<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
<TABLE>
<CAPTION>
<S> <C>
(Mark One)
[x] Quarterly report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition period from to
Commission file number 0-24516
</TABLE>
HEFTEL BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 99-0113417
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3102 Oak Lawn Avenue, Suite 215
Dallas, Texas 75219
(Address of principal executive offices) (Zip Code)
(214) 525-7700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
<S> <C>
Class Outstanding at May 14, 1999
- ----- ---------------------------
Class A Common Stock, $.001 Par Value 35,182,719
Class B Non-Voting Common Stock, $.001 Par Value 14,156,470
</TABLE>
<PAGE>
HEFTEL BROADCASTING CORPORATION
March 31, 1999
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 1999
and December 31, 1998........................................... 2
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998...................... 3
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998...................... 4
Notes to Condensed Consolidated Financial Statements ........... 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .............................................. 7
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ....................................................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 10
Item 6. Exhibits and Reports on Form 8-K .................................. 10
</TABLE>
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 20,328,920 $ 10,293,241
Accounts receivable, net 29,276,300 34,309,106
Prepaid expenses and other current assets 1,266,235 456,843
------------- -------------
Total current assets 50,871,455 45,059,190
Property and equipment, at cost, net 33,334,876 33,807,371
Intangible assets, net 642,736,570 646,200,359
Deferred charges and other assets 21,097,438 21,622,079
------------- -------------
Total assets $ 748,040,339 $ 746,688,999
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 24,683,612 $ 27,769,816
Current portion of long-term obligations 122,059 121,052
------------- -------------
Total current liabilities 24,805,671 27,890,868
------------- -------------
Long-term obligations, less current portion 1,523,909 1,547,130
------------- -------------
Deferred income taxes 95,380,353 94,630,353
------------- -------------
Stockholders' equity:
Preferred Stock, cumulative, $.001 par value;
authorized 5,000,000 shares; no shares issued or outstanding - -
Class A Common Stock, $.001 par value; authorized
100,000,000 shares; issued and outstanding
35,182,719 at March 31, 1999 and 35,171,980 at
December 31, 1998 35,182 35,172
Class B Common Stock, convertible, $.001 par value;
authorized 50,000,000 shares; issued and outstanding
14,156,470 shares 14,156 14,156
Additional paid-in capital 665,730,087 665,339,306
Accumulated deficit (39,449,019) (42,767,986)
------------- -------------
Total stockholders' equity 626,330,406 622,620,648
------------- -------------
Total liabilities and stockholders' equity $ 748,040,339 $ 746,688,999
------------- -------------
------------- -------------
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1999 1998
------------------------------
<S> <C> <C>
Net revenues $ 37,709,139 $ 31,347,088
Operating expenses 24,051,015 20,136,524
Depreciation and amortization 6,229,693 4,338,556
------------- -------------
Operating income before corporate expenses 7,428,431 6,872,008
Corporate expenses 1,663,141 1,186,734
------------- -------------
Operating income 5,765,290 5,685,274
Interest income (expense), net (139,923) 1,678,162
------------- -------------
Income before income tax 5,625,367 7,363,436
Income tax 2,306,400 3,019,018
------------- -------------
Net income $ 3,318,967 $ 4,344,418
------------- -------------
------------- -------------
Net income per common share - basic
and diluted $ 0.07 $ 0.09
------------- -------------
------------- -------------
Weighted average common shares outstanding:
Basic 49,338,831 48,109,168
Diluted 49,729,084 48,462,844
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,318,967 $ 4,344,418
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for bad debts 468,628 368,949
Depreciation and amortization 6,229,693 4,338,556
Deferred income taxes 750,000 500,000
Other 56,589 (16,694)
Changes in operating assets and liabilities 668,581 4,166,995
------------ -------------
Net cash provided by operating activities 11,492,458 13,702,224
------------ -------------
Cash flows from investing activities:
Property and equipment acquisitions (1,074,350) (518,894)
Dispositions of property and equipment 11,846 104,813
Additions to intangible assets (4,822) (102,888)
Increase in deferred charges and other assets (758,030) (56,095)
Acquisitions of radio stations - (1,698,088)
------------ -------------
Net cash used in investing activities (1,825,356) (2,271,152)
------------ -------------
Cash flows from financing activities:
Payments on long-term obligations (22,214) (12,170,457)
Proceeds from stock issuances 390,791 205,662,235
------------ -------------
Net cash provided by financing activities 368,577 193,491,778
------------ -------------
Net increase in cash and cash equivalents 10,035,679 204,922,850
Cash and cash equivalents at beginning of period 10,293,241 6,553,271
------------ -------------
Cash and cash equivalents at end of period $ 20,328,920 $ 211,476,121
------------ -------------
------------ -------------
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements of Heftel Broadcasting Corporation and subsidiaries (the
"Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the disclosures required by generally accepted
accounting principles. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months
ended March 31, 1999 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999. For further information,
refer to the consolidated financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), REPORTING
COMPREHENSIVE INCOME. SFAS 130 requires the reporting of comprehensive
income in financial statements by all entities that provide a full set of
financial statements. The Company's net income is the same as its
comprehensive income and no additional disclosures are necessary.
2. ACQUISITIONS AND DISPOSITIONS
1999 ACQUISITIONS
On March 1, 1999, the Company entered into an asset purchase
agreement to acquire the assets of KISF(FM), serving the Las Vegas market,
for $20.3 million (the "KISF(FM) Acquisition"). The KISF(FM) Acquisition
closed on April 30, 1999. The asset acquisition was financed with a borrowing
from the Company's $300.0 million revolving credit facility (the "Credit
Facility") and cash generated from operations. Immediately after closing,
the station's programming was converted to a Spanish language format.
On January 27, 1999, the Company entered into an asset purchase
agreement to acquire the assets of KHOT(FM), serving the Phoenix market, for
$18.3 million (the "KHOT(FM) Acquistion"). The KHOT(FM) Acquisition closed
on April 5, 1999. The asset acquisition was made with cash generated from
operations. Immediately after closing, the station's programming was
converted to a Spanish language format. The Company is in the process of
building out new studios and office space in Phoenix. The anticipated
capital costs will approximate $0.5 million.
PENDING TRANSACTIONS
On April 14, 1999, the Company entered into a letter of intent with
Z-Spanish Media Corporation ("Z"), the fourth largest Spanish radio operator
in the United States, to purchase approximately 4.1% of Z's fully diluted
shares of common stock for $6.0 million. The Company will also be granted an
option to purchase additional shares of Z common stock that, if exercised,
would increase the Company's ownership to approximately 10.1%. Z has the
right, under certain conditions, to require the Company to purchase
additional shares of Z common stock for approximately $4.8 million.
Additionally, the Company has agreed to exchange the assets of KRTX(FM), a
radio station serving Houston, Texas for the assets of KLNZ(FM), a radio
station owned by Z serving Phoenix, Arizona. Consummation of the investment
in Z common stock and the asset exchange is subject to a number of
conditions, including approval by the FCC
5
<PAGE>
of the transfer of the FCC licenses. The Z common stock investment will be
financed with a borrowing from the Credit Facility.
On January 2, 1997, the Company acquired an option to purchase all
of the assets used in connection with the operation of KSCA(FM), Glendale,
California (the "KSCA Option"). In connection with the acquisition of the
KSCA Option, the Company began providing programming to KSCA(FM) under a time
brokerage agreement on February 5, 1997. The KSCA Option, which is
exercisable only upon the death of Gene Autry, the indirect principal
stockholder of the seller, had an initial term which expired on December 31,
1997. The KSCA Option was renewable for additional one-year terms during the
lifetime of Mr. Autry upon payment by the Company of $3.0 million on or
before the then scheduled expiration date of the KSCA Option. On February
4, 1997, the Company made an initial payment of $10.0 million, as required
under the option agreement. On December 29, 1997, the Company renewed the
KSCA Option through December 31, 1998. All such payments will be credited
against the purchase price for the KSCA(FM) assets. The purchase price for
the KSCA(FM) assets is the greater of (a) $112.5 million, or (b) the sum of
(i) $105.0 million, plus (ii) an amount equal to $13,699 per day during the
term of the time brokerage agreement.
Gene Autry died on October 2, 1998, and the Company exercised the
KSCA Option. The closing is expected to occur during the third quarter of
1999. If the acquisition of KSCA(FM) closes on August 1, 1999, the purchase
price for the KSCA(FM) assets will be approximately $117.4 million, and
approximately $104.4 million ($117.4 million less $13.0 million in option
payments credited against the purchase price) will be paid at closing. This
transaction will be financed with a borrowing from the Credit Facility.
Consummation of the purchase is subject to a number of conditions, including
approval by the FCC of the transfer of the FCC licenses.
3. LONG-TERM OBLIGATIONS
The Company's ability to borrow under the Credit Facility is subject
to compliance with certain financial ratios and other conditions set forth
in the Credit Facility. The Credit Facility is secured by the stock of the
Company's subsidiaries. Borrowings under the Credit Facility bear interest at
a rate based on the LIBOR rate plus an applicable margin as determined by
the Company's leverage ratio. The Company has $300.0 million of credit
available, and may elect under the terms of the Credit Facility to increase
the facility by $150.0 million. Availability under the Credit Facility
decreases quarterly commencing September 30, 1999 and ending December 31,
2004.
As of March 31, 1999, the Company had no outstanding balance due on the
Credit Facility. On January 29, 1998, the Company repaid the $12.0 million
outstanding balance on the Credit Facility from the proceeds of the January 1998
secondary public stock offering (the "January 1998 Offering").
4. STOCKHOLDERS' EQUITY
On January 22, 1998, the Company completed the January 1998 Offering,
selling 5,175,000 shares of Class A Common Stock at $39.75 per share, net of
underwriters' discounts and commissions. The net proceeds of the offering were
approximately $205.1 million.
6
<PAGE>
The following is a reconciliation of the denominators of the basic and
diluted earnings per share computations:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Weighted average common shares 49,338,831 48,109,168
Effect of dilutive securities:
Stock options 383,604 347,546
Employee Stock Purchase Plan 6,649 6,130
---------- ----------
Denominator for diluted earnings per
share 49,729,084 48,462,844
---------- ----------
---------- ----------
</TABLE>
5. LONG-TERM INCENTIVE PLAN
On May 21, 1997, the stockholders of the Company approved the Heftel
Broadcasting Corporation Long-Term Incentive Plan (the "Incentive Plan"). The
types of awards that may be granted under the Incentive Plan include (a)
incentive stock options, (b) non-qualified stock options, (c) stock
appreciation rights, (d) rights to receive a specified amount of cash or
shares of Class A Common Stock and (e) restricted stock. In addition, the
Incentive Plan provides that directors of the Company may elect to receive
some or all of their annual director compensation in the form of shares of
Class A Common Stock. Subject to certain exceptions set forth in the
Incentive Plan, the aggregate number of shares of Class A Common Stock that
may be the subject of awards under the Incentive Plan at one time shall be an
amount equal to (a) five percent of the total number of shares of Class A
Common Stock outstanding from time to time minus (b) the total number of
shares of Class A Common Stock subject to outstanding awards on the date of
calculation under the Incentive Plan and any other stock-based plan for
employees or directors of the Company (other than the Company's Employee
Stock Purchase Plan). The Company has granted incentive and non-qualified
stock options for 1,408,934 shares of Class A Common Stock to directors and
key employees. The exercise prices range from $16.44 to $48.88 per share and
were equal to the fair market value of the Class A Common Stock on the dates
such options were granted.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The performance of a radio station group is customarily measured by
its ability to generate broadcast cash flow. The two components of broadcast
cash flow are net revenues (gross revenues net of agency commissions) and
operating expenses (excluding depreciation, amortization and corporate
general and administrative expense). The primary source of revenues is the
sale of broadcasting time for advertising. The Company's most significant
operating expenses for purposes of the computation of broadcast cash flow are
employee salaries and commissions, programming expenses, and advertising and
promotion expenses. The Company strives to control these expenses by working
closely with local station management. The Company's revenues vary throughout
the year. As is typical in the radio broadcasting industry, the Company's
first calendar quarter generally produces the lowest revenues. The second
and third quarters generally produce the highest revenues.
Another measure of operating performance is EBITDA. EBITDA consists of
operating income or loss excluding depreciation and amortization.
Broadcast cash flow and EBITDA are not calculated in accordance with
generally accepted accounting principles. These measures should not be
considered in isolation or as substitutes for operating income, cash flows from
operating activities or any other measure for determining the Company's
operating performance or liquidity that is calculated in accordance with
generally accepted accounting
7
<PAGE>
principles. Broadcast cash flow and EBITDA do not take into account the
Company's debt service requirements and other commitments and, accordingly,
broadcast cash flow and EBITDA are not necessarily indicative of amounts that
may be available for dividends, reinvestment in the Company's business or
other discretionary uses.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE
THREE MONTHS ENDED MARCH 31,1998
The results of operations for the three months ended March 31, 1999
are not comparable to results of operations for the same period in 1998
primarily due to the start-up of radio stations WCAA(FM) in New York on May
22, 1998 (WPAT(AM) was exchanged for WCAA(FM)), KRTX(AM/FM) in Houston on May
29, 1998, and KLQV(FM) and KLNV(FM) in San Diego on August 10, 1998.
Net revenues increased by $6.4 million or 20.4% to $37.7 million in
the three months ended March 31, 1999 from $31.3 million in the same
quarter of 1998. Net revenues increased for the three months ended March 31,
1999, compared to the same period in 1998 primarily because of revenue growth
of same stations offset somewhat by the loss of revenues generated by
WPAT(AM), which was exchanged in the WCAA(FM) transaction and a decrease in
barter revenue.
Operating expenses increased by $4.0 million, or 19.9% to $24.1
million for the three months ended March 31, 1999 from $20.1 million for the
same period of 1998. Operating expenses increased primarily due to operating
expenses of start-up stations offset somewhat by the elimination of operating
expenses generated by WPAT(AM) which was exchanged in the WCAA(FM)
transaction and a decrease in barter expense.
Operating income before corporate expenses, depreciation and
amortization ("broadcast cash flow")for the three months ended March 31, 1999
increased 22.3% to $13.7 million, compared to $11.2 million, for the three
months ended March 31, 1998.
Corporate expenses increased by $0.5 million, or 41.7% to $1.7 million
for the three months ended March 31, 1999, compared to the same period of 1998.
The increase was primarily due to higher staffing costs of the Company and the
one-time expenses related to the resignation of an executive officer. EBITDA
increased $2.0 million, or 20.0% to $12.0 million for the three months ended
March 31, 1999, compared to the same period of 1998. Depreciation and
amortization for the quarter ended March 31, 1999 increased 44.2% to $6.2
million compared to $4.3 million for the same period in 1998. The increase is
due to radio station acquisitions and capital expenditures.
Interest income, net of interest expense decreased from $1.7 million
for the three months ended March 31, 1998 to $0.1 of interest expense, net of
interest income for the three months ended March 31, 1999. The reduction of
interest income was due to the proceeds of the January 1998 Offering being spent
on the acquisition of radio stations WCAA(FM), KLTN(FM), KLQV(FM) and
KLNV(FM) in 1998.
Federal and state income taxes are being provided at an effective rate
of 41.0% in 1999 and 41.5% in 1998. The decrease in the effective tax rate in
1999 is due to a decrease in the estimated effective state tax rate.
For the three months ended March 31, 1999, the Company's net income
totaled $3.3 million ($0.07 per common share) compared to $4.3 million ($0.09
per common share) in the same period of 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the three months ended
March 31, 1999 was $11.5 million as compared to $13.7 million for the same
period of 1998. Net cash used in investing activities was
8
<PAGE>
$1.8 and $2.3 million for the three months ended March 31, 1999 and 1998,
respectively. The $0.5 million decrease from 1998 to 1999 is due to $1.7
million spent in 1998 on radio station acquisitions offset by increases in
1999 for property and equipment acquisitions ($0.5 million) and deferred
charges and other assets ($0.7 million). Net cash provided by financing
activities was $0.4 and $193.5 million for the three months ended March 31,
1999 and 1998, respectively. The $193.1 million decrease from 1998 to 1999
is due to a $205.3 million decrease in proceeds from stock issuances offset
by a $12.2 million decrease in payments on long-term obligations.
Generally, capital expenditures are made with cash provided by
operations. Capital expenditures totaled $1.1 million and $0.5 million for the
three months ended March 31, 1999 and 1998, respectively. The increase in
capital expenditures was due primarily to the office space improvement costs for
New York and the corporate office in Dallas as well as equipment purchased for
HBC Radio Network.
Available cash on hand plus cash flow provided by operations was
sufficient to fund the Company's operations, meet its debt obligations, and
to fund capital expenditures. The Company believes it will have sufficient
cash on hand and cash provided by operations to finance its operations,
satisfy its debt service requirements, and to fund capital expenditures. The
Company regularly reviews potential acquisitions. The Company intends to
finance acquisitions primarily through proceeds from additional borrowings
under the Credit Facility, proceeds from securities offerings, and/or from
cash provided by operations.
YEAR 2000
The Year 2000 problem is the result of computer programs being
written using two digits rather than four to define the applicable year.
Programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failures
or miscalculations.
The Company has been replacing its software and hardware as part of
its long-term technological plans. The new software being implemented
functions properly with respect to dates in the year 2000 and thereafter.
All software used in the accounting system is in the process of
being replaced. The key software components used in the accounting system
are the general ledger and traffic system. The general ledger is used to
record all transactional activity whereas the traffic system is used to
record the airing of commercials, perform billing and maintain the accounts
receivable detail. The new general ledger software has been implemented in
thirteen of the fourteen locations in which the Company operates. The one
remaining location will implement the new general ledger software by June 1,
1999. Ten of the thirteen radio station markets in which the Company operates
have implemented the new traffic software. The three remaining radio station
markets will implement the new traffic software at or around September 1999.
The Company is in the process of reviewing the hardware used in its
operations that might be affected by the Year 2000 problem. Hardware testing
for Year 2000 compliance is anticipated to be completed by June 30, 1999.
Inquiries of the Company's top ten customers, vendors and service
providers regarding Year 2000 compliance will be made during 1999.
The Company decided, after the merger with Tichenor Media System,
Inc. in February 1997, to change its general ledger and traffic system
software so all locations would be on the same system. The replacement of the
general ledger and traffic system software was not accelerated due to Year
2000 issues.
The Company does not believe the costs related to the Year 2000
compliance project will be material to its financial position or results of
operations. Unanticipated failures by critical customers,
9
<PAGE>
vendors and service providers, as well as the failure by the Company to
execute its own remediation efforts, could have a material adverse effect on
the cost of the Year 2000 project, its completion date, and the Company's
financial position or results of operations. The Company has not yet
established contingency plans in the event of the failure of its system with
regard to Year 2000 compliance or those of its significant customers, vendors
and service providers. Based on its assessment of the Year 2000 issue, the
Company will establish contingency plans, however there is no assurance that
such plans will be adequate to meet the Company's needs in the event of any
disruption in the Company's operations.
FORWARD LOOKING STATEMENTS
Certain statements contained in this report are not based on
historical facts, but are forward looking statements that are based on
numerous assumptions made as of the date of this report. When used in the
preceding and following discussions, the words "believes," "intends,"
"expects," "anticipates" and similar expressions are intended to identify
forward looking statements. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
expressed in any of the forward looking statements. Such risks and
uncertainties include, but are not limited to, industry-wide market factors
and regulatory developments affecting the Company's operations, acquisitions
and dispositions of broadcast properties described elsewhere herein, the
financial performance of start-up stations, and efforts by the new management
to integrate its operating philosophies and practices at the station level.
This report should be read in conjunction with the Company's Annual Report on
Form 10-K. The Company disclaims any obligation to update the forward looking
statements in this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company does not have significant market risk exposure since it
does not have any outstanding variable rate debt or derivative financial and
commodity instruments as of March 31, 1999.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various claims and lawsuits, which are
generally incidental to its business. The Company is vigorously contesting
all such matters and believes that their ultimate resolution will not have a
material adverse effect on its consolidated financial position or results of
operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
3.1 Second Amended and Restated Certificate of Incorporation of the Company dated
February 14, 1997 (incorporated by reference to Exhibit 3.1 to the Company's
Form 8-K filed March 3, 1997).
3.2 Certificate of Amendment to the Second Amended and Restated Certificate of
Incorporation of the Registrant dated June 4, 1998 (incorporated by reference
to Exhibit 3.1 to the Company's Form 10-Q filed on November 11, 1998).
3.3 Amended and Restated Bylaws of the Registrant (incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement on Form S-1, as amended
Reg. No. 33-78370).
10
<PAGE>
4.1 Credit Agreement among the Registrant and its subsidiaries, The Chase Manhattan
Bank, as administrative agent, and certain other lenders, dated February 14, 1997
without Exhibits (Schedules omitted) (incorporated by reference to Exhibit 10.5
to the Registrant's Form 8-K filed on March 3, 1997).
10.1 Asset Purchase Agreement, dated April 28, 1999, by and among Golden West
Broadcasters, Jacqueline Autry and Stanley B. Schneider, as co-trustees of the
Autry Qualified Interest Trust, KTNQ/KLVE, Inc., HBC License Corporation and
Heftel Broadcasting Corporation.
10.2 Asset Purchase Agreement dated January 27, 1999, by and between New Century Arizona
LLC, New Century Arizona License Partnership and the Company (incorporated by
reference to Exhibit 10.24 to the Company's Form 10-K for the year ended December 31,
1998).
10.3 Asset Purchase Agreement, dated March 1, 1999, by and between Radio Vision, Inc.,
George E. Tobin and the Company (incorporated by reference to Exhibit 10.25 to the
Company's Form 10-K for the year ended December 31, 1998).
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Heftel Broadcasting Corporation
--------------------------------------
(Registrant)
/s/ Jeffrey T. Hinson
------------------------------------
Jeffrey T. Hinson
Senior Vice President/
Chief Financial Officer
Dated: May 14, 1999
11
<PAGE>
<TABLE>
<CAPTION>
Index To Exhibits
-----------------
Exhibit No. Description
----------- -----------
<S> <C>
3.1 Second Amended and Restated Certificate of Incorporation of the Company dated
February 14, 1997 (incorporated by reference to Exhibit 3.1 to the Company's
Form 8-K filed March 3, 1997).
3.2 Certificate of Amendment to the Second Amended and Restated Certificate of
Incorporation of the Registrant dated June 4, 1998 (incorporated by reference
to Exhibit 3.1 to the Company's Form 10-Q filed on November 11, 1998).
3.3 Amended and Restated Bylaws of the Registrant (incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement on Form S-1, as amended
Reg. No. 33-78370).
4.1 Credit Agreement among the Registrant and its subsidiaries, The Chase Manhattan
Bank, as administrative agent, and certain other lenders, dated February 14, 1997
without Exhibits (Schedules omitted) (incorporated by reference to Exhibit 10.5
to the Registrant's Form 8-K filed on March 3, 1997).
10.1 Asset Purchase Agreement, dated April 28, 1999, by and among Golden West
Broadcasters, Jacqueline Autry and Stanley B. Schneider, as co-trustees of the
Autry Qualified Interest Trust, KTNQ/KLVE, Inc., HBC License Corporation and
Heftel Broadcasting Corporation.
10.2 Asset Purchase Agreement dated January 27, 1999, by and between New Century Arizona
LLC, New Century Arizona License Partnership and the Company (incorporated by
reference to Exhibit 10.24 to the Company's Form 10-K for the year ended December 31,
1998).
10.3 Asset Purchase Agreement, dated March 1, 1999, by and between Radio Vision, Inc.,
George E. Tobin and the Company (incorporated by reference to Exhibit 10.25 to the
Company's Form 10-K for the year ended December 31, 1998).
27 Financial Data Schedule
</TABLE>
12
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
on April 28, 1999 by and among GOLDEN WEST BROADCASTERS, a California
corporation ("Seller"), JACQUELINE AUTRY and STANLEY B. SCHNEIDER, AS
CO-TRUSTEES OF THE AUTRY QUALIFIED INTEREST TRUST (collectively, the
"Trustees"), KTNQ/KLVE, INC., a California corporation ("KTNQ-KLVE") and HBC
LICENSE CORPORATION, a Delaware corporation ("HBC") (KTNQ-KLVE and HBC
collectively are referred to herein as "Buyers") and HEFTEL BROADCASTING
CORPORATION, a Delaware corporation ("Heftel" and together with Buyers the
"Buying Parties"), 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, Clear Channel Radio, Inc. ("CCR") and Stanley B. Schneider and
Orvon Gene Autry, as co-trustees of the Autry Survivor's Trust, predecessor in
interest to the Autry Qualified Interest Trust, entered into an Option
Agreement, dated as of December 23, 1996, (the "Option Agreement"). CCR
assigned its rights under the Option Agreement to Heftel, and Heftel assigned
some of its rights under the Option Agreement to KTNQ-KLVE and the rest of its
rights under the Option Agreement to HBC. This Agreement is being entered into
pursuant to the exercise of the option rights granted to Buyers under the Option
Agreement.
C. Seller desires to sell to KTNQ-KLVE, and KTNQ-KLVE desires to purchase
from Seller, substantially all of the assets used or held for use in connection
with the operation of the Station, with the exception of the FCC Licenses, all
on the terms and subject to the conditions set forth herein.
D. Seller desires to sell to HBC, and HBC desires to purchase from
Seller, the FCC Licenses, 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:
<PAGE>
ARTICLE 1
PURCHASE OF ASSETS
1.1 TRANSFER OF ASSETS BY SELLER. On the Closing Date, subject to the
conditions contained herein, Seller shall sell, assign, transfer and convey to
KTNQ-KLVE, and KTNQ-KLVE 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, with the exception of the FCC
Licenses (collectively, the "Purchased Assets"), including, without limitation,
the following:
(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 KTNQ-KLVE agrees to assume such agreement in writing at
the Closing (collectively, the "Contracts"); at KTNQ-KLVE's option, exercisable
by delivery of written notice before the Closing, the Auxiliary Site Lease shall
be included in the Contracts;
(c) 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");
(d) All files, records, and reports which Seller must retain
under FCC rules and regulations;
(e) 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
(f) All goodwill in, and going concern value of, the Station;
(g) All claims and rights against third parties relating to the
Purchased Assets, including, without limitation, all rights under manufacturers'
and vendors' warranties; and
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(h) 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.
1.2 TRANSFER OF FCC LICENSES BY SELLER. On the Closing Date, subject
to the conditions contained herein, Seller shall assign, transfer and convey to
HBC, and HBC shall purchase from Seller, 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
1.2 attached hereto (collectively, the "FCC Licenses");
1.3 EXCLUDED ASSETS. Notwithstanding anything to the contrary
contained herein, it is expressly understood and agreed that the neither the
Purchased Assets nor the FCC Licenses shall 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
KTNQ-KLVE 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
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respect to obligations to be assumed by KTNQ-KLVE 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.
1.4 NO LIENS. The Purchased Assets shall be transferred to KTNQ-KLVE
free and clear of all Liens and the FCC Licenses shall be transferred to HBC
free and clear of all Liens.
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
2.1 ASSUMPTION OF OBLIGATIONS. In addition to the provisions of
Section 3.4, on the Closing Date, KTNQ-KLVE 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 KTNQ-KLVE and Seller shall enter into an equitable
arrangement pursuant to which KTNQ-KLVE 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 KTNQ-KLVE the
rights and benefits under such Contract arising on or after the Closing Date.
2.2 RETAINED LIABILITIES. Except as set forth in Sections 2.1 and 3.4,
KTNQ-KLVE 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) KTNQ-KLVE 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 KTNQ-KLVE
and (b) KTNQ-KLVE 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 KTNQ-KLVE under the TBA to reimburse Seller for certain expenses
or pay certain severance obligations.
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ARTICLE 3
CONSIDERATION
3.1 PURCHASE PRICE. In consideration for the transfer of the Purchased
Assets and the FCC Licenses, Buyers 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 KTNQ-KLVE, KTNQ-KLVE shall assume the Assumed Liabilities.
3.2 PAYMENT OF PURCHASE PRICE. On the Closing Date, KTNQ-KLVE 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.
3.3 ALLOCATION OF PURCHASE PRICE. Within 90 days after the Closing,
KTNQ-KLVE 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 and the FCC Licenses
determined by a nationally recognized appraisal firm chosen by KTNQ-KLVE and
reasonably acceptable to Seller (it being anticipated that the Purchase Price
will be allocated first to such of the Purchased Assets and the FCC Licenses as
are tangible to the extent of the approximate replacement values thereof on the
Closing Date, with the balance to intangible assets). KTNQ-KLVE shall pay all
fees and expenses of such appraisal firm. Seller and KTNQ-KLVE will report the
federal income tax consequences of the sale and acquisition of the Purchased
Assets and the FCC Licenses 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. KTNQ-KLVE 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
KTNQ-KLVE, such draft of 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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3.4 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 and the FCC Licenses 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 KTNQ-KLVE 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 KTNQ-KLVE 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 KTNQ-KLVE, or for which
KTNQ-KLVE is obligated to reimburse Seller, pursuant to the TBA or for any
revenue to which KTNQ-KLVE 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 KTNQ-KLVE. The decision of
such accountant shall be conclusive and binding on the parties. All prorations
and adjustments made on the Closing Date shall be paid in the form of an
increase or decrease of the amount payable by KTNQ-KLVE at the Closing. All
prorations and
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adjustments made after the Closing shall be paid within five (5) business
days of the determination thereof.
ARTICLE 4
GOVERNMENTAL CONSENTS
4.1 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").
4.2 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 HBC. 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.
4.3 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,
Buyers 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 5
CLOSING
5.1 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 KTNQ-KLVE'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.
5.2 CLOSING PLACE. The Closing shall be held at such place as the
parties hereto may agree.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyers as follows:
6.1 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.
6.2 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 the FCC Licenses, 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 or the FCC Licenses, Buyers' use or enjoyment of the Purchased Assets
or the FCC Licenses or the ability of Seller to complete the sale of the
Purchased Assets and FCC Licenses to Buyers 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 which may be required under the HSR
Act.
6.3 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. 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 Buyers 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.
6.4 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.
6.5 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
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Seller, no other party to any Contract is in default thereunder or breach
thereof. Seller has delivered to Heftel 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 May 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.
6.6 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.
6.7 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.
6.8 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 Buyers' ability to purchase the Purchased Assets or the FCC Licenses,
Buyers' ability to full use and enjoyment of the Purchased Assets or the FCC
Licenses or the ability of Seller to sell the Purchased Assets or the FCC
Licenses to Buyers pursuant
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to this Agreement. Seller is not subject to any order, judgment, writ,
injunction or decree of any court or governmental agency or entity.
6.9 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.
6.10 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. Seller has provided to Heftel 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 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. Except as permitted by the Settlement Agreement with AFTRA
described in SCHEDULE 6.10(a), Seller has no knowledge of any organizational
effort currently being made or threatened respecting any of the employees of
Seller relating to the Station.
(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 KTNQ-KLVE the names of all present
employees of Seller and the positions, total annual compensation and accrued
vacation and sick time of each.
6.11 ABSENCE OF MATERIAL CHANGE. Except as caused by non-compliance by
Buyers 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;
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(b) Seller has not granted a security interest in the Purchased
Assets or the FCC Licenses 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.
6.12 SHAREHOLDERS. The Trustees, as co-trustees of the Autry Qualified
Interest Trust, are the sole shareholders of Seller.
6.13 REAL PROPERTY. Seller has no interest in any real property other
than 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.
6.14 SALES TAX. Seller has not made any sales which would cause the
sale of the Purchased Assets or the FCC Licenses to Buyers hereunder to fail to
be exempt from sales tax under California law.
6.15 SCHEDULES. The Schedules attached hereto are the same as the
Schedules attached to the Option Agreement, except for the changes indicated in
the redlined Schedules attached hereto, changes which are not materially adverse
to Buyers, and changes which are not due to the actions or omissions of Seller,
and are accurate and complete as of the date hereof.
6.16 DISCLOSURE. No provision of this Agreement relating to Seller, the
Station, the Purchased Assets or the FCC Licenses or any other document,
Schedule or other written information furnished by Seller to Buyers 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
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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 Buyers 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 Buyers or set forth in the Schedules attached hereto.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BUYING PARTIES
Buying Parties jointly and severally represent and warrant to Seller as
follows:
7.1 ORGANIZATION, STANDING AND POWER. KTNQ-KLVE 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. Each of HBC and Heftel is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power to carry on its business as it is now
being conducted.
7.2 AUTHORITY.
(a) Each Buying Party 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 Buying Parties and the consummation by Buying Parties of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of each Buying Party. This Agreement has been duly
executed and delivered by each Buying Party and constitutes a valid and binding
obligation of each Buying Party enforceable against each Buying Party in
accordance with its terms.
(b) No consent, approval, order or authorization of, notice to,
or registration, declaration or filing with, any governmental entity or any
third party is necessary in connection with the execution and delivery of this
Agreement by Buying Parties or the consummation by Buying Parties of the
transactions contemplated hereby, except the FCC Consent and the filings
required under the HSR Act.
7.3 BROKERS. No Buying Party has 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.
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7.4 LITIGATION. There are no claims, actions, suits, litigation, labor
disputes, arbitrations, proceedings or investigations pending or, to the best
knowledge of each Buying Party, threatened against any Buying Party relating to
the transactions contemplated by this Agreement.
7.5 QUALIFICATION. There are no facts which, under the Communications
Act or the existing rules and regulations of the FCC, would disqualify HBC as an
assignee of the FCC Licenses.
ARTICLE 8
COVENANTS
8.1 OPERATION OF BUSINESS. Except as caused by non-compliance by
Buyers 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 FCC Licenses or grant a Lien
thereon or permit a Lien to remain on the Purchased Assets or the FCC Licenses
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;
(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.
8.2 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 KTNQ-KLVE and the officers, employees and
agents of KTNQ-KLVE complete access at all reasonable times to Seller's
officers, employees,
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independent contractors, agents, properties and to Seller's books, records
and contracts relating to the Station.
8.3 CONFIDENTIALITY.
(a) Each Buying Party 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 a Buying Party or one of its affiliates in violation of its
obligations under this subsection, (ii) becomes available to a Buying Party 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 a Buying Party on a nonconfidential basis
prior to its disclosure to a Buying Party hereunder. If this Agreement is
terminated, Buying Parties shall deliver, and cause their 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. Buying Parties shall be jointly and severally liable for a breach of
this Section 8.3 by any Buying Party.
(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
each Buying Party, 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 a Buying Party 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 Buying Parties to deliver, to Heftel
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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.
8.4 NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt notice
to Buying Parties 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. Buying Parties shall
give prompt notice to Seller of the discovery of (1) any material inaccuracy in
any representation or warranty made by any of them,(2) any material failure of
any Buying Party 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.
8.5 CONSENTS AND APPROVALS. Seller and Buying Parties 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. Buying Parties and Seller will cooperate with
each other in obtaining, and will provide all information necessary to obtain,
such consents.
8.6 CONTROL OF STATION. From the date hereof to the Closing Date, no
Buying Party shall, 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
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parties have entered into the TBA, pursuant to which Seller has granted to
Heftel (or its permitted assignee) the right to program the Station in
accordance with the Communications Act and the rules and regulations of the FCC.
8.7 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 Heftel and Seller, or
their respective representatives, and shall be acceptable to them prior to the
dissemination thereof.
8.8 BUYERS' COVENANT. Buying Parties agree that none of them shall
take any action which would cause HBC to be disqualified under the
Communications Act or the FCC's rules or regulations as an assignee of the FCC
Licenses.
ARTICLE 9
CONDITIONS
9.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYERS. The obligations of
Buyers 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 KTNQ-KLVE 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.
(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 Buyers 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.
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9.2 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 Buying Parties 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) Buying Parties 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
any of them 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) Buying Parties 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.
ARTICLE 10
CLOSING DELIVERIES
10.1 DELIVERIES BY SELLER. At the Closing, Seller shall deliver or
cause to be delivered to Buyers 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 KTNQ-KLVE, as shall be effective to vest
in KTNQ-KLVE title in and to the Purchased Assets and to vest in HBC title in
and to the FCC Licenses.
(b) A certificate, executed by an officer of Seller, in such
detail as KTNQ-KLVE 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.
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(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 Buyers.
(f) An opinion of Jeffer, Mangels, Butler & Marmaro LLP covering
the following matters:
(i) Seller is a corporation 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.
(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 by Fox or KCET to the assignment of the
Transmitter Site Lease to KTNQ-KLVE is necessary; and
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(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 by Metromedia to the assignment of the
Transmitter Site Lease to KTNQ-KLVE 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.
10.2 DELIVERIES BY KTNQ-KLVE. At the Closing, KTNQ-KLVE shall deliver
or cause to be delivered to Seller the following:
(a) The payment required under Section 3.2 hereof.
(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 each Buying Party,
in such detail as Seller shall reasonably request, certifying to the fulfillment
or satisfaction by Buying Parties 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 Buying Parties as to the statements set forth
therein.
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ARTICLE 11
TRANSFER TAXES, FEES AND EXPENSES
11.1 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.
11.2 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 Buying Parties.
ARTICLE 12
INDEMNIFICATION AND SPECIFIC PERFORMANCE
12.1 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 or the FCC Licenses
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.
12.2 INDEMNIFICATION OF BUYERS BY SELLER. Subject to Section 12.4, from
and after the Closing Date, Seller shall indemnify and hold Buyers and their
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 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.
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Notwithstanding the foregoing, Seller shall not have any indemnity obligations
for expenses or liabilities for which Buyers are responsible under the TBA.
12.3 INDEMNIFICATION OF SELLER BY BUYING PARTIES. Subject to
Section 12.4, from and after the Closing Date, Buying Parties jointly and
severally 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 any Buying Party 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 any
Buying Party 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 Buyers on or after the Closing Date.
12.4 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.
(b) The indemnification obligations of Buying Parties 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 Buying Parties for indemnity under
Section 12.3(a) shall be $20 million.
12.5 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
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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.
(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.
12.6 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.
12.7 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
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adequate remedy. Therefore, unless either Buyer is in material breach of
this Agreement, Buyers 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 Buyers 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, Buyers 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, Buyers shall
still be entitled to bring an action for indemnification of Damages under
Section 12.2.
ARTICLE 13
TERMINATION RIGHTS
13.1 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;
(b) Subject to Section 15.2, by written notice from Buying
Parties 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 Buying Parties, 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 Buying Parties 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 any Buying Party fails to
perform or breaches any of its material obligations or duties under this
Agreement and such Buying Party 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 any Buying Party
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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 Buying Parties 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
Buying Parties, 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.
13.2 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 a 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 limit the obligations of
Seller under the Option Agreement to refund payments made under the Option
Agreement.
13.3 SURVIVAL. Notwithstanding anything to the contrary contained
herein, the provisions of Section 8.3 and Article 15 shall survive the
termination hereof.
ARTICLE 14
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.
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"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 Heftel (or its permitted assignee) is unable to broadcast its programming
on the Station under the TBA because of preemption thereof by Seller 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 Heftel (or
its permitted assignee) 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 Heftel (or its
permitted assignee) 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.
"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 (ii) rights of any parties to any Contract
set forth in such Contract.
-26-
<PAGE>
"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 First Amended and Restated Time Brokerage Agreement,
dated as of December 1, 1998, between Seller and Heftel, as permitted assignee
of CCR, and consented to by CCR pursuant to a letter dated as of December 1,
1998 to Heftel and Seller.
"TBA Effective Date" shall mean February 5, 1997.
"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.
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
Buyers Preamble
Buying Parties 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 2.1
Final Order 5.1
HBC Preamble
Heftel Preamble
Indemnified Party 12.5(a)
Indemnifying Party 12.5(a)
Intellectual Property 1.1(d)
KTNQ-KLVE Preamble
Option Agreement Recital B
-27-
<PAGE>
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 15
MISCELLANEOUS PROVISIONS
15.1 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
KTNQ-KLVE, Seller shall repair, replace and restore any such damaged or lost
Purchased Asset to the condition necessary to cause Buyers to be able to
broadcast under the FCC Licenses. If the provisions of this Section conflict
with the TBA, the TBA shall control.
15.2 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) either Buyer may assign its rights hereunder, without the consent
of Seller or the Trustees, to Heftel or any of its wholly-owned subsidiaries and
(b) if no Buying Party is in material breach of any of its obligations,
representations, warranties or duties hereunder and the acquisition of the
Purchased Assets by KTNQ-KLVE or the FCC Licenses by HBC is prohibited by law,
Buyers may assign their rights hereunder, without the consent of Seller or the
Trustees, to an entity which is financially capable of performing the
obligations of Buyers hereunder. No assignment by either Buyer hereunder shall
relieve that Buyer or Heftel 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.
15.3 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.
15.4 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.
15.5 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>
15.6 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.
15.7 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.
15.8 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.
15.9 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
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 Seller:
4383 Colfax Avenue
Studio City, California 91604
Attention: Mrs. Jackie Autry
Telecopier: (818) 752-7779
-29-
<PAGE>
with a copy to:
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, Tenth Floor
Los Angeles, California 90067
Attention: Frederick W. Gartside, 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: Frederick W. Gartside, Esq.
Telecopier No.: (310) 203-0567
If to any Buying Party:
3102 Oak Lawn, Suite 215
Dallas, Texas 75219
Attention: Mr. McHenry T. Tichenor, Jr.
Telecopier No.: (214) 525-7750
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.
15.10 INCORPORATION BY REFERENCE. All Schedules attached hereto or to be
delivered in connection herewith are incorporated herein by this reference.
15.11 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.
15.12 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.
-30-
<PAGE>
15.13 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.
15.14 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.
15.15 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.
15.16 REFERENCE TO BUYING PARTIES. In the context of references herein to
representations, warranties, covenants, obligations or duties of any Buying
Parties under, or any Buying Party's non-compliance with, the Option Agreement
or the TBA, Buying Parties shall be deemed to include any of their assigns under
this Agreement or the TBA.
ARTICLE 1
GUARANTEES
16.1 GUARANTEE OF THE TRUSTEES. The Trustees, as co-trustees of the
Autry Qualified Interest Trust, hereby guarantee the obligations of Seller
hereunder; provided, however, Buyers hereby agree the monetary liability of the
co-trustees under this guarantee shall be limited to the assets of the Autry
Qualified Interest Trust.
16.2 REPRESENTATIONS AND WARRANTIES OF THE TRUSTEES. The Trustees
represent and warrant to Buyers 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.
16.3 GUARANTEE OF HEFTEL. Heftel hereby absolutely and unconditionally
guarantees payment and performance of all of the obligations of Buyers hereunder
whether now existing or hereafter arising. This guaranty is a guaranty of
payment not merely a guaranty of collection. Seller shall be entitled to
collect from, or take action against, Heftel without first being obligated to
pursue any collection from, or take any action
-31-
<PAGE>
against, either Buyer or any other person liable for the obligations of
Buyers hereunder. Heftel hereby waives its rights of subrogation,
reimbursement, indemnification, and contribution and any other rights and
defenses that are or may become available to it by reason of Section 2787 to
2855, inclusive, of the California Civil Code.
-32-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
GOLDEN WEST BROADCASTERS, a
California corporation
By: /s/ Jacqueline Autry
------------------------------------
Jacqueline Autry, President
/s/ Jacqueline Autry
---------------------------------------
JACQUELINE AUTRY, as
co-trustee of the Autry
Qualified Interest Trust
/s/ Stanley B. Schneider
---------------------------------------
STANLEY B. SCHNEIDER, as
co-trustee of the Autry
Qualified Interest Trust
-33-
<PAGE>
KTNQ/KLVE, INC., a California
corporation
By: /s/ McHenry T. Tichenor, Jr.
-----------------------------------
Name: McHenry T. Tichenor, Jr.
---------------------------------
Title:
--------------------------------
HBC LICENSE CORPORATION, a Delaware
corporation
By: /s/ McHenry T. Tichenor, Jr.
-----------------------------------
Name: McHenry T. Tichenor, Jr.
---------------------------------
Title:
--------------------------------
HEFTEL BROADCASTING CORPORATION, a
Delaware corporation
By: /s/ McHenry T. Tichenor, Jr.
-----------------------------------
Name: McHenry T. Tichenor, Jr.
---------------------------------
Title:
--------------------------------
-34-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD ENDED MARCH 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 20,329
<SECURITIES> 0
<RECEIVABLES> 31,459
<ALLOWANCES> 2,183
<INVENTORY> 0
<CURRENT-ASSETS> 50,871
<PP&E> 50,676
<DEPRECIATION> 17,341
<TOTAL-ASSETS> 748,040
<CURRENT-LIABILITIES> 24,806
<BONDS> 0
0
0
<COMMON> 49
<OTHER-SE> 626,281
<TOTAL-LIABILITY-AND-EQUITY> 748,040
<SALES> 0
<TOTAL-REVENUES> 37,709
<CGS> 0
<TOTAL-COSTS> 31,944
<OTHER-EXPENSES> (112)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 252
<INCOME-PRETAX> 5,625
<INCOME-TAX> 2,306
<INCOME-CONTINUING> 3,319
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,319
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
