<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[x] Quarterly report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 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
HISPANIC 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 75219
Dallas, Texas (Zip Code)
(Address of principal executive offices)
(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.
CLASS OUTSTANDING AT AUGUST 12, 1999
Class A Common Stock, $.001 Par Value 37,193,488
Class B Non-Voting Common Stock, $.001 Par Value 14,156,470
<PAGE>
HISPANIC BROADCASTING CORPORATION
JUNE 30, 1999
INDEX
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998................................................................. 2
Condensed Consolidated Statements of Operations for the
Three Months Ended June 30, 1999 and 1998 and the Six Months
Ended June 30, 1999 and 1998.......................................................... 3
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 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 ...................................................................... 8
Item 3. Quantitative and Qualitative Disclosures about
Market Risk ............................................................................... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders......................................... 12
Item 6. Exhibits and Reports on Form 8-K ........................................................... 12
</TABLE>
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------------- ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 112,983,015 $ 10,293,241
Accounts receivable, net 39,203,394 34,309,106
Prepaid expenses and other current assets 1,260,874 456,843
-------------------- ------------------
Total current assets 153,447,283 45,059,190
Property and equipment, at cost, net 36,714,446 36,005,235
Intangible assets, net 675,741,916 646,200,359
Deferred charges and other assets 18,584,333 19,424,215
-------------------- ------------------
Total assets $ 884,487,978 $ 746,688,999
-------------------- ------------------
-------------------- ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 28,874,239 $ 27,769,816
Current portion of long-term obligations 122,966 121,052
-------------------- ------------------
Total current liabilities 28,997,205 27,890,868
-------------------- ------------------
Long-term obligations, less current portion 1,480,617 1,547,130
-------------------- ------------------
Deferred income taxes 97,680,353 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
37,182,719 at June 30, 1999 and 35,171,980 at
December 31, 1998 37,182 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 785,751,410 665,339,306
Accumulated deficit (29,472,945) (42,767,986)
-------------------- ------------------
Total stockholders' equity 756,329,803 622,620,648
-------------------- ------------------
Total liabilities and stockholders' equity $ 884,487,978 $ 746,688,999
-------------------- ------------------
-------------------- ------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------- -----------------------------------
1999 1998 1999 1998
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 51,905,043 $ 44,392,528 $ 89,614,182 $ 75,739,616
Operating expenses 27,064,047 25,375,655 51,115,062 45,512,179
Depreciation and amortization 6,496,842 5,152,097 12,726,535 9,490,653
------------- ------------ ------------ ------------
Operating income before corporate
expenses 18,344,154 13,864,776 25,772,585 20,736,784
Corporate expenses 1,562,856 1,575,905 3,225,997 2,762,639
------------- ------------ ------------ ------------
Operating income 16,781,298 12,288,871 22,546,588 17,974,145
Interest income (expense), net 127,302 1,113,313 (12,621) 2,791,475
------------- ------------ ------------ ------------
Income before income tax 16,908,600 13,402,184 22,533,967 20,765,620
Income tax 6,932,526 5,598,714 9,238,926 8,617,732
------------- ------------ ------------ ------------
Net income $ 9,976,074 $ 7,803,470 $ 13,295,041 $ 12,147,888
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Net income per common share - basic
and diluted $ 0.20 $ 0.16 $ 0.27 $ 0.25
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Weighted average common shares outstanding:
Basic 49,844,684 49,316,967 49,591,758 48,713,068
Diluted 50,488,658 49,617,324 50,108,871 49,040,084
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
JUNE 30,
---------------------------------------
1999 1998
------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 13,295,041 $ 12,147,888
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for bad debts 737,834 598,963
Depreciation and amortization 12,726,535 9,490,653
Deferred income taxes 3,050,000 2,900,000
Other 114,441 (9,907)
Changes in operating assets and liabilities (5,331,731) (617,934)
-------------- --------------
Net cash provided by operating activities 24,592,120 24,509,663
-------------- --------------
Cash flows from investing activities:
Property and equipment acquisitions (3,899,311) (1,887,647)
Dispositions of property and equipment 905,212 -
Additions to intangible assets (10,328) (107,047)
Increase in deferred charges and other assets (499,903) (1,678,513)
Acquisitions of radio stations (38,747,531) (170,954,029)
-------------- --------------
Net cash used in investing activities (42,251,861) (174,627,236)
-------------- --------------
Cash flows from financing activities:
Borrowing on long-term obligations 20,000,000 -
Payments on long-term obligations (20,064,599) (12,289,318)
Proceeds from stock issuances, net of costs 120,414,114 205,538,554
-------------- --------------
Net cash provided by financing activities 120,349,515 193,249,236
-------------- --------------
Net increase in cash and cash equivalents 102,689,774 43,131,663
Cash and cash equivalents at beginning of period 10,293,241 6,553,271
-------------- --------------
Cash and cash equivalents at end of period $ 112,983,015 $ 49,684,934
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
HISPANIC BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Hispanic Broadcasting Corporation (formerly 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 and six month periods ended June 30,
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 for all periods
presented and no additional disclosures are necessary.
2. ACQUISITIONS AND DISPOSITIONS
1999 ACQUISITIONS
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) Acquisition"). 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 $0.8 million.
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.
1998 ACQUISITIONS
On December 1, 1997, the Company entered into an asset exchange agreement
to exchange WPAT(AM), serving the New York City market, and $115.5 million in
cash for the assets of WCAA(FM) (formerly WNWK(FM)), serving the New York City
market (the "WCAA(FM) Acquisition"). The asset exchange was financed with a
portion of the proceeds from the January 1998 secondary public stock offering
(the "January 1998 Offering"). The WCAA(FM) Acquisition closed on May 22, 1998.
Immediately after closing, the station's programming was converted to a Spanish
language format.
On March 25, 1998, the Company entered into an asset purchase agreement to
acquire the assets of KLTN(FM) (formerly KKPN(FM)), serving the Houston market,
for $54.0 million (the "KLTN(FM) Acquisition"). The asset acquisition was
financed with a portion of the proceeds from the January 1998
5
<PAGE>
Offering. The KLTN(FM) Acquisition closed on May 29, 1998. Immediately after
closing, the station's programming was converted to a Spanish language format.
Pro forma results of operations for the three and six months ended
June 30, 1998, calculated as though the WCAA(FM) Acquisition had occurred at
the beginning of 1998, is as follows (dollars in thousands, except per share
data):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
Historical Pro forma Historical Pro forma
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $51,905 $44,954 $89,614 $77,020
Operating income 16,781 11,794 22,547 17,623
Net income 9,976 6,928 13,295 10,092
Net income per common share -
basic and diluted 0.20 0.14 0.27 0.21
</TABLE>
PENDING TRANSACTIONS
On July 6, 1999, the Company entered into an agreement to acquire from a
nonaffiliated trust for $65.0 million, the FCC licenses and transmission
equipment of a radio station broadcasting at 94.1 MHz, serving the
Dallas/Fort Worth market (the "Dallas Acquisition"). The closing of this
acquisition is expected to occur during the third or fourth quarter of 1999.
The Company will launch a Spanish-language format on the 94.1 MHz frequency
following the expected closing of the transaction. Consummation of the
purchase is subject to a number of conditions, including approval by the FCC
of the transfer of the FCC licenses. This transaction will be financed with
proceeds of the June 1999 secondary public stock offering (the "June 1999
Offering") and a borrowing from the Credit Facility.
To facilitate the Dallas Acquisition, the Company entered into a bridge
loan agreement (the "Bridge Loan") with a nonaffiliated partnership. The Bridge
Loan, in the amount of $57.0 million, closed on July 1, 1999. The partnership
has contracted to sell the radio station broadcasting at 94.1 MHz to the
aforementioned nonaffiliated trust. The Bridge Loan interest rate ranges from 7%
to 8.5% and the principal and accrued interest are due on the earlier of the
acquisition of the radio station by the trust or January 15, 2000. The Bridge
Loan is collateralized by substantially all the assets of the partnership.
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 the Houston market for the assets of KLNZ(FM), a radio
station owned by Z serving the Phoenix market. Consummation of the investment
in Z common stock and the asset exchange is subject to a number of
conditions, including approval by the FCC of the transfer of the FCC
licenses. The Z common stock investment will be financed with proceeds of the
June 1999 Offering and 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), a radio station
serving the Los Angeles market (the "KSCA Option"), upon the death of Gene
Autry, the indirect principal stockholder of the seller. 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. Gene Autry
died on October 2, 1998, and the Company exercised the KSCA Option. As of
June 30, 1999, the Company has made a total of $13.0 million in payments
under the
6
<PAGE>
terms of the option which will be credited against the purchase price of the
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. The closing is
expected to occur during the third quarter of 1999. If the acquisition of
KSCA(FM) closes on September 1, 1999, the purchase price for the KSCA(FM) assets
will be approximately $117.9 million, and approximately $104.9 million ($117.9
million less $13.0 million in option payments credited against the purchase
price) will be paid at closing. The FCC approved the application to assign the
license of KSCA(FM) to the Company on July 19, 1999. In the absence of a protest
or FCC action on its own motion, the grant will become final (unappealable and
unreviewable) on August 31, 1999. This transaction will be financed with
proceeds of the June 1999 Offering and a borrowing from the Credit Facility.
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 June 30, 1999, the Company had no outstanding balance due on the
Credit Facility. On April 30, 1999, the Company borrowed $20.0 million on the
Credit Facility and repaid the entire amount by June 30, 1999 from the proceeds
of the June 1999 Offering. On January 29, 1998, the Company repaid the $12.0
million outstanding balance on the Credit Facility from the proceeds of the
January 1998 Offering.
4. STOCKHOLDERS' EQUITY
On June 7, 1999, the Company completed the June 1999 Offering, selling
2,000,000 shares of Class A Common Stock at $60.03 per share, net of
underwriters' discounts and commissions. The net proceeds of the offering were
approximately $120.0 million.
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.
The following is a reconciliation of the denominators of the basic and
diluted earnings per share computations:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------------- -------------------------------------
1999 1998 1999 1998
------------------- ------------------- -------------------------------------
<S> <C> <C> <C> <C>
Denominator for basic earnings
per share 49,844,684 49,316,967 49,591,758 48,713,068
Effect of dilutive securities:
Stock options 633,205 288,874 508,404 318,210
Employee Stock Purchase Plan 10,769 11,483 8,709 8,806
---------- ---------- ---------- ----------
Denominator for diluted earnings
per share 50,488,658 49,617,324 50,108,871 49,040,084
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
7
<PAGE>
5. LONG-TERM INCENTIVE PLAN
On May 21, 1997, the stockholders of the Company approved the Hispanic
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 1,399,434 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 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 AND SIX MONTHS ENDED JUNE 30, 1999 COMPARED
TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1998
The results of operations for the three and six months ended June 30, 1999
are not comparable to results of operations for the same periods 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, KLQV(FM) and KLNV(FM) in San Diego on August 10,
8
<PAGE>
1998, KHOT(FM) in Phoenix on April 5, 1999, and the start-up of HBC Radio
Network (a radio network sales and programming division) on January 1, 1999.
Net revenues increased by $7.5 million or 16.9% to $51.9 million for the
three months ended June 30, 1999 from $44.4 million for the same period in 1998.
Net revenues for the six months ended June 30, 1999 increased by $13.9 million,
or 18.4% to $89.6 million, compared to $75.7 million for the same period in
1998. Net revenues increased for the three and six months ended June 30, 1999,
compared to the same periods in 1998 primarily because of (a) revenue growth of
same stations, offset somewhat by a decrease in barter revenues, and (b)
revenues from start-up stations which were not operating for all or part of the
three and six months ended June 30, 1998. Had the WCAA(FM) Acquisition occurred
on January 1, 1998, net revenues, on a pro forma basis, for the three and six
months ended June 30, 1999 would have increased 15.5% and 16.4%,
respectively, compared to the same periods in 1998.
Operating expenses increased by $1.7 million or 6.7% to $27.1 million for
the three months ended June 30, 1999 from $25.4 million for the same period in
1998. Operating expenses for the six months ended June 30, 1999 increased by
$5.6 million or 12.3% to $51.1 million, compared to $45.5 million for the same
period in 1998. Operating expenses increased primarily due to operating expenses
of start-up stations offset somewhat by decreases in barter expenses. As a
percentage of net revenues, operating expenses decreased to 52.2% from 57.2% for
the three months ended June 30, 1999 and 1998, respectively, and decreased to
57.0% from 60.1% for the six months ended June 30, 1999 and 1998, respectively.
Had the WCAA(FM) Acquisition occurred on January 1, 1998, operating expenses,
on a pro forma basis, for the three and six months ended June 30, 1999 would
have increased 5.5% and 10.6%, respectively, compared to the same periods in
1998.
Operating income before corporate expenses, depreciation and amortization
("broadcast cash flow") for the three and six months ended June 30, 1999
increased 30.5% and 27.5%, to $24.8 million and $38.5 million, respectively,
compared to $19.0 million and $30.2 million, respectively, for the three and six
months ended June 30, 1998. As a percentage of net revenues, broadcast cash flow
increased to 47.8% from 42.8% for the three months ended June 30, 1999 and 1998,
respectively, and increased to 43.0% from 39.9% for the six months ended June
30, 1999 and 1998, respectively. Had the WCAA(FM) Acquisition occurred on
January 1, 1998, broadcast cash flow, on a pro forma basis, for the three and
six months ended June 30, 1999 would have increased 28.7% and 25.0%,
respectively, compared to the same periods in 1998.
Corporate expenses of $1.6 million remained unchanged for the three months
ended June 30, 1999, compared to the same period of 1998. Corporate expenses for
the six months ended June 30, 1999, increased by $0.4 million, or 14.3%, to $3.2
million, 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. As a percentage of net revenues, corporate
expenses decreased to 3.1% from 3.6% for the three months ended June 30, 1999
and 1998, respectively, and decreased to 3.6% from 3.7% for the six months ended
June 30, 1999 and 1998, respectively.
EBITDA for the three and six months ended June 30, 1999 increased 33.9% and
28.4%, to $23.3 million and $35.3 million, respectively, compared to $17.4
million and $27.5 million, respectively, for the three and six months ended June
30, 1998. As a percentage of net revenues, EBITDA increased to 44.9% from 39.2%
for the three months ended June 30, 1999 and 1998, respectively, and increased
to 39.4% from 36.3% for the six months ended June 30, 1999 and 1998,
respectively.
Depreciation and amortization for the three months ended June 30, 1999
increased 25.0% to $6.5 million compared to $5.2 million for the same period in
1998. Depreciation and amortization for the six months ended June 30, 1999,
increased 33.7% to $12.7 million compared to $9.5 million for the same period in
1998. The increase in both periods is due to radio station acquisitions and
capital expenditures.
9
<PAGE>
Interest income, net of interest expense decreased to $0.1 million from
$1.1 million for the three months ended June 30, 1999 and 1998, respectively.
Interest income, net of interest expense decreased from $2.8 million for the six
months ended June 30, 1998 to $0.01 million of interest expense, net of interest
income for the six months ended June 30, 1999. Interest income declined in the
three and six months ended June 30, 1999 compared to the same periods in 1998
because the Company utilized all of the proceeds from the January 1998 Offering
to acquire radio stations and it incurred interest expense on the $20.0 million
outstanding on the Credit Facility for May and June of 1999.
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 June 30, 1999, the Company's net income totaled
$10.0 million ($0.20 per common share) compared to $7.8 million ($0.16 per
common share) in the same period in 1998. For the six months ended June 30,
1999, the Company's net income totaled $13.3 million compared to $12.1 million
in the same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended June 30,
1999 was $24.6 million as compared to $24.5 million for the same period in 1998.
Net cash used in investing activities was $42.3 and $174.6 million for the six
months ended June 30, 1999 and 1998, respectively. The $132.3 million decrease
from 1998 to 1999 is due to $171.0 million spent during the first six months of
1998 on radio station acquisitions versus $38.7 million being spent during the
comparable period of 1999. Net cash provided by financing activities was $120.3
and $193.2 million for the six months ended June 30, 1999 and 1998,
respectively. The $72.9 million decrease from 1998 to 1999 is due to the
proceeds of the January 1998 Offering being larger than those of the June 1999
Offering.
Generally, capital expenditures are made with cash provided by operations.
Capital expenditures totaled $3.9 and $1.9 million for the six months ended June
30, 1999 and 1998, respectively. Approximately $1.6 million of the capital
expenditures incurred during the six months ended June 30, 1999 related to radio
signal upgrade projects for four different radio stations and the build-out of
studios related to acquisitions made in New York, Phoenix and Las Vegas.
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 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.
10
<PAGE>
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 Year 2000 compliant general ledger software has been implemented in all
locations in which the Company operates. Twelve of the thirteen radio station
markets in which the Company operates have implemented traffic software which is
Year 2000 compliant. The one remaining radio station market will implement the
new traffic software in November 1999. The Company has reviewed the hardware
used in its operations that might be affected by the Year 2000 problem. Hardware
which was not Year 2000 compliant has been replaced and is now Year 2000
compliant.
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, 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 established a contingency plan in the event of the failure of
its system and the systems of its significant customers, vendors and service
providers, with regard to Year 2000 compliance. There is no assurance that such
a contingency plan 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 June 30, 1999 and cash and cash equivalents as of
June 30, 1999 will be significantly reduced in the third quarter of 1999. The
closing of the KSCA(FM) acquisition and the Z common stock purchase
transactions in the third quarter of 1999 will be financed with cash and cash
equivalents. A change of 10% in the interest rate earned on short-term
investments would not have had a significant impact on the Company's
historical financial statements.
11
<PAGE>
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual Meeting of Stockholders on June 3, 1999 in
Dallas, Texas.
(b) The stockholders of the Company voted to elect five members to the
Board of Directors as follows:
<TABLE>
<CAPTION>
DIRECTORS FOR AGAINST ABSTENTIONS
<S> <C> <C> <C>
McHenry T. Tichenor, Jr. 29,299,007 8,684 0
McHenry T. Tichenor, Sr. 29,305,341 2,350 0
Robert W. Hughes 29,305,307 2,384 0
James M. Raines 29,305,341 2,350 0
Ernesto Cruz 29,305,341 2,350 0
</TABLE>
(c) The stockholders of the Company voted to amend the Company's Second
Amended and Restated Certificate of Incorporation to change the name
of the Company from "Heftel Broadcasting Corporation" to "Hispanic
Broadcasting Corporation" as follows:
FOR AGAINST ABSTENTIONS
29,295,441 7,394 4,856
The stockholders of the Company also voted to ratify the appointment of
KPMG LLP as independent auditors for the year ending December 31, 1999 as
follows:
FOR AGAINST ABSTENTIONS
29,182,639 418 124,634
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).
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
3.3 Certificate of Amendment to the Second Amended and Restated
Certificate of Incorporation of the Registrant dated June 3, 1999.
3.4 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 Exchange Agreement, dated April 14, 1999, by and between
Glendale Broadcasting, Inc., KLNZ License Company, LLC, and Heftel
Broadcasting Corporation.
10.2 First Amendment to Asset Exchange Agreement, dated May 14, 1999,
by and between Glendale Broadcasting, Inc., KLNZ License Company,
LLC, and Heftel Broadcasting Corporation.
10.3 Bridge Loan Agreement, dated May 21, 1999, by and between Sunburst
Texas, LP, Heftel Broadcasting Texas, L.P., and Heftel Broadcasting
Corporation.
10.4 Asset Purchase Agreement, dated July 6, 1999, by and between SBT
Communications Statutory Trust and HBC Broadcasting Texas, L.P.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated April 20, 1999,
disclosing the acquisition of radio station KHOT(FM).
The Company filed a report on Form 8-K dated May 13, 1999, disclosing
the acquisition of radio station KISF(FM).
The Company filed a report on Form 8-K dated May 28, 1999, which
contained the required consents of independent auditors.
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.
Hispanic Broadcasting Corporation
---------------------------------
(Registrant)
/s/ JEFFREY T. HINSON
----------------------------------
Jeffrey T. Hinson
Senior Vice President/
Chief Financial Officer
Dated: August 12, 1999
13
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
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 Certificate of Amendment to the Second Amended and Restated
Certificate of Incorporation of the Registrant dated June 3, 1999.
3.4 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 Exchange Agreement, dated April 14, 1999, by and between
Glendale Broadcasting, Inc., KLNZ License Company, LLC, and Heftel
Broadcasting Corporation.
10.2 First Amendment to Asset Exchange Agreement, dated May 14, 1999,
by and between Glendale Broadcasting, Inc., KLNZ License Company,
LLC, and Heftel Broadcasting Corporation.
10.3 Bridge Loan Agreement, dated May 21, 1999, by and between Sunburst
Texas, LP, Heftel Broadcasting Texas, L.P., and Heftel Broadcasting
Corporation.
10.4 Asset Purchase Agreement, dated July 6, 1999, by and between SBT
Communications Statutory Trust and HBC Broadcasting Texas, L.P.
27 Financial Data Schedule.
</TABLE>
14
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HEFTEL BROADCASTING CORPORATION
HEFTEL BROADCASTING CORPORATION, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation"), does hereby certify as follows:
FIRST: That the Board of Directors of said corporation has adopted
a resolution approving the following as an amendment to the Second Amended
and Restated Certificate of Incorporation of the Corporation:
Article I of the Second Amended and Restated Certificate of
Incorporation is amended to read in its entirety as follows:
"The name of the Corporation is Hispanic Broadcasting
Corporation".
SECOND: That thereafter the stockholders of said Corporation entitled
to vote on the proposed amendment approved the proposed amendment by a
written consent executed by the holders of the necessary number of shares of
common stock in accordance with Section 228 of the Delaware General
Corporation Law.
THIRD: That this Certificate of Amendment to the Second Amended and
Restated Certificate of Incorporation was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That this Certificate of Amendment shall be effective upon
June 3, 1999.
The undersigned, being the President of the Corporation, for the purpose
of amending the Second Amended and Restated Certificate of Incorporation of
said corporation pursuant to the Delaware General Corporation Law, does make
this certificate, hereby declaring and certifying that this is his act and
deed and the acts herein stated are true, and accordingly has hereunto set
his hand this 3rd day of June, 1999.
Heftel Broadcasting Corporation
<PAGE>
By: /s/ McHenry T. Tichenor, Jr.
--------------------------------------------
McHenry T. Tichenor, Jr.
President
<PAGE>
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT is made as of the 14th day of
April, 1999, by and among Glendale Broadcasting, Inc., an Arizona corporation
("Glendale Inc."), KLNZ License Company, LLC, a Delaware limited liability
company ("KLNZ LLC") (collectively Glendale Inc. and KLNZ LLC shall be
referred to as "Z-SPANISH"), and Heftel Broadcasting Corporation, a Delaware
corporation ("HEFTEL").
W I T N E S S E T H:
WHEREAS, Z-Spanish owns and operates commercial radio
broadcasting station KLNZ-FM, 103.5, licensed to Glendale, Arizona (the
"Z-SPANISH STATION"), and holds licenses and other authorizations issued by
the Federal Communications Commission ("FCC") for the operation of the
Z-Spanish Station; and
WHEREAS, Heftel owns and operates commercial radio broadcasting
station KRTX-FM, 100.7, licensed to Winnie, Texas (the "HEFTEL STATION"), and
holds licenses and other authorizations issued by the FCC for the operation
of the Heftel Station (the Z-Spanish Station and the Heftel Station being
collectively referred to herein as the "STATIONS"); and
WHEREAS, Z-Spanish and Heftel desire to exchange ownership of the
Stations and their related assets, in a non-taxable, like-kind exchange
pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended
(the "Code"), under the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as
follows:
1. EXCHANGE OF ASSETS.
1.1 EXCHANGE OF STATION ASSETS. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined herein),
Z-Spanish shall assign, transfer, convey and deliver to Heftel with respect
to the Z-Spanish Station, and Heftel shall assign, transfer, convey and
deliver to Z-Spanish with respect to the Heftel Station, all right, title and
interest in and to the following assets (the "TRANSFERRED ASSETS"), free and
clear of all liens, security interests, charges, encumbrances and rights of
others (other than "PERMITTED LIENS" as defined herein), except those assets
specifically listed on SCHEDULE 1.1(a) and SCHEDULE 1.1(b) hereto (the
"EXCLUDED ASSETS"):
(a) All licenses, permits and auxiliary authorizations issued by
the FCC or any other governmental authority for the operation of the
Stations, together with any and all renewals, extensions and modifications
thereof, any temporary or special authorization, issued to or held by Heftel
or Z-Spanish in connection with
<PAGE>
the business and operations of the Stations, and any pending applications
therefor ("GOVERNMENTAL LICENSES");
(b) The real and personal property set forth on SCHEDULE 1.1(c)
and SCHEDULE 1.1(d) hereto, together with replacements thereof and additions
thereto made between the date hereof and the Closing; and
(c) Unless as may be otherwise required by law, the books and
records related to the Transferred Assets, such as property tax records,
logs, all materials maintained in the FCC public file relating to the
Stations, technical data and records and all correspondence with and
documents pertaining to governmental authorities and other third parties (the
"BUSINESS RECORDS").
The Transferred Assets to be transferred from Z-Spanish to Heftel are
referred to herein as the "Z-SPANISH TRANSFERRED ASSETS." The Transferred
Assets to be transferred from Heftel to Z-Spanish are referred to herein as
the "HEFTEL TRANSFERRED ASSETS." The consideration for the assets transferred
by each party shall be the assets transferred to such party by the other
party hereunder and the assumption of certain liabilities as set forth in
SECTION 1.2.
1.2 ASSUMED CONTRACTS.
(a) At the Closing, Heftel shall assume those specified
contractual obligations of the Z-Spanish Station listed on SCHEDULE 1.2(a)
hereto, as the same may be amended through the Closing Date with the mutual
consent of Z-Spanish and Heftel (the "HEFTEL ASSUMED CONTRACTS"), and Heftel
agrees to pay and perform the Heftel Assumed Contracts after the Closing Date.
(b) At the Closing, Z-Spanish shall assume those specified
contractual obligations of the Heftel Station listed on SCHEDULE 1.2(b)
hereto, as the same may be amended through the Closing Date with the mutual
consent of Z-Spanish and Heftel (the "Z-SPANISH ASSUMED CONTRACTS"), and
Z-Spanish agrees to pay and perform the Z-Spanish Assumed Contracts after the
Closing Date.
(c) Except as specifically set forth in this SECTION 1.2, Heftel
does not assume and shall in no event be liable for any debt, obligation,
responsibility or liability of the Z-Spanish Station, Z-Spanish, any
subsidiary or any affiliate or successor of Z-Spanish, or any claim against
any of the foregoing, whether known or unknown, contingent or absolute, or
otherwise. Except as specifically set forth in this SECTION 1.2, Z-Spanish
does not assume and shall in no event be liable for any debt, obligation,
responsibility or liability of the Heftel Station, Heftel, any
2
<PAGE>
subsidiary or any affiliate or successor of Heftel, or any claim against any
of the foregoing, whether known or unknown, contingent or absolute, or
otherwise. Without limiting the foregoing, neither party shall be liable for
any contractual obligation of the other unless specifically included on
SCHEDULE 1.2(a) or SCHEDULE 1.2(b), or for any obligations to the other's
employees.
1.3 TAX TREATMENT OF EXCHANGE. Z-Spanish and Heftel shall
structure the exchange of the Stations as a like-kind exchange of property in
accordance with Section 1031 of the Code and the Treasury Regulations
thereunder (the "Regulations"). Heftel and Z-Spanish shall use the values,
exchange groups, residual group and liabilities, as mutually determined by,
and acceptable to, Z-Spanish and Heftel, to determine their respective
taxable gain or loss, if any, resulting from the exchange of the Stations.
All federal and state tax returns and other reporting made to any
governmental agency, including specifically Form 8594 which shall be filed
with the Internal Revenue Service.
2. CLOSING.
2.1 TIME OF CLOSING.
(a) A closing (the "CLOSING") for the exchange of the Transferred
Assets shall be held at such place as may be selected by the parties on the
date which is the later of (i) the tenth business day after the Final Order
(as defined hereinbelow) or (ii) the satisfaction or waiver of all of the
conditions precedent to the obligations of Heftel and Z-Spanish hereunder, or
on such other date as may be agreed upon by the parties in writing (the
"CLOSING DATE"); provided, however, that in no event shall the Closing Date
be prior to the earlier of (i) 15 days after the acquisition of KCDX
(referenced in Section 5.4 below) or (ii) July 31, 1999. The Closing shall be
deemed to be effective as of 12:01 a.m. on the Closing Date.
(b) Z-Spanish shall prepare an application to be filed with the
FCC requesting its consent to the assignment of all Governmental Licenses
relating to the operation of the Z-Spanish Station to Heftel (the "Z-SPANISH
GOVERNMENTAL LICENSES"). Heftel shall prepare an application to be filed with
the FCC requesting its consent to the assignment of all Governmental Licenses
relating to the operation of the Heftel Station to Z-Spanish (the "HEFTEL
GOVERNMENTAL LICENSES"). Z-Spanish and Heftel shall assist the other in the
filing of the applications (collectively the "ASSIGNMENT APPLICATIONS"),
shall promptly furnish to the other any information necessary for the
Assignment Applications and shall jointly file the Assignment Applications
with the FCC, requesting that consent to each assignment be granted.
Z-Spanish and Heftel shall use their respective commercially reasonable
efforts to
3
<PAGE>
file the Assignment Applications within 10 days following the execution of
this Agreement. The parties agree that the Assignment Applications will be
prosecuted in good faith and with due diligence. The parties agree to use
their commercially reasonable efforts to file additional information or
amendments requested by the FCC orally or in writing within five business
days after such request and, in any event, to commence preparation of such
additional information or amendments immediately upon request and to complete
and file the same with the FCC as rapidly as practical. Each party will be
solely responsible for the expenses incurred by it in the preparation, filing
and prosecution of the Assignment Applications (it being understood that the
parties will bear equally the FCC filing fee). As used herein, the term "FCC
ORDER" shall mean that the FCC has granted or given its initial consent,
without any condition materially adverse to Heftel or Z-Spanish, to the
Assignment Applications; and the term "FINAL ORDER" shall mean that the FCC
Order shall have been final, that such FCC Order is not reversed, stayed,
enjoined or set aside, and with respect to such FCC Order, no timely request
for stay, reconsideration, review, rehearing or notice of appeal is pending,
and as to which FCC Order the time for filing any such request, petition or
notice of appeal or for review by the FCC on its own motion has expired.
(c) To the extent required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR ACT"), the parties further agree to use
their commercially reasonable efforts to make any necessary filings under the
HSR Act. Heftel and Z-Spanish will bear equally the filing fees due under the
HSR Act.
2.2 CLOSING PROCEDURE. At the Closing, (i) Z-Spanish shall
deliver to Heftel the bills of sale, instruments of assignment, transfer and
conveyance as Heftel shall reasonably request with respect to the Z-Spanish
Station; and (ii) Heftel shall deliver to Z-Spanish such deeds, bills of
sale, instruments of assignment, transfer and conveyance as Z-Spanish shall
reasonably request with respect to the Heftel Station. Each party will cause
to be prepared, executed and delivered all other documents required to be
delivered by such party pursuant to this Agreement and all other appropriate
and customary documents as the other party or its counsel may reasonably
request for the purpose of consummating the transactions contemplated by this
Agreement. All actions taken at the Closing shall be deemed to have been
taken simultaneously at the time the last of any such actions is taken or
completed.
3. REPRESENTATIONS AND WARRANTIES OF Z-SPANISH.
Z-Spanish hereby represents and warrants to Heftel, as follows:
4
<PAGE>
3.1 ORGANIZATION; GOOD STANDING. Glendale Inc. is a corporation,
duly incorporated, validly existing and in good standing under the laws of
the State of Arizona and has all requisite corporate power and authority to
own and lease its properties and assets and to carry on its business as
currently conducted. KLNZ LLC is a limited liability company, duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own and lease its own
properties and assets and to carry on its business as currently conducted.
Z-Spanish is qualified as a foreign corporation or limited liability company,
as applicable, in each jurisdiction where it is required to be so qualified.
3.2 DUE AUTHORIZATION; EXECUTION AND DELIVERY. Subject to the
issuance of the FCC Order and obtaining any other consents required to be
obtained hereunder, Z-Spanish has full power and authority to enter into and
perform this Agreement and to carry out the transactions contemplated hereby.
Z-Spanish has taken all requisite action to approve the execution and
delivery of this Agreement and the transactions contemplated hereby. This
Agreement constitutes the legal, valid and binding obligation of Z-Spanish,
enforceable against it in accordance with its terms, except as may be limited
by the availability of equitable remedies or by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors'
rights generally. Neither the execution and delivery by Z-Spanish of this
Agreement nor the consummation by it of the transactions contemplated hereby
will: (i) conflict with or result in a breach of the certificate of
incorporation or bylaws of Z-Spanish; (ii) subject to the issuance of the FCC
Order and obtaining any other consents required to be obtained hereunder,
violate any statute, law, rule or regulation or any order, writ, injunction
or decree of any court or governmental authority, which violation, either
individually or in the aggregate, might reasonably be expected to have a
material adverse effect on the business or operations of Z-Spanish or
Heftel's ownership of the Z-Spanish Transferred Assets; or (iii) violate or
conflict with or constitute a default under (or give rise to any right of
termination, cancellation or acceleration under), or result in the creation
of any lien on any of the Z-Spanish Transferred Assets pursuant to, any
material agreement, indenture, mortgage or other material instrument to which
Z-Spanish is a party or by which it or its assets may be bound or affected.
3.3 GOVERNMENTAL CONSENTS. No approval, authorization, consent,
order or other action of, or filing with, any governmental authority or
administrative agency is required in connection with the execution and
delivery by Z-Spanish of this Agreement or the consummation of the
transactions contemplated hereby, other than those of the FCC and under the
HSR Act.
5
<PAGE>
3.4 TITLE TO ASSETS. Except as otherwise set forth on SCHEDULE
3.4 and for Z-Spanish Permitted Liens (as defined herein), Z-Spanish is the
sole and exclusive legal owner of all right, title and interest in, and has
good and marketable title to, all of the Z-Spanish Transferred Assets, free
and clear of liens, claims and encumbrances. As used herein, "Z-SPANISH
PERMITTED LIENS" shall mean, in each case with respect to the Z-Spanish
Transferred Assets, (i) liens for current taxes and other governmental
charges not yet due and payable, (ii) mechanics' liens and other similar
liens arising in the ordinary course that will be discharged prior to Closing
and (iii) statutory landlord's liens arising in the ordinary course.
3.5 REAL ESTATE.
(a) Z-Spanish has a valid, binding and enforceable leasehold
interest, free and clear of liens (other than Z-Spanish Permitted Liens),
claims, encumbrances, subleases or other restrictions, in and to the real
estate on which the operations of the Z-Spanish Station are conducted and the
buildings, structures and improvements situated thereon that are necessary
for the operation of the Z-Spanish Station (the "Z-SPANISH REAL ESTATE"). A
true, complete and correct copy of the leases evidencing such interests has
been furnished to Heftel.
(b) Z-Spanish has not received any notice of, and has no actual
knowledge of, any material violation of any zoning, building, health, fire,
water use or similar statute, ordinance, law, regulation or code in
connection with the leasehold interest in the Z-Spanish Real Estate. To the
knowledge of Z-Spanish, no fact or condition exists which would result in the
termination or impairment of access of the Z-Spanish Station to the Z-Spanish
Real Estate or discontinuation of necessary sewer, water, electrical, gas,
telephone or other utilities or services.
(c) To Z-Spanish's knowledge, no Hazardous Material (as defined
below) exists in any structure located on, or exists on or under the surface
of, any of the Z-Spanish Real Estate which is in violation of Environmental
Law. For purposes of this Agreement, "HAZARDOUS MATERIAL" shall mean waste,
substance, materials, smoke, gas or particulate matter designated as
hazardous, toxic or dangerous under any Environmental Law. For purposes of
this Agreement, "ENVIRONMENTAL LAW" shall include the Comprehensive
Environmental Response Compensation and Liability Act, the Clean Air Act, the
Clean Water Act and any other applicable federal, state or local
environmental, health or safety law, rule or regulation relating to or
imposing liability or standards concerning or in connection with Hazardous
Materials.
6
<PAGE>
3.6 CONDITION OF ASSETS. All of the Z-Spanish Transferred Assets
viewed as a whole and not on an asset by asset basis are in good condition
and working order, ordinary wear and tear excepted, and are suitable for the
uses for which intended, free from any known defects except such minor
defects that do not interfere with the continued use thereof.
3.7 GOVERNMENTAL LICENSES. SCHEDULE 3.7 lists and accurately
describes all of the Z-Spanish Governmental Licenses necessary for the lawful
ownership and operation of the Z-Spanish Station and the conduct of its
business, except where the failure to hold such Governmental License would
not have a material adverse effect on the Z-Spanish Station. Z-Spanish has
furnished to Heftel true and accurate copies of all of the Z-Spanish
Governmental Licenses. Each such Governmental License is in full force and
effect and is valid under applicable federal, state and local laws; the
Z-Spanish Station is being operated in compliance in all material respects
with the Communications Act of 1934, as amended (the "Act"), and all rules,
regulations and policies of the FCC; and to the knowledge of Z-Spanish, no
event has occurred which (whether with or without notice, lapse of time or
the happening or occurrence of any other event) is reasonably likely to
result in the revocation or termination of any Governmental License or the
imposition of any restriction of such a nature as might adversely affect the
ownership or operation of the Z-Spanish Station as now conducted, except for
proceedings of a legislative or rule-making nature intended to affect the
broadcasting industry generally. The Z-Spanish Station, its physical
facilities, electrical and mechanical systems and transmitting and studio
equipment are being operated in all material respects in accordance with the
specifications of the Z-Spanish Governmental Licenses. The Z-Spanish
Governmental Licenses are unimpaired by any act or omission of Z-Spanish or
any of Z-Spanish's officers, directors or employees and Z-Spanish has
fulfilled and performed all of its obligations with respect to the Z-Spanish
Governmental Licenses and has full power and authority thereunder. No
application, action or proceeding is pending for the renewal or modification
of any of the Z-Spanish Governmental Licenses. No event has occurred which,
individually or in the aggregate, and with or without the giving of notice or
the lapse of time or both, would constitute ground for revocation thereof and
would have a materially adverse effect on the business or financial
conditions of the Z-Spanish Station.
3.8 TAXES. Other than taxes imposed upon the income of Z-Spanish (as
to which no representation is made), all tax reports and returns required to be
filed by Z-Spanish relating to the Z-Spanish Transferred Assets or operations
(including sales, use, property and employment taxes) have been filed with the
appropriate federal, state and local governmental agencies, and there have been
paid all taxes,
7
<PAGE>
penalties, interest, deficiencies, assessments or other charges due as
reflected on the filed returns or claimed to be due by such federal, state or
local taxing authorities (other than taxes, deficiencies, assessments or
claims which are being contested in good faith and which in the aggregate are
not material). There are no examinations or audits pending or unresolved
examinations or audit issues with respect to Z-Spanish's state or local tax
returns relating primarily to the Z-Spanish Transferred Assets. All
additional taxes, if any, assessed as a result of such examinations or audits
have been paid. There are no pending claims or proceedings relating to, or
asserted for, taxes, penalties, interest, deficiencies or assessments against
the Z-Spanish Transferred Assets.
3.9 LITIGATION. There is no order of any court, governmental
agency or authority and no complaint, notice of violation, action, suit,
proceeding or investigation, judicial, administrative or otherwise, of which
Z-Spanish has knowledge that is pending or threatened against or affecting
the Z-Spanish Station which, if adversely determined, might materially and
adversely affect the business, operations, properties, assets or conditions
(financial or otherwise) of the Z-Spanish Station or which challenges the
validity or propriety of any of the transactions contemplated by this
Agreement.
3.10 REPORTS. Z-Spanish has duly filed all reports required to be
filed by law or applicable rule, regulation, order, writ or decree of any
court, governmental commission, body or instrumentality and has made payment
of all charges and other payments, if any, shown by such reports to be due
and payable, except where the failure to so file or make payment would not
have a material adverse effect upon the operations of the Z-Spanish Station.
All reports required to be filed by Z-Spanish with the FCC with respect to
the Z-Spanish Station have been filed, except where the failure to so file
would not materially and adversely affect the business, operations,
properties, assets or conditions (financial or otherwise) of the Z-Spanish
Station or which challenges the validity or propriety of any of the
transactions contemplated by this Agreement. Such reports and disclosures are
complete and accurate in all material respects.
3.11 CONTRACTS AND AGREEMENTS. The Z-Spanish Station is not in
default with respect to any of the contracts contained on SCHEDULE 1.2(a)
hereto, and, as of the Closing Date, the Z-Spanish Station will have paid all
sums and performed all obligations under such contracts which are required to
be paid or performed prior to the Closing Date. True and complete copies of
such contracts have been delivered to Heftel on or prior to the date hereof.
8
<PAGE>
3.12 INTANGIBLE PROPERTY. Z-Spanish has, and after the Closing,
Heftel will have, the right to use the intangible property included in the
Z-Spanish Transferred Assets, free and clear of any royalty or other payment
obligations. Z-Spanish's use of such intangible property does not conflict
with, violate or infringe upon any rights of any other person or entity with
respect to such intangible property and Z-Spanish has not received any notice
of any such claimed conflict, violation or infringement.
3.13 THIRD PARTY CONSENTS. By the Closing Date, Z-Spanish will
have obtained all consents from any person or entity (other than the FCC
Order) which are required in connection with the execution and delivery by
Z-Spanish of this Agreement and the consummation of the transactions
contemplated hereby, which such consents are described on SCHEDULE 3.13,
except where the failure to obtain such consent has been waived by Heftel on
or prior to the Closing Date.
3.14. YEAR 2000. All operating system, application and other
computer software included in the Z-Spanish Transferred Assets is currently
Year 2000 compliant, or to the extent that such software or hardware is not
currently Year 2000 compliant, Z-Spanish has in place and is implementing
detailed plans to ensure that such software and hardware will be Year 2000
compliant no later than the Closing Date.
3.15 QUALIFICATION OF Z-SPANISH. Z-Spanish does not have any
knowledge of any facts or proceedings which are reasonably likely to
disqualify it under the Act, the rules and regulations promulgated
thereunder, and the policies of the FCC in respect thereof, from acquiring or
operating the Heftel Station or would otherwise cause the FCC not to approve
the assignment of the Heftel Governmental Licenses to Z-Spanish.
9
<PAGE>
3.16 FINDERS AND BROKERS. Except as to Rumbaut & Co. (whose fees
and expenses shall be paid by Heftel), there are no agreements or
understandings that give rise to any valid claim against any of the parties
hereto for a brokerage commission, finder's fee or other like payment.
4. REPRESENTATIONS AND WARRANTIES OF HEFTEL.
Heftel hereby represents and warrants to Z-Spanish, as follows:
4.1 ORGANIZATION; GOOD STANDING. Heftel is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own
and lease its properties and assets and to carry on its business as currently
conducted. Heftel is qualified as a foreign corporation in each jurisdiction
where it is required to be so qualified.
4.2 DUE AUTHORIZATION; EXECUTION AND DELIVERY. Subject to the
issuance of the FCC Order and obtaining any other consents required to be
obtained hereunder, Heftel has full power and authority to enter into and
perform this Agreement and to carry out the transactions contemplated hereby.
Heftel has taken all requisite action to approve the execution and delivery
of this Agreement and the transactions contemplated hereby. This Agreement
constitutes the legal, valid and binding obligation of Heftel, enforceable
against it in accordance with its terms, except as may be limited by the
availability of equitable remedies or by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights
generally. Neither the execution and delivery by Heftel of this Agreement nor
the consummation by it of the transactions contemplated hereby will: (i)
conflict with or result in a breach of the certificate of incorporation or
bylaws of Heftel; (ii) subject to the issuance of the FCC Order and obtaining
any other consents required to be obtained hereunder, violate any statute,
law, rule or regulation or any order, writ, injunction or decree of any court
or governmental authority, which violation, either individually or in the
aggregate, might reasonably be expected to have a material adverse effect on
the business or operations of Heftel or Z-Spanish's ownership of the Heftel
Transferred Assets; or (iii) violate or conflict with or constitute a default
under (or give rise to any right of termination, cancellation or acceleration
under), or result in the creation of any lien on any of the Heftel
Transferred Assets pursuant to, any material agreement, indenture, mortgage
or other material instrument to which Heftel is a party or by which it or its
assets may be bound or affected.
10
<PAGE>
4.3 GOVERNMENTAL CONSENTS. No approval, authorization, consent,
order or other action of, or filing with, any governmental authority or
administrative agency is required in connection with the execution and
delivery by Heftel of this Agreement or the consummation of the transactions
contemplated hereby, other than those of the FCC or under the HSR Act.
4.4 TITLE TO ASSETS. Except for Heftel Permitted Liens (as
defined herein), Heftel or a subsidiary thereof is the sole and exclusive
legal owner of all right, title and interest in, and has good and marketable
title to, all of the Heftel Transferred Assets, free and clear of liens,
claims and encumbrances. As used herein, "HEFTEL PERMITTED LIENS" shall mean,
in each case with respect to the Heftel Transferred Assets, (i) liens for
current taxes and other governmental charges not yet due and payable, (ii)
mechanics' liens and other similar liens arising in the ordinary course that
will be discharged prior to Closing and (iii) statutory landlord's liens
arising in the ordinary course.
4.5 REAL ESTATE.
(a) Heftel has a valid, binding and enforceable leasehold
interest, free and clear of liens (other than Heftel Permitted Liens),
claims, encumbrances, subleases or other restrictions, in and to the real
estate on which the operations of the Heftel Station are conducted and the
buildings, structures and improvements situated thereon that are necessary
for the operation of the Heftel Station (the "HEFTEL REAL ESTATE"). A true,
complete and correct copy of the leases evidencing such interests has been
furnished to Z-Spanish.
(b) Heftel has not received any notice of, and has no actual
knowledge of, any material violation of any zoning, building, health, fire,
water use or similar statute, ordinance, law, regulation or code in
connection with its interest in the Heftel Real Estate. To the knowledge of
Heftel, no fact or condition exists which would result in the termination or
impairment of access of the Heftel Station to the Heftel Real Estate or
discontinuation of necessary sewer, water, electrical, gas, telephone or
other utilities or services.
(c) To Heftel's knowledge, no Hazardous Material exists in any
structure located on, or exists on or under the surface of, the Heftel Real
Property which is in violation of Environmental Law. Heftel has not received
any notice that Hazardous Material exists in any structure located on, or
exists on or under the surface of, the other Heftel Real Estate which is in
violation of Environmental Law.
11
<PAGE>
4.6 CONDITION OF ASSETS. All of the Heftel Transferred Assets
viewed as a whole and not on an asset by asset basis are in good condition
and working order, ordinary wear and tear excepted, and are suitable for the
uses for which intended, free from any known defects except such minor
defects that do not interfere with the continued use thereof.
4.7 GOVERNMENTAL LICENSES. SCHEDULE 4.7 lists and accurately
describes all of the Heftel Governmental Licenses necessary for the lawful
ownership and operation of the Heftel Station and the conduct of their
business, except where the failure to hold such Governmental Licenses would
not have a material adverse effect on the Heftel Station. Heftel has
furnished to Z-Spanish true and accurate copies of all of the Heftel
Governmental Licenses. Each such Governmental License is in full force and
effect and is valid under applicable federal, state and local laws; the
Heftel Station is being operated in compliance in all material respects with
the Act and all rules, regulations and policies of the FCC; and, to the
knowledge of Heftel, no event has occurred which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) is
reasonably likely to result in the revocation or termination of any
Governmental License or the imposition of any restriction of such a nature as
might adversely affect the ownership or operation of the Heftel Station as
now conducted, except for proceedings of a legislative or rule-making nature
intended to affect the broadcasting industry generally. The Heftel Station,
its physical facilities, electrical and mechanical systems and transmitting
and studio equipment are being operated in all material respects in
accordance with the specifications of the Heftel Governmental Licenses. The
Heftel Governmental Licenses are unimpaired by any act or omission of Heftel
or any of Heftel's officers, directors or employees and Heftel has fulfilled
and performed all of its obligations with respect hereto and has full power
and authority thereunder. No application, action or proceeding is pending for
the renewal or modification of any of the Heftel Governmental Licenses. No
event has occurred which, individually or in the aggregate, and with or
without the giving of notice or the lapse of time or both, would constitute
grounds for revocation thereof and would have a materially adverse effect on
the business or financial conditions of the Heftel Station.
4.8 TAXES. Other than taxes imposed upon the income of Heftel (as to
which no representation is made), all tax reports and returns required to be
filed by Heftel relating to the Heftel Transferred Assets or operations
(including sales, use, property and employment taxes) have been filed with the
appropriate federal, state and local governmental agencies, and there have been
paid all taxes, penalties, interest, deficiencies, assessments or other charges
due as reflected on the filed returns or claimed to be due by such federal,
state or local taxing authorities (other
12
<PAGE>
than taxes, deficiencies, assessments or claims which are being contested in
good faith and which in the aggregate are not material). There are no
examinations or audits pending or unresolved examinations or audit issues
with respect to Heftel's state or local tax returns relating to the Heftel
Transferred Assets. All additional taxes, if any, assessed as a result of
such examinations or audits have been paid. There are no pending claims or
proceedings relating to, or asserted for, taxes, penalties, interest,
deficiencies or assessments against the Heftel Transferred Assets.
4.9 LITIGATION. There is no order of any court, governmental
agency or authority and no complaint, notice of violation, action, suit,
proceeding or investigation, judicial, administrative or otherwise, that is
pending or, to Heftel's knowledge, threatened against or affecting the Heftel
Station which, if adversely determined, might materially and adversely affect
the business, operations, properties, assets or conditions (financial or
otherwise) of the Heftel Station or which challenges the validity or
propriety of any of the transactions contemplated by this Agreement.
4.10 REPORTS. Heftel has duly filed all reports required to be
filed by law or applicable rule, regulation, order, writ or decree of any
court, governmental commission, body or instrumentality and has made payment
of all charges and other payments, if any, shown by such reports to be due
and payable, except where the failure to so file or make payment would not
have a material adverse effect upon the operations of the Heftel Station. All
reports required to be filed by Heftel with the FCC with respect to the
Heftel Station have been filed, except where the failure to so file would not
materially and adversely affect the business, operations, properties, assets
or conditions (financial or otherwise) of the Heftel Station or which
challenges the validity or propriety of any of the transactions contemplated
by this Agreement. Such reports and disclosures are complete and accurate in
all material respects.
4.11 CONTRACTS AND AGREEMENTS. The Heftel Station is not in
default with respect to any of the contracts contained on SCHEDULE 1.2(B)
hereto, and, as of the Closing Date, the Heftel Station will have paid all
sums and performed all obligations under such contracts which are required to
be paid or performed prior to the Closing Date. True and complete copies of
such contracts have been delivered to Z-Spanish on or prior to the date
hereof.
4.12 INTANGIBLE PROPERTY. Heftel has, and after the Closing,
Z-Spanish will have, the right to use the intangible property included in the
Heftel Transferred Assets, free and clear of any royalty or other payment
obligations. Heftel's use of such intangible property does not conflict with,
violate or infringe upon any rights
13
<PAGE>
of any other person or entity with respect to such intangible property and
Heftel has not received any notice of any such claimed conflict, violation or
infringement.
4.13 THIRD PARTY CONSENTS. By the Closing Date, Heftel will have
obtained all consents from any person or entity (other than the FCC Order)
which are required in connection with the execution and delivery by Heftel of
this Agreement and the consummation of the transactions contemplated hereby,
which such consents are described on SCHEDULE 4.13, except where the failure
to obtain such consent has been waived by Z-Spanish on or prior to the
Closing Date.
4.14 YEAR 2000. All operating system, application and other
computer software included in the Heftel Transferred Assets is currently Year
2000 compliant, or to the extent that such software or hardware is not
currently Year 2000 compliant, Heftel has in place and is implementing
detailed plans to ensure that such software and hardware will be Year 2000
compliant no later than the Closing Date.
4.15 QUALIFICATION OF HEFTEL. Heftel does not have any knowledge
of any facts or proceedings which are reasonably likely to disqualify it
under the Act, the rules and regulations promulgated thereunder, and the
policies of the FCC in respect thereof, from acquiring or operating the
Z-Spanish Station or would otherwise cause the FCC not to approve the
assignment of the Z-Spanish Governmental Licenses to Heftel.
4.16 FINDERS AND BROKERS. Except as to Rumbaut & Co. (whose fees
and expenses shall be paid by Heftel), there are no agreements or
understandings that give rise to any valid claim against any of the parties
hereto for a brokerage commission, finder's fee or other like payment.
5. CERTAIN COVENANTS AND AGREEMENTS.
5.1 ACCESS. Each of Heftel and Z-Spanish will take all action
reasonably necessary to enable the other, its counsel, accountants and other
representatives to discuss the affairs, properties, business, operations and
records of the Transferred Assets at such times and as often as Heftel or
Z-Spanish (as the case may be) may reasonably request with executives,
independent accountants, engineers and counsel of the other party. In the
event that the Closing does not occur and this Agreement is terminated, each
party shall keep in confidence, and shall cause its counsel, accountants and
other representatives to keep in confidence, and shall not use or disclose to
others, all information provided hereunder to it, except such information as
is in the public domain or as required by law.
14
<PAGE>
5.2 COMMERCIALLY REASONABLE EFFORTS. Each of Z-Spanish and Heftel
shall take all reasonable action necessary to consummate the transactions
contemplated by this Agreement and will use all commercially reasonable
efforts to obtain all necessary consents and approvals of other persons and
governmental authorities required to enable it to consummate the transactions
contemplated by this Agreement; provided, however, nothing herein shall
require the expenditure or payment of monies or the giving of any other
consideration by either party in order to obtain any such consent (other than
governmental filing fees and the payment of reasonable fees and expenses of a
party's own advisors and representatives). Each of Heftel and Z-Spanish
acknowledges and agrees that it shall pay all costs, fees (other than as
expressly provided herein) and expenses incurred by it in obtaining such
necessary consents and approvals to transfer the Heftel Transferred Assets
and Z-Spanish Transferred Assets, respectively. Each party shall make all
filings, applications, statements and reports to all governmental agencies or
entities which are required to be made prior to the Closing Date by or on its
behalf pursuant to any statute, rule or regulation in connection with the
transactions contemplated by this Agreement, and copies of all such filings,
applications, statements and reports shall be provided to the other.
5.3 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, all notices
to third parties and other publicity relating to the transaction contemplated
by this Agreement shall be jointly planned and agreed to by Z-Spanish and
Heftel; provided, however, each of Heftel and Z-Spanish shall be entitled to
make such disclosure in its sole discretion as may be required by any
applicable governmental regulations.
15
<PAGE>
5.4 MAINTENANCE OF BUSINESS. Between the date of this Agreement
and the Closing, each party shall conduct the business of the Stations and
use the Transferred Assets only in the ordinary course of business,
consistent with past practices, which shall include compliance in all
material respects with all laws, regulations and administrative orders of any
federal, state or local governmental authority that are applicable to each
party with respect to the Transferred Assets or the operation of the
Stations, with the intent of preserving the ongoing operations of the
Stations and the Transferred Assets. Without limiting the generality of the
foregoing:
(a) Each party shall: (i) maintain the Transferred Assets in
their present condition (reasonable wear and tear in normal use excepted);
(ii) remove, cure and correct prior to the Closing any violations under
applicable statutes, rules or regulations that render (or if unremedied would
render) inaccurate such party's representations and warranties contained in
this Agreement or in any certificate delivered by such party pursuant to this
Agreement; (iii) maintain its existing insurance coverage on the Stations and
the Transferred Assets; and (iv) maintain its books and records in the usual
and ordinary manner, on a basis consistent with prior periods.
(b) Neither party shall, without the other party's prior written
consent (which shall not unreasonably be withheld or delayed) create, assume
or permit to exist any lien upon the Transferred Assets, except for Permitted
Liens or liens in existence on the date of this Agreement which will be
removed on or prior to Closing Date.
(c) Neither party shall sell or agree to sell or otherwise
dispose of any of the Transferred Assets, unless such sale or disposal occurs
in the ordinary course of business, consistent with past practices and such
Transferred Assets are replaced with similar assets of equal or greater value
and utility.
(d) Each party shall operate the Stations in all respects in
accordance with the Governmental Licenses, and all applicable rules and
regulations of the FCC and all other applicable laws, regulations, rules and
orders. Each party shall use its commercially reasonable efforts not to cause
or permit any of the Governmental Licenses to expire, be surrendered,
adversely modified or otherwise terminated.
Notwithstanding the foregoing, Heftel acknowledges that, prior to Closing,
(i) Z-Spanish shall be permitted to simulcast its Z-Spanish Station
programming on station KCDX(FM), Florence, Arizona ("KCDX") for a period of
15 days from the date that a commonly owned or affiliated company of
Z-Spanish acquires KCDX,
16
<PAGE>
after which the Z-Spanish Station may program instrumental music and KCDX
shall continue to broadcast the programming format previously aired on the
Z-Spanish Station; and (ii) Z-Spanish shall be permitted to relinquish the
"KLNZ" call sign for the Z-Spanish Station and transfer said call sign, with
the approval of the FCC, to station KCDX (it being understood that Z-Spanish
shall request from the FCC any replacement call sign for the Z-Spanish
Station as may be requested by Heftel.
6. CONDITIONS TO HEFTEL'S CLOSING.
All obligations of Heftel under this Agreement shall be subject
to the fulfillment at or prior to the Closing of the following conditions, it
being understood that Heftel may, in its sole discretion, waive any or all of
such conditions (except for the requirement of FCC consent) in whole or in
part:
6.1 REPRESENTATIONS, ETC. Z-Spanish shall have performed in all
material respects the covenants and agreements contained in this Agreement
that are to be performed by it at or prior to the Closing, and the
representations and warranties of Z-Spanish contained in this Agreement shall
be true and correct in all material respects as of the Closing Date with the
same effect as though made at such time, except as contemplated or permitted
by this Agreement.
6.2 CONSENTS. All consents and approvals from the FCC and
governmental agencies (including the FCC Order) and from other third parties
required to consummate the transactions contemplated by this Agreement shall
have been obtained without material cost or other materially adverse
consequence to Heftel and shall be in full force and effect.
6.3 NO ADVERSE LITIGATION. No order or temporary, preliminary or
permanent injunction or restraining order shall have been entered and no
action, suit or other legal or administrative proceeding by any court or
governmental authority, agency or other person shall be pending or threatened
on the Closing Date which may have the effect of (i) making any of the
transactions contemplated hereby illegal, (ii) materially adversely affecting
the value of the Z-Spanish Transferred Assets, other than any of the
foregoing which affects the radio broadcasting industry generally or (iii)
making Heftel liable for the payment of damages to any person as a result of
the transactions contemplated hereby.
6.4 CLOSING DELIVERIES. Heftel shall have received each of the
documents or items required to be delivered to it pursuant to SECTION 8.1
hereof.
17
<PAGE>
7. CONDITIONS TO Z-SPANISH'S CLOSING.
All obligations of Z-Spanish under this Agreement shall be
subject to the fulfillment at or prior to the Closing of the following
conditions, it being understood that Z-Spanish may, in its sole discretion,
waive any or all of such conditions (except for the requirement of FCC
consent) in whole or in part:
7.1 REPRESENTATIONS, ETC. Heftel shall have performed in all
material respects the covenants and agreements contained in this Agreement
that are to be performed by it at or prior to the Closing, and the
representations and warranties of Heftel contained in this Agreement shall be
true and correct in all material respects as of the Closing Date with the
same effect as though made at such time, except as contemplated or permitted
by this Agreement.
7.2 CONSENTS. All consents and approvals from the FCC and
governmental agencies (including the FCC Order) and from other third parties
required to consummate the transactions contemplated by this Agreement shall
have been obtained without material cost or other materially adverse
consequence to Z-Spanish and shall be in full force and effect.
7.3 NO ADVERSE LITIGATION. No order or temporary, preliminary or
permanent injunction or restraining order shall have been entered and no
action, suit or other legal or administrative proceeding by any court or
governmental authority, agency or other person shall be pending or threatened
on the Closing Date which may have the effect of (i) making any of the
transactions contemplated hereby illegal, (ii) materially adversely affecting
the value of the Heftel Transferred Assets, other than any of the foregoing
which affects the radio broadcasting industry generally or (iii) making
Z-Spanish liable for the payment of damages to any person as a result of the
transactions contemplated hereby.
7.4 CLOSING DELIVERIES. Z-Spanish shall have received each of
the documents or items required to be delivered to it pursuant to SECTION 8.2
hereof.
8. DOCUMENTS TO BE DELIVERED AT CLOSING.
8.1 CLOSING DOCUMENTS TO BE DELIVERED BY Z-SPANISH.
At the Closing, Z-Spanish shall deliver to Heftel (in form and
substance reasonably satisfactory to Heftel):
18
<PAGE>
(a) One or more assignments assigning to Heftel the Z-Spanish
Governmental Licenses, as Heftel may request;
(b) A bill of sale conveying to Heftel all of the Z-Spanish
Transferred Assets constituting tangible personal property.
(c) One or more assignment and assumption agreements by which
Z-Spanish assigns the Z-Spanish Material Contracts to Heftel, and Heftel
assumes the Assumed Contracts and agrees to perform, from and after the
Closing Date, all of the Assumed Contracts, together with each consent
obtained by Z-Spanish necessary for the assignments of such contracts;
(d) Certified copies of resolutions of Z-Spanish's Board of
Directors and shareholders authorizing the execution, delivery and
performance of this Agreement;
(e) A certificate executed by Z-Spanish attesting to Z-Spanish's
compliance with the matters set forth in SECTION 6.1 and SECTION 6.3;
(f) The Business Records;
(g) Opinion of FCC counsel to Z-Spanish, dated as of the Closing,
in form reasonably satisfactory to Heftel; and
(h) Such other instruments and further assurances of conveyance
and such other certificates or other documentation as Heftel may reasonably
request.
8.2 CLOSING DOCUMENTS TO BE DELIVERED BY HEFTEL.
At the Closing, Heftel shall deliver to Z-Spanish (in form and
substance reasonably satisfactory to Z-Spanish):
(a) One or more assignments assigning to KLNZ LLC the Heftel
Governmental Licenses, as Z-Spanish may request;
(b) A bill of sale conveying to Glendale Inc. all of the Heftel
Transferred Assets constituting tangible personal property.
(c) One or more assignment and assumption agreements by which
Heftel assigns the Heftel Material Contracts to Glendale Inc., and Glendale
Inc. assumes the Assumed Contracts and agrees to perform, from and after the
Closing Date, all
19
<PAGE>
of the Assumed Contracts, together with each consent obtained by Heftel
necessary for the assignments of such contracts;
(d) Certified copies of resolutions of Heftel's Board of
Directors authorizing the execution, delivery and performance of this
Agreement;
(e) A certificate executed by Heftel attesting to Heftel's
compliance with the matters set forth in SECTION 7.1 and SECTION 7.3;
(f) The Business Records;
(g) Opinion of FCC counsel to Heftel, dated as of the Closing, in
form reasonably satisfactory to Z-Spanish; and
(h) Such other instruments and further assurances of conveyance
and such other certificates or other documentation as Z-Spanish may
reasonably request.
9. SURVIVAL.
All representations, warranties, covenants and agreements made by
any party to this Agreement or pursuant hereto shall be deemed to have been
relied upon by the parties hereto, and shall survive the Closing; provided,
however, that notice of any claim, whether made under the indemnification
provisions hereof or otherwise, based on a breach of a representation,
warranty, covenant or agreement must be given within one year from the
Closing Date; provided, however, that representations as to the title of the
Transferred Assets shall survive indefinitely. The representations and
warranties hereunder shall not be affected or diminished by any investigation
at any time by or on behalf of the party for whose benefit such
representations and warranties were made. All statements contained herein or
in any certificate, exhibit, list or other document delivered pursuant hereto
or in connection with the transactions contemplated hereby shall be deemed to
be representations and warranties. No representation or warranty contained
herein shall be deemed to be made at any time after the date of this
Agreement or, if made in a certificate, the date of such certificate.
20
<PAGE>
10. INDEMNIFICATION OF HEFTEL.
Subject to the limitations set forth in SECTIONS 9 and 12,
Z-Spanish shall indemnify and hold Heftel harmless from, against, for and in
respect of:
(a) any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action and
encumbrances suffered, sustained, incurred or required to be paid by Heftel
because of the breach of any written representation, warranty, agreement or
covenant of Z-Spanish contained in this Agreement or any document,
certificate or agreement executed in connection with this Agreement;
(b) any and all liabilities, obligations, claims and demands
arising out of the ownership and operation of the Z-Spanish Station at all
times prior to the Closing Date (other than the Heftel Assumed Contracts);
(c) any and all liabilities, obligations, claims and demands
arising out of the ownership and operation of the Heftel Station with respect
to periods on and after the Closing Date;
(d) any and all liabilities, obligations, claims and demands of
third parties claiming a brokerage commission, finder's fee or other like
payment in connection with the transactions contemplated hereby as a result
of the actions or omissions of Z-Spanish; and
(e) all reasonable costs and expenses (including, without
limitation, reasonable attorneys' fees, interest and penalties) incurred by
Heftel in connection with any action, suit, proceeding, demand, assessment or
judgment incident to any of the matters indemnified against in this SECTION
10.
11. INDEMNIFICATION OF Z-SPANISH.
Subject to the limitations set forth in SECTIONS 9 and 12, Heftel
shall indemnify and hold Z-Spanish harmless from, against, for and in respect
of:
(a) any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action and
encumbrances suffered, sustained, incurred or required to be paid by
Z-Spanish because of the breach of any written representation, warranty,
agreement or covenant of Heftel contained in this Agreement or any document,
certificate or agreement executed in connection with this Agreement;
21
<PAGE>
(b) any and all liabilities, obligations, claims and demands
arising out of the ownership and operation of the Heftel Station at all times
prior to the Closing Date (other than the Z-Spanish Assumed Contracts);
(c) any and all liabilities, obligations, claims and demands
arising out of the ownership and operation of the Z-Spanish Station with
respect to periods on and after the Closing Date;
(d) any and all liabilities, obligations, claims and demands of
third parties claiming a brokerage commission, finder's fee or other like
payment in connection with the transactions contemplated hereby as a result
of the actions or omissions of Heftel; and
(e) all reasonable costs and expenses (including, without
limitation, reasonable attorneys' fees, interest and penalties) incurred by
Z-Spanish in connection with any action, suit, proceeding, demand, assessment
or judgment incident to any of the matters indemnified against in this
SECTION 11.
12. GENERAL RULES REGARDING INDEMNIFICATION.
The obligations and liabilities of each indemnifying party
hereunder with respect to claims resulting from the assertion of liability by
the other party or indemnified third parties shall be subject to the
following terms and conditions:
(a) Subject to SECTION 12(f) below, the indemnified party shall
give prompt written notice (which in no event shall exceed 30 days from the
date on which the indemnified party first became aware of such claim or
assertion) to the indemnifying party of any claim which might give rise to a
claim by the indemnified party against the indemnifying party based on the
indemnity agreements contained in SECTION 10 or 11 hereof, stating the nature
and basis of said claims and the amounts thereof, to the extent known;
(b) If any action, suit or proceeding is brought against the
indemnified party with respect to which the indemnifying party may have
liability under the indemnity agreements contained in SECTION 10 or 11
hereof, the action, suit or proceeding shall, upon the written acknowledgment
by the indemnifying party that it is obligated to indemnify under such
indemnity agreement, be defended (including all proceedings on appeal or for
review which counsel for the indemnified party shall deem appropriate) by the
indemnifying party. The indemnified party shall have the right to employ its
own counsel in any such case, but the fees and expenses of
22
<PAGE>
such counsel shall be at the indemnified party's own expense unless (A) the
employment of such counsel and the payment of such fees and expenses both
shall have been specifically authorized in writing by the indemnifying party
in connection with the defense of such action, suit or proceeding, or (B)
counsel to such indemnified party shall have reasonably concluded and
specifically notified the indemnifying party that there may be specific
defenses available to it which are different from or additional to those
available to the indemnifying party or that such action, suit or proceeding
involves or could have an effect upon matters beyond the scope of the
indemnity agreements contained in SECTIONS 10 and 11 hereof, in any of which
events the indemnifying party, to the extent made necessary by such defenses,
shall not have the right to direct the defense of such action, suit or
proceeding on behalf of the indemnified party. In the latter such case only
that portion of such fees and expenses of the indemnified party's separate
counsel reasonably related to matters covered by the indemnity agreements
contained in SECTION 10 or 11 hereof shall be borne by the indemnifying
party. The indemnified party shall be kept fully informed of such action,
suit or proceeding at all stages thereof whether or not it is represented by
separate counsel.
(c) The indemnified party shall make available to the
indemnifying party and its attorneys and accountants all books and records of
the indemnified party relating to such proceedings or litigation and the
parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding.
(d) The indemnified party shall not make any settlement of any
claims without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld or delayed.
(e) If any claims are made by third parties against an
indemnified party for which an indemnifying party would be liable, and it
appears likely that such claims might also be covered by the indemnified
party's insurance policies, the indemnified party shall make a timely claim
under such policies and to the extent that such party obtains any recovery
from such insurance, such recovery shall be offset against any sums due from
an indemnifying party (or shall be repaid by the indemnified party to the
extent that an indemnifying party has already paid any such amounts). The
parties acknowledge, however, that if an indemnified party is self-insured as
to any matters, either directly or through an insurer which assesses
retroactive premiums based on loss experience, then to the extent that the
indemnified party bears the economic burden of any claims through
self-insurance or retroactive premiums or insurance ratings, the indemnifying
party's obligation
23
<PAGE>
shall only be reduced by any insurance recovery in excess of the amount paid
or to be paid by the indemnified party in insurance premiums.
(f) No claim or indemnification shall be made unless and until
the indemnified party has first incurred, in the aggregate, damages, losses
and expenses for which it would be entitled to be indemnified hereunder of at
least $10,000.
13. SPECIFIC PERFORMANCE.
Z-Spanish and Heftel acknowledge that the Transferred Assets and
the transactions contemplated hereby are unique, that a failure by Z-Spanish
or Heftel to complete such transactions will cause irreparable injury to the
other, and that actual damages for any such failure may be difficult to
ascertain and may be inadequate. Consequently, Z-Spanish and Heftel agree
that each shall be entitled, in the event of a default by the other, to
specific performance of any of the provisions of this Agreement in addition
to any other legal or equitable remedies to which the non-defaulting party
may otherwise be entitled. In the event any action is brought, the prevailing
party shall be entitled to recover court costs, arbitration expenses and
reasonable attorneys' fees.
14. TERMINATION AND RESCISSION RIGHTS; RISK OF LOSS.
14.1 TERMINATION PRIOR TO CLOSING. This Agreement may be
terminated by the mutual consent of Z-Spanish and Heftel, or by either
Z-Spanish or Heftel, if the terminating party is not then in material breach
of its obligations hereunder, upon written notice to the other upon the
occurrence of any of the following:
(a) By the terminating party, if the other party is in
material breach of its obligations hereunder, and such breach has
not been cured by the other party within 30 days of written
notice of such breach (or such longer period of time if the
breach cannot be reasonably cured within 30 days and the
breaching party is diligently attempting to cure such breach);
(b) If the FCC designates either FCC Application contemplated
by Section 2.2(b) hereof for hearing at any time, or if either FCC
Application should be dismissed or denied; or
(c) If the Closing has not occurred on or before December 31,
1999.
24
<PAGE>
In the event that this Agreement is terminated as a result of either party's
material breach of this Agreement, the non-breaching party will incur
substantial damages that are difficult to quantify. In such event, the sum of
$2,000,000 (the "Break-up Fee") is deemed by the parties to be an amount
which is a fair and reasonable estimate of the damage the non-breaching party
may incur. Accordingly, in the event of such termination, the breaching party
will pay the Break-up Fee to the non-breaching party within 10 days of such
termination.
14.2 RESCISSION OF PURCHASE AND SALE. In the event the parties
elect to close prior to the time the FCC Order has become a Final Order,
Heftel and Z-Spanish shall enter into rescission agreement to be mutually
agreed upon which provides for unwinding the transaction in the event a Final
Order is not obtained.
14.3 RISK OF LOSS.
(a) Heftel shall bear the risk of all damage to, loss of or
destruction of any of the Heftel Transferred Assets between the date of this
Agreement and the Closing Date. If any material portion of the Heftel
Transferred Assets shall suffer any material damage or destruction prior to
the Closing Date, Heftel shall promptly notify Z-Spanish in writing of such
damage or destruction, shall promptly take all necessary steps to restore,
repair or replace such assets at its sole expense, and shall advise Z-Spanish
in writing of the estimated cost to complete such restoration, repair or
replacement and all amounts actually paid as of the date of the estimate.
Z-Spanish may extend the Closing Date for a period not exceeding 45 days to
accomplish such restoration, repair or replacement, but is not required to do
so. If such restoration, repair or replacement is not accomplished prior to
the Closing Date, whether or not extended as provided herein, Z-Spanish may,
at its option either (i) terminate this Agreement upon written notice to
Heftel; or (ii) receive all insurance proceeds paid or payable to Heftel in
excess of amounts actually applied towards such restoration, repair or
replacement, close this Agreement and thereafter complete such restoration,
repair or replacement at its sole expense; provided, however, Heftel shall
have no further liabilities with respect to such damage or destruction after
payment to Z-Spanish of such insurance proceeds.
(b) Z-Spanish shall bear the risk of all damage to, loss of or
destruction of any of the Z-Spanish Transferred Assets between the date of
this Agreement and the Closing Date. If any material portion of the Z-Spanish
Transferred Assets shall suffer any material damage or destruction prior to
the Closing Date, Z-Spanish shall promptly notify Heftel in writing of such
damage or destruction, shall promptly take all necessary steps to restore,
repair or replace such assets at its sole expense, and shall advise Heftel in
writing of the estimated cost to complete such restoration,
25
<PAGE>
repair or replacement and all amounts actually paid as of the date of the
estimate. Heftel may extend the Closing Date for a period not exceeding 45
days to accomplish such restoration, repair or replacement, but is not
required to do so. If such restoration, repair or replacement is not
accomplished prior to the Closing Date, whether or not extended as provided
herein, Heftel may, at its option either (i) terminate this Agreement upon
written notice to Z-Spanish; or (ii) receive all insurance proceeds paid or
payable to Z-Spanish in excess of amounts actually applied towards such
restoration, repair or replacement, close this Agreement and thereafter
complete such restoration, repair or replacement at its sole expense;
provided, however, Z-Spanish shall have no further liabilities with respect
to such damage or destruction after payment to Heftel of such insurance
proceeds.
15. BOOKS AND RECORDS; TAX MATTERS.
(a) BOOKS AND RECORDS. Each party agrees that it will cooperate
with and make available (or cause to be made available) to the other party,
during normal business hours, all books and records, information and
employees (without substantial disruption of employment) retained and
remaining in existence after the Closing which are necessary or useful in
connection with any tax inquiry, audit, or dispute, any litigation or
investigation or any other matter requiring any such books and records,
information or employees for any reasonable business purpose (a "PERMITTED
Use"). The party requesting any such books and records, information or
employees shall bear all of the out-of-pocket costs and expenses reasonably
incurred in connection with providing such books and records, information or
employees. All information received pursuant to this SECTION 15 (including
duplicate copies of the Business Records retained by the other party pursuant
to SECTION 15(b) hereof) shall be kept confidential by the party receiving
it, except to the extent that disclosure is reasonably necessary in
connection with any Permitted Use.
(b) COOPERATION AND RECORDS RETENTION. Each party shall (i)
provide the other with such assistance as may reasonably be requested by
either of them in connection with the preparation of any return, audit or
other examination by any taxing authority or judicial or administrative
proceedings relating to liability for any taxes, (ii) retain and provide the
other with any records or other information that may be relevant to such
return, audit or examination, proceeding or determination, and (iii) provide
the other with any final determination of any such audit or examination,
proceeding, or determination that affects any amount required to be shown on
any tax return of the other for any period. Without limiting the generality
of the foregoing, each party shall retain (or cause to be retained), until
the applicable statutes of limitations (including any extensions) have
expired, copies of
26
<PAGE>
all tax returns, supporting work schedules, and other records or information
that may be relevant to such returns for all tax periods or portions thereof
ending on or before the Closing.
16. MISCELLANEOUS PROVISIONS.
16.1 EXPENSES. Except as otherwise expressly provided herein,
each party shall pay the fees and expenses incurred by it in connection with
the transactions contemplated by this Agreement. If any action is brought for
breach of this Agreement or to enforce any provision of this Agreement, the
prevailing party shall be entitled to recover court costs, arbitration
expenses and reasonable attorneys' fees.
16.2 PRORATIONS.
(a) All items of income and expense arising from the operation of
the Z-Spanish Station and the Heftel Assumed Contracts before the Closing
Date shall be for the account of Z-Spanish and thereafter shall be for the
account of Heftel. Proration of the items described below between Z-Spanish
and Heftel shall be effective as of 12:01 a.m., local time, on the Closing
Date and shall occur as set forth in subsections (c) through (e) below with
respect to those rights, liabilities and obligations of Z-Spanish transferred
to and assumed by Heftel hereunder.
(b) All items of income and expense arising from the operation of
the Heftel Station and the Z-Spanish Assumed Contracts before the Closing
Date shall be for the account of Heftel and thereafter shall be for the
account of Z-Spanish. Proration of the items described below between
Z-Spanish and Heftel shall be effective as of 12:01 a.m., local time, on the
Closing Date and shall occur as set forth in subsections (c) through (e)
below with respect to those rights, liabilities and obligations of Heftel
transferred to and assumed by Z-Spanish hereunder.
(c) Liability for state and local taxes assessed on the
Transferred Assets payable with respect to the tax year in which the
effective time of proration falls shall be prorated as between Z-Spanish and
Heftel on the basis of the number of days of the tax year elapsed to but
excluding such effective time, appropriately adjusted with respect to
improvements to the Transferred Assets effected by either party after such
effective time.
(d) Prepaid items and accruals such as water, electricity,
telephone, other utility and service charges, lease expenses, license fees
(if any) and payments under any contracts to be assumed by Heftel or
Z-Spanish (as the case may be)
27
<PAGE>
shall be prorated between Z-Spanish and Heftel on the basis of the period of
time to which such liabilities, prepaid items and accruals apply.
(e) All prorations shall be made and paid in cash insofar as
feasible on or before the Closing Date. Any prorations not made on the
Closing Date shall be made no later than 90 days thereafter. Z-Spanish and
Heftel agree to assume, pay and perform all costs, liabilities and expenses
allocated to each of them pursuant to this SECTION 16.2.
16.3 AMENDMENT. This Agreement may be amended at any time but
only by an instrument in writing signed by the parties hereto.
16.4 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
nationally recognized "next-day" delivery service, to the parties at the
addresses set forth below (or at such other address for a party as shall be
specified by like notice), or sent by facsimile (having a notification
receipt) to the number set forth below (or such other number for a party as
shall be specified by proper notice hereunder):
If to Heftel:
3102 Oak Lawn, Suite 215
Dallas, Texas 75219
Attn: McHenry T. Tichenor, Jr., President
Fax: 214-525-7750
If to Z-Spanish:
1436 Auburn Blvd.
Sacramento, California 95815
Attn: Amador Bustos, President and Catherine Sandoval, General Counsel
Fax: 916-646-3230
with a copy to:
Francisco R. Montero
Fisher Wayland Cooper Leader & Zaragoza, LLP
2001 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Fax: 202-296-6518
28
<PAGE>
16.5 ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, heirs
and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the others; provided, however,
that (i) Heftel may assign its rights under this Agreement to any of its
subsidiaries or an affiliated corporation and (ii) in the event of such
assignment, the assigning party shall remain liable for all of the
obligations of such assignee.
16.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.7 HEADINGS. The headings of the Sections of this Agreement
are inserted for convenience only and shall not constitute a part
hereof.
16.8 ENTIRE AGREEMENT. This Agreement and the documents referred
to herein contain the entire understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties, conveyances or undertakings other than those expressly set forth
herein. This Agreement supersedes any prior agreements and understandings
between the parties with respect to the subject matter.
16.9 WAIVER. No attempted waiver of compliance with any provision
or condition hereof, or consent pursuant to this Agreement, will be effective
unless evidenced by an instrument in writing by the party against whom the
enforcement of any such waiver or consent is sought.
16.10 NO THIRD PARTY BENEFICIARIES. This Agreement is made for
the benefit of the parties hereto, and no third party shall be deemed to be a
third party beneficiary thereof.
16.11 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona (irrespective
of its choice of law provisions).
16.12 CONTROL OF THE STATIONS.
(a) Prior to the Closing, Heftel shall not, directly or
indirectly, control, or attempt to control, the operations of the Z-Spanish
Station; such operations,
29
<PAGE>
including complete control and supervision of all programs, employees and
policies of the Z-Spanish Station, shall be the sole responsibility of
Z-Spanish.
(b) Prior to the Closing, Z-Spanish shall not, directly or
indirectly, control, or attempt to control, the operations of the Heftel
Station; such operations, including complete control and supervision of all
programs, employees and policies of the Heftel Station, shall be the sole
responsibility of Heftel.
16.13 BULK SALES. The parties hereto waive compliance with the
provisions of any bulk sales law applicable to the transactions contemplated
hereby.
16.14 ARBITRATION. Any controversy or dispute among the parties
arising in connection with this Agreement shall be submitted to a panel of
three arbitrators and finally settled by arbitration in accordance with the
commercial arbitration rules of the American Arbitration Association. Each of
the disputing parties shall appoint one arbitrator, and these two arbitrators
shall independently select a third arbitrator. Arbitration shall take place
in Phoenix, Arizona, or such other location as the arbitrators may select.
The prevailing party in such arbitration shall be entitled to the award of
all costs and attorneys' fees in connection with such action but, in such
action or otherwise in respect to any claim or liabilities, shall in no event
be entitled to the receipt of any consequential or punitive damages. Any
award for monetary damages resulting from nonpayment of sums due hereunder
shall bear interest from the date on which such sums were originally due and
payable. Judgment upon the award rendered may be entered in any court having
jurisdiction or application may be made to such court for judicial acceptance
of the award and an order of enforcement, as the case may be.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
HEFTEL BROADCASTING CORPORATION
By: /s/ McHenry T. Tichenor, Jr.
----------------------------------------
McHenry T. Tichenor, Jr.
President
GLENDALE BROADCASTING, INC.
30
<PAGE>
By: /s/ Amador Bustos
----------------------------------------
Amador Bustos
President
KLNZ LICENSE COMPANY, LLC
By: /s/ Amador Bustos
----------------------------------------
Amador Bustos
President
31
<PAGE>
FIRST AMENDMENT TO ASSET EXCHANGE AGREEMENT
This First Amendment to Asset Exchange Agreement (this "AMENDMENT"),
dated as of May 14, 1999, by and among Glendale Broadcasting, Inc., an Arizona
corporation ("GLENDALE INC."), KLNZ License Company, LLC, a Delaware limited
liability company ("KLNZ LLC") and Heftel Broadcasting Corporation, a Delaware
corporation ("HEFTEL").
WITNESSETH:
WHEREAS, Glendale, KLNZ LLC and Heftel have executed an Asset Exchange
Agreement, dated April 14, 1999 (the "AGREEMENT"), pursuant to which, the
parties have agreed to exchange the Transferred Assets associated with the
Stations, pursuant to the terms therein; and
WHEREAS, performance by Glendale and KLNZ LLC of their obligations
under the Agreement have been guaranteed by their corporate parent, Z-Spanish
Media Corporation, a Delaware corporation ("GUARANTOR") pursuant to a Guaranty
Agreement ("GUARANTY") with Heftel executed contemporaeously with the Agreement
on April 14, 1999; and
WHEREAS, in order to comply with certain requirements under a Credit
Agreement between Glendale, Azle Broadcasting, Inc., the Lenders parties
thereto, City National Bank and Union Bank of California, N.A., as Managing
Agent and City National Bank, as Administrative Agent, dated as of February 3,
1999, as amended by the First Amendment to Credit Agreement dated March 12, 1999
("CREDIT AGREEMENT"), KLNZ LLC may not be a party to the Agreement and the
parties have agreed to amend the Agreement in order to comport with the
requirements of the Credit Agreement, without affecting the ability or desire of
the parties to consummate the Agreement.
NOW, THEREFORE, in consideration of the premises and agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, agree as follows:
1. The Agreement is hereby amended to remove KLNZ LLC as a signatory
and party to the Agreement and KLNZ LLC shall be relieved of all rights,
obligations and liabilities under the Agreement.
2. Any and all representations, warranties and covenants in the
Agreement as to the Z Spanish Transferred Assets and the organization,
qualification and due authorization of KLNZ LLC shall remain, however, said
representations, warranties and covenants shall be made by Guarantor in lieu of
KLNZ LLC, and, where necessary, Guarantor shall cause KLNZ LLC to perform any
obligations under the Agreement to effectuate and consummate the transactions
contemplated therein. This Amendment shall not be construed to alter the pending
FCC Assignment Applications for the exchange of the Governmental Licenses or the
intent of the parties to have KLNZ LLC be the assignor of the Z-Spanish
Governmental Licenses and to have
<PAGE>
KLNZ LLC be the assignee of the Heftel Governmental Licenses.
3. The Agreement and the Guaranty is and shall continue to be in full
force and effect, except as otherwise provided in this Amendment and except that
all references in the Agreement to "this Agreement" or words of like import
referring to the Agreement shall mean the Agreement as amended by this
Amendment.
4. Any and all defined terms which are not explicitly defined herein
shall have the meaning ascribed to them in the Agreement.
5. This Amendment may be signed in counterpart originals, which
collectively shall have the same legal effect as if all signatures had appeared
on the same physical document. This Amendment may be signed and exchanged by
facsimile transmission, with the same legal effect as if the signatures had
appeared in original handwriting on the same physical document.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be duly executed as of the date first above written.
Z-SPANISH MEDIA CORPORATION
By: /s/ Amador S. Bustos
------------------------------------
Amador S. Bustos, President
GLENDALE BROADCASTING, INC.
By: /s/ Amador S. Bustos
------------------------------------
Amador S. Bustos, President
KLNZ LICENSE COMPANY, LLC
By: /s/ Amador S. Bustos
------------------------------------
Amador S. Bustos, President
HEFTEL BROADCASTING CORPORATION
<PAGE>
By: /s/ Jeffrey T. Hinson
------------------------------------
Its: Sr. Vice President & CFO
-----------------------------------
<PAGE>
BRIDGE LOAN AGREEMENT
This Bridge Loan Agreement, dated as of May 21, 1999 (this "Agreement"),
is by and among Sunburst Texas, LP, a Delaware limited partnership ("Borrower"),
Heftel Broadcasting Texas, L.P., a Delaware limited partnership ("Lender"), and
Heftel Broadcasting Corporation, a Delaware corporation ("Heftel").
WHEREAS, the Borrower has entered into that certain Stock Purchase
Agreement, dated March 2, 1999, as amended (the "Stock Purchase Agreement"),
with the holders of the Common and Class A Common Stock of Delaware Radio, Inc.,
a Delaware corporation ("DRI"), the licensee of radio station KLTY-FM (the
"Station"), providing for the purchase by Borrower of all of the capital stock
of DRI outstanding at the time of closing (the "DRI Acquisition"); and
WHEREAS, the Lender has entered into negotiations with SBT Communications
Statutory Trust (the "Trust") regarding a potential purchase of certain assets
of the Station (the "Asset Purchase"); and
WHEREAS, the Trust's obligations to proceed with the transactions
contemplated by the Asset Purchase will be conditioned upon the successful
consummation of the DRI Acquisition; and
WHEREAS, the Borrower will require funding to complete the DRI
Acquisition and has therefore requested that Heftel commit to cause the Lender
(Heftel's subsidiary) to extend a bridge loan to the Borrower; and
WHEREAS, Heftel has agreed to cause the Lender to extend such bridge loan
upon the terms and conditions set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall
have the following meanings:
"Affiliate" means any Person that directly or indirectly controls or is
controlled by or is under common control with another Person; and the term
"control" means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities or equity interests, by contract or
otherwise.
"Applicable Rate" shall mean (i) 7% per annum with respect to the period
from the Effective Date through September 30, 1999; (ii) 7.5% per annum with
respect to the period from October 1, 1999 through October 31, 1999; (iii) 8%
per annum with respect to the period from November 1, 1999 through November 30,
1999; and (iv) 8.5% per annum with respect to the period from December 1, 1999
through January 15, 2000.
"Borrowing Notice" shall mean the written notice of Borrower to Lender
that it
<PAGE>
requests to receive the Bridge Loan.
"Breakage Costs" shall mean (i) the difference between Lender's interest
obligation to its banks in respect of the LIBOR Advance and the interest earned
by Lender on its investment of the LIBOR Advance from the fourth business day
after the date of the Borrowing Notice through the Effective Date or Commitment
Termination Date, as the case may be, and (ii) the amounts charged to Lender by
its banks for any loss, cost or expense incurred by such banks by reason of
Lender's repayment to such banks of the LIBOR Advance on a date other than the
end of the applicable interest period.
"Bridge Loan" shall mean the extension of credit to Borrower made on the
Effective Date in the principal amount of $57.0 million.
"Bridge Loan Papers" shall mean this Bridge Loan Agreement, the Note, the
Guaranty, the Security Agreement, the Stock Pledge Agreement, the Collateral
Assignment Agreement, the Guarantor Security Agreement and the Partnership
Pledge Agreement.
"Collateral" shall have the meaning set forth in the Security Agreement
and the Guarantor Security Agreement.
"Collateral Assignment Agreement" means the Collateral Assignment of
Leases Agreement, dated the Effective Date and in the form of Exhibit F hereto,
pursuant to which certain leases of DRI will be pledged to Lender to secure
payment of the Obligations.
"Commitment Termination Date" shall mean the date on which Borrower has
advised Lender in writing of its election to terminate Lender's commitment to
make the Bridge Loan, as described in Section 3(b) hereof.
"Distribution" shall mean, with respect to any Person, (i) the
retirement, redemption, purchase or other acquisition for value of any capital
stock or other equity securities issued by such Person or (ii) the declaration
or payment of any dividend or distribution on or with respect to any such
capital stock or other equity securities (other than a stock dividend payable
only in the capital stock of such Person).
"Effective Date" shall mean the date on which the Bridge Loan is made.
"FCC" shall mean the Federal Communications Commission.
"GoGlobal" shall mean GoGlobal Broadcasting, Inc.
"Governmental Licenses" shall mean all licenses, construction permits or
authorizations issued by or pending before the FCC or any other governmental
authority for use in the operation of the Station, together with any and all
renewals, extensions and modifications thereof.
"Guarantor Security Agreement" means the Guarantor Security Agreement,
dated the Effective Date and in the form of Exhibit E hereto, pursuant to which
substantially all assets of DRI will be pledged to Lender to secure payment of
the Guarantor's Obligations (as defined in
2
<PAGE>
the Guarantor Security Agreement).
"Guaranty" shall mean the Guaranty, dated the Effective Date and in the
form of Exhibit B hereto, executed by DRI in favor of Lender.
"Highest Lawful Rate" shall mean, at the particular time of
determination, the maximum rate of interest which, under applicable law, Lender
is then permitted to charge with respect to the Bridge Loan.
"Holding Company" shall mean the corporate entity which the Borrower may
elect to form, after the Effective Date, as its wholly-owned subsidiary to own
the outstanding capital stock of DRI.
"Indebtedness" means all indebtedness of a Person (i) in respect of money
borrowed, (ii) evidenced by a note, debenture or other like written obligation
to pay money (including, without limitation, all of the Obligations), (iii) in
respect of rent or hire of property under leases required to be capitalized
under generally accepted accounting principles or for or in connection with the
deferred purchase price of property, (iv) in respect of obligations under
conditional sales or other title retention agreements and (v) all guaranties of
any or all of the foregoing.
"LIBOR Advance" shall mean the 30-day LIBOR option loan, in the principal
amount of the Bridge Loan, requested by Lender from its banks under Lender's
existing credit agreement as a result of Lender's receipt of the Borrowing
Notice to enable Lender to fund the Bridge Loan.
"Lien" shall mean any claim, lien, mortgage, deed of trust, security
interest, pledge, charge, encumbrance or other right of a creditor to have its
claim satisfied out of any property or assets, or the proceeds therefrom, prior
to the general creditors of the owner thereof.
"Maturity Date" shall mean the earlier of (i) the closing of the
transactions contemplated by the STLP Acquisition and (ii) January 15, 2000.
"Note" shall mean the promissory note, dated the Effective Date and in
the form of Exhibit A hereto, evidencing the Bridge Loan.
"Obligations" shall mean any and all indebtedness of Borrower due or to
become due to Lender pursuant to the terms of this Agreement.
"Partnership Pledge Agreement" means the Partnership Interest Pledge
Agreement, dated the date hereof and in the form of Exhibit G hereto, pursuant
to which all of the equity interests in the Borrower have been pledged to Lender
to secure payment of the Obligations.
"Permitted Liens" means any of the following Liens: (i) the Liens created
under the Bridge Loan Papers; (ii) Liens for taxes or assessments and similar
charges, which either are not delinquent or being contested diligently and in
good faith by appropriate proceedings, and as to which Borrower has set aside
adequate reserves on its books; (iii) statutory Liens, such as mechanic's,
materialman's, warehouseman's carrier's or other like Liens incurred in good
3
<PAGE>
faith in the ordinary course of business; (iv) zoning ordinances, easements,
licenses, reservations, provisions, covenants, conditions, waivers or
restrictions on the use of property and other title exceptions that do not
materially and adversely affect the use or value of a Person's property; (v)
Liens in respect of judgments or awards with respect to which no Event of
Default would exist; (vi) Liens to secure payment of insurance premiums in
connection with workers' compensation, unemployment insurance and similar
programs; and (vii) Liens arising in connection with purchase money security
interests for equipment leases or purchases in an aggregate amount not to exceed
$500,000.
"Permitted Investments" means (i) investments in direct obligations of,
or instruments unconditionally guaranteed by, the United States of America or in
certificates of deposit issued by a member bank of the Federal Reserve System
having a combined capital and surplus of at least $100 million, (ii) investments
in commercial or finance paper which, at the time of investment, is rated either
"A", "AAA" or better by Moody's Investors Service, Inc. or Standard & Poor's
Corporation, respectively, or at the equivalent rate by any of their respective
successors and (iii) any interests in any money market account maintained, at
the time of investment, with a member bank described in clause (i) above, the
investments of which, at the time of investment, are restricted to the types
described in clause (i) above; and in each case, with maturities not exceeding
one year.
"Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, trust or other entity.
"SDLP" shall mean Sunburst Dallas, LP, a Delaware limited partnership.
"STLP Acquisition" means the purchase by the Trust from the Borrower,
either directly or indirectly, of 100% of the issued and outstanding capital
stock of DRI.
"Security Agreement" shall mean that certain Security Agreement, dated
even date herewith and in the form of Exhibit C hereto, pursuant to which
substantially all assets of Borrower have been pledged to Lender to secure
payment of the Obligations.
"Stock Pledge Agreement" shall mean that certain Stock Pledge Agreement,
dated the Effective Date and in the form of Exhibit D hereto, pursuant to which
all of the capital stock of DRI will be pledged to Lender to secure payment of
the Obligations.
"Time Brokerage Agreement" shall mean a Time Brokerage Agreement, in
customary industry form and pursuant to which DRI will grant to SDLP the right
to program the Station.
2. THE BRIDGE LOAN.
2.1. REPAYMENT OF PRINCIPAL AMOUNT. Borrower shall repay the entire
unpaid principal amount of the Bridge Loan on the Maturity Date. Borrower shall
have the right to prepay without penalty all or any portion of the principal
amount of the Bridge Loan at any time prior to the Maturity Date. All
prepayments shall be credited first to accrued and unpaid interest on the Note
and second to the principal amount of the Note.
2.2. INTEREST ON LOAN. Borrower shall pay interest on the unpaid
principal amount of
4
<PAGE>
the Bridge Loan, as accrued from and including the Effective Date until the
principal amount shall be paid in full, at the Applicable Rate; provided,
however, that on and after an Event of Default, the Bridge Loan shall bear
interest, payable on demand, equal to the Highest Lawful Rate. Interest
shall be paid in arrears on the last business day of each month commencing
with the month in which the Effective Date occurs, until the principal
balance of, and all accrued and unpaid interest on, the Bridge Loan has been
paid in full. All computations of interest shall be made by Lender on the
basis of a year of 365 days.
2.3. PLACE OF PAYMENT; TAXES. Any and all payments by Borrower in
respect of the Bridge Loan shall be made in U.S. dollars at the office of Lender
set forth herein (or as otherwise advised in writing by Lender), free and clear
of and without deduction for any and all present or future levies, deductions,
stamp or documentary taxes or similar charges or withholdings.
2.4. USURY LAWS. It is the intention of the parties to comply with all
applicable laws. Accordingly, it is agreed that, notwithstanding any provisions
to the contrary in the Bridge Loan Papers, interest on the debt evidenced by the
Note shall not exceed the maximum amount of nonusurious interest that may be
contracted for, taken, reserved, charged or received under law; any interest in
excess of that maximum amount shall be credited on the principal of the debt or,
if that has been paid, refunded. It is further agreed that, without limitation
of the foregoing, all calculations of the rate of interest contracted for,
charged, or received under the Bridge Loan Papers which are made for the purpose
of determining whether such rate exceeds the maximum lawful rate of interest
shall be made, to the extent permitted by applicable law, by amortizing,
prorating, allocating, and spreading in equal parts during the period of the
full term of the indebtedness evidenced thereby all interest at any time
contracted for, charged, or received from Borrower or otherwise by the holder or
holders hereof in connection with such indebtedness.
2.5. SECURITY FOR BRIDGE LOAN. Borrower's Obligations shall be secured
by a Lien upon all of the Collateral, which at all times shall be superior and
prior to all other Liens.
2.6. BRIDGE LOAN PAPERS AND RELATED DOCUMENTS.
(a) Borrower has herewith delivered to the Lender the following
documents:
(i) the Note, duly executed by Borrower;
(ii) a copy of the resolutions of the board of directors of the
general partner of Borrower approving the Bridge Loan Papers, certified
by the Secretary of the general partner of Borrower;
(iii) the Partnership Pledge Agreement, duly executed by the
partners of the Borrower;
(iv) the Security Agreement and accompanying financing statement
on Form UCC-1, duly executed by Borrower; and
5
<PAGE>
(v) the opinion of legal counsel to Borrower, in the form of
Exhibit H hereto;
all of which the Lender hereby accepts for all purposes hereof.
(b) On the Effective Date, Borrower will, or will cause DRI, to
furnish to the Lender the following:
(i) the Guaranty, duly executed by DRI;
(ii) the Stock Pledge Agreement (and accompanying stock
certificates of DRI and related stock powers), duly executed by the
Borrower;
(iii) the Guarantor Security Agreement and accompanying financing
statement on Form UCC-1, duly executed by DRI; and
(iv) the Collateral Assignment Agreement, duly executed by DRI.
3. BRIDGE LOAN COMMITMENT.
(a) For good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Heftel hereby irrevocably commits to Borrower
to cause Lender to make, and to ensure that Lender has the funds to make, the
Bridge Loan to Borrower, subject only to the following conditions:
(i) Borrower shall have provided the Borrowing Notice at least
four business days prior to the Effective Date;
(ii) (A) Borrower shall have furnished to Lender the items set
forth in Section 2.6(a); and (B) Borrower or DRI (as applicable) shall
have furnished to Lender the items set forth in Section 2.6(b)
contemporaneously with the funding of the Bridge Loan on the Effective
Date;
(iii) the Effective Date shall not be prior to July 1, 1999; and
(iv) Except with the prior written consent of Lender (which
consent shall not be unreasonably withheld or delayed), Borrower shall
not have knowingly amended any provision of the Stock Purchase Agreement,
knowingly consented to any default by the sellers thereunder or knowingly
waived any condition to the closing of the DRI Acquisition, if the direct
consequence of such amendment, consent or waiver by Borrower would
reasonably be expected to materially and adversely impact the value of
the Station's Governmental Licenses or main transmitter site lease, or
(assuming Lender shall have entered into an agreement with respect
thereto) the ability of Lender to consummate the Asset Purchase.
Recognizing that Borrower is obligated to complete the DRI Acquisition as of
9:00 a.m., Dallas, Texas time, on the Effective Date, Lender agrees that the
Bridge Loan will consist of
6
<PAGE>
immediately available funds on the Effective Date and that it will instruct
its banks to wire such funds (pursuant to Borrower's written wire transfer
instructions) as promptly as practicable after the opening of business on the
Effective Date.
(b) The Borrower may elect at any time prior to the Effective Date to
terminate the Lender's obligation to make the Bridge Loan by so notifying the
Lender in writing; provided, however, that Borrower shall repay to Lender any
Breakage Costs as a result of any such termination made after the Borrowing
Notice has been issued (it being understood that Lender will use commercially
reasonable efforts to minimize such Breakage Costs). In the event of such
termination, the Lender shall, as promptly as practicable after the Commitment
Termination Date and repayment of such Breakage Costs, (i) return to Borrower
the items referred to in Section 2.6(a)(i) and (v) and (ii) release all
collateral covered by the documents referred to in Section 2.6(a)(iii) and (iv),
including any signed UCC-3 Termination Statement necessary to terminate any
financing statements filed of record.
(c) Heftel acknowledges that, due to its commitment to cause Lender to
make, and the Lender's commitment to make, the Bridge Loan, Borrower has relied
upon such commitment and foregone other financing arrangements to meet its
obligations under the Stock Purchase Agreement. Without limiting the provisions
of Section 3(a) hereof, the obligations of Heftel and Lender hereunder are not
subject in any manner to the failure, delay or termination of the proposed Asset
Purchase.
(d) Subject to Section 3(a) hereof, the agreements of Heftel and
Lender made herein shall continue in full force and effect for any closing of
the DRI Acquisition which occurs pursuant to the Stock Purchase Agreement, even
if later than July 15, 1999.
(e) In the event that the Effective Date is delayed (except as a
result of any default of Lender or Heftel hereunder) to a date more than four
days after the date of the Borrowing Notice, Borrower will repay to Lender any
Breakage Costs incurred by Lender as a result of such delay (it being understood
that Lender will use commercially reasonable efforts to minimize such Breakage
Costs).
4. REPRESENTATIONS AND WARRANTIES. To induce Heftel and Lender to
enter into this Agreement, Borrower represents and warrants to Heftel and Lender
as follows:
4.1. ORGANIZATION AND GOOD STANDING OF BORROWER. Borrower is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite partnership power and authority
to own and lease its properties and carry on its business as currently
conducted. Borrower has delivered to Lender true, complete and correct copies
of its agreement of limited partnership agreement, as in effect on the date
hereof.
4.2. SUBSIDIARIES. Borrower does not have any subsidiaries or equity
interests in other entities; provided, however, that (i) each of DRI and
GoGlobal will become a wholly-owned subsidiary of the Borrower on the Effective
Date and (ii) Borrower may cause the Holding Company to be incorporated and
organized as a wholly-owned subsidiary of Borrower.
7
<PAGE>
4.3. POWER AND AUTHORITY. Borrower has the power and authority and all
licenses and permits required by governmental authorities to own, lease and
operate its properties and assets, to carry on its business as currently being
conducted, and to execute, deliver and perform the Bridge Loan Papers to which
it is a party.
4.4. BINDING EFFECT. Each of the Bridge Loan Papers to which Borrower
is a party has been duly authorized, executed and delivered by Borrower and each
is the legal, valid and binding obligation of Borrower enforceable in accordance
with its terms except that (i) enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
4.5. CONSENTS; COMPLIANCE WITH OTHER INSTRUMENTS. Borrower has
obtained all consents, approvals and authorizations from, and has made all
filings with, each governmental instrumentality or other agency required as a
condition to the execution, delivery and performance of the Bridge Loan Papers
(except for the consents of the FCC which may be required for Lender to exercise
certain remedies after an event of default, as elsewhere described in the Bridge
Loan Papers). Neither the execution and delivery of the Bridge Loan Papers by
Borrower nor the consummation by it of the transactions contemplated thereby
will violate, breach, be in conflict with, or constitute a default under, or
permit the termination or the acceleration of maturity of, or result in the
imposition of any Lien upon any property or asset of Borrower pursuant to
(i) Borrower's agreement of limited partnership or (ii) any note, bond,
indenture, mortgage, deed of trust, evidence of indebtedness, loan or lease
agreement, other agreement or instrument, judgment, order, injunction or decree
by which Borrower is bound, to which it is a party or to which its assets are
subject.
4.6. CAPITALIZATION. The authorized partnership interests of Borrower
and the record and beneficial owners thereof is as set forth on the Partnership
Pledge Agreement. All of the issued and outstanding partnership interests of
Borrower have been duly authorized and validly issued and are fully paid and, as
to the limited partner interests, nonassessable, and were issued without
violation of any federal or state securities laws. Except as set forth on
Schedule 4.6 hereto, there are no voting trusts, shareholder agreements or other
voting arrangements by the shareholders of Borrower other than as described in
the Partnership Pledge Agreement. Except as described in the agreements
described on Schedule 4.6, there is no outstanding subscription, contract,
convertible or exchangeable security, option, warrant, call, or other right
(whether absolute or contingent) obligating Borrower to issue, sell, exchange,
or otherwise dispose of, or to purchase, redeem, or otherwise acquire equity
interests in the Borrower or securities convertible into or exchangeable for,
equity interests in the Borrower.
4.8. LITIGATION AND GOVERNMENT CLAIMS. There is no pending suit,
action or litigation, or administrative, arbitration or other proceeding or, to
Borrower's knowledge, any governmental investigation or inquiry, to which
Borrower is a party or to which its assets are subject which would reasonably be
expected to have a material adverse effect on the business, results of
operations, assets or the condition, financial or otherwise, of Borrower. To
the knowledge of Borrower, there are no such proceedings threatened,
contemplated, or any basis for any unasserted claims (whether or not the
potential claimant may be aware of the claim) which would reasonably be expected
to have a material adverse effect on the business, results
8
<PAGE>
of operations, assets or the condition, financial or otherwise, of Borrower.
5. COVENANTS. Until the Note has been paid in full, Borrower
covenants and agrees that it will, and (on and after the Effective Date) will
cause DRI to:
5.1. FINANCIAL STATEMENTS AND OTHER INFORMATION. Deliver to Lender the
following:
(i) within 30 days after the close of each month (commencing
with the month that includes the Effective Date) a copy of the balance
sheet and statement of operations of the Borrower and DRI as of the end
of such month and for the month then ended;
(ii) prompt notice of any citation, summons or other order
naming Borrower or DRI a party to any proceeding before any governmental
body which might reasonably be expected to have a material adverse effect
on Borrower or DRI; and
(iii) prompt notice of any lapse or other termination of any
Governmental License or any refusal by a governmental body to renew or
extend any Governmental License or any dispute between Borrower or DRI
and such governmental body.
5.2. INSPECTION. Permit Lender to visit and inspect its properties, to
examine its books of account and records and to discuss its affairs, finances
and accounts with its officers, all at such reasonable times during business
hours as may be requested by Lender.
5.3. MAINTENANCE OF LICENSES AND PROPERTIES. Maintain and preserve all
of the Governmental Licenses and its material properties which are used or
necessary in the conduct of its business; timely file all material reports,
applications, documents, instruments and information required to be filed
pursuant to all governmental authorities having jurisdiction over the operation
of its business; and continue to cause the Station to be operated in the
ordinary course of business, including maintaining the current "Contemporary
Christian" programming format.
5.4. USE OF PROCEEDS. Use the proceeds of the Bridge Loan to fund the
transactions contemplated by the Stock Purchase Agreement and, to the extent the
proceeds are not needed to consummate such transactions, to use the remaining
loan proceeds for any proper purpose, including the funding of working capital
advances to SDLP.
5.5. MAINTENANCE OF PRIORITY OF LENDER'S LIENS. Perform such acts and
duly authorize, execute, deliver, file and record such additional documents and
instruments as Lender may deem reasonably necessary or appropriate to perfect
and maintain the Liens in favor of Lender contemplated by the other Bridge Loan
Papers.
5.6. DISTRIBUTIONS. Not make or pay any Distribution.
5.7. LIENS. Not create, incur or suffer or permit to be created or
incurred or to exist any lien or encumbrance upon any of its assets except
Permitted Liens.
5.8. LOANS, ADVANCES AND INVESTMENTS. Not (i) loan, advance or
otherwise extend credit to, or contribute capital to invest in, GoGlobal or any
other Person or (ii) purchase or
9
<PAGE>
commit to purchase any stock, other securities or any other interests in any
other Person other than DRI, GoGlobal and Permitted Investments; provided,
however, that Borrower may organize the Holding Company to the extent that
(i) Borrower pledges all of the outstanding capital stock thereof to Lender
pursuant to an agreement in form comparable to the Stock Pledge Agreement and
(ii) Holding Company executes a guaranty of the Obligations in form
comparable to the Guaranty.
5.9. ACQUISITIONS, MERGERS AND DISSOLUTIONS. Not (i) acquire any
business other than DRI and GoGlobal, (ii) merge or consolidate with any Person
or (iii) liquidate, wind up or dissolve itself, or enter into any agreements to
do the foregoing.
5.10. TRANSACTIONS WITH AFFILIATES. Not (i) enter into any transactions
with Affiliates unless such transaction is on terms no less favorable than those
otherwise attainable on an arms' length basis from any Person which is not an
Affiliate or (ii) pay any management, consulting or similar fees to Affiliates.
5.11. SALES OF ASSETS. Not sell, lease, transfer or otherwise dispose
of any material assets of Borrower except in the ordinary course of business;
provided, however, that in no event shall the Borrower allow DRI to sell, lease,
transfer or otherwise dispose of any Governmental Licenses or material
intellectual property assets.
5.12. MODIFICATION OF GOVERNING DOCUMENTS. Without Lender's consent
(which will not be unreasonably withheld or delayed), not to modify, repeal or
amend any provision of the partnership agreement of Borrower or articles of
incorporation or bylaws of DRI.
5.13. INDEBTEDNESS. Not create or suffer to exist any Indebtedness
other than the Obligations.
5.14. CAPITAL STOCK OF DRI. Not issue, or commit to issue, any equity
securities of DRI or securities exercisable for or convertible into such equity
securities.
Notwithstanding the foregoing, it is understood and agreed by Lender that
Borrower may enter into the STLP Acquisition and take all necessary, advisable
and appropriate actions towards the consummation thereof (provided, however,
that the Obligations shall be repaid in full contemporaneously with the
consummation of the STLP Acquisition).
6. EVENTS OF DEFAULT. Should any of the following events (each of
which is herein called an "Event of Default") occur and be continuing, Borrower
shall be in default hereunder:
(a) If the repayment of principal or accrued interest is not made on
the due date and such default is not cured within 10 days' written notice;
(b) If Borrower or DRI shall fail to perform any of its obligations
and covenants in any of the Bridge Loan Papers and such default is not cured
after 30 days' written notice (provided, however, that such period shall be
extended to the extent and so long as the Borrower is proceeding in good faith
to cure such default and such default has not materially and adversely impacted
the value of the Collateral or Lender's rights with respect thereto);
10
<PAGE>
(c) If the on-air broadcasting operations of the Station shall cease
completely at any time for more than 72 hours during any period of three
consecutive days;
(d) If DRI has become subject to the revocation, suspension or adverse
modification of its main FM commercial broadcasting license, or a hearing for
such purpose has been scheduled or conducted;
(e) If Borrower or DRI (X) (i) makes a general assignment for the
benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes
the subject of an order for relief or is declared insolvent in any federal or
state bankruptcy or insolvency proceedings; (iv) files a petition or answer
seeking for Borrower or DRI a reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any law; (v)
files an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against it in a proceeding of the type described
in subclauses (i) through (iv) of this clause (X); or (vi) seeks, consents to,
or acquiesces in the appointment of a trustee, receiver, or liquidator of
Borrower's or DRI's or of all or any substantial part of the properties of
either; or (Y) has filed against it a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any law and 120 days have expired without dismissal thereof or with
respect to which, without the consent or acquiescence or Borrower or DRI (as
applicable), a trustee, receiver, or liquidator of the Borrower or DRI or of all
or any substantial part of the properties of Borrower or DRI (as applicable) has
been appointed and 90 days have expired without the appointment's having been
vacated or stayed, or 90 days have expired after the date of expiration of a
stay, if the appointment has not previously been vacated; or
(f) If there shall exist a final judgment or award against Borrower or
DRI which shall have been outstanding for a period of 60 days or more from the
date of entry thereof and shall not have been discharged in full or stayed
pending appeal, if the aggregate amount of all such judgments and awards exceeds
$1.0 million.
7. ACCELERATION OF INDEBTEDNESS. Upon the occurrence, and during the
continuance, of an Event of Default which is not waived by Lender, the entire
principal balance of the Bridge Loan, and all accrued and unpaid interest
thereon, shall be due and payable in full. Upon and after, and during the
continuance of, an Event of Default, Borrower shall pay to Lender on demand any
expenses or other costs, including reasonable attorneys' fees and expenses
incurred by Lender in connection with the enforcement or collection against the
Borrower or DRI of any provision of the Bridge Loan Papers, and in connection
with or arising out of any litigation, investigation or proceeding instituted by
any person with respect to any of the Bridge Loan Papers, whether or not suit is
instituted, including but not limited to such costs or expenses arising from the
enforcement or collection against Borrower or DRI of any provision of the Bridge
Loan Papers in a workout or restructuring or in any state or federal bankruptcy
or reorganization proceeding.
8. MISCELLANEOUS.
(a) The headings, captions and arrangements used in the Bridge Loan
Papers, unless specified otherwise, for convenience only and shall not be deemed
to limit, amplify or modify the terms of the Bridge Loan Papers, nor affect the
meaning thereof.
11
<PAGE>
(b) Any notice, consent, demand, request, approval or other
communication to be given hereunder by any party to another shall be deemed to
have been duly given if given in writing and personally delivered or sent by
overnight delivery service, facsimile transmission or United States mail,
registered or certified, postage prepaid, with return receipt requested, to the
address set forth under the parties' signature hereto. Notice so given shall,
in the case of notice so given by mail, be deemed to be given and received on
the fourth calendar day after posting, in the case of notice so given by
overnight delivery service or personal delivery, on the date of actual delivery
and, in the case of notice so given by facsimile transmission on the date of
actual transmission.
(c) The Bridge Loan Papers are intended to be performed in the State
of Texas, and the laws (other than conflict-of-laws provisions thereof) of such
State and of the United States of America shall govern the rights and duties of
the parties thereto and the validity, construction, enforcement and
interpretation of this Agreement, except to the extent otherwise specified
therein.
(d) If any provision in the Bridge Loan Papers is held to be illegal,
invalid or unenforceable, such provision shall be fully severable; the
applicable Bridge Loan Paper shall be construed and enforced as if such
provision had never comprised a part thereof; and the remaining provisions
thereof shall remain in full force and effect and shall not be affected by such
provision or by its severance therefrom.
(e) THE BRIDGE LOAN PAPERS REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES OR ANY TERM SHEETS BETWEEN BORROWER
AND LENDER (ALL THE TERMS AND CONDITIONS OF WHICH ARE SUPERSEDED BY THE BRIDGE
LOAN PAPERS). THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(f) Except as otherwise specifically provided, the Bridge Loan Papers
may only be amended by an instrument in writing executed jointly by Borrower,
Heftel and Lender and supplemented only by documents delivered or to be
delivered in accordance with the express terms thereof.
(g) This Agreement may be executed in a number of identical
counterparts, each of which shall be deemed an original for all purposes and all
of which constitute, collectively, one agreement.
(h) Heftel and Lender hereby represent and warrant to Borrower that
the execution, delivery and performance of the Bridge Loan Papers have been duly
authorized by all necessary corporate action and approvals, and the individual
signing this Agreement and the individuals who execute the Bridge Loan Papers on
behalf of Heftel or Lender, as the case may be, are duly authorized to execute
and deliver such Bridge Loan Papers on behalf of Heftel or Lender, as the case
may be.
(i) Notwithstanding any terms, provisions, conditions, covenants and
agreements
12
<PAGE>
contained in any or all of the Bridge Loan Papers to the contrary, Heftel and
Lender hereby consent to and agree that Borrower may engage in any or all of
the following described transactions without any of same, individually or in
the aggregate, constituting a default by Borrower under any of the Bridge
Loan Papers, and to the extent any of same constitute a default by Borrower
under any of the Bridge Loan Papers, such default is hereby waived:
(1) Borrower may acquire up to 100% of the issued and
outstanding stock of GoGlobal.
(2) Borrower shall be deemed to have advanced working capital
to DRI upon the consummation of the DRI Acquisition (as a result of the
working capital payment made by Borrower under the Stock Purchase
Agreement). DRI may pay to Borrower the cash collected from its accounts
receivable. Also, DRI may at any time transfer to Borrower its then
remaining uncollected accounts receivable.
(3) DRI may enter into the Time Brokerage Agreement with SDLP
upon such terms and conditions as DRI and SDLP shall deem necessary,
advisable or appropriate, provided that the Time Brokerage Agreement may
not become effective earlier than two days prior to the payment in full
of the Obligations. The Time Brokerage Agreement may include provisions
pursuant to which (i) DRI will time broker all of the Station's
commercial air time to SDLP, (ii) DRI will allow SDLP to use the
programming and other intellectual property of DRI in connection with
presenting its programming on the Station and (iii) SDLP will fulfill
DRI's obligations under Station operating agreements and agreements for
the broadcast of commercial air time.
(4) Borrower or DRI may reimburse SDLP for the employee costs
associated with any employees of the Station that are carried on SDLP's
payroll.
[signatures on following page]
13
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
Sunburst Texas LP
By Sunburst Texas, Inc. (general partner)
By: /s/ Don L. Turner
-------------------------------
Don L. Turner
Vice President
Address: 1350 One Galleria Tower
13355 Noel Road
Dallas, Texas 75240
Fax: (972) 503-2183
Heftel Broadcasting Corporation
By: /s/ Jeffrey T. Hinson
--------------------------------
Jeffrey T. Hinson
Senior Vice President
Address: 3102 Oak Lawn, Suite 215
Dallas, Texas 75219
Fax: (214) 525-7750
Heftel Broadcasting Texas, L.P.
By Heftel GP Texas, Inc. (general partner)
By: /s/ Jeffrey T. Hinson
---------------------------------
Jeffrey T. Hinson
Senior Vice President
Address: 3102 Oak Lawn, Suite 215
Dallas, Texas 75219
Fax: (214) 525-7750
14
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("AGREEMENT"), dated as of July 6,
1999, by and between SBT COMMUNICATIONS STATUTORY TRUST, a Connecticut
statutory trust ("SELLER"), and HBC BROADCASTING TEXAS, L.P., a Texas limited
partnership ("PURCHASER").
W I T N E S S E T H:
WHEREAS, prior to the Closing, Seller shall have, directly or
indirectly, acquired Delaware Radio, Inc., a Delaware corporation (the
"COMPANY") the owner, operator and licensee of radio station KLTY-FM (the
"STATION");
WHEREAS, either Seller (in the event that the assets of the Company
have been transferred from the Company to Seller) or the Company (in the
event that no such transfer has occurred) will be the licensee of the Station
authorized by the Federal Communications Commission (the "COMMISSION" or
"FCC") to operate the Station, and will hold title to various assets which
are used in the operation of the Station and certain of which are included in
this sale of assets;
WHEREAS, in the event that the assets of the Company have not been
transferred from the Company to the Seller, Seller shall cause the Company to
sell, convey and transfer to Purchaser the certain identified assets of the
Company, in which event, certain references to "SELLER" herein, where
appropriate, shall be references to the Company and, in connection with the
Closing, Seller shall cause the Company to deliver to Purchaser certificates
or other evidence regarding the organization, existence and authority of the
Company to consummate the transactions contemplated hereby; and
WHEREAS, Seller desires to sell and assign to Purchaser, and
Purchaser desires to purchase and assume from Seller, certain of the assets
and related liabilities used in the ownership and operation of the Station,
including, without limitation, certain contracts and leases and, subject to
the approval of the Commission, to accept assignment from Seller of the
licenses and other authorizations issued by the Commission for the operation
of the Station.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as
follows:
ARTICLE I
DEFINED TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement,
the following terms shall have the following meanings:
<PAGE>
"ACTION" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by any Governmental Authority or other third
party.
"ENCUMBRANCES" means liens, charges, pledges, options, mortgages,
deeds of trust, security interests, claims, restrictions (whether on voting,
sale, transfer, disposition or otherwise), easements and other encumbrances
of every type and description, whether imposed by law, agreement,
understanding or otherwise.
"GOVERNMENTAL AUTHORITY" means any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal or arbitral body.
"GOVERNMENTAL ORDER" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered into by or with any
Governmental Authority.
"LAW" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, requirement or rule of common law.
"LIABILITIES" means any and all debts, liabilities and obligations
(including, without limitation, all obligations relating to employees or
former employees of the Company), whether accrued or fixed, absolute or
contingent, matured or unmatured, or determined or determinable, including,
without limitation, those arising under any Law (including, without
limitation, any environmental law), Action or Governmental Order and those
arising under any contract agreement, arrangement, commitment or undertaking.
"PERMITTED ENCUMBRANCES" means any and all of the following liens,
charges, defects and encumbrances:
(a) Liens for taxes and assessments which are not yet due and
payable or, if due and payable, the validity of which is being contested
in good faith by appropriate legal proceedings;
(b) Rights existing under applicable laws or operating agreements or
similar contracts to assert liens against any properties of the Station
or Seller, but not including liens and other rights which have actually
been asserted, unless the Station or Seller disputes the validity of any
such lien or the amount claimed to be owed in connection therewith, or
such lien or other right is not enforceable against the interest of the
Station or Seller;
(c) Any obligations or duties affecting any property to any
municipality or public authority with respect to any franchise, grant,
license or permit and all applicable laws, rules and orders of any
Governmental Authority;
<PAGE>
(d) Any other defect, irregularity or encumbrance which are not
substantial in character, amount or extent and do not materially detract
from the value of the property subject thereto;
(e) Any Encumbrance created by Purchaser or any of its affiliates; and
(f) Such Encumbrances or impairments to the quality of title arising
as a result of the sale to Purchaser of the Station Assets pursuant to
this Agreement.
SECTION 1.02. OTHER DEFINED TERMS. The following terms shall have
the meanings defined for such terms in the Sections of this Agreement set
forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
affiliates...........................................Section 9.10
Agreement............................................First Paragraph
Assignment Application...............................Section 2.04
Assumed Contracts....................................Section 2.03
Assumed Liabilities..................................Section 2.03
Closing..............................................Section 3.01
Closing Date.........................................Section 3.01
Commission...........................................Recitals
Commission Authorizations............................Section 4.01
Company..............................................Recitals
Drumcree Capital.....................................Section 3.03
Excluded Assets......................................Section 2.02
Excluded Tax Liabilities.............................Section 2.03
FCC..................................................Recitals
FCC Applications.....................................Section 3.02
FCC Order............................................Section 2.04
Final Order..........................................Section 2.04
Governmental Licenses................................Section 2.01
HBC GP...............................................Section 3.04
HSR Act..............................................Section 2.04
Lease No. 1..........................................Section 2.01
Lease No. 2..........................................Section 2.01
License..............................................Section 4.01
Losses...............................................Section 7.02
Purchase Price.......................................Section 2.05
Purchaser............................................First Paragraph
SDLP.................................................Section 2.01
<PAGE>
Seller...............................................First Paragraph
Seller...............................................Recitals
Station..............................................Recitals
Station Assets.......................................Section 2.01
Time Brokerage Agreement.............................Section 2.01
Transmission Equipment...............................Section 2.01
Trust Agreement......................................Section 9.14
Trust Estate.........................................Section 9.14
</TABLE>
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE OF STATION ASSETS. Upon the terms
and subject to the conditions set forth in this Agreement, at the Closing,
Seller shall assign, transfer, convey and deliver to Purchaser, and Purchaser
shall purchase from Seller, all right, title and interest in and to the
following assets (the "STATION ASSETS"), free and clear of all Encumbrances,
other than Permitted Encumbrances:
(a) All licenses issued by or pending before the FCC, together with
all other authorizations pending before or issued by the FCC to Seller for
use at the Station, together with any and all renewals, extensions and
modifications thereof ("GOVERNMENTAL LICENSES");
(b) All transmitters and transmitter equipment and antennas, used or
useful in the operation of the Station, as listed on Schedule 2.01(b) hereto,
together with replacements thereof and additions thereto made between the
date hereof and the Closing (collectively, the "TRANSMISSION EQUIPMENT");
(c) All right, title and interest of Seller in and to that certain
(i) Lease Agreement, dated July 26, 1982, as amended to date, by and between
Arcetex Corporation and Latin American Broadcasting Company ("LEASE NO. 1")
and (ii) Lease Agreement, dated as of November 30, 1997, by and between
Corsicana Communications, Inc. and the Company ("LEASE NO. 2");
(d) All right, title and interest of Seller in and to the Time
Brokerage Agreement (the "TIME BROKERAGE AGREEMENT"), to be entered into
between Seller and Sunburst Dallas, LP ("SDLP"), related to the Station, in
the form attached as Exhibit A hereto; and
(e) All property tax records, FCC logs, all materials maintained in
the Station's FCC public file, technical data and records and all
correspondence with and documents pertaining to suppliers, governmental
authorities and other third parties relating to the assets
<PAGE>
described in clauses (a) through (d) above.
SECTION 2.02. EXCLUDED ASSETS. The following property will not be
purchased by Purchaser and shall remain the property of Seller (collectively,
the "EXCLUDED ASSETS"):
(a) Corporate minute books, stock books and income tax returns of
Seller;
(b) Investments of Seller in subsidiaries, partnerships and other
entities;
(c) All tradenames, trademarks, patents, service marks, call
letters, copyrights, logos and similar intangibles owned by Seller or used in
the operation of the Station;
(d) All programming materials, programs, jingles and promotional
materials owned by, licensed to or held by Seller and used in the operation
of the Station, whether recorded on tape or any other substance or intended
for live performance and whether completed or in production;
(e) All contracts for the sale of time on the Station and all
accounts receivable in respect thereof;
(f) Employment contracts; and
(g) The cash and cash equivalents of the Station as of the
Closing Date.
SECTION 2.03. ASSUMPTION AND EXCLUSION OF LIABILITIES. (a) On the
terms and subject to the conditions of this Agreement, from and after the
Closing Date, Purchaser shall assume and shall pay, perform and discharge
when due all Liabilities relating to the contracts (the "ASSUMED CONTRACTS")
listed on Schedule 2.03 hereto, or arising out of Purchaser's ownership after
the Closing Date of the Governmental Licenses or the Transmission Equipment
(collectively, the "ASSUMED LIABILITIES").
(b) Purchaser shall not assume any Liabilities of Seller, Seller's
beneficiary or the Company in respect of any United States federal income tax
on or resulting from the transactions contemplated by this Agreement
(collectively, "EXCLUDED TAX LIABILITIES").
(c) Except as set forth in Section 2.03(a), Purchaser shall not
assume any Liabilities of Seller, Seller's beneficiary, the Company or the
Station.
SECTION 2.04. ASSIGNMENT OF GOVERNMENTAL LICENSES. (a) In
order to consummate the transfer of the Station Assets, Purchaser and Seller
will file within five business
<PAGE>
days after the execution and delivery of this Agreement an assignment of
license application (the "ASSIGNMENT APPLICATION") requesting FCC consent to
the assignment to Purchaser of all Governmental Licenses relating to the
operation of the Station. The parties agree that the Assignment Application
will be prosecuted in good faith and with due diligence. The parties agree to
use their reasonable best efforts to file additional information or
amendments requested by the FCC orally or in writing within five business
days after such request and, in any event, to commence preparation of such
additional information or amendments promptly upon request and to complete
and file the same with the FCC as rapidly as practical. Each party will be
solely responsible for the expenses incurred by it in the preparation, filing
and prosecution of the Assignment Application (it being understood that each
of Seller and Purchaser will pay one-half of the FCC filing fee). As used
herein, the term "FCC ORDER" shall mean that the FCC has granted or given its
consent, without any condition materially adverse to Purchaser, to the
Assignment Application; the term "FINAL ORDER" shall mean that the FCC Order
shall have been final, that such FCC Order is not reversed, stayed, enjoined
or set aside, and with respect to such FCC Order, no timely request for stay,
reconsideration, review, rehearing or notice of appeal is pending, and as to
which FCC Order the time set forth in the FCC rules or the Communications Act
of 1934, as amended for filing any such request, petition or notice of appeal
or for review by the FCC staff on its own motion has expired.
(b) Within ten days after the execution and delivery of this
Agreement, Purchaser and Seller shall make any and all necessary filings
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR ACT") with respect to the transactions contemplated by this
Agreement.
SECTION 2.05. PURCHASE PRICE. The purchase price (the "PURCHASE
PRICE") for the Station Assets shall be (i) $65,000,000 and (ii) the
assumption of the Assumed Liabilities pursuant to this Agreement.
SECTION 2.06. CONSUMMATION BY PURCHASER. Purchaser shall use
commercially reasonable efforts to further establish, prior to the Closing,
Purchaser's ability to consummate the transactions contemplated by this
Agreement.
ARTICLE III
CLOSING
SECTION 3.01. CLOSING. Subject to the terms of this Agreement,
the sale and purchase of the Station Assets and the assumption of the Assumed
Contracts contemplated by this Agreement shall take place at a closing of the
transactions contemplated hereby (the "CLOSING") to be held at the offices of
Hispanic Broadcasting Corporation, Dallas, Texas on the date which is the later
of (i) the fifth day after issuance of the FCC Order or (ii) the satisfaction of
all closing conditions set forth in this Article III or at such other place or
at such other time or
<PAGE>
on such other date as Seller and Purchaser may mutually agree upon in writing
(the day on which the Closing takes place being the "CLOSING DATE").
SECTION 3.02. CONDITIONS TO THE CLOSING. The obligations of Seller
and Purchaser hereunder shall be subject to the satisfaction or written
waiver at or prior to the Closing Date of the following conditions:
(a) The waiting period (and any extension thereof), if any,
applicable to the transactions contemplated by this Agreement under the
HSR Act, shall have been terminated or shall have expired, and no
restrictive order or other requirements pursuant to the HSR Act shall
have been placed on the Parties.
(b) The FCC shall have approved the Assignment Application (and such
other applications as may be required by applicable law, rule or
regulation to permit the transfer to the Seller of the assets of the
Company, as contemplated by the recitals of this Agreement) to be filed
with respect to the transactions contemplated by this Agreement (the
"FCC APPLICATIONS").
(c) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction
or other legal restraint or prohibition preventing the consummation of
the sale of the Station Assets shall be in effect, nor shall any
proceeding by or with any Governmental Authority or third party seeking
any of the foregoing be pending (excluding, in each case, any such
matter initiated by Seller, Purchaser or any of their affiliates). There
shall not be any Action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the sale of the
Station Assets, which makes the consummation of the sale of the Assets
illegal (excluding, in each case, any such matter initiated by Seller,
Purchaser or any of their affiliates).
(d) Purchaser and Seller shall have entered into an Unwind
Agreement, substantially in the form attached hereto as EXHIBIT 3.02(e).
(e) The delivery by (i) Seller to Purchaser of the items set forth
in Section 3.03 and (ii) Purchaser to Seller of the items set forth in
Section 3.04.
(f) Seller shall have consummated its acquisition of the company at
least two days prior to the Closing Date.
SECTION 3.03. CLOSING DELIVERIES BY SELLER. At the Closing, Seller
shall execute, acknowledge (where appropriate) and deliver, or cause to be
executed, acknowledged (where appropriate) and delivered, to Purchaser the
following:
<PAGE>
(a) Such instruments, in form and substance satisfactory to
Purchaser, as may be requested by Purchaser to transfer the Station
Assets to Purchaser or evidence such transfer on the public records.
(b) A certificate, executed by Seller, dated as of the Closing Date,
certifying that (i) the representations and warranties of Seller in this
Agreement are true and correct in all material respects as of the
Closing (or, in the case of representations and warranties which address
matters only as of a particular date, as of such particular date), with
the same effect as though made as of such date, (ii) that each covenant
or agreement of Seller in this Agreement to be complied with at or prior
to Closing shall have been complied with in all material respects and
(iii) no Action (excluding any such matter initiated by Purchaser or any
of its Affiliates) is pending or, to Seller's knowledge, threatened
before and no injunction issued by any Governmental Authority seeking to
enjoin or restrain or prohibit, delay, or restrain the performance of or
to obtain damages or other relief in connection with this Agreement, or
the consummation of the transactions contemplated thereby or hereby.
(c) A certificate, executed by an officer of Drumcree Capital, Inc.
("DRUMCREE CAPITAL"), dated as of the Closing Date, certifying the
incumbency and signature of the officers of Drumcree Capital and that
attached to such certificate is a true and complete copy of (i) the
Articles of Association of Drumcree Capital, (ii) the By-laws of
Drumcree Capital and (iii) evidence reasonably satisfactory to Purchaser
of the necessary trust action of Seller authorizing the execution and
delivery of this Agreement and the closing documents to which it is a
party and the consummation of the transactions contemplated hereunder.
(d) A written opinion, dated as of the Closing Date, of counsel for
Seller, in form and substance reasonably satisfactory to Purchaser.
(e) A letter to Purchaser from counsel to Seller's beneficiary
relating to Seller's acquisition of the Company and the transactions
contemplated by this Agreement, in form and substance reasonably
satisfactory to Purchaser.
SECTION 3.04. CLOSING DELIVERIES BY PURCHASER. At the Closing,
Purchaser shall execute, acknowledge (where appropriate) and deliver, or
cause to be executed, acknowledged (where appropriate) and delivered, to
Seller the following:
(a) Such assumption agreements and similar instruments, in form and
substance satisfactory to Seller, relating to the assumption of the
Assumed Contracts and the transfer of the Station Assets, as may be
requested by Seller.
(b) The Purchase Price, delivered to Seller by wire transfer of
immediately
<PAGE>
available funds.
(c) A certificate, executed by the duly authorized officer of HBC
GP Texas, Inc. ("HBC GP"), the general partner of Purchaser, dated as of
the Closing Date, certifying that (i) the representations and warranties
of Purchaser in this Agreement are true and correct in all material
respects as of the Closing, with the same effect as though made as of
such date (or, in the case of representations and warranties which
address matters only as of a particular date, as of such particular
date), (ii) that each covenant or agreement of Purchaser in this
Agreement to be complied with at or prior to Closing shall have been
complied with in all material respects and (iii) no Action (excluding
any such matter initiated by Seller or any of its Affiliates) is pending
or, to Purchaser's knowledge, threatened before any court or
governmental agency seeking to enjoin or restrain or prohibit, delay, or
restrain the performance of or to obtain damages or other relief in
connection with this Agreement, or the consummation of the transactions
contemplated thereby or hereby.
(d) A certificate, executed by the duly authorized Secretary or
Assistant Secretary of HBC GP on behalf of Purchaser, dated as of the
Closing Date, certifying the incumbency and signatures of the officers
of HBC GP on behalf of Purchaser and that attached to such certificate
is a true and complete copy of (i) the organizational documents of HBC
GP and Purchaser and (ii) evidence of all necessary partnership action
of Purchaser authorizing the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereunder and the
closing documents to which it is a party.
(e) A written opinion, dated as of the Closing Date, of counsel to
Purchaser, in a form acceptable to Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 4.01. Seller hereby represents and warrants to Purchaser as
follows:
(a) ORGANIZATION; GOOD STANDING. Seller is a statutory trust duly
formed under the laws of Connecticut and has all requisite trust power and
authority to own and lease its properties and assets and to carry on its
business as currently conducted.
(b) DUE AUTHORIZATION; EXECUTION AND DELIVERY. Subject to the
issuance of the Final Order, any required compliance with the HSR Act, Seller
has full power and authority to enter into and perform this Agreement and to
carry out the transactions contemplated hereby.
<PAGE>
Prior to the Closing, Seller will have taken all requisite action to approve
the execution and delivery of this Agreement and the transactions
contemplated hereby. This Agreement constitutes the legal, valid and binding
obligation of Seller, enforceable against it in accordance with its terms,
except as may be limited by the availability of equitable remedies or by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally (whether such rights are considered at
law or in equity). Neither the execution and delivery by Seller of this
Agreement nor the consummation by it of the transactions contemplated hereby
will conflict with or result in a breach of the trust agreement of Seller.
(c) GOVERNMENTAL CONSENTS. No approval, authorization, consent,
order or other action of, or filing with, any governmental authority or
administrative agency is required in connection with the execution and
delivery by Seller of this Agreement or the consummation of the transactions
contemplated hereby, other than those of the FCC or those under the HSR Act,
other than (i) filings with other Governmental Authorities to occur in the
ordinary course following the consummation of the transaction contemplated by
this Agreement, (ii) filings, with or approvals of Governmental Authorities
which may be necessary due to the status of Purchaser or any affiliate of
Purchaser and (iii) such consents, approvals, orders or authorizations which,
if not obtained, and such declarations, filings, or registrations which, if
not made, would not, individually or in the aggregate, have a material and
adverse effect on the Station Assets.
(d) TITLE TO ASSETS. As of the Closing Date, Seller will have good
and defensible title or, with respect to Station Assets which it leases,
valid leasehold rights, to all of the material Station Assets, free and clear
of all Encumbrances other than Permitted Encumbrances.
(e) CONDITION OF ASSETS. As of the Closing Date, the Station Assets
shall be (i) in the case of tangible properties, in reasonably good operating
condition and repair (ordinary wear and tear excepted) and have been
maintained in substantial accordance with industry practice and (ii) adequate
for normal operation of the Station.
(f) GOVERNMENTAL LICENSES.
(i) Schedule 4.01(f) includes a true and complete list of all of
the Governmental Licenses, including the FM broadcast station license
(the "LICENSE"), which, together with all applications for such
authorizations pending as of the date hereof, are herein referred to as
the "COMMISSION AUTHORIZATIONS". Schedule 4.01(f) accurately identifies
each of the Commission Authorizations (including each of the
applications therefor) as to the licensee, city of license, and call
sign (or, with respect to applications therefor, the file number
assigned by the Commission to such application). Seller has delivered to
Purchaser copies of each of the Commission Authorizations (including any
and all amendments and other modifications thereto and all applications
for additional such licenses). The Commission Authorizations identified
on Schedule
<PAGE>
4.01(f) comprise all of the licenses, permits and other authorizations
required from the Commission for the normal and lawful broadcast
operations of the Station in the manner now conducted.
(ii) No action or proceeding is pending or threatened before the
Commission or other Governmental Entity for the cancellation or material
adverse modification of the Commission Authorizations other than the
License. The Station's Public File which is required by the Commission
to be maintained by the Company is current and contains all information
required to be included therein. Seller is current with all reports,
filings and other matters that it is required to file with the
Commission and is not delinquent in the payment of any fees and charges
due to the Commission. The material required by 47 C.F.R. Section 73.3526
to be kept in the public inspection file of the Station is in such file.
(iii) As of the Closing Date, Seller shall be the authorized legal
holder of the License. The License is in full force and effect and no
action or proceeding is pending or threatened before the Commission for
the cancellation of the License. The Station, its physical facilities,
electrical and mechanical systems and transmitting and studio equipment
are being operated in material compliance with the terms of each
Governmental License and are in substantial and material compliance with
the rules and regulations of the Commission.
(g) LITIGATION. There are no Governmental Orders and no Actions
pending or, to Seller's knowledge, threatened against or affecting the
Station Assets which, if adversely determined, might materially and adversely
affect the Station Assets (taken as a whole) or which challenges the validity
or propriety of any of the transactions contemplated by this Agreement.
(h) BROKERS. No broker, finder, financial advisor or investment
banker is entitled to any brokerage, finder's or other fee, commission or
expense reimbursement in connection with the transactions contemplated by
this Agreement as a result of any agreement or action of Seller.
SECTION 4.02. DISCLAIMER OF WARRANTIES; LIMITATION ON WARRANTIES.
(a) EXCEPT WITH RESPECT TO THE REPRESENTATIONS AND WARRANTIES SPECIFICALLY
SET FORTH IN THIS AGREEMENT, SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED,
WHETHER OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
OR QUALITY AS TO THE STATION ASSETS, OR ANY PART THEREOF, OR AS TO THE
CONDITION OR WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN,
WHETHER LATENT OR PATENT, IT BEING UNDERSTOOD THAT THE STATION ASSETS ARE TO
BE CONVEYED HEREUNDER "AS IS" AND PURCHASER SHALL RELY UPON ITS OWN
EXAMINATION THEREOF. WITHOUT LIMITING THE GENERALITY OF THE IMMEDIATELY
PRECEDING SENTENCE AND EXCEPT AS EXPRESSLY SET FORTH IN
<PAGE>
THIS AGREEMENT, THE SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE, RELATING TO (i) ANY INFRINGEMENT BY SELLER OR ANY OF ITS
AFFILIATES OF ANY PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY OR (ii) THE
ACCURACY, COMPLETENESS OR MATERIALITY OF ANY ESTIMATES, PROJECTIONS AND
EVALUATIONS.
(b) Seller makes no representation or warranty that any
date-sensitive data included among the Station Assets is in proper format and
accurate for all dates in the twentieth and twenty-first centuries, or that
any systems included in the Station Assets accurately process all
date-sensitive data, including for the twentieth and twenty-first centuries
and any leap-year sensitive data, or will operate properly after December 31,
1999 and, notwithstanding anything to the contrary set forth herein, if any
representation or warranty of Seller contained herein is rendered untrue or
incorrect (other than Sellers representations regarding title to the Station
Assets), or Seller is rendered unable to perform any covenant or agreement
contained herein as a result of the Closing occurring in the year 2000, then
such representations and warranties shall nevertheless be deemed to be true
and correct for all purposes and such covenants and conditions shall be
deemed to have been performed and Purchaser waives any such breach of such
representations or warranties or such nonperformance of such covenants and
agreements by Seller. Furthermore, Purchaser will not be excused from
performance of any of its obligations hereunder on the grounds that the
advent of the year 2000 makes it impractical or impossible to perform such
obligations. Purchaser assumes all risk of loss or damage to the Station
Assets or the Purchaser to the extent that such loss or damage is caused by
the advent of the year 2000.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION 5.01. Purchaser hereby represents and warrants to Seller as
follows:
(a) ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the state
of Delaware and has all requisite corporate power and authority to own and
lease its properties and carry on its business as currently conducted.
(b) DUE AUTHORIZATION; EXECUTION AND DELIVERY. Subject to the
issuance of the Final Order and any required compliance with the HSR Act,
Purchaser has full power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary partnership action on the part of
Purchaser. This Agreement has been duly executed and delivered by Purchaser
and constitutes the legal, valid
<PAGE>
and binding obligation of Purchaser, enforceable against it in accordance
with its respective terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors'
rights generally or general equitable principles. Neither the execution and
delivery by Purchaser of this Agreement nor the consummation of the
transactions contemplated hereby will: (i) conflict with or result in a
breach of the organizational documents of Purchaser; (ii) subject to the
issuance of the Final Order, violate any law, statute, rule or regulation or
any order, writ, injunction or decree of any court or governmental authority;
or (iii) violate or conflict with or constitute a default under (or give rise
to any right of termination, cancellation or acceleration under) any
indenture, mortgage, lease, contract or other instrument to which Purchaser
or any of its affiliates is a party or by which it or any of its affiliates
is bound or affected.
(c) GOVERNMENTAL CONSENTS. No consent, approval, authorization,
license, exemption of, filing or registration with any court, governmental
authority or administrative agency is required by Purchaser in connection
with the execution and delivery of this Agreement or the consummation by it
of any transaction contemplated hereby, other than the consent of the FCC or
under the HSR Act. Purchaser warrants that it is legally qualified to become
a licensee of the Station and is aware of no material impediment to the
approval by the FCC or any other Governmental Authority of the assignment of
the Governmental Licenses.
(d) LITIGATION. There is no order of any court, governmental agency
or authority and no action, suit, proceeding or investigation, judicial,
administrative or otherwise that is pending or, to Purchaser's knowledge,
threatened against or affecting Purchaser which challenges the validity or
propriety of any of the transactions contemplated by this Agreement.
(e) BROKERS. No broker, finder, financial advisor or investment
banker is entitled to any brokerage, finder's or other fee, commission or
expense reimbursement in connection with the transactions contemplated by
this Agreement as a result of any agreement or action of Purchaser.
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS
SECTION 6.01. BEST EFFORTS. Seller and Purchaser shall take all
reasonable action necessary to consummate the transactions contemplated by
this Agreement and will use all necessary and reasonable means at its
disposal to obtain all necessary consents and approvals of other persons and
governmental authorities required to enable it to consummate the transactions
contemplated by this Agreement, including the consent of the FCC and any
necessary filings and consents under the HSR Act. Except as otherwise
provided herein, each of Seller and Purchaser acknowledges and agrees that it
shall pay all costs, fees and expenses incurred by it in obtaining
<PAGE>
such necessary consents and approvals (it being understood that Seller and
Purchaser shall each pay one-half of all filing fees in connection with
filings under the HSR Act or with the FCC). Each party shall promptly make
all filings, applications, statements and reports to all governmental
agencies or entities which are required to be made prior to the Closing Date
by or on its behalf pursuant to any statute, rule or regulation in connection
with the transactions contemplated by this Agreement, and copies of all such
filings, applications, statements and reports shall be provided to the other.
If the FCC determines that the transactions contemplated hereby or a portion
thereof are inconsistent or violative of FCC rules or regulations, the
parties agree that they will, to the extent practicable, negotiate in good
faith to amend, modify or restructure the transactions contemplated hereby so
as to be consistent with FCC rules and regulations.
SECTION 6.02. PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, all
notices to third parties and other publicity relating to the transactions
contemplated by this Agreement shall be jointly planned by Seller and
Purchaser.
SECTION 6.03. TRUST DURATION. In connection with the Time Brokerage
Agreement and the License Agreement to be entered into between Seller and
SDLP with respect to certain assets of the Company and Seller's obligations
thereunder, Seller shall (a) for at least five years following the Closing
maintain itself as a validly existing statutory trust under the laws of
Connecticut and (b) retain and not distribute to its beneficiary any of the
periodic payments received by Seller pursuant to such License Agreement until
such time as Seller has received $1,000,000 in periodic payments under such
License Agreement. Thereafter, Seller shall retain and not distribute to its
beneficiary at least $1,000,000 in such periodic payments for the balance of
the five year period following the Closing. Seller may, however, without
limitation, distribute the entire initial payment received under such License
Agreement. During such five-year period, Seller shall retain its ownership of
the assets licensed by it to SDLP pursuant to such License Agreement.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. SURVIVAL. All representations, warranties, covenants
and agreements made by any party to this Agreement or pursuant hereto shall
be deemed to be material and to have been relied upon by the parties hereto
and shall survive the Closing for twelve months after the Closing Date;
provided, however, that (i) Seller's obligations in Section 6.03 hereof shall
survive for five years after the Closing and (ii) Seller's indemnification
obligations set forth in Section 7.02(c) shall survive for 30 days after the
applicable statute of limitations relating to the Excluded Tax Liabilities.
<PAGE>
SECTION 7.02. INDEMNIFICATION BY SELLER. Subject to the
limitations set forth in Sections 7.01 and 7.04, Seller shall indemnify and
hold harmless Purchaser from, against, for and in respect of:
(a) any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action and encumbrances
(collectively, "LOSSES") suffered, sustained, incurred or required to be paid
by Purchaser and arising from the breach of any written representation,
warranty, agreement or covenant of Seller contained in this Agreement;
(b) any and all Liabilities of Seller or its beneficiaries other
than the Assumed Liabilities arising from and after the Closing Date;
(c) the Excluded Tax Liabilities; and
(d) all reasonable costs and expenses (including, without
limitation, attorneys' fees, interest and penalties) incurred by Purchaser in
connection with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against in this Section 7.02.
SECTION 7.03. INDEMNIFICATION BY PURCHASER. Subject to the
limitations set forth in Sections 7.01 and 7.04, Purchaser shall indemnify
and hold Seller harmless from, against, for and in respect of:
(a) any and all Losses suffered, sustained, incurred or required to
be paid by Seller and arising from the breach of any written representation,
warranty, agreement or covenant of Purchaser contained in this Agreement;
(b) any and all Assumed Liabilities arising from and after the
Closing Date; and
(c) all reasonable costs and expenses (including, without
limitation, attorneys' fees, interest and penalties) incurred by Seller in
connection with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against in this Section 7.03.
SECTION 7.04. INDEMNIFICATION PROCEDURES. The obligations and
liabilities of each indemnifying party hereunder with respect to claims
resulting from the assertion of liability by the other party or indemnified
third parties shall be subject to the following terms and conditions:
(a) The indemnified party shall give prompt written notice (which
in no event shall exceed 30 days from the date on which the indemnified party
first became aware of such claim or assertion) to the indemnifying party of
any claim which might give rise to a claim by the
<PAGE>
indemnified party against the indemnifying party based on the indemnity
agreements contained in Sections 7.02 or 7.03 hereof, stating the nature and
basis of said claims and the amounts thereof, to the extent known. The
failure to so notify or any delay in so notifying the indemnifying party will
not relieve the indemnifying party of its obligations under Sections 7.02 or
7.03, except solely to the extent that such failure actually and materially
prejudices the indemnifying party.
(b) If any action, suit or proceeding is brought against the
indemnified party with respect to which the indemnifying party may have
liability under the indemnity agreements contained in Section 7.02 or 7.03
hereof, the action, suit or proceeding shall, upon the written acknowledgment
by the indemnifying party that it is obligated to indemnify under such
indemnity agreement, be defended (including all proceedings on appeal or for
review which counsel for the indemnified party shall deem appropriate) by the
indemnifying party. The indemnified party shall have the right to employ its
own counsel in any such case, but the fees and expenses of such counsel shall
be at the indemnified party's own expense unless (i) the employment of such
counsel and the payment of such fees and expenses both shall have been
specifically authorized in writing by the indemnifying party in connection
with the defense of such action, suit or proceeding, or (ii) counsel to such
indemnified party shall have reasonably concluded and specifically notified
the indemnifying party that there may be specific defenses available to it
which are different from or additional to those available to the indemnifying
party or that such action, suit or proceeding involves or could have an
effect upon matters beyond the scope of the indemnity agreements contained in
Sections 7.02 or 7.03 hereof, in any of which events the indemnifying party,
to the extent made necessary by such defenses, shall not have the right to
direct the defense of such action, suit or proceeding on behalf of the
indemnified party. In the latter such case only that portion of such fees and
expenses of the indemnified party's separate counsel reasonably related to
matters covered by the indemnity agreements contained in Section 7.02 or 7.03
hereof shall be borne by the indemnifying party. The indemnified party shall
be kept fully informed of such action, suit or proceeding at all stages
thereof whether or not it is represented by separate counsel.
(c) The indemnified party shall make available to the indemnifying
party and its attorneys and accountants all books and records of the
indemnified party relating to such proceedings or litigation and the parties
hereto agree to render to each other such assistance as they may reasonably
require of each other in order to ensure the proper and adequate defense of
any such action, suit or proceeding.
(d) The indemnified party shall not make any settlement of any
claims without the written consent of the indemnifying party, which consent
shall not be unreasonably withheld or delayed.
ARTICLE VIII
<PAGE>
TERMINATION
SECTION 8.01. TERMINATION. This Agreement may be terminated by the
mutual consent of Purchaser and Seller, or by either Purchaser or Seller, if
the terminating party is not then in material breach of its obligations
hereunder, upon written notice to the other upon the occurrence of any of the
following:
(a) By the terminating party, if the other party is in material
breach of its obligations hereunder, and such breach has not been cured by
the other party within 30 days of written notice of such breach (or such
longer period of time if the breach cannot be reasonably cured within 30 days
and the breaching party is diligently attempting to cure such breach);
(b) If the FCC designates the FCC Application contemplated by
Section 2.04 hereof for hearing at any time; or
(c) If the Closing has not occurred on or before November 10, 1999,
unless, in either clause (b) or (c) above, the breach of the representations,
warranties, covenants or agreements of the party seeking to terminate this
Agreement is a cause of the Commission's denial of such FCC Application or
the failure of the commission to grant such FCC Application by November 10,
1999.
SECTION 8.02. LIQUIDATED DAMAGES. In the event of the termination
of this Agreement resulting from a default by Purchaser under this Agreement,
Purchaser shall pay to Seller $3,250,000 as liquidated damages, and not as a
penalty, and as part of the consideration given to Seller for entering into
this Agreement. The parties agree that it would be impracticable and
extremely difficult to ascertain the actual damages suffered by Seller as a
result of Purchaser's failure to complete the transaction contemplated by
this Agreement, and that under the circumstances existing as of the date of
this Agreement, the liquidated damages provided for in this section represent
a reasonable estimate of the damages which Seller will incur as a result of
such failure.
SECTION 8.03. SPECIFIC PERFORMANCE. It is understood and agreed
that money damages would not be sufficient remedy for Seller's failure to
transfer, assign, convey, sell or deliver the Station Assets to Purchaser,
that Purchaser would be irreparably harmed by such a breach and that
Purchaser shall be entitled to specific performance and injunctive relief as
remedies for any such breach. Such remedies shall not be deemed to be the
exclusive remedies for breach of this Agreement by Seller, but shall be in
addition to all other remedies available at law or in equity to Purchaser.
<PAGE>
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.01. EXPENSES. Except as otherwise expressly provided
herein, each party shall pay the fees and expenses incurred by it in
connection with the transactions contemplated by this Agreement, it being
understood that each of Seller and Purchaser shall pay one half of the filing
fees required by the FCC or under the HSR Act. Purchaser shall be responsible
for all recordation costs and all applicable transfer, stamp, documentary and
similar taxes and all governmental filing fees incurred in connection with
this Agreement with this. If any action is brought for breach of this
Agreement or to enforce any provision of this Agreement, the prevailing party
shall be entitled to recover court costs, arbitration expenses and reasonable
attorneys' fees.
SECTION 9.02. PRORATIONS. Payments under the Time Brokerage
Agreement and other Assumed Contracts, property taxes on the Station Assets
and similar items customarily prorated in an asset sale shall be prorated
effective as of the opening of business on the Closing Date. All prorations
shall be made and paid insofar as feasible on the Closing Date.
SECTION 9.03 AMENDMENT. This Agreement may be amended at any time
but only by an instrument in writing signed by the parties hereto.
SECTION 9.04 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if mailed by
certified mail, return receipt requested, or delivered by nationally
recognized "next-day" delivery service, to the parties at the addresses set
forth below (or at such other address for a party as shall be specified by
like notice), or sent by facsimile to the number set forth below (or such
other number for a party as shall be specified by proper notice hereunder):
If to Purchaser:
Hispanic Broadcasting Corporation
3102 Oak Lawn Avenue, Suite 215
Dallas, TX 75201
Attention: McHenry T. Tichenor, Jr., President & CEO
Telecopy No.: (214) 525-7750
If to Seller:
SBT Communications Statutory Trust
c/o Drumcree Capital, Inc., Trustee
5074 Dorsey Hall Drive, Suite 205
<PAGE>
Ellicott City, MD 21042
Attention: W. Lawrence Patrick, President
Telecopy No.: (410) 740-7222
with copies (which shall not constitute notice) to:
Shearman & Sterling
555 California Street, Suite 2000
San Francisco, CA 94104-1522
Attention: Christopher D. Dillon, Esq.
Telecopy No.: (415) 616-1199
Bingham Dana LLP
100 Pearl Street
Hartford, CT 06103
Attention: James G. Scantling, Esq.
Telecopy No.: (860) 527-5188
Leventhal, Senter & Lerman, P.L.L.C.
2000 K Street, N.W., Suite 600
Washington, D.C. 20006-1809
Attention: Brian M. Madden, Esq.
Telecopy No.: (202) 293-7783
SECTION 9.05. ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
heirs and permitted assigns. This Agreement may not be assigned by either
party without the prior written consent of the other; provided, that the
parties hereto acknowledge and agree that Seller may dissolve and/or
liquidate the Company prior to the Closing or may cause the Company to
fulfill the obligations of Seller hereunder and, further, that Purchaser may
assign its rights and obligations hereunder to one or more subsidiaries of
Hispanic Broadcasting Corporation and such subsidiary or subsidiaries shall
be deemed the "Purchaser" pursuant hereto; provided, however, if such
assignment occurs, Hispanic Broadcasting Corporation will continue to have
ultimate responsibility for all obligations, representations and duties
contained herein and shall guarantee the obligations of such assignee
hereunder.
SECTION 9.06. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 9.07. HEADINGS. The headings of the Sections of this
Agreement are
<PAGE>
inserted for convenience only and shall not constitute a part hereof.
SECTION 9.08. ENTIRE AGREEMENT. This Agreement and the documents
referred to herein contain the entire understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties, conveyances or undertakings other than those expressly
set forth herein. This Agreement supersedes any prior agreements and
understandings between the parties with respect to the subject matter.
SECTION 9.09. WAIVER. No attempted waiver of compliance with any
provision or condition hereof, or consent pursuant to this Agreement, will be
effective unless evidenced by an instrument in writing by the party against
whom the enforcement of any such waiver or consent is sought.
SECTION 9.10. CERTAIN DEFINITIONS. As used in this Agreement,
"AFFILIATES" of a party shall mean persons or entities that directly, or
indirectly through one or more intermediaries, control or are controlled by,
or are under common control with, such party.
SECTION 9.11. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
SECTION 9.12. INTENDED BENEFICIARIES. The rights and obligations
contained in this Agreement are hereby declared by the parties hereto to have
been provided expressly for the exclusive benefit of such entities as set
forth herein and shall not benefit, and do not benefit, any unrelated third
parties.
SECTION 9.13. MUTUAL CONTRIBUTION. The parties to this Agreement
and their counsel have mutually contributed to its drafting. Consequently, no
provision of this Agreement shall be construed against any party on the
ground that such party drafted the provision or caused it to be drafted or
the provision contains a covenant of such party.
SECTION 9.14. NO RECOURSE. It is expressly understood and agreed
that this Agreement is executed and delivered on behalf of Seller by Drumcree
Capital, not in its individual capacity but solely as Trustee under the Trust
Agreement (SBT Communications Statutory Trust) dated as of May 1, 1999
between Drumcree Capital and the Beneficiary named therein (the "TRUST
AGREEMENT"), in the exercise of the powers and authority conferred and vested
in it as the trustee thereunder, and that each of the representations,
warranties, undertakings and agreements herein made on the part of Seller is
made solely as a representation, warranty, undertaking or agreement of Seller
and not as a personal representation, warranty, undertaking or agreement of
Drumcree Capital and is made solely for the purpose of binding the trust
estate created by the Trust Agreement (the "TRUST ESTATE") and all persons
having any claim by reason of any such representation, warranty, undertaking
or agreement shall look only to the Trust Estate for payment or satisfaction
thereof.
<PAGE>
SECTION 9.15. BULK SALES. Each of Seller and Purchaser hereby
waives compliance by the other with the requirements of any and all laws
relating to bulk sales and transfers in connection with the transactions
contemplated by this Agreement.
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be duly executed as of the date first above written by their
respective officers thereunto duly authorized.
HBC BROADCASTING TEXAS, L.P., a Texas
limited partnership
By: HBC GP TEXAS, INC., a Delaware
corporation, its general partner
By: /s/ Jeffrey T. Hinson
-------------------------------
Jeffrey T. Hinson
Senior Vice President
SBT COMMUNICATIONS STATUTORY
TRUST, a Connecticut Statutory trust
By: DRUMCREE CAPITAL, INC., not in its
individual capacity, but solely as
trustee
By: /s/ W. Lawrence Patrick
-------------------------------
W. Lawrence Patrick
President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 112,983
<SECURITIES> 0
<RECEIVABLES> 41,336
<ALLOWANCES> 2,133
<INVENTORY> 0
<CURRENT-ASSETS> 153,447
<PP&E> 55,757
<DEPRECIATION> 19,043
<TOTAL-ASSETS> 884,488
<CURRENT-LIABILITIES> 28,997
<BONDS> 1,481
0
0
<COMMON> 51
<OTHER-SE> 756,279
<TOTAL-LIABILITY-AND-EQUITY> 884,488
<SALES> 0
<TOTAL-REVENUES> 89,614
<CGS> 0
<TOTAL-COSTS> 66,330
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 737
<INTEREST-EXPENSE> 577
<INCOME-PRETAX> 22,534
<INCOME-TAX> 9,239
<INCOME-CONTINUING> 13,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,295
<EPS-BASIC> 0.27
<EPS-DILUTED> 0.27
</TABLE>
