<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1996
REGISTRATION NO. 333-14207
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
HEFTEL BROADCASTING CORPORATION
(Exact name of Registrant as specified in its charter)
6767 WEST TROPICANA AVENUE, SUITE 102
LAS VEGAS, NEVADA 89103
(702) 367-3322
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 4832 99-0113417
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>
------------------------
L. LOWRY MAYS
HEFTEL BROADCASTING CORPORATION
200 CONCORD PLAZA, SUITE 600
SAN ANTONIO, TEXAS 78216
(210) 822-2828
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
<TABLE>
<S> <C>
Copies to:
RICHARD C. TILGHMAN, JR., ESQ.
STEPHEN C. MOUNT, ESQ. STEPHEN A. RIDDICK, ESQ.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. PIPER & MARBURY L.L.P.
1500 NATIONSBANK PLAZA CHARLES CENTER SOUTH
300 CONVENT STREET 36 SOUTH CHARLES STREET
SAN ANTONIO, TEXAS 78205 BALTIMORE, MARYLAND 21202
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
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
DECEMBER , 1996
3,500,000 SHARES
HEFTEL BROADCASTING CORPORATION
[LOGO]
CLASS A COMMON STOCK
------------------
All of the shares of Class A Common Stock offered hereby are being sold by
Heftel Broadcasting Corporation (the "Company"). The Class A Common Stock of the
Company is traded on the Nasdaq National Market under the symbol "HBCCA." On
, 1996, the last reported sale price of the Class A Common Stock was
$44.25 per share. See "Price Range of Class A Common Stock."
The Company's authorized capital stock currently includes Class A Common
Stock, Class B Common Stock and Preferred Stock. The rights of holders of Class
A Common Stock and Class B Common Stock are identical, except currently each
share of Class B Common Stock generally entitles its holder to ten votes and
each share of Class A Common Stock entitles its holder to one vote. There are no
shares of Class B Common Stock outstanding. Upon consummation of the merger of
the Company and Tichenor Media System, Inc., the rights of the Class B Common
Stock will be amended to provide, among other things, that such shares will have
no voting rights except in certain circumstances when such shares will be
entitled to a class vote. See "Description of Capital Stock."
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------
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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY(1)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Per Share......................... $ $ $
- -------------------------------------------------------------------------------------------------
Total(2).......................... $ $ $
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses payable by the Company estimated at $ .
(2) The Company has granted to the Underwriters a 30-day option to purchase up
to 525,000 additional shares of Class A Common Stock solely to cover
over-allotments, if any. To the extent such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively.
See "Underwriting."
------------------
The shares of Class A Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by them, and
subject to the right of the Underwriters to reject any order in whole or in
part. It is expected that delivery of the Class A Common Stock will be made at
the offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1996.
ALEX. BROWN & SONS
INCORPORATED
CREDIT SUISSE FIRST BOSTON
LEHMAN BROTHERS
MONTGOMERY SECURITIES
SMITH BARNEY INC.
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE> 3
[ARTWORK]
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS), IF ANY, OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE CLASS A COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE CLASS A COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES
10B-6, 10B-7, AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by (i) the more detailed
information appearing elsewhere in this Prospectus and in documents incorporated
by reference in this Prospectus and (ii) the financial statements, including
notes thereto, appearing in this Prospectus or the documents incorporated by
reference into this Prospectus. Unless otherwise indicated, the information in
this Prospectus assumes the Underwriters' over-allotment option is not
exercised. References herein to the "Company" are to Heftel Broadcasting
Corporation, a Delaware corporation, and its consolidated subsidiaries unless
the context otherwise requires. References to "Clear Channel" are to Clear
Channel Communications, Inc., a Texas corporation, and its consolidated
subsidiaries and references to "Tichenor" are to Tichenor Media System, Inc., a
Texas corporation, and its consolidated subsidiaries.
THE COMPANY
The Company is the largest Spanish language radio broadcasting company in
the United States and currently owns and programs 17 radio stations, 16 of which
serve five of the ten largest Hispanic markets in the United States, including
Los Angeles, New York, Miami, Chicago and Dallas/Fort Worth. The Company has
agreed to acquire Tichenor, the third largest Spanish language radio
broadcasting company in the United States (the "Tichenor Merger"). Tichenor owns
or programs 20 radio stations which serve six of the ten largest Hispanic
markets in the United States, including San Francisco/San Jose, Chicago,
Houston, San Antonio, McAllen/Brownsville/Harlingen and El Paso. Following the
Tichenor Merger, the Company will own or program 37 radio stations in 11
markets, including stations in each of the top ten Hispanic markets in the
United States.
The Company's strategy is to own and program top performing radio stations,
principally in the largest Spanish language radio markets in the United States.
The top ten Hispanic markets account for approximately 17.2 million Hispanics,
representing approximately 63% of the total Hispanic population in the United
States. Upon completion of the Tichenor Merger, the Company will have the
largest Spanish language radio station combination, as measured by audience and
revenue share, in eight of the top ten Hispanic markets. Additionally, the
Company will have the highest rated radio station in any format in four of the
top ten Hispanic markets. The Company intends to acquire or develop additional
Spanish language stations in the leading Hispanic markets.
The following table sets forth certain information regarding the Company's
radio stations owned or programmed, assuming completion of the Tichenor Merger:
<TABLE>
<CAPTION>
RANKING OF NO. OF
MARKET BY STATIONS
HISPANIC -----------
POPULATION(1) MARKET AM FM
- ------------- ------------------------------------------------------- --- ---
<C> <S> <C> <C>
1 Los Angeles............................................ 1 1
2 New York(2)............................................ 3 0
3 Miami.................................................. 2 2
4 San Francisco/San Jose................................. 0 2
5 Chicago................................................ 2 1
6 Houston................................................ 2 4
7 San Antonio............................................ 2 2
8 McAllen/Brownsville/Harlingen.......................... 1 2
9 Dallas/Fort Worth...................................... 3 3
10 El Paso................................................ 2 1
33 Las Vegas.............................................. 1 0
--- ---
Total.................................................. 19 18
</TABLE>
--------------------
(1) Ranking of the principal radio market served by the Company's
station(s) among all U.S. radio markets by Hispanic population as
reported by Strategy Research Corporation -- 1996 U.S. Hispanic
Market Study.
(2) Includes WGLI-AM serving New York which is currently not
broadcasting.
3
<PAGE> 5
The Company believes Spanish language radio broadcasting has significant
growth potential for the following reasons:
- The Hispanic population is the fastest growing population segment in the
United States and is expected to grow from an estimated 27.2 million
(approximately 10.3% of the total United States population) at the end of
1995 to an estimated 30.7 million (approximately 11.3% of the total
United States population) by the year 2000. These estimates imply a
growth rate of approximately three times the expected growth rate for the
total U.S. population during the same period.
- Advertisers have substantially increased their use of Spanish language
media in recent years. Total advertising revenues from advertising in
Spanish language media rose from $166 million in 1983 to $1.06 billion in
1995. This represents a compound annual growth rate of 16.7%, which is
more than double the growth rate of total advertising over the same
period. Although Hispanic consumers will spend an estimated $340 billion
in 1997, or 6.5% of the total consumer spending in the United States,
Spanish language advertising currently represents less than 0.7% of the
total advertising expenditures.
- Advertisers have begun to target Hispanic households because they are
younger and spend a greater percentage of their household income on
consumer products than non-Hispanic households.
- Hispanics have maintained strong social and cultural ties to their
countries of origin, particularly in their continued use of the Spanish
language. An estimated 78% of Hispanics speak at least some Spanish and
approximately 40% speak it exclusively. Spanish is expected to continue
to be the language of preference for Hispanics.
- The number of Spanish language media outlets is disproportionately lower
than the number of similar English language outlets. In the radio
segment, there are currently approximately 400 Spanish language
commercial stations, which constitute only 4% of all commercial radio
stations in the United States, although the Hispanic population comprises
approximately 10.3% of the United States population.
The Company's principal executive offices are located at 6767 West
Tropicana Avenue, Suite 102, Las Vegas, Nevada 89103 and the telephone number is
(702) 367-3322.
RECENT DEVELOPMENTS
Clear Channel Tender Offer. Clear Channel is a diversified broadcasting
company that currently owns or programs 97 radio stations and 18 television
stations in 33 markets. On August 5, 1996, Clear Channel completed a tender
offer and a related private purchase of stock from existing stockholders of the
Company (collectively, the "Tender Offer"). As a result of the Tender Offer,
Clear Channel currently owns approximately 63% of the Class A Common Stock of
the Company. See "Risk Factors -- Relationship Between the Company and Clear
Channel."
The Tichenor Merger. On July 9, 1996, Clear Channel and Tichenor entered
into an Agreement and Plan of Merger (the "Tichenor Merger Agreement") which,
subject to the terms and conditions thereof, provides for the acquisition of
Tichenor by the Company. Tichenor is a national radio broadcasting company
engaged in the business of acquiring, developing and programming Spanish
language radio stations in major Hispanic markets located in the United States.
Currently, Tichenor owns or programs 20 radio stations serving six of the top
ten Hispanic markets in the United States, including San Francisco/San Jose,
Chicago, Houston, San Antonio, McAllen/Brownsville/Harlingen and El Paso.
Pursuant to the Tichenor Merger Agreement, a newly-formed wholly owned
subsidiary of the Company will merge with and into Tichenor, and Tichenor shall
continue as the surviving corporation as a wholly owned subsidiary of the
Company. At the time the Tichenor Merger
4
<PAGE> 6
Agreement was executed, Clear Channel had commenced but not completed the Tender
Offer. The then existing management and the Board of Directors of the Company
were not involved in the negotiations concerning the acquisition of Tichenor. On
August 14, 1996, after the consummation of the Tender Offer, Clear Channel
offered to assign the Tichenor Merger Agreement to the Company in accordance
with the Tichenor Merger Agreement, and on October 10, 1996, the current Board
of Directors of the Company approved the Tichenor Merger and the assignment to
the Company of the Tichenor Merger Agreement. In approving the Tichenor Merger,
the Company considered, among other things, the strength of the combined
management of the Company and Tichenor; the marketing and operating benefits of
the expansion of the Company's presence into each of the top ten Hispanic
markets; and the benefits of diversifying the Company's operations thereby
reducing its reliance on any individual market.
Pursuant to the Tichenor Merger Agreement, the shareholders and warrant
holders of Tichenor, including Clear Channel, will receive an aggregate of
5,689,878 shares of Common Stock and approximately $3.4 million in cash. Upon
consummation of the Tichenor Merger, the former shareholders and warrant holders
of Tichenor, other than Clear Channel, will own 5,559,464 shares of the Class A
Common Stock of the Company, representing approximately 42% of the total
outstanding Class A Common Stock of the Company on a fully diluted basis,
assuming completion of this offering. The Company will also assume Tichenor's
outstanding debt, which was approximately $71.3 million on September 30, 1996.
In addition, pursuant to the Tichenor Merger Agreement, Clear Channel will
convert all of its shares of Class A Common Stock and shares of common stock of
Tichenor into 7,428,235 shares of a redesignated Class B Common Stock
("Nonvoting Common Stock") that will not have any voting rights except as
specifically provided for in the charter or as otherwise required by law. As
used herein, the term "Common Stock" prior to the consummation of the Tichenor
Merger shall mean the Company's Class A Common Stock and the existing Class B
Common Stock (none of which is currently outstanding) and, upon consummation of
the Tichenor Merger, shall mean the Company's Class A Common Stock and the
Nonvoting Common Stock.
The Tichenor Merger requires the approval of the Federal Communications
Commission ("FCC"). The FCC's cross-interest policy bars a party which holds an
attributable interest in one or more radio stations in a market from having a
"meaningful relationship" with another radio station in that market. A
"meaningful relationship" is construed by the FCC to include a non-voting equity
position in excess of 33 1/3% of the total outstanding Common Stock. See "The
Company -- Federal Regulation of Radio Broadcasting." After consummation of the
Tichenor Merger and this offering, Clear Channel will own approximately 36% of
the Common Stock (approximately 35% if the Underwriters' over-allotment option
is exercised in full). Clear Channel has informed the Company that it is
considering a number of alternatives to comply with FCC regulations upon
consummation of the Tichenor Merger. In the event that no other alternative is
approved by the FCC, Clear Channel may place any remaining shares of Nonvoting
Common Stock above the 33 1/3% maximum in a disposition trust for the purpose of
sale, through negotiated block transactions or other types of sales. The use of
a disposition trust, and the terms thereof, would be subject to the prior
consent of the FCC.
Upon consummation of the Tichenor Merger, McHenry T. Tichenor, Jr. will
enter into an employment agreement to serve as Chairman, President and Chief
Executive Officer of the Company for a five year term. Mr. Tichenor is currently
the President and Chief Executive Officer of Tichenor. The Tichenor Merger
Agreement also provides that following the consummation of the Tichenor Merger,
five designees of Tichenor shall constitute the entire Board of Directors of the
Company. Subsequent to the Tichenor Merger, Clear Channel will have no
overlapping officers or directors with the Company. See
"Management -- Management of the Company Following the Tichenor Merger."
The Tichenor Merger will be accounted for using the purchase method of
accounting.
The Tichenor Merger is subject to a number of conditions, including
regulatory approvals, and will not be consummated prior to the closing of this
offering (the "Offering"), and the approval of
5
<PAGE> 7
the Company's existing holders of Class A Common Stock with respect to certain
matters relating to the Tichenor Merger. It is not anticipated that purchasers
of the Company's Class A Common Stock in the Offering will be entitled to vote
on matters relating to the Tichenor Merger. See "Risk Factors -- Tichenor
Merger" and "The Tichenor Merger."
Financial Matters. As a result of and in connection with the completion of
the Tender Offer and certain other events and transactions, the Company incurred
certain one-time restructuring charges and recognized other losses during the
quarter ended September 30, 1996 totaling approximately $44.6 million, before
tax benefits, including $16.2 million of non-cash charges. Such charges consist
of approximately $25.1 million relating to the Tender Offer (including $18.8
million incurred in connection with employment contract settlements with former
senior executives of the Company), $7.5 million relating to the Company
refinancing its credit agreement and $8.1 million relating to the discontinued
operations of the radio network owned by Spanish Coast-to-Coast, Ltd., a wholly
owned subsidiary of the Company doing business as Cadena Radio Centro ("CRC").
The remainder of the charges relate to the cost to close and dispose of
duplicate facilities and severance payments.
THE OFFERING
Class A Common Stock offered
hereby............................ 3,500,000 shares
Common Stock to be outstanding after
the Offering...................... 15,047,731 shares of Class A Common
Stock
0 shares of Class B Common
Stock
Common Stock to be outstanding after
the Offering and after the
consummation of the Tichenor
Merger............................ 13,309,374 shares of Class A Common
Stock
7,428,235 shares of Nonvoting Common
Stock(1)
20,737,609 shares of Common Stock
Use of proceeds..................... To reduce borrowing under the Credit
Agreement (as defined herein). Such
funds may be subsequently re-borrowed
for general corporate purposes,
including working capital and possible
acquisitions of radio stations. See
"Use of Proceeds."
Nasdaq National Market symbol....... HBCCA
- ---------------
(1) Pursuant to a Second Amended and Restated Articles of Incorporation to be
filed by the Company immediately prior to the completion of the Tichenor
Merger, the Class B Common Stock authorized at the time of the Offering will
be amended to become Nonvoting Common Stock. See "Description of Capital
Stock."
6
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
COMPANY PRO
FORMA
AS
ADJUSTED(1)
-------------
YEARS ENDED SEPTEMBER 30, YEAR ENDED
------------------------------------- SEPTEMBER 30,
1994(2) 1995(3) 1996 1996
--------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net broadcasting revenues................................. $ 27,433 $ 64,160 $ 71,732 $ 119,747
Station operating expenses................................ 15,345 43,643 48,896 85,451
Corporate expenses........................................ 3,454 4,720 5,072 6,945
Depreciation and amortization............................. 1,906 3,344 5,140 16,412
--------- ---------- ---------- -----------
Total operating expenses................................ 20,705 51,707 59,108 108,358
--------- ---------- ---------- -----------
Operating income.......................................... 6,728 12,453 12,624 11,389
Other income (expense):
Interest expense, net................................... (2,997) (6,389) (11,034) (9,594)
Income in equity of joint venture(4).................... 616 -- -- --
Loss on retirement of debt.............................. (1,738) -- (7,461) (7,461)
Restructuring charges................................... -- -- (29,011) (29,011)
Other expenses, net..................................... (1,407) (428) (1,671) (1,757)
--------- ---------- ---------- -----------
Total other income (expense)............................ (5,526) (6,817) (49,177) (47,823)
--------- ---------- ---------- -----------
Income (loss) before minority interest and provision for
income taxes............................................ 1,202 5,636 (36,553) (36,434)
Minority interest in Viva Media(4)........................ (351) (1,167) -- --
Provision for income taxes................................ (100) (150) (65) 3,541
--------- ---------- ---------- -----------
Income (loss) from continuing operations.................. 751 4,319 (36,618) (32,893)
===========
Loss from discontinued operations......................... (285) (626) (9,988)
--------- ---------- ----------
Net income (loss)......................................... $ 466 $ 3,693 $ (46,606)
========= ========== ==========
Income (loss) from continuing operations per common and
common equivalent share................................. $ .14 $ .40 $ (3.56) $ (1.69)
========= ========== ========== ==========
Net income (loss) per common and common equivalent
share................................................... $ .05 $ .34 $ (4.53)
========= ========== ==========
Weighted average common shares and common share
equivalents outstanding................................. 5,384,678 10,805,346 10,294,967 19,484,845
========= ========== ========== ==========
OTHER OPERATING DATA:
Broadcast cash flow(5).................................... $ 12,088 $ 20,517 $ 22,836 $ 34,296
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------
SEPTEMBER 30, PRO
-------------------------------- FORMA
AS AS
1994 1995 1996 ADJUSTED(6) ADJUSTED(7)
-------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 10,219 $ 5,404 $ 5,132 $ 5,132 $ 6,210
Working capital.................................. 18,366 14,967 7,168 7,168 12,086
Total assets..................................... 113,353 151,637 165,751 165,751 486,237
Long-term debt, less current portion............. 59,898 97,516 137,659 30,159 101,410
Stockholders' equity............................. 44,436 43,581 12,101 119,601 308,541
</TABLE>
7
<PAGE> 9
- ---------------
(1) The unaudited pro forma condensed consolidated statements of operations for
the year ended September 30, 1996 assume the Transactions (as defined
herein) occurred on October 1, 1995. The pro forma information does not
purport to present the actual financial position or results of operations of
the Company had the Transactions actually occurred on the date specified,
nor is it necessarily indicative of the results of operations that may be
achieved in the future. See "The Tichenor Merger," "Notes to Unaudited Pro
Forma Condensed Consolidated Financial Information" and the Financial
Statements and the Notes thereto for each of the Company, Tichenor and the
Tichenor Acquisitions included elsewhere in this Prospectus or incorporated
herein by reference.
(2) During August 1994, the Company completed three separate business
acquisitions and began consolidating its previously unconsolidated
investment in Viva America Media Group, a Florida general partnership ("Viva
Media"). Total net revenues and net income (loss), adjusted for interest
expense on retired debt, relating to these acquisitions and transactions
from the respective dates of these transactions to September 30, 1994 were
approximately $5,488,000 and $(80,000), respectively.
(3) During fiscal 1995, the Company completed several radio station
acquisitions. Due to the financial effects of these transactions, the
results of operations for 1996 reflect a full fiscal year of operations for
these radio stations compared to a partial fiscal year in 1995.
Consequently, the results of operations for the two years ended September
30, 1996 are not entirely comparable.
(4) Effective August 20, 1994, the Company began accounting for its 49% interest
in Viva Media on a consolidated basis. Accordingly, Viva Media's results of
operations are included in the consolidated financial statements for the
period from August 20, 1994 through September 30, 1994, and for each of the
fiscal years ended September 30, 1995 and 1996. Prior to August 20, 1994,
the accounts and results of operations of Viva Media were accounted for
using the equity method of accounting.
(5) Data on station operating income excluding corporate expenses, depreciation
and amortization (commonly referred to as "broadcast cash flow"), although
not calculated in accordance with generally accepted accounting principles,
is widely used in the broadcast industry as a measure of a broadcasting
company's operating performance. Nevertheless, this measure should not be
considered in isolation or as a substitute for operating income, cash flows
from operating activities or any other measures for determining the
Company's operating performance or liquidity, which are calculated in
accordance with generally accepted accounting principles.
(6) As adjusted to give effect to the Offering (at an assumed offering price of
$32.25 per share) and the application of the estimated net proceeds
therefrom as if the Offering had been consummated on September 30, 1996.
(7) Pro forma as adjusted to give effect to the Transactions, including the
Offering (at an assumed offering price of $32.25 per share) and the
application of the estimated net proceeds therefrom, as if they had been
consummated on September 30, 1996. The effect of the Tichenor Merger is
based on preliminary purchase price allocations. The pro forma information
does not purport to present the actual financial position of the Company had
the Transactions actually occurred on the date specified. See "The Tichenor
Merger," "Use of Proceeds," "Capitalization" and the Financial Statements
and Notes thereto for each of the Company, Tichenor and the Tichenor
Acquisitions included elsewhere in this Prospectus or incorporated herein by
reference.
8
<PAGE> 10
RISK FACTORS
In addition to the other information contained or incorporated herein by
reference in this Prospectus, the following risk factors should be considered
carefully in evaluating an investment in the Class A Common Stock offered by
this Prospectus.
Recent Change of Control. On August 5, 1996, Clear Channel acquired a
controlling interest in the Company and replaced the previous Board of Directors
with its own slate of directors. The new management team of the Company may have
different operating and strategic philosophies than its predecessor which may
take time to integrate into the existing business. There can be no assurance
that such integration will not adversely affect the operations of the Company.
Tichenor Merger. The consummation of the Tichenor Merger requires FCC
approval with respect to the transfer of the broadcast licenses of Tichenor to
the Company. The Company and Tichenor filed an application seeking FCC approval
for the transfer. However, a formal petition to deny the application was filed
with the FCC which the Company plans to vigorously oppose. There can be no
assurance that the FCC will grant the transfer application, nor any assurance
that post-grant objections will not be made.
The consummation of the Tichenor Merger is also subject to the expiration
or termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Pursuant to the
requirements of the HSR Act, Clear Channel, as the ultimate parent (as defined
under the rules) of the Company, filed a Notification and Report Form with
respect to the Tichenor Merger with the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the Federal Trade Commission ("FTC") on
October 4, 1996. Tichenor also filed a Notification and Report Form with respect
to the Tichenor Merger on such date. The Antitrust Division commenced an
investigation of the Tichenor Merger but declined to pursue any enforcement
action. By letter dated December 4, 1996, the FTC informed the Company that the
Company had been granted early termination of the applicable waiting period for
the Tichenor Merger under the HSR Act, but there can be no assurance that the
Antitrust Division or the FTC will not undertake enforcement action against the
Company in connection with future radio station acquisitions.
Consummation of the Tichenor Merger is subject to numerous other
conditions. See "The Tichenor Merger." Therefore, there can be no assurance that
the Tichenor Merger will be consummated in a timely manner or on the terms
described herein, if at all.
Antitrust Matters. An important element of the Company's growth strategy
involves the acquisition of additional radio stations, most of which are likely
to require preacquisition antitrust review by the FTC and the Antitrust
Division. Following passage of the Telecommunications Act of 1996 (the "1996
Act"), the Antitrust Division has become more aggressive in reviewing proposed
acquisitions of radio stations and radio station networks, particularly in
instances where the proposed acquiror already owns one or more radio stations in
a particular market and the acquisition involves another radio station in the
same market. Recently, the Antitrust Division has obtained consent decrees
requiring an acquiror to dispose of at least one radio station in a particular
market where the acquisition otherwise would have resulted in a concentration of
market share by the acquiror. Although the Antitrust Division reviewed the
antitrust implications of the Tichenor Merger and decided not to undertake any
enforcement action, there can be no assurance that the Antitrust Division or the
FTC will not seek to bar the Company from acquiring additional radio stations in
a market where the Company's existing stations already have a significant market
share.
Concentration of Cash Flow from Los Angeles Stations. Broadcast cash flow
generated by the Company's Los Angeles stations accounted for approximately 68%
of the Company's broadcast cash flow for the year ended September 30, 1996. On a
pro forma basis, assuming the Tichenor Merger had occurred on October 1, 1995,
the Company's Los Angeles stations would have accounted for 46% of the Company's
broadcast cash flow for the year ended September 30, 1996. Increased
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<PAGE> 11
competition for advertising dollars with other radio stations and communications
media in the Los Angeles metropolitan area, both generally and relative to the
broadcasting industry, increased competition from a new format competitor and
other competitive and economic factors could cause a decline in revenue from the
Company's Los Angeles stations. A significant decline in the revenue of the Los
Angeles stations could have a material adverse effect on the Company's overall
results of operations and broadcast cash flow.
Financial Leverage; Pledge of Assets. After giving effect to the Offering
(at an assumed offering price of $32.25 per share) and application of the net
proceeds therefrom as set forth in "Use of Proceeds" and the consummation of the
Tichenor Merger, the Company's total debt would have been approximately $103.3
million at September 30, 1996. There can be no assurance that the Company will
have sufficient cash flow to satisfy its future debt service requirements,
particularly if there is a downturn in the operating performance of its radio
stations or in economic conditions.
Assets of the Company and the stock and partnership interests of the
Company's subsidiaries are pledged to secure the Company's obligations under the
Credit Agreement dated August 5, 1996, among the Company, the lenders signatory
thereto and NationsBank of Texas, N.A., as agent (the "Credit Agreement"). The
Credit Agreement contains various financial and operational covenants and other
restrictions with which the Company must comply, including limitations on
capital expenditures and the incurrence of additional indebtedness, prohibitions
on the payment of cash dividends and the redemption or repurchase of capital
stock of the Company and restrictions on the use of borrowings. The Credit
Agreement may adversely affect the Company's ability to pursue its strategy of
further growth through acquisitions. After giving effect to the application of
the proceeds from the Offering and the consummation of the Tichenor Merger, the
Company will have approximately $51.7 million available under the Credit
Agreement for future borrowings.
Integration of the Business of the Company and Tichenor. The Tichenor
Merger involves the integration of two companies that have previously operated
independently. As soon as practicable following the Tichenor Merger, the Company
intends to integrate certain aspects of the operations of Tichenor. However,
there can be no assurance that the Company will successfully integrate the
operations of Tichenor with those of the Company or that all of the benefits
expected from such integration will be realized. Any delays or unexpected costs
incurred in connection with such integration could have an adverse effect on the
Company's business, operating results or financial position. Additionally, there
can be no assurance that the operations, management and personnel of the two
companies will be compatible or that the Company or Tichenor will not experience
the loss of key personnel. Furthermore, upon consummation of the Tichenor
Merger, a new management team will be formed. The new management team of the
Company may have different operating and strategic philosophies which may take
time to integrate into the existing business. There can be no assurance that
such integration will not adversely affect the operations of the Company. See
"Management -- Management of the Company Following the Tichenor Merger."
Control by the Tichenor Family. Following the completion of the Offering
and the consummation of the Tichenor Merger, the Tichenor Family (as hereinafter
defined) will have voting control over approximately 34% of the shares of Class
A Common Stock. See "The Tichenor Merger." This will enable the Tichenor Family
to exert significant influence in electing the Board of Directors and over other
management decisions. In any event, pursuant to the Tichenor Merger Agreement,
upon consummation of the Tichenor Merger, designees of Tichenor will constitute
the entire Board of Directors of the Company. See "The Tichenor
Merger -- Tichenor Family Ownership" and "Management -- Management of the
Company Following the Tichenor Merger."
Growth Through Future Acquisitions; Capital Requirements. One of the
Company's growth strategies is to acquire additional radio stations. There can
be no assurance that the Company will be able to complete any further
acquisitions or, if completed, that such acquired radio stations can be operated
profitably or assimilated into the Company's business structure in the manner
desired by the Company's management. Entities acquired by the Company may have
liabilities for which the
10
<PAGE> 12
Company may become responsible. Additional debt or equity financing may be
required in order to complete future acquisitions, and there can be no assurance
that the Company will be able to obtain such financing. The Company may acquire
stations which have not previously broadcast Spanish language programming. In
converting these stations to a Spanish language format, revenue and cash flow
from station operations generated prior to the conversion may not be indicative
of future financial performance. Furthermore, such conversions may result in
significant operating losses for an undetermined period of time.
Government Regulation of Broadcasting Industry. The domestic broadcasting
industry is subject to extensive federal regulation which, among other things,
requires approval by the FCC for the issuance, renewal, transfer and assignment
of broadcasting station operating licenses and limits the number of broadcasting
properties the Company may acquire. The 1996 Act, which became law on February
8, 1996, creates significant new opportunities for broadcasting companies but
also creates uncertainties as to how the FCC and the courts will enforce and
interpret the 1996 Act.
The Company's business will continue to be dependent upon acquiring and
maintaining broadcasting licenses issued by the FCC, which are currently issued
for a term of seven years (the 1996 Act authorizes the FCC to extend the license
term to eight years, but this provision has not yet been implemented). There can
be no assurance that pending or future renewal applications will be approved, or
that renewals will not include conditions or qualifications that could adversely
affect the Company'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 the Company's business, financial position
and results of operations.
In addition, the FTC and the Antitrust Division have been reviewing media
acquisitions, including radio station acquisitions, to determine whether they
are in compliance with antitrust laws, even in situations in which the
acquisition conforms with the ownership restrictions of the 1996 Act. See
"-- Antitrust Matters."
Competition. Broadcasting is a highly competitive business. The Company's
radio stations compete for audiences and advertising revenues with other radio
stations of all formats, as well as with other media, such as newspapers,
magazines, television, cable television, outdoor advertising and direct mail,
within their respective markets. Audience ratings and market shares are subject
to change and any adverse change in a particular market could have a material
adverse effect on the revenue of stations located in that market. Future
operations are further subject to many variables which could have an adverse
effect upon the Company's financial performance. These variables include
economic conditions, both general and relative to the broadcasting industry;
shifts in population and other demographics; the level of competition for
advertising dollars with other radio 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, including the
FCC. Although the Company believes that each of its stations is able to compete
effectively in its respective market, there can be no assurance that any such
station will be able to maintain or increase its current audience ratings and
advertising revenues. Radio stations can quickly change formats. Any radio
station currently broadcasting in either English or Spanish could shift its
format to duplicate the format of any of the Company's stations. If a station
converted its programming to a format similar to that of a station owned by the
Company, the ratings and broadcast cash flow of the Company's station could be
adversely affected.
New Technologies. The FCC is considering ways to introduce new technologies
to the radio broadcast industry, including satellite and terrestrial delivery of
digital audio broadcasting and the standardization of available technologies
which significantly enhance the sound quality of AM broadcasts. The Company is
unable to predict the effect any such new technology will have on the Company's
financial condition or results of operations. In addition, cable television
operators are introducing a new service commonly referred to as "cable radio"
which provides cable television
11
<PAGE> 13
subscribers with several high-quality channels of music, news and other
information, and direct satellite broadcast television companies are supplying
subscribers with several high quality music channels.
Uncertainty as to Market Price of the Class A Common Stock. Because the
market price of the Class A Common Stock is subject to fluctuation, the market
value of the shares of the Class A Common Stock may increase or decrease prior
to and following the consummation of the Offering. There can be no assurance
that at or after the consummation of the Offering the shares of the Class A
Common Stock will trade at the prices at which such shares have traded in the
past. The prices at which the Class A Common Stock trades after the consummation
of the Offering may be influenced by many factors, including the liquidity of
the Class A Common Stock, investor perceptions of the Company and the radio
broadcasting industry, the operating results of the Company, the Company's
dividend policy, possible future changes in regulation of the radio broadcasting
industry and general economic and market conditions.
Relationship Between the Company and Clear Channel.
Control by Clear Channel. Following the completion of the Offering,
Clear Channel will have voting control over approximately 48.5% of the
shares of Class A Common Stock. This will enable Clear Channel to exert
significant influence in electing the Board of Directors and over other
management decisions.
Future Sales of Common Stock. Upon consummation of the Tichenor Merger
and the Offering, Clear Channel will own approximately 36% of the
outstanding Common Stock of the Company on a fully diluted basis
(approximately 35% if the Underwriter's over-allotment option is exercised
in full), less any shares which may be transferred in order to obtain FCC
approval to consummate the Tichenor Merger. Any sale of shares of Common
Stock owned by Clear Channel could adversely affect the market price for
the Common Stock and could impair the ability of the Company to raise money
in the equity markets. Clear Channel has indicated to the Company that it
does not currently intend to sell any of its shares of the Company's Common
Stock (except as may be necessary to consummate the Tichenor Merger, see
"The Tichenor Merger"). In addition, pursuant to a Stockholders Agreement
to be entered into in connection with the consummation of the Tichenor
Merger and an agreement with the Underwriters in connection with the
Offering, Clear Channel has agreed not to sell any shares of the Company's
Common Stock for 180 days from the effective date of the Tichenor Merger
and for 90 days from the closing of the Offering, respectively (except as
may be necessary to obtain the FCC's approval of, or to consummate, the
Tichenor Merger). However, there can be no assurances that Clear Channel
will not sell any of such shares in the future or that any such contractual
restrictions will not be waived.
Ownership of Nonvoting Common Stock. Following the consummation of the
Tichenor Merger, Clear Channel will own no shares of Class A Common Stock
and thus will not be entitled to vote in the election of the Company's
directors, although Clear Channel will own all of the outstanding shares of
the Company's Nonvoting Common Stock, which will have a class vote on
certain matters, including the sale of all or substantially all of the
assets of the Company, any merger or consolidation involving the Company
where the stockholders of the Company immediately prior to the transaction
would not own at least 50% of the capital stock of the surviving entity,
any reclassification, capitalization, dissolution, liquidation or winding
up of the Company, the issuance of any shares of Preferred Stock by the
Company, the amendment of the Company's Certificate of Incorporation in a
manner that adversely affects the rights of the holders of Nonvoting Common
Stock, the declaration or payment of any non-cash dividends on the
Company's Common Stock or any amendment to the Company's Certificate of
Incorporation concerning the Company's capital stock. Furthermore, shares
of Nonvoting Common Stock will be readily convertible into shares of Class
A Common Stock, subject to any necessary FCC consents. These provisions
relating to the Nonvoting Common Stock could have the effect of delaying or
preventing a change in control of the Company, thereby possibly having the
effect of
12
<PAGE> 14
depriving stockholders of the opportunity to receive a premium for their
shares. Such provisions could also have the effect of making the Company
less attractive to a potential acquirer and could result in holders of
Class A Common Stock receiving less consideration upon a sale of their
shares than might otherwise be available in the event of a takeover
attempt. See "Description of Capital Stock."
Potential Conflicts of Interest. The nature of the respective
businesses of the Company and Clear Channel gives rise to potential
conflicts of interest between the two companies. The Company and Clear
Channel are each engaged in the radio broadcasting business in Miami, and
as a result, they are competing with each other for advertising revenues.
Upon consummation of the Tichenor Merger, the Company and Clear Channel
will begin competing with each other in additional markets. In addition,
conflicts could arise with respect to transactions involving the purchase
or sale of radio broadcasting companies, particularly Spanish language
radio broadcasting companies, the issuance of additional shares of Common
Stock, or the payment of dividends by the Company.
Clear Channel has advised the Company that it does not currently
intend to engage in the Spanish language radio broadcasting business, other
than through its ownership of shares in the Company. However, circumstances
could arise that would cause Clear Channel to engage in the Spanish
language broadcasting business. For example, opportunities could arise
which would require greater financial resources than those available to the
Company or which are located in areas in which the Company does not intend
to operate. Thus, although Clear Channel has no current intention to do so,
there can be no assurance that it will not engage in the Spanish language
broadcasting business. In addition, as part of Clear Channel's overall
acquisition strategy, Clear Channel may from time to time acquire Spanish
language radio broadcasting companies individually or as part of a larger
group and thereafter engage in the Spanish language radio broadcasting
business. Such activities could directly or indirectly compete with the
Company's business.
Tichenor Loan Agreement. Concurrent with the execution of the Tichenor
Merger Agreement, Clear Channel and a subsidiary of Tichenor entered into a
Loan Agreement (the "Tichenor Loan Agreement"), pursuant to which Clear
Channel loaned a Tichenor subsidiary $40.0 million to finance the
acquisition of two radio stations and related assets in San Francisco. The
loan is secured by all of the outstanding stock of a subsidiary of the
borrower which holds the radio licenses for the two radio stations in San
Francisco. The loan is guaranteed by Tichenor, and the guaranty is secured
by all of the outstanding stock of the borrower. The loan and the guaranty
will remain an obligation of the Tichenor subsidiary and Tichenor,
respectively, following the acquisition of Tichenor by the Company pursuant
to the Tichenor Merger. Although the Company will not assume or otherwise
have any obligations with respect to the loan or the guaranty, potential
conflicts of interest could arise between the Company, as the indirect sole
stockholder of the Tichenor subsidiary, and Clear Channel, as a creditor.
Following the Tichenor Merger, the Company may refinance all or a part of
its consolidated indebtedness, including the loan to the Tichenor
subsidiary. There can be no assurance, however, that any such refinancing
will be consummated, or if consummated, that the terms thereof will be as
favorable as those of the Clear Channel loan.
Shares Eligible for Future Sale. The 3,500,000 shares of Class A Common
Stock sold in the Offering will be freely tradeable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), unless acquired by "affiliates" (as defined in Rule 144
promulgated by the Securities and Exchange Commission under the Securities Act
("Rule 144")). 3,679,952 of the currently outstanding shares of Class A Common
Stock are freely tradeable without restriction or further registration under the
Securities Act, unless acquired by "affiliates." Beginning 90 days after the
date of this Prospectus, approximately 2,426,108 of the currently outstanding
shares of Class A Common Stock owned by Clear Channel will be eligible for sale
in the public market, although they will remain subject to the volume and other
limitations (other than the two year
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<PAGE> 15
holding period) of Rule 144; provided, however, as long as the Registration
Statement on Form S-3 declared effective on February 26, 1996 remains in effect,
subject to any contractual limitations, Clear Channel may sell 2,156,799 of such
shares without regard to any limitations contained in Rule 144. Clear Channel
has indicated to the Company that it does not currently intend to sell any
shares of the Company's Common Stock except as may be necessary to obtain the
FCC's approval of, or to consummate, the Tichenor Merger. See "The Tichenor
Merger -- Conditions to the Tichenor Merger" and "Shares Eligible for Future
Sale."
Dilution. Persons purchasing shares of Class A Common Stock at the offering
price will incur immediate dilution in net tangible book value per share of the
common stock. As of September 30, 1996, the deficit in net tangible book value
of the common stock was approximately $109.6 million, or $9.49 per share. The
deficit in net tangible book value per share represents the amount of total
tangible assets of the Company less total liabilities and the liquidation
preference of the Series A Preferred Stock, if any, divided by the number of
shares of common stock outstanding. After giving effect to the sale of the
3,500,000 shares of Class A Common Stock offered hereby by the Company (at an
assumed offering price of $32.25 per share) and the application of the estimated
net proceeds thereof as described in "Use of Proceeds" (after deducting
underwriting discounts and commissions and estimated offering expenses), the as
adjusted deficit in net tangible book value of the common stock at September 30,
1996 would have been approximately $0.14 per share. This represents an immediate
increase in net tangible book value per share of $9.35 to existing stockholders
and an immediate net tangible book value dilution per share of $32.39 to
investors purchasing shares in the Offering. Net tangible book value dilution
per share represents the difference between the amount per share paid by new
investors in the Offering and the as adjusted deficit in net tangible book value
per share after the Offering.
Forward-Looking Statements. This Prospectus contains forward-looking
statements within the meaning of Section 27A of the Securities Act. Discussions
containing such forward-looking statements may be found in the material set
forth under "Summary," "The Tichenor Merger" and "The Company," as well as
within the Prospectus generally. In addition, when used in this Prospectus, 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 herein and the matters set forth in the Prospectus generally.
The Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances. The Company cautions the reader, however, that
this list of risk factors may not be exhaustive.
USE OF PROCEEDS
The net proceeds to the Company from the sale of 3,500,000 shares of Class
A Common Stock offered hereby by the Company at an assumed public offering price
of $32.25 per share (after deducting underwriting discounts and commissions and
estimated offering expenses) are estimated to be approximately $107.5 million
($123.7 million if the Underwriters' over-allotment option is exercised in
full). The Company will use all of the net proceeds to repay borrowings
outstanding under the Credit Agreement. Upon repayment of such borrowings, the
amount repaid will become available to the Company for reborrowing under the
Credit Agreement for general corporate purposes, including working capital and
possible acquisitions of additional broadcast properties, including the Tichenor
Merger. Borrowings under the Credit Agreement bear interest at a floating rate
based on either (i) the London Interbank Offered Rate ("LIBOR") for deposits in
United States dollars, or (ii) the higher of the agent bank's prime rate plus an
incremental rate or the federal funds rate plus an incremental rate. The average
interest rate for borrowings under the Credit Agreement as of September 30,
1996, was 7.315%. Principal outstanding under the Credit Agreement is due in
January 1998. The Company regularly reviews potential acquisitions of radio
stations.
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<PAGE> 16
PRICE RANGE OF CLASS A COMMON STOCK
The Class A Common Stock is traded on the Nasdaq National Market under the
symbol "HBCCA." The following table sets forth for each of the quarters in the
fiscal years ended September 30, 1995 and 1996 and the first quarter of fiscal
1997 the high and low closing sale prices per share as reported by the Nasdaq
National Market.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR 1995
First Quarter............................................................. $16.00 $ 9.50
Second Quarter............................................................ 13.88 10.00
Third Quarter............................................................. 15.75 10.13
Fourth Quarter............................................................ 21.75 15.25
FISCAL YEAR 1996
First Quarter............................................................. $19.50 $14.75
Second Quarter............................................................ 21.00 15.25
Third Quarter............................................................. 29.88 19.50
Fourth Quarter............................................................ 43.63 28.25
FISCAL YEAR 1997
First Quarter (through December 12, 1996)................................. $47.75 $31.75
</TABLE>
DIVIDEND POLICY
The Company has never paid a cash dividend on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company intends
to retain any earnings for use in the growth of its business. The Company
currently is prohibited from paying any cash dividends on its capital stock
under the Credit Agreement.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth, as of September 30, 1996, (a) the actual
capitalization of the Company, (b) the capitalization of the Company as adjusted
to reflect the sale of the 3,500,000 shares of Class A Common Stock offered
hereby by the Company at an assumed offering price of $32.25 per share (after
deducting the underwriting discounts and commissions and estimated offering
expenses) and the application of the estimated net proceeds therefrom as set
forth in "Use of Proceeds" and (c) the pro forma capitalization of the Company
to reflect the Transactions (as defined herein), as if they had occurred on
September 30, 1996.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------------------
AS PRO FORMA
ACTUAL ADJUSTED AS ADJUSTED
-------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................ $ 5,132 $ 5,132 $ 6,210
======== ======== ========
Current portion of long-term debt........................ $ 1,859 $ 1,859 $ 1,901
Long-term debt:
Credit Agreement....................................... 135,000 27,500 58,748
Other long-term debt................................... 2,659 2,659 42,662
-------- -------- --------
Total long-term debt........................... 137,659 30,159 101,410
Stockholders' equity:
Preferred Stock, $0.001 par value, 5,000,000 shares
authorized; none issued and outstanding actual, as
adjusted, and pro forma as adjusted................. -- -- --
Class A Common Stock, $0.001 par value; 30,000,000
shares authorized actual and as adjusted; 11,547,731
shares issued and outstanding actual; 15,047,731
shares issued and outstanding as adjusted;
50,000,000 shares authorized pro forma as adjusted
and 13,309,374 shares issued and outstanding pro
forma as adjusted................................... 11 15 13
Class B Common Stock, $0.001 par value; 7,000,000
shares authorized actual; none issued and
outstanding actual and as adjusted; 50,000,000
shares authorized pro forma as adjusted and
7,428,235 shares issued and outstanding pro forma as
adjusted(1)......................................... -- -- 8
Additional paid-in capital............................. 102,578 210,074 399,008
Accumulated deficit.................................... (90,488) (90,488) (90,488)
-------- -------- --------
Total stockholders' equity..................... 12,101 119,601 308,541
-------- -------- --------
Total capitalization...................... $151,619 $151,619 $ 411,852
======== ======== ========
</TABLE>
- ---------------
(1) Upon consummation of the Tichenor Merger, the authorized Class B Common
Stock will be amended to become Nonvoting Common Stock.
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<PAGE> 18
THE TICHENOR MERGER
GENERAL
Tichenor is a national radio broadcasting company engaged in the business
of acquiring, developing and programming Spanish language radio stations in
major Hispanic markets located in the United States. Currently, Tichenor owns or
programs 20 radio stations serving six of the top ten Hispanic markets in the
United States, including San Francisco/San Jose, Chicago, Houston, San Antonio,
McAllen/Brownsville/Harlingen and El Paso. Individually or through AM-FM station
combinations, Tichenor operates the top-rated radio station in any format in
three of the top ten Hispanic markets (San Antonio,
McAllen/Brownsville/Harlingen and El Paso), as measured by the Arbitron four
book average adults 25-54 demographic. Tichenor operates the top-rated Spanish
language radio station in five of its six markets as measured by the same
audience share statistics. Tichenor recently entered the San Francisco/San Jose
market, the fourth largest Hispanic market, by purchasing KSOL-FM and KZOL-FM
(formerly KYLZ-FM) for approximately $40 million. These two stations, previously
programmed in English, were converted to a Spanish format in August 1996. These
two stations will be simulcast under one Spanish format, representing the first
full-signal Spanish FM stations to cover the San Francisco/San Jose market.
THE TICHENOR MERGER AGREEMENT
On July 9, 1996, Clear Channel and Tichenor entered into the Tichenor
Merger Agreement which, subject to the terms and conditions thereof, provides
for the acquisition of Tichenor by the Company. The then existing management and
Board of Directors of the Company were not involved in the negotiations
concerning the acquisition of Tichenor. On August 14, 1996, after the
consummation of the Tender Offer, Clear Channel offered to assign the Tichenor
Merger Agreement to the Company in accordance with the Tichenor Merger
Agreement, and on October 10, 1996, the Board of Directors of the Company
approved the Tichenor Merger and the assignment to the Company of the Tichenor
Merger Agreement. In approving the Tichenor Merger, the Company considered,
among other things, the strength of the combined management of the Company and
Tichenor; the marketing and operating benefits of the expansion of the Company's
presence into each of the top ten Hispanic markets; and the benefits of
diversifying the Company's operations thereby reducing its reliance on any
individual market.
Pursuant to the Tichenor Merger Agreement, a newly-formed wholly owned
subsidiary of the Company will be merged with and into Tichenor and the shares
of Tichenor capital stock (other than certain preferred stock) will be converted
into shares of the Company's Class A Common Stock. Pursuant to the Tichenor
Merger Agreement, (i) 684,168.93 shares of outstanding Tichenor common stock
will be converted into an aggregate of approximately 5,354,350 shares of the
Company's Class A Common Stock, (ii) 35,772.48 shares of Tichenor's outstanding
Junior Preferred Stock will be converted into an aggregate of approximately
155,528 shares of the Company's Class A Common Stock, (iii) 3,000 shares of
Tichenor's outstanding 14% Senior Redeemable Cumulative Preferred Stock will be
converted into the right to receive an aggregate of $3,000,000, plus
approximately $379,000 of accrued and unpaid dividends, and (iv) an existing
warrant for Tichenor capital stock, or the shares received upon exercise thereof
if the warrant is exercised prior to the effective time of the Tichenor Merger,
shall be converted into 180,000 shares of the Company's Class A Common Stock.
The ratios at which the Company's Class A Common Stock will be exchanged for
shares of Tichenor's common and preferred stock were determined in July 1996 in
arms-length negotiations between Clear Channel and Tichenor. The aggregate
market value of the Company's Common Stock to be received by Tichenor
shareholders (including Clear Channel) was $180.7 million, based on a closing
price per share of $32.25 on December 12, 1996 and assuming that the market
value per share of the Company's Nonvoting Common Stock is the same as that of
the Company's Class A Common Stock). As a result of the Tichenor Merger,
Tichenor will become a
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<PAGE> 19
wholly owned subsidiary of the Company. The Company will also indirectly assume
Tichenor's outstanding debt which was approximately $71.3 million at September
30, 1996.
Prior to consummation of the Tichenor Merger, Clear Channel will purchase
16,664 shares of Tichenor common stock from certain shareholders of Tichenor for
approximately $3,000,000. At the effective time of the Tichenor Merger, each
share of Tichenor common stock owned by Clear Channel will be converted into
7.8261 shares of Nonvoting Common Stock and each share of the Company's Class A
Common Stock owned by Clear Channel will be converted into one share of
Nonvoting Common Stock.
FUTURE MANAGEMENT TEAM
The Tichenor Merger Agreement provides that the Company will take such
actions necessary so that immediately after the effective time of the Tichenor
Merger five designees of Tichenor shall constitute the entire Board of Directors
of the Company. The Tichenor Merger Agreement also provides that at or prior to
the effective time of the Tichenor Merger, the Company will enter into an
employment agreement with McHenry T. Tichenor, Jr. pursuant to which Mr.
Tichenor will serve as Chairman, President and Chief Executive Officer of the
Company for a five year term. See "Management -- Management of the Company
Following the Tichenor Merger"
REGISTRATION RIGHTS; STOCKHOLDERS AGREEMENT
The Tichenor Merger Agreement also provides that the Company will grant
certain demand and "piggyback" registration rights to certain former Tichenor
shareholders (including Mr. Tichenor) who will own an aggregate of 5,180,827
shares of Class A Common Stock following the Tichenor Merger (collectively, the
"Major Tichenor Shareholders"), and will grant certain demand and piggyback
registration rights to Clear Channel with respect to any shares of Class A
Common Stock that may be held from time to time by Clear Channel following the
Tichenor Merger. It is also contemplated that Clear Channel and the Major
Tichenor Shareholders will enter into a Stockholders Agreement with the Company
whereby such stockholders will agree to certain restrictions on the transfer of
their shares of Common Stock of the Company and will grant certain rights of
first refusal and "tag-along" rights with respect to certain sales of such
shares.
CONDITIONS TO THE TICHENOR MERGER
Consummation of the Tichenor Merger is subject to a number of conditions,
including, among others, approval of the Tichenor Merger Agreement or matters
relating to the Tichenor Merger by the stockholders of the Company and Tichenor;
the receipt by the Company of an opinion from a nationally recognized investment
banking firm or financial advisor that the consideration to be paid by the
Company in the Tichenor Merger is fair to the stockholders of the Company from a
financial point of view; expiration or termination of the applicable waiting
period under the HSR Act; effectiveness under the Securities Act of a
registration statement relating to the securities of the Company to be issued in
the Tichenor Merger; no material adverse effect occurring with respect to
Tichenor or the Company; and the receipt of all required FCC approvals. In
addition, the consummation of the Tichenor Merger may not occur prior to
February 6, 1997. There can be no assurance that all of these conditions will be
satisfied or waived or that the Tichenor Merger will be consummated. Clear
Channel, which will own a majority of the outstanding shares of the Company's
Class A Common Stock on the record date for the vote for the Tichenor Merger,
intends to vote all such shares in favor of matters presented to the Company's
stockholders related to the Tichenor Merger. It is not anticipated that
purchasers of shares of the Company's Class A Common Stock in the Offering will
be entitled to vote on such matters related to the Tichenor Merger. See "Risk
Factors -- Tichenor Merger."
Consummation of the Tichenor Merger requires the approval of the FCC. The
FCC's cross-interest policy bars a party that holds an attributable interest in
one or more radio stations in a
18
<PAGE> 20
market from having a "meaningful relationship" with another radio station in
that market. A "meaningful relationship" is construed by the FCC to include a
non-voting equity position in excess of 33 1/3% of the total outstanding Common
Stock. After consummation of the Tichenor Merger and the Offering, Clear Channel
will own approximately 36% of the Common Stock. Clear Channel has informed the
Company that it is considering a number of alternatives to comply with FCC
regulations upon consummation of the Tichenor Merger. In the event that no other
alternative is approved by the FCC, Clear Channel may place any remaining shares
of Nonvoting Common Stock above the 33 1/3% maximum in a disposition trust for
the purpose of sale through negotiated block transactions or other types of
sales. The use of a disposition trust, and the terms thereof, would be subject
to the prior consent of the FCC. See "Risk Factors -- Tichenor Merger."
TICHENOR FAMILY OWNERSHIP
Upon consummation of the Tichenor Merger and after giving effect to the
Offering, Mr. Tichenor and certain members of his family (collectively, the
"Tichenor Family") will own an aggregate of approximately 4,556,486 shares of
Class A Common Stock (representing approximately 34% of the then outstanding
Class A Common Stock) and may have the ability, if they act together as a group,
to control the Company. The members of the Tichenor Family have entered into a
Voting Agreement pursuant to which the majority of the shares of Tichenor common
stock and Junior Preferred Stock currently held by them, as well as the
approximately 4,345,718 shares of the Company's Class A Common Stock to be
received in exchange therefor in the Tichenor Merger, shall be voted in
accordance with the instructions of McHenry T. Tichenor, Jr. and McHenry T.
Tichenor, Sr. until such time as the FCC shall have approved an amendment to
such agreement, whereupon the shares subject to the voting agreement shall be
voted in accordance with the instructions of the holders of a majority of such
shares.
CLEAR CHANNEL OWNERSHIP
Upon consummation of the Tichenor Merger, Clear Channel will own only
Nonvoting Common Stock and thus will not have the right to vote for the election
of directors of the Company, although Clear Channel will have certain class
voting rights discussed in more detail below.
The Nonvoting Common Stock that Clear Channel will receive in the Tichenor
Merger will convert into Class A Common Stock automatically upon sale or
transfer to a person or entity other than Clear Channel. Each share of the
Nonvoting Common Stock will also be convertible into Class A Common Stock at the
option of its holder, subject to any necessary FCC consent. In addition, Clear
Channel may convert shares of Class A Common Stock held by it into shares of
Nonvoting Common Stock at its option.
Holders of the Nonvoting Common Stock will in certain circumstances have
certain voting rights. Specifically, so long as Clear Channel owns at least 20%
of the Company's Common Stock then outstanding, the Company will not be able to,
and will not be able to permit any subsidiary to, without the vote or consent by
the holders of a majority of the Nonvoting Common Stock voting as a single
class, take any of the following actions: (i) effect the sale, lease or other
transfer of all or substantially all of the assets of the Company, or any merger
or consolidation involving the Company where the stockholders of the Company
immediately prior to such transaction would not own at least 50% of the capital
stock of the surviving entity, or any reclassification, recapitalization,
dissolution, liquidation or winding up of the Company; (ii) authorize, issue or
obligate itself to issue any shares of Preferred Stock; (iii) make or permit any
amendment to the Company's certificate of incorporation that adversely affects
the rights of the holders of Nonvoting Common Stock; (iv) declare or pay any
non-cash dividends on or make any other non-cash distribution on its common
stock; or (v) make or permit any amendment or modification to the Company's
certificate of incorporation concerning the Company's Common Stock. See
"Description of Capital Stock."
19
<PAGE> 21
LOAN TO TICHENOR
Concurrent with the execution of the Tichenor Merger Agreement, Clear
Channel and a subsidiary of Tichenor entered into a Loan Agreement (the
"Tichenor Loan Agreement"), pursuant to which Clear Channel loaned $40 million
to a Tichenor subsidiary to finance the subsidiary's acquisition of two FM radio
stations and related assets serving the San Francisco/San Jose market. The loan
is secured by all of the outstanding stock of a subsidiary of the borrower which
holds the radio licenses for the acquired stations. The loan is guaranteed by
Tichenor, and the guaranty is secured by all of the outstanding stock of the
borrower. The loan becomes due on January 1, 1998, and must be repaid in full at
that time. The loan has no penalty for early repayment and carries a market rate
of interest. See "Risk Factors -- Relationship Between the Company and Clear
Channel -- Tichenor Loan Agreement."
20
<PAGE> 22
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information presents the Company's balance sheet at September 30, 1996 as if at
such date, the following transactions (collectively, the "Transactions") had
been completed: (i) the Offering (at an assumed offering price of $32.25 per
share) and application of the estimated net proceeds therefrom as set forth in
"Use of Proceeds;" (ii) the Tichenor Acquisitions (as defined herein); and (iii)
the Tichenor Merger. The following unaudited pro forma condensed consolidated
statements of operations present the Company's results of operations for the
year ended September 30, 1996 and Tichenor's results of operations for the
twelve months ended September 30, 1996, as if the Transactions had been
completed at October 1, 1995. The pro forma condensed consolidated financial
statements also give effect to various acquisitions completed by Tichenor (the
"Tichenor Acquisitions") during the periods presented, as more fully described
in the Notes hereto.
The purchase price of the Tichenor Merger approximates $256.1 million,
assuming the issuance of 5,689,878 shares of the Company's Common Stock (with a
per share value equal to $31.75, which was the closing price for the Class A
Common Stock on July 9, 1996, the day the Tichenor Merger was announced), the
Company's assumption of Tichenor's outstanding debt, which was approximately
$71.3 million at September 30, 1996 (on a pro forma basis), plus the redemption
of 3,000 shares of Tichenor's outstanding 14% Senior Redeemable Cumulative
Preferred Stock for $3,000,000, plus approximately $379,000 of accrued and
unpaid dividends, less cash of Tichenor on a pro forma basis. Such purchase
price will change based on the actual debt and cash of Tichenor on the closing
date for the Tichenor Merger. The Tichenor Merger will be accounted for using
the purchase method of accounting. The purchase price will be allocated
primarily to FCC licenses and other intangible assets and amortized over 40
years. The pro forma condensed consolidated financial information does not
purport to present the actual financial position or results of operations of the
Company had the Transactions actually occurred on the dates specified, nor is it
necessarily indicative of the results of operations that may be achieved in the
future. See "The Tichenor Merger," "Use of Proceeds," "Capitalization" and the
Financial Statements included elsewhere in this Prospectus or incorporated
herein by reference.
21
<PAGE> 23
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
COMPANY THE COMPANY TICHENOR(2) TICHENOR
AS REPORTED OFFERING(1) AS ADJUSTED AS REPORTED ACQUISITIONS(3)
----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Net broadcasting revenues........................... $ 71,732 $ -- $ 71,732 $44,467 $ 3,548
Station operating expenses.......................... 48,896 -- 48,896 32,417 4,166
Corporate expenses.................................. 5,072 -- 5,072 3,578 345
Depreciation and amortization....................... 5,140 -- 5,140 3,018 496
---------- -------- ---------- ------- -------
Total operating expenses........................... 59,108 -- 59,108 39,013 5,007
---------- -------- ---------- ------- -------
Operating income (loss)............................. 12,624 -- 12,624 5,454 (1,459)
Interest expense, net............................... (11,034) 8,600 (2,434) (3,063) (2,331)
Loss on retirement of debt.......................... (7,461) -- (7,461) -- --
Restructuring charges............................... (29,011) -- (29,011) -- --
Other income (expense), net......................... (1,671) -- (1,671) (197) (7)
---------- -------- ---------- ------- -------
Income (loss) before provision for income taxes..... (36,553) 8,600 (27,953) 2,194 (3,797)
Income tax (expense) benefit........................ (65) -- (65) (2,457) --
---------- -------- ---------- ------- -------
Income (loss) from continuing operations............ $ (36,618) $ 8,600 $ (28,018) $ (263) $(3,797)
========== ======== ========== ======= =======
Income (loss) from continuing operations per common
and common equivalent share........................ $(3.56) $(2.03) $(.98)(4)
========== ========== =======
Weighted average shares outstanding................. 10,294,967 13,794,967 683,857
========== ========== =======
OTHER OPERATING DATA:
Broadcast cash flow................................. $22,836 $22,836 $12,050
<CAPTION>
TICHENOR COMPANY
TICHENOR MERGER PRO FORMA
PRO FORMA TICHENOR PRO FORMA CONDENSED
ADJUSTMENTS PRO FORMA ADJUSTMENTS CONSOLIDATED
----------- --------- ----------- ------------
<S> <C<C> <C> <C> <C>
Net broadcasting revenues........................... $ -- $48,015 $ -- $ 119,747
Station operating expenses.......................... (28)(5) 36,555 -- 85,451
Corporate expenses.................................. -- 3,923 (2,500)(9) 6,495
Depreciation and amortization....................... 784(6) 4,298 6,974(10) 16,412
------- ------- ------- ----------
Total operating expenses........................... 756 44,776 4,474 108,358
------- ------- ------- ----------
Operating income (loss)............................. (756) 3,239 (4,474) 11,389
Interest expense, net............................... (1,766)(7) (7,160) -- (9,594)
Loss on retirement of debt.......................... -- -- -- (7,461)
Restructuring charges............................... -- -- -- (29,011)
Other income (expense), net......................... 118(5) (86) -- (1,757)
------- ------- ------- ----------
Income (loss) before provision for income taxes..... (1,648) (4,007) (4,474) (36,434)
Income tax (expense) benefit........................ 2,263(8) (194) 3,800(11) 3,541
------- ------- ------- ----------
Income (loss) from continuing operations............ $ (141) $(4,201) $ (674) $ (32,893)
======= ======= ======= ==========
Income (loss) from continuing operations per common
and common equivalent share........................ $(6.38)(4) $ (1.69)
======= ==========
Weighted average shares outstanding................. 683,857 19,484,845
======= ==========
OTHER OPERATING DATA:
Broadcast cash flow................................. $11,460 $34,296
</TABLE>
22
<PAGE> 24
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
TICHENOR
MERGER
COMPANY THE COMPANY AS TICHENOR PRO FORMA
AS REPORTED OFFERING(1) ADJUSTED AS REPORTED ADJUSTMENTS(12)
------------ ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents............................. $ 5,132 $ -- $ 5,132 $ 5,066 $ (3,988)(13)
Accounts receivable, net.............................. 17,015 -- 17,015 9,851 --
Other current assets.................................. 1,012 -- 1,012 868 --
-------- ---------- -------- -------- --------
Total current assets................................ 23,159 -- 23,159 15,785 (3,988)
Property and equipment, net........................... 19,836 -- 19,836 9,436 --
Intangible assets, net................................ 121,742 -- 121,742 74,786 222,961(14)
Other assets.......................................... 1,014 -- 1,014 1,506 --
-------- ---------- -------- -------- --------
Total assets........................................ $165,751 $ -- $165,751 $ 101,513 $ 218,973
======== ========== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities................................... 14,132 $ -- $ 14,132 $ 6,837 $ --
Current portion of long-term debt..................... 1,859 -- 1,859 42 --
Long-term debt, net of current portion:
Credit Agreement.................................... 135,000 (107,500) 27,500 31,248 --
Other long-term debt................................ 2,659 -- 2,659 40,003 --
-------- ---------- -------- -------- --------
Total long-term debt, net of current portion........ 137,659 (107,500) 30,159 71,251 --
Deferred income taxes................................. -- -- -- 3,818 49,598 (15)
Senior preferred stock................................ -- -- -- 3,379 (3,379)(16)
Common stock purchase warrant......................... -- -- -- 4,140 (4,140)(17)
-------- ---------- -------- -------- --------
Total liabilities................................... 153,650 (107,500) 46,150 89,467 42,079
Preferred stock....................................... -- -- -- -- --
Junior preferred stock................................ -- -- -- 368 (368)(17)
Class A common stock.................................. 11 4 15 -- (2)(17)
Class B common stock*................................. -- -- -- -- 8 (17)
Common stock (Tichenor)............................... -- -- -- 744 (744)(17)
Additional paid-in capital............................ 102,578 107,496 210,074 4,357 180,437 (17)
Notes receivable from stockholders.................... -- -- -- (158) 158 (17)
(Accumulated deficit) Retained earnings............... (90,488) -- (90,488) 8,130 (8,130)(18)
Less treasury stock, at cost.......................... -- -- -- (1,395) 1,395 (17)
-------- ---------- -------- -------- --------
Total stockholders' equity.......................... 12,101 107,500 119,601 12,046 172,754
-------- ---------- -------- -------- --------
Total liabilities and stockholders' equity.......... $165,751 $ -- $165,751 $ 101,513 $ 218,973
======== ========== ======== ======== ========
<CAPTION>
COMPANY
PRO FORMA
CONDENSED
CONSOLIDATED
-------------
<S> <C<C>
ASSETS:
Cash and cash equivalents............................. $ 6,210
Accounts receivable, net.............................. 26,866
Other current assets.................................. 1,880
---------
Total current assets................................ 34,956
Property and equipment, net........................... 29,272
Intangible assets, net................................ 419,489
Other assets.......................................... 2,520
---------
Total assets........................................ $ 486,237
=========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities................................... $ 20,969
Current portion of long-term debt..................... 1,901
Long-term debt, net of current portion:
Credit Agreement.................................... 58,748
Other long-term debt................................ 42,662
---------
Total long-term debt, net of current portion........ 101,410
Deferred income taxes................................. 53,416
Senior preferred stock................................ --
Common stock purchase warrant......................... --
---------
Total liabilities................................... 177,696
Preferred stock....................................... --
Junior preferred stock................................ --
Class A common stock.................................. 13
Class B common stock*................................. 8
Common stock (Tichenor)............................... --
Additional paid-in capital............................ 399,008
Notes receivable from stockholders.................... --
(Accumulated deficit) Retained earnings............... (90,488)
Less treasury stock, at cost.......................... --
---------
Total stockholders' equity.......................... 308,541
---------
Total liabilities and stockholders' equity.......... $ 486,237
=========
</TABLE>
* Includes Class B referred to in this Prospectus as Nonvoting Common Stock.
23
<PAGE> 25
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(1) Reflects the application of the estimated net proceeds from the
Offering, assuming an offering price of $32.25 per share, toward the paydown of
debt outstanding under the Credit Agreement and the related effects on interest
expense and the effect of the Offering on the Company's Common Stock and
additional paid-in capital.
(2) Represents the historical operating results of Tichenor for the twelve
months ended September 30, 1996 obtained by adding Tichenor operating results
for the three months ended December 31, 1995 to operating results for the nine
months ended September 30, 1996. Net revenues and net loss for the three months
ended December 31, 1995 were $11,354,882 and ($622,892), respectively.
(3) Represents the historical operating results of the Tichenor
Acquisitions for the period of October 1, 1995 to the respective dates on which
Tichenor began operating the acquired stations as a result of the purchase of
station assets or entering into time brokerage agreements as follows:
<TABLE>
<CAPTION>
KSOL-FM KYLZ-FM
-----------------------------------------------------
PERIOD
KQXX-FM THREE MONTHS JULY 1,
YEAR ENDED ENDED SIX MONTHS 1996 TO
SEPTEMBER 30, DECEMBER 31, ENDED JUNE AUGUST 15,
1996 1995 30, 1996 1996 SUBTOTAL TOTAL
------------- ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues...................... $ 153,804 $ 979,412 $ 1,948,688 $ 467,683 $ 3,413,781 $ 3,547,685
Station operating expenses
excluding depreciation and
amortization................ 129,100 1,091,720 2,366,525 414,705 4,030,963 4,166,053
Corporate expense............. -- 68,407 200,000 49,247 344,730 344,730
Depreciation and
amortization................ 5,600 132,610 287,805 70,069 450,484 490,064
Interest expense.............. -- 701,528 1,296,502 333,005 2,331,033 2,331,035
Other expense................. -- 14,630 (8,757) 874 6,817 6,817
--------- ----------- ----------- ---------- ----------- -----------
Total expense......... 134,700 2,028,988 4,151,031 1,030,003 7,210,018 7,344,719
--------- ----------- ----------- ---------- ----------- -----------
Net loss.............. $ (896) $(1,049,573 ) $(2,204,345) $(642,320) $(3,788,258) $(3,797,134)
========= =========== =========== ========== =========== ===========
</TABLE>
(4) Net income per common and common equivalent share for Tichenor is
calculated by deducting from net income senior preferred stock dividends and
accretion of stock warrant totaling $404,304 for the twelve months ended
September 30, 1996 and dividing such result by the weighted average shares
outstanding for the respective period. As a result of the Tichenor Merger, the
senior preferred stock and stock warrant will be retired and the related
dividend and accretion requirements will be eliminated.
(5) Represents the elimination of local marketing agreement fees relating
to KQXX-FM and KRTX-FM of $146,000 for the year ended September 30, 1996.
(6) Represents incremental depreciation and amortization expense for the
twelve months ended September 30, 1996 resulting from the Tichenor Acquisitions
for the period of October 1, 1995 through the respective dates of purchase as
follows:
<TABLE>
<CAPTION>
KSOL-FM/
KRTX-FM KQXX-FM KLTP-FM KYLZ-FM TOTAL
------- -------- ------- --------- ----------
<S> <C> <C> <C> <C> <C>
Depreciation...................... $ -- $33,085 $18,589 $206,877 $ 258,551
Amortization...................... 36,458 156,281 14,551 814,460 1,021,751
Less historical................... -- (5,600) -- (490,484) (496,084)
------- -------- ------- -------- ----------
Total................... $36,458 $183,766 $33,140 $530,853 $ 784,218
======= ======== ======= ======== ==========
</TABLE>
The estimated weighted average useful lives of fixed assets, FCC licenses,
going concern and other intangibles are assumed to be seven, forty, fifteen and
five years, respectively.
24
<PAGE> 26
(7) Represents incremental interest expense for the twelve months ended
September 30, 1996 associated with borrowings in connection with the Tichenor
Acquisitions as if such borrowings were outstanding for the entire periods
presented. The purchases of KRTX-FM, KQXX-FM and KLTP-FM were funded with cash
from operations and borrowings under Tichenor's credit facility. The purchase of
KSOL-FM/KYLZ-FM was funded with a note payable issued to Clear Channel with a
weighted average interest rate of 11%. The weighted average interest rate under
Tichenor's credit facility during the respective periods is 8% based on
historical borrowing costs.
<TABLE>
<CAPTION>
LESS
KSOL-FM/ HISTORICAL
KRTX-FM KQXX-FM KLTP-FM KYLZ-FM BALANCES TOTAL
-------- -------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest expense........ $120,000 $ 86,667 $40,000 $3,850,000 $(2,331,035) $1,765,632
======== ======== ======== ========== =========== ==========
</TABLE>
(8) Represents the incremental income tax effect of the pro forma
adjustments at an estimated effective income tax rate of 38%.
(9) Reflects the elimination of executive compensation and related benefits
of approximately $2,500,000 for the year ended September 30, 1996, relating to
former officers of the Company terminated in connection with the consummation of
the Tender Offer.
(10) Reflects incremental amortization expense of approximately $6,974,000
for the year ended September 30, 1996, consisting of (a) the amortization over
forty years of additional intangible assets allocated and recorded as a result
of the Tichenor Merger of $5,574,000 plus (b) $1,400,000 relating to the
amortization of five-year non-compete agreements entered into with former senior
management in connection with the termination of their employment in connection
with the consummation of the Tender Offer.
(11) Reflects the tax benefit assuming the utilization of Heftel's net
operating losses against Tichenor's deferred tax liability.
(12) Summary of purchase price components and allocation to assets and
liabilities acquired:
<TABLE>
<S> <C>
Purchase price:
Number of shares of Class A Common Stock to be issued.................... 5,689,878
Assumed per share price.................................................. 31.75
-----------
Purchase price paid in stock............................................. 180,653,627
Amount payable for Tichenor Senior Preferred Stock and related
dividends............................................................. 3,379,000
Estimated legal and other transaction costs.............................. 767,373
-----------
Total cash to be paid.................................................... 4,146,373
-----------
Purchase price excluding assumed Tichenor debt........................... 184,800,000
Assumption of Tichenor debt.............................................. 71,293,000
-----------
Total purchase price............................................. 256,093,000
===========
Allocation of purchase price:
FCC licenses and other intangible assets................................. 234,398,000
Deferred income tax liability............................................ (49,598,000)
Long-term debt........................................................... 71,293,000
-----------
Total purchase price............................................. 256,093,000
===========
</TABLE>
(13) Reflects net cash paid in connection with the Tichenor Merger as
follows:
<TABLE>
<S> <C>
Payment of Tichenor Senior Preferred Stock and related dividends...... $(3,379,000)
Estimated legal and other transaction cost............................ (767,000)
Cash received in collection of notes receivable from Tichenor
stockholders........................................................ 158,000
-----------
Net cash paid............................................... $(3,988,000)
===========
</TABLE>
25
<PAGE> 27
(13) Represents the allocation to intangible assets of the excess purchase
price over the fair value of net working capital, tangible assets and long-term
liabilities acquired in connection with the Tichenor Merger. For purposes of the
preliminary allocation of the purchase price, the carrying amounts of net
working capital, tangible assets and long-term liabilities (excluding deferred
tax liabilities) are assumed to approximate their fair value.
(14) Represents the deferred tax liability resulting from the Tichenor
Merger. The deferred tax liability is calculated by applying an assumed
effective tax rate of 38% to the difference between the pro forma book and tax
basis of the combined entities. Deferred tax assets are recognized to the extent
that such assets are expected to be utilized in the carryforward period.
(15) Represents the retirement of Tichenor's senior preferred stock at its
carrying value with cash of $3,378,749.
(16) Represents the conversion of the Tichenor stock warrant and junior
preferred stock to Tichenor common stock, the retirement of Tichenor's notes
receivable from stockholders and the exchange of each outstanding share of
Tichenor common stock into 7.8261 shares of the Class A Common Stock with a per
share value of $31.75 in connection with the Tichenor Merger. Also reflects the
conversion of 7,428,235 shares of Class A Common Stock ($.001 par value) held by
Clear Channel into an equal number of shares of Nonvoting Common Stock.
(17) Represents the elimination of the historical retained earnings of
Tichenor.
26
<PAGE> 28
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)
The selected consolidated balance sheet data as of September 30, 1994, 1995
and 1996, and the consolidated statement of operations data for each of the
fiscal years then ended are derived from the Company's consolidated financial
statements incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------
1994(1) 1995(2) 1996
--------- ---------- ----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net broadcasting revenues..................................................... $ 27,433 $ 64,160 $ 71,732
Station operating expenses.................................................... 15,345 43,643 48,896
Corporate expenses............................................................ 3,454 4,720 5,072
Depreciation and amortization................................................. 1,906 3,344 5,140
--------- ---------- ----------
Total operating expenses.................................................... 20,705 51,707 59,108
--------- ---------- ----------
Operating income.............................................................. 6,728 12,453 12,624
Other income (expense):
Interest expense, net....................................................... (2,997) (6,389) (11,034)
Income in equity of joint venture(3)........................................ 616 -- --
Loss on retirement of debt.................................................. (1,738) -- (7,461)
Restructuring charges....................................................... -- -- (29,011)
Other expenses, net......................................................... (1,407) (428) (1,671)
--------- ---------- ----------
Total other income (expense)............................................ (5,526) (6,817) (49,177)
--------- ---------- ----------
Income before minority interest and provision for income taxes................ 1,202 5,636 (36,553)
Minority interest in Viva Media(3)............................................ (351) (1,167) --
Provision for income taxes.................................................... (100) (150) (65)
--------- ---------- ----------
Income from continuing operations............................................. 751 4,319 (36,618)
Loss from discontinued operations............................................. (285) (626) (9,988)
--------- ---------- ----------
Net income (loss)............................................................. $ 466 $ 3,693 $ (46,606)
========= ========== ==========
Income from continuing operations per common and common equivalent share...... $ .14 $ .40 $ (3.56)
========= ========== ==========
Net income (loss) per common and common equivalent share...................... $ .05 $ .34 $ (4.53)
========= ========== ==========
Weighted average common shares and common shares equivalents outstanding...... 5,384,678 10,805,346 10,294,967
========= ========== ==========
OTHER OPERATING DATA:
Broadcast cash flow(4)........................................................ $ 12,088 $ 20,517 $ 22,836
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
SEPTEMBER 30, -----------------------------
------------------------------------- AS PRO FORMA,
1994 1995 1996 ADJUSTED(5) AS ADJUSTED(6)
--------- ---------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 10,219 $ 5,404 $ 5,132 $ 5,132 $ 6,210
Working capital............................ 18,366 14,967 7,168 7,168 12,086
Total assets............................... 113,353 151,637 165,751 165,751 486,237
Long-term debt, less current portion....... 59,898 97,516 137,659 30,159 101,410
Stockholders' equity (deficiency).......... 44,436 43,581 12,101 119,601 308,541
</TABLE>
- ---------------
(1) During August 1994, the Company completed three separate business
acquisitions and began consolidating its previously unconsolidated
investment in Viva Media. Total net revenues and net income (loss), adjusted
for interest expense on retired debt, relating to these acquisitions and
transaction from the respective dates of these transactions to September 30,
1994 were approximately $5,488,000 and $(80,000), respectively.
(2) During fiscal 1995, the Company completed several radio station
acquisitions. Due to the financial effects of these transactions, the results
of operations for 1996 reflect a full fiscal year of operations for these
radio stations compared to a partial fiscal year in 1995. Consequently, the
results of operations for the two years ended September 30, 1996 are not
entirely comparable.
(3) Effective August 20, 1994, the Company began accounting for its 49% interest
in Viva Media on a consolidated basis. Accordingly Viva Media's results of
operations are included in the consolidated financial statements for the
period from August 20, 1994 through September 30, 1994 and for each of the
fiscal years ended September 30, 1995 and 1996. Prior to August 20, 1994,
the accounts and results of operations of Viva Media were accounted for
using the equity method of accounting.
(4) Data on station operating income excluding corporate expenses, depreciation
and amortization (commonly referred to as "broadcast cash flow"), although
not calculated in accordance with generally accepted accounting principles,
is widely used in the broadcast industry as a measure of a broadcast
company's operating performance. Nevertheless, this measure should not be
considered in isolation or as a substitute for operating income, cash flows
from operating activities or any other measures for determining the
Company's operating performance or liquidity which are calculated in
accordance with generally accepted accounting principles.
(5) As adjusted to give effect to the Offering (at an assumed offering price of
$32.25 per share) and the application of the estimated net proceeds
therefrom as if the Offering had been consummated on September 30, 1996.
(6) Pro forma as adjusted to give effect to the Transactions, including the
Offering (at an assumed price of $32.25 per share) and the application of
the estimated net proceeds therefrom, as if they had been consummated on
September 30, 1996. The effect of the Tichenor Merger is based on
preliminary purchase price allocations. The pro forma information does not
purport to present the actual financial position of the Company had the
Transactions actually occurred on the date specified. See "The Tichenor
Merger," "Use of Proceeds," "Capitalization" and the Financial Statements
and Notes thereto for each of the Company, Tichenor and the Tichenor
Acquisitions included elsewhere in this Prospectus or incorporated herein by
reference.
27
<PAGE> 29
THE COMPANY
GENERAL
The Company was incorporated under the laws of the State of Delaware in
1992, as the successor to a radio broadcasting company which began operations in
1974. The Company is the largest Spanish language radio broadcasting company in
the United States and currently owns and programs 17 radio stations, 16 of which
are in five of the ten largest Hispanic markets in the United States, including
Los Angeles, New York, Miami, Chicago and Dallas/Fort Worth. The Board of
Directors of the Company has approved the Tichenor Merger Agreement to acquire
Tichenor, the third largest Spanish language radio broadcasting company in the
United States. Tichenor owns or programs 20 stations, which serve six of the ten
largest Hispanic markets in the United States, including San Francisco/San Jose,
Chicago, Houston, San Antonio, McAllen/Brownsville/Harlingen and El Paso.
Following the Tichenor Merger, the Company will own or program 37 radio stations
in 11 markets, including stations in each of the top ten Hispanic markets in the
United States.
The Company's strategy is to own and program top performing radio stations,
principally in the largest Spanish language radio markets in the United States.
The top ten Hispanic markets account for approximately 17.2 million Hispanics,
representing approximately 63% of the total Hispanic population in the United
States. Upon completion of the Tichenor Merger, the Company will have the
largest Spanish language radio station combination, as measured by audience and
revenue share, in eight of the top ten Hispanic markets. Additionally, the
Company will have the highest rated radio station in any format in four of the
top ten Hispanic markets.
The Company intends to acquire or develop additional Spanish language
stations in the leading Hispanic markets. When evaluating a potential
acquisition, the Company considers the following factors: (i) the ability to
generate satisfactory rates of return on its investment, (ii) the ability to
increase operating cash flow at the station, (iii) the strategic importance of
the station to the Company's overall business objectives, (iv) the size and
projected rates of growth of the market's broadcasting revenues, Hispanic
population and consumer spending and (v) the number of competitive stations in
the market.
SPANISH LANGUAGE RADIO
The Company believes Spanish language radio broadcasting has significant
growth potential for the following reasons:
- The Hispanic population is the fastest growing population segment in the
United States and is expected to grow from an estimated 27.2 million
(approximately 10.3% of the total United States population) at the end of
1995 to an estimated 30.7 million (approximately 11.3% of the total
United States population) by the year 2000. These estimates imply a
growth rate of approximately three times the expected growth rate for the
total U.S. population during the same period. The Company estimates that
by the end of 1996 approximately 26% of the overall population of the ten
largest Hispanic markets will be of Hispanic origin.
- Advertisers have substantially increased their use of Spanish language
media in recent years. Total advertising revenues from advertising in
Spanish language media rose from $166 million in 1983 to $1.06 billion in
1995. This represents a compound annual growth rate of 16.7%, which is
more than double the growth rate of total advertising over the same
period. Although Hispanic consumers will spend an estimated $340 billion
in 1997, or 6.5% of the total consumer spending in the United States,
Spanish language advertising currently represents less than 0.7% of total
advertising expenditures.
- Advertisers have begun to target Hispanic households because they are
younger and spend a greater percentage of their household income on
consumer products than non-Hispanic households. Hispanic households in
the United States average 3.5 persons, compared to an
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<PAGE> 30
average of 2.5 persons for non-Hispanic households. In addition, 82% of
Hispanic households in the United States are family units, compared to
71% of all households in the United States. During the 1990's, one in
four new households in the United States is expected to be headed by a
person of Hispanic origin.
- Hispanics have maintained strong social and cultural ties to their
countries of origin, particularly the continued use of the Spanish
language. An estimated 78% of Hispanics speak at least some Spanish and
approximately 40% speak it exclusively. Spanish is expected to continue
to be the language of preference for Hispanics.
- The number of Spanish language media outlets is disproportionately lower
than the number of similar English language outlets. In the radio
segment, there are currently approximately 400 Spanish language
commercial stations, which constitute only approximately 4% of all
commercial radio stations in the United States, although the Hispanic
population comprises approximately 10.3% of the United States population.
PROGRAMMING
Due to differences in origin, Hispanics are not a homogeneous group. The
music, culture, customs and Spanish dialects vary from one radio market to
another. Consequently, the Company programs its stations in a manner responsive
to the local preferences of a target demographic audience in each of the markets
it serves. A well-researched mix of music and on-air programming at an
individual station can attract a wide audience targeted by Spanish language
advertisers. Programming is consistently monitored to maintain its quality and
relevance to the target audience. Most music formats are primarily variations of
Regional Mexican, Tropical, Tejano and Contemporary music styles. The local
program director will select music from the various music styles that best
reflect the music preferences of the local Hispanic audiences. A brief
description of each follows:
Regional Mexican. Regional Mexican consists of various types of music
played in different regions of Mexico. Ranchera music, originating in Jalisco,
Mexico, is a traditional folkloric sound commonly referred to as Mariachi music.
Mariachi music features acoustical instruments and is considered the music
indigenous to Mexicans who have lived in the country towns. Nortena means
northern, and is representative of Northern Mexico. Featuring an accordion,
Nortena has a Polka sound with a distinct Mexican flavor. Banda is a regional
format from the state of Sinaloa, Mexico and is popular in California. Banda
resembles up-tempo marching band music with synthesizers. Regional Mexican also
includes Cumbia music, which originates in Colombia.
Contemporary. The Contemporary format includes pop, Latin rock, and
ballads. This format is similar to English adult contemporary and contemporary
hit radio stations.
Tropical. The Tropical format primarily consists of Salsa, Merengue, and
Cumbia music. Salsa is dance music combining Latin Caribbean rhythms with jazz.
Salsa symbolizes music from Puerto Rico, Cuba, and the Dominican Republic and is
popular with Hispanics living in New York, Miami and Chicago. Merengue music is
up-tempo dance music originating in the Dominican Republic.
Tejano. Tejano music originated in Texas and is based on Mexican themes but
is indigenous to Texas. It is a combination of contemporary rock, Ranchera, and
country music. The lyrics are sung in both Spanish and English. The on-air
talent speak in Spanish and English.
Full Service. The Full Service format includes all the traditional radio
services: music, news, sports, traffic reports, special information programs and
weather.
News/Talk. News includes local, national, international reports and
weather, business, traffic and sports. Talk includes commentary, analysis,
discussion, interviews, call-ins and information shows.
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<PAGE> 31
COMPANY'S STATIONS
The following table sets forth information regarding the Company's radio
stations, assuming completion of the Tichenor Merger:
<TABLE>
<CAPTION>
PRIMARY
MARKET (HISPANIC HEFTEL/ DEMOGRAPHIC FCC
MARKET RANK) STATION(1) TICHENOR STATION FORMAT(2) TARGET FREQUENCY
- ------------------- ------------ -------- ----------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Los Angeles(1) KLVE-FM Heftel Contemporary A 25-54 107.5 MHZ
KTNQ-AM Heftel News/Talk A 25-54 1020 kHz
New York(2) WADO-AM Heftel News/Talk A 25+ 1280 kHz
WPAT-AM(3) Heftel Brokered n/a 930 kHz
WGLI-AM Heftel n/a n/a n/a
Adult
Miami(3) WAMR-FM Heftel Contemporary A 25-54 107.5 MHZ
WRTO-FM Heftel Tropical A 18-34 98.3 MHZ
WAQI-AM Heftel News/Talk A 35+ 710 kHz
WQBA-AM Heftel News/Talk/Sports A 35+ 1140 kHz
San Francisco/
San Jose(4) KSOL-FM Tichenor Regional Mexican A 25-54 98.9 MHZ
KZOL-FM Tichenor Regional Mexican A 25-54 99.1 MHZ
Chicago(5) WOJO-FM(4) Tichenor Regional Mexican A 25-54 105.1 MHZ
WIND-AM(4) Tichenor Full Service A 35+ 560 kHz
WLXX-AM(4) Heftel Tropical A 18-49 1200 kHz
Houston(6) KLTN-FM Tichenor Regional Mexican A 18-49 93.3 MHZ
KLTO-FM(5) Tichenor Regional Mexican A 25-54 104.9 MHZ
KLTP-FM Tichenor Regional Mexican A 25-54 104.9 MHZ
KRTX-FM Tichenor Tejano A 25-54 100.7 MHZ
KLAT-AM Tichenor Full Service A 25-54 1010 kHz
KMPQ-AM(6) Tichenor n/a n/a 980 kHz
San Antonio(7) KXTN-FM Tichenor Tejano A 25-54 107.5 MHZ
KXTN-AM Tichenor Tejano A 25-54 1310 kHz
KROM-FM Tichenor Regional Mexican A 25-54 92.9 MHZ
KCOR-AM Tichenor Regional Mexican A 35+ 1350 kHz
McAllen/Brownsville/
Harlingen(8) KQXX-FM Tichenor Regional Mexican A 25-54 98.5 MHZ
KGBT-AM Tichenor Regional Mexican A 25-54 1530 kHz
KIWW-FM Tichenor Tejano A 25-54 96.1 MHZ
Dallas/Fort
Worth(9) KESS-AM Heftel Full Service A 18+ 1270 kHz
KHCK-FM Heftel Tejano A 18-49 99.1 MHZ
KMRT-FM Heftel Contemporary A 18-49 106.7 MHZ
KINF-AM Heftel Talk A 18-49 1440 kHz
KICI-FM Heftel Tejano A 18-49 107.9 MHZ
KMRT-AM Heftel Contemporary A 18-49 1480 kHz
El Paso(10) KBNA-FM Tichenor Regional Mexican A 25-54 97.5 MHZ
KBNA-AM Tichenor Regional Mexican A 25-54 920 kHz
KAMA-AM Tichenor Tejano A 25-54 750 kHz
Las Vegas(33) KLSQ-AM Heftel Regional Mexican A 18-49 870 kHz
</TABLE>
- ---------------
(1) Actual city of License may differ from the metropolitan market served.
(2) See "Programming."
(3) The Company sells airtime on this station to third parties for broadcast of
specialty programming.
(4) Application for renewal of license pending with the FCC.
(5) Tichenor programs this station under a local marketing agreement.
(6) Tichenor has entered into a local marketing agreement with Kidstar
Interactive Media, Inc., which provides children's programming.
Statistical information contained herein regarding the radio industry,
population, consumer spending and advertising expenditures are taken from the
Arbitron Company 1995-1996; radio metro ratings; 1990 U.S. Census; the Hispanic
Consumer Market Report (DRI/McGraw Hill, June 1992);
30
<PAGE> 32
SRDS -- Standard Rate & Data Services (August 1996); Advertising Age (September
30, 1996); Sales and Marketing Management's Survey of Buying Power; Strategy
Research Corporation -- 1996 U.S. Hispanic Market Study; Duncan's Radio Market
Guide (1996 Edition); Hispanic Business (December 1995); Market Segment
Research, Inc., and Paul Kagan Associates, Inc.
MANAGEMENT
MANAGEMENT OF COMPANY FOLLOWING THE TICHENOR MERGER
Upon consummation of the Tichenor Merger, the Company will enter into a
five year employment contract with McHenry Tichenor, Jr. to serve as the
Company's President and Chief Executive Officer (the "Employment Agreement").
Mr. Tichenor, 41, has been the President and Chief Executive Officer and a
director of Tichenor since 1981. The Employment Agreement provides for an annual
salary of $260,000 plus incentive compensation as determined by the Compensation
Committee of the Company's Board of Directors. Upon termination by the Company
without cause or by Mr. Tichenor for good reason, the Company shall be obligated
to pay to Mr. Tichenor a lump sum amount equal to the estimated payments of
salary and bonus remaining through the end of the term of the agreement.
Furthermore, the Employment Agreement provides that Mr. Tichenor agrees not to
compete with the Company for a period of one year following the date the
Employment Agreement is terminated.
Tichenor has indicated to the Company that, in addition to McHenry
Tichenor, Jr., the following individuals will serve as executive officers of the
Company following the consummation of the Tichenor Merger:
David L. Lykes. Mr. Lykes, 61, is Senior Vice President and a Director of
Tichenor. Mr. Lykes began his career at Tichenor in 1958. Mr. Lykes is
responsible for the day-to-day operation of Tichenor's stations.
Jeffrey T. Hinson. Mr. Hinson, 41, joined Tichenor as Chief Financial
Officer, Treasurer, and a Director in October 1995. From October 1991 to October
1995, Mr. Hinson was President of Alliance Investors Holdings, Ltd., a
privately-held merchant bank located in Houston, Texas. For two years prior to
joining Tichenor, Mr. Hinson acted as a consultant for Tichenor.
Ricardo del Castillo. Mr. Castillo, 50, has been Vice President of
Operations of Tichenor since 1988 and became a director of Tichenor in February
1989.
The Tichenor Merger Agreement also provides that following the consummation
of the Tichenor Merger, five designees of Tichenor shall constitute the entire
Board of Directors of the Company. Tichenor has informed the Company that its
designees are:
McHenry T. Tichenor, Jr. Mr. Tichenor, 41, has been the President and Chief
Executive Officer and a director of Tichenor since 1981.
McHenry T. Tichenor, Sr. Mr. Tichenor, 64, is the Chairman and a Director
of Tichenor and has served as the Vice Chairman and a Director of Tichenor since
. McHenry T. Tichenor, Sr. is the father of McHenry T. Tichenor, Jr.
Robert W. Hughes. Mr. Hughes, 61, is Chairman of the Prime Management
Group, Austin, Texas. In that capacity, he also serves as Chairman of Prime
Cable, Prime Video, Prime Venture I and Prime New Venture Management. Mr. Hughes
serves on the Board of Directors of Atlantic Cellular, Providence, R.I. and
Hawaiian Wireless, Honolulu, Hawaii. For the past 28 years, he has primarily
been involved in the cable television industry. He served as Chairman of the
National Cable Television Association in 1978-79.
James M. Raines. Mr. Raines became a director of the Company on August 5,
1996. Mr. Raines has been the President of James M. Raines & Company for more
than five years. Mr. Raines also serves as a director of 50-OFF Stores, Inc.
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<PAGE> 33
Ernesto Cruz. Mr. Cruz became a director of the Company on August 5, 1996.
Mr. Cruz has been a Managing Director of Credit Suisse First Boston Corp. for
more than five years.
CURRENT EXECUTIVE OFFICERS AND DIRECTORS
The current directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ------------------------------------------------
<S> <C> <C>
L. Lowry Mays(1)..................... 61 President, Chief Executive Officer and Director
John T. Kendrick..................... 44 Senior Vice President and Chief Financial
Officer
Ernesto Cruz(1)...................... 42 Director
B. J. McCombs........................ 68 Director
James M. Raines(1)(2)................ 56 Director
John H. Williams(2).................. 62 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
All directors hold office until the annual meeting of stockholders next
following their election, or until their successors are elected and qualified.
Officers are elected annually by the Board of Directors and serve at the
discretion of the Board.
The Board has two committees, the Compensation Committee and the Audit
Committee. The basic function of the Compensation Committee is to determine
stock option grants to executive officers and other key employees, as well as to
review salaries, bonuses, and other elements of compensation of executive
officers and other key employees and make recommendations on such matters to the
full Board of Directors. The basic function of the Audit Committee is to review
the financial statements of the Company, to consult with the Company's
independent auditors and to consider such other matters with respect to the
internal and external audit of the financial affairs of the Company as may be
necessary or appropriate in order to facilitate accurate financial reporting.
Information with respect to the business experience and affiliations of the
current directors, other than for Messrs. Raines and Cruz (who will remain
directors after completion of the Tichenor Merger), and executive officers of
the Company is set forth below.
Mr. Mays became President, Chief Executive Officer and director of the
Company on August 5, 1996. Mr. Mays is also President, Chief Executive Officer
and director of Clear Channel and has served as such since 1972.
Mr. Kendrick joined the Company as Vice President, Finance in September
1993. In December 1993, he was promoted to Senior Vice President and Chief
Financial Officer. From October 1992 through September 1993, Mr. Kendrick
provided financial consulting to the entertainment and computer software
industries. From June 1988 through October 1992, Mr. Kendrick served as Senior
Vice President and Chief Financial Officer of Skouras Pictures, Inc.
Mr. McCombs became a director of the Company on August 5, 1996. Mr. McCombs
also serves as a director of Clear Channel. Mr. McCombs is and has been a
private investor for more than five years.
Mr. Williams became a director of the Company on August 5, 1996. Mr.
Williams also serves as a director of Clear Channel and of GAINSCO, Inc. Mr.
Williams is Senior Vice President of Everon Securities, Inc., and has served in
such a position for more than five years.
SHARES ELIGIBLE FOR FUTURE SALE
GENERAL
Upon completion of the Offering, the Company will have 15,047,731 shares of
Class A Common Stock outstanding (assuming no exercise of the Underwriters'
overallotment option). All of the 3,500,000 shares offered hereby (plus up to
525,000 additional shares in the event the Underwriters
32
<PAGE> 34
exercise their over-allotment option) will be freely transferable without
restriction or further registration under the Securities Act, unless purchased
by an "affiliate" of the Company (as that term is defined under the Securities
Act). The 7,297,821 shares of Class A Common Stock owned by Clear Channel will
be "control securities" within the meaning of Rule 144, and are subject to
agreements with the Underwriters pursuant to which they may not be offered for
sale, sold or otherwise disposed of for 90 days after the date of this
Prospectus without the consent of Alex. Brown & Sons Incorporated or as may be
required to obtain the FCC's approval to consummate the Tichenor Merger. See
"The Tichenor Merger." Following this 90 day period, 2,426,108 shares of the
Class A Common Stock owned by Clear Channel will become eligible for sale,
although they will remain subject to the volume and other limitations (other
than the two year holding period) of Rule 144; provided, however, as long as the
Registration Statement on Form S-3 (declared effective on February 26, 1996)
remains in effect, subject to any contractual limitations, Clear Channel may
sell 2,156,799 of such shares without regard to any limitations contained in
Rule 144. Clear Channel has indicated to the Company that it does not currently
intend to sell any shares of the Company's Common Stock except as may be
necessary to obtain the FCC's approval to consummate the Tichenor Merger.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned shares of Class A Common
Stock for at least two years is entitled to sell, within any three-month period,
a number of such shares which does not exceed the greater of 1% of the
then-outstanding shares of Class A Common Stock (15,047,731 shares immediately
after the Offering) or the average weekly public trading volume of the Class A
Common Stock during the four calendar weeks preceding the date on which notice
of the sale is filed with the Securities and Exchange Commission. Sales under
Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. Any person (or persons whose shares are aggregated) who has not been an
affiliate of the Company at any time during the three months preceding a sale
and who has owned shares of Class A Common Stock for at least three years is
entitled to sell such shares under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information or notice
requirements of Rule 144.
The Company cannot make any predictions as to the effect, if any, sales of
shares of Class A Common Stock, or the availability of shares for future sale,
will have on the market price of the Class A Common Stock prevailing from time
to time.
REGISTRATION RIGHTS; STOCKHOLDERS AGREEMENT
Upon consummation of the Tichenor Merger, the Company will enter into a
registration rights agreement with each of Clear Channel and certain
shareholders of Tichenor who receive Class A Common Stock in the Merger pursuant
to which Clear Channel and such Tichenor shareholders will have certain demand
and piggyback registration rights with respect to shares of Class A Common Stock
owned by them. In addition, upon consummation of the Merger, it is anticipated
that Clear Channel and the Major Tichenor Stockholders will enter into the
Stockholders Agreement whereby such stockholders will agree to certain
restrictions on the transfer of their shares of Common Stock of the Company and
will grant certain rights of first refusal and "tag-along" rights with respect
to certain sales of such shares. See "The Tichenor Merger -- Registration
Rights; Stockholders Agreement."
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<PAGE> 35
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 30,000,000 shares of
Class A Common Stock, $.001 par value, 7,000,000 shares of Class B Common Stock,
$.001 par value, and 5,000,000 shares of Preferred Stock, $.001 par value. As of
September 30, 1996, 11,547,731 shares of Class A Common Stock were outstanding
and no shares of Class B Common Stock or Preferred Stock were outstanding. Upon
consummation of the Tichenor Merger, the authorized shares of each of Class A
Common Stock and Class B Common Stock will increase to 50,000,000.
COMMON STOCK
General. All of the outstanding shares of Common Stock are, and the shares
of Class A Common Stock offered hereby will be, validly issued, fully paid and
nonassessable. The rights of holders of shares of Class A Common Stock and Class
B Common Stock are identical except for voting rights. Currently, there are no
outstanding shares of Class B Common Stock.
Voting Rights. Holders of shares of Common Stock vote as a single class on
all matters submitted to a vote of the stockholders, with each share of Class A
Common Stock entitled to one vote and each share of Class B Common Stock
generally entitled to ten votes. However, each share of Class A Common Stock and
Class B Common Stock is entitled to one vote when required by law. Holders of
Common Stock are not entitled to cumulate votes in the election of directors.
There are no shares of Class B Common Stock currently outstanding. Upon
consummation of the Tichenor Merger, the Certificate of Incorporation of the
Company will be amended to provide that the rights of the Class B Common Stock
will be modified as described herein under "Nonvoting Common Stock."
Under Delaware law, the affirmative vote of the holders of a majority of
the outstanding shares of any class of Common Stock which is entitled to vote is
required to approve any amendment to the Certificate of Incorporation of the
Company which would increase or decrease the aggregate number of authorized
shares of any class, increase or decrease the par value of the shares of any
class, or modify or change the powers, preferences or special rights of the
shares of any class so as to affect such class adversely.
Nonvoting Common Stock. If approved by the Board of Directors and
stockholders of the Company, the Company will amend its certificate of
incorporation (the "Charter Amendment") to authorize 50,000,000 shares of the
Class B Common Stock and amend the rights of the holders thereof, as further
described herein. For purposes of this Prospectus, the Class B Common Stock,
after giving effect to the amendment to the rights thereof, has been referred to
herein as the "Nonvoting Common Stock." The Nonvoting Common Stock will be
issued in exchange for shares of Class A Common Stock held by Clear Channel in
the Tichenor Merger.
Holders of the Nonvoting Common Stock will, in certain circumstances, have
certain voting rights, with each share of Nonvoting Common Stock being entitled
to one vote. Specifically, so long as Clear Channel and its affiliates own at
least 20% of the Common Stock then outstanding, the Company will not be able to,
and will not be able to permit any subsidiary to, without the vote or consent by
the holders of a majority of the Nonvoting Common Stock voting as a single
class, take any of the following actions: (i) effect the sale, lease or other
transfer of all or substantially all of the assets of the Company, or any merger
or consolidation involving the Company where the stockholders of the Company
immediately prior to such transaction would not own at least 50% of the capital
stock of the surviving entity, or any reclassification, recapitalization,
dissolution, liquidation or winding up of the Company; (ii) authorize, issue or
obligate itself to issue any shares of Preferred Stock; (iii) make or permit any
amendment to the Company's certificate of incorporation that adversely affects
the rights of the holders of Nonvoting Common Stock; (iv) declare or pay any
non-cash dividends on or make any other non-cash distribution on the Company's
Common Stock; or (v) make or permit any amendment or modification to the
Company's certificate of incorporation concerning the Company's capital stock.
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<PAGE> 36
Conversion of Nonvoting Common Stock. The Company's Restated Certificate of
Incorporation will provide that only Clear Channel and its affiliates may own
shares of Nonvoting Common Stock. The Nonvoting Common Stock that Clear Channel
and its affiliates will receive in the Tichenor Merger will convert into Class A
Common Stock automatically upon sale, gift or other transfer to a person or
entity other than Clear Channel or an affiliate of Clear Channel. Each share of
the Nonvoting Common Stock will also be convertible into Class A Common Stock at
the option of its holder subject to necessary FCC consents. In addition, Clear
Channel may convert shares of Class A Common Stock held by it into shares of
Nonvoting Common Stock at its option.
Other Provisions. Subject to the rights of any Preferred Stock, the holders
of Common Stock are entitled to receive such dividends, if any, as may be
declared from time to time by the Board of Directors in it discretion from funds
legally available therefor, and upon liquidation or dissolution are entitled to
receive all assets available for distribution to the stockholders. The holders
of the Common Stock have no preemptive or other subscription rights, and there
are no redemption or sinking fund provisions with respect to such shares.
PREFERRED STOCK
The shares of Preferred Stock may be issued in series with such
designations, preferences, limitations and relative rights as the Company's
Board of Directors may determine.
CERTAIN ANTITAKEOVER EFFECTS OF CHARTER AMENDMENT AND DELAWARE LAW
Certain provisions of the Charter Amendment and the Delaware General
Corporation Law ("DGCL") may have the effect of impeding the acquisition of
control of the Company by means of a tender offer, proxy fight, open market
purchases or otherwise.
As provided in the Charter Amendment, holders of Nonvoting Common Stock
will have the right to vote separately as a class on certain matters, including
a merger of the Company or sale of all or substantially all of its assets. In
addition, shares of Nonvoting Common Stock are convertible into shares of Class
A Common Stock at the holder's option.
Section 203 of the DGCL restricts a wide range of transactions ("business
combinations") between a corporation and an interested stockholder. An
"interested stockholder" is, generally, any person who beneficially owns,
directly or indirectly, 15% or more of the corporation's outstanding voting
stock. Business combinations are broadly defined to include (i) mergers or
consolidations with, (ii) sales or other dispositions of more than 10% of the
corporation's assets to, (iii) certain transactions which would result in
increasing the proportionate share of stock of the corporation or any subsidiary
owned by, or (iv) receipt of the benefit (other than proportionately as a
stockholder) or any loans, advances or other financial benefits by, an
interested stockholder. Section 203 provides that an interested stockholder may
not engage in a business combination with the corporation for a period of three
years from the time of becoming an interested stockholder unless (i) the board
of directors approved either the business combination or the transaction which
resulted in the person becoming an interested stockholder prior to the time such
person became an interested stockholder; (ii) upon consummation of the
transaction which resulted in the person becoming an interested stockholder,
that person owned at least 85% of the corporation's voting stock (excluding
shares owned by persons who are officers and also directors and shares owned by
certain employee stock plans); or (iii) the business combination is approved by
the board of directors and authorized by the affirmative vote of at least
66 2/3% of the outstanding voting stock not owned by the interested stockholder.
ALIEN OWNERSHIP
The Company's Restated Certificate of Incorporation restricts the ownership
and voting of the Company's capital stock, including its Class A Common Stock,
in accordance with the Communications Act and the rules of the FCC to prohibit
ownership of more than 25% of the Company's
35
<PAGE> 37
outstanding capital stock (or control of more than 25% of the voting power it
represents) by or for the account of aliens, foreign governments, or non-U.S.
corporations or corporations otherwise subject to control by such persons or
entities. The Restated Certificate of Incorporation also prohibits any transfer
of the Company's capital stock which would cause the Company to violate this
prohibition. In addition, the Restated Certificate of Incorporation authorizes
the Company's Board of Directors to adopt such provisions as it deems necessary
to enforce these prohibitions.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Class A Common Stock is Harris
Trust Company of California.
36
<PAGE> 38
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, CS First Boston Corporation, Lehman Brothers
Inc., Montgomery Securities and Smith Barney Inc. (the "Representatives"), have
severally agreed to purchase from the Company the following respective number of
shares of Class A Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- -------------------------------------------------------------------------------- ---------
<S> <C>
Alex. Brown & Sons Incorporated.................................................
Credit Suisse First Boston Corp. ...............................................
Lehman Brothers Inc.............................................................
Montgomery Securities...........................................................
Smith Barney Inc................................................................
---------
Total........................................................................... 3,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of Class A Common Stock offered hereby if
any of such shares are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the shares of Class A Common Stock to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $ per share.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers.
The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to 525,000
additional shares of Class A Common Stock at the public offering price less the
underwriting discounts and commission set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Class A Common Stock to be
purchased by it shown in the above table bears to 3,500,000, and the Company
will be obligated, pursuant to the option, to sell such shares to the
Underwriters. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of Class A Common Stock offered
hereby. If purchased, the Underwriters will offer such additional shares on the
same terms as those in which the 3,500,000 shares are being offered.
The Underwriting Agreement contains covenants of indemnity and contribution
between the Company and the Underwriters with respect to certain liabilities,
including liabilities under the Securities Act.
The Company, its directors and executive officers and its stockholders have
agreed that they will not, directly or indirectly, offer, sell or otherwise
dispose of any equity securities of the Company or any securities convertible
into, or exchangeable for, or any rights to purchase or acquire, equity
securities of the Company (other than employee stock options granted by the
Company in the ordinary course of business) for a period of 90 days after the
date of this Prospectus, without the prior written consent of Alex. Brown & Sons
Incorporated. This restriction shall not apply to any sale of shares of Common
Stock made by Clear Channel in order to comply with FCC regulations upon
consummation of the Tichenor Merger.
One or more of the Underwriters currently act as market makers for the
Class A Common Stock and may engage in "passive market making" in such
securities on the Nasdaq National Market in accordance with Rule 10b-6A under
the Exchange Act. Rule 10b-6A permits, upon the satisfaction of
37
<PAGE> 39
certain condition, underwriters participating in a distribution that are also
Nasdaq market makers in the security being distributed to engage in limited
market making transactions during the period when Rule 10b-6 under the Exchange
Act would otherwise prohibit such activity. Rule 10b-6 prohibits underwriters
engaged in passive market making generally from entering a bid or effecting a
purchase at a price that exceeds the highest bid for those securities displayed
on the Nasdaq National Market by a market maker that is not participating in the
distribution. Under Rule 10b-6A, each underwriter engaged in passive market
making is subject to a daily net purchase limitation equal to 30% of such
entity's average daily trading volume during the two full consecutive calendar
months immediately preceding the date of the filing of the registration
statement under the Securities Act pertaining to the security to be distributed.
LEGAL OPINIONS
Certain legal matters in connection with the shares of Class A Common Stock
offered hereby will be passed upon for the Company by its special counsel, Akin,
Gump, Strauss, Hauer & Feld, L.L.P. (a partnership including professional
corporations), San Antonio, Texas. Certain legal matters in connection with the
Offering will be passed upon for the Underwriters by their counsel, Piper &
Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The consolidated financial statements of Heftel Broadcasting Corporation
appearing in Heftel Broadcasting Corporation's Annual Report (Form 10-K) for the
year ended September 30, 1996 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Tichenor Media System, Inc. as of
December 31, 1994 and 1995 and for each of the years in the three-year period
ended December 31, 1995, are included herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants included herein, and
upon the authority of said firm as experts in accounting and auditing.
The combined financial statements of KSOL-FM and KYLZ-FM (Divisions of
Crescent Communications, L.P.) as of December 31, 1994 and 1995 and for the
period April 1, 1994 to December 31, 1994 and for the year ended December 31,
1995 are incorporated herein, in reliance upon the report of Miller, Kaplan,
Arase & Co., independent certified public accountants incorporated herein, and
upon the authority of said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements filed by the Company with the Commission pursuant to the
information requirements of the Exchange Act may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, Seven World Trade Center, 13th Floor, New
York, New York, 10048, Los Angeles Regional Office, Suite 1100, 5670 Wilshire
Boulevard, Los Angeles, California, 90036, and Chicago Regional Office, 500 W.
Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of such material may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates or through the
Internet from the SEC's home page on the World Wide Web at
38
<PAGE> 40
http://www.sec.gov. In addition, reports, proxy statements and other information
concerning the Company can be inspected and copied at the offices of the Nasdaq
National Market, Report Section, 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus, which constitutes a part of a Registration Statement filed
by the Company with the Commission under the Securities Act, omits certain
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement and to the exhibits thereto for further
information with respect to the Company and the Class A Common Stock offered
hereby. Statements contained herein concerning provisions of any document are
not necessarily complete, and each statement is qualified in its entirety by
reference to the copy of such document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Company pursuant to
the Exchange Act are incorporated by reference in this Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996; and
2. The description of the Company's Common Stock contained in the
section entitled "Description of Capital Stock" contained in the
Registration Statement on Form S-1 of the Company, as amended, filed with
the Securities and Exchange Commission on April 29, 1994 (No. 33-78370) and
incorporated by reference into the Registration Statement on Form 8-A under
the Securities Exchange Act of 1934, as amended, of the Company filed with
the Commission on July 8, 1994, and the Registration Statement on Form S-3,
of the Company, as amended, filed with the Commission on February 26, 1996
(No. 333-1060).
Any documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Offering shall be deemed to be incorporated by reference in
this Prospectus 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 of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. To the extent that any
proxy statement is incorporated by reference herein, such incorporation shall
not include any information contained in such proxy statement which is not,
pursuant to the Commission's rules, deemed to be "filed" with the Commission or
subject to the liabilities of Section 18 of the Exchange Act.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any document described
above (other than exhibits, unless such exhibits are specifically incorporated
by reference). Requests for such copies should be directed to John T. Kendrick,
Senior Vice President, Chief Financial Officer and Assistant Secretary, Heftel
Broadcasting Corporation, 6767 West Tropicana Avenue, Suite 102, Las Vegas,
Nevada 89103 (telephone: (702) 367-3322).
39
<PAGE> 41
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
Independent Auditors' Report........................................................ F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996
(unaudited)...................................................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1993, 1994 and
1995 and the Nine Months Ended September 30, 1995 and 1996 (unaudited)........... F-4
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 1993, 1994 and 1995 and for the Nine Months Ended September 30, 1996
(unaudited)...................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1994
and 1995 and for the Nine Months Ended September 30, 1995 and 1996 (unaudited)... F-6
Notes to Consolidated Financial Statements.......................................... F-7
KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.)
Independent Auditor's Report........................................................ F-16
Combined Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996
(unaudited)...................................................................... F-17
Combined Statements of Operations and Partners' Deficiency for the Nine Months Ended
December 31, 1994, the Year Ended December 31, 1995 and for the Six Months Ended
June 30, 1995 and 1996 (unaudited)............................................... F-18
Combined Statements of Cash Flows for the Nine Months Ended December 31, 1994, the
Year Ended December 31, 1995 and for the Six Months Ended June 30, 1995 and 1996
(unaudited)...................................................................... F-19
Notes to Combined Financial Statements.............................................. F-20
</TABLE>
F-1
<PAGE> 42
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Tichenor Media System, Inc.:
We have audited the accompanying consolidated financial statements of
Tichenor Media System, Inc. and subsidiaries as listed in the accompanying
index. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 audits 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tichenor
Media System, Inc. and subsidiaries as of December 31, 1994 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
May 6, 1996
F-2
<PAGE> 43
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------- SEPTEMBER 30,
1994 1995 1996
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................... $ 2,331,014 $ 3,593,955 $ 5,065,872
Accounts receivable, net of allowance of $228,282 in 1994,
$756,808 in 1995 and $443,001 in 1996..................... 7,465,380 8,275,427 9,851,274
Income tax receivable, including accrued interest........... 5,156,081 -- --
Amounts receivable from officers and stockholders........... 54,930 99,168 121,451
Prepaid expenses and other current assets................... 241,547 358,640 746,827
----------- ----------- ------------
Total current assets................................. 15,248,952 12,327,190 15,785,424
----------- ----------- ------------
Investments, at equity........................................ 249,892 221,458 206,583
----------- ----------- ------------
Property and equipment, at cost:
Land........................................................ 1,541,152 2,095,690 2,093,190
Buildings and improvements.................................. 2,823,251 2,553,595 2,794,970
Broadcast and other equipment............................... 10,985,817 12,075,807 14,296,563
Furniture and fixtures...................................... 2,136,571 2,253,794 2,474,034
----------- ----------- ------------
17,486,791 18,978,886 21,658,757
Less accumulated depreciation............................... 11,107,206 11,449,267 (12,222,272)
----------- ----------- ------------
6,379,585 7,529,619 9,436,485
----------- ----------- ------------
Intangible assets:
Broadcast licenses.......................................... 26,792,702 31,981,514 76,339,610
Cost in excess of fair value of net assets acquired......... 363,100 363,100 363,100
Other intangible assets..................................... 4,667,207 6,098,796 6,615,466
----------- ----------- ------------
31,823,009 38,443,410 83,318,176
Less accumulated amortization............................... 5,417,195 6,975,960 8,532,480
----------- ----------- ------------
26,405,814 31,467,450 74,785,696
----------- ----------- ------------
Other noncurrent assets:
Deferred charges, net....................................... 847,164 853,730 731,938
Notes receivable from related parties....................... 578,439 571,439 566,439
----------- ----------- ------------
1,425,603 1,425,169 1,298,377
----------- ----------- ------------
Total assets......................................... $49,709,846 $52,970,886 $101,512,565
=========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 1,872,925 $ 1,213,979 $ 1,836,280
Accrued expenses............................................ 1,656,247 2,743,274 4,200,855
Income taxes payable........................................ 584,931 565,574 615,081
Amounts payable to officers and stockholders................ 211,152 270,184 184,419
Current portion of long-term obligations.................... 5,608,823 47,611 42,468
----------- ----------- ------------
Total current liabilities............................ 9,934,078 4,840,622 6,879,103
----------- ----------- ------------
Long-term obligations, less current portion................... 18,541,055 25,381,706 71,251,200
----------- ----------- ------------
Deferred income taxes......................................... 3,691,480 3,582,421 3,818,064
----------- ----------- ------------
14% senior redeemable cumulative preferred stock and accrued
dividends, $1,000 par value; authorized, issued and
outstanding 3,000 shares.................................... 3,359,680 3,378,749 3,378,749
----------- ----------- ------------
Common stock purchase warrant subject to mandatory redemption,
at accreted value........................................... 2,394,520 3,828,520 4,140,000
----------- ----------- ------------
Commitments and contingencies
Stockholders' equity:
10.5% junior noncumulative preferred stock, $10 par value;
authorized 100,000 shares; issued 42,829 shares;
outstanding 35,919 shares in 1994 and 35,772 shares in
1995 and 1996 (liquidation preference of $3,682,950)...... 368,295 368,295 368,295
Common stock, $1 par value; authorized 9,897,000 shares;
issued 743,704 shares; outstanding 678,897 shares in 1994,
684,420 shares in 1995 and 684,169 shares in 1996......... 743,704 743,704 743,704
Additional paid-in capital.................................. 4,212,814 4,357,038 4,357,038
Retained earnings........................................... 8,031,391 8,081,638 8,130,477
Less treasury stock at cost................................. (1,470,073) (1,379,263) (1,395,535)
Receivables for stock purchases............................. (97,098) (212,544) (158,530)
----------- ----------- ------------
Stockholders' equity................................. 11,789,033 11,958,868 12,045,449
----------- ----------- ------------
Total liabilities and stockholders' equity........... $49,709,846 $52,970,886 $101,512,565
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 44
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.................................. $35,349,367 $41,099,785 $46,377,676 $33,745,932 $37,202,302
Agency commissions........................ (3,550,029) (4,238,805) (4,776,415) (3,499,553) (4,090,677)
----------- ----------- ----------- ----------- -----------
Net revenues..................... 31,799,338 36,860,980 41,601,261 30,246,379 33,111,625
----------- ----------- ----------- ----------- -----------
Operating expenses:
Selling................................. 10,968,783 13,203,789 13,864,947 9,609,062 10,096,635
Programming............................. 3,998,801 4,866,974 5,452,060 3,978,874 4,896,413
Promotion and market research........... 1,143,868 1,701,147 1,730,225 1,286,512 1,793,533
Engineering............................. 906,199 983,014 1,038,024 760,617 935,986
General and administrative.............. 6,765,544 7,087,274 7,659,303 5,481,595 6,066,585
Corporate expenses...................... 2,238,115 2,484,121 2,685,541 1,852,179 2,744,737
Depreciation and amortization........... 1,930,783 2,368,113 2,467,056 1,821,191 2,371,824
----------- ----------- ----------- ----------- -----------
Total operating expenses......... 27,952,093 32,694,432 34,897,156 24,790,030 28,905,713
----------- ----------- ----------- ----------- -----------
Operating income.......................... 3,847,245 4,166,548 6,704,105 5,456,349 4,205,912
----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest income......................... 113,358 2,852,011 190,390 214,747 61,480
Interest expense........................ (2,145,519) (2,594,590) (2,230,009) (1,641,038) (2,511,031)
Costs relating to unconsummated
acquisitions.......................... -- -- (123,300) (10,569) (358)
Other, net.............................. (199,920) (429,492) 161,814 190,780 (54,641)
----------- ----------- ----------- ----------- -----------
(2,232,081) (172,071) (2,001,105) (1,246,080) (2,504,550)
----------- ----------- ----------- ----------- -----------
Income before income taxes and
extraordinary loss...................... 1,615,164 3,994,477 4,703,000 4,210,269 1,701,362
Income taxes.............................. 125,000 1,292,647 2,779,684 1,664,061 1,341,043
----------- ----------- ----------- ----------- -----------
Income before extraordinary
loss........................... 1,490,164 2,701,830 1,923,316 1,588,046 1,237,312
Extraordinary loss on retirement of debt,
net of income tax benefit of $224,030... -- (381,456) -- -- --
----------- ----------- ----------- ----------- -----------
Net income....................... 1,490,164 2,320,374 1,923,316 2,546,208 360,319
Preferred stock dividends................. (228,667) (431,013) (439,069) (329,245) --
Accretion of stock warrant to redemption
value................................... (1,516,000) (715,000) (1,434,000) (414,000) (311,480)
----------- ----------- ----------- ----------- -----------
Net income (loss) applicable to
common shareholders............ $ (254,503) $ 1,174,361 $ 50,247 $ 1,802,963 $ 48,839
=========== =========== =========== =========== ===========
Net income (loss) per share:
Income before extraordinary loss........ $ (.39) $ 2.00 $ .07 $ 2.44 $ .07
=========== =========== =========== =========== ===========
Net income.............................. $ (.39) $ 1.51 $ .07 $ 2.44 $ .07
=========== =========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding......... 654,651 778,211 740,150 738,431 747,523
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 45
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNIOR PREFERRED
STOCK COMMON STOCK RECEIVABLES
-------------------- -------------------- ADDITIONAL FOR
NUMBER NUMBER PAID-IN TREASURY STOCK RETAINED
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL STOCK PURCHASES EARNINGS
--------- -------- --------- -------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992....................... 42,829 $428,295 726,523 $726,523 $4,447,765 $(1,681,180) $ (2,052) $ 7,170,163
Accretion of stock warrant to
redemption value........... -- -- -- -- -- -- -- (1,516,000)
Senior redeemable preferred
stock dividends............ -- -- -- -- -- -- -- (228,667)
Issuance costs of senior
redeemable preferred
stock...................... -- -- -- -- (321,836) -- -- --
Sale of treasury stock....... -- -- -- -- -- 181,129 (91,250) (58,630)
Collection of stock purchase
receivables................ -- -- -- -- -- -- 30,514 --
Net income................... -- -- -- -- -- -- -- 1,490,164
------ -------- ------- -------- ---------- ----------- --------- -----------
Balance at December 31,
1993....................... 42,829 428,295 726,523 726,523 4,125,929 (1,500,051) (62,788) 6,857,030
Conversion of junior
preferred stock to common
stock...................... (6,000) (60,000) 17,181 17,181 42,819 -- -- --
Accretion of stock warrant to
redemption value........... -- -- -- -- -- -- -- (715,000)
Senior redeemable preferred
stock dividends............ -- -- -- -- -- -- -- (431,013)
Purchase of treasury stock... -- -- -- -- -- (36,957) -- --
Sale of treasury stock....... -- -- -- -- 44,066 66,935 (81,000) --
Collection of stock purchase
receivables................ -- -- -- -- -- -- 46,690 --
Net income................... -- -- -- -- -- -- -- 2,320,374
------ -------- ------- -------- ---------- ----------- --------- -----------
Balance at December 31,
1994....................... 36,829 368,295 743,704 743,704 4,212,814 (1,470,073) (97,098) 8,031,391
Accretion of stock warrant to
redemption value........... -- -- -- -- -- -- -- (1,434,000)
Senior redeemable preferred
stock dividends............ -- -- -- -- -- -- -- (439,069)
Purchase of treasury stock... -- -- -- -- -- (41,467) -- --
Sale of treasury stock....... -- -- -- -- 144,224 132,277 (219,000) --
Collection of receivables for
stock...................... -- -- -- -- -- -- 103,554 --
Net income................... -- -- -- -- -- -- -- 1,923,316
------ -------- ------- -------- ---------- ----------- --------- -----------
Balance at December 31,
1995....................... 36,829 368,295 743,704 743,704 4,357,038 (1,379,263) (212,544) 8,081,638
Accretion of stock warrant to
redemption value
(unaudited)................ -- -- -- -- -- -- -- (311,000)
Purchase of treasury stock
(unaudited)................ -- -- -- -- -- (16,272) 2,376 --
Collection of stock purchase
receivables (unaudited).... -- -- -- -- -- -- 51,630 --
Net income (unaudited)....... -- -- -- -- -- -- -- 360,319
------ -------- ------- -------- ---------- ----------- --------- -----------
Balance at September 30, 1996
(unaudited)................ 36,829 $368,295 743,704 $743,704 $4,357,038 $(1,395,535) $(158,530) $ 8,130,477
====== ======== ======= ======== ========== =========== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 46
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
---------------------------------------- -------------------------
1993 1994 1995 1995 1996
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Adjustments to reconcile net income to net
cash provided by operating activities:
Net income................................ $ 1,490,164 $ 2,320,374 $ 1,923,316 $ 2,546,208 $ 360,319
Provision for bad debts................... 330,727 491,750 767,614 397,950 344,992
Depreciation and amortization............. 1,930,783 2,368,113 2,467,056 1,821,191 2,371,824
Barter transactions, net.................. (214,222) (312,926) (34,450) 163,559 (131,514)
Amortization of debt facility fee included
in interest expense..................... 201,158 112,565 134,608 101,956 100,956
Loss (gain) from unconsolidated
partnership interests................... 55,291 (109,624) 19,834 14,874 14,875
Loss (gain) from sale of investments...... -- -- (6,081) -- --
Valuation adjustments on notes receivable,
investments and other noncurrent
assets.................................. 691,978 12,600 -- -- --
Loss (gain) on disposition of assets...... (223,348) 325,676 (260,619) (270,845) 5,608
Deferred income taxes..................... -- 3,691,480 (109,059) (81,794) 235,643
Loss on retirement of debt................ -- 605,486 -- -- --
Changes in operating assets and
liabilities:
Accounts receivable, net................ (1,919,735) (1,459,841) (1,543,211) (2,254,953) (1,789,325)
Income tax receivable................... -- (5,156,081) 5,156,081 5,156,081 --
Amounts receivable from officers and
stockholders......................... 6,261 105,120 (44,238) (25,138) (22,283)
Prepaid expenses and other current
assets............................... (68,199) 263,534 (117,093) (239,677) (388,187)
Accounts payable........................ 1,298,235 (438,554) (658,946) (931,037) 622,301
Accrued expenses........................ 714,089 (259,329) 1,087,027 1,722,811 1,457,581
Income taxes payable.................... 125,000 459,931 (19,357) (192,245) 49,507
Amounts payable to officers and
stockholders......................... 43,390 138,898 59,032 (81,964) (85,765)
------------ ----------- ----------- ----------- -----------
Net cash provided by operating
activities......................... 4,461,572 3,159,172 8,821,514 7,846,977 3,146,532
------------ ----------- ----------- ----------- -----------
Cash flows from investing activities:
Investment sales, distributions and
additions................................. (31,277) 25,000 14,681 8,526 --
Acquisitions of radio stations.............. (14,800,000) -- (6,740,000) (6,250,000) (46,500,000)
Property and equipment acquisitions......... (600,350) (899,762) (1,279,915) (969,747) (1,167,019)
Dispositions of property and equipment...... 339,529 652,080 644,737 643,682 2,950
Increase in intangible assets............... (437,706) (303,223) (1,042,929) (924,219) 61,525
Decrease (increase) in other noncurrent
assets.................................... (65,789) (150,362) (134,174) (146,316) 25,836
------------ ----------- ----------- ----------- -----------
Net cash used in investing
activities......................... (15,595,593) (676,267) (8,537,600) (7,638,074) (47,576,708)
------------ ----------- ----------- ----------- -----------
Cash flows from financing activities:
Borrowings on long-term obligations......... 26,803,922 -- 7,150,000 6,650,000 45,900,000
Payments on long-term obligations........... (16,119,907) (3,014,894) (5,870,561) (5,857,941) (35,649)
Dividends on senior preferred stock......... -- (300,000) (420,000) (420,000) --
Net proceeds from issuance of senior
preferred stock........................... 2,678,164 -- -- -- --
Payment of deferred financing costs......... (717,742) (897,389) -- -- --
Proceeds from issuance of common stock
purchase warrant.......................... 163,520 -- -- -- --
Sales of treasury stock..................... 31,249 30,001 57,501 -- --
Note payments from stockholders............. 28,462 46,690 103,554 48,384 51,638
Purchases of treasury stock................. -- (36,957) (41,467) (41,466) (13,896)
------------ ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities............... 12,867,668 (4,172,549) 979,027 378,977 45,902,093
------------ ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents................................. 1,733,647 (1,689,644) 1,262,941 587,880 1,471,917
Cash and cash equivalents at beginning of
period...................................... 2,287,011 4,020,658 2,331,014 2,331,014 3,593,955
------------ ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period.... $ 4,020,658 $ 2,331,014 $ 3,593,955 $ 2,918,894 $ 5,065,872
============ =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 47
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH
PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Tichenor Media System, Inc. was formed on August 17, 1982 for the purpose
of owning and operating a group of Spanish language broadcast radio stations.
The Company's radio stations are located in San Antonio, McAllen-Brownsville,
Houston and El Paso, Texas and Chicago, Illinois.
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
Tichenor Media System, Inc. and its wholly-owned subsidiaries, Tichenor License
Corporation ("TLC"), WADO Radio, Inc. ("WRI") and TC Television, Inc. ("TCTV")
(collectively, the "Company"). The Company consolidates the accounts of
subsidiaries when it has a controlling financial interest (over 50%) in the
outstanding voting shares of the subsidiary.
All significant intercompany accounts and transactions have been eliminated
in consolidation.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents
Debt instruments with original maturities of three months or less are
considered to be cash equivalents. Cash equivalents at December 31, 1994 and
1995 are comprised of treasury bills, other government securities and money
market funds and totalled $1,813,793 and $461,029, respectively.
Investments
The Company uses the equity method to account for investments when it does
not have a controlling interest but has the ability to exercise significant
influence over the operating and/or financial decisions of the investee.
Investments where the Company does not exert significant influence are accounted
for using the cost method. Investments at December 31, 1994 and 1995 are
comprised primarily of a 50% interest in a general partnership which owns a
transmission tower that is leased to the Company.
Property, Equipment and Land
Property, equipment and land are recorded at cost. Expenditures for
significant renewals and betterments are capitalized. Repairs and maintenance
are charged to expense as incurred.
Depreciation is provided in amounts sufficient to relate the asset cost to
operations over the estimated useful lives (five to forty years) on a
straight-line basis. Leasehold improvements are amortized over the life of the
lease or the estimated service life of the asset, whichever is shorter. Gains or
losses from disposition of property and equipment is recognized in the statement
of operations.
F-7
<PAGE> 48
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH
PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
Intangible Assets
Intangible assets are recorded at cost. Amortization of intangible assets
is provided in amounts sufficient to relate the asset cost to operations over
the estimated useful lives (two to forty years) on a straight-line basis.
Advertising Costs
Advertising costs are charged to operations in the year incurred and
totaled $779,582, $894,982 and $1,232,255 for the years ended December 31, 1993,
1994 and 1995, respectively.
Barter Transactions
Barter transactions are recorded at the estimated fair value of the goods
or services received. Revenues from barter transactions are recognized as income
when advertisements are broadcast. Expenses are recognized when goods or
services are received or used. Barter amounts are not significant to the
Company's financial statements.
Income Taxes
The Company follows Statement of Financial Accounting Standards No. 109
("SFAS No. 109"), "Accounting for Income Taxes." SFAS No. 109 requires
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.
Earnings Per Share
Net income or loss per common share is computed by dividing net income or
loss applicable to common shareholders by the weighted average number of common
and dilutive common equivalent shares (junior preferred stock) outstanding
during each year. The stock warrant has been excluded from the computation as
its effect would be antidilutive.
Financial Instruments
The carrying amounts of financial instruments including cash and cash
equivalents, trade receivables and accounts payable approximated fair value as
of December 31, 1994 and 1995, because of the relatively short maturity of these
instruments. The carrying value of long-term obligations, including the current
portion, approximated fair value as of December 31, 1994 and 1995, based upon
quoted market prices for the same or similar debt issues.
Interim Financial Statements
In the opinion of management, the accompanying unaudited consolidated
financial statements as of June 30, 1996 and for the six-month periods ended
June 30, 1995 and 1996 reflect all adjustments (none of which were other than
normal recurring accruals) necessary to a fair presentation of the Company's
financial position and results of operations for such periods. The results of
operations for the six-month period ended June 30, 1996 are not necessarily
indicative of
F-8
<PAGE> 49
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH
PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
results to be achieved for the full year. The unaudited interim financial
statements do not include all disclosures required by generally accepted
accounting principles.
2. ACQUISITIONS OF RADIO STATIONS
On June 1, 1995, certain tangible and intangible assets of radio station
KMPQ-AM in Rosenberg-Richmond (Houston), Texas were acquired for $2,500,000. The
intangible assets acquired are amortized using the straight line method over 15
to 40 years. This acquisition, along with a deposit for $500,000 related to the
KMIA-FM acquisition, was funded with bank financing.
On June 16, 1995, the Company purchased certain tangible and intangible
assets of KLTN-FM in Port Arthur (Houston), Texas for $3,650,000. The intangible
assets acquired are amortized using the straight line method over 15 to 40
years. Bank financing was used to fund this acquisition.
On June 23, 1995, TCTV purchased certain tangible and intangible assets
associated with the television program known as "Tejano Country." The purchase
price was $100,000 and was funded from operations.
The Company acquired certain tangible and intangible assets of radio
station KAMA-AM in El Paso, Texas on October 11, 1995. The purchase price was
$300,000. In addition, a two-year non-competition agreement was acquired for
$190,000. The intangible assets acquired are amortized using the straight line
method over 2 to 40 years. These assets together with $10,000 in working capital
were funded with bank financing.
Prior to the acquisitions of KMPQ-AM, KLTN-FM and KAMA-AM, the Company
operated the stations under time brokerage agreements. The time brokerage
agreements provided that the Company retain all revenues associated with
advertising time and pay certain operating expenses. These agreements were
effective December 1, 1994, April 27, 1992, and June 23, 1995, for KMPQ-AM,
KLTN-FM and KAMA-AM, respectively. Time brokerage agreement fees related to
these stations for the years ended December 31, 1994 and 1995 are $579,404 and
$91,463, respectively.
Unaudited consolidated condensed pro forma results of operations as if all
acquisitions occurred as of the beginning of the periods presented are as
follows:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Net revenues........................................... $34,294,803 $38,229,370
Operating income....................................... 2,988,834 6,251,306
Net income............................................. 562,712 1,204,873
Net loss per common share.............................. (.83) (.91)
</TABLE>
3. ACCRUED EXPENSES
The following is a summary of accrued expenses as of December 31, 1994 and
1995:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Commissions payable....................................... $1,200,128 $1,431,253
Accrued interest.......................................... -- 796,933
Other accrued expenses.................................... 456,119 515,088
---------- ----------
Total accrued expenses.......................... $1,656,247 $2,743,274
========== ==========
</TABLE>
F-9
<PAGE> 50
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH
PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
4. LONG-TERM OBLIGATIONS
The following is a summary of long-term obligations outstanding as of
December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Bank loans, aggregate commitment of $50 million,
interest rate based on LIBOR and prime plus an
applicable margin as determined by the Company's
total leverage ratio; interest rates ranging from
7.44% to 9.25% at December 31, 1995; interest rates
ranged from 7.32% to 9.75% during 1995; payable
through 2001; collateralized by all of the Company's
assets (including the stock of TLC, WRI, and TCTV)
excluding FCC licenses; the Company is required to
comply with certain financial and nonfinancial
covenants............................................ $23,616,033 $25,348,217
Loans from related parties, interest at 10%, payable on
demand............................................... 404,263 --
Various loans, interest ranging from 11.75% to 12.38%,
payable through 1997................................. 58,203 38,456
Obligations under capital leases, implicit interest
rates of 5.8% to 12.2%, payable through 1997......... 71,379 42,644
----------- -----------
24,149,878 25,429,317
Less current portion................................... (5,608,823) (47,611)
----------- -----------
$18,541,055 $25,381,706
=========== ===========
</TABLE>
Maturities of long-term obligations for the five years subsequent to
December 31, 1995 and thereafter are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
-------------------------------------------- -----------
<S> <C>
1996........................................ $ 47,611
1997........................................ 33,490
1998........................................ --
1999........................................ 4,098,216
2000........................................ 13,750,000
Thereafter.................................. 7,500,000
</TABLE>
After April 30, 1997, the bank loan agreement requires principal reductions
in the loan equal to 50% of excess cash flow, as defined.
On August 9, 1994, the Company refinanced its bank loan. An extraordinary
loss of $605,486 has been recognized due to the write-off of the unamortized
deferred financing costs of the loan.
To reduce the impact of changes in interest rates on its floating rate
long-term bank loan, the Company entered into an interest rate swap agreement.
As of December 31, 1994, $10,370,000 of the notional amount of the agreement was
outstanding. The outstanding swap agreement matured in December 1995 and
effectively fixed the interest rate on the corresponding amount of the loan at
7.31%, which was based on the 90 day LIBOR plus an incremental rate. Amounts
receivable or
F-10
<PAGE> 51
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH
PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
payable under the agreement were recognized currently in interest expense.
Interest expense (income) recognized under the agreement totalled $279,309,
$140,767 and ($57,241) for the years ended December 31, 1993, 1994 and 1995,
respectively. The bank loan agreement requires the Company to enter into an
interest rate swap agreement covering 50% of the outstanding obligation by
December 31, 1996.
Interest paid for the years ended December 31, 1993, 1994 and 1995 amounted
to $1,478,879, $2,221,643 and $2,091,919, respectively.
5. STOCKHOLDERS' EQUITY
The senior preferred stock has a preference as to dividends and assets in
the event of a partial or complete liquidation. Dividends are cumulative and
accrue at 14% per annum, compounded annually, on the sum of the par value of the
stock and all accrued and unpaid dividends. As of December 31, 1994 and 1995,
accrued and unpaid dividends were $359,680 and $378,749, respectively. In the
event of a partial or complete liquidation, the senior preferred stock is
entitled to receive the sum of the par value of the stock and all accrued and
unpaid dividends ("Redemption Price") before payment of the preferential amount
owed with respect to the junior preferred stock.
The senior preferred stock has no voting rights; however, the holders of
the senior preferred stock are entitled to elect one director of the Company.
Each director is entitled to one vote, but if certain covenants to the
investment agreement with the preferred shareholders are not met, the senior
preferred stock director is entitled to 100 votes, whereas other directors will
have one vote. The preferred stock director in this situation will have the
power to cause the Company to sell certain assets to satisfy first the bank
obligation in full and then redeem the senior preferred stock and repurchase the
stock warrant discussed in the following paragraph.
The senior preferred shareholders were issued a warrant to purchase common
stock for $38,000 on or before June 15, 2003. The stock warrant is for the
purchase of common stock in an amount up to 4% of the Company's total common
stock outstanding at the time of exercise of the warrant, computed on a fully
diluted basis. The difference between the carrying value of the warrant and its
estimated fair value, as determined by management on an annual basis, is being
accreted over the term of the warrant through charges to retained earnings.
The Company has the option to redeem all the senior preferred stock at the
Redemption Price and repurchase the stock warrant after December 31, 1996. The
stock warrant would be repurchased at a value which approximates 4% of the sum
of the fair market value of the Company's net assets. The mandatory redemption
date for the senior preferred stock is June 30, 2001. Both the option to redeem
the senior preferred stock and the mandatory redemption provision require the
Company to simultaneously repurchase the stock warrant.
The junior preferred stock has a preference as to dividends and assets in
the event of a partial or complete liquidation. The payment of dividends on this
class of stock is restricted by the bank credit agreement. In the event of a
partial or complete liquidation, holders of the junior preferred stock are
entitled to receive $100 per share after full payment of amounts owed to holders
of the senior preferred stock and before any distribution on the common stock.
The holders of the junior preferred stock have the right to convert their
shares into common stock. The conversion rate for each share of junior preferred
stock is the quotient of $100 divided by the fair market value of one share of
common stock on the date of conversion. The number of shares to be converted is
multiplied by such quotient.
F-11
<PAGE> 52
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH
PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
The holders of the junior preferred stock have voting rights equal in the
aggregate to 45% of the voting rights of all outstanding voting shares. The
holders of the common stock have voting rights equal to the remaining 55%.
As of December 31, 1995, treasury stock is comprised of 59,284 shares of
common stock at an aggregate cost of $1,273,563 and 1,057 shares of junior
preferred stock at an aggregate cost of $105,700. Except for the purchase of 147
shares of junior preferred stock at a cost of $14,700 in 1995, all other
treasury stock transactions during the three years ended December 31, 1995 and
the six months ended June 30, 1996 represent purchases and sales of common
stock.
6. INCOME TAXES
The provision (benefit) for income taxes on earnings before extraordinary
item for the years ended December 31, 1993, 1994, and 1995 consists of the
following:
<TABLE>
<CAPTION>
1993 1994 1995
-------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal..................................... $125,000 $(2,481,971) $2,532,002
State....................................... -- 83,138 356,741
-------- ----------- ----------
Total current tax expense
(benefit)......................... 125,000 (2,398,833) 2,888,743
-------- ----------- ----------
Deferred:
Federal..................................... -- 3,392,171 (219,425)
State....................................... -- 299,309 110,366
-------- ----------- ----------
Total deferred tax expense
(benefit)......................... -- 3,691,480 (109,059)
-------- ----------- ----------
Total income tax expense............ $125,000 $ 1,292,647 $2,779,684
======== =========== ==========
</TABLE>
In 1994, an income tax benefit of $224,030 was allocated to the
extraordinary charge discussed in note 3.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1994 and
1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Intangible assets.................................... $ 280,654 $ 444,800
Allowance for doubtful accounts receivable........... 84,464 290,540
Other................................................ 60,976 68,000
----------- -----------
Total deferred tax assets.................... 426,094 803,340
----------- -----------
Deferred tax liabilities:
Broadcast licenses................................... (4,107,838) (4,356,131)
Other................................................ (9,736) (29,630)
----------- -----------
Total deferred tax liabilities............... (4,117,574) (4,385,761)
----------- -----------
Net deferred tax liabilities................. $(3,691,480) $(3,582,421)
=========== ===========
</TABLE>
F-12
<PAGE> 53
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH
PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
The reconciliation of income tax expense computed at the federal statutory
tax rate to the Company's actual income tax expense for the years ended December
31, 1993, 1994, and 1995 is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
--------- ---------- ----------
<S> <C> <C> <C>
Federal income tax at statutory rate........ $ 549,156 $1,358,122 $1,599,020
State income taxes, net of federal
benefit................................... -- 252,415 308,291
Nondeductible intangible asset
amortization.............................. -- 33,150 140,927
Use of net operating loss carryforwards..... (424,156) (288,600) --
Other....................................... -- (62,440) 731,446
--------- ---------- ----------
$ 125,000 $1,292,647 $2,779,684
========= ========== ==========
</TABLE>
Income taxes paid for the years ended December 31, 1993, 1994, and 1995
amounted to $0, $21,958, and $2,908,100, respectively.
7. COMMITMENTS AND CONTINGENCIES
The Company is the lessor of office space, transmitter towers, and parcels
of land. Included in buildings and equipment as of December 31, 1994 and 1995 is
$2,186,261 and $2,005,433 of assets leased to others under operating leases and
the related accumulated depreciation of $617,571 and $623,711. Included in land
as of December 31, 1994 and 1995 is $52,396 representing a parcel of land which
is leased to another party under an operating lease.
The Company operates certain radio stations and the corporate offices from
leased facilities. Terms of the office space leases vary from three to ten
years. None of the leases contain contingent rent clauses; however, certain
leases contain five year renewal options. Other leases have terms which vary
from a month-to-month term to ten years. Certain leases have contingent rent
clauses providing for increases based on the Consumer Price Index. These leases
have renewal options of one to ten years.
Future minimum rental payments under noncancellable operating leases in
effect at December 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
------------------------------------------------ ----------
<S> <C>
1996............................................ $1,103,301
1997............................................ 1,080,089
1998............................................ 998,124
1999............................................ 898,354
2000............................................ 831,457
Thereafter...................................... 3,873,064
</TABLE>
Rent expense for the years ended December 31, 1993, 1994 and 1995 was
$933,685, $936,128 and $1,075,400, respectively.
In December 1994, the Company entered into a time brokerage agreement to
provide programming to, and sell advertising time on, radio station KMPQ-FM in
Rosenberg-Richmond (Houston), Texas, and acquired an option to purchase the
station. The time brokerage agreement provides that the Company will retain all
revenues associated with advertising time and pay certain operating expenses
effective December 1, 1994. The KMPQ-FM time brokerage agreement provides for
F-13
<PAGE> 54
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH
PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
payments of $12,500 a month to the licensee until the earlier of November 30,
1997 or the Company exercises its option to purchase the station. If the grantor
obtains an upgrade of the station's broadcast authorization status and relocates
the transmitter site, the purchase price of the station's assets would be
$14,000,000. If this upgrade is not accomplished, the purchase price is the fair
market value as defined in the agreement. If the upgrade of KMPQ-FM is not
completed at the expiration of the initial term of the time brokerage agreement,
the agreement may be extended for two, two-year periods with payments to the
licensee of $15,000 per month. If the upgrade becomes final, as defined in the
agreement, during the initial term or any extension of the agreement, the fee
paid to the licensee can increase to $150,000 per month.
On December 15, 1995, the Company entered into a time brokerage agreement
to provide programming to, and sell advertising time on, radio station KRTX-FM
in Galveston (Houston), Texas. Also, on December 15, 1995, the Company entered
into an asset purchase agreement related to this station. The time brokerage
agreement provides that the Company will retain all revenues associated with
advertising time and pay certain operating expenses effective December 15, 1995.
The KRTX-FM time brokerage agreement provides for payments of $13,000 per month
to the licensee until the earlier of the closing of the transactions
contemplated by the asset purchase agreement or the termination of such
agreement. The asset purchase agreement for KRTX-FM provides for the purchase of
certain tangible and intangible assets. The purchase price is $900,000. As of
December 31, 1995, the Company was waiting for approval from the Federal
Communications Commission ("FCC") before it could close on the purchase.
Time brokerage agreement fees for the years ended December 31, 1994 and
1995 were $12,500 (KMPQ-FM) and $155,000 (KMPQ-FM and KRTX-FM), respectively.
Spanish Radio Network ("SRN"), a partnership in which the Company was
previously a partner, was examined by the Internal Revenue Service ("IRS") for
the tax years ended December 31, 1992 and 1993. SRN owned and operated radio
stations. The IRS disagrees with SRN's radio station purchase price allocations
and has allocated a portion of the purchase price of certain amortizable
intangible assets to nonamortizable going concern value. The tax effect of these
adjustments to the Company, before interest, is approximately $326,000. The
Company intends to protest the adjustments through the appeals process of the
IRS and believes these adjustments will be reduced.
The IRS audited the Company's federal income tax returns for the tax years
ended February 29, 1984, and February 28, 1985, 1986 and 1987 and the Company
petitioned the United States Tax Court related to certain proposed adjustments.
The Company reached an agreement with the IRS on June 16, 1994, and all issues
were settled. At December 31, 1994, the Company accrued a tax refund receivable
of approximately $5,794,000 for the aforementioned tax years which includes net
interest income of approximately $2,671,000. The refund was received on April
24, 1995.
The Company is subject to other legal proceedings and claims which have
arisen in the ordinary course of its business and have not been fully
adjudicated. These actions, when ultimately concluded, will not, in the opinion
of management, have a material adverse effect upon the financial position or
results of operations of the Company.
8. SUBSEQUENT EVENTS
The Company closed on the purchase of the assets of KMIA-FM (subsequently
renamed KRTX-FM) in Jasper (Houston), Texas on March 25, 1996. The purchase
price was $3,500,000. A $3,000,000 bank loan was used to finance this
acquisition of assets.
F-14
<PAGE> 55
TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH
PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
On March 31, 1996, the Company entered into a time brokerage agreement to
provide programming to, and sell advertising time on, radio station KQXX-FM in
McAllen, Texas. The Company also entered into an asset purchase agreement
related to this radio station. The time brokerage agreement provides that the
Company will retain all revenues associated with advertising time and pay
certain operating expenses effective April 1, 1996. The Company pays $12,500
monthly to the licensee of KQXX-FM until the earlier of the closing date or
termination of the asset purchase agreement.
9. OTHER SUBSEQUENT EVENTS (UNAUDITED)
The Company closed on the purchase of the assets of KLTP-FM (formerly
KRTX-FM) in Galveston (Houston), Texas on July 31, 1996. The purchase price was
$900,000. A $600,000 bank loan was used to finance this acquisition.
The Company closed on the purchase of the assets of KQXX-FM in McAllen,
Texas on August 1, 1996. The purchase price of KQXX-FM was $1,300,000. Also, a
five year non-competition agreement from the seller was purchased for $800,000.
A $1,300,000 bank loan was used to finance this acquisition.
On August 16, 1996, the Company purchased the assets of KSOL-FM and KYLZ-FM
in San Francisco and Santa Cruz (San Jose), California. The purchase price was
$40,000,000. The acquisition was financed with a $40,000,000 loan from Clear
Channel Communications, Inc. The interest rate on the loan starts at 9% and
escalates to 13% over the loan term. The loan matures on September 30, 1997.
The Company has entered into an Agreement and Plan of Merger whereby it
will merge with a wholly owned subsidiary of Heftel Broadcasting Corporation
("Heftel"). In connection with the merger, management of the Company will assume
management responsibilities of Heftel. Upon consummation of the merger, the
Company's senior preferred stock will be redeemed and the common stock warrant
will be repurchased. The senior preferred stock will be redeemed for $3,378,749
and 23,000 shares of common stock will be issued to repurchase the warrant. The
merger is expected to become effective in early 1997.
F-15
<PAGE> 56
INDEPENDENT AUDITOR'S REPORT
KSOL-FM and KYLZ-FM (Divisions of Crescent
Communications, L.P.)
San Francisco, California
To the Partners:
We have audited the accompanying combined balance sheets of KSOL-FM and
KYLZ-FM (Divisions of Crescent Communications, L.P.) as of December 31, 1994 and
1995 and the related combined statements of operations and partners' deficiency,
and cash flows for the nine months ended December 31, 1994 and the year ended
December 31, 1995. These financial statements are the responsibility of the
Partnership'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 audits 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of KSOL-FM and KYLZ-FM
(Divisions of Crescent Communications, L.P.) as of December 31, 1994 and 1995,
and the results of their operations and their cash flows for the nine months
ended December 31, 1994 and the year ended December 31, 1995 in accordance with
generally accepted accounting principles.
MILLER, KAPLAN, ARASE & CO.
North Hollywood, California
March 1, 1996 (Except for Note 11 as to
which the date is August 16, 1996).
F-16
<PAGE> 57
EXHIBIT "A"
KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS:
Cash............................................. $ 500 $ 500 $ 500
Accounts receivable (net of allowance for
doubtful accounts of $65,869, $95,537 and
$105,411)..................................... 443,840 643,752 722,446
Trade receivable................................. -- 4,156 11,391
Other receivables................................ 1,537 9,759 14,802
Other prepaid expenses........................... 154,320 410,990 35,903
----------- ----------- -----------
Total current assets..................... 600,197 1,069,157 785,042
Property and equipment, net of accumulated
depreciation (Note 2)............................ 50,840 554,502 496,604
Intangible assets, net of accumulated amortization
(Note 3)......................................... 84,805 15,428,597 15,210,071
----------- ----------- -----------
Total assets............................. $ 735,842 $17,052,256 $16,491,717
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses............ $ 109,178 $ 199,497 $ 121,416
Accrued wages and commissions.................... 108,681 52,300 76,074
Trade liability.................................. 90,931 285,356 285,356
Deferred income.................................. 16,192 6,928 5,272
----------- ----------- -----------
Total current liabilities................ 324,982 544,081 488,118
Interdivisional payable (Note 4)................... 2,811,206 22,740,589 24,440,358
----------- ----------- -----------
Total liabilities........................ 3,136,188 23,284,670 24,928,476
Commitments and contingencies (Notes 5 and 6)
Partners' deficiency............................. (2,400,346) (6,232,414) (8,436,759)
----------- ----------- -----------
Total liabilities and partners'
deficiency............................. $ 735,842 $17,052,256 $16,491,717
=========== =========== ===========
</TABLE>
(Attached notes are an integral part of this statement)
F-17
<PAGE> 58
EXHIBIT "B"
KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.)
COMBINED STATEMENTS OF OPERATIONS AND PARTNERS' DEFICIENCY
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NINE MONTHS JUNE 30,
ENDED YEAR ENDED (UNAUDITED)
DECEMBER 31, DECEMBER 31, --------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Revenues......................... $ 1,796,162 $ 3,411,596 $ 1,631,085 $ 1,946,686
----------- ----------- ----------- -----------
Operation Expenses:
Operating expenses excluding
Depreciation and amortization,
General and administrative, and
Corporate expenses.............. 2,249,380 2,886,877 1,342,712 1,729,652
Depreciation and amortization...... 6,942 430,609 146,035 287,805
General and administrative
expense......................... 704,309 1,082,252 474,054 638,873
Corporate expense.................. 1,235,877 755,573 543,727 206,986
----------- ----------- ----------- -----------
Total operating expenses... 4,196,508 5,155,311 2,506,528 2,863,316
----------- ----------- ----------- -----------
Loss from operations....... (2,400,346) (1,743,715) (875,443) (916,630)
----------- ----------- ----------- -----------
Other income (expense):
Interest expense................... -- (2,104,583) (547,049) (1,296,502)
Other income....................... -- 16,230 9,140 8,787
----------- ----------- ----------- -----------
Net other (expense)........ -- (2,088,353) (537,909) (1,287,715)
----------- ----------- ----------- -----------
Net loss............................. (2,400,346) (3,832,068) (1,413,352) (2,204,345)
Partners' deficiency -- beginning of
period............................. -- (2,400,346) (2,400,346) (6,232,414)
----------- ----------- ----------- -----------
Partners' deficiency -- end of
period............................. $(2,400,346) $(6,232,414) $(3,813,698) $(8,436,759)
=========== =========== =========== ===========
</TABLE>
(Attached notes are an integral part of this statement)
F-18
<PAGE> 59
EXHIBIT "C"
KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NINE MONTHS JUNE 30,
ENDED YEAR ENDED (UNAUDITED)
DECEMBER 31, DECEMBER 31, --------------------------
1994 1995 1995 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Cash Flows From Operating
Activities:
Net loss.......................... $(2,400,346) $(3,832,068) $(1,413,352) $(2,204,345)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation................... 6,942 102,570 29,275 69,279
Amortization................... -- 328,039 116,760 218,526
(Increase) decrease in:
Accounts receivable.......... (443,840) (199,912) (258,457) (78,695)
Trade receivable............. -- (4,156) (103,133) (7,235)
Other receivables............ (1,537) (8,222) (18,899) (5,043)
Other prepaid expenses....... (154,320) (171,865) 206,766 375,087
Increase (decrease) in:
Accounts payable and accrued
expenses.................. 109,178 90,319 68,501 (78,081)
Accrued wages and
commissions............... 108,681 (56,381) (55,386) 23,774
Trade liability.............. 90,931 194,425 57,285 --
Deferred revenue............. 16,192 (9,264) (16,192) (1,656)
Interdivisional payable...... 2,811,206 3,929,383 1,726,966 1,699,769
----------- ----------- ----------- -----------
Net cash provided by
operating activities.... 143,087 362,868 340,134 11,380
----------- ----------- ----------- -----------
Cash Flows From Investing
Activities:
Purchase of property and
equipment...................... (57,782) (59,942) (37,208) (11,380)
Purchase of intangibles........... (84,805) (302,926) (302,926) --
----------- ----------- ----------- -----------
Net cash used by investing
activities.............. (142,587) (362,868) (340,134) (11,380)
----------- ----------- ----------- -----------
Net increase (decrease) in cash..... 500 -- -- --
Cash, beginning of period........... -- 500 500 500
----------- ----------- ----------- -----------
Cash, end of period................. $ 500 $ 500 $ 500 $ 500
=========== =========== =========== ===========
</TABLE>
Supplemental Disclosure of Non-Cash Activity:
The Partnership purchased KSOL-FM and KYLZ-FM on March 22, 1995 by
incurring approximately $16,000,000 in additional debt. This transaction was
recorded on the station's books through the interdivisional payable account.
(Attached notes are an integral part of this statement.)
F-19
<PAGE> 60
KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS
NINE MONTHS ENDED DECEMBER 31, 1994 (AUDITED)
YEAR ENDED DECEMBER 31, 1995 (AUDITED)
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Nature of Business and Basis of Presentation
Radio stations KSOL-FM and KYLZ-FM ("the stations"), licensed to San
Francisco, California and Santa Cruz, California, respectively, are divisions of
Crescent Communications, L.P. ("the Partnership"). The Partnership was
established as a limited partnership for the purpose of acquiring and operating
radio stations and commenced operations on November 19, 1993. The Partnership
purchased radio stations KSOL-FM and KYLZ-FM on March 22, 1995 which it had been
operating on a contract basis since April 1, 1994. KYLZ-FM was simulcast with
another station owned by the Partnership since April 1, 1994. The accompanying
combined financial statements present only the accounts of KSOL-FM and KYLZ-FM,
after eliminating all significant interdivisional accounts and transactions
between the stations.
B. Unaudited Interim Information
In the opinion of management, the combined financial statements for the six
month periods ended June 30, 1995 and 1996 (unaudited) include all adjustments
necessary for a fair presentation in accordance with generally accepted
accounting principles consisting solely of normal recurring accruals and
adjustments. The results of operations and cash flows for the six months ended
June 30, 1995 and 1996 are not necessarily indicative of results which would be
expected for a full year.
C. Revenue Recognition
Revenue is recognized when commercial spot announcements are aired.
Unbilled commercial air time is accrued at year end and included in accounts
receivable. Payments received in advance are included in deferred revenue.
D. Property and Equipment
Property and equipment are stated at cost. Amounts expended for
improvements which increase the useful life or replace major units of property
and equipment are capitalized, while expenditures for repairs, maintenance and
minor renewals are charged to expense as incurred. The cost and related
accumulated depreciation of assets sold or otherwise disposed of are removed
from the accounts and any gain or loss is reflected in current year earnings.
E. Depreciation
Depreciation of property and equipment is computed using the straight-line
method over the estimated economic lives of the assets as follows:
<TABLE>
<S> <C>
Broadcasting Equipment............................................. 5 years
Furniture and Fixtures............................................. 7 years
Music Library...................................................... 5 years
Vehicles........................................................... 3 years
Computers.......................................................... 3 years
</TABLE>
F-20
<PAGE> 61
KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NINE MONTHS ENDED DECEMBER 31, 1994 (AUDITED)
YEAR ENDED DECEMBER 31, 1995 (AUDITED)
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
F. Amortization
Amortization of intangible assets is computed using the straight-line
method over the estimated lives of the assets as follows:
<TABLE>
<S> <C>
FCC License....................................................... 40 years
Goodwill.......................................................... 40 years
Going Concern Value............................................... 40 years
Acquisition Costs................................................. 5 years
</TABLE>
G. Trades
Under trade agreements with certain advertisers, the Partnership provides
commercial spot announcements in exchange for goods and services, as is
customary in the broadcasting industry. These transactions are recorded at the
estimated fair market value of the goods and services received. Trade sales are
recognized when commercial spot announcements are broadcast and the value of
goods or services is recorded when received or utilized. The value of air time
provided and goods or services received are reflected in the balance sheet as a
trade receivable and a trade liability until they are paid for and earned,
respectively.
H. Concentration of Risk
Financial instruments that potentially subject the Partnership to credit
risk consist of accounts receivable. Concentration of credit risk with respect
to accounts receivable is limited due to the large number of diversified
customers and the geographic diversification of KSOL-FM and KYLZ-FM's national
customer base.
I. Allowance for Doubtful Accounts
The allowance for doubtful accounts is based on management's estimate of
the collectability of accounts receivable.
J. Income Taxes
As a Limited Partnership, all income and losses of Crescent Communications,
L.P. are passed directly to the partners for federal and state income tax
purposes. Accordingly, income tax expense is not reflected on the statements of
operations and partners' deficiency.
K. Accounting Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires that management use estimates and
assumptions in preparing financial statements. Those estimates and assumptions
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
Corporate and interest expenses were allocated among the individual radio
station divisions of Crescent Communications, L.P. on a pro rata basis.
Corporate expenses were allocated based on
F-21
<PAGE> 62
KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NINE MONTHS ENDED DECEMBER 31, 1994 (AUDITED)
YEAR ENDED DECEMBER 31, 1995 (AUDITED)
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
revenues and interest expenses were allocated based on station purchase price.
The amounts allocated to KSOL-FM and KYLZ-FM have been reflected in these
financial statements.
The accounting records of KYLZ-FM were combined with those of another
station also owned by Crescent Communications, L.P. Approximately 12.7% of the
combined revenues and expenses were allocated to KYLZ-FM based on a combination
of wattage, sales price and spot rate.
NOTE 2 -- PROPERTY AND EQUIPMENT
Property and Equipment consist of the following at December 31,:
<TABLE>
<CAPTION>
1994 1995
------- ---------
<S> <C> <C>
Broadcasting Equipment........................................ $20,671 $ 438,922
Furniture and Fixtures........................................ 618 88,768
Music Library................................................. -- 47,600
Vehicles...................................................... 22,181 38,881
Computers..................................................... 14,312 49,842
------- ---------
57,782 664,013
Accumulated Depreciation...................................... (6,942) (109,511)
------- ---------
$50,840 $ 554,502
======= =========
</TABLE>
NOTE 3 -- INTANGIBLE ASSETS
Intangible assets consist of the following at December 31,:
<TABLE>
<CAPTION>
1994 1995
------- -----------
<S> <C> <C>
FCC Licenses................................................ $ -- $15,000,000
Goodwill.................................................... -- 409,004
Going Concern Value......................................... -- 100,000
Acquisition Costs........................................... 84,805 247,632
------- -----------
84,805 15,756,636
Accumulated Amortization.................................... -- (328,039)
------- -----------
$84,805 $15,428,597
======= ===========
</TABLE>
The majority of the intangibles were acquired in the March 22, 1995
purchase of KSOL-FM and KYLZ-FM.
NOTE 4 -- INTERDIVISIONAL PAYABLE
As discussed in Note 1A, these combined financial statements present only
the accounts of KSOL-FM and KYLZ-FM. The interdivisional transactions which
would have been eliminated had the financial statements been prepared on a
consolidated basis have resulted in an interdivisional payable to those entities
which have not been included herein.
This payable consists primarily of KSOL-FM and KYLZ-FM station acquisition
debt recorded on the books of the Partnership, and interdivisional allocations
of Corporate and interest expenses.
F-22
<PAGE> 63
KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NINE MONTHS ENDED DECEMBER 31, 1994 (AUDITED)
YEAR ENDED DECEMBER 31, 1995 (AUDITED)
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
Since KSOL-FM and KYLZ-FM do not maintain significant cash balances, all of the
receipts and disbursements of the stations are also recorded through this
account.
NOTE 5 -- COMMITMENTS
A. Long-Term Debt
The secured long-term debt of the Partnership is not reflected in these
financial statements although interest expense has been allocated to the
stations as discussed in Note 1K. This long-term debt is secured by a lien on
all tangible and intangible assets of the Partnership, including KSOL-FM and
KYLZ-FM. This secured long-term debt outstanding of the Partnership totaled
$8,800,000 and $40,755,000 at December 31, 1994 and 1995, respectively. On
August 16, 1996, immediately subsequent to the sale of KSOL-FM and KYLZ-FM to
Tichenor Media System, Inc. (see Note 11) the debt mentioned above was retired
and all liens on the Stations were released. At December 31, 1995, loan covenant
violations had been waived by certain Partnership lenders concerning outstanding
debt totaling $40,755,000.
B. Lease Commitments
The Partnership is committed to four KSOL-FM and KYLZ-FM operating lease
agreements for office space, transmitter facilities and equipment, which expire
in various years through February, 2000. Payments on these leases range from
$600 to $10,200 per month. One of the leases includes a renewal option and calls
for an annual rental increase ranging from $270 to $2,290 per year as provided
in the lease agreement. KSOL-FM and KYLZ-FM rental expense for the nine months
ended December 31, 1994 and the year ended December 31, 1995 was $159,103 and
$206,359, respectively.
Future KSOL-FM and KYLZ-FM minimum rental payments under these lease
agreements for each of the years ending December 31 are as follows:
<TABLE>
<S> <C>
1996............................................. $204,746
1997............................................. 116,026
1998............................................. 108,533
1999............................................. 104,157
2000............................................. 14,400
</TABLE>
NOTE 6 -- COMMITMENTS -- RELATED PARTY
A. Management Agreements
The Partnership entered into a two year management agreement with a series
of one year automatic renewals with Crescent Communications Corporation. Two key
management members of this corporation are also related party stockholders of
S&W LP Corporation (Note 7). During the year ended December 31, 1995, the
Partnership paid $520,000 to Crescent Communications Corporation for 1995
management fees which included a bonus of $89,874 based on 1994's operating cash
flow. During the nine months ended December 31, 1994 and the year ended December
31, 1995, $386,714 and $476,207 was charged to corporate expenses of which
$90,491 and $136,195 has been allocated to KSOL-FM and KYLZ-FM on a pro rata
basis.
F-23
<PAGE> 64
KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NINE MONTHS ENDED DECEMBER 31, 1994 (AUDITED)
YEAR ENDED DECEMBER 31, 1995 (AUDITED)
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
Crescent Communications Corporation incurs certain costs on behalf of the
Partnership, which are periodically reimbursed. These reimbursable expenses
totalled $113,626 and $132,581 during the nine months ended December 31, 1994
and the year ended December 31, 1995 of which $26,588 and $32,918 have been
allocated to KSOL-FM and KYLZ-FM on a pro rata basis, respectively.
B. Capital Bonus Plan
During the nine months ended December 31, 1994 and the year ended December
31, 1995, the Partnership implemented a Capital Bonus Plan as an incentive for
certain key employees of the Partnership whereby the Board of Directors may
award "units" representing the right to receive a percentage of the net equity
growth of the stations owned by the Partnership including KSOL-FM and KYLZ-FM.
No bonuses were awarded under the plan for the year ended December 31, 1995.
NOTE 7 -- OTHER RELATED PARTY ACTIVITY
During the nine months ended December 31, 1994 and the year ended December
31, 1995, the Partnership incurred reimbursable expenses to a related party
stockholder of S&W LP Corporation (a partner of Crescent Communications, L.P.)
for expenses paid on behalf of the Partnership totalling $7,013 and $22,887, of
which $1,642 and $6,546 has been allocated to KSOL-FM and KYLZ-FM on a pro rata
basis, respectively.
NOTE 8 -- EMPLOYEE BENEFIT PLAN
The Partnership has adopted a Savings Retirement Program (the "Program")
under Section 401(k) of the Internal Revenue Code. The Program allows all
employees who are at least 21 years of age and have been employed with the
Company for a minimum of three months with a full time status to defer up to 15%
of their income on a pretax basis through contributions to the Program, limited
to an annual maximum ($9,240 in 1994 and 1995). The Program does not provide for
any matching of contributions, but the Partnership pays the annual
administration fee which was $1,700 and $2,226 for the nine months ended
December 31, 1994 and the year ended December 31, 1995, respectively.
NOTE 9 -- RADIO STATION PURCHASE
On March 22, 1995, Crescent Communications L.P. purchased substantially all
the assets of radio stations KSRY-FM (operating as KSOL-FM under a Program
Service and Time Brokerage Agreement since April 1, 1994) licensed to San
Francisco, California and KSRI-FM (operating as KYLZ-FM under LMA since April 1,
1994) licensed to Santa Cruz, California for an aggregate price of $16,000,000.
F-24
<PAGE> 65
KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NINE MONTHS ENDED DECEMBER 31, 1994 (AUDITED)
YEAR ENDED DECEMBER 31, 1995 (AUDITED)
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
NOTE 10 -- LOCAL MARKETING AGREEMENTS
As mentioned in Note 9, the Partnership entered into a Program Service and
Time Brokerage Agreement (the "LMA") with the sellers of KSRY-FM and KSRI-FM
under which the Partnership operated the Stations until the purchase closed
(March 22, 1995). During this time, the Partnership retained all the revenues
and paid virtually all the expenses related to the Stations' operations. In
addition, the Partnership paid the sellers the following monthly fees while the
LMA was in effect:
<TABLE>
<S> <C>
April - July, 1994....................................................... $100,000
August - November, 1994.................................................. 125,000
December, 1994 - March, 1995............................................. 150,000
</TABLE>
During the nine months ended December 31, 1994 and the year ended December
31, 1995, an aggregate amount of $1,050,000 and $401,613 was paid under the
above agreement and is included in corporate expenses.
NOTE 11 -- SUBSEQUENT EVENTS
Sale of Stations
On May 3, 1996, the Partnership entered into an Asset Purchase Agreement to
sell substantially all the assets of radio stations KSOL-FM and KYLZ-FM for
$40,000,000 in cash pending FCC approval. On August 15, 1996, subsequent to the
FCC approval the sale closed transferring ownership of KSOL-FM and KYLZ-FM to
Tichenor Media System, Inc.
F-25
<PAGE> 66
------------------------------------------------------
------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.....................
Risk Factors...........................
Use of Proceeds........................
Price Range of Class A Common Stock....
Dividend Policy........................
Capitalization.........................
The Tichenor Merger....................
Unaudited Pro Forma Financial
Information..........................
Selected Consolidated Financial Data...
The Company............................
Management.............................
Shares Eligible For Future Sale........
Description of Capital Stock...........
Underwriting...........................
Legal Opinions.........................
Experts................................
Available Information..................
Incorporation of Certain Documents by
Reference............................
</TABLE>
======================================================
======================================================
3,500,000 SHARES
HEFTEL BROADCASTING CORPORATION
CLASS A COMMON STOCK
-------------------
PROSPECTUS
-------------------
ALEX. BROWN & SONS
INCORPORATED
CREDIT SUISSE FIRST BOSTON
LEHMAN BROTHERS
MONTGOMERY SECURITIES
SMITH BARNEY INC.
, 1996
======================================================
<PAGE> 67
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses (other than underwriting discounts and commissions)
in connection with the issuance and distribution of the Class A Common Stock
registered hereby are as follows:
<TABLE>
<S> <C>
SEC registration fee...................................................... $ 50,617
NASD filing fee........................................................... 17,405
NASDAQ National Market listing fee........................................ 17,500
Legal fees and expenses................................................... 75,000
Accounting fees and expenses.............................................. 100,000
Blue Sky fees and expenses................................................ 1,660
Printing and engraving expenses........................................... 100,000
Miscellaneous............................................................. 137,818
--------
Total........................................................... $500,000
========
</TABLE>
- ---------------
* Estimated.
The foregoing expenses will be paid by the Registrant.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to provisions of the Delaware General Corporation Law, the
Restated Certificate of Incorporation of Registrant (the "Company") includes a
provision which eliminates the personal liability of its directors to the
Company and its stockholders for monetary damage to the fullest extent
permissible under Delaware law. This provision does not eliminate liability (a)
for any breach of a director's duty of loyalty to the Company or its
stockholders; (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (c) in connection with
payment of any illegal dividend or an illegal stock repurchase; or (d) for any
transaction from which the director derives an improper personal benefit.
Further, this provision has no effect on claims arising under federal or state
securities laws and does not affect the availability of injunctions and other
equitable remedies available to the Company's stockholders for any violation of
a director's fiduciary duty to the Company or its stockholders.
The Company's Restated Certificate of Incorporation authorizes the Company
to indemnify its officers, directors and other agents to the fullest extent
permitted by Delaware law, exclusive of rights provided through bylaw
provisions, agreements, vote of stockholders or disinterested directors or
otherwise. The Company's Restated Certificate of Incorporation also authorizes
the Company to indemnify its officers, directors and agents for breach of duty
to the corporation and its stockholders through bylaw provisions, agreements or
both, in excess of the indemnification otherwise permitted under Delaware law,
subject to certain limitations. The Company has entered into indemnification
agreements with all of its directors and executive officers whereby the Company
will indemnify each such person (an "indemnitee") against certain claims arising
out of certain past, present or future acts, omissions or breaches of duty
committed by an indemnitee while serving in his employment capacity. Such
indemnification does not apply to acts or omissions which are knowingly
fraudulent, deliberately dishonest or arise from willful misconduct.
Indemnification will only be provided to the extent the indemnitee has not
already received payments in respect of such claim from the Company or from an
insurance company. Under certain circumstances, such indemnification (including
reimbursement of expenses incurred) will be allowed for liability arising under
the Securities Act of 1933.
II-1
<PAGE> 68
The Bylaws of the Company require the Company to provide indemnification
for directors and officers to the fullest extent permitted under Delaware law
and the Company's Restated Certificate of Incorporation.
The Underwriting Agreement provides for indemnification by the Underwriters
of the Registrant, its directors and officers, and by the Registrant of the
Underwriters, for certain liabilities, including liabilities arising under the
Securities Act.
An insurance policy obtained by the registrant provides for indemnification
of officers and directors of the Registrant and certain other persons against
liabilities and expenses incurred by any of them in certain stated proceedings
and under certain stated conditions.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS. DESCRIPTION
-----------------------------------------------------------------------------
<S> <C>
1 Form of Underwriting Agreement
2.1.1 Amended and Restated Agreement and Plan of Reorganization, dated September 7,
1995, among the Company, Viva Acquisition Corporation, Mambisa Broadcasting
Corporation ("Mambisa"), SFS Management Corporation, Amancio Victor Suarez,
Charles Fernandez and Amancio Jorge Suarez, Jr., (such three individuals are
referred to herein collectively as the ("Stockholders") (the "Purchase
Agreement") (Schedules omitted) (incorporated by reference to Exhibit 1.1.1
to Registrant's Form 8-K filed on September 22, 1995)
2.1.2 Escrow Agreement, dated September 7, 1995, among the Company, Mambisa, the
Stockholders and Citibank, N.A. (incorporated by reference to Exhibit 1.1.2
to Registrant's Form 8-K filed on September 22, 1995)
2.1.3 Mutual Release, dated September 7, 1995, among the parties to the Purchase
Agreement and other parties (incorporated by reference to Exhibit 1.1.3 to
Company's Form 8-K filed on September 22, 1995)
2.1.4 Agreement of Purchase and Sale, dated September 7, 1995, among the Company,
Mambisa, Amancio Victor Suarez and Amancio Jorge Suarez, Jr. (incorporated by
reference to Exhibit 1.1.4 to Registrant's Form 8-K filed on September 22,
1995)
2.1.5 Promissory Note dated January 9, 1996, executed by the Company and HBC
Florida, Inc. to the order of Mambisa Broadcasting Corporation (incorporated
by reference to the identically numbered exhibit to the Company's Form 10-K
filed on December 13, 1996.)
2.2.1 Tender Offer Agreement, dated June 1, 1996, between the Company and Clear
Channel Radio, Inc. ("Clear Channel") (incorporated herein by reference to
Exhibit 99(c)(1) of Clear Channel's Schedule 14D-1 filed on June 7, 1996)
2.2.2 Amendment No. 1 to Tender Offer Agreement, dated June 6, 1996 (incorporated
herein by reference to Exhibit 99(c)(9) of Clear Channel's Schedule 14D-1
filed on June 7, 1996)
2.2.3 Amendment No. 2 to Tender Offer Agreement, dated June 20, 1996 (incorporated
by reference to Exhibit (c)(3) of the Company's Schedule 14D-9 dated June 20,
1996)
2.2.4 Amendment No. 3 to Tender Offer Agreement, dated July 2, 1996 (incorporated
by reference to Exhibit 99(c)(15) of Amendment No. 2 to the Schedule 14D-1 of
Clear Channel filed on July 9, 1996)
2.3 Confidentiality Letter Agreement dated May 31, 1996, between the Company and
Clear Channel (incorporated herein by reference to Exhibit 99(c)(12) of Clear
Channel's Schedule 14D-1 filed on June 7, 1996)
2.4.1 Asset Purchase Agreement, dated November 1, 1995, between HBC New York, Inc.
and Park Radio of Greater New York, Inc. (incorporated by reference to
Exhibit 2.2 of Company's Form 10-K filed on December 29, 1995)
</TABLE>
II-2
<PAGE> 69
<TABLE>
<CAPTION>
EXHIBITS. DESCRIPTION
------------
<S> <C>
2.4.2 First Amendment to Asset Purchase Agreement, dated March 25, 1996 between HBC
New York, Inc. and Park Radio of Greater New York, Inc. (incorporated by
reference to Exhibit 1.1.2 of Company's Form 8-K filed on March 28, 1996)
2.5.1 Agreement and Plan of Merger, dated July 9, 1996, between Clear Channel
Communications, Inc. and Tichenor Media System, Inc. with Exhibits (Schedules
omitted) (incorporated by reference to Exhibit 99(c)(16) of Amendment No. 2
to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9,
1996)
2.5.2 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel
Communications, Inc., and McHenry T. Tichenor, Sr. (incorporated by reference
to Exhibit 99(c)(17) of Amendment No. 2 to Schedule 14D-1 of Clear Channel
Communications, Inc., filed on July 9, 1996)
2.5.3 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel
Communications, Inc., and McHenry T. Tichenor, Jr. (incorporated by reference
to Exhibit 99(c)(18) of Amendment No. 2 to Schedule 14D-1 of Clear Channel
Communications, Inc., filed on July 9, 1996)
2.5.4 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel
Communications, Inc., and Warren Tichenor (incorporated by reference to
Exhibit 99(c)(19) of Amendment No. 2 to Schedule 14D-1 of Clear Channel
Communications, Inc., filed on July 9, 1996)
2.5.5 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel
Communications, Inc., and William Tichenor (incorporated by reference to
Exhibit 99(c)(20) of Amendment No. 2 to Schedule 14D-1 of Clear Channel
Communications, Inc., filed on July 9, 1996)
2.5.6 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel
Communications, Inc., and Jean Russell (incorporated by reference to Exhibit
99(c)(21) of Amendment No. 2 to Schedule 14D-1 of Clear Channel
Communications, Inc., filed on July 9, 1996)
2.5.7 Amended and Restated Agreement and Plan of Merger, dated October 10, 1996,
between Clear Channel Communications, Inc. and Tichenor Media System, Inc.
without Exhibits (Schedules omitted) (incorporated by reference to the
identically numbered exhibit to the Company's Form 10-K filed on December 23,
1996.)
2.5.8 Assignment Agreement, dated October 10, 1996 by Company and Heftel Merger
Sub, Inc. (incorporated by reference to the identically numbered exhibit to
the Company's Form 10-K filed on December 23, 1996.)
2.5.9 Form of Registration Rights Agreement by and among the Company, McHenry T.
Tichenor, Sr., McHenry T. Tichenor, Jr., Warren W. Tichenor, William E.
Tichenor, Jean T. Russell, McHenry T. Tichenor, Jr., as Custodian for David
T. Tichenor, Alta Subordinated Debt Partners III, L.P., Prime II Management,
LP, PrimeComm, LP, Ricardo A. del Castillo, Jeffrey T. Hinson and David D.
Lykes. (included in Exhibit 2.5.1)
2.5.10 Form of Employment Agreement by and between the Company and McHenry T.
Tichenor, Jr. (included in Exhibit 2.5.1)
2.5.11 Form of Stockholders Agreement by and among the Company and each of the
stockholders listed on the signature pages thereto. (included in Exhibit
2.5.1)
2.5.12 Form of the Company's Indemnification Agreement. (included in Exhibit 2.5.1)
2.5.13 Form of Registration Rights Agreement by and among the Company and Clear
Channel Communications, Inc. (included in Exhibit 2.5.1)
4.1 Specimen certificate for the Class A Common Stock (a)
4.2 Article 4 of the Restated Certificate of Incorporation (b)
</TABLE>
II-3
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBITS. DESCRIPTION
------------
<S> <C>
4.3 Credit Agreement, dated August 5, 1996, among the Company, NationsBank of
Texas, N.A. and the other lenders signatory thereto (incorporated by
reference to Exhibit 1.0 of Registrant's Form 8-K filed on August 20, 1996.)
4.4 Form of Second Amended and Restated Certificate of Incorporation of the
Company. (included in Exhibit 2.5.7)
4.5 Loan Agreement, dated July 9, 1996, between Clear Channel Communications,
Inc., as the lender, and TMS Assets California, Inc., as the borrower.
(incorporated by reference to the identically numbered exhibit to the
Company's Form 10-K filed on December 23, 1996.)(c)
4.6 Guarantee, dated July 9, 1996, by Tichenor Media System, Inc., in favor of
Clear Channel Communications, Inc. (incorporated by reference to the
identically numbered exhibit to the Company's Form 10-K filed on December 23,
1996.)(c)
5 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
23.1.1 Consent of Ernst & Young LLP
23.1.5 Consent of KPMG Peat Marwick LLP
23.1.6 Consent of Miller, Kaplan, Arase & Co.
23.2.1 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in Exhibit 5)
24 Power of Attorney (included on signature pages)
99.1 Consent of McHenry T. Tichenor, Jr.
99.2 Consent of McHenry T. Tichenor, Sr.
99.3 Consent of Robert W. Hughes
</TABLE>
- ---------------
(a) Incorporated by reference to the identically numbered exhibit to the
Company's Registration Statement on Form S-1, as amended (Reg. No.
33-78370).
(b) Incorporated by reference to Exhibit No. 4.3 to the Company's Registration
Statement on Form S-1, as amended (Reg. No. 33-78370).
(c) The Company is not a party to this agreement. Upon consummation of the
Tichenor Merger, a subsidiary of the Registrant will be the beneficiary of
this agreement.
The Company agrees to furnish supplementally a copy of any omitted
schedules to the Commission upon request.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new
II-4
<PAGE> 71
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions set forth or described in Item 15 of
the Registration Statement, or otherwise, the registrant has been advised that
in the opinion of the Commission such indemnification is against public policy
as expressed in the Exchange Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Exchange
Act and will be governed by the final adjudication of such issue.
II-5
<PAGE> 72
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Antonio, State of Texas, on
December 23, 1996.
HEFTEL BROADCASTING CORPORATION
By: /s/ L. LOWRY MAYS
------------------------------------
L. Lowry Mays
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
L. Lowry Mays and John T. Kendrick, and each of them, each with full power to
act without the other, his true and lawful attorneys-in-fact and agents, each
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments to
this Registration Statement (including post-effective amendments), including
this Amendment No. 1 to this Registration Statement, and to file the same with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each of said attorneys-in-fact
and agents full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as he might or could do in person hereby ratifying and
confirming that each of said attorneys-in-fact and agents or his substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated below.
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- -------------------------- -------------------
<C> <S> <C>
/s/ L. LOWRY MAYS President, Chief Executive December 23, 1996
- --------------------------------------------- Officer and Director
L. Lowry Mays
/s/ JOHN T. KENDRICK Senior Vice President, Chief December 23, 1996
- --------------------------------------------- Financial Officer and
John T. Kendrick Assistant Secretary
(Principal Financial and
Accounting Officer)
/s/ ERNESTO CRUZ Director December 23, 1996
- ---------------------------------------------
Ernesto Cruz
/s/ B.J. MCCOMBS Director December 23, 1996
- ---------------------------------------------
B.J. McCombs
/s/ JAMES M. RAINES Director December 23, 1996
- ---------------------------------------------
James M. Raines
/s/ JOHN H. WILLIAMS Director December 23, 1996
- ---------------------------------------------
John H. Williams
</TABLE>
II-6
<PAGE> 73
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- -------------------- ------------------------------------------------------------- -----------
<C> <S> <C>
1 Form of Underwriting Agreement
2.1.1 Amended and Restated Agreement and Plan of Reorganization,
dated September 7, 1995, among the Company, Viva Acquisition
Corporation, Mambisa Broadcasting Corporation ("Mambisa"), SFS
Management Corporation, Amancio Victor Suarez, Charles
Fernandez and Amancio Jorge Suarez, Jr., (such three
individuals are referred to herein collectively as the
("Stockholders") (the "Purchase Agreement") (Schedules omitted)
(incorporated by reference to Exhibit 1.1.1 to Registrant's
Form 8-K filed on September 22, 1995)
2.1.2 Escrow Agreement, dated September 7, 1995, among the Company,
Mambisa, the Stockholders and Citibank, N.A. (incorporated by
reference to Exhibit 1.1.2 to Registrant's Form 8-K filed on
September 22, 1995)
2.1.3 Mutual Release, dated September 7, 1995, among the parties to
the Purchase Agreement and other parties (incorporated by
reference to Exhibit 1.1.3 to Company's Form 8-K filed on
September 22, 1995)
2.1.4 Agreement of Purchase and Sale, dated September 7, 1995, among
the Company, Mambisa, Amancio Victor Suarez and Amancio Jorge
Suarez, Jr. (incorporated by reference to Exhibit 1.1.4 to
Registrant's Form 8-K filed on September 22, 1995)
2.1.5 Promissory Note dated January 9, 1996, executed by the Company
and HBC Florida, Inc. to the order of Mambisa Broadcasting
Corporation (incorporated by reference to the identically
numbered exhibit to the Company's Form 10-K filed on December
13, 1996.)
2.2.1 Tender Offer Agreement, dated June 1, 1996, between the Company
and Clear Channel Radio, Inc. ("Clear Channel") (incorporated
herein by reference to Exhibit 99(c)(1) of Clear Channel's
Schedule 14D-1 filed on June 7, 1996)
2.2.2 Amendment No. 1 to Tender Offer Agreement, dated June 6, 1996
(incorporated herein by reference to Exhibit 99(c)(9) of Clear
Channel's Schedule 14D-1 filed on June 7, 1996)
2.2.3 Amendment No. 2 to Tender Offer Agreement, dated June 20, 1996
(incorporated by reference to Exhibit (c)(3) of the Company's
Schedule 14D-9 dated June 20, 1996)
2.2.4 Amendment No. 3 to Tender Offer Agreement, dated July 2, 1996
(incorporated by reference to Exhibit 99(c)(15) of Amendment
No. 2 to the Schedule 14D-1 of Clear Channel filed on July 9,
1996)
2.3 Confidentiality Letter Agreement dated May 31, 1996, between
the Company and Clear Channel (incorporated herein by reference
to Exhibit 99(c)(12) of Clear Channel's Schedule 14D-1 filed on
June 7, 1996)
2.4.1 Asset Purchase Agreement, dated November 1, 1995, between HBC
New York, Inc. and Park Radio of Greater New York, Inc.
(incorporated by reference to Exhibit 2.2 of Company's Form
10-K filed on December 29, 1995)
2.4.2 First Amendment to Asset Purchase Agreement, dated March 25,
1996 between HBC New York, Inc. and Park Radio of Greater New
York, Inc. (incorporated by reference to Exhibit 1.1.2 of
Company's Form 8-K filed on March 28, 1996)
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ----------- ---------------------------------------------------------------------- -----------
<C> <S> <C>
2.5.1 Agreement and Plan of Merger, dated July 9, 1996, between Clear
Channel Communications, Inc. and Tichenor Media System, Inc.
with Exhibits (Schedules omitted) (incorporated by reference to
Exhibit 99(c)(16) of Amendment No. 2 to Schedule 14D-1 of Clear
Channel Communications, Inc., filed on July 9, 1996)
2.5.2 Stock Purchase Agreement dated as of July 9, 1996, by and among
Clear Channel Communications, Inc., and McHenry T. Tichenor,
Sr. (incorporated by reference to Exhibit 99(c)(17) of
Amendment No. 2 to Schedule 14D-1 of Clear Channel
Communications, Inc., filed on July 9, 1996)
2.5.3 Stock Purchase Agreement dated as of July 9, 1996, by and among
Clear Channel Communications, Inc., and McHenry T. Tichenor,
Jr. (incorporated by reference to Exhibit 99(c)(18) of
Amendment No. 2 to Schedule 14D-1 of Clear Channel
Communications, Inc., filed on July 9, 1996)
2.5.4 Stock Purchase Agreement dated as of July 9, 1996, by and among
Clear Channel Communications, Inc., and Warren Tichenor
(incorporated by reference to Exhibit 99(c)(19) of Amendment
No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc.,
filed on July 9, 1996)
2.5.5 Stock Purchase Agreement dated as of July 9, 1996, by and among
Clear Channel Communications, Inc., and William Tichenor
(incorporated by reference to Exhibit 99(c)(20) of Amendment
No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc.,
filed on July 9, 1996)
2.5.6 Stock Purchase Agreement dated as of July 9, 1996, by and among
Clear Channel Communications, Inc., and Jean Russell
(incorporated by reference to Exhibit 99(c)(21) of Amendment
No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc.,
filed on July 9, 1996)
2.5.7 Amended and Restated Agreement and Plan of Merger, dated
October 10, 1996, between Clear Channel Communications, Inc.
and Tichenor Media System, Inc. without Exhibits (Schedules
omitted) (incorporated by reference to the identically numbered
exhibit to the Company's Form 10-K filed on December 23, 1996.)
2.5.8 Assignment Agreement, dated October 10, 1996 by Company and
Heftel Merger Sub, Inc. (incorporated by reference to the
identically numbered exhibit to the Company's Form 10-K filed
on December 23, 1996.)
2.5.9 Form of Registration Rights Agreement by and among the Company,
McHenry T. Tichenor, Sr., McHenry T. Tichenor, Jr., Warren W.
Tichenor, William E. Tichenor, Jean T. Russell, McHenry T.
Tichenor, Jr., as Custodian for David T. Tichenor, Alta
Subordinated Debt Partners III, L.P., Prime II Management, LP,
PrimeComm, LP, Ricardo A. del Castillo, Jeffrey T. Hinson and
David D. Lykes. (included in Exhibit 2.5.1)
2.5.10 Form of Employment Agreement by and between the Company and
McHenry T. Tichenor, Jr. (included in Exhibit 2.5.1)
2.5.11 Form of Stockholders Agreement by and among the Company and
each of the stockholders listed on the signature pages thereto.
(included in Exhibit 2.5.1)
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ------------ ------------------------------------------------------------- -------------
<S> <S> <C>
2.5.12 Form of the Company's Indemnification Agreement. (included in
Exhibit 2.5.1)
2.5.13 Form of Registration Rights Agreement by and among the Company
and Clear Channel Communications, Inc. (included in Exhibit
2.5.1)
4.1 Specimen certificate for the Class A Common Stock (a)
4.2 Article 4 of the Restated Certificate of Incorporation (b)
4.3 Credit Agreement, dated August 5, 1996, among the Company,
NationsBank of Texas, N.A. and the other lenders signatory
thereto (incorporated by reference to Exhibit 1.0 of
Registrant's Form 8-K filed on August 20, 1996.)
4.4 Form of Second Amended and Restated Certificate of
Incorporation of the Company. (included in Exhibit 2.5.7)
4.5 Loan Agreement, dated July 9, 1996, between Clear Channel
Communications, Inc., as the lender, and TMS Assets California,
Inc., as the borrower. (incorporated by reference to the
identically numbered exhibit to the Company's Form 10-K filed
on December 23, 1996.)(c)
4.6 Guarantee, dated July 9, 1996, by Tichenor Media System, Inc.,
in favor of Clear Channel Communications, Inc. (incorporated by
reference to the identically numbered exhibit to the Company's
Form 10-K filed on December 23, 1996.)(c)
5 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
23.1.1 Consent of Ernst & Young LLP
23.1.5 Consent of KPMG Peat Marwick LLP
23.1.6 Consent of Miller, Kaplan, Arase & Co.
23.2.1 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included
in Exhibit 5)
24 Power of Attorney (included on signature pages)
99.1 Consent of McHenry T. Tichenor, Jr.
99.2 Consent of McHenry T. Tichenor, Sr.
99.3 Consent of Robert W. Hughes
</TABLE>
- ---------------
(a) Incorporated by reference to the identically numbered exhibit to the
Company's Registration Statement on Form S-1, as amended (Reg. No.
33-78370).
(b) Incorporated by reference to Exhibit No. 4.3 to the Company's Registration
Statement on Form S-1, as amended (Reg. No. 33-78370).
(c) The Company is not a party to this agreement. Upon consummation of the
Tichenor Merger, a subsidiary of the Company will be the beneficiary of
this agreement.
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,500,000 SHARES
HEFTEL BROADCASTING CORPORATION
CLASS A COMMON STOCK
------------------------
UNDERWRITING AGREEMENT
------------------------
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
3,500,000 SHARES
HEFTEL BROADCASTING CORPORATION
CLASS A COMMON STOCK
UNDERWRITING AGREEMENT
, 1996
ALEX. BROWN & SONS INCORPORATED
CS FIRST BOSTON CORPORATION
LEHMAN BROTHERS INC.
MONTGOMERY SECURITIES
SMITH BARNEY INC.
As Representatives of the
Several Underwriters
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Gentlemen:
Heftel Broadcasting Corporation, a Delaware corporation (the "Company"),
proposes to sell to the several underwriters (the "Underwriters") named in
Schedule I hereto for whom you are acting as representatives (the
"Representatives") 3,500,000 shares of the Company's Class A Common Stock, $.001
par value (the "Firm Shares"). The respective amounts of the Firm Shares to be
so purchased by the several Underwriters are set forth opposite their names in
Schedule I hereto. The Company also proposes to sell at the Underwriters' option
an aggregate of up to 525,000 additional shares of the Company's Class A Common
Stock (the "Option Shares") as set forth below.
As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option Shares
if you elect to exercise the over-allotment option in whole or in part for the
accounts of the several Underwriters. The Firm Shares and the Option Shares (to
the extent the aforementioned option is exercised) are herein collectively
called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants as follows:
(a) A registration statement on Form S-3 (File No. 33- ) with
respect to the Shares has been carefully prepared by the Company in
conformity in all material respects with the requirements of the
Securities Act of 1933, as amended, (the "Act") and the Rules and
Regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder and has been filed with the
Commission under the Act. The Company has complied with the conditions
for the use of Form S-3. Copies of such registration statement,
including any amendments thereto, the preliminary prospectuses (meeting
the requirements of Rule 430A of the Rules and Regulations) contained
therein and the exhibits, financial statements and schedules, as finally
amended and revised, have heretofore been delivered by the Company to
you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act,
herein referred to as the "Registration Statement," which shall be
deemed to include all information omitted therefrom in reliance upon
Rule 430A and contained in the Prospectus referred to below, has been
declared effective by the Commission under the Act and no
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<PAGE> 3
post-effective amendment to the Registration Statement has been filed as
of the date of this Agreement. "Prospectus" means (i) the form of
prospectus first filed by the Company with the Commission pursuant to
its Rule 424(b) or (ii) the last preliminary prospectus included in the
Registration Statement filed prior to the time it becomes effective or
filed pursuant to Rule 424(a) under the Act that is delivered by the
Company to the Underwriters for delivery to purchasers of the Shares,
together with any term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary
prospectus included in the Registration Statement prior to the time it
becomes effective is herein referred to as a "Preliminary Prospectus."
Any reference herein to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include the documents incorporated by
reference therein, as of the date of such Preliminary Prospectus or
Prospectus, as the case may be, and, in the case of any reference herein
to any Prospectus, also shall be deemed to include any documents
incorporated by reference therein, and any supplements or amendments
thereto, filed with the Commission after the date of filing of the
Prospectus under Rules 424(b) and 430A, and prior to the termination of
the offering of the Shares by the Underwriters.
(b) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct its
business as described in the Registration Statement; each of the
subsidiaries of the Company as listed in Exhibit A hereto (collectively,
the "Subsidiaries") has been duly organized and, except as set forth in
Exhibit A hereto, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, with corporate
power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; the Company and
each of the Subsidiaries are duly qualified to transact business in all
jurisdictions in which the conduct of their business requires such
qualification and a failure to qualify would have a materially adverse
effect upon the business or financial condition of the Company and the
Subsidiaries taken as a whole; the outstanding shares of capital stock
of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable and are owned by the Company or
another Subsidiary free and clear of all liens, encumbrances and
security interests except for a lien on 100% of the outstanding capital
stock of each of the Subsidiaries granted to NationsBank of Texas, N.A.,
as agent on behalf of multiple lenders, and no options, warrants or
other rights to purchase, agreements or other obligations to issue or
other rights to convert any obligations into shares of capital stock or
ownership interests in the Subsidiaries are outstanding.
(c) The 7,000,000 authorized shares of Class B Common Stock of the
Company have been duly authorized. The outstanding shares of Class A
Common Stock of the Company have been duly authorized and are validly
issued, fully-paid and non-assessable; the Shares to be issued and sold
by the Company have been duly authorized and when issued and paid for as
contemplated herein will be validly issued, fully-paid and
non-assessable; and no preemptive rights of stockholders exist with
respect to any of the Shares or the issue and sale thereof. Neither the
filing of the Registration Statement nor the offering or sale of the
Shares as contemplated by this Agreement gives rise to any rights, other
than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock.
(d) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. The Shares conform in all material
respects with the statements concerning them in the Registration
Statement.
(e) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the
Shares nor instituted proceedings for that purpose. The Registration
Statement contains and the Prospectus and any amendments or supplements
thereto will contain all statements which are required to be stated
therein by, and in all material respects conform or will conform, as the
case may be, to the requirements of, the Act and the Rules and
Regulations. The documents incorporated by reference in the Prospectus,
at the time they were filed with the Commission conformed in all
material respects to the requirements of the
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<PAGE> 4
Securities Exchange Act of 1934 or the Act, as applicable, and the Rules
and Regulations of the Commission thereunder. Neither the Registration
Statement nor any amendment thereto, and neither the Prospectus nor any
supplement thereto, including any documents incorporated by reference
therein, contains or will contain, as the case may be, any untrue
statement of a material fact or omits or will omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted
from the Registration Statement or the Prospectus, or any such amendment
or supplement, or any documents incorporated by reference therein in
reliance upon, and in conformity with, written information furnished to
the Company by or on behalf of any Underwriter through the
Representatives, specifically for use in the preparation thereof.
(f) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules included in the
Registration Statement, present fairly the financial position and the
results of operations of the Company and Subsidiaries consolidated, at
the indicated dates and for the indicated periods. Such financial
statements have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods
involved, and all adjustments necessary for a fair presentation of
results for such periods have been made. The selected and summary
financial and statistical data included in the Registration Statement
presents fairly the information shown therein and have been compiled on
a basis consistent with the financial statements presented therein and
the books and records of the Company. The pro forma financial statements
and other pro forma financial information included in the Registration
Statement and the Prospectus present fairly the information shown
therein, have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements, have been
properly compiled on the pro forma bases described therein, and, in the
opinion of the Company, the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein.
(g) Except for those license renewal applications of the Company or
its Subsidiaries currently pending before the Federal Communications
Commission (the "FCC"), there is no action or proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of
the Subsidiaries before any court or administrative agency which might
result in any material adverse change in the earnings, business,
management, properties, assets, rights, operations, condition (financial
or otherwise) of the Company and of the Subsidiaries (taken as a whole),
except as set forth in the Registration Statement.
(h) The Company and the Subsidiaries have good and marketable title
to all of the properties and assets reflected in the financial
statements hereinabove described (or as described in the Registration
Statement) subject to no lien, mortgage, pledge, charge or encumbrance
of any kind except those reflected in such financial statements (or as
described in the Registration Statement) or which are not material in
amount. The Company and the Subsidiaries occupy their leased properties
under valid leases with such exceptions as are not material to the
Company and the Subsidiaries taken as a whole and do not materially
interfere with the use made and proposed to be made of such properties
by the Company and the Subsidiaries.
(i) The Company and the Subsidiaries have filed all Federal, State
and foreign income tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments
received by them or any of them to the extent that such taxes have
become due and are not being contested in good faith. The Company has no
knowledge of any tax deficiency that has been or might be asserted
against the Company.
(j) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there
has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings,
business, management, properties, assets, rights, operations, condition
(financial or otherwise) or business
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<PAGE> 5
prospects of the Company and its Subsidiaries (taken as a whole),
whether or not occurring in the ordinary course of business, other than
general economic and industry conditions changes in the ordinary course
of business and changes or transactions described or contemplated in the
Registration Statement and there has not been any material transaction
entered into by the Company or the Subsidiaries, other than transactions
in the ordinary course of business and changes and transactions
contemplated by the Registration Statement, as it may be amended or
supplemented. None of the Company or the Subsidiaries have any material
contingent obligations which are not disclosed in the Registration
Statement, as it may be amended or supplemented.
(k) Neither the Company nor any of the Subsidiaries is or with the
giving of notice or lapse of time or both, will be in default under its
Certificate of Incorporation or By-Laws or any agreement, lease,
contract, indenture or other instrument or obligation to which it is a
party or by which it, or any of its properties, is bound and which
default is of material significance in respect of the business or
financial condition of the Company and its Subsidiaries (taken as a
whole). The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated and the fulfillment
of the terms hereof will not conflict with or result in a breach of any
of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other material agreement or
instrument to which the Company or any Subsidiary is a party, or of the
Certificate of Incorporation or by-laws of the Company or any order,
rule or regulation applicable to the Company or any Subsidiary, or of
any court or of any regulatory body or administrative agency or other
governmental body having jurisdiction, except in all cases a conflict,
breach or default which would not have a materially adverse effect on
the business or financial condition of the Company and the Subsidiaries
(taken as a whole).
(l) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and
delivery by the Company of this Agreement and the consummation of the
transactions herein contemplated (except such additional steps as may be
required by the National Association of Securities Dealers, Inc. (the
"NASD") or may be necessary to qualify the Shares for public offering by
the Underwriters under State securities or Blue Sky laws) has been
obtained or made and is in full force and effect.
(m) The Company and each of the Subsidiaries hold all material
licenses, certificates and permits from governmental authorities which
are necessary to the conduct of their businesses; and neither the
Company nor any of the Subsidiaries has received notice of any
infringement of any material patents, patent rights, trade names,
trademarks or copyrights, which infringement is material to the business
of the Company and the Subsidiaries (taken as a whole).
(n) Ernst & Young LLP, who have certified the consolidated
financial statements of the Company, filed with the Commission as part
of, or incorporated by reference in, the Registration Statement and
Prospectus, are to the knowledge of the Company independent public
accountants as required by the Act and the Rules and Regulations.
(o) To the best of the Company's knowledge, there are no
affiliations or association between any member of the National
Association of Securities Dealers, Inc. and any of the Company's
officers, directors or 5% or greater security holders, except as set
forth in the Registration Statement or as otherwise disclosed in writing
to the Representatives.
(p) Neither the Company, nor to the Company's knowledge, any of the
Subsidiaries, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation
of the price of the shares of Common Stock to facilitate the sale or
resale of the Shares. The Company acknowledges that the Underwriters may
engage in passive market making transactions in the Shares on The Nasdaq
Stock Market in accordance (and in compliance) with Rule 10b-6A under
the Exchange Act.
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<PAGE> 6
(q) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company
Act of 1940 and the rules and regulations of the Commission thereunder.
(r) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(s) The Company and each of its Subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their
respective properties and as is customary for companies engaged in
similar industries.
(t) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each "pension
plan" for which the Company would have any liability that is intended t
be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by
failure to act, which would cause the loss of such qualification.
(u) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter
92-198, An Act Relating to Disclosure of doing Business with Cuba, and
the Company further agrees that if it commences engaging in business
with the government of Cuba or with any person or affiliate located in
Cuba after the date the Registration Statement becomes or has become
effective with the Commission or with the Florida Department of Banking
and Finance (the "Department"), whichever date is later, or if the
information reported or incorporated by reference in the Prospectus, if
any, concerning the Company's business with Cuba or with any person or
affiliate located in Cuba changes in any material way, the Company will
provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the
Company agrees to sell to the Underwriters, and each Underwriter agrees,
severally and not jointly, to purchase at a price of $ per share, the
number of Firm Shares set forth opposite the name of each Underwriter in
Schedule I hereof, subject to adjustments in accordance with Section
hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made via
wire transfer of immediately available funds or such other payment
procedures agreed to by the parties. Such payment and delivery are to be
made at the offices of Alex. Brown & Sons Incorporated, 135 East Baltimore
Street, Baltimore, Maryland, at 10:00 a.m., Baltimore time, on the third
business day after the date of this Agreement or at such other time and
date not later than five business days thereafter as you and the Company
shall agree upon, such time and date being herein referred to as the
"Closing Date." (As used herein, "business day" means a day on which the
Nasdaq Stock Market (National Market) is open for trading and on which
banks in New York are open for business and not permitted by law or
executive order to be closed.) The certificates for the Firm Shares will be
delivered in such denominations and in such registrations as the
Representatives request in writing not later than the second full business
day
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<PAGE> 7
prior to the Closing Date, and will be made available for inspection by the
Representatives at least one business day prior to the Closing Date.
(c) In addition, on the basis of representations and warranties herein
contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase the
Option Shares at the price per share as set forth in the first paragraph of
this Section 2. The option granted hereby may be exercised in whole or in
part by giving written notice only once within 30 days after the date of
this Agreement, by you, as Representatives of the several Underwriters, to
the Company, setting forth the number of Option Shares as to which the
several Underwriters are exercising the option, the names and denominations
in which the Option Shares are to be registered and the time and date at
which such certificates are to be delivered. The time and date at which
certificates for Option Shares are to be delivered shall be determined by
the Representatives but shall not be earlier than three nor later than ten
full business days after the exercise of such option, nor in any event
prior to the Closing Date (such time and date being herein referred to as
the "Option Closing Date"). If the date of exercise of the option is three
or more days before the Closing Date, the notice of exercise shall set the
Closing Date as the Option Closing Date. The number of Option Shares to be
purchased by each Underwriter shall be in the same proportion to the total
number of Option Shares being purchased as the number of Firm Shares being
purchased by such Underwriter bears to the total number of Firm Shares,
adjusted by you in such manner as to avoid fractional shares. The option
with respect to the Option Shares granted hereunder may be exercised only
to cover over-allotments in the sale of the Firm Shares by the
Underwriters. You, as Representatives of the several Underwriters, may
cancel such option at any time prior to its expiration by giving written
notice of such cancellation to the Company. To the extent, if any, that the
option is exercised, payment for the Option Shares shall be made on the
Option Closing Date via wire transfer of immediately available funds or
other payment procedures agreed to by the parties against delivery of
certificates therefor at the offices of Alex. Brown & Sons Incorporated,
135 East Baltimore Street, Baltimore, Maryland.
3. Offering by the Underwriters. It is understood that the several
Underwriters are to make a public offering of the Firm Shares as soon as the
Representatives deem it advisable to do so. The Firm Shares are to be initially
offered to the public at the public offering price set forth in the Prospectus.
The Representatives may from time to time thereafter change the public offering
price and other selling terms. To the extent, if at all, that any Option Shares
are purchased pursuant to Section 2 hereof, the Underwriters will offer them to
the public on the foregoing terms.
It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company.
The Company covenants and agrees with the several Underwriters that:
(a) The Company will (i) prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus
containing information previously omitted at the time of effectiveness
of the Registration Statement in reliance on Rule 430A of the Rules and
Regulations, (ii) not file any amendment to the Registration Statement
or supplement to the Prospectus or documents incorporated by reference
therein of which the Representatives shall not previously have been
advised and furnished with a copy or to which the Representatives shall
have reasonably objected in writing or which is not in compliance with
the Rules and Regulations and (iii) file on a timely basis all reports
and any definitive proxy or information statements required to be filed
by the Company with the Commission subsequent to the date of the
Prospectus and prior to the termination of the offering of the Shares by
the Underwriters.
(b) The Company will advise the Representatives promptly of any
request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, or
of the issuance by the Commission of any stop order suspending the
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<PAGE> 8
effectiveness of the Registration Statement or the use of the Prospectus
or of the institution of any proceedings for that purpose, and the
Company will use reasonable efforts to prevent the issuance of any such
stop order preventing or suspending the use of the Prospectus and to
obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of
such jurisdictions as the Representatives may reasonably have designated
in writing and will make such applications, file such documents, and
furnish such information as may be reasonably required for that purpose,
provided the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction where it is not now so qualified or required to file such a
consent. The Company will, from time to time, prepare and file such
statements, reports, and other documents, as are or may be required to
continue such qualifications in effect for so long a period as the
Representatives may reasonably request for distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company
will deliver to, or upon the order of, the Representatives during the
period when delivery of a Prospectus is required under the Act, as many
copies of the Prospectus in final form, or as thereafter amended or
supplemented, as the Representatives may reasonably request. The Company
will deliver to the Representatives at or before the Closing Date, four
signed copies of the Registration Statement and all amendments thereto
including all exhibits filed therewith, and will deliver to the
Representatives such number of copies of the Registration Statement, but
without exhibits, and of all amendments thereto, as the Representatives
may reasonably request, including documents incorporated by reference
therein.
(e) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not
later than 15 months after the effective date of the Registration
Statement, an earnings statement (which need not be audited) in
reasonable detail, covering a period of at least 12 consecutive months
beginning after the effective date of the Registration Statement, which
earnings statement shall satisfy the requirements of Section 11(a) of
the Act and Rule 158 of the Rules and Regulations and will advise you in
writing when such statement has been so made available.
(f) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and copies
of all other documents, reports and information furnished by the Company
to its stockholders or filed with any securities exchange pursuant to
the requirements of such exchange or with the Commission pursuant to the
Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(g) No offering, sale, short sale or other disposition of any
Common Stock of the Company will be made for a period of 90 days after
the date of this Agreement, directly or indirectly, by the Company
otherwise than hereunder, or with the prior written consent of Alex.
Brown & Sons Incorporated, except that the Company may, without such
consent, issue shares as consideration for future acquisitions and grant
options or issue shares of Common Stock pursuant to the exercise of
options granted under the Company's current option plans.
(h) The Company will comply with the Act and the Rules and
Regulations, and the Exchange Act, and the rules and regulations of the
Commission thereunder, so as to permit the completion of the
distribution of the Shares as contemplated in this Agreement and the
Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur
as a result of which, in the judgment of the Company or in the
reasonable opinion of the Underwriters, it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in
the light of the circumstances existing at the time the Prospectus is
delivered to a purchaser, not misleading, or, if it is necessary at any
time to amend or supplement the Prospectus to comply with any law, the
Company promptly will either (i) prepare and file with the
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<PAGE> 9
Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus or (ii) prepare and file with the
Commission an appropriate filing under the Exchange Act which shall be
incorporated by reference in the Prospectus so that the Prospectus as so
amended or supplemented will not, in the light of the circumstances when
it is so delivered, be misleading, or so that the Prospectus will comply
with the law.
(i) The Company will use its best efforts to list, subject to
notice of issuance, the Shares on the Nasdaq Stock Market.
(j) The Company has caused each of Clear Channel Communications,
Inc., a Texas corporation and each executive officer and director and
each of their affiliates to furnish to you, on or prior to the date of
this agreement, a letter or letters, in form and substance satisfactory
to the Underwriters, pursuant to which each such person shall agree not
to offer, sell, sell short or otherwise dispose of any shares of Common
Stock of the Company or other capital stock of the Company, or any other
securities convertible, exchangeable or exercisable for common shares or
derivative of common shares owned by such person or request the
registration for the offer or sale of any of the foregoing (or as to
which such person has the right to direct the disposition of) for a
period of 90 days after the date of this Agreement, directly or
indirectly, except with the prior written consent of Alex. Brown & Sons
Incorporated ("Lockup Agreements"). This restriction shall not apply to
any sale of shares of Common Stock made by Clear Channel Communications,
Inc. or its affiliates in order to comply with certain FCC regulations
specified in the Prospectus in connection with consummation of the
business combination involving the Company described therein.
(k) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act").
(l) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for
the Common Stock.
(m) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
5. Costs and Expenses. The Company will pay all costs, expenses and fees
incident to the performance of the obligations of the Company under this
Agreement, including, without limiting the generality of the foregoing, the
following: accounting fees of the Company; the fees and disbursements of counsel
for the Company; the cost of printing and delivering to, or as requested by, the
Underwriters copies of the Registration Statement, Preliminary Prospectuses, the
Prospectus, this Agreement, the Invitation Letter, the Blue Sky Survey and any
supplements or amendments thereto; the filing fees of the Commission; the filing
fees of the NASD; and the expenses, including the fees and disbursements of
counsel for the Underwriters, up to $10,000, incurred in connection with the
qualification of the Shares under State securities or Blue Sky laws. The Company
shall not, however, be required to pay for any of the Underwriters' expenses
(other than those related to qualification under State securities or Blue Sky
laws) except that, if this Agreement shall not be consummated because the
conditions in Section 7 hereof are not satisfied, or because this Agreement is
terminated by the Representatives pursuant to Section 6 hereof, or by reason of
any failure, refusal or inability on the part of the Company to perform any
undertaking or satisfy any condition of this Agreement or to comply with any of
the terms hereof on its part to be performed, unless such failure to satisfy
said condition or to comply with said terms be due to the default or omission of
any Underwriter, then the Company shall reimburse the several Underwriters for
reasonable out-of-pocket expenses, including fees and disbursements of counsel,
reasonably incurred in connection with investigating, marketing and proposing to
market the Shares or in contemplation of performing their obligations hereunder;
but the Company shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits from the sale
by them of the Shares.
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<PAGE> 10
6. Conditions of Obligations of the Underwriters. The several obligations
of the Underwriters to purchase the Firm Shares on the Closing Date and the
Option Shares, if any, on the Option Closing Date are subject to the accuracy,
as of the Closing Date or the Option Closing Date, as the case may be, of the
representations and warranties of the Company contained herein, and to the
performance by the Company of its covenants and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by
Rule 424 and Rule 430A of the Rules and Regulations shall have been made,
and any request of the commission for additional information (to be
included in the Registration Statement or otherwise) shall have been
disclosed to the Representatives and complied with to their reasonable
satisfaction. No stop order suspending the effectiveness of the
Registration Statement, as amended from time to time, shall have been
issued and no proceedings for that purpose shall have been taken or, to the
knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing
Date which would prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Akin, Gump,
Strauss, Hauer & Feld, L.L.P., counsel for the Company, or Jeffer, Mangels,
Butler & Marmoro LLP, counsel for the Company (as such respective counsel
shall mutually determine) dated the Closing Date or the Option Closing
Date, as the case may be, addressed to the Underwriters to the effect that:
(i) The Company is validly existing as a corporation in good
standing under the laws of the State of Delaware, with corporate power
and authority to own its properties and conduct its business as
described in the Prospectus; each of the Subsidiaries has been duly
incorporated and, except as set forth in Exhibit A hereto, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority to
own its properties and conduct its business as described in the
Prospectus; the Company and each of the Subsidiaries are duly qualified
to transact business in all jurisdictions in which the conduct of their
business requires such qualification, or in which the failure to qualify
would have a materially adverse effect upon the business of the Company
and the Subsidiaries taken as a whole; and the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and
validly issued, are fully paid and non-assessable and are owned by the
Company or a Subsidiary; and, to the best of such counsel's knowledge,
the outstanding shares of capital stock of each of the Subsidiaries are
owned free and clear of all liens, encumbrances and security interests,
except for a lien on 100% of the outstanding shares of each of the
Subsidiaries granted to NationsBank of Texas, N.A., as agent on behalf
of multiple lenders, and no options, warrants or other rights to
purchase, agreements or other obligations to issue, or other rights to
convert any obligations into any shares of capital stock or of ownership
interests in the Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of its Class A and Class B Common Stock have been duly
authorized; the outstanding shares of its Class A Common Stock have been
duly authorized and validly issued and are fully-paid and
non-assessable; all of the Shares conform to the description thereof
contained in the Prospectus; the Shares, including the Option Shares, if
any, to be sold by the Company pursuant to this Agreement have been duly
authorized and will be validly issued, fully paid and non-assessable
when issued and paid for as contemplated by this Agreement; and, to the
best knowledge of such counsel, no preemptive rights of stockholders
exist with respect to any of the Shares or the issue and sale thereof.
(iii) Except as described in or contemplated by the Prospectus, to
the knowledge of such counsel, there are no outstanding securities of
the Company convertible or exchangeable into or evidencing the right to
purchase or subscribe for any shares of capital stock of the Company and
there are no outstanding or authorized options, warrants, or rights of
any character obligating the Company to issue any shares of its capital
stock or any securities convertible or exchangeable into or
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<PAGE> 11
evidencing the right to purchase or subscribe for any shares of such
stock; and except as described in the Prospectus, to the knowledge of
such counsel, no holder of any securities of the Company or any other
person has the right, contractual or otherwise, which has not been
satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of,
any of the Shares or the right to have any Common Stock or other
securities of the Company included in the Registration Statement or the
right, as a result of the filing of the Registration Statement, to
require registration under the Act of any shares of Common Stock or
other securities of the Company.
(iv) The Registration Statement has become effective under the Act
and, to the best of the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending or
threatened under the Act.
(v) The Registration Statement, all Preliminary Prospectuses, the
Prospectus and each amendment or supplement thereto and documents
incorporated by reference therein comply as to form in all material
respects with the requirements of the Act or the Exchange Act, as
applicable and the applicable rules and regulations thereunder (except
that such counsel need express no opinion as to, the statistical
information contained in the Prospectus or financial statements,
schedules and other financial information incorporated by reference
therein). The conditions for the use of Form S-3, set forth in the
General Instructions thereto, have been satisfied.
(vi) The statements under the captions "Risk Factors -- Tichenor
Merger," "-- Relationship Between the Company and Clear Channel," "The
Tichenor Merger," "Management -- Management of the Company following the
Tichenor Merger," "Shares Eligible for Future Sale -- Registration
Rights" and "Description of Capital Stock" in the Prospectus, insofar as
such statements constitute a summary of documents referred to therein or
matters of law, are accurate summaries and fairly and correctly present
the information called for with respect to such documents and matters.
(vii) To the best of such counsel's knowledge, there are no
contracts or documents required to be filed as exhibits to the
Registration Statement or described in the Registration Statement or the
Prospectus (excluding any document incorporated therein by reference)
which are not so filed or described as required, and such contracts and
documents as are summarized in the Registration Statement or the
Prospectus (excluding any document incorporated therein by reference)
are fairly summarized in all material respects.
(viii) To the best of such counsel's knowledge, there are no
material legal proceedings pending or threatened against the Company or
any of the Subsidiaries which is of a character required to be disclosed
in the Prospectus and which has not been properly disclosed therein.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, the Certificate of Incorporation or
By-laws of the Company, or any agreement or instrument known to such
counsel to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries may be bound (other than
licenses or permits granted by the Federal Communications Commission, on
which such counsel need not express any opinion), except a conflict,
breach or default which would not have a materially adverse effect on
the business or financial condition of the Company and the Subsidiaries
taken as a whole.
(x) This Agreement has been duly authorized, executed and delivered
by the Company.
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body having jurisdiction over the Company is necessary in
connection with the execution and delivery of this Agreement and the
consummation of the transactions herein contemplated (other than as may
be required by the National Association of Securities Dealers, Inc. or
as required by State securities and Blue Sky laws as to which such
counsel need express no opinion) except such as have been obtained or
made, specifying the same.
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<PAGE> 12
(xii) The Company is not, and will not become, as a result of the
consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefor as described in the Prospectus,
required to register as an investment company under the 1940 Act.
In rendering such opinion, such counsel may rely (A) as to matters
governed by the laws of states other than California and Delaware or
Federal laws on local counsel in such jurisdictions, provided that in each
case such counsel shall state that they believe that they and the
Underwriters are justified in relying on such other counsel and (B) as to
matters of fact, on certificates of responsible officers of the Company and
certificates or other written statements of officers or departments of
various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and any Subsidiary. In addition
to the matters set forth above, such opinion shall also include a statement
to the effect that nothing has come to the attention of such counsel which
leads them to believe that the Registration Statement, as of the time it
became effective under the Act, the Prospectus or any amendment or
supplement thereto, on the date it was filed pursuant to Rule 424(b) and
the Registration Statement and the Prospectus, or any amendment or
supplement thereto, as of the Closing Date or the Option Closing Date, as
the case may be, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading (except that such counsel need
express no view as to matters pertaining to statistical information
contained in the Prospectus or financial statements, schedules and other
financial information contained or incorporated by reference in the
Prospectus). With respect to such statement, such counsel may state that
their belief is based upon the procedures set forth therein, but is without
independent check and verification.
(c) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Wiley, Rein and
Fielding, special Federal Communications Commission counsel to the Company,
dated the Closing Date or the Option Closing Date, as the case may be,
addressed to the Underwriters to the effect that:
(i) The statements under the captions "Federal Regulation of Radio
Broadcasting" and "Risk Factors -- Government Regulation of Broadcasting
Industry contained in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein or matters of law,
are accurate summaries and fairly and correctly present the information
called for with respect to such documents and matters.
(ii) No approval, consent, order, authorization, designation,
declaration or filing by or with the Federal Communications Commission
is necessary in connection with the execution and delivery of this
Agreement and the consummation of the transactions herein contemplated
except such as have been obtained or made, specifying the same.
(d) The Representatives shall have received from Piper & Marbury
L.L.P., counsel for the Underwriters, an opinion dated the Closing Date or
the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (ii), (iv), (v) and (x) of Paragraph (b) of this
Section 6, and that the Company is a validly organized and existing
corporation under the laws of the State of Delaware. In rendering such
opinion Piper & Marbury L.L.P. may rely as to all matters governed other
than by the laws of the State of Maryland and Delaware or Federal laws on
the opinion of counsel referred to in paragraph (b) of this Section 6. In
addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such
counsel which leads them to believe that the Registration Statement, as of
the time it became effective under the Act, and the Prospectus or any
amendment or supplement thereto, on the date it was filed pursuant to Rule
424(b) and the Registration Statement and the Prospectus, or any amendment
or supplement thereto, as of the Closing Date or the Option Closing Date,
as the case may be, contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading (except that such counsel need
express no view as to financial statements, schedules and other financial
information included therein). With respect to such
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<PAGE> 13
statement, Piper & Marbury L.L.P. may state that their belief is based upon
the procedures set forth therein, but is without independent check and
verification.
(e) The Representatives shall have received at or prior to the Closing
Date from Piper & Marbury L.L.P. a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under
the State securities or Blue Sky laws of such jurisdictions as the
Representatives may reasonably have designated to the Company.
(f) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, signed letters from Ernst & Young
LLP[,] [and], KPMG Peat Marwick LLP [and ], dated the Closing
Date or the Option Closing Date, as the case may be, which shall confirm,
on the basis of a review in accordance with the procedures set forth in the
letters signed by such firms and dated and delivered to the Representatives
on the date hereof that nothing has come to their attention during the
period from the date five days prior to the date hereof, to a date not more
than five days prior to the Closing Date or the Option Closing Date, as the
case may be, which would require any change in their letter dated the date
hereof if it were required to be dated and delivered on the Closing Date or
the Option Closing Date, as the case may be. All such letters shall be in
form and substance satisfactory to the Representatives.
(g) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of
the President and Chief Executive Officer and the Senior Vice President and
Chief Financial Officer of the Company to the effect that, as of the
Closing Date or the Option Closing Date, as the case may be, each of them
severally represents as follows:
(i) The Registration Statement has become effective under the Act
and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have been
taken or are, to his knowledge, contemplated by the Commission.
(ii) He does not know of any litigation instituted or threatened
against the Company of a character required to be disclosed in the
Registration Statement which is not so disclosed; he does not know of
any material contract required to be filed as an exhibit to the
Registration Statement which is not so filed; and the representations
and warranties of the Company contained in Section 1 hereof are true and
correct as of the Closing Date or the Option Closing Date, as the case
may be.
(iii) He has carefully examined the Registration Statement and the
Prospectus and, in his opinion to the best of his knowledge, as of the
effective date of the Registration Statement, the statements contained
in the Registration Statement were true and correct in all material
respects, and such Registration Statement and Prospectus did not omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and, in his opinion,
since the effective date of the Registration Statement, no event has
occurred which should have been set forth in a supplement to or an
amendment of the Prospectus which has not been so set forth in such
supplement or amendment.
(h) The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties contained herein and related matters as the Representatives may
reasonably have requested.
(i) The Firm Shares and Option Shares, if any, have been approved for
designation upon official notice of issuance on the Nasdaq Stock Market
(National Market).
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Representatives and to Piper & Marbury L.L.P.,
counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated
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<PAGE> 14
by the Representatives by notifying the Company of such termination in writing
or by telegram at or prior to the Closing Date or the Option Closing Date, as
the case may be.
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. Conditions of the Obligations of the Company. The obligations of the
Company to sell and deliver the Shares required to be delivered as and when
specified in this Agreement are subject to the conditions that at the Closing
Date or the Option Closing Date, as the case may be, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and in
effect or proceedings therefor initiated or threatened.
8. Indemnification
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of the Act
against any losses, claims, damages or liabilities to which such Underwriter or
such controlling person may become subject under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement, or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or such amendment or supplement, in reliance upon and in conformity
with written information furnished to the Company by or through the
Representatives specifically for use in the preparation thereof, and provided
further that the Company shall not be liable with respect to any untrue
statement contained in or any omission from a Preliminary Prospectus if the
untrue statement contained in or such omission from such Preliminary Prospectus
was corrected in the applicable Prospectus and the person asserting any such
loss, liability, claim or damage was not given or sent a copy of the applicable
Prospectus (excluding the documents incorporated by reference therein) in the
manner and at such time as required by the Act, providing the Company has
furnished you copies of such applicable Prospectus. This indemnity agreement
will be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities to which the Company or any
such director, nominee for director, officer, or controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by such Underwriter or through the
Representatives on behalf of such Underwriter specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
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<PAGE> 15
(c) In case any proceeding (including any governmental investigation) shall
be instituted involving any person in respect of which indemnity may be sought
pursuant to this Section 8, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the "indemnifying
party") in writing. No indemnification provided for in Section 8(a) or (b) shall
be available to any party who shall fail to give notice as provided in this
Section 8(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by the
failure to give such notice, but the failure to give such notice shall not
relieve the indemnifying party or parties from any liability which it or they
may have to the indemnified party for contribution or otherwise than on account
of the provisions of Section 8(a) or (b). In case any such proceeding shall be
brought against any indemnified party and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one separate firm for all such indemnified parties.
Such firm shall be designated in writing by you in the case of parties
indemnified pursuant to Section 8(a) and by the Company in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under Section 8(a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. No
party shall be held liable for contribution with respect to any claim or action
settled without its consent which shall not be unreasonably withheld. Such
consent shall be given within three business days from the date on which the
party requesting consent provides a written request to the other party.
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<PAGE> 16
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 8(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this Section 8(d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers of any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. Default by Underwriters. If on the Closing Date or the Option Closing
Date, as the case may be, any Underwriter shall fail to purchase and pay for the
portion of the Shares which such Underwriter has agreed to purchase and pay for
on such date (otherwise than by reason of any default on the part of the
Company), you, as Representatives of the Underwriters, shall use your best
efforts to procure within 24 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company such amounts as may be
agreed upon and upon the terms set forth herein, the Firm Shares or Option
Shares, as the case may be, which the defaulting Underwriter or Underwriters
failed to purchase. If during such 24 hours you, as such Representatives, shall
not have procured such other Underwriters, or any others, to purchase the Firm
Shares or Option Shares, as the case may be, agreed to be purchased by the
defaulting Underwriter or Underwriters, then (a) if the aggregate number of
shares with respect to which such default shall occur does not exceed 10% of the
Firm Shares or Option Shares, as the case may be, covered hereby, the other
Underwriters shall be obligated, severally, in proportion to the respective
numbers of Firm Shares or Option Shares, as the case may be, which they are
obligated to purchase hereunder, to purchase the Firm Shares or Option Shares,
as the case may be, which such defaulting Underwriter or Underwriters failed to
purchase, or (b) if the aggregate number of shares of Firm Shares or Option
Shares, as the case may be, with respect to which such default shall occur
exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the Company or you as the Representatives of the Underwriters will have
the right, by written notice given within the next 24-hour period to the parties
to this Agreement, to terminate this Agreement without liability on the part of
the non-defaulting Underwriters or of the Company except to the extent provided
in Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option Closing
Date, as the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representatives, may determine in order that the required
changes in the Registration Statement or in the
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<PAGE> 17
Prospectus or in any other documents or arrangements may be effected. The term
"Underwriter" includes any person substituted for a defaulting Underwriter. Any
action taken under this Section 9 shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter under this
Agreement.
10. Notices. All communications hereunder shall be in writing and, except
as otherwise provided herein, will be mailed, delivered or telegraphed and
confirmed as follows: if to the Underwriters, to Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202, Attention:
Jeffrey S. Amling, Managing Director; if to the Company, to Heftel Broadcasting
Corporation, 6767 West Tropicana Avenue, Las Vegas, Nevada 89103, Attention:
John T. Kendrick, Senior Vice President and Chief Financial Officer, with a copy
to Heftel Broadcasting Corporation, 200 Concord Plaza, Suite 600, San Antonio,
Texas 78216, Attention: L. Lowry Mays, President and Chief Executive Officer.
11. Termination. This Agreement may be terminated by you by notice to the
Company as follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 A.M.
on the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the effective date of the Registration Statement, any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of
the Company and its Subsidiaries taken as a whole or the earnings, business
affairs, management or business prospects of the Company and its
Subsidiaries taken as a whole, whether or not arising in the ordinary
course of business, (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, calamity, crisis or change on
the financial markets of the United States would, in your reasonable
judgment, make the offering or delivery of the Shares impracticable, (iii)
suspension of trading in securities on the New York Stock Exchange or the
American Stock Exchange or limitation on prices (other than limitations on
hours or numbers of days of trading) for securities on either such
Exchange, (iv) the enactment, publication, decree or other promulgation of
any federal or state statute, regulation, rule or order of any court or
other governmental authority which in your reasonable opinion materially
and adversely affects or will materially or adversely affect the business
or operations of the Company and the Subsidiaries taken as a whole, (v)
declaration of a banking moratorium by either federal or New York State
authorities, (vi) the suspension of trading of the Company's common stock
by the Commission on the Nasdaq Stock Market or (vii) the taking of any
action by any federal, state or local government or agency in respect of
its monetary or fiscal affairs which in your reasonable opinion has a
material adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
This Agreement also may be terminated by you, by notice to the Company, as
to any obligation of the Underwriters to purchase the Option Shares, upon the
occurrence at any time prior to the Option Closing Date of any of the events
described in subparagraph (b) above or as provided in Sections 6 and 9 of this
Agreement.
12. Successors. This Agreement has been and is made solely for the
benefit of the Underwriters, the Company and their respective successors,
executors, administrators, heirs and assigns, and the officers, directors and
controlling persons referred to herein, and no other person will have any right
or obligation hereunder. The term "successors" shall not include any purchaser
of the Shares merely because of such purchase.
13. Information Provided by Underwriters. The Company and the
Underwriters acknowledge and agree that the only information furnished or to be
furnished by any Underwriter to the Company for inclusion in any Prospectus or
the Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
Underwriters), legends required by Item 502(d) of Regulation S-K under the Act
and the information under the caption "Underwriting" in the Prospectus.
14. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and
-16-
<PAGE> 18
effect regardless of (a) any termination of this Agreement, (b) any
investigation made by or on behalf of any Underwriter or controlling person
thereof, or by or on behalf of the Company or its directors or officers and (c)
delivery of and payment for the Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
HEFTEL BROADCASTING CORPORATION
By _____________________________
L. Lowry Mays
President and Chief Executive
Officer
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
ALEX. BROWN & SONS INCORPORATED
CS FIRST BOSTON INCORPORATED
LEHMAN BROTHERS INC.
MONTGOMERY SECURITIES
SMITH BARNEY INC.
As Representatives of the several
Underwriters listed on Schedule I
By ALEX. BROWN & SONS INCORPORATED
By ____________________________
Authorized Officer
-17-
<PAGE> 19
SCHEDULE I
SCHEDULE OF UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
- ------------------------------------------------------------------------- ---------------------
<S> <C>
Alex. Brown & Sons Incorporated..........................................
CS First Boston Incorporated.............................................
Lehman Brothers Inc......................................................
Montgomery Securities....................................................
Smith Barney Inc.........................................................
---------------
Total.......................................................... 3,500,000
===============
</TABLE>
-18-
<PAGE> 1
EXHIBIT 5
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
1500 NATIONSBANK PLAZA
300 CONVENT STREET
SAN ANTONIO, TEXAS 78205
(210) 270-0800
December 19, 1996
Heftel Broadcasting Corporation
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Gentlemen:
We have acted as counsel to Heftel Broadcasting Corporation, a
Delaware corporation (the "Company"), in connection with the proposed public
offering of up to 4,025,000 shares of the Company's Class A Common Stock, $.001
par value (the "Common Stock"), as described in the Registration Statement on
Form S-3, file No. 333-14207 (the "Registration Statement"), originally filed
with the Securities and Exchange Commission on October 16, 1996.
We have, as counsel, examined such corporate records, certificates and
other documents and reviewed such questions of law as we have deemed necessary,
relevant or appropriate to enable us to render the opinions expressed below.
In rendering such opinions, we have assumed the genuineness of all signatures
and the authenticity of all documents examined by us. As to various questions
of fact material to such opinions, we have relied upon representations of the
Company.
Based upon such examination and representations, we advise you that,
in our opinion:
1. The shares of Common Stock which are to be sold and delivered
by the Company as contemplated by the Underwriting Agreement (the "Underwriting
Agreement"), the form of which is filed as Exhibit 1 to the Registration
Statement, have been duly and validly authorized by the Company.
2. The shares of Common Stock which are to be sold and delivered
by the Company as contemplated by the Underwriting Agreement, when issued and
delivered in accordance with the terms of the Underwriting Agreement, will be
validly issued, fully paid, and non-assessable.
We consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference of this firm under the caption
"Legal Opinions" in the Prospectus contained therein.
Very truly yours,
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
<PAGE> 1
EXHIBIT 23.1.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-14207) and
related Prospectus of Heftel Broadcasting Corporation for the registration of
3,500,000 shares of its Class A Common Stock and to the incorporation by
reference therein of our report dated November 7, 1996, with respect to the
consolidated financial statements of Heftel Broadcasting Corporation included in
its Annual Report (Form 10-K) for the year ended September 30, 1996, filed with
the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Los Angeles, California
December 20, 1996
<PAGE> 1
EXHIBIT 23.1.5
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Tichenor Media System, Inc.:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the Prospectus.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Dallas, Texas
December 20, 1996
<PAGE> 1
EXHIBIT 23.1.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation of our report dated March 1, 1996 (except for Notes 5A and 11)
as to which the date is August 16, 1996.), with respect to the financial
statements of KSOL-FM and KYLZ-FM (Divisions of Crescent Communications, L.P.)
for the nine months ended December 31, 1994 and year ended December 31, 1995
included in the Registration Statement on Form S-3 and the related Prospectus of
Heftel Broadcasting Corporation for the registration of 3,500,000 shares of its
Class A Common Stock.
/s/ MILLER, KAPLAN, ARASE & CO.
------------------------------------
Miller, Kaplan, Arase & Co.
North Hollywood, California
December 20, 1996
<PAGE> 1
EXHIBIT 99.1
December 12, 1996
Heftel Broadcasting Corporation
6767 West Tropicana Avenue
Las Vegas, Nevada 89103
Ladies and Gentlemen:
The undersigned hereby consents to being named as designee for
appointment to the board of directors of Heftel Broadcasting Corporation, a
Delaware corporation (the "Company"), in (a) the Company's Registration
Statement on Form S-4 and the Joint Proxy Statement/Prospectus included therein
filed with the Securities and Exchange Commission on or about December 16,
1996, and (b) the Company's Registration Statement on Form S-3 filed with the
Commission on October 16, 1996, and any amendments, supplements or additional
registration statements filed pursuant to Rule 462 with respect to either of
the foregoing registration statements.
/s/ MCHENRY T. TICHENOR, JR.
-----------------------------
McHenry T. Tichenor, Jr.
<PAGE> 1
EXHIBIT 99.2
December 12, 1996
Heftel Broadcasting Corporation
6767 West Tropicanas Avenue
Las Vegas, Nevada 89103
Ladies and Gentlemen:
The undersigned hereby consents to being named as designee for
appointment to the board of directors of Heftel Broadcasting Corporation, a
Delaware corporation (the "Company"), in (a) the Company's Registration
Statement on Form S-4 and the Joint Proxy Statement/Prospectus included therein
filed with the Securities and Exchange Commission on or about December 16,
1996, and (b) the Company's Registration Statement on Form S-3 filed with the
Commission on October 16, 1996, and any amendments, supplements or additional
registration statements filed pursuant to Rule 462 with respect to either of
the foregoing registration statements.
/s/ MCHENRY T. TICHENOR, SR.
-----------------------------
McHenry T. Tichenor, Sr.
<PAGE> 1
EXHIBIT 99.3
December 12, 1996
Heftel Broadcasting Corporation
6767 West Tropicans Avenue
Las Vegas, Nevada 89103
Ladies and Gentlemen:
The undersigned hereby consents to being named as designee for
appointment to the board of directors of Heftel Broadcasting Corporation, a
Delaware corporation (the "Company"), in (a) the Company's Registration
Statement on Form S-4 and the Joint Proxy Statement/Prospectus included therein
filed with the Securities and Exchange Commission on or about December 16,
1996, and (b) the Company's Registration Statement on Form S-3 filed with the
Commission on October 16, 1996, and any amendments, supplements or additional
registration statements filed pursuant to Rule 462 with respect to either of
the foregoing registration statements.
/s/ ROBERT W. HUGHES
--------------------
Robert W. Hughes
