SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO
SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934
Check The Appropriate Box:
/X/ Preliminary information statement / / Confidential, for Use of the Commission
Only
(as permitted by Rule 14c-5(d)(2))
/ / Definitive information statement
Filing By:
PREMIERE RADIO NETWORKS, INC.
(Name Of Registrant As Specified In Charter)
Payment Of Filing Fee (Check The Appropriate Box):
/ / $125 Per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
/X/ Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
PER UNIT PRICE
OR OTHER
UNDERLYING
VALUE OF
AGGREGATE NUMBER TRANSACTION
OF SECURITIES COMPUTED
TO WHICH PURSUANT TO PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TRANSACTION EXCHANGE ACT AGGREGATE VALUE OF
TO WHICH TRANSACTION APPLIES APPLIES RULE 0-11* TRANSACTION TOTAL FEE PAID
- ------------------------------------------- ------------------ --------------- ------------------ ---------------------
Common Stock, par value $.01 per share..... 3,659,817 $16.625 $186,200,000(1) $37,240.00(1)(2)
Class A Common Stock, par value $.01 per
share.................................... 4,256,404
- ------------------------
* Pursuant to the Agreement and Plan of Merger dated as of April 7, 1997 by
and among Jacor Communications, Inc. ("Jacor"), Jacor Communications
Company, PRN Holding Acquisition Corp., and Premiere Radio Networks, Inc.
("Premiere") (the "Merger Agreement"), the price per share of Common Stock,
$.01 par value, and Class A Common Stock, $.01 par value, of Premiere
(collectively the "Premiere Common Stock") is (i) $13.50 in cash, plus (ii)
shares of Jacor common stock ("Jacor Common Stock") at an exchange ratio to
be determined under the formulas set forth in the Merger Agreement. The
value as of the date of this Information Statement is $16.625 per share of
Premiere Common Stock. Pursuant to Rule 0-11(c)(1), the filing fee of
$37,240.00 was calculated as 1/50 of 1% of the aggregate consideration
payable under the Merger Agreement, which is equal to the product of $16.625
per share of Premiere Common Stock and 7,916,221 shares of Premiere Common
Stock outstanding as of April 28, 1997 plus the estimated value of options
and warrants to purchase Premiere Common Stock for which holders thereof
shall receive merger consideration.
(1) Includes the estimated value of options and warrants to purchase Premiere
Common Stock for which holders thereof shall receive merger consideration.
(2) Pursuant to Rule 0-11(a)(2), only one fee per transaction is required to be
paid. Accordingly, due to the payment by Jacor of a registration fee of
$81,239.57 in connection with the filing of its related Form S-4
Registration Statement, no additional fee is required to be paid upon the
filing of this Schedule 14C.
/ / Fee paid previously with preliminary materials.
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
Amount Previously Paid: $37,240.00 Filing Party: Jacor Communications, Inc.
Form, Schedule or Registration
Statement No.: Form S-4 Date Filed: April 30, 1997
PREMIERE RADIO NETWORKS, INC.
15260 VENTURA BOULEVARD, FIFTH FLOOR
SHERMAN OAKS, CALIFORNIA 91403
May , 1997
Dear Premiere Stockholder:
On behalf of the Board of Directors of Premiere Radio Networks, Inc., a
Delaware corporation ("Premiere"), I am pleased to inform you that on April 7,
1997, Premiere, Jacor Communications, Inc., a Delaware corporation ("Jacor"),
Jacor Communications Company, a Florida corporation and a wholly owned
subsidiary of Jacor ("JCC"), and PRN Holding Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of JCC ("Acquisition Corp."), entered
into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which
Acquisition Corp. will merge with and into Premiere (the "Merger"). As a result
of the Merger, Premiere will become a subsidiary of JCC. At the effective time
of the Merger (the "Effective Time"), each share of Common Stock, par value
$0.01 per share ("Common Stock"), and each share of Class A Common Stock, par
value $0.01 per share ("Class A Stock"), of Premiere (the Common Stock and the
Class A Stock being referred to herein collectively as the "Premiere Common
Stock") issued and outstanding immediately prior to the Effective Time (other
than (i) Premiere Common Stock owned by Premiere, Jacor, JCC, Acquisition Corp.
or any direct or indirect subsidiary of Premiere, Jacor, JCC, or Acquisition
Corp., (ii) any Premiere Common Stock held in the treasury of Premiere or (iii)
any Premiere Common Stock held by a holder who has properly perfected appraisal
rights in accordance with Delaware law) 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) $13.50 in cash, plus, if the closing of the
transactions contemplated by the Merger Agreement (the "Closing") does not occur
prior to July 31, 1997, for each full calendar month ending prior to the
Closing, commencing with August 1997, an additional amount of $.084375 in cash
(the "Cash Consideration"); plus (ii) .1525424 shares of Common Stock of Jacor
as long as the average per share closing trade price of the Common Stock of
Jacor immediately preceding the Effective Time (the "Jacor Closing Price") is
equal to or greater than $26.50 per share and equal to or less than $32.50 per
share (the "Stock Consideration," and together with the Cash Consideration, the
"Merger Consideration"). If the Jacor Closing Price is below $26.50, the number
of shares of Common Stock of Jacor comprising the Stock Consideration will be
increased, and if the Jacor Closing Price is above $32.50, the number of shares
of Common Stock of Jacor comprising the Stock Consideration will be reduced such
that the trading value of the Stock Consideration immediately prior to the
Closing will not be less than $4.04 nor more than $4.96, respectively, per share
of Premiere Common Stock.
Your Board of Directors unanimously approved the Merger Agreement and
determined that the terms of the Merger are fair to, and in the best interests
of, the holders of Premiere Common Stock. In reaching its conclusion, the Board
of Directors gave careful consideration to a number of factors, which are
described in the Prospectus/Information Statement filed by Jacor and Premiere
with the Securities and Exchange Commission (a copy of which is enclosed with
this letter). I urge you to read the enclosed materials carefully. The Board of
Directors also engaged Alex. Brown & Sons Incorporated as its financial advisor
to evaluate the Merger Agreement and the Merger, and Alex. Brown & Sons
Incorporated has rendered to the Board its written opinion, which is included as
an exhibit to the Prospectus/Information Statement, that the Merger
Consideration is fair, from a financial point of view, to holders of Premiere
Common Stock as of the date of delivery of such opinion.
Also on April 7, 1997, certain stockholders of Premiere (collectively, the
"Consenting Stockholders") entered into an agreement with Jacor, JCC, Archon
Communications Inc., Archon Communications Partners LLC, and News America
Holdings, Incorporated, pursuant to which each of the Consenting Stockholders
agreed to execute and deliver to Premiere prior to the close of business on the
fifteenth day following the date of the Merger Agreement, unless the Merger
Agreement was terminated prior to such date, an irrevocable written consent
approving the Merger Agreement. On April 7, 1997, Consenting
Stockholders owning shares representing approximately 25% of the voting power of
Premiere Common Stock, and on April ___, 1997, Consenting Stockholders owning
additional shares representing approximately 26% of the voting power of Premiere
Common Stock, outstanding on April 7, 1997 executed and delivered to Premiere
the written consents to approve the Merger Agreement. Such written consents are
sufficient under the Delaware General Corporation Law ("DGCL") to approve the
Merger Agreement. Therefore, no further action by the stockholders of Premiere
is necessary to approve the Merger Agreement or consummate the Merger and no
such approval will be sought. ACCORDINGLY, WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY. NO MEETING OF PREMIERE STOCKHOLDERS
WILL BE HELD TO CONSIDER APPROVAL OF THE MERGER AGREEMENT.
THE MERGER AGREEMENT AND DELAWARE LAW STATE THAT THE HOLDERS OF PREMIERE
COMMON STOCK HAVE DISSENTERS' RIGHTS IN CONNECTION WITH THE MERGER. SEE "THE
MERGER--APPRAISAL OR DISSENTERS' RIGHTS" IN THE ACCOMPANYING
PROSPECTUS/INFORMATION STATEMENT.
Promptly after the Effective Time, a letter of transmittal and instructions
for the use thereof will be sent by the Exchange Agent to holders of Premiere
Common Stock as of the Effective Time to enable such holders to surrender their
Premiere Common Stock in exchange for the Merger Consideration. Because the
obligations of Premiere, Jacor, JCC, and Acquisition Corp. 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 PREMIERE COMMON STOCK ARE REQUESTED NOT TO
SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL THE LETTER OF TRANSMITTAL IS
RECEIVED.
Sincerely,
Stephen C. Lehman
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 30, 1997
PROSPECTUS OF JACOR COMMUNICATIONS, INC.
INFORMATION STATEMENT OF PREMIERE RADIO NETWORKS, INC.
This Prospectus/Information Statement relates to the proposed merger (the
"Merger") of PRN Holding Acquisition Corp., a Delaware corporation ("Acquisition
Corp.") and wholly-owned subsidiary of Jacor Communications Company, a Florida
corporation ("JCC") and wholly-owned subsidiary of Jacor Communications, Inc.
("Jacor"), with and into Premiere Radio Networks, Inc., a Delaware corporation
("Premiere"), pursuant to the Agreement and Plan of Merger dated as of April 7,
1997 by and among Jacor, JCC, Acquisition Corp., and Premiere (the "Merger
Agreement," a copy of which is attached hereto as Annex I).
In connection with the Merger, JCC will also be acquiring all of the
outstanding shares of capital stock of Premiere's largest stockholder, Archon
Communications Inc., a Delaware corporation ("ACI"), pursuant to the Stock
Purchase Agreement dated as of April 7, 1997 among Jacor, JCC, Archon
Communications Partners LLC, News America Holdings, Incorporated and The News
Corporation Limited (the "Stock Purchase Agreement").
This Prospectus/Information Statement is being furnished to the stockholders
of Premiere in connection with the approval of the Merger Agreement on April ,
1997 by the written consent of the holders of shares representing a majority of
the voting power of Premiere's Common Stock, $.01 par value (the "Common
Stock"), and Premiere's Class A Common Stock, $.01 par value (the "Class A
Stock," and, together with the Common Stock, the "Premiere Common Stock"). See
"AUTHORIZATION BY STOCKHOLDERS AND BOARDS OF DIRECTORS" for a more detailed
discussion of the actions taken by the Consenting Stockholders (as defined
herein). PREMIERE IS NOT ASKING PREMIERE STOCKHOLDERS FOR A PROXY, AND PREMIERE
STOCKHOLDERS ARE REQUESTED NOT TO SEND PREMIERE A PROXY.
UNDER DELAWARE LAW, THE HOLDERS OF PREMIERE COMMON STOCK HAVE DISSENTERS'
RIGHTS IN CONNECTION WITH THE MERGER. SEE "THE MERGER--APPRAISAL OR DISSENTERS'
RIGHTS."
This Prospectus/Information Statement also constitutes a prospectus of Jacor
filed as part of a Registration Statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
up to 2,000,000 shares of Jacor common stock, $.01 par value (the "Jacor Common
Stock") to be issued in the Merger pursuant to the Merger Agreement and the
Stock Purchase Agreement. Jacor will file an application with the Nasdaq
National Market tier of The Nasdaq Stock Market (the "Nasdaq National Market")
seeking approval for quotation on the Nasdaq National Market of the Jacor Common
Stock to be issued in connection with the Merger and the Stock Purchase
Agreement. Under Delaware Law, the Merger does not require the approval of the
Jacor stockholders.
The Merger Agreement provides that Premiere stockholders will have the right
to receive in the Merger, in exchange for each issued and outstanding share of
Premiere Common Stock, (i) $13.50 in cash, plus, if the closing of the
transactions contemplated by the Merger Agreement (the "Closing") does not occur
prior to July 31, 1997, for each full calendar month ending prior to the
Closing, commencing with August 1997, an additional amount of $.084375 in cash,
provided that such additional amount shall be prorated through and including the
date on which the Closing occurs (the "Closing Date") for a partial month on the
basis of a 30-day month (the "Cash Consideration"); plus (ii) .1525424 shares
(the "Exchange Ratio") of Jacor Common Stock (the "Stock Consideration" and,
together with the Cash Consideration, the "Merger Consideration"). The Exchange
Ratio shall be .1525424 as long as the Jacor Closing Price (as defined below) is
equal to or greater than $26.50 per share and equal to or less than $32.50 per
share. If the Jacor Closing Price is less than $26.50 per share, the Exchange
Ratio shall be .1525424 multiplied by a fraction the numerator of which is
$26.50 and the denominator of which is the Jacor Closing Price. If the Jacor
Closing Price is greater than $32.50 per share, the Exchange Ratio shall be
.1525424 multiplied by a fraction the numerator of which is $32.50 and
denominator of which is the Jacor Closing Price. The Jacor Closing Price is
defined as the average per share closing trade price of the Jacor Common Stock
as quoted through the Nasdaq National Market for the ten Nasdaq National Market
trading days immediately preceding the date which is three Nasdaq National
Market trading days before the Closing Date.
Based on the number of shares of Premiere Common Stock and options and
warrants to purchase Premiere Common Stock outstanding on the date hereof,
pursuant to the Merger Agreement and the Stock Purchase Agreement, the Cash
Consideration is expected to be approximately $136.5 million and the Stock
Consideration is expected to be approximately 1.55 million shares of Jacor
Common Stock (assuming that the Jacor Closing Price is not less than $26.50 per
share). See "THE MERGER."
SEE "RISK FACTORS" AT PAGE 16 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY THE PREMIERE STOCKHOLDERS.
-------------------
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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS/INFORMATION STATEMENT IS , 1997.
THIS PROSPECTUS/INFORMATION STATEMENT IS FIRST BEING MAILED
TO PREMIERE STOCKHOLDERS ON OR ABOUT , 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 OF AN OFFER 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.
AVAILABLE INFORMATION
Each of Jacor and Premiere 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. Each of Jacor and Premiere 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.
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.
Each of Jacor Common Stock and Premiere Common Stock is traded on the Nasdaq
National Market. Reports, proxy and information statements, and other
information concerning Jacor and Premiere 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. Application will be made to list on the Nasdaq
National Market the Jacor Common Stock to be issued in connection with the
Merger and the Stock Purchase Agreement. Following the Merger, Premiere will
become a subsidiary of JCC, and there will be no public trading of Premiere
Common Stock. Accordingly, registration of Premiere Common Stock under the
Exchange Act will be terminated upon application of Premiere to the Commission
when the Merger is consummated, and Premiere will no longer be subject to the
reporting requirements of the Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Jacor with the Commission under
the Exchange Act are incorporated herein by reference:
(a) Jacor's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, as amended;
(b) Jacor's Current Reports on Form 8-K dated January 9, 1997, January 24,
1997, March 7, 1997 (amending Jacor's Form 8-K dated October 23, 1996),
March 21, 1997, as amended, and April 8, 1997; and
(c) Jacor's Form 8-B Registration Statement dated September 23, 1996.
2
All documents filed by Jacor pursuant to Sections 13(a), 13(c), 14, or 15(d)
of the Exchange Act after the date of this Prospectus/Information Statement and
prior to the effective time of the Merger shall be deemed to be incorporated by
reference into this Prospectus/Information Statement and to be a part hereof
from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that is or is deemed to be incorporated by
reference herein) modifies or supersedes such previous statement. Any statement
so modified or superseded shall not be deemed to constitute a part hereof except
as so modified or superseded.
All information contained or incorporated by reference in this
Prospectus/Information Statement relating to Jacor has been supplied by Jacor
and all such information relating to Premiere has been supplied by Premiere, and
neither Jacor nor Premiere assumes any responsibility for the accuracy or
completeness of the information provided by the other.
This Prospectus/Information Statement incorporates documents by reference
which are not presented herein or delivered herewith. These documents (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference herein) are available without charge upon oral or
written request by any person to whom this Prospectus/Information Statement has
been delivered. In the case of documents relating to Jacor, such request should
be directed to Jacor Communications, Inc., 50 East RiverCenter Boulevard, 12th
Floor, Covington, Kentucky 41011, Attention: Corporate Communications and
Investor Relations, Telephone Number (606) 655-2267, Fax Number (606) 655-9345.
3
TABLE OF CONTENTS
PAGE
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AVAILABLE INFORMATION................................................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................................................... 2
PROSPECTUS/INFORMATION STATEMENT SUMMARY................................................................ 6
Parties to the Merger................................................................................. 6
Authorization by Stockholders and Boards of Directors................................................. 6
The Merger............................................................................................ 7
Merger Consideration.................................................................................. 8
Reasons for the Merger................................................................................ 8
Opinion of Premiere Financial Advisor................................................................. 9
Termination; Termination Fee.......................................................................... 9
Financing Arrangements................................................................................ 9
Interests of Certain Persons in the Merger............................................................ 9
Regulatory Matters.................................................................................... 10
Nasdaq Listing........................................................................................ 10
Certain Federal Income Tax Consequences............................................................... 10
Accounting Treatment.................................................................................. 10
Appraisal or Dissenters' Rights....................................................................... 10
Recent Developments................................................................................... 11
Summary Unaudited Pro Forma Financial Information..................................................... 12
Summary Historical Financial Data..................................................................... 13
Comparative Per Share Data............................................................................ 14
Comparative Market Prices and Dividends............................................................... 14
RISK FACTORS............................................................................................ 16
AUTHORIZATION BY STOCKHOLDERS AND BOARDS OF DIRECTORS................................................... 19
THE MERGER.............................................................................................. 20
Background of and Reasons for the Merger.............................................................. 20
Opinion of Premiere Financial Advisor................................................................. 23
Conversion of Premiere Common Stock for the Merger Consideration...................................... 27
Exchange of Premiere Certificates in the Merger....................................................... 28
Certain Terms of the Merger Agreement and Related Agreements.......................................... 28
Financing Arrangements................................................................................ 31
Interests of Certain Persons in the Merger............................................................ 32
Regulatory Matters.................................................................................... 34
Nasdaq Listing........................................................................................ 35
Certain Federal Income Tax Consequences............................................................... 35
Accounting Treatment.................................................................................. 36
Federal Securities Law Consequences................................................................... 36
Appraisal or Dissenters' Rights....................................................................... 37
UNAUDITED PRO FORMA FINANCIAL INFORMATION............................................................... 40
SELECTED HISTORICAL FINANCIAL DATA OF JACOR............................................................. 45
SELECTED HISTORICAL FINANCIAL DATA OF PREMIERE.......................................................... 47
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION.............................................
BUSINESS OF JACOR....................................................................................... 49
BUSINESS OF PREMIERE.................................................................................... 49
Business Strategy..................................................................................... 49
4
PAGE
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Industry Overview..................................................................................... 51
Seasonality........................................................................................... 52
Competition........................................................................................... 52
Employees and Others.................................................................................. 53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PREMIERE....... 53
Industry Overview..................................................................................... 53
Fiscal Year Ended December 31, 1996 Compared to Fiscal Year Ended December 31, 1995................... 54
Fiscal Year Ended December 31, 1995 Compared to Fiscal Year Ended December 31, 1994................... 56
Fiscal Year Ended December 31, 1994 Compared to Fiscal Year Ended December 31, 1993................... 57
Seasonality........................................................................................... 58
Liqudity and Capital Resources........................................................................ 58
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF JACOR................................. 61
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF PREMIERE.............................. 65
COMPARISON OF CORPORATE CHARTERS........................................................................ 67
DESCRIPTION OF JACOR CAPITAL STOCK...................................................................... 70
Common Stock.......................................................................................... 70
Class A and Class B Preferred Stock................................................................... 70
Citicasters Warrants.................................................................................. 70
Regent Warrants....................................................................................... 72
Registrar and Transfer Agent.......................................................................... 74
DESCRIPTION OF OTHER JACOR INDEBTEDNESS................................................................. 74
1996 10 1/8% Notes.................................................................................... 74
Liquid Yield Option-TM- Notes......................................................................... 75
1996 9 3/4% Notes..................................................................................... 76
LEGAL MATTERS........................................................................................... 77
EXPERTS................................................................................................. 77
INDEX TO FINANCIAL STATEMENTS........................................................................... F-1
ANNEX I AGREEMENT AND PLAN OF MERGER BY AND AMONG JACOR, JCC, ACQUISITION CORP., AND PREMIERE DATED AS
OF APRIL 7, 1997.............................................................................. A-1-1
ANNEX II SHAREHOLDERS' AGREEMENT DATED AS OF APRIL 7, 1997
BY AND AMONG JACOR COMMUNICATIONS, INC., JACOR COMMUNICATIONS COMPANY, ARCHON COMMUNICATIONS
INC., ARCHON COMMUNICATIONS PARTNERS LLC, NEWS AMERICA HOLDINGS, INCORPORATED, AND CERTAIN STOCKHOLDERS
OF PREMIERE............................................................................................. A-II-1
ANNEX III STOCK PURCHASE AGREEMENT AMONG JACOR COMMUNICATIONS, INC., JACOR COMMUNICATIONS COMPANY,
ARCHON COMMUNICATIONS PARTNERS LLC, NEWS AMERICA HOLDINGS, INCORPORATED, AND THE NEWS
CORPORATION LIMITED DATED AS OF APRIL 7, 1997................................................ A-III-1
ANNEX IV FAIRNESS OPINION OF ALEX. BROWN & SONS INCORPORATED........................................... A-IV-1
ANNEX V SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW........................................... A-V-1
5
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
PREMIERE 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 radio broadcasting
and providing related services to radio broadcasting companies. As of April 28,
1997, Jacor entities owned, operated, and/or entered into agreements to acquire,
137 radio stations located across the United States in 29 broadcast areas: Los
Angeles; Atlanta; Denver; San Diego; St. Louis; Cincinnati; Tampa; Cleveland;
Portland, Oregon; Columbus, Ohio; Kansas City, Missouri; Jacksonville; Toledo;
Sarasota/Bradenton; Lexington; Boise; Santa Barbara; Des Moines; Cedar Rapids;
Venice/Englewood, Florida; Salt Lake City; Las Vegas; Louisville; Rochester;
Casper, Wyoming; Fort Collins/Greeley, Colorado; Lima, Ohio; Cheyenne, Wyoming;
and Sandusky, Ohio; and one television station located in the Cincinnati
broadcast area. Jacor also has joint sales agreements to sell advertising time
for one station 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 pursuant to an
exclusive sales agency agreement. Jacor also owns and distributes the RUSH
LIMBAUGH and DR. DEAN EDELL programs, syndicated talk programming for radio
broadcasting, and Jacor acts as a satellite systems integrator, Internet service
provider and communications consultant focused on the radio broadcasting
industry. See "BUSINESS OF JACOR."
JCC. JCC is a wholly-owned subsidiary of Jacor. Upon consummation of the
Merger, Premiere will be a subsidiary of JCC.
ACQUISITION CORP. Acquisition Corp. is a wholly-owned subsidiary of JCC
organized for the sole purpose of effecting the Merger. Acquisition Corp. will
cease to exist following the Merger.
The mailing address and telephone number of the principal executive offices
of Jacor, JCC, and Acquisition Corp. are 50 East RiverCenter Boulevard, 12th
Floor, Covington, Kentucky 41011 and (606) 655-2267.
PREMIERE. Premiere is a leading independent creator, producer and
distributor of innovative comedy, entertainment and music-related programs and a
supplier of research, production music libraries and other services to the radio
industry. Premiere offers programs and services to radio stations in exchange
for commercial broadcast time which Premiere then sells to more than 350
national advertisers. Premiere has grown from three programs and 250 radio
station affiliates at its inception in 1987 to 52 programs and services provided
to more than 4,000 radio stations pursuant to over 6,300 contracts with such
stations in 1997. Premiere's radio station affiliates broadcast in markets that
reach more than 99% of the U.S. population. Premiere's management believes that,
based on advertising revenues generated by its programs and services, Premiere
is the fourth largest producer and distributor of network radio programming and
services to the radio industry in the U.S. behind Westwood One Entertainment,
ABC Radio Networks, and CBS Radio Networks. See "BUSINESS OF PREMIERE--Industry
Overview" and "BUSINESS OF PREMIERE--Competition." The mailing address and
telephone number of the principal executive offices of Premiere are 15260
Ventura Boulevard, Fifth Floor, Los Angeles,, California 91403 and (818)
377-5300. See "BUSINESS OF PREMIERE."
AUTHORIZATION BY STOCKHOLDERS AND BOARDS OF DIRECTORS
On April 3, 1997, the Premiere Board of Directors (the "Premiere Board")
concluded that the terms of the draft of the Merger Agreement presented to it
were fair to and in the best interests of its
6
stockholders, approved the draft of the Merger Agreement presented to it, and
authorized management to execute final documents, subject to such modifications
approved by the Executive Committee of the Premiere Board (the "Premiere
Executive Committee"). Under the Delaware General Corporation Law (the "DGCL"),
the affirmative vote of the holders of a majority of the voting power
represented by the outstanding shares of Premiere Common Stock is required to
approve the Merger. As of the Premiere Record Date (as defined herein), there
were issued and outstanding 3,654,121 shares of Common Stock and 4,256,794
shares of Class A Stock. Holders of record of Common Stock are entitled to ten
votes per share and holders of record of Class A Stock are entitled to one vote
per share on all matters submitted to a vote of stockholders.
In conjunction with Premiere's execution of the Merger Agreement, Jacor,
JCC, ACI, Archon Communications Partners LLC ("ACP"), News America Holdings,
Incorporated ("News America"), Stephen C. Lehman, Louise G. Palanker, Timothy M.
Kelly, and Kraig T. Kitchin entered into the Shareholders' Agreement dated April
7, 1997 (the "Shareholders' Agreement," a copy of which is attached hereto as
Annex II). ACI, Mr. Lehman, Ms. Palanker, Mr. Kelly, and Mr. Kitchin
(collectively the "Consenting Stockholders") are the holders of a majority of
the voting power represented by outstanding shares of Premiere Common Stock. The
Shareholders' Agreement provides, among other things, that the Consenting
Stockholders will take action by written consent to approve the Merger
Agreement.
As required by the Shareholders' Agreement, on April 7, 1997 and April ,
1997, the Consenting Stockholders executed and delivered to Premiere written
consents approving the Merger Agreement. Such written consents are irrevocable
and were sufficient under the DGCL, upon receipt by Premiere, to approve the
Merger Agreement. Therefore, no further action by the stockholders of Premiere
is necessary to approve the Merger Agreement or consummate the Merger.
ACCORDINGLY, PREMIERE IS NOT ASKING ANY PREMIERE STOCKHOLDER FOR A PROXY AND
PREMIERE STOCKHOLDERS ARE REQUESTED NOT TO SEND A PROXY. NO MEETING OF PREMIERE
STOCKHOLDERS WILL BE HELD TO CONSIDER APPROVAL OF THE MERGER AGREEMENT.
The Merger Agreement also has been approved by the Jacor Board of Directors
(the "Jacor Board"). 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. See "AUTHORIZATION BY
STOCKHOLDERS AND BOARDS OF DIRECTORS."
In order to facilitate the Merger, JCC has further agreed to purchase all of
the outstanding shares of common stock of ACI, the largest shareholder of
Premiere Common Stock, pursuant to the Stock Purchase Agreement, a copy of which
is attached hereto as Annex III. The transactions contemplated by the Stock
Purchase Agreement are to be consummated immediately prior to the Closing, and
the consummation of the Merger is conditioned upon the closing of JCC's purchase
of the ACI stock. ACI's principal business activity has been the ownership of
Premiere Common Stock and options and warrants to acquire Premiere Common Stock,
and the provision of strategic consulting services to Premiere. Accordingly, for
their shares in ACI, the ACI shareholders will receive an amount of cash and
Jacor Common Stock calculated in the same manner as the Merger Consideration to
be received by the other Premiere stockholders, plus cash equal to ACI's cash on
hand (net of ACI liabilities) upon closing. See "THE MERGER--Interests of
Certain Persons in the Merger--ACI."
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 and Related
Agreements." It is expected that the Effective Time will promptly
7
follow the receipt of all regulatory approvals. See "THE MERGER--Regulatory
Matters." At the Effective Time, Acquisition Corp. will be merged with and into
Premiere, with Premiere being the surviving entity. Premiere will thereby become
a subsidiary of JCC.
MERGER CONSIDERATION
In the Merger, each issued and outstanding share of Premiere Common Stock
(other than shares of Premiere Common Stock held: (i) by Premiere, Jacor, JCC,
Acquisition Corp. or any direct or indirect subsidiary of Premiere, Jacor, JCC
or Acquisition Corp. including, as of the Effective Time, ACI; (ii) in the
treasury of Premiere; or, (iii) by a holder who has not voted in favor of the
Merger or consented thereto in writing and who has properly demanded appraisal
for such shares in accordance with the DGCL) at the Effective Time will be
converted into the right to receive the Merger Consideration. The Merger
Consideration will consist of the Cash Consideration and the Stock
Consideration. The Cash Consideration will consist of $13.50 in cash, plus, in
the event that the Closing does not occur prior to July 31, 1997, for each full
calendar month ending prior to the Closing, commencing with August 1997, an
additional amount of $.084375 in cash, provided that such additional amount
shall be prorated through and including the Closing Date for a partial month on
the basis of a 30-day month. The Stock Consideration will consist of .1525424
shares (the "Exchange Ratio") of Jacor Common Stock as long as the Jacor Closing
Price is equal to or greater than $26.50 per share and equal to or less than
$32.50 per share. If the Jacor Closing Price is less than $26.50 per share, the
Exchange Ratio shall be .1525424 multiplied by a fraction the numerator of which
is $26.50 and the denominator of which is the Jacor Closing Price. If the Jacor
Closing Price is greater than $32.50 per share, the Exchange Ratio shall be
.1525424 multiplied by a fraction the numerator of which is $32.50 and
denominator of which is the Jacor Closing Price. Based on the number of shares
of Premiere Common Stock and options and warrants to purchase Premiere Common
Stock outstanding on the date hereof, pursuant to the Merger Agreement and the
Stock Purchase Agreement, the Cash Consideration is expected to be approximately
$136.5 million and the Stock Consideration is expected to be approximately 1.55
million shares of Jacor Common Stock (assuming the Jacor Closing Price is not
less than $26.50 per share). See "THE MERGER--Conversion of Premiere Common
Stock for the Merger Consideration."
AT THE EFFECTIVE TIME, ALL OUTSTANDING SHARES OF PREMIERE COMMON STOCK WILL
CEASE TO BE OUTSTANDING AND CERTIFICATES REPRESENTING SHARES OF PREMIERE COMMON
STOCK WILL REPRESENT THE RIGHT TO RECEIVE THE MERGER CONSIDERATION. AS SOON AS
POSSIBLE AFTER THE EFFECTIVE TIME, CHASEMELLON SHAREHOLDER SERVICES LLC (THE
"EXCHANGE AGENT") WILL MAIL TRANSMITTAL INSTRUCTIONS TO EACH HOLDER OF RECORD OF
SHARES OF PREMIERE COMMON STOCK AT THE EFFECTIVE TIME, ADVISING THEM OF THE
PROCEDURE FOR SURRENDERING THEIR CERTIFICATES. HOLDERS OF PREMIERE COMMON STOCK
SHOULD NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
REASONS FOR THE MERGER
In late fall of 1996, the Premiere Executive Committee, consisting of
Stephen C. Lehman and Kenin M. Spivak, and senior management began an internal
review of Premiere's operations and long-term growth opportunities. While the
Premiere Executive Committee and senior management concluded that Premiere could
continue its growth strategy of internal expansion and selective acquisitions,
they also determined that the growth and prospects of Premiere could be
adversely affected by its lack of strategic affiliation with a major radio
broadcasting company. As a result, the Premiere Executive Committee began to
consider the prospects for such a strategic affiliation. Thereafter,
representatives of Premiere had discussions with certain parties which had
indicated an interest in acquiring Premiere. On April 7, 1997, Premiere and
Jacor entered into the Merger Agreement. Among the factors considered by the
Premiere Board in approving the Merger Agreement were (i) the implied premium
over recent market prices of the
8
Premiere Common Stock, (ii) the opportunity to participate, through the portion
of the Merger Consideration consisting of Jacor Common Stock, in the continued
growth of Premiere, and (iii) the receipt by the Premiere Board of the written
opinion of Alex. Brown & Sons, Incorporated ("Alex. Brown") that as of April 1,
1997 and based on and subject to certain matters stated therein, the Merger
Consideration was fair from a financial point of view to holders of Premiere
Common Stock. For a description of all the material factors considered by the
Premiere Board and the background of the transaction, see "THE MERGER--
Background of and Reasons for the Merger."
OPINION OF PREMIERE FINANCIAL ADVISOR
Alex. Brown has delivered an opinion to the Premiere Board to the effect
that, as of April 1, 1997, the consideration to be paid by Jacor in the Merger
is fair, from a financial point of view, to the stockholders of Premiere. The
full text of the opinion of Alex. Brown, which includes a description of the
assumptions made, matters considered and scope of review undertaken by such firm
in rendering its opinion, is attached hereto as Annex IV and should be read in
its entirety.
TERMINATION; TERMINATION FEE
The Merger Agreement may be terminated at any time prior to the Effective
Time (a) by mutual written consent; (b) by either party if (i) the Effective
Time shall have not occurred on or before August 31, 1997, (ii) any governmental
authority shall have issued an injunction, order, or decree enjoining or
otherwise prohibiting the Merger and such injunction, order, or decree shall
have become final and non-appealable (provided that the party seeking to so
terminate the Merger Agreement shall have used all reasonable efforts to remove
such injunction, order, or decree), or (iii) if any condition to the terminating
party's obligations to consummate the transactions contemplated thereby is
incapable of being satisfied on or prior to August 31, 1997; provided, however,
that the terminating party has not breached the terms of the Merger Agreement;
or (c) by Jacor, if ACI shall have breached any material representation or
warranty, or failed to perform any covenant or duty contained in the Stock
Purchase Agreement, other than a breach or noncompliance that would not
materially affect the benefits Jacor is receiving from the Stock Purchase
Agreement.
If Premiere terminates the Merger Agreement by reason of Jacor's breach
thereof or if the Merger otherwise fails to be consummated by reason of Jacor's
breach of the Merger Agreement, Premiere shall be entitled to recover from
Jacor, as Premiere's sole and exclusive remedy, liquidated damages in the amount
of $15.0 million plus its reasonable attorneys fees and expenses incurred in
connection with collecting such liquidated damages. See "THE MERGER--Certain
Terms of the Merger Agreement and Related Agreements--Termination; Termination
Fee."
FINANCING ARRANGEMENTS
Jacor expects that the funds necessary to pay the Cash Consideration will be
obtained from a combination of one or more of the following sources: borrowings
under the June 1996 credit facility, as amended and restated in February 1997
(the "Credit Facility"), JCC's working capital, and proceeds from a possible
public offering of Jacor's equity and/or debt securities pursuant to its omnibus
shelf registration statement providing for the sale from time to time of up to
$250.0 million of Jacor securities (the "1997 Offering"). See "THE
MERGER--Financing Arrangements."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Members of the Premiere Board or their affiliates (including three persons
who are also on the Board of Directors of ACI) and members of senior management
of Premiere have interests that present them with actual or potential conflicts
of interest in connection with the Merger. Each member of the Premiere Board and
senior management is the holder of options and/or warrants to acquire Premiere
Common
9
Stock. As a result of the Merger, all options and warrants not vested at the
Effective Time will become fully vested and immediately exercisable. See "THE
MERGER--Interests of Certain Persons in the Merger--Stock Options." In addition,
in connection with the Merger and conditioned upon the consummation thereof,
Premiere's existing employment agreements with Stephen C. Lehman, Kraig T.
Kitchin, Timothy M. Kelly, Daniel M. Yukelson, Robert W. Crawford and Louise G.
Palanker have been amended. See "THE MERGER--Interests of Certain Persons in the
Merger--Employment Agreements."
Also, pursuant to the Stock Purchase Agreement, JCC will purchase all the
common stock and common stock equivalents of ACI. The purchase price to be paid
by JCC will be an amount equal to the amount ACI would receive in the Merger
(payable in the same allocation of cash and Jacor Common Stock as would be
payable in the Merger), plus the amount, if any, by which ACI's cash and cash
equivalents exceed its liabilities as of the consummation of the sale. The Stock
Purchase Agreement permits the shareholders of ACI to avoid the liquidation of
ACI. This benefit will not result in a cost to Premiere or Jacor, does not have
an effect on the tax treatment of the Merger to Premiere's other stockholders
and does not affect the consideration to be paid by Jacor to Premiere's
stockholders in the Merger. See "THE MERGER--Interests of Certain Persons in the
Merger--ACI."
REGULATORY MATTERS
The receipt of certain federal and state governmental or regulatory
approvals is required in order to consummate the Merger, including 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 Premiere have agreed in the Merger Agreement to use their
reasonable best efforts to obtain such approvals or waivers, but there can be no
assurance as to when or if such approvals or waivers will be obtained such that
the Merger may be consummated. See "THE MERGER--Regulatory Matters."
NASDAQ LISTING
The Jacor Common Stock is presently listed on the Nasdaq National Market.
Jacor will use its reasonable best efforts to cause the shares of Jacor Common
Stock comprising the Stock Consideration to be listed for trading on the Nasdaq
National Market. See "THE MERGER--Nasdaq Listing."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Under the federal income tax backup withholding rules, unless an exemption
applies, the Exchange Agent will be required to withhold, and will withhold, 31%
of all payments to which a holder or other payee is entitled pursuant to the
Merger, unless the holder or other payee provides a tax identification number
(social security number, in the case of an individual, or employer
identification number in the case of other Premiere stockholders) and certifies
that such number is correct. Any amounts withheld will be allowed as a credit
against the holder's federal income tax liability.
ALL PREMIERE STOCKHOLDERS SHOULD READ CAREFULLY THE DISCUSSION IN "THE
MERGER--CERTAIN FEDERAL INCOME TAX CONSEQUENCES" 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 Premiere Common Stock
will be entitled to demand appraisal rights in respect of such shares of
Premiere Common Stock under Section 262 of the
10
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 V to this
Prospectus/ Information Statement. See "THE MERGER--Appraisal or Dissenters'
Rights."
RECENT DEVELOPMENTS
Since the enactment of the Telecommunications Act of 1996 (the "Telecom
Act") on February 8, 1996 through April 28, 1997, Jacor has acquired and entered
into binding agreements to acquire 107 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 $1.5 billion. Jacor
has also disposed or agreed to dispose of nine radio stations for approximately
$75.0 million. In addition, Jacor has exchanged one television station and three
radio stations for 11 radio stations in transactions valued in the aggregate at
approximately $245.0 million. Jacor also acquired for approximately $61.0
million substantially all of the assets (i) relating to the broadcast
distribution and related print and electronic media publishing businesses (the
"EFM Acquisition") of EFM Media Management, Inc., EFM Publishing, Inc. and PAM
Media, Inc. (collectively, the "EFM Companies") and (ii) of Standard Broadcast
Service, Inc., a satellite systems integrator, Internet service provider and
communications consultant focused on the radio broadcasting industry, which
conducted business under the trade name NSN Network Services, Ltd. ("NSN Network
Services"). The business of the EFM Companies included the ownership and
distribution of the RUSH LIMBAUGH and DR. DEAN EDELL programs, syndicated talk
programming for radio broadcasting, which contracts were assigned to Jacor in
the acquisition.
Of the above described acquisitions that are currently pending, Jacor will
acquire 43 radio stations for a purchase price aggregating approximately $244.8
(including $23.9 million already advanced by Jacor to fund various escrow
deposits). Jacor is currently negotiating additional acquisitions. 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
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following sets forth summary unaudited pro forma financial information
derived from the Unaudited Pro Forma Financial Information included elsewhere in
this Prospectus/Information Statement. The unaudited pro forma condensed
consolidated statements of operations for the year ended December 31, 1996, give
effect to each of the following transactions as if such transactions had been
completed January 1, 1996: (i) the Merger, (ii) the EFM Acquisition, (iii)
Jacor's 1996 acquisitions of Citicasters Inc. ("Citicasters") and Noble
Broadcast Group, Inc. ("Noble"), the acquisition of the Selected Gannett Radio
Stations (as defined herein) and the Tampa Television Station divestiture, and
other immaterial acquisitions completed in 1996, (iv) Jacor's 1997 acquisition
of Regent Communications, Inc. ("Regent") and other 1997 immaterial acquisitions
both completed and pending as of March 31, 1997 ((iii) and (iv) collectively,
the "Radio Station Acquisitions"). The pro forma condensed consolidated balance
sheet as of December 31, 1996 has been prepared as if the Merger and the other
Pending Transactions had occurred on December 31, 1996.
The Summary 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 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
Premiere, included herein, and for Jacor, incorporated by reference in this
Prospectus/ Information Statement.
PRO FORMA
(DOLLARS IN THOUSANDS)
YEAR ENDED
DECEMBER 31, 1996
-----------------
STATEMENT OF OPERATIONS DATA:
Net revenue.................................................................................. $ 526,219
Broadcast operating expenses................................................................. 361,449
Depreciation and amortization................................................................ 87,732
Corporate general and administrative expenses................................................ 9,108
Operating income............................................................................. 65,627
Interest expense............................................................................. (80,195)
OTHER FINANCIAL DATA:
Broadcast cash flow.......................................................................... $ 164,770
Broadcast cash flow margin................................................................... 31.3%
EBITDA....................................................................................... $ 153,359
Capital expenditures......................................................................... 13,102
AS OF
DECEMBER 31, 1996
-----------------
BALANCE SHEET DATA:
Working capital.............................................................................. $ 50,110
Intangible assets............................................................................ 1,986,578
Total assets................................................................................. 2,346,826
Long-term debt............................................................................... 897,500
LYONs........................................................................................ 118,682
Total shareholders' equity................................................................... 818,161
12
SUMMARY HISTORICAL FINANCIAL DATA
The following sets forth summary historical financial data for Jacor and
Premiere for the three years ended December 31, 1996 and the three month periods
ended March 31, 1996 and 1997. The comparability of the historical consolidated
financial data reflected in this 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, "SELECTED HISTORICAL
FINANCIAL DATA OF JACOR," "SELECTED HISTORICAL FINANCIAL DATA OF PREMIERE" and
the Consolidated Financial Statements and the Notes thereto for Jacor,
incorporated herein by reference, and for Premiere, included herein.
HISTORICAL
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- --------------------
JACOR 1994 1995 1996 1996 1997
---------- ---------- ---------- --------- ---------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA
Net revenue............................................. $ 107,010 $ 118,891 $ 223,761 $ 30,074 $
Broadcast operating expenses............................ 80,468 87,290 151,056 23,871
Depreciation and amortization........................... 9,698 9,483 23,404 2,619
Corporate general and administrative expenses........... 3,361 3,501 7,629 1,139
Operating income........................................ 13,483 18,617 39,360 2,445
Net income.............................................. 7,852 10,965 5,105 891
OTHER FINANCIAL DATA
Broadcast cash flow..................................... $ 26,542 $ 31,601 $ 72,696 $ 6,203 $
Broadcast cash flow margin.............................. 24.8% 26.6% 32.5% 20.6% %
EBITDA.................................................. $ 23,181 $ 28,100 $ 62,764 $ 5,064 $
Capital expenditures.................................... $ 2,221 $ 4,969 $ 11,852 $ 3,437 $
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- --------------------
PREMIERE 1994 1995 1996 1996 1997
---------- ---------- ---------- --------- ---------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA
Net revenue............................................. $ 15,979 $ 18,319 $ 23,826 $ 4,877 $
Operating expenses...................................... 12,948 13,300 16,950 3,632
Depreciation and amortization........................... 938 1,265 1,908 412
Operating income........................................ 2,093 3,754 4,967 833
Net income.............................................. 1,985 2,556 2,436 666
OTHER FINANCIAL DATA
EBITDA.................................................. $ 3,031 $ 5,019 $ 6,875 $ 1,245 $
Capital expenditures.................................... $ 470 $ 631 $ 1,250 $ 442 $
13
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 Premiere and unaudited pro forma per share data. The data set forth
below should be read in conjunction with the Jacor and Premiere audited
financial statements, including the notes thereto, which are incorporated by
reference or 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.
YEAR ENDED DECEMBER
31, 1996
----------------------
JACOR PREMIERE
--------- -----------
HISTORICAL:
Earnings per share........................................................................ $ 0.30 $ 0.28
Cash dividends per share.................................................................. -- --
Book value per share...................................................................... $ 15.56 $ 5.72
PRO FORMA:
Loss per share............................................................................ $ (0.14)
Cash dividends per share.................................................................. --
Book value per share...................................................................... $ 18.80
COMPARATIVE MARKET PRICES AND DIVIDENDS
Both Jacor Common Stock and Premiere Common Stock are quoted on the Nasdaq
National Market. Jacor Common Stock is quoted under the symbol "JCOR" and
Premiere Common Stock is quoted under the symbols "PRNI" for the Common Stock
and "PRNIA" for the Class A Stock.
The table below sets forth, for the calendar quarters indicated, the
reported high and low per share sales prices of Jacor Common Stock and Premiere
Common Stock, as reported on the Nasdaq National Market. The Class A Stock began
trading on the Nasdaq National Market on January 26, 1996.
PREMIERE
------------------------------------------
JACOR
COMMON STOCK COMMON STOCK CLASS A STOCK
-------------------- -------------------- --------------------
HIGH LOW HIGH LOW HIGH LOW
--------- --------- --------- --------- --------- ---------
1995
First Quarter........................................ $ 14.50 $ 12.00 $ 7.17 $ 4.50 $ -- $ --
Second Quarter....................................... 17.00 13.00 8.00 5.67 -- --
Third Quarter........................................ 19.25 15.00 19.33 7.17 -- --
Fourth Quarter....................................... 17.50 15.00 14.67 10.33 -- --
1996
First Quarter........................................ $ 22.25 $ 16.00 $ 14.33 $ 10.67 $ 13.17 $ 10.17
Second Quarter....................................... 31.25 19.50 16.00 11.25 15.63 10.75
Third Quarter........................................ 35.00 24.75 14.25 9.88 12.88 10.00
Fourth Quarter....................................... 36.38 23.75 13.00 10.00 12.75 9.75
1997
First Quarter........................................ $ 31.75 $ 25.63 $ 16.50 $ 12.75 $ 16.13 $ 11.50
Second Quarter
(through April 25, 1997)........................... $ 28.75 $ 26.50 $ 17.00 $ 15.75 $ 17.00 $ 15.75
14
On April 7, 1997, 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 (i) Jacor Common Stock was $28.00, (ii) Common Stock was $16.00 and
(iii) Class A Stock was $16.00. On May , 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 (i) Jacor
Common Stock was $ and (ii) Premiere Common Stock was $ (or $
on an equivalent per share basis, calculated as described above) for the Common
Stock and $ (or $ on an equivalent per share basis, calculated as
described above) for the Class A Stock.
Neither Jacor nor Premiere has declared any cash dividends 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 existing credit facilities, Jacor is
prohibited from paying cash dividends on Jacor Common Stock except as may be
provided therein. See "THE MERGER-- Financing Arrangements."
Premiere declared a one-for-two stock dividend, effected in the form of a
three-for-two stock split, of Class A Stock payable on March 25, 1996 to all
holders of Common Stock and Class A Stock on the April 1, 1996 record date for
such dividend (the "Class A Dividend").
On April 11, 1997, there were approximately 1,500 holders of record of Jacor
Common Stock, and approximately 58 and 67 holders of record of Common Stock and
Class A Stock, respectively, and an aggregate of approximately 2,850 beneficial
holders of Premiere Common Stock.
15
RISK FACTORS
PENDING TRANSACTIONS. Except for the Merger, 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 Federal
Communications Commission ("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 has received a second request for information from the Antitrust
Division of the Department of Justice (the "Antitrust Division") relating to
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 second request.
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 programming and 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.
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 businesses. There can be no assurance that Jacor's management will
be able to manage effectively the acquired businesses 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 several mergers and acquisitions 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.
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
divested WKRQ-FM in Cincinnati and agreed to inform the Antitrust
16
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 less than 1.0% of Jacor's net revenue. Jacor has
completed its response to the civil investigative demand relating to JSAs
received from the Antitrust Division, although the investigation may still be
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. Some 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 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.
17
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, fixed charge coverage and leverage ratios. See "UNAUDITED PRO
FORMA FINANCIAL INFORMATION."
SHARE OWNERSHIP BY ZELL/CHILMARK. Zell/Chilmark Fund L.P. ("Zell/Chilmark")
currently holds approximately 38.3% 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 Jacor Common Stock
issuable upon conversion of the LYONs, the Citicasters Warrants and the Regent
Warrants, all as defined herein.
18
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 and Section 21E of the Exchange 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. Neither Jacor nor Premiere
undertakes any 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 and Premiere caution the reader, however, that this list
of risk factors may not be exhaustive.
AUTHORIZATION BY STOCKHOLDERS AND BOARDS OF DIRECTORS
This Prospectus/Information Statement is being furnished to the holders of
Premiere Common Stock in connection with the approval of the Merger Agreement
upon action taken by written consent of the holders of shares representing a
majority of the voting power of the Premiere Common Stock.
On April 3, 1997, the Premiere Board unanimously concluded that the terms of
the draft of the Merger Agreement presented to the Premiere Board were fair to,
and in the best interests of, the holders of Premiere Common Stock, approved the
draft of the Merger Agreement presented to it, and authorized management to
execute final documents, subject to such modifications approved by the Premiere
Executive Committee. Under the DGCL, the affirmative vote of the holders of a
majority of the voting power represented by the outstanding shares of Premiere
Common Stock is required to approve the Merger. As of the Premiere Record Date,
there were issued and outstanding 3,654,121 shares of Common Stock and 4,255,794
shares of Class A Stock. Holders of record of Common Stock are entitled to ten
votes per share and holders of record of Class A Stock are entitled to one vote
per share on all matters submitted to a vote of stockholders. Therefore, of the
total 40,798,004 possible votes as of the Premiere Record Date, 20,399,003 votes
are required to approve the Merger.
On April 7, 1997 (the "Premiere Record Date"), the Consenting Stockholders
entered into the Shareholders' Agreement with Jacor and JCC, pursuant to which
the Consenting Stockholders are required to execute and deliver to Premiere
irrevocable written consents approving the Merger Agreement. Concurrently with
the execution of the Shareholders' Agreement, ACI and Messrs. Lehman and Kitchin
delivered written consents to Premiere representing an aggregate of 781,212
shares of Class A Stock, 955,789 shares of Common Stock, and 10,339,102 votes
(or approximately 25% of the votes as of the Premiere Record Date). On April ,
1997, Messrs. Lehman and Kelly and Ms. Palanker delivered written consents to
Premiere representing an aggregate of 223,008 shares of Class A Stock, 1,052,651
shares of Common Stock, and 10,749,518 votes (or approximately 26% of the votes
as of the Premiere Record Date). The written consents delivered on April 7 and
April , 1997 represent an aggregate of approximately 52% of the votes as of
the Record Date, are irrevocable and were sufficient under the DGCL, upon
receipt by Premiere, to approve the Merger Agreement. ACCORDINGLY, PREMIERE IS
NOT ASKING ANY PREMIERE STOCKHOLDER FOR A PROXY AND PREMIERE STOCKHOLDERS ARE
REQUESTED NOT TO SEND A PROXY. NO MEETING OF PREMIERE 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 the DGCL. No additional corporate action by Jacor or
Premiere, and no further action by the Premiere stockholders, will be required
to effect the Merger.
19
THE MERGER
The descriptions of the Merger Agreement, Shareholders' Agreement and Stock
Purchase Agreement set forth in this Section include all material terms of such
agreements but do not purport to be complete and are qualified in their entirety
by reference to the Merger Agreement, Shareholders' Agreement and Stock Purchase
Agreement which are attached as Annexes I, II and III, respectively, to this
Prospectus/ Information Statement and are incorporated by reference herein.
BACKGROUND OF AND 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 through April 28, 1997,
Jacor has spent and agreed to spend approximately $1.7 billion on acquisitions.
Jacor continues to negotiate for additional acquisitions in its existing
locations and in new locations. Jacor identified Premiere as a potential
acquisition candidate in February 1997 and began to review information regarding
Premiere at that time.
In the summer of 1996, members of the Premiere Executive Committee were
approached by two parties ("Company A," a radio programming company, and
"Company B," a radio broadcasting company, respectively) which expressed an
interest in effecting a business combination with Premiere. Stephen C. Lehman
and Kenin M. Spivak, the President of Premiere and ACI, respectively, and the
members of the Premiere Executive Committee had preliminary conversations with
such parties, the first of which indicated an interest in an all stock
combination based upon the respective market values of Company A and Premiere,
and the second of which indicated an interest in a cash acquisition of Premiere
for $14.00 per share; however, no formal offer was received by Premiere.
In the fall of 1996, the Premiere Executive Committee also had informal
discussions with representatives and shareholders of a radio programming company
("Company C"), and a broad-based media company ("Company D"), with respect to
possible combinations. No proposal resulted from the discussions.
Thereafter, in late fall of 1996, the Premiere Executive Committee and
senior management began an internal review of Premiere's operations and
long-term growth opportunities. While the Premiere Executive Committee and
senior management concluded that Premiere could continue its growth strategy of
internal expansion and selective acquisitions, they also determined that the
growth and prospects of Premiere could be adversely effected by its lack of
strategic affiliation with a major radio broadcasting company. In reaching this
conclusion, the Premiere Executive Committee and senior management were mindful
of the fact that Premiere's principal competitors are owned or controlled by
entities which also own and operate major groups of radio stations. The Premiere
Executive Committee and senior management believe that while Premiere can
continue to grow as an independent entity, Premiere's ability to launch new
programs and sustain existing programs could be impeded without an affiliation
with a major radio broadcasting company. Accordingly, the Premiere Executive
Committee began to consider the prospects for such a strategic affiliation.
Commencing in October 1996 and continuing through January 1997, the Premiere
Executive Committee had several meetings and conversations with representatives
of a publicly held radio broadcasting company ("Company E") which indicated an
interest in acquiring Premiere. In the discussions, the representative of
Company E indicated an interest in acquiring Premiere for Company E stock valued
at $15.00 per share of Premiere Common Stock and a willingness to consider the
issuance of additional Company E securities if the acquisition consideration did
not have a trading value of at least $16.50 per share of Premiere Common Stock
within a specified period of time. As a result of a decline in the market price
of Company E's stock, Company E suspended the discussions. During this period of
time, Premiere approached Company D and another broad based media company
("Company F") about possible business combinations involving Premiere. Company F
executed a confidentiality agreement and obtained confidential information, but
did not make an offer. Company D did not express an interest in a transaction.
Also,
20
at about this time, Premiere was approached by a radio programming company
("Company G") about a possible business combination.
In December 1996, the Premiere Executive Committee determined that a managed
sale process would best enable Premiere's stockholders to receive the highest
value for their Premiere Common Stock and would minimize the adverse effects on
Premiere's business which could result from a public auction. Premiere thereupon
retained Alex. Brown to assist Premiere in developing a list of companies which
might be interested in acquiring Premiere and would likely be able to consummate
such a transaction. Alex. Brown was also engaged to assist Premiere in
evaluating any offers, and if Premiere determined to accept any such offer, to
express its opinion as to the fairness of such offer to Premiere's stockholders.
See "THE MERGER--Opinion of Premiere Financial Advisor." At such time, ACI
indicated that it would consider waiving its right under the Stock Purchase
Agreement dated July 28, 1995 between ACI and Premiere (the "1995 Agreement") to
designate the financial advisor to be retained by Premiere in connection with a
potential business combination.
Premiere identified six potential acquirors, four of which were contacted
after December 23, 1996 on its behalf by Alex. Brown and two of which were
contacted by the Premiere Executive Committee. Four of the six potential
acquirors identified by Premiere (including Jacor, Company A, Company E and
Company H, a radio broadcasting company) indicated an interest in potentially
acquiring Premiere. Company A was interested in acquiring Premiere for stock
based on the relative market values of Company A and Premiere, with no premium
to be paid for Premiere. Such conversations were not pursued. Jacor, Company E
and Company H each undertook "due diligence" with respect to Premiere.
In late February 1997, representatives of Jacor indicated that Jacor had an
interest, on a preliminary basis, in acquiring Premiere for either $17.50 per
share in cash, or $18.00 per share, consisting of $9.00 in cash and $9.00 in
Jacor Common Stock.
In early March 1997, representatives of Jacor and their advisors met with
the Premiere Executive Committee, certain of Premiere's senior management,
Premiere's advisors (including representatives of Alex. Brown) and with
representatives of ACI to discuss a possible transaction. As a result of such
meetings, a preliminary understanding was reached whereby Jacor would acquire
Premiere, in a partially tax-free transaction, for $18.00 per share of Premiere
Common Stock, consisting of $9.00 in cash and $9.00 in Jacor Common Stock, and
would acquire ACI for the same consideration, based upon the number of shares of
Premiere Common Stock and share equivalents owned by ACI. As a condition to
Jacor's offer, Jacor required that the holders of a majority of the voting power
of Premiere's stock consent to the Merger concurrently with the execution of the
definitive Merger Agreement.
As discussions continued in March 1997, the proposal was modified, after it
was determined that the proposal was likely to be fully taxable, to reflect the
terms ultimately embodied in the Merger Agreement. During that period through
the execution of the Merger Agreement and Stock Purchase Agreement on April 7,
1997, the parties and their advisors continued their due diligence and the
negotiation of the definitive agreements.
During January through March 1997, the Premiere Executive Committee also
continued to have discussions with representatives of Company A, Company E,
Company G and Company H.
Company A continued to express an interest in a stock combination based on
the respective market values of the stock of Company A and Premiere. Ultimately,
Company E orally indicated an interest in acquiring Premiere in a transaction
potentially valued at $19.00 per share of Premiere Common Stock, consisting of
approximately 40% cash and approximately 60% in Company E's Common Stock.
Company G indicated that it would not proceed so long as the price remained in
the range required by the Premiere Executive Committee (i.e., at least $17.00
per share). Company H indicated a willingness to consider a cash offer at a
price of approximately $17.00 per share, but never made a proposal.
While the Premiere Executive Committee and Premiere Board carefully
considered Company E's proposal, they determined to proceed to enter into a
definitive merger agreement with Jacor. The principal
21
reasons for favoring an agreement with Jacor as opposed to Company E were that
the Company E proposal was predominantly for stock, whereas the transaction with
Jacor is predominantly for cash. The Premiere Executive Committee and Premiere
Board noted that in a transaction with Company E, the Company E shares issued to
Premiere's stockholders would constitute a substantial component of Company E's
capitalization, and there was concern that Premiere stockholders who wished to
dispose of such shares following such a transaction would have difficulty in
doing so at the market price used to value the proposed transaction, and would
thus be exposed to significant market risk in a security with a history of
market volatility. Additionally, the negotiations with Jacor were substantially
further advanced, and it was believed that a transaction with Jacor could be
entered into and consummated more rapidly than a transaction with Company E.
Throughout the period from summer 1996 through the end of March 1997, the
Premiere Executive Committee internally briefed the members of the Premiere
Board on the progress of discussions regarding possible business combinations.
At a meeting of the Premiere Board held on March 28, 1997, the Premiere
Executive Committee and counsel to Premiere reviewed in detail the events taking
place with respect to possible business combinations involving Premiere. The
Premiere Board also reviewed drafts of the Merger Agreement, Shareholders'
Agreement and Stock Purchase Agreement. During this meeting, ACI waived its
right to designate a financial advisor for Premiere.
At its April 3, 1997 meeting, the Premiere Board determined that the Merger
is fair to Premiere and in the best interests of its stockholders. Accordingly,
at such meeting the Board approved the draft of the Merger Agreement presented
to it, and authorized management to execute final agreements, subject to such
modifications to be approved by the Premiere Executive Committee. The Premiere
Board also approved the Shareholders' Agreement and the Stock Purchase
Agreement. In addition, the Premiere Board noted that pursuant to the Stock
Purchase Agreement, ACI would waive certain rights to indemnification under the
terms of the 1995 Agreement which related to services to be provided to Premiere
by ACI. In order to assist ACI to waive such rights, the Premiere Board agreed
that ACI would not be required to provide any services to Premiere pursuant to
such agreement through the Effective Time. The Premiere Board also waived
certain rights to redeem warrants to purchase Premiere Common Stock held by ACI
for a period ending 60 days after the termination of the Merger Agreement. In
waiving such rights, the Premiere Board noted that neither Premiere nor its
stockholders would receive any benefit from the redemption of such warrants
prior to the Effective Time.
After the April 3, 1997 Premiere Board meeting, the Premiere Executive
Committee and counsel for Premiere continued to have discussions with
representatives of Jacor. On April 7, 1997 the Premiere Executive Committee
approved the final forms of the Merger Agreement, Shareholders' Agreement and
Stock Purchase Agreement, and authorized management of Premiere to execute the
Merger Agreement and Shareholders' Agreement. At that time, the agreements were
executed by the applicable parties.
The determination by the Premiere Board was based on consideration of a
number of factors. The following list includes all material factors considered
by the Premiere Board in its evaluation of the Merger and the Merger Agreement:
(i) the Merger Consideration negotiated with Jacor and the implied premium
over the recent market prices of Premiere Common Stock;
(ii) the strategic and financial alternatives available to Premiere,
including remaining an independent company;
(iii) the Premiere Board's receipt of the written opinion of Alex. Brown
that, as of April 1, 1997 and based on and subject to certain matters stated
therein, the Merger Consideration was fair, from a financial point of view, to
holders of Premiere Common Stock;
(iv) the Premiere Board's review of the historical market prices of shares
of Premiere Common Stock compared to the number of shares of Jacor Common Stock
to be received as the stock portion of the Merger Consideration;
22
(v) the Premiere Board's review of presentations by, and discussion of the
terms and conditions of the Merger Agreement with senior executive officers of
Premiere, representatives of its legal counsel and representatives of Alex.
Brown;
(vi) certain publicly available information with respect to the financial
condition and results of operations of Jacor as well as presentations made by
Alex. Brown regarding the business, financial condition and prospects of Jacor;
(vii) that the Merger Agreement and Stock Purchase Agreement provide for
equal treatment of all Premiere stockholders, including the shareholders of ACI,
with respect to the allocation of the cash and stock portion of the Merger
Consideration and provides for downside protection with respect to the stock
portion through the Effective Time;
(viii) that Jacor has a history of closing acquisition transactions on a
timely basis, and the fact that the Merger Agreement provides for the payment of
interest on the cash portion of the Merger Consideration if the Effective Time
is later than July 31, 1997;
(ix) that the holders of shares representing a majority of the voting power
of the Premiere Common Stock were willing to execute the Shareholders' Agreement
which was a condition to the execution of the Merger Agreement by Jacor, thereby
allowing all Premiere stockholders the opportunity to benefit from the Merger.
(x) that the portion of the Merger Consideration which is subject to
variation constitutes only 25% of the Merger Considerations and that the total
Merger Consideration payable to Premiere's stockholders could vary by less than
6%;
(xi) that the Jacor Common Stock has historically been more liquid than the
Premiere Common Stock; and
(xii) that the Merger Agreement with Jacor provides Premiere stockholders
with the opportunity to participate, through the portion of the Merger
Consideration consisting of Jacor Common Stock, in the continued growth of
Premiere, as a wholly-owned subsidiary of Jacor, and of Jacor, and that the
Merger Agreement provides for price protection on the downside (with
corresponding limits on the upside) through the Effective Time with respect to
the Jacor Common Stock portion of the Merger Consideration.
In view of the wide variety of material factors considered in connection
with its evaluation of the Merger, the Premiere Board did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination. In
making its determination, Premiere's Board also considered the risks and
likelihood of achieving the results discussed above. The Premiere Board also
took note of the fact that eleven companies (including Jacor) were contacted
regarding possible business combinations involving Premiere, including two
broad-based media companies, six radio broadcasting companies and three radio
programming companies. For a discussion of the interests of certain members of
Premiere's management and the Premiere Board in the Merger, see "THE
MERGER--Interests of Certain Persons in the Merger."
OPINION OF PREMIERE FINANCIAL ADVISOR
Alex. Brown has delivered its opinion (the "Alex. Brown Opinion") to the
Premiere Board to the effect that, as of April 1, 1997, the Merger Consideration
is fair from a financial point of view, to the stockholders of Premiere (the
"Alex. Brown Opinion").
A copy of the Alex. Brown Opinion dated April 1, 1997 which sets forth the
assumptions made, matters considered, limitations on the scope of the review
undertaken and procedures followed by Alex. Brown in rendering its opinion is
attached hereto as Annex IV, and is incorporated herein by reference. The
Company's stockholders are urged to read the Alex. Brown Opinion in its
entirety. The summary of the Alex. Brown Opinion set forth in this
Prospectus/Information Statement is qualified in its entirety by
23
reference to the full text of such opinion letter. Alex. Brown has consented to
the inclusion of its opinion letter in this Information Statement.
The Alex. Brown Opinion is directed only to the fairness from a financial
point of view of the Merger Consideration in the Merger. Alex. Brown was not
asked to consider, nor did it express any opinion with respect to, the fairness
of any other transaction. Although Alex. Brown took into account discussions
held by Premiere with other interested parties and other potential transactions,
the Alex. Brown Opinion does not constitute a recommendation to any stockholder
as to how such stockholder should vote at any required stockholder's meeting.
It should be understood that, although subsequent developments may affect
the Alex. Brown Opinion, Alex. Brown does not have any obligation to update,
revise or reaffirm its opinion and Premiere's obligation to consummate the
Merger is not conditioned upon an update of the Alex. Brown Opinion.
The following briefly summarizes the procedures followed by Alex. Brown in
reaching its opinion and the basis for and methods of arriving at such opinion.
No limitations were imposed by the Premiere Executive Committee or the Premiere
Board with respect to the investigations made or procedures followed.
Alex. Brown was selected and retained by Premiere to render its opinion to
the Premiere Board and will receive a fee for its services. Alex. Brown was
selected on the basis of its reputation and expertise and its knowledge of the
radio broadcasting and the radio network businesses. As part of its advisory and
investment banking business, Alex. Brown is regularly engaged in the valuation
of businesses and their securities for corporate, estate and other purposes.
In conducting its analysis and arriving at its opinion, Alex. Brown
considered such financial and other factors as they deemed appropriate under the
circumstances including, among others, (i) certain publicly available
information concerning Premiere including the annual reports on Form 10-KSB of
Premiere for each of the fiscal years in the two-year period ended December 31,
1996; (ii) the quarterly reports on Form 10-QSB of Premiere for the quarters
reported during 1996; (iii) certain other internal information, primarily
financial in nature, including unaudited pro forma estimated financial data for
the years ended December 31, 1997-1999 prepared by Premiere's management
concerning the business and operations of Premiere; (iv) certain publicly
available information concerning the trading of, and the trading for, the
Premiere Common Stock; (v) the Merger Agreement; (vi) certain information
concerning preliminary indications of interest in acquiring Premiere and/or a
substantial portion of Premiere over the last six months; (vii) publicly
available information with respect to certain other publicly traded radio
broadcasting and radio network companies; (viii) publicly available information
concerning the nature and terms of other transactions that Alex. Brown
considered relevant to its inquiry and (ix) certain publicly available
information regarding the business, operations, financial results and trading
data of Jacor and its Common Stock. In addition, representatives of Alex. Brown
discussed with certain officers and employees of Premiere the past and current
business operations, financial condition and future prospects of Premiere and
considered such other matters that they reasonably believed to be relevant to
their inquiry. Similar discussions, but on a less detailed basis, were held with
Jacor. Alex. Brown also took into account its assessment of general economic,
market, and financial conditions as well as its experience in connection with
similar transactions and securities valuation generally. The Alex. Brown Opinion
is necessarily based upon conditions as they existed and could be evaluated on
the date it was rendered.
The Alex. Brown Opinion states that, in the course of its review and
analysis and in arriving at said opinion, Alex. Brown assumed and relied upon
the accuracy and completeness of all the financial and other information
provided to Alex. Brown or publicly available, and did not independently verify
any such information. In the course of Alex. Brown's review, nothing came to
Alex. Brown's attention which led Alex. Brown to believe that it would not be
reasonable to rely upon and utilize such information for the purposes of
expressing Alex. Brown's opinion. Alex. Brown did not make or obtain any
independent evaluation or appraisals of any of the properties or facilities of
Premiere.
24
In accordance with recognized professional standards as generally practiced
in the investment banking industry, the fee for Alex. Brown's services is not
contingent upon Alex. Brown's conclusions. Alex. Brown determined, to the best
of its knowledge and in good faith, that neither it nor any of its agents or
employees has a material financial interest in Premiere.
GENERAL. Alex. Brown placed significance on the fact that Premiere is a
radio network company with overall sales derived from a variety of services and
products, including long-form and short-form programming, research services,
production music libraries and jingles. Alex. Brown also placed significance on
the fact that Premiere has very few business peers with which it can be
compared. As a result, evaluating Premiere required certain reasonable
assumptions with respect to Premiere's business model, product mix and cash flow
components.
DISCOUNTED CASH FLOW ANALYSIS. Alex. Brown estimated the present value of
Premiere by discounting the projected free cash flow (or earnings before
interest, depreciation and amortization) over a five-year period. Alex. Brown
utilized Premiere's estimate of pro forma operating cash flow for 1997-1999 and
prepared its own estimate for operating cash flow for the years 2000-2001.
Total enterprise value was calculated by adding the figure for the present
value on the terminal value to the present value of the free cash flows. Alex.
Brown added its estimate of cash and cash equivalents to the total enterprise
value and divided that figure by the fully diluted number of shares outstanding
in order to arrive at an equity value per share for Premiere which ranged from a
low of $12.94 to a high of $16.35 per share.
COMPARABLE COMPANY AND SELECTED PRECEDENT TRANSACTIONS ANALYSES
COMPARABLE COMPANY ANALYSIS. Alex. Brown analyzed the operating data and
ratios of Premiere and Jacor, as well as seven publicly owned radio broadcasting
companies, including American Radio Systems, Chancellor Media, Clear Channel
Communications, Emmis Broadcasting, Evergreen Media, Saga Communications and SFX
Broadcasting. Furthermore, Alex. Brown analyzed the operating data and ratios of
the publicly owned radio programming companies, Westwood One and Metro Networks,
Inc. For each of its analyses, Alex. Brown used the closing share prices as of
April 1, 1997.
The comparisons of analysis of the data and ratios of Premiere and the
selected companies included: (i) the total market capitalization of the Premiere
Common Stock plus estimated net debt (Alex. Brown "Adjusted Market Value") to
the (a) estimated pro forma revenue and EBITDA for calendar 1996; and (b)
estimated pro forma revenue and EBITDA for calendar 1997; and (ii) the common
stock price to the estimated pro forma calendar 1996 and 1997 after-tax cash
flow per share.
SELECTED PRECEDENT TRANSACTIONS. Alex. Brown analyzed four radio group
acquisitions in markets ranked 25-150 and which were announced and/or completed
during the period from March 1, 1996, through December 1, 1996 in terms of the
acquisition price and the multiple of broadcast cash flow. The average multiple
for the four transactions was 10.1x for 1996 and 9.0x for 1997.
STOCK TRADING HISTORY. On the day prior to the April 3, 1997 meeting of the
Board of Directors, the share price closed at $16.38. The Merger Consideration
represented an 8.2% premium. The Merger Consideration compared to the 52-week
high and low represented a premium of 7.4% and 77.1%, respectively, on that
date. Alex. Brown also examined the premiums versus the high and low share
prices at conventional interval periods prior to the public announcement of the
transaction. As of February 18, 1997 the premium was 14.3% versus the closing
price on that date, and 7.4% and 38.9% versus the 30 day high and low as of that
date. As of January 7, 1997 the premium was 27.7% versus the closing price on
that date, and 7.4% and 38.9% versus the 60-day high and low as of that date. As
of October 15, 1996 the premium was 70.7% versus the closing price on that date,
and 7.4% and 77.1% versus the 120-day high and low as of that date. As of July
23, 1996 the premium was 50.8% versus the closing price on that date, and 7.4%
and 77.1% versus the 180 day high and low as of that date.
25
OTHER FACTORS. Alex. Brown was engaged by Premiere in late December 1996 to
assist Premiere in considering its alternatives following an unsolicited
indication of interest from a large, publicly-traded radio group about a
potential business combination. The original intention of Premiere was for Alex.
Brown to advise it on the process generally and to provide a fairness opinion if
a transaction with this radio group was consummated. Premiere then asked Alex.
Brown to contact four other large publicly-traded radio groups on its behalf and
inquire about a potential business combination with Premiere. Premiere and Alex.
Brown decided that a managed sale of Premiere greatly reduced the business risks
associated with a public auction in connection with which Alex. Brown would
contact numerous companies in the industry with which Premiere transacted
business. Premiere and Alex. Brown also determined that a larger scale auction
was unlikely to attract a higher value for Premiere. Only two of the four
companies contacted by Alex. Brown, including Jacor, showed significant
interest. Thereafter, Premiere and Alex. Brown determined that Jacor's offer was
superior to the prior existing offer and to a verbal indication of interest from
the second interested party.
The summary set forth above is not a complete description of the analyses
performed by Alex. Brown. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances.
The Alex. Brown opinion is not, by definition, amenable to summary description.
No single analytical methodology used by Alex. Brown was critical to its
overall conclusion, as each analytical technique has its inherent strengths and
weaknesses. The nature of available information may further affect the value of
any particular methodology or technique. Alex. Brown's conclusion was based upon
all of the analyses and factors that it considered taken as a whole and also on
the application of Alex. Brown's experience and judgment. Its conclusion
involved significant elements of subjective judgment and qualitative analyses.
Accordingly, Alex. Brown believes that its analyses must be considered as a
whole and that to focus upon specific portions of such analyses and factors
would create an incomplete and misleading view of the process underlying the
preparation of the Alex. Brown Opinion. Alex. Brown's analyses and opinion were
based upon the forecasts and projections of future results which are not
necessarily indicative of actual future results.
ALEX. BROWN'S FEE ARRANGEMENT. Premiere's engagement letter with Alex.
Brown provides that Alex. Brown will receive a higher fee if the acquiring party
was contacted on Premiere's behalf by Alex. Brown with Premiere's consent than
if the acquiring party was contacted by Premiere. If the acquiring party was
contacted by Alex. Brown on behalf of Premiere with Premiere's consent, Alex.
Brown will receive a fee in the amount of 7/8 of 1.0% of the value of all cash
and securities paid by the acquiring party to Premiere's stockholders and
certain non-employee option and warrant holders (the "Aggregate Consideration").
In addition, to the extent that the per share price of the Aggregate
Consideration exceeds $17.15 per share, Alex. Brown will receive incremental
fees in an amount equal to 2.0% of the incremental per share Aggregate
Consideration from $17.15 per share to $18.25 per share and 2.5% of the
incremental per share Aggregate Consideration in excess of $18.25 per share. If
the acquiring party was not contacted by Alex. Brown on behalf of Premiere with
Premiere's consent, Alex. Brown would receive a fee in an amount equal to 1/4 of
1% of the Aggregate Consideration. In either case, Premiere will reimburse Alex.
Brown up to $25,000 of its out-of-pocket expenses.
Jacor was contacted by Alex. Brown on Premiere's behalf. Accordingly, Alex.
Brown will receive a fee of approximately $ upon consummation of the Merger.
Certain of the other parties who expressed an interest in acquiring Premiere,
including Company E, were not contacted by Alex. Brown.
In connection with the retention of Alex. Brown by Premiere, Premiere has
agreed to indemnify Alex. Brown and its directors, officers, employees, agents
and stockholders against certain claims and potential liabilities to which it
may be subject arising out of the performance of its services under the
retention agreement between Alex. Brown and the Premiere Board.
26
CONVERSION OF PREMIERE COMMON STOCK FOR THE MERGER CONSIDERATION
At the Effective Time, all outstanding shares of Premiere Common Stock
(other than shares of Premiere Common Stock held: (i) by Jacor or any direct or
indirect subsidiary of Premiere or Jacor, including, as of the Effective Time,
ACI; (ii) in the treasury of Premiere; or (iii) by a holder who has not voted in
favor of the Merger or consented thereto in writing and who has properly
demanded appraisal for such shares in accordance with the DGCL) will cease to be
outstanding, and subject to the terms, conditions and procedures set forth in
the Merger Agreement, holders of shares of Premiere Common Stock shall receive
for each share of Premiere Common Stock $13.50 in cash, plus, in the event that
the Closing does not occur prior to July 31, 1997, for each full calendar month
ending prior to the Closing, commencing with August 1997, an additional amount
of $.084375 in cash, provided that such additional amount shall be prorated
through and including the Closing Date for a partial month on the basis of a
30-day month. In addition, for each share of Premiere Common Stock held,
Premiere stockholders will receive .1525424 shares (the "Exchange Ratio") of
Jacor Common Stock as long as the Jacor Closing Price is equal to or greater
than $26.50 per share and equal to or less than $32.50 per share. If the Jacor
Closing Price is less than $26.50 per share, the Exchange Ratio shall be
.1525424 multiplied by a fraction the numerator of which is $26.50 and the
denominator of which is the Jacor Closing Price. If the Jacor Closing Price is
greater than $32.50 per share, the Exchange Ratio shall be .1525424 multiplied
by a fraction the numerator of which is $32.50 and denominator of which is the
Jacor Closing Price. Notwithstanding the foregoing three sentences: (i) in the
event that subsequent to the date hereof and prior to the Effective Time Jacor
shall pay a dividend in Jacor Common Stock or other equity securities of Jacor,
subdivide the Jacor Common Stock into a larger number of shares (it being
understood that a sale or issuance of Jacor Common Stock shall not constitute
such a subdivision) or combine the Jacor Common Stock into a smaller number of
shares, the Exchange Ratio, the $32.50 ceiling price for the adjustment of the
Exchange Ratio and the $26.50 floor price for the adjustment of the Exchange
Ratio shall be proportionately adjusted; and (ii) in the event that subsequent
to the date hereof and prior to the Effective Time, Jacor pays an extraordinary
cash dividend and the Jacor Closing Price is greater than or equal to $26.50 per
share and less than or equal to $32.50 per share, the Exchange Ratio shall be
adjusted so that the value of the Stock Merger Consideration is the same as it
would have been if such an extraordinary cash dividend had not been paid.
Based on the number of shares of Premiere Common Stock and options and
warrants to purchase Premiere Common Stock outstanding on the date hereof,
pursuant to the Merger Agreement and the Stock Purchase Agreement, the Cash
Consideration is expected to be approximately $136.5 million and the Stock
Consideration is expected to be approximately 1.55 million shares of Jacor
Common Stock (assuming that the Jacor Closing Price is at least $26.50 per
share).
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 Premiere Common 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 Premiere Common Stock shall assert
the right to be paid the fair value of such Premiere Common Stock as described
above, Premiere shall give Jacor notice thereof and Jacor shall have the right
to participate in all negotiations and proceedings with respect to any such
demands. Premiere 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."
27
EXCHANGE OF PREMIERE CERTIFICATES IN THE MERGER
Promptly after the Effective Time, Jacor or the Exchange Agent will mail to
each holder of record of certificates which immediately prior to the Effective
Time represented outstanding shares of Premiere Common Stock (the "Premiere
Certificates") a form of transmittal letter advising such holder of the terms of
the exchange effected by the Merger and the procedure to be used for the
surrender of the Premiere Certificates in exchange for the Merger Consideration
such holder has the right to receive pursuant to the Merger Agreement, without
interest thereon, per share of Premiere Common Stock. PREMIERE STOCKHOLDERS ARE
REQUESTED NOT TO SURRENDER THEIR PREMIERE CERTIFICATES FOR EXCHANGE UNTIL AFTER
THE EFFECTIVE TIME WHEN THE TRANSMITTAL FORM AND INSTRUCTIONS ARE MAILED BY
JACOR OR THE EXCHANGE AGENT AND RECEIVED BY THEM. The Stock Consideration and
the Cash Consideration shall be delivered to such holder as promptly after
proper delivery of the applicable Premiere Certificates and letters of
transmittal to the Exchange Agent.
At and after the Effective Time and until surrendered as provided above,
Premiere Certificates will be deemed to represent, for all purposes, only the
right to receive the Merger Consideration. Upon surrender as provided above,
Premiere Certificates shall be canceled.
CERTAIN TERMS OF THE MERGER AGREEMENT AND RELATED AGREEMENTS
REPRESENTATIONS AND WARRANTIES. 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,
performance and enforceability of the Merger Agreement and related matters,
(iii) each party's capital structure, (iv) 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, and the procurement of required consents or approvals, (v)
the documents and reports filed by each party with the Commission and the
accuracy of the information contained therein, (vi) the accuracy of financial
statements and compliance with other accounting and tax related matters, (vii)
good and marketable title to Premiere's material tangible and intangible
properties and assets, (viii) Premiere's employee benefit plans, (viii) the
absence of material litigation, (ix) the accuracy of the information provided by
each party with respect to this Prospectus/Information Statement, (x) certain
environmental matters, and (xi) certain personnel and employment agreement
issues of Premiere.
COVENANTS. Pursuant to the Merger Agreement, Premiere has agreed that prior
to the Effective Time, except as agreed by the parties at the time of signing of
the Merger Agreement, Premiere shall not without the prior written consent of
Jacor: (i) except in the ordinary course consistent with past practice, as
required by law or in accordance with the provisions of any applicable program
or plan adopted by the Premiere Board, grant any general increase in
compensation or benefits to its employees or to its officers, or enter into or
amend the terms of any severance agreements with its officers; (ii) amend, alter
or revise any existing employment contract, understanding, arrangement or
agreement between Premiere and any person receiving compensation in excess of
$150,000 per year (unless such amendment is required by law) to increase the
compensation or benefits payable thereunder or pursuant thereto or enter into
any new employment contract, understanding, arrangement or agreement with any
person having a salary thereunder in excess of $150,000 that does not have the
unconditional right to terminate without liability (other than liability for
services already rendered) at any time on or after the Effective Time; (iii)
adopt any new employee benefit plan or make any change in or to any existing
plans other than any such change that is 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 Premiere; (iv) sell, lease or otherwise dispose of
any of its assets or acquire any business or assets, except in the ordinary
course of business, for an amount not exceeding $250,000 in the aggregate; (v)
incur any
28
amount of indebtedness for borrowed money or make any loans, advances or capital
contributions to, or investments (other than non-controlling investments in the
ordinary course of business) in, any other person other than a Premiere
subsidiary, or issue or sell any debt securities, other than certain borrowings
otherwise permitted by the Merger Agreement; (vi) authorize, commit to or make
capital expenditures in an amount exceeding $250,000 in the aggregate; (vii)
mortgage or otherwise encumber or subject to any lien any material amount of
properties or assets owned by Premiere or any Premiere subsidiary as of the date
of the Merger Agreement except in the normal course of business; (viii) make any
material change to its accounting (including tax accounting) methods, principles
or practices, except as may be required by generally accepted accounting
principles; (ix) amend or propose to amend its certificate of incorporation or
by-laws or equivalent organizational documents; (x) declare or pay any dividend
or distribution with respect to the Premiere Common Stock; (xi) except pursuant
to stock options or warrants outstanding as of the date of the Merger Agreement,
issue, sell, deliver or agree to issue, sell, deliver (whether through issuance
or granting of options, warrants, commitments, subscriptions or rights to
purchase) any Premiere Common Stock or split, combine, reclassify or subdivide
the Premiere Common Stock; (xii) make any tax election or settle or compromise
any material tax liability for an amount greater than reflected on the Premiere
financial statements; (xiii) directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or other securities; (xiv)
enter into any new lines of business or otherwise make material changes to the
operation of its business; (xv) except as to liabilities accrued on the books of
Premiere as of the date of the Merger Agreement, pay or agree to pay in
settlement or compromise of any suits or claims of liability against Premiere,
its directors, officers, employees or agents, more than an aggregate of $100,000
for all such suits and claims; (xvi) enter into any agreement providing for the
acceleration of payment or performance or other consequence as a result of a
change in control of Premiere; (xvii) take any action or agree, in writing or
otherwise, to take any of the foregoing actions or any action which would make
any representation or warranty in the Merger Agreement materially untrue or
incorrect; or (xviii) commit to any of the foregoing.
The Merger Agreement also obligates Jacor and Premiere to (i) make their
respective filings under the HSR Act within 10 business days after the date of
the Merger and thereafter make any other required submissions under the HSR Act;
(ii) use their reasonable best efforts to cooperate with each other in
determining which governmental filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, governmental
authorities in connection with the execution and delivery of the Merger
Agreement and the consummation of the transactions contemplated thereby, and
timely making all such filings and timely seeking all such consents, approvals,
permits or authorizations; and (iii) use their reasonable best efforts to take,
or cause to be taken, all other action and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and make effective the
transactions contemplated by the Merger Agreement and satisfy the conditions to
the transactions contemplated thereby. However, nothing in the Merger Agreement
shall require Jacor or require Acquisition Corp. to cause the surviving
corporation, to divest or hold separate any station or stations, or asset or
groups of assets, or enter into new arrangements or terminate any existing
arrangement, or take any other specific action requested by any governmental
authorities. The Merger Agreement may be terminated in the event of certain
breaches of a representation, warranty or covenant therein. See "THE
MERGER--Certain Terms of the Merger Agreement--Termination; Termination Fee."
CONDITIONS PRECEDENT TO THE MERGER. In addition to the approval and
adoption of the Merger Agreement and the terms of the Merger by JCC, as the sole
stockholder of Acquisition Corp., and by a majority of the voting power
represented by the outstanding shares of Premiere Common Stock, the obligations
of Jacor and Premiere to effect the Merger are subject to the fulfillment or
waiver of certain conditions specified in the Merger Agreement including, among
others: (i) the continuing accuracy of their respective representations in all
respects by the respective parties contained in the Merger Agreement except to
the extent that the aggregate effect of the inaccuracies in such representations
and warranties as of the applicable times (excluding materiality qualifiers)
does not constitute a Material Adverse Effect (as defined below) on Jacor
29
or Premiere, as the case may be, 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; (ii) the performance and compliance in all material
respects by the other party of all obligations under the Merger Agreement
required to be performed on or prior to the consummation of the Merger, except
to the extent that the aggregate effect of any non-performance or non-compliance
by such other party (excluding materiality qualifiers) does not constitute a
Material Adverse Effect on the injured party when compared to the state of facts
which would exist if all such agreements and covenants had been performed and
complied with by the other party; (iii) the receipt of certain material
consents, approvals and waivers from governmental authorities and third parties;
(iv) the absence of any injunction or other order by any federal or state court
preventing consummation of the Merger; (v) the absence of any stop order
suspending the effectiveness of the Registration Statement of which this
Prospectus/Information Statement is a part; (vi) the waiting period applicable
to the consummation of the Merger under the HSR Act shall have expired or been
terminated; (vii) JCC shall have purchased all of the outstanding capital stock
of ACI pursuant to the Stock Purchase Agreement; and (viii) as to Jacor's
obligation to close, that certain Premiere executive officers execute and
deliver to Jacor option agreements, that certain Premiere Employment Agreements
and Amended Employment Agreements shall remain in full force and effect and that
certain "affiliates" of Premiere, including ACI, execute agreements pursuant to
which such affiliates agree to the transfer restrictions imposed by Rule 145
under the Securities Act.
For purposes of the Merger Agreement, "Material Adverse Effect" means, with
respect to Premiere or Jacor, 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 the
party to perform its obligations under the Merger Agreement; PROVIDED, HOWEVER,
that fluctuations in the market price of Premiere Common Stock or Jacor Common
Stock shall not be deemed to have a Material Adverse Effect on Premiere or
Jacor, as the case may be. In addition, a failure by Premiere to meet the
projected results of operations provided to Jacor will not, by itself, be deemed
to have a material adverse effect on the economic benefits Jacor reasonably
anticipates to realize from the Merger.
TERMINATION; TERMINATION FEE. The Merger Agreement may be terminated at any
time prior to the Effective Time (a) by mutual written consent; (b) by either
party if (i) the Effective Time shall have not occurred on or before August 31,
1997, (ii) any governmental authority shall have issued an injunction, order, or
decree enjoining or otherwise prohibiting the Merger and such injunction, order,
or decree shall have become final and non-appealable (provided that the party
seeking to so terminate the Merger Agreement shall have used all reasonable
efforts to remove such injunction, order, or decree), or (iii) if any condition
to the terminating party's obligations to consummate the transactions
contemplated thereby is incapable of being satisfied on or prior to August 31,
1997; provided, however, that the terminating party has not breached the terms
of the Merger Agreement; or (c) by Jacor, if ACI shall have breached any
material representation or warranty, or failed to perform any covenant or duty
contained in the Stock Purchase Agreement, other than a breach or noncompliance
that would not materially affect the benefits Jacor is receiving from the Stock
Purchase Agreement.
If Premiere terminates the Merger Agreement by reason of Jacor's breach
thereof or if the Merger otherwise fails to be consummated by reason of Jacor's
breach of the Merger Agreement, Premiere shall be entitled to recover from Jacor
as Premiere's sole and exclusive remedy liquidated damages in the amount of
$15.0 million plus its reasonable attorneys fees and expenses incurred in
connection with collecting such liquidated damages.
AMENDMENT; WAIVER. The Merger Agreement may be amended only in a writing
signed by each of the parties thereto. At any time prior to the Effective Time,
the parties to the Merger Agreement may (a) extend the time for the performance
of any of the obligations or other acts of the parties thereto, (b) waive any
inaccuracies in the representations and warranties contained therein or in any
document delivered pursuant thereto, or (c) waive compliance with any of the
agreements or conditions contained therein, to the extent permitted by
applicable law. Any agreement on the part of a party to the Merger
30
Agreement to any such extension or waiver shall be valid only if set forth in a
writing signed on behalf of such party.
EXPENSES. Except with respect to the termination fee described above and
except for certain filing fees required under the HSR Act (which filing fees
shall be shared equally by Jacor and Premiere), the Merger Agreement provides
that each party thereto will pay its own expenses in connection with the Merger.
STOCK PURCHASE AGREEMENT. In order to facilitate the Merger, JCC has
agreed, pursuant to the Stock Purchase Agreement, to purchase all of the
outstanding shares of common stock of ACI, the largest shareholder of Premiere's
capital stock. ACI's principal business activity has been the ownership of
Premiere Common Stock and options and warrants to acquire Premiere Common Stock
and the provision of strategic consulting services to Premiere. Such stock
purchase is to be consummated immediately prior to the closing of the Merger and
the consummation of the Merger is conditioned upon the closing of JCC's purchase
of the ACI stock. For their shares in ACI, the ACI shareholders will receive an
amount of cash and Jacor common stock calculated on the basis of what ACI would
have received in the Merger for Premiere Common Stock and options and warrants
owned by ACI, plus cash equal to ACI's cash on hand (net of ACI liabilities)
upon closing.
The Stock Purchase Agreement contains representations and warranties similar
to those contained in the Merger Agreement, however, the representations and
warranties contained in the Stock Purchase Agreement survive the consummation of
the stock purchase. Under the Stock Purchase Agreement, the stockholders of ACI
have agreed not to sell or hypothecate ACI securities held by them other than in
connection with the Stock Purchase Agreement. Additionally, ACI will not issue
or acquire its equity or voting debt securities. The Stock Purchase Agreement is
terminable at any time upon the mutual written consent of the parties thereto
and automatically terminates upon and at the same time as any termination of the
Merger Agreement.
SHAREHOLDERS' AGREEMENT. In conjunction with Premiere's execution of the
Merger Agreement, Jacor, JCC, ACI, Archon Communications Partners LLC ("ACP"),
News America Holdings, Incorporated ("News America"), Stephen C. Lehman, Louise
G. Palanker, Timothy M. Kelly, and Kraig T. Kitchin entered into the
Shareholders' Agreement pursuant to which the Consenting Stockholders are
required to execute and deliver to Premiere irrevocable written consents
approving the Merger Agreement. The Consenting Stockholders are the holders of a
majority of the voting power represented by outstanding shares of Premiere
Common Stock. The Shareholders' Agreement also provides that the Consenting
Stockholders may not transfer or otherwise dispose of their shares of Premiere
without the prior written consent of Jacor and JCC. The Shareholders' Agreement
terminates upon the termination of the Merger Agreement.
FINANCING ARRANGEMENTS
Jacor expects that the funds necessary to pay the Cash Consideration will be
obtained from a combination of one or more of the following sources: borrowings
under the Credit Facility, JCC's working capital, and proceeds from the 1997
Offering.
CREDIT FACILITY. JCC entered into the Credit Facility on June 12, 1996, as
amended and restated on February 14, 1997, with a syndicate of banks and other
financial institutions. The Credit Facility provides availability of $750.0
million of loans to JCC in three components: (i) a revolving credit facility of
up to $450.0 million with mandatory semi-annual commitment reductions beginning
June 12, 1999 and a final maturity date of June 12, 2003; (ii) a term loan of
$200.0 million with scheduled semi-annual reductions beginning December 12, 1997
and a final maturity date of June 12, 2003; and (iii) a tranche B term loan of
$100.0 million with scheduled semi-annual reductions beginning December 12, 1998
and a final maturity date no later than June 12, 2004.
31
The Credit Facility bears interest at a rate that fluctuates with a bank
base rate and/or the Eurodollar rate per annum, and in April 1997 this rate was
7 1/8%.
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 the Jacor's and JCC's subsidiaries and by
the guarantee of JCC's parent, Jacor.
The Credit Facility contains covenants and provisions that restrict, among
other things, Jacor's and 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 Jacor's and 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 1996 10 1/8% Notes and
the 1996 9 3/4% Notes) 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
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
on terms acceptable to JCC.
1997 OFFERING. Jacor has filed an omnibus shelf registration statement with
the Commission registering for possible public sale from time to time of up to
$250.0 million of various types of equity and debt securities. Any proceeds from
such a sale may be used to pay all or part of the Cash Consideration.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Members of the Premiere Board (including Kenin M. Spivak, Robert M. Fell and
David E. Evans, who are also members of the Board of Directors of ACI) or their
affiliates and members of Premiere's senior management have interests that
present them with actual or potential conflicts of interest in connection with
the Merger.
STOCK OPTIONS. Each member of the Premiere Board and senior management is
the holder of options and/or warrants to acquire Premiere Common Stock. As a
result of the Merger, all options and warrants not vested at the Effective Time
will become fully vested and immediately exercisable.
In addition, Stephen C. Lehman, Kraig T. Kitchin, Timothy M. Kelly, Louise
G. Palanker, Daniel M. Yukelson and Robert W. Crawford, each of whom is a member
of the Premiere Board and/or senior management, have agreed to convert their
options to acquire Premiere Common Stock into options to
32
purchase Jacor Common Stock. Each such option held to purchase Premiere Common
Stock will be converted into an option to purchase .61016949 shares of Jacor
Common Stock. Messrs. Lehman, Kitchin, Kelly, Yukelson and Crawford and Ms.
Palanker will exchange options to purchase 63,000, 52,500, 49,166, 5,000, 32,333
and 32,000 shares of Common Stock, respectively, and 121,500, 66,250, 34,583,
27,500, 41,167 and 26,000 shares of Class A Stock, respectively, for options to
purchase 112,576, 72,458, 51,101, 19,831, 44,847 and 35,390 shares of Jacor
Common Stock, respectively. In each case the exercise price of the options will
be appropriately adjusted.
EMPLOYMENT AGREEMENTS. In connection with the Merger and conditioned upon
the consummation thereof, Premiere's existing employment agreements with Messrs.
Lehman, Kitchin, Kelly, Yukelson and Crawford and Ms. Palanker have been
amended.
Following the Merger, Mr. Lehman will continue as the President and the
Chief Executive Officer of Premiere for a term ending on the third anniversary
of the Effective Date. Mr. Lehman will receive an annual base salary of
$315,000, which amount will be increased annually to reflect increases in the
consumer price index (up to $25,000 per year). Mr. Lehman will also receive: an
annual incentive bonus in an amount equal to 20 percent of his base salary if
budgeted cash flow targets (to be determined by Jacor and Mr. Lehman in good
faith) are met, and if budgeted cash flow targets are exceeded, 10 percent of
such excess; a monthly car allowance of $1,250; life insurance coverage from the
Effective Date until December 31, 1997; and other benefits afforded to
Premiere's senior executives. In addition, at each of the Effective Date and the
first anniversary of the Effective Date Mr. Lehman will receive options to
purchase 25,000 shares of Jacor Common Stock. The exercise price of two-thirds
of the options will be the fair market value of Jacor Common Stock as of the
date of the grant and the exercise price of the remaining options will be 110
percent of such amount. The options will vest in four equal installments
beginning on the date of the grant and each of the next three anniversaries
thereof, subject to Mr. Lehman's continued employment. Premiere may terminate
Mr. Lehman's employment with Premiere at any time prior to the expiration of the
term. The basis for the termination will determine the compensation, if any, Mr.
Lehman will receive upon termination. Mr. Lehman has also agreed not to compete
with Premiere for a period of up to three and one-half years from the Effective
Date, whether or not he is employed by Premiere. Within three business days
following the Effective Date, Mr. Lehman will repay all indebtedness owed by him
to Premiere. Also, provisions contained in Mr. Lehman's present employment
agreement providing for certain payments under certain circumstances following a
change in control of Premiere will be deleted.
Mr. Kitchin will continue as the Executive Vice President/Sales of Premiere
for a term ending on the third anniversary of the Effective Date. No change will
be made to Mr. Kitchin's present salary or bonus arrangements. At the Effective
Time, Mr. Kitchin will receive options to purchase 5,000 shares of Jacor Common
Stock. The exercise price of two-thirds of the options will be the fair market
value of Jacor Common Stock as of the Effective Date and the exercise price of
the remaining options will be 110 percent of such amount. The options will vest
in equal installments beginning the Effective Date and each of the next three
anniversaries thereof, subject to Mr. Kitchin's continued employment by the
Company. Mr. Kitchin has agreed not to compete with Premiere through the third
anniversary of the Effective Date, subject to reduction under certain
circumstances. Also, provisions contained in Mr. Kitchin's present employment
agreement providing for certain payments to Mr. Kitchin under certain
circumstances following a change in control of Premiere will be deleted.
Mr. Yukelson will become the Senior Vice President/Finance of Premiere and
continue as its Chief Financial Officer for a term ending on December 31, 1999.
No change will be made to Mr. Yukelson's present salary and bonus arrangements.
At the Effective Date, Mr. Yukelson will receive options to purchase 5,000
shares of Jacor Common Stock. The exercise price of two-thirds of the options
will be the fair market value of Jacor Common Stock as of the Effective Date and
the exercise price of the remaining options will be 110 percent of such amount
of the shares. The options will vest in equal installments beginning the
Effective Date and each of the next three anniversaries thereof, subject to Mr.
Yukelson's continued employment. Also, provisions contained in Mr. Yukelson's
present employment agreement
33
providing for certain payments to Mr. Yukelson under certain circumstances
following a change in control of Premiere will be deleted.
The employment agreements of Messrs. Kelly and Crawford and Ms. Palanker
will be amended to eliminate provisions in such agreements providing for certain
payments under certain circumstances following a change of control of Premiere.
ACI. Pursuant to the Stock Purchase Agreement, immediately prior to the
consummation of the Merger, JCC will purchase all common stock and common stock
equivalents of ACI. The purchase price to be paid by JCC will be an amount equal
to the amount ACI would have received in the Merger (payable with the same
allocation of cash and Jacor Common Stock as would be payable in the Merger),
plus the amount (payable in cash), if any, by which ACI's cash and cash
equivalents exceed its liabilities as of the consummation of the sale (estimated
to be less than $1 million).
Pursuant to the Stock Purchase Agreement, ACI will waive certain rights to
be indemnified by Premiere which ACI otherwise would have under the 1995
Agreement. Although the shareholders of ACI will receive the same consideration
as all other stockholders of Premiere with respect to the Premiere Common Stock
held by ACI, the sale of ACI's stock to Jacor will permit ACI's shareholders to
avoid taxes that would arise in a liquidation of ACI and that would be payable
if ACI participated in the Merger. This benefit will not result in a cost to
Premiere or Jacor and does not have an effect on the tax treatment of the Merger
to Premiere's other stockholders.
ACI advised Premiere that it would not have waived its right to designate a
financial advisor, entered into the Shareholders' Agreement whereby ACI has
agreed, among other things, to consent to the Merger and not to dispose of its
shares of Premiere Common Stock or warrants (see "THE MERGER--Certain Terms of
the Merger Agreement and Related Transactions") or agreed to waive its
indemnification rights under the 1995 Agreement, if its stockholders had not
been permitted to sell their shares of ACI as described above. Jacor has advised
Premiere that it was willing to accommodate the ACI shareholders and that such
accommodation has not resulted in any reduction in the consideration Jacor is
paying to all Premiere stockholders in the Merger. Conversely, Jacor also has
advised Premiere that in the absence of its accommodation for the ACI
shareholders, it would not increase the price it is paying to all Premiere
stockholders in the Merger.
Premiere will reimburse the stockholders who are parties to the
Shareholders' Agreement and the members of management whose employment
agreements will be amended for their legal expenses incurred in connection with
the Shareholders' Agreement and the amendments to the employment agreements and
certain ancilliary matters. However, ACI will be responsible for its own legal
fees incurred in connection with the Stock Purchase Agreement.
REGULATORY MATTERS
The receipt of certain federal and state governmental or regulatory
approvals are required in order to consummate the Merger, including the
expiration of the waiting period under the HSR Act. Jacor and Premiere have
agreed in the Merger Agreement to use their reasonable best efforts to obtain
such approvals or waivers, but there can be no assurance as to when or if such
approvals or waivers will be obtained.
Under the HSR Act and the rules promulgated thereunder by the FTC, the
Merger may not be consummated until notifications have been given and certain
information has been furnished to the Antitrust Division and the FTC and
specified waiting period requirements have been satisfied. In April 1997, Jacor
and Premiere each filed with the Antitrust Division and the FTC a Notification
and Report Form (the "Notification and Report Form") with respect to the Merger.
Notice of early termination of the initial waiting period with respect to
Premiere's filing was received on April 29, 1997. On April 25, 1997, Jacor and
ACI filed the required applications with the Antitrust Division and the FTC with
respect to the
34
Stock Purchase Agreement. The initial waiting period for these filings is
scheduled to expire at 11:59 p.m. on May 25, 1997.
The Antitrust Division, which reviews the Notification and Report Form, may
make a request for additional information. Under the HSR Act, 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 request
for additional information. 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.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. The Antitrust Division or
the FTC could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the Merger or
seeking the divestiture of substantial assets of Premiere or its subsidiaries or
Jacor or its subsidiaries.
In addition, state antitrust authorities may also bring legal action under
the antitrust laws. Such action could include seeking to enjoin the consummation
of the Merger or seeking divestiture of certain assets of Jacor or Premiere. No
state authorities have indicated that they will undertake an investigation of
the Merger. Private parties may also seek to take legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Merger on antitrust grounds will not be made or, if such a
challenge is made, what the result of such challenge may be.
NASDAQ LISTING
Jacor will use its reasonable best efforts to cause the Jacor Common Stock
to be issued pursuant to the Merger to be listed for trading on the Nasdaq
National Market.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion, based on current law, of certain of
the expected federal income tax consequences applicable to holders of Premiere
Common Stock who receive cash and Jacor Common Stock in exchange for their
shares of Premiere Common Stock pursuant to the Merger. Except as otherwise
expressly indicated, this summary discusses only certain tax consequences to
United States persons (i.e., citizens or residents of the United States and
domestic corporations) who hold shares of Premiere Common Stock as capital
assets. It does not discuss the tax consequences to holders of options and
warrants issued by Premiere who receive cash and stock in exchange for their
options and warrants pursuant to the Merger, nor does it discuss the tax
consequences that might be relevant to holders who acquired their shares of
Premiere Common Stock through the exercise of options or otherwise as
compensation. In addition, it does not discuss the tax consequences that might
be relevant to holders of Premiere Common Stock entitled to special treatment
under the federal income tax law, such as life insurance companies, tax exempt
organizations, S corporations, and taxpayers subject to alternative minimum tax.
Holders of Premiere Common Stock will be treated as if, at the Effective
Time, they had sold each of their shares for $13.50 in cash and a fraction of a
share of Jacor Common Stock. A holder will recognize capital gain or loss equal
to the difference between (a) the cash and the FAIR MARKET VALUE, if any, of the
fraction of a share of Jacor Common Stock received and (b) the holder's basis in
Premiere Common Stock given up in exchange. In general, such gain or loss will
be long-term capital gain or loss if, at the time of the exchange, the holding
period for Premiere Common Stock is more than one year.
35
If a former holder of Premiere Common Stock disposes of the Jacor Common
Stock received pursuant to the Merger, the holder generally will recognize a
capital gain or loss equal to the difference between (a) the proceeds received
on disposition and (b) the holder's basis in the Jacor Common Stock.
Under the federal income tax backup withholding rules, unless an exemption
applies, the Exchange Agent will be required to withhold, and will withhold, 31%
of all payments to which a holder or other payee is entitled pursuant to the
Merger, unless the holder or other payee provides a tax identification number
(social security number, in the case of an individual, or employer
identification number in the case of other Premiere stockholders) and certifies
that such number is correct. Each holder of Premiere Common Stock, and, if
applicable, each other payee, should complete and sign the substitute Form W-9
which will be included as part of the letter of transmittal to be returned to
the Exchange Agent in order to provide the information and certification
necessary to avoid backup withholding, unless an applicable exception exists and
is proved in a manner satisfactory to the Exchange Agent. The exceptions provide
that certain holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, however, he or she must submit a signed statement (i.e., Certificate
of Foreign Status on Form W-8) attesting to his or her exempt status. Any
amounts withheld will be allowed as a credit against the holder's federal income
tax liability, and, in general, refunded by the Internal Revenue Service if and
to the extent that the amounts withheld exceed the holder's federal income tax
liability assuming that the appropriate procedures are followed.
The consummation of the Merger is not expected to have any material adverse
tax effects on Jacor.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. IT
DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. THE
DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND
PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE
COULD AFFECT THE CONTINUING VALIDITY OF THE DISCUSSION. EACH PREMIERE
STOCKHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO THE HOLDER, INCLUDING THE APPLICATION AND EFFECT
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, Premiere'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 Premiere'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 the final
allocation will differ, the pro forma consolidated financial information
reflects management's best estimate based upon currently available information.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of Jacor Common Stock received by Premiere stockholders in the
Merger will be freely transferable, except that shares of Jacor Common Stock
received by persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of Premiere prior to the Merger may be resold by them
only in transactions permitted by the resale provisions of Rule 145 promulgated
under the
36
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 who may be
deemed to be affiliates of Jacor or Premiere 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 shareholders of such party. The Merger Agreement requires Premiere to
use its reasonable best efforts to cause each of its affiliates to execute a
written agreement to the effect that such affiliate will not offer or sell or
otherwise dispose of any shares of Jacor Common Stock issued to such affiliate
in or pursuant to the Merger in violation of the Securities Act or the rules and
regulations promulgated by the Commission thereunder.
APPRAISAL OR DISSENTERS' RIGHTS
THE FOLLOWING DISCUSSION IS A SUMMARY OF THE PROCEDURES THAT A HOLDER OF
PREMIERE COMMON 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 V) 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 V to this
Prospectus/Information Statement, entitles any holder of Premiere Common Stock
who dissents from the Merger and who follows the procedures set forth therein to
receive in cash the "fair value" of their Premiere Common 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 Premiere Common Stock who (i) has neither voted in favor of the
Merger nor consented thereto in writing, (ii) makes the demand described below
with respect to such shares, (iii) continuously is the record holder of such
shares through the Effective Time and (iv) 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 Premiere Common Stock. Jacor must, within 10 days after
the Merger is effected, send by certified or registered mail to any such
dissenting holder of Premiere Common 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 Premiere Common Stock owned by the
holder of the Premiere Common Stock) and a statement that he or she intends to
demand the appraisal of his shares, must be delivered by the dissenting holder
of Premiere Common 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 Premiere stockholder's name appears on the
certificate or certificates representing Premiere Common Stock. A person having
a beneficial interest in Premiere Common Stock that is of record in the
37
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 Premiere Common 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 Premiere Common 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
Premiere Common 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 Premiere Common 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 Premiere Common 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 Premiere Common Stock.
Notwithstanding the foregoing, at any time within 60 days after the Effective
Time of the Merger, any holder of Premiere Common 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 Premiere Common
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 Premiere 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 Premiere 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 Premiere 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 Premiere stockholders who have complied with the DGCL and who have become
entitled to appraisal rights. After determining the Premiere stockholders
entitled to an appraisal, the Court will appraise the Premiere Common 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 Premiere 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 Premiere Common Stock who has exercised his appraisal rights
will not be entitled to vote, to receive dividends or to exercise any other
rights of a Premiere stockholder, other than the right to receive payment for
his or her Premiere Common Stock under the DGCL, and his or her Premiere Common
Stock shall not be considered issued and outstanding for the purposes of any
subsequent vote of Premiere stockholders. If Jacor complies with the
requirements of the DGCL, any Premiere stockholder
38
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 Premiere stockholder to be paid the fair value
of his or her Premiere Common Stock will cease and his status as a holder of
Premiere Common Stock will be restored if: (i) a written withdrawal by the
dissenting Premiere stockholder is sent to Jacor at any time within 60 days
after the Effective Time of the 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
Premiere stockholder to be paid the fair value of his shares of Premiere Common
Stock has ceased and his rights as a Premiere 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.
39
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
and Premiere 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, 1996 give effect to each of the following
transactions as if such transactions had been completed January 1, 1996: (i) the
Merger, (ii) the EFM Acquisition, (iii) Jacor's 1996 acquisitions of Citicasters
and Noble, the acquisition of the Selected Gannett Radio Stations and the Tampa
Television Station divestiture, and other immaterial acquisitions completed in
1996, (iv) Jacor's 1997 acquisition of Regent and other 1997 immaterial
acquisitions both completed and pending as of March 31, 1997 ((iii) and (iv)
collectively, the "Radio Station Acquisitions"). The pro forma condensed
consolidated balance sheet as of December 31, 1996 has been prepared as if the
Premiere Merger and the other Pending Transactions had occurred on December 31,
1996.
The Pending Transactions will be accounted for using the purchase method of
accounting. The total purchase costs of the Pending Transactions will be
allocated to the tangible and intangible assets and liabilities acquired based
upon their respective fair values. The allocation of the aggregate purchase
price reflected in the Pro Forma Financial Information is preliminary. The final
allocation of the purchase price will be contingent upon the receipt of final
appraisals of the acquired assets and notes thereto. The unaudited Pro Forma
Financial Information is not necessarily indicative of either future results of
operations or the results that might have occurred if the foregoing transactions
had been consummated on the indicated dates.
The unaudited Pro Forma Financial Information should be read in conjunction
with Jacor's Consolidated Financial Statements and notes thereto incorporated by
reference in this Prospectus/Information Statement and Premiere's Consolidated
Financial Statements and notes thereto included herein.
40
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
RADIO STATION
ACQUISITIONS JACOR PREMIERE ACQUISITION
HISTORICAL PRO FORMA RADIO STATION HISTORICAL HISTORICAL PRO FORMA PRO FORMA
JACOR ADJUSTMENTS PRO FORMA EFM PREMIERE ADJUSTMENTS ADJUSTMENTS
----------- ------------- ------------- ----------- ----------- ------------- ------------
Net revenue................. $ 223,761 $ 223,423(a) $ 447,184 $ 47,357 $ 23,826 $ 7,852(c)
Broadcast operating
expenses.................. 151,065 155,775(a) 306,840 29,538 16,533 5,932(c) $ 2,606(d)
Depreciation and
amortization.............. 23,404 41,510(a) 64,914 84 1,908 2,400(c) 18,426(e)
Corporate general and
administrative expenses... 7,629 1,479(a) 9,108 13,645 (13,645)(d)
Unusual charges............. 417 (417)(f)
Special bonuses............. 2,303 2,303
----------- ------------- ------------- ----------- ----------- ------------- ------------
Operating income........ 39,360 24,659 64,019 4,090 4,968 (480) (6,970)
Interest expense............ (32,244) (46,232)(b) (78,476) (102) (1,617)(b)
Gain on sale of radio
stations.................. 2,539 2,539
Write-off of debt issuance
costs..................... (1,949) 1,949(g)
Other income (expense),
net....................... 5,716 5,716 488 1,217 (632)(c)
----------- ------------- ------------- ----------- ----------- ------------- ------------
Income (loss) before
income taxes and
extraordinary items..... 15,371 (21,573) (6,202) 4,578 4,134 (1,112) (6,638)
----------- ------------- ------------- ----------- ----------- ------------- ------------
Income tax (expense)
credit.................... (7,300) 6,629(h) (671) (1,698) 354(c) 1,128(h)
----------- ------------- ------------- ----------- ----------- ------------- ------------
Income (loss) before
extraordinary items..... $ 8,071 $ (14,944) $ (6,873) $ 4,578 $ 2,436 $ (758) $ (5,510)
----------- ------------- ------------- ----------- ----------- ------------- ------------
----------- ------------- ------------- ----------- ----------- ------------- ------------
Income (loss) per common
share................... $ 0.30
Number of common shares used
in per share
computations.............. 26,830
TOTAL
COMBINED
PRO FORMA
-----------
Net revenue................. $ 526,219
Broadcast operating
expenses.................. 361,449
Depreciation and
amortization.............. 87,732
Corporate general and
administrative expenses... 9,108
Unusual charges.............
Special bonuses............. 2,303
-----------
Operating income........ 65,627
Interest expense............ (80,195)
Gain on sale of radio
stations.................. 2,539
Write-off of debt issuance
costs.....................
Other income (expense),
net....................... 6,789
-----------
Income (loss) before
income taxes and
extraordinary items..... (5,240)
-----------
Income tax (expense)
credit.................... (887)
-----------
Income (loss) before
extraordinary items..... $ (6,127)
-----------
-----------
Income (loss) per common
share................... $ (0.14)
Number of common shares used
in per share
computations.............. 43,525(o)
See accompanying notes to unaudited proforma condensed consolidated financial
statements.
41
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
RADIO STATION
ACQUISITION JACOR ACQUISITION TOTAL
HISTORICAL PRO FORMA RADIO STATION HISTORICAL HISTORICAL PRO FORMA COMBINED
JACOR ADJUSTMENTS PRO FORMA EFM PREMIERE ADJUSTMENTS PRO FORMA
---------- ------------- ------------- ----------- ----------- ------------ -----------
Current assets:
Cash and cash equivalents...... $ 78,137 $ (64,031)(j) $ 14,106 $ 4,868 $ 14,776 $ (16,500)(m) $ 17,250
Accounts receivable............ 79,502 1,459(i) 80,961 2,220 7,264 90,445
Prepaid expenses and other
current assets............... 8,963 855(i) 9,818 7,283 1,954 19,055
---------- ------------- ------------- ----------- ----------- ------------ -----------
Total current assets......... 166,602 (61,717) 104,885 14,371 23,994 (13,800) 126,750
Property and equipment........... 131,488 51,834(i) 183,322 153 2,319 528(l) 186,322
Intangible assets................ 1,290,172 474,420(i) 1,764,592 15,371 206,615(l) 1,986,578
Other assets..................... 116,680 (26,519)(i) 41,261 33 5,882 47,176
(50,382)( (k)
1,482(i)
---------- ------------- ------------- ----------- ----------- ------------ -----------
Total assets............... $1,704,942 $ 389,118 $ 2,094,060 $ 14,557 $ 47,566 $ 190,643 $2,346,826
---------- ------------- ------------- ----------- ----------- ------------ -----------
---------- ------------- ------------- ----------- ----------- ------------ -----------
Current liabilities:
Accounts payable, accrued
expenses and other current
liabilities.................. $ 55,532 $ 6,815(i) $ 62,347 $ 11,155 $ 3,138 $ 76,640
---------- ------------- ------------- ----------- ----------- -----------
Total current
liabilities.............. 55,532 6,815 62,347 11,155 3,138 76,640
Long-term debt................... 670,000 205,000(j) 875,000 $ 22,500(m) 897,500
5 1/2% Liquid Yield Option
Notes.......................... 118,682 118,682 118,682
Other liabilities................ 108,914 1,206(i) 110,120 3,322 1,851 5,700(m) 120,993
Deferred tax liability........... 264,878 37,972(i) 302,850 12,000(l) 314,850
Shareholders' equity:
(78)(n)
Common stock .................. 313 43(j) 356 2 76 54(m) 410
Additional paid-in capital..... 434,763 128,485(j) 563,248 34,617 (34,617)(n) 756,294
193,046(m)
Common stock warrants.......... 26,500 5,000(j) 31,500 31,500
Retained earnings.............. 25,360 4,597(k) 29,957 78 7,884 (7,962)(n) 29,957
---------- ------------- ------------- ----------- ----------- ------------ -----------
Total shareholders'
equity................... 486,936 138,125 625,061 80 42,577 150,443 818,161
---------- ------------- ------------- ----------- ----------- ------------ -----------
Total liabilities and
shareholders' equity..... $1,704,942 $ 389,118 $ 2,094,060 $ 14,557 $ 47,566 $ 190,643 $2,346,826
---------- ------------- ------------- ----------- ----------- ------------ -----------
---------- ------------- ------------- ----------- ----------- ------------ -----------
42
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
(a) These adjustments reflect additional revenues and expenses related to
Jacor's 1996 acquisitions of Noble, Citicasters, the selected Gannett radio
stations and Tampa television station divestiture, and other immaterial
acquisitions from January 1, 1996 to the respective acquisition consummation
dates, as well as the 1997 acquisition of Regent and other 1997 pending and
completed immaterial acquisitions.
BROADCAST DEPRECIATION
NET OPERATING AND CORPORATE G
REVENUE EXPENSES AMORTIZATION & A
---------- ---------- ------------ -----------
Noble....................................... $ 10,715 $ 9,062 $ 2,365 $ --
Citicasters................................. 101,806 58,543 21,913 1,479
Gannett..................................... 2,202 6,727 -- --
Regent...................................... 33,797 26,447 6,897 --
Other....................................... 74,903 54,996 10,365 --
---------- ---------- ------------ -----------
Total................................... $ 223,423 $ 155,775 $ 41,510 $ 1,479
---------- ---------- ------------ -----------
---------- ---------- ------------ -----------
(b) The adjustment represents additional interest expense associated with
Jacor's borrowings under the credit facility, the issuance of the 1996
10 1/8% Notes, 1996 9 3/4% Notes and 5 1/2% Liquid Yield Option Notes, which
proceeds were used to finance the acquisitions. The assumed interest rate
under the credit facility was 7 1/8%, which represents the current rate as
of April 1997.
(c) The adjustments represent additional revenues and expenses related to
Premiere's acquisitions of After MidNite Entertainment, completed January
1997, and Cutler Productions, SJM Productions and Philadelphia Music Works,
which were completed at various dates during the second half of 1996.
(d) The adjustment represents the elimination of $11,039 of corporate expenses
related to the EFM Acquisition and the reclassification of $2,606 in
operating expenses to conform with Jacor's reporting practices. The
elimination of expenses is due primarily to salaries of the selling
shareholder whose employment was not continued.
(e) The adjustment reflects the additional depreciation and amortization expense
resulting from the allocation of Jacor's purchase price to the assets
acquired in the Merger and the EFM Acquisition including, an increase in
property and equipment and identifiable intangible assets, to their
estimated fair market values and the goodwill associated with the
acquisition of Premiere. Goodwill is amortized over 40 years.
(f) The adjustment represents costs recorded by Premiere related to certain
attempted business acquisitions and the assimilation of completed business
acquisitions, including miscellaneous severance, professional fees and
transition costs.
(g) The adjustment represents the elimination of debt issuance costs written off
by Premiere in 1996.
(h) To provide for the tax effect of pro forma adjustments using an estimated
statutory tax rate of 40%. The acquisition adjustments described in Note (a)
include non-deductible goodwill amortization estimated to be approximately
$5,000. The acquisition adjustments for Premiere include non-deductible
goodwill amortization estimated to be approximately $3,800.
43
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
(i) The adjustments represent the allocation of the purchase price of Regent,
completed in February 1997, and other 1997 immaterial acquisitions to the
estimated fair value of the assets acquired and liabilities assumed, and the
recording of goodwill associated with the acquisitions. Previously funded
escrow deposits of $26,519 were allocated as part of the purchase price.
(j) The adjustment represents the issuance of stock and warrants, credit
facility borrowings, utilization of excess cash and sale of certain
investments to finance the Regent and other acquisitions completed in 1997.
OTHER
REGENT ACQUISITIONS TOTAL
---------- ----------- ----------
Common Stock Issued..................................... $ 105,878 $ 22,650 $ 128,528
Merger Warrants Issued.................................. 5,000 -- 5,000
Credit Facility Borrowings.............................. -- 205,000 205,000
Excess Cash............................................. 64,031 -- 64,031
Investment Sale Proceeds................................ 9,557 45,425 54,982
---------- ----------- ----------
Total............................................... $ 184,466 $ 273,075 $ 457,541
---------- ----------- ----------
---------- ----------- ----------
(k) In February 1997 and March 1997, Jacor sold certain investments for proceeds
of approximately $55,000. The Company recorded gains of approximately $4,600
in conjunction with the sales.
(l) The adjustments represent the allocation of the purchase price of EFM and
Premiere to the estimated fair value of the assets acquired and liabilities
assumed, and the recording of goodwill associated with the acquisitions.
(m) The adjustment represents the assumed net proceeds from issuance of stock in
conjunction with the 1997 Offering, to be utilized in part to finance a
portion of the Premiere Merger Consideration, and the issuance of stock to
the Premiere shareholders, borrowings under the credit facility to finance
the EFM acquisition and excess cash utilized to pay down credit facility
borrowings.
EFM PREMIERE TOTAL
--------- ---------- ----------
Common Stock Offering Proceeds............................. -- $ 150,000 $ 150,000
Common Stock Issued to Premiere Stockholders............... -- 48,800 48,800
Credit Facility Borrowings (repayments).................... $ 50,000 (27,500) 22,500
Excess Cash Utilized....................................... -- 16,500 16,500
--------- ---------- ----------
$ 50,000 $ 187,800 $ 237,800
--------- ---------- ----------
--------- ---------- ----------
Common Stock Issued to Premiere Stockholders includes Jacor stock options
which will be issued to certain Premiere option holders valued at $5,700.
(n) The adjustments represent the elimination of historical stockholders' equity
of EFM and Premiere as the acquisitions will be accounted for as purchases.
(o) The pro forma weighted average shares outstanding includes all shares of
common stock outstanding at December 31, 1996 and the shares to be issued in
the proposed 1997 Offering, the shares issued in conjunction with the
acquisition of Regent and the shares to be issued to the Premiere
shareholders. The pro forma weighted average shares of Jacor do not reflect
any outstanding options and warrants as they are antidilutive.
44
SELECTED HISTORICAL FINANCIAL DATA OF 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,
1996, 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, 1995 and 1996 and for each of the three
years in the period ended December 31, 1996 and the auditors' report thereon are
incorporated by reference in this Prospectus/Information Statement. The selected
financial data as of March 31, 1997 and for the three months ended March 31,
1996 and 1997 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.
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING STATEMENT DATA:(1)
Net revenue.............................. $ 70,506 $ 89,932 $ 107,010 $ 118,891 $ 223,761 $ 30,074 $
Broadcast operating expenses............. 55,782 69,520 80,468 87,290 151,065 23,871
--------- --------- --------- --------- --------- --------- ---------
Station operating income excluding
depreciation and amortization.......... 14,724 20,412 26,542 31,601 72,696 6,203
Depreciation and amortization............ 6,399 10,223 9,698 9,483 23,404 2,619
Reduction in carrying value of assets to
net realizable value 8,600 -- -- --
Corporate general and administrative
expenses 2,926 3,564 3,361 3,501 7,629 1,139
Special bonuses.......................... -- -- -- -- 2,303 --
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss).................. (3,201) 6,625 13,483 18,617 39,360 2,445
Net interest income (expense)............ (13,443) (2,476) 684 (184) (26,528) (1,884)
Gain on sale of radio stations........... 2,539 2,539
Other non-operating expenses, net........ (7,057) (11) (2) (168)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations
before income tax and extraordinary
item................................... $ (23,701) $ 4,138 $ 14,165 $ 18,265 $ 15,371 $ 3,101 $
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations
after income tax but before
extraordinary items and the cumulative
effect of accounting changes........... $ (23,701) $ 1,438 $ 7,852 $ 10,965 $ 8,071 $ 1,842 $
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)........................ $ (23,701) $ 1,438 $ 7,852 $ 10,965 $ 5,105 $ 891(2) $
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) per common share:(3)
primary and fully diluted.............. $ (61.50) $ 0.10 $ 0.37 $ 0.52 $ 0.19 $ 0.04 $
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average shares outstanding:(3)
Primary and fully diluted.............. 381 14,505 21,409 20,913 26,830 20,503
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
OTHER FINANCIAL DATA:(1)...................
Broadcast cash flow(4)................... $ 14,724 $ 20,412 $ 26,542 $ 31,601 $ 72,696 $ 6,203 $
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Broadcast cash flow margin(5)............ 20.9% 22.7% 24.8% 26.6% 32.5% 20.6% %
EBITDA(4)................................ $ 11,798 $ 16,848 $ 23,181 $ 28,100 $ 62,764 $ 5,064 $
Capital expenditures..................... 915 1,495 2,221 4,969 11,852 3,437
45
AS OF DECEMBER 31, AS OF
----------------------------------------------------- MARCH 31,
1992(6) 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:(1)
Working capital (deficit)..................... $(140,547) $ 38,659 $ 44,637 $ 24,436 $ 111,070 $
Intangible assets (net of accumulated
amortization)............................... 70,038 84,991 89,543 127,158 1,290,172
Total assets.................................. 122,000 159,909 173,579 208,839 1,704,942
Total long-term debt (including current
portion).................................... 140,542 45,500 670,000
Common stock purchase warrants................ 1,383 390 390 388 26,500
Shareholders' equity (deficit)................ (50,840) 140,413 148,794 139,073 486,936
- ------------------------------
(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 or 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 Noble
acquisition and the Citicaster Merger in 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 year ended December 31, 1996 and the three months ended
March 31, 1996 includes, as extraordinary items, losses of approximately
$3.0 million and $1.0 million, respectively for the write-off of unamortized
costs associated with amended credit facilities.
(3) Income (loss) per common share for the two years ended December 31, 1992 is
based on the weighted average number of shares of Jacor 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, 1996 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 year ended December 31, 1992
are adjusted to reflect the 0.0423618 reverse stock split in Jacor 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):
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
46
SELECTED HISTORICAL FINANCIAL DATA OF PREMIERE
The selected consolidated financial data for Premiere presented below, for
and as of the end of each of the years in the five-year period ended December
31, 1996, is derived from Premiere's Consolidated Financial Statements which
have been audited by Ernst & Young LLP, independent auditors. The consolidated
financial statements at December 31, 1995 and 1996 and for each of the three
years in the period ended December 31, 1996 and the auditors' report thereon are
included elsewhere in this Prospectus/Information Statement. The selected
financial data as of March 31, 1997 and for the three months ended March 31,
1996 and 1997 are unaudited. In the opinion of Premiere'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
Premiere's Consolidated Financial Statements, related notes and other financial
information included elsewhere herein.
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31 MARCH 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENTS OF OPERATIONS DATA:
Revenue:
Gross revenue............................. $ 11,525 $ 12,371 $ 18,016 $ 20,757 $ 27,147 $ 5,549
Less: agency commissions.................. (1,412) (1,514) (2,037) (2,438) (3,322) (672)
--------- --------- --------- --------- --------- --------- ---------
Net operating revenue....................... 10,113 10,857 15,979 18,319 23,826 4,877
Operating expenses:
Production, programming and promotions.... 3,918 4,120 5,284 5,472 7,495 1,619
Selling, general and administrative....... 4,099 7,353 7,665 7,827 9,038 2,013
Depreciation and amortization............. 196 425 939 1,265 1,908 412
Unusual charges........................... -- -- -- -- 417 --
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)..................... 1,900 (1,041) 2,093 3,754 4,967 833
Other income (expense), net:
Interest income (expense), net............ 119 (18) (177) 18 1,116 258
Gain on sale of assets.................... -- -- 1,660 453 -- --
Write-off of debt issuance costs.......... -- -- -- -- (1,949) --
Other..................................... -- 189 (221) 18 12
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before minority interest and
income taxes............................... 2,019 (870) 3,354 4,243 4,134 1,104
Minority interest in loss of joint
venture.................................... -- 34 -- 34 -- 9
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes........... 2,019 (836) 3,354 4,277 4,134 1,113
Provision (benefit) for income taxes........ 855 (315) 1,369 1,721 1,698 447
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)........................... $ 1,164 $ (521) $ 1,985 $ 2,556 $ 2,436 $ 666
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) per share (1)............... $ 0.29 $ (0.11) $ 0.43 $ 0.46 $ 0.28 $ 0.08
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average common and common
equivalent shares outstanding (1).......... 4,012,295 4,500,000 4,664,921 6,105,494 8,929,954 8,926,935
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
OTHER DATA:
EBITDA (2)(3)............................. $ 2,096 $ (616) $ 3,031 $ 5,019 $ 6,875 $ 1,245
47
AT DECEMBER 31 AT MARCH 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................... $ 2,849 $ 634 $ 2,371 $ 5,432 $ 14,776 $ 26,654
Working capital............................. 7,336 4,429 4,923 8,841 20,856 30,145
Total assets................................ 9,817 11,552 17,567 24,034 47,566 44,859
Total liabilities........................... 1,237 3,493 7,445 4,732 4,989 2,827
Total stockholders' equity.................. 8,580 8,059 10,122 19,302 42,577 42,032
- ------------------------
(1) Earnings (loss) per share is based upon the weighted average number of
shares outstanding during each period presented which includes, where
appropriate, the assumed exercise of dilutive stock options and warrants to
purchase Premiere Common Stock. Earnings per share for each of the years
ended December 31, 1994 and 1992 were computed using the treasury stock
method. During the year ended December 31, 1993, Premiere reported a net
loss and, accordingly, all common stock equivalents were anti-dilutive.
Under the treasury stock method, Premiere reduces the assumed number of
common shares issued from the exercise of stock options and warrants to
purchase Premiere Common Stock by the number of treasury shares assumed to
be purchased from the proceeds of such dilutive securities by utilizing the
average market price of the Premiere Common Stock. In determining earnings
per share for the years ended December 31, 1995 and 1996, Premiere utilized
the modified treasury stock method which assumes the exercise of all
outstanding options and warrants to purchase Premiere Common Stock, and the
use of the assumed proceeds thereof to purchase up to a maximum of 20% of
the then outstanding Premiere Common Stock. Excess proceeds derived from the
assumed exercise and purchase of such shares are assumed to be utilized to
first reduce outstanding indebtedness under notes payable and second for
investment in short-term, cash equivalent marketable securities. Earnings
per share and the weighted average number of common shares outstanding have
been adjusted to reflect the Class A Dividend.
(2) EBITDA is earnings before interest income (expense), gain (loss) on sale of
marketable securities, provision for income taxes, depreciation and
amortization and minority interest. Although EBITDA is not a measure of
performance calculated in accordance with generally accepted accounting
principles ("GAAP"), it is generally accepted as providing useful
information regarding a company's ability to service and/or incur debt.
EBITDA should not be considered in isolation or as a substitute for net
income, cash flows from operating activities and other income and cash flow
statement data prepared in accordance with GAAP or as a measure of liquidity
or profitability.
(3) EBITDA for the year ended December 31, 1996 includes a reduction for "other
charges" of $417 that were incurred by Premiere in connection with attempted
business acquisitions and the assimiliation of completed business
acquisitions. See Note 11 to Premiere's Consolidated Financial Statements
included elsewhere herein.
48
BUSINESS OF JACOR
Jacor is a holding company engaged primarily in radio broadcasting and
providing related services to radio broadcasting companies. Jacor's principal
executive offices are located at 50 East RiverCenter Boulevard, 12th Floor,
Covington, Kentucky 41011 and its telephone number is (606) 655-2267.
As of April 28, 1997, Jacor entities owned, operated, and/or entered into
agreements to acquire 137 radio stations located across the United States in 29
broadcast areas: Los Angeles; Atlanta; Denver; San Diego; St. Louis; Cincinnati;
Tampa; Cleveland; Portland, Oregon; Columbus, Ohio; Kansas City, Missouri;
Jacksonville; Toledo; Sarasota/Bradenton; Lexington; Boise; Santa Barbara; Des
Moines; Cedar Rapids; Venice/Englewood, Florida; Salt Lake City; Las Vegas;
Louisville; Rochester; Casper, Wyoming; Fort Collins/Greeley, Colorado; Lima,
Ohio; Cheyenne, Wyoming; and Sandusky, Ohio; and one television station located
in the Cincinnati broadcast area. Jacor also has joint sales agreements to sell
advertising time for one station 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
pursuant to an exclusive sales agency agreement. Jacor also owns and distributes
the RUSH LIMBAUGH and DR. DEAN EDELL programs, syndicated talk programming for
radio broadcasting, and Jacor acts as a satellite systems integrator, Internet
service provider and communications consultant focused on the radio broadcasting
industry.
Jacor is continuing to negotiate acquisitions for additional radio stations
in its existing markets and in new markets and for entities that provide
services to radio stations. There can be no assurance that Jacor will
successfully complete any such acquisitions or what the consequences thereof
would be.
Additional information concerning Jacor is included in the Jacor Reports
incorporated by reference in this Prospectus/Information Statement. See
"AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
BUSINESS OF PREMIERE
Based in Los Angeles, California, Premiere is a leading independent creator,
producer and distributor of innovative comedy, entertainment and music-related
programs and a supplier of research, production music libraries and other
services to the radio industry. Premiere offers programs and services to radio
stations in exchange for commercial broadcast time which Premiere then sells to
more than 350 national advertisers. Premiere has grown from three programs and
250 radio station affiliates at its inception in 1987 to 52 programs and
services provided to more than 4,000 radio stations pursuant to over 6,300
contracts with such stations in 1997. Premiere's radio station affiliates
broadcast in markets that reach more than 99% of the population of the U.S.
Premiere's management believes that, based on advertising revenues generated by
its programs and services, Premiere is the fourth largest producer and
distributor of network radio programming and services to the radio industry in
the U.S. behind Westwood One Entertainment, ABC Radio Networks, and CBS Radio
Networks. See "BUSINESS OF PREMIERE-- Industry Overview" and "BUSINESS OF
PREMIERE--Competition."
Premiere was incorporated in California in January 1987 and reincorporated
in Delaware in July 1995. Premiere's principal executive offices are located at
15260 Ventura Boulevard, Fifth Floor, Los Angeles, California 91403-5339, and
its telephone number is (818) 377-5300.
In July 1995, ACI made a significant investment in Premiere. Premiere has
been advised that ACI is currently 50% owned by each of ACP and a subsidiary of
NewsAmerica. ACI's representatives on the Premiere Board include executives
designated by ACP and NewsAmerica.
BUSINESS STRATEGY
Premiere currently produces 33 network radio programs, which target the most
popular radio formats, including Adult Contemporary, Album Oriented Rock,
Contemporary Hit Radio, Country, News/Talk,
49
Oldies and Urban. Premiere specializes in a form of "interactive" programming
which provides radio station affiliates with program elements that can be
customized and integrated locally, enabling local on-air personalities to
actively participate by inserting their own voice within Premiere-scripted
dialogues and pre-recorded program elements. Premiere also produces
mini-features, including LEEZA GIBBONS' ENTERTAINMENT TONIGHT ON THE RADIO and
THE MELROSE PLACE MINUTE and long-form programming, including LEEZA GIBBONS' TOP
25 COUNTDOWN, THE MICHAEL REAGAN SHOW, THE JIM ROME SHOW, and AFTER MIDNITE WITH
BLAIR GARNER in addition to its comedy programs. Premiere believes it is the
largest producer and distributor of syndicated radio comedy in the U.S.
Premiere has expanded the programs and services it offers through internal
development, and through the selective investment in and/or acquisition of
assets and businesses which complement Premiere's operations.
In January 1997, Premiere acquired After MidNite Entertainment, Inc.
("AME"), a producer and distributor of five country western network radio
programs and a production music library. Through its acquisition of AME,
Premiere intends to expand its slate of country music programming. In November
1996, Premiere completed its $4.0 million minority investment in and strategic
alliance with AudioNet, Inc. ("AudioNet"), a leading aggregator and broadcaster
of audio content on the Internet and World Wide Web. As part of the AudioNet
investment, Premiere became AudioNet's exclusive network radio sales
representative and will act as a strategic partner with AudioNet to expand its
base of radio station affiliates and advertisers on AudioNet's and Premiere's
Web sites.
In September 1996, Premiere completed its acquisition of Cutler Productions,
Inc. and SJM Productions, Inc. (collectively, "Cutler"), the second largest
producer and distributor of syndicated comedy radio programming. Through the
acquisition of Cutler, Premiere acquired six comedy and music programs broadcast
on more than 700 radio station affiliates and further solidified its position as
the largest producer and distributor of syndicated comedy radio programming in
the U.S. Also in September 1996, Premiere acquired Philadelphia Music Works,
Inc. ("PMW"). Through its acquisition of PMW, Premiere began producing and
distributing jingle services directly to advertisers for cash and to affiliated
radio stations in exchange for commercial broadcast inventory. In August 1995,
Premiere acquired Broadcast Results Group ("BRG"), through which it provides
production music libraries to its radio station affiliates.
Through its acquisition of Mediabase Research Services ("Mediabase") in
1993, Premiere began providing a comprehensive radio research service. During
1995, Premiere debuted its Newstrack service, which provides, among other
things, comprehensive weekly call-out research services for News/Talk radio
formats. Premiere believes that its research services provide information that
helps its radio station affiliates increase their audience share and ratings in
an increasingly competitive market. Premiere's strategy is to provide its
services, which are typically available from Premiere's competitors on a cash
basis, in exchange for commercial broadcast inventory from its radio station
affiliates. Compared to cash basis distribution, Premiere's method of
distribution makes its services more attractive to radio stations which have
limited cash resources and/or excess commercial broadcast inventory. Since
Premiere generally offers such services to radio stations on a non-exclusive
basis, Premiere is able to sell its services to more than one radio station
affiliate in each market.
Premiere has a national, in-house sales force and infrastructure which sells
commercial broadcast inventory to more than 350 national advertisers. Premiere
has been able to leverage its sales force and generate additional revenues
without significant additional overhead costs by providing network advertising
sales representation services, on a commission basis, to third-party radio
networks and independent programming and service suppliers that do not have
their own sales force. Premiere believes that it is presently the second largest
network radio advertising sales representative in the U.S. in terms of its gross
billings. Currently, Premiere represents nine independent radio networks,
including WOR Radio Networks, One-on-One Sports Radio Network, and Accuweather.
50
Premiere's growth strategy involves a continuing commitment to both internal
development and expansion through acquisitions. Premiere's principal objective
is to maximize the value and quantity of its commercial broadcast inventory and
other revenue sources. The principal strategies employed by management to
achieve this objective are to: (i) develop, produce and distribute high quality
radio programming; (ii) offer a broad array of services, including research,
music libraries and jingle packages; (iii) acquire assets or businesses
complementary to Premiere's operations; and (iv) leverage its advertising sales
force through third-party sales representation services. Premiere expects to
continue to pursue its strategy following the consummation of the Merger.
Premiere's strategies are set forth below.
PROVIDE HIGH QUALITY RADIO PROGRAMMING. One of Premiere's principal
operating strategies is to provide high quality radio programs targeted to the
most popular radio station formats in order to obtain commercial broadcast
inventory that Premiere then resells to national advertisers. Premiere
specializes in a form of "interactive" programming which enables local on-air
personalities to participate by inserting their own voice within
Premiere-scripted dialogues and pre-recorded programs. As evidence of its
success in creating innovative and entertaining programming, Premiere has
attracted radio station affiliates in each of the top 50 U.S. radio markets.
Premiere intends to develop additional programming by using its internal
creative staff, contracting with outside on-air talent and acquiring other
programming companies. Premiere presently has a total of 33 long-form and
short-form network radio programs, including several of the most popular,
nationally renowned radio personalities such as Leeza Gibbons, Jim Rome, Michael
Reagan, Ken Hamblin, and Blair Garner.
OFFER BROAD ARRAY OF SERVICES. Premiere provides a variety of services to
the radio industry. Premiere offers radio station affiliates music and News/Talk
research through Mediabase and Newstrack, which Premiere believes provides
information that helps its radio station affiliates increase their audience
share and ratings in an increasingly competitive market. In addition, Premiere
offers production music libraries and jingle packages through BRG and PMW.
Premiere's strategy is to provide its services, which are typically available
from others on a cash basis, in exchange for commercial broadcast inventory from
its radio station affiliates. The research services are offered on a
non-exclusive basis, enabling Premiere to sell these services to more than one
radio station affiliate in each market. Premiere plans to increase its services
through internal development and the acquisition of complementary radio-related
businesses.
ACQUIRE COMPLEMENTARY ASSETS OR BUSINESSES. Premiere's business strategy
includes the expansion of Premiere through the acquisition of complementary
strategic assets or businesses. Premiere has made several strategic acquisitions
since its founding, including three corporate acquisitions and one strategic
investment during 1996 and early 1997.
MAINTAIN AND LEVERAGE NATIONAL ADVERTISING SALES FORCE. Premiere has a
full-service, national advertising sales force, which management believes
provides it with a key competitive advantage over many other independent network
radio program syndicators. Premiere's sales force has relationships with
approximately 150 advertising agencies that represent over 350 national
advertisers. To enhance its cash flow, Premiere makes its advertising sales
force available to third party network radio programmers and independent radio
programming and service suppliers that do not employ their own sales force. Such
sales representative service enables Premiere to leverage its sales force,
thereby generating increased revenue with only incremental associated costs.
Premiere intends to continue to leverage its sales force by pursuing additional,
profitable sales representation opportunities in the future.
INDUSTRY OVERVIEW
According to the National Association of Broadcasters ("NAB"), there are
more than 10,000 commercial radio stations in the U.S. Given radio's wide reach
and relatively low advertising costs in comparison to print and television
media, radio is one of the most efficient and cost-effective means for
advertisers to reach targeted demographic groups. Radio is a popular form of
advertising due to the very short lead time between commercial production and
broadcast, the relative ease and low cost of producing
51
radio commercials, the relatively small seasonal variation in radio listening
patterns, and the fact that more than half of all radio listening occurs away
from the home, closer to the point of purchase. Estimates of total 1996 radio
advertising revenues were in excess of $11.5 billion, which included estimates
of total network radio advertising in excess of $600.0 million.
Radio stations develop formats, such as music, news/talk or various types of
entertainment programming, intended to appeal to a target listening audience
with demographic characteristics that will attract national, regional and local
commercial advertisers. However, limited financial and creative resources, among
other things, prevent most radio stations from producing national quality
programming, or developing their own research or related services. Accordingly,
radio stations rely on network programming, research and other services from
independent producers or "syndicators," such as Premiere, to enhance their
existing local programming and research. A network programmer licenses
programming, research or related services to radio stations in exchange for a
contractual amount of commercial broadcast time which is then resold to
advertisers requiring national coverage. Research and other services are
generally acquired by stations for commercial broadcast time, cash or a
combination thereof.
By placing a program or service with radio stations throughout the U.S., the
syndicator creates a "network" of radio stations that have agreed to carry its
programming or receive its services in exchange for commercial broadcast time.
The commercial broadcast time for such programs may vary from market to market
within a specified time period, depending upon the requirements of the
particular radio station affiliate. Rates for the sale of advertising time are
generally established on the basis of audience ratings for the specific
demographic group targeted by the advertiser. Audience levels and demographics
are measured and rated by the Arbitron Research Company Nationwide Service
("Arbitron"), which periodically measures the percentage of the radio audience
in a market area listening to a particular radio station during specified
dayparts or by Statistical Research, Inc.'s RADAR Service ("RADAR"), which
measures the listening audience at the specific time a commercial is actually
broadcast.
Network programming may be pre-recorded and distributed to radio station
affiliates in advance via compact discs, audiotapes or satellite, enabling an
affiliate to broadcast the program within any prescribed time period established
by agreement between the affiliate and the program syndicator, or may be
distributed live via satellite, aired either simultaneously throughout the U.S.
or at the same hour of the day in each time zone.
SEASONALITY
As is standard in the network radio industry, Premiere's revenues have
historically been highest in the second and third quarters and lowest in the
first and fourth quarters. Other than sales commissions paid to Premiere's sales
personnel, costs do not vary significantly with respect to the seasonal
fluctuation of revenues. As a result, Premiere's net income historically has
typically been highest in the second and third quarters and lowest in the first
and fourth quarters. See "BUSINESS OF PREMIERE--Industry Overview."
COMPETITION
Competition for radio advertising revenues and audience share is intense.
Premiere competes with approximately ten other major network radio companies in
the U.S., some of which have greater financial resources than Premiere, as well
as with smaller independent producers and distributors. In addition, several of
Premiere's competitors are affiliated with major radio station group owners,
have recognized brand names and have large networks which include affiliates to
which such competitors pay compensation to broadcast the network's commercials.
Premiere's largest direct competitors include ABC Radio Networks, Westwood One
Radio Networks and CBS Radio Networks, which Premiere estimates accounted for an
aggregate of approximately 70% of total network radio advertising revenues. The
principal competitive factors in the radio industry are the quality and
creativity of programming and the ability to provide
52
advertisers with a cost-effective method of delivering commercial
advertisements. In addition, the radio industry competes for advertising
revenues with television, print, outdoor and other media. Management believes
that the quality and creativity of Premiere's programming and the capability of
its affiliate relations and advertising sales force have enabled Premiere to
become a significant competitor in network radio. Furthermore, research is
provided by many other companies, many of which may have greater financial
resources than Premiere.
EMPLOYEES AND OTHERS
As of April 28, 1997, Premiere had 142 full-time employees. In addition,
Premiere maintains continuing relationships with more than 50 independent
writers, program hosts, technical personnel and producers. Premiere is not a
party to any collective bargaining agreement. Premiere believes its relations
with its employees and independent contractors are good.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF PREMIERE
INDUSTRY OVERVIEW
Premiere is a leading independent creator, producer and distributor of
innovative comedy, entertainment and music related programs and a supplier of
research and other services to the radio industry.
The U.S. radio industry consists of over 10,000 commercial radio stations.
Radio stations rely on network radio programmers and distributors, such as
Premiere, to provide national quality programming and research and other
services to enhance their existing programming and ratings. Limited financial
and creative resources, among other matters, typically prevent most radio
stations from producing their own national quality programming, research or
related services. The group of radio stations or "affiliates" which contract
with a distributor to broadcast a particular program or utilize one of its
services constitute a "radio network."
Network radio advertising, in general, involves the sale of commercial
broadcast time within specific time periods of the day or "dayparts" on a given
network programmer's station affiliates throughout the U.S. Network program
providers obtain a station's commercial broadcast time in exchange for programs
or services. In certain cases, network programmers pay compensation to radio
stations for "clearing" commercial time, whether or not the station broadcasts
the network's programming. Premiere does not currently pay compensation to radio
station affiliates for "clearing" its commercial time. As Premiere grows and
increases the number of long-form programs it offers to radio stations, Premiere
may elect to pay compensation if it concludes that to do so would enhance the
penetration and ratings for its radio networks.
The creation of a "radio network" enables Premiere to sell the acquired
commercial broadcast inventory to advertisers desiring national coverage. Rates
for the sale of network advertising are established on the basis of audience
delivery or ratings and the demographic composition of the listening audience.
Premiere sells commercial broadcast time by "guaranteeing" certain ratings and
demographics. There can be no assurance that the guarantee will be achieved. If
the radio network on which the commercial broadcast time is sold does not
achieve the guarantee, Premiere may be obligated to offer the advertiser
additional advertising time (I.E., "make goods" or "bonus spots") on the same
radio network or on an alternate radio network. "Make goods" or "bonus spots"
are the predominant means whereby Premiere satisfies such obligations to
advertisers. Alternatively, Premiere could be obligated to refund or credit a
portion of the advertising revenue derived from such sales. Historically,
Premiere has not had to rebate cash.
53
Advertisers which purchase commercial broadcast time from Premiere include
nine of the top ten network radio advertisers in the U.S., and in total include
more than 350 national advertisers. National advertisers that regularly purchase
advertising time on Premiere's networks include AT&T, Hershey, McDonalds,
Nabisco, Sears, Roebuck & Co. and Warner-Lambert.
In certain circumstances, Premiere accepts barter arrangements with
advertisers, exchanging excess inventory of perishable commercial broadcast time
for goods and services. Such arrangements are common in the radio and television
broadcasting industry. Premiere's revenues from barter arrangements, based upon
the fair market value of the goods and services received for advertising time,
were approximately 6.4%, 7.3%, and 7.5% of net operating revenues in 1996, 1995,
and 1994, respectively. Although Premiere historically has been able to use the
goods and services received under its barter arrangements to lower its cash
outlays, there can be no assurance that Premiere will be able to continue to do
so in the future. See Note 8 of Notes to Consolidated Financial Statements of
Premiere.
As a result of Premiere's growth in sales representation services for
third-party program producers, its acquisitions of AME, PMW, BRG, Mediabase, and
Olympia Broadcasting Networks ("Olympia") and its acquisition and divestiture of
Premiere's Denver, Colorado radio station KZDG-FM ("KZDG"), period-to-period
results of operations may not be comparable, and the results of operations for
the fiscal year ended December 31, 1996 may not be indicative of results for any
future period.
FISCAL YEAR ENDED DECEMBER 31, 1996 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1995
OPERATING REVENUES. Gross revenues for the fiscal years ended December 31,
1996 and 1995 were $27.1 and $20.8 million, respectively, representing an
increase of $6.3 million, or 30.8%. Net operating revenues increased $5.5
million, or 30.1% from $18.3 million for the fiscal year ended December 31,
1995, to $23.8 million for the fiscal year ended December 31, 1996. These
increases were principally due to increased gross advertising revenues that
resulted from acquisitions of other independent network radio programmers and
service providers, the continued growth in research services and the launch of
new programs and services all of which were offset, in part, by lower overall
revenues on certain syndicated comedy programs.
PRODUCTION, PROGRAMMING AND PROMOTIONS EXPENSES. Production, programming
and promotions expenses for the fiscal years ended December 31, 1996 and 1995
were $7.5 million and $5.5 million, respectively, representing an increase of
$2.0 million, or 37.0%. As a percentage of net operating revenues, production,
programming and promotions expenses were 31.5% and 29.9% for the fiscal years
ended December 31, 1996 and 1995, respectively, representing an increase as a
percentage of net operating revenues of 1.6%. The increase in production,
programming and promotions expenses in absolute dollars resulted from production
and programming costs associated with acquisitions completed during the later
half of 1995 and during 1996, and costs associated with the production of new
programs and services. From September 1995 through fiscal year ended December
31, 1996, Premiere completed the acquisitions of BRG, Cutler and PMW; and also
during that time acquired the distribution rights to or launched four new
long-form programs, a new mini-feature and a new research service. All of the
acquisitions and new programs and services are included in Premiere's results of
operations from their date of acquisition or introduction, except that
programming costs incurred with respect to the development of new programs and
services are expensed as incurred. The increase in production, programming and
promotions expenses as a percentage of net operating revenues was principally
due to acquisitions completed during the fourth quarter of fiscal year ended
December 31, 1996 and the acquisition of distribution rights to three long-form,
talk programs during that year. As Premiere completes acquisitions or introduces
new programs, production and programming costs may temporarily be higher as a
percentage of net operating revenues as Premiere assimilates the acquisitions
within its operations and/or builds the revenue base of acquired or newly
introduced programs and services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the fiscal years ended December 31, 1996 and 1995
were $9.0 million and $7.8 million, respectively, representing an increase of
$1.2 million or 15.5%. The increase in selling, general and administrative
expenses in terms of
54
absolute dollars was due to the incremental overhead costs associated with
acquired companies such as BRG, Cutler and PMW, and increased salaries, sales
and related costs associated with Premiere's growth in programming and services.
As a percentage of net operating revenues, selling, general and administrative
expenses were 37.9% and 42.7% during the fiscal years ended December 31, 1996
and 1995, respectively, representing a decrease as a percentage of net operating
revenues of 4.8%. The decrease in selling, general and administrative expenses
as a percentage of net operating revenues was principally due to the effects of
higher overall levels of gross operating revenues and the nature of fixed and
variable components of selling, general and administrative expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
$1.9 million and $1.3 million for the fiscal years ended December 31, 1996 and
1995, respectively, representing an increase of $0.6 million, or 50.8%. This
increase was principally due to increased amortization expenses associated with
acquisitions of the intellectual properties of BRG, Cutler and PMW.
OTHER CHARGES. In connection with attempted business acquisitions and the
assimilation of completed business acquisitions during the year ended December
31, 1996, Premiere incurred professional fees, severance, transition and other
costs. The costs which aggregated approximately $0.4 million were charged to
expense in the 1996 statement of income.
OPERATING INCOME. Operating income for the fiscal year ended December 31,
1996 was $5.0 million, an increase of $1.2 million, or 32.3% over the same
period in 1995. The increased operating income was principally due to increased
net advertising revenues resulting from the acquisitions of other independent
network radio programmers and service providers and the continued growth in
Mediabase research services. In addition, lower overall operating expenses
relative to total operating revenues contributed to higher operating income.
OTHER INCOME AND (EXPENSES). Other income and (expenses) for the fiscal
year ended December 31, 1996 was $(0.8) million, a decrease of $1.3 million
versus the same period in 1995. Other income and (expenses) for the fiscal year
ended December 31, 1996 principally included a one-time write-off of debt
issuance costs which was offset by interest income on investments in short-term
marketable securities. Premiere had recorded debt issuance costs in connection
with the Debentures, as hereinafter defined. Because Premiere did not exercise
its call on Archon to purchase the Debentures by October 28, 1996, Premiere
wrote-off the then remaining unamortized debt issuance costs resulting in a
one-time earnings charge during the fourth quarter of 1996 of $1.9 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Premiere-Liquidity and Capital Resources" and Note 11 to
Premiere's audited financial statements. Interest income resulted from
Premiere's investment of proceeds received from the sale of Class A Common Stock
in January 1996 (the "Offering"). See "Liquidity and Capital Resources." Other
income for the fiscal year ended December 31, 1995 included a one-time gain on
Premiere's sale of KZDG in February 1995 ("KZDG Sale") of $0.5 million.
INCOME TAXES. The provision for income taxes for each of the fiscal years
ended December 31, 1996 and 1995 was $1.7 million. The estimated effective tax
rate utilized by Premiere for the fiscal year ended December 31, 1996 was 41.1%,
while the estimated effective tax rate for the fiscal year ended December 31,
1995 was 40.2%.
NET INCOME AND EARNINGS PER SHARE. Net income for the fiscal years ended
December 31, 1996 and 1995 was $2.4 million, or $0.28 per share and $2.6
million, or $0.46 per share, respectively. The decreased net income for the
fiscal year ended December 31, 1996 was principally due to the effects of the
one-time write-off of debt issuance costs and Other Charges aggregating $2.4
million, all of which was offset, in part, by higher overall operating income
and increased interest income. Earnings per share, which includes the dilutive
effects of options and warrants to purchase Common Stock, are based upon
8,929,954 and 6,105,494 shares for the fiscal years ended December 31, 1996 and
1995, respectively.
Premiere declared a one-for-two stock dividend in March 1996, effected in
the form of a three-for-two stock split, of Class A Stock payable to all holders
of Common Stock and Class A Stock on the April 1,
55
1996 record date for such dividend. Per share earnings for the year ended
December 31, 1995 has been adjusted to reflect the Class A Stock Dividend.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1994
OPERATING REVENUES. Gross revenues for the fiscal years ended December 31,
1995 and 1994 were $20.8 and $18.0 million, respectively, representing an
increase of $2.8 million, or 15.2%. Net operating revenues increased $2.3
million, or 14.6% from $16.0 million for the fiscal year ended December 31,
1994, to $18.3 million for the fiscal year ended December 31, 1995. These
increases are principally due to increased gross advertising revenues related to
network programs and services of $2.5 million ($2.1 million net revenues) and
increased revenues from sales representation and other operating revenues of
$1.5 million, which were offset by a decrease in revenues from the operation of
KZDG of $1.2 million. The increased advertising revenues resulted from the
growth in established programming, continued growth in Mediabase research
services, and expansion in sales representation and marketing and promotional
services. The decrease in KZDG revenues resulted from the KZDG sale.
PRODUCTION, PROGRAMMING AND PROMOTIONS EXPENSES. Production, programming
and promotions expenses for the fiscal years ended December 31, 1995 and 1994
were $5.5 million and $5.3 million, respectively, representing an increase of
$0.2 million or 3.6%. In absolute dollars, production, programming and
promotions expenses remained relatively flat, while as a percentage of net
operating revenues, production, programming and promotions expenses were 29.9%
and 33.1% for the fiscal years ended December 31, 1995 and 1994, respectively,
representing a decrease as a percentage of net operating revenues of 3.2%. This
decrease as a percentage of net operating revenue was principally due to the
discontinuance of operations of KZDG resulting in an expense reduction of $0.4
million (2.6% of net operating revenues for the fiscal year ended December 31,
1995) and the discontinuance of the Gerry House Show resulting in an expense
reduction of $0.2 million (1.3% of net operating revenues for the fiscal year
ended December 31, 1995), both of which had a substantially higher cost
structure than other operations of Premiere, offset, in part, by increased costs
associated with new radio programming and services and other costs. There were
no significant additional production, programming and promotions expenses
associated with the expansion in sales representation service revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the fiscal years ended December 31, 1995 and 1994
were $7.8 and $7.7 million, respectively, representing an increase of $0.1
million or 2.1%. In absolute dollars, selling, general and administrative
expenses remained relatively flat while as a percentage of net operating
revenues, selling, general and administrative expenses were 42.7% and 48.0%
during the fiscal years ended December 31, 1995 and 1994, respectively,
representing a decrease as a percentage of net operating revenues of 5.3%. The
decrease in selling, general and administrative expenses as a percentage of net
operating revenues was principally due to the effects of the KZDG sale, which
had a substantially higher cost structure than other operations of Premiere, and
the effects of higher overall levels of gross operating revenues and the nature
of fixed and variable components of selling, general and administrative
expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses were
$1.3 million and $0.9 million for the fiscal years ended December 31, 1995 and
1994, respectively, representing an increase of $0.4 million, or 35%. This
increase is principally due to increased amortization expenses associated with
acquisitions of intellectual properties and an acquired program network.
OPERATING INCOME. Operating income for the fiscal year ended December 31,
1995 was $3.8 million, an increase of $1.7 million, or 79.4% over the same
period in 1994. The increased operating income was principally due to increased
net advertising revenues resulting from the growth in established programming,
continued growth in Mediabase research services, and expansion in sales
representative services. In addition, lower overall operating expenses relative
to total operating revenues, resulting principally from the KZDG sale and the
discontinuance of the Gerry House Show, contributed to higher operating income.
56
OTHER INCOME. Other income for the fiscal year ended December 31, 1995 was
$0.5 million, a decrease of $0.8 million versus the same period in 1994. Other
income for the fiscal year ended December 31, 1995 included a one-time gain on
the KZDG sale of $0.5 million, while other income for the fiscal year ended
December 31, 1994 included a one-time gain on sale of program networks of $1.7
million. The decrease in other income was offset, in part, by higher interest
income on investments in short-term marketable securities and lower interest
expense resulting from lower overall outstanding indebtedness. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
PREMIERE--Liquidity and Capital Resources."
INCOME TAXES. The provision for income taxes for the fiscal years ended
December 31, 1995 and 1994 was $1.7 million and $1.4 million, respectively. The
estimated effective tax rate utilized by Premiere for the fiscal year ended
December 31, 1995 was 40.2%, while the estimated effective tax rate for the
fiscal year ended December 31, 1994 was 40.8%.
NET INCOME AND EARNINGS PER SHARE. Net income for the fiscal years ended
December 31, 1995 and 1994 was $2.6 million, or $0.46 per share and $2.0
million, or $0.43 per share, respectively. The increased net income for the
fiscal year ended December 31, 1995 was principally due to increased operating
income which was offset by lower other income attributable to the difference in
one-time gains on sale during the first quarter of each of the respective fiscal
years. Earnings per share, which includes the dilutive effects of options and
warrants to purchase Common Stock, are based upon 6,105,494 and 4,664,921 shares
for the fiscal years ended December 31, 1995 and 1994, respectively.
Premiere declared a one-for-two stock dividend in March 1996, effected in
the form of a three-for-two stock split, of Class A Stock payable to all holders
of Common Stock and Class A Stock on the April 1, 1996 record date for such
dividend. Per share earnings for the years ended December 31, 1995 and 1994 have
been adjusted to reflect the Class A Dividend.
FISCAL YEAR ENDED DECEMBER 31, 1994 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1993
OPERATING REVENUES. Gross operating revenues for the year ended December
31, 1994 were $18.0 million, an increase of $5.6 million or 45.6% from the same
period in 1993. Net operating revenues for the year ended December 31, 1994 were
$16.0 million, an increase of $5.1 million or 47.2% from the same period in
1993. The increase in net operating revenues is primarily attributable to
increased net advertising revenues of $4.7 million, related to the growth in new
network programming and research services and sales representation and other
services, as well as an increase of $0.4 million in revenues of KZDG which was
sold by Premiere on March 1, 1995. The increase in net advertising revenues
related to Premiere's network programming and services is primarily due to the
addition and growth of programs developed internally and acquired from Olympia,
and the increase in Mediabase revenues is due to the growth in the number of
radio station affiliates utilizing the Mediabase service.
PRODUCTION, PROGRAMMING AND PROMOTIONS EXPENSES. Production, programming
and promotions expenses for the year ended December 31, 1994 were $5.6 million,
an increase of $1.3 million, or 29.3%, from the same period in 1993. As a
percentage of net operating revenues, however, production, programming and
promotions expenses decreased from 39.5% of net revenues in 1993 to 34.7% in
1994. The increase in absolute dollars was due to increased production and
programming expenses incurred in connection with Premiere's network programs of
$1.4 million, partially offset by a decrease in operating expenses for KZDG of
$0.1 million. The increases in production, programming and promotions expenses
related to network programs are attributable to the growth of the programs
acquired from Olympia and the continued expansion of Premiere's Mediabase
service. The decrease in expenses as a percentage of net operating revenues was
due to the growth in net operating revenues in 1994 as Premiere achieved
operating efficiencies at the higher level of operating revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the year ended December 31, 1994 were $8.3 million,
an increase of $0.7 million or 9.6% from the same period in 1993. As a
percentage of net operating revenues, however, selling, general and
administrative expenses
57
decreased from 70% in 1993 to 52.2% in 1994. The increase in absolute dollars
was due to increased general corporate overhead and selling expenses necessary
to support Premiere's expanded programming and service offerings of $1.8
million, offset by a decrease in overhead expenses of KZDG of $1.1 million. The
increase in general corporate overhead and selling expenses is due to increased
personnel and related payroll expenses of $0.9 million and other general
overhead expenses of $0.9 million. The decrease in expenses of KZDG is due
primarily to decreased advertising expenses of $0.6 million, decreased sales
promotion expenses of $0.2 million and decreased other general and
administrative expenses of $0.2 million. The decrease in expenses as a
percentage of net operating revenues was principally due to the effects of
higher overall gross operating revenues, start-up costs associated with KZDG,
Mediabase and the Gerry House Show in 1993 and the nature of the fixed and
variable components of Premiere's overhead structure.
OPERATING INCOME. Operating income for the year ended December 31, 1994 was
$2.1 million, an increase of $3.1 million from the same period in 1993. The
increase is attributable to Premiere's strong growth in network advertising
revenues related to its syndicated programs and Mediabase research service.
OTHER INCOME. Other income for the year ended December 31, 1994 was $1.3
million, an increase of $1.1 million over the same period in 1993. The increase
is primarily attributable to a gain on the sale of five program networks of $1.7
million offset by a loss of $0.2 realized on the sale of marketable securities
in 1994 versus a gain on the sale of marketable securities of approximately $0.2
million in 1993. In addition, Premiere incurred increased interest expense of
$0.1 million due to higher average borrowings and average interest rates.
INCOME TAXES. Premiere provided for income taxes of $1.4 million for the
year ended December 31, 1994 corresponding with an effective tax rate of 40.8%.
EARNINGS (LOSS) PER SHARE. Earnings per share for the year ended December
31, 1994 was $0.43, as compared to a loss per share for the year ended December
31, 1993 of ($0.11). The weighted average number of Common and Common equivalent
shares outstanding increased from 4,500,000 at December 31, 1993 to 4,164,921 at
December 31, 1994, as a result of the dilutive effect of outstanding options and
warrants to purchase Common Stock.
Premiere declared a one-for-two stock dividend in March 1996, effected in
the form of a three-for-two stock split, of Class A Stock payable to all holders
of Common Stock and Class A Stock on the April 1, 1996 record date for such
dividend. Per share earnings for the years ended December 31, 1994 and 1993 have
been adjusted to reflect the Class A Dividend.
SEASONALITY
As is standard in the network radio industry, Premiere's revenues have
historically been highest in the second and third quarters and lowest in the
first and fourth quarters. Other than sales commissions paid to Premiere's sales
personnel, costs do not vary significantly with respect to the seasonal
fluctuation of revenues. As a result, Premiere's net income historically has
typically been highest in the second and third quarters and lowest in the first
and fourth quarters.
As Premiere expands its programming and services, Premiere's income may from
time to time be adversely affected because the initial expenses associated with
such new programming and services are typically expensed in the quarter in which
incurred.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Premiere has financed its cash flow requirements through cash
flows generated from operations and financing activities.
Net cash (used in) provided by operating activities for the three years
ended December 31, 1996, 1995 and 1994 were $4.9 million, $(0.8) million, and
$0.6 million, respectively. The increased cash flows from operations in 1996 was
principally due to changes in operating assets and liabilities, including
increased deferred income and the impact of non-cash expenses such as
depreciation and amortization and the write-
58
off of debt issuance costs, all of which were offset, in part, by increased
account receivables. The decreased cash flows from operations in 1995 was
principally due to increased accounts receivable and other assets, increased
prepaid expenses associated with deferred stock offering costs incurred in
connection with the Offering (as defined herein) and lower deferred income. The
increased cash flow from operations in 1994 was principally due to changes in
operating assets and liabilities.
Net cash (used in) provided by investing activities for the three years
ended December 31, 1996, 1995, and 1994 was $(14.9) million, $2.7 million, and
$(1.2) million, respectively. The increase in net cash (used in) investing
activities was principally due to increased acquisitions of intangible assets
and the investment in AudioNet. The increase in net cash provided by investing
activities during 1995 resulted from the KZDG sale, which was offset, in part,
by the acquisition of BRG. The decrease in net cash used in investing activities
during 1994 resulted from the sale of program networks, which was offset by the
acquisition of the minority interest in Mediabase.
Net cash provided by financing activities for the years ended December 31,
1996, 1995, and 1994 were $19.4 million, $1.1 million, and $2.3 million,
respectively. Net cash provided by financing activities during 1996 increased
principally due to Premiere's sale of Class A Stock during January 1996. Net
cash provided by financing activities during 1995 decreased principally due to
repayments of borrowings and note payable to officer; offset in part by proceeds
from sales of Common Stock and warrants, and exercise of stock options. During
the third quarter of 1995, Premiere sold 500,000 and 250,000 shares (as adjusted
for the Stock Dividend) of Common Stock and Class A Stock, respectively, and
warrants (the "Class B Warrants") to purchase up to 814,500 and 407,250 shares
(as adjusted for the Class A Dividend) of Common Stock and Class A Stock,
respectively, to ACI for net proceeds of $3.9 million. See Note 10 to the "Notes
to Consolidated Financial Statements of Premiere". Cash used in financing
activities during the fiscal year ended December 31, 1995 was principally
utilized for payment of Premiere's term loan in the amount of $2.9 million and
payment of a note payable to a Premiere officer in the amount of $800,000. Net
cash provided by financing activities during 1994 remained relatively flat as
Premiere's net borrowings were approximately the same in each of 1994 and 1993.
Premiere's working capital at December 31, 1996, 1995, and 1994 was $20.9
million, $8.8 million, and $4.9 million, respectively. This increase in working
capital from 1995 to 1996 was primarily attributable to an increase in cash and
cash equivalents resulting from the proceeds received in connection with the
sale of Class A Stock. See Note 12 "Notes to Consolidated Financial Statements
of Premiere". The increase in working capital from 1994 to 1995 was primarily
attributable to an increase in cash and cash equivalents resulting from the
proceeds received from the KZDG sale and from the sale of Common Stock and Class
B Warrants to ACI.
On March 19, 1993, Premiere entered into an agreement (as subsequently
amended) with Bank of America NT&SA whereby Premiere obtained a $2.0 million
working capital line of credit and a $2.2 million term loan. Both loans were
secured by substantially all of the assets of Premiere. In connection with
Premiere's acquisition of the remaining minority share of Mediabase, the term
loan was increased to $4.2 million on July 15, 1994. Upon consummation of
Premiere's sale of KZDG on March 1, 1995, Premiere repaid $1.9 million of the
term loan and utilized the remainder of the proceeds for general working capital
and for investments in short-term marketable securities. In January 1996,
Premiere repaid all then outstanding borrowings.
On March 1, 1994, Premiere received $2.7 million from its sale of five
sports networks to Major Broadcast Companies, Inc. and an additional $1.0
million prepayment towards its sales representation agreement with Major
Broadcast Companies, Inc.
On February 28, 1995, Premiere sold the assets and broadcast license of KZDG
to Shamrock Broadcasting, Inc. for $5.5 million cash. KZDG was purchased by
Premiere in March 1993 for $3.6 million. For the years ended December 31, 1993
and 1994, KZDG had revenues of $0.9 million and $1.2 million, respectively, and
losses from operations before income taxes of $2.1 million and $0.7 million,
respectively.
59
In connection with the BRG acquisition, Premiere issued a non-interest
bearing note in the face amount of approximately $0.4 million which was paid in
full in January 1997. In connection with the PMW acquisition, Premiere issued a
6.5% interest note payable in the face amount of $0.2 million due in eight equal
quarterly installments principal plus accrued interest. In addition, Premiere
amended and restated an August 29, 1995 agreement pursuant to which it had
entered into future commitments to acquire licenses to three (3) production
music libraries from Canary Productions, Inc. ("Canary"). Under the amended and
restated agreement, Premiere has entered into future commitments to acquire one
(1) additional production music library, four (4) production music libraries in
total, from Canary. During 1997, Premiere paid Canary a nominal amount for the
first such library. See Note 2 of "Notes to Consolidated Financial Statements of
Premiere".
On January 25, 1996, Premiere completed the sale of 1,500,000 shares (of
which 1,360,000 shares were sold by Premiere and 140,000 shares by certain
management shareholders of Premiere) of its Class A Stock at $18.25 per share
(after giving effect to the Stock Dividend, holders received 2,250,000 shares of
Class A Stock from the sale and paid $12.17 per share) pursuant to a public
offering, and received net proceeds (net of underwriting discounts, commissions
and expenses) of approximately $22.0 million (the "Offering").
On July 28, 1995, Premiere, ACI and certain management stockholders entered
into a Commitment Agreement pursuant to which ACI agreed to purchase up to $10.8
million principal amount of debentures (the "Debentures") and 1,080,000 and
540,000 Class A Warrants (as adjusted for the Class A Dividend) for Common Stock
and Class A Stock, respectively, upon Premiere's call at any time until October
28, 1996, including 707,000 Class A Warrants which are issuable to Archon
whether or not Premiere exercises its call rights with respect to the
Debentures. Premiere had recorded as debt issuance costs, the value of the
707,000 and 353,500 Class A Warrants (as adjusted for the Class A Dividend), for
Common Stock and Class A Stock, respectively, issuable to ACI whether or not
Premiere exercised its call of all or a portion of $10.8 million of the
Debentures as well as certain legal, professional and other costs directly
related to the Debentures. Because Premiere did not call on ACI to purchase the
Debentures by October 28, 1996, Premiere wrote-off any unamortized debt issuance
costs related to the 707,000 and 353,500 Class A Warrants and other unamortized
debt issuance costs, which resulted in a one-time earnings charge during the
fourth quarter of 1996 of $1.9 million.
In connection with ACI's commitment to purchase the Debentures, ACI had
charged Premiere a facility fee payable to ACI of 0.3% of the unused commitment
for each quarter during which the commitment is outstanding ($32,400 per
quarter, assuming none of the commitment is called). Premiere had not paid this
commitment fee since January 1996. Effective July 1, 1996, ACI agreed to waive
the commitment fees (including any accrued, but unpaid commitment fees).
Accordingly, included in results of operations for the year ended December 31,
1996 is a reduction in interest expense of $64,800 relating to commitment fees
waived by ACI effective January 1, 1996.
During January 1997 a wholly-owned merger subsidiary of Premiere acquired
100% of the outstanding shares of AME for consideration consisting of $3.9
million cash and 400,000 shares of Premiere's Class A Stock. Under the terms of
the merger agreement with AME, Premiere has agreed to pay additional
consideration either in cash or additional shares of Class A Stock, at its
option, if the market value of the Class A Stock is less than $16.00 per share
one year from the closing date of the transaction. As a result of the Merger
Agreement, at the Effective Time this provision will no longer be applicable.
Premiere's management believes that its available cash together with
operating revenues will be sufficient to fund Premiere's working capital
requirements through December 31, 1997. Premiere's management further believes
it has sufficient liquidity to implement its expansion and acquisition
strategies.
60
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF JACOR
The following table sets forth, as of April 11, 1997, the number of shares
and percentage of Jacor Common Stock beneficially owned by each person who is
known to Jacor to be the beneficial owner of more than 5% of Jacor's Common
Stock, by each of Jacor's directors and nominees for election as directors, by
Jacor's named executive officers, and by all of Jacor's executive officers and
directors as a group.
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- ------------------------------------------------------------------------------ ------------------------ -----------
5% OR MORE BENEFICIAL OWNERS
Zell/Chilmark Fund L.P........................................................ 13,349,720(3) 38.3%
David M. Schulte.............................................................. 13,349,720(4) 38.3%
FMR Corp. and related reporting persons....................................... 3,052,943(5) 8.6%
Massachusetts Financial Services Company...................................... 2,759,849(6) 7.9%
American Financial Group, Inc. and related reporting persons.................. 2,182,589(7) 5.9%
Marsh and McLennan Companies, Inc. and related reporting persons.............. 2,164,673(8) 6.2%
DIRECTORS AND EXECUTIVE OFFICERS
John W. Alexander............................................................. 40,000(9) *
Peter C.B. Bynoe.............................................................. 0 *
Rod F. Dammeyer............................................................... 13,366,720(4)(10) 38.4%
F. Philip Handy............................................................... 60,100(11) *
Marc Lasry.................................................................... 27,000(9) *
Robert L. Lawrence............................................................ 533,255(12) 1.5%
Randy Michaels................................................................ 691,857(13)(14) 2.0%
Sheli Z. Rosenberg............................................................ 13,420,513(4)(15) 38.4%
Maggie Wilderotter............................................................ 200 *
Samuel Zell................................................................... 13,409,963(3)(4)(16) 38.4%
Jon M. Berry.................................................................. 237,437(14)(17) *
Thomas P. Owens............................................................... 48,455(18) *
R. Christopher Weber.......................................................... 471,836(14)(19) 1.2%
All executive officers and directors as a group (21 persons).................. 15,253,256(20) 41.8%
- ------------------------
* Less than 1%
(1) The Securities and Exchange Commission (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 are 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 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.
(3) The address of Zell/Chilmark Fund L.P. ("Zell/Chilmark") is Two North
Riverside Plaza, Suite 600, Chicago, Illinois 60606. Zell/Chilmark is a
Delaware limited partnership controlled by Samuel Zell,
61
Chairman of the Board of Jacor, and David M. Schulte, a former director of
Jacor, 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 general partners of ZC Partnership are ZC, Inc. and
CZ, Inc.; Mr. Zell is the sole stockholder of ZC, Inc.; and Mr. Schulte is
the sole stockholder 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 ZC Limited. The address of Mr. Schulte is 875 N.
Michigan Avenue, Suite 2200, Chicago, Illinois 60611. The address of Mr.
Zell is Two North Riverside Plaza, Suite 600, Chicago, Illinois 60606. 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 February 14, 1997, FMR Corp. ("FMR"), Fidelity Management and Research
Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp., and the
affiliates of FMR Corp. set forth below, as a group, filed with the
Commission a Schedule 13G reporting beneficial ownership of Jacor Common
Stock as of December 31, 1996. FMR reported beneficial ownership of
3,052,943 shares of Jacor Common Stock. Fidelity reported beneficial
ownership of 2,942,185 shares of Jacor Common Stock as a result of acting
as an investment advisor to various investment companies. This number of
shares includes 249,785 shares of Jacor Common Stock resulting from the
assumed conversion of $18,624,000 principal amount of Liquid Yield Option
Notes ("LYONs") (13.412 shares of Jacor Common Stock for each $1,000
principal amount of LYONs). Edward C. Johnson 3d, Chairman of FMR Corp.,
and FMR Corp., through their control of Fidelity, each reported having the
sole power to dispose of the 2,942,185 shares owned by the various
investment funds ("Fidelity Funds'). Neither FMR Corp. nor Mr. Johnson
reported the sole power to vote or direct the voting of the shares owned
directly by the Fidelity Funds, which power reportedly resides in the
Fidelity Funds' Boards of Trustees. Fidelity Management Trust Company, a
wholly-owned subsidiary of FMR Corp, reported having beneficial ownership
of 110,757 shares of Jacor Common Stock as a result of its serving as
investment manager of institutional accounts. This number of shares
includes 55,257 shares of Jacor Common Stock resulting from the assumed
conversion of $4,120,000 principal amount of the LYONs. Mr. Johnson and FMR
Corp., through their control of Fidelity Management Trust Company, each
reported having the sole power to dispose of 110,757 shares, the sole power
to vote or to direct the voting of 62,884 shares, and no power to vote or
to direct the vote of 47,873 shares owned by the institutional accounts.
Members of Mr. Johnson's family and trusts for their benefit are the
predominant owners of the Class B shares of common stock of FMR Corp.,
representing approximately 49% of the voting power of FMR Corp. Mr. Johnson
owns 12% and Abigail P. Johnson owns 24.5% of the aggregate outstanding
voting stock of FMR Corp. Mr. Johnson is the Chairman of FMR Corp., and
Mrs. Johnson is a director of FMR Corp. The Johnson family group and all
other Class B shareholders of FMR Corp. have entered into a shareholders'
voting agreement under which all Class B shares of FMR Corp. will be voted
in accordance with the majority vote of Class B shares. Accordingly,
members of the Johnson family may be deemed to for a controlling group with
respect to FMR Corp. under the Investment Company Act of 1940. The address
of such entities and persons is 82 Devonshire Street, Boston, Massachusetts
02109.
(6) On February 12, 1997, Massachusetts Financial Services Company ("MFS")
filed with the Commission a Schedule 13G reporting beneficial ownership of
Jacor Common Stock as of December 31, 1996. MFS reported having sole voting
power with respect to 2,687,349 shares of Jacor Common Stock and sole
dispositive power over 2,759,849 shares of Jacor Common Stock. In the
aggregate, MFS reported beneficial ownership of 2,759,849 shares of Jacor
Common Stock, which are also beneficially owned by other non-reporting
entities as well as MFS. The address of MFS is 500 Boylston Street, Boston,
Massachusetts 02116-3741.
62
(7) 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, as a group, filed with the
Commission 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
merger of Citicasters, Inc. with and into Jacor in September 1996. The
address of such entities and persons is One East Fourth Street, Cincinnati,
Ohio 45202.
(8) Marsh & McLennan Companies, Inc. ("MMC"), a Delaware corporation, 1166
Avenue of the Americas, New York, New York 10036 is the parent holding
company of Putnam Investments, Inc. ("Putnam"), a Massachusetts
corporation, One Post Office Square, Boston, Massachusetts 02109, which
owns two registered investment advisors, Putnam Investment Management, Inc.
("PIM"), a Massachusetts corporation, One Post Office Square, Boston,
Massachusetts 02109, and The Putnam Advisory Company, Inc. ("PAC"), a
Massachusetts corporation, One Post Office Square, Boston, Massachusetts
02109. On January 27, 1997, MMC, Putnam, PAC and PIM, filed as a group,
filed with the Commission a Schedule 13G reporting beneficial ownership of
Jacor Common Stock as of December 31, 1996. MMC reported having no voting
or dispositive power over any shares of Jacor Common Stock. Putnam reported
beneficially owning 2,164,673 shares of Jacor Common Stock, of which
1,921,173 shares were also beneficially owned by PIM, and 243,500 shares
were also beneficially owned by PAC. Of the 1,921,173 shares of Jacor
Common Stock beneficially owned by Putnam and PIM, Putnam and PIM reported
sharing voting power over none of the shares, and sharing dispositive power
over all 1,921,173 shares. Of the 243,500 shares of Jacor Common Stock
reportedly beneficially owned by Putnam and PAC, Putnam and PAC reported
sharing voting power over 116,800 shares, and sharing dispositive power
over all 243,500 shares.
(9) Includes vested options to purchase 17,000 shares.
(10) 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 (4) above.
(11) 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.
(12) Includes vested options to purchase 523,010 shares. Of the shares
indicated, 397 shares are owned by members of Mr. Lawrence's family.
(13) Includes vested options to purchase 467,200 shares. The number of shares
indicated includes shares held as co-trustee under the Jacor
Communications, Inc. Retirement Plan (the "Retirement Plan"). See Note (15)
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. See "Certain Relationships and Related Transactions."
(14) Includes 214,270 shares held under the Retirement Plan with respect to
which Messrs. Michaels, Weber and Berry as co-trustees, share voting and
investment power. Of these 214,270 shares, 10,803 shares are beneficially
owned by the named executives.
(15) 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 (4) above. Also, Mrs. Rosenberg is a
partner in SZ2 (IGP) Partnership, an Illinois general partnership ("SZ2"),
which beneficially owns 60,243 shares issuable upon the exercise of certain
warrants. Other partners of SZ2 include trusts created for the benefit of
Mr. Zell. As a result, Mrs. Rosenberg and Mr. Zell may be deemed to be the
beneficial owners of the warrants. Mrs. Rosenberg and Mr. Zell disclaim
beneficial ownership of such warrants. See Note (16) below.
63
(16) Includes 60,243 shares issuable pursuant to warrants. The warrants are
beneficially owned by SZ2. Certain partners of SZ2 include Mrs. Rosenberg
and trusts created for the benefit of Mr. Zell. As a result, Mrs. Rosenberg
and Mr. Zell may be deemed to be beneficial owners of the warrants reported
herein. Mrs. Rosenberg and Mr. Zell disclaim beneficial ownership of such
warrants. See Note (15) above.
(17) Includes vested options to purchase 22,912 shares. The number of shares
indicated includes shares and warrant shares held as co-trustee under the
Retirement Plan. See Note (14) above.
(18) Includes vested options to purchase 47,400 shares.
(19) Includes vested options to purchase 254,500 shares. The number of shares
indicated includes shares held as co-trustee under the Retirement Plan. See
Note (14) above.
(20) Includes 115,583 shares issuable pursuant to warrants (beneficial
ownership of 60,258 shares of which is disclaimed, as described in Notes
(15) and (16) above), vested options to purchase 1,477,173 shares and
214,270 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-employee 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, 1,914 stock units to
Mr. Owens and 1,435 stock units to Mr. Berry). 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.
No agreements, formal or informal, exist among the various officers and
directors to vote their shares collectively.
64
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF PREMIERE
The following tables set forth certain information with respect to
beneficial ownership of Premiere's Common Stock and Class A Stock as of March
28, 1997 by: (i) each person who is known by Premiere to own beneficially more
than five percent of either class of Premiere Common Stock; (ii) each of
Premiere's directors; (iii) each of the chief executive officer and the
four-most highly compensated executive officers of Premiere other than the chief
executive officer; and (iv) all executive officers and directors of Premiere as
a group.
TABLE I--COMMON STOCK BENEFICIALLY OWNED
COMMON PERCENT OF
STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS(1) OWNED(2) OWNED
- --------------------------------------------------------------- ----------- -----------------
Archon Communications Inc...................................... 2,321,500 44.8%
15260 Ventura Blvd., Third Floor
Los Angeles, California 91403
Liberty Investment Management.................................. 70,800 1.9%
2502 Rocky Point Drive, Ste. 500
Tampa, Florida 33607
Stephen C. Lehman.............................................. 733,420 19.8%
Kraig T. Kitchin............................................... 160,160 4.3%
Harold S. Wrobel............................................... 221,910 6.0%
Timothy M. Kelly............................................... 211,346 5.7%
Daniel M.Yukelson.............................................. 6,241 *
Louise G. Palanker............................................. 300,180 8.1%
David J. Evans................................................. -- *
Robert M. Fell................................................. -- *
Andrew Schuon.................................................. -- *
David E. Salzman............................................... 37,500 1.0%
Kenin M. Spivak................................................ -- *
Eric R. Weiss.................................................. -- *
All executive officers and directors as a group (12 persons)... 1,670,757 42.4%
65
TABLE II--CLASS A STOCK BENEFICIALLY OWNED
CLASS A
STOCK PERCENT OF
BENEFICIALLY CLASS A STOCK
NAME AND ADDRESS(1) OWNED(3) BENEFICIALLY OWNED
- ---------------------------------------------------------------------------------- ----------- -------------------
Archon Communications Inc......................................................... 1,180,750 23.4%
15260 Ventura Blvd., Third Floor
Los Angeles, California 91403
Liberty Investment Management..................................................... 300,500 7.1%
2502 Rocky Point Drive, Ste. 500
Tampa, Florida 33607
Stephen C. Lehman................................................................. 396,710 9.2%
Kraig T. Kitchin.................................................................. 93,413 2.2%
Harold S. Wrobel.................................................................. 125,136 2.9%
Timothy M. Kelly.................................................................. 109,006 2.5%
Daniel M. Yukelson................................................................ 11,443 *
Louise G. Palanker................................................................ 153,423 3.6%
David E. Evans.................................................................... 52,500 1.2%
Robert M. Fell.................................................................... 52,500 1.2%
David E. Salzman.................................................................. 71,250 1.7%
Andrew Schuon..................................................................... 13,333 *
Kenin M. Spivak................................................................... 52,500 1.2%
Eric R. Weiss..................................................................... 138,000 3.2%
All executive officers and directors as a group (12 persons)...................... 1,269,215 27.0%
- ------------------------
* Represents less than 1%.
(1) The address of each person other than ACI and Liberty Investment Management
is c/o Premiere at 15260 Ventura Boulevard, Fifth Floor, Los Angeles,
California 91403-5339.
(2) For ACI, includes 1,521,500 shares of Common Stock issuable upon the
exercise of warrants exercisable within 60 days, and excludes 394,312 shares
of Common Stock owned by certain members of management (the "Management
Stockholders") which are subject to proxies granted to ACI by the Management
Stockholders, as to which ACI disclaims beneficial ownership, and excludes
894,312 shares of Common Stock owned by the Management Stockholders which
are subject to a Voting Trust Agreement as to which ACI may acquire shared
voting power under certain circumstances. For Mr. Lehman, includes 63,000
shares of Common Stock issuable upon exercise of options exercisable within
60 days. For Mr. Kitchin, includes 52,500 shares of Common Stock issuable
upon exercise of options exercisable within 60 days. For Mr. Kelly, includes
49,166 shares of Common Stock issuable upon exercise of options exercisable
within 60 days. For Mr. Wrobel, includes 50,434 shares of Common Stock
issuable upon exercise of options exercisable within 60 days. For Mr.
Yukelson, includes 5,000 shares of Common Stock issuable upon exercise of
options and warrants exercisable within 60 days. For Ms. Palanker, includes
32,000 shares of Common Stock issuable upon exercise of options exercisable
within 60 days. Mr. Evans holds all shares as a nominee of a subsidiary of
NewsAmerica and disclaims any beneficial ownership of such shares. For each
of Messrs. Fell and Spivak, excludes shares owned by ACI and shares issuable
upon exercise of options and warrants within 60 days. For Mr. Salzman
includes 37,500 shares of Common Stock issuable upon the exercise of
warrants exercisable within 60 days.
(3) For ACI, includes 780,750 shares of Class A Stock issuable upon the exercise
of options and warrants exercisable within 60 days, and excludes 197,156
shares of Class A Stock owned by the Management Stockholders which are
subject to proxies granted to ACI by the Management Stockholders, as to
66
which ACI disclaims beneficial ownership and, excludes 447,156 shares of
Class A Stock owned by the Management Stockholders which are subject to a
Voting Trust Agreement as to which ACI may acquire shared voting power under
certain circumstances. For Mr. Lehman, includes 61,500 shares of Class A
Stock issuable upon exercise of options exercisable within 60 days. For Mr.
Kitchin, includes 39,583 shares of Class A Stock issuable upon exercise of
options exercisable within 60 days. For Mr. Wrobel, includes 35,217 shares
of Class A Stock issuable upon exercise of options exercisable within 60
days. For Mr. Kelly, includes 27,916 shares of Class A Stock issuable upon
exercise of options exercisable within 60 days. For Mr. Yukelson, includes
10,833 shares of Class A Stock issuable upon exercise of options and
warrants exercisable within 60 days. Mr. Evans holds all shares as a nominee
of a subsidiary of NewsAmerica and disclaims any beneficial ownership of
such shares. For Ms. Palanker, includes 16,000 shares of Class A Stock
issuable upon exercise of options exercisable within 60 days. For Mr.
Schuon, includes 13,333 shares of Class A Stock issuable upon the exercise
of options and warrants exercisable within 60 days. For Mr. Salzman includes
71,250 shares of Class A Stock issuable upon the exercise of options and
warrants exercisable within 60 days. For each of Messrs. Evans, Fell, and
Spivak includes 52,500 shares each of Class A Stock issuable upon the
exercise of options and warrants exercisable within 60 days. For each of
Messrs. Fell and Spivak, excludes shares owned by ACI or ACP and shares
issuable upon exercise of options and warrants within 60 days. For Mr. Weiss
includes 10,000 shares of Class A Stock issuable upon exercise of options
within 60 days.
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").
Premiere is incorporated under the laws of the State of Delaware, and
Premiere's stockholders' rights are governed by Delaware law, Premiere's
Certificate of Incorporation (the "Premiere Certificate") and Premiere's Bylaws
(the "Premiere Bylaws"). Upon consummation of the Merger and receipt of the
Merger Consideration, Premiere 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 Premiere stockholders under the Jacor
Certificate and Jacor Bylaws, and the Premiere Certificate and Premiere Bylaws.
The following comparison does not purport to be a complete statement of the
rights of Jacor stockholders or of the rights of Premiere's stockholders under
applicable Delaware law, or a complete summary of the Jacor Certificate, Jacor
Bylaws, Premiere Certificate or Premiere Bylaws. The following comparison is
qualified in its entirety by reference to the Jacor Certificate, the Jacor
Bylaws, the Premiere Certificate and the Premiere Bylaws.
In addition, ACI, Premiere, Stephen C. Lehman and certain other members of
Premiere management owning Premiere Common Stock (the "Management Shareholders")
entered into a Stockholders Agreement pursuant to which such parties agreed to
vote their respective shares of Premiere Common Stock in favor of a Board of
Directors of Premiere, consisting of three designees of ACI, three designees of
the Management Stockholders and two independent directors, and in favor of
Premiere's 1995 Stock Option Plan and, if recommended by the Premiere Board of
Directors, additional increases in the amount of shares available for grant
under Premiere's stock option plans such that the shares available for grant
shall equal 15% of Premiere's outstanding Common Stock and Class A Stock.
ACI and the Management Stockholders also entered into a Voting Trust
Agreement to which ACI contribute 750,000 shares of Common Stock and the
Management Stockholders either contributed or made subject to the voting trust
created thereunder (the "Voting Trust"), an aggregate of 894,312 shares of
Common Stock and 447,156 shares of Class A Stock. The shares of Class A Stock
issued by virtue of the
67
Class A Dividend with respect to the shares of Common Stock subject to the
Voting Trust are also subject to the Voting Trust. The Management Stockholders
granted to ACI an irrevocable proxy with respect to 394,312 shares of Common
Stock subject to the Voting Trust (which proxy also relates to 197,156 shares of
Class A Stock issued as a result of the Class A Dividend) such that, after
giving effect to the proxy, ACI and the Management Stockholders have equal
voting power within the Voting Trust. All shares subject to the Voting Trust
were to be voted in accordance with the determination of the majority of the
Voting Trust votes and in accordance with the Stockholders Agreement. In the
event of a deadlock, each holder of shares within the Voting Trust was to vote
its shares in the same manner and in the same proportion as all other shares not
subject to the Voting Trust. In the event that any Management Stockholder ceased
to be employed on a full-time basis by the Company, ACI could determine to
remove such person's shares from the Voting Trust. The trustee under the Voting
Trust Agreement is U.S. Trust Company of California, N.A. The Stockholders
Agreement and the Voting Trust Agreement will each be terminated upon
consummation of the Merger.
In addition to the irrevocable proxy granted to ACI by the Management
Stockholders in connection with the Voting Trust Agreement, the Management
Stockholders granted an additional proxy to Archon with respect to 211,808 of
the Management Stockholders' shares not subject to the Voting Trust (after
giving effect to the Class A Dividend). The shares of Class A Common Stock
issued by virtue of the Class A Dividend with respect to such shares of Common
Stock are also subject to this proxy. Such additional proxy will also terminate
upon consummation of the Merger.
CAPITAL STOCK. As described under "DESCRIPTION OF JACOR 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 Premiere Certificate authorizes 39,000,000 shares of capital stock, of
which 14,000,000 shares are Common Stock, $0.01 par value, 20,000,000 shares are
Class A Stock, $0.01 par value, and 5,000,000 shares are "blank check" Preferred
Stock. The Premiere Certificate permits the Premiere Board 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 Premiere Certificate. Holders of
Common Stock shall have the right to cast ten votes for each share held of
record and holders of Class A Stock shall have the right to cast one vote for
each share held of record on all matters submitted to a vote of the holders of
Premiere Common Stock. The Common Stock and the Class A Stock shall vote
together as a single class on all matters on which stockholders may vote,
including the election of directors, except when class voting is required by
applicable law.
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 Premiere Bylaws provide that the
number of directors shall be at least one, but may be increased or decreased by
action of the stockholders or of the directors. Currently, the Jacor Board
consists of ten members and the Premiere Board consists of eight members.
Under Jacor's Bylaws, the Jacor Board 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
68
that, to the extent provided by the Jacor Board, any committee designated by the
Jacor Board may exercise the power and authority of the Jacor Board 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 Premiere Bylaws provide that whenever the Premiere Board
consists of three or more directors, the Premiere Board may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of two or more of the directors of
Premiere. Any such committee, to the extent provided in the resolution of the
Premiere Board may exercise the powers and authority of the Premiere Board in
the management of the business and affairs of the corporation with the exception
of any authority the delegation of which is prohibited by Section 141 of the
DGCL.
PREEMPTIVE RIGHTS. Neither the Jacor Certificate nor the Premiere
Certificate provides for preemptive rights of stockholders to purchase shares.
CUMULATIVE VOTING. Neither the Jacor Certificate and the Jacor Bylaws, nor
the Premiere Certificate and Premiere Bylaws provide for cumulative voting in
the election of directors.
AMENDMENTS TO BYLAWS. Under both the Jacor Certificate and the Premiere
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 Premiere 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 Premiere 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. Both the Jacor Certificate and the
Premiere Certificate contain such a provision.
69
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, 31,287,221 shares of Common Stock
were issued and outstanding.
COMMON STOCK
Under the Jacor Certificate and Delaware law, the holders of Jacor Common
Stock have no preemptive rights and the Jacor Common Stock has no redemption,
sinking fund, or conversion privileges. The holders of Jacor 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, the Jacor Certificate 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 the Jacor
Certificate, (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 Jacor 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 Jacor 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.
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.
The Jacor Certificate 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 Jacor Certificate, 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 Jacor 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 Jacor Common Stock the holders of Jacor 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
70
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 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
71
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 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.
REGENT WARRANTS
Jacor issued one warrant to acquire a fractional share of Jacor Common Stock
(the "Regent Warrants") for each outstanding share of Regent common stock
pursuant to the terms of the October 1996 definitive merger agreement (the
"Regent Merger Agreement") entered into by Jacor and Regent Communications, Inc.
("Regent"), whereby Regent merged with and into Jacor (the "Regent Merger"). If
all of the Regent Warrants are exercised, 500,000 shares of Jacor Common Stock
would be issued. Each Regent Warrant initially entitles the holder thereof to
purchase .10877 (the "Fraction") of a share of Jacor Common Stock at a price of
$40.00 per full share of Jacor Common Stock (the "Regent Price"). The Regent
Price and the number of shares of Jacor Common Stock issuable upon the exercise
of each Regent Warrant are subject to adjustment if certain events described
below occur. Each Regent Warrant may be exercised until 5:00 pm., Eastern Time,
on February 27, 2002 (the "Regent Expiration Date") in accordance with the terms
of the Regent Warrants and the Regent Warrant Agreement; provided, however, if
any of the Regent Warrants are called for redemption by Jacor, at a price per
Regent Warrant equal to $12.00 multiplied by the Fraction, as adjusted from time
to time under the terms of the Regent Warrant Agreement, on or after February
27, 2000, the right to so redeem the Regent Warrants shall expire at the close
of business, New York time, on such redemption date. To the extent that any
Regent Warrant remains outstanding after such time, such unexercised Regent
Warrant will automatically terminate.
Regent Warrants may be exercised by surrendering to the warrant agent a
signed Regent Warrant certificate together with the form of election to purchase
on the reverse thereof indicating the warrant holder's election to exercise all
or a portion of the Regent Warrants evidenced by such certificate. Surrendered
certificates must be accompanied by payment of the aggregate Regent Price in
respect of the Regent 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 Regent Warrants.
If fewer than all the Regent Warrants evidenced by any certificate are
exercised, the warrant agent will deliver to the exercising warrant holder a new
Regent Warrant certificate representing the unexercised Regent Warrants. Jacor
will not be required to issue fractional shares of Jacor Common Stock upon
exercise of any Regent Warrant and in lieu thereof will pay in cash an amount
equal to the same fraction of the closing price per share of Jacor Common Stock,
determined as provided in the Regent Warrant
72
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 Regent Warrants.
A Regent 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 Regent Warrant and the Regent Price are subject to 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 pursuant to an announced policy of Jacor payable out
of earnings or out of surplus legally available for dividends) or of convertible
securities, all as set forth in the Regent Warrant Agreement. Notwithstanding
the foregoing, no adjustment in the number of shares of Jacor Common Stock
issuable upon the exercise of the Regent 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
Regent Warrant. In addition, Jacor may at its option reduce the Regent Price to
any amount deemed appropriate by the Jacor Board of Directors.
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 Regent Warrant Agreement requires
that effective provisions will be made so that each holder of an outstanding
Regent Warrant will have the right thereafter to exercise the Regent 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 Regent Warrant were exercisable
immediately prior thereto. In addition, pending execution of the Regent Warrant
Agreement, the Regent Merger Agreement provides that, if after the date of the
Regent Merger Agreement and prior to the issuance of the Regent Warrants, Jacor
takes any action which, if the Regent Warrants had been issued and outstanding
as of such date, would have required an adjustment in the exercise price of the
Regent Warrants or in the number of shares purchasable upon exercise of the
Regent Warrants, then the exercise price of the Regent Warrants or such number
of shares will be adjusted upon issuance of the Regent Warrants to give effect
to the adjustment which would have been required as a result of such action.
The Regent Warrant Agreement may be amended or supplemented without the
consent of the holders of Regent 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 Regent Warrant
Agreement shall require the consent of warrant holders representing not less
than 50% of the Regent Warrants then outstanding provided that no change in the
number or nature of the securities purchasable upon the exercise of any Regent
Warrant, or the Regent Price therefor, or the acceleration of the Regent
Expiration Date, and no change in the antidilution provisions which would
adversely affect the interests of the holders of Regent Warrants, shall be made
without the consent of the holder of such Regent Warrant, other than such
changes as are specifically prescribed by the Regent Warrant Agreement or are
made in compliance with applicable law.
No holder of Regent Warrants shall be entitled to vote or receive dividends
or be deemed for any purpose the holder of Jacor Common Stock until the Regent
Warrants are properly exercised as provided in the Regent Warrant Agreement.
73
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Jacor Common Stock is ChaseMellon
Shareholder Services LLC.
DESCRIPTION OF OTHER JACOR INDEBTEDNESS
Jacor expects that the funds necessary to pay the Cash Consideration will be
obtained from a combination of one or more of the following sources: borrowings
under the Credit Facility, JCC's working capital, and proceeds from the 1997
Offering. In addition to the Credit Facility, 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
74
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 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.
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
75
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.
1996 9 3/4% NOTES
In December 1996, JCC conducted an offering (the "1996 9 3/4% Notes
Offering") whereby JCC issued and sold 9 3/4% Senior Subordinated Notes due 2006
(the "1996 9 3/4% Notes") in an aggregate principal amount of $170.0 million.
JCC then lent the net proceeds of the 1996 9 3/4% Notes Offering to Jacor. 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% 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 "Change of Control" means (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.
76
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.
LEGAL MATTERS
The legality of the Jacor Common Stock 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, 1996 and 1995 and the consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1996 and the combined balance sheets of EFM Media
Management, Inc., EFM Publishing, Inc. and PAM Media, Inc. (the "Combined EFM
Companies") as of December 31, 1995 and 1996 and related combined statements of
operations, changes in retained earnings and cash flows for the years ended
December 31, 1994, 1995 and 1996, each incorporated by reference in this
registration statement, have been incorporated 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 financial statements of Premiere Radio Networks, Inc. at
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996, appearing in the Prospectus/ Information Statement and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
77
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
REFERENCE
-------------
Report of Independent Auditors......................................................................... F-2
Consolidated Balance Sheets at December 31, 1996 and 1995.............................................. F-3
Consolidated Statements of Income for each of the three years in the period ended December 31, 1996.... F-5
Consolidated Statements of Stockholders' Equity for each of the three years in the period ended
December 31, 1996..................................................................................... F-6
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31,
1996.................................................................................................. F-7
Notes to Consolidated Financial Statements............................................................. F-8
F-1
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Premiere Radio Networks, Inc.
We have audited the accompanying consolidated balance sheets of Premiere
Radio Networks, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 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 Premiere Radio
Networks, Inc. at December 31, 1996 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, 1996, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Los Angeles, California
February 21, 1997
F-2
PREMIERE RADIO NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
----------------------------
1996 1995
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 14,776,436 $ 5,432,088
Accounts receivable, less allowance for doubtful accounts of $144,000 (1996) and
$214,000 (1995)................................................................ 7,165,928 4,086,623
Notes receivable from officer/employees.......................................... 98,172 282,279
Recoverable income taxes (Note 7)................................................ 213,828 250,952
Deferred income taxes (Note 7)................................................... 1,000,993 549,000
Prepaid expenses and other assets................................................ 739,208 1,375,805
------------- -------------
Total current assets........................................................... 23,994,565 11,976,747
Notes receivable from officer/employees (Note 9)................................... 668,356 845,000
Investments (Note 15).............................................................. 4,215,268 --
Deferred income taxes.............................................................. 99,000 --
Property and equipment, at cost, less accumulated depreciation and amortization
(Note 4).......................................................................... 2,318,939 1,797,337
Acquired program library and program networks, net of accumulated amortization of
$699,217 (1996) and $367,469 (1995) (Note 2)...................................... 1,368,223 1,699,971
Intellectual property, net of accumulated amortization of $1,376,893 (1996) and
$550,200 (1995) (Note 2).......................................................... 14,002,048 4,858,749
Debt issuance costs, net of accumulated amortization of $27,300 (1995) (Notes 10
and 11)........................................................................... -- 2,143,729
Other assets (Note 9).............................................................. 899,558 711,968
------------- -------------
Total assets................................................................... $ 47,565,957 $ 24,033,501
------------- -------------
------------- -------------
See Accompanying Notes.
F-3
PREMIERE RADIO NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
----------------------------
1996 1995
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other liabilities
(Notes 8 and 10)............................................................... $ 1,535,429 $ 1,722,205
Accrued payroll, bonuses, deferred compensation and profit sharing contribution
(Note 9)....................................................................... 830,788 905,468
Income taxes payable (Note 7).................................................... 15,920 25,022
Deferred revenue (Notes 2 and 15)................................................ 250,000 83,326
Current portion of notes payable, net of discount of $6,568 (1996)
(Note 5)....................................................................... 505,932 400,000
------------- -------------
Total current liabilities...................................................... 3,138,069 3,136,021
Notes payable, net of discount of $45,045 (1995), less current portion (Notes 2 and
5)................................................................................ 75,125 1,467,455
Deferred revenue................................................................... 1,516,800 --
Due to related party (Note 10)..................................................... -- 120,000
Other liabilities (Note 9)......................................................... 258,482 7,714
Commitments and contingencies (Note 6).............................................
Stockholders' equity (Notes 10 and 12):
Preferred stock, par value $.01 per share, 5,000,000 shares authorized........... -- --
Common stock, par value $.01 per share, 14,000,000 shares authorized, 3,592,675
and 3,641,650 shares issued at December 31, 1996 and 1995, respectively........ 35,927 36,417
Class A common stock, par value $.01 per share, 20,000,000 shares authorized,
4,041,420 shares issued at December 31, 1996................................... 40,414 --
Additional paid-in capital....................................................... 34,617,213 11,752,595
Retained earnings................................................................ 9,834,325 7,513,299
Less cost of common stock held in treasury, 1,000 shares of common stock and
186,600 shares of Class A common stock at December 31, 1996.................... (1,950,398) --
------------- -------------
Total stockholders' equity..................................................... 42,577,481 19,302,311
------------- -------------
Total liabilities and stockholders' equity..................................... $ 47,565,957 $ 24,033,501
------------- -------------
------------- -------------
See Accompanying Notes.
F-4
PREMIERE RADIO NETWORKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
Revenue:
Gross revenue..................................................... $ 27,147,199 $ 20,756,932 $ 18,015,998
Less agency commissions........................................... (3,321,637) (2,437,973) (2,036,600)
------------- ------------- -------------
Net operating revenue............................................... 23,825,562 18,318,959 15,979,398
Operating expenses:
Production, programming and promotions............................ 7,495,131 5,472,346 5,284,036
Selling, general and administrative............................... 9,038,141 7,827,153 7,664,557
Depreciation and amortization..................................... 1,908,035 1,265,358 937,649
Other charges (Note 11)........................................... 417,045 -- --
------------- ------------- -------------
Total operating expenses........................................ 18,858,352 14,564,857 13,886,242
------------- ------------- -------------
Operating income.................................................... 4,967,210 3,754,102 2,093,156
Other income and expenses:
Interest income................................................... 1,217,885 262,046 88,989
Interest expense.................................................. (101,807) (244,503) (266,289)
Gain on sale of networks.......................................... -- -- 1,659,642
Gain on sale of radio station assets.............................. -- 452,919 --
Gain (loss) on sale of marketable securities and other............ -- 18,445 (221,112)
Write-off of debt issuance costs (Note 11)........................ (1,949,120) -- --
------------- ------------- -------------
(833,042) 488,907 1,261,230
------------- ------------- -------------
Income before minority interest and income taxes.................... 4,134,168 4,243,009 3,354,386
Minority interest in loss of joint venture.......................... -- 34,121 --
------------- ------------- -------------
Income before income taxes.......................................... 4,134,168 4,277,130 3,354,386
Provision for income taxes (Note 7)................................. 1,698,000 1,721,000 1,369,000
------------- ------------- -------------
Net income.......................................................... $ 2,436,168 $ 2,556,130 $ 1,985,386
------------- ------------- -------------
------------- ------------- -------------
Earnings per share.................................................. $ 0.28 $ 0.46 $ 0.43
------------- ------------- -------------
------------- ------------- -------------
Weighted average common and common equivalent shares outstanding.... 8,929,954 6,105,494 4,664,921
------------- ------------- -------------
------------- ------------- -------------
See Accompanying Notes.
F-5
PREMIERE RADIO NETWORKS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CLASS A
COMMON STOCK COMMON STOCK TREASURY STOCK ADDITIONAL
---------------------- ---------------------- --------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
--------- ----------- --------- ----------- --------- ---------- ---------- ---------
Balance at December 31,
1993......................... 3,000,000 $ 30,000 -- $ -- -- $ -- $5,057,234 $2,971,783
Net income for 1994......... -- -- -- -- -- -- -- 1,985,386
Exercise of options......... 10,832 108 -- -- -- -- 77,176 --
--------- ----------- --------- ----------- --------- ---------- ---------- ---------
Balance at December 31,
1994......................... 3,010,832 30,108 -- -- -- -- 5,134,410 4,957,169
Net income.................. -- -- -- -- -- -- -- 2,556,130
Sale of common stock and
Class B warrants.......... 500,000 5,000 -- -- -- -- 3,855,877 --
Issuance of Class A
warrants.................. -- -- -- -- -- -- 1,378,650 --
Income tax benefit from
stock options exercised... -- -- -- -- -- -- 400,000 --
Exercise of options and
warrants.................. 130,818 1,309 -- -- -- -- 983,658 --
--------- ----------- --------- ----------- --------- ---------- ---------- ---------
Balance at December 31,
1995......................... 3,641,650 36,417 -- -- -- -- 11,752,595 7,513,299
Net income.................. -- -- -- -- -- -- -- 2,436,168
Exchange of common stock for
Class A common stock...... (140,000) (1,400) 140,000 1,400 -- -- -- --
Issuance of Class A common
stock..................... -- -- 1,360,000 13,600 -- -- 22,035,167 --
Income tax benefit from
stock options exercised... -- -- -- -- -- -- 262,000 --
Stock dividend.............. -- -- 2,502,988 25,030 -- -- -- (25,030)
Exercise of options and
warrants.................. 91,025 910 38,432 384 -- -- 567,451 --
Unrealized loss on
securities available for
sale...................... -- -- -- -- -- -- -- (90,112)
Purchase of treasury
stock..................... -- -- -- -- 187,600 (1,950,398) -- --
--------- ----------- --------- ----------- --------- ---------- ---------- ---------
Balance at December 31,
1996......................... 3,592,675 $ 35,927 4,041,420 $ 40,414 187,600 $(1,950,398) $34,617,213 $9,834,325
--------- ----------- --------- ----------- --------- ---------- ---------- ---------
--------- ----------- --------- ----------- --------- ---------- ---------- ---------
TOTAL
----------
Balance at December 31,
1993......................... $8,059,017
Net income for 1994......... 1,985,386
Exercise of options......... 77,284
----------
Balance at December 31,
1994......................... 10,121,687
Net income.................. 2,556,130
Sale of common stock and
Class B warrants.......... 3,860,877
Issuance of Class A
warrants.................. 1,378,650
Income tax benefit from
stock options exercised... 400,000
Exercise of options and
warrants.................. 984,967
----------
Balance at December 31,
1995......................... 19,302,311
Net income.................. 2,436,168
Exchange of common stock for
Class A common stock...... --
Issuance of Class A common
stock..................... 22,048,767
Income tax benefit from
stock options exercised... 262,000
Stock dividend.............. --
Exercise of options and
warrants.................. 568,745
Unrealized loss on
securities available for
sale...................... (90,112)
Purchase of treasury
stock..................... (1,950,398)
----------
Balance at December 31,
1996......................... $42,577,481
----------
----------
See Accompanying Notes.
F-6
PREMIERE RADIO NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
---------------------------------
1996 1995 1994
----------- --------- ---------
OPERATING ACTIVITIES
Net income................................................................... $ 2,436,168 $2,556,130 $1,985,386
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization.............................................. 1,908,035 1,265,358 937,649
Loss on sale of marketable securities...................................... -- -- 221,114
Write-off of debt issuance costs........................................... 1,949,120 -- --
Gain on sale of networks................................................... -- -- (1,659,642)
Gain on sale of radio station assets....................................... -- (452,919) --
Gain on sale of fixed assets............................................... (1,216) (12,636) --
Deferred compensation...................................................... -- -- 106,939
Deferred operating costs of radio station.................................. -- (260,071) (431,667)
(Decrease) increase in allowance for doubtful accounts..................... (70,000) 8,000 53,000
Changes in deferred income taxes........................................... (551,000) (290,000) (353,000)
Changes in operating assets and liabilities:
Accounts receivable...................................................... (3,009,305) (948,679) (602,494)
Income taxes............................................................. 28,029 (404,249) 447,319
Prepaid expenses and other current assets................................ 566,432 (1,060,751) (308,795)
Notes receivable from officer/employees.................................. 110,751 (797,612) (339,767)
Investments.............................................................. (6,825) -- --
Other assets............................................................. (187,590) 25,082 (327,818)
Accounts payable and accrued liabilities................................. (227,326) 232,344 342,631
Deferred income.......................................................... 1,683,474 (521,129) 549,840
Other liabilities........................................................ 242,979 (99,225) --
----------- --------- ---------
Net cash provided by (used in) operating activities.......................... 4,871,726 (760,357) 620,695
----------- --------- ---------
INVESTING ACTIVITIES
Acquisition of property and equipment........................................ (1,250,046) (631,084) (469,579)
Acquisition of intangible assets............................................. (9,713,176) (2,320,935) (3,986,199)
Purchase of common stock of Audio Net........................................ (4,000,028) -- --
Net proceeds from sale of radio station assets............................... -- 5,565,496 --
Net proceeds from sale of equipment.......................................... 35,000 80,000 --
Sale of program networks..................................................... -- -- 2,136,339
Sale of marketable securities, net........................................... -- -- 1,095,896
----------- --------- ---------
Net cash (used in) provided by investing activities.......................... (14,928,250) 2,693,477 (1,223,543)
FINANCING ACTIVITIES
Proceeds from borrowings..................................................... -- -- 2,500,000
Repayment of note payable to officer......................................... -- (750,000) --
Repayment of borrowings...................................................... (1,528,242) (2,962,500) (237,500)
Proceeds from issuance of common stock and Class B warrants.................. -- 3,860,877 --
Proceeds from issuance of Class A common stock............................... 22,048,767 -- --
Exercise of stock options and warrants, including related tax benefit........ 830,745 1,384,967 77,284
Increase in debt issuance costs.............................................. -- (405,690) --
Purchase of treasury stock................................................... (1,950,398) -- --
----------- --------- ---------
Net cash provided by financing activities.................................... 19,400,872 1,127,654 2,339,784
----------- --------- ---------
Increase in cash and cash equivalents........................................ 9,344,348 3,060,774 1,736,936
Cash and cash equivalents at beginning of year............................... 5,432,088 2,371,314 634,378
----------- --------- ---------
Cash and cash equivalents at end of year..................................... $14,776,436 $5,432,088 $2,371,314
----------- --------- ---------
----------- --------- ---------
Cash paid for:
Interest................................................................... $ 11,034 $ 198,058 $ 250,135
----------- --------- ---------
----------- --------- ---------
Income taxes............................................................... $ 1,929,612 $1,998,871 $1,271,700
----------- --------- ---------
----------- --------- ---------
See Accompanying Notes.
F-7
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Premiere Radio Networks, Inc. (the Company) is an independent creator,
producer and distributor of comedy, entertainment and music-related network
radio programming, and research and other services. The Company derives a
substantial portion of its revenues from the sale of commercial radio broadcast
time to advertisers. The Company obtains commercial radio broadcast time from
third party radio station affiliates in exchange for its network radio programs
and services. The Company also derives a portion of its revenues from
commissions on sales of commercial broadcast time which it sells on behalf of
third party network radio programmers pursuant to exclusive sales representation
agreements. Substantially all of the Company's accounts receivable are from
advertising agencies that purchase commercial broadcast time from the Company on
behalf of national advertisers. The Company generally does not require
collateral from its customers.
The Company also owned a radio station in Denver, Colorado (see Note 2).
Radio station revenues were generally derived from the sale of commercial
broadcast time to advertisers and from the leasing of the radio station to a
buyer (from October 1, 1994 through February 28, 1995).
PRINCIPLES OF CONSOLIDATION
The consolidated 1995 financial statements include the accounts of the
Company's 75% owned joint venture (see Note 3). All material intercompany
transactions and accounts have been eliminated. Effective on September 3, 1996,
the Company acquired the other partner's interest in the joint venture and
merged the joint venture entity into the Company as part of one of its
divisions.
REVENUE RECOGNITION
Revenue from the sale to advertisers of commercial broadcast time obtained
in exchange for produced radio programs or research and other services is
recognized when the commercials are broadcast. Sales representation commission
revenue is recognized when the commercials are broadcast. Promotional fees are
recognized as services are rendered. Amounts received prior to the rendering of
promotional related services are recorded as deferred revenue.
Radio station revenue was recognized in the period in which commercials were
broadcast or in the case of the Local Programming and Marketing Agreement (LMA)
(see Note 2) in the period during which the LMA pertains.
Barter revenues, representing commercial broadcast time exchanged for
products or services, are recognized when the commercials are broadcast and are
recorded at the lesser of the estimated fair value of the commercial broadcast
time or the estimated fair value of products or services received, whichever is
more readily determinable.
PRODUCTION AND PROGRAMMING COSTS
Production and programming costs are expensed in the period in which they
occur. Costs related to programs not broadcast as of the balance sheet date are
insignificant. The Company does not capitalize costs associated with production
and distribution of internally developed programming, as the estimated future
revenues from this programming is considered immaterial.
F-8
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
Advertising costs are expensed in the period in which they occur. The
accompanying statements of income include advertising costs of $105,000 in 1996,
$160,000 in 1995 and $153,000 in 1994.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less, when purchased, to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization is
computed by the straight-line method over the estimated useful lives of the
related assets as follows:
Office furniture and equipment 5 years
Production and programming equipment 5 - 7 years
Leasehold improvements Remaining life of lease
MARKETABLE SECURITIES
The Company determines the appropriate classification of debt and equity
securities at the time of purchase and reevaluates their classification at each
balance sheet date. Securities are classified as held-to-maturity when the
Company has the intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at cost and investment income is included
in earnings. The Company classifies certain highly liquid securities as trading
securities. Trading securities are stated at fair value and unrealized holding
gains and losses are included in income. Securities that are not classified as
held-to-maturity or trading are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
holding gains and losses, net of tax, reported in stockholders' equity.
FINANCIAL INSTRUMENTS
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate. Unless
otherwise described, the fair values of financial instruments approximate their
recorded values.
DEBT ISSUANCE COSTS
Debt issuance costs include the value of certain of the Class A warrants and
commitment fees, legal and other professional costs directly related to the
subordinated debentures. Debt issuance costs related to commitment fees incurred
in connection with the subordinated debentures were being amortized over a
seven-year period using the straight-line method. During the fourth quarter of
1996, the Company wrote-off the then remaining unamortized balance of debt
issuance costs (Notes 10 and 11).
INTANGIBLE ASSETS
Intangible assets are stated at cost and consist of program networks, an
acquired program library, production music libraries and other intellectual
properties. The carrying value of intangible assets are
F-9
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
reviewed if the facts and circumstances suggest they may be impaired. If this
review indicates that the intangible assets will not be recoverable based on the
undiscounted cash flows over the remaining amortization period, the Company's
carrying value of the intangible assets will be reduced by the estimated short
fall of the discounted cash flows.
PROGRAM NETWORKS: Program networks represent the value of contracts with
various radio stations to broadcast certain Company-produced programming and the
tradenames and contracts with talent, used in the production of programming. The
program networks are being amortized over a seven-year or ten-year period using
the straight-line method.
ACQUIRED PROGRAM LIBRARY: The acquired program library represents the value
of a compilation of sports radio broadcasts purchased by the Company to produce
sports-oriented programming. The library is being amortized over a seven-year
period using the straight-line method.
INTELLECTUAL PROPERTY: Intellectual property consists of acquired software
used in radio broadcast research and the tradenames Mediabase and Newstrack, and
contracts with various third party radio station affiliates which subscribe to
the Mediabase and/or Newstrack research services. In addition, intellectual
property includes production music libraries consisting of copyrights or
exclusive licenses to production music and jingles libraries, including
short-form background music utilized in the production of radio programs,
commercials and jingles. Intellectual property is being amortized over a
seven-year or ten-year period using the straight-line method.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes, in
accordance with Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes."
EARNINGS PER SHARE
The computation of earnings per common and common equivalent shares is based
upon the weighted average number of common shares outstanding during the period
plus (in periods in which they have a dilutive effect) the effect of common
shares contingently issuable, primarily from the assumed exercise of stock
options and warrants to purchase common stock.
During 1996 and 1995, primary earnings per share and fully diluted earnings
per share were the same. During 1994, stock options and warrants to purchase
common stock were antidilutive for purposes of calculating fully diluted
earnings per share.
Earnings per share for the years ended December 31, 1996 and 1995, is
computed under the modified treasury stock method which assumes the exercise of
all outstanding stock options and warrants to purchase common stock, and the use
of the assumed proceeds thereof to purchase up to a maximum of 20% of the then
outstanding common stock of the Company. Excess proceeds derived from the
assumed purchase of such shares are assumed to be utilized to first reduce the
outstanding balances of notes payable and second for investment in short-term,
cash equivalent marketable securities. As a result, for purposes of determining
earnings per share, net income is adjusted for the hypothetical reduction in
interest expense ($16,000 and $108,000 for 1996 and 1995, respectively) and for
hypothetical interest
F-10
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
income related to the assumed investment in marketable securities ($48,000 and
$140,000 for 1996 and 1995, respectively), such adjustments being made net of
income taxes.
Earnings per share for the year ended December 31, 1994 was computed under
the treasury stock method. Under the treasury stock method, the Company reduces
the assumed number of common shares issued from the exercise of stock options
and warrants to purchase common stock by the number of treasury shares assumed
to be purchased from the proceeds of such dilutive securities by utilizing the
average market price of the Company's common stock.
During March 1996 the Company's Board of Directors declared a 1-for-2 stock
dividend effected in the form of a 3-for-2 stock split. The stock dividend was
payable in shares of Class A common stock to holders of record of the Company's
common stock and Class A common stock (Stock Dividend). All references in the
financial statements to the number of shares and per share amounts prior to
March 1996, have been retroactively adjusted for the stock dividend.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). SFAS 123 established a fair value-based method of
accounting for compensation cost related to stock options and other forms of
stock-based compensation plans. However, SFAS 123 allows an entity to continue
to measure compensation costs using the principles of APB 25 if certain pro
forma disclosures are made. The Company has elected to account for its stock
compensation arrangements under the provisions of APB 25, "Accounting for Stock
Issued to Employees." The Company adopted the provisions for pro forma
disclosure requirements of SFAS 123 in fiscal 1996.
CHANGE IN BASIS OF PRESENTATION
Certain reclassifications have been made to the 1995 and 1994 financial
statements in order to conform to the 1996 presentation.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-11
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS AND DISPOSITIONS
RADIO STATION
On March 12, 1993, the Company completed an acquisition of certain assets of
radio station KZDG-FM in Denver, Colorado (KZDG-FM), for $3,605,395, including
acquisition costs. On September 30, 1994, the Company entered into an agreement
with Shamrock Broadcasting Inc. (Shamrock), a Delaware corporation, pursuant to
which the Company sold the radio station and broadcast license. The sale was
completed on February 28, 1995. Under the terms of the agreement, Shamrock
acquired the assets of the radio station, exclusive of cash, accounts receivable
and certain identified assets for $5,500,000. In connection with the sale, the
Company deferred operating losses and disposition costs of $432,000 for the
period October 1, 1994 to December 31, 1994. For the year ended December 31,
1994 the radio station had revenues of $1,209,000 and losses from operations
before income taxes of $729,000.
The Company also entered into a LMA with Shamrock pursuant to which the
Company licensed its broadcast time to Shamrock, including advertising time, for
$22,500 per month commencing October 1, 1994. The LMA terminated upon the
consummation of the sale of the radio station to Shamrock.
OLYMPIA PROGRAM NETWORKS
On November 29, 1993, the Company acquired nine radio program networks from
Olympia Networks of Missouri, Inc., including three comedy, one country music
and five sports program networks for $1,000,000.
On March 1, 1994, the Company completed the sale of the five sports program
networks for $2,700,000. In connection with the sale, the Company issued
warrants to purchase 15,000 shares of the Company's common stock exercisable at
$8 per share through February 28, 1998.
In addition, the Company signed an agreement to provide certain future sales
representation services on an exclusive basis to the buyer of the networks for a
period of three years. In connection with the sales representation agreement,
the Company received a nonrefundable $1,000,000 advance which was recognized as
income in accordance with the terms of the agreement.
ACQUIRED SPORTS RADIO PROGRAM LIBRARY
On December 14, 1994, the Company acquired a collection of sports radio
broadcasts (the Library) from a corporation controlled by an officer of the
Company. The Library was acquired for $1,500,000 (exclusive of acquisition costs
of $19,286) payable, $750,000 at closing and $750,000 on April 1, 1995.
BROADCAST RESULTS GROUP (BRG)
On August 29, 1995, the Company acquired substantially all of the assets of
BRG for $2,337,500 cash and a noninterest bearing, 18-month note payable with a
face amount of $412,500. The assets of BRG acquired by the Company consist
principally of intellectual properties and other intangibles, including
production music libraries, third-party radio station affiliate broadcast
contracts, and copyrights. The Company did not assume any preacquisition
accounts payable or other obligations of BRG, except for certain commitments
under real property and equipment leases. The acquisition of BRG has been
accounted for using the purchase method of accounting. The former chief
executive officer and 39% stockholder of BRG has been employed by the Company
pursuant to a four-year employment agreement.
F-12
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
The results of operations of BRG have been included in the consolidated
statement of income from the date of acquisition.
The net purchase price was allocated as follows:
Property, plant and equipment........................... $ 25,000
Intellectual property................................... 2,543,000
Other assets............................................ 25,000
---------
$2,593,000
---------
---------
PHILADELPHIA MUSIC WORKS (PMW)
On September 27, 1996 the Company acquired substantially all of the assets
of Philadelphia Music Works, Inc. (PMW) from an employee (the former chief
executive officer of BRG) of the Company, for total consideration of $635,000,
consisting of $435,000 in cash and $200,000 in a 6.5% interest, two-year
promissory note payable. Further, additional consideration of up to $700,000 may
be payable depending upon the audience levels delivered by PMW in the future.
The assets of PMW acquired by the Company consist principally of
intellectual properties and other intangible assets, including a library of over
6,000 jingles, third-party radio station affiliate broadcast contracts, and
copyrights. The Company did not assume any pre-acquisition accounts payable or
other obligations of PMW, except for certain commitments under real property and
equipment leases. The acquisition of PMW has been accounted for using the
purchase method of accounting.
On September 27, 1996 the Company amended and restated an August 29, 1995
agreement pursuant to which it had entered into future commitments to acquire
licenses to three (3) production music libraries from Canary Productions, Inc.
(Canary), which is wholly-owned by an employee of the Company. Under the amended
and restated agreement, the Company has entered into future commitments to
acquire a license to one (1) additional production music library, or four (4)
production music libraries in total, from Canary. The licenses to the production
music libraries will be acquired by the Company, one each year during the next
four years, for a purchase price that will be based upon a formula of a multiple
of earnings of each such library, payable in cash or shares of the Company's
Class A common stock. Subsequent to December 31, 1996, the Company acquired the
license to the first such library for a nominal amount.
The net purchase price of PMW was allocated as follows:
Property, plant and equipment............................. $ 10,000
Intellectual property..................................... 676,000
Other assets.............................................. 25,000
---------
$ 711,000
---------
---------
The results of operations of PMW have been included in the consolidated
statement of income from the date of acquisition.
F-13
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
CUTLER PRODUCTIONS, INC. AND SJM PRODUCTIONS, INC. (CUTLER)
On October 1, 1996, the Company consummated an agreement pursuant to which
it acquired substantially all of the assets of Cutler Productions, Inc. and SJM
Productions, Inc. (collectively, Cutler) for consideration consisting of
$8,500,000 in cash.
The assets of Cutler acquired by the Company consist principally of
intellectual properties and other intangibles, including third-party radio
station affiliate broadcast contracts, a library of programs and program rights,
and copyrights. The Company did not assume any pre-acquisition accounts payable
or other obligations of Cutler, except for certain commitments under real
property and equipment leases. The acquisitions of Cutler has been accounted for
using the purchase method of accounting. Cutler's sole shareholder and Chief
Executive officer has been employed by the Company pursuant to a three year
employment agreement.
The net purchase price of Cutler was allocated as follows:
Property, plant and equipment........................... $ 75,000
Intellectual property................................... 8,736,000
Covenant not to compete................................. 100,000
Other assets............................................ 180,000
---------
$9,091,000
---------
---------
The results of operations of Cutler have been included in the consolidated
statement of income from the date of acquisition.
In connection with the acquisition of Cutler, the Company paid Archon
Communications Inc. (Archon) a fee of $100,000.
The following summarized, unaudited pro forma statements of operations give
effect to the acquisition of PMW and Cutler as if the acquisitions had occurred
at the beginning of each period presented and after giving effect to certain
adjustments, including the inclusion of PMW's and Cutler's operations during the
years ended December 31, 1996 and 1995. The summarized, unaudited pro forma
statements of income do not purport to be indicative of the results of
operations that actually would have resulted had the sale occurred on the date
indicated, and is not intended to be indicative of future results.
YEAR ENDED DECEMBER 31
----------------------------
1996 1995
------------- -------------
(UNAUDITED)
Net operating revenue.......................................... $ 28,654,000 $ 22,689,000
Operating income............................................... 5,547,000 3,681,000
Net income..................................................... 2,774,000 2,516,000
Primary earnings per share..................................... $ 0.32 $ 0.45
Weighted average common and common equivalent shares
outstanding................................................... 8,929,954 6,105,494
3. JOINT VENTURES
On May 28, 1993, the Company entered into an agreement with Mediabase, a
Michigan corporation, pursuant to which the Company and Mediabase formed a joint
venture to nationally syndicate the Monday
F-14
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. JOINT VENTURES (CONTINUED)
Morning Replay research service to radio stations principally throughout the
United States and Canada. The joint venture had commenced operations as
Mediabase Premiere Radio Networks (MPRN) and was 50% owned by each party, with
profits and losses shared equally. During the period May 28, 1993 through April
27, 1994, the Company accounted for this joint venture using the consolidation
method of accounting as it held a majority of the seats on the Executive
Committee and had management control of the joint venture.
Effective April 27, 1994, the Company acquired the remaining 50% share of
MPRN for $3,216,915, including transaction costs. The purchase price was
allocated to tangible equipment of $230,000 and $2,720,559 to intellectual
property (net of the carrying value of the minority interest of $266,356).
On March 20, 1995, the Company entered into a joint venture agreement with
Marketing/Research Partners, Inc. (MRPI) to nationally syndicate Newstrack
(Newstrack Joint Venture), a research service jointly developed by the Company
and MRPI. The Newstrack Joint Venture commenced operations on or about September
1, 1995.
In exchange for a 75% interest in the Newstrack Joint Venture, the Company
agreed to contribute $265,000 payable in four quarterly payments of $66,250
commencing on August 15, 1995, and advance certain commencement costs related to
the Newstrack Joint Venture. MRPI received a 25% interest in the Newstrack Joint
Venture for contributing computer systems and providing certain research
services for a one-year period.
The Company had the option to acquire MRPI's interest in the Newstrack Joint
Venture anytime after May 1, 1997 based upon a multiple of Newstrack's pre-tax
earnings, or at an earlier date based upon defined conditions. Effective
September 3, 1996, the Company acquired the remaining 25% minority interest from
MRPI for $303,188.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
DECEMBER 31
--------------------------
1996 1995
------------ ------------
Office furniture and equipment.................................... $ 2,101,584 $ 1,758,283
Production and programming equipment.............................. 1,220,861 973,372
Leasehold improvements............................................ 799,449 445,417
------------ ------------
4,121,894 3,177,072
Less accumulated depreciation and amortization.................... 1,802,955 1,379,735
------------ ------------
$ 2,318,939 $ 1,797,337
------------ ------------
------------ ------------
5. NOTES PAYABLE
On March 19, 1993, the Company entered into an agreement (as subsequently
amended) with Bank of America NT&SA (the Bank) whereby the Company obtained a
$2,200,000 term loan which was subsequently amended to $4,200,000 on July 15,
1994 and a $2,000,000 working capital line of credit which expired on May 15,
1996. Both loans were secured by substantially all the assets of the Company.
Outstanding borrowings were repaid in full in January 1996.
F-15
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. NOTES PAYABLE (CONTINUED)
In connection with the acquisition of BRG, the Company issued a $412,500
non-interest bearing note payable, due in January 1997. In connection with the
acquisition of PMW the Company issued a $200,000, 6 1/2% interest note payable
due in equal quarterly installments of principal and accrued interest over two
years (see Note 2).
6. COMMITMENTS AND CONTINGENCIES
The Company leases space for its office and production facilities under
operating leases expiring at various dates through 2000. Renewal options are
available on certain of these leases. Future minimum lease payments under
noncancelable operating leases, including amounts payable under barter
arrangements, at December 31, 1996, are as follows:
1997.................................................... $ 899,000
1998.................................................... 734,000
1999.................................................... 494,000
2000.................................................... 458,000
2001.................................................... --
---------
$2,585,000
---------
---------
Rental expense under operating leases was $671,585 in 1996, $453,248 in 1995
and $312,508 in 1994.
The Company is, from time to time, a party to various legal actions and
complaints arising in the ordinary course of business. In the opinion of the
Company's management, all such matters are without merit or involve amounts
which, in the event of unfavorable disposition, will not have a material impact
on the Company's financial position or results of operations.
7. INCOME TAXES
The components of the provision (benefit) for income taxes are as follows:
1996 1995 1994
------------ ------------ ------------
Current:
Federal........................................... $ 1,766,000 $ 1,577,000 $ 1,423,000
State............................................. 423,000 434,000 299,000
------------ ------------ ------------
2,189,000 2,011,000 1,722,000
Deferred:
Federal........................................... (384,000) (226,000) (287,000)
State............................................. (107,000) (64,000) (66,000)
------------ ------------ ------------
(491,000) (290,000) (353,000)
------------ ------------ ------------
$ 1,698,000 $ 1,721,000 $ 1,369,000
------------ ------------ ------------
------------ ------------ ------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax
F-16
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
purposes. Significant components of the Company's current deferred tax assets as
of December 31 are as follows:
1996 1995
------------ ----------
Accounts receivable allowance....................................... $ 121,000 $ 169,000
Deferred compensation............................................... 143,000 196,000
State income taxes.................................................. 65,000 50,000
Unrealized losses on securities..................................... 78,000 18,000
Deferred revenue.................................................... 706,000 33,000
Accrued expenses.................................................... 17,000 110,000
Other............................................................... 29,000 33,000
------------ ----------
Total............................................................... 1,159,000 609,000
Valuation allowance................................................. (60,000) (60,000)
------------ ----------
Net deferred tax assets............................................. $ 1,099,000 $ 549,000
------------ ----------
------------ ----------
The effective tax rate varied from the statutory federal income tax rate as
follows:
1996 1995 1994
--------- --------- ---------
Statutory federal rate........................................... 34.0% 34.0% 34.0%
State and local taxes, net of federal tax benefit................ 5.1 5.2 4.6
Other items...................................................... 1.9 1.0 2.2
--------- --------- ---------
Effective income tax rate........................................ 41.0% 40.2% 40.8%
--------- --------- ---------
--------- --------- ---------
8. BARTER ARRANGEMENTS
The Company exchanges otherwise perishable, unsold commercial broadcast time
for products and services. Net operating revenue includes $1,517,210 in 1996,
$1,337,809 in 1995 and $1,194,427 in 1994, representing the fair value of
products or services exchanged for broadcast time. Selling and general and
administrative expenses include the fair value of products and services utilized
of $1,010,906 in 1996, $956,661 in 1995 and $1,003,222 in 1994. Additions to
property and equipment through such transactions were $70,350 in 1996, $425,936
in 1995 and $187,342 in 1994.
Included in accounts payable, accrued expenses and other liabilities at
December 31, 1996 and 1995, is $159,686 and $193,729, respectively, representing
the fair value of goods and services owed by the Company to third parties under
noncancelable agreements for commercial time broadcast prior to December 31 of
the respective years.
9. RETIREMENT PLANS, EXECUTIVE BONUS POOL, EXECUTIVE LIFE INSURANCE AND
EXECUTIVE LOAN
The Company provides for retirement through a profit-sharing plan, as
subsequently amended into a qualified 401(k) savings retirement plan, and
through a non-qualified Supplemental Executive Retirement Plan (SERP).
The Company's 401(k) savings retirement plan covers all eligible employees.
Contributions were determined by the Board of Directors subject to maximum
limitations as provided in the Internal Revenue
F-17
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. RETIREMENT PLANS, EXECUTIVE BONUS POOL, EXECUTIVE LIFE INSURANCE AND
EXECUTIVE LOAN (CONTINUED)
Code. Contributions by the Company made under the plan and included in the
accompanying statements of income were $58,800 in 1996, $69,000 in 1995 and
$80,000 in 1994.
Under the 401(k) savings retirement plan (401(k) Plan), all employees who
have completed one year of service or 1,000 hours of service in that year with
the Company are eligible to join the 401(k) Plan on January 1 or July 1 of any
given year. All eligible employees may contribute from 1% to 15% of their annual
compensation on a pre-tax basis subject to annual IRS limitations. The Company
makes matching contributions in an amount equal to 20% of the employee's
contributions up to 10% of their annual compensation. Matching contributions
made by the Company vest 20% per year beginning with the employee's first date
of eligibility and participation in the 401(k) Plan.
The Company has an Executive Bonus Pool under which bonuses are paid to
executives at the discretion of the Compensation Committee. Amounts recorded as
expense under the plan were $285,000 in 1996, $240,000 in 1995 and $170,000 in
1994.
Effective December 31, 1995, the Company adopted a SERP for 5% or more
stockholder/employees and certain designated executive officers of the Company.
Under the SERP, all eligible employees may defer up to 100% of their annual
compensation up to a maximum of $100,000 per year and earn interest on their
deferred amounts. The total participant deferrals, were $120,000 and $230,000
during the years ended December 31, 1996 and 1995, respectively.
During 1996, the Company entered into split-dollar life insurance agreements
with certain executives of the Company. Under the terms of the agreements, the
Company purchases life insurance policies on behalf of the executives that build
cash surrender value while also providing life insurance benefits for the
executives. The Company is entitled to a refund of all previously paid premiums
or the cash surrender value, whichever is lower. In the event of the death of
the executive, the Company will immediately be entitled to a refund of
previously paid premiums. The Company may terminate the agreements at any time
by giving written notice to the executive. At December 31, 1996, none of the
executive insurance policies had any cash surrender value in excess of
previously paid premiums.
As contemplated pursuant to the terms of an employment agreement, on
November 10, 1995, the Company loaned its Chief Executive Officer (the
Executive) $800,000, which is secured by 170,000 and 85,000 shares of the
Company's common stock and Class A common stock, respectively, owned by the
Executive. The loan is non-recourse and bears interest, payable quarterly, at
the Bank's Reference Rate, as announced on the first day of each quarter. The
loan is payable on the earlier of July 28, 1999, or such date as the Executive
ceases full-time employment with the Company (or, if the Company terminates such
employment without cause, one year thereafter). Not less than 70% of the net
proceeds of the sale by the Executive of any pledged shares and 25% of the net
proceeds of sale of any other Company shares owned by the Executive shall be
applied to repayment of the loan. The number of pledged shares will be reduced
proportionately in the event of partial principal payments on the loan, provided
that no collateral would be released to the extent the fair market value or the
collateral remaining as security is less than 200% of the outstanding principal
amount. During 1996, the executive repaid $197,664 in principal.
F-18
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. DEBT AND EQUITY PLACEMENT
On July 26, 1995, the Company's stockholders approved, and on July 28, 1995
(Closing Date), the Company consummated, various agreements including the
Securities Purchase Agreement with Archon pursuant to which Archon provided to
the Company standby commitments (Commitment Agreements) to purchase up to
$10,800,000 of subordinated debentures (Debentures) and purchased from the
Company 750,000 shares of common stock and 1,221,750 Class B warrants (659,250
warrants were placed in escrow to be released to Archon pro rata if Debentures
were issued by the Company or upon termination of the commitments, whichever
came first) for aggregate cash consideration of $4,025,000. The Debentures were
issuable in units consisting of $1,000 principal amount of Debentures and 150
detachable Class A warrants exercisable at $7.00 per share (an aggregate or up
to 1,620,000 detachable Class A warrants were issuable). The Debentures were
issuable at the Company's call through October 28, 1996. In the event the
Company did not exercise its call rights with respect to the Debentures, Archon
was still entitled to receive 1,060,500 of the Class A warrants.
On the Closing Date, the Company paid Archon a commitment fee of $108,000
for executing the Commitment Agreements and $40,000 representing the first of
five annual installments for providing standby commitments to purchase the
Debentures. The Company was also obligated to pay Archon a facility fee equal to
0.30% per quarter of the average principal amount of the unused subordinated
debentures which facility fee was waived by Archon effective January 1, 1996. In
addition, the Company paid $204,000 directly to or on behalf of Archon for legal
and professional fees and expenses incurred by Archon in connection with these
transactions.
All of the securities, including the Debentures, common stock and warrants,
have certain registration and piggyback rights.
Under the Securities Purchase Agreement, Archon and the Company's principal
stockholders and executive officers (the Insiders) have entered into a
Stockholders' Agreement. Under the Stockholders' Agreement, the Insiders and
Archon have entered into a Voting Trust Agreement pursuant to which Archon has
contributed 500,000 shares of common stock and 250,000 shares of Class A common
stock and the Insiders have contributed 1,288,624 shares of common stock, and
644,312 shares of Class A common stock. Through the Voting Trust Agreement,
Archon has received proxies which will enable it to effectuate 50% control of
the voting trust shares and 50% of the shares of Insiders not in the voting
trust. In addition, Archon received three seats on the eight-member board of
directors and the right to designate two outside directors.
During January 1996, the Company completed the sale of 1,500,000 shares of
Class A common stock at $18.25 per share (after giving effect to the Stock
Dividend, holders received 2,250,000 shares of Class A common stock from this
sale) pursuant to a follow-on public offering and received net proceeds of
$22,049,000 (net of underwriting discounts, commissions and expenses). Included
in prepaid expenses and other assets at December 31, 1995, is approximately
$511,000 representing expenses incurred in connection with the public offering.
In connection with this offering, the Company paid Archon a fee of $200,000.
11. WRITE-OFF OF DEBT ISSUANCE COSTS AND OTHER CHARGES
The Company recorded, as debt issuance costs, the value of the 1,060,500
Class A warrants which were issuable to Archon whether or not the Company
exercised its call rights with respect to the Debentures, commitment fees,
legal, professional and other costs directly related to the Debentures (Note
F-19
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. WRITE-OFF OF DEBT ISSUANCE COSTS AND OTHER CHARGES (CONTINUED)
10). Because the Company did not call on Archon to purchase the Debentures by
October 28, 1996, the Company wrote off the then remaining unamortized debt
issuance costs which resulted in a one-time earnings charge during the fourth
quarter of 1996 of $1,949,120.
In connection with attempted business acquisitions and the assimilation of
completed business acquisitions (Note 2) during the year ended December 31,
1996, the Company incurred professional fees, severance, transition and other
costs. The costs which aggregated $417,045 were charged to expense in the 1996
statement of income.
12. STOCKHOLDERS' EQUITY
In connection with the Company's initial public offering on May 5, 1992, the
Company issued warrants for 100,000 shares of common stock (and up to 50,000
shares of Class A common stock after giving effect to the Stock Dividend) (such
number of warrants are subject to adjustment under certain conditions) to the
underwriter that are exercisable through April 28, 1997. At December 31, 1996,
warrants for 52,667 and 27,334 shares of common stock and Class A common stock,
respectively, at an exercise price of $4.31 per share were outstanding.
The Company purchased 1,000 shares of common stock and 186,600 shares of
Class A common stock in 1996 at an aggregate cost of $1,950,398. At December 31,
1996 the Company had remaining authorization under its stock repurchase program
to acquire up to an aggregate value of $1,049,602 of either class of its common
stock.
As a condition, among others, to the consummation of the Securities Purchase
Agreement (Note 10), the Company reincorporated from the State of California to
the State of Delaware. Upon completion of the reincorporation, each outstanding
share of the Company's common stock, no par value, was converted into one share
of common stock, $.01 par value of the Delaware corporation. In addition, the
authorized capital stock of the Delaware corporation was expanded to include
14,000,000 shares of Class A common stock, $.01 par value, and 5,000,000 shares
of "blank check" preferred stock, $.01 par value. The common stock and Class A
common stock are identical in all respects except that each share of common
stock will be entitled to one vote and Class A common stock will be entitled to
one-tenth vote on all matters submitted to stockholders.
In August 1996, the Company's stockholders approved an amendment to the
Certificate of Incorporation of the Company which provided that (a) each share
of common stock is entitled to ten votes per share and each share of Class A
common stock is entitled to one vote per share, (b) each share of common stock
is convertible into one share of Class A common stock at the option of the
holder thereof, (c) that the Company may not treat the common stock and Class A
common stock differently (except for voting rights) in any merger,
reorganization, recapitalization or similar transaction or support a tender
offer which attempts to do so, and (d) the authorized number of shares of common
stock and Class A common stock be increased to 14,000,000 and 20,000,000 shares,
respectively.
13. STOCK OPTION PLANS
On May 5, 1992, the Company established the 1992 Stock Option Plan (1992
Plan) pursuant to which 547,207 and 221,029 shares of common stock and Class A
common stock, respectively, have been reserved for issuance under the 1992 Plan.
All options were granted at no less than the fair market value of the shares on
the date of grant (or 110% of fair market value, in the case of persons owning
10% or more of
F-20
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. STOCK OPTION PLANS (CONTINUED)
the Company's stock on the date of grant). On July 26, 1995, the Company's
stockholders approved the Company's 1995 Stock Option Plan (1995 Plan) pursuant
to which additional options for 1,113,887 Class A common stock have been
reserved for future issuance.
The Company's 1992 Plan and 1995 Plan have certain anti-dilution provisions.
As a result of the Stock Dividend, options authorized, granted and outstanding
on the record date of the Stock Dividend were adjusted accordingly. At December
31, 1996, an aggregate of 1,722,438 options have been granted under the
Company's stock option plans and 898,115 options were vested and exercisable.
The Company has elected to follow APB 25 (Note 1) in accounting for its
employee stock options because, as discussed below, the alternative fair value
accounting provided for under SFAS 123, requires use of option valuation models
that were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of SFAS 123. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for each of
the years ended December 31, 1996 and 1995: risk-free interest rates ranging
from 5.5% to 6.5%; volatility factors of the expected market price of the
Company's common stock of 0.551; and a weighted-average expected life of the
options ranging from 1 to 5 years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Given this
method of amortization, the initial impact of applying SFAS 123 on pro forma net
income and pro forma earnings per share is not representative of the potential
impact on pro forma amounts in future years, when the effect of amortization
from multiple awards would be reflected. The Company's pro forma information
follows:
1996 1995
------------ ------------
Pro forma net income.............................................. $ 1,221,832 $ 2,691,289
Pro forma earnings per share...................................... $ 0.13 $ 0.37
F-21
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. STOCK OPTION PLANS (CONTINUED)
The following is a summary of stock options granted, exercised and
terminated through December 31:
1996 1995 1994
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
---------- ----------- ---------- ----------- ---------- -----------
Outstanding at beginning of year............ 910,873 $ 6.18 755,323 $ 4.64 727,601 $ 4.63
Granted..................................... 643,500 $ 10.50 264,375 $ 9.90 63,750 $ 4.73
Exercised................................... (95,230) $ 4.32 (108,825) $ 4.52 (16,250) $ 4.76
Forfeited................................... (39,653) $ 6.78 -- -- (19,778) $ 4.63
---------- ----------- ---------- ----- ---------- -----
Outstanding at end of year.................. 1,419,490 $ 8.24 910,873 $ 6.18 755,323 $ 4.64
---------- ----------- ---------- ----- ---------- -----
---------- ----------- ---------- ----- ---------- -----
Exercisable at end of year.................. 898,115 $ 6.83 806,370 $ 5.10 701,063 $ 4.72
---------- ----------- ---------- ----- ---------- -----
---------- ----------- ---------- ----- ---------- -----
Weighted average fair value of options
granted during year........................ $ 5.11 $ 3.76
Exercise prices for options outstanding as of December 31, 1996 ranged from
$3.83 to $20.00. The weighted average remaining contractual life of those
options is 3.6 years. Options vest over a period of two or five years from
respective grant dates.
At December 31, 1996, the Company had outstanding, other than the Class A
warrants and Class B warrants (Note 10), and the warrants issued to an
underwriter in connection with its initial public offering (Note 12), 52,500 and
26,250 warrants to purchase common stock and Class A common stock issued to a
company controlled by a director of the Company, respectively, at an exercise
price of $5.17 per share, and 135,000 warrants to purchase Class A common stock
at $8.67 per share issued to certain current and former directors of the
Company.
During October 1996 the Company granted 60,000 options to an affiliate of
Archon at an exercise price of $11.00 per share.
14. NOTE RECEIVABLE
On November 15, 1995, the Company loaned $500,000 to Major Networks, Inc.
(Major) secured by certain of Major's accounts receivable and five sports
programs. The loan does was noninterest bearing and was payable from proceeds of
accounts receivable collected by the Company under the terms of a sales
representation agreement. During 1996, the loan was repaid.
15. INVESTMENTS
During November 1996 the Company acquired 5% of the outstanding common
shares of Audionet, Inc. (Audionet) for $4,000,028 in cash. The investment which
is available for sale is being carried at fair value (approximates cost at
December 31, 1996). Under separate agreements, Audionet has retained the Company
as Audionet's exclusive network radio sales representative, and has paid to the
Company an advance of $2,000,000 towards Audionet's commitment to purchase
network radio advertising from the Company over a two-year period. At December
31, 1996 the Company has recorded $1,766,800 of deferred revenue representing
the unrecognized amount of the advance paid by Audionet.
F-22
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. INVESTMENTS (CONTINUED)
Also, included in investments at December 31, 1996 is $215,240 representing
the estimated fair value of third-party common stock acquired in exchange for
commercial time broadcast prior to December 31, 1996. At December 31, 1996, an
unrealized loss of $150,112, which was offset by deferred income taxes of
$60,000, was charged to stockholders' equity.
16. SUBSEQUENT EVENT--ACQUISITION OF AFTER MIDNITE ENTERTAINMENT, INC.
Effective on January 7, 1997, pursuant to an Agreement and Plan of Merger By
and Among the Company, After MidNite Entertainment, Inc. (AME) and the
Shareholders of AME dated as of January 1, 1997 (Merger Agreement), a
wholly-owned merger subsidiary of the Company acquired 100% of the outstanding
shares of AME for consideration consisting of $3,900,000 cash and 400,000 shares
of the Company's Class A common stock. Under the terms of the Merger Agreement,
the Company has agreed to pay additional consideration either in cash or
additional shares of Class A common stock, at its option, if the market value of
the Class A common stock is less than $16.00 per share one year from the closing
date of the transaction.
Pursuant to the terms of the Merger Agreement, the sellers assumed
responsibility for all pre-acquisition accounts payable or other obligations of
AME, except for certain commitments under real property and equipment leases. In
addition, the sellers retained AME's pre-Closing accounts receivable and cash
balances as of the closing date of the transaction. The acquisition of AME will
be accounted for by the Company as a purchase.
In connection with the AME acquisition, the Company entered into various
agreements with a former shareholder of AME, whereby, among other things, the
Company paid the shareholder a transaction fee in the amount of $500,000. In
addition, the Company has agreed to retain the shareholder under a two-year
consulting agreement and the shareholder was nominated to the Company's Board of
Directors in January 1997.
17. SUBSEQUENT EVENT (UNAUDITED)--SALE OF 100% OF THE COMPANY'S COMMON STOCK TO
JACOR COMMUNICATIONS, INC.
On April 7, 1997, the Company announced that it had signed a definitive
merger agreement with Jacor Communications, Inc. (Jacor) pursuant to which Jacor
will acquire 100% of the outstanding common stock, Class A common stock and
common stock equivalents of the Company for cash and stock valued at
approximately $185 million or approximately $18 per share, consisting of $13.50
in cash with the balance in Jacor common stock. The acquisition price is subject
to adjustment in certain circumstances. Actual closing of the merger transaction
is subject to regulatory review, including the expiration of the applicable
Hart-Scott-Rodino waiting period, and other customary closing considerations.
F-23
ANNEX I
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
JACOR COMMUNICATIONS, INC.,
JACOR COMMUNICATIONS COMPANY,
PRN HOLDING ACQUISITION CORP.
AND
PREMIERE RADIO NETWORKS, INC.
DATED AS OF APRIL 7, 1997
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April 7,
1997, among Jacor Communications, Inc., a Delaware corporation ("Jacor"), Jacor
Communications Company ("Communications"), a Florida corporation and a wholly
owned subsidiary of Jacor, PRN Holding Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of Communications ("Acquisition Corp."), and
Premiere Radio Networks, Inc., a Delaware corporation ("Premiere").
RECITALS
WHEREAS, the respective Boards of Directors of Jacor, Communications,
Acquisition Corp. and Premiere have determined that a business combination
between Jacor, Communications, Acquisition Corp. and Premiere is in the best
interests of their respective companies and stockholders;
WHEREAS, Jacor, Communications, Acquisition Corp. and Premiere desire to
make certain representations, warranties, covenants and agreements in connection
with the transactions contemplated hereby;
WHEREAS, concurrently with the execution hereof, in order to induce Jacor to
enter into this Agreement, Jacor and Communications are entering into a Stock
Purchase Agreement (the "Stock Purchase Agreement") with the stockholders of
Archon Communications, Inc. ("Archon") providing for the purchase immediately
prior to the Effective Time (as defined below) by Communications of all of the
outstanding capital stock of Archon upon the terms and conditions specified
therein; and
WHEREAS, concurrently with the execution hereof, Archon and certain
executive officers of Premiere (collectively, the "Consenting Stockholders")
beneficially owning shares of voting stock of Premiere representing not less
than a majority of the voting power of the shares of voting stock of Premiere
entitled to vote on the Merger (as defined below) are entering into a
Shareholders' Agreement with Jacor in which they agree with Jacor to deliver to
Premiere: (i) concurrently with the execution and delivery of this Agreement,
consents adopting and approving this Agreement with respect to all outstanding
shares of voting stock of Premiere of which they are record owners, and (ii)
with respect to all outstanding shares of voting stock of Premiere of which they
are beneficial owners but not record owners, as promptly as practicable and in
any event within 15 business days after the execution of this Agreement,
consents adopting and approving this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
subject to the terms and conditions set forth herein, Jacor, Communications,
Acquisition Corp. and Premiere hereby agree as follows:
ARTICLE 1
THE MERGER; CLOSING; EFFECTIVE TIME
1.1 THE MERGER. (a) Subject to the terms and conditions contained in this
Agreement, at the Effective Time (as defined in Section 1.3), Acquisition Corp.
shall be merged with and into Premiere in accordance with the applicable
provisions of the Delaware General Corporation Law (the "DGCL"), and the
separate corporate existence of Acquisition Corp. shall thereupon cease (the
"Merger"). Following the Merger, Premiere shall continue as the surviving
corporation (sometimes hereinafter referred to as the "Surviving Corporation")
and shall be a Subsidiary (as defined below) of Communications.
(b) At the Effective Time, the corporate existence of Premiere, with all its
rights, privileges, powers and franchises, shall continue unaffected and
unimpaired by the Merger. The Merger shall have the effects specified in the
DGCL.
1.2 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Mayer, Brown &
Platt, 190 South LaSalle Street, Chicago, Illinois 60603, at 10:00 a.m., local
time, on the third business day immediately following the date on which the last
of the conditions specified in Sections 7.1(a), 7.1(c), 7.1(d), 7.1(e), 7.3(d),
7.3(e), 7.3(g) and 7.3(h) is satisfied or waived in accordance herewith, or at
such other date, time and place as Jacor and Premiere
may agree in writing. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.3 EFFECTIVE TIME. At or as promptly as practicable after the Closing,
the parties hereto shall cause a certificate of merger (the "Certificate of
Merger"), in appropriate form and executed in accordance with the relevant
provisions of the DGCL, to be filed with the Secretary of State of the State of
Delaware as provided in the DGCL. Upon the completion of such filing, or at such
other time as may be specified in such filing, the Merger shall become effective
in accordance with the DGCL. The time and date at which the Merger becomes
effective is herein referred to as the "Effective Time."
ARTICLE 2
GOVERNING DOCUMENTS, DIRECTORS AND OFFICERS
OF SURVIVING ENTITIES
2.1 CERTIFICATE OF INCORPORATION. At the Effective Time and without any
further action on the part of Acquisition Corp. or Premiere, the certificate of
incorporation of Premiere, as in effect immediately prior to the Effective Time,
shall become the certificate of incorporation of the Surviving Corporation until
thereafter amended as provided therein and under applicable law.
2.2 BY-LAWS. At the Effective Time and without any further action on the
part of Acquisition Corp. or Premiere, the by-laws of Acquisition Corp., as in
effect immediately prior to the Effective Time, shall become the by-laws of the
Surviving Corporation until thereafter amended or repealed in accordance with
their terms and as provided in the certificate of incorporation of the Surviving
Corporation and under applicable law.
2.3 DIRECTORS AND OFFICERS. The directors of Acquisition Corp. at the
Effective Time shall, from and after the Effective Time, be the directors of the
Surviving Corporation until their respective successors shall have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's certificate of
incorporation and by-laws. The officers of Premiere at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
until their respective successors shall have been duly appointed or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's by-laws.
ARTICLE 3
CONVERSION OF SHARES; DISSENTING SHARES
3.1 CONVERSION OF SHARES. (a) At the Effective Time, each of the shares of
Common Stock, par value $0.01 per share (the "Common Stock"), and Class A Common
Stock, par value $0.01 per share (the "Class A Common Stock" and, together with
the Common Stock, the "Premiere Shares") of Premiere issued and outstanding
immediately prior to the Effective Time (other than (i) Premiere Shares held by
Jacor or any direct or indirect Subsidiary of Premiere or Jacor, including, as
of the Effective Time, Archon (ii) Premiere Shares in the treasury of Premiere
or (iii) Dissenting Shares (as defined below) (collectively, the "Excluded
Shares")) shall, by virtue of the Merger and without any action on the part of
the holders thereof, be converted into and represent the right to receive,
without interest (except as otherwise provided herein) (i) $13.50 in cash plus,
in the event the Closing does not occur on or prior to July 31, 1997, for each
full calendar month ending prior to the Closing, commencing with August, 1997,
an additional amount of $.084375 in cash, provided that such additional amount
shall be prorated through and including the Closing Date for a partial month on
the basis of a 30-day month (the "Cash Merger Consideration") and (ii) a
fraction of a share of common stock, no par value, of Jacor ("Jacor Shares")
equal to 0.25 multiplied by the Exchange Ratio (as defined below) (the "Stock
Merger Consideration" and, together with the Cash Merger Consideration, the
"Merger Consideration"). The Exchange Ratio shall be .61016949 as long as the
Jacor Closing Price (as defined below) is equal to or greater than $26.50 per
share
A-I-2
and equal to or less than $32.50 per share. If the Jacor Closing Price is less
than $26.50 per share, the Exchange Ratio shall be .61016949 multiplied by a
fraction the numerator of which is $26.50 and the denominator of which is the
Jacor Closing Price. If the Jacor Closing Price is greater than $32.50 per
share, the Exchange Ratio shall be .61016949 multiplied by a fraction the
numerator of which is $32.50 and the denominator of which is the Jacor Closing
Price. Notwithstanding the foregoing three sentences: (i) in the event that
subsequent to the date hereof and prior to the Effective Time Jacor shall pay a
dividend in Jacor Shares or other equity securities of Jacor, subdivide the
Jacor Shares into a larger number of shares (it being understood that a sale or
issuance of Jacor Shares shall not constitute such a subdivision) or combine the
Jacor Shares into a smaller number of shares, the Exchange Ratio, the $32.50
ceiling price for the adjustment of the Exchange Ratio and the $26.50 floor
price for the adjustment of the Exchange Ratio shall be proportionately
adjusted; and (ii) in the event that subsequent to the date hereof and prior to
the Effective Time, Jacor pays an extraordinary cash dividend and the Jacor
Closing Price is greater than or equal to $26.50 per share and less than or
equal to $32.50 per share, the Exchange Ratio shall be adjusted so that the
value of the Stock Merger Consideration is the same as it would have been if
such an extraordinary cash dividend had not been paid.
The Jacor Closing Price shall be equal to the average per share closing
trade price of Jacor Shares as quoted through the Nasdaq Stock Market for the
ten Nasdaq Stock Market trading days immediately preceding the date which is
three Nasdaq Stock market trading days before the Closing Date.
(b) At the Effective Time, all of the Premiere Shares issued and outstanding
immediately prior to the Effective Time (other than the Excluded Shares), by
virtue of the Merger and without any action on the part of the holders thereof,
shall no longer be outstanding and shall be canceled and retired and shall cease
to exist, and each registered holder of any such Premiere Shares shall
thereafter cease to have any rights with respect to such Premiere Shares, except
that each holder (other than holders of Excluded Shares) will have the right to
receive, without interest, the Merger Consideration for such Premiere Shares
upon the surrender of the certificate or certificates, if any, representing such
Premiere Shares in accordance with Section 3.2.
(c) At the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, each Premiere Share issued and outstanding
immediately prior to the Effective Time and owned by a direct or indirect
Subsidiary of Premiere, or held in the treasury of Premiere, immediately prior
to the Effective Time, shall no longer be outstanding, shall be canceled without
payment of any consideration therefor and shall cease to exist, and each
registered holder thereof shall thereafter cease to have any rights with respect
to such Premiere Shares.
(d) At the Effective Time, each Premiere Share held by Jacor or any of its
direct or indirect Subsidiaries (including Archon) shall not be converted and
shall remain issued and outstanding shares of the Surviving Corporation.
(e) At the Effective Time, the shares of common stock of Acquisition Corp.
issued and outstanding immediately prior to the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, shall be
converted into and become a number of fully-paid and non-assessable shares of
Common Stock and Class A Common Stock of the Surviving Corporation equal to the
number of shares of Common Stock and Class A Common Stock outstanding (excluding
Excluded Shares) immediately prior to the Effective Time.
(f) All calculations hereunder shall be carried out to the eighth decimal
place.
3.2 SURRENDER AND PAYMENT. (a) Prior to the Effective Time, Jacor shall
appoint an agent (the "Exchange Agent") for the purpose of exchanging
certificates, if any, representing Premiere Shares for the Merger Consideration.
At the Effective Time, Jacor will deposit with the Exchange Agent certificates
representing the aggregate Stock Merger Consideration and Cash Merger
Consideration to be paid in respect of the Premiere Shares. Promptly after the
Effective Time, Jacor shall send, or shall cause
A-I-3
the Exchange Agent to send, to each holder of Premiere Shares at the Effective
Time a form of letter of transmittal for use in such exchange (which form shall
specify that the delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery of the certificates, if any, representing
Premiere Shares to the Exchange Agent).
(b) Each holder of Premiere Shares that have been converted into a right to
receive the Merger Consideration, upon surrender to the Exchange Agent of the
certificate or certificates, if any, representing such Premiere Shares, together
with a properly completed letter of transmittal covering such Premiere Shares,
will be entitled to receive the Merger Consideration payable in respect of such
Premiere Shares. Until so surrendered, each such certificate shall, after the
Effective Time, represent for all purposes only the right to receive such Merger
Consideration.
(c) If any portion of the Merger Consideration is to be paid to a person
other than the registered holder of the Premiere Shares represented by the
certificate or certificates, if any, surrendered in exchange therefor, it shall
be a condition to such payment that the certificate or certificates, if any, so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such payment shall pay to the Exchange
Agent any transfer or other taxes required as a result of such payment to a
person other than the registered holder of such Premiere Shares or establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) After the Effective Time, there shall be no further registration of
transfers of Premiere Shares. If, after the Effective Time, certificates
representing Premiere Shares are presented to the Surviving Corporation or,
subject to the provisions of Section 3.2(e), the Exchange Agent, they shall be
canceled and exchanged for the Merger Consideration in accordance with the
procedures set forth in this Article Three.
(e) Any portion of the Merger Consideration deposited with the Exchange
Agent pursuant to Section 3.2(a), and any cash payment for a fractional Jacor
Share made pursuant to Section 3.3, that remains unclaimed by the holders of
Premiere Shares entitled thereto twelve months after the Effective Time shall be
returned by the Exchange Agent to Jacor or an Affiliate designated by Jacor,
upon demand, and any such holder who has not exchanged his Premiere Shares for
the Merger Consideration in accordance with this Article Three prior to that
time shall thereafter look only to Jacor for his claim for the Merger
Consideration, any cash in lieu of fractional Jacor Shares and any dividends or
distributions with respect to Jacor Shares paid after the Closing.
Notwithstanding the foregoing, Jacor shall not be liable to any holder of
Premiere Shares for any amount paid to a public authority pursuant to applicable
abandoned property laws.
(f) No dividends or other distributions with respect to the Jacor Shares
constituting part of the Merger Consideration shall be paid to the holder of any
unsurrendered certificates representing Premiere Shares until such certificates
are surrendered as provided in this Section 3.2. Upon such surrender, there
shall be paid (to the extent due and not yet paid), without interest, to the
person in whose name the certificates representing the Jacor Shares into which
such Premiere Shares were converted are registered, any dividends and other
distributions in respect of Jacor Shares that are payable on a date subsequent
to, and the record date for which occurs after, the Effective Time.
3.3 FRACTIONAL SHARES. No certificates or scrip representing fractional
Jacor Shares shall be issued in the Merger, but in lieu thereof each holder of
Premiere Shares otherwise entitled to a fractional Jacor Share shall be entitled
to receive, from the Exchange Agent in accordance with the provisions of this
Section 3.3, a cash payment in lieu of such fractional Jacor Share representing
the value of such fraction, which for this purpose shall be calculated by
multiplying such fraction by the Jacor Closing Price. As soon as practicable
after the determination of the amount of cash, if any, to be paid to holders of
Premiere Shares in lieu of any fractional Jacor Share, the Exchange Agent shall
promptly pay all such amounts without interest to all holders of Premiere Shares
entitled thereto.
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3.4 VOTING. In determining stockholders of Jacor entitled to notice of and
to vote at meetings of stockholders of Jacor, former stockholders of record of
Premiere shall not be deemed stockholders of record until such holders have
delivered their certificates, if any, representing Premiere Shares to the
Exchange Agent pursuant to Section 3.2(a), or otherwise pursuant to Section
3.2(e).
3.5 NO FURTHER RIGHTS. At and after the Effective Time, each holder of a
certificate or certificates that represented issued and outstanding Premiere
Shares (other than Premiere Shares held by Jacor or any direct or indirect
Subsidiary of Jacor, including, as of the Effective Time, Archon) immediately
prior to the Effective Time shall cease to have any rights as a stockholder of
Premiere, except for the right to receive the Merger Consideration upon
surrender of its certificate or certificates.
3.6 DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, Premiere Shares outstanding immediately prior to the Effective Time
and held of record by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has properly demanded appraisal for such
Premiere Shares in accordance with the DGCL ("Dissenting Shares") shall not be
converted into the right to receive the Merger Consideration unless such holder
fails to perfect or withdraws or otherwise loses his right to appraisal. If,
after the Effective Time, such holder fails to perfect or withdraws or loses his
right to appraisal, such Premiere Shares shall be treated as if they had been
converted as of the Effective Time into the right to receive the Merger
Consideration without interest thereon. Premiere shall give Jacor prompt notice
of any demands received by Premiere for appraisal of Premiere Shares, and, prior
to the Effective Time, Jacor shall have the right to participate in all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, Premiere shall not, except with the prior written consent of
Jacor, make any payment with respect to, or settle or offer to settle, any such
demands.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PREMIERE
Premiere represents and warrants to Jacor and Communications as follows:
4.1 ORGANIZATION AND STANDING. Premiere is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and is duly qualified to do business, and is in good standing, in
the states of the United States in which the character of the properties owned
or leased by it or the conduct of its business requires it to be so qualified,
except where the failure to be so qualified or to be in good standing would not
have a Material Adverse Effect.
For purposes of this Agreement, the term "Material Adverse Effect" means,
with respect to any person, a material adverse effect on the business, assets,
liabilities, financial condition or results of operations of such person 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
fluctuations in the market price of Premiere Shares or Jacor Shares shall not be
deemed to have a Material Adverse Effect on Premiere or Jacor, as the case may
be.
Premiere has furnished to Jacor complete and correct copies of its
Certificate of Incorporation and By-laws and of the Certificate of Incorporation
and By-laws (each an "Organizational Document") of each of its Subsidiaries, as
amended through the date hereof. Such Organizational Documents are in full force
and effect and no other organizational documents are applicable to or binding
upon Premiere or any Subsidiary thereof.
4.2 AUTHORIZATION, VALIDITY AND EFFECT. (a) Premiere has the requisite
power and authority to execute and deliver this Agreement and all agreements and
documents contemplated hereby to be executed and delivered by it, and, subject
to stockholder approval, to consummate the transactions contemplated hereby and
thereby. Subject to stockholder approval, the execution and delivery of this
Agreement and such other agreements and documents, and the consummation of the
transactions contemplated herein and therein, have been duly and validly
authorized by all necessary corporate action
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in respect thereof on the part of Premiere. This Agreement has been duly and
validly executed and delivered by Premiere and represents the legal, valid and
binding obligation of Premiere, enforceable against it in accordance with its
terms.
(b) The Board of Directors of Premiere has duly approved the transactions
contemplated by this Agreement, the Stock Purchase Agreement and the
Shareholders' Agreement for the purposes of Section 203 of the DGCL such that
the provisions of Section 203 of the DGCL will not apply to such transactions.
4.3 CAPITALIZATION. (a) The authorized capital stock of Premiere consists
of (i) 14,000,000 shares of Common Stock, of which, as of the date hereof,
3,658,121 shares are issued, 3,654,121 shares are outstanding and 4,000 shares
are treasury shares, (ii) 20,000,000 shares of Class A Common Stock, of which,
as of the date hereof, 4,469,894 shares are issued, 4,253,974 shares are
outstanding and 216,100 shares are treasury shares, and (iii) 5,000,000 shares
of preferred stock, none of which are outstanding as of the date hereof. All of
the issued and outstanding Premiere Shares are duly and validly issued and
outstanding and are fully paid and non-assessable. As of the date hereof,
Premiere had outstanding options and warrants representing the right to acquire
from Premiere not more than 1,962,596 shares of Common Stock and 1,967,116
shares of Class A Common Stock. Each such option or warrant, the holder thereof,
the grant date, exercise price, vesting and other material terms and the
instrument or plan pursuant to which such option or warrant was issued are
described in Section 4.3(b) of the disclosure memorandum delivered at or prior
to the execution hereof to Jacor (the "Disclosure Memorandum").
(b) Except as set forth in subsection 4.3(a), there are no shares of capital
stock or other equity securities of Premiere outstanding, and except as set
forth in subsection 4.3(b) of the Disclosure Memorandum, no outstanding options,
warrants or rights to subscribe for, securities or rights convertible into or
exchangeable for, or contracts, commitments or arrangements by which Premiere is
or may be required to issue or sell additional Premiere Shares or any other
equity interest in Premiere (collectively, "Equity Rights").
(c) Except as described in Section 4.3(c) of the Disclosure Memorandum,
since December 31, 1996, Premiere has not (i) issued any Premiere Shares or
Equity Rights, other than pursuant to the exercise of options and warrants that
were issued and outstanding on December 31, 1996, (ii) purchased, redeemed or
otherwise acquired, directly or indirectly through one or more Subsidiaries, any
Premiere Shares, or (iii) declared, set aside, made or paid to the stockholders
of Premiere dividends or other distributions on the outstanding Premiere Shares.
4.4 PREMIERE SUBSIDIARIES. (a) Section 4.4(a) of the Disclosure Memorandum
lists all Subsidiaries of Premiere. All of the outstanding shares of capital
stock of each Subsidiary of Premiere are duly and validly issued, fully paid and
nonassessable and are owned by Premiere either directly or indirectly through
another wholly owned Subsidiary of Premiere free and clear of any claim, lien or
encumbrance. No equity securities of any Subsidiary may be required to be issued
(other than to Premiere) by reason of any Equity Rights for shares of the
capital stock of any such Subsidiary. There are no contracts, commitments,
understandings or arrangements by which Premiere or any Subsidiary of Premiere
is or may be obligated to transfer any shares of the capital stock of any
Subsidiary.
Each Subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated or organized, has
the corporate power and authority necessary for it to own or lease its
properties and assets and to carry on its business as it is now being conducted,
and is duly qualified to do business and in good standing in the states of the
United States in which the ownership of its property or the conduct of its
business requires it to be so qualified, except for such jurisdictions in which
the failure to be so qualified and in good standing would not have a Material
Adverse Effect on Premiere.
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As used in this Agreement, the term "Subsidiary" shall mean, with respect to
Premiere or Jacor, 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 on the election of
members to the board of directors or similar governing body.
(b) Other than as set forth in Section 4.4(b) of the Disclosure Memorandum
and except for interests in Subsidiaries, neither Premiere nor any Subsidiary
thereof owns, directly or indirectly, any interest or investment (whether equity
or debt) in any corporation, limited liability company, partnership, joint
venture, business, trust or other legal entity.
4.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) None of the execution
and delivery of this Agreement by Premiere, nor the consummation by Premiere of
the transactions contemplated herein, nor compliance by Premiere with any of the
provisions hereof, will (i) conflict with or result in a breach of any provision
of the Organizational Documents of Premiere or any Subsidiary thereof, (ii)
constitute or result in the breach of any term, condition or provision of, or
constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon, any property or assets of Premiere or any
Subsidiary thereof pursuant to, any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which any of them is a
party or by which any of them or any of their properties or assets may be
subject, and that would, in any such event, have a Material Adverse Effect on
Premiere, or (iii) subject to receipt of the requisite approvals referred to in
Section 4.5(b), violate any order, writ, injunction, decree, statute, rule or
regulation of any governmental, quasi-governmental, judicial, quasi-judicial or
regulatory authority with jurisdiction, domestic or foreign (each, a
"Governmental Authority"), applicable to Premiere or any Subsidiary thereof or
any of their properties or assets where such violation would have a Material
Adverse Effect on Premiere.
(b) Other than (i) in connection or compliance with the provisions of
applicable state and federal securities laws, and the rules and regulations of
the Securities and Exchange Commission (the "Commission") thereunder, (ii)
notices under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (iii) filings with the Secretary of State of the State
of Delaware required to effect the Merger, (iv) in connection or compliance with
the applicable requirements of the Internal Revenue Code of 1986, as amended,
(the "Code") and state, local and foreign tax laws, (v) as set forth in Section
4.5(b) of the Disclosure Memorandum, and (vi) where the failure to give such
notice, make such filing or receive such order, authorization, exemption,
consent or approval would not have a Material Adverse Effect on Premiere, no
notice to, filing with, authorization of, exemption by or consent or approval of
any Governmental Authority is necessary for the consummation by Premiere of the
transactions contemplated in this Agreement.
(c) The consents of the Consenting Stockholders, when delivered to the
Secretary of Premiere with respect to the outstanding Premiere shares of which
they are the beneficial owners, are sufficient to approve the Merger and the
transactions contemplated hereby on behalf of Premiere. The Secretary of
Premiere has custody of the book in which proceedings of meetings of
stockholders of Premiere are recorded.
4.6 PREMIERE REPORTS; FINANCIAL STATEMENTS. (a) Premiere has filed all
forms, reports and documents required to be filed by it with the Commission
since January 1, 1994 (collectively, the "Premiere Reports") pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations promulgated thereunder. As of their respective dates, the
Premiere Reports (i) complied when filed as to form in all material respects
with the applicable requirements of the Exchange Act and the rules and
regulations promulgated thereunder and (ii) did not when filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
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(b) The consolidated balance sheets of Premiere and its Subsidiaries as of
December 31, 1996 and December 31, 1995 and the related statements of
operations, changes in stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1996, together with the notes
thereto, included in Premiere's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996, a copy of which, in the form in which it is to be filed
with the Commission (the "Premiere Form 10-KSB"), has been provided to Jacor
(together, the "Premiere Financial Statements") have been prepared in accordance
with United States generally accepted accounting principles ("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 stockholders' equity and cash flows of
Premiere and its consolidated Subsidiaries as of the dates and for the periods
indicated.
(c) As of the date of this Agreement, except as set forth in the Premiere
Financial Statements or the notes thereto, or as described in Section 4.6(c) of
the Disclosure Memorandum, neither Premiere nor any Subsidiary has any material
outstanding claims against it, liabilities or indebtedness, contingent or
otherwise, nor does there exist any condition, fact or circumstances which
Premiere reasonably anticipates will create such claim or liability, other than
claims or liabilities incurred subsequent to December 31, 1996, in the ordinary
course of business, consistent with past practices and which individually and in
the aggregate do not have and are not reasonably anticipated to have a Material
Adverse Effect on Premiere.
(d) Since December 31, 1996 and except as disclosed in the Premiere Reports,
Premiere and its Subsidiaries have conducted their respective businesses only in
the ordinary course and consistent with past practices.
(e) Since December 31, 1996, except as disclosed in Section 4.6(e) of the
Disclosure Memorandum and the Premiere Form 10-KSB, there has been no event or
condition that has caused or is reasonably anticipated to cause a Material
Adverse Effect on Premiere.
4.7 TAX AND ACCOUNTING MATTERS.
(a) For purposes of this Agreement, (i) the term "TAXES" shall include all
federal, state, county, local or foreign taxes, charges, levies, imposts or
other assessments of any nature whatsoever, including, without limitation,
corporate income tax, corporate franchise tax, payroll tax, sales tax, use tax,
property tax, excise tax, withholding tax, and environmental tax, together with
any interest thereon and any penalties or additions to tax relating thereto
imposed by any governmental taxing authority for which Premiere or any other
member of the Group (as defined below in this Section 4.7(a)) may be directly or
contingently liable in its own right, as collection agent for taxes imposed on
another person, as a result of any guaranty or election, or as a transferee of
the assets of, or as successor to, any person, or pursuant to any applicable
law; (ii) the term "GROUP" shall mean, individually and collectively, Premiere,
any Subsidiary of Premiere, and any individual, trust, corporation, partnership,
limited liability company, and any other entity as to which Premiere may be
liable for Taxes for which Premiere or such individual or entity may be directly
or contingently liable in its own right, as a result of any guaranty or
election, or as a transferee of the assets of, or as successor to, any person,
or pursuant to any applicable law; (iii) the term "RETURNS" shall mean all
returns, reports, estimates, declarations of estimated tax, information
statements and other filings relating to, or required to be filed in connection
with, any Taxes, including, without limitation, information returns or reports
with respect to backup or employee withholding and other payments to third
parties; and (iv) for purposes of this Agreement, the term "CODE" shall mean the
Internal Revenue Code of 1986, as amended.
(b) Except as indicated in Section 4.7(b) of the Disclosure Memorandum, (i)
all Returns required to be filed by or on behalf of any member of the Group have
been duly filed on a timely basis and all such Returns are true, correct and
complete in all material respects; (ii) all Taxes that have been shown as due
and payable on the Returns that have been filed by or on behalf of each Member
of the Group have been timely paid, and no other Taxes are payable by any member
of the Group with respect to items or periods covered by such Returns (whether
or not shown on or reportable on such Returns); (iii) the amounts set forth as
provisions for current and deferred taxes and/or accrued liabilities in the
Premiere Financial
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Statements are sufficient for the payment of all unpaid Taxes (other than Taxes
attributable to After MidNite Entertainment, Inc. or its predecessor) accrued
for or applicable to all periods ended on the respective dates of the Premiere
Financial Statements and all years and periods prior thereto, and each of the
amounts set forth on the Premiere Financial Statements in respect of current
Taxes and deferred Taxes has been correctly determined in accordance with GAAP;
(iv) no member of the Group is delinquent in the payment of any Taxes or has
requested any extension of time within which to file any Return, which Return
has not since been filed, accompanied by payment of all Taxes shown as due and
payable thereon; (v) there is no dispute or claim concerning any Tax liability
of any member of the Group either (A) claimed or raised by any governmental
taxing authority in writing or (B) as to which any director or officer of any
member of the Group (or employees responsible for Taxes of any such member of
the Group) has knowledge based upon personal contact with any agent of such
authority, other than those Taxes, identified in Section 4.7(b) of the
Disclosure Memorandum, being contested in good faith by appropriate proceedings;
(vi) no member of the Group has waived any statute of limitations in respect of
Taxes or granted any extension of the limitations period applicable to any claim
for Taxes; (vii) Premiere is not liable for the Taxes of any person, including,
without limitation, as a result of the application of United States Treasury
Regulation section 1.1502-6, any analogous provision of state, local or foreign
law (including, without limitation, principles of unitary taxation), or as a
result of any contractual arrangement, whether with any third party or with any
taxing authority; (viii) Premiere is not nor has it ever been a party to any tax
sharing agreement with any corporation or limited liability company which is not
currently a member of the Group; (ix) no claim has ever been made by any
governmental taxing authority in any jurisdiction where any member of the Group
does not file Returns that it is or may be subject to taxation by such
jurisdiction; (x) there are no liens on any of the assets of any member of the
Group that arose in connection with any failure (or alleged failure) to pay any
Taxes; (xi) each member of the Group has withheld and paid over all Taxes
required to have been withheld and paid over and complied with all information
reporting and backup withholding requirements, including maintenance of required
records with respect thereto, in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party;
(xii) no director or officer of any member of the Group (or employee responsible
for Taxes of any such member) expects any governmental taxing authority to
assess any additional Taxes for any period for which Returns have been filed;
(xiii) Section 4.7(b) of the Disclosure Memorandum lists all federal, state,
local, and foreign income and franchise Tax Returns filed with respect to
Premiere for taxable periods for which the applicable statute of limitations for
the assessment of any Tax has not yet expired; (xiv) Section 4.7(b) of the
Disclosure Memorandum lists all Returns (relating to any type of Tax and to any
taxable period) filed with respect to Premiere that have been audited and
indicates those Returns that currently are the subject of audit; (xv) Premiere
has delivered to Communications correct and complete copies of all federal,
state, local and foreign income and franchise Tax Returns filed with respect to
Premiere for all taxable periods for which the applicable statute of limitations
for the assessment of any Tax has not yet expired, and has provided
representatives of Communications access to all Returns (relating to any type of
Tax and to any taxable period) filed with respect to Premiere; (xvi) Premiere
has delivered to Communications all examination reports and statements of
deficiency assessed against or agreed to by each member of the Group since the
date of incorporation of the predecessor of Premiere; (xvii) Premiere is not and
has never been a "United States real property holding corporation" within the
meaning of Section 897(c) of the Code); (xviii) no member of the Group is a
"consenting corporation" under Section 341(f) of the Code; (xix) no member of
the Group has entered into any compensatory agreement with respect to the
performance of services as to which payment or vesting thereunder (including
payment or vesting as a result of the transactions contemplated hereunder) would
result in a nondeductible expense to the Group pursuant to Section 280G of the
Code or an excise tax to the recipient of such payment pursuant to Section 4999
of the Code; (xx) Premiere has not agreed, nor is it required, to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise that would require the recognition of income pursuant to
such adjustment in any post-closing period; (xxi) the amount of unpaid Taxes
attributable to After MidNite Entertainment, Inc. or its predecessor accrued for
all periods ended on the date hereof and all years or periods prior hereto does
not
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exceed $250,000; (xxii) Section 4.7(b) of the Disclosure Memorandum sets forth a
list of each joint venture, limited liability company, partnership or other
arrangement or contract which is treated as a partnership for Federal income tax
purposes in which Premiere holds a direct or indirect ownership interest as of
the date hereof or during any taxable period as to which the statute of
limitations on the assessment of income or franchise tax has not yet expired;
and (xxiii) any past due property taxes for which Premiere or any Subsidiary is
liable do not exceed $100,000.
4.8 PROPERTIES. Except as disclosed or reserved against in the Premiere
Financial Statements and except for circumstances that would not have a Material
Adverse Effect on Premiere, Premiere and each Subsidiary thereof has good and
marketable title to all of the material properties and assets, tangible or
intangible, reflected in the Financial Statements as being owned by Premiere and
its Subsidiaries as of the dates thereof, free and clear of all liens,
encumbrances, charges, defaults or equities of whatever character, except such
imperfections or irregularities of title as do not affect the use thereof in any
material respect and statutory liens securing payments not yet due ("Liens").
Premiere does not own, directly or indirectly, any real estate. All leased
buildings and all leased fixtures, equipment and other property and assets that
are material to the business of Premiere on a consolidated basis are held under
leases or subleases that are valid instruments enforceable in accordance with
their respective terms. All leases to which Premiere or any Subsidiary thereof
is a party were entered into in the ordinary course of business. None of such
leases is with an Affiliate or contain any material terms or conditions which
make any such lease unreasonably onerous or commercially unreasonable. For
purposes of this Agreement, an "Affiliate" of a specified person is a person
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified.
4.9 COMPLIANCE WITH LAWS. Except for environmental matters, which shall be
covered by Section 4.16 and which shall not be covered by this Section 4.9,
Premiere and each Subsidiary thereof:
(a) is in compliance with all laws, regulations, reporting and licensing
requirements and orders applicable to its business or employees conducting its
business, the breach or violation of which would have a Material Adverse Effect
on Premiere;
(b) has received no notification or communication from any Governmental
Authority (i) asserting that it or any of its Subsidiaries is not in compliance
with any of the statutes, regulations or ordinances that such Governmental
Authority enforces, which noncompliance would have a Material Adverse Effect on
Premiere or (ii) threatening to revoke any license, franchise, permit or
authorization of any Governmental Authority, which revocation would have a
Material Adverse Effect on Premiere.
4.10 EMPLOYEE BENEFIT PLANS. (a) Except as listed in Section 4.10 of the
Disclosure Memorandum, none of Premiere, any of the Subsidiaries of Premiere or
any of their respective ERISA Affiliates (as defined below) maintains, is a
party to, participates in or has any liability or contingent liability with
respect to:
(i) any "employee welfare benefit plan" or "employee pension benefit plan"
(as those terms are defined in Sections 3(1) and 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), respectively); or
(ii) any retirement or deferred compensation plan, incentive compensation
plan, stock plan, unemployment compensation plan, vacation pay, severance pay,
bonus or benefit arrangement, insurance or hospitalization program or any other
fringe benefit arrangements for any current or former employee, director,
consultant or agent, whether pursuant to contract, arrangement, custom or
informal understanding, which does not constitute an employee benefit plan (as
defined in Section 3(3) of ERISA).
For purposes of this Agreement, the term "ERISA Affiliate" means, with
respect to any person, any corporation, trade or business which, together with
such person, is a member of a controlled group of corporations or a group of
trades or businesses under common control within the meaning of sections 414(b),
(c), (m) or (o) of the Code.
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(b) A true and correct copy of each of the plans, arrangements, and
agreements listed in Section 4.10 of the Disclosure Memorandum (referred to
hereinafter as "Employee Benefit Plans"), and all contracts relating thereto, or
to the funding thereof, including, without limitation, all trust agreements,
insurance contracts, administration contracts, investment management agreements,
subscription and participation agreements, and recordkeeping agreements, each as
in effect on the date hereof, has been supplied to Jacor. In the case of any
Employee Benefit Plan which is not in written form, Jacor has been supplied with
an accurate description of such Employee Benefit Plan as in effect on the date
hereof. A true and correct copy of the most recent annual report, actuarial
report, accountant's opinion relating to of the plan's financial statements,
summary plan description and Internal Revenue Service determination letter with
respect to each Employee Benefit Plan, to the extent applicable, and a current
schedule of assets (and the fair market value thereof assuming liquidation of
any asset which is not readily tradable) held with respect to any funded
Employee Benefit Plan has been supplied to Jacor, and there have been no
material changes in the financial condition of the respective plans from that
stated in the annual reports and actuarial reports supplied.
(c) As to all Employee Benefit Plans:
(i) Such Plans comply and have been administered in form and in
operation in all material respects with all applicable requirements of law,
and no event has occurred which will or could cause any such Employee
Benefit Plan to fail to comply with such requirements and no notice has been
issued by any governmental authority questioning or challenging such
compliance.
(ii) Such Plans which are employee pension benefit plans comply in form
and in operation with all applicable requirements of Sections 401(a) and
501(a) of the Code; there have been no amendments to such plans which are
not the subject of a favorable determination letter issued with respect
thereto by the Internal Revenue Service; and no event has occurred which
will or could give rise to disqualification of any such plan under such
sections or to a tax under Section 511 of the Code.
(iii) None of the assets of any such Plan (other than Premiere's 401(k)
plan) are invested in employer securities or employer real property.
(iv) There have been no "prohibited transactions" (as described in
Section 406 of ERISA or Section 4975 of the Code) with respect to any such
Plan and none of Premiere, any of its Subsidiaries or any of their
respective ERISA Affiliates has engaged in any prohibited transaction.
(v) There have been no acts or omissions by Premiere, any of its
Subsidiaries or any of their respective ERISA Affiliates which have given
rise to or may give rise to fines, penalties, taxes or related charges under
section 502 of ERISA or Chapters 43, 47 or 68 of the Code for which Premiere
or any of its Subsidiaries may be liable.
(vi) None of the payments contemplated by such Plans would, in the
aggregate, constitute excess parachute payments (as defined in section 280G
of the Code) and neither the execution of this Agreement nor the
consummation of the transactions contemplated by this Agreement would
accelerate the payment, vesting or funding of benefits under any of such
Plans.
(vii) There are no actions, suits or claims (other than routine claims
for benefits) pending or threatened involving any such Plan or the assets
thereof and no facts exist which could give rise to any such actions, suits
or claims (other than routine claims for benefits).
(viii) No such Plan is subject to Title IV of ERISA and no such Plan is
a multi-employer plan (within the meaning of Section 3(37) of ERISA.
(ix) None of Premiere or any of its Subsidiaries has any liability or
contingent liability for providing, under any such Plan or otherwise, any
post-retirement medical or life insurance benefits, other than statutory
liability for providing group health plan continuation coverage under Part 6
of Title I of ERISA and Section 4980B of the Code.
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(x) Accruals for all obligations under such Plans are reflected in the
financial statements of Premiere in accordance with GAAP.
(xi) To Premiere's Knowledge, there has been no act or omission that
would impair the ability of Premiere or any of its Subsidiaries (or any
successor thereto) to unilaterally amend or terminate any Employee Benefit
Plan.
(d) The full amount necessary to pay benefits accrued (determined as of the
Closing) under The Premiere Deferred Compensation Plan have been contributed to
a trust dated as of December 1, 1995 between Premiere and The Prudential Bank
and Trust Company.
4.11 MATERIAL CONTRACTS. Set forth in Section 4.11 of the Disclosure
Memorandum is a list, as of the date hereof, of the following agreements (but
specifically excluding any commitment made by advertisers to purchase commercial
broadcast time or radio station affiliation contracts, which in each case are
terminable within 18 months):
(a) each agreement between Premiere and a consumer or recipient of
Premiere's products or services and pursuant to which Premiere is to receive
more than $250,000 (or the fair market equivalent thereof in goods or services)
on an annual or annualized basis;
(b) each agreement pursuant to which Premiere will receive amounts in excess
of $250,000 (or the fair market equivalent thereof in goods or services) on an
annual or annualized basis; each agreement pursuant to which Premiere will be
required to pay an amount in excess of $250,000 (or the fair market equivalent
thereof in goods or services) on an annual or annualized basis; and each
agreement, the term of which exceeds two years and which may not be canceled by
Premiere without penalty on one year or less notice, and pursuant to which
Premiere will receive (in cash, services or property) or will be obligated to
pay, during the unexpired term thereof, an amount in excess of $250,000 (or the
fair market equivalent thereof in goods or services);
(c) each partnership or joint venture agreement to which Premiere or any
Subsidiary is a party;
(d) each agreement limiting the right of Premiere or any Subsidiary to
engage in or compete with any person in any business or geographical area;
(e) each agreement or other arrangement of or involving Premiere or any
Subsidiary with respect to indebtedness for money borrowed, including letters of
credit, guaranties, indentures, swaps and similar agreements;
(f) each management, consulting, employment, severance or similar agreement
requiring the payment of compensation in excess of $150,000 annually, to which
Premiere or any Subsidiary is a party and which may not be terminated by
Premiere without penalty on 90 days (or less) notice;
(g) each lease or other agreement with respect to real property leased by
Premiere and which: requires Premiere to pay an amount or amounts in excess of
$250,000 on annual or annualized basis; or has an unexpired term which exceeds
two years and may not be canceled by Premiere without penalty on one year or
less notice and which requires Premiere to pay, during the unexpired term, an
amount in excess of $250,000;
(h) each collective bargaining agreement to which Premiere or any Subsidiary
is a party;
(i) each agreement with any Affiliate of Premiere (other than employment
agreements and agreements between Premiere and any Subsidiary thereof) to which
Premiere or any Subsidiary is a party which involves total payments or
liabilities to or from Premiere or any Subsidiary in excess of $60,000; and
(j) each stockholder agreement, voting trust agreement, share purchase
agreement, registration rights agreement or other similar agreement granting
rights to one or more stockholders of Premiere,
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restricting the voting or transferability of Premiere Shares or otherwise
pertaining to the Premiere Shares or any interest (economic or voting) therein.
Except for such matters as would not, individually or in the aggregate, have
a Material Adverse Effect on Premiere, each contract identified in Section 4.11
of the Disclosure Memorandum (such contracts, together with all commitments made
by advertisers to purchase commercial broadcast time and radio station
affiliation contracts, are referred to herein as the "Premiere Contracts") is in
full force and effect and is a legal, valid and binding contract or agreement of
Premiere, and there is no default or breach (or, to the actual knowledge of
Premiere's president ("Premiere's Knowledge"), any event that, with the giving
of notice or lapse of time or both would result in a material default or breach)
by Premiere, any Subsidiary, or, to Premiere's Knowledge, any other party, in
the timely performance of any obligation to be performed or paid thereunder or
any other material provision thereof.
Except for such matters as would not, individually or in the aggregate, have
a Material Adverse Effect on Premiere, none of the Premiere Contracts will
terminate, become terminable by the other party thereto, or have the terms
thereof become amended or amendable by the other party thereto without the
consent of Premiere, as a result of the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
4.12 LEGAL PROCEEDINGS. As of the date of this Agreement, except as
disclosed in Section 4.12 of the Disclosure Memorandum, there are no actions,
suits, investigations or proceedings instituted, pending or overtly threatened,
against Premiere or any Subsidiary thereof, 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 from Premiere or a
Subsidiary thereof, or that would have, either individually or in the aggregate,
a Material Adverse Effect on Premiere if adversely decided. Neither Premiere nor
any Subsidiary thereof is subject to any judgment, order, writ, injunction or
decree that would have a Material Adverse Effect on Premiere.
4.13 CERTAIN INFORMATION. (a) When the Registration Statement (as defined
in Section 6.4) to be filed with the Commission by Jacor pursuant to Section 6.4
hereof or any post-effective amendment thereto shall become effective, and at
all times subsequent to such effectiveness up to and including the Effective
Time, such Registration Statement and all amendments or supplements thereto,
with respect to all information set forth therein furnished by Premiere relating
to Premiere or its Subsidiaries, shall, if Premiere has approved the contents
and presentation of such information (such consent to be conclusively presumed
to have been given if the prospectus referred to in Section 6.4 in such
Registration Statement is identical to the Information Statement (as defined
below), comply as to form in all material respects with the provisions of all
applicable securities laws. Any written information supplied or to be supplied
by Premiere specifically for inclusion in the Registration Statement will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made not misleading.
(b) None of the information supplied or to be supplied by Premiere for
inclusion in the Information Statement (as defined in Section 6.4) shall, at the
time such document is filed with the Commission and when it is first mailed to
the stockholders of Premiere, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event occurs of which
Premiere has knowledge and which is required to be described in the Information
Statement or any supplement or amendment thereto, Premiere will file and
disseminate, as required, a supplement or amendment which complies as to form in
all material respects with the provisions of all applicable securities laws.
Prior to its filing with the Commission, the Information Statement and each
amendment or supplement thereto shall be delivered to Jacor and its counsel.
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(c) All documents that Premiere is responsible for filing with the
Commission or any other Governmental Authority in connection with the
transactions contemplated hereby shall comply as to form in all material
respects with the provisions of applicable law and the applicable rules and
regulations thereunder.
4.14 NO BROKERS. Premiere has not entered into any contract, arrangement
or understanding with any person or firm that may result in the obligation of
Premiere, Jacor, Communications or Acquisition Corp. to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby, except that Premiere has retained Alex. Brown & Sons
Incorporated as its financial advisor (the "Premiere Financial Advisor"), which
Financial Advisor may be entitled to an advisor fee of up to $2,000,000 plus
reimbursement of expenses in connection with the transactions contemplated
hereby.
4.15 OPINION OF FINANCIAL ADVISOR. Premiere has received the opinion of
the Premiere Financial Advisor to the effect that, as of the date hereof, the
consideration to be received by the holders of Premiere Shares in the Merger is
fair to such holders from a financial point of view. A copy of such opinion (or
a written confirmation thereof, if presented orally) and any amendments or
supplements thereto shall be delivered to Jacor as promptly as practicable after
receipt thereof by Premiere.
4.16 ENVIRONMENTAL. Except as disclosed in Section 4.16 of the Disclosure
Memorandum and except insofar as inaccuracies in the following statements would
not have a Material Adverse Effect on Premiere (and with respect to properties
formerly owned or leased by Premiere or any Subsidiary, only with respect to
such period of ownership or lease): (i) the properties owned or leased by
Premiere or any Subsidiary and properties formerly owned or leased by Premiere
or any Subsidiary for which Premiere has contractual liability (the "Premiere
Properties") are or were, as the case may be, in compliance in all material
respects with all applicable federal, state and local environmental and
hazardous waste laws and regulations; (ii) no enforcement actions are pending or
threatened against Premiere or any Subsidiary and no notice of potential
liability or administrative or judicial proceedings (including notices regarding
clean up of off-site third party hazardous waste sites) has been received by
Premiere or such Subsidiary; (iii) there does not now exist on any Premiere
Properties currently owned or leased by Premiere, and there has not occurred on,
from or under Premiere Properties, a material disposal or release of, Hazardous
Substances, Hazardous Wastes or Contaminants; (iv) Premiere Properties contain
no unregistered underground storage tanks; (v) neither Premiere nor any
Subsidiary nor any of their respective predecessors has any contingent liability
in connection with the release of any Hazardous Substances, Hazardous Wastes or
Contaminants into the environment; and (vi) neither Premiere or any Subsidiary
nor any of their respective predecessors has (A) given any release or waiver of
liability that would waive or impair any claim based on Hazardous Substances,
Hazardous Wastes or Contaminants to any current or prior tenant or owner of any
real property owned or leased at any time by either Premiere or any Subsidiary
or to any party who may be potentially responsible for the presence of Hazardous
Substances, Hazardous Wastes or Contaminants on any such real property; or (B)
made any promise of indemnification to any party regarding Hazardous Substances,
Hazardous Wastes or Contaminants that may be located on any real property owned
or leased at any time by either Premiere or any Subsidiary or any of their
respective predecessors. Section 4.16 of the Disclosure Memorandum contains a
description of environmental indemnities of which either Premiere or any
Subsidiary is a beneficiary.
4.17 PERSONNEL. Except as set forth in Section 4.17 of the Disclosure
Memorandum, there are no labor disputes existing, or to Premiere's Knowledge,
threatened, involving strikes, work stoppages, slow downs or lockouts. There are
no grievance proceedings or claims of unfair labor practices filed or, to
Premiere's Knowledge, threatened to be filed with the National Labor Relations
Board against Premiere or any Subsidiary. To Premiere's Knowledge, there is no
union representation or organizing effort pending or threatened against Premiere
or any Subsidiary. Neither Premiere nor any Subsidiary has agreed to recognize
any union or other collective bargaining unit except those governed by the terms
of the agreements listed in Section 4.11 of the Disclosure Memorandum.
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4.18 TAKEOVER STATUTES. Except for Section 203 of the DGCL, 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 Premiere is applicable to the Merger or the other transactions
contemplated hereby.
4.19 INTELLECTUAL PROPERTY. Except for such matters as would not,
individually or in the aggregate, have a Material Adverse Effect on Premiere:
(i) Premiere and each Subsidiary owns or possesses, or has all necessary rights
and licenses in, all patents, patent rights, licenses, inventions (whether or
not patentable or reduced to practice), copyrights (whether registered or
unregistered), know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
registered and unregistered trademarks, service marks and trade names and other
intellectual property rights (collectively, "Intellectual Property") necessary
to conduct its business as conducted; (ii) neither Premiere nor any Subsidiary
has received any unresolved notice of, or is aware of any fact or circumstance
that would give any Third Party a right to assert, infringement or
misappropriation of, or conflict with, asserted rights of others or invalidity
or unenforceability of any Intellectual Property owned by Premiere or any
Subsidiary; (iii) the use of such Intellectual Property to conduct the business
and operations of Premiere and its Subsidiaries as conducted does not infringe
on the rights of any person; (iv) no person is challenging or infringing on or
otherwise violating any right of Premiere or any Subsidiary with respect to any
Intellectual Property owned by and/or licensed to Premiere or Subsidiary; (v)
neither the execution of this Agreement nor the consummation of the transactions
contemplated hereby will result in a loss or limitation in (x) the rights and
licenses of Premiere or any Subsidiary to use or enjoy the benefit of any
Intellectual Property employed by them in connection with their business as
conducted (y) the amount of any royalties or other benefits received by Premiere
or any Subsidiary thereof from Intellectual Property owned by it.
4.20 EMPLOYMENT AGREEMENTS. As of the date hereof:
(a) Amended employment agreements in substantially the form of Exhibit
7.2(f)(i) hereto (the "Employment Agreements") between Premiere and each of
Stephen C. Lehman, Kraig T. Kitchen, Timothy M. Kelly and Daniel M. Yukelson
(the "Premiere Executive Officers") have been executed and delivered and are in
full force and effect (subject to the consummation of the transactions
contemplated hereby) and have not been materially breached.
(b) Amended employment agreements in substantially the form of Exhibit
7.2(f)(ii) hereto (the "Amended Employment Agreements") between Premiere and
each of Robert W. Crawford and Louise G. Palanker have been executed and
delivered and are in full force and effect (subject to the consummation of the
transactions contemplated hereby) and have not been materially breached.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF JACOR,
COMMUNICATIONS AND ACQUISITION CORP.
Jacor, Communications and Acquisition Corp., jointly and severally,
represent and warrant to Premiere as follows:
5.1 ORGANIZATION AND STANDING. Each of Jacor, Communications and
Acquisition Corp. is a corporation duly organized, validly existing and in good
standing under the laws of the State of its incorporation. Each of Jacor,
Communications and Acquisition Corp. is duly qualified to do business, and in
good standing, in the states of the United States in which the character of the
properties owned or leased by it or in which the conduct of its business
requires it to be so qualified, except where the failure to be so qualified or
to be in good standing would not have a Material Adverse Effect. Jacor's
Certificate of Incorporation and By-laws are in full force and effect and no
other organizational documents are applicable to or binding upon Jacor.
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5.2 AUTHORIZATION, VALIDITY AND EFFECT. Each of Jacor, Communications and
Acquisition Corp. has the requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents contemplated hereby to
be executed and delivered by it, and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and such other
agreements and documents, and the consummation of the transactions contemplated
herein and therein, have been duly and validly authorized by all necessary
corporate action and stockholder action (to the extent required) in respect
thereof on the part of each of Jacor, Communications and Acquisition Corp. This
Agreement has been duly and validly executed and delivered by each of Jacor,
Communications and Acquisition Corp. and represents the legal, valid and binding
obligation of each of Jacor, Communications and Acquisition Corp., enforceable
against each of them in accordance with its terms.
5.3 CAPITALIZATION. As of April 1, 1997, the authorized capital stock of
Jacor consisted of 100,000,000 Common Shares, of which 34,834,780 shares were
issued and outstanding (the "Jacor Common Stock"), 2,000,000 shares of Class A
Preferred Stock, none of which is issued as of the date of this Agreement, and
2,000,000 shares of Class B Preferred Stock, none of which is issued as of the
date of this Agreement. All of the issued and outstanding shares of Jacor Common
Stock are duly and validly issued and outstanding and are fully paid and
nonassessable.
5.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) None of the execution
and delivery of this Agreement by Jacor, Communications or Acquisition Corp.,
nor the consummation by Jacor, Communications or Acquisition Corp. of the
transactions contemplated herein, nor compliance by Jacor, Communications or
Acquisition Corp. with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of the certificate of incorporation or
by-laws or equivalent organizational documents of Jacor, Communications or
Acquisition Corp., (ii) constitute or result in the breach of any term,
condition or provision of, or constitute a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, or result in
the creation of any lien, charge or encumbrance upon, any property or assets of
Jacor, Communications or Acquisition Corp. or, pursuant to any note, bond,
mortgage, indenture, license, agreement, lease or other instrument or obligation
to which any of them is a party or by which any of them or their respective
properties or assets may be subject, and that would, in any such event, have a
Material Adverse Effect on Jacor, or (iii) subject to receipt of the requisite
approvals referred to in subsection 5.4(b), violate any order, writ, injunction,
decree, statute, rule or regulation of any Governmental Authority applicable to
Jacor, Communications, Acquisition Corp. or any of their respective properties
or assets where such violation would have a Material Adverse Effect on Jacor.
(b) Other than (i) such as are required under Federal or state securities or
"blue sky" laws and the rules and regulations thereunder, (ii) notices and
completion of waiting periods under the HSR Act, (iii) filings with the
Secretary of State of the State of Delaware under the DGCL required to effect
the Merger, (iv) in connection or compliance with the applicable requirements of
the Code and state, local and foreign tax laws and (v) where the failure to give
such notice, make such filing or receive such order, authorization, exemption,
consent or approval would not have a Material Adverse Effect on Jacor, no notice
to, filing with, authorization of, exemption by or consent or approval of any
Governmental Authority is necessary for the consummation by Jacor,
Communications or Acquisition Corp. of the transactions contemplated in this
Agreement.
(c) The affirmative vote of Communications, as the sole stockholder of
Acquisition Corp. is sufficient, and no further vote or consent of any class or
series of capital stock of Jacor, Communications or Acquisition Corp. is
necessary, to approve the Merger and the other transactions contemplated hereby
on the part of Jacor, Communications or Acquisition Corp.
5.5 JACOR REPORTS; FINANCIAL STATEMENTS. (a) Jacor has filed all forms,
reports and documents required to be filed by it with the Commission since
January 1, 1994 (collectively, the "Jacor Reports") pursuant to Section 13 or
15(d) of the Exchange Act and the rules and regulations promulgated
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thereunder. As of their respective dates, the Jacor Reports (i) complied when
filed as to form in all material respects with the applicable requirements of
the Exchange Act and the rules and regulations promulgated thereunder and (ii)
did not when filed contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(b) The consolidated balance sheets of Jacor and its Subsidiaries as of
December 31, 1996 and December 31, 1995 and the related statements of
operations, changes in stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1996, together with the notes
thereto, included in Jacor's Annual Reports on Form 10-K for the fiscal year
ended December 31, 1996, as filed with the Commission (together, the "Jacor
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 stockholders' equity and cash flows of Jacor
and its consolidated Subsidiaries as of the dates and for the periods indicated.
5.6 LEGAL PROCEEDINGS. As of the date of this Agreement, there are no
actions, suits or proceedings instituted or pending, or to the actual knowledge
of Jacor's president ("Jacor's Knowledge"), overtly threatened, against Jacor,
Communications or Acquisition Corp., or any of their respective Subsidiaries or
against any property, asset, interest or right of any of them, or any of their
respective Subsidiaries that would have, either individually or in the
aggregate, a Material Adverse Effect on Jacor. None of Jacor, Communications or
Acquisition Corp. is subject to any judgment, order, writ, injunction or decree
that would have a Material Adverse Effect on Jacor.
5.7 ACQUISITION CORP. Acquisition Corp. was formed solely for the purpose
of engaging in the transactions contemplated hereby. Acquisition Corp. is, and
shall be on the Closing Date, a wholly owned direct Subsidiary of
Communications. Except for obligations or liabilities incurred in connection
with its incorporation or organization, and the transactions contemplated
hereby, Acquisition Corp. has not incurred any obligations or liabilities or
engaged in any business or activities of any type or kind whatsoever or entered
into any agreements or arrangements with any person or entity.
5.8 NO BROKERS. None of Jacor, Communications or Acquisition Corp. has
entered into a contract, arrangement or understanding with any person or firm
that may result in the obligation of Jacor or Acquisition Corp. to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
5.9 JACOR'S FINANCING. Jacor has or will have sufficient funds available
to consummate the transactions contemplated by this Agreement and to pay all
transaction related fees and expenses.
5.10 COMPLIANCE WITH LAWS. Jacor, Communications and Acquisition and each
Subsidiary thereof:
(a) is in compliance with all laws, regulations, reporting and licensing
requirements and orders applicable to its business or employees conducting its
business, the breach or violation of which would have a Material Adverse Effect
on Jacor;
(b) has received no notification or communication from any Governmental
Authority (i) asserting that it or any of its Subsidiaries is not in compliance
with any of the statutes, regulations or ordinances that such Governmental
Authority enforces, which noncompliance would have a Material Adverse Effect on
Jacor or (ii) threatening to revoke any license, franchise, permit or
authorization of any Governmental Authority, which revocation would have a
Material Adverse Effect on Jacor.
5.11 CERTAIN INFORMATION. (a) When the Information Statement (as defined
in Section 6.4) to be filed with the Commission by Premiere pursuant to Section
6.4 hereof or any amendment or
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supplement thereto, shall be mailed to Premiere's stockholders, and at all times
subsequent thereto up to and including the Effective Time, such Information
Statement and all amendments or supplements thereto, with respect to all
information set forth therein furnished by Jacor relating to Jacor or its
Subsidiaries, shall, if Jacor has approved the contents and presentation of such
information (such consent to be conclusively presumed to have been given if the
prospectus included in the Registration Statement (as defined below) is
identical to the Information Statement), comply as to form in all material
respects with the provisions of all applicable securities laws. Any written
information supplied or to be supplied by Jacor specifically for inclusion in
the Information Statement will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made not
misleading.
(b) None of the information supplied or to be supplied by Jacor for
inclusion in the Registration Statement (as defined in Section 6.4) shall, at
the time such Registration Statement or any post-effective amendment thereto is
filed with the Commission or shall become effective, and at all times subsequent
thereto up to and including the Effective Time, be false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the Effective Time, any
event occurs of which Jacor has knowledge which is required to be described in
the Registration Statement or any supplement or amendment thereto, Jacor will
file and disseminate, as required, a supplement or amendment which complies as
to form in all material respects with the provisions of all applicable
securities laws. Prior to its filing with the Commission, the Registration
Statement and each amendment or supplement thereto shall be delivered to
Premiere and its counsel.
All documents that Jacor is responsible for filing with the Commission or
any other Governmental Authority in connection with the transactions
contemplated hereby shall comply as to form in all material respects with the
provisions of applicable law and the applicable rules and regulations
thereunder.
5.12 STOCK MERGER CONSIDERATION. When issued at the Effective Time, the
Jacor Shares comprising the Stock Merger Consideration will be duly issued,
fully paid and non-assessable.
ARTICLE 6
COVENANTS AND AGREEMENTS
6.1 EMPLOYMENT AGREEMENTS. Premiere agrees to keep in full force and
effect (subject to the consummation of the transactions contemplated hereby)
each of the Employment Agreements and Amended Employment Agreements and not to
amend any of the Employment Agreements or Amended Employment Agreements without
the consent of Jacor, which consent may be withheld in Jacor's sole judgment;
provided, however, that it shall not be a breach of this covenant if a person
who has executed any of the Employment Agreements or Amended Employment
Agreements has died or become disabled.
6.2 INTERIM OPERATIONS OF PREMIERE. Prior to the earlier of the Effective
Time or the termination of this Agreement, except as contemplated by any other
provision of this Agreement, unless Jacor has previously consented in writing
thereto (which consent shall be granted in Jacor's sole discretion), Premiere
and its Subsidiaries will each conduct its operations according to its ordinary
course of business consistent with past practice, and Premiere and its
Subsidiaries will each use its reasonable best efforts to preserve intact its
business organization, to keep available the services of its officers and
employees and to maintain existing relationships with licensors, licensees,
suppliers, contractors, distributors, customers and others having business
relationships with it. Without limiting the generality of the foregoing,
Premiere shall not, and shall not permit any Subsidiary thereof, to:
(a) grant any general increase in compensation or benefits to its employees
or to its officers, except in the ordinary course consistent with past practice
or as required by law; pay any bonus compensation except in the ordinary course
consistent with past practice or in accordance with the provisions of any
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applicable program or plan adopted by the Board of Directors of Premiere or any
Subsidiary of Premiere prior to the date hereof; enter into or amend the terms
of any severance agreements with its officers; or effect any change in
retirement benefits for any class of its employees or officers (unless such
change is required by applicable law) that would materially increase the
retirement benefit liabilities of Premiere and its Subsidiaries on a
consolidated basis;
(b) amend, alter or revise any existing employment contract, understanding,
arrangement or agreement with any person receiving compensation (including
salary and bonus) in excess of $150,000 per year (unless such amendment is
required by law) to increase the compensation (including bonus) or benefits
payable thereunder or pursuant thereto or enter into any new employment
contract, understanding, arrangement or agreement with any person having a
salary thereunder in excess of $150,000 that Premiere or such Subsidiary does
not have the unconditional right to terminate without liability (other than
liability for services already rendered) at any time on or after the Effective
Time;
(c) adopt any new employee benefit plan or make any change in or to any
existing Employee Benefit Plan other than any such change that (i) is required
by law, (ii) in the opinion of counsel is necessary or advisable to maintain the
tax qualified status of any such, plan, or (iii) would not materially increase,
in the aggregate, the employee benefit plan liabilities of Premiere and its
Subsidiaries, taken as a whole;
(d) sell, lease or otherwise dispose of any of its assets (including capital
stock of its Subsidiaries) or acquire any business or assets, except in the
ordinary course of business for an amount not exceeding $250,000 in the
aggregate;
(e) incur any indebtedness for borrowed money or make any loans, advances or
capital contributions to, or investments (other than non-controlling investments
in the ordinary course of business) in, any other person other than a
Subsidiary, or issue or sell any debt securities, other than (i) borrowings in
connection with acquisitions permitted by subsection 6.2(d) and (ii) borrowings
under existing lines of credit in the ordinary course of business not to exceed
$500,000 in the aggregate at any time outstanding.
(f) authorize, commit to or make capital expenditures in an amount exceeding
$250,000 in the aggregate;
(g) mortgage or otherwise encumber or subject to any Lien any material
amount of properties or assets owned by Premiere or any Subsidiary thereof as of
the date of this Agreement except for such of the foregoing as are in the normal
course of business;
(h) make any material change to its accounting (including tax accounting)
methods, principles or practices, except as may be required by GAAP;
(i) amend or propose to amend its Organizational Documents;
(j) declare or pay any dividend or distribution with respect to its capital
stock;
(k) other than pursuant to options or warrants outstanding as of the date
hereof and listed in Section 4.3(b) of the Disclosure Memorandum, issue, sell,
deliver or agree to issue, sell, deliver (whether through issuance or granting
of options, warrants, commitments, subscriptions or rights to purchase) any
capital stock or split, combine, reclassify or subdivide the capital stock;
(l) make any tax election or settle or compromise any material tax liability
for an amount greater than reflected on the Premiere Financial Statements;
(m) directly or indirectly redeem, purchase or otherwise acquire any shares
of its capital stock or other securities;
(n) enter into any new lines of business or otherwise make material changes
to the operation of its business;
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(o) except as to liabilities accrued as of the date of this Agreement, pay
or agree to pay in settlement or compromise of any suits or claims of liability
against Premiere, its directors, officers, employees or agents, more than an
aggregate of $100,000 for all such suits and claims; provided, however, in the
event Premiere does not effect such settlement or compromise because Jacor has
declined to consent thereto, and this Agreement is subsequently terminated by
Premiere pursuant to Section 8.1 hereof, Jacor shall indemnify and hold Premiere
harmless against all liabilities and expense reasonably incurred in connection
with such matter to the extent in excess of the amount for which Premiere could
have settled or compromised such matter if Jacor had granted such consent;
(p) enter into any agreement providing for the acceleration of any party's
rights or payment or performance or other consequence as a result of a change in
control of Premiere;
(s) take any action or agree, in writing or otherwise, to take any of the
foregoing actions or any action which would make any representation or warranty
in Article 4 hereof materially untrue or incorrect; or
(t) commit to any of the foregoing.
6.3 STOCKHOLDER APPROVAL. With respect to Premiere, this Agreement is
subject to the approval of the stockholders of Premiere. Premiere acknowledges
that the Consenting Stockholders have agreed to execute and deliver to Premiere
written consents approving this Agreement as soon as practicable after the
execution of this Agreement.
6.4 INFORMATION STATEMENT; REGISTRATION STATEMENT. As soon as practicable
following the date hereof, Premiere shall file with the Commission an
information statement with respect to the Merger (the "Information Statement").
Jacor shall cooperate with Premiere in preparing the Information Statement and
shall provide Premiere with all information about Jacor that is required to be
included in the Information Statement under the rules and regulations of the
Commission under the Exchange Act. As soon as practicable following receipt of
final comments from the staff of the Commission on the Information Statement (or
advice that such staff will not review such filing), Jacor shall use its
reasonable best efforts to file a registration statement on Form S-4 relating to
the Jacor Shares issuable in the Merger at the Effective Time (the "Registration
Statement") and to have the Registration Statement declared effective by the
Commission and to maintain the effectiveness of such Registration Statement
until completion of the Merger. The parties shall cooperate in taking any action
reasonably necessary to allow the Information Statement to also serve as a
prospectus for the Registration Statement (the "Prospectus/Information
Statement"). Promptly after the effectiveness of the Registration Statement,
Premiere shall mail the Prospectus/Information Statement to all holders of
Premiere Shares. Jacor and Premiere shall cooperate with each other in the
preparation of the Prospectus/Information Statement and the Registration
Statement and shall advise the other in writing if, at any time prior to the
Effective Time, any such party shall obtain knowledge of any facts that might
make it necessary or appropriate to amend or supplement the
Prospectus/Information Statement or the Registration Statement in order to make
the statements contained or incorporated by reference therein not misleading or
to comply with applicable law. Notwithstanding the foregoing, each party shall
be responsible for the information and disclosures which it makes or
incorporates by reference in all regulatory filings, the Prospectus/Information
Statement and the Registration Statement.
6.5 NOTIFICATION. Premiere and Jacor 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.
6.6 INVESTIGATION AND CONFIDENTIALITY. Prior to the earlier of the
Effective Time and the termination of this Agreement, Jacor, on the one hand,
and Premiere, on the other hand, shall keep
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the other advised of all material developments relevant to the transactions
contemplated hereby and may make or cause to be made such investigation, if any,
of the business and properties of the other and of their respective financial
and legal condition as Jacor or Premiere reasonably deem necessary or advisable
to familiarize itself and its advisors with such business, properties and other
matters; provided, however, that such investigation shall be reasonably related
to the transactions contemplated hereby and shall not interfere unnecessarily
with normal operations. Premiere agrees to furnish Jacor and its advisors with
such financial and operating data and other information with respect to its
businesses, properties and employees as Jacor shall from time to time reasonably
request. All information furnished to Premiere or Jacor by the other party
hereto shall be subject to the Confidentiality Agreement, dated February 3, 1997
(the "Confidentiality Agreement"), between Jacor and Premiere.
6.7 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, the parties shall (a) within ten business days hereof make their
respective filings and thereafter make any other required submissions under the
HSR Act; (b) use their reasonable best efforts to cooperate with each other in
(i) determining which filings are required to be made prior to the Effective
Time with, and which consents, approvals, permits or authorizations are required
to be obtained prior to the Effective Time from, Governmental Authorities in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (ii) timely making all
such filings and timely seeking all such consents, approvals, permits or
authorizations; and (c) use their reasonable best efforts to take, or cause to
be taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement and satisfy the conditions to the
transactions contemplated hereby; provided, however, that nothing in this
Section 6.7 shall require Jacor, or require any Subsidiary of Jacor, to divest
or hold separate any radio or television station or stations, or asset or groups
of assets, or enter into new arrangements or terminate any existing arrangement,
or take any other similar specific action as the result of a request or
requirement requested by any Governmental Authorities. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement, subject to the remaining provisions hereof, the
officers and directors of the parties shall promptly take all such necessary
action.
6.8 INDEMNIFICATION AND INSURANCE.
(a) For the four years following the Effective Time, Jacor shall indemnify
and hold harmless each present and former employee, agent, director or officer
of Premiere and its Subsidiaries ("Indemnified Parties") from and against any
and all claims arising out of or in connection with activities in such capacity,
or on behalf of, or at the request of, Premiere or its Subsidiaries, 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 four-year period, all
rights to indemnification in respect of such claims shall continue until the
final disposition of any and all such claims.
(b) Jacor shall cause the Surviving Corporation to keep in effect provisions
substantially similar to the provisions in Premier's Certificate of
Incorporation and By-laws 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, 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 the obligations set forth in this
Section 6.8. The provisions of this Section 6.8 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
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date of this Agreement, or who becomes prior to the Effective Time, an officer,
director, employee or agent of Premiere or any of its Subsidiaries (and his
heirs and representatives).
(d) In connection with any claim for indemnification under the provisions
contained or referred to in subsections (a) and (b) of this Section 6.8, Jacor
agrees that it shall not, and shall cause Premiere not to, assert as a defense
to or a mitigating factor is any such claim that any Indemnified Party is a
present or former employee, agent, officer or director of Archon or was
otherwise affiliated with Archon.
(e) Jacor will cause to be maintained for a period of not less than four
years from the Effective Time directors and officers liability insurance ("D&O
Insurance"), to the extent commercially available, on terms and conditions no
less advantageous to the Indemnified Parties than Premiere's existing D&O
Insurance. Notwithstanding the foregoing, in satisfying its obligation under
this Section 6.8(e), Jacor and Premiere shall not be obligated to pay premiums
in excess of 125% of the premium paid or to be paid by Premiere in the fiscal
year ended December 31, 1996, which amounts are disclosed in Section 6.8(e) of
the Disclosure Memorandum, but provided further that Jacor and Premiere shall
nevertheless be obligated to provide such coverage as may be obtained for 125%
of the premium to be paid by Premiere for such insurance in the fiscal year
ended December 31, 1996.
6.9 PUBLICITY. Premiere and Jacor shall, subject to their respective legal
obligations (including requirements of national securities exchanges and other
similar regulatory bodies), consult with each other regarding the text of any
press release regarding the transactions contemplated hereby before issuing any
such press release and in making any filings with any Governmental Authority or
with any national securities exchange with respect thereto.
6.10 TRANSFER TAXES. Jacor shall pay any and all transfer taxes
(including, without limitation, any real estate transfer taxes) incurred in
connection with the Merger, whether such taxes are imposed on Jacor, Premiere,
their respective Subsidiaries or their stockholders, except transfer taxes in
connection with the registration of Jacor Shares in a name other than the name
of the holder of Premiere Shares in respect of which the Jacor Shares are to be
issued.
6.11 PREMIERE OPTIONS. (a) Premiere shall use its reasonable best efforts
to cause each of the Premiere Executive Officers, Roberto W. Crawford and Louise
G. Palanker, immediately after the execution of this Agreement, to enter into an
agreement, substantially in the form of Exhibit 6.11(a) to this Agreement (an
"Employee Option Agreement"), providing for the cancellation and replacement of
such options ("Existing Employee Options") by an option to acquire Jacor Shares
under Jacor's existing option plan (a "Roll-Over Option") at the Effective Time,
all as provided in Section 6.11(b).
(b) The cancellation of the Existing Employee Options and replacement with
Roll-Over Options shall comply in all respects, and shall be performed in
accordance, with the methodology prescribed by the provisions of Section 424(a)
of the Code and the regulations thereunder. Consistent with the methodology
prescribed by Section 424(a) of the Code and the applicable regulations
thereunder, (i) the number of Jacor Shares subject to such Roll-Over Option will
be determined by multiplying the Exchange Ratio by the number of Premiere Shares
subject to the canceled Existing Employee Option, and (ii) the exercise price
under such Roll-Over Option will be determined by dividing the exercise price
per share under the Cancelled Existing Employee Option in effect immediately
prior to the Effective Time by the Exchange Ratio, and rounding the exercise
price thus determined to the nearest whole cent (a half-cent shall be rounded to
the next higher whole cent). The number of Jacor Shares subject to each
Roll-Over Option will be fully vested as of the Effective Time and such
Roll-Over Option will expire at the same time as the Existing Employee Option it
replaces.
(c) Premiere will use its reasonable best efforts to cause the vesting,
prior to the Effective Time, of each unvested option or warrant to acquire
Premiere Shares (other than options and warrants owned by Archon, any of the
Premiere Executive Officers or Roberto W. Crawford or Louise G. Palanker), and
to cause each person holding any such option or warrant (a "Holder") to enter
into an agreement, in a form
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substantially similar to Exhibit 6.11(c) to this Agreement (an "Option and
Warrant Agreement"), to cancel each of such options and warrants immediately
prior to the Effective Time in exchange for the Applicable Option or Warrant
Payment. The Applicable Option or Warrant Payment for a Holder shall be the
amount of cash and Jacor Shares that would be payable as the Merger
Consideration for a number of Premiere Shares equal to (i) the sum of the
amounts determined by multiplying the respective numbers of Premiere Shares
issuable upon exercise of each of the Premiere options or Premiere warrants held
of record by the Holder on the Closing Date by the Spread applicable to each
such Premiere option or Premiere warrant divided by (ii) the Presumed Premiere
Stock Price. The Spread of each Premiere option or Premiere warrant shall be the
difference between the Presumed Premiere Stock Price and the per share exercise
price of such warrant or option. The Presumed Premiere Stock Price shall be the
Jacor Closing Price multiplied by the Exchange Ratio. Cash shall be paid for
fractional shares yielded by the quotient computed pursuant to the second
sentence of this Section 6.11(c).
6.12 CONSENTS. Premiere shall promptly forward to Jacor a copy of all
consents received from Consenting Stockholders and shall promptly acknowledge in
writing to Jacor that consents have been received from the holders of a majority
of the outstanding voting stock of Premiere and that accordingly this Agreement
has been duly approved pursuant to the DGCL.
6.13 STOCK PURCHASE AGREEMENT. Jacor and Communications shall comply in
all material respects with their obligations contained in the Stock Purchase
Agreement.
6.14 EMPLOYEE BENEFIT PLAN. Prior to the Closing, the Board of Directors
of Premiere shall have adopted a resolution ceasing further contribution and
benefit accruals under the Premiere Employee 401(k) Plan (the "401(k) Plan") and
terminating the 401(k) Plan effective as of a date prior to the Closing.
6.15 TERMINATION OF CERTAIN AGREEMENTS. (a) Premiere shall use its
reasonable best efforts to cause all agreements relating to the Premiere Shares,
voting or otherwise, to which Archon or Affiliates of Premiere are parties
(other than this Agreement, the Stock Purchase Agreement and the Shareholders'
Agreement), including those listed in Section 6.15(a) of the Disclosure
Schedule, to be terminated prior to the Closing (subject to the consummation of
the transactions contemplated hereby) without any liability to Premiere or Jacor
other than those liabilities fully satisfied prior to the Closing.
(b) Premiere shall use its reasonable best efforts to cause the registration
rights agreement entered into in connection with the acquisition by Premiere of
After MidNite Entertainment, Inc. to be terminated prior to the Closing (subject
to the consummation of the transactions contemplated hereby) without any
liability to Premiere or Jacor other than those liabilities fully satisfied
prior to the Closing.
ARTICLE 7
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 CONDITIONS TO OBLIGATIONS OF THE PARTIES. The respective obligations
of Premiere, Jacor, Communications and Acquisition Corp. to effect the Merger
shall be subject to the satisfaction or waiver at or prior to the Closing of
each of the following conditions:
(a) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
(b) None of the parties hereto shall be subject to any order or injunction
of a court or Governmental Authority of competent jurisdiction that prohibits
the consummation of the transactions contemplated by this Agreement. In the
event any such order or injunction shall have been issued, each party agrees to
use its reasonable best efforts to have any such order overturned or injunction
lifted; provided, however, that nothing in this Section 7.1(b) shall require
Jacor, any Subsidiary of Jacor or any Affiliate of Archon to divest or hold
separate any radio or television station or stations, or asset or groups of
assets, or enter into
A-I-23
new arrangements or terminate any existing arrangement, or take any other
similar specific action. as the result of a request or requirement requested by
any Governmental Authorities.
(c) All consents, authorizations, orders and approvals of (or filings or
registrations with) any Governmental Authority required in connection with the
execution, delivery and performance of this Agreement (each a "Regulatory
Authorization") shall have been obtained or made, except for filings in
connection with the Merger and any other documents required to be filed after
the Effective Time and except where the failure to have obtained or made any
such consent, authorization, order, approval, filing or registration would not
have a Material Adverse Effect on the Surviving Corporation following the
Effective Time.
(d) The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act of 1933, as amended (the "Securities
Act") and no stop order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and remain in effect.
(e) This Agreement shall have been approved by (i) the holders of
outstanding voting securities of Premiere representing a majority of the votes
entitled to be voted on the matter and (ii) Communications, as the sole
stockholder of Acquisition Corp.
(f) Communications shall have purchased all of the outstanding capital stock
of Archon pursuant to the Stock Purchase Agreement.
7.2 CONDITIONS TO OBLIGATIONS OF PREMIERE. The obligations of Premiere to
effect the Merger shall be subject to the satisfaction or waiver at or prior to
the Closing of each of the following additional conditions:
(a) The representations and warranties of Jacor, Communications and
Acquisition Corp. set forth in this Agreement which are qualified as to
materiality shall be true and correct in all respects, and the representations
and warranties of Jacor, Communications and Acquisition Corp. set forth in this
Agreement which are not qualified as to materiality shall be true and correct in
all material respects, in each case 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 for any such
representations and warranties made as of a specified date, which shall be true
and correct in all respects or all material respects, as the case may be, as of
such date); provided, however that this condition shall be deemed satisfied
unless the failure of such condition to be satisfied would have a material
adverse effect on the benefits that the stockholders of Premiere are reasonably
expected to receive in the Merger.
(b) Each of the agreements and covenants of Jacor, Communications and
Acquisition Corp. to be performed and complied with by Jacor, Communications and
Acquisition Corp. pursuant to this Agreement prior to the Effective Time shall
have been duly performed and complied with in all material respects; provided,
however that this condition shall be deemed satisfied unless the failure of such
condition to be satisfied would have a material adverse effect on the benefits
that the stockholders of Premiere are reasonably expected to receive in the
Merger.
(c) Jacor shall have delivered to Premiere a certificate, dated as of the
Closing Date and signed on its behalf by its chief executive officer and its
chief financial officer, as to the satisfaction by it of the conditions set
forth in subsections 7.2(a) and 7.2(b).
7.3 CONDITIONS TO OBLIGATIONS OF JACOR, COMMUNICATIONS AND ACQUISITION
CORP. The obligations of Jacor, Communications and Acquisition Corp. to effect
the Merger shall be subject to the satisfaction or waiver at or prior to the
Closing of the following conditions:
(a) The representations and warranties of Premiere set forth in this
Agreement which are qualified as to materiality and the representations and
warranties contained in Section 4.3 hereof shall be true and correct in all
respects, and the representations and warranties of Premiere set forth in this
Agreement which are not qualified as to materiality shall be true and correct in
all material respects, in each case as of
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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 for any such representations and warranties made as of a
specified date, which shall be true and correct in all respects or all material
respects, as the case may be, as of such date); provided, however, that except
with respect to the representation and warranties in Section 4.3 this condition
shall be deemed satisfied unless the failure of such condition to be satisfied
would have a Material Adverse Effect on Premiere or a material adverse effect on
the overall economic benefits Jacor reasonably anticipates to realize from its
acquisition of Premiere (it being understood and agreed that the failure of
Premiere to meet the projected results of operations provided to Jacor shall
not, by itself, be deemed to have material adverse effect on the overall
economic benefits Jacor reasonably anticipates to realize from its acquisition
of Premiere).
(b) The agreement of Premiere contained in Section 6.2(k) hereof shall have
been duly performed and complied with in all respects and each of the other
agreements and covenants of Premiere to be performed and complied with by
Premiere pursuant to this Agreement prior to the Effective Time shall have been
duly performed and complied with in all material respects; provided, however,
that except for the agreement contained in Section 6.2(k), this condition shall
be deemed satisfied unless the failure of such condition to be satisfied would
have a Material Adverse Effect on Premiere or a material adverse effect on the
overall economic benefits Jacor reasonably anticipates to realize from its
acquisition of Premiere.
(c) Premiere shall have delivered to Jacor a certificate, dated as of the
Closing Date and signed on its behalf by its chief executive officer and its
chief financial officer, as to the satisfaction by it of the conditions set
forth in subsections 7.3(a) and 7.3(b).
(d) Each of the Premiere Executive Officers, Roberto W. Crawford and Louise
G. Palanker shall have executed and delivered to Jacor an Employee Option
Agreement.
(e) Except for (i) options and warrants to acquire Premiere Shares held by
Archon, (ii) options to acquire Premiere Shares that will be converted to
options to acquire Jacor Shares pursuant to the Employee Option Agreements that
have been executed and delivered to Jacor, and (iii) options and warrants to
acquire Premiere Shares that will be canceled pursuant to the Option and Warrant
Agreements that have been executed and delivered to Jacor, there shall be no
more than 750,000 Premiere Shares that may be acquired pursuant to options or
warrants to acquire Premiere Shares.
(f) The Employment Agreements and the Amended Employment Agreements shall be
in full force and effect (subject to the consummation of the transactions
contemplated hereby) and shall not have been materially breached as of the
Closing; provided, however, this condition shall be waived with respect to any
such individual who has died or become disabled prior to the Closing.
(g) At least 10 days prior to the Closing, Premiere shall have delivered to
Jacor a letter identifying all persons who would be deemed to be "affiliates" of
Premiere for purposes of Rule 145 under the Securities Act (the "Rule 145
Affiliates") and Jacor shall have received an agreement substantially in the
form of Exhibit 7.3(g) to this Agreement from each Rule 145 Affiliate.
(h) All agreements relating to the Premiere Shares, voting or otherwise, to
which Archon or Affiliates of Premiere are parties (other than this Agreement,
the Stock Purchase Agreement and the Shareholders' Agreement), including those
listed in Section 6.15(a) of the Disclosure Schedule, shall have been terminated
without any liability to Premiere or Jacor other than those liabilities fully
satisfied prior to the Closing.
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ARTICLE 8
TERMINATION OF AGREEMENT
8.1 TERMINATION. Notwithstanding any other provision of this Agreement,
this Agreement may be terminated at any time prior to the Effective Time:
(a) by mutual written consent of Premiere and Jacor;
(b) by Premiere or Jacor, upon written notice to the other party, if the
Merger shall not have been consummated on or prior to August 31, 1997 (the
"Outside Date").
(c) by Premiere or Jacor, upon written notice to the other party, if a
Governmental Authority of competent jurisdiction shall have issued an
injunction, order or decree enjoining or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement, and such injunction, order
or decree shall have become final and non-appealable or if a Governmental
Authority has otherwise made a final determination that any required Regulatory
Authorization would not be forthcoming; provided, however, that the party
seeking to terminate this Agreement pursuant to this clause has used all
required efforts as specified in Section 7.1(b) to remove such injunction, order
or decree;
(d) by Premiere or Jacor, if any condition to such party's obligations to
consummate the transactions contemplated hereby is incapable of being satisfied
on or prior to the Outside Date; provided, however, that the terminating party
has not breached the terms of this Agreement; or
(e) by Jacor, if Archon shall have breached any material representation or
warranty, or failed to perform any covenant or duty contained in, the Stock
Purchase Agreement, other than a breach or noncompliance that would not
materially affect the benefits Jacor is receiving from the Stock Purchase
Agreement.
8.2 EFFECT OF TERMINATION. (a) In the event of the termination of this
Agreement pursuant to Section 8.1, the respective obligations of the parties
under this Agreement will terminate except for Sections 6.2(o), 8.2, 9.2, 9.4,
9.5, 9.6, 9.10, 9.11, 9.12 and 9.13; provided, however, that the termination of
this Agreement will not relieve any party from liability for any breach of this
Agreement.
(b) The parties acknowledge that in the event this Agreement is terminated
by Premiere by reason of a breach of this Agreement by Jacor or the Merger
otherwise fails to be consummated by reason of a breach of this Agreement by
Jacor, Premiere will incur substantial damages which will be difficult or
impossible to quantify. Accordingly, the parties hereto agree that in the event
it is determined that the termination of this Agreement and/or the failure of
the Merger to be consummated is the result of a breach of this Agreement by
Jacor, Premiere shall be entitled to recover from Jacor as Premiere's sole and
exclusive remedy liquidated damages in the amount of $15,000,000 plus its
reasonable attorneys fees and expenses incurred in connection with collecting
such liquidated damages. The parties acknowledge that the liquidated damages
provided for herein constitute a reasonable estimate of the damages Premiere
would incur.
ARTICLE 9
MISCELLANEOUS AND GENERAL
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties contained herein shall survive the Closing or the
termination of this Agreement. The covenants and agreements contained herein
shall survive the Closing.
9.2 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except as
expressly provided herein and except that the filing fee in connection with the
HSR Act filing shall be shared equally by Premiere and Jacor.
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9.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assignable by any party hereto without the prior
written consent of the other parties hereto, provided however that Jacor may
assign its rights under this Agreement to an Affiliate at any time and to a
non-Affiliate if Jacor, in its sole discretion, determines that it is
appropriate to do so because of difficulties encountered in satisfying the
conditions in Article 7 of this Agreement. Any such assignment shall not affect
Jacor's liability hereunder, including, without limitation, its obligation to
deliver the Stock Merger Consideration.
9.4 THIRD PARTY BENEFICIARIES. Except as set forth in Article 3 and
Sections 6.8 and 7.1(b) (each of which shall inure to the benefit of the persons
or entities benefitting from the provisions thereof, which persons are intended
to be third party beneficiaries thereof; provided, however, that no person shall
have third party beneficiary or other rights under Article 3 of this Agreement
if the Merger has not been consummated, regardless of the reason that the Merger
has not been consummated), each party hereto intends that this Agreement shall
not benefit or create any right or cause of action in or on behalf of any person
other than the parties hereto.
9.5 NOTICES. Any notice or other communication provided for herein or
given hereunder to a party hereto shall be sufficient if in writing, and sent by
facsimile transmission (electronically confirmed), delivered in person, mailed
by first class registered or certified mail, postage prepaid, or sent by Federal
Express or other overnight courier of national reputation, addressed as follows:
If to Jacor,
Communications or any
Acquisition Corp.: Paul F. Solomon
Jacor Communications, Inc.
50 East RiverCenter Boulevard
Twelfth Floor
Covington, Kentucky 41011
Facsimile: (606) 655-9356
with a copy to: Scott J. Davis
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Facsimile: (312) 701-7711
If to Premiere: Stephen C. Lehman
President and Chief Executive Officer
Premiere Radio Networks, Inc.
15260 Ventura Boulevard
Fifth Floor
Sherman Oaks, California 91403-5339
Facsimile: (818) 377-5330
with copies to: Kenin M. Spivak
Co-Chairman of the Executive Committee
Premiere Radio Networks, Inc.
15260 Ventura Boulevard
Fifth Floor
Sherman Oaks, California 91403-5339
Facsimile: (818) 385-3662
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and Gary N. Jacobs
Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro
2121 Avenue of the Stars
Suite 1800
Los Angeles, California 90067
Facsimile: (310) 556-2920
and Richard V. Sandler, Esq.
Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Facsimile: (310) 440-3690
or to such other address with respect to a party as such party shall notify the
other parties in writing as above provided.
9.6 COMPLETE AGREEMENT. This Agreement and the other documents and
agreements delivered by the parties in connection herewith contain the complete
agreement among the parties hereto with respect to the Merger and the other
transactions contemplated hereby and thereby and supersede all prior agreements
and understandings among the parties hereto with respect thereto; provided,
however, that the Confidentiality Agreement shall remain in full force and
effect.
9.7 CAPTIONS; REFERENCES. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement. When a
reference is made in this Agreement to a clause, a Section, a subsection or an
Article, such reference shall be to such clause, Section, subsection or Article
of this Agreement unless otherwise indicated.
9.8 AMENDMENT. At any time, the parties hereto, by action taken by their
respective Board of Directors or pursuant to authority delegated by their
respective Boards of Directors, may amend this Agreement. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
9.9 WAIVER. At any time prior to the Effective Time, the parties hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto, or
(c) waive compliance with any of the agreements or conditions contained herein,
to the extent permitted by applicable law. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
writing signed on behalf of such party.
9.10 GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, without regard
to its rules of conflict of laws.
9.11 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.12 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
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 hereof, this being in addition to any other remedy to
which they are entitled at law or in equity.
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9.13 CONSENT TO JURISDICTION. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Delaware and of the United States of America
located in the State of Delaware (the "Delaware Courts") for any litigation
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such Delaware Courts), waives any objection to the laying of venue of any such
litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in an
inconvenient forum.
9.14 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
JACOR COMMUNICATIONS, INC.
By: /s/ JEROME L. KERSTING
-----------------------------------------
Name: Jerome L. Kersting
Title: Senior Vice President
JACOR COMMUNICATIONS COMPANY
By: /s/ JEROME L. KERSTING
-----------------------------------------
Name: Jerome L. Kersting
Title: Senior Vice President
PRN HOLDING ACQUISITION CORP.
By: /s/ JEROME L. KERSTING
-----------------------------------------
Name: Jerome L. Kersting
Title: Senior Vice President
PREMIERE RADIO NETWORKS, INC.
By: /s/ DANIEL M. YUKELSON
-----------------------------------------
Name: Daniel M. Yukelson
Title: Vice President/Finance
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ANNEX II
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "AGREEMENT") is made and entered into as
of April 7, 1997 by and among (i) Jacor Communications, Inc., a Delaware
corporation ("JACOR"), and its wholly-owned subsidiary, Jacor Communications
Company, a Florida corporation ("COMMUNICATIONS"), on the one hand, and (ii)
Archon Communications Inc., a Delaware corporation ("ACI"), both in its
individual capacity and as Proxy (as defined below), the stockholders of ACI,
namely, Archon Communications Partners LLC, a California limited liability
company, and News America Holdings, Incorporated, a Delaware corporation (each
an "ARCHON SHAREHOLDER" and collectively the "ARCHON SHAREHOLDERS"), and each of
the other shareholders of Premiere signatory hereto (each an "INSIDER" and
collectively the "INSIDERS"), on the other hand. ACI, the Archon Shareholders
and the Insiders are each referred to herein individually as a "SHAREHOLDER" and
are referred to herein collectively as the "SHAREHOLDERS".
A. Jacor, Communications and PRN Holding Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Communications ("ACQUISITION
CORP."), on the one hand, and Premiere Radio Networks, Inc., a Delaware
corporation ("PREMIERE"), on the other hand, have entered into that certain
Agreement and Plan of Merger (the "MERGER AGREEMENT"), dated as of even date
herewith, pursuant to which Acquisition Corp. will merge with and into Premiere
(the "MERGER" ), with the stockholders of Premiere to receive a combination of
shares of Common Stock of Jacor (the "JACOR STOCK") and cash in exchange for
their shares of Common Stock and/or Class A Common Stock of Premiere
(collectively, the "PREMIERE STOCK").
B. ACI is currently the owner of shares of Premiere Stock and options and
warrants to purchase Premiere Stock.
C. Under the Voting Trust Proxy and Voting Agreement (the "TRUST PROXY
AGREEMENT"), dated as of July 28, 1995, by and among the Insiders and ACI, each
Insider appointed ACI, with full power of substitution, as such Insider's
attorney and proxy (ACI acting in such capacity being referred to herein as the
"TRUST PROXY") to vote, and to express consent or dissent to corporate action in
writing without a meeting with respect to, the shares of Premiere Stock owned by
such Insider listed on Schedule A to the Trust Proxy Agreement ("TRUST SHARES")
subject to that certain voting trust (the "VOTING TRUST") created pursuant to
that certain Voting Trust Agreement (the "VOTING TRUST AGREEMENT"), dated as of
July 28, 1995, by and among U.S. Trust Company of California, N.A., not in its
individual capacity but solely as trustee of the Voting Trust ("TRUSTEE"), ACI
and the Insiders, on all matters on which such Insider is entitled to vote at a
meeting of the shareholders of Premiere, and in all proceedings in which the
vote or consent, written or otherwise, of the holders of the Trust Shares may be
required or authorized by law. Pursuant to the Voting Trust Agreement, the
Trustee is required to vote such Trust Shares in accordance with the
determination of the holders of more than 50% of the voting power of such Trust
Shares.
D. Under the Stockholders Voting Agreement and Proxy (the "VOTING
AGREEMENT"), dated as of July 28, 1995, by and among the Insiders and ACI, each
Insider appointed ACI, with full power of substitution, as attorney and proxy
(ACI acting in such capacity being referred to herein as the "VOTING PROXY" and
ACI acting both in such capacity and as the Trust Proxy being referred to herein
as the "PROXY") to vote the shares of Premiere Stock owned by such Insider
listed on Schedule A to the Voting Agreement (which shares are not subject to
the Voting Trust Agreement) and any shares of voting capital stock issued with
respect thereto (such existing shares and any such new shares being collectively
referred to herein as the "PROXY SHARES") on all matters as to which such
Insider is entitled to vote at a meeting of the shareholders of Premiere, or to
which they are entitled to express consent or dissent to corporate action in
writing without a meeting, in the Voting Proxy's absolute and sole discretion.
E. Each of the Trustee and the Proxy is obligated to vote all Trust Shares
and Proxy Shares, as the case may be, in accordance with that certain
Stockholders Agreement ("STOCKHOLDERS AGREEMENT"), dated as
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of July 28, 1995, by and among Premiere, ACI and the Insiders, which
Stockholders Agreement restricts the transfer of the shares of Premiere Stock
owned by the Shareholders (including by operation of law) except in accordance
with the terms and conditions of such Stockholders Agreement.
F. A condition precedent to the Merger is the acquisition of all of the
outstanding shares of Common Stock of ACI (the "ACI STOCK") by Communications in
exchange for a combination of shares of Jacor Stock and cash pursuant to the
Stock Purchase Agreement, dated as of even date herewith, between Jacor and
Communications, on the one hand, and the Archon Shareholders, on the other (the
"STOCK PURCHASE AGREEMENT").
G. As a condition to their willingness to enter into the Merger Agreement
and the Stock Purchase Agreement, Jacor and Communications have required that
each Shareholder enter into, and each such Shareholder has agreed to enter into,
this Agreement.
NOW, THEREFORE, in consideration of the foregoing, for good and valuable
consideration, the parties hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF ACI AND THE ARCHON SHAREHOLDERS. Each
of ACI, both in its individual capacity and as the Proxy (except that (x) the
representations and warranties set forth in SECTIONS 1(A)(I) and 1(B) are made
by ACI solely in its individual capacity and (y) the representations and
warranties set forth in SECTION 1(C) are made by ACI solely in its capacity as
the Proxy) and each Archon Shareholder hereby, jointly and severally represents
and warrants to Jacor and Communications as follows:
(a) AUTHORITY; NO VIOLATION. Each of ACI and each such Archon
Shareholder has all necessary power and authority to enter into and perform
its respective obligations hereunder. The execution, delivery and
performance of this Agreement by each of ACI and each such Archon
Shareholder will not (i) violate its certificate of incorporation, bylaws or
other similar governing documents, (ii) constitute or result in the breach
of any term, condition or provision of, or constitute a default under, or
give rise to any right of termination, cancellation or acceleration with
respect to, or result in the creation of any lien, charge or encumbrance
upon any of its property or assets pursuant to, any note, bond, mortgage,
indenture, license, agreement, lease, voting agreement, shareholders'
agreement, trust agreement, voting trust or other instrument, contract or
obligation to which it is a party (including the Proxy Agreements as defined
below) or by which its properties or assets may be bound, or (iii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to it. This Agreement has been duly and validly executed and delivered by
ACI (including ACI acting hereunder in its capacities as the Proxy) and each
such Archon Shareholder and constitutes a valid and binding agreement of ACI
(including ACI acting hereunder in its capacities as the Proxy) and each
such Archon Shareholder enforceable against it in accordance with its terms.
(b) OWNERSHIP OF SHARES. ACI is the beneficial owner holder of the
number and class of shares of Premiere Stock indicated under ACI's name on
Schedule 1(b) hereto (the "ACI EXISTING SHARES," and together with any
shares of Premiere Stock acquired by ACI after the date hereof, the "ACI
SHARES") and, as of the date hereof, the ACI Existing Shares constitute all
the outstanding shares of Premiere Stock owned of record or beneficially by
ACI. Schedule 1(b) lists the record owner of any ACI Existing Shares of
which ACI is not the record owner, the number of such shares and whether a
Consent (as defined in Section 3(a)) can be delivered immediately with
respect to those shares. ACI has with respect to the ACI Existing Shares,
and at all times between the date of this Agreement and the consummation of
the Merger will have with respect to the ACI Shares, good and valid title to
such ACI Shares, free and clear of any liens, charges, encumbrances,
ownership interests or claims of any third parties. Except as disclosed on
Schedule 1(b), there are no options or rights to acquire, or any agreements
to which ACI or any Archon Shareholder is a party relating to, any ACI
Shares, other than this Agreement. With respect to the ACI Existing Shares,
ACI has sole voting power and sole power to issue instructions with respect
to the matters set forth in SECTION 3 hereof, sole power of disposition,
sole power to demand appraisal rights and sole power to engage in the
actions set forth in
A-II-2
SECTION 3 hereof, with no restrictions on the voting rights, rights of
disposition or otherwise, except in each of the foregoing cases for such
restrictions as are set forth in the respective agreements referred to
herein, all of which are being waived to the extent set forth elsewhere
herein.
(c) AUTHORITY OF THE PROXY. With respect to the Trust Shares and the
Proxy Shares, the Proxy has sole voting power and sole power to issue
instructions with respect to the matters set forth in SECTION 3 hereof, sole
power to demand appraisal rights and sole power to engage in the actions set
forth in SECTION 3 hereof, with no restrictions on such voting rights,
rights of disposition or otherwise, except as expressly stated herein.
2. REPRESENTATIONS AND WARRANTIES OF THE INSIDERS. Each Insider hereby,
severally only and not for one another or jointly, represents and warrants to
Jacor and Communications as follows:
(a) AUTHORITY; NO VIOLATION. Such Insider has all necessary power and
authority to enter into and perform all of such Insider's obligations
hereunder. The execution, delivery and performance of this Agreement by such
Insider will not violate or conflict with, or constitute a violation of or
default under, any contract, commitment, agreement, arrangement or
restriction of any kind to which such Insider is a party or by which such
Insider is bound, including the Proxy Agreements, any voting agreement,
shareholders' agreement, trust agreement or voting trust. This Agreement has
been duly and validly executed and delivered by such Insider and constitutes
a valid and binding agreement of such Insider enforceable against such
Insider in accordance with its terms.
(b) OWNERSHIP OF SHARES. Such Insider is the beneficial owner holder of
the number and class of outstanding shares of Premiere Stock indicated under
such Insider's name on Schedule 2(b) hereto (the "INSIDER EXISTING SHARES,"
and together with any shares of Premiere Stock acquired by such Insider
after the date hereof, the "INSIDER SHARES") and, as of the date hereof, the
Insider Existing Shares constitute all the outstanding shares of Premiere
Stock owned of record or beneficially by the Insider. Schedule 2(b) lists,
with respect to each Insider, the record owner of the Insider Existing
Shares owned beneficially but not of record by that Insider, the number of
such shares, and whether a Consent (as defined in Section 3(a)) can be
delivered immediately with respect to those shares. Such Insider has with
respect to the Insider Existing Shares, and at all times between the date of
this Agreement and the consummation of the Merger will have with respect to
the Insider Shares, good and valid title to such the Insider Shares, free
and clear of any liens. Except as disclosed on Schedule 2(b), there are no
options or rights to acquire, or any agreements to which any Insider is a
party relating to, any Insider Shares, other than this Agreement. With
respect to the Insider Existing Shares, subject to applicable community
property laws, such Insider has sole voting power and sole power to issue
instructions with respect to the matters set forth in SECTION 3 hereof, sole
power of disposition, sole power to demand appraisal rights and sole power
to engage in the actions set forth in SECTION 3 hereof, with no restrictions
on the voting rights, rights of disposition or otherwise, except in each of
the foregoing cases for such restrictions as are set forth in the respective
agreements referred to herein, all of which are being waived to the extent
set forth elsewhere herein.
3. VOTING AGREEMENT, PROXY AND AGREEMENT NOT TO TRANSFER.
Notwithstanding anything to the contrary set forth in any of the
Stockholders Agreement, the Trust Proxy Agreement, the Voting Trust Agreement
and the Voting Agreement (collectively, the "PROXY AGREEMENTS"),
(a) Each Shareholder (except that the obligations in SECTION 3(A)(II)
and 3(A)(III) are undertaken by the Insiders only) hereby severally (i)
instructs, empowers, authorizes and directs the Trustee to vote the Trust
Shares and to give written consent at all meetings of shareholders of
Premiere and in all proceedings in which the vote or consent, written or
otherwise, of the Shareholders may be required or authorized by law, to
approve, adopt and consent to the Merger Agreement and the transactions
contemplated thereby in the exercise of its duties as Trustee under the
Voting Trust Agreement;
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(ii) instructs, empowers, authorizes and directs the Trust Proxy to
instruct, empower, authorize and direct the Trustee to vote the Trust Shares
and to give written consent at all meetings of shareholders of Premiere and
in all proceedings in which the vote or consent, written or otherwise, of
the Shareholders may be required or authorized by law, to approve, adopt and
consent to the Merger Agreement and the transactions contemplated thereby in
the exercise of its duties as Trustee under the Voting Trust Agreement;
(iii) instructs, empowers, authorizes and directs the Voting Proxy to vote
the Proxy Shares and to give written consent at all meetings of stockholders
of Premiere and in all proceedings in which the vote or consent, written or
otherwise, of the Shareholders may be required or authorized by law, to
approve, adopt and consent to the Merger Agreement and the transactions
contemplated thereby in the exercise of its duties as the Voting Proxy under
the Voting Agreement; (iv) approves, adopts and consents to the Merger, the
Merger Agreement, and the transactions contemplated thereby pursuant to
Section 228 of the Delaware General Corporation Law and, with respect to the
ACI Existing Shares or Insider Existing Shares owned of record by that
Shareholder or as to which that Shareholder can cause a Consent (as defined
below) to be delivered immediately, further agrees to execute and deliver
(and instructs, empowers, authorizes and directs the Trustee and the Proxy
and, if appropriate, the record owner of such shares, to execute and
deliver), immediately following the execution of the Merger Agreement and
this Agreement, a written consent in the form attached hereto as EXHIBIT A
approving and consenting to the Merger, the Merger Agreement and the
transactions contemplated thereby to the Secretary of Premiere (a
"Consent"); (v) with respect to the ACI Existing Shares or Insider Existing
Shares owned beneficially but not of record by that Shareholder as to which
that Shareholder cannot cause a Consent to be delivered immediately, shall
cause a Consent to be executed and delivered to the Secretary of Premiere
(either by causing record ownership to be transferred to that Shareholder's
name or otherwise) as soon as practicable and in any event within 15
business days of the date of this Agreement; and (vi) except with the prior
written consent of Jacor and Communications, agrees not to revoke any
Consent once delivered and to vote or cause to be voted all of such
Shareholder's ACI Existing Shares or Insider Existing Shares, as the case
may be, beneficially owned or held by such Shareholder (such shares,
together with any shares of Premiere Stock acquired by such Shareholder
after the date hereof, being referred to herein as the "SHARES") against the
following actions (other than the Merger and the transactions contemplated
by the Merger Agreement): (A) any extraordinary corporate transactions, such
as a merger, consolidation or other business combination involving Premiere
or its subsidiaries; (B) any sale, lease or transfer of the assets of
Premiere or its subsidiaries; (C) any change in the board of directors of
Premiere; (D) any material change in the present capitalization of Premiere;
(E) any amendment of Premiere's Certificate of Incorporation or Bylaws; (F)
any other action which is intended, or could reasonably be expected to,
impede, interfere with, delay, postpone, discourage or adversely affect the
contemplated economic benefits to Jacor and Communications of the Merger or
the transactions contemplated by the Merger Agreement. Each Shareholder
agrees that he or it shall not enter into any agreement or understanding
with any person or entity that would be effective prior to the Termination
Date (as defined in SECTION 6) to vote or give instructions after the
Termination Date in any manner inconsistent with this SECTION 3(A).
(b) Each Shareholder hereby severally grants to Jacor and
Communications, and appoints (and instructs, empowers, authorizes and
directs the Trustee and the Proxy to appoint) Jerome Kersting, Paul Solomon
and Christopher Weber of Jacor, in their respective capacities as officers
of Jacor, and any individual who shall succeed to any such office of Jacor,
and any other designee of Jacor, and each of them, as such Shareholder's
irrevocable proxy and attorney-in-fact (with full power of substitution and
resubstitution) to vote the Shares with respect to the Merger, the Merger
Agreement and the transactions contemplated thereby, in the event that Jacor
determines that any further shareholder vote or consent is required or
advisable in order to consummate the Merger and the transactions
contemplated thereby. Such Shareholder intends this proxy to be irrevocable
and coupled with an interest, and will take such further action and execute
such other instruments as may be necessary to
A-II-4
effectuate the intent of this proxy and hereby revokes any proxy previously
granted by such Shareholder with respect to the Shares.
(c) Each Shareholder hereby severally agrees not to sell, transfer,
assign, grant an option or other rights to acquire, or otherwise dispose of
any of his or her Shares without the prior written consent of Jacor and
Communications. Any permitted transferee of Shares must become a party to
this Agreement and any purported transfer of Shares to a person or entity
that has not become a party hereto shall be null and void.
4. COOPERATION. Until the earlier of the Termination Date or the Merger:
Each Shareholder severally agrees that it will not, and will use such
Shareholder's best efforts as a shareholder to cause Premiere not to, (i)
directly or indirectly solicit any inquiries or proposals from any person
relating to any proposal or transaction for the disposition of the business or
assets of Premiere or any of its subsidiaries, or the acquisition of or tender
or exchange offer for voting securities of Premiere or any subsidiary of
Premiere or any business combination between Premiere or any subsidiary of
Premiere and any person other than Jacor, Communications or Acquisition Corp.
(collectively, a "COMPETING TRANSACTION"), or (ii) furnish to any other person
any nonpublic information or access to such information with respect to or
otherwise concerning a Competing Transaction. Each Shareholder agrees to
immediately cease and cause to be terminated any existing discussions or
negotiations with any third parties conducted heretofore with respect to any
Competing Transaction. Each Shareholder will promptly disclose to Jacor and
Communications the identity of any person who attempts to initiate discussions
contemplating a Competing Transaction and a description of the terms of the
proposed Competing Transaction.
5. INSIDER CAPACITY. Each Insider is entering into this Agreement in his
or her capacity as the record or beneficial owner of such Insider's Shares, and
not in his or her capacity as a director or officer of Premiere, except as
expressly stated herein. To the extent that the Shares constitute community
property, all references herein to "Insider" shall also include such Insider's
spouse.
6. TERMINATION. The obligations of the parties hereunder shall terminate
upon the termination of the Merger Agreement pursuant to Section 8.1 thereof.
The date on which such termination occurs is referred to herein as the
"TERMINATION DATE".
7. PROXY AGREEMENTS. Notwithstanding anything to the contrary in the Proxy
Agreements, each Shareholder hereby severally acknowledges, agrees and consents
to the termination of all of the Proxy Agreements on and as of the Closing (as
defined in the Merger Agreement) and further agrees to execute and deliver any
such further document or agreement as Jacor and Communications shall reasonably
consider to be desirable to evidence such termination.
8. SPECIFIC PERFORMANCE. Each Shareholder acknowledges that damages would
be an inadequate remedy to Jacor and Communications for an actual or prospective
breach of this Agreement and that the obligations of each of the Shareholders
hereto shall be specifically enforceable.
9. MISCELLANEOUS.
(a) DEFINITIONAL MATTERS.
(i) Unless the context otherwise requires, "person" shall mean a
corporation, association, partnership, joint venture, organization,
business, individual, trust, estate or any other entity or group (within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended).
(ii) All capitalized terms used but not defined in this Agreement
shall have the respective meanings that the Merger Agreement ascribes to
such terms.
(iii) The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the
meaning or interpretation of this Agreement.
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(b) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof.
(c) PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective successors,
assigns, heirs, executors, administrators and other legal representatives.
Nothing in this Agreement, express or implied, is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
(d) ASSIGNMENT. This Agreement shall not be assigned without the prior
written consent of the other party hereto, except that Jacor and
Communications may assign, in their sole discretion, all or any of their
rights, interests and obligations hereunder to any direct or indirect
wholly-owned subsidiary of Jacor.
(e) MODIFICATIONS. This Agreement shall not be amended, altered or
modified in any manner whatsoever, except by a written instrument executed
by the parties hereto.
(f) GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to the provisions thereof relating to
conflicts of law).
(g) VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
(h) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
(i) NOTICES. Any notices or other communications required or permitted
hereunder shall be in writing and shall be deemed duly given upon (i)
transmitter's confirmation of a receipt of a facsimile transmission, (ii)
confirmed delivery by a standard overnight carrier or (iii) the expiration
of five business days after the day when mailed by certified or registered
mail, postage prepaid, addressed at the following addresses (or at such
other address as the parties hereto shall specify by like notice):
If to Jacor or Communications:
Jacor Communications, Inc.
50 East RiverCenter Boulevard
Twelfth Floor
Covington, Kentucky 41011
Attention: Paul Solomon
With courtesy copies to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Scott J. Davis, Esq.
If to any of the Shareholders, to the respective addresses noted on the
signature page hereto.
10. FURTHER ASSURANCES. Each Shareholder shall execute and deliver all
such further documents and instruments, including additional consents and
proxies with respect to such Shareholder's Shares, and take all such further
actions as may be necessary or appropriate in the reasonable judgment of Jacor
and Communications in order to evidence the agreements of, and grant of proxies
by such Shareholder set forth herein and consummate the transactions
contemplated hereby.
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11. CONSENT. The Shareholders hereby consent to the execution and delivery
by Archon Communications Inc. of the Stock Purchase Agreement referred to in the
Merger Agreement and providing for the purchase of the outstanding stock of
Archon by Jacor.
12. CONSENT TO JURISDICTION. Each of the parties hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of Delaware and of the United States of America located in
the State of Delaware (the "DELAWARE COURTS") for any litigation arising out of
or relating to this Agreement and the transactions contemplated hereby (and
agrees not to commence any litigation relating thereto except in such Delaware
Courts), waives any objection to the laying of venue of any such litigation in
the Delaware Courts and agrees not to plead or claim in any Delaware Court that
such litigation brought therein has been brought in an inconvenient forum.
13. EMPLOYMENT AND OPTION AGREEMENTS. Steven Lehman, Timothy Kelly and
Kraig Kitchin agree (i) to execute Employee Option Agreements (as defined in the
Merger Agreement) immediately after the execution of this Agreement, and (ii) to
use their reasonable best efforts to comply with and keep in full force and
effect their respective Employment Agreement (as defined in the Merger
Agreement).
14. INDEMNITY. (a) So long as this Agreement has not been terminated,
Jacor shall, or after the Effective Time, shall cause Premiere to, indemnify and
hold harmless the Shareholders and the present or former employees, agents,
officers or directors of the Shareholders (the "Shareholder Indemnified
Parties") from any and all damages, losses, interest, liabilities, costs and
expenses (including attorneys' fees and expenses), net of any amounts recovered
from applicable insurance, incurred or suffered by the Shareholder Indemnified
Parties solely in their capacity as shareholders (or representative of
shareholders) of Premiere as a result of a third party claim asserting that the
agreements of the Shareholders in Section 3(a) of this Agreement are unlawful;
provided, that the parties shall use their reasonable best efforts through
subrogation or other methods to preserve the ability of any party or Premiere to
recover under applicable insurance policies. The parties acknowledge that the
obligations pursuant to this Section 14 shall continue after the Effective Time.
(b) If any lawsuit, enforcement action, or other claim is filed or made
against the Shareholder Indemnified Parties (a "Third-Party Claim") and is
covered by the indemnity set forth in (a) above, written notice thereof (the
"Third-Party Claim Notice") shall be given to Jacor as promptly as practicable
(and in any event within ten (10) calendar days after the receipt of such
Third-Party Claim; provided that failure to give such notice shall not affect
the indemnity provided herein unless Jacor can demonstrates it was materially
prejudiced as a consequence of such failure). After the receipt of such
Third-Party Claim Notice, Jacor shall be entitled, upon written notice to the
Shareholder Indemnified Parties, if Jacor so elects and at Jacor's sole cost,
risk, and expense: (i) to take control of the defense and investigation of such
Third-Party Claim, (ii) to employ and engage attorneys of its own choice,
subject to the reasonable approval of the Shareholder Indemnified Parties to
handle and defend the same, and (iii) to compromise or settle such Third-Party
Claim, which compromise or settlement shall be made only with the written
consent of the Shareholder Indemnified Parties, such consent not to be
unreasonably withheld. If Jacor does elect to take control of the defense of a
Third-Party Claim, the Shareholder Indemnified Parties shall fully cooperate in
the defense of such Third-Party Claim. If the Shareholder Indemnified Parties do
not elect to take control of the defense of a Third-Party Claim, Jacor may not
compromise or settle such Third-Party Claim without the consent of the
Shareholder Indemnified Parties, such consent not to be unreasonably withheld.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
JACOR COMMUNICATIONS, INC.
By: /s/ JEROME L. KERSTING
----------------------------------------
Title: Senior Vice President
JACOR COMMUNICATIONS COMPANY
By: /s/ JEROME L. KERSTING
----------------------------------------
Title: Senior Vice President
ARCHON COMMUNICATIONS INC.
both in its individual capacity and as the
Proxy
By: /s/ KENIN M. SPIVAK
----------------------------------------
Title: President
Address for Notices:
c/o Richard V. Sandler
Maron & Sandler
844 Moraga Drive
Los Angeles, California 90049
ARCHON COMMUNICATIONS PARTNERS LLC
By: /s/ RICHARD V. SANDLER
----------------------------------------
Title: Manager
Address for Notices:
c/o Richard V. Sandler
Maron & Sandler
844 Moraga Drive
Los Angeles, California 90049
NEWS AMERICA HOLDINGS, INC.
By: /s/ CHASE CAREY
----------------------------------------
Title: Executive Vice President
Address for Notices:
10201 West Pico Boulevard
Building 88, Room 142
Los Angeles, California 90035
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INSIDERS:
/s/ STEPHEN LEHMAN
---------------------------------------------
STEPHEN LEHMAN
Address for Notices:
25742 Simpson Place
Calabasas, California 91302
Spouse: /s/ STEPHANIE LEHMAN
-------------------------------------
Typed Name: Stephanie Lehman
/s/ LOUISE PALANKER
---------------------------------------------
LOUISE PALANKER
Address for Notices:
3742 Beverly Ridge Drive
Sherman Oaks, California 91423
/s/ TIMOTHY KELLY
---------------------------------------------
TIMOTHY KELLY
Address for Notices:
23547 Schoenborn Street
West Hills, California 91304
Spouse: /s/ EVELYN KELLY
-------------------------------------
Typed Name: Evelyn Kelly
/s/ KRAIG T. KITCHIN
---------------------------------------------
KRAIG T. KITCHIN
Address for Notices:
4231 Hunt Club Lane
West Lake Village, CA 91361
Spouse: /s/ LISA KITCHIN
-------------------------------------
Typed Name: Lisa Kitchin
A-II-9
PREMIERE CONSENT
Notwithstanding the Stockholders Agreement, Premiere Radio Networks, Inc.
("PREMIERE") hereby consents and agrees to the execution and delivery of the
attached Shareholders' Agreement by each of the above Shareholders of Premiere
and agrees to be bound by the terms thereof.
PREMIERE RADIO NETWORKS, INC.
By: /s/ DANIEL M. YUKELSON
--------------------------------------
Name: Daniel M. Yukelson
Title: Vice President/Finance and
Chief Financial Officer
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TRUSTEE ACKNOWLEDGEMENT
U.S. Trust Company of California, N.A., not in its individual capacity but
solely as trustee ("TRUSTEE") under that certain Voting Trust Agreement, dated
as of July 28, 1995, by and among Trustee and certain stockholders of Premiere
Radio Networks, Inc., a Delaware corporation, hereby acknowledges receipt of a
copy of the attached Shareholders' Agreement and agrees to vote on all matters
as instructed in such Agreement and to sign the form of consent attached hereto
as Appendix 1 as instructed by such Shareholders' Agreement in the exercise of
its duties as Trustee under the Voting Trust Agreement.
U.S. TRUST COMPANY OF CALIFORNIA, N.A.,
not in its individual capacity but solely as
Trustee
By: /s/ D. YOUNG
--------------------------------------
Name: Deborah Young
Title: Assistant Vice President
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EXHIBIT A
WRITTEN CONSENT
OF
SHAREHOLDERS
OF
PREMIERE RADIO NETWORKS, INC.
The undersigned shareholders of Premiere Radio Networks, Inc., a Delaware
corporation ("PREMIERE"), without the formality of a meeting, do hereby approve,
adopt and consent to, pursuant to Section 228 of the Delaware General
Corporation Law, that certain Agreement and Plan of Merger (the "MERGER
AGREEMENT"), dated as of April 7, 1997, between Jacor Communications, Inc. a
Delaware corporation ("JACOR"), its wholly-owned subsidiary Jacor Communications
Company, a Florida corporation ("COMMUNICATIONS"), and PRN Holding Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Communications
("PRN"), on the one hand, and Premiere, on the other, whereby PRN will merge
with and into Premiere, with the stockholders of Premiere to receive a
combination of shares of Common Stock of Jacor and cash in exchange for their
shares of Common Stock and/or Class A Common Stock of Premiere as provided in
the Merger Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Written Consent as of
the dates indicated below.
------------------------------------------
Dated: , 1997
NUMBER OF SHARES
Common Stock:
Class A Common Stock:
Address for Notices:
Spouse:
Typed Name:
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APPENDIX 1
WRITTEN CONSENT
OF
TRUSTEE
U.S. Trust Company of California, N.A., not in its individual capacity but
solely as trustee ("TRUSTEE"), under that certain Voting Trust Agreement (the
"Agreement"), dated as of July 28, 1995, by and among Trustee and certain
stockholders of Premiere Radio Networks, Inc., a Delaware corporation
("PREMIERE"), without the formality of a meeting, does, with respect to all
shares of Common Stock or Class A Common Stock subject to the Agreement, hereby
approve, adopt and consent to, pursuant to Section 228 of the Delaware General
Corporation Law, that certain Agreement and Plan of Merger (the "MERGER
AGREEMENT"), dated as of April 7, 1997, between Jacor Communications, Inc. a
Delaware corporation ("JACOR"), its wholly-owned subsidiary Jacor Communications
Company, a Florida corporation ("COMMUNICATIONS"), and PRN Holding Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Communications
("PRN"), on the one hand, and Premiere, on the other, whereby PRN will merge
with and into Premiere, with the stockholders of Premiere to receive a
combination of shares of Common Stock of Jacor and cash in exchange for their
shares of Common Stock and/or Class A Common Stock of Premiere as provided in
the Merger Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Written Consent as of
the date indicated below.
U.S. TRUST COMPANY OF CALIFORNIA, N.A.,
not in its individual capacity but solely as
Trustee
By:
Name:
Title:
Dated: , 1997
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ANNEX III
STOCK PURCHASE AGREEMENT
AMONG
JACOR COMMUNICATIONS, INC.,
JACOR COMMUNICATIONS COMPANY, AS PURCHASER
AND
ARCHON COMMUNICATIONS PARTNERS LLC, AS SELLER
AND
NEWS AMERICA HOLDINGS, INCORPORATED, AS SELLER
AND
THE NEWS CORPORATION LIMITED, AS INDEMNITOR
DATED AS OF APRIL 7, 1997
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("AGREEMENT") is entered into as of April 7,
1997 among JACOR COMMUNICATIONS, INC., a Delaware corporation ("JACOR"), and
JACOR COMMUNICATIONS COMPANY, a Florida corporation (the "PURCHASER"), on the
one hand, and ARCHON COMMUNICATIONS PARTNERS LLC, a California limited liability
company ("ACP"), and NEWS AMERICA HOLDINGS, INCORPORATED, a Delaware corporation
("NEWS AMERICA"), a wholly owned subsidiary of News Corporation (as defined
below), on the other (ACP and News America being collectively referred to herein
as the "SELLING ENTITIES") and THE NEWS CORPORATION LIMITED, a corporation
organized under the laws of Australia ("News Corporation"), with reference to
the following facts:
A. All of the issued and outstanding stock of the Purchaser is owned by
Jacor. Concurrently herewith, Jacor, the Purchaser and PRN HOLDING ACQUISITION
CORP., a Delaware corporation and wholly owned subsidiary of Purchaser, are
entering into an Agreement and Plan of Merger (the "MERGER AGREEMENT") with
PREMIERE RADIO NETWORKS, INC., a Delaware corporation ("PREMIERE"). The
acquisition of Premiere by Jacor provided for in the Merger Agreement is to be
accomplished through a merger (the "MERGER") of a newly organized subsidiary of
the Purchaser with and into Premiere, in which Merger, among other things,
Premiere will be the surviving corporation but the currently outstanding shares
of stock of Premiere will, with certain exceptions, be exchanged for and
converted into a combination of cash and shares of the common stock, no par
value, of Jacor ("JACOR SHARES").
B. ACP and News America are each holders of the common stock of Archon
Communications Inc., a Delaware corporation ("ARCHON"), and together constitute
the holders of all of the outstanding Archon Common Stock. The principal assets
of Archon consist of shares of Premiere Stock and Premiere Warrants (each as
defined herein).
C. To facilitate the Merger, Jacor desires to acquire Archon through the
purchase of all of the issued and outstanding stock of Archon by the Purchaser
on the terms and subject to the conditions set forth in this Agreement, and the
Seller desires that such stock be sold on such terms and subject to such
conditions.
THEREFORE, the parties hereto agree as follows:
ARTICLE I.
PURCHASE AND SALE
1.1 AGREEMENT OF PURCHASE AND SALE.
On the terms and subject to the conditions set forth in this Agreement, the
Purchaser agrees to purchase, and each of the Selling Entities agrees to sell to
the Purchaser, all of the shares of Archon Common Stock held by them (the
"SHARES"), which Shares shall constitute all of the issued and outstanding
shares of Archon Common Stock (as defined in Section 2.4 below).
1.2 PURCHASE CONSIDERATION; MANNER OF PAYMENT.
(a) The aggregate purchase consideration that shall be paid by the Purchaser
for the Shares (the "PURCHASE CONSIDERATION") shall be payable in a combination
of cash and Jacor Shares, the respective aggregate amounts and proportions of
which shall be determined in accordance with the following:
(i) Solely for purposes of calculating the respective amounts of cash
and Jacor Shares that shall together comprise the Purchase Consideration
hereunder, and not as a statement of the intended aggregate value thereof, a
"PRESUMED PREMIERE SHARE AMOUNT" (as defined in SECTION 1.2(B) below) shall
first be determined.
(ii) The Purchase Consideration shall consist of (i) the aggregate
amounts of cash and Jacor Shares that would be payable as the "Merger
Consideration" (as such term is defined in the Merger Agreement) for the
Presumed Premiere Share Amount in the Merger, plus (ii) an amount of cash
equal to the amount, if any, of cash and cash equivalents held by Archon as
of the Closing Date that exceeds the amount of cash necessary to pay
liabilities of Archon as provided in SECTION 4.2(B) below.
(iii) The respective amounts of cash and Jacor Shares comprising the
Purchase Consideration shall be paid and issued as designated in the written
notice from the Selling Entities specified in Section 1.2(a)(iv).
(iv) All references to "dollars" herein shall mean U.S. dollars and all
amounts that are to be paid in cash shall be paid through wire transfer of
federal or other immediately available U.S. dollar funds to such accounts as
the Selling Entities shall specify in a notice (the "Notice") to the
Purchaser not later than two days prior to the Closing. Certificates for
Jacor Shares that are part of the Purchase Consideration will be issued in
the names specified, and to the persons specified, by the Selling Entities
in the Notice.
(b) For purposes of the calculations and determinations provided for in
SECTION 1.2(A) above, "PRESUMED PREMIERE SHARE AMOUNT" shall mean the aggregate
number of Premiere Shares (as such term is defined in the Merger Agreement) that
equals the sum of the respective amounts calculated as indicated below:
(i) The aggregate number of shares of Premiere Common Stock and Premiere
Class A Common Stock (each as defined in SECTION 2.5(A) below) held of
record by Archon as of the Closing Date; and
(ii) The sum of the amounts determined by multiplying the respective
numbers of shares issuable upon exercise of each of the Premiere Warrants
(as defined in SECTION 2.5(A) below) held of record by Archon as of the
Closing Date by the "Spread Factor" applicable to each such Premiere
Warrant, with the "SPREAD FACTOR" of each such Premiere Warrant being
determined as the quotient obtained by dividing (A) the difference between
the Presumed Premiere Stock Price (as defined below) and the per share
exercise price of such Premiere Warrants by (B) the Presumed Premiere Stock
Price. For purposes of the preceding sentence, the PRESUMED PREMIERE STOCK
PRICE shall be the Jacor Closing Price (as such term is defined in the
Merger Agreement) multiplied by the Exchange Ratio (as such term is defined
in the Merger Agreement).
1.3 CLOSING. The respective deliveries of Purchase Consideration and
documents, and the taking of all other actions necessary to complete the
purchase and sale transaction provided for in this Agreement (the "CLOSING"),
shall take place immediately prior to the Merger on the date (referred to herein
as the "CLOSING DATE") that is the same date as the Closing Date under the
Merger Agreement, and the Closing shall be held at the offices of Mayer, Brown &
Platt located at 190 South LaSalle Street, Chicago, Illinois. The Merger shall
not take place until and unless the Closing has been completed.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLING ENTITIES
Each of the Selling Entities, for itself alone and not one for the other,
hereby represents and warrants to Jacor and the Purchaser as follows:
2.1 ORGANIZATION AND RELATED MATTERS.
(a) Each of the Selling Entities and Archon (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, (ii) has all requisite power and authority to
carry on its businesses as now conducted, and (iii) is qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
such qualification is necessary under applicable law, except to the extent that
the failure to have such power or authority or to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on it.
For purposes of this Agreement, the term "Material Adverse Effect" means,
with respect to Archon, either of the Selling Entities or Jacor, as the case may
be, a material adverse effect on the business, assets,
A-III-2
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.
2.2 NON-CONTRAVENTION; BINDING EFFECT.
(a) The Selling Entities each have all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly authorized, executed and
delivered by each of the Selling Entities and constitutes the valid and legally
binding obligation of each of the Selling Entities or Archon, enforceable
against such parties in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally or by general equitable
principles, regardless of whether such enforcement is sought at law or in
equity.
(b) Neither the execution and delivery of this Agreement by the Selling
Entities, nor the consummation by any of them of the transactions contemplated
hereby will (i) conflict with or result in a breach of any provision of their
respective articles of incorporation, by-laws or other similar governing
documents, or (ii) constitute or result in the breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or assets of any
of them pursuant to, any note, bond, mortgage, indenture, license, agreement,
lease or other instrument, contract or obligation to which any of them is a
party or by which any of their properties or assets may be bound; or (iii)
subject to receipt of the requisite approvals referred to in Section 2.2(c),
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to any of the Selling Entities or Archon, or to any of their
respective properties or assets.
(c) Other than (i) such filings as are required under Federal or state
securities or "blue sky" laws and the rules and regulations thereunder, (ii)
notices and completion of waiting periods under the Hart-Scott-Rodino Antitrust
improvements Act of 1976 (the "HSR Act"), (iii) filings with the Secretary of
State of the State of Delaware under the DGCL required to effect the Merger,
(iv) in connection or compliance with the applicable requirements of the
Internal Revenue Code of 1986 (the "Code") and state, local and foreign tax
laws, and (v) where the failure to give such notice, make such filing, or
receive such order, authorization, exemption, consent, or approval would not
have a material adverse effect on Archon or Jacor, no notice to, filing with,
authorization of, exemption by or consent or approval of any Governmental
Authority (as defined in Section 2.3(b)) is necessary for the consummation by
Archon or the Selling Entities of the transactions contemplated in this
Agreement.
2.3 COMPLIANCE WITH LAWS.
(a) Archon has conducted its business in compliance with all laws,
regulations, ordinances, permits, reporting and licensing requirements and
orders applicable to its business or properties or to any of its employees.
(b) Except as set forth in Schedule 2.3(b), Archon has timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that it was required to file with any governmental
or regulatory agencies, authorities, corporations, boards, commissions,
departments or other governmental instrumentalities (each a "GOVERNMENTAL
AUTHORITY"), and has paid all fees and assessments due and payable in connection
therewith. Archon has not received any notification from any Governmental
Authority asserting that it is not in compliance with any of the statutes,
regulations or ordinances that such Governmental Authority enforces.
2.4 CAPITALIZATION.
(a) Archon is authorized to issue 18,000 shares of Class A non-voting common
stock, par value $0.01 per share, and 2,000 shares of Class B voting common
stock, par value $0.01 per share (collectively, the "ARCHON COMMON STOCK"). As
of the date hereof, no shares of preferred stock of Archon are authorized,
A-III-3
issued or outstanding, 10,000 shares of Archon Common Stock, consisting of 9,000
shares of Class A common stock and 1,000 shares of Class B common stock, are
issued and outstanding, of which ACP owns, both of record and beneficially,
5,000 shares (consisting of 4,500 shares of Class A common stock and 500 shares
of Class B common stock) and News America owns, both of record and beneficially,
5,000 shares (consisting of 4,500 shares of Class A common stock and 500 shares
of Class B common stock).
(b) As of the date hereof, no bonds, debentures, notes or other
indebtedness, having the right to vote on any matters on which stockholders of
Archon may vote ("VOTING DEBT"), are issued or outstanding and no such
securities are authorized for issuance by Archon.
(c) The Shares to be sold to the Purchaser pursuant to this Agreement
constitute, and will as of the Closing Date constitute, all of the issued and
outstanding shares of Archon Common Stock as of the date hereof. All of such
Shares (i) have been duly and validly authorized and issued, are fully paid and
nonassessable and were not issued in violation of any preemptive rights of any
person or entity, and (ii) are owned of record and beneficially solely by ACP
and News America in the respective amounts set forth in (a) above, with full
right on the part of each to transfer sole legal and beneficial ownership
thereof to the Purchaser as provided in this Agreement, free and clear of any
lien, charge, encumbrance, security interest, restriction or right or claim of
any third party. Except for those employee stock options listed and described in
Schedule 2.4 hereto, there are no outstanding subscriptions, options, rights,
warrants, convertible securities or other agreements or commitments obligating
Archon to issue, transfer from treasury, deliver or sell any additional shares
of capital stock or Voting Debt of Archon, and no unissued shares of Archon
Common Stock are subject to any preemptive rights of stockholders of Archon or
any other party. There are no outstanding contractual obligations of Archon to
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
of or other ownership interests in Archon.
2.5 ASSETS, BUSINESS AND LIABILITIES; SUBSIDIARIES.
(a) Except as disclosed in Schedule 2.5(a) hereto, the business activities
of Archon consist, and have since the initial organization of Archon consisted,
solely of the ownership of shares of Common Stock, par value $0.01 per share,
and Class A Common Stock, par value $0.01 per share (collectively, the "PREMIERE
STOCK") and classes of warrants to purchase Premiere Stock (the "PREMIERE
WARRANTS") as listed and described in Schedule 2.5(a) hereto, the provision of
services to Premiere pursuant to the Securities Purchase Agreement (as defined
in Section 7.1(a) hereof), all matters related to the Securities Purchase
Agreement and the exercise of Archon rights under the various agreements
relating to Premiere. Such Premiere Stock and Premiere Warrants, together with
the cash and cash equivalents and certain other nonmaterial assets also listed
and described in Schedule 2.5(a) hereto, constitute the sole assets of Archon.
Archon is the sole record and beneficial owner of such Premiere Stock and
Premiere Warrants, free and clear of any liens, charges, encumbrances,
restrictions or claims of any third party.
(b) Except as listed and described in Schedule 2.5(a) hereto, which Schedule
includes, among other things, a list and description of all contracts and other
agreements to which Archon is a party or to which Archon or any of its assets
are subject, after the Closing Archon will have no contractual or other
liabilities or obligations of any kind, whether absolute, contingent or
otherwise.
(c) Archon has no subsidiaries or other entities in which it has any
investment, other than the investment that Archon has in the Premiere Stock and
Premiere Warrants indicated in Schedule 2.5(a) hereto.
(d) Except for the investment of its cash and the purchase of the Premiere
Stock and the Premiere Warrants, Archon has never made any other investment and
has never entered into any binding agreement to make any other investment.
2.6 LITIGATION. Archon is not a party to or the subject of any legal or
administrative proceedings of any kind or nature now pending or, to the best
knowledge of the Selling Entities, threatened before any
A-III-4
court or administrative body. Archon is not in default with respect to any
judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental agency or instrumentality.
2.7 TAX MATTERS.
(a) NO LIENS, ETC. Archon has not incurred any liabilities for Taxes other
than in the ordinary course of business. There are no liens on account of any
Taxes (other than liens for current Taxes not yet due and payable) upon the
properties or assets of Archon. Archon has not granted or been requested to
grant any waiver of any statute of limitations applicable to the assessment or
collection of any Taxes. For purposes of this Agreement, the term "TAXES" shall
include all federal, state, county, local or foreign taxes, charges, levies,
imposts or other assessments of any nature whatsoever, including, without
limitation, corporate income tax, corporate franchise tax, payroll tax, sales
tax, use tax, property tax, excise tax, withholding tax, and environmental tax,
together with any interest thereon and any penalties or additions to tax
relating thereto imposed by any governmental taxing authority for which Archon
may be directly or contingently liable in its own right, as collection agent for
Taxes imposed on another person, as a result of any guaranty or election, or as
a transferee of the assets of, or as successor to, any Person. For purposes of
establishing the Estimated Tax Amount, Archon's liability for Taxes shall be
estimated by applying the book-closing method as described in SECTION 4.5(B) or
the pro-rata method as described in SECTION 4.5(C), as applicable.
(b) RETURNS; PAYMENT OF TAXES. Except as set forth in Schedule 2.7(b),
Archon has timely filed all federal, state and foreign corporate income and
franchise tax returns and all other filings, whether or not of returns, in
respect of Taxes as required by all applicable laws for all periods through and
including the Closing Date. Copies of all such returns and filings have been
provided to the Purchaser. All Taxes shown as due on all such returns and other
filings have been paid. Each such return and filing is true and correct. Archon
will not have any additional liability for Taxes with respect to any return or
other filing heretofore filed or which was required by law to be filed, other
than for amounts included in the Estimated Tax Amount (as defined in Section
4.5(g)). None of the income tax returns or other filings of Archon has ever been
audited or investigated by any taxing authority, and no facts exist which would
constitute grounds for the assessment of any additional Taxes by any taxing
authority with respect to the taxable years covered by such returns and filings.
All Taxes which Archon is required by law to withhold or collect, including,
without limitation, payroll taxes and sales and use taxes, have been duly
withheld or collected, and, to the extent required, have been paid over to the
proper governmental authorities or are held in separate bank accounts for such
purpose.
(c) STATUS OF SELLING ENTITIES. Each Selling Entity represents that it is
not a "foreign person" as defined in SECTION 1445(F)(3) of the Internal Revenue
Code.
(d) DEFERRED ITEMS. Archon is not a party to and is not otherwise subject
to any arrangement having the effect of or giving rise to the recognition of a
deduction or loss in a taxable period ending on or before the Closing Date, and
a corresponding recognition of taxable income or gain in a taxable period ending
after the Closing Date, or any other arrangement that would have the effect of
or give rise to the recognition of taxable income or gain in a taxable period
ending after the Closing Date without the receipt of or entitlement to a
corresponding amount of cash.
(e) JOINT VENTURES, ETC. Archon is not a party to, or a partner or member
of, any joint venture, partnership, limited liability company, or other
arrangement or contract which is treated as a partnership for Federal income tax
purposes.
(f) CONSOLIDATED AND COMBINED RETURNS. Archon has never been included in
any consolidated tax return for United states federal income tax purposes.
Archon has never been included in any combined report for California or other
state corporate franchise or income tax purposes, nor has Archon ever filed a
separate return for California or other state corporate franchise or income tax
purposes on which it treated itself as or reported that it was a member of a
unitary group for purposes of the California or other state corporate franchise
or income tax. Archon is not and has never been a party to any tax sharing
agreement.
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(g) STATUS OF PROPERTY. None of the assets of Archon constitutes
tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Internal Revenue Code and none of its assets is subject to
a lease, safe harbor lease or other arrangement as a result of which Archon is
not treated as the owner of such asset for federal income tax purposes.
(h) CERTAIN PAYMENTS. Archon has not made or become obligated to make, and
will not as a result of any event connected with this Agreement or the Merger
Agreement or any other transaction contemplated herein become obligated to make,
any "excess parachute payment" as defined in Section 280G of the Code (without
regard to subsection (b)(4) thereof).
(i) NO SECTION 341(F) CONSENT. Archon has never filed a consent under
Section 341(f) of the Internal Revenue Code.
2.8 EMPLOYEE MATTERS. Archon has no more than seven employees. Except for
employment or consulting agreements set forth on Schedule 2.8 hereto, neither
Archon nor any of its ERISA Affiliates (as defined below) maintains, is a party
to, participates in or has any liability or contingent liability with respect to
(i) any employee benefit plan (as defined in section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended) or (ii) any retirement or
deferred compensation plan, incentive compensation plan, stock plan,
unemployment compensation plan, vacation pay, severance pay, bonus or benefit
arrangement, insurance or hospitalization program or any other fringe benefit
arrangements for any current or former employee, director, consultant or agent,
whether pursuant to contract, arrangement, custom or informal understanding,
which does not constitute an employee benefit plan. All of the contracts and
arrangements set forth on Schedule 2.8 hereto (the "Employee Arrangements") can
be terminated at or prior to the Closing without any cost or liability to Archon
and its ERISA Affiliates which would survive the Closing and all such will be
terminated by Archon as of the Closing. For purposes of this Agreement, the term
"ERISA Affiliate" means any person, corporation, trade or business which,
together with Archon, would be a member of a controlled group of corporations or
a group of trades or businesses under common control within the meaning of
sections 414(b), (c), (m) or (o) of the Code.
2.9 BROKER'S AND FINDER'S FEES. None of the Selling Entities or Archon has
any liability to any broker, finder, or similar agent, nor have any of them
agreed to pay any brokerage fee, finder's fee or commission with respect hereto
or to the transactions contemplated hereby that in any such case could result in
any obligation or liability of Jacor or the Purchaser.
2.10 INFORMATION TRUE, COMPLETE AND CORRECT. None of the information
supplied by the Selling Entities or Archon in connection with the investigation
conducted by Jacor and the Purchaser of the businesses of Archon or to be filed
with any Governmental Authority in connection with the purchase and sale of the
Shares, or with any HSR filing by Premiere, Archon or the Selling Entities,
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary in order to make the statements
made therein, in light of the circumstances in which they were made, not
misleading. Jacor and the Purchaser have been provided all such information and
full access to all such corporate books and records of Archon as they have
requested to date.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Jacor and the Purchaser represent and warrant to the Selling Entities as
follows:
3.1 ORGANIZATION AND RELATED MATTERS. Except where the failure to do so
would not prevent the consummation of the transactions contemplated under this
Agreement, (i) each of Jacor and the Purchaser is duly organized, validly
existing and in good standing under the jurisdiction of its incorporation and
(ii) each of Jacor and the Purchaser has all requisite corporate power and
authority to carry on its businesses as now conducted.
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3.2 BINDING EFFECT. Each of Jacor and the Purchaser has all requisite
corporate power and authority to enter into this Agreement, to consummate the
transactions contemplated hereby and to perform its obligations hereunder. This
Agreement has been duly and validly authorized, executed and delivered by each
of Jacor and the Purchaser and constitutes the valid and legally binding
obligation of Jacor and the Purchaser, enforceable against each of Jacor and the
Purchaser in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally, or general equitable principles
regardless of whether such enforcement is sought at law or in equity.
3.3 INVESTMENT REPRESENTATIONS. The Purchaser is purchasing the Shares
pursuant to this Agreement solely for investment for its own account and not
with a view to any public distribution pursuant to the Securities Act of 1933
(the "SECURITIES ACT") thereof.
3.4 BROKER'S AND FINDER'S FEES. Neither Jacor nor the Purchaser has
engaged any broker, finder or similar agent, nor have any of them agreed to pay
or otherwise incurred any liability for any brokerage fee, finder's fee or
commission, with respect hereto or to the transactions contemplated hereby that
in any such case could result in any obligation or liability of the Selling
Entities.
3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) None of the execution and delivery of this Agreement by Jacor or the
Purchaser, nor the consummation by Jacor or the Purchaser of the transactions
contemplated herein, nor compliance by Jacor or the Purchaser with any of the
provisions hereof, will, except where the events set forth in clauses (i), (ii)
or (iii) below would not prevent the consummation of the transactions
contemplated in this Agreement, (i) conflict with or result in a breach of any
provision of the certificate of incorporation or by-laws or equivalent
organizational documents of Jacor or the Purchaser, (ii) constitute or result in
the breach of any term, condition or provision of, or constitute a default
under, or give rise to any right of termination, cancellation, or acceleration
with respect to, or result in the creation of any lien, charge, or encumbrance
upon, any property or assets of Jacor or the Purchaser or, pursuant to any note,
bond, mortgage, indenture, license, agreement, lease, or other instrument or
obligation to which any of them is a party or by which any of them or their
respective properties or assets may be subject, and that would, in any such
event, have a material adverse effect on Jacor, or (iii) subject to receipt of
the requisite approvals referred to in Section 3.5(b), violate any order, writ,
injunction, decree, statute, rule, or regulation of any Governmental Authority
applicable to Jacor or the Purchaser or any of their respective properties or
assets.
(b) Other than (i) such filings as are required under Federal or state
securities or "blue sky" laws and the rules and regulations thereunder, (ii)
notices and completion of waiting periods under the HSR Act, (iii) filings with
the Secretary of State of the State of Delaware under the DGCL required to
effect the Merger, (iv) in connection or compliance with the applicable
requirements of the Code and state, local, and foreign tax laws, and (v) where
the failure to give such notice, make such filing, or receive such order,
authorization, exemption, consent, or approval would not prevent the
consummation of the transactions contemplated under this Agreement, no notice
to, filing with, authorization of, exemption by or consent or approval of any
Governmental Authority is necessary for the consummation by Jacor or the
Purchaser of the transactions contemplated under this Agreement.
3.6 JACOR'S FINANCING. Jacor has or will have sufficient funds available
to consummate the transactions contemplated under this Agreement.
3.7 JACOR REPORTS. (a) Jacor has filed all forms, reports and documents
required to be filed by it with the Commission since January 1, 1994,
(collectively, the "Jacor Reports") pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations promulgated thereunder. As of their respective dates, the Jacor
Reports (i) complied when filed as to form in all material respects with the
applicable requirements of the Exchange Act and the rules and regulations
promulgated thereunder and (ii) did not when filed contain any untrue statement
of a material fact or omit
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to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(b) The consolidated balance sheets of Jacor and its subsidiaries as of
December 31, 1996 and December 31, 1995 and the related statements of
operations, changes in stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1996, together with the notes
thereto, included in Jacor's Annual Reports on Form 10-K for the fiscal year
ended December 31, 1996, as filed with the Commission (together, with "Jacor
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 stockholders' equity and cash flows of Jacor
and its consolidated subsidiaries as of the dates and for the periods indicated.
3.8 SUITS. As of the date of this Agreement, there are no actions, suits
or proceedings instituted or pending, or to the actual knowledge of Jacor's
president ("Jacor's Knowledge"), overtly threatened, against Jacor, the
Purchaser or Acquisition Corp., or any of their respective subsidiaries or
against any property, asset, interest or right of any of them, or any of their
respective subsidiaries, that would have, either individually or in the
aggregate, a Material Adverse Effect on Jacor. None of Jacor or Communications
is subject to any judgment, order, writ, injunction or decree that would have a
Material Adverse Effect on Jacor.
3.9 COMPLIANCE. Jacor, the Purchaser and each subsidiary thereof:
(a) is in compliance with all laws, regulations, reporting and licensing
requirements and orders applicable to its business or employees conducting it
business, the breach or violation of which would have a Material Adverse Effect
on Jacor;
(b) has received no notification or communication from any Governmental
Authority (i) asserting that it or any of its subsidiaries is not in compliance
with any of the statutes, regulations or ordinances that such Governmental
Authority enforces, which noncompliance would have a Material Adverse Effect on
Jacor or (ii) threatening to revoke any license, franchise, permit or
authorization of any Governmental Authority, which revocation would have a
Material Adverse Effect on Jacor.
3.10 JACOR SHARES. When issued at the Closing, the Jacor Shares comprising
part of the Purchase Consideration will be duly issued, fully paid and
nonassessable.
ARTICLE IV.
COVENANTS OF THE SELLING ENTITIES AND THE PURCHASER
4.1 MUTUAL COVENANTS OF THE PURCHASER AND THE SELLING ENTITIES. Jacor, the
Purchaser and the Selling Entities shall each:
(a) FILINGS AND APPROVALS. Cooperate with the other in providing necessary
information, and in the preparation and filing, as soon as practicable, of (i)
all notices, registration statements, applications and other documents necessary
to obtain all clearances, consents, approvals, orders, resolutions or
forbearances by or from any Governmental Authorities necessary for the
completion of the transactions contemplated by this Agreement, including without
limitation the filing of an appropriate registration statement with the
Securities and Exchange Commission (the "SEC") for registration of the sale of
the Jacor Shares that are to be issued pursuant to this Agreement and pursuant
to the Merger Agreement and filings with the United States Department of Justice
and Federal Trade Commission pursuant to the HSR Act (collectively, the
"REGULATORY APPROVALS"), and (ii) all other documents necessary to obtain any
other approvals and consents required to complete such transactions. Without
limiting the generality of the foregoing, Jacor, the Purchaser and the Selling
Entities shall promptly apprise each other of all communications with
Governmental Authorities regarding the transactions provided for herein and
related applications and proceedings.
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(b) REASONABLE BEST EFFORTS. Use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
complete and make effective as promptly as practicable the transactions
contemplated by this Agreement, including, without limitation, using their
respective reasonable best efforts to bring about the completion of the Merger
provided for in the Merger Agreement. Such efforts shall include, without
limitation, (i) using reasonable best efforts to obtain all necessary consents,
approvals or waivers from third parties and Governmental Authorities and the
satisfaction of all conditions necessary for the completion of the transactions
contemplated by this Agreement, PROVIDED, HOWEVER, that nothing in this
Agreement shall require Jacor or any other party to this Agreement, or require
any subsidiary, affiliate or parent of any party to this Agreement, to divest or
hold separate any radio or television station or stations or asset or groups of
assets or enter into new arrangements or terminate any existing arrangement, or
take any other specific action requested by any Governmental Authorities, (ii)
opposing vigorously any litigation seeking to enjoin or otherwise prevent the
transactions contemplated by this Agreement, and (iii) using reasonable best
efforts in connection with any administrative proceeding or with respect to any
directive relating to this Agreement or the transactions contemplated hereby to
ensure that the transactions can be completed as soon as possible.
(c) FURTHER ASSURANCES; COOPERATION. If at any time after the Closing Date
any party to this Agreement shall reasonably determine that any further
assignment, instrument of transfer or other document or action is necessary,
desirable or appropriate to evidence, confirm or complete the transactions
provided for in this Agreement, cooperate with such party in executing and
delivering any such assignment, instrument of transfer or other document and the
taking of such further action as may reasonably be requested of it.
(d) PUBLICITY. Archon and Jacor shall, subject to their respective legal
obligations (including, in the case of Jacor, requirements of the National
Association of Securities Dealers and the Commission), consult with each other
regarding the text of any press release relating to the transactions
contemplated hereby before issuing any such press release and in making any
filings with any Governmental Authority or with the National Association of
Securities Dealers with respect thereto.
4.2 AFFIRMATIVE COVENANTS OF ARCHON AND THE SELLING ENTITIES.
(a) ACCESS; INFORMATION. Archon shall, during normal business hours and
upon reasonable prior notice, afford to the Purchaser and its counsel,
accountants or any other duly authorized representatives of the Purchaser full
access to, and shall permit the Purchaser to, inspect and make copies of all
stock records, minute books, books of account, and other records, and furnish to
the Purchaser such counterpart originals or certified or other copies of such
documents or such information with respect to its businesses and affairs as the
Purchaser may from time to time reasonably request. The Selling Entities and
Archon shall also provide the Purchaser prompt notice of (i) any material
changes of which they become aware regarding the business operations or
prospects of Archon, (ii) any complaints, investigations or hearings (or
communications indicating that the same may be contemplated) of any Governmental
Authority regarding the same or the purchase and sale of the Shares or (iii) the
institution or the threat of material litigation involving Archon. From and
after the Closing, all of Archon's books and records shall remain with Archon.
The Selling Entities shall be entitled following the Closing to inspect or make
copies of such books and records for the period prior to the Closing.
(b) FINAL LIABILITIES STATEMENT; PAYMENT OR SETTLEMENT. The Selling
Entities shall cause Archon to prepare and deliver to the Purchaser, not later
than three days prior to the Closing Date hereunder, a final statement of all
liabilities of Archon, if any, existing as of the date of delivery thereof,
together with estimates of any additional liabilities of Archon that may exist
as of the Closing Date (including the Estimated Tax Amount (as defined in
SECTION 4.5(G)), together with a statement of the steps that Archon has taken or
will take to pay, settle or otherwise terminate all of such liabilities at or
prior to the Closing Date, it being understood and agreed that such payment or
provision for such payment shall, in the case of the Estimated Tax Amount, and
in the case of any other liability approved by the Purchaser for treatment
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in such manner, be made through retention in Archon of a sufficient amount of
cash to make such payments.
(c) EMPLOYEE STOCK OPTIONS. The Selling Entities shall use their
reasonable best efforts to cause all holders of employee stock options
heretofore granted by Archon (the "Employee Stock Options") to release and agree
to the cancellation of, or otherwise to terminate, all of such options to the
satisfaction of Jacor and the Purchaser on or prior to the Closing Date with no
cost or liability to Archon surviving the Closing.
4.3 NEGATIVE COVENANTS OF THE SELLING ENTITIES.
(a) ACQUISITION PROPOSALS. The Selling Entities agree that none of them,
nor any of their respective officers and directors or affiliates shall, and the
Selling Entities shall direct their employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by them) not to, initiate or solicit any inquiries or the making of any
proposal or offer with respect to a merger, consolidation business combination
or similar transaction involving, or any purchase of any equity securities of,
or any substantial assets of, Premiere or Archon (any such proposal or offer
being referred to as an "ACQUISITION PROPOSAL"), or engage in any negotiations
concerning, or provide any confidential information or data to, or initiate or
have any discussions with, any person relating to an Acquisition Proposal. The
Selling Entities shall promptly cease and cause to be terminated any existing
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. The Selling Entities shall immediately notify the
Purchaser of any offer or inquiry of the foregoing type that they receive from
any third party, including a complete description of the proposed terms thereof.
(b) NONALIENATION. The Selling Entities shall not sell, hypothecate or
otherwise transfer, whether with or without consideration, any shares of Archon
Common Stock or any other security of Archon held by them, or any interest
therein, other than in connection with the sale thereof to the Purchaser as
provided in this Agreement.
(c) COMPLIANCE WITH REPRESENTATIONS AND WARRANTIES. The Selling Entities
shall not knowingly take any other action that would result in a violation of
any of the Selling Entities' representations and warranties herein, or any
covenant made by the Selling Entities herein.
4.4 ADDITIONAL NEGATIVE COVENANTS RELATING TO ARCHON. From the date hereof
through the Closing Date, except with the prior consent of the Purchaser, Archon
shall not, and the Selling Entities shall not permit Archon to:
(a) ORGANIZATIONAL DOCUMENTS. Amend its certificate of incorporation or
by-laws.
(b) DIVIDENDS. Declare or pay any dividend (whether in cash, stock or
other property) or make any other distribution in respect of its capital stock,
except that cash dividends may be paid in such amount as the Purchaser and the
Selling Entities shall agree as being appropriate to reduce the amount of cash
and cash equivalents held by Archon to an amount equal to the Estimated Tax
Amount, and any other liabilities approved by the Purchaser pursuant to SECTION
4.2(B) above, of Archon in respect of taxable periods (or portions of taxable
periods) ending on or prior to the Closing Date.
(c) SECURITIES. Issue, grant, reissue, sell, adjust, split, combine,
reclassify or acquire shares of its capital stock, other equity securities or
Voting Debt or rights, options or warrants to acquire any such shares of stock
or other equity securities or Voting Debt or stock appreciation rights.
(d) BORROWINGS. Incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity.
(e) SALE OR TRANSFER OF ASSETS. Sell, transfer, mortgage, encumber or
otherwise dispose of any of the Premiere Stock or Premiere Warrants or any other
material assets, it being agreed by the Purchaser that none of the office
furniture or office equipment of Archon shall be deemed to be material assets.
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(f) INVESTMENTS. Make any material investment, either by purchase of stock
or securities, in any corporation or other person or entity.
(g) AGREEMENTS REGARDING THE ABOVE. Agree to, or make any commitment to,
take any of the actions covered by this SECTION 4.4.
4.5 TAX COVENANTS.
(a) GENERAL. To the extent Archon's Taxes for all periods included in the
"TAX INDEMNIFICATION PERIOD" (as defined in SECTION 7.2(A)) exceed the Estimated
Tax Amount, the Selling Entities shall pay or cause to be paid all such Taxes or
shall reimburse the Purchaser therefor as provided in SECTIONS 4.5(B) AND 4.5(C)
and the Tax Indemnitors (as defined in SECTION 7.2(A)) shall indemnify and hold
harmless the Tax Indemnitees (as defined in SECTION 7.2(B)) therefrom as
provided in SECTION 7.2.
(b) SHORT PERIOD RETURNS. Archon shall close its books as of the Closing
Date. Not later than 90 days following the Closing, the Selling Entities shall
cause Schwartz Kales Accountancy Corp. (at the expense of the Selling Entities)
to prepare and deliver to the Purchaser for the Purchaser's review and approval
prior to filing (which approval shall not be unreasonably withheld or delayed),
Archon's federal and applicable state income and franchise tax returns for its
short taxable year ended on the Closing Date. For purposes of determining
Archon's taxable income for any short taxable year ended on the Closing Date,
Archon shall take into account, in accordance with its applicable methods of
accounting, all items of income, gain, deduction, loss or credit accrued on or
prior to the Closing Date (as determined based on such closing of its books) and
shall not make the election provided in Treasury Regulations Section
1.1502-76(b)(2)(ii)(D) to allocate tax items ratably. To the extent that the
amount of such Taxes reflected as a liability on any such short-year return
exceeds the amount included therefor in the computation of the Estimated Tax
Amount, the Selling Entities shall pay such excess to the applicable
governmental authority upon the filing of such return or shall reimburse the
Purchaser therefor within fifteen (15) days after payment thereof by the
Purchaser or Archon.
(c) RETURNS FOR OTHER PERIODS. The Purchaser shall prepare and file or
cause to be prepared and filed all Tax returns for Archon for periods which
begin before the Closing Date and end after the Closing Date. To the extent that
the amount of Taxes reflected as a liability on any such return that is
attributable to the portion of such taxable period ending on the Closing Date
exceeds the amount included therefor in the computation of the Estimated Tax
Amount, the Selling Entities shall pay such excess to the applicable
governmental authority upon the filing of such return or shall reimburse the
Purchaser therefor within fifteen (15) days after payment thereof by the
Purchaser or Archon. In the case of any Taxes (other than corporate income or
franchise Taxes and other than Taxes based on sales or gross receipts) that are
imposed on a periodic basis and are payable for a taxable period that includes
(but does not end on) the Closing Date, the portion of such Tax which relates to
the portion of such taxable period ending on the Closing Date shall be deemed to
be the amount of such Tax for the entire taxable period multiplied by a fraction
the numerator of which shall be the number of days in the taxable period before
the Closing Date and the denominator of which shall be the number of days in the
entire taxable period. The allocation of Taxes based on income, sales or gross
receipts shall be determined on the basis of the closing of Archon's books on
the Closing Date.
(d) REFUNDS. The Selling Entities shall be entitled to any refunds of
Taxes (including interest thereon) payable with respect to the assets or
operations of Archon for any period included in the Tax Indemnification Period,
and Archon shall promptly remit to the Selling Entities any refunds of Taxes to
which such Selling Entities are so entitled; provided, however, that nothing
contained in this Agreement shall be deemed to entitle the Selling Entities to
receive payments attributable to the utilization by Archon (or any successor of
Archon) of net operating or capital loss carryovers attributable to deductions
or losses arising in any period included in the Tax Indemnification Period. For
purposes of the preceding sentence, the amount of any Taxes relating to the Tax
Indemnification Period shall be determined consistently with the methods
provided in SECTIONS 4.5(B) AND 4.5(C). Any refunds of Taxes other than those
described in the
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first sentence of this SECTION 4.5(D) shall constitute refunds to which the
Selling Entities are not entitled. Refunds to which the Selling Entities are not
entitled shall be retained by Archon.
(e) POST-CLOSING TAXES. Jacor and the Purchaser shall pay or cause to be
paid all Taxes that accrue with respect to the operations or assets of Archon
for any taxable period (or portion thereof) after the Tax Indemnification
Period, and shall indemnify and hold the Selling Entities harmless therefrom as
provided for in SECTION 7.2(G).
(f) COOPERATION. The Selling Entities and the Purchaser shall cooperate
fully in connection with (A) the preparation and filing of any Tax returns or
similar filings that include the business and operations of Archon for any
period (or portion of a period) included within the Tax Indemnification Period,
and (B) any audit examination by any governmental taxing authority of any such
returns or other filings. Such cooperation shall include, without limitation,
the furnishing or making available of records, books of account or other
materials necessary or helpful for the preparation of any such return or filing,
the defense of any deficiencies in Taxes asserted by any such authority relating
to the operations of Archon during the Tax Indemnification Period, and the
pursuit of any refund claims relating to the operations of Archon during the Tax
Indemnification Period. Archon shall have the sole authority and responsibility
for handling all audits and controversies relating to its liability for Taxes
and for contesting or compromising any asserted deficiencies in Taxes and any
claims for refund for any taxable period (whether or not included in the Tax
Indemnification Period), and none of Archon, the Purchaser, Jacor, their
respective Affiliates, or the directors, officers, employees, affiliates,
successors or assigns of any of them, shall be liable to the Selling Entities
for any decisions made or actions taken relating thereto; provided, however,
that the Selling Entities shall have the rights provided in SECTION 7.2(E).
(g) ESTIMATED TAX AMOUNT. Not later than 30 days prior to the Closing
Date, Archon shall prepare, and shall submit to the Purchaser, an estimate
(which shall set forth each applicable category of Tax and the period to which
it relates) of all of the unpaid Taxes accrued or expected to be accrued with
respect to the operations or assets of Archon for all periods (or portions
thereof) ending prior to or on the Closing Date (the "ESTIMATED TAX AMOUNT").
The Estimated Tax Amount shall not be less than (i) $40,000 less (ii) any tax
payments with respect to the receipt of Premiere Warrants made by Archon between
the date of this Agreement and the Closing.
(h) TRANSFER TAXES. The Selling Entities shall pay all transfer,
documentary, sales, use, stamp, registration and other Taxes incurred in
connection with the transactions contemplated by this Agreement, and the Selling
Entities shall, at their own expense, file all necessary returns or other
filings relating thereto; PROVIDED, that the Purchaser shall pay any stock
transfer taxes that may arise from the issuance of Jacor Shares in connection
with the transactions provided for herein to the Selling Entities, but not to
any transferee thereof.
4.6 NOTIFICATION. Each party to this Agreement shall notify the other
parties hereto promptly after becoming aware of the occurrence of, or the
impending or threatened occurrence of, any event that would constitute a breach
on its part of any covenant or other obligation under this Agreement or the
occurrence of any event that would cause any representation or warranty made by
it herein to be false or misleading, or if it becomes a party or is threatened
with becoming a party to any legal or equitable proceeding or governmental
investigation or upon the occurrence of any event that would result in a change
in the circumstances of any party described in the representations and
warranties contained herein.
4.7 CORPORATE NAME CHANGE. Within 60 days following the Closing hereunder,
the Purchaser shall cause Archon to take appropriate action to amend its
Certificate of Incorporation to change its corporate name to one not using the
word "Archon" or any variant thereof, and shall relinquish all right to use such
name effective as of the effective date of such amendment.
4.8 NO OTHER PROMISES BY ARCHON. None of Archon, the Selling Entities, nor
any director, officer, employee, agent or representative of any of the foregoing
are making any representations, warranties, covenants or agreements relating to
Premiere, Archon, the Selling Entities, the transactions contemplated
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by this Agreement or the Merger Agreement, except only that Archon and the
Selling Entities are making the representations, warranties, covenants and
agreements expressly contained in this Agreement or the Shareholders' Agreement
(as defined in the Merger Agreement).
4.9 NO OTHER PROMISES BY JACOR. Jacor is not making any representations,
warranties, covenants or agreements with Archon, the Selling Entities, or any
directors, officers, employees, agents or representatives of any of the
foregoing, relating to the transactions contemplated by this Agreement or the
Merger Agreement, except for those expressly contained in this Agreement or the
Shareholders' Agreement (it being understood that Jacor is making the agreements
contained in Section 6.8 of the Merger Agreement for the benefit of, among
others, certain persons who are officers, directors or employees of Archon).
4.10 TERMINATION OF AGREEMENTS. Archon shall use its reasonable best
efforts to cause the satisfaction of the condition contained in Section 7.3(h)
of the Merger Agreement with respect to agreements to which Archon or any Archon
Affiliates are parties and to terminate the Employee Arrangements at no cost to
Archon that survives the Closing.
ARTICLE V.
CONDITIONS TO CLOSING
5.1 CONDITIONS TO OBLIGATIONS OF THE SELLING ENTITIES. The obligations of
the Selling Entities to complete the transactions provided for in this Agreement
are subject to the satisfaction or waiver on or before the Closing Date of each
of the following conditions:
(a) CONTINUED ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Jacor and the Purchaser contained in this
Agreement shall be true and correct (except where the failure to be true and
correct would not have a material adverse effect on the reasonably expected
benefits to the Selling Entities of the transactions contemplated under this
Agreement) on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date;
Jacor and the Purchaser shall have performed and satisfied in all material
respects all covenants, agreements and conditions required by this Agreement to
be performed or satisfied by them at or prior to the Closing Date; and there
shall have been delivered to the Seller on the Closing Date a certificate
executed by duly authorized officers of Jacor and the Purchaser certifying
compliance with the provisions of this SECTION 5.1(A).
(b) REGULATORY APPROVALS. All Regulatory Approvals necessary for the
consummation of the transactions contemplated by this Agreement shall have been
obtained; such approvals shall be in effect and no adverse proceedings shall
have been initiated challenging or questioning such approvals by any
governmental agency with jurisdiction relating thereto; all applicable waiting
periods with respect to such approvals shall have expired, and all conditions
and requirements prescribed by law or otherwise imposed in connection with such
Regulatory Approvals shall have been satisfied.
(c) NO INJUNCTION. There shall not be in effect any temporary restraining
order or preliminary or permanent injunction, order or decree of a court or
other Governmental Authority of competent jurisdiction restraining or
prohibiting consummation of the transactions contemplated hereby, nor shall any
Governmental Authority have commenced or threatened any material proceedings to
issue or obtain any such temporary restraining or preliminary or permanent
injunction, order or decree.
5.2 CONDITIONS TO JACOR AND THE PURCHASER'S OBLIGATIONS. The obligations
of Jacor and the Purchaser to complete the transactions provided for in this
Agreement are subject to the satisfaction or waiver on or before the Closing
Date of each of the following conditions:
(a) CONTINUED ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Selling Entities contained in Section 2.4
and in Section 2.5(a) hereof shall be true and correct in all respects and the
representations and warranties of the Selling Entities set forth in this
Agreement other than those contained in Sections 2.4 and 2.5(a) shall be true
and correct except where the failure to be true
A-III-13
and correct would not have a material adverse effect on the reasonably expected
benefits to Jacor or Communications of the transactions contemplated in this
Agreement and the Merger Agreement, in each case as of the date of this
Agreement and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date
(except for any such representations and warranties made as of a specified date,
which shall be true and correct (subject to the qualifications set forth above)
as of such date; the Selling Entities shall have performed and satisfied in all
material respects all covenants, agreements and conditions required by this
Agreement to be performed and satisfied by them at or prior to the Closing Date;
and there shall have been delivered to the Purchaser on the Closing Date
certificates executed by duly authorized officers of each of the Selling
Entities certifying compliance with all the provisions of this SECTION 5.2(A).
(b) REGULATORY APPROVALS. All Regulatory Approvals necessary for the
consummation of the transactions contemplated by this Agreement shall have been
obtained without the imposition of any unusual condition which is so materially
burdensome upon the conduct of the business of Jacor or the Purchaser or which
would so adversely impact the economic and business benefits of the transactions
contemplated hereby to Jacor or the Purchaser as to make it unreasonable, in the
reasonable judgment of Jacor or the Purchaser, for the Purchaser to purchase the
Shares; such approvals shall be in effect and no adverse proceedings shall have
been instituted with respect thereto; all applicable waiting periods with
respect to such approvals shall have expired; and all conditions and
requirements prescribed by law or otherwise imposed in connection with the
Regulatory Approvals shall have been satisfied.
(c) NO INJUNCTION. There shall not be in effect any temporary restraining
order, preliminary or permanent injunction, order or decree of a court or other
Governmental Authority of competent jurisdiction restraining or prohibiting
consummation of the transactions contemplated hereby, nor shall any Governmental
Authority have commenced or threatened any material proceedings to issue or
obtain any such temporary restraining order, preliminary or permanent
injunction, order or decree. No law, rule or regulation shall have been adopted
by any Governmental Authority having jurisdiction over any of the Selling
Entities, the Purchaser or any of their respective subsidiaries challenging or
seeking to restrain, materially limit or prohibit the completion of the
transactions contemplated hereby or the ownership by the Purchaser.
(d) CONSENTS. The Selling Entities shall have obtained the consent or
approval (in addition to the Regulatory Approvals) of any person or entity whose
consent or approval is required in order to permit the succession of the
Purchaser to ownership of the Shares.
(e) NO MATERIAL ADVERSE CHANGE. There shall not have been any material
adverse change in the business, properties, assets or operations of Archon since
the date of this Agreement, provided that a change of value of the Premiere
Shares or Premiere Warrants shall not be considered to be a material adverse
change.
(f) MERGER AGREEMENT. All conditions precedent to the Merger provided for
in the Merger Agreement (other than the closing hereunder) shall have been
satisfied such that the Merger may be completed immediately following the
Closing hereunder.
(g) STOCK OPTIONS. All Employee Stock Options shall have been cancelled or
otherwise terminated to the satisfaction of Jacor and the Purchaser.
(h) PAYMENT OF LIABILITIES. All final liabilities of Archon shall have
been paid or provided for to the satisfaction of Jacor and the Purchaser as
contemplated pursuant to SECTION 4.2(B) hereof.
(i) EMPLOYEE ARRANGEMENTS. All Employee Arrangements shall have been
terminated at no cost to or liability of Archon which survives the Closing,
except as described in Section 7 of this Agreement.
(j) OFFICER RESIGNATIONS. Archon shall have received an executed
instrument substantially in the form of Exhibit 5.2(j) to this Agreement from
all of its officers, directors and employees resigning from
A-III-14
their respective offices or positions and releasing Archon from liability in
connection with their offices or positions with Archon except as described in
Article 7 of this Agreement.
ARTICLE VI.
TERMINATION
6.1 TERMINATION. This Agreement and the obligations of the parties
hereunder may be terminated by mutual written consent of the parties at any time
and shall automatically be terminated upon and at the same time as any
termination of the Merger Agreement.
6.2 EFFECT OF TERMINATION. In the event of a termination under SECTION 6.1
hereof, this Agreement shall have no further effect, and, except as set forth
below, there shall be no liability on the part of any party hereto or any of
such party's directors, officers, employees or agents to any other party;
PROVIDED that the obligations set forth in SECTION 8.8 shall survive the
termination of this Agreement; and PROVIDED, FURTHER, that a termination under
SECTION 6.1 shall not relieve any party of any liability for any breach of this
Agreement.
ARTICLE VII.
INDEMNIFICATION
7.1 GENERAL INDEMNITY.
(a) Except for the representations and warranties in Sections 3.5, 3.6, 3.7,
3.8, 3.9 and 3.10, which shall not survive the Closing, all representations,
warranties, covenants and agreements set forth in this Agreement shall survive
the Closing. Except as provided below, from and after the Closing, News
Corporation shall indemnify and hold Archon, Jacor, the Purchaser, and the
present and former employees, agents, officers and directors of Jacor and the
Purchaser (the "Indemnified Parties") harmless from any and all damages, losses,
interest, liabilities, costs and expenses (including attorneys' fees and
expenses) (collectively, "Losses") incurred or suffered by any Indemnified Party
(i) arising out of, relating to or as a result of any liabilities or obligations
of Archon (regardless of whether such liabilities or obligations have been
disclosed) resulting from the transactions contemplated under this Agreement or
the Merger Agreement or arising out of, relating to or resulting from the
conduct of Archon's business prior to the Closing or acts or omissions that
occurred prior to the Closing, (ii) that result from, relate to, or arise out of
the breach of any representation, warranty, agreement or covenant made or given
by either of the Selling Entities or Archon in this Agreement (regardless of
whether such representation, warranty, covenant or agreement was made by News
America or ACP), or (iii) arising out of, relating to or as a result of payments
made or liabilities incurred pursuant to or to cancel Employee Arrangements, to
cancel or purchase Employee Stock Options, or to purchase shares acquired
through the exercise of Employee Stock Options, in each case after the Closing.
The indemnification obligations set forth in this SECTION 7.1 shall be in
addition to, and not to the exclusion of, the indemnification regarding tax
matters provided for in SECTION 7.2 hereof (it being understood that claims
relating to tax matters shall be governed by Section 7.2). Notwithstanding
anything to the contrary in this Section 7.1, from and after the Closing (i)
Jacor shall cause Premiere not to assert any claims against Archon's former
employees, agents, officers and directors (the "Archon Affiliates") or Archon
arising out of or relating to services performed for Premiere by Archon or the
Archon Affiliates under the Securities Purchase Agreement dated January 17, 1995
between Archon and Premiere (the "Securities Purchase Agreement") or otherwise
(the "Services"); (ii) if a third party brings a claim against Archon or the
Archon Affiliates arising out of or relating to the Services, News Corporation
shall be free to assert any defense, affirmative defense, or affirmative claim
on behalf of the Selling Entities or Archon (and such claims are hereby assigned
to News Corporation by Archon for such purpose only) to assert that Premiere, or
any third party, rather than Archon or any Archon Affiliate, is liable under
such claim except that News Corporation shall not assert any contractual right
of indemnification or contribution from Premiere belonging to Archon or the
Archon Affiliates (including without
A-III-15
limitation any right of indemnification or contribution under the Securities
Purchase Agreement); (iii) the indemnity in this Section 7.1 shall not cover
liabilities for which the Consenting Stockholders (as defined in the Merger
Agreement) are indemnified under Section 14 of the Shareholders' Agreement; (iv)
the indemnity in this Section 7.1 shall not extend to the first $30,000 of
Losses incurred by the Indemnified Parties which are in excess of any amount
established pursuant to Section 4.2(b) hereof; and (v) the indemnification in
this Section 7.1 shall not apply to Jacor, the Purchaser, or the present or
former employees, agents, officers, or directors of Jacor and the Purchaser
(but, subject to the qualifications set forth above, shall apply to Archon) if
the claim relates to the Services. Jacor shall cause the originals of any of
Archon's books and records to be available if needed pursuant to any claim under
this Article VII.
(b) If any lawsuit, enforcement action, or other claim is filed or made
against an Indemnified Party (a "Third-Party Claim") and is covered by the
indemnity set forth in (a) above, written notice thereof (the "Third-Party Claim
Notice") shall be given to the Selling Entities as promptly as practicable (and
in any event within ten (10) calendar days after the receipt of such Third-Party
Claim); provided that failure to give such notice shall not affect the indemnity
provided herein unless the Selling Entities can demonstrate that they were
materially prejudiced as a consequence of such failure. After the receipt of
such Third-Party Claim Notice, the Selling Entities shall be entitled, upon
written notice to the Indemnified Parties, if the Selling Entities so elect and
at the Selling Entities' sole cost, risk, and expense: (i) to take control of
the defense and investigation of such Third-Party Claim, (ii) to employ and
engage attorneys of their own choice, subject to the reasonable approval of the
Indemnified Parties to handle and defend the same, and (iii) to compromise or
settle such Third-Party Claim, which compromise or settlement shall be made only
with the written consent of the Indemnified Parties, such consent not to be
unreasonably withheld. If the Selling Entities do elect to take control of the
defense of a Third-Party Claim, the Indemnified Parties shall fully cooperate in
the defense of such Third-Party Claim. If the Selling Entities do not elect to
take control of the defense of a Third-Party Claim, the Indemnified Parties may
not compromise or settle such Third-Party Claim without the consent of the
Selling Entities, such consent not to be unreasonably withheld.
7.2 TAX INDEMNITY.
(a) For purposes of this Agreement, the term "TAX INDEMNIFICATION PERIOD"
shall mean the period (including all prior taxable years) ending on and
including the Closing Date, and the term "TAX INDEMNITOR" shall mean News
Corporation.
(b) The Tax Indemnitor indemnifies the Purchaser, Jacor, their Affiliates,
and the directors, employees and successors or assigns of each of them (the "TAX
INDEMNITEES") from and against any and all Net Tax Losses (as hereinafter
defined). For purposes of this SECTION 7.2, "NET TAX LOSSES" shall mean the
excess of (i) Tax Losses (as defined in SECTION 7.2(C)), over (ii) the Estimated
Tax Amount.
(c) "TAX LOSSES" shall mean Taxes (other than: (i) any interest or penalties
which result solely from the failure after the Closing Date by Archon or the
Purchaser to take any action known by it to be reasonably required to avoid the
imposition of such interest or penalty or reasonably requested in writing by the
Selling Entities or (ii) Taxes incurred on income recognized by Archon in
connection with any transaction entered into by Archon and Premiere during the
Tax Indemnification Period, but only to the extent of any tax benefit actually
realized by Premiere as a result of Premiere's claiming a deduction
corresponding to such income item of Archon.
(d) Within ten (10) days after receipt by a Tax Indemnitee of a written
notice (including a revenue agent's report, "thirty-day letter" or "ninety-day
letter," and similar notices issued by a state taxing authority, but not
including requests for information or documents issued in the ordinary course of
a tax audit ("Tax Notice")) issued by any taxing authority of any demand, claim
or circumstances which, with the lapse of time, would or might give rise to a
claim or the commencement (or threatened commencement) of any action, proceeding
or investigation that may result in a Tax Loss (an "ASSERTED TAX LIABILITY"),
such Tax Indemnitee shall give notice thereof (the "TAX CLAIM NOTICE") to the
Selling Entities. The Tax Claim Notice shall contain factual information (to the
extent known to the Tax Indemnitee) describing the Asserted Tax
A-III-16
Liability in reasonable detail, shall include copies of any notice or other
document received from any taxing authority in respect of any such Asserted Tax
Liability, and shall, to the extent known to the Tax Indemnitee, indicate the
amount of the Tax Loss that has been or may be suffered by the Tax Indemnitee as
a result of such Asserted Tax Liability. If the Tax Indemnitee fails to give the
Selling Entities notice of an Asserted Tax Liability as required by this SECTION
7.2(D), and such failure prevents the Selling Entities from exercising the
rights provided to the Selling Entities pursuant to SECTION 7.2(E), the Tax
Indemnitor shall have no obligation to indemnify for any loss arising out of
such Asserted Tax Liability. If Archon receives from the Internal Revenue
Service or the California Franchise Tax Board any Tax Notice of an Asserted Tax
Liability or if Archon grants to the Internal Revenue Service or the California
Franchise Tax Board any extension of the applicable statute of limitations on
the assessment of corporate income or franchise tax for any taxable year
included in the Tax Indemnification Period, Premiere shall use its reasonable
best efforts to file a timely protective claim for refund if such action is
necessary to preserve Premiere's ability to claim a corresponding deduction
("Corresponding Deduction") relating to any potential audit adjustment
increasing the taxable income of Archon based on any transaction entered into
between Archon and Premiere during the Tax Indemnification Period. If, under the
circumstances described in the preceding sentence, Premiere fails to use its
reasonable best efforts to file a timely protective claim for refund, and such
failure prevents Premiere from claiming a Corresponding Deduction which, if
timely claimed, would have reduced Premiere's liability for Taxes, the
obligation of the Tax Indemnitor to indemnify for Net Tax Losses shall be
reduced by the amount of the reduction in Premiere's liability for Taxes which
would have resulted had Premiere claimed a Corresponding Deduction.
(e) After the receipt of a Tax Claim Notice, the Selling Entities shall be
entitled, upon written notice to the Tax Indemnitees within ten (10) days of the
receipt of the Tax Claim Notice, if the Selling Entities so elect and at the
Selling Entities sole cost, risk, and expense: (i) to take control of the
defense and investigation of the Asserted Tax Liability, (ii) to employ and
engage attorneys of their own choice, subject to the reasonable approval of the
Tax Indemnitees, to handle and defend the same, and (iii) to compromise or
settle such Asserted Tax Liability, which compromise or settlement shall be made
only with the written consent of the Tax Indemnitees, such consent not to be
unreasonably withheld. If the Selling Entities elect to take control of the
defense and investigation of an Asserted Tax Liability, the Tax Indemnitees
shall fully cooperate in such defense. If the Selling Entities fail to so notify
the Tax Indemnitees, the Tax Indemnitees shall be entitled to contest or
compromise such Asserted Tax Liability without the involvement of the Selling
Entities; provided, however, that the Tax Indemnitees shall not compromise such
Asserted Tax Liability without the consent of the Selling Entities, such consent
not to be unreasonably withheld.
(f) Upon the expiration of the statute of limitations for the assessment of
Federal income tax for all taxable years of Archon included in the Tax
Indemnification Period, Archon shall pay to the Selling Entities in proportion
to each such Selling Entity's Interest in the Purchase Price, an amount equal to
the lesser of the excess, if any, of the Estimated Tax Amount over the
cumulative Tax Losses.
(g) From and after the Closing Date, the Purchaser and Jacor shall
reimburse, indemnify and hold harmless the Selling Entities against any damages,
losses, deficiencies, liabilities, costs and expenses (including reasonable
attorneys' fees) incurred or suffered by any Selling Shareholder that result
from, relate to, or arise out of the breach of any warranty, agreement or
covenant on the part of the Purchaser for payment of Taxes pursuant to SECTION
4.6(C).
7.3 INDEMNIFICATION OF ARCHON AFFILIATES. Notwithstanding anything to the
contrary in this Agreement, Merger Agreement or any other instrument being
executed in connection with the transaction, from and after the Closing, Jacor
shall cause Archon to keep in place the provisions in Archon's certificate of
incorporation and bylaws in effect as of the date of this Agreement providing
for the indemnification of, and advancement of expenses to, the Archon
Affiliates (the "Indemnification Provisions"); provided, however, that Jacor may
at its option substitute equivalent protections from Jacor. Jacor or Archon
shall be entitled to indemnification from News America under Section 7.1 above
for any payments made by
A-III-17
Archon or Jacor to any Archon Affiliate pursuant to the Indemnification
Provisions or a substitute arrangement.
7.4 OTHER. Nothing contained in this Agreement, or in any instrument
referred to herein or to be executed pursuant hereto, including, but not limited
to, the employment agreement terminations described in this Agreement shall
diminish or modify the rights of Robert Fell and the employees of Archon under
Section 6.8 of the Merger Agreement. The employees of Archon and Robert Fell are
intended third party beneficiaries of Section 7.3 and this provision. News
Corporation shall not be responsible for payments made by Premiere or Jacor
under Section 6.8 of the Merger Agreement. News America shall be responsible for
the indemnities of News Corporation hereunder if News Corporation does not honor
those indemnities.
ARTICLE VIII.
MISCELLANEOUS
8.1 NOTICES. Any notice or other communication required or permitted
hereunder shall be made in writing and shall be delivered personally or sent by
an overnight delivery or courier service, by certified or registered mail
(postage prepaid), by telegraph or by facsimile transmission as follows:
To Jacor or the Purchaser: Paul F. Solomon
Jacor Communications, Inc.
50 East RiverCenter Boulevard
Twelfth Floor
Covington, Kentucky 41011
Scott J. Davis
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
To ACP: Richard V. Sandler
Maron & Sandler
844 Moraga Drive
Los Angeles, California 90049
With a courtesy copy to:
Kenin Spivak
c/o Stephen Silbert
Christensen, Miller, Fink,
Jacobs, Glaser, Weil &
Shapiro, LLP
2121 Avenue of the Stars
18th Floor
Los Angeles, California 90067
Robert Fell
10550 Wilshire Blvd.
Suite 1105
Los Angeles, California 90024
A-III-18
To News America: Jay Itzkowitz
News America
10201 West Pico Boulevard
Building 88, Room 142
Los Angeles, California 90035
To News Corporation: Jay Itzkowitz
The News Corporation Limited
10201 West Pico Boulevard
Building 88, Room 142
Los Angeles, California 90035
Such notice or other communication shall be deemed given when so delivered
personally, telegraphed, telexed or sent by facsimile transmission, or, if sent
by overnight delivery or courier service, the day after sent from within the
United states, or if mailed, four days after the date of deposit in the United
states mails.
8.2 GOVERNING LAW. This Agreement and the legal relations between the
parties hereto shall, to the extent not governed by federal law, be governed by
and construed in accordance with the internal laws of the state of Delaware,
without taking into account Delaware statutory provisions or judicial decisions
regarding choice of law questions.
8.3 ENTIRE AGREEMENT. The parties intend that the terms of this Agreement
shall be the final expression of their agreement with respect to the subject
matter hereof and may not be contradicted by evidence of any prior or
contemporaneous agreement, except as provided below. The parties further intend
that this Agreement shall constitute the complete and exclusive statement of its
terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative or other legal proceeding involving this Agreement.
This Agreement, including all schedules and exhibits hereto, constitutes the
entire agreement between the parties and supersedes all prior negotiations,
undertakings, representations and agreements, if any, of the parties hereto,
other than the Merger Agreement and the Shareholders' Agreement (as such term is
defined in the Merger Agreement).
8.4 AMENDMENTS AND WAIVERS. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. By an
instrument in writing, any party may waive compliance by any other party with
any term or provision of this Agreement that such other party was or is
obligated to comply with or perform; PROVIDED, HOWEVER, that such waiver shall
not operate as a waiver of, or estoppel with respect to, any other or subsequent
failure. No failure to exercise and no delay in exercising any right, remedy or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy or power hereunder preclude any other or
further exercise thereof or the exercise of any other right, remedy or power
provided herein or by law or in equity. The waiver by any party of the time for
performance of any act or condition hereunder does not constitute a waiver of
the act or condition itself.
8.5 SEVERABILITY. If any provision of this Agreement, or the application
thereof to any person, place or circumstance, shall be held by a court of
competent jurisdiction to be invalid, unenforceable or void, the remainder of
this Agreement and such provisions as applied to other persons, places and
circumstances shall remain in full force and effect.
8.6 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall constitute one and the same instrument.
8.7 INTERPRETATION OF AGREEMENT. The article, section and other headings
used in this Agreement are for reference purposes only and shall not constitute
a part hereof or affect the meaning or interpretation of this Agreement. The
term "PERSON" shall include any individual, partnership, joint venture,
corporation,
A-III-19
trust or unincorporated organization, any other business entity and any
government or any department or agency thereof, whether acting in an individual,
fiduciary or other capacity. Whenever the context so requires, the use of the
singular shall be deemed to include the plural and vice versa.
8.8 EXPENSES. Each of the parties hereto shall bear its own fees and
out-of-pocket expenses incurred in connection with the transactions contemplated
by this Agreement except that the Selling Entities shall pay the expense
(including reasonable attorneys' fees attributable to any HSR filing required to
consummate the transactions contemplated hereunder) of any HSR filing required
under this Agreement when such expenses are incurred.
8.9 ATTORNEYS' FEES. If any legal action is brought for the enforcement of
this Agreement or because of an alleged dispute, breach or default in connection
with this Agreement the prevailing parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in such action or proceeding
in addition to any other relief to which it may be entitled.
8.10 BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns; PROVIDED, HOWEVER, that this Agreement may not be assigned by any party
without the prior written consent of the other party.
8.11 NO THIRD PARTY BENEFIT. Each party intends that this Agreement shall
not benefit or create any right or cause of action in any person other than the
parties to this Agreement, except as otherwise set forth herein.
8.12 GENDER; NUMBER. Whenever the context of this Agreement requires, the
masculine gender shall include the feminine or neuter, and the singular number
shall include the plural.
8.13 SURVIVAL. The representations, warranties, agreements and covenants
of the respective parties set forth in this Agreement shall survive and shall
continue in effect following the Closing of the transaction provided for herein.
8.14 CONSENT TO JURISDICTION. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the state of Delaware and of the United states of America
located in the state of Delaware (the "DELAWARE COURTS") for any litigation
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such Delaware Courts), waives any objection to the laying of venue of any such
litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in an
inconvenient forum.
8.15 CORPORATE OPPORTUNITY MATTERS. Jacor and the Purchaser agree that and
from and after the Closing hereunder any former Archon employee may pursue any
business opportunities that would, prior to the Closing, have been foreclosed to
such employee as a result of the corporate opportunity doctrine or similar
principles of fiduciary duty, and Jacor and the Purchaser hereby waive the right
to assert the benefits of any such principle in such circumstance.
A-III-20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
JACOR THE SELLING ENTITIES
JACOR COMMUNICATIONS, INC. ARCHON COMMUNICATIONS
PARTNERS LLC
By: /s/ JEROME L. KERSTING By: /s/ RICHARD V. SANDLER
---------------------------------- ----------------------------------
Its: Senior Vice President Its: Manager
THE PURCHASER
JACOR COMMUNICATIONS COMPANY NEWS AMERICA HOLDINGS,
INCORPORATED
By: /s/ JEROME L. KERSTING By: /s/ CHASE CAREY
---------------------------------- ----------------------------------
Its: Senior Vice President Its: Executive Vice President
THE INDEMNITOR
THE NEWS CORPORATION LIMITED
By: /s/ CHASE CAREY
----------------------------------
Its: Director
A-III-21
ANNEX IV
The Board of Directors
Premiere Radio Networks, Inc.
15260 Ventura Boulevard
Sherman Oaks, CA 91403-5339
April 1, 1997
Dear Sirs:
Premiere Radio Networks, Inc. ("Premiere" or the "Company"), Jacor
Communications, Inc. ("Jacor"), Jacor Communications Company ("JCC"), PRN
Acquisition Corp. ("PRN") and Archon Communications Inc. ("ACI") have entered
into an Agreement and Plan of Merger dated as of April 4, 1997 (the
"Agreement"). Pursuant to the Agreement, the implementation of which is
contingent on approval by the Premiere stockholders, Premiere and a newly formed
subsidiary of Jacor will merge wherein each Premiere shareholder will receive
the right to receive (i) $13.50 in cash and (ii) a fraction of a share of Jacor
common stock equal to (a) one quarter multiplied by (b) an exchange ratio of
.6102 as long as the Jacor closing price (for ten days, on average, prior to
closing) is between $26.50 and $32.50 per share. You have requested our opinion
as to whether the consideration to be received by the holders of Premiere Common
Stock and Class A Common Stock, pursuant to the Agreement, is fair from a
financial point of view, to such holders.
Alex. Brown & Sons Incorporated ("Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We have acted as financial advisor to the Board of Directors of
Premiere in connection with the Merger and will receive a fee for our services,
a portion of which is contingent upon the consummation of the Merger. We have
also within the past twelve months acted as co-manager in the sale of Jacor
common stock. Alex. Brown regularly publishes research reports regarding the
broadcasting industry and the businesses and securities of publicly owned
companies in that industry, including Jacor.
In connection with our opinion, we have reviewed certain publicly available
financial information concerning Premiere and Jacor, as well as certain internal
financial analyses and other financial information furnished to us by the
Company. We have also held discussions with the senior management and Executive
Committee of Premiere regarding its businesses and prospects and have
participated in certain discussions between Premiere and Jacor regarding Jacor's
businesses and prospects. In addition, we have (i) reviewed the reported price
and trading activity for the Common Stock and Class A Common Stock of Premiere;
(ii) compared certain financial and stock market information for Premiere with
similar information for certain other radio broadcasting companies and network
radio companies whose securities are publicly traded; (iii) reviewed the
financial terms of certain recent business combinations in the radio
broadcasting industry; and (iv) performed such other studies and analyses and
considered such other factors as we deemed appropriate.
We have not independently verified the information described above; and for
purposes of this opinion, we have assumed the accuracy, completeness and
fairness thereof. With specific regard to the information received relating to
the prospects of Premiere, we have assumed that such information reflects the
best currently available judgments and estimates of Premiere management as to
the likely future financial performance of the Company. In addition, we have not
made, been provided with, nor relied upon an independent evaluation or appraisal
of the assets of Premiere. Our opinion is based on market, economic and other
conditions as they exist and can be evaluated as of the date of this letter.
Our services and the opinion expressed herein were prepared for the use of
the Board of Directors of Premiere and do not, nor are intended to, constitute a
recommendation to the holders of the Premiere Common Stock or Class A Common
Stock, as to how they should vote at the stockholder's meeting in connection
with the Merger. At the request of the Board of Directors of Premiere, but
without expanding, nor intending to expand, the limited use and purpose hereof,
we hereby consent to the inclusion (but only to the extent such inclusion is
legally required) of this opinion as an exhibit to filings required to be made
with the Securities and Exchange Commission or with materials required to be
distributed to stockholders of Premiere in connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of April 1, 1997, the consideration to be received by the holders of the
Premiere Common Stock and Class A Common Stock, pursuant to the Agreement is
fair, from a financial point of view, to such holders.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
By: JEFFREY S. AMLING
-----------------------------------
Name: JEFFREY S. AMLING
---------------------------------
Managing Director
A-IV-2
ANNEX V
SECTION 262 OF THE DELAWARE GENERAL CORPORATION
LAW
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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
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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.
(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 constituent 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 constituent 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 constituent
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 constituent 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
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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 the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent 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
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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 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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