<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 1997
REGISTRATION NO. 333-14207
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
AMENDMENT NO. 2
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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(1) FEE(1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock.............. 350,000 $31.875 $11,156,250 $3,381
================================================================================================
</TABLE>
(1) The Registrant has previously registered and paid the appropriate filing fee
for 4,025,000 shares of Class A Common Stock.
(2) Pursuant to Rule 457(h), the offering price and registration fee are
computed on the basis of the average of the high and low prices of the Class
A Common Stock, as reported by the Nasdaq National Market on January 3,
1997.
------------------------
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
JANUARY 10, 1997
3,850,000 SHARES
HEFTEL BROADCASTING CORPORATION
[HBC LOGO]
CLASS A COMMON STOCK
------------------
Of the 3,850,000 shares of Class A Common Stock offered hereby, 3,500,000
are being sold by Heftel Broadcasting Corporation (the "Company") and 350,000
shares are being sold by Clear Channel Communications, Inc. ("Clear Channel").
See "Selling Shareholder." The Company will not receive any of the proceeds from
the sale of shares by Clear Channel. The Class A Common Stock of the Company is
traded on the Nasdaq National Market under the symbol "HBCCA." On January 8,
1997, the last reported sale price of the Class A Common Stock was $32.625 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 10 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 PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS COMPANY(1) SHAREHOLDER(1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share............... $ $ $
- ------------------------------------------------------------------------------------------------
Total(2)................ $ $ $
================================================================================================
</TABLE>
(1) Before deducting expenses payable by the Company and Clear Channel 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
, 1997.
ALEX. BROWN & SONS
INCORPORATED
CREDIT SUISSE FIRST BOSTON
LEHMAN BROTHERS
MONTGOMERY SECURITIES
SMITH BARNEY INC.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE> 3
---------------------
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 WZZU-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 five 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 465 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 103 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 7,078,235 shares of Class B Common Stock that will be amended to,
among other things, not have any voting rights except as specifically provided
for in the charter or as otherwise required by law ("Nonvoting Common Stock").
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"), which was obtained on January 7, 1997. In order to comply
with the FCC's cross-interest policy, the FCC's approval was conditioned upon
Clear Channel owning no more than 33 1/3% of the total outstanding Common Stock
within six months following consummation of the Tichenor Merger (the "FCC
Approval Condition"). 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. After
consummation of the Tichenor Merger and this offering, Clear Channel will own
approximately 34% of the Common Stock (approximately 33% if the Underwriters'
over-allotment option is exercised in full). See "Risk Factors -- Shares
Eligible for Future Sale" and "Shares Eligible for Future Sale." The FCC's
approval is also subject to the outcome of a broadcast attribution rulemaking in
which the FCC is considering the circumstances under which it might attribute
otherwise nonattributable equity interests in a licensee.
A party wishing to contest the FCC's approval may do so during a thirty day
period commencing on the date public notice is given of the approval. The FCC
may reconsider its approval on its own motion for an additional ten days
thereafter. Public notice is expected shortly. The Tichenor Merger may be
consummated during these periods unless the FCC stays the effectiveness of its
approval. A formal petition to deny the Tichenor Merger was denied by the FCC on
January 7, 1997.
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"). The Antitrust
Division of the Department of Justice (the "Antitrust Division") commenced an
investigation of the Tichenor Merger but declined to pursue any enforcement
action. By letter dated December 4, 1996, the Federal Trade Commission ("FTC")
5
<PAGE> 7
informed the Company that the Company had been granted early termination of the
applicable waiting period under the HSR Act.
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 approval, and the approval of the Company's existing holders of Class
A Common Stock with respect to certain matters relating to the Tichenor Merger,
and will not be consummated prior to the closing of this offering (the
"Offering"). 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."
KSCA Option. Clear Channel and Golden West Broadcasters, a California
corporation ("Golden West"), have entered into an Option Agreement, dated as of
December 23, 1996 (the "Option Agreement"), pursuant to which Golden West
granted to the Company (as assignee of Clear Channel) the option to purchase all
of the assets used or held for use in connection with the operation of KSCA
(FM), Glendale, California ("KSCA"), including, without limitation, all FCC
licenses for such station (the "KSCA Assets"), on the terms and conditions of an
Asset Purchase Agreement attached as an exhibit to the Option Agreement (the
"Purchase Agreement"). Clear Channel assigned its rights under the Option
Agreement to the Company pursuant to an Assignment and Assumption Agreement,
dated as of January 2, 1997, among the Company, Clear Channel and Tichenor (the
"KSCA Assignment Agreement"). The option is exercisable upon the death of Gene
Autry, the indirect principal stockholder of Golden West. The Option Agreement
has an initial term which expires on December 30, 1997. However, the Option
Agreement terminates if the Company fails to pay to Golden West $10.0 million
within five business days after termination or expiration of the waiting period
under the HSR Act. The Option Agreement is renewable for additional one-year
terms provided the Company pays to Golden West an additional $3.0 million on or
before the expiration date for the one-year option period then in effect. Once
the option under the Option Agreement is exercised, the Option Agreement remains
in effect without the need to make any further $3.0 million payments. The $10.0
million payment and any additional $3.0 million payments (the "Option Payments")
will be applied against the purchase price for the KSCA Assets, if the sale of
the KSCA Assets is consummated. If the sale of the KSCA Assets is not
consummated, Golden West is obligated to refund to the Company a portion of the
Option Payments only under certain circumstances.
Under the Purchase Agreement, the purchase price for the KSCA Assets is the
greater of (a) $112.5 million, or (b) the sum of (i) $105.0 million, plus (ii)
an amount equal to $13,698.63 per day during the term of the KSCA Time Brokerage
Agreement (as hereinafter defined), which daily amount is subject to reduction
if the Company is unable to broadcast its programming on KSCA under the KSCA
Time Brokerage Agreement. Consummation of the sale of the KSCA Assets under the
Purchase Agreement will be subject to a number of conditions, including the
FCC's approval of the transfer of the FCC licenses for KSCA to the Company.
Concurrent with the execution of the Option Agreement, Clear Channel and
Golden West entered into a Time Brokerage Agreement, dated as of December 23,
1996, for KSCA (the "KSCA Time Brokerage Agreement"). Clear Channel assigned its
rights under the KSCA Time Brokerage Agreement to the Company pursuant to the
KSCA Assignment Agreement. The Company will begin
6
<PAGE> 8
providing programming under the KSCA Time Brokerage Agreement no later than 14
days after the $10.0 million payment under the Option Agreement is due.
Pursuant to the requirements of the HSR Act, on January 6, 1997, the
ultimate parent entity of each of Golden West and the Company filed a
Notification and Report Form with respect to the Option Agreement, the purchase
of the KSCA Assets under the Purchase Agreement and the KSCA Time Brokerage
Agreement with the Antitrust Division and the FTC. A request for early
termination of the waiting period under the HSR Act was made.
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 by the
Company........................... 3,500,000 shares
Class A Common Stock offered by
Clear Channel..................... 350,000 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............................ 13,659,374 shares of Class A Common
Stock
7,078,235 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."
7
<PAGE> 9
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(3) 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 85,479
Corporate expenses........................................ 3,454 4,720 5,072 6,495
Depreciation and amortization............................. 1,906 3,344 5,140 16,393
---------- ----------- ----------- -----------
Total operating expenses................................ 20,705 51,707 59,108 108,367
---------- ----------- ----------- -----------
Operating income.......................................... 6,728 12,453 12,624 11,380
Other income (expense):
Interest expense, net................................... (2,997) (6,389) (11,034) (9,497)
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) (1,875)
---------- ----------- ----------- -----------
Total other income (expense)............................ (5,526) (6,817) (49,177) (47,844)
---------- ----------- ----------- -----------
Income (loss) before minority interest and provision for
income taxes............................................ 1,202 5,636 (36,553) (36,464)
Minority interest in Viva Media(4)........................ (351) (1,167) -- --
Provision for income taxes................................ (100) (150) (65) 3,690
---------- ----------- ----------- -----------
Income (loss) from continuing operations.................. 751 4,319 (36,618) $ (32,774)
===========
Loss from discontinued operations(5)...................... (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) $ (1.68)
========== =========== =========== ===========
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(6).................................... $ 12,088 $ 20,517 $ 22,836 $ 34,268
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------
SEPTEMBER 30, PRO
-------------------------------- FORMA
AS AS
1994 1995 1996 ADJUSTED(7) ADJUSTED(8)
-------- -------- -------- ----------- -----------
<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
Net intangible assets............................ 70,528 109,253 121,742 121,742 418,722
Total assets..................................... 113,353 151,637 165,751 165,751 485,470
Long-term debt, less current portion(9).......... 58,472 95,937 136,126 27,408 98,659
Stockholders' equity............................. 44,436 43,581 12,101 120,819 308,992
</TABLE>
8
<PAGE> 10
- ---------------
(1) The unaudited pro forma condensed consolidated statements of operations for
the year ended September 30, 1996 assume the Transactions (as defined
herein) and the Tender Offer 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 and the Tender
Offer 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 years ended September 30,
1995 and 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) The Company's Board of Directors approved a plan to discontinue the
operations of the radio network owned by CRC, effective August 5, 1996. The
total loss relating to the discontinued operations of CRC for fiscal 1996
was approximately $10 million, and has been accounted for as discontinued
operations. Accordingly, the results of operations for CRC for prior years
have been reclassified to conform to the current year presentation. CRC
intends to fulfill its contractual program obligations and is expected to
cease operating by early 1997.
(6) 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.
(7) As adjusted to give effect to the Offering (at an assumed offering price of
$32.625 per share) and the application of the estimated net proceeds
therefrom as if the Offering had been consummated on September 30, 1996.
(8) Pro forma as adjusted to give effect to the Transactions, including the
Offering (at an assumed offering price of $32.625 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.
(9) Long-term debt, less current portion, excludes other non-current obligations
of the Company ($1,533,000 at September 30, 1996.)
9
<PAGE> 11
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. Consummation of the Tichenor Merger is subject to numerous
conditions, including without limitation, the approval by the existing holders
of the Company's Class A Common Stock with respect to certain matters related to
the Tichenor Merger and the non-occurrence of any material adverse event with
respect to the Company or Tichenor. 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 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 $32.625 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, excluding other non-current
obligations, would have been approximately $98.7 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.
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
10
<PAGE> 12
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 $56.3 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 33% 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 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
11
<PAGE> 13
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 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.
12
<PAGE> 14
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 46.2% 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 34% of the
outstanding Common Stock of the Company on a fully diluted basis
(approximately 33% if the Underwriters' over-allotment option is exercised
in full). If the Underwriters' over-allotment option is not exercised in
full, Clear Channel would be required to sell up to 165,699 shares of
Common Stock within six months of the consummation of 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
meet the FCC Approval Condition). 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, except as may be necessary to meet the FCC Approval Condition, and
for 90 days from the closing of the Offering, respectively. 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 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 broad-
13
<PAGE> 15
casting 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 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 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 3,850,000 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 2,566,108 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 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 meet the FCC Approval Condition. See "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, 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
14
<PAGE> 16
offered hereby by the Company (at an assumed offering price of $32.625 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 $9.49 to existing stockholders and an immediate net tangible book value
dilution per share of $32.77 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 $32.625 per share (after deducting underwriting discounts and commissions and
estimated offering expenses) are estimated to be approximately $108.7 million
($125.0 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. The Company will not receive any of the proceeds from the sale of
shares by Clear Channel.
15
<PAGE> 17
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 and second 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............................................................. $47.75 $30.75
Second Quarter (through January 8, 1997).................................. $32.63 $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.
16
<PAGE> 18
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 $32.625 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:
Notes payable and credit agreements.................... 135,000 26,282 97,530
Other long-term debt(1)................................ 1,126 1,126 1,129
-------- -------- --------
Total long-term debt........................... 136,126 27,408 98,659
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 13,659,374 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
7,078,235 shares issued and outstanding pro forma as
adjusted(2)......................................... -- -- 8
Additional paid-in capital............................. 102,578 211,292 399,459
Accumulated deficit.................................... (90,488) (90,488) (90,488)
-------- -------- --------
Total stockholders' equity..................... 12,101 120,819 308,992
-------- -------- --------
Total capitalization...................... $150,086 $150,086 $ 409,552
======== ======== ========
</TABLE>
- ---------------
(1) Long-term debt, less current portion, excludes other non-current obligations
of the Company ($1,533,000 at September 30, 1996).
(2) Upon consummation of the Tichenor Merger, the authorized Class B Common
Stock will be amended to become Nonvoting Common Stock.
17
<PAGE> 19
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 $185.6 million, based on a closing
price per share of $32.625 on January 8, 1997 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
18
<PAGE> 20
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 Tichenor and the Company;
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."
19
<PAGE> 21
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 33% 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 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."
LOAN TO TICHENOR
Concurrent with the execution of the Tichenor Merger Agreement, Clear
Channel and a subsidiary of Tichenor entered into 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 $32.625 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
statement of operations presents 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 and the Tender
Offer 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. Such purchase price will change based on the actual debt 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 and the Tender Offer 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 (1)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
COMPANY TENDER THE COMPANY TICHENOR(3) TICHENOR
AS REPORTED OFFER OFFERING(2) AS ADJUSTED AS REPORTED ACQUISITIONS(4)
----------- ------- ----------- ----------- ----------- ---------------
<S> <C> <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 (2,500)(5) -- 2,572 3,578 345
Depreciation and amortization.................... 5,140 1,400(6) -- 6,540 3,018 496
---------- ------- -------- ---------- ------- -------
Total operating expenses........................ 59,108 (1,100) -- 58,008 39,013 5,007
---------- ------- -------- ---------- ------- -------
Operating income (loss).......................... 12,624 1,100 -- 13,724 5,454 (1,459)
Interest expense, net............................ (11,034) -- 8,697 (2,337) (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) 1,100 8,697 (26,756) 2,194 (3,797)
Income tax (expense) benefit..................... (65) -- -- (65) (2,457) --
---------- ------- -------- ---------- ------- -------
Income (loss) from continuing operations......... $ (36,618) $ 1,100 $ 8,697 $ (26,821) $ (263) $(3,797)
========== ======= ======== ========== ======= =======
Income (loss) from continuing operations per
common and common equivalent share.............. $(3.56) $(1.94) $(.98)(7)
========== ========== =======
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>
Net broadcasting revenues........................ $ -- $48,015 $ -- $ 119,747
Station operating expenses....................... -- 36,583 -- 85,479
Corporate expenses............................... -- 3,923 6,495
Depreciation and amortization.................... 784(8) 4,298 5,555(11) 16,393
------- ------- ------- ----------
Total operating expenses........................ 784 44,804 5,555 108,367
------- ------- ------- ----------
Operating income (loss).......................... (784) 3,211 (5,555) 11,380
Interest expense, net............................ (1,766)(9) (7,160) -- (9,497)
Loss on retirement of debt....................... -- -- -- (7,461)
Restructuring charges............................ -- -- -- (29,011)
Other income (expense), net...................... -- (204) -- (1,875)
------- ------- ------- ----------
Income (loss) before provision for income
taxes........................................... (2,550) (4,153) (5,555) (36,464)
Income tax (expense) benefit..................... 2,412(10) (45) 3,800(12) 3,690
------- ------- ------- ----------
Income (loss) from continuing operations......... $ (138) $(4,198) $(1,755) $ (32,774)
======= ======= ======= ==========
Income (loss) from continuing operations per
common and common equivalent share.............. $(6.73)(7) $ (1.68)
======= ==========
Weighted average shares outstanding.............. 683,857 19,484,845
======= ==========
OTHER OPERATING DATA:
Broadcast cash flow.............................. $11,432 $34,268
</TABLE>
22
<PAGE> 24
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 (1)
(Dollars in thousands)
<TABLE>
<CAPTION>
TICHENOR
MERGER
COMPANY THE COMPANY AS TICHENOR PRO FORMA
AS REPORTED OFFERING(2) ADJUSTED AS REPORTED ADJUSTMENTS(13)
------------ ----------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents............................. $ 5,132 $ -- $ 5,132 $ 5,066 $ (3,988)(14)
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 74,786 222,194(15)
Other assets.......................................... 1,014 -- 1,014 1,506 --
-------- ---------- -------- --------- ---------
Total assets........................................ $165,751 $ -- $165,751 $ 101,513 $ 218,206
======== ========== ======== ========= =========
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:
Notes payable and credit agreements................. 135,000 (108,718) 26,282 71,248 --
Other long-term debt................................ 2,659 -- 2,659 3 --
-------- ---------- -------- --------- ---------
Total long-term debt, net of current portion........ 137,659 (108,718) 28,941 71,251 --
Deferred income taxes................................. -- -- -- 3,818 49,598(16)
Senior preferred stock................................ -- -- -- 3,379 (3,379)(17)
Common stock purchase warrant......................... -- -- -- 4,140 (4,140)(18)
-------- ---------- -------- --------- ---------
Total liabilities................................... 153,650 (108,718) 44,932 89,467 42,079
Junior preferred stock................................ -- -- -- 368 (368)(18)
Class A common stock.................................. 11 4 15 -- (2)(18)
Class B common stock*................................. -- -- -- -- 8(18)
Common stock (Tichenor)............................... -- -- -- 744 (744)(18)
Additional paid-in capital............................ 102,578 108,714 211,292 4,357 183,810(18)
Notes receivable from stockholders.................... -- -- -- (158) 158(18)
(Accumulated deficit) Retained earnings............... (90,488) -- (90,488) 8,130 (8,130)(19)
Less treasury stock, at cost.......................... -- -- -- (1,395) 1,395(18)
-------- ---------- -------- --------- ---------
Total stockholders' equity.......................... 12,101 108,718 120,819 12,046 176,127
-------- ---------- -------- --------- ---------
Total liabilities and stockholders' equity.......... $165,751 $ -- $165,751 $ 101,513 $ 218,206
======== ========== ======== ========= =========
<CAPTION>
COMPANY
PRO FORMA
CONDENSED
CONSOLIDATED
-------------
<S> <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................................ 418,722
Other assets.......................................... 2,520
---------
Total assets........................................ $ 485,470
=========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities................................... $ 20,969
Current portion of long-term debt..................... 1,901
Long-term debt, net of current portion:
Notes payable and credit agreements................. 97,530
Other long-term debt................................ 2,662
---------
Total long-term debt, net of current portion........ 100,192
Deferred income taxes................................. 53,416
Senior preferred stock................................ --
Common stock purchase warrant......................... --
---------
Total liabilities................................... 176,478
Junior preferred stock................................ --
Class A common stock.................................. 13
Class B common stock*................................. 8
Common stock (Tichenor)............................... --
Additional paid-in capital............................ 399,459
Notes receivable from stockholders.................... --
(Accumulated deficit) Retained earnings............... (90,488)
Less treasury stock, at cost.......................... --
---------
Total stockholders' equity.......................... 308,992
---------
Total liabilities and stockholders' equity.......... $ 485,470
=========
</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
(1) The Company is the acquiring entity for accounting purposes in the
Tichenor Merger because of: (i) the Company's relative size as compared to
Tichenor, (ii) Clear Channel's relationship with the Company and Tichenor both
before and after the consummation of the Tichenor Merger, and (iii) Clear
Channel's ability in the future to convert its Nonvoting Common Stock into Class
A Common Stock and comply with the FCC's cross-interest policy without
substantial economic hardship.
(2) Reflects the application of the estimated net proceeds from the
Offering, assuming an offering price of $32.625 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.
(3) 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.
(4) 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...................... $ 133,804 $ 979,412 $ 1,946,686 $ 487,683 $ 3,413,781 $ 3,547,585
Station operating expenses
excluding depreciation and
amortization................ 129,100 1,091,720 2,368,525 576,708 4,036,953 4,166,053
Corporate expense............. -- 88,497 206,986 49,247 344,730 344,730
Depreciation and
amortization................ 5,600 132,610 287,805 70,069 490,484 496,084
Interest expense.............. -- 701,528 1,296,502 333,005 2,331,035 2,331,035
Other expense................. -- 14,630 (8,787) 974 6,817 6,817
--------- ----------- ----------- ---------- ----------- -----------
Total expense......... 134,700 2,028,985 4,151,031 1,030,003 7,210,019 7,344,719
--------- ----------- ----------- ---------- ----------- -----------
Net loss.............. $ (896) $(1,049,573) $(2,204,345) $(542,320) $(3,796,238) $(3,797,134)
========= =========== =========== ========== =========== ===========
</TABLE>
(5) Reflects the elimination of executive compensation and related benefits
of approximately $2,500,000 for the year ended September 30, 1996, relating to
the termination of contractual employment agreements with two former officers of
the Company terminated in connection with the consummation of the Tender Offer.
The two former officers will be replaced by existing executive officers of
Tichenor. The historical compensation of such officers is included in corporate
expense in Tichenor's financial statements under the column"Tichenor as
reported."
(6) Reflects the amortization over five years of two non-compete agreements
totaling $7,000,000 paid to two former officers of the Company in connection
with the termination of their employment.
(7) Net income (loss) per common and common equivalent share for Tichenor
is calculated by deducting from net income (loss) 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.
24
<PAGE> 26
(8) 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...................... 36,458 156,282 14,551 814,460 1,021,751
Less historical................... -- (5,600) -- (490,484) (496,084)
------- -------- ------- -------- ----------
Total................... $36,458 $183,767 $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 five, forty, fifteen and
five years, respectively.
(9) 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>
(10) Represents the incremental income tax effect of the pro forma
adjustments at an estimated effective income tax rate of 38%.
(11) Reflects incremental amortization expense of approximately $5,555,000
for the year ended September 30, 1996, consisting of the amortization over forty
years of additional intangible assets allocated and recorded as a result of the
Tichenor Merger.
(12) Reflects the tax benefit assuming the utilization of the Company's net
operating losses to offset Tichenor's deferred tax liability.
(13) 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
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:
Tangible net assets, excluding intangible assets......................... $ 12,204,000
FCC licenses and other intangible assets................................. 222,194,000
Deferred income tax liability............................................ (49,598,000)
Assumption of Tichenor debt.............................................. 71,293,000
-----------
Total purchase price............................................. $256,093,000
===========
</TABLE>
25
<PAGE> 27
(14) Reflects adjustments to cash as follows:
<TABLE>
<S> <C>
Payment of Tichenor Senior Preferred Stock and related dividends...... $(3,379,000)
Payment of estimated legal and other transaction costs................ (767,000)
Cash received in collection of notes receivable from Tichenor
stockholders........................................................ 158,000
-----------
Net cash paid............................................... $(3,988,000)
===========
</TABLE>
(15) Represents the allocation of the purchase price to intangible assets
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.
(16) 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
bases of the combined entities. Deferred tax assets are recognized to the extent
that such assets are expected to be utilized in the carryforward period.
(17) Represents the retirement of Tichenor's Senior Preferred Stock at its
carrying value with cash of approximately $3,379,000.
(18) 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 $31.75 in connection with the Tichenor Merger. Also reflects the
conversion of 7,078,235 shares of Class A Common Stock ($.001 par value) held by
Clear Channel into an equal number of shares of Nonvoting Common Stock.
(19) 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(2)
--------- ---------- ----------
<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(4)...................................................... (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 share equivalents outstanding................... 5,384,678 10,805,346 10,294,967
========= ========== ==========
OTHER OPERATING DATA:
Broadcast cash flow(5).................................................................... $ 12,088 $ 20,517 $ 22,836
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
SEPTEMBER 30, -----------------------------
------------------------------------- AS PRO FORMA,
1994 1995 1996 ADJUSTED(6) AS 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
Net intangible assets.................................. 70,528 109,253 121,742 121,742 418,722
Total assets........................................... 113,353 151,637 165,751 165,751 485,470
Long-term debt, less current portion(8)................ 58,472 95,937 136,126 27,408 98,659
Stockholders' equity (deficiency)...................... 44,436 43,581 12,101 120,819 308,992
</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 years ended September 30,
1995 and 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) The Company's Board of Directors approved a plan to discontinue the
operations of the radio network owned by CRC, effective August 5, 1996. The
total loss relating to the discontinued operations of CRC for fiscal 1996
was approximately $10 million, and has been accounted for as discontinued
operations. Accordingly, the results of operations for CRC for prior years
have been reclassified to conform to the current year presentation. CRC
intends to fulfill its contractual program obligations and is expected to
cease operating by early 1997.
(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 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.
(6) As adjusted to give effect to the Offering (at an assumed offering price of
$32.625 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 price of $32.625 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) Long-term debt, less current portion, excludes other non-current obligations
of the Company ($1,533,000 at September 30, 1996).
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 five 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
28
<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 465 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 primarily sung in Spanish. 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.
29
<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
WZZU-AM Heftel n/a n/a n/a
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 Tichenor Regional Mexican A 25-54 105.1 MHZ
WIND-AM Tichenor Full Service A 35+ 560 kHz
WLXX-AM Heftel Tropical A 18-49 1200 kHz
Houston(6) KLTN-FM Tichenor Regional Mexican A 18-49 93.3 MHZ
KLTO-FM(4) 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(5) 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 Full Service 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) Tichenor programs this station under a local marketing agreement.
(5) 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); SRDS -- Standard Rate &
Data Services (August 1996); Advertising Age (September 30, 1996); Sales
30
<PAGE> 32
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 Vice Chairman and a
Director of Tichenor and has served as the Vice Chairman and a Director of
Tichenor since 1981. 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.
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.
31
<PAGE> 33
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.
32
<PAGE> 34
SELLING SHAREHOLDER
The table below sets forth the beneficial ownership of the Company's Class
A Common Stock by Clear Channel as of January 8, 1997, and after giving effect
to the sale of the shares of Class A Common Stock offered by the Company and
Clear Channel hereby. Clear Channel has sole voting and investment power with
respect to the shares of Class A Common Stock it owns.
<TABLE>
<CAPTION>
CLASS A CLASS A
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY
PRIOR CLASS A OWNED AFTER THE
TO THE OFFERING COMMON STOCK OFFERING(1)
-------------------- TO BE SOLD IN --------------------
BENEFICIAL OWNER SHARES PERCENT OFFERING SHARES PERCENT
- ------------------------------------- --------- ------- ------------- --------- -------
<S> <C> <C> <C> <C> <C>
Clear Channel Communications, Inc.... 7,297,821 48.50 350,000 6,947,821 46.17
</TABLE>
- ---------------
(1) Following the consummation of the Tichenor Merger, the shares of Class A
Common Stock of the Company held by Clear Channel and Clear Channel's shares
of Tichenor common stock will be exchanged into 7,078,235 shares of the
Company's Nonvoting Common Stock, which will represent 34.13% of the
Company's outstanding Common Stock (33.29% if the Underwriters'
over-allotment option is exercised in full).
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 3,850,000 shares offered hereby (plus up to
525,000 additional shares in the event the Underwriters 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 6,947,821 shares of Class A Common Stock which will be owned by Clear
Channel upon completion of the Offering 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. Following this 90 day period, 2,566,108 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 meet the FCC Approval Condition.
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.
33
<PAGE> 35
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 Tichenor 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 Tichenor
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."
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 (to be amended to become Nonvoting 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.
34
<PAGE> 36
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.
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
35
<PAGE> 37
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 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") have severally agreed to purchase
from the Company and Clear Channel 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........................................................................... 3,850,000
=========
</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 and Clear Channel have 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 3,850,000, 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 3,850,000 shares are being offered.
The Underwriting Agreement contains covenants of indemnity and contribution
among the Company, Clear Channel and the Underwriters with respect to certain
liabilities, including liabilities under the Securities Act.
The Company, its directors and executive officers and Clear Channel 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.
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 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
37
<PAGE> 39
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 and Clear Channel by their
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. Alan D. Feld, the
sole shareholder of a professional corporation which is a partner of Akin, Gump,
Strauss, Hauer & Feld, L.L.P., is a director of Clear Channel, the selling
shareholder.
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 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.
38
<PAGE> 40
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
------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1994 1995 1996
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Commissions payable....................... $1,200,128 $1,431,253 $ 2,032,314
Accrued interest.......................... -- 796,933 1,334,184
Other accrued expenses.................... 456,119 515,088 834,357
---------- ---------- -------------
Total accrued expenses.......... $1,656,247 $2,743,274 $ 4,200,855
========== ========== ============
</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 escalates from 9% to
13% over the loan term. The loan matures on January 1, 1998.
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..................... 3
Risk Factors........................... 10
Use of Proceeds........................ 15
Price Range of Class A Common Stock.... 16
Dividend Policy........................ 16
Capitalization......................... 17
The Tichenor Merger.................... 18
Unaudited Pro Forma Financial
Information.......................... 21
Selected Consolidated Financial Data... 27
The Company............................ 28
Management............................. 31
Selling Shareholder.................... 33
Shares Eligible For Future Sale........ 33
Description of Capital Stock........... 34
Underwriting........................... 37
Legal Opinions......................... 38
Experts................................ 38
Available Information.................. 38
Incorporation of Certain Documents by
Reference............................ 39
Index to Financial Statements.......... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,850,000 SHARES
HEFTEL BROADCASTING CORPORATION
CLASS A COMMON STOCK
-------------------
PROSPECTUS
-------------------
ALEX. BROWN & SONS
INCORPORATED
CREDIT SUISSE FIRST BOSTON
LEHMAN BROTHERS
MONTGOMERY SECURITIES
SMITH BARNEY INC.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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................................................... 100,000*
Accounting fees and expenses.............................................. 100,000*
Blue Sky fees and expenses................................................ 1,660*
Printing and engraving expenses........................................... 100,000*
Miscellaneous............................................................. 112,818*
--------
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 23, 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)
2.5.14 Option Agreement, dated as of December 23, 1996, among Clear Channel Radio,
Inc., Golden West Broadcasters ("GWB"), and Gene Autry and Stanley B.
Schneider, as co-trustees of the Autry Survivor's Trust, with Exhibits
(Schedules omitted)
</TABLE>
II-3
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBITS. DESCRIPTION
-----------------------------------------------------------------------------
<S> <C>
2.5.15 Time Brokerage Agreement, dated as of December 23, 1996, between GWB and
Clear Channel Radio, Inc. (exhibits omitted)
2.5.16 Assignment and Assumption Agreement, dated as of January 2, 1997, among the
Company, Clear Channel Radio, Inc. and Tichenor Media System, Inc.
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(d) Power of Attorney
99.1(d) Consent of McHenry T. Tichenor, Jr.
99.2(d) Consent of McHenry T. Tichenor, Sr.
99.3(d) 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.
(d) Previously filed.
The Company agrees to furnish supplementally a copy of any omitted
schedules or exhibits 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
II-4
<PAGE> 71
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 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. 2 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
January 9, 1997.
HEFTEL BROADCASTING CORPORATION
By: /s/ L. LOWRY MAYS
------------------------------------
L. Lowry Mays
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 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 January 9, 1997
- --------------------------------------------- Officer and Director
L. Lowry Mays
/s/ JOHN T. KENDRICK Senior Vice President, Chief January 9, 1997
- --------------------------------------------- Financial Officer and
John T. Kendrick Assistant Secretary
(Principal Financial and
Accounting Officer)
/s/ ERNESTO CRUZ* Director January 9, 1997
- ---------------------------------------------
Ernesto Cruz
/s/ B.J. MCCOMBS* Director January 9, 1997
- ---------------------------------------------
B.J. McCombs
/s/ JAMES M. RAINES* Director January 9, 1997
- ---------------------------------------------
James M. Raines
/s/ JOHN H. WILLIAMS* Director January 9, 1997
- ---------------------------------------------
John H. Williams
</TABLE>
*By L. Lowry Mays, attorney-in-fact
pursuant to a Power of Attorney
previously filed
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
23, 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
- -------------------- --------------------------------------------------------------------------
<C> <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)
2.5.14 Option Agreement, dated as of December 23, 1996, among Clear
Channel Radio, Inc., Golden West Broadcasters ("GWB"), and Gene
Autry and Stanley B. Schneider, as co-trustees of the Autry
Survivor's Trust, with Exhibits (Schedules omitted)
2.5.15 Time Brokerage Agreement, dated as of December 23, 1996,
between GWB and Clear Channel Radio, Inc. (exhibits omitted)
2.5.16 Assignment and Assumption Agreement, dated as of January 2,
1997, among the Company, Clear Channel Radio, Inc. and Tichenor
Media System, Inc.
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(d) Power of Attorney
99.1(d) Consent of McHenry T. Tichenor, Jr.
99.2(d) Consent of McHenry T. Tichenor, Sr.
99.3(d) 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.
(d) Previously filed.
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,850,000 SHARES
HEFTEL BROADCASTING CORPORATION
CLASS A COMMON STOCK
------------------------
UNDERWRITING AGREEMENT
------------------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
3,850,000 SHARES
HEFTEL BROADCASTING CORPORATION
CLASS A COMMON STOCK
UNDERWRITING AGREEMENT
, 1997
ALEX. BROWN & SONS INCORPORATED
CREDIT SUISSE FIRST BOSTON CORP.
LEHMAN BROTHERS INC.
MONTGOMERY SECURITIES
SMITH BARNEY INC.
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Gentlemen:
Heftel Broadcasting Corporation, a Delaware corporation (the "Company"),
and Clear Channel Communications, Inc., a Texas corporation, or its subsidiary
(together, the "Selling Shareholder"), propose to sell to the several
underwriters (the "Underwriters") named in Schedule I hereto 3,850,000 shares of
the Company's Class A Common Stock, $.001 par value (the "Firm Shares"), of
which 3,500,000 shares are to be sold by the Company (the "Company Shares") and
350,000 of which are to be sold by the Selling Shareholder (the "Selling
Shareholder 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. The Selling Shareholder has
executed a Custody Agreement (the "Custody Agreement"), the form of which has
been previously delivered to you, pursuant to which the Selling Shareholder has
placed its Selling Shareholder Shares in custody with the Company and agreed to
take certain other actions with respect thereto and hereto.
As the Underwriters, you have advised the Company and the Selling
Shareholder (a) that you are authorized to enter into this Agreement, and (b)
that the 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. 333-14207) 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
-1-
<PAGE> 3
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 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
-2-
<PAGE> 4
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 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, 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.
-3-
<PAGE> 5
(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 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 Underwriters.
(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
-4-
<PAGE> 6
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.
(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. Representations and Warranties of the Selling Shareholder. The Selling
Shareholder represents and warrants to the Underwriters that:
(a) The Selling Shareholder has and at the Closing Date will have good
and valid title to the Selling Shareholder Shares, free and clear of any
outstanding liens, encumbrances, security interests, rights, subscriptions,
warrants, calls, preemptive rights, options or other agreements of any
kind, and full right, power and authority to effect the sale and delivery
of the Selling Shareholder Shares; and upon the delivery of and payment for
the Selling Shareholder Shares pursuant to this Agreement, good and valid
title thereto, free and clear of any liens, encumbrances, security
interests, rights, subscriptions, warrants, calls, preemptive rights,
options or other agreements of any kind, will be transferred to the several
Underwriters.
(b) 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
-5-
<PAGE> 7
default under, any indenture, mortgage, deed of trust or other material
agreement or instrument to which the Selling Shareholder is a party, or any
order, rule or regulation applicable to the Selling Shareholder of any
court or of any regulatory body or administrative agency or other
governmental body having jurisdiction.
(c) The Selling Shareholder has not taken and will not take, directly
or indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result, under the Exchange Act, or
otherwise, in stabilization or manipulation of the price of the Company's
Class A Common Stock to facilitate the sale or resale of the Shares.
(d) The Selling Shareholder has executed and delivered this Agreement
and the Custody Agreement, and in connection herewith, the Selling
Shareholder further represents, warrants and agrees that the Selling
Shareholder has deposited with the Company, pursuant to the Custody
Agreement, the certificates in negotiable form representing the Selling
Shareholder Shares for the purpose of further delivery pursuant to this
Agreement; and the form of the Custody Agreement has been previously
delivered to you.
(e) Without having undertaken to determine independently the accuracy
or completeness of either the representations and warranties of the Company
contained herein or the information contained in the Registration Statement
and documents incorporated therein by reference, the Selling Shareholder
(i) has no reason to believe that the representations and warranties of the
Company contained in Section 1 hereof are not true and correct, and (ii) is
familiar with the Registration Statement and has no knowledge of any
material fact, condition or information not disclosed in the Registration
Statement or the documents incorporated therein by reference which has
adversely affected or may adversely affect the business of the Company or
any of the Subsidiaries; and the sale of the Selling Shareholder Shares by
the Selling Shareholder pursuant hereto is not prompted by any information
concerning the Company or any of the Subsidiaries which is not set forth in
the Registration Statement or the documents incorporated therein by
reference.
(f) On the Closing Date, all transfer and other taxes (other than
income taxes) that are required to be paid in connection with the sale and
transfer of the Selling Shareholder Shares to the Underwriters will have
been paid by the Selling Shareholder.
3. 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, (i) the
Company agree to sell to the Underwriters the Company shares, 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 10 hereof and (ii) the Selling Shareholder agrees to sell to
the Underwriters the Selling Shareholder Shares, subject to adjustments in
accordance with Section 10 hereof. The number of Firm Shares to be
purchased by each Underwriter from the Company and the Selling Shareholder
shall be as nearly as practical in the same proportion to the total number
of Firm Shares being sold by the Company and the Selling Shareholder as the
number of Firm Shares being purchased by each Underwriter bears to the
total number of Firm Shares to be sold hereunder. The obligations of the
Company and the Selling Shareholder shall be several and not joint.
(b) Certificates in negotiable form for the total number of Shares to
be sold hereunder by the Selling Shareholder have been placed in custody
with the Company as custodian (the "Custodian") pursuant to the Custody
Agreement executed by the Selling Shareholder for delivery of all Selling
Shareholder Shares. The Selling Shareholder specifically agrees that the
Firm Shares represented by the certificates held in custody for the Selling
Shareholder under the Custody Agreement are subject to the interest of the
Underwriters hereunder, and that the arrangements made by the Selling
Shareholder for such custody are to that extent irrevocable, and that the
obligations of the Selling Shareholder hereunder shall not be terminable by
any act or deed of the Selling Shareholder (or by any other person, firm or
corporation, including the Company, the Custodian or the Underwriters) or
by operation of law or by the occurrence
-6-
<PAGE> 8
of any other event or events, except as set forth in the Custody Agreement.
If any such event should occur prior to the delivery to the Underwriters of
the Firm Shares hereunder, certificates for the Firm Shares shall be
delivered by the Custodian in accordance with the terms and conditions of
this Agreement as if such event had not occurred. The Custodian is
authorized to receive and acknowledge receipt of the proceeds of the sale
of the Selling Shareholder Shares held by it against the delivery of such
Shares.
(c) Payment for the Firm Shares to be sold hereunder by the Company
and the Selling Shareholder 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, 1 South 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 prior to the Closing Date, and will be made available for inspection by
the Underwriters at least one business day prior to the Closing Date.
(d) 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 3. 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, the 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 Underwriters 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, the 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, 1
South Street, Baltimore, Maryland.
4. Offering by the Underwriters. It is understood that the 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 Underwriters 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 3 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Underwriters in the
offering and sale of the Shares will take place in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters.
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<PAGE> 9
5. Covenants of the Company and the Selling Shareholder.
The Company (and the Selling Shareholder with respect to Paragraph (j)
of the Section 5 only) 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 Underwriters 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
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 Underwriters in endeavoring
to qualify the Shares for sale under the securities laws of such
jurisdictions as the Underwriters 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
Underwriters may reasonably request for distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the
Underwriters, from time to time, as many copies of any Preliminary
Prospectus as the Underwriters may reasonably request. The Company will
deliver to, or upon the order of, the Underwriters 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 Underwriters may reasonably request. The Company
will deliver to the Underwriters 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
Underwriters such number of copies of the Registration Statement, but
without exhibits, and of all amendments thereto, as the Underwriters 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 Underwriters 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
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<PAGE> 10
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 (i) 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 and (ii) the
Company may issue shares of its Class A Common Stock and Class B Common
Stock pursuant to that certain Agreement and Plan of Merger between the
Selling Shareholder and Tichenor Media, Inc., a Texas Corporation, as
amended (the "Merger Agreement").
(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 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 Selling Shareholder agrees, on behalf of itself and its
subsidiaries (other than the Company), not to offer, sell, sell short or
otherwise dispose of any shares of Class A or Class B 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").
(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.
6. Costs and Expenses. The Company will pay all costs, expenses and fees
incident to the performance of the obligations of the Company and the Selling
Shareholder 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 and the Selling Shareholder; the cost
of printing and delivering to, or as requested by, the Underwriters copies of
the Registration Statement, Preliminary Prospectuses, the
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<PAGE> 11
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
and the Selling Shareholder 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 8 hereof are not satisfied, or
because this Agreement is terminated by the Representatives pursuant to Section
7 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 is 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 and the Selling Shareholder 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.
7. 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 Underwriters 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 and the Selling
Shareholder, 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
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<PAGE> 12
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 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.
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<PAGE> 13
(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.
(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.
(xiii) This Agreement and the Custody Agreement have been duly
authorized, executed and delivered by the Selling Shareholder.
(xiv) The Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than as required by
the NASD or state securities and Blue Sky laws as to which such counsel
need express no opinion), to sell, assign, transfer and deliver the
Selling Shareholder Shares by such Selling Shareholder.
(xv) The Underwriters (assuming they are bona fide purchasers
within the meaning of the Uniform Commercial Code) have acquired good
and marketable title to the Selling Shareholder Shares, free and clear
of all claims, liens, encumbrances and security interests whatsoever.
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 Underwriters 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
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<PAGE> 14
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 "Risk Factors -- Government
Regulation of Broadcasting Industry" contained in the Prospectus and
"Item 1. Business -- Federal Regulation of Radio Broadcasting" contained
in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996, 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 Underwriters 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 7, 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 7. 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 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 Underwriters 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 Underwriters, 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 each of the date
hereof, the Closing Date or the Option Closing Date, as the case may be,
signed letters from Ernst & Young LLP, KPMG Peat Marwick LLP and Miller,
Kaplan, Arase & Co., 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 Underwriters 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 Underwriters.
(g) The Underwriters 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.
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<PAGE> 15
(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.
(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 Underwriters such further
certificates and documents confirming the representations and warranties
contained herein and related matters as the Underwriters may reasonably
have requested.
(i) The Company 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 Underwriters and to Piper & Marbury L.L.P., counsel
for the Underwriters.
If any of the conditions hereinabove provided for in this Section 7 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Underwriters by notifying the Company and the Selling Shareholder 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 Selling Shareholder and the Underwriters
shall not be under any obligation to each other (except to the extent provided
in Sections 6 and 9 hereof).
8. Conditions of the Obligations of the Company and the Selling
Shareholder. The obligations of the Company and the Selling Shareholder 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.
9. 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
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<PAGE> 16
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, provided 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) The Selling Shareholder 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 to the extent, but in any such case only
to the extent that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company or such Underwriter directly or through the
Selling Shareholder's representatives specifically for inclusion therein, and
the Selling Shareholder 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 Selling Shareholder 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 or the Selling
Shareholder by or through the Representatives specifically for use in the
preparation thereof, and provided further that the Selling Shareholder 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,
provided the Company has furnished you copies of such applicable Prospectus. In
no event, however, shall the liability of the Selling Shareholder for
indemnification under this Section 9(b) exceed the lesser of (i) that proportion
of the total losses, claims, damages or liabilities indemnified against equal to
the proportion of total Shares sold hereunder which is sold by the Selling
Shareholder and (ii) the proceeds received by the Selling Shareholder from the
Underwriters in the Offering. This indemnity agreement will be in addition to
any liability which the Selling Shareholder may otherwise have.
(c) Each Underwriter will indemnify and hold harmless the Company, each of
its directors or nominees for director, each of its officers who have signed the
Registration Statement, the Selling Shareholder, each of its officers and
directors, and each person, if any, who controls the Company or the Selling
Shareholder within the meaning of the Act, against any losses, claims, damages
or liabilities to which the Company, the Selling Shareholder 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,
the Selling Shareholder or any such director, nominee for 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
-15-
<PAGE> 17
use in the preparation thereof. This indemnity agreement will be in addition to
any liability which such Underwriter may otherwise have.
(d) 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 9, 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 9(a), (b) or (c)
shall be available to any party who shall fail to give notice as provided in
this Section 9(d) 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 9(a), (b) or (c). 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 9(a), by the Selling Shareholder in the case of
parties indemnified pursuant to Section 9(b), and by the Company in the case of
parties indemnified pursuant to Section 9(c). 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.
(e) If the indemnification provided for in this Section 9 is unavailable to
or insufficient to hold harmless an indemnified party under Section 9(a), (b) or
(c) 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 and the Selling Shareholder 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 and the Selling Shareholder 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 and the Selling
Shareholder 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 and the Selling Shareholder 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 and the Selling Shareholder 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
-16-
<PAGE> 18
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.
The Company, the Selling Shareholder and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this Section 9(e)
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
9(e). 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 9(e) 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 (e), (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 9(e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) 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 9 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.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 9 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 9 and the
representations and warranties of the Company and the Selling Shareholder 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, the Selling Shareholder or
their respective directors, nominees for director or officers or any persons
controlling the Company or the Selling Shareholder, (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, the Selling
Shareholder or their respective directors or officers, or any person controlling
the Company or the Selling Shareholder, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
9.
10. 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
or the Selling Shareholder), the non-defaulting Underwriters shall use their
best efforts to procure within 24 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company and the Selling
Shareholder 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, the non-defaulting Underwriters, 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 Underwriters will have the right, by written notice given within the next
24-hour period to the parties to this
-17-
<PAGE> 19
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 9 hereof. In the event of a default by any Underwriter or Underwriters,
as set forth in this Section 10, the Closing Date or Option Closing Date, as the
case may be, may be postponed for such period, not exceeding seven days, as you,
the non-defaulting Underwriters, may determine in order that the required
changes in the Registration Statement or in the 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 10 shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
11. 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, 1 South 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; and if to
the Selling Shareholder to Clear Channel Communications, Inc., Heftel
Broadcasting Corporation, 200 Concord Plaza, Suite 600, San Antonio, Texas
78216, Attention: L. Lowry Mays, President and Chief Executive Officer.
12. Termination. This Agreement may be terminated by you by notice to the
Company and the Selling Shareholder 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 7 and 10 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 7 and 10 of this
Agreement.
13. Successors. This Agreement has been and is made solely for the
benefit of the Underwriters, the Company, the Selling Shareholder 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.
-18-
<PAGE> 20
14. Information Provided by Underwriters. The Company, the Selling
Shareholder and the Underwriters acknowledge and agree that the only information
furnished or to be furnished by any Underwriter to the Company or the Selling
Shareholder 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.
15. 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 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.
-19-
<PAGE> 21
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, the Selling
Shareholder and the several Underwriters in accordance with its terms.
Very truly yours,
HEFTEL BROADCASTING CORPORATION
By
-------------------------------
L. Lowry Mays
President and Chief Executive
Officer
CLEAR CHANNEL COMMUNICATIONS, INC.
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
CREDIT SUISSE FIRST BOSTON CORP.
LEHMAN BROTHERS INC.
MONTGOMERY SECURITIES
SMITH BARNEY INC.
By ALEX. BROWN & SONS INCORPORATED
By
-------------------------------
Authorized Officer
-20-
<PAGE> 22
SCHEDULE I
SCHEDULE OF UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
- ------------------------------------------------------------------------- ---------------------
<S> <C>
Alex. Brown & Sons Incorporated..........................................
Credit Suisse First Boston Corp..........................................
Lehman Brothers Inc......................................................
Montgomery Securities....................................................
Smith Barney Inc.........................................................
---------
Total.......................................................... 3,850,000
=========
</TABLE>
-21-
<PAGE> 1
EXHIBIT 2.5.14
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement") is made as of December 23,
1996, by and among GOLDEN WEST BROADCASTERS, a California corporation (the
"Company"), ORVON GENE AUTRY and STANLEY B. SCHNEIDER, AS CO-TRUSTEES OF THE
AUTRY SURVIVOR'S TRUST (collectively, the "Trustees") and CLEAR CHANNEL RADIO,
INC., a Nevada corporation ("Optionee"), with reference to the following facts:
Recitals
A. The Company is authorized to operate radio station KSCA(FM),
Glendale, California (the "Station") pursuant to a license issued to the
Company by the Federal Communications Commission (the "FCC"); and
B. Optionee desires to have, and the Company desires to grant to
Optionee, an option to buy certain of the assets relating to the Station,
including all FCC licenses, on the terms and conditions hereof.
Agreement
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements contained herein, and intending to be legally bound, the
parties hereby agree as follows:
1. Option. The Company hereby grants to Optionee, and Optionee
hereby accepts for the consideration set forth in Section 2 of this Agreement,
the exclusive right (the "Option") to purchase from the Company the assets of
the Company described in the Purchase Agreement (the "Assets") on the terms and
conditions set forth in the Purchase Agreement. The parties acknowledge
included with the Purchase Agreement attached hereto are schedules which
provide the information required under the Purchase Agreement and exceptions to
the representations and warranties in the Purchase Agreement, assuming the
Purchase Agreement was executed on the date hereof.
2. Option Period.
(a) Subject to Section 14, the initial term of this
Agreement shall commence on the date hereof and shall remain in full force and
effect until 5:00 p.m., Pacific Time on December 30, 1997, provided Optionee
delivers to the Company within 5 business days after the Initial Payment Date
$10 million by bank cashier's check or wire-transfer of immediately available
funds.
<PAGE> 2
(b) Subject to Section 14, this Agreement shall be
automatically renewed for a period of one year (with each period expiring at
5:00 p.m., Pacific Time, on December 30), provided that for each one year
extension period Optionee shall have delivered to the Company an additional $3
million by bank cashier's check or wire-transfer of immediately available funds
before the expiration time for the one year option period then in effect. For
example, assuming the Initial Payment Date is January 1, 1997 for this
Agreement to be extended until December 30, 1998, Optionee must have delivered
$10 million on or before January 8, 1997 and another $3 million by December 30,
1997, for a total payment of $13 million. Notwithstanding the foregoing, if
Optionee exercises the Option during the Exercise Period, this Agreement shall
remain in effect (without the need to make any further additional $3 million
payments) until the earlier of termination hereof pursuant to Section 14 or the
closing of the transactions contemplated by the Purchase Agreement.
(c) All amounts due under this Section 2 shall be payable
in lawful money of the United States of America.
3. Application and Refund of Option Payments.
(a) If Optionee exercises the Option prior to the time
this Agreement expires under Section 2 or is terminated under Section 14 (the
"Expiration Time") and the transactions contemplated by the Purchase Agreement
are consummated, then all amounts paid pursuant to Section 2 (the "Option
Payments") shall be applied to the purchase price for the Assets.
(b) If (1) the Purchase Agreement is terminated pursuant
to Section 13.1(c) thereof, (2) this Agreement is terminated pursuant to
Section 14(b)(iv), or (3) the Company terminates this Agreement or the Purchase
Agreement other than pursuant to the terms hereof or thereof, the Company shall
refund to Optionee the Breaching Refund Amount.
(c) If either (1) the Purchase Agreement is terminated
pursuant to Section 13.1(b), (e), or (f) thereof, (2) this Agreement is
terminated pursuant to Section 14(b)(iii) or Section 14(b)(vi), or (3) Seller
terminates the Purchase Agreement pursuant to Section 13.1(g) thereof, the
Company shall refund to Optionee the Non-Breaching Refund Amount.
(d) If this Agreement is terminated pursuant to Section
14(b)(i) and the schedules referred to in Section 14(b)(i) are different as a
result of
-2-
<PAGE> 3
(1) the Assumed Liabilities (as defined in the
Purchase Agreement) at the time the Company delivers the
Purchase Agreement for execution pursuant to Section 4 being
greater than the Assumed Liabilities on the date hereof
(assuming the Purchase Agreement was executed on the date
hereof), as a result of a breach by the Company of its
covenant contained in Section 8(c)(vi) hereof,
(2) if the FCC licenses for the Station have
expired, been terminated or been modified in a manner which is
materially adverse to the holder thereof due more to the
actions or omissions of the Company than the actions or
omissions of Optionee (the parties agree the FCC licenses
shall not be deemed to have expired or been terminated due
solely to the passage of the expiration date for such licenses
if the Company has timely filed a renewal application which is
pending), or
(3) a material reduction in the Assets due to the
actions or omissions of the Company (normal wear and tear on
any Assets will not be deemed a material reduction in the
Assets),
then the Company shall refund to Optionee the Breaching Refund Amount.
(e) If this Agreement is terminated pursuant to Section
14(b)(i) and the schedules referred to in Section 14(b)(i) are different as a
result of
(1) the Assumed Liabilities (as defined in the
Purchase Agreement) at the time the Company delivers the
Purchase Agreement for execution pursuant to Section 4 being
greater than the Assumed Liabilities on the date hereof
(assuming the Purchase Agreement was executed on the date
hereof) for any reason other than as described in Section
(d)(1) hereof, or
(2) if the FCC licenses for the Station have
expired, been terminated or been modified in a manner which is
materially adverse to the holder thereof for any reason other
than described in Section (d)(2) hereof (the parties agree the
FCC licenses shall not be deemed to have expired or been
terminated due solely to the passage of the expiration date
for such licenses if the Company has timely filed a renewal
application which is pending)
-3-
<PAGE> 4
then the Company shall refund to Optionee the Non-Breaching Refund Amount.
(f) Any refund of a portion of the Option Payments due
under this Section 3 shall be paid promptly to Optionee, but in no event later
than five business days after this Agreement is terminated.
(g) Except as set forth in Sections 3(b),(c),(d) and (e),
the Company shall be entitled to retain all of the Option Payments.
(h) Any refund of any portion of the Option Payments, or
retention of all or part of the Option Payments, shall be in addition to all
other rights or remedies of Optionee or the Company, as the case may be,
including, without limitation, the right to recover damages incurred as a
result of a breach by the other party of its obligations, representations,
warranties or duties hereunder, under the TBA or under the Purchase Agreement,
including, without limitation, any capital expenditures of the Company
reimbursed by Optionee under the TBA and any amounts reimbursed by Optionee to
the Company under Section 3(b)(iii) of the TBA.
4. Exercise. If Optionee is not in material breach of this
Agreement, Optionee may exercise the Option at any time during the period
commencing on the date of death of Gene Autry and ending one month after the
date of delivery by the Company of written notice of the death of Gene Autry
(the "Exercise Period") by delivering to the Company written notice (the
"Exercise Notice"). The Company shall have 30 days from the date of delivery
of the Exercise Notice to the Company to execute and deliver to Optionee the
Purchase Agreement, together with any schedules thereunder, for execution by
Optionee (the date of such delivery by the Company is referred to herein as the
"Delivery Date").
5. Hart-Scott-Rodino Filing. As promptly as practical after the
date hereof (which in no event shall be later than January 3, 1997), Optionee
and the Company shall prepare and file with the Federal Trade Commission and
the United States Department of Justice all documents which are required to
comply with the HSR Act, and shall promptly furnish all materials thereafter
requested by any of the regulatory agencies having jurisdiction over such
filings.
-4-
<PAGE> 5
6. Representations and Warranties of the Company and the
Trustees.
(a) The Company represents and warrants to Optionee as
follows:
(i) The Company has the corporate power and authority
to enter into this Agreement, to perform its obligations hereunder, and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
(ii) The representations and warranties of the
Company in the Purchase Agreement are true and correct on the date hereof.
(b) The Trustees represent and warrant to Optionee they have
the power and authority to enter into this Agreement, to perform their
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Trustees and
constitutes a valid and binding obligation of the Trustees, enforceable against
the Trustees in accordance with its terms.
7. Representations and Warranties of Optionee. Optionee hereby
represents and warrants to the Company as follows:
(a) Optionee has all requisite corporate power and
authority to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Optionee and the consummation by Optionee of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Optionee. This Agreement has been duly
executed and delivered by Optionee and constitutes a valid and binding
obligation of Optionee, enforceable against Optionee in accordance with its
terms.
(b) The representations and warranties of Optionee
contained in the Purchase Agreement are true and correct on the date hereof.
-5-
<PAGE> 6
8. Covenants of the Company. From the date hereof until the
Execution Date, the Company agrees:
(a) it shall not by its acts or omissions cause the
representations and warranties of the Company in the Purchase Agreement to be
untrue in any material respect on the Execution Date;
(b) to maintain the insurance set forth on Schedule 6.9
attached hereto as part of Exhibit A, to submit a claim to the insurance
carriers for each event of loss or damage to any of the Assets and in
consultation with Optionee apply any insurance proceeds received by the Company
to the repair or replacement of the lost or damaged Asset;
(c) Except as caused by non-compliance by Optionee with
the TBA, the Company:
(i) shall not sell or otherwise dispose of any of
the Assets or grant a Lien on the Assets or permit a Lien to remain on the
Assets if such Lien was placed thereon as a result of the actions or omissions
of the Company;
(ii) shall not commit any act or omit to do any act
which will cause a breach of any Contract;
(iii) shall not amend or renew any Contract or
terminate its lease for the Station's main transmitter site;
(iv) will operate in the ordinary course of
business, consistent with past practice, and will take no actions to diminish
materially the goodwill of the business of the Station;
(v) will operate the Station in material compliance
with the Communications Act and the FCC rules and regulations;
(vi) will not increase the liabilities which Optionee
will assume under the Purchase Agreement above the amount of the liabilities
which Optionee would assume if the Purchase Agreement was executed on the date
hereof, other than an increase resulting from any amendment or renewal of a
Contract approved in writing by Optionee or any new agreement which Optionee
requests in writing for the Company to execute and assign to Optionee under the
Purchase Agreement; and
(vii) will take all action necessary to maintain the
FCC licenses relating to the Station in full force and effect without material
modification, including, without limitation, the timely filing of a renewal
application and responding to requests thereunder from the FCC, and will keep
Optionee informed with
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<PAGE> 7
respect to any renewal application and requests thereunder from the FCC.
9. Access to Information. From the date hereof until the
Execution Date, the Company shall afford, and shall cause its respective
officers, directors, employees and agents to afford, to Optionee and the
officers, employees and agents of Optionee complete access at all reasonable
times to the Company's officers, employees, independent contractors, agents,
properties and to the Company's books, records and contracts relating to the
Station.
10. Confidentiality.
(a) Optionee shall hold, and shall cause its officers,
employees and agents and representatives, including, without limitation,
attorneys, accountants, consultants and financial advisors who obtain such
information to hold, in confidence, and not use for any purpose other than
evaluating the transactions contemplated by this Agreement or performing its
obligations hereunder or under the TBA, any confidential information of the
Company or the Trustees, which for the purposes hereof shall not include any
information which (i) is or becomes generally available to the public other
than as a result of disclosure by Optionee or one of its affiliates in
violation of its obligations under this subsection, (ii) becomes available to
Optionee on a nonconfidential basis from a source, other than the Company, the
Trustees or affiliates of the Company, which has represented that such source
is entitled to disclose it, or (iii) was known to Optionee on a nonconfidential
basis prior to its disclosure to Optionee hereunder. If this Agreement is
terminated without a closing of the acquisition of the Assets by Optionee,
Optionee shall deliver, and cause its officers, employees, agents, and
representatives, including, without limitation, attorneys, accountants,
consultants and financial advisors who obtain confidential information of the
Company or the Trustees to deliver, to the Company all such confidential
information that is written (including copies or extracts thereof), whether
such confidential information was obtained before or after the execution
hereof.
(b) The Company shall hold, and shall cause its officers,
employees and agents and representatives, including, without limitation,
attorneys, accountants, consultants and financial advisors who obtain such
information to hold, in confidence, and not use for any purpose other than
evaluating the transactions contemplated by this Agreement, any confidential
information of Optionee, which for the purposes hereof shall not include any
information which (i) is or becomes generally available to the public other
than as a result of disclosure by the Company or one of its affiliates in
violation of its obligations under this subsection, (ii) becomes available to
the Company on a nonconfidential basis from a source, other than
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<PAGE> 8
Optionee or its affiliates, which has represented that such source is entitled
to disclose it, or (iii) was known to the Company on a nonconfidential basis
prior to its disclosure to the Company hereunder. If this Agreement is
terminated without a closing of the acquisition of the Assets by Optionee, the
Company shall deliver, and cause its officers, employees, agents, and
representatives, including, without limitation, attorneys, accountants,
consultants and financial advisors who obtain confidential information of
Optionee to deliver, to Optionee all such confidential information that is
written (including copies or extracts thereof), whether such confidential
information was obtained before or after the execution hereof.
(c) If a person who receives confidential information is
requested or becomes legally compelled (by oral questions, interrogatories,
requests for information or documents, subpoena, criminal or civil
investigative demand or similar process) to disclose any of such confidential
information, such person will provide the other party with prompt written
notice so that such other party may seek a protective order or other
appropriate remedy or waive compliance with Section 10(a) or (b), as the case
may be. If such protective order or other remedy is not obtained, or if the
applicable party waives compliance with Section 10(a) or (b), as the case may
be, the person subject to the request will furnish only that portion of such
confidential information which is legally required and will exercise reasonable
efforts to obtain reliable assurance that confidential treatment will be
accorded such confidential information.
11. Notification of Certain Matters. The Company shall give
prompt notice to Optionee, of the discovery of (i) any material inaccuracy in
any representation or warranty made by it, (ii) any material failure of the
Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or (iii) any legal
proceedings related to the Station or the transactions contemplated hereby.
Optionee shall give prompt notice to the Company of the discovery of (1) any
material inaccuracy in any representation or warranty made by it,(2) any
material failure of Optionee to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement or (3)
any legal proceedings related to the Station or the transactions contemplated
hereby. Notwithstanding the foregoing, no notification made under this Section
shall affect the representations or warranties or covenants or agreements of
the parties or the conditions to the obligations of the parties hereunder.
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<PAGE> 9
12. News Releases. Except for announcements required by
applicable law, prior to the Execution Date, any news releases pertaining to
the transactions contemplated hereby shall be reviewed and approved by Optionee
and the Company, or their respective representatives, and shall be acceptable
to them prior to the dissemination thereof.
13. Covenants of Optionee. From the date hereof until the
Execution Date, Optionee agrees it shall not by its actions or omissions cause
(a) the representations and warranties of Optionee in the Purchase Agreement to
be untrue in any material respect on the Execution Date or (b) the schedules
delivered by the Company pursuant to Section 4 to be different than the
Schedules attached hereto as part of Exhibit A in a manner which is materially
adverse to Optionee or the Company.
14. Termination and Modification of Purchase Price. This
Agreement shall be terminated only as follows:
(a) This Agreement shall terminate as follows:
(i) At the expiration of the Exercise Period if
the Option has not been exercised during the Exercise Period;
(ii) Upon a termination of the Purchase Agreement in
accordance with its terms; or
(iii) If Optionee fails to deliver the $10 million to
the Company in accordance with Section 2(a).
(b) This Agreement may be terminated as follows,
provided, in the case of a termination pursuant to clause (i), (iii), (iv),
(v), (vi) or (vii), the terminating party is not in material breach of any of
its obligations, representations, warranties or duties hereunder:
(i) By written notice from the Optionee, if Optionee
exercises the Option during the Exercise Period but the schedules delivered by
the Company pursuant to Section 4 are different than the schedules attached
hereto as part of Exhibit A in a manner which is materially adverse to
Optionee;
(ii) By mutual written consent of the parties;
(iii) Subject to Section 15, written notice from
either the Company or Optionee, if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action, in each case
permanently restraining, enjoining or otherwise prohibiting the acquisition of
the Assets pursuant to the terms of the Purchase Agreement and such order,
decree, ruling or other action is not subject to appeal or further
administrative or judicial review;
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<PAGE> 10
(iv) By written notice from Optionee, if the Company
fails to perform or breaches any of its material obligations or duties under
this Agreement and the Company has not cured such failure to perform or breach
within 30 days after delivery of written notice from Optionee or upon a
material breach of any representation and warranty of the Company contained
herein;
(v) By written notice from the Company, if Optionee
fails to perform or breaches any of its material obligations or duties under
this Agreement and Optionee has not cured such failure to perform or breach
within 30 days after delivery of written notice from the Company or upon a
material breach of any representation and warranty of Optionee contained
herein;
(vi) Subject to Section 15, by written notice from
the Company or Optionee, if the Federal Trade Commission or the United States
Department of Justice prohibits the acquisition of the Assets pursuant to the
Purchase Agreement under a decision, order or decree which is not subject to
appeal or further administrative or judicial review; or
(vii) By written notice from the Company, if
neither of the following occurs: (A) within 30 days of the Delivery Date,
Optionee shall have executed, and delivered to the Company, the Purchase
Agreement, together with the schedules delivered by the Company pursuant to
Section 4, or (B) within 30 days of the Delivery Date, Optionee shall have
delivered to the Company a written notice (the "Execution Notice") that
Optionee intends to execute the Purchase Agreement, together with the schedules
delivered by the Company pursuant to Section 4, but Optionee has determined the
parties are required to file Notification and Report Forms under the HSR Act
prior to executing such Purchase Agreement and Optionee executes such Purchase
Agreement within five business days after the waiting period under the HSR Act
has expired or been terminated.
(c) Upon a termination of this Agreement in accordance
with its terms no party shall have any liability hereunder, except (i) as
provided in Sections 3 and 10, (ii) for liability for a breach of such party's
representations and warranties contained herein and (iii) for liability for
nonperformance of any of such party's obligations, covenants or agreements
contained herein.
(d) Notwithstanding anything to the contrary contained
herein, the provisions of Sections 3, 10 and 18 shall survive the termination
hereof and Section 19 (only with respect to Sections 3, 10 and 18) shall
survive the termination hereof.
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<PAGE> 11
(e) If Optionee would be entitled to terminate this
Agreement under Section 14(b)(i) but Optionee desires to proceed with the
acquisition of the Assets, in lieu of termination of this Agreement the parties
agree the Purchase Agreement shall be executed and, if Optionee would have been
entitled to receive a refund under Section 3(d) or 3(e) if it had terminated
this Agreement, the purchase price for the Assets shall be reduced by the
amount of the increase in liabilities or the amount of the reduction in the
Assets, as the case may be, described in Section 3(d) or 3(e), as the case may
be.
15. Assignment. Optionee shall have no right, without the consent
of the Company (which consent may not be unreasonably withheld), to assign,
sell, transfer, pledge, hypothecate, delegate or otherwise transfer, whether
voluntarily, involuntarily or by operation of law, any of Optionee's rights or
obligations hereunder, nor shall Optionee's rights be subject to encumbrance or
the claim of creditors. Any such purported assignment, transfer or delegation
shall be null and void. Notwithstanding the foregoing, (a) Optionee may
assign its rights hereunder, without the consent of the Company or the
Trustees, to any of its wholly-owned subsidiaries, as well as to Heftel
Broadcasting Corporation, a Delaware corporation, or any of its wholly-owned
subsidiaries, and (b) if Optionee is not in material breach of any of its
obligations, representations, warranties or duties hereunder and the
acquisition of the Assets by Optionee is prohibited by law, Optionee may assign
it rights hereunder, without the consent of the Company or the Trustees, to an
entity which is financially capable of performing the obligations of Optionee
hereunder and under the Purchase Agreement. No assignment by Optionee
hereunder shall relieve Optionee of its obligations hereunder. Notwithstanding
anything to the contrary contained herein no assignment of any rights hereunder
may be made unless the rights of the assigning party under the Purchase
Agreement are also assigned to the same person.
16. Recordation and UCC-1. The Company agrees to execute a
memorandum of this Agreement in a form reasonably acceptable to the parties
which Optionee shall be entitled to record in the applicable county recorders'
offices. In addition, the Company shall execute and deliver to Optionee a
Financing Statement on Form UCC-1 which shall indicate the existence of this
Agreement and which Optionee may file with the California Secretary of State
and applicable county recorders' offices for purposes of informing the general
public of the existence of this Agreement.
17. Definitions.
(a) The following terms shall have the following meaning:
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<PAGE> 12
"Breaching Refund Amount" shall mean an amount equal to the Option
Payments less the lesser of (i) the product of the Daily Amount (the parties
acknowledge the Daily Amount may be different for each day) multiplied by the
number of days elapsed from the TBA Effective Date until the date of
termination of this Agreement or (ii) Optionee's broadcast cash flow from the
Station for such period (for purposes hereof "broadcast cash flow" shall mean
broadcasting revenues less Station operating expenses).
"Communications Act" shall mean the Communications Act of 1934, as
amended.
"Contracts" shall mean the contracts set forth on Schedule 1.1(b) to
the Purchase Agreement attached hereto.
"Daily Amount" shall mean $13,698.63; provided, however, (i) for any
day on which Optionee is unable to broadcast its programming on the Station
under the TBA because of preemption thereof by Licensee or because the Station
is unable to broadcast (except if the reason for the inability to broadcast is
a capital expenditure was not made under the TBA due to Optionee not consenting
to such expenditure), the "Daily Amount" shall be reduced by an amount equal to
(1) $570.78, multiplied by (2) the number of hours (rounded to the nearest
whole number) for which Optionee is unable to broadcast its programming on the
Station under the TBA and (ii) for each day on which the TBA is not in effect
due to a termination thereof, the "Daily Amount" shall be zero.
"Execution Date" shall mean the date the Purchase Agreement is
executed by both parties.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Initial Payment Date" shall mean the earlier of the date on which the
waiting period under the HSR Act for the filing described in Section 5 expires
or the date of written notice of termination of such waiting period.
"Liens" shall mean all claims, liens, encumbrances, security
interests, mortgages, or pledges of any kind except for (i) rights of the
lessor of the transmitter site and the studio premises, and (ii) rights of any
parties to any Contract set forth in such Contract.
"Non-Breaching Refund Amount" shall mean an amount equal to the Option
Payments less the product of the Daily Amount (the parties acknowledge the
Daily Amount may be different for each day) multiplied by the number of days
elapsed from the TBA Effective Date until the date of termination of this
Agreement.
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<PAGE> 13
"Purchase Agreement" shall mean the Asset Purchase Agreement attached
hereto as Exhibit A and incorporated herein by reference.
"TBA" shall mean the Time Brokerage Agreement, of even date herewith,
between the Company and Optionee.
"TBA Effective Date" shall mean the Effective Date as defined in the
TBA.
Each of the following terms shall have the meanings set forth in the
Section opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Agreement Preamble
Applicable Period 21
Assets 1
Company Preamble
Delivery Date 4
Execution Notice 14(b)(vii)
Exercise Notice 4
Exercise Period 4
Expiration Time 3(a)
FCC Recital A
Option 1
Optionee Preamble
Option Payments 3(a)
Station Recital A
Trustees Preamble
</TABLE>
18. Miscellaneous
(a) Benefit. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, permitted assigns, heirs, administrators, executors and
representatives.
(b) Headings. The headings set forth in this Agreement
are for convenience only and will not control or affect the meaning or
construction of the provisions of this Agreement.
(c) Governing Law. This Agreement and the rights of the
parties hereto shall be governed by, and construed in accordance with, the laws
of the State of California, without giving effect to the choice of law
principles thereof.
(d) Amendment. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
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<PAGE> 14
(e) Severability. In the event that any one or more of
the provisions contained in this Agreement or in any other instrument referred
to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then to the maximum extent permitted by law, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other such instrument.
(f) Attorneys' Fees. Should any party hereto institute
any action or proceeding at law or in equity to enforce any provision of this
Agreement, including an action for declaratory relief, or for damages by reason
of an alleged breach of any provision of this Agreement, or otherwise in
connection with this Agreement, or any provision hereof, the prevailing party
shall be entitled to recover from the losing party or parties reasonable
attorneys' fees and costs for services rendered to the prevailing party in such
action or proceeding.
(g) Multiple Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument.
(h) Notices. Unless applicable law requires a different
method of giving notice, any and all notices, demands or other communications
required or desired to be given hereunder by any party shall be in writing.
Assuming that the contents of a notice meet the requirements of the specific
Section of this Agreement which mandates the giving of that notice, a notice
shall be validly given or made to another party if served either personally or
if deposited in the United States mail, certified or registered, postage
prepaid, or if transmitted by telegraph, telecopy or other electronic written
transmission device or if sent by overnight courier service, and if addressed
to the applicable party as set forth below. If such notice, demand or other
communication is served personally, service shall be conclusively deemed given
at the time of such personal service. If such notice, demand or other
communication is given by mail, service shall be conclusively deemed given
seventy-two (72) hours after the deposit thereof in the United States mail. If
such notice, demand or other communication is given by overnight courier, or
electronic transmission, service shall be conclusively deemed given at the time
of confirmation of delivery. The addresses for the parties are as follows:
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<PAGE> 15
If to Optionee:
Clear Channel Radio, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: Mr. Mark P. Mays
Telecopier No.: (210) 822-2299
If to the Company:
4383 Colfax Avenue
Studio City, California 91604
Attention: Mrs. Jackie Autry
Telecopier: (818) 752-7779
with a copy to:
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, Tenth Floor
Los Angeles, California 90067
Attention: Richard M. Brown, Esq.
Telecopier No.: (310) 203-0567
If to the Trustees:
Gursey, Schneider & Co., LLP
10351 Santa Monica Boulevard, Suite 300
Los Angeles, California 90025
Attention: Stanley B. Schneider, Co-Trustee
Telecopier No.: (310) 557-3468
with a copy to:
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, Tenth Floor
Los Angeles, California 90067
Attention: Richard M. Brown, Esq.
Telecopier No.: (310) 203-0567
Any party hereto may change its or his address for the purpose of receiving
notices, demands and other communications as herein provided, by a written
notice given in the aforesaid manner to the other parties hereto.
(i) Waivers. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver. No waiver shall be binding unless executed in writing by the party
making the waiver.
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<PAGE> 16
(j) No Third Party Beneficiaries. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
to any person or entity, other than the parties hereto and their respective
successors, permitted assigns, heirs, administrators, executors and
representatives, any rights or remedies under or by reason of this Agreement.
(k) Entire Agreement. This Agreement constitutes the
entire agreement and understanding of the parties hereto relating to the
matters provided for herein and supersede any and all prior agreements,
arrangements, negotiations, discussions and understandings relating to the
matters provided for herein.
(l) Rule of Construction. Each party and counsel for
each party have reviewed this Agreement. The parties hereto hereby agree that
the normal rule of construction, which requires a court to resolve any
ambiguities against the drafting party, shall not apply in interpreting this
Agreement.
(m) Exhibits. Each Exhibit referred to in this Agreement
is hereby incorporated herein by reference.
(n) HSR Filing Fee. Optionee shall be responsible for
paying any governmental filing fee for all filings made under the HSR Act.
Each party shall be responsible for its own attorneys fees and costs related to
the filings under the HSR Act and responding to any requests for additional
information made by the Federal Trade Commission or the United States
Department of Justice in response to such filings.
(o) References to Optionee. In the context of references
herein to representations, warranties, covenants, obligations or duties of
Optionee under the Purchase Agreement or the TBA, Optionee shall be deemed to
include its assigns under the Purchase Agreement and the TBA.
19. Guaranty. The Trustees, as co-trustees of the Autry
Survivor's Trust, hereby guarantee the obligations of the Company hereunder;
provided, however, Optionee agrees the monetary liability of Stanley B.
Schneider under this guarantee shall be limited to the assets of the Autry
Survivor's Trust.
20. Specific Performance. The Company recognizes that, in the
event the Company defaults in the performance of its obligations hereunder,
monetary damages will not be an adequate remedy. Therefore, unless Optionee is
in material breach of this Agreement, Optionee shall be entitled to obtain
specific performance of the terms of this Agreement. In any action to enforce
specifically the performance of this Agreement, the Company waives the defense
that there is another adequate remedy at law or equity and agrees that Optionee
shall have the right to obtain specific performance of the Company's
obligations under
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<PAGE> 17
the terms of this Agreement without being required to prove actual damages,
post bond or furnish other security. As a condition to seeking specific
performance, Optionee shall not be required to have tendered the purchase price
for the Assets, but shall be required to demonstrate that it is ready, willing
and able to do so at the closing of the transactions contemplated by the
Purchase Agreement and to perform its other obligations hereunder and under the
Purchase Agreement in accordance with the terms hereof and thereof.
21. Extension of Time Periods. If either the Company or
Optionee is required or permitted to perform an action hereunder within a
certain time period (the "Applicable Period") but on or before the end of the
Applicable Period such party has delivered a notice of breach by the other
hereunder, the balance of the Applicable Period shall be suspended until the
day after the date on which the breaching party has cured the Subject Breach.
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
GOLDEN WEST BROADCASTERS
By:/s/ Jacqueline Autry
-----------------------------
Jacqueline Autry
Executive Vice President
CLEAR CHANNEL RADIO, INC.
By:/s/ Kenneth E. Wyker
----------------------------
Name: Kenneth E. Wyker
Title: Vice President,
Legal Affairs
/s/ Orvon Gene Autry
-------------------------------
ORVON GENE AUTRY, as co-trustee
of the Autry Survivor's Trust
/s/ Stanley B. Schneider
-------------------------------
STANLEY B. SCHNEIDER, as
co-trustee of the Autry
Survivor's Trust
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<PAGE> 19
EXHIBIT A
Asset Purchase Agreement and Schedules
1. See the attached document consisting of 50 pages.
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<PAGE> 20
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and
entered into on _______ by and among GOLDEN WEST BROADCASTERS, a California
corporation ("Seller"), ________________ and STANLEY B. SCHNEIDER, AS CO-
TRUSTEES OF THE AUTRY SURVIVOR'S TRUST (collectively, the "Trustees") and CLEAR
CHANNEL RADIO, INC., a Nevada corporation ("Buyer"), with reference to the
following facts:
Recitals
A. Seller operates radio station KSCA(FM), Glendale,
California (the "Station") pursuant to licenses issued by the Federal
Communications Commission (the "FCC");
B. Seller, Buyer and Stanley B. Schneider and Orvon Gene
Autry, as co-trustees of the Autry Survivor's Trust, entered into an Option
Agreement, dated as of December 23, 1996, (the "Option Agreement") and this
Agreement is being entered into pursuant to the exercise of the option granted
to Buyer under the Option Agreement.
C. Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, substantially all of the assets used or held for use in
connection with the operation of the Station, all on the terms and subject to
the conditions set forth herein.
Agreement
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE 22
PURCHASE OF ASSETS
22.1 Transfer of Assets by Seller. On the Closing Date,
subject to the conditions contained herein, Seller shall sell, assign, transfer
and convey to Buyer, and Buyer shall purchase from Seller, all of the assets,
properties, interests and rights of Seller which are used or held for use in
connection with the operation of the Station (collectively, the "Purchased
Assets"), including, without limitation, the following:
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<PAGE> 21
(a) All furniture, equipment and other tangible
personal property relating to the operation of the Station, including, without
limitation, the property listed on Schedule 1.1(a) attached hereto, together
with any additions thereto made between the date hereof and the Closing Date,
and less any dispositions thereof made in the ordinary course of business
between the date hereof and the Closing Date which are replaced with items of
equal or greater value (collectively, the "Tangible Personal Property");
(b) All of Seller's right, title and interest
in and to each permit, contract, agreement, license and lease, written or oral,
relating to the operation of the Station listed in Schedule 1.1(b) hereto,
together with all contracts, agreements and leases entered into by Seller
between the date hereof and the Closing Date if Buyer agrees to assume such
agreement in writing at the Closing (collectively, the "Contracts"); at Buyer's
option, exercisable by delivery of written notice before the Closing, the
Auxiliary Site Lease shall be included in the Contracts;
(c) All licenses, permits and other
authorizations relating to the Station issued to Seller by the FCC on or prior
to the Closing Date, together with renewals or modifications thereof,
including, without limitation, the licenses, permits and authorizations listed
on Schedule 1.1(c) attached hereto (collectively, the "FCC Licenses");
(d) All of Seller's right, title and interest
in and to all of its intellectual property associated with the Station,
including, but not limited to, the call letters "KSCA(FM)," together with any
associated goodwill (collectively, the "Intellectual Property");
(e) All files, records, and reports which
Seller must retain under FCC rules and regulations;
(f) All rights of way and other interests of
every kind in and to any real property and buildings thereon leased by Seller
and used or held for use in connection with the business and operations of the
Station; and
(g) All goodwill in, and going concern value
of, the Station;
(h) All claims and rights against third parties
relating to the Purchased Assets, including, without limitation, all rights
under manufacturers' and vendors' warranties; and
(i) Any books and records relating to any of
the foregoing, except to the extent that Seller wishes to make, at its expense,
a duplicate copy of such materials.
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<PAGE> 22
22.2 Excluded Assets. Notwithstanding anything to the
contrary contained herein, it is expressly understood and agreed that the
Purchased Assets shall not include the following assets along with all right,
title and interest therein (collectively, the "Excluded Assets"):
(a) All cash, cash equivalents or similar type
investments of Seller, such as certificates of deposit, Treasury bills and
other marketable securities on hand and/or in banks;
(b) All of Seller's accounts receivable
existing prior to the TBA Effective Date;
(c) All contracts or agreements to which Seller
is a party that Buyer has not assumed pursuant to the terms of Section 2.1
hereof;
(d) Seller's corporate seal, minute books,
charter documents, corporate stock record books and such other books and
records as pertain to the organization, existence or share capitalization of
Seller and duplicate copies of such records as are necessary to enable Seller
to file its tax returns and reports as well as any other records or materials
relating to Seller generally and not involving the Station's operations;
(e) All pension, profit sharing or cash or
deferred (Section 401(k)) plans and trusts and the assets thereof and any other
employee benefit plan or arrangement and the assets thereof, if any maintained
by Seller;
(f) Contracts of insurance and all insurance
proceeds or claims made by Seller relating to property or equipment repaired,
replaced or restored by Seller prior to the Closing Date;
(g) Any and all claims (except as set forth in
Section 1.1(h)) made by Seller with respect to transactions prior to the
Closing Date and the proceeds thereof, except claims with respect to
obligations to be assumed by Buyer pursuant to Section 2.1 hereof; and
(h) All other assets of Seller which are not
used or held for use in the operation of the Station.
22.3 No Liens. The Purchased Assets shall be transferred to
Buyer free and clear of all Liens.
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<PAGE> 23
ARTICLE 23
ASSUMPTION OF OBLIGATIONS
23.1 Assumption of Obligations. In addition to the
provisions of Section 3.4, on the Closing Date, Buyer shall assume and
undertake to pay, satisfy or discharge the obligations and commitments of
Seller arising or to be performed on or after the Closing Date under the
Contracts. All of the foregoing assumed obligations and commitments shall be
referred to herein collectively as the "Assumed Liabilities." If any required
approval of or consent to the assignment of any Contract is not obtained and
the Closing occurs, such Contract shall not be assigned until such consent is
obtained, but on the Closing Date Buyer and Seller shall enter into an
equitable arrangement pursuant to which Buyer shall pay, satisfy, perform, and
discharge Seller's obligations which arise or are to be performed under such
Contract on or after the Closing Date and Seller shall provide to Buyer the
rights and benefits under such Contract arising on or after the Closing Date.
23.2 Retained Liabilities. Except as set forth in Sections
2.1 and 3.4, Buyer expressly does not, and shall not, assume or be deemed to
assume, under this Agreement or otherwise by reason of the transactions
contemplated hereby, any liability, obligation, commitment, undertaking,
expense or agreement of Seller of any nature whatsoever, whether known or
unknown or absolute or contingent. All of such liabilities and obligations
shall be referred to herein collectively as the "Retained Liabilities." Without
limiting the generality of the foregoing, (a) Buyer shall have no obligation or
liability to employees of Seller due to or because of any past service
liability, vested benefits, retirement plan insolvencies or other retirement
plan or past employment obligation under local, state or federal law (including
the Employee Retirement Income Security Act of 1974, as amended) as a result of
the purchase of the Purchased Assets or former employees of Seller becoming
employees of Buyer and (b) Buyer shall have no liability to any employees of
Seller under any employment agreement between Seller and such employee, whether
or not listed on any Schedule attached hereto. Nothing contained herein shall
limit the obligations of Buyer under the TBA to reimburse Seller for certain
expenses or pay certain severance obligations.
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ARTICLE 24
CONSIDERATION
24.1 Purchase Price. In consideration for the transfer of
the Purchased Assets, Buyer shall pay to Seller an amount (the "Purchase
Price") equal to the greater of (a) $112.5 million or (b) the sum of (i) $105
million plus (ii) an amount equal to the product of the Daily Amount (the
parties acknowledge the Daily Amount may be different for each day) multiplied
by the number of days elapsed from the TBA Effective Date until (but not
including) the Closing Date. The Purchase Price shall be subject to any
adjustment to be made pursuant to Section 3.4 hereof and shall be subject to
adjustment for any damages incurred by a party as a result of termination of
the TBA due to a breach thereof or a termination of the TBA not made in
accordance with the terms thereof. In addition, as consideration for the
transfer of the Purchased Assets to Buyer, Buyer shall assume the Assumed
Liabilities.
24.2 Payment of Purchase Price. On the Closing Date, Buyer
shall pay the Purchase Price, plus or minus any adjustment to be made pursuant
to Sections 3.1 and 3.4 hereof and minus all payments made under the Option
Agreement, in lawful money of the United States of America by bank cashier's
check or wire-transfer of immediately available funds.
24.3 Allocation of Purchase Price. Within 90 days after the
Closing, Buyer and Seller shall mutually determine the allocation of the
Purchase Price in accordance with Treasury Regulation Section 1.1060-1T based
upon the approximate replacement values of the Purchased Assets determined by a
nationally recognized appraisal firm chosen by Buyer and reasonably acceptable
to Seller (it being anticipated that the Purchase Price will be allocated first
to such of the Purchased Assets as are tangible to the extent of the
approximate replacement values thereof on the Closing Date, with the balance to
intangible assets). Buyer shall pay all fees and expenses of such appraisal
firm. Seller and Buyer will report the federal income tax consequences of the
sale and acquisition of the Purchased Assets under this Agreement in a manner
consistent with the foregoing, and will file Forms 8594 in the manner and at
the times required by Treasury Regulation Section 1.1060-1T. Buyer shall
prepare drafts of Form 8594 reflecting the respective Purchase Price
allocations determined as provided above in accordance with Treasury Regulation
Section 1.1060-1T for Seller and Buyer, such draft Form 8594 to be provided to
Seller within 180 days following the Closing Date, but in no event later than
the due date for Seller's federal income tax return for the period including
the Closing Date; and Seller's consent to such drafts shall not be unreasonably
withheld or delayed.
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24.4 Proration of Income and Expenses.
(a) Except as otherwise provided herein or in
the TBA, all income and expenses arising from the conduct of the business and
operation of the Station, including, without limitation, all ad valorem, real
estate and other property taxes (but excluding taxes arising by reason of the
transfer of the Purchased Assets as contemplated hereby, which shall be paid as
set forth in Article 11 of this Agreement), business and license fees, music
and other license fees, utility expenses, rents and similar prepaid and
deferred items attributable to the ownership and operation of the Station,
shall be prorated between Buyer and Seller in accordance with generally
accepted accounting principles as of 11:59 p.m., California time, on the date
immediately preceding the Closing Date (the "Effective Time") in accordance
with the principle that Seller shall receive all revenues and be responsible
for all expenses, costs, and liabilities allocable to the period prior to the
Effective Time, and Buyer shall receive all revenues, and be responsible for
all expenses, costs, and obligations, allocable to the period after the
Effective Time, subject to the following:
(i) There shall be no adjustment
with respect to any contracts not included in the Contracts;
(ii) There shall be no adjustment
for any expenses or payments to terminated employees which are the
responsibility of Buyer, or for which Buyer is obligated to reimburse Seller,
pursuant to Section 3(b) of the TBA or for any revenue to which Buyer is
entitled under the TBA; and
(iii) Revenues, expenses, taxes,
costs and liabilities earned or incurred in connection with particular programs
and announcements shall be allocated to the time of performance of such
programs and announcements without regard to the date of payment therefor.
(b) The prorations and adjustments contemplated
by this Section, to the extent practicable, shall be made on the Closing Date.
As to those prorations and adjustments not capable of being ascertained on the
Closing Date, an adjustment and proration shall be made within sixty (60) days
of the Closing Date. In the event of any disputes between the parties as to
such adjustments, the amounts not in dispute shall nonetheless be paid at such
time and such disputes shall be resolved by an independent certified public
accountant mutually acceptable to the parties, and the fees and expenses of
such accountant shall be paid one-half by Seller and one-half by Buyer. The
decision of such accountant shall be conclusive and binding on the parties.
All prorations and
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adjustments made on the Closing Date shall be paid in the form of an increase
or decrease of the amount payable by Buyer at the Closing. All prorations and
adjustments made after the Closing shall be paid within five (5) business days
of the determination thereof.
ARTICLE 25
GOVERNMENTAL CONSENTS
25.1 FCC Consent. It is specifically understood and agreed
by the parties hereto that consummation of the transactions contemplated hereby
is expressly conditioned on and is subject to the prior consent and approval of
the FCC ("FCC Consent").
25.2 FCC Application. Within five business days after
execution of this Agreement, the parties shall file with the FCC an application
for assignment of the FCC Licenses ("FCC Application") from Seller to Buyer.
The parties shall thereafter prosecute the FCC Application with all reasonable
diligence and otherwise use commercially reasonable efforts to obtain the grant
of the FCC Application as expeditiously as practicable. If the FCC Consent
imposes any condition on a party hereto, such party shall use commercially
reasonable efforts to comply with such condition. If reconsideration or
judicial review is sought with respect to the FCC Consent, the parties shall
oppose such efforts for reconsideration or judicial review.
25.3 Hart-Scott-Rodino Filings. If the HSR Act and the
rules and regulations of the Federal Trade Commission require the parties to
file Notification and Report Forms after the execution hereof, as soon as
possible after the date hereof, but in no event later than 30 days after the
date hereof, Buyer and Seller shall prepare and file all documents with the
Federal Trade Commission and the United States Department of Justice as are
required to comply with the HSR Act and shall promptly furnish all materials
thereafter requested by any of the regulatory agencies having jurisdiction over
such filings.
ARTICLE 26
CLOSING
26.1 Closing Date. Except as otherwise agreed upon by the
parties hereto, the consummation of the transactions contemplated herein (the
"Closing") shall occur within five (5) business days after the FCC Consent
shall have become a Final Order, subject to extension to allow Seller to comply
with Section 15.1 (the "Closing Date"). As used herein, the term "Final Order"
means a written action or order issued by the FCC setting forth the FCC Consent
and (a) which has not been reversed, stayed, enjoined, set aside, annulled or
suspended, and (b) with respect to which (i) no requests have been filed for
administrative or judicial review, reconsideration, appeal or stay, and the
time for filing any such requests and for the FCC to set aside the action on
its own motion (whether upon reconsideration or otherwise) has expired, or (ii)
in the event of
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review, reconsideration, appeal or stay, the time for further review,
reconsideration or appeal has expired or such requests have been withdrawn or
denied. Notwithstanding the foregoing, at Buyer's election the Closing shall
occur within five (5) business days after the date on which public notice of
the grant of FCC Consent is given (even though the FCC Consent shall not have
become a Final Order), subject to extension to allow Seller to comply with
Section 15.1. In addition, notwithstanding anything to the contrary contained
herein, if a party has a condition to its obligations which has not been
satisfied by the 5th business day after the date on which public notice of the
grant of the FCC Consent is given or the date on which the FCC Consent becomes
a Final Order, as the case may be, such party may extend the Closing Date for
such time as is necessary to cause such condition to be satisfied. All actions
taken at the Closing will be considered as having been taken simultaneously and
no such actions will be considered to be completed until all such actions have
been completed.
26.2 Closing Place. The Closing shall be held at such place
as the parties hereto may agree.
ARTICLE 27
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
27.1 Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has the requisite corporate power to carry on its business as it is now
being conducted.
27.2 Authority.
(a) Seller has the corporate power and
authority to enter into this Agreement, to perform its obligations hereunder,
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Seller and the consummation by Seller of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement has been duly executed
and delivered by Seller and constitutes a valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms.
(b) Except as set forth in Schedule 6.2(b)
attached hereto, the execution and delivery by Seller of this Agreement do not,
and the consummation of the transactions contemplated hereby will not, (i)
conflict with, or result in a violation of, any provision of the Articles of
Incorporation or Bylaws of Seller, (ii) constitute or result in a material
breach of or material default (or an event which with notice or lapse of time,
or both, would constitute a material default) under, or
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result in the termination or suspension of, or accelerate the performance
required by, or result in a right of termination, cancellation or acceleration
of any contract or agreement of Seller, (iii) create any Lien upon any of the
Purchased Assets, or (iv) constitute, or result in, a violation of any
judgment, ruling, order, writ, injunction, decree, statute, law, rule or
regulation applicable to Seller or any of its properties or assets, other than
in the cases of clauses (ii) and (iv) a breach, default, termination or
suspension, acceleration of performance, cancellation or violation which would
not adversely affect the Purchased Assets, Buyer's use or enjoyment of the
Purchased Assets or the ability of Seller to complete the sale of the Purchased
Assets to Buyer pursuant to this Agreement.
(c) No consent, approval, order or
authorization of, notice to, or registration, declaration of filing with, any
governmental entity is necessary in connection with the execution and delivery
of this Agreement by Seller or the consummation of the transactions
contemplated hereby by Seller, except for the FCC Consent and the filings
required under the HSR Act.
27.3 Station Licenses. Schedule 1.1(c) attached hereto
contains a true and complete list of the FCC Licenses. Seller is the
authorized legal holder of the FCC Licenses. The FCC Licenses are in full
force and effect [if the Purchase Agreement is executed after August 1, 1997,
this sentence will need to be modified to reflect the filing of the renewal
application for the FCC Licenses]. The FCC Licenses are all of the licenses,
permits or other authorizations required under the Communications Act and the
rules and regulations of the FCC to operate the Station as currently operated.
No proceedings are pending or, to the best knowledge of Seller, threatened
which may result in the revocation, modification, non-renewal or suspension of
any of the FCC Licenses. Except as caused by non-compliance by Buyer with the
TBA, the Station is operating in compliance in all material respects with the
Communications Act and all FCC rules and regulations, including, but not
limited to, the timely filing of all accurate reports required by the FCC. The
representations and warranties contained in this Section 6.3 are subject to
Schedule 6.3 attached hereto.
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27.4 Equipment. Schedule 1.1(a) attached hereto contains a
true and complete list of the Tangible Personal Property. Seller (a) is the
lawful owner of all of the Tangible Personal Property it purports to own, and
(b) has valid leasehold interests in the Tangible Personal Property it purports
to lease, in all cases free and clear of any Liens. Seller will not be a party
to any equipment financing leases as of the Closing Date.
27.5 Contracts. Seller is not in violation or breach of,
nor has Seller received in writing any claim or threat that it has breached any
of the terms and conditions of, any Contract, including any real property
leases. To the best knowledge of Seller, no other party to any Contract is in
default thereunder or breach thereof. Seller has delivered to Buyer a true,
accurate and complete copy of each Contract. Except as set forth in Schedule
6.5 attached hereto, neither the execution and delivery by Seller of this
Agreement nor the consummation by Seller of the transactions contemplated under
this Agreement requires the consent of any party to a Contract. With respect
to the Transmitter Site Lease, (a) such lease is in full force and effect and
is valid, binding and enforceable in accordance with its terms, (b) to the best
knowledge of Seller, no event has occurred or condition exists that, with
notice or lapse of time or both, would become a breach or default by either
party to such lease, (c) Seller's interest in such lease is not subject to any
Liens, and (d) the term thereof has been extended to September 30, 1999 and the
term "Master Sublease" as used therein means the KCET Sublease. The rights
under the Transmitter Site Lease provide sufficient access to the tower and
other facilities for the Station which are located on the premises described in
such lease without the need to obtain any other access rights. Seller has not
received any notice that any of the Senior Leases are being terminated.
27.6 Intellectual Property. None of the Intellectual
Property was granted to Seller pursuant to any licensing or sublicensing
agreement under which Seller is the licensee or the sublicensee. No person has
a right to receive a royalty or similar payment in respect of any Intellectual
Property pursuant to any contractual arrangements entered into by Seller.
Seller has not granted to any other person any right to use the Intellectual
Property pursuant to any licensing or sublicensing agreement. No notices have
been received by Seller that Seller's use of the Intellectual Property
infringes upon or otherwise violates any proprietary rights of others. To the
best knowledge of Seller, no third-party is infringing on the Intellectual
Property. The Intellectual Property, including any registered marks or
applications, is owned by Seller free and clear of any Liens. The
representations and warranties contained in this Section 6.6 are subject to
Schedule 6.6 attached hereto.
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27.7 Brokers. Seller has not entered into any contract,
agreement, arrangement or understanding with any person or entity which will
result in the obligation to pay any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement.
27.8 Litigation. There are no claims, actions, suits,
litigation, labor disputes, arbitrations, proceedings or investigations pending
or, to the best knowledge of Seller, threatened against Seller which would have
an adverse effect on Buyer's ability to purchase the Purchased Assets, Buyer's
ability to full use and enjoyment of the Purchased Assets or the ability of
Seller to sell the Purchased Assets to Buyer pursuant to this Agreement.
Seller is not subject to any order, judgment, writ, injunction or decree of any
court or governmental agency or entity.
27.9 Insurance. Seller maintains the insurance policies
relating to the Station and the Purchased Assets bearing the policy numbers,
for the terms, with the companies, in the amounts, and providing the general
coverage set forth on Schedule 6.9 attached hereto. All of such policies are
in full force and effect and Seller is not in default of any material provision
thereof. Seller has not received notice from any issuer of any such policies
of its intention to cancel, terminate or refuse to renew any policy issued by
it.
27.10 Labor, Employment Contracts and Benefit Programs.
(a) There are no collective bargaining
agreements, or written or oral agreements, relating to the terms and conditions
of employment or termination of employment, covering any employees, consultants
or agents of Seller relating to the Station, except as listed and described in
Schedule 6.10(a) attached hereto [if the Purchase Agreement is signed before
the TBA Effective Date, the following language will be included: and except for
agreements which will be terminated at the beginning of the term of the TBA].
Buyer has provided to Seller a copy of all of the agreements listed on Schedule
6.10(a) together with any amendments or modifications thereof. Except as
listed and described in Schedule 6.10(a), none of the employees of Seller
relating to the Station [if the Purchase Agreement is signed before the TBA
Effective Date, the following language will be included: who will remain as
employees after the beginning of the term of the TBA] have written employment
contracts. There is no strike, picketing, slowdown or work stoppage by or
concerning the employees of Seller relating to the Station pending against or
involving Seller. Other than with respect to the existing AFTRA agreement,
Seller has no knowledge of any organizational effort currently being made or
threatened respecting any of the employees of Seller relating to the Station.
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(b) All handbooks, policies and procedures of
Seller relating to all aspects of employment of employees of Seller relating to
the Station, including but not limited to compensation, benefits, equal
employment opportunity and safety, are listed and described in Schedule 6.10(b)
attached hereto.
(c) Seller has provided to Buyer the names of
all present employees of Seller and the positions, total annual compensation
and accrued vacation and sick time of each.
27.11 Absence of Material Change. Except as caused by non-
compliance by Buyer with the TBA, since the date of the Option Agreement:
(a) Seller has not taken any action with
respect to the Station outside of the ordinary and usual course of business,
except as related to the transactions contemplated hereby;
(b) Seller has not granted a security interest
in the Purchased Assets to secure any borrowings of Seller or any obligation or
liability of others;
(c) Seller has with respect to the Station paid
all of its debts and obligations under the Contracts as they became due;
(d) Seller has not waived any right of
substantial value under the Contracts; and
(e) Seller has maintained its books, accounts
and records with respect to the Contracts in the usual, customary and ordinary
manner.
27.12 Shareholders. The Trustees, as co-trustees of the
Autry Survivor's Trust, are the sole shareholders of Seller.
27.13 Real Property. Seller has no interest in any real
property other than its interest in the K-LITE Studio/Office Lease, dated
February 4, 1994, between Seller and Toluca Plaza Company, together with the
Addendum dated February 4, 1994, and the Antenna Leases. Neither Seller, nor
to the best knowledge of Seller, any of Seller's lenders possess a title
insurance policy with respect to such interests. To the best knowledge of
Seller, the real property on which the tower for the Station is located is
owned by Katella, Katella leases such property to BALP pursuant to the Ground
Lease, BALP leases such property to RMBC pursuant to the RMBC Lease, RMBC
leases such property to Metromedia pursuant to the Metromedia Sublease,
Metromedia leases such property to Fox pursuant to the Fox Sublease, Fox leases
such property to KCET pursuant to the KCET Sublease and KCET leases a portion
of such property to Seller pursuant to the Transmitter Site Lease.
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27.14 Sales Tax. Seller has not made any sales which would
cause the sale of the Purchased Assets to Buyer hereunder to fail to be exempt
from sales tax under California law.
27.15 Schedules. The Schedules attached hereto are the same
as the Schedules attached to the Option Agreement, except for changes which are
not materially adverse to Buyer and changes which are not due to the actions or
omissions of Seller, and are accurate and complete as of the date hereof.
27.16 Disclosure. No provision of this Agreement relating to
Seller, the Station or the Purchased Assets or any other document, Schedule or
other written information furnished by Seller to Buyer in connection with the
execution, delivery and performance of this Agreement, or the consummation of
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
required to be stated in order to make the statement, in light of the
circumstances in which it is made, not misleading. Except for facts affecting
the radio industry generally and except for facts or circumstances caused by
non- compliance by Buyer with the TBA, there is no fact now known to Seller
relating to the Station which in Seller's reasonable opinion adversely affects
the condition of the Purchased Assets, the status of the FCC licenses for the
Station or the ownership, operation, financial condition or business of the
Station which has not been disclosed to Buyer or set forth in the Schedules
attached hereto.
ARTICLE 28
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
28.1 Organization, Standing and Power. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has the requisite corporate power to carry on
its business as it is now being conducted.
28.2 Authority.
(a) Buyer has all requisite corporate power and
authority to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed
and delivered by Buyer and constitutes a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
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(b) No consent, approval, order or
authorization of, notice to, or registration, declaration or filing with, any
governmental entity is necessary in connection with the execution and delivery
of any of this Agreement by Buyer or the consummation by Buyer of the
transactions contemplated hereby, except the FCC Consent and the filings
required under the HSR Act.
28.3 Brokers. Buyer has not entered into any contract,
agreement, arrangement or understanding with any person or entity which will
result in the obligation to pay any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement.
28.4 Litigation. There are no claims, actions, suits,
litigation, labor disputes, arbitrations, proceedings or investigations pending
or, to the best knowledge of Buyer, threatened against Buyer relating to the
transactions contemplated by this Agreement.
28.5 Qualification. There are no facts which, under the
Communications Act or the existing rules and regulations of the FCC, would
disqualify Buyer as an assignee of the FCC Licenses.
ARTICLE 29
COVENANTS
29.1 Operation of Business. Except as caused by
non-compliance by Buyer with the TBA, notwithstanding anything to the contrary
contained herein, between the date of this Agreement and the Closing Date,
Seller:
(a) except in accordance with Section 1.1,
shall not sell or otherwise dispose of any of the Purchased Assets or grant a
Lien thereon or permit a Lien to remain on the Purchased Assets if such Lien
was placed thereon as a result of the actions or omissions of Seller;
(b) shall not commit any act or omit to do any
act which will cause a breach of any Contract;
(c) shall not amend or renew any Contract or
terminate the lease for the Station's main transmitter site;
(d) will operate in the ordinary course of
business, consistent with past practice, and will take no actions to diminish
materially the goodwill of the business of the Station;
(e) will operate the Station in material
compliance with the Communications Act and the FCC's rules and regulations;
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(f) will maintain the insurance coverage listed
on Schedule 6.9 in full force and effect through the Closing Date; and
(g) will take all action necessary to maintain
the FCC Licenses in full force and effect without material modification,
including, without limitation, the timely filing of a renewal application and
responding to requests thereunder from the FCC, and will keep Buyer informed
with respect to any renewal application for the FCC Licenses and requests
thereunder from the FCC.
29.2 Access to Information. From the date hereof to the
Closing Date, Seller shall afford, and shall cause its respective officers,
directors, employees and agents to afford, to Buyer and the officers, employees
and agents of Buyer complete access at all reasonable times to Seller's
officers, employees, independent contractors, agents, properties and to
Seller's books, records and contracts relating to the Station.
29.3 Confidentiality.
(a) Buyer shall hold, and shall cause its
officers, employees and agents and representatives, including, without
limitation, attorneys, accountants, consultants and financial advisors who
obtain such information to hold, in confidence, and not use for any purpose
other than evaluating the transactions contemplated by this Agreement or
performing its obligations hereunder or under the TBA, any confidential
information of Seller or the Trustees, which for the purposes hereof shall not
include any information which (i) is or becomes generally available to the
public other than as a result of disclosure by Buyer or one of its affiliates
in violation of its obligations under this subsection, (ii) becomes available
to Buyer on a nonconfidential basis from a source, other than Seller, the
Trustees or affiliates of Seller, which has represented that such source is
entitled to disclose it, or (iii) was known to Buyer on a nonconfidential basis
prior to its disclosure to Buyer hereunder. If this Agreement is terminated,
Buyer shall deliver, and cause its officers, employees, agents, and
representatives, including, without limitation, attorneys, accountants,
consultants and financial advisors who obtain confidential information of
Seller or the Trustees to deliver, to Seller all such confidential information
that is written (including copies or extracts thereof), whether such
confidential information was obtained before or after the execution hereof.
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(b) Seller shall hold, and shall cause its
officers, employees and agents and representatives, including, without
limitation, attorneys, accountants, consultants and financial advisors who
obtain such information to hold, in confidence, and not use for any purpose
other than evaluating the transactions contemplated by this Agreement, any
confidential information of Buyer, which for the purposes hereof shall not
include any information which (i) is or becomes generally available to the
public other than as a result of disclosure by Seller or one of its affiliates
in violation of its obligations under this subsection, (ii) becomes available
to Seller on a nonconfidential basis from a source, other than Buyer or its
affiliates, which has represented that such source is entitled to disclose it,
or (iii) was known to Seller on a nonconfidential basis prior to its disclosure
to Seller hereunder. If this Agreement is terminated, Seller shall deliver,
and cause its officers, employees, agents, and representatives, including,
without limitation, attorneys, accountants, consultants and financial advisors
who obtain confidential information of Buyer to deliver, to Buyer all such
confidential information that is written (including copies or extracts
thereof), whether such confidential information was obtained before or after
the execution hereof.
(c) If a person who receives confidential
information is requested or becomes legally compelled (by oral questions,
interrogatories, requests for information or documents, subpoena, criminal or
civil investigative demand or similar process) to disclose any of such
confidential information, such person will provide the other party with prompt
written notice so that such other party may seek a protective order or other
appropriate remedy or waive compliance with Section 8.3(a) or (b), as the case
may be. If such protective order or other remedy is not obtained, or if the
applicable party waives compliance with Section 8.3(a) or (b), as the case may
be, the person subject to the request will furnish only that portion of such
confidential information which is legally required and will exercise reasonable
efforts to obtain reliable assurance that confidential treatment will be
accorded such confidential information.
29.4 Notification of Certain Matters. Seller shall give
prompt notice to Buyer, of the discovery of (i) any material inaccuracy in any
representation or warranty made by it, (ii) any material failure of Seller to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement or (iii) any legal proceedings related
to the Station or the transactions contemplated hereby. Buyer shall give
prompt notice to Seller of the discovery of (1) any material inaccuracy in any
representation or warranty made by it,(2) any material failure of Buyer to
comply with or satisfy any covenant, condition or agreement to be complied with
or
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satisfied by it under this Agreement or (3) any legal proceedings related to
the Station or the transactions contemplated hereby. Notwithstanding the
foregoing, no notification made under this Section shall affect the
representations or warranties or covenants or agreements of the parties or the
conditions to the obligations of the parties hereunder.
29.5 Consents and Approvals. Seller and Buyer shall use
commercially reasonable efforts to obtain any and all consents, transfers,
authorizations, or approvals required for the consummation of the transactions
contemplated by this Agreement. Buyer and Seller will cooperate with each
other in obtaining, and will provide all information necessary to obtain, such
consents.
29.6 Control of Station. From the date hereof to the
Closing Date, Buyer shall not, directly or indirectly, control, supervise or
direct the operation of the Station. Such operation, including complete
control and supervision of all Station programs, employees and policies, shall
be the sole responsibility of Seller. Notwithstanding the foregoing, the
parties have entered into the TBA, pursuant to which Seller has granted to
Buyer (or its permitted assignee) the right to program the Station in
accordance with the Communications Act and the rules and regulations of the
FCC.
29.7 News Releases. Except for announcements required by
applicable law, prior to the Closing Date, any news releases pertaining to the
transactions contemplated hereby shall be reviewed and approved by Buyer and
Seller, or their respective representatives, and shall be acceptable to them
prior to the dissemination thereof.
29.8 Buyer's Covenant. Buyer agrees it shall not take any
action which would cause it to be disqualified under the Communications Act or
the FCC's rules or regulations as an assignee of the FCC Licenses.
ARTICLE 30
CONDITIONS
30.1 Conditions Precedent to Obligations of Buyer. The
obligations of Buyer to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, prior to or at the Closing, of each
of the following conditions, except to the extent Buyer shall have waived in
writing satisfaction of such condition:
(a) The representations and warranties made by
Seller in this Agreement shall be true and correct in all material respects as
of the date of this Agreement and on the Closing Date as though such
representations and warranties were made on such date.
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(b) Seller shall have performed and complied in
all material respects with all covenants, agreements, representations,
warranties and undertakings required by this Agreement to be performed or
complied with by it prior to or at the Closing.
(c) No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been completed
which restrains, enjoins, rescinds, prevents or changes the transactions
contemplated hereby in a material manner.
(d) Seller shall have delivered to Buyer all of
the documents required by Section 10.1 hereof.
(e) The conditions set forth in Section 5.1
regarding the FCC Consent shall have been satisfied.
(f) Any applicable waiting period under the HSR
Act shall have expired or been terminated.
30.2 Conditions Precedent to Obligations of Seller. The
obligations of Seller to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, prior to or at the Closing, of each
of the following conditions, except to the extent Seller shall have waived in
writing satisfaction of such condition:
(a) The representations and warranties made by
Buyer in this Agreement shall be true and correct in all material respects as
of the date of this Agreement and on the Closing Date as though such
representations and warranties were made on such date.
(b) Buyer shall have performed and complied in
all material respects with all covenants, agreements, representations,
warranties and undertakings required by this Agreement to be performed or
complied with by it prior to or at the Closing.
(c) No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been completed
which restrains, enjoins, rescinds, prevents or changes the transactions
contemplated hereby in a material manner.
(d) Buyer shall have delivered to Seller all of
the documents required by Section 10.2 hereof.
(e) The conditions set forth in Section 5.1
regarding the FCC Consent shall have been satisfied.
(f) Any applicable waiting period under the HSR
Act shall have expired or been terminated.
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ARTICLE 31
CLOSING DELIVERIES
31.1 Deliveries by Seller. At the Closing, Seller shall
deliver or cause to be delivered to Buyer the following:
(a) Bill of Sale, assignment and other good and
sufficient instruments of conveyance, transfer and assignment, all in form and
substance reasonably satisfactory to counsel for Buyer, as shall be effective
to vest in Buyer title in and to the Purchased Assets.
(b) A certificate, executed by an officer of
Seller, in such detail as Buyer shall reasonably request, certifying to the
fulfillment or satisfaction of the conditions set forth in Sections 9.1(a), (b)
and (c). The delivery of such certificate shall constitute a representation
and warranty of Seller as to the statements set forth therein.
(c) Resolutions of the Board of Directors of
Seller authorizing the execution, delivery and performance of this Agreement by
Seller, certified by the corporate secretary of Seller.
(d) Updated Schedules to this Agreement
reflecting any changes necessary to render the information contained therein
true and accurate on the Closing Date.
(e) Originals or copies of all program,
operations, transmissions, or maintenance logs and all other records required
to be maintained by the FCC with respect to the Station, including the
Station's public file, shall be left at the Station and thereby delivered to
Buyer.
(f) An opinion of Jeffer, Mangels, Butler &
Marmaro LLP covering the following matters:
(i) Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has the requisite corporate power to carry on its business as it
is being conducted on the Closing Date;
(ii) Seller has the corporate power and
authority to enter into this Agreement, to perform its obligations hereunder,
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Seller and the consummation by Seller of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller; and
(iii) This Agreement constitutes a
valid and binding obligation of Seller and the Trustees.
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(g) An estoppel certificate executed by each of KCET
and Fox containing the following information:
(i) The lease or leases to which it is a
party are in full force and effect;
(ii) To its knowledge, no party to such
lease(s) or any other agreement related to the property is in default thereof;
(iii) Stating the expiration date of the
lease(s);
(iv) No consent to the assignment of the
KCET Sublease to Buyer is necessary; and
(v) To its knowledge, no proceedings are
pending which would effect the use of the property as a site for a broadcasting
tower.
(h) An estoppel certificate executed by Metromedia
containing the following information:
(i) The lease or leases to which it is a
party are in full force and effect;
(ii) To its knowledge, no party to such
lease(s) or any other agreement related to the property is in default thereof;
(iii) Stating the expiration date of the
lease(s);
(iv) No consent to the assignment of the
KCET Sublease to Buyer is necessary;
(v) To its knowledge, no proceedings are
pending which would effect the use of the property as a site for a broadcasting
tower; and
(vi) To its knowledge, attached to the
certificate are the Ground Lease and the RMBC Lease.
(i) A Certification of Trust pursuant to California
Probate Code Section 18100.5 executed by the Trustees.
31.2 Buyer's Deliveries. At the Closing, Buyer shall
deliver or cause to be delivered to Seller the following:
(a) The payment required under Section 3.2
hereof.
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(b) An Assignment and Assumption Agreement
reasonably satisfactory in form and substance to counsel to Seller effecting
the assumption of the Assumed Liabilities on the terms and conditions hereof.
(c) A certificate, executed by an officer of
Buyer, in such detail as Seller shall reasonably request, certifying to the
fulfillment or satisfaction by Buyer of the conditions set forth in Sections
9.2(a), (b) and (c). The delivery of such certificate shall constitute a
representation and warranty of Buyer as to the statements set forth therein.
ARTICLE 32
TRANSFER TAXES, FEES AND EXPENSES
32.1 Expenses. Except as set forth in Section 11.2 hereof,
each party hereto shall be solely responsible for all costs and expense
incurred by it in connection with the negotiation and preparation of this
Agreement and the documents contemplated hereby and completion of the
transactions contemplated thereby, including, without limitation, attorneys'
fees and costs related to any governmental filings or any response to requests
made by a governmental agency in connection with such filings.
32.2 Governmental Filing or Grant Fees. Any filing or grant
fees imposed by any governmental authority the consent of which is required to
complete the transactions contemplated hereby shall be borne by Buyer.
ARTICLE 33
INDEMNIFICATION AND SPECIFIC PERFORMANCE
33.1 Survival of Representations and Warranties. All
representations and warranties made in this Agreement shall survive the Closing
for a period of six months from the Closing Date; provided, however, the
representation and warranty regarding title to any of the Purchased Assets
shall survive until the expiration of all applicable statutes of limitation.
The right of any party to recover Damages on any claim shall not be affected by
the termination of any representations and warranties as set forth above
provided that notice of the existence of such claim has been given by the
Indemnified Party to the Indemnifying Party prior to such termination.
33.2 Indemnification of Buyer by Seller. Subject to Section
12.4, from and after the Closing Date, Seller shall indemnify and hold Buyer
and its attorneys, affiliates, representatives, agents, officers, directors,
successors or assigns harmless from and against any Damages resulting from,
arising out of or incurred with respect to:
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(a) A breach of any representation, warranty,
covenant or agreement of Seller contained herein, subject to notice of a claim
being given before the expiration of the applicable period specified in Section
12.1 hereof with respect to the representations or warranties by Seller
contained herein;
(b) The Retained Liabilities; or
(c) Except as provided by the TBA, any and all
claims, liabilities or obligations of any nature, absolute or contingent,
relating to the business and operation of the Station as conducted by Seller
before the Closing Date.
Notwithstanding the foregoing, Seller shall not have any indemnity obligations
for expenses or liabilities for which Buyer is responsible under the TBA.
33.3 Indemnification of Seller. Subject to Section 12.4,
from and after the Closing Date Buyer shall indemnify and hold Seller and its
attorneys, affiliates, representatives, agents, officers, directors, successors
or assigns, harmless from and against any Damages resulting from, arising out
of, or incurred with respect to:
(a) A breach of any representation, warranty,
covenant or agreement by Buyer contained herein, subject to notice of a claim
being given before the expiration of the applicable period specified in Section
12.1 hereof with respect to the representations and warranties made by Buyer
herein;
(b) The Assumed Liabilities; or
(c) Any and all claims, liabilities or
obligations of any nature, absolute or contingent, relating to the business and
operation of the Station as conducted by Buyer on or after the Closing Date.
33.4 Limitations on Indemnification Liabilities.
(a) The indemnification obligations of Seller
under Section 12.2(a) shall not be effective until the aggregate dollar amount
of all Damages indemnified against under such Section exceeds $100,000, at
which time, all Damages in excess of $100,000 shall be subject to such
indemnification obligations. The maximum amount payable by Seller for
indemnity under Section 12.2(a) shall be $20 million.
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(b) The indemnification obligations of Buyer
under Section 12.3(a) shall not be effective until the aggregate dollar amount
of all Damages indemnified against under such Section exceeds $100,000, at
which time, all Damages in excess of $100,000 shall be subject to such
indemnification obligations. The maximum amount payable by Buyer for indemnity
under Section 12.3(a) shall be $20 million.
33.5 Procedures.
(a) Promptly after the receipt by a party (the
"Indemnified Party") of notice of (i) any claim or (ii) the commencement of any
action or proceeding which may entitle such party to indemnification under this
Section, such party shall give the other party (the "Indemnifying Party")
written notice of such claim or the commencement of such action or proceeding
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting from such claim. The failure to give the
Indemnifying Party timely notice under this subsection shall not preclude the
Indemnified Party from seeking indemnification from the Indemnifying Party
unless, and then only to the extent, such failure has materially prejudiced the
Indemnifying Party's ability to defend the claim or litigation. If such claim
does not arise from the claim of a third party, the Indemnifying Party shall
have 30 days after such notice to cure the conditions giving rise to such claim
to the Indemnified Party's satisfaction. Failure by the Indemnifying Party to
notify an Indemnified Party of its election to defend any such claim or action
by a third party within 30 days after notice thereof shall have been given to
the Indemnifying Party shall be deemed a waiver by the Indemnifying Party of
its rights to defend such claim or action.
(b) If the Indemnifying Party assumes the
defense of any such claim or litigation resulting therefrom with counsel
reasonably acceptable to the Indemnified Party, the Indemnified Party may
participate, at its expense, in the defense of such claim or litigation
provided that the Indemnifying Party shall direct and control the defense of
such claim or litigation. The Indemnified Party shall cooperate and make
available all books and records reasonably necessary and useful in connection
with the defense. Except with the prior written consent of the Indemnified
Party, the Indemnifying Party shall not, in the defense of such claim or any
litigation resulting therefrom, consent to the entry of any judgment (other
than a judgment of dismissal on the merits without cost) or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the Indemnified Party of a release from all
Damages in respect of such claim or litigation.
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(c) If the Indemnifying Party shall not assume
the defense of any such claim or litigation resulting therefrom, the
Indemnified Party may, but shall have no obligation to, defend against such
claim or litigation in such manner as it may deem appropriate; provided,
however, the Indemnified Party may not compromise or settle such claim or
litigation without the Indemnifying Party's prior written consent.
33.6 Indemnity Payments. The parties agree that any
payments made pursuant to this Article 12 will be treated by the parties on all
applicable tax returns as an adjustment to the Purchase Price.
33.7 Sole Remedy.. After the Closing, indemnity hereunder
shall be the sole remedy for a breach of a representation, warranty, covenant
or agreement of a party.
12.8 Specific Performance. Seller recognizes that, in the
event Seller defaults in the performance of its obligations to close under this
Agreement, monetary damages will not be an adequate remedy. Therefore, unless
Buyer is in material breach of this Agreement, Buyer shall be entitled to
obtain specific performance of the terms of this Agreement. In any action to
enforce specifically the performance of this Agreement, Seller waives the
defense that there is another adequate remedy at law or equity and agrees that
Buyer shall have the right to obtain specific performance of Seller's
obligations to close under the terms of this Agreement without being required
to prove actual damages, post bond or furnish other security. As a condition
to seeking specific performance, Buyer shall not be required to have tendered
the Purchase Price, but shall be required to demonstrate that it is ready,
willing and able to do so and to perform its other obligations hereunder in
accordance with the terms hereof. If the parties close under this Agreement as
a result of an order for specific performance or otherwise, Buyer shall still
be entitled to bring an action for indemnification of Damages under Section
12.2.
ARTICLE 34
TERMINATION RIGHTS
34.1 Termination. This Agreement may be terminated at any
time prior to the Closing Date only as follows (provided the terminating party
is not in material breach of any of its obligations, representations,
warranties or duties hereunder):
(a) By mutual written consent of the parties;
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(b) Subject to Section 15.2, by written notice
from either Buyer or Seller, if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action, in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
is not subject to appeal or further administrative or judicial review;
(c) By written notice from Buyer, if Seller
fails to perform or breaches any of its material obligations or duties under
this Agreement and Seller has not cured such failure to perform or breach
within 30 days after delivery of written notice from Buyer or upon a material
breach of any representation and warranty of Seller contained herein, in either
case such that the conditions set forth in Sections 9.1(a) and (b) would not be
satisfied;
(d) By written notice from Seller, if Buyer
fails to perform or breaches any of its material obligations or duties under
this Agreement and Buyer has not cured such failure to perform or breach within
30 days after delivery of written notice from Seller or upon a material breach
of any representation and warranty of Buyer contained herein, in either case
such that the conditions set forth in Sections 9.2(a) and (b) would not be
satisfied;
(e) By written notice from Buyer or Seller, if
the FCC denies the FCC Application in a decision which is not subject to appeal
or further administrative or judicial review;
(f) Subject to Section 15.2, by written notice
from Seller or Buyer, if the Federal Trade Commission or the United States
Department of Justice prohibits the acquisition of the Purchased Assets
pursuant to this Agreement under a decision, order or decree which is not
subject to appeal or further administrative or judicial review; or
(g) By any party which was not in material
breach of the TBA at the time of the termination thereof if the Closing has not
occurred on or before the later of (i) one year from the date hereof, or (ii)
one year from the date of the termination of the TBA; the parties agree the
termination right under this subparagraph (g) only applies if the TBA is
terminated.
34.2 Liability of Parties. Upon a termination of this
Agreement in accordance with its terms no party shall have any liability
hereunder, except (a) as provided in Section 8.3, (b) for liability for an
breach of such party's representations and warranties contained herein and (c)
for liability for nonperformance of any of such party's obligations, covenants
or agreements contained herein. Nothing contained herein shall
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limit the obligations of Seller under the Option Agreement to refund payments
made under the Option Agreement.
34.3 Survival. Notwithstanding anything to the contrary
contained herein, the provisions of Section 8.3 and Article 15 shall survive
the termination hereof.
ARTICLE 35
DEFINITIONS
The following terms shall have the following meaning:
"Antenna Leases" shall mean the Transmitter Site Lease and the
Auxiliary Site Lease.
"Auxiliary Site Lease" shall mean the Radio Transmission Site and
Joint Occupancy Agreement, dated April 12, 1983, between Golden West
Television, Inc., a California corporation, and Seller.
"BALP" shall mean Branford Associates Limited Partnership.
"Communications Act" shall mean the Communications Act of 1934, as
amended.
"Daily Amount" shall mean $13,698.63; provided, however, (i) for
any day on which Buyer is unable to broadcast its programming on the Station
under the TBA because of preemption thereof by Licensee or because the Station
is unable to broadcast (except if the reason for the inability to broadcast is
a capital expenditure was not made under the TBA due to Buyer not consenting to
such expenditure), the "Daily Amount" shall be reduced by an amount equal to
(1) $570.78, multiplied by (2) the number of hours (rounded to the nearest
whole number) for which Buyer is unable to broadcast its programming on the
Station under the TBA and (ii) for each day on which the TBA is not in effect
due to a termination thereof, the "Daily Amount" shall be zero.
"Damages" shall mean any liability, loss, cost, expense, judgment,
order, settlement, obligation, deficiency, claim, suit, proceeding (whether
formal or informal), investigation, Lien or other damage, including, without
limitation, attorney's fees and expenses. Notwithstanding the foregoing,
"Damages" shall not include any consequential damages, including, but not
limited to, loss of future revenue or income, cost of capital or loss of
business reputation or opportunity.
"Fox" shall mean Fox Television Stations, Inc.
"Fox Sublease" shall mean the Sublease, dated March 3, 1986,
between Fox and Metromedia, as amended.
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"Ground Lease" shall mean the Ground Lease Agreement, dated
November 1, 1983, between Katella and BALP.
"HSR Act" shall mean Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Katella" shall mean Katella Realty Corporation.
"KCET" shall mean Community Television of Southern California, a
California non-profit corporation.
"KCET Sublease" shall mean the Master Sublease, dated October 1,
1994, between Fox and KCET.
"Liens" shall mean all claims, liens, encumbrances, security
interests, mortgages, or pledges of any kind except for (i) rights of the
lessor of the Station's main transmitter site [and the studio premises], and
(ii) rights of any parties to any Contract set forth in such Contract.
"Metromedia" shall mean Metromedia Company, successor-in-interest
to Metromedia, Inc.
"Metromedia Sublease" shall mean the Sublease and Agreement dated
November 1, 1983, between Metromedia and RMBC.
"RMBC" shall mean R.M. Branford Corporation.
"RMBC Lease" shall mean the Lease and Agreement, dated November 1,
1983, between RMBC and BALP.
"Senior Leases" shall mean the Ground Lease, the RMBC Lease, the
Metromedia Sublease, the Fox Sublease and the KCET Sublease collectively.
"TBA" shall mean the Time Brokerage Agreement, dated as of December
23, 1996, between Seller and Buyer.
"TBA Effective Date" shall mean the Effective Date, as defined in
the TBA.
"Transmitter Site Lease" shall mean the Sublease, dated February 1,
1992, between KCET and Seller, as amended by a First Amendment dated December
4, 1996.
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Each of the following terms shall have the meanings set forth in
the Section opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Agreement Preamble
Assumed Liabilities 2.1
Buyer Preamble
Closing 5.1
Closing Date 5.1
Contracts 1.1(b)
Effective Time 3.4(a)
Excluded Assets 1.2
FCC Recital A
FCC Application 4.2
FCC Consent 4.1
FCC Licenses 1.1(c)
Final Order 5.1
Indemnified Party 12.5(a)
Indemnifying Party 12.5(a)
Intellectual Property 1.1(d)
Option Agreement Recital B
Purchased Assets 1.1
Purchase Price 3.1
Retained Liabilities 2.2
Seller Preamble
Station Recital A
Tangible Personal Property 1.1(a)
Trustees Preamble
</TABLE>
ARTICLE 36
MISCELLANEOUS PROVISIONS
36.1 Risk of Loss. The risk of loss or damage to any of the
Purchased Assets prior to the Closing Date shall be upon the Seller. In
consultation with Buyer, Seller shall repair, replace and restore any such
damaged or lost Purchased Asset to the condition necessary to cause Buyer to be
able to broadcast under the FCC Licenses. If the provisions of this Section
conflict with the TBA, the TBA shall control.
36.2 Benefit and Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. No party may voluntarily or
involuntarily assign its interest under this Agreement without the prior
written consent of the other parties, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, (a) Buyer may assign its rights
hereunder, without the consent of Seller or the Trustees, to any of its
wholly-owned subsidiaries, as well as to Heftel Broadcasting Corporation, a
Delaware corporation, or any of its wholly-owned subsidiaries and (b) if Buyer
is not in material
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breach of any of its obligations, representations, warranties or duties
hereunder and the acquisition of the Purchased Assets by Buyer is prohibited by
law, Buyer may assign its rights hereunder, without the consent of Seller or
the Trustees, to an entity which is financially capable of performing the
obligations of Buyer hereunder. No assignment by Buyer hereunder shall relieve
Buyer of its obligations hereunder. Notwithstanding anything to the contrary
contained herein no assignment of any rights hereunder may be made unless the
rights of the assigning party under the Option Agreement are also assigned to
the same person.
36.3 Headings. The headings set forth in this Agreement are
for convenience only and will not control or affect the meaning or construction
of the provisions of this Agreement.
36.4 Governing Law. This Agreement and the rights of the
parties hereto shall be governed by, and construed in accordance with, the laws
of the State of California without giving effect to the choice of law
principles thereof.
36.5 Amendment. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto.
36.6 Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
36.7 Attorneys' Fees. Should any party hereto institute any
action or proceeding at law or in equity to enforce any provision of this
Agreement, including an action for declaratory relief, or for damages by reason
of an alleged breach of any provision of this Agreement, or otherwise in
connection with this Agreement, or any provision hereof, the prevailing party
shall be entitled to recover from the losing party or parties reasonable
attorneys' fees and costs for services rendered to the prevailing party in such
action or proceeding.
36.8 Multiple Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
36.9 Notices. Unless applicable law requires a different
method of giving notice, any and all notices, demands or other communications
required or desired to be given hereunder by any party shall be in writing.
Assuming that the contents of a notice meet the requirements of the specific
Section of this
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Agreement which mandates the giving of that notice, a notice shall be validly
given or made to another party if served either personally or if deposited in
the United States mail, certified or registered, postage prepaid, or if
transmitted by telegraph, telecopy or other electronic written transmission
device or if sent by overnight courier service, and if addressed to the
applicable party as set forth below. If such notice, demand or other
communication is served personally, service shall be conclusively deemed given
at the time of such personal service. If such notice, demand or other
communication is given by mail, service shall be conclusively deemed given
seventy-two (72) hours after the deposit thereof in the United States mail. If
such notice, demand or other communication is given by overnight courier, or
electronic transmission, service shall be conclusively deemed given at the time
of confirmation of delivery. The addresses for the parties are as follows:
If to Buyer:
Clear Channel Radio, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: Mr. Mark P. Mays
Telecopier No.: (210) 822-2299
If to Seller:
4383 Colfax Avenue
Studio City, California 91604
Attention: Mrs. Jackie Autry
Telecopier: (818) 752-7779
with a copy to:
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, Tenth Floor
Los Angeles, California 90067
Attention: Richard M. Brown, Esq.
Telecopier No.: (310) 203-0567
If to the Trustees:
Gursey, Schneider & Co., LLP
10351 Santa Monica Boulevard, Suite 300
Los Angeles, California 90025
Attention: Stanley B. Schneider, Co-Trustee
Telecopier No.: (310) 557-3468
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with a copy to:
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, Tenth Floor
Los Angeles, California 90067
Attention: Richard M. Brown, Esq.
Telecopier No.: (310) 203-0567
Any party hereto may change its or his address for the purpose of receiving
notices, demands and other communications as herein provided, by a written
notice given in the aforesaid manner to the other party hereto.
36.10 Incorporation by Reference. All Schedules attached
hereto or to be delivered in connection herewith are incorporated herein by
this reference.
36.11 Waivers. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver. No waiver shall be binding unless executed in writing by the party
making the waiver.
36.12 No Third Party Beneficiaries. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give to any
person or entity other than the parties hereto and their successors or
permitted assigns, any rights or remedies under or by reason of this Agreement.
36.13 Entire Agreement. This Agreement, the Schedules
attached hereto, the TBA, the Option Agreement and the other ancillary
documents provided for herein, constitute the entire agreement and
understanding of the parties hereto relating to the matters provided for herein
and supersede any and all prior agreements, arrangements, negotiations,
discussions and understandings relating to the matters provided for herein. To
the extent this Agreement conflicts with the TBA or the Option Agreement, this
Agreement shall control.
36.14 Rule of Construction. Each party and counsel for each
party have reviewed this Agreement. The parties hereto hereby agree that the
normal rule of construction, which requires a court to resolve any ambiguities
against the drafting party, shall not apply in interpreting this Agreement.
36.15 Neuter and Gender. In this Agreement, the masculine,
feminine or neuter gender shall each be deemed to include the others when the
context so requires.
36.16 Reference to Buyer. In the context of references herein
to representations, warranties, covenants, obligations or
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duties of Buyer under, or Buyer's non-compliance with, the Option Agreement or
the TBA, Optionee shall be deemed to include its assigns under the Option
Agreement or the TBA.
ARTICLE 37
GUARANTEE
37.1 Guarantee. The Trustees, as co-trustees of the Autry
Survivor's Trust, hereby guarantee the obligations of Seller hereunder;
provided, however, Buyer hereby agrees the monetary liability of the co-
trustees under this guarantee shall be limited to the assets of the Autry
Survivor's Trust.
37.2 Representations and Warranties. The Trustees represent
and warrant to Buyer that (a) they have the power and authority to enter into
this Agreement, to perform their obligations hereunder and to consummate the
transactions contemplated hereby and (b) this Agreement has been duly executed
and delivered by the Trustees and constitutes a valid and binding obligation of
the Trustees, enforceable against the Trustees in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
GOLDEN WEST BROADCASTERS
By:_____________________________
Jacqueline Autry,
Executive Vice President
CLEAR CHANNEL RADIO, INC.
By:_____________________________
Name:___________________________
Title:__________________________
________________________________
______________, as co-trustee
of the Autry Survivor's Trust
_______________________________
STANLEY B. SCHNEIDER, as
co-trustee of the Autry
Survivor's Trust
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LIST OF SCHEDULES
1.1(a) Equipment
1.1(b) Contracts
1.1(c) FCC Licenses
6.2(b) Exceptions to Section 6.2(b)
6.3 Exceptions to Section 6.3
6.5 Consents to Assignment of Contracts
6.6 Exceptions to Section 6.6
6.9 List of Insurance
6.10(a) Collective Bargaining Agreements and Employment Agreements
6.10(b) Employee Handbooks, Benefits and Policies
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EXHIBIT 2.5.15
TIME BROKERAGE AGREEMENT
THIS TIME BROKERAGE AGREEMENT (this "Agreement") is made and entered
into as of December 23, 1996, by and among GOLDEN WEST BROADCASTERS, a
California corporation ("Licensee"), and CLEAR CHANNEL RADIO, INC., a Nevada
corporation ("Programmer"), with reference to the following facts:
Recitals
A. Licensee is authorized to operate radio station KSCA(FM),
Glendale, California (the "Station") pursuant to a license issued to Licensee
by the Federal Communications Commission (the "FCC");
B. The parties have entered into an Option Agreement, of even
date herewith (the "Option Agreement"), pursuant to which Programmer has an
option to buy certain of the assets relating to the Station, including all FCC
licenses (the "Option");
C. Licensee desires to obtain a regular source of programming and
income which will sustain the operation of the Station; and
D. Programmer desires to purchase time on the Station for the
broadcast of programming on the Station and for the sale of advertising time
included in that programming.
Agreement
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Time Sale. Subject to the provisions of this
Agreement and to applicable rules, regulations and policies of the FCC,
Licensee agrees to make the Station's broadcasting transmission facilities
available to Programmer for broadcast of Programmer's programs on the Station
originating either from Programmer's studio or from Licensee's studio.
Programmer will have the right to broadcast on the Station up to twenty-four
(24) hours of programming each day during the Term (as defined in Section 2
below); provided, however, Licensee shall be entitled to reserve up to four
hours as it determines is necessary to comply with the FCC's policies regarding
the broadcast of public affairs' programming, including Spanish programming
relating to the Autry Museum of Western Heritage. The time period during which
such public affairs' programming is aired shall be mutually determined by
Licensee and Programmer. During the Term, Programmer shall provide all on-air
personnel for programming originated by Licensee. During the Term, Programmer
shall have the sole responsibility for setting the terms and conditions of
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employment for on-air personnel used in Licensee's programming and for
determining which on-air personnel shall be utilized in Licensee's programming.
Programmer shall be responsible for delivering its programming and/or
Programmer's programming audio signal, suitable and ready for broadcast, to the
Station.
2. Term. The term of this Agreement shall begin on the
Effective Date and shall continue until the exercise of the Option and the
closing of the sale of the assets of the Station pursuant to the terms of the
Asset Purchase Agreement contemplated by the Option Agreement (the "Asset
Purchase Agreement"), unless earlier terminated in accordance with Section 14
hereof, (the "Term").
3. Consideration. As consideration for the air time
made available hereunder during the Term, Programmer shall (a) pay to Licensee
a monthly fee of $8,333.33, and (b) Programmer shall reimburse Licensee for (i)
all reasonable operating expenses for the Station and its transmission
facilities, including, without limitation, rent, salaries, maintenance costs,
taxes (other than income taxes), licensing fees and royalties and premiums for
insurance on the Station's equipment and facilities; provided, however, the
amounts reimbursed under this clause (i) (other than fees payable to BMI, ASCAP
or SESAC) shall not exceed the annual amounts set forth on Exhibit A attached
hereto,(ii) all reasonable capital expenditures not covered by insurance
necessary to maintain the Station's equipment and transmission facilities in
good working order and repair (provided, however, any capital expenditure in
excess of $10,000 shall require the prior consent of Programmer, which consent
shall not be unreasonably withheld), and (iii) all amounts, up to a maximum of
$550,000, payable by Licensee to employees terminated by Licensee as a result
of Licensee entering into this Agreement or the closing of the acquisition of
the assets of the Company contemplated by the Asset Purchase Agreement. The
fee payable under clause (a) shall be paid on or before the first day of each
month, except the fee for the first month shall be paid on the Effective Date,
and the fee payable for any partial month shall be pro-rated. The amounts
payable under clause (b) shall be paid within 15 days after paid invoices are
presented to Programmer. Licensee shall be responsible for operating costs of
the Station (subject to reimbursement by Programmer hereunder). Programmer
shall furnish the materials and personnel for programming it provides hereunder
and shall be responsible for all costs related to the production of, broadcast
of, and sale of advertising time on the programming it provides hereunder,
including, without limitation, salaries and commissions for air personnel,
salespersons, employees and other personnel, promotional expenses and licensing
fees. Without limiting the generality of the prior sentence, Programmer shall
be solely responsible for setting the terms and conditions of employment for
all on-air personnel for the programming it provides, including, without
limitation, setting the wages and benefits for such on-air personnel;
scheduling, directing and
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assigning such on-air personnel; and hiring, firing, promoting, demoting, and
disciplining such on-air personnel, and Licensee shall have no responsibility
for setting the terms and conditions of employment for on-air personnel for
programming provided by Programmer hereunder. Notwithstanding anything to the
contrary contained herein, upon expiration of the lease for Licensee's studio
and office premises, during the Term Programmer shall provide station and
office premises for Licensee at the Station's main studio.
4. Performance of Air Time and Contracts. Effective on
the Effective Date, Licensee hereby assigns to Programmer, and Programmer
hereby assumes from Licensee, (a) all obligations of Licensee under the barter
agreements set forth on Exhibit B (collectively "Barter Agreements") arising or
to be performed on or after the Effective Date and all rights and benefits
under the Barter Agreements, including all unused goods and services, and (b)
all obligations of Licensee under cash orders for advertising to be aired on or
after the Effective Date on the Station which may be canceled without penalty.
Licensee represents and warrants to Programmer Exhibit B attached hereto
contains a list of the balance (as of the date hereof) of advertising owed
under all Barter Agreements on or after the date hereof and all unused goods
and services under the Barter Agreements. Programmer agrees Licensee shall
have no obligation to reimburse Programmer for any goods or services received
by Licensee under the Barter Agreements prior to the date hereof that have been
used. Effective on the Effective Date, during the Term Programmer hereby agrees
to perform and pay (without duplication of the reimbursement obligations of
Programmer under Section 3) all obligations of Licensee under the agreements
listed on Exhibit C attached hereto arising or to be performed on or after the
Effective Date, and the parties agree to cooperate with each other in having
the other parties to such agreements perform directly for the benefit of, and
accept performance and payment directly from, Programmer. Licensee
acknowledges the programming provided hereunder by Programmer will be in
Spanish. Licensee represents and warrants to Programmer that such change in
format will not cause Programmer to have to compensate any party to any Barter
Agreement for any unused advertising under such Barter Agreement.
5. Licensee's Authority. Notwithstanding anything to
the contrary in this Agreement, Licensee shall have full authority and power
over the operation of the Station during the Term and the full responsibility
to comply in all material respects with the Communications Act and all FCC
rules and regulations. Notwithstanding the foregoing, Licensee shall have no
power to set the terms and conditions of employment for on-air personnel
utilized for programming broadcast on the Station originated by Licensee or
Programmer. Licensee shall retain the right to interrupt or preempt
Programmer's programming at any time if Licensee determines the programming is
not in the public interest or violates this Agreement, or in case of an
emergency
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or Emergency Broadcast System or any successor system ("EBS") activation, or
for the purpose of providing programming which Licensee in its sole discretion
determines to be of greater national, regional or local importance.
6. Advertising And Programming Revenues. Programmer
shall retain, and be entitled to receive, all revenues from the sale of
advertising time on programming broadcast on the Station. Licensee shall
provide to Programmer all revenues from the sale of advertising time on the
programming it provides for broadcast on the Station including without
limitation all revenues for sales of advertising time on programming provided
by Licensee pursuant to Section 1, 5 or 7 hereof.
7. Political Advertising. Programmer will provide, make
available to and shall sell time to political candidates from the time it
purchases from Licensee in material compliance with the Communications Act, and
the rules, regulations and policies of the FCC, including without limitation,
the equal time and lowest unit rate provisions of the Communications Act, and
will otherwise cooperate with Licensee, and provide information to Licensee, to
ensure compliance with the political broadcasting requirements of the
Communications Act and the FCC's rules and regulations. In the event that it
is necessary for Licensee to make time directly available to political
candidates in order to comply with the provisions of the Communications Act,
Programmer shall immediately relinquish such amounts of time as Licensee shall
require.
8. Licensee's Representations, Warranties and Covenants.
Licensee represents, warrants and covenants to Programmer as follows:
(a) Organization and Authorization. Licensee is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has the requisite corporate power to carry
on its business as it is now being conducted. Licensee has the corporate power
and authority to enter into this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Licensee and the consummation by it
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Licensee. This Agreement has been
duly executed and delivered by Licensee and constitutes a valid and binding
obligation of Licensee, enforceable against Licensee in accordance with its
terms.
(b) Music Licenses. Licensee shall maintain
licenses with BMI, ASCAP and SESAC.
(c) Correspondence. Licensee shall promptly
forward to Programmer any mail which it may receive from any agency of
government or any correspondence from members of the
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public relating to a material complaint regarding any of Programmer's
programming broadcast on the Station reasonably believed by Licensee to be
actionable at the FCC.
(d) Change in Call Letters. Upon request from
Programmer, Licensee shall file an application with the FCC to change the call
letters for the Station to letters requested by Programmer and shall prosecute
such application. Programmer shall pay all costs and expenses, including
attorneys' fees and costs, incurred by Licensee in connection with such
application promptly upon presentation of invoices for such costs and expenses.
9. Programmer's Representations, Warranties and
Covenants. Programmer represents, warrants and covenants to Licensee as
follows:
(a) Organization and Authorization. Programmer
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Nevada and has the requisite corporate power to carry
on its business as it is now being conducted. Programmer has the corporate
power and authority to enter into this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Programmer and the consummation by
it of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Programmer. This Agreement has been
duly executed and delivered by Programmer and constitutes a valid and binding
obligation of Programmer, enforceable against Programmer in accordance with its
terms.
(b) Compliance. All of the programming,
advertising and promotional material Programmer broadcasts on the Station shall
comply in all material respects with all applicable laws, rules, regulations
and policies, including, without limitation, the Communications Act and the
rules and regulations of the FCC, and the reasonable standards established by
Licensee. The performing rights to all music contained in broadcast material
supplied hereunder by Programmer shall be licensed by BMI, ASCAP, or SESAC, in
the public domain, controlled by Programmer, or cleared at the source by
Programmer. Programmer shall provide programming hereunder for at least the
number of hours necessary to enable Licensee to meet the minimum hours of
operation for the Station required under the FCC's rules and regulations.
(c) Station Identification. Programmer shall
cooperate with Licensee to ensure that all required Station Identifications
announcements are broadcast as required by the FCC rules and regulations.
Programmer shall, at Licensee's request, have its employees record, on a form
to be supplied by Licensee and at intervals to be specified by Licensee,
information concerning transmitter operating characteristics,
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<PAGE> 6
tower lighting information, and EBS test information and shall transmit weekly
EBS tests under Licensee's supervision.
(d) Documentation. Programmer shall provide to
Licensee monthly documentation of the programs it has broadcast which address
problems, needs and interests of the community for the Station. Programmer
shall provide local news and public affairs programming relevant to the
community for the Station and of sufficient quality to assist Licensee in
satisfying its obligations to respond to the needs of such communities.
(e) Emergency Broadcasting. Programmer shall
cooperate with Licensee to ensure that all required EBS announcements are
broadcast as required by the FCC rules and regulations.
(f) Information. Programmer will promptly
prepare and furnish to Licensee such information, records and reports regarding
the programming provided by Programmer hereunder in sufficient detail as is
necessary to enable Licensee to comply with all rules and policies of the FCC
or any other government agency.
(g) Correspondence. Programmer shall promptly
forward to Licensee any mail which it may receive from any agency of government
or any correspondence from members of the public relating to a material
complaint regarding the Station or to any of Programmer's programming broadcast
on the Station reasonably believed by Programmer to be actionable at the FCC.
10. Certification Regarding Market Overlap. Programmer
hereby certifies that this Agreement complies with the provisions of paragraphs
(a)(1) and (e)(1) of Section 73.3555 of the FCC's rules.
11. Right to Use Programs. The right to use Programmer's
programs and to authorize their use in any manner and in any media whatsoever
shall be, and remain, vested in Programmer.
12. Payola and Conflicts of Interest. Programmer agrees
that it will not accept, and will not permit any of its employees to accept,
any consideration, compensation, gift, or gratuity of any kind whatsoever,
regardless of its value or form, including, but not limited to, a commission,
discount, bonus, material, supplies, or other merchandise, services, or labor
(collectively, "Consideration"), whether or not pursuant to written contracts
or agreements between Programmer and merchants or advertisers, unless the payor
is identified in the program for which the Consideration was provided as having
paid for or furnished such Consideration, in accordance with the Communications
Act and FCC requirements. Programmer agrees to execute, and to have each of
its employees who are in a position to determine the content of programming to
be broadcast on the
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Station execute, at least once every six (6) months, payola Affidavits in a
form reasonably requested by Licensee and Programmer agrees to deliver the
originals of all such Affidavits to Licensee as expeditiously as possible
following their execution.
13. Indemnification.
(a) By Programmer. Programmer shall indemnify
and hold Licensee and its attorneys, affiliates, representatives, agents,
officers, directors, successors or assigns harmless from and against any
Damages resulting from, arising out of or incurred with respect to: (i) a
breach of any representation, warranty, covenant or agreement of Programmer
contained herein, (ii) any programming provided to Licensee by Programmer
pursuant to this Agreement, including, without limitation, liabilities for
copyright or proprietary right infringement, libel, slander, defamation, or
invasion of privacy, or (iii) any damage to the facilities of Licensee
attributable to actions or omissions of employees, representatives or agents of
Programmer.
(b) Indemnification by Licensee. Licensee shall
indemnify and hold Programmer and its attorneys, affiliates, representatives,
agents, officers, directors, successors or assigns harmless from and against
any Damages resulting from, arising out of, or incurred with respect to: (i) a
breach of any representation, warranty, covenant or agreement of Licensee
contained herein, or (ii) any programming originated by Licensee for broadcast
on the Station, including, without limitation, liabilities for copyright or
proprietary right infringement, libel, slander, defamation, or invasion of
privacy, .
(c) Procedures.
(i) Promptly after the receipt by a
party (the "Indemnified Party") of notice of (A) any claim or (B) the
commencement of any action or proceeding which may entitle such party to
indemnification under this Section, such party shall give the other party (the
"Indemnifying Party") written notice of such claim or the commencement of such
action or proceeding and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting from such claim. The
failure to give the Indemnifying Party timely notice under this subsection
shall not preclude the Indemnified Party from seeking indemnification from the
Indemnifying Party unless, and then only to the extent, such failure has
materially prejudiced the Indemnifying Party's ability to defend the claim or
litigation. If such claim does not arise from the claim of a third party, the
Indemnifying Party shall have 30 days after such notice to cure the conditions
giving rise to such claim to the Indemnified Party's satisfaction. Failure by
the Indemnifying Party to notify an Indemnified Party of its election to defend
any such claim or action by a third party within 30 days after notice thereof
shall have been given to the Indemnifying Party shall be
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<PAGE> 8
deemed a waiver by the Indemnifying Party of its rights to defend such claim or
action.
(ii) If the Indemnifying Party assumes
the defense of any such claim or litigation resulting therefrom with counsel
reasonably acceptable to the Indemnified Party, the Indemnified Party may
participate, at its expense, in the defense of such claim or litigation
provided that the Indemnifying Party shall direct and control the defense of
such claim or litigation. The Indemnified Party shall cooperate and make
available all books and records reasonably necessary and useful in connection
with the defense. Except with the prior written consent of the Indemnified
Party, the Indemnifying Party shall not, in the defense of such claim or any
litigation resulting therefrom, consent to the entry of any judgment (other
than a judgment of dismissal on the merits without cost) or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the Indemnified Party of a release from all
Damages in respect of such claim or litigation.
(iii) If the Indemnifying Party shall
not assume the defense of any such claim or litigation resulting therefrom, the
Indemnified Party may, but shall have no obligation to, defend against such
claim or litigation in such manner as it may deem appropriate; provided,
however, the Indemnified Party may not compromise or settle such claim or
litigation without the Indemnifying Party's prior written consent.
(d) AFTRA Claims.
(i) If (A) any claim against Programmer is
made that Programmer is subject to or bound by the Agreement dated March 17,
1995, between Licensee and Los Angeles Local, American Federation of Television
and Radio Artists (the "AFTRA Contract") due to the existence of this
Agreement, including a claim that Programmer has repudiated the AFTRA Contract
during the term hereof by not complying with the terms of the AFTRA Contract,
(B) any claim is made against Programmer that Programmer is obligated to
bargain with the American Federation of Television and Radio Artists ("AFTRA")
as a result of the existence of the AFTRA Contract and the existence of this
Agreement, or (C) any claim is made against Programmer which is based on a
breach of the AFTRA Contract by Licensee, Licensee shall retain counsel
mutually acceptable to Licensee and Programmer (the parties agree Jeffer,
Mangels, Butler & Marmaro LLP is acceptable to both parties) to defend
Programmer (and Licensee, if applicable) against such claim, including acting
as defense counsel in any lawsuit, arbitration or administrative proceeding and
prosecuting any appeals. In addition, if during the term of this Agreement
AFTRA conducts a strike against the Station, KLVE-FM, Los Angeles, California
or KTNQ- AM, Los Angeles, California (the Stations, KLVE-FM and KTNQ-AM
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collectively are referred to herein as the "Subject Stations") or pickets or
handbills the Subject Stations' premises, upon request from Programmer Licensee
shall retain counsel mutually acceptable to Licensee and Programmer (the
parties agree Jeffer, Mangels, Butler & Marmaro LLP is acceptable to both
parties) to take affirmative legal action, including seeking an injunction,
against AFTRA to cause AFTRA to cease or limit such strike, picketing or
handbilling. Licensee shall pay all fees and costs of counsel retained under
this subsection. Programmer shall direct and control the defense of the claim
or affirmative legal action, as the case may be; provided, however, unless
Programmer obtains the prior written consent of Licensee, Programmer may not
enter into any settlement which imposes liability on Licensee or which does not
include a waiver of all claims against Licensee for a failure by Programmer to
comply with the AFTRA Contract.
(ii) If it is determined, by an order
or decree of an arbitrator, court or administrative agency of competent
jurisdiction in an action for which Licensee is required to retain counsel
under Section 13(d)(i) that is not subject to appeal or further administrative
review or pursuant to a settlement approved by Licensee and Programmer (such
order, decree or settlement is referred to herein as the "Final Order"), that
any on-air staff announcer at any of the Subject Stations, (collectively, the
"Announcers") is covered by the AFTRA Contract or that Programmer is liable for
the payment of any wages, including payment for sick days and accrued but
unused vacation, reimbursement of business expenses, or contributions to AFTRA
Health and Retirement Funds under the AFTRA Contract as a result of a claim
described in Section 13(d)(i)(C), Licensee agrees to pay to Programmer 50% of
the amount equal to the excess of (A) the minimum wages, including payment for
sick days and accrued but unused vacation, and reimbursement of business
expenses which must be paid by Programmer under the AFTRA Contract to such
Announcer for the period beginning on the Effective Date and ending on March
16, 1998 (the "Union Period") and all contributions which must be made by
Programmer to AFTRA Health and Retirement Funds under the AFTRA Contract during
the Union Period pursuant to the Final Order, over (B) all wages and
reimbursement of business expenses which would have been paid by Programmer to,
and all contributions to pension or similar retirement funds which would have
been made by Programmer on behalf of, such Announcer during the Union Period if
he was not covered under the AFTRA Contract (for purposes of this clause B, an
Announcer's wages from Programmer, Programmer's policies of reimbursement for
business expenses and contributions by Programmer to pension or similar
retirement funds in effect on the date of the Final Order shall be deemed to be
the wages which an Announcer would have received after the date of the Final
Order, the policy under which such Announcer would have received reimbursement
of business expenses after the date of the Final Order and the retirement
contributions which would have been made after the date of the Final Order).
In addition, if it is determined by a Final Order that any Subject Station is
obligated
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to negotiate with AFTRA concerning a collective bargaining agreement covering
any Announcers, Licensee agrees to pay to Programmer 50% of the amount equal to
the excess of (1) the minimum wages, including payment for sick days and
accrued but unused vacation, and reimbursement of business expenses which must
be paid by Programmer to such Announcers under the new collective bargaining
agreement with AFTRA for the Union Period and all contributions which must be
made by Programmer to AFTRA Health and Retirement Funds under such new
collective bargaining agreement during the Union Period, over (2) all wages and
reimbursement of business expenses which would have been paid by Programmer to,
and all contributions to pension or similar retirement funds which would have
been made by Programmer on behalf of, such Announcers during the Union Period
if such new collective bargaining agreement had not been entered into (for
purposes of this clause 2, an Announcer's wages from Programmer, Programmer's
policies of reimbursement for business expenses and contributions by Programmer
to pension or similar retirement funds in effect on the date of the Final Order
shall be deemed to be the wages which an Announcer would have received after
the date of the Final Order, the policy under which such Announcer would have
received reimbursement of business expenses after the date of the Final Order
and the retirement contributions which would have been made after the date of
the Final Order); provided, however, the amount payable by Licensee under this
sentence shall not exceed the amount which Licensee would have paid under this
sentence if the Subject Station was subject to the AFTRA Contract instead of
the new collective bargaining agreement.
(iii) Programmer shall take all
reasonable action, which does not involve Programmer incurring additional costs
or assuming any actual or potential liabilities, suggested by counsel for
Licensee to protect against a claim by AFTRA that any Announcer is covered by
the AFTRA Contract.
(e) Survival. The indemnity obligations of
Programmer and Licensee under this Section 13 shall survive any termination of
this Agreement, including a termination as a result of the closing of the
transactions contemplated by the Asset Purchase Agreement attached as an
exhibit to the Option Agreement, and shall continue until the expiration of all
applicable statutes of limitations.
14. Termination.
(a) This Agreement may be terminated only as
follows, provided the party seeking to terminate is not then in material
default or breach of this Agreement, the Asset Purchase Agreement or the Option
Agreement, as follows:
(i) Only after compliance with
Section 16(a), by 30 days written notice from Licensee or Programmer, if this
Agreement is declared invalid or illegal in whole or
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material part by an order or decree of the FCC or any other administrative
agency or court of competent jurisdiction which is not subject to appeal or
further administrative or judicial review;
(ii) By written notice from either
party, if the other party is in material breach of its obligations hereunder
and has failed to cure such breach within thirty (30) days of delivery of
written notice from the non-breaching party; provided, however, if the breach
is a failure by Programmer to pay the amounts due under Section 3, then
Licensee may terminate this Agreement if Programmer has not paid the amount due
within five business days of delivery of written notice;
(iii) By mutual written consent of the
parties;
(iv) Only after compliance with
Section 16(a), by 30 days written notice from Licensee or Programmer if there
has been a change in FCC rules or policies that would cause this Agreement or
any material provision hereof to be in violation thereof and such change is not
subject to appeal or further administrative or judicial review; or
(v) By written notice from Licensee
or Programmer, upon termination of the Option Agreement.
(b) Survival. The provisions of Sections 3 (only
with respect to expenses incurred prior to termination and any payments with
respect to terminated employees under Section 3(b)(iii)), 4 (only with respect
to obligations incurred prior to termination), 6, 13 and 18 shall survive a
termination of this Agreement.
15. Use of Assets. Licensee hereby grants to Programmer
an unlimited license to use the term "KSCA(FM)" in conjunction with programming
aired on the Station. Licensee agrees to permit Programmer to have access to
the equipment for the Station when necessary in connection with airing
programming on the Station.
16. Regulatory Matters.
(a) Governmental Action. If this Agreement could
be terminated under Section 14(a)(i) or 14(a)(iv) after compliance with this
Section 16(a), then the parties shall use good faith efforts to reasonably
modify this Agreement in a manner that will cure such invalidity, illegality or
violation and that will maintain a balance of the material benefits and burdens
to Licensee and Programmer comparable to the balance of the material benefits
and burdens to Licensee and Programmer provided in this Agreement in its current
form. If modifying this Agreement in order to effect such cure without
materially changing the balance of benefits and burdens to Licensee and
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Programmer provided in this Agreement in its current form is not possible, then
either party may terminate this Agreement in accordance with Section 14(a)(i) or
14(a)(iv) if such party is in compliance with such Section.
(b) FCC Matters. Should a change in FCC policy
or rules make it necessary to obtain the FCC's consent to the implementation,
continuation, or further effectuation of any element of this Agreement,
Licensee and Programmer shall use their commercially reasonable efforts (each
party to bear its own costs) diligently to prepare, file, and prosecute before
the FCC all petitions, waiver requests, applications, amendments, rulemaking
comments, and other documents necessary to secure and/or to retain the FCC's
approval of all aspects of this Agreement. Notwithstanding anything in this
Agreement to the contrary, no joint filing shall be made with the FCC by
Licensee and Programmer with respect to this Agreement, unless both parties
hereto shall have reviewed said filing and shall have consented to its
submission to the FCC; and neither Licensee nor Programmer shall make any
unilateral filing with the FCC with respect to this Agreement, unless the party
intending to make such filing shall first have consulted with the other party
concerning such filing.
17. Definitions. The following terms shall have the
following meaning:
"Communications Act" shall mean the Communications Act of 1934,
as amended.
"Damages" shall mean any liability, loss, cost, expense,
judgment, order, settlement, obligation, deficiency, claim, suit, proceeding
(whether formal or informal), investigation, lien, encumbrance, security
interest, mortgage, pledge or other damage, including, without limitation,
attorney's fees and expenses. Notwithstanding the foregoing, "Damages" shall
not include any consequential damages, including, but not limited to, loss of
future revenue or income, cost of capital or loss of business reputation or
opportunity.
"Effective Date" shall mean the date after the Initial Payment
Date (as defined in the Option Agreement) specified by Programmer in a notice
delivered to Licensee, which date shall not be more than 14 days after the
Initial Payment Date (as defined in the Option Agreement).
-12-
<PAGE> 13
Each of the following terms shall have the meanings set forth
in the Section opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Agreement Preamble
AFTRA 13(d)(i)
AFTRA Contract 13(d)(i)
Announcers 13(d)(ii)
Asset Purchase Agreement 2
Consideration 12
EBS 5
FCC Recital A
Final Order 13(d)(ii)
Indemnified Party 13(c)
Indemnifying Party 13(c)
Licensee Preamble
Option 5
Option Agreement Recital B
Programmer Preamble
Station Recital A
Subject Station 13(d)(i)
Term 2
Union Period 13(d)(ii)
</TABLE>
18. Miscellaneous.
(a) Force Majeure. Notwithstanding anything
contained in this Agreement to the contrary, no party shall be liable to
another party for a failure to perform any obligation under this Agreement, if
such party shall be prevented from such performance by reason of fires,
strikes, labor unrest, embargoes, civil commotion, rationing, or other orders
or requirements, acts of civil or military authorities, acts of God, or other
contingencies beyond the reasonable control of the parties, including equipment
failures, and all provisions herein requiring performance within a specified
period shall be deemed to have been modified in order to toll or to extend the
period in which such performance shall be required, in order to accommodate the
period of the pendency of such contingency which shall prevent such
performance. This provision is subject to the provisions of the Asset Purchase
Agreement, if executed, which provide for a reduction of the purchase price in
certain circumstances relating to preemption of programming and the Station's
inability to broadcast.
(b) Benefit and Assignment. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. No party may voluntarily or
involuntarily assign its interest under this Agreement without the prior
written consent of the other party, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, Programmer may assign its rights
hereunder to any permitted assignee of the optionee
-13-
<PAGE> 14
under the Option Agreement or buyer under the Purchase Agreement. No
assignment by Programmer hereunder shall relieve Programmer of its obligations
hereunder.
(c) Headings. The headings set forth in this
Agreement are for convenience only and will not control or affect the meaning
or construction of the provisions of this Agreement.
(d) Governing Law. This Agreement and the
rights of the parties hereto shall be governed by, and construed in accordance
with, the laws of the State of California, without giving effect to the choice
of law principles thereof.
(e) Amendment. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
(f) Severability. In the event that any one or
more of the provisions contained in this Agreement or in any other instrument
referred to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then to the maximum extent permitted by law, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other such instrument.
(g) Attorneys' Fees. Should any party hereto
institute any action or proceeding at law or in equity to enforce any provision
of this Agreement, including an action for declaratory relief, or for damages
by reason of an alleged breach of any provision of this Agreement, or otherwise
in connection with this Agreement, or any provision hereof, the prevailing
party shall be entitled to recover from the losing party reasonable attorneys'
fees and costs for services rendered to the prevailing party in such action or
proceeding.
(h) Multiple Counterparts. This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument.
(i) Notices. Unless applicable law requires a
different method of giving notice, any and all notices, demands or other
communications required or desired to be given hereunder by any party shall be
in writing. Assuming that the contents of a notice meet the requirements of
the specific Section of this Agreement which mandates the giving of that
notice, a notice shall be validly given or made to another party if served
either personally or if deposited in the United States mail, certified or
registered, postage prepaid, or if transmitted by telegraph, telecopy or other
electronic written transmission device or if sent by overnight courier service,
and if addressed to the applicable party as set forth below. If such notice,
demand or other communication is served personally, service shall be
conclusively deemed given at the time of such personal service. If such notice,
demand or other communication is given by mail, service shall be conclusively
deemed given seventy-two (72) hours after the deposit thereof in the United
States mail. If such
-14-
<PAGE> 15
notice, demand or other communication is given by overnight courier, or
electronic transmission, service shall be conclusively deemed given at the time
of confirmation of delivery. The addresses for the parties are as follows:
If to Programmer:
Clear Channel Radio, Inc.
200 Concord Plaza, Suite 600
San Antonio, Texas 78216
Attention: Mr. Mark P. Mays
Telecopier No.: (210) 822-2299
If to Licensee:
4383 Colfax Avenue
Studio City, California 91604
Attention: Mrs. Jackie Autry
Telecopier: (818) 752-7779
with a copy to:
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, Tenth Floor
Los Angeles, California 90067
Attention: Richard M. Brown, Esq.
Telecopier No.: (310) 203-0567
Either party hereto may change its address for the purpose of receiving
notices, demands and other communications as herein provided, by a written
notice given in the aforesaid manner to the other party hereto.
(j) Waivers. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver.
(k) No Third Party Beneficiaries. Nothing
herein expressed or implied is intended or shall be construed to confer upon or
give to any person or entity other than the parties hereto and their successors
or permitted assigns, any rights or remedies under or by reason of this
Agreement.
(l) Entire Agreement. This Agreement and the
Exhibits hereto constitute the entire agreement and understanding of the
parties hereto relating to the matters provided for herein and supersede any
and all prior agreements, arrangements,
-15-
<PAGE> 16
negotiations, discussions and understandings relating to the matters provided
for herein. Notwithstanding the foregoing, this Agreement shall not supersede
the Option Agreement.
(m) Rule of Construction. Each party and
counsel for each party have reviewed this Agreement. The parties hereto hereby
agree that the normal rule of construction, which requires a court to resolve
any ambiguities against the drafting party, shall not apply in interpreting
this Agreement.
(n) Exhibits. Each Exhibit attached hereto is
incorporated herein by reference.
-16-
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
GOLDEN WEST BROADCASTERS
By:/s/ Jacqueline Autry
------------------------
Jacqueline Autry
Executive Vice President
CLEAR CHANNEL RADIO, INC.
By:/s/ Kenneth E. Wyker
-----------------------
Name: Kenneth E. Wyker
Title: Vice President
Legal Affairs
-17-
<PAGE> 18
LIST OF EXHIBITS
A Budget
B Barter Agreements
C Agreements to be Performed
<PAGE> 1
EXHIBIT 2.5.16
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is made as
of January 2, 1997 among Clear Channel Radio, Inc., a Nevada corporation
("Assignor"), Heftel Broadcasting Corporation, a Delaware corporation
("Assignee") and Tichenor Media System, Inc., a Texas corporation ("Tichenor").
Recitals
Assignor and Golden West Broadcasters, a California corporation ("GWB"),
are parties to an Option Agreement (the "Option Agreement") and a Time
Brokerage Agreement (the "TBA"), both dated December 23, 1996, with respect to
radio station KSCA(FM), Glendale, California (the "Station"). The Option
Agreement provides for execution of the Purchase Agreement attached thereto
(the "Purchase Agreement") upon exercise of the Option under the Option
Agreement. The Option Agreement, Purchase Agreement and TBA are referred to
herein collectively as the "Transaction Documents." Tichenor and Clear Channel
Communications, Inc., a Texas corporation ("Clear Channel") are parties to an
Agreement and Plan of Merger dated July 9, 1996 with respect to Assignee.
Assignee and Tichenor desire Assignor to assign and delegate to Assignee the
Transaction Documents. This Agreement contains certain representations,
warranties, indemnities, releases, covenants and agreements of Assignee and
consents and approvals of Tichenor without which Assignor would not assign or
delegate the Transaction Documents to Assignee.
Agreement
NOW, THEREFORE, taking the foregoing recitals into account, and in
consideration of the mutual agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and confirmed, the parties agree as follows:
1. Assignment and Assumption. Assignor hereby assigns and delegates
to Assignee the Transaction Documents and all Assignor's rights and obligations
thereunder. Assignee hereby accepts the foregoing assignment and delegation
and assumes all obligations of Assignor under the Transaction Documents. On
the date hereof, Assignee shall pay to Assignor an amount equal to (i) $10
million (being the amount of all payments made by Assignor under the Option
Agreement) plus (ii) $_____________ being the amount of all payments made by
Assignor under the TBA.
2. Representations and Warranties. Assignee represents and warrants
to Assignor that all representations and warranties of Assignor under the
Transaction Documents are true and correct with respect to Assignee as though
made by Assignee (except that Assignee is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware rather
than Nevada). Assignee acknowledges and agrees that the
<PAGE> 2
assignment and delegation hereunder is made without representation or warranty
by, and without recourse to, Assignor.
3. Covenants. Notwithstanding anything to the contrary set forth in
the Transaction Documents (including Section 15 of the Option Agreement,
Section 18(b) of the TBA and Section 15.2 of the Purchase Agreement), as
between Assignor and Assignee, Assignor shall have no obligations under the
Transaction Documents and Assignee shall be responsible for the payment and
performance of all obligations thereunder. Assignee shall timely pay and
perform all obligations of Assignor under the Transaction Documents and shall
otherwise fully comply with the terms thereof. Assignor may, but shall not be
obligated to, from time to time pay or perform any obligation under any of the
Transaction Documents at Assignee's cost and expense. Assignee shall pay to
Assignor on demand all costs and expenses incurred by Assignor in paying or
performing any such obligations. Assignee covenants and agrees that, without
the prior written consent of Assignor (which consent Assignor may withhold in
its sole and absolute discretion), Assignee shall not (i) exercise the Option
under the Option Agreement or (ii) assign or delegate any of the Transaction
Documents or any rights or obligations thereunder or (iii) modify, amend or
terminate any of the Transaction Documents. Assignee shall (i) deliver to
Assignor copies of all notices, demands and other communications given or
received under the Transaction Documents at the same time such notices, demands
and communications are given or received by Assignee and (ii) otherwise keep
Assignor informed regarding all matters relating to the Transaction Documents.
4. Indemnification and Release. Assignee shall indemnify, defend
and hold harmless Assignor and Clear Channel and their respective directors,
officers, employees, agents, successors and assigns (each an "Indemnified
Person") from and against any and all claims, demands, actions, suits,
proceedings, losses, damages, liabilities, obligations, costs and expenses
(including without limitation reasonable attorneys' fees) of whatsoever kind or
nature (collectively "Claims") which may be imposed on, incurred by or asserted
against any Indemnified Person that directly or indirectly arise or result from
or are attributable to any of the Transaction Documents or the execution,
delivery or performance (or non-performance) thereof, including without
limitation any failure by Assignee to comply with the terms thereof, but
excluding Claims that arise or result solely from the gross negligence or
willful misconduct of Assignor. Assignee hereby releases each Indemnified
Person from any and all Claims which Assignee may now or hereafter have,
whether known or unknown, that directly or indirectly arise or result from or
are attributable to any of the Transaction Documents or the execution, delivery
or performance (or non-performance) thereof.
5. Remedies. In addition to any other rights and remedies of
Assignor, in the event of a failure by Assignee to comply with the terms of
this Agreement or any of the Transaction Documents or if any representation or
warranty of Assignee hereunder or thereunder is or becomes untrue, at
Assignor's option, the Transaction Documents and all rights thereunder shall be
assigned by Assignee to Assignor or Assignor's designee. Assignee hereby
assigns the Transaction Documents and all rights thereunder to Assignor or
Assignor's designee effective upon any exercise by Assignor of such option, it
being the intent of the
-2-
<PAGE> 3
parties that any such assignment shall occur upon written notice thereof given
by Assignor to Assignee, without need for any further act by Assignor or
Assignee. Assignee shall execute and deliver all documents and agreements and
take all other actions necessary to fully effectuate any such assignment upon
Assignor's exercise of such option, and Assignee hereby irrevocably appoints
Assignor as Assignee's attorney-in-fact to execute and deliver all such
documents and agreements and take all such actions on behalf of Assignee.
6. Consent and Approval. Tichenor hereby irrevocably consents to,
authorizes and approves, the execution, delivery and performance of this
Agreement by Assignee, including without limitation the assumption and
performance by Assignee of the Transaction Documents and the consummation by
Assignee of the transactions contemplated by this Agreement and the Transaction
Documents. Nothing in this Agreement shall be deemed an assumption by TMS of
any obligations or liabilities under any of the Transaction Documents.
7. Miscellaneous.
(a) Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original, but which together
shall constitute one agreement.
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of Texas,
without giving effect to principles of conflicts of laws.
(c) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in a manner as to be valid under applicable law,
but if any provision of this Agreement shall be held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or any other provision of this Agreement.
(d) Attorneys' Fees. In the event of any action or proceeding
at law or in equity to enforce any provision of this Agreement (including an
action for declaratory relief) or based on or arising out of any alleged breach
of any provision of this Agreement, or otherwise in connection with this
Agreement or any provision hereof, the prevailing party shall be entitled to
recover from the losing party or parties reasonable attorneys' fees and other
costs of such action or proceeding.
(e) Amendments and Waivers. This Agreement may not be amended
except by an instrument in writing signed by each of the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall any such waiver constitute a continuing waiver. No waiver of any
provision of this Agreement shall be binding unless executed in writing by the
party making the waiver.
(f) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and any permitted assigns.
-3-
<PAGE> 4
Neither Assignee nor Tichenor may assign or delegate this Agreement or any
rights or obligations hereunder, except as expressly set forth herein.
(g) Third Party Beneficiaries. Except that Clear Channel and
each other Indemnified Person is an intended beneficiary of this Agreement,
nothing herein is intended or shall be construed to confer upon or give to any
person or entity other than the parties hereto and their successors and any
permitted assigns, any rights or remedies under or by reason of this Agreement.
(h) Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto relating to the matters
provided for herein and supersedes any and all prior agreements, arrangements,
negotiations, discussions and understandings relating to the matters provided
for herein.
[SIGNATURE PAGE FOLLOWS]
-4-
<PAGE> 5
SIGNATURE PAGE TO KSCA(FM)
ASSIGNMENT AND ASSUMPTION AGREEMENT
IN WITNESS WHEREOF, Assignor, Assignee and Tichenor have executed this
Agreement as of the date first set forth above.
ASSIGNOR: CLEAR CHANNEL RADIO, INC.
By: /s/ KENNETH E. WYKER
-------------------------------
Name: Kenneth E. Wyker
Title: Vice President
ASSIGNEE: HEFTEL BROADCASTING CORPORATION
By: /s/ KENNETH E. WYKER
-------------------------------
Name: Kenneth E. Wyker
Title: Vice President
TICHENOR: TICHENOR MEDIA SYSTEM, INC.
By: /s/ McHENRY T. TICHENOR, JR.
-------------------------------
Name: McHenry T. Tichenor, Jr.
Title: President
-5-
<PAGE> 1
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
1500 NATIONSBANK PLAZA
300 CONVENT STREET
SAN ANTONIO, TEXAS 78205
(210) 270-0800
January 9, 1997
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 4,375,000 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 and the selling stockholder of the Company (the "Selling
Stockholder") 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 and, in the
case of the shares of Common Stock to be sold by the Selling Stockholder, have
been validly issued and are fully paid and non-assessable.
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,
/s/ AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
----------------------------------------------
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. 2 to the Registration Statement (Form S-3 No. 333-14207) and
related Prospectus of Heftel Broadcasting Corporation for the registration of
3,850,000 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
January 9, 1997
<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
January 9, 1997
<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 3,850,000 shares of its
Class A Common Stock.
/s/ MILLER, KAPLAN, ARASE & CO.
------------------------------------
Miller, Kaplan, Arase & Co.
North Hollywood, California
January 9, 1997
