of Credit is
prohibited by its terms, or if the Letter of Credit does not expressly permit a
subsequent holder to draw on such Letter of Credit, then Escrow Agent shall not
deliver the Letter of Credit to the clerk for any such court, but instead either
(i) Acquiror shall arrange for the replacement of such Letter of Credit with
another Letter of Credit permitting such transfer and permitting the subsequent
holder to draw on the replacement Letter of Credit in accordance with the terms
hereof and as specified in the replacement Letter of Credit (which shall be on
the same terms and conditions contained in the Letter of Credit), in which event
the Escrow Agent may deposit such replacement Letter of Credit with the clerk of
any such court, or (ii) the Escrow Agent shall draw on such non-transferable
Letter of Credit and deliver the proceeds to the clerk of such court.
10. NOTICES. All notices, demands, orders or other directions to be given
under this Escrow Agreement shall be in writing, shall be signed by the persons
giving them and shall be deemed sufficiently given only if personally delivered,
sent by facsimile (electronically confirmed) or sent by certified mail, postage
prepaid, return receipt requested, and addressed as follows:
If to Regent, to: Copy to:
Regent Communications, Inc. Wyatt, Tarrant & Combs
50 E. RiverCenter Boulevard 2800 Citizens Plaza
Suite 180 Louisville, Kentucky 40202
Covington, Kentucky 41011 Attn: Stewart E. Conner, Esq.
Attn: Terry S. Jacobs Fax: (502) 589-0309
Fax: (606) 292-0352
and
Cravath, Swaine & Moore
825 Eighth Avenue
New York, N.Y. 10019
Attn: William P. Rogers, Jr., Esq.
Fax: (212) 474-3700
A-III-4
<PAGE>
<TABLE>
<S> <C>
If to Acquiror, to: Copy to:
Jacor Communications, Inc. Graydon, Head & Ritchey
1300 PNC Center 1900 Fifth Third Center
201 E. Fifth Street 511 Walnut Street
Cincinnati, OH 45202 Cincinnati, OH 45202
Attn: Randy Michaels Attn: John J. Kropp, Esq.
Fax: (513) 621-0090 Fax: (513) 651-3836
If to Escrow Agent, to:
PNC Bank, Ohio, N.A.
201 East Fifth Street
Corporate Trust Department
Third Floor
Cincinnati, OH 45202
Attn: Jack Hannah
Fax: (513) 651-7901
</TABLE>
or at such other addresses or to the attention of such other person as any of
the parties may designate to the other by written notice given in the manner
provided above.
11. ENTIRE AGREEMENT. This Escrow Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof.
12. NO ORAL CHANGES. This Escrow Agreement may not be changed, amended,
waived, discharged or terminated orally, but only by an instrument in writing
signed by all parties hereto.
13. SUCCESSORS AND ASSIGNS. This Escrow Agreement shall inure to the
benefit of and be binding upon the respective parties and their respective
successors and assigns.
14. COUNTERPARTS. This Escrow Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be an original,
but all such counterparts shall constitute one and the same instrument.
15. GOVERNING LAW. This Escrow Agreement shall be construed in accordance
with, and shall be governed by, the laws of the State of Ohio.
16. SECTION HEADINGS. The Section headings contained herein are inserted
for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof.
17. ESCROW FEE. The Escrow Agent shall be paid an annual fee of $1,000
("Escrow Fee") which shall be paid upon the execution of this Agreement.
Provided that in the event the Escrow Agreement is renewed after the first
anniversary of the date hereof for each such renewal the Escrow Agent shall be
paid an additional $1,000. Acquiror and Regent shall each pay one-half of said
Escrow Fee.
A-III-5
<PAGE>
IN WITNESS WHEREOF, Regent, Acquiror and Escrow Agent have caused this
Escrow Agreement to be executed and delivered in their names, by an individual
thereunto duly authorized, as of the day and year first above written.
REGENT COMMUNICATIONS, INC.
By: /s/ TERRY S. JACOBS
-----------------------------------
Title: President
JACOR COMMUNICATIONS, INC.
By: /s/ R. CHRISTOPHER WEBER
-----------------------------------
Title: Senior Vice President and
Chief
Financial Officer
PNC BANK, OHIO, N.A.
By: /s/ JACK HANNAH
-----------------------------------
Title: Assistant Vice President
A-III-6
<PAGE>
ANNEX IV
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
A-IV-1
<PAGE>
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
8 DEL. C. SECTION 262 (1996)
Section 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
A-IV-2
<PAGE>
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of his shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares. A proxy
or vote against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective date
of such merger or consolidation, the surviving or resulting corporation
shall notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each consitutent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constitutent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constitutent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or series
of stock of such constitutent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second notice to all
such holders on or within 10 days after such effective date; provided,
however, that if such second notice is sent more than 20 days following the
sending of the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent
of the corporation that is required to give either notice that such notice
has been given shall, in the absence of fraud, be prima facie evidence of
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the facts stated therein. For purposes of determining the stockholders
entitled to receive either notice, each constitutent corporation may fix, in
advance, a record date that shall be not more than 10 days prior to the date
the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to
the effective date, the record date shall be the close of business on the
day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has
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submitted his certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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<PAGE>
ANNEX V
REGISTRATION RIGHTS AGREEMENT
DATED OCTOBER 8, 1996, AMONG
JACOR, REGENT AND CERTAIN
REGENT SHAREHOLDERS
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<PAGE>
REGISTRATION RIGHTS AGREEMENT dated as of October 8, 1996, among Jacor
Communications, Inc., a Delaware corporation ("the Company"), Regent
Communications, Inc., a Delaware corporation ("Regent"), and the individuals and
entities named in Schedule I hereto (herein referred to collectively as the
"Stockholders" and individually as a "Stockholder").
This Agreement is made pursuant to Section 5.16 of the Agreement and Plan of
Merger dated as of October 8, 1996 (the "Merger Agreement"), between the Company
and Regent Communications, Inc., a Delaware corporation. In order to induce the
Stockholders to consummate the transactions contemplated by the Merger
Agreement, and in further consideration therefor, the Company has agreed to
execute and deliver this Agreement and provide the registration rights set forth
in this Agreement.
Accordingly, it is hereby agreed as follows:
1. DEFINITIONS. Capitalized terms used but not otherwise defined herein
shall have the meanings assigned to such terms in the Merger Agreement. For
purposes of this Agreement the following terms shall have the following
meanings:
"EFFECTIVE PERIOD" means a period commencing on the date of this
Agreement and ending on the earlier of (i) the first date as of which all
Registrable Securities cease to be Registrable Securities and (ii) the later
of (A) the third anniversary of the Closing Date and (B) the first
anniversary of the date on which the last Warrant was exercised.
"HOLDER" means, subject to Section 9, a holder of Registrable
Securities.
"PROSPECTUS" means the prospectus included in the Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement and by all other amendments
and supplements to the prospectus, including post-effective amendments and
all material incorporated by reference in such prospectus.
"REGISTRABLE SECURITIES" means, collectively, (i) the shares of Acquiror
Common Stock issued to Regent Affiliates in connection with the Merger, (ii)
the shares of Acquiror Common Stock issuable upon the exercise of the
Warrants (the shares set forth in clauses (i) and (ii) referred to herein as
the "Shares"), (iii) the Warrants and (iv) any securities issued or
distributed in respect of any Shares or Warrants by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
reorganization, merger, consolidation or otherwise.
"REGISTRATION EXPENSES" means any and all expenses incident to
performance of or compliance with this Agreement, including, without
limitation, (i) all SEC and securities exchange registration and filing fees
(including all expenses incident to any filing with the National Association
of Securities Dealers, Inc.), (ii) all fees and expenses of complying with
securities or blue sky laws, (iii) all printing, messenger and delivery
expenses, (iv) all fees and expenses incurred in connection with the listing
of the Registrable Securities on any securities exchange pursuant to Section
6(h), (v) the fees and disbursements of counsel for the Company and of its
independent public accountants and (vi) the reasonable fees and
disbursements of one counsel, other than the Company's counsel, selected by
the Holders of a majority of the Registrable Securities being registered to
represent all Holders of the Registrable Securities being registered in
connection with such registration (it being understood that any Holder may,
at its own expense, retain separate counsel to represent it in connection
with such registration).
"REGISTRATION STATEMENT" means any registration statement of the Company
which covers Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, and all
exhibits and all material incorporated by reference in such Registration
Statement, which shall provide for the sale by the Holders of Registrable
Securities from time to time on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
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<PAGE>
"SEC" means the Securities and Exchange Commission.
2. SECURITIES SUBJECT TO THIS AGREEMENT. The securities entitled to the
benefits of this Agreement are the Registrable Securities. For the purposes of
this Agreement, Registrable Securities will cease to be Registrable Securities
when (i) a Registration Statement covering such Registrable Securities has been
declared effective under the Securities Act and they have been disposed of
pursuant to such effective Registration Statement, (ii) such Registrable
Securities are distributed to the public pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act, (iii) such Registrable
Securities shall have been otherwise transferred, new certificates for such
Registrable Securities not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of such
Registrable Securities shall not require registration or qualification of such
Registrable Securities under the Securities Act or any state securities or blue
sky law then in force, (iv) the Effective Period ends, (v) such Registrable
Securities shall have ceased to be outstanding, or (vi) in the written opinion
of counsel to the Company, when all Registrable Securities may be transferred by
the Holders without registration pursuant to Rule 144 under the Securities Act
without regard to the volume limitation or manner of sale limitations contained
therein.
3. SHELF REGISTRATION. The Company shall file and use all reasonable
efforts to cause to be declared effective, not later than the Effective Time, a
"shelf" Registration Statement on any appropriate form pursuant to Rule 415 (or
similar rule that may be adopted by the SEC) under the Securities Act for all
the Registrable Securities, which (i) shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution thereof and (ii) shall cover the issuance of Registrable Securities
pursuant to the exercise of Warrants. The Company agrees to use its best efforts
to keep such Registration Statement continuously effective and usable until the
end of the Effective Period; PROVIDED, HOWEVER, that the Company may elect that
such Registration Statement not be useable during any Blackout Period (as
defined in Section 4).
4. BLACKOUT PERIOD. The Company shall be entitled to (a) postpone the
filing of the Registration Statement otherwise required to be prepared and filed
by the Company pursuant to Section 3 or (b) elect that the Registration
Statement not be useable, in each case for a reasonable period of time, but not
in excess of 60 days (a "Blackout Period"), if the Company determines in good
faith that the registration and distribution of Registrable Securities (or the
use of the Registration Statement or related Prospectus) would interfere with
any pending financing, acquisition, corporate reorganization or any other
corporate development involving the Company or any of its subsidiaries or would
require premature disclosure thereof and promptly gives the Holders of
Registrable Securities written notice of such determination, containing a
general statement of the reasons for such postponement or restriction on use and
an approximation of the anticipated delay; PROVIDED, HOWEVER, that the aggregate
number of days included in all Blackout Periods during any consecutive 12 months
during the Effective Period shall not exceed 120 days.
5. REGISTRATION PROCEDURES. In connection with the registration
obligations of the Company pursuant to Section 3 hereof, the Company shall use
its best efforts to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Agreement, and the
Company will, as expeditiously as possible:
(a) prepare and file with the SEC amendments and post-effective
amendments to such Registration Statement and such amendments and
supplements to the Prospectus used in connection therewith as may be
necessary to maintain the effectiveness of such registration or as may be
required by the rules, regulations or instructions applicable to the
registration form utilized by the Company or by the Securities Act or rules
and regulations thereunder for shelf registration or as otherwise necessary
to keep the Registration Statement effective for the Effective Period and
cause the Prospectus as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and to otherwise comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement through the end of the Effective Period;
PROVIDED, HOWEVER, that before filing the Registration Statement or
Prospectus, or any amendments or supplements thereto (other than
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<PAGE>
reports required to be filed by it under the Securities and Exchange Act of
1934, as amended, and the rules and regulations adopted by the Commission
thereunder), the Company will furnish to the Holders and their counsel for
review and comment, copies of all documents proposed to be filed;
(b) furnish to each Holder of such Registrable Securities such number of
copies of such Registration Statement and of each amendment and
post-effective amendment thereto (in each case including all exhibits), the
Prospectus and Prospectus supplement, as applicable, and such other
documents as such Holder may reasonably request in order to facilitate the
disposition of the Registrable Securities by such Holder (the Company hereby
consenting to the use (subject to the limitations set forth in the last
paragraph of this Section 5) of the Prospectus or any amendment or
supplement thereto in connection with such disposition);
(c) use its best efforts to register or qualify such Registrable
Securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as each Holder shall
reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition in such jurisdictions of the Registrable Securities owned by
such Holder, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this Section 5(c), it would
not be obligated to be so qualified, to subject itself to taxation in any
such jurisdiction, or to consent to general service of process in any such
jurisdiction;
(d) notify each Holder of any such Registrable Securities covered by
such Registration Statement, at any time when a Prospectus relating thereto
is required to be delivered under the Securities Act within the appropriate
period mentioned in Section 5(a), of the Company's becoming aware that the
Prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and at
the request of any such Holder, prepare and furnish to such Holder a
reasonable number of copies of an amendment or supplement to the
Registration Statement or related Prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
Prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing;
(e) notify each Holder of Registrable Securities covered by such
Registration Statement at any time,
(1) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has
become effective,
(2) of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional information,
and
(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(f) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable (but not more than eighteen months) after the
effective date of the Registration Statement, an earnings statement which
shall satisfy the provisions of Section 10(a) of the Securities Act and the
rules and regulations promulgated thereunder; PROVIDED, HOWEVER, that
compliance with Rule 158 under the Securities Act shall be deemed to satisfy
the provisions of Section 10(a) of the Securities Act and the rules and
regulations promulgated thereunder; and
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<PAGE>
(g) use reasonable efforts to cause all such Registrable Securities to
be listed on any securities exchange on which the Common Stock is then
listed, or approved for trading through the Nasdaq Stock Market or any other
inter-dealer quotation system through which the Common Stock is then traded,
if such Registrable Securities are not already so listed or traded and if
such listing or trading is then permitted under the rules of such exchange,
provide a transfer agent and registrar for such Registrable Securities
covered by such Registration Statement no later than the effective date of
such Registration Statement and provide certificates for Registrable
Securities covered by a Registration Statement without any restrictive
legends.
The Company may require each Holder of Registrable Securities as to which
any registration is being effected to furnish the Company with such information
regarding such Holder and pertinent to the disclosure requirements relating to
the registration and the distribution of such securities as the Company may from
time to time reasonably request in writing.
Each Holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 5(d) or the commencement of a Blackout Period, such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the
Prospectus or Registration Statement covering such Registrable Securities until
such Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(d), and, if so directed by the Company, such Holder
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the period
mentioned in Section 5(a) shall be extended by the number of days during the
period from the date of the giving of such notice pursuant to Section 5(d) and
through the date when each seller of Registrable Securities covered by such
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 5(d).
6. REGISTRATION EXPENSES. The Company will pay all Registration Expenses
in connection with all registrations of Registrable Securities pursuant to
Section 3 upon the written request of any of the Holders, and each Holder shall
pay all other expenses, if any, relating to the sale or disposition of such
Holder's Registrable Securities pursuant to the Registration Statement.
7. INDEMNIFICATION; CONTRIBUTION. (a) Indemnification by the
Company. The Company agrees to indemnify each Holder of Registrable Securities,
its officers and directors and each person who controls such Holder (within the
meaning of the Securities Act), and any agent or investment adviser thereof
against all losses, claims, damages, liabilities and expenses (including
reasonable attorneys' fees and expenses of investigation) incurred by such party
pursuant to any actual or threatened action, suit, proceeding or investigation
arising out of or based upon (i) any untrue or alleged untrue statement of
material fact contained in the Registration Statement, any Prospectus or
preliminary Prospectus, or any amendment or supplement to any of the foregoing
or (ii) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
the case of a Prospectus or a preliminary Prospectus, in light of the
circumstances then existing) not misleading, except in each case insofar as the
same arise out of or are based upon, any such untrue statement or omission made
in reliance on and in conformity with information with respect to such
indemnified party furnished in writing to the Company by such indemnified party
or its counsel expressly for use therein.
(b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. In connection
with the Registration Statement, each Holder will furnish to the Company in
writing such information, including with respect to the name, address and the
amount of Registrable Securities held by such Holder, as the Company reasonably
requests for use in such Registration Statement or the related Prospectus and
agrees to indemnify and hold harmless (in the same manner and to the same extent
as set forth in Section 7(a)) the Company, all other prospective Holders or any
underwriter, as the case may be, and any of their respective affiliates,
directors, officers and controlling Persons, (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of a material fact or any
omission or alleged omission of a material fact required to be stated in such
Registration Statement
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<PAGE>
or Prospectus or any amendment or supplement to either of them or necessary to
make the statements therein (in the case of a Prospectus, in the light of the
circumstances then existing) not misleading, but only to the extent that any
such untrue statement or omission is made in reliance on and in conformity with
information with respect to such Holder furnished in writing to the Company by
such Holder or its counsel specifically for inclusion therein.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such indemnified party of any written
notice of the commencement of any action, suit, proceeding or investigation or
threat thereof made in writing for which such indemnified party may claim
indemnification or contribution pursuant to this Agreement (provided that
failure to give such notification shall not affect the obligations of the
indemnifying person pursuant to this Section 7 except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure). In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under these indemnification provisions for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation, unless in the reasonable judgment of any indemnified
party a conflict of interest is likely to exist between such indemnified party
and any other of such indemnified parties with respect to such claim, in which
event the indemnifying party shall be obligated to pay the reasonable fees and
expenses of such additional counsel or counsels. The indemnifying party will not
be subject to any liability for any settlement made without its consent (which
will not be unreasonably withheld).
(d) CONTRIBUTION. If the indemnification from the indemnifying party
provided for in this Section 7 is unavailable to an indemnified party hereunder
in respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities and expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions which resulted in
such losses, claims, damages, liabilities and expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 7(c), any legal and other fees and expenses
reasonably incurred by such indemnified party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by PRO RATA
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7(d), no Holder of Registrable
Securities shall be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities of such Holder were
offered to the public (net of all underwriting discounts and commissions, if
any) exceeds the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue statement or omission. No Person guilty
of fraudulent misrepresentation (within the meaning
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of Section 9(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 7(a) or (b), as the case may be, without regard to the relative fault of
said indemnifying parties or indemnified party or any other equitable
consideration provided for in this Section 7(d).
(e) The provisions of this Section 7 shall be applicable in respect of each
registration pursuant to this Agreement, shall be in addition to any liability
which any party may have to any other party and shall survive any termination of
this Agreement.
8. RULE 144. Until the end of the Effective Period, the Company covenants
that it will file the reports required to be filed by it under the Securities
Act and the Securities Exchange Act of 1934, as amended, and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any Holder of
Registrable Securities, made publicly available other information so long as
necessary to permit sales under Rule 144 under the Securities Act), and it will
take such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the written request of any
Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
9. TRANSFER OF RIGHTS. The rights of the Holders of Registrable Securities
and Warrants under this Agreement with respect to any Registrable Security may
be transferred to any one or more transferees of such Registrable Security or
Warrant; PROVIDED, HOWEVER, that such registration rights shall not be
transferred to any transferee of Registrable Securities that is entitled to
freely resell all of such Registrable Securities without registration or
qualification of such securities under the Securities Act or any state
securities or blue sky law then in force. Any transfer of registration rights
pursuant to this Section shall be effective only upon receipt of a written
notice from the relevant Stockholder stating the name and address of any
transferee and identifying the Registrable Securities with respect to which the
rights under this Agreement are being transferred.
10. THIRD-PARTY BENEFICIARIES. All Holders of Registrable Securities that
have not executed this Agreement as Stockholders are intended to be third party
beneficiaries hereof as to the shelf registration of the shares of Acquiror
Common Stock issuable upon the exercise of the Warrants, but not as to the
shares of Acquiror Common Stock or the Warrants issued to such persons in the
Merger.
11. MISCELLANEOUS. (a) REMEDIES. Each Holder of Registrable Securities
in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement.
(b) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of Holders of at least a
majority in number of the Registrable Securities then outstanding; PROVIDED,
HOWEVER, that to the extent any such proposed change should solely affect the
rights of the Regent Affiliates under this Agreement, such proposed change shall
require the Company to obtain the written consent of at least a majority of the
Holders that are Regent Affiliates.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by telex or telecopier, registered or
certified mail (return receipt requested), postage prepaid or courier
guaranteeing next day delivery to the parties at the following addresses (or at
such other address for any party as shall be specified by like notice, provided
that notices of a change of address shall be effective only upon receipt
A-V-7
<PAGE>
thereof). Notices delivered personally shall be effective upon receipt, notices
sent by mail shall be effective three days after mailing, notices sent by telex
shall be effective when answered back, notices sent by telecopier shall be
effective when receipt is acknowledged, and notices sent by courier guaranteeing
next day delivery shall be effective on the next business day after timely
deliver to the courier:
(i) if to a Holder of Registrable Securities, at the address of such
Holder provided in Schedule I hereto or at such other address as the
applicable Holder may designate to the Company in writing; and
(ii) if to Regent at:
Regent Communications, Inc.
50 E. River Center Boulevard
Suite 100
Covington, Kentucky 41011
Facsimile No.: (606) 292-0352
with a copy to:
Wyatt, Tarrant & Combs
2800 Citizens Plaza
Louisville, KY 40202
Attention: Stewart E. Connor, Esq.
Facsimile No.: (502) 589-0309
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: William P. Rogers, Jr.
Facsimile No.: (212) 474-3700
(iii) If to the Company at:
Jacor Communications, Inc.
1300 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202
Facsimile No.: (513) 621-0090
with a copy to:
Graydon, Head & Ritchey
1900 Fifth Third Center
P.O. Box 6464
Cincinnati, OH 45201
Attention: John Kropp, Esq.
Facsimile No.: (513) 651-3836
A-V-8
<PAGE>
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors of each of the parties; PROVIDED, HOWEVER,
that subject to Section 9, this Agreement and the provisions of this Agreement
that are for the benefit of the Holders shall not be assignable by any Holder to
any Person and any such purported assignment shall be null and void.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of any executed
signature page by facsimile transmission shall be as effective as delivery of a
manually signed counterpart of this Agreement.
(f) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
(h) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all remaining provisions contained herein shall
not be in any way impaired thereby, it being intended that all of the rights and
privileges of the Stockholders shall be enforceable to the fullest extent
permitted by law.
(i) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
expression and a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter hereof.
There are no restrictions, promises, warranties or undertakings with respect to
the subject matter hereof, other than those set forth or referred to herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
JACOR COMMUNICATIONS, INC.,
By: /s/ R. Christopher Weber
-----------------------------------
Name: R. Christopher Weber
Title: Senior Vice President and
Chief Financial Officer
REGENT COMMUNICATIONS, INC.,
By: /s/ Terry S. Jacobs
-----------------------------------
Name: Terry S. Jacobs
Title: President
[Signatures of parties listed on
Schedule I hereto]
A-V-9
<PAGE>
SCHEDULE I
TO THE REGISTRATION RIGHTS AGREEMENT
Terry S. Jacobs
South Atlantic Venture Fund II, L.P.
South Atlantic Venture Fund III, L.P.
LN Capital Investment Company
Michael J. Connelly
Lepercq, de Neuflize & Co.
J. David Grissom
David A. Jones, Jr.
JG Partnership
William H. Lomicka
Lawrence, Tyrell & Ortale
Richland Ventures, L.P.
Electra Investment Trust, PLC
Southwest Florida Enterprises, Inc.
A-V-10
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS/INFORMATION STATEMENT
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Jacor, being incorporated under the General Corporation Law of the State of
Delaware, is empowered by Section 145 of such law ("Statute"), subject to the
procedures and limitations stated in the Statute, to indemnify any person
("Indemnitee") against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
Indemnitee in connection with any threatened, pending or completed action, suit
or proceeding to which an Indemnitee is made a party or threatened to be made a
party by reason of the Indemnitee's being or having been a director, officer,
employee or agent of Jacor or a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise at the
request of Jacor. The Statute provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a person
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. The Statute also provides that Jacor may
purchase insurance on behalf of any director, officer, employee or agent.
Article Sixth of Jacor's Certificate of Incorporation contains provisions
permitted by Section 102 of the General Corporation Law of the State of Delaware
which eliminate personal liability of members of its board of directors for
violations of their fiduciary duty of care. Neither the Delaware General
Corporation Law nor the Certificate of Incorporation, however, limits the
liability of a director for breaching such director's duty of loyalty, failing
to act in good faith, engaging in intentional misconduct or knowingly violating
a law, paying a dividend or approving a stock repurchase under circumstances
where such payment or repurchase is not permitted under the Statute, or
obtaining an improper personal benefit.
Article 8 of Jacor's Bylaws provides that Jacor is obligated to indemnify an
Indemnitee in each and every situation where Jacor is obligated to make such
indemnification pursuant to the Statute. Jacor must also indemnify an Indemnitee
in each and every situation where, under the Statute, Jacor is not obligated but
is nevertheless permitted or empowered to make such indemnification. However,
before making such indemnification with respect to any situation covered by the
preceding sentence, (i) Jacor shall promptly make or cause to be made, by any of
the methods referred to in subsection (d) of the Statute, a determination as to
whether the Indemnitee acted in good faith and in a manner such indemnitee
reasonably believed to be in or not opposed to the best interests of Jacor, and,
in the case of any criminal action or proceeding, had no reasonable cause to
believe that such Indemnitee's conduct was unlawful and (ii) no such
indemnification shall be made unless it is determined that such Indemnitee acted
in good faith and in a manner such Indemnitee reasonably believed to be in or
not opposed to the best interests of Jacor, and, in the case of any criminal
action or proceeding, had no reasonable cause to believe that such Indemnitee's
conduct was unlawful.
Pursuant to authority contained in its Bylaws, Jacor maintains in force a
standard directors' and officers' liability insurance policy providing a
coverage of $10,000,000 against liability incurred by any director or officer in
his or her capacity as such.
The preceding discussion of the Statute and Jacor's Certificate of
Incorporation and Bylaws is not intended to be exhaustive and is qualified in
its entirety by reference to the complete texts of Jacor's Certificate of
Incorporation and Bylaws and to the Statute.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
See Index to Exhibits.
II-1
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any Prospectus/Information Statement required by section
10(a)(3) of the Securities Act;
(ii) To reflect in the Prospectus/Information Statement any facts or
events arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any increase
or decrease in the volume of securities offered (if the total dollar value
of securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of Prospectus/Information Statement filed with
the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
Prospectus/Information Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in this Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a Prospectus/Information Statement which is part of
this registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering Prospectus/Information Statement will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by the
other Items of the applicable form.
(6) That every Prospectus/Information Statement (i) that is filed pursuant
to paragraph (5), or (ii) purports to meet the requirements of Section 10(a)(3)
of the Act and is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such
II-2
<PAGE>
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(8) To respond to requests for information that is incorporated by reference
into the Prospectus/ Information Statement pursuant to Items 4, 10(b), 11, or 13
of this Form, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding to
the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involves therein, that
was not the subject of and included in the registration statement when it became
effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Covington, State of Kentucky on this 3rd day of
February, 1997.
JACOR COMMUNICATIONS, INC.
By: /s/ R. Christopher Weber
---------------------------------------------------------------------
R. Christopher Weber
SENIOR VICE PRESIDENT, CHIEF
FINANCIAL OFFICER AND SECRETARY
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints R. Christopher Weber and Jon M. Berry, or
either of them, as such signatory's true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for such signatory
and in such signatory's name, place and stead, in any and all capacities, to
sign any or all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the foregoing, as fully as to all intents and purposes as such
signatory might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on February 3, 1997 by the following
persons in the capacities indicated.
<TABLE>
<S> <C>
Principal Executive Officer: Principal Financial and Accounting Officer:
/s/ RANDY MICHAELS /s/ R. CHRISTOPHER WEBER
- -------------------------------------------- --------------------------------------------
Randy Michaels R. Christopher Weber
CHIEF EXECUTIVE OFFICER AND DIRECTOR SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND SECRETARY
/s/ ROBERT L. LAWRENCE /s/ ROD F. DAMMEYER
- -------------------------------------------- --------------------------------------------
Robert L. Lawrence Rod F. Dammeyer
PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR
DIRECTOR
/s/ SHELI Z. ROSENBERG /s/ F. PHILIP HANDY
- -------------------------------------------- --------------------------------------------
Sheli Z. Rosenberg F. Philip Handy
BOARD CHAIR AND DIRECTOR DIRECTOR
/s/ JOHN W. ALEXANDER /s/ MARC LASRY
- -------------------------------------------- --------------------------------------------
John W. Alexander Marc Lasry
DIRECTOR DIRECTOR
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------------ ---------------------------------------------------------------------------------------- -------------
<C> <S> <C>
2.1 Agreement and Plan of Merger dated as of October 8, 1996 ("Regent Merger Agreement")
between Jacor Communications, Inc. ("Jacor") and Regent Communications, Inc. (omitting
schedules and exhibits not deemed material). Incorporated by reference to Exhibit 2.1
to Jacor's Current Report on Form 8-K dated October 23, 1996, and attached as Annex I
to the Prospectus/Information Statement in this Registration Statement. *
2.2 Form of Warrant Agreement between Jacor and KeyCorp Shareholder Services, Inc., as
warrant agent (included as Exhibit B to Regent Merger Agreement). Incorporated by
reference to Exhibit 2.2 to Jacor's Current Report on Form 8-K dated October 23, 1996,
and attached as Annex II to the Prospectus/ Information Statement in this Registration
Statement. *
2.3 Escrow Agreement dated as of October 8, 1996 among Jacor, Regent Communications, Inc.
and PNC Bank, as escrow agent (included as Exhibit H to Regent Merger Agreement).
Incorporated by reference to Exhibit 2.3 to Jacor's Current Report on Form 8-K dated
October 23, 1996, and attached as Annex III to the Prospectus/Information Statement in
this Registration Statement. *
2.4 Registration Rights Agreement dated as of October 8, 1996 among Jacor and the parties
listed in Schedule I thereto (included as Exhibit I to Regent Merger Agreement).
Incorporated by reference to Exhibit 2.4 to Jacor's Current Report on Form 8-K dated
October 23,1996, and attached as Annex V to the Prospectus/Information Statement in
this Registration Statement. *
2.5 Agreement and Plan of Merger dated February 12, 1996 among Citicasters Inc.
("Citicasters"), Jacor and JCAC, Inc. Incorporated by reference to Exhibit 2.1 to
Jacor's Current Report on Form 8-K dated February 27, 1996. *
2.6 Warrant Agreement dated as of September 18, 1996 between Jacor and KeyCorp Shareholder
Services, Inc., as warrant agent. Incorporated by reference to Exhibit 4.1 to Jacor's
Current Report on Form 8-K dated October 3, 1996. *
2.7 Supplemental Agreement dated as of September 18, 1996 between Jacor and KeyCorp
Shareholder Services, Inc., as warrant agent. Incorporated by reference to Exhibit 4.2
of Jacor's Current Report on Form 8-K dated October 3, 1996. *
2.8 Registration Rights Agreement dated as of August 5, 1996 among Jacor, JCAC, Inc., Great
American Insurance Company, American Financial Corporation, American Financial
Enterprises, Inc., Carl H. Lindner, The Carl H. Lindner Foundation, and S. Craig
Lindner. Incorporated by reference to Exhibit 2.22 to Jacor's Post-Effective Amendment
No. 1 on Form S-3 to Form S-4 (File No. 333-6639). *
2.9 Stock Purchase and Stock Warrant Redemption Agreement dated as of February 20, 1996
among Jacor, Prudential Venture Partners II, L.P., Northeast Ventures, II, John T.
Lynch, Frank A. DeFrancesco, Thomas R. Jiminez, William R. Arbenz, CIHC, Incorporated,
Bankers Life Holding Corporation and Noble Broadcast Group, Inc. ("Noble") (omitting
exhibits not deemed material or filed separately in executed form). [Prudential and
Northeast are sometimes referred to hereafter as the "Class A Stockholders"; Lynch,
DeFrancesco, Jiminez and Arbenz as the "Class B Stockholders," and CHIC and Bankers
Life as the Warrant Sellers.] Incorporated by reference to Exhibit 2.1 to Jacor's
Current Report on Form 8-K dated March 6, 1996, as amended. *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------------ ---------------------------------------------------------------------------------------- -------------
<C> <S> <C>
2.10 Investment Agreement dated as of February 20, 1996, among Jacor, Noble and the Class B
Stockholders (omitting exhibits not deemed material). Incorporated by reference to
Exhibit 2.2 to Jacor's Current Report on Form 8-K dated March 6, 1996, as amended. *
2.11 Asset Exchange Agreement dated as of September 26, 1996 between Citicasters Co. and
Pacific and Southern Company, Inc. (omitting schedules and exhibits not deemed
material). Incorporated by reference to Exhibit 2.1 to Jacor's Current Report on Form
8-K dated October 11, 1996. *
2.12 Form of Plan and Agreement of Merger between Jacor and New Jacor, Inc. Incorporated by
reference to Annex VII to the Proxy Statement/Information
Statement/Prospectus/Information Statement to Jacor's Form S-4 Registration Statement
(File No. 333-6639). *
3.1 Articles of Incorporation of Jacor **
3.2 Bylaws of Jacor **
4.1 Indenture dated as of December 17, 1996 between Jacor Communications Company ("JCC") and
The Bank of New York for JCC's 9 3/4% Senior Subordinated Notes due 2006 and Jacor's
Guaranty thereof. Incorporated by reference to Exhibit 4.11 to Jacor's Form S-3
Registration Statement (File No. 333-19291) *
4.2 Indenture dated as of June 12, 1996 between Jacor and The Bank of New York for Jacor's
Liquid Yield Option Notes Due 2011. Incorporated by reference to Exhibit 4.23 to
Jacor's Form S-4 Registration Statement (File No. 333-6639). *
4.3 Indenture dated as of June 12, 1996 among Jacor, JCAC, Inc. and First Trust of Illinois,
National Association for JCAC, Inc.'s 10 1/8% Senior Subordinated Notes due 2006 and
Jacor's Guaranty thereof. Incorporated by reference to Exhibit 4.24 to Jacor's Form
S-4 Registration Statement (File No. 333-6639). *
4.4 Credit Agreement dated as of June 12, 1996 ("Credit Agreement") by and among JCAC, Inc.,
the Lenders named therein (the "Lenders"), Chemical Bank, as Administrative Agent,
Banque Paribas, as Documentation Agent, and Bank of America Illinois, as Syndication
Agent. Incorporated by reference to Exhibit 4.27 to Jacor's Form S-4 Registration
Statement (File No. 333-6639). *
4.5 Security Agreement dated as of June 12, 1996 by and between JCAC, Inc. and Chemical Bank
as Administrative Agent. Incorporated by reference to Exhibit 4.28 to Jacor's Form S-4
Registration Statement (File No. 333-6639). *
4.6 Parent Guaranty dated as of June 12, 1996 by Jacor in favor of Chemical Bank, as
Administrative Agent, for the Lenders and any Interest Rate Hedge Providers (as
defined in the Credit Agreement). Incorporated by reference to Exhibit 4.29 to Jacor's
Form S-4 Registration Statement (File No. 333-6639). *
4.7 Pledge Agreement dated as of June 12, 1996 by and between Jacor and Chemical Bank, as
Administrative Agent for the Agents (as defined in the Credit Agreement), the Lenders
and any Interest Rate Hedge Providers. Incorporated by reference to Exhibit 4.30 to
Jacor's Form S-4 Registration Statement (File No. 333-6639). *
4.8 First Amendment dated as of June 18, 1996 to Credit Agreement dated as of June 12, 1996
by and among JCAC, Inc., the Lenders named therein, Chemical Bank, as Administrative
Agent, Banque Paribas, as Documentation Agent, and Bank of America Illinois, as
Syndication Agent. Incorporated by reference to Exhibit 4 to Jacor's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996. *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------------ ---------------------------------------------------------------------------------------- -------------
<C> <S> <C>
4.9 Second Amendment dated as of September 18, 1996 to Credit Agreement dated as of June 12,
1996 by and among Citicasters (as successor by merger to JCAC, Inc.), the Lenders
named therein, The Chase Manhattan Bank (as successor by merger to Chemical Bank), as
Administrative Agent, Banque Paribas, as Documentation Agent, and Bank of America
Illinois, as Syndication Agent (omitting exhibits not deemed material). Incorporated
by reference to Exhibit 4.1 to Jacor's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996. *
4.10 Third Amendment dated as of October 8, 1996 to Credit Agreement dated as of June 12,
1996 by and among Citicasters (as successor by merger to JCAC, Inc.), the Lenders
named therein, The Chase Manhattan Bank (as successor by merger to Chemical Bank), as
Administrative Agent, Banque Paribas, as Documentation Agent, and Bank of America
Illinois, as Syndication Agent (omitting exhibits not deemed material). Incorporated
by reference to Exhibit 4.2 to Jacor's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996. *
4.11(#) Restricted Stock Agreement dated as of June 23, 1993 between Jacor and Rod F. Dammeyer.
(1) Incorporated by reference to Exhibit 4.2 to Jacor's Quarterly Report on Form 10-Q
dated August 13, 1993. *
4.12(#) Stock Option Agreement dated as of June 23, 1993 between Jacor and Rod F. Dammeyer
covering 10,000 shares of Jacor's common stock. (1) Incorporated by reference to
Exhibit 4.3 to Jacor's Quarterly Report on Form 10-Q dated August 13, 1993. *
4.13(#) Stock Option Agreement dated as of December 15, 1994 between Jacor and Rod F. Dammeyer
covering 5,000 shares of Jacor's common stock. (3) Incorporated by reference to
Exhibit 4.23 to Jacor's Quarterly Report on Form 10-Q dated August 13,1993 *
5.1 Opinion of Graydon, Head & Ritchey. **
8.1 Tax opinion of Graydon, Head & Ritchey. **
8.2 Tax opinion of Cravath, Swaine & Moore. **
10.1 Credit Agreement dated as of February 20, 1996 among Broadcast Finance, Inc. (a Jacor
subsidiary), Noble Broadcast Group, Inc. and Noble Broadcast Holdings, Inc. (omitting
exhibits not deemed material or filed separately in executed form). Incorporated by
reference to Exhibit 10.1 to Jacor's Current Report on Form 8-K dated March 6, 1996,
as amended. *
10.2 Subsidiary Guaranty dated as of February 20, 1996 in favor of Broadcast Finance, Inc. by
Noble Broadcast Center, Inc., Noble Broadcast of Colorado, Inc., Noble Broadcast of
St. Louis, Inc., Noble Broadcast of Toledo, Inc., Nova Marketing Group, Inc., Noble
Broadcast Licenses, Inc., Noble Broadcast of San Diego, Inc., Sports Radio, Inc. and
Sports Radio Broadcasting, Inc. Incorporated by reference to Exhibit 10.2 to Jacor's
Current Report on Form 8-K dated March 6, 1996, as amended. *
10.3 Term Note in the amount of $40,000,000 by Noble Broadcast Holdings, Inc. in favor of
Broadcast Finance, Inc., dated as of February 20, 1996. Incorporated by reference to
Exhibit 10.3 to Jacor's Current Report on Form 8-K dated March 6, 1996, as amended. *
10.4 Revolving Note in the amount of $1,000,000 by Noble Broadcast Holdings, Inc. in favor of
Broadcast Finance, Inc. dated as of February 20, 1996. Incorporated by reference to
Exhibit 10.4 to Jacor's Current Report on Form 8-K dated March 6, 1996, as amended. *
10.5 (#) 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. *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------------ ---------------------------------------------------------------------------------------- -------------
<C> <S> <C>
10.6 (#) 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. *
12 Computation of Earnings to Fixed Charges.
21 Subsidiaries of Jacor. Incorporated by reference to Exhibit 21 of Jacor's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, as amended. *
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Price Waterhouse LLP.
23.4 Consent of Graydon, Head & Ritchey (included in opinion of counsel filed as Exhibit
5.1). **
23.5 Consent of Graydon, Head & Ritchey (included in tax opinion of counsel filed as Exhibit
8.1). **
23.6 Consent of Cravath, Swaine & Moore (included in tax opinion of counsel filed as Exhibit
8.2). **
24.1 Powers of Attorney of directors and officers of Jacor signing this Registration
Statement (included in the signature pages hereto).
27.1 Financial Data Schedule of Jacor. Incorporated by reference to Jacor's Annual Report on
Form 10-K for the year ended December 31, 1995, as amended. *
27.2 Financial Data Schedule of Citicasters. Incorporated by reference to Citicasters' Annual
Report on Form 10-K for the year ended December 31, 1995, as amended. *
99.1 Letter to the holders of Regent's Stock (attached to Prospectus/Information Statement).
</TABLE>
- ------------------------
(*) Incorporated by reference.
(**) To be filed by amendment.
(#) Management Contracts and Compensatory Arrangements.
(1) 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.
(2) Identical documents were entered into with John W. Alexander, F. Philip
Handy and Marc Lasry.
(3) Identical documents were entered into with John W. Alexander, F. Philip
Handy, Marc Lasry and Sheli Z. Rosenberg.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement of Jacor
Communications, Inc. on Form S-4 of our report dated February 12, 1996, except
for Note 14, as to which the date is March 13, 1996, on our audits of the
consolidated financial statements of Jacor Communications, Inc. as of December
31, 1995 and 1994 and for each of the three years in the period ended December
31, 1995 and; of our report dated November 15, 1996, on our audits of the
combined financial statements of the Selected Gannett Radio Stations as of
December 31, 1995 and September 29, 1996 and for the years ended December 25,
1994 and December 31, 1995 and for the nine month period ended September 29,
1996, and; of our report dated November 8, 1996, on our audits of the
consolidated financial statements of Regent Communications, Inc. as of December
31, 1995 and September 30, 1996 and for the years ended December 31, 1994 and
1995 and for the nine month period ended September 30, 1996. We also consent to
the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
January 29, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 23, 1996, with respect to the consolidated
financial statements of Citicasters Inc. included in the Registration Statement
(Form S-4) and related Prospectus of Jacor Communications, Inc. for the
registration of 4,461,539 shares of its Common Stock, 4,596,694 of its Common
Stock purchase warrants and 500,000 shares of its Common Stock issuable upon the
exercise of the Warrants.
ERNST & YOUNG LLP
Cincinnati, Ohio
January 29, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus/Information Statement
constituting part of this Registration Statement on Form S-4 of Jacor
Communications, Inc. of our report dated March 21, 1996 relating to the
consolidated financial statements of Noble Broadcast Group, Inc. (which report
includes an explanatory paragraph regarding Jacor Communications, Inc.'s
agreement to purchase Noble Broadcast Group, Inc.) which appears in such
Prospectus/Information Statement. We also consent to the reference to us under
the heading "Experts" in such Prospectus/Information Statement.
PRICE WATERHOUSE LLP
San Diego, California
January 29, 1997
<PAGE>
EXHIBIT 99.1
REGENT COMMUNICATIONS, INC.
50 EAST RIVERCENTER BOULEVARD, SUITE 180
COVINGTON, KENTUCKY 41011
Dear Regent Stockholder and Holders of Rights to Acquire Regent Stock:
On behalf of the Board of Directors of Regent Communications, Inc., a
Delaware corporation ("Regent"), I am pleased to inform you that Regent and
Jacor Communications, Inc., a Delaware corporation ("Jacor"), entered into an
Agreement and Plan of Merger, dated as of October 8, 1996 (the "Merger
Agreement"), pursuant to which Regent will merge with and into Jacor, with Jacor
as the surviving corporation (the "Merger"). At the effective time of the Merger
("Effective Time"), each share of Regent's Class A Common Stock, par value $.01
per share, and Class B Common Stock, par value $.01 per share ("Regent Common
Stock") and Regent's Preferred Stock, par value $.01 per share (the "Regent
Preferred Stock," together with the Regent Common Stock , the "Regent Stock")
issued and outstanding immediately prior to the Effective Time will, by virtue
of the Merger and without any action on the part of holders thereof, be
converted into and represent the right to receive: (i) the Conversion Number (as
defined herein) of a fully paid and nonassessable share of common stock of
Jacor, par value $.01 per share ("Jacor Common Stock") (the "Stock
Consideration") and/or any cash payable due to downward fluctuations in the
market price of Jacor Common Stock which trigger certain payment options for
Jacor, as described below (the "Cash Consideration") plus (ii) a warrant to
acquire a fractional share of Jacor Common Stock, which fractional share is
anticipated to be .10877 of a share of Jacor Common Stock (a "Merger Warrant")
on the terms described in the Warrant Agreement (the "Warrant Consideration,"
together with the Stock Consideration and Cash Consideration, the "Merger
Consideration"). The Conversion Number shall mean the number (rounded to the
nearest 1/100,000) equal to the quotient of (i) 3.55 million, and (ii) the
aggregate number of shares of Regent Stock equal to the sum of (x) the aggregate
number of shares of Regent Common Stock outstanding on the closing date of the
Merger ("Closing Date") after the exercise of all outstanding options to
purchase Regent Common Stock granted under Regent's stock option plan and
agreements exercised on or prior to such date, (y) the aggregate number of
shares of Regent Preferred Stock outstanding on the Closing Date and (z)
480,000.
Holders of Regent Stock may receive Cash Consideration in addition to the
Stock Consideration, or in lieu of the Stock Consideration if, on the third
business day preceding the Closing Date, the "Average Value of Jacor Common
Stock" (as defined in the Prospectus/Information Statement filed by Jacor with
the Securities and Exchange Commission (a copy of which is enclosed with this
letter)), multiplied by 3.55 million (the "Aggregate Average Value of Jacor
Common Stock"), is less than $116.0 million. If this should occur, then Jacor
has the option with respect to the Stock Consideration to: (a) adjust the
Conversion Number by a fraction (y) the numerator of which is equal to
$32.67606, and (z) the denominator of which is the Average Value of Jacor Common
Stock; (b) pay additional Merger Consideration in the form of cash, in an amount
equal to the difference between $116.0 million and the Aggregate Average Value
of Jacor Common Stock; or (c) pay no Stock Consideration and instead pay, as
part of the Merger Consideration, $116.0 million in cash (the "Cash Election").
The amount of the Merger Consideration is subject to adjustment in certain other
circumstances, including (i) based on the amount of Regent's long-term debt and
certain other liabilities and (ii) to take account of the simultaneous closing
of the acquisition by Jacor of Southwest Radio Las Vegas, Inc. ("SRLV"). If no
adjustment provisions are applied, the Stock Consideration would consist of
3,550,000 shares of Jacor Common Stock.
Since the last reported sale price of Jacor Common Stock on January 31, 1997
was less than $32.67606, Jacor expects that the foregoing adjustment provisions,
including the Cash Election, are likely to be applicable to the Merger. As such,
Jacor has informed Regent that it intends to exercise the Cash Election and pay
Cash Consideration in the amount of approximately $103.9 million in lieu of the
Stock Consideration to holders of Regent Stock. Pursuant to the Cash Election,
each holder of Regent Stock would be entitled to receive $25.23553 in cash in
exchange for the tender of each share of Regent Stock in the Merger (assuming
all outstanding exercisable options to purchase Regent Stock are exercised).
Notwithstanding a Cash Election by Jacor, the sole stockholder of SRLV will be
entitled to receive the Stock Consideration, subject to certain adjustments.
Such Stock Consideration payable to the sole
<PAGE>
stockholder of SRLV would amount to 457,104 shares of Jacor Common Stock
(assuming an average value of $26.50 for a share of Jacor Common Stock on the
third day preceding the Closing Date). For more information regarding the Merger
and the merger of SRLV with and into Jacor, see the attached
Prospectus/Information Statement, "THE MERGER."
Effective October 8, 1996, the holders of more than a majority of the voting
power represented by the outstanding shares of Regent Stock, executed and
delivered to Regent irrevocable written consents to approve the Merger Agreement
and the Merger. Such written consents are sufficient under the Delaware General
Corporation Law ("DGCL") to approve the Merger Agreement. Therefore, no
additional corporate action by Jacor or Regent, and no further action of the
Regent stockholders, will be required to effect the Merger. ACCORDINGLY, WE ARE
NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. NO
MEETING OF REGENT STOCKHOLDERS WILL BE HELD TO CONSIDER APPROVAL OF THE MERGER
AGREEMENT.
IN CONNECTION WITH THE MERGER, HOLDERS OF SHARES OF REGENT STOCK WILL BE
ENTITLED TO DEMAND APPRAISAL RIGHTS IN RESPECT OF SUCH SHARES OF REGENT STOCK
UNDER SECTION 262 OF THE DGCL ("SECTION 262"), SUBJECT TO SATISFACTION BY SUCH
STOCKHOLDERS OF THE CONDITIONS FOR APPRAISAL RIGHTS ESTABLISHED BY SECTION 262.
FAILURE TO TAKE ANY OF THE STEPS REQUIRED UNDER SECTION 262 ON A TIMELY BASIS
MAY RESULT IN THE LOSS OF APPRAISAL RIGHTS.
Promptly after the Effective Time, a letter of transmittal and instructions
for the use thereof will be sent by the Exchange Agent (as defined in the
Prospectus/Information Statement) to holders of Regent Stock as of the Effective
Time to enable such holders to surrender their Regent Stock in exchange for the
Merger Consideration. Because the obligations of Regent and Jacor to consummate
the Merger are subject to certain conditions, including certain regulatory
approvals, the date on which the Merger will be consummated cannot be specified
at this time. ACCORDINGLY, HOLDERS OF REGENT STOCK ARE REQUESTED NOT TO
SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL THE LETTER OF TRANSMITTAL HAS
BEEN RECEIVED.
Terry S. Jacobs
President and Chief Executive Officer
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