-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IALyw3nbnYIP09Vr4ONbayMyAAEMP/2LosGMJvVXdtSiaFYfaF6fJDPL14MF1mIl YdGu2anXrIHrdhGzV6A4Qw== 0000950134-97-000125.txt : 19970113 0000950134-97-000125.hdr.sgml : 19970113 ACCESSION NUMBER: 0000950134-97-000125 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19970110 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEFTEL BROADCASTING CORP CENTRAL INDEX KEY: 0000922503 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 990113417 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-14207 FILM NUMBER: 97503657 BUSINESS ADDRESS: STREET 1: 6767 WEST TROPICANA AVE CITY: LAS VEGAS STATE: NV ZIP: 89603 BUSINESS PHONE: 7023673322 S-3/A 1 AMENDMEMT TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 1997 REGISTRATION NO. 333-14207 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ AMENDMENT NO. 2 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ HEFTEL BROADCASTING CORPORATION (Exact name of Registrant as specified in its charter) 6767 WEST TROPICANA AVENUE, SUITE 102 LAS VEGAS, NEVADA 89103 (702) 367-3322 (Address, including zip code, and telephone number, including area code, of registrant's principal executive office) ------------------------ DELAWARE 4832 99-0113417 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or Classification Code Number) Identification No.) organization)
------------------------ L. LOWRY MAYS HEFTEL BROADCASTING CORPORATION 200 CONCORD PLAZA, SUITE 600 SAN ANTONIO, TEXAS 78216 (210) 822-2828 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: RICHARD C. TILGHMAN, JR., ESQ. STEPHEN C. MOUNT, ESQ. STEPHEN A. RIDDICK, ESQ. AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. PIPER & MARBURY L.L.P. 1500 NATIONSBANK PLAZA CHARLES CENTER SOUTH 300 CONVENT STREET 36 SOUTH CHARLES STREET SAN ANTONIO, TEXAS 78205 BALTIMORE, MARYLAND 21202
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE
================================================================================================ PROPOSED PROPOSED MAXIMUM MAXIMUM AMOUNT OFFERING AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(1) FEE(1) - ------------------------------------------------------------------------------------------------ Class A Common Stock.............. 350,000 $31.875 $11,156,250 $3,381 ================================================================================================
(1) The Registrant has previously registered and paid the appropriate filing fee for 4,025,000 shares of Class A Common Stock. (2) Pursuant to Rule 457(h), the offering price and registration fee are computed on the basis of the average of the high and low prices of the Class A Common Stock, as reported by the Nasdaq National Market on January 3, 1997. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 *************************************************************************** * * * INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A * * REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED * * WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT * * BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE * * REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT * * CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY * * NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH * * SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO * * REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH * * STATE. * * * *************************************************************************** SUBJECT TO COMPLETION JANUARY 10, 1997 3,850,000 SHARES HEFTEL BROADCASTING CORPORATION [HBC LOGO] CLASS A COMMON STOCK ------------------ Of the 3,850,000 shares of Class A Common Stock offered hereby, 3,500,000 are being sold by Heftel Broadcasting Corporation (the "Company") and 350,000 shares are being sold by Clear Channel Communications, Inc. ("Clear Channel"). See "Selling Shareholder." The Company will not receive any of the proceeds from the sale of shares by Clear Channel. The Class A Common Stock of the Company is traded on the Nasdaq National Market under the symbol "HBCCA." On January 8, 1997, the last reported sale price of the Class A Common Stock was $32.625 per share. See "Price Range of Class A Common Stock." The Company's authorized capital stock currently includes Class A Common Stock, Class B Common Stock and Preferred Stock. The rights of holders of Class A Common Stock and Class B Common Stock are identical, except currently each share of Class B Common Stock generally entitles its holder to ten votes and each share of Class A Common Stock entitles its holder to one vote. There are no shares of Class B Common Stock outstanding. Upon consummation of the merger of the Company and Tichenor Media System, Inc., the rights of the Class B Common Stock will be amended to provide, among other things, that such shares will have no voting rights except in certain circumstances when such shares will be entitled to a class vote. See "Description of Capital Stock." ------------------ SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. ------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================================ PRICE UNDERWRITING PROCEEDS PROCEEDS TO TO DISCOUNTS AND TO SELLING PUBLIC COMMISSIONS COMPANY(1) SHAREHOLDER(1) - ------------------------------------------------------------------------------------------------ Per Share............... $ $ $ - ------------------------------------------------------------------------------------------------ Total(2)................ $ $ $ ================================================================================================
(1) Before deducting expenses payable by the Company and Clear Channel estimated at $ . (2) The Company has granted to the Underwriters a 30-day option to purchase up to 525,000 additional shares of Class A Common Stock solely to cover over-allotments, if any. To the extent such option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." ------------------ The shares of Class A Common Stock are offered by the several Underwriters, subject to prior sale, when, as and if delivered to and accepted by them, and subject to the right of the Underwriters to reject any order in whole or in part. It is expected that delivery of the Class A Common Stock will be made at the offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about , 1997. ALEX. BROWN & SONS INCORPORATED CREDIT SUISSE FIRST BOSTON LEHMAN BROTHERS MONTGOMERY SECURITIES SMITH BARNEY INC. THE DATE OF THIS PROSPECTUS IS , 1997 3 --------------------- IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS), IF ANY, OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE CLASS A COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING." DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS IN THE CLASS A COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES 10B-6, 10B-7, AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934. 2 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by (i) the more detailed information appearing elsewhere in this Prospectus and in documents incorporated by reference in this Prospectus and (ii) the financial statements, including notes thereto, appearing in this Prospectus or the documents incorporated by reference into this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes the Underwriters' over-allotment option is not exercised. References herein to the "Company" are to Heftel Broadcasting Corporation, a Delaware corporation, and its consolidated subsidiaries unless the context otherwise requires. References to "Clear Channel" are to Clear Channel Communications, Inc., a Texas corporation, and its consolidated subsidiaries and references to "Tichenor" are to Tichenor Media System, Inc., a Texas corporation, and its consolidated subsidiaries. THE COMPANY The Company is the largest Spanish language radio broadcasting company in the United States and currently owns and programs 17 radio stations, 16 of which serve five of the ten largest Hispanic markets in the United States, including Los Angeles, New York, Miami, Chicago and Dallas/Fort Worth. The Company has agreed to acquire Tichenor, the third largest Spanish language radio broadcasting company in the United States (the "Tichenor Merger"). Tichenor owns or programs 20 radio stations which serve six of the ten largest Hispanic markets in the United States, including San Francisco/San Jose, Chicago, Houston, San Antonio, McAllen/Brownsville/Harlingen and El Paso. Following the Tichenor Merger, the Company will own or program 37 radio stations in 11 markets, including stations in each of the top ten Hispanic markets in the United States. The Company's strategy is to own and program top performing radio stations, principally in the largest Spanish language radio markets in the United States. The top ten Hispanic markets account for approximately 17.2 million Hispanics, representing approximately 63% of the total Hispanic population in the United States. Upon completion of the Tichenor Merger, the Company will have the largest Spanish language radio station combination, as measured by audience and revenue share, in eight of the top ten Hispanic markets. Additionally, the Company will have the highest rated radio station in any format in four of the top ten Hispanic markets. The Company intends to acquire or develop additional Spanish language stations in the leading Hispanic markets. The following table sets forth certain information regarding the Company's radio stations owned or programmed, assuming completion of the Tichenor Merger:
RANKING OF NO. OF MARKET BY STATIONS HISPANIC ----------- POPULATION(1) MARKET AM FM - ------------- ------------------------------------------------------- --- --- 1 Los Angeles............................................ 1 1 2 New York(2)............................................ 3 0 3 Miami.................................................. 2 2 4 San Francisco/San Jose................................. 0 2 5 Chicago................................................ 2 1 6 Houston................................................ 2 4 7 San Antonio............................................ 2 2 8 McAllen/Brownsville/Harlingen.......................... 1 2 9 Dallas/Fort Worth...................................... 3 3 10 El Paso................................................ 2 1 33 Las Vegas.............................................. 1 0 --- --- Total.................................................. 19 18
-------------------- (1) Ranking of the principal radio market served by the Company's station(s) among all U.S. radio markets by Hispanic population as reported by Strategy Research Corporation -- 1996 U.S. Hispanic Market Study. (2) Includes WZZU-AM serving New York which is currently not broadcasting. 3 5 The Company believes Spanish language radio broadcasting has significant growth potential for the following reasons: - The Hispanic population is the fastest growing population segment in the United States and is expected to grow from an estimated 27.2 million (approximately 10.3% of the total United States population) at the end of 1995 to an estimated 30.7 million (approximately 11.3% of the total United States population) by the year 2000. These estimates imply a growth rate of approximately five times the expected growth rate for the total U.S. population during the same period. - Advertisers have substantially increased their use of Spanish language media in recent years. Total advertising revenues from advertising in Spanish language media rose from $166 million in 1983 to $1.06 billion in 1995. This represents a compound annual growth rate of 16.7%, which is more than double the growth rate of total advertising over the same period. Although Hispanic consumers will spend an estimated $340 billion in 1997, or 6.5% of the total consumer spending in the United States, Spanish language advertising currently represents less than 0.7% of the total advertising expenditures. - Advertisers have begun to target Hispanic households because they are younger and spend a greater percentage of their household income on consumer products than non-Hispanic households. - Hispanics have maintained strong social and cultural ties to their countries of origin, particularly in their continued use of the Spanish language. An estimated 78% of Hispanics speak at least some Spanish and approximately 40% speak it exclusively. Spanish is expected to continue to be the language of preference for Hispanics. - The number of Spanish language media outlets is disproportionately lower than the number of similar English language outlets. In the radio segment, there are currently approximately 465 Spanish language commercial stations, which constitute only 4% of all commercial radio stations in the United States, although the Hispanic population comprises approximately 10.3% of the United States population. The Company's principal executive offices are located at 6767 West Tropicana Avenue, Suite 102, Las Vegas, Nevada 89103 and the telephone number is (702) 367-3322. RECENT DEVELOPMENTS Clear Channel Tender Offer. Clear Channel is a diversified broadcasting company that currently owns or programs 103 radio stations and 18 television stations in 33 markets. On August 5, 1996, Clear Channel completed a tender offer and a related private purchase of stock from existing stockholders of the Company (collectively, the "Tender Offer"). As a result of the Tender Offer, Clear Channel currently owns approximately 63% of the Class A Common Stock of the Company. See "Risk Factors -- Relationship Between the Company and Clear Channel." The Tichenor Merger. On July 9, 1996, Clear Channel and Tichenor entered into an Agreement and Plan of Merger (the "Tichenor Merger Agreement") which, subject to the terms and conditions thereof, provides for the acquisition of Tichenor by the Company. Tichenor is a national radio broadcasting company engaged in the business of acquiring, developing and programming Spanish language radio stations in major Hispanic markets located in the United States. Currently, Tichenor owns or programs 20 radio stations serving six of the top ten Hispanic markets in the United States, including San Francisco/San Jose, Chicago, Houston, San Antonio, McAllen/Brownsville/Harlingen and El Paso. Pursuant to the Tichenor Merger Agreement, a newly-formed wholly owned subsidiary of the Company will merge with and into Tichenor, and Tichenor shall continue as the surviving corporation as a wholly owned subsidiary of the Company. At the time the Tichenor Merger 4 6 Agreement was executed, Clear Channel had commenced but not completed the Tender Offer. The then existing management and the Board of Directors of the Company were not involved in the negotiations concerning the acquisition of Tichenor. On August 14, 1996, after the consummation of the Tender Offer, Clear Channel offered to assign the Tichenor Merger Agreement to the Company in accordance with the Tichenor Merger Agreement, and on October 10, 1996, the current Board of Directors of the Company approved the Tichenor Merger and the assignment to the Company of the Tichenor Merger Agreement. In approving the Tichenor Merger, the Company considered, among other things, the strength of the combined management of the Company and Tichenor; the marketing and operating benefits of the expansion of the Company's presence into each of the top ten Hispanic markets; and the benefits of diversifying the Company's operations thereby reducing its reliance on any individual market. Pursuant to the Tichenor Merger Agreement, the shareholders and warrant holders of Tichenor, including Clear Channel, will receive an aggregate of 5,689,878 shares of Common Stock and approximately $3.4 million in cash. Upon consummation of the Tichenor Merger, the former shareholders and warrant holders of Tichenor, other than Clear Channel, will own 5,559,464 shares of the Class A Common Stock of the Company, representing approximately 42% of the total outstanding Class A Common Stock of the Company on a fully diluted basis, assuming completion of this offering. The Company will also assume Tichenor's outstanding debt, which was approximately $71.3 million on September 30, 1996. In addition, pursuant to the Tichenor Merger Agreement, Clear Channel will convert all of its shares of Class A Common Stock and shares of common stock of Tichenor into 7,078,235 shares of Class B Common Stock that will be amended to, among other things, not have any voting rights except as specifically provided for in the charter or as otherwise required by law ("Nonvoting Common Stock"). As used herein, the term "Common Stock" prior to the consummation of the Tichenor Merger shall mean the Company's Class A Common Stock and the existing Class B Common Stock (none of which is currently outstanding) and, upon consummation of the Tichenor Merger, shall mean the Company's Class A Common Stock and the Nonvoting Common Stock. The Tichenor Merger requires the approval of the Federal Communications Commission ("FCC"), which was obtained on January 7, 1997. In order to comply with the FCC's cross-interest policy, the FCC's approval was conditioned upon Clear Channel owning no more than 33 1/3% of the total outstanding Common Stock within six months following consummation of the Tichenor Merger (the "FCC Approval Condition"). The FCC's cross-interest policy bars a party which holds an attributable interest in one or more radio stations in a market from having a "meaningful relationship" with another radio station in that market. A "meaningful relationship" is construed by the FCC to include a non-voting equity position in excess of 33 1/3% of the total outstanding Common Stock. After consummation of the Tichenor Merger and this offering, Clear Channel will own approximately 34% of the Common Stock (approximately 33% if the Underwriters' over-allotment option is exercised in full). See "Risk Factors -- Shares Eligible for Future Sale" and "Shares Eligible for Future Sale." The FCC's approval is also subject to the outcome of a broadcast attribution rulemaking in which the FCC is considering the circumstances under which it might attribute otherwise nonattributable equity interests in a licensee. A party wishing to contest the FCC's approval may do so during a thirty day period commencing on the date public notice is given of the approval. The FCC may reconsider its approval on its own motion for an additional ten days thereafter. Public notice is expected shortly. The Tichenor Merger may be consummated during these periods unless the FCC stays the effectiveness of its approval. A formal petition to deny the Tichenor Merger was denied by the FCC on January 7, 1997. The consummation of the Tichenor Merger is also subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). The Antitrust Division of the Department of Justice (the "Antitrust Division") commenced an investigation of the Tichenor Merger but declined to pursue any enforcement action. By letter dated December 4, 1996, the Federal Trade Commission ("FTC") 5 7 informed the Company that the Company had been granted early termination of the applicable waiting period under the HSR Act. Upon consummation of the Tichenor Merger, McHenry T. Tichenor, Jr. will enter into an employment agreement to serve as Chairman, President and Chief Executive Officer of the Company for a five year term. Mr. Tichenor is currently the President and Chief Executive Officer of Tichenor. The Tichenor Merger Agreement also provides that following the consummation of the Tichenor Merger, five designees of Tichenor shall constitute the entire Board of Directors of the Company. Subsequent to the Tichenor Merger, Clear Channel will have no overlapping officers or directors with the Company. See "Management -- Management of the Company Following the Tichenor Merger." The Tichenor Merger will be accounted for using the purchase method of accounting. The Tichenor Merger is subject to a number of conditions, including regulatory approval, and the approval of the Company's existing holders of Class A Common Stock with respect to certain matters relating to the Tichenor Merger, and will not be consummated prior to the closing of this offering (the "Offering"). It is not anticipated that purchasers of the Company's Class A Common Stock in the Offering will be entitled to vote on matters relating to the Tichenor Merger. See "Risk Factors -- Tichenor Merger" and "The Tichenor Merger." KSCA Option. Clear Channel and Golden West Broadcasters, a California corporation ("Golden West"), have entered into an Option Agreement, dated as of December 23, 1996 (the "Option Agreement"), pursuant to which Golden West granted to the Company (as assignee of Clear Channel) the option to purchase all of the assets used or held for use in connection with the operation of KSCA (FM), Glendale, California ("KSCA"), including, without limitation, all FCC licenses for such station (the "KSCA Assets"), on the terms and conditions of an Asset Purchase Agreement attached as an exhibit to the Option Agreement (the "Purchase Agreement"). Clear Channel assigned its rights under the Option Agreement to the Company pursuant to an Assignment and Assumption Agreement, dated as of January 2, 1997, among the Company, Clear Channel and Tichenor (the "KSCA Assignment Agreement"). The option is exercisable upon the death of Gene Autry, the indirect principal stockholder of Golden West. The Option Agreement has an initial term which expires on December 30, 1997. However, the Option Agreement terminates if the Company fails to pay to Golden West $10.0 million within five business days after termination or expiration of the waiting period under the HSR Act. The Option Agreement is renewable for additional one-year terms provided the Company pays to Golden West an additional $3.0 million on or before the expiration date for the one-year option period then in effect. Once the option under the Option Agreement is exercised, the Option Agreement remains in effect without the need to make any further $3.0 million payments. The $10.0 million payment and any additional $3.0 million payments (the "Option Payments") will be applied against the purchase price for the KSCA Assets, if the sale of the KSCA Assets is consummated. If the sale of the KSCA Assets is not consummated, Golden West is obligated to refund to the Company a portion of the Option Payments only under certain circumstances. Under the Purchase Agreement, the purchase price for the KSCA Assets is the greater of (a) $112.5 million, or (b) the sum of (i) $105.0 million, plus (ii) an amount equal to $13,698.63 per day during the term of the KSCA Time Brokerage Agreement (as hereinafter defined), which daily amount is subject to reduction if the Company is unable to broadcast its programming on KSCA under the KSCA Time Brokerage Agreement. Consummation of the sale of the KSCA Assets under the Purchase Agreement will be subject to a number of conditions, including the FCC's approval of the transfer of the FCC licenses for KSCA to the Company. Concurrent with the execution of the Option Agreement, Clear Channel and Golden West entered into a Time Brokerage Agreement, dated as of December 23, 1996, for KSCA (the "KSCA Time Brokerage Agreement"). Clear Channel assigned its rights under the KSCA Time Brokerage Agreement to the Company pursuant to the KSCA Assignment Agreement. The Company will begin 6 8 providing programming under the KSCA Time Brokerage Agreement no later than 14 days after the $10.0 million payment under the Option Agreement is due. Pursuant to the requirements of the HSR Act, on January 6, 1997, the ultimate parent entity of each of Golden West and the Company filed a Notification and Report Form with respect to the Option Agreement, the purchase of the KSCA Assets under the Purchase Agreement and the KSCA Time Brokerage Agreement with the Antitrust Division and the FTC. A request for early termination of the waiting period under the HSR Act was made. Financial Matters. As a result of and in connection with the completion of the Tender Offer and certain other events and transactions, the Company incurred certain one-time restructuring charges and recognized other losses during the quarter ended September 30, 1996 totaling approximately $44.6 million, before tax benefits, including $16.2 million of non-cash charges. Such charges consist of approximately $25.1 million relating to the Tender Offer (including $18.8 million incurred in connection with employment contract settlements with former senior executives of the Company), $7.5 million relating to the Company refinancing its credit agreement and $8.1 million relating to the discontinued operations of the radio network owned by Spanish Coast-to-Coast, Ltd., a wholly owned subsidiary of the Company doing business as Cadena Radio Centro ("CRC"). The remainder of the charges relate to the cost to close and dispose of duplicate facilities and severance payments. THE OFFERING Class A Common Stock offered by the Company........................... 3,500,000 shares Class A Common Stock offered by Clear Channel..................... 350,000 shares Common Stock to be outstanding after the Offering...................... 15,047,731 shares of Class A Common Stock 0 shares of Class B Common Stock Common Stock to be outstanding after the Offering and after the consummation of the Tichenor Merger............................ 13,659,374 shares of Class A Common Stock 7,078,235 shares of Nonvoting Common Stock(1) 20,737,609 shares of Common Stock Use of proceeds..................... To reduce borrowing under the Credit Agreement (as defined herein). Such funds may be subsequently re-borrowed for general corporate purposes, including working capital and possible acquisitions of radio stations. See "Use of Proceeds." Nasdaq National Market symbol....... HBCCA - --------------- (1) Pursuant to a Second Amended and Restated Articles of Incorporation to be filed by the Company immediately prior to the completion of the Tichenor Merger, the Class B Common Stock authorized at the time of the Offering will be amended to become Nonvoting Common Stock. See "Description of Capital Stock." 7 9 SUMMARY CONSOLIDATED FINANCIAL INFORMATION (Dollars in thousands, except per share data)
COMPANY PRO FORMA AS ADJUSTED(1) ------------- YEARS ENDED SEPTEMBER 30, YEAR ENDED ------------------------------------- SEPTEMBER 30, 1994(2) 1995(3) 1996(3) 1996 --------- ---------- ---------- ------------- STATEMENT OF OPERATIONS DATA: Net broadcasting revenues................................. $ 27,433 $ 64,160 $ 71,732 $ 119,747 Station operating expenses................................ 15,345 43,643 48,896 85,479 Corporate expenses........................................ 3,454 4,720 5,072 6,495 Depreciation and amortization............................. 1,906 3,344 5,140 16,393 ---------- ----------- ----------- ----------- Total operating expenses................................ 20,705 51,707 59,108 108,367 ---------- ----------- ----------- ----------- Operating income.......................................... 6,728 12,453 12,624 11,380 Other income (expense): Interest expense, net................................... (2,997) (6,389) (11,034) (9,497) Income in equity of joint venture(4).................... 616 -- -- -- Loss on retirement of debt.............................. (1,738) -- (7,461) (7,461) Restructuring charges................................... -- -- (29,011) (29,011) Other expenses, net..................................... (1,407) (428) (1,671) (1,875) ---------- ----------- ----------- ----------- Total other income (expense)............................ (5,526) (6,817) (49,177) (47,844) ---------- ----------- ----------- ----------- Income (loss) before minority interest and provision for income taxes............................................ 1,202 5,636 (36,553) (36,464) Minority interest in Viva Media(4)........................ (351) (1,167) -- -- Provision for income taxes................................ (100) (150) (65) 3,690 ---------- ----------- ----------- ----------- Income (loss) from continuing operations.................. 751 4,319 (36,618) $ (32,774) =========== Loss from discontinued operations(5)...................... (285) (626) (9,988) ---------- ----------- ----------- Net income (loss)......................................... $ 466 $ 3,693 $ (46,606) ========== =========== =========== Income (loss) from continuing operations per common and common equivalent share................................. $ .14 $ .40 $ (3.56) $ (1.68) ========== =========== =========== =========== Net income (loss) per common and common equivalent share................................................... $ .05 $ .34 $ (4.53) ========== =========== =========== Weighted average common shares and common share equivalents outstanding................................. 5,384,678 10,805,346 10,294,967 19,484,845 ========== =========== =========== =========== OTHER OPERATING DATA: Broadcast cash flow(6).................................... $ 12,088 $ 20,517 $ 22,836 $ 34,268
SEPTEMBER 30, 1996 -------------------------- SEPTEMBER 30, PRO -------------------------------- FORMA AS AS 1994 1995 1996 ADJUSTED(7) ADJUSTED(8) -------- -------- -------- ----------- ----------- BALANCE SHEET DATA: Cash and cash equivalents........................ $ 10,219 $ 5,404 $ 5,132 $ 5,132 $ 6,210 Working capital.................................. 18,366 14,967 7,168 7,168 12,086 Net intangible assets............................ 70,528 109,253 121,742 121,742 418,722 Total assets..................................... 113,353 151,637 165,751 165,751 485,470 Long-term debt, less current portion(9).......... 58,472 95,937 136,126 27,408 98,659 Stockholders' equity............................. 44,436 43,581 12,101 120,819 308,992
8 10 - --------------- (1) The unaudited pro forma condensed consolidated statements of operations for the year ended September 30, 1996 assume the Transactions (as defined herein) and the Tender Offer occurred on October 1, 1995. The pro forma information does not purport to present the actual financial position or results of operations of the Company had the Transactions and the Tender Offer actually occurred on the date specified, nor is it necessarily indicative of the results of operations that may be achieved in the future. See "The Tichenor Merger," "Notes to Unaudited Pro Forma Condensed Consolidated Financial Information" and the Financial Statements and the Notes thereto for each of the Company, Tichenor and the Tichenor Acquisitions included elsewhere in this Prospectus or incorporated herein by reference. (2) During August 1994, the Company completed three separate business acquisitions and began consolidating its previously unconsolidated investment in Viva America Media Group, a Florida general partnership ("Viva Media"). Total net revenues and net income (loss), adjusted for interest expense on retired debt, relating to these acquisitions and transactions from the respective dates of these transactions to September 30, 1994 were approximately $5,488,000 and $(80,000), respectively. (3) During fiscal 1995, the Company completed several radio station acquisitions. Due to the financial effects of these transactions, the results of operations for 1996 reflect a full fiscal year of operations for these radio stations compared to a partial fiscal year in 1995. Consequently, the results of operations for the years ended September 30, 1995 and 1996 are not entirely comparable. (4) Effective August 20, 1994, the Company began accounting for its 49% interest in Viva Media on a consolidated basis. Accordingly, Viva Media's results of operations are included in the consolidated financial statements for the period from August 20, 1994 through September 30, 1994, and for each of the fiscal years ended September 30, 1995 and 1996. Prior to August 20, 1994, the accounts and results of operations of Viva Media were accounted for using the equity method of accounting. (5) The Company's Board of Directors approved a plan to discontinue the operations of the radio network owned by CRC, effective August 5, 1996. The total loss relating to the discontinued operations of CRC for fiscal 1996 was approximately $10 million, and has been accounted for as discontinued operations. Accordingly, the results of operations for CRC for prior years have been reclassified to conform to the current year presentation. CRC intends to fulfill its contractual program obligations and is expected to cease operating by early 1997. (6) Data on station operating income excluding corporate expenses, depreciation and amortization (commonly referred to as "broadcast cash flow"), although not calculated in accordance with generally accepted accounting principles, is widely used in the broadcast industry as a measure of a broadcasting company's operating performance. Nevertheless, this measure should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measures for determining the Company's operating performance or liquidity, which are calculated in accordance with generally accepted accounting principles. (7) As adjusted to give effect to the Offering (at an assumed offering price of $32.625 per share) and the application of the estimated net proceeds therefrom as if the Offering had been consummated on September 30, 1996. (8) Pro forma as adjusted to give effect to the Transactions, including the Offering (at an assumed offering price of $32.625 per share) and the application of the estimated net proceeds therefrom, as if they had been consummated on September 30, 1996. The effect of the Tichenor Merger is based on preliminary purchase price allocations. The pro forma information does not purport to present the actual financial position of the Company had the Transactions actually occurred on the date specified. See "The Tichenor Merger," "Use of Proceeds," "Capitalization" and the Financial Statements and Notes thereto for each of the Company, Tichenor and the Tichenor Acquisitions included elsewhere in this Prospectus or incorporated herein by reference. (9) Long-term debt, less current portion, excludes other non-current obligations of the Company ($1,533,000 at September 30, 1996.) 9 11 RISK FACTORS In addition to the other information contained or incorporated herein by reference in this Prospectus, the following risk factors should be considered carefully in evaluating an investment in the Class A Common Stock offered by this Prospectus. Recent Change of Control. On August 5, 1996, Clear Channel acquired a controlling interest in the Company and replaced the previous Board of Directors with its own slate of directors. The new management team of the Company may have different operating and strategic philosophies than its predecessor which may take time to integrate into the existing business. There can be no assurance that such integration will not adversely affect the operations of the Company. Tichenor Merger. Consummation of the Tichenor Merger is subject to numerous conditions, including without limitation, the approval by the existing holders of the Company's Class A Common Stock with respect to certain matters related to the Tichenor Merger and the non-occurrence of any material adverse event with respect to the Company or Tichenor. See "The Tichenor Merger." Therefore, there can be no assurance that the Tichenor Merger will be consummated in a timely manner or on the terms described herein, if at all. Antitrust Matters. An important element of the Company's growth strategy involves the acquisition of additional radio stations, most of which are likely to require preacquisition antitrust review by the FTC and the Antitrust Division. Following passage of the Telecommunications Act of 1996 (the "1996 Act"), the Antitrust Division has become more aggressive in reviewing proposed acquisitions of radio stations and radio station networks, particularly in instances where the proposed acquiror already owns one or more radio stations in a particular market and the acquisition involves another radio station in the same market. Recently, the Antitrust Division has obtained consent decrees requiring an acquiror to dispose of at least one radio station in a particular market where the acquisition otherwise would have resulted in a concentration of market share by the acquiror. Although the Antitrust Division reviewed the antitrust implications of the Tichenor Merger and decided not to undertake any enforcement action, there can be no assurance that the Antitrust Division or the FTC will not seek to bar the Company from acquiring additional radio stations in a market where the Company's existing stations already have a significant market share. Concentration of Cash Flow from Los Angeles Stations. Broadcast cash flow generated by the Company's Los Angeles stations accounted for approximately 68% of the Company's broadcast cash flow for the year ended September 30, 1996. On a pro forma basis, assuming the Tichenor Merger had occurred on October 1, 1995, the Company's Los Angeles stations would have accounted for 46% of the Company's broadcast cash flow for the year ended September 30, 1996. Increased competition for advertising dollars with other radio stations and communications media in the Los Angeles metropolitan area, both generally and relative to the broadcasting industry, increased competition from a new format competitor and other competitive and economic factors could cause a decline in revenue from the Company's Los Angeles stations. A significant decline in the revenue of the Los Angeles stations could have a material adverse effect on the Company's overall results of operations and broadcast cash flow. Financial Leverage; Pledge of Assets. After giving effect to the Offering (at an assumed offering price of $32.625 per share) and application of the net proceeds therefrom as set forth in "Use of Proceeds" and the consummation of the Tichenor Merger, the Company's total debt, excluding other non-current obligations, would have been approximately $98.7 million at September 30, 1996. There can be no assurance that the Company will have sufficient cash flow to satisfy its future debt service requirements, particularly if there is a downturn in the operating performance of its radio stations or in economic conditions. Stock and partnership interests of the Company's subsidiaries are pledged to secure the Company's obligations under the Credit Agreement dated August 5, 1996, among the Company, the lenders signatory thereto and NationsBank of Texas, N.A., as agent (the "Credit Agreement"). The 10 12 Credit Agreement contains various financial and operational covenants and other restrictions with which the Company must comply, including limitations on capital expenditures and the incurrence of additional indebtedness, prohibitions on the payment of cash dividends and the redemption or repurchase of capital stock of the Company and restrictions on the use of borrowings. The Credit Agreement may adversely affect the Company's ability to pursue its strategy of further growth through acquisitions. After giving effect to the application of the proceeds from the Offering and the consummation of the Tichenor Merger, the Company will have approximately $56.3 million available under the Credit Agreement for future borrowings. Integration of the Business of the Company and Tichenor. The Tichenor Merger involves the integration of two companies that have previously operated independently. As soon as practicable following the Tichenor Merger, the Company intends to integrate certain aspects of the operations of Tichenor. However, there can be no assurance that the Company will successfully integrate the operations of Tichenor with those of the Company or that all of the benefits expected from such integration will be realized. Any delays or unexpected costs incurred in connection with such integration could have an adverse effect on the Company's business, operating results or financial position. Additionally, there can be no assurance that the operations, management and personnel of the two companies will be compatible or that the Company or Tichenor will not experience the loss of key personnel. Furthermore, upon consummation of the Tichenor Merger, a new management team will be formed. The new management team of the Company may have different operating and strategic philosophies which may take time to integrate into the existing business. There can be no assurance that such integration will not adversely affect the operations of the Company. See "Management -- Management of the Company Following the Tichenor Merger." Control by the Tichenor Family. Following the completion of the Offering and the consummation of the Tichenor Merger, the Tichenor Family (as hereinafter defined) will have voting control over approximately 33% of the shares of Class A Common Stock. See "The Tichenor Merger." This will enable the Tichenor Family to exert significant influence in electing the Board of Directors and over other management decisions. In any event, pursuant to the Tichenor Merger Agreement, upon consummation of the Tichenor Merger, designees of Tichenor will constitute the entire Board of Directors of the Company. See "The Tichenor Merger -- Tichenor Family Ownership" and "Management -- Management of the Company Following the Tichenor Merger." Growth Through Future Acquisitions; Capital Requirements. One of the Company's growth strategies is to acquire additional radio stations. There can be no assurance that the Company will be able to complete any further acquisitions or, if completed, that such acquired radio stations can be operated profitably or assimilated into the Company's business structure in the manner desired by the Company's management. Entities acquired by the Company may have liabilities for which the Company may become responsible. Additional debt or equity financing may be required in order to complete future acquisitions, and there can be no assurance that the Company will be able to obtain such financing. The Company may acquire stations which have not previously broadcast Spanish language programming. In converting these stations to a Spanish language format, revenue and cash flow from station operations generated prior to the conversion may not be indicative of future financial performance. Furthermore, such conversions may result in significant operating losses for an undetermined period of time. Government Regulation of Broadcasting Industry. The domestic broadcasting industry is subject to extensive federal regulation which, among other things, requires approval by the FCC for the issuance, renewal, transfer and assignment of broadcasting station operating licenses and limits the number of broadcasting properties the Company may acquire. The 1996 Act, which became law on February 8, 1996, creates significant new opportunities for broadcasting companies but also creates uncertainties as to how the FCC and the courts will enforce and interpret the 1996 Act. The Company's business will continue to be dependent upon acquiring and maintaining broadcasting licenses issued by the FCC, which are currently issued for a term of seven years (the 11 13 1996 Act authorizes the FCC to extend the license term to eight years, but this provision has not yet been implemented). There can be no assurance that pending or future renewal applications will be approved, or that renewals will not include conditions or qualifications that could adversely affect the Company's operations. Moreover, governmental regulations and policies may change over time and there can be no assurance that such changes would not have a material adverse impact upon the Company's business, financial position and results of operations. In addition, the FTC and the Antitrust Division have been reviewing media acquisitions, including radio station acquisitions, to determine whether they are in compliance with antitrust laws, even in situations in which the acquisition conforms with the ownership restrictions of the 1996 Act. See "-- Antitrust Matters." Competition. Broadcasting is a highly competitive business. The Company's radio stations compete for audiences and advertising revenues with other radio stations of all formats, as well as with other media, such as newspapers, magazines, television, cable television, outdoor advertising and direct mail, within their respective markets. Audience ratings and market shares are subject to change and any adverse change in a particular market could have a material adverse effect on the revenue of stations located in that market. Future operations are further subject to many variables which could have an adverse effect upon the Company's financial performance. These variables include economic conditions, both general and relative to the broadcasting industry; shifts in population and other demographics; the level of competition for advertising dollars with other radio stations and other entertainment and communications media; fluctuations in operating costs; technological changes and innovations; changes in labor conditions; and changes in governmental regulations and policies and actions of federal regulatory bodies, including the FCC. Although the Company believes that each of its stations is able to compete effectively in its respective market, there can be no assurance that any such station will be able to maintain or increase its current audience ratings and advertising revenues. Radio stations can quickly change formats. Any radio station currently broadcasting in either English or Spanish could shift its format to duplicate the format of any of the Company's stations. If a station converted its programming to a format similar to that of a station owned by the Company, the ratings and broadcast cash flow of the Company's station could be adversely affected. New Technologies. The FCC is considering ways to introduce new technologies to the radio broadcast industry, including satellite and terrestrial delivery of digital audio broadcasting and the standardization of available technologies which significantly enhance the sound quality of AM broadcasts. The Company is unable to predict the effect any such new technology will have on the Company's financial condition or results of operations. In addition, cable television operators are introducing a new service commonly referred to as "cable radio" which provides cable television subscribers with several high-quality channels of music, news and other information, and direct satellite broadcast television companies are supplying subscribers with several high quality music channels. Uncertainty as to Market Price of the Class A Common Stock. Because the market price of the Class A Common Stock is subject to fluctuation, the market value of the shares of the Class A Common Stock may increase or decrease prior to and following the consummation of the Offering. There can be no assurance that at or after the consummation of the Offering the shares of the Class A Common Stock will trade at the prices at which such shares have traded in the past. The prices at which the Class A Common Stock trades after the consummation of the Offering may be influenced by many factors, including the liquidity of the Class A Common Stock, investor perceptions of the Company and the radio broadcasting industry, the operating results of the Company, the Company's dividend policy, possible future changes in regulation of the radio broadcasting industry and general economic and market conditions. 12 14 Relationship Between the Company and Clear Channel. Control by Clear Channel. Following the completion of the Offering, Clear Channel will have voting control over approximately 46.2% of the shares of Class A Common Stock. This will enable Clear Channel to exert significant influence in electing the Board of Directors and over other management decisions. Future Sales of Common Stock. Upon consummation of the Tichenor Merger and the Offering, Clear Channel will own approximately 34% of the outstanding Common Stock of the Company on a fully diluted basis (approximately 33% if the Underwriters' over-allotment option is exercised in full). If the Underwriters' over-allotment option is not exercised in full, Clear Channel would be required to sell up to 165,699 shares of Common Stock within six months of the consummation of the Tichenor Merger. Any sale of shares of Common Stock owned by Clear Channel could adversely affect the market price for the Common Stock and could impair the ability of the Company to raise money in the equity markets. Clear Channel has indicated to the Company that it does not currently intend to sell any of its shares of the Company's Common Stock (except as may be necessary to meet the FCC Approval Condition). In addition, pursuant to a Stockholders Agreement to be entered into in connection with the consummation of the Tichenor Merger and an agreement with the Underwriters in connection with the Offering, Clear Channel has agreed not to sell any shares of the Company's Common Stock for 180 days from the effective date of the Tichenor Merger, except as may be necessary to meet the FCC Approval Condition, and for 90 days from the closing of the Offering, respectively. However, there can be no assurances that Clear Channel will not sell any of such shares in the future or that any such contractual restrictions will not be waived. Ownership of Nonvoting Common Stock. Following the consummation of the Tichenor Merger, Clear Channel will own no shares of Class A Common Stock and thus will not be entitled to vote in the election of the Company's directors, although Clear Channel will own all of the outstanding shares of the Company's Nonvoting Common Stock, which will have a class vote on certain matters, including the sale of all or substantially all of the assets of the Company, any merger or consolidation involving the Company where the stockholders of the Company immediately prior to the transaction would not own at least 50% of the capital stock of the surviving entity, any reclassification, capitalization, dissolution, liquidation or winding up of the Company, the issuance of any shares of Preferred Stock by the Company, the amendment of the Company's Certificate of Incorporation in a manner that adversely affects the rights of the holders of Nonvoting Common Stock, the declaration or payment of any non-cash dividends on the Company's Common Stock or any amendment to the Company's Certificate of Incorporation concerning the Company's capital stock. Furthermore, shares of Nonvoting Common Stock will be readily convertible into shares of Class A Common Stock, subject to any necessary FCC consents. These provisions relating to the Nonvoting Common Stock could have the effect of delaying or preventing a change in control of the Company, thereby possibly having the effect of depriving stockholders of the opportunity to receive a premium for their shares. Such provisions could also have the effect of making the Company less attractive to a potential acquirer and could result in holders of Class A Common Stock receiving less consideration upon a sale of their shares than might otherwise be available in the event of a takeover attempt. See "Description of Capital Stock." Potential Conflicts of Interest. The nature of the respective businesses of the Company and Clear Channel gives rise to potential conflicts of interest between the two companies. The Company and Clear Channel are each engaged in the radio broadcasting business in Miami, and as a result, they are competing with each other for advertising revenues. Upon consummation of the Tichenor Merger, the Company and Clear Channel will begin competing with each other in additional markets. In addition, conflicts could arise with respect to transactions involving the purchase or sale of radio broadcasting companies, particularly Spanish language radio broad- 13 15 casting companies, the issuance of additional shares of Common Stock, or the payment of dividends by the Company. Clear Channel has advised the Company that it does not currently intend to engage in the Spanish language radio broadcasting business, other than through its ownership of shares in the Company. However, circumstances could arise that would cause Clear Channel to engage in the Spanish language broadcasting business. For example, opportunities could arise which would require greater financial resources than those available to the Company or which are located in areas in which the Company does not intend to operate. Thus, although Clear Channel has no current intention to do so, there can be no assurance that it will not engage in the Spanish language broadcasting business. In addition, as part of Clear Channel's overall acquisition strategy, Clear Channel may from time to time acquire Spanish language radio broadcasting companies individually or as part of a larger group and thereafter engage in the Spanish language radio broadcasting business. Such activities could directly or indirectly compete with the Company's business. Tichenor Loan Agreement. Concurrent with the execution of the Tichenor Merger Agreement, Clear Channel and a subsidiary of Tichenor entered into a Loan Agreement (the "Tichenor Loan Agreement"), pursuant to which Clear Channel loaned a Tichenor subsidiary $40.0 million to finance the acquisition of two radio stations and related assets in the San Francisco/San Jose market. The loan is secured by all of the outstanding stock of a subsidiary of the borrower which holds the radio licenses for the two radio stations in San Francisco. The loan is guaranteed by Tichenor, and the guaranty is secured by all of the outstanding stock of the borrower. The loan and the guaranty will remain an obligation of the Tichenor subsidiary and Tichenor, respectively, following the acquisition of Tichenor by the Company pursuant to the Tichenor Merger. Although the Company will not assume or otherwise have any obligations with respect to the loan or the guaranty, potential conflicts of interest could arise between the Company, as the indirect sole stockholder of the Tichenor subsidiary, and Clear Channel, as a creditor. Following the Tichenor Merger, the Company may refinance all or a part of its consolidated indebtedness, including the loan to the Tichenor subsidiary. There can be no assurance, however, that any such refinancing will be consummated, or if consummated, that the terms thereof will be as favorable as those of the Clear Channel loan. Shares Eligible for Future Sale. The 3,850,000 shares of Class A Common Stock sold in the Offering will be freely tradeable without restriction or further registration under the Securities Act of 1933, as amended (the "Securities Act"), unless acquired by "affiliates" (as defined in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act ("Rule 144")). 3,679,952 of the currently outstanding shares of Class A Common Stock are freely tradeable without restriction or further registration under the Securities Act, unless acquired by "affiliates." Beginning 90 days after the date of this Prospectus, approximately 2,566,108 of the currently outstanding shares of Class A Common Stock owned by Clear Channel will be eligible for sale in the public market, although they will remain subject to the volume and other limitations (other than the two year holding period) of Rule 144; provided, however, as long as the Registration Statement on Form S-3 declared effective on February 26, 1996 remains in effect, subject to any contractual limitations, Clear Channel may sell 2,156,799 of such shares without regard to any limitations contained in Rule 144. Clear Channel has indicated to the Company that it does not currently intend to sell any shares of the Company's Common Stock except as may be necessary to meet the FCC Approval Condition. See "Shares Eligible for Future Sale." Dilution. Persons purchasing shares of Class A Common Stock at the offering price will incur immediate dilution in net tangible book value per share of the common stock. As of September 30, 1996, the deficit in net tangible book value of the common stock was approximately $109.6 million, or $9.49 per share. The deficit in net tangible book value per share represents the amount of total tangible assets of the Company less total liabilities, divided by the number of shares of Common Stock outstanding. After giving effect to the sale of the 3,500,000 shares of Class A Common Stock 14 16 offered hereby by the Company (at an assumed offering price of $32.625 per share) and the application of the estimated net proceeds thereof as described in "Use of Proceeds" (after deducting underwriting discounts and commissions and estimated offering expenses), the as adjusted deficit in net tangible book value of the common stock at September 30, 1996 would have been approximately $0.14 per share. This represents an immediate increase in net tangible book value per share of $9.49 to existing stockholders and an immediate net tangible book value dilution per share of $32.77 to investors purchasing shares in the Offering. Net tangible book value dilution per share represents the difference between the amount per share paid by new investors in the Offering and the as adjusted deficit in net tangible book value per share after the Offering. Forward-Looking Statements. This Prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act. Discussions containing such forward-looking statements may be found in the material set forth under "Summary," "The Tichenor Merger" and "The Company," as well as within the Prospectus generally. In addition, when used in this Prospectus, the words "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially from those described in the forward-looking statements as a result of the risk factors set forth herein and the matters set forth in the Prospectus generally. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. The Company cautions the reader, however, that this list of risk factors may not be exhaustive. USE OF PROCEEDS The net proceeds to the Company from the sale of 3,500,000 shares of Class A Common Stock offered hereby by the Company at an assumed public offering price of $32.625 per share (after deducting underwriting discounts and commissions and estimated offering expenses) are estimated to be approximately $108.7 million ($125.0 million if the Underwriters' over-allotment option is exercised in full). The Company will use all of the net proceeds to repay borrowings outstanding under the Credit Agreement. Upon repayment of such borrowings, the amount repaid will become available to the Company for reborrowing under the Credit Agreement for general corporate purposes, including working capital and possible acquisitions of additional broadcast properties, including the Tichenor Merger. Borrowings under the Credit Agreement bear interest at a floating rate based on either (i) the London Interbank Offered Rate ("LIBOR") for deposits in United States dollars, or (ii) the higher of the agent bank's prime rate plus an incremental rate or the federal funds rate plus an incremental rate. The average interest rate for borrowings under the Credit Agreement as of September 30, 1996, was 7.315%. Principal outstanding under the Credit Agreement is due in January 1998. The Company regularly reviews potential acquisitions of radio stations. The Company will not receive any of the proceeds from the sale of shares by Clear Channel. 15 17 PRICE RANGE OF CLASS A COMMON STOCK The Class A Common Stock is traded on the Nasdaq National Market under the symbol "HBCCA." The following table sets forth for each of the quarters in the fiscal years ended September 30, 1995 and 1996 and the first and second quarter of fiscal 1997 the high and low closing sale prices per share as reported by the Nasdaq National Market.
HIGH LOW ------ ------ FISCAL YEAR 1995 First Quarter............................................................. $16.00 $ 9.50 Second Quarter............................................................ 13.88 10.00 Third Quarter............................................................. 15.75 10.13 Fourth Quarter............................................................ 21.75 15.25 FISCAL YEAR 1996 First Quarter............................................................. $19.50 $14.75 Second Quarter............................................................ 21.00 15.25 Third Quarter............................................................. 29.88 19.50 Fourth Quarter............................................................ 43.63 28.25 FISCAL YEAR 1997 First Quarter............................................................. $47.75 $30.75 Second Quarter (through January 8, 1997).................................. $32.63 $31.75
DIVIDEND POLICY The Company has never paid a cash dividend on its Common Stock and does not anticipate paying cash dividends in the foreseeable future. The Company intends to retain any earnings for use in the growth of its business. The Company currently is prohibited from paying any cash dividends on its capital stock under the Credit Agreement. 16 18 CAPITALIZATION The following table sets forth, as of September 30, 1996, (a) the actual capitalization of the Company, (b) the capitalization of the Company as adjusted to reflect the sale of the 3,500,000 shares of Class A Common Stock offered hereby by the Company at an assumed offering price of $32.625 per share (after deducting the underwriting discounts and commissions and estimated offering expenses) and the application of the estimated net proceeds therefrom as set forth in "Use of Proceeds" and (c) the pro forma capitalization of the Company to reflect the Transactions (as defined herein), as if they had occurred on September 30, 1996.
SEPTEMBER 30, 1996 ------------------------------------- AS PRO FORMA ACTUAL ADJUSTED AS ADJUSTED -------- -------- ----------- (DOLLARS IN THOUSANDS) Cash and cash equivalents................................ $ 5,132 $ 5,132 $ 6,210 ======== ======== ======== Current portion of long-term debt........................ $ 1,859 $ 1,859 $ 1,901 Long-term debt: Notes payable and credit agreements.................... 135,000 26,282 97,530 Other long-term debt(1)................................ 1,126 1,126 1,129 -------- -------- -------- Total long-term debt........................... 136,126 27,408 98,659 Stockholders' equity: Preferred Stock, $0.001 par value, 5,000,000 shares authorized; none issued and outstanding actual, as adjusted, and pro forma as adjusted................. -- -- -- Class A Common Stock, $0.001 par value; 30,000,000 shares authorized actual and as adjusted; 11,547,731 shares issued and outstanding actual; 15,047,731 shares issued and outstanding as adjusted; 50,000,000 shares authorized pro forma as adjusted and 13,659,374 shares issued and outstanding pro forma as adjusted................................... 11 15 13 Class B Common Stock, $0.001 par value; 7,000,000 shares authorized actual; none issued and outstanding actual and as adjusted; 50,000,000 shares authorized pro forma as adjusted and 7,078,235 shares issued and outstanding pro forma as adjusted(2)......................................... -- -- 8 Additional paid-in capital............................. 102,578 211,292 399,459 Accumulated deficit.................................... (90,488) (90,488) (90,488) -------- -------- -------- Total stockholders' equity..................... 12,101 120,819 308,992 -------- -------- -------- Total capitalization...................... $150,086 $150,086 $ 409,552 ======== ======== ========
- --------------- (1) Long-term debt, less current portion, excludes other non-current obligations of the Company ($1,533,000 at September 30, 1996). (2) Upon consummation of the Tichenor Merger, the authorized Class B Common Stock will be amended to become Nonvoting Common Stock. 17 19 THE TICHENOR MERGER GENERAL Tichenor is a national radio broadcasting company engaged in the business of acquiring, developing and programming Spanish language radio stations in major Hispanic markets located in the United States. Currently, Tichenor owns or programs 20 radio stations serving six of the top ten Hispanic markets in the United States, including San Francisco/San Jose, Chicago, Houston, San Antonio, McAllen/Brownsville/Harlingen and El Paso. Individually or through AM-FM station combinations, Tichenor operates the top-rated radio station in any format in three of the top ten Hispanic markets (San Antonio, McAllen/Brownsville/Harlingen and El Paso), as measured by the Arbitron four book average adults 25-54 demographic. Tichenor operates the top-rated Spanish language radio station in five of its six markets as measured by the same audience share statistics. Tichenor recently entered the San Francisco/San Jose market, the fourth largest Hispanic market, by purchasing KSOL-FM and KZOL-FM (formerly KYLZ-FM) for approximately $40 million. These two stations, previously programmed in English, were converted to a Spanish format in August 1996. These two stations will be simulcast under one Spanish format, representing the first full-signal Spanish FM stations to cover the San Francisco/San Jose market. THE TICHENOR MERGER AGREEMENT On July 9, 1996, Clear Channel and Tichenor entered into the Tichenor Merger Agreement which, subject to the terms and conditions thereof, provides for the acquisition of Tichenor by the Company. The then existing management and Board of Directors of the Company were not involved in the negotiations concerning the acquisition of Tichenor. On August 14, 1996, after the consummation of the Tender Offer, Clear Channel offered to assign the Tichenor Merger Agreement to the Company in accordance with the Tichenor Merger Agreement, and on October 10, 1996, the Board of Directors of the Company approved the Tichenor Merger and the assignment to the Company of the Tichenor Merger Agreement. In approving the Tichenor Merger, the Company considered, among other things, the strength of the combined management of the Company and Tichenor; the marketing and operating benefits of the expansion of the Company's presence into each of the top ten Hispanic markets; and the benefits of diversifying the Company's operations thereby reducing its reliance on any individual market. Pursuant to the Tichenor Merger Agreement, a newly-formed wholly owned subsidiary of the Company will be merged with and into Tichenor and the shares of Tichenor capital stock (other than certain preferred stock) will be converted into shares of the Company's Class A Common Stock. Pursuant to the Tichenor Merger Agreement, (i) 684,168.93 shares of outstanding Tichenor common stock will be converted into an aggregate of approximately 5,354,350 shares of the Company's Class A Common Stock, (ii) 35,772.48 shares of Tichenor's outstanding Junior Preferred Stock will be converted into an aggregate of approximately 155,528 shares of the Company's Class A Common Stock, (iii) 3,000 shares of Tichenor's outstanding 14% Senior Redeemable Cumulative Preferred Stock will be converted into the right to receive an aggregate of $3,000,000, plus approximately $379,000 of accrued and unpaid dividends, and (iv) an existing warrant for Tichenor capital stock, or the shares received upon exercise thereof if the warrant is exercised prior to the effective time of the Tichenor Merger, shall be converted into 180,000 shares of the Company's Class A Common Stock. The ratios at which the Company's Class A Common Stock will be exchanged for shares of Tichenor's common and preferred stock were determined in July 1996 in arms-length negotiations between Clear Channel and Tichenor. The aggregate market value of the Company's Common Stock to be received by Tichenor shareholders (including Clear Channel) was $185.6 million, based on a closing price per share of $32.625 on January 8, 1997 and assuming that the market value per share of the Company's Nonvoting Common Stock is the same as that of the Company's Class A Common Stock. As a result of the Tichenor Merger, Tichenor will become a 18 20 wholly owned subsidiary of the Company. The Company will also indirectly assume Tichenor's outstanding debt, which was approximately $71.3 million at September 30, 1996. Prior to consummation of the Tichenor Merger, Clear Channel will purchase 16,664 shares of Tichenor common stock from certain shareholders of Tichenor for approximately $3,000,000. At the effective time of the Tichenor Merger, each share of Tichenor common stock owned by Clear Channel will be converted into 7.8261 shares of Nonvoting Common Stock and each share of the Company's Class A Common Stock owned by Clear Channel will be converted into one share of Nonvoting Common Stock. FUTURE MANAGEMENT TEAM The Tichenor Merger Agreement provides that the Company will take such actions necessary so that immediately after the effective time of the Tichenor Merger five designees of Tichenor shall constitute the entire Board of Directors of the Company. The Tichenor Merger Agreement also provides that at or prior to the effective time of the Tichenor Merger, the Company will enter into an employment agreement with McHenry T. Tichenor, Jr. pursuant to which Mr. Tichenor will serve as Chairman, President and Chief Executive Officer of the Company for a five year term. See "Management -- Management of the Company Following the Tichenor Merger" REGISTRATION RIGHTS; STOCKHOLDERS AGREEMENT The Tichenor Merger Agreement also provides that the Company will grant certain demand and "piggyback" registration rights to certain former Tichenor shareholders (including Mr. Tichenor) who will own an aggregate of 5,180,827 shares of Class A Common Stock following the Tichenor Merger (collectively, the "Major Tichenor Shareholders"), and will grant certain demand and piggyback registration rights to Clear Channel with respect to any shares of Class A Common Stock that may be held from time to time by Clear Channel following the Tichenor Merger. It is also contemplated that Clear Channel and the Major Tichenor Shareholders will enter into a Stockholders Agreement with the Company whereby such stockholders will agree to certain restrictions on the transfer of their shares of Common Stock of the Company and will grant certain rights of first refusal and "tag-along" rights with respect to certain sales of such shares. CONDITIONS TO THE TICHENOR MERGER Consummation of the Tichenor Merger is subject to a number of conditions, including, among others, approval of the Tichenor Merger Agreement or matters relating to the Tichenor Merger by the stockholders of Tichenor and the Company; the receipt by the Company of an opinion from a nationally recognized investment banking firm or financial advisor that the consideration to be paid by the Company in the Tichenor Merger is fair to the stockholders of the Company from a financial point of view; expiration or termination of the applicable waiting period under the HSR Act; effectiveness under the Securities Act of a registration statement relating to the securities of the Company to be issued in the Tichenor Merger; no material adverse effect occurring with respect to Tichenor or the Company; and the receipt of all required FCC approvals. In addition, the consummation of the Tichenor Merger may not occur prior to February 6, 1997. There can be no assurance that all of these conditions will be satisfied or waived or that the Tichenor Merger will be consummated. Clear Channel, which will own a majority of the outstanding shares of the Company's Class A Common Stock on the record date for the vote for the Tichenor Merger, intends to vote all such shares in favor of matters presented to the Company's stockholders related to the Tichenor Merger. It is not anticipated that purchasers of shares of the Company's Class A Common Stock in the Offering will be entitled to vote on such matters related to the Tichenor Merger. See "Risk Factors -- Tichenor Merger." 19 21 TICHENOR FAMILY OWNERSHIP Upon consummation of the Tichenor Merger and after giving effect to the Offering, Mr. Tichenor and certain members of his family (collectively, the "Tichenor Family") will own an aggregate of approximately 4,556,486 shares of Class A Common Stock (representing approximately 33% of the then outstanding Class A Common Stock) and may have the ability, if they act together as a group, to control the Company. The members of the Tichenor Family have entered into a Voting Agreement pursuant to which the majority of the shares of Tichenor common stock and Junior Preferred Stock currently held by them, as well as the approximately 4,345,718 shares of the Company's Class A Common Stock to be received in exchange therefor in the Tichenor Merger, shall be voted in accordance with the instructions of the holders of a majority of such shares. CLEAR CHANNEL OWNERSHIP Upon consummation of the Tichenor Merger, Clear Channel will own only Nonvoting Common Stock and thus will not have the right to vote for the election of directors of the Company, although Clear Channel will have certain class voting rights discussed in more detail below. The Nonvoting Common Stock that Clear Channel will receive in the Tichenor Merger will convert into Class A Common Stock automatically upon sale or transfer to a person or entity other than Clear Channel. Each share of the Nonvoting Common Stock will also be convertible into Class A Common Stock at the option of its holder, subject to any necessary FCC consent. In addition, Clear Channel may convert shares of Class A Common Stock held by it into shares of Nonvoting Common Stock at its option. Holders of the Nonvoting Common Stock will in certain circumstances have certain voting rights. Specifically, so long as Clear Channel owns at least 20% of the Company's Common Stock then outstanding, the Company will not be able to, and will not be able to permit any subsidiary to, without the vote or consent by the holders of a majority of the Nonvoting Common Stock voting as a single class, take any of the following actions: (i) effect the sale, lease or other transfer of all or substantially all of the assets of the Company, or any merger or consolidation involving the Company where the stockholders of the Company immediately prior to such transaction would not own at least 50% of the capital stock of the surviving entity, or any reclassification, recapitalization, dissolution, liquidation or winding up of the Company; (ii) authorize, issue or obligate itself to issue any shares of Preferred Stock; (iii) make or permit any amendment to the Company's certificate of incorporation that adversely affects the rights of the holders of Nonvoting Common Stock; (iv) declare or pay any non-cash dividends on or make any other non-cash distribution on its common stock; or (v) make or permit any amendment or modification to the Company's certificate of incorporation concerning the Company's Common Stock. See "Description of Capital Stock." LOAN TO TICHENOR Concurrent with the execution of the Tichenor Merger Agreement, Clear Channel and a subsidiary of Tichenor entered into the Tichenor Loan Agreement, pursuant to which Clear Channel loaned $40 million to a Tichenor subsidiary to finance the subsidiary's acquisition of two FM radio stations and related assets serving the San Francisco/San Jose market. The loan is secured by all of the outstanding stock of a subsidiary of the borrower which holds the radio licenses for the acquired stations. The loan is guaranteed by Tichenor, and the guaranty is secured by all of the outstanding stock of the borrower. The loan becomes due on January 1, 1998, and must be repaid in full at that time. The loan has no penalty for early repayment and carries a market rate of interest. See "Risk Factors -- Relationship Between the Company and Clear Channel -- Tichenor Loan Agreement." 20 22 UNAUDITED PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma condensed consolidated financial information presents the Company's balance sheet at September 30, 1996 as if at such date, the following transactions (collectively, the "Transactions") had been completed: (i) the Offering (at an assumed offering price of $32.625 per share) and application of the estimated net proceeds therefrom as set forth in "Use of Proceeds;" (ii) the Tichenor Acquisitions (as defined herein); and (iii) the Tichenor Merger. The following unaudited pro forma condensed consolidated statement of operations presents the Company's results of operations for the year ended September 30, 1996 and Tichenor's results of operations for the twelve months ended September 30, 1996, as if the Transactions and the Tender Offer had been completed at October 1, 1995. The pro forma condensed consolidated financial statements also give effect to various acquisitions completed by Tichenor (the "Tichenor Acquisitions") during the periods presented, as more fully described in the Notes hereto. The purchase price of the Tichenor Merger approximates $256.1 million, assuming the issuance of 5,689,878 shares of the Company's Common Stock (with a per share value equal to $31.75, which was the closing price for the Class A Common Stock on July 9, 1996, the day the Tichenor Merger was announced), the Company's assumption of Tichenor's outstanding debt, which was approximately $71.3 million at September 30, 1996 (on a pro forma basis), plus the redemption of 3,000 shares of Tichenor's outstanding 14% Senior Redeemable Cumulative Preferred Stock for $3,000,000, plus approximately $379,000 of accrued and unpaid dividends. Such purchase price will change based on the actual debt of Tichenor on the closing date for the Tichenor Merger. The Tichenor Merger will be accounted for using the purchase method of accounting. The purchase price will be allocated primarily to FCC licenses and other intangible assets and amortized over 40 years. The pro forma condensed consolidated financial information does not purport to present the actual financial position or results of operations of the Company had the Transactions and the Tender Offer actually occurred on the dates specified, nor is it necessarily indicative of the results of operations that may be achieved in the future. See "The Tichenor Merger," "Use of Proceeds," "Capitalization" and the Financial Statements included elsewhere in this Prospectus or incorporated herein by reference. 21 23 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 1996 (1) (Dollars in thousands, except per share data)
COMPANY TENDER THE COMPANY TICHENOR(3) TICHENOR AS REPORTED OFFER OFFERING(2) AS ADJUSTED AS REPORTED ACQUISITIONS(4) ----------- ------- ----------- ----------- ----------- --------------- Net broadcasting revenues........................ $ 71,732 $ -- $ -- $ 71,732 $44,467 $ 3,548 Station operating expenses....................... 48,896 -- -- 48,896 32,417 4,166 Corporate expenses............................... 5,072 (2,500)(5) -- 2,572 3,578 345 Depreciation and amortization.................... 5,140 1,400(6) -- 6,540 3,018 496 ---------- ------- -------- ---------- ------- ------- Total operating expenses........................ 59,108 (1,100) -- 58,008 39,013 5,007 ---------- ------- -------- ---------- ------- ------- Operating income (loss).......................... 12,624 1,100 -- 13,724 5,454 (1,459) Interest expense, net............................ (11,034) -- 8,697 (2,337) (3,063) (2,331) Loss on retirement of debt....................... (7,461) -- -- (7,461) -- -- Restructuring charges............................ (29,011) -- -- (29,011) -- -- Other income (expense), net...................... (1,671) -- -- (1,671) (197) (7) ---------- ------- -------- ---------- ------- ------- Income (loss) before provision for income taxes........................................... (36,553) 1,100 8,697 (26,756) 2,194 (3,797) Income tax (expense) benefit..................... (65) -- -- (65) (2,457) -- ---------- ------- -------- ---------- ------- ------- Income (loss) from continuing operations......... $ (36,618) $ 1,100 $ 8,697 $ (26,821) $ (263) $(3,797) ========== ======= ======== ========== ======= ======= Income (loss) from continuing operations per common and common equivalent share.............. $(3.56) $(1.94) $(.98)(7) ========== ========== ======= Weighted average shares outstanding.............. 10,294,967 13,794,967 683,857 ========== ========== ======= OTHER OPERATING DATA: Broadcast cash flow.............................. $22,836 $22,836 $12,050 TICHENOR COMPANY TICHENOR MERGER PRO FORMA PRO FORMA TICHENOR PRO FORMA CONDENSED ADJUSTMENTS PRO FORMA ADJUSTMENTS CONSOLIDATED ----------- --------- ----------- ------------ Net broadcasting revenues........................ $ -- $48,015 $ -- $ 119,747 Station operating expenses....................... -- 36,583 -- 85,479 Corporate expenses............................... -- 3,923 6,495 Depreciation and amortization.................... 784(8) 4,298 5,555(11) 16,393 ------- ------- ------- ---------- Total operating expenses........................ 784 44,804 5,555 108,367 ------- ------- ------- ---------- Operating income (loss).......................... (784) 3,211 (5,555) 11,380 Interest expense, net............................ (1,766)(9) (7,160) -- (9,497) Loss on retirement of debt....................... -- -- -- (7,461) Restructuring charges............................ -- -- -- (29,011) Other income (expense), net...................... -- (204) -- (1,875) ------- ------- ------- ---------- Income (loss) before provision for income taxes........................................... (2,550) (4,153) (5,555) (36,464) Income tax (expense) benefit..................... 2,412(10) (45) 3,800(12) 3,690 ------- ------- ------- ---------- Income (loss) from continuing operations......... $ (138) $(4,198) $(1,755) $ (32,774) ======= ======= ======= ========== Income (loss) from continuing operations per common and common equivalent share.............. $(6.73)(7) $ (1.68) ======= ========== Weighted average shares outstanding.............. 683,857 19,484,845 ======= ========== OTHER OPERATING DATA: Broadcast cash flow.............................. $11,432 $34,268
22 24 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1996 (1) (Dollars in thousands)
TICHENOR MERGER COMPANY THE COMPANY AS TICHENOR PRO FORMA AS REPORTED OFFERING(2) ADJUSTED AS REPORTED ADJUSTMENTS(13) ------------ ----------- ---------- ----------- --------------- ASSETS: Cash and cash equivalents............................. $ 5,132 $ -- $ 5,132 $ 5,066 $ (3,988)(14) Accounts receivable, net.............................. 17,015 -- 17,015 9,851 -- Other current assets.................................. 1,012 -- 1,012 868 -- -------- ---------- -------- --------- --------- Total current assets................................ 23,159 -- 23,159 15,785 (3,988) Property and equipment, net........................... 19,836 -- 19,836 9,436 -- Intangible assets, net................................ 121,742 -- 121,742 74,786 222,194(15) Other assets.......................................... 1,014 -- 1,014 1,506 -- -------- ---------- -------- --------- --------- Total assets........................................ $165,751 $ -- $165,751 $ 101,513 $ 218,206 ======== ========== ======== ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities................................... $ 14,132 $ -- $ 14,132 $ 6,837 $ -- Current portion of long-term debt..................... 1,859 -- 1,859 42 -- Long-term debt, net of current portion: Notes payable and credit agreements................. 135,000 (108,718) 26,282 71,248 -- Other long-term debt................................ 2,659 -- 2,659 3 -- -------- ---------- -------- --------- --------- Total long-term debt, net of current portion........ 137,659 (108,718) 28,941 71,251 -- Deferred income taxes................................. -- -- -- 3,818 49,598(16) Senior preferred stock................................ -- -- -- 3,379 (3,379)(17) Common stock purchase warrant......................... -- -- -- 4,140 (4,140)(18) -------- ---------- -------- --------- --------- Total liabilities................................... 153,650 (108,718) 44,932 89,467 42,079 Junior preferred stock................................ -- -- -- 368 (368)(18) Class A common stock.................................. 11 4 15 -- (2)(18) Class B common stock*................................. -- -- -- -- 8(18) Common stock (Tichenor)............................... -- -- -- 744 (744)(18) Additional paid-in capital............................ 102,578 108,714 211,292 4,357 183,810(18) Notes receivable from stockholders.................... -- -- -- (158) 158(18) (Accumulated deficit) Retained earnings............... (90,488) -- (90,488) 8,130 (8,130)(19) Less treasury stock, at cost.......................... -- -- -- (1,395) 1,395(18) -------- ---------- -------- --------- --------- Total stockholders' equity.......................... 12,101 108,718 120,819 12,046 176,127 -------- ---------- -------- --------- --------- Total liabilities and stockholders' equity.......... $165,751 $ -- $165,751 $ 101,513 $ 218,206 ======== ========== ======== ========= ========= COMPANY PRO FORMA CONDENSED CONSOLIDATED ------------- ASSETS: Cash and cash equivalents............................. $ 6,210 Accounts receivable, net.............................. 26,866 Other current assets.................................. 1,880 --------- Total current assets................................ 34,956 Property and equipment, net........................... 29,272 Intangible assets, net................................ 418,722 Other assets.......................................... 2,520 --------- Total assets........................................ $ 485,470 ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities................................... $ 20,969 Current portion of long-term debt..................... 1,901 Long-term debt, net of current portion: Notes payable and credit agreements................. 97,530 Other long-term debt................................ 2,662 --------- Total long-term debt, net of current portion........ 100,192 Deferred income taxes................................. 53,416 Senior preferred stock................................ -- Common stock purchase warrant......................... -- --------- Total liabilities................................... 176,478 Junior preferred stock................................ -- Class A common stock.................................. 13 Class B common stock*................................. 8 Common stock (Tichenor)............................... -- Additional paid-in capital............................ 399,459 Notes receivable from stockholders.................... -- (Accumulated deficit) Retained earnings............... (90,488) Less treasury stock, at cost.......................... -- --------- Total stockholders' equity.......................... 308,992 --------- Total liabilities and stockholders' equity.......... $ 485,470 =========
* Includes Class B referred to in this Prospectus as Nonvoting Common Stock. 23 25 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (1) The Company is the acquiring entity for accounting purposes in the Tichenor Merger because of: (i) the Company's relative size as compared to Tichenor, (ii) Clear Channel's relationship with the Company and Tichenor both before and after the consummation of the Tichenor Merger, and (iii) Clear Channel's ability in the future to convert its Nonvoting Common Stock into Class A Common Stock and comply with the FCC's cross-interest policy without substantial economic hardship. (2) Reflects the application of the estimated net proceeds from the Offering, assuming an offering price of $32.625 per share, toward the paydown of debt outstanding under the Credit Agreement and the related effects on interest expense and the effect of the Offering on the Company's Common Stock and additional paid-in capital. (3) Represents the historical operating results of Tichenor for the twelve months ended September 30, 1996 obtained by adding Tichenor operating results for the three months ended December 31, 1995 to operating results for the nine months ended September 30, 1996. Net revenues and net loss for the three months ended December 31, 1995 were $11,354,882 and ($622,892), respectively. (4) Represents the historical operating results of the Tichenor Acquisitions for the period of October 1, 1995 to the respective dates on which Tichenor began operating the acquired stations as a result of the purchase of station assets or entering into time brokerage agreements as follows:
KSOL-FM KYLZ-FM ----------------------------------------------------- PERIOD KQXX-FM THREE MONTHS JULY 1, YEAR ENDED ENDED SIX MONTHS 1996 TO SEPTEMBER 30, DECEMBER 31, ENDED JUNE AUGUST 15, 1996 1995 30, 1996 1996 SUBTOTAL TOTAL ------------- ------------ ----------- ---------- ----------- ----------- Revenues...................... $ 133,804 $ 979,412 $ 1,946,686 $ 487,683 $ 3,413,781 $ 3,547,585 Station operating expenses excluding depreciation and amortization................ 129,100 1,091,720 2,368,525 576,708 4,036,953 4,166,053 Corporate expense............. -- 88,497 206,986 49,247 344,730 344,730 Depreciation and amortization................ 5,600 132,610 287,805 70,069 490,484 496,084 Interest expense.............. -- 701,528 1,296,502 333,005 2,331,035 2,331,035 Other expense................. -- 14,630 (8,787) 974 6,817 6,817 --------- ----------- ----------- ---------- ----------- ----------- Total expense......... 134,700 2,028,985 4,151,031 1,030,003 7,210,019 7,344,719 --------- ----------- ----------- ---------- ----------- ----------- Net loss.............. $ (896) $(1,049,573) $(2,204,345) $(542,320) $(3,796,238) $(3,797,134) ========= =========== =========== ========== =========== ===========
(5) Reflects the elimination of executive compensation and related benefits of approximately $2,500,000 for the year ended September 30, 1996, relating to the termination of contractual employment agreements with two former officers of the Company terminated in connection with the consummation of the Tender Offer. The two former officers will be replaced by existing executive officers of Tichenor. The historical compensation of such officers is included in corporate expense in Tichenor's financial statements under the column"Tichenor as reported." (6) Reflects the amortization over five years of two non-compete agreements totaling $7,000,000 paid to two former officers of the Company in connection with the termination of their employment. (7) Net income (loss) per common and common equivalent share for Tichenor is calculated by deducting from net income (loss) senior preferred stock dividends and accretion of stock warrant totaling $404,304 for the twelve months ended September 30, 1996 and dividing such result by the weighted average shares outstanding for the respective period. As a result of the Tichenor Merger, the senior preferred stock and stock warrant will be retired and the related dividend and accretion requirements will be eliminated. 24 26 (8) Represents incremental depreciation and amortization expense for the twelve months ended September 30, 1996 resulting from the Tichenor Acquisitions for the period of October 1, 1995 through the respective dates of purchase as follows:
KSOL-FM/ KRTX-FM KQXX-FM KLTP-FM KYLZ-FM TOTAL ------- -------- ------- --------- ---------- Depreciation...................... $ -- $33,085 $18,589 $206,877 $ 258,551 Amortization...................... 36,458 156,282 14,551 814,460 1,021,751 Less historical................... -- (5,600) -- (490,484) (496,084) ------- -------- ------- -------- ---------- Total................... $36,458 $183,767 $33,140 $530,853 $ 784,218 ======= ======== ======= ======== ==========
The estimated weighted average useful lives of fixed assets, FCC licenses, going concern and other intangibles are assumed to be five, forty, fifteen and five years, respectively. (9) Represents incremental interest expense for the twelve months ended September 30, 1996 associated with borrowings in connection with the Tichenor Acquisitions as if such borrowings were outstanding for the entire periods presented. The purchases of KRTX-FM, KQXX-FM and KLTP-FM were funded with cash from operations and borrowings under Tichenor's credit facility. The purchase of KSOL-FM/KYLZ-FM was funded with a note payable issued to Clear Channel with a weighted average interest rate of 11%. The weighted average interest rate under Tichenor's credit facility during the respective periods is 8% based on historical borrowing costs.
LESS KSOL-FM/ HISTORICAL KRTX-FM KQXX-FM KLTP-FM KYLZ-FM BALANCES TOTAL -------- -------- ------- ---------- ----------- ---------- Interest expense........ $120,000 $ 86,667 $40,000 $3,850,000 $(2,331,035) $1,765,632 ======== ======== ======== ========== =========== ==========
(10) Represents the incremental income tax effect of the pro forma adjustments at an estimated effective income tax rate of 38%. (11) Reflects incremental amortization expense of approximately $5,555,000 for the year ended September 30, 1996, consisting of the amortization over forty years of additional intangible assets allocated and recorded as a result of the Tichenor Merger. (12) Reflects the tax benefit assuming the utilization of the Company's net operating losses to offset Tichenor's deferred tax liability. (13) Summary of purchase price components and allocation to assets and liabilities acquired: Purchase price: Number of shares of Class A Common Stock to be issued.................... 5,689,878 Per share price.......................................................... $ 31.75 ----------- Purchase price paid in stock............................................. $180,653,627 Amount payable for Tichenor Senior Preferred Stock and related dividends............................................................. 3,379,000 Estimated legal and other transaction costs.............................. 767,373 ----------- Total cash to be paid.................................................... 4,146,373 ----------- Purchase price excluding assumed Tichenor debt........................... 184,800,000 Assumption of Tichenor debt.............................................. 71,293,000 ----------- Total purchase price............................................. $256,093,000 =========== Allocation of purchase price: Tangible net assets, excluding intangible assets......................... $ 12,204,000 FCC licenses and other intangible assets................................. 222,194,000 Deferred income tax liability............................................ (49,598,000) Assumption of Tichenor debt.............................................. 71,293,000 ----------- Total purchase price............................................. $256,093,000 ===========
25 27 (14) Reflects adjustments to cash as follows: Payment of Tichenor Senior Preferred Stock and related dividends...... $(3,379,000) Payment of estimated legal and other transaction costs................ (767,000) Cash received in collection of notes receivable from Tichenor stockholders........................................................ 158,000 ----------- Net cash paid............................................... $(3,988,000) ===========
(15) Represents the allocation of the purchase price to intangible assets acquired in connection with the Tichenor Merger. For purposes of the preliminary allocation of the purchase price, the carrying amounts of net working capital, tangible assets and long-term liabilities (excluding deferred tax liabilities) are assumed to approximate their fair value. (16) Represents the deferred tax liability resulting from the Tichenor Merger. The deferred tax liability is calculated by applying an assumed effective tax rate of 38% to the difference between the pro forma book and tax bases of the combined entities. Deferred tax assets are recognized to the extent that such assets are expected to be utilized in the carryforward period. (17) Represents the retirement of Tichenor's Senior Preferred Stock at its carrying value with cash of approximately $3,379,000. (18) Represents the conversion of the Tichenor stock warrant and junior preferred stock to Tichenor common stock, the retirement of Tichenor's notes receivable from stockholders and the exchange of each outstanding share of Tichenor common stock into 7.8261 shares of the Class A Common Stock with a per share value of $31.75 in connection with the Tichenor Merger. Also reflects the conversion of 7,078,235 shares of Class A Common Stock ($.001 par value) held by Clear Channel into an equal number of shares of Nonvoting Common Stock. (19) Represents the elimination of the historical retained earnings of Tichenor. 26 28 SELECTED CONSOLIDATED FINANCIAL DATA (Dollars in thousands, except per share data) The selected consolidated balance sheet data as of September 30, 1994, 1995 and 1996, and the consolidated statement of operations data for each of the fiscal years then ended are derived from the Company's consolidated financial statements incorporated by reference into this Prospectus.
YEARS ENDED SEPTEMBER 30, ----------------------------------- 1994(1) 1995(2) 1996(2) --------- ---------- ---------- STATEMENT OF OPERATIONS DATA: Net broadcasting revenues................................................................. $ 27,433 $ 64,160 $ 71,732 Station operating expenses................................................................ 15,345 43,643 48,896 Corporate expenses........................................................................ 3,454 4,720 5,072 Depreciation and amortization............................................................. 1,906 3,344 5,140 --------- ---------- ---------- Total operating expenses................................................................ 20,705 51,707 59,108 --------- ---------- ---------- Operating income.......................................................................... 6,728 12,453 12,624 Other income (expense): Interest expense, net................................................................... (2,997) (6,389) (11,034) Income in equity of joint venture(3).................................................... 616 -- -- Loss on retirement of debt.............................................................. (1,738) -- (7,461) Restructuring charges................................................................... -- -- (29,011) Other expenses, net..................................................................... (1,407) (428) (1,671) --------- ---------- ---------- Total other income (expense)........................................................ (5,526) (6,817) (49,177) --------- ---------- ---------- Income before minority interest and provision for income taxes............................ 1,202 5,636 (36,553) Minority interest in Viva Media(3)........................................................ (351) (1,167) -- Provision for income taxes................................................................ (100) (150) (65) --------- ---------- ---------- Income from continuing operations......................................................... 751 4,319 (36,618) Loss from discontinued operations(4)...................................................... (285) (626) (9,988) --------- ---------- ---------- Net income (loss)......................................................................... $ 466 $ 3,693 $ (46,606) ========= ========== ========== Income from continuing operations per common and common equivalent share.................. $ .14 $ .40 $ (3.56) ========= ========== ========== Net income (loss) per common and common equivalent share.................................. $ .05 $ .34 $ (4.53) ========= ========== ========== Weighted average common shares and common share equivalents outstanding................... 5,384,678 10,805,346 10,294,967 ========= ========== ========== OTHER OPERATING DATA: Broadcast cash flow(5).................................................................... $ 12,088 $ 20,517 $ 22,836
SEPTEMBER 30, 1996 SEPTEMBER 30, ----------------------------- ------------------------------------- AS PRO FORMA, 1994 1995 1996 ADJUSTED(6) AS ADJUSTED(7) --------- ---------- ---------- ----------- -------------- BALANCE SHEET DATA: Cash and cash equivalents.............................. $ 10,219 $ 5,404 $ 5,132 $ 5,132 $ 6,210 Working capital........................................ 18,366 14,967 7,168 7,168 12,086 Net intangible assets.................................. 70,528 109,253 121,742 121,742 418,722 Total assets........................................... 113,353 151,637 165,751 165,751 485,470 Long-term debt, less current portion(8)................ 58,472 95,937 136,126 27,408 98,659 Stockholders' equity (deficiency)...................... 44,436 43,581 12,101 120,819 308,992
- --------------- (1) During August 1994, the Company completed three separate business acquisitions and began consolidating its previously unconsolidated investment in Viva Media. Total net revenues and net income (loss), adjusted for interest expense on retired debt, relating to these acquisitions and transaction from the respective dates of these transactions to September 30, 1994 were approximately $5,488,000 and $(80,000), respectively. (2) During fiscal 1995, the Company completed several radio station acquisitions. Due to the financial effects of these transactions, the results of operations for 1996 reflect a full fiscal year of operations for these radio stations compared to a partial fiscal year in 1995. Consequently, the results of operations for the years ended September 30, 1995 and 1996 are not entirely comparable. (3) Effective August 20, 1994, the Company began accounting for its 49% interest in Viva Media on a consolidated basis. Accordingly Viva Media's results of operations are included in the consolidated financial statements for the period from August 20, 1994 through September 30, 1994 and for each of the fiscal years ended September 30, 1995 and 1996. Prior to August 20, 1994, the accounts and results of operations of Viva Media were accounted for using the equity method of accounting. (4) The Company's Board of Directors approved a plan to discontinue the operations of the radio network owned by CRC, effective August 5, 1996. The total loss relating to the discontinued operations of CRC for fiscal 1996 was approximately $10 million, and has been accounted for as discontinued operations. Accordingly, the results of operations for CRC for prior years have been reclassified to conform to the current year presentation. CRC intends to fulfill its contractual program obligations and is expected to cease operating by early 1997. (5) Data on station operating income excluding corporate expenses, depreciation and amortization (commonly referred to as "broadcast cash flow"), although not calculated in accordance with generally accepted accounting principles, is widely used in the broadcast industry as a measure of a broadcast company's operating performance. Nevertheless, this measure should not be considered in isolation or as a substitute for operating income, cash flows from operating activities or any other measures for determining the Company's operating performance or liquidity which are calculated in accordance with generally accepted accounting principles. (6) As adjusted to give effect to the Offering (at an assumed offering price of $32.625 per share) and the application of the estimated net proceeds therefrom as if the Offering had been consummated on September 30, 1996. (7) Pro forma as adjusted to give effect to the Transactions, including the Offering (at an assumed price of $32.625 per share) and the application of the estimated net proceeds therefrom, as if they had been consummated on September 30, 1996. The effect of the Tichenor Merger is based on preliminary purchase price allocations. The pro forma information does not purport to present the actual financial position of the Company had the Transactions actually occurred on the date specified. See "The Tichenor Merger," "Use of Proceeds," "Capitalization" and the Financial Statements and Notes thereto for each of the Company, Tichenor and the Tichenor Acquisitions included elsewhere in this Prospectus or incorporated herein by reference. (8) Long-term debt, less current portion, excludes other non-current obligations of the Company ($1,533,000 at September 30, 1996). 27 29 THE COMPANY GENERAL The Company was incorporated under the laws of the State of Delaware in 1992, as the successor to a radio broadcasting company which began operations in 1974. The Company is the largest Spanish language radio broadcasting company in the United States and currently owns and programs 17 radio stations, 16 of which are in five of the ten largest Hispanic markets in the United States, including Los Angeles, New York, Miami, Chicago and Dallas/Fort Worth. The Board of Directors of the Company has approved the Tichenor Merger Agreement to acquire Tichenor, the third largest Spanish language radio broadcasting company in the United States. Tichenor owns or programs 20 stations, which serve six of the ten largest Hispanic markets in the United States, including San Francisco/San Jose, Chicago, Houston, San Antonio, McAllen/Brownsville/Harlingen and El Paso. Following the Tichenor Merger, the Company will own or program 37 radio stations in 11 markets, including stations in each of the top ten Hispanic markets in the United States. The Company's strategy is to own and program top performing radio stations, principally in the largest Spanish language radio markets in the United States. The top ten Hispanic markets account for approximately 17.2 million Hispanics, representing approximately 63% of the total Hispanic population in the United States. Upon completion of the Tichenor Merger, the Company will have the largest Spanish language radio station combination, as measured by audience and revenue share, in eight of the top ten Hispanic markets. Additionally, the Company will have the highest rated radio station in any format in four of the top ten Hispanic markets. The Company intends to acquire or develop additional Spanish language stations in the leading Hispanic markets. When evaluating a potential acquisition, the Company considers the following factors: (i) the ability to generate satisfactory rates of return on its investment, (ii) the ability to increase operating cash flow at the station, (iii) the strategic importance of the station to the Company's overall business objectives, (iv) the size and projected rates of growth of the market's broadcasting revenues, Hispanic population and consumer spending and (v) the number of competitive stations in the market. SPANISH LANGUAGE RADIO The Company believes Spanish language radio broadcasting has significant growth potential for the following reasons: - The Hispanic population is the fastest growing population segment in the United States and is expected to grow from an estimated 27.2 million (approximately 10.3% of the total United States population) at the end of 1995 to an estimated 30.7 million (approximately 11.3% of the total United States population) by the year 2000. These estimates imply a growth rate of approximately five times the expected growth rate for the total U.S. population during the same period. The Company estimates that by the end of 1996 approximately 26% of the overall population of the ten largest Hispanic markets will be of Hispanic origin. - Advertisers have substantially increased their use of Spanish language media in recent years. Total advertising revenues from advertising in Spanish language media rose from $166 million in 1983 to $1.06 billion in 1995. This represents a compound annual growth rate of 16.7%, which is more than double the growth rate of total advertising over the same period. Although Hispanic consumers will spend an estimated $340 billion in 1997, or 6.5% of the total consumer spending in the United States, Spanish language advertising currently represents less than 0.7% of total advertising expenditures. - Advertisers have begun to target Hispanic households because they are younger and spend a greater percentage of their household income on consumer products than non-Hispanic households. Hispanic households in the United States average 3.5 persons, compared to an 28 30 average of 2.5 persons for non-Hispanic households. In addition, 82% of Hispanic households in the United States are family units, compared to 71% of all households in the United States. During the 1990's, one in four new households in the United States is expected to be headed by a person of Hispanic origin. - Hispanics have maintained strong social and cultural ties to their countries of origin, particularly the continued use of the Spanish language. An estimated 78% of Hispanics speak at least some Spanish and approximately 40% speak it exclusively. Spanish is expected to continue to be the language of preference for Hispanics. - The number of Spanish language media outlets is disproportionately lower than the number of similar English language outlets. In the radio segment, there are currently approximately 465 Spanish language commercial stations, which constitute only approximately 4% of all commercial radio stations in the United States, although the Hispanic population comprises approximately 10.3% of the United States population. PROGRAMMING Due to differences in origin, Hispanics are not a homogeneous group. The music, culture, customs and Spanish dialects vary from one radio market to another. Consequently, the Company programs its stations in a manner responsive to the local preferences of a target demographic audience in each of the markets it serves. A well-researched mix of music and on-air programming at an individual station can attract a wide audience targeted by Spanish language advertisers. Programming is consistently monitored to maintain its quality and relevance to the target audience. Most music formats are primarily variations of Regional Mexican, Tropical, Tejano and Contemporary music styles. The local program director will select music from the various music styles that best reflect the music preferences of the local Hispanic audiences. A brief description of each follows: Regional Mexican. Regional Mexican consists of various types of music played in different regions of Mexico. Ranchera music, originating in Jalisco, Mexico, is a traditional folkloric sound commonly referred to as Mariachi music. Mariachi music features acoustical instruments and is considered the music indigenous to Mexicans who have lived in the country towns. Nortena means northern, and is representative of Northern Mexico. Featuring an accordion, Nortena has a Polka sound with a distinct Mexican flavor. Banda is a regional format from the state of Sinaloa, Mexico and is popular in California. Banda resembles up-tempo marching band music with synthesizers. Regional Mexican also includes Cumbia music, which originates in Colombia. Contemporary. The Contemporary format includes pop, Latin rock, and ballads. This format is similar to English adult contemporary and contemporary hit radio stations. Tropical. The Tropical format primarily consists of Salsa, Merengue, and Cumbia music. Salsa is dance music combining Latin Caribbean rhythms with jazz. Salsa symbolizes music from Puerto Rico, Cuba, and the Dominican Republic and is popular with Hispanics living in New York, Miami and Chicago. Merengue music is up-tempo dance music originating in the Dominican Republic. Tejano. Tejano music originated in Texas and is based on Mexican themes but is indigenous to Texas. It is a combination of contemporary rock, Ranchera, and country music. The lyrics are primarily sung in Spanish. The on-air talent speak in Spanish and English. Full Service. The Full Service format includes all the traditional radio services: music, news, sports, traffic reports, special information programs and weather. News/Talk. News includes local, national, international reports and weather, business, traffic and sports. Talk includes commentary, analysis, discussion, interviews, call-ins and information shows. 29 31 COMPANY'S STATIONS The following table sets forth information regarding the Company's radio stations, assuming completion of the Tichenor Merger:
PRIMARY MARKET (HISPANIC HEFTEL/ DEMOGRAPHIC FCC MARKET RANK) STATION(1) TICHENOR STATION FORMAT(2) TARGET FREQUENCY - ------------------- ------------ -------- ----------------- ----------- --------- Los Angeles(1) KLVE-FM Heftel Contemporary A 25-54 107.5 MHZ KTNQ-AM Heftel News/Talk A 25-54 1020 kHz New York(2) WADO-AM Heftel News/Talk A 25+ 1280 kHz WPAT-AM(3) Heftel Brokered n/a 930 kHz WZZU-AM Heftel n/a n/a n/a Miami(3) WAMR-FM Heftel Contemporary A 25-54 107.5 MHZ WRTO-FM Heftel Tropical A 18-34 98.3 MHZ WAQI-AM Heftel News/Talk A 35+ 710 kHz WQBA-AM Heftel News/Talk/Sports A 35+ 1140 kHz San Francisco/ San Jose(4) KSOL-FM Tichenor Regional Mexican A 25-54 98.9 MHZ KZOL-FM Tichenor Regional Mexican A 25-54 99.1 MHZ Chicago(5) WOJO-FM Tichenor Regional Mexican A 25-54 105.1 MHZ WIND-AM Tichenor Full Service A 35+ 560 kHz WLXX-AM Heftel Tropical A 18-49 1200 kHz Houston(6) KLTN-FM Tichenor Regional Mexican A 18-49 93.3 MHZ KLTO-FM(4) Tichenor Regional Mexican A 25-54 104.9 MHZ KLTP-FM Tichenor Regional Mexican A 25-54 104.9 MHZ KRTX-FM Tichenor Tejano A 25-54 100.7 MHZ KLAT-AM Tichenor Full Service A 25-54 1010 kHz KMPQ-AM(5) Tichenor n/a n/a 980 kHz San Antonio(7) KXTN-FM Tichenor Tejano A 25-54 107.5 MHZ KXTN-AM Tichenor Tejano A 25-54 1310 kHz KROM-FM Tichenor Regional Mexican A 25-54 92.9 MHZ KCOR-AM Tichenor Regional Mexican A 35+ 1350 kHz McAllen/Brownsville/ Harlingen(8) KQXX-FM Tichenor Regional Mexican A 25-54 98.5 MHZ KGBT-AM Tichenor Regional Mexican A 25-54 1530 kHz KIWW-FM Tichenor Tejano A 25-54 96.1 MHZ Dallas/Fort Worth(9) KESS-AM Heftel Full Service A 18+ 1270 kHz KHCK-FM Heftel Tejano A 18-49 99.1 MHZ KMRT-FM Heftel Contemporary A 18-49 106.7 MHZ KINF-AM Heftel Full Service A 18-49 1440 kHz KICI-FM Heftel Tejano A 18-49 107.9 MHZ KMRT-AM Heftel Contemporary A 18-49 1480 kHz El Paso(10) KBNA-FM Tichenor Regional Mexican A 25-54 97.5 MHZ KBNA-AM Tichenor Regional Mexican A 25-54 920 kHz KAMA-AM Tichenor Tejano A 25-54 750 kHz Las Vegas(33) KLSQ-AM Heftel Regional Mexican A 18-49 870 kHz
- --------------- (1) Actual city of License may differ from the metropolitan market served. (2) See "Programming." (3) The Company sells airtime on this station to third parties for broadcast of specialty programming. (4) Tichenor programs this station under a local marketing agreement. (5) Tichenor has entered into a local marketing agreement with Kidstar Interactive Media, Inc., which provides children's programming. Statistical information contained herein regarding the radio industry, population, consumer spending and advertising expenditures are taken from the Arbitron Company 1995-1996; radio metro ratings; 1990 U.S. Census; the Hispanic Consumer Market Report (DRI/McGraw Hill, June 1992); SRDS -- Standard Rate & Data Services (August 1996); Advertising Age (September 30, 1996); Sales 30 32 and Marketing Management's Survey of Buying Power; Strategy Research Corporation -- 1996 U.S. Hispanic Market Study; Duncan's Radio Market Guide (1996 Edition); Hispanic Business (December 1995); Market Segment Research, Inc., and Paul Kagan Associates, Inc. MANAGEMENT MANAGEMENT OF COMPANY FOLLOWING THE TICHENOR MERGER Upon consummation of the Tichenor Merger, the Company will enter into a five year employment contract with McHenry Tichenor, Jr. to serve as the Company's President and Chief Executive Officer (the "Employment Agreement"). Mr. Tichenor, 41, has been the President and Chief Executive Officer and a director of Tichenor since 1981. The Employment Agreement provides for an annual salary of $260,000 plus incentive compensation as determined by the Compensation Committee of the Company's Board of Directors. Upon termination by the Company without cause or by Mr. Tichenor for good reason, the Company shall be obligated to pay to Mr. Tichenor a lump sum amount equal to the estimated payments of salary and bonus remaining through the end of the term of the agreement. Furthermore, the Employment Agreement provides that Mr. Tichenor agrees not to compete with the Company for a period of one year following the date the Employment Agreement is terminated. Tichenor has indicated to the Company that, in addition to McHenry Tichenor, Jr., the following individuals will serve as executive officers of the Company following the consummation of the Tichenor Merger: David L. Lykes. Mr. Lykes, 61, is Senior Vice President and a Director of Tichenor. Mr. Lykes began his career at Tichenor in 1958. Mr. Lykes is responsible for the day-to-day operation of Tichenor's stations. Jeffrey T. Hinson. Mr. Hinson, 41, joined Tichenor as Chief Financial Officer, Treasurer, and a Director in October 1995. From October 1991 to October 1995, Mr. Hinson was President of Alliance Investors Holdings, Ltd., a privately-held merchant bank located in Houston, Texas. For two years prior to joining Tichenor, Mr. Hinson acted as a consultant for Tichenor. Ricardo del Castillo. Mr. Castillo, 50, has been Vice President of Operations of Tichenor since 1988 and became a director of Tichenor in February 1989. The Tichenor Merger Agreement also provides that following the consummation of the Tichenor Merger, five designees of Tichenor shall constitute the entire Board of Directors of the Company. Tichenor has informed the Company that its designees are: McHenry T. Tichenor, Jr. Mr. Tichenor, 41, has been the President and Chief Executive Officer and a director of Tichenor since 1981. McHenry T. Tichenor, Sr. Mr. Tichenor, 64, is the Vice Chairman and a Director of Tichenor and has served as the Vice Chairman and a Director of Tichenor since 1981. McHenry T. Tichenor, Sr. is the father of McHenry T. Tichenor, Jr. Robert W. Hughes. Mr. Hughes, 61, is Chairman of the Prime Management Group, Austin, Texas. In that capacity, he also serves as Chairman of Prime Cable, Prime Video, Prime Venture I and Prime New Venture Management. Mr. Hughes serves on the Board of Directors of Atlantic Cellular, Providence, R.I. and Hawaiian Wireless, Honolulu, Hawaii. For the past 28 years, he has primarily been involved in the cable television industry. He served as Chairman of the National Cable Television Association in 1978-79. James M. Raines. Mr. Raines became a director of the Company on August 5, 1996. Mr. Raines has been the President of James M. Raines & Company for more than five years. Mr. Raines also serves as a director of 50-OFF Stores, Inc. Ernesto Cruz. Mr. Cruz became a director of the Company on August 5, 1996. Mr. Cruz has been a Managing Director of Credit Suisse First Boston Corp. for more than five years. 31 33 CURRENT EXECUTIVE OFFICERS AND DIRECTORS The current directors and executive officers of the Company are as follows:
NAME AGE POSITION - ------------------------------------- --- ------------------------------------------------ L. Lowry Mays(1)..................... 61 President, Chief Executive Officer and Director John T. Kendrick..................... 44 Senior Vice President and Chief Financial Officer Ernesto Cruz(1)...................... 42 Director B. J. McCombs........................ 68 Director James M. Raines(1)(2)................ 56 Director John H. Williams(2).................. 62 Director
- --------------- (1) Member of the Compensation Committee. (2) Member of the Audit Committee. All directors hold office until the annual meeting of stockholders next following their election, or until their successors are elected and qualified. Officers are elected annually by the Board of Directors and serve at the discretion of the Board. The Board has two committees, the Compensation Committee and the Audit Committee. The basic function of the Compensation Committee is to determine stock option grants to executive officers and other key employees, as well as to review salaries, bonuses, and other elements of compensation of executive officers and other key employees and make recommendations on such matters to the full Board of Directors. The basic function of the Audit Committee is to review the financial statements of the Company, to consult with the Company's independent auditors and to consider such other matters with respect to the internal and external audit of the financial affairs of the Company as may be necessary or appropriate in order to facilitate accurate financial reporting. Information with respect to the business experience and affiliations of the current directors, other than for Messrs. Raines and Cruz (who will remain directors after completion of the Tichenor Merger), and executive officers of the Company is set forth below. Mr. Mays became President, Chief Executive Officer and director of the Company on August 5, 1996. Mr. Mays is also President, Chief Executive Officer and director of Clear Channel and has served as such since 1972. Mr. Kendrick joined the Company as Vice President, Finance in September 1993. In December 1993, he was promoted to Senior Vice President and Chief Financial Officer. From October 1992 through September 1993, Mr. Kendrick provided financial consulting to the entertainment and computer software industries. From June 1988 through October 1992, Mr. Kendrick served as Senior Vice President and Chief Financial Officer of Skouras Pictures, Inc. Mr. McCombs became a director of the Company on August 5, 1996. Mr. McCombs also serves as a director of Clear Channel. Mr. McCombs is and has been a private investor for more than five years. Mr. Williams became a director of the Company on August 5, 1996. Mr. Williams also serves as a director of Clear Channel and of GAINSCO, Inc. Mr. Williams is Senior Vice President of Everon Securities, Inc., and has served in such a position for more than five years. 32 34 SELLING SHAREHOLDER The table below sets forth the beneficial ownership of the Company's Class A Common Stock by Clear Channel as of January 8, 1997, and after giving effect to the sale of the shares of Class A Common Stock offered by the Company and Clear Channel hereby. Clear Channel has sole voting and investment power with respect to the shares of Class A Common Stock it owns.
CLASS A CLASS A COMMON STOCK COMMON STOCK BENEFICIALLY OWNED BENEFICIALLY PRIOR CLASS A OWNED AFTER THE TO THE OFFERING COMMON STOCK OFFERING(1) -------------------- TO BE SOLD IN -------------------- BENEFICIAL OWNER SHARES PERCENT OFFERING SHARES PERCENT - ------------------------------------- --------- ------- ------------- --------- ------- Clear Channel Communications, Inc.... 7,297,821 48.50 350,000 6,947,821 46.17
- --------------- (1) Following the consummation of the Tichenor Merger, the shares of Class A Common Stock of the Company held by Clear Channel and Clear Channel's shares of Tichenor common stock will be exchanged into 7,078,235 shares of the Company's Nonvoting Common Stock, which will represent 34.13% of the Company's outstanding Common Stock (33.29% if the Underwriters' over-allotment option is exercised in full). SHARES ELIGIBLE FOR FUTURE SALE GENERAL Upon completion of the Offering, the Company will have 15,047,731 shares of Class A Common Stock outstanding (assuming no exercise of the Underwriters' overallotment option). All of the 3,850,000 shares offered hereby (plus up to 525,000 additional shares in the event the Underwriters exercise their over-allotment option) will be freely transferable without restriction or further registration under the Securities Act, unless purchased by an "affiliate" of the Company (as that term is defined under the Securities Act). The 6,947,821 shares of Class A Common Stock which will be owned by Clear Channel upon completion of the Offering will be "control securities" within the meaning of Rule 144, and are subject to agreements with the Underwriters pursuant to which they may not be offered for sale, sold or otherwise disposed of for 90 days after the date of this Prospectus without the consent of Alex. Brown & Sons Incorporated. Following this 90 day period, 2,566,108 shares of the Class A Common Stock owned by Clear Channel will become eligible for sale, although they will remain subject to the volume and other limitations (other than the two year holding period) of Rule 144; provided, however, as long as the Registration Statement on Form S-3 (declared effective on February 26, 1996) remains in effect, subject to any contractual limitations, Clear Channel may sell 2,156,799 of such shares without regard to any limitations contained in Rule 144. Clear Channel has indicated to the Company that it does not currently intend to sell any shares of the Company's Common Stock except as may be necessary to meet the FCC Approval Condition. In general, under Rule 144 as currently in effect, any person (or persons whose shares are aggregated) who has beneficially owned shares of Class A Common Stock for at least two years is entitled to sell, within any three-month period, a number of such shares which does not exceed the greater of 1% of the then-outstanding shares of Class A Common Stock (15,047,731 shares immediately after the Offering) or the average weekly public trading volume of the Class A Common Stock during the four calendar weeks preceding the date on which notice of the sale is filed with the Securities and Exchange Commission. Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about the Company. Any person (or persons whose shares are aggregated) who has not been an affiliate of the Company at any time during the three months preceding a sale and who has owned shares of Class A Common Stock for at least three years is entitled to sell such shares under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information or notice requirements of Rule 144. The Company cannot make any predictions as to the effect, if any, sales of shares of Class A Common Stock, or the availability of shares for future sale, will have on the market price of the Class A Common Stock prevailing from time to time. 33 35 REGISTRATION RIGHTS; STOCKHOLDERS AGREEMENT Upon consummation of the Tichenor Merger, the Company will enter into a registration rights agreement with each of Clear Channel and certain shareholders of Tichenor who receive Class A Common Stock in the Tichenor Merger pursuant to which Clear Channel and such Tichenor shareholders will have certain demand and piggyback registration rights with respect to shares of Class A Common Stock owned by them. In addition, upon consummation of the Tichenor Merger, it is anticipated that Clear Channel and the Major Tichenor Stockholders will enter into the Stockholders Agreement whereby such stockholders will agree to certain restrictions on the transfer of their shares of Common Stock of the Company and will grant certain rights of first refusal and "tag-along" rights with respect to certain sales of such shares. See "The Tichenor Merger -- Registration Rights; Stockholders Agreement." DESCRIPTION OF CAPITAL STOCK The Company's authorized capital stock consists of 30,000,000 shares of Class A Common Stock, $.001 par value, 7,000,000 shares of Class B Common Stock, $.001 par value, and 5,000,000 shares of Preferred Stock, $.001 par value. As of September 30, 1996, 11,547,731 shares of Class A Common Stock were outstanding and no shares of Class B Common Stock or Preferred Stock were outstanding. Upon consummation of the Tichenor Merger, the authorized shares of each of Class A Common Stock and Class B Common Stock (to be amended to become Nonvoting Common Stock) will increase to 50,000,000. COMMON STOCK General. All of the outstanding shares of Common Stock are, and the shares of Class A Common Stock offered hereby will be, validly issued, fully paid and nonassessable. The rights of holders of shares of Class A Common Stock and Class B Common Stock are identical except for voting rights. Currently, there are no outstanding shares of Class B Common Stock. Voting Rights. Holders of shares of Common Stock vote as a single class on all matters submitted to a vote of the stockholders, with each share of Class A Common Stock entitled to one vote and each share of Class B Common Stock generally entitled to ten votes. However, each share of Class A Common Stock and Class B Common Stock is entitled to one vote when required by law. Holders of Common Stock are not entitled to cumulate votes in the election of directors. There are no shares of Class B Common Stock currently outstanding. Upon consummation of the Tichenor Merger, the Certificate of Incorporation of the Company will be amended to provide that the rights of the Class B Common Stock will be modified as described herein under "Nonvoting Common Stock." Under Delaware law, the affirmative vote of the holders of a majority of the outstanding shares of any class of Common Stock which is entitled to vote is required to approve any amendment to the Certificate of Incorporation of the Company which would increase or decrease the aggregate number of authorized shares of any class, increase or decrease the par value of the shares of any class, or modify or change the powers, preferences or special rights of the shares of any class so as to affect such class adversely. Nonvoting Common Stock. If approved by the Board of Directors and stockholders of the Company, the Company will amend its certificate of incorporation (the "Charter Amendment") to authorize 50,000,000 shares of the Class B Common Stock and amend the rights of the holders thereof, as further described herein. For purposes of this Prospectus, the Class B Common Stock, after giving effect to the amendment to the rights thereof, has been referred to herein as the "Nonvoting Common Stock." The Nonvoting Common Stock will be issued in exchange for shares of Class A Common Stock held by Clear Channel in the Tichenor Merger. 34 36 Holders of the Nonvoting Common Stock will, in certain circumstances, have certain voting rights, with each share of Nonvoting Common Stock being entitled to one vote. Specifically, so long as Clear Channel and its affiliates own at least 20% of the Common Stock then outstanding, the Company will not be able to, and will not be able to permit any subsidiary to, without the vote or consent by the holders of a majority of the Nonvoting Common Stock voting as a single class, take any of the following actions: (i) effect the sale, lease or other transfer of all or substantially all of the assets of the Company, or any merger or consolidation involving the Company where the stockholders of the Company immediately prior to such transaction would not own at least 50% of the capital stock of the surviving entity, or any reclassification, recapitalization, dissolution, liquidation or winding up of the Company; (ii) authorize, issue or obligate itself to issue any shares of Preferred Stock; (iii) make or permit any amendment to the Company's certificate of incorporation that adversely affects the rights of the holders of Nonvoting Common Stock; (iv) declare or pay any non-cash dividends on or make any other non-cash distribution on the Company's Common Stock; or (v) make or permit any amendment or modification to the Company's certificate of incorporation concerning the Company's capital stock. Conversion of Nonvoting Common Stock. The Company's Restated Certificate of Incorporation will provide that only Clear Channel and its affiliates may own shares of Nonvoting Common Stock. The Nonvoting Common Stock that Clear Channel and its affiliates will receive in the Tichenor Merger will convert into Class A Common Stock automatically upon sale, gift or other transfer to a person or entity other than Clear Channel or an affiliate of Clear Channel. Each share of the Nonvoting Common Stock will also be convertible into Class A Common Stock at the option of its holder subject to necessary FCC consents. In addition, Clear Channel may convert shares of Class A Common Stock held by it into shares of Nonvoting Common Stock at its option. Other Provisions. Subject to the rights of any Preferred Stock, the holders of Common Stock are entitled to receive such dividends, if any, as may be declared from time to time by the Board of Directors in it discretion from funds legally available therefor, and upon liquidation or dissolution are entitled to receive all assets available for distribution to the stockholders. The holders of the Common Stock have no preemptive or other subscription rights, and there are no redemption or sinking fund provisions with respect to such shares. PREFERRED STOCK The shares of Preferred Stock may be issued in series with such designations, preferences, limitations and relative rights as the Company's Board of Directors may determine. CERTAIN ANTITAKEOVER EFFECTS OF CHARTER AMENDMENT AND DELAWARE LAW Certain provisions of the Charter Amendment and the Delaware General Corporation Law ("DGCL") may have the effect of impeding the acquisition of control of the Company by means of a tender offer, proxy fight, open market purchases or otherwise. As provided in the Charter Amendment, holders of Nonvoting Common Stock will have the right to vote separately as a class on certain matters, including a merger of the Company or sale of all or substantially all of its assets. In addition, shares of Nonvoting Common Stock are convertible into shares of Class A Common Stock at the holder's option. Section 203 of the DGCL restricts a wide range of transactions ("business combinations") between a corporation and an interested stockholder. An "interested stockholder" is, generally, any person who beneficially owns, directly or indirectly, 15% or more of the corporation's outstanding voting stock. Business combinations are broadly defined to include (i) mergers or consolidations with, (ii) sales or other dispositions of more than 10% of the corporation's assets to, (iii) certain transactions which would result in increasing the proportionate share of stock of the corporation or any subsidiary owned by, or (iv) receipt of the benefit (other than proportionately as a stockholder) or any loans, advances or other financial benefits by, an interested stockholder. Section 203 provides 35 37 that an interested stockholder may not engage in a business combination with the corporation for a period of three years from the time of becoming an interested stockholder unless (i) the board of directors approved either the business combination or the transaction which resulted in the person becoming an interested stockholder prior to the time such person became an interested stockholder; (ii) upon consummation of the transaction which resulted in the person becoming an interested stockholder, that person owned at least 85% of the corporation's voting stock (excluding shares owned by persons who are officers and also directors and shares owned by certain employee stock plans); or (iii) the business combination is approved by the board of directors and authorized by the affirmative vote of at least 66 2/3% of the outstanding voting stock not owned by the interested stockholder. ALIEN OWNERSHIP The Company's Restated Certificate of Incorporation restricts the ownership and voting of the Company's capital stock, including its Class A Common Stock, in accordance with the Communications Act and the rules of the FCC to prohibit ownership of more than 25% of the Company's outstanding capital stock (or control of more than 25% of the voting power it represents) by or for the account of aliens, foreign governments, or non-U.S. corporations or corporations otherwise subject to control by such persons or entities. The Restated Certificate of Incorporation also prohibits any transfer of the Company's capital stock which would cause the Company to violate this prohibition. In addition, the Restated Certificate of Incorporation authorizes the Company's Board of Directors to adopt such provisions as it deems necessary to enforce these prohibitions. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the Class A Common Stock is Harris Trust Company of California. 36 38 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, the Underwriters named below (the "Underwriters") have severally agreed to purchase from the Company and Clear Channel the following respective number of shares of Class A Common Stock at the public offering price less the underwriting discounts and commissions set forth on the cover page of this Prospectus:
NUMBER OF UNDERWRITER SHARES - -------------------------------------------------------------------------------- --------- Alex. Brown & Sons Incorporated................................................. Credit Suisse First Boston Corp. ............................................... Lehman Brothers Inc............................................................. Montgomery Securities........................................................... Smith Barney Inc................................................................ --------- Total........................................................................... 3,850,000 =========
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will purchase all shares of Class A Common Stock offered hereby if any of such shares are purchased. The Company and Clear Channel have been advised by the Underwriters that the Underwriters propose to offer the shares of Class A Common Stock to the public at the public offering price set forth on the cover page of this Prospectus, and to certain dealers at such price less a concession not in excess of $ per share. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain other dealers. The Company has granted to the Underwriters an option, exercisable not later than 30 days after the date of this Prospectus, to purchase up to 525,000 additional shares of Class A Common Stock at the public offering price less the underwriting discounts and commission set forth on the cover page of this Prospectus. To the extent that the Underwriters exercise such option, each of the Underwriters will have a firm commitment to purchase approximately the same percentage thereof that the number of shares of Class A Common Stock to be purchased by it shown in the above table bears to 3,850,000, and the Company will be obligated, pursuant to the option, to sell such shares to the Underwriters. The Underwriters may exercise such option only to cover over-allotments made in connection with the sale of Class A Common Stock offered hereby. If purchased, the Underwriters will offer such additional shares on the same terms as those in which the 3,850,000 shares are being offered. The Underwriting Agreement contains covenants of indemnity and contribution among the Company, Clear Channel and the Underwriters with respect to certain liabilities, including liabilities under the Securities Act. The Company, its directors and executive officers and Clear Channel have agreed that they will not, directly or indirectly, offer, sell or otherwise dispose of any equity securities of the Company or any securities convertible into, or exchangeable for, or any rights to purchase or acquire, equity securities of the Company (other than employee stock options granted by the Company in the ordinary course of business) for a period of 90 days after the date of this Prospectus, without the prior written consent of Alex. Brown & Sons Incorporated. One or more of the Underwriters currently act as market makers for the Class A Common Stock and may engage in "passive market making" in such securities on the Nasdaq National Market in accordance with Rule 10b-6A under the Exchange Act. Rule 10b-6A permits, upon the satisfaction of certain condition, underwriters participating in a distribution that are also Nasdaq market makers in the security being distributed to engage in limited market making transactions during the period when Rule 10b-6 under the Exchange Act would otherwise prohibit such activity. Rule 10b-6 37 39 prohibits underwriters engaged in passive market making generally from entering a bid or effecting a purchase at a price that exceeds the highest bid for those securities displayed on the Nasdaq National Market by a market maker that is not participating in the distribution. Under Rule 10b-6A, each underwriter engaged in passive market making is subject to a daily net purchase limitation equal to 30% of such entity's average daily trading volume during the two full consecutive calendar months immediately preceding the date of the filing of the registration statement under the Securities Act pertaining to the security to be distributed. LEGAL OPINIONS Certain legal matters in connection with the shares of Class A Common Stock offered hereby will be passed upon for the Company and Clear Channel by their special counsel, Akin, Gump, Strauss, Hauer & Feld, L.L.P. (a partnership including professional corporations), San Antonio, Texas. Certain legal matters in connection with the Offering will be passed upon for the Underwriters by their counsel, Piper & Marbury L.L.P., Baltimore, Maryland. Alan D. Feld, the sole shareholder of a professional corporation which is a partner of Akin, Gump, Strauss, Hauer & Feld, L.L.P., is a director of Clear Channel, the selling shareholder. EXPERTS The consolidated financial statements of Heftel Broadcasting Corporation appearing in Heftel Broadcasting Corporation's Annual Report (Form 10-K) for the year ended September 30, 1996 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements of Tichenor Media System, Inc. as of December 31, 1994 and 1995 and for each of the years in the three-year period ended December 31, 1995, are included herein in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, included herein, and upon the authority of said firm as experts in accounting and auditing. The combined financial statements of KSOL-FM and KYLZ-FM (Divisions of Crescent Communications, L.P.) as of December 31, 1994 and 1995 and for the period April 1, 1994 to December 31, 1994 and for the year ended December 31, 1995 are incorporated herein, in reliance upon the report of Miller, Kaplan, Arase & Co., independent certified public accountants incorporated herein, and upon the authority of said firm as experts in accounting and auditing. AVAILABLE INFORMATION The Company is subject to the information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy and information statements filed by the Company with the Commission pursuant to the information requirements of the Exchange Act may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of the Commission: New York Regional Office, Seven World Trade Center, 13th Floor, New York, New York, 10048, Los Angeles Regional Office, Suite 1100, 5670 Wilshire Boulevard, Los Angeles, California, 90036, and Chicago Regional Office, 500 W. Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of such material may be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates or through the Internet from the SEC's home page on the World Wide Web at http://www.sec.gov. In addition, reports, proxy statements and other information concerning the Company can be inspected and copied at the offices of the Nasdaq National Market, Report Section, 1735 K Street, N.W., Washington, D.C. 20006. 38 40 This Prospectus, which constitutes a part of a Registration Statement filed by the Company with the Commission under the Securities Act, omits certain information contained in the Registration Statement, and reference is hereby made to the Registration Statement and to the exhibits thereto for further information with respect to the Company and the Class A Common Stock offered hereby. Statements contained herein concerning provisions of any document are not necessarily complete, and each statement is qualified in its entirety by reference to the copy of such document filed with the Commission. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the Commission by Company pursuant to the Exchange Act are incorporated by reference in this Prospectus: 1. The Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1996; and 2. The description of the Company's Common Stock contained in the section entitled "Description of Capital Stock" contained in the Registration Statement on Form S-1 of the Company, as amended, filed with the Securities and Exchange Commission on April 29, 1994 (No. 33-78370) and incorporated by reference into the Registration Statement on Form 8-A under the Securities Exchange Act of 1934, as amended, of the Company filed with the Commission on July 8, 1994, and the Registration Statement on Form S-3, of the Company, as amended, filed with the Commission on February 26, 1996 (No. 333-1060). Any documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the Offering shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. To the extent that any proxy statement is incorporated by reference herein, such incorporation shall not include any information contained in such proxy statement which is not, pursuant to the Commission's rules, deemed to be "filed" with the Commission or subject to the liabilities of Section 18 of the Exchange Act. The Company will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus is delivered, upon the written or oral request of any such person, a copy of any document described above (other than exhibits, unless such exhibits are specifically incorporated by reference). Requests for such copies should be directed to John T. Kendrick, Senior Vice President, Chief Financial Officer and Assistant Secretary, Heftel Broadcasting Corporation, 6767 West Tropicana Avenue, Suite 102, Las Vegas, Nevada 89103 (telephone: (702) 367-3322). 39 41 INDEX TO FINANCIAL STATEMENTS TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES Independent Auditors' Report........................................................ F-2 Consolidated Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996 (unaudited)...................................................................... F-3 Consolidated Statements of Income for the Years Ended December 31, 1993, 1994 and 1995 and the Nine Months Ended September 30, 1995 and 1996 (unaudited)........... F-4 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1993, 1994 and 1995 and for the Nine Months Ended September 30, 1996 (unaudited)...................................................................... F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995 and for the Nine Months Ended September 30, 1995 and 1996 (unaudited)... F-6 Notes to Consolidated Financial Statements.......................................... F-7 KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.) Independent Auditor's Report........................................................ F-16 Combined Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996 (unaudited)...................................................................... F-17 Combined Statements of Operations and Partners' Deficiency for the Nine Months Ended December 31, 1994, the Year Ended December 31, 1995 and for the Six Months Ended June 30, 1995 and 1996 (unaudited)............................................... F-18 Combined Statements of Cash Flows for the Nine Months Ended December 31, 1994, the Year Ended December 31, 1995 and for the Six Months Ended June 30, 1995 and 1996 (unaudited)...................................................................... F-19 Notes to Combined Financial Statements.............................................. F-20
F-1 42 INDEPENDENT AUDITORS' REPORT The Board of Directors Tichenor Media System, Inc.: We have audited the accompanying consolidated financial statements of Tichenor Media System, Inc. and subsidiaries as listed in the accompanying index. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tichenor Media System, Inc. and subsidiaries as of December 31, 1994 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Dallas, Texas May 6, 1996 F-2 43 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
DECEMBER 31 --------------------------- SEPTEMBER 30, 1994 1995 1996 ----------- ----------- ------------- (UNAUDITED) Current assets: Cash and cash equivalents................................... $ 2,331,014 $ 3,593,955 $ 5,065,872 Accounts receivable, net of allowance of $228,282 in 1994, $756,808 in 1995 and $443,001 in 1996..................... 7,465,380 8,275,427 9,851,274 Income tax receivable, including accrued interest........... 5,156,081 -- -- Amounts receivable from officers and stockholders........... 54,930 99,168 121,451 Prepaid expenses and other current assets................... 241,547 358,640 746,827 ----------- ----------- ------------ Total current assets................................. 15,248,952 12,327,190 15,785,424 ----------- ----------- ------------ Investments, at equity........................................ 249,892 221,458 206,583 ----------- ----------- ------------ Property and equipment, at cost: Land........................................................ 1,541,152 2,095,690 2,093,190 Buildings and improvements.................................. 2,823,251 2,553,595 2,794,970 Broadcast and other equipment............................... 10,985,817 12,075,807 14,296,563 Furniture and fixtures...................................... 2,136,571 2,253,794 2,474,034 ----------- ----------- ------------ 17,486,791 18,978,886 21,658,757 Less accumulated depreciation............................... 11,107,206 11,449,267 (12,222,272) ----------- ----------- ------------ 6,379,585 7,529,619 9,436,485 ----------- ----------- ------------ Intangible assets: Broadcast licenses.......................................... 26,792,702 31,981,514 76,339,610 Cost in excess of fair value of net assets acquired......... 363,100 363,100 363,100 Other intangible assets..................................... 4,667,207 6,098,796 6,615,466 ----------- ----------- ------------ 31,823,009 38,443,410 83,318,176 Less accumulated amortization............................... 5,417,195 6,975,960 8,532,480 ----------- ----------- ------------ 26,405,814 31,467,450 74,785,696 ----------- ----------- ------------ Other noncurrent assets: Deferred charges, net....................................... 847,164 853,730 731,938 Notes receivable from related parties....................... 578,439 571,439 566,439 ----------- ----------- ------------ 1,425,603 1,425,169 1,298,377 ----------- ----------- ------------ Total assets......................................... $49,709,846 $52,970,886 $ 101,512,565 =========== =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................................ $ 1,872,925 $ 1,213,979 $ 1,836,280 Accrued expenses............................................ 1,656,247 2,743,274 4,200,855 Income taxes payable........................................ 584,931 565,574 615,081 Amounts payable to officers and stockholders................ 211,152 270,184 184,419 Current portion of long-term obligations.................... 5,608,823 47,611 42,468 ----------- ----------- ------------ Total current liabilities............................ 9,934,078 4,840,622 6,879,103 ----------- ----------- ------------ Long-term obligations, less current portion................... 18,541,055 25,381,706 71,251,200 ----------- ----------- ------------ Deferred income taxes......................................... 3,691,480 3,582,421 3,818,064 ----------- ----------- ------------ 14% senior redeemable cumulative preferred stock and accrued dividends, $1,000 par value; authorized, issued and outstanding 3,000 shares.................................... 3,359,680 3,378,749 3,378,749 ----------- ----------- ------------ Common stock purchase warrant subject to mandatory redemption, at accreted value........................................... 2,394,520 3,828,520 4,140,000 ----------- ----------- ------------ Commitments and contingencies Stockholders' equity: 10.5% junior noncumulative preferred stock, $10 par value; authorized 100,000 shares; issued 42,829 shares; outstanding 35,919 shares in 1994 and 35,772 shares in 1995 and 1996 (liquidation preference of $3,682,950)...... 368,295 368,295 368,295 Common stock, $1 par value; authorized 9,897,000 shares; issued 743,704 shares; outstanding 678,897 shares in 1994, 684,420 shares in 1995 and 684,169 shares in 1996......... 743,704 743,704 743,704 Additional paid-in capital.................................. 4,212,814 4,357,038 4,357,038 Retained earnings........................................... 8,031,391 8,081,638 8,130,477 Less treasury stock at cost................................. (1,470,073) (1,379,263) (1,395,535) Receivables for stock purchases............................. (97,098) (212,544) (158,530) ----------- ----------- ------------ Stockholders' equity................................. 11,789,033 11,958,868 12,045,449 ----------- ----------- ------------ Total liabilities and stockholders' equity........... $49,709,846 $52,970,886 $ 101,512,565 =========== =========== ============
See accompanying notes to consolidated financial statements. F-3 44 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED YEAR ENDED DECEMBER 31 SEPTEMBER 30 --------------------------------------- ------------------------- 1993 1994 1995 1995 1996 ----------- ----------- ----------- ----------- ----------- (UNAUDITED) Revenues.................................. $35,349,367 $41,099,785 $46,377,676 $33,745,932 $37,202,302 Agency commissions........................ (3,550,029) (4,238,805) (4,776,415) (3,499,553) (4,090,677) ----------- ----------- ----------- ----------- ----------- Net revenues..................... 31,799,338 36,860,980 41,601,261 30,246,379 33,111,625 ----------- ----------- ----------- ----------- ----------- Operating expenses: Selling................................. 10,968,783 13,203,789 13,864,947 9,609,062 10,096,635 Programming............................. 3,998,801 4,866,974 5,452,060 3,978,874 4,896,413 Promotion and market research........... 1,143,868 1,701,147 1,730,225 1,286,512 1,793,533 Engineering............................. 906,199 983,014 1,038,024 760,617 935,986 General and administrative.............. 6,765,544 7,087,274 7,659,303 5,481,595 6,066,585 Corporate expenses...................... 2,238,115 2,484,121 2,685,541 1,852,179 2,744,737 Depreciation and amortization........... 1,930,783 2,368,113 2,467,056 1,821,191 2,371,824 ----------- ----------- ----------- ----------- ----------- Total operating expenses......... 27,952,093 32,694,432 34,897,156 24,790,030 28,905,713 ----------- ----------- ----------- ----------- ----------- Operating income.......................... 3,847,245 4,166,548 6,704,105 5,456,349 4,205,912 ----------- ----------- ----------- ----------- ----------- Other income (expense): Interest income......................... 113,358 2,852,011 190,390 214,747 61,480 Interest expense........................ (2,145,519) (2,594,590) (2,230,009) (1,641,038) (2,511,031) Costs relating to unconsummated acquisitions.......................... -- -- (123,300) (10,569) (358) Other, net.............................. (199,920) (429,492) 161,814 190,780 (54,641) ----------- ----------- ----------- ----------- ----------- (2,232,081) (172,071) (2,001,105) (1,246,080) (2,504,550) ----------- ----------- ----------- ----------- ----------- Income before income taxes and extraordinary loss...................... 1,615,164 3,994,477 4,703,000 4,210,269 1,701,362 Income taxes.............................. 125,000 1,292,647 2,779,684 1,664,061 1,341,043 ----------- ----------- ----------- ----------- ----------- Income before extraordinary loss........................... 1,490,164 2,701,830 1,923,316 1,588,046 1,237,312 Extraordinary loss on retirement of debt, net of income tax benefit of $224,030... -- (381,456) -- -- -- ----------- ----------- ----------- ----------- ----------- Net income....................... 1,490,164 2,320,374 1,923,316 2,546,208 360,319 Preferred stock dividends................. (228,667) (431,013) (439,069) (329,245) -- Accretion of stock warrant to redemption value................................... (1,516,000) (715,000) (1,434,000) (414,000) (311,480) ----------- ----------- ----------- ----------- ----------- Net income (loss) applicable to common shareholders............ $ (254,503) $ 1,174,361 $ 50,247 $ 1,802,963 $ 48,839 =========== =========== =========== =========== =========== Net income (loss) per share: Income before extraordinary loss........ $ (.39) $ 2.00 $ .07 $ 2.44 $ .07 =========== =========== =========== =========== =========== Net income.............................. $ (.39) $ 1.51 $ .07 $ 2.44 $ .07 =========== =========== =========== =========== =========== Weighted average common and common equivalent shares outstanding......... 654,651 778,211 740,150 738,431 747,523 =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. F-4 45 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
JUNIOR PREFERRED STOCK COMMON STOCK RECEIVABLES -------------------- -------------------- ADDITIONAL FOR NUMBER NUMBER PAID-IN TREASURY STOCK RETAINED OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL STOCK PURCHASES EARNINGS --------- -------- --------- -------- ---------- ----------- ----------- ----------- Balance at December 31, 1992....................... 42,829 $428,295 726,523 $726,523 $4,447,765 $(1,681,180) $ (2,052) $ 7,170,163 Accretion of stock warrant to redemption value........... -- -- -- -- -- -- -- (1,516,000) Senior redeemable preferred stock dividends............ -- -- -- -- -- -- -- (228,667) Issuance costs of senior redeemable preferred stock...................... -- -- -- -- (321,836) -- -- -- Sale of treasury stock....... -- -- -- -- -- 181,129 (91,250) (58,630) Collection of stock purchase receivables................ -- -- -- -- -- -- 30,514 -- Net income................... -- -- -- -- -- -- -- 1,490,164 ------ -------- ------- -------- ---------- ----------- --------- ----------- Balance at December 31, 1993....................... 42,829 428,295 726,523 726,523 4,125,929 (1,500,051) (62,788) 6,857,030 Conversion of junior preferred stock to common stock...................... (6,000) (60,000) 17,181 17,181 42,819 -- -- -- Accretion of stock warrant to redemption value........... -- -- -- -- -- -- -- (715,000) Senior redeemable preferred stock dividends............ -- -- -- -- -- -- -- (431,013) Purchase of treasury stock... -- -- -- -- -- (36,957) -- -- Sale of treasury stock....... -- -- -- -- 44,066 66,935 (81,000) -- Collection of stock purchase receivables................ -- -- -- -- -- -- 46,690 -- Net income................... -- -- -- -- -- -- -- 2,320,374 ------ -------- ------- -------- ---------- ----------- --------- ----------- Balance at December 31, 1994....................... 36,829 368,295 743,704 743,704 4,212,814 (1,470,073) (97,098) 8,031,391 Accretion of stock warrant to redemption value........... -- -- -- -- -- -- -- (1,434,000) Senior redeemable preferred stock dividends............ -- -- -- -- -- -- -- (439,069) Purchase of treasury stock... -- -- -- -- -- (41,467) -- -- Sale of treasury stock....... -- -- -- -- 144,224 132,277 (219,000) -- Collection of receivables for stock...................... -- -- -- -- -- -- 103,554 -- Net income................... -- -- -- -- -- -- -- 1,923,316 ------ -------- ------- -------- ---------- ----------- --------- ----------- Balance at December 31, 1995....................... 36,829 368,295 743,704 743,704 4,357,038 (1,379,263) (212,544) 8,081,638 Accretion of stock warrant to redemption value (unaudited)................ -- -- -- -- -- -- -- (311,000) Purchase of treasury stock (unaudited)................ -- -- -- -- -- (16,272) 2,376 -- Collection of stock purchase receivables (unaudited).... -- -- -- -- -- -- 51,630 -- Net income (unaudited)....... -- -- -- -- -- -- -- 360,319 ------ -------- ------- -------- ---------- ----------- --------- ----------- Balance at September 30, 1996 (unaudited)................ 36,829 $368,295 743,704 $743,704 $4,357,038 $(1,395,535) $(158,530) $ 8,130,477 ====== ======== ======= ======== ========== =========== ========= ===========
See accompanying notes to consolidated financial statements. F-5 46 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED YEAR ENDED DECEMBER 31 SEPTEMBER 30 ---------------------------------------- ------------------------- 1993 1994 1995 1995 1996 ------------ ----------- ----------- ----------- ----------- (UNAUDITED) Cash flows from operating activities: Adjustments to reconcile net income to net cash provided by operating activities: Net income................................ $ 1,490,164 $ 2,320,374 $ 1,923,316 $ 2,546,208 $ 360,319 Provision for bad debts................... 330,727 491,750 767,614 397,950 344,992 Depreciation and amortization............. 1,930,783 2,368,113 2,467,056 1,821,191 2,371,824 Barter transactions, net.................. (214,222) (312,926) (34,450) 163,559 (131,514) Amortization of debt facility fee included in interest expense..................... 201,158 112,565 134,608 101,956 100,956 Loss (gain) from unconsolidated partnership interests................... 55,291 (109,624) 19,834 14,874 14,875 Loss (gain) from sale of investments...... -- -- (6,081) -- -- Valuation adjustments on notes receivable, investments and other noncurrent assets.................................. 691,978 12,600 -- -- -- Loss (gain) on disposition of assets...... (223,348) 325,676 (260,619) (270,845) 5,608 Deferred income taxes..................... -- 3,691,480 (109,059) (81,794) 235,643 Loss on retirement of debt................ -- 605,486 -- -- -- Changes in operating assets and liabilities: Accounts receivable, net................ (1,919,735) (1,459,841) (1,543,211) (2,254,953) (1,789,325) Income tax receivable................... -- (5,156,081) 5,156,081 5,156,081 -- Amounts receivable from officers and stockholders......................... 6,261 105,120 (44,238) (25,138) (22,283) Prepaid expenses and other current assets............................... (68,199) 263,534 (117,093) (239,677) (388,187) Accounts payable........................ 1,298,235 (438,554) (658,946) (931,037) 622,301 Accrued expenses........................ 714,089 (259,329) 1,087,027 1,722,811 1,457,581 Income taxes payable.................... 125,000 459,931 (19,357) (192,245) 49,507 Amounts payable to officers and stockholders......................... 43,390 138,898 59,032 (81,964) (85,765) ------------ ----------- ----------- ----------- ----------- Net cash provided by operating activities......................... 4,461,572 3,159,172 8,821,514 7,846,977 3,146,532 ------------ ----------- ----------- ----------- ----------- Cash flows from investing activities: Investment sales, distributions and additions................................. (31,277) 25,000 14,681 8,526 -- Acquisitions of radio stations.............. (14,800,000) -- (6,740,000) (6,250,000) (46,500,000) Property and equipment acquisitions......... (600,350) (899,762) (1,279,915) (969,747) (1,167,019) Dispositions of property and equipment...... 339,529 652,080 644,737 643,682 2,950 Increase in intangible assets............... (437,706) (303,223) (1,042,929) (924,219) 61,525 Decrease (increase) in other noncurrent assets.................................... (65,789) (150,362) (134,174) (146,316) 25,836 ------------ ----------- ----------- ----------- ----------- Net cash used in investing activities......................... (15,595,593) (676,267) (8,537,600) (7,638,074) (47,576,708) ------------ ----------- ----------- ----------- ----------- Cash flows from financing activities: Borrowings on long-term obligations......... 26,803,922 -- 7,150,000 6,650,000 45,900,000 Payments on long-term obligations........... (16,119,907) (3,014,894) (5,870,561) (5,857,941) (35,649) Dividends on senior preferred stock......... -- (300,000) (420,000) (420,000) -- Net proceeds from issuance of senior preferred stock........................... 2,678,164 -- -- -- -- Payment of deferred financing costs......... (717,742) (897,389) -- -- -- Proceeds from issuance of common stock purchase warrant.......................... 163,520 -- -- -- -- Sales of treasury stock..................... 31,249 30,001 57,501 -- -- Note payments from stockholders............. 28,462 46,690 103,554 48,384 51,638 Purchases of treasury stock................. -- (36,957) (41,467) (41,466) (13,896) ------------ ----------- ----------- ----------- ----------- Net cash provided by (used in) financing activities............... 12,867,668 (4,172,549) 979,027 378,977 45,902,093 ------------ ----------- ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents................................. 1,733,647 (1,689,644) 1,262,941 587,880 1,471,917 Cash and cash equivalents at beginning of period...................................... 2,287,011 4,020,658 2,331,014 2,331,014 3,593,955 ------------ ----------- ----------- ----------- ----------- Cash and cash equivalents at end of period.... $ 4,020,658 $ 2,331,014 $ 3,593,955 $ 2,918,894 $ 5,065,872 ============ =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. F-6 47 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Tichenor Media System, Inc. was formed on August 17, 1982 for the purpose of owning and operating a group of Spanish language broadcast radio stations. The Company's radio stations are located in San Antonio, McAllen-Brownsville, Houston and El Paso, Texas and Chicago, Illinois. Basis of Consolidation The accompanying consolidated financial statements include the accounts of Tichenor Media System, Inc. and its wholly-owned subsidiaries, Tichenor License Corporation ("TLC"), WADO Radio, Inc. ("WRI") and TC Television, Inc. ("TCTV") (collectively, the "Company"). The Company consolidates the accounts of subsidiaries when it has a controlling financial interest (over 50%) in the outstanding voting shares of the subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents Debt instruments with original maturities of three months or less are considered to be cash equivalents. Cash equivalents at December 31, 1994 and 1995 are comprised of treasury bills, other government securities and money market funds and totalled $1,813,793 and $461,029, respectively. Investments The Company uses the equity method to account for investments when it does not have a controlling interest but has the ability to exercise significant influence over the operating and/or financial decisions of the investee. Investments where the Company does not exert significant influence are accounted for using the cost method. Investments at December 31, 1994 and 1995 are comprised primarily of a 50% interest in a general partnership which owns a transmission tower that is leased to the Company. Property, Equipment and Land Property, equipment and land are recorded at cost. Expenditures for significant renewals and betterments are capitalized. Repairs and maintenance are charged to expense as incurred. Depreciation is provided in amounts sufficient to relate the asset cost to operations over the estimated useful lives (five to forty years) on a straight-line basis. Leasehold improvements are amortized over the life of the lease or the estimated service life of the asset, whichever is shorter. Gains or losses from disposition of property and equipment is recognized in the statement of operations. F-7 48 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED) Intangible Assets Intangible assets are recorded at cost. Amortization of intangible assets is provided in amounts sufficient to relate the asset cost to operations over the estimated useful lives (two to forty years) on a straight-line basis. Advertising Costs Advertising costs are charged to operations in the year incurred and totaled $779,582, $894,982 and $1,232,255 for the years ended December 31, 1993, 1994 and 1995, respectively. Barter Transactions Barter transactions are recorded at the estimated fair value of the goods or services received. Revenues from barter transactions are recognized as income when advertisements are broadcast. Expenses are recognized when goods or services are received or used. Barter amounts are not significant to the Company's financial statements. Income Taxes The Company follows Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes." SFAS No. 109 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Earnings Per Share Net income or loss per common share is computed by dividing net income or loss applicable to common shareholders by the weighted average number of common and dilutive common equivalent shares (junior preferred stock) outstanding during each year. The stock warrant has been excluded from the computation as its effect would be antidilutive. Financial Instruments The carrying amounts of financial instruments including cash and cash equivalents, trade receivables and accounts payable approximated fair value as of December 31, 1994 and 1995, because of the relatively short maturity of these instruments. The carrying value of long-term obligations, including the current portion, approximated fair value as of December 31, 1994 and 1995, based upon quoted market prices for the same or similar debt issues. Interim Financial Statements In the opinion of management, the accompanying unaudited consolidated financial statements as of June 30, 1996 and for the six-month periods ended June 30, 1995 and 1996 reflect all adjustments (none of which were other than normal recurring accruals) necessary to a fair presentation of the Company's financial position and results of operations for such periods. The results of operations for the six-month period ended June 30, 1996 are not necessarily indicative of F-8 49 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED) results to be achieved for the full year. The unaudited interim financial statements do not include all disclosures required by generally accepted accounting principles. 2. ACQUISITIONS OF RADIO STATIONS On June 1, 1995, certain tangible and intangible assets of radio station KMPQ-AM in Rosenberg-Richmond (Houston), Texas were acquired for $2,500,000. The intangible assets acquired are amortized using the straight line method over 15 to 40 years. This acquisition, along with a deposit for $500,000 related to the KMIA-FM acquisition, was funded with bank financing. On June 16, 1995, the Company purchased certain tangible and intangible assets of KLTN-FM in Port Arthur (Houston), Texas for $3,650,000. The intangible assets acquired are amortized using the straight line method over 15 to 40 years. Bank financing was used to fund this acquisition. On June 23, 1995, TCTV purchased certain tangible and intangible assets associated with the television program known as "Tejano Country." The purchase price was $100,000 and was funded from operations. The Company acquired certain tangible and intangible assets of radio station KAMA-AM in El Paso, Texas on October 11, 1995. The purchase price was $300,000. In addition, a two-year non-competition agreement was acquired for $190,000. The intangible assets acquired are amortized using the straight line method over 2 to 40 years. These assets together with $10,000 in working capital were funded with bank financing. Prior to the acquisitions of KMPQ-AM, KLTN-FM and KAMA-AM, the Company operated the stations under time brokerage agreements. The time brokerage agreements provided that the Company retain all revenues associated with advertising time and pay certain operating expenses. These agreements were effective December 1, 1994, April 27, 1992, and June 23, 1995, for KMPQ-AM, KLTN-FM and KAMA-AM, respectively. Time brokerage agreement fees related to these stations for the years ended December 31, 1994 and 1995 are $579,404 and $91,463, respectively. Unaudited consolidated condensed pro forma results of operations as if all acquisitions occurred as of the beginning of the periods presented are as follows:
1994 1995 ----------- ----------- Net revenues........................................... $34,294,803 $38,229,370 Operating income....................................... 2,988,834 6,251,306 Net income............................................. 562,712 1,204,873 Net loss per common share.............................. (.83) (.91)
3. ACCRUED EXPENSES The following is a summary of accrued expenses:
DECEMBER 31, ------------------------- SEPTEMBER 30, 1994 1995 1996 ---------- ---------- ------------- (UNAUDITED) Commissions payable....................... $1,200,128 $1,431,253 $ 2,032,314 Accrued interest.......................... -- 796,933 1,334,184 Other accrued expenses.................... 456,119 515,088 834,357 ---------- ---------- ------------- Total accrued expenses.......... $1,656,247 $2,743,274 $ 4,200,855 ========== ========== ============
F-9 50 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED) 4. LONG-TERM OBLIGATIONS The following is a summary of long-term obligations outstanding as of December 31, 1994 and 1995:
1994 1995 ----------- ----------- Bank loans, aggregate commitment of $50 million, interest rate based on LIBOR and prime plus an applicable margin as determined by the Company's total leverage ratio; interest rates ranging from 7.44% to 9.25% at December 31, 1995; interest rates ranged from 7.32% to 9.75% during 1995; payable through 2001; collateralized by all of the Company's assets (including the stock of TLC, WRI, and TCTV) excluding FCC licenses; the Company is required to comply with certain financial and nonfinancial covenants............................................ $23,616,033 $25,348,217 Loans from related parties, interest at 10%, payable on demand............................................... 404,263 -- Various loans, interest ranging from 11.75% to 12.38%, payable through 1997................................. 58,203 38,456 Obligations under capital leases, implicit interest rates of 5.8% to 12.2%, payable through 1997......... 71,379 42,644 ----------- ----------- 24,149,878 25,429,317 Less current portion................................... (5,608,823) (47,611) ----------- ----------- $18,541,055 $25,381,706 ============ ============
Maturities of long-term obligations for the five years subsequent to December 31, 1995 and thereafter are as follows:
YEAR AMOUNT -------------------------------------------- ----------- 1996........................................ $ 47,611 1997........................................ 33,490 1998........................................ -- 1999........................................ 4,098,216 2000........................................ 13,750,000 Thereafter.................................. 7,500,000
After April 30, 1997, the bank loan agreement requires principal reductions in the loan equal to 50% of excess cash flow, as defined. On August 9, 1994, the Company refinanced its bank loan. An extraordinary loss of $605,486 has been recognized due to the write-off of the unamortized deferred financing costs of the loan. To reduce the impact of changes in interest rates on its floating rate long-term bank loan, the Company entered into an interest rate swap agreement. As of December 31, 1994, $10,370,000 of the notional amount of the agreement was outstanding. The outstanding swap agreement matured in December 1995 and effectively fixed the interest rate on the corresponding amount of the loan at 7.31%, which was based on the 90 day LIBOR plus an incremental rate. Amounts receivable or F-10 51 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED) payable under the agreement were recognized currently in interest expense. Interest expense (income) recognized under the agreement totalled $279,309, $140,767 and ($57,241) for the years ended December 31, 1993, 1994 and 1995, respectively. The bank loan agreement requires the Company to enter into an interest rate swap agreement covering 50% of the outstanding obligation by December 31, 1996. Interest paid for the years ended December 31, 1993, 1994 and 1995 amounted to $1,478,879, $2,221,643 and $2,091,919, respectively. 5. STOCKHOLDERS' EQUITY The senior preferred stock has a preference as to dividends and assets in the event of a partial or complete liquidation. Dividends are cumulative and accrue at 14% per annum, compounded annually, on the sum of the par value of the stock and all accrued and unpaid dividends. As of December 31, 1994 and 1995, accrued and unpaid dividends were $359,680 and $378,749, respectively. In the event of a partial or complete liquidation, the senior preferred stock is entitled to receive the sum of the par value of the stock and all accrued and unpaid dividends ("Redemption Price") before payment of the preferential amount owed with respect to the junior preferred stock. The senior preferred stock has no voting rights; however, the holders of the senior preferred stock are entitled to elect one director of the Company. Each director is entitled to one vote, but if certain covenants to the investment agreement with the preferred shareholders are not met, the senior preferred stock director is entitled to 100 votes, whereas other directors will have one vote. The preferred stock director in this situation will have the power to cause the Company to sell certain assets to satisfy first the bank obligation in full and then redeem the senior preferred stock and repurchase the stock warrant discussed in the following paragraph. The senior preferred shareholders were issued a warrant to purchase common stock for $38,000 on or before June 15, 2003. The stock warrant is for the purchase of common stock in an amount up to 4% of the Company's total common stock outstanding at the time of exercise of the warrant, computed on a fully diluted basis. The difference between the carrying value of the warrant and its estimated fair value, as determined by management on an annual basis, is being accreted over the term of the warrant through charges to retained earnings. The Company has the option to redeem all the senior preferred stock at the Redemption Price and repurchase the stock warrant after December 31, 1996. The stock warrant would be repurchased at a value which approximates 4% of the sum of the fair market value of the Company's net assets. The mandatory redemption date for the senior preferred stock is June 30, 2001. Both the option to redeem the senior preferred stock and the mandatory redemption provision require the Company to simultaneously repurchase the stock warrant. The junior preferred stock has a preference as to dividends and assets in the event of a partial or complete liquidation. The payment of dividends on this class of stock is restricted by the bank credit agreement. In the event of a partial or complete liquidation, holders of the junior preferred stock are entitled to receive $100 per share after full payment of amounts owed to holders of the senior preferred stock and before any distribution on the common stock. The holders of the junior preferred stock have the right to convert their shares into common stock. The conversion rate for each share of junior preferred stock is the quotient of $100 divided by the fair market value of one share of common stock on the date of conversion. The number of shares to be converted is multiplied by such quotient. F-11 52 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED) The holders of the junior preferred stock have voting rights equal in the aggregate to 45% of the voting rights of all outstanding voting shares. The holders of the common stock have voting rights equal to the remaining 55%. As of December 31, 1995, treasury stock is comprised of 59,284 shares of common stock at an aggregate cost of $1,273,563 and 1,057 shares of junior preferred stock at an aggregate cost of $105,700. Except for the purchase of 147 shares of junior preferred stock at a cost of $14,700 in 1995, all other treasury stock transactions during the three years ended December 31, 1995 and the six months ended June 30, 1996 represent purchases and sales of common stock. 6. INCOME TAXES The provision (benefit) for income taxes on earnings before extraordinary item for the years ended December 31, 1993, 1994, and 1995 consists of the following:
1993 1994 1995 -------- ----------- ---------- Current: Federal..................................... $125,000 $(2,481,971) $2,532,002 State....................................... -- 83,138 356,741 ---------- ----------- ---------- Total current tax expense (benefit)......................... 125,000 (2,398,833) 2,888,743 ---------- ----------- ---------- Deferred: Federal..................................... -- 3,392,171 (219,425) State....................................... -- 299,309 110,366 ---------- ----------- ---------- Total deferred tax expense (benefit)......................... -- 3,691,480 (109,059) ---------- ----------- ---------- Total income tax expense............ $125,000 $ 1,292,647 $2,779,684 ========== =========== ==========
In 1994, an income tax benefit of $224,030 was allocated to the extraordinary charge discussed in note 3. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1994 and 1995 are as follows:
1994 1995 ----------- ----------- Deferred tax assets: Intangible assets.................................... $ 280,654 $ 444,800 Allowance for doubtful accounts receivable........... 84,464 290,540 Other................................................ 60,976 68,000 ----------- ----------- Total deferred tax assets.................... 426,094 803,340 ----------- ----------- Deferred tax liabilities: Broadcast licenses................................... (4,107,838) (4,356,131) Other................................................ (9,736) (29,630) ----------- ----------- Total deferred tax liabilities............... (4,117,574) (4,385,761) ----------- ----------- Net deferred tax liabilities................. $(3,691,480) $(3,582,421) =========== ===========
F-12 53 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED) The reconciliation of income tax expense computed at the federal statutory tax rate to the Company's actual income tax expense for the years ended December 31, 1993, 1994, and 1995 is as follows:
1993 1994 1995 --------- ---------- ---------- Federal income tax at statutory rate........ $ 549,156 $1,358,122 $1,599,020 State income taxes, net of federal benefit................................... -- 252,415 308,291 Nondeductible intangible asset amortization.............................. -- 33,150 140,927 Use of net operating loss carryforwards..... (424,156) (288,600) -- Other....................................... -- (62,440) 731,446 --------- ---------- ---------- $ 125,000 $1,292,647 $2,779,684 ========= ========== ==========
Income taxes paid for the years ended December 31, 1993, 1994, and 1995 amounted to $0, $21,958, and $2,908,100, respectively. 7. COMMITMENTS AND CONTINGENCIES The Company is the lessor of office space, transmitter towers, and parcels of land. Included in buildings and equipment as of December 31, 1994 and 1995 is $2,186,261 and $2,005,433 of assets leased to others under operating leases and the related accumulated depreciation of $617,571 and $623,711. Included in land as of December 31, 1994 and 1995 is $52,396 representing a parcel of land which is leased to another party under an operating lease. The Company operates certain radio stations and the corporate offices from leased facilities. Terms of the office space leases vary from three to ten years. None of the leases contain contingent rent clauses; however, certain leases contain five year renewal options. Other leases have terms which vary from a month-to-month term to ten years. Certain leases have contingent rent clauses providing for increases based on the Consumer Price Index. These leases have renewal options of one to ten years. Future minimum rental payments under noncancellable operating leases in effect at December 31, 1995 are summarized as follows:
YEAR AMOUNT ------------------------------------------------ ---------- 1996............................................ $1,103,301 1997............................................ 1,080,089 1998............................................ 998,124 1999............................................ 898,354 2000............................................ 831,457 Thereafter...................................... 3,873,064
Rent expense for the years ended December 31, 1993, 1994 and 1995 was $933,685, $936,128 and $1,075,400, respectively. In December 1994, the Company entered into a time brokerage agreement to provide programming to, and sell advertising time on, radio station KMPQ-FM in Rosenberg-Richmond (Houston), Texas, and acquired an option to purchase the station. The time brokerage agreement provides that the Company will retain all revenues associated with advertising time and pay certain operating expenses effective December 1, 1994. The KMPQ-FM time brokerage agreement provides for F-13 54 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED) payments of $12,500 a month to the licensee until the earlier of November 30, 1997 or the Company exercises its option to purchase the station. If the grantor obtains an upgrade of the station's broadcast authorization status and relocates the transmitter site, the purchase price of the station's assets would be $14,000,000. If this upgrade is not accomplished, the purchase price is the fair market value as defined in the agreement. If the upgrade of KMPQ-FM is not completed at the expiration of the initial term of the time brokerage agreement, the agreement may be extended for two, two-year periods with payments to the licensee of $15,000 per month. If the upgrade becomes final, as defined in the agreement, during the initial term or any extension of the agreement, the fee paid to the licensee can increase to $150,000 per month. On December 15, 1995, the Company entered into a time brokerage agreement to provide programming to, and sell advertising time on, radio station KRTX-FM in Galveston (Houston), Texas. Also, on December 15, 1995, the Company entered into an asset purchase agreement related to this station. The time brokerage agreement provides that the Company will retain all revenues associated with advertising time and pay certain operating expenses effective December 15, 1995. The KRTX-FM time brokerage agreement provides for payments of $13,000 per month to the licensee until the earlier of the closing of the transactions contemplated by the asset purchase agreement or the termination of such agreement. The asset purchase agreement for KRTX-FM provides for the purchase of certain tangible and intangible assets. The purchase price is $900,000. As of December 31, 1995, the Company was waiting for approval from the Federal Communications Commission ("FCC") before it could close on the purchase. Time brokerage agreement fees for the years ended December 31, 1994 and 1995 were $12,500 (KMPQ-FM) and $155,000 (KMPQ-FM and KRTX-FM), respectively. Spanish Radio Network ("SRN"), a partnership in which the Company was previously a partner, was examined by the Internal Revenue Service ("IRS") for the tax years ended December 31, 1992 and 1993. SRN owned and operated radio stations. The IRS disagrees with SRN's radio station purchase price allocations and has allocated a portion of the purchase price of certain amortizable intangible assets to nonamortizable going concern value. The tax effect of these adjustments to the Company, before interest, is approximately $326,000. The Company intends to protest the adjustments through the appeals process of the IRS and believes these adjustments will be reduced. The IRS audited the Company's federal income tax returns for the tax years ended February 29, 1984, and February 28, 1985, 1986 and 1987 and the Company petitioned the United States Tax Court related to certain proposed adjustments. The Company reached an agreement with the IRS on June 16, 1994, and all issues were settled. At December 31, 1994, the Company accrued a tax refund receivable of approximately $5,794,000 for the aforementioned tax years which includes net interest income of approximately $2,671,000. The refund was received on April 24, 1995. The Company is subject to other legal proceedings and claims which have arisen in the ordinary course of its business and have not been fully adjudicated. These actions, when ultimately concluded, will not, in the opinion of management, have a material adverse effect upon the financial position or results of operations of the Company. 8. SUBSEQUENT EVENTS The Company closed on the purchase of the assets of KMIA-FM (subsequently renamed KRTX-FM) in Jasper (Houston), Texas on March 25, 1996. The purchase price was $3,500,000. A $3,000,000 bank loan was used to finance this acquisition of assets. F-14 55 TICHENOR MEDIA SYSTEM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED) On March 31, 1996, the Company entered into a time brokerage agreement to provide programming to, and sell advertising time on, radio station KQXX-FM in McAllen, Texas. The Company also entered into an asset purchase agreement related to this radio station. The time brokerage agreement provides that the Company will retain all revenues associated with advertising time and pay certain operating expenses effective April 1, 1996. The Company pays $12,500 monthly to the licensee of KQXX-FM until the earlier of the closing date or termination of the asset purchase agreement. 9. OTHER SUBSEQUENT EVENTS (UNAUDITED) The Company closed on the purchase of the assets of KLTP-FM (formerly KRTX-FM) in Galveston (Houston), Texas on July 31, 1996. The purchase price was $900,000. A $600,000 bank loan was used to finance this acquisition. The Company closed on the purchase of the assets of KQXX-FM in McAllen, Texas on August 1, 1996. The purchase price of KQXX-FM was $1,300,000. Also, a five year non-competition agreement from the seller was purchased for $800,000. A $1,300,000 bank loan was used to finance this acquisition. On August 16, 1996, the Company purchased the assets of KSOL-FM and KYLZ-FM in San Francisco and Santa Cruz (San Jose), California. The purchase price was $40,000,000. The acquisition was financed with a $40,000,000 loan from Clear Channel Communications, Inc. The interest rate on the loan escalates from 9% to 13% over the loan term. The loan matures on January 1, 1998. The Company has entered into an Agreement and Plan of Merger whereby it will merge with a wholly owned subsidiary of Heftel Broadcasting Corporation ("Heftel"). In connection with the merger, management of the Company will assume management responsibilities of Heftel. Upon consummation of the merger, the Company's senior preferred stock will be redeemed and the common stock warrant will be repurchased. The senior preferred stock will be redeemed for $3,378,749 and 23,000 shares of common stock will be issued to repurchase the warrant. The merger is expected to become effective in early 1997. F-15 56 INDEPENDENT AUDITOR'S REPORT KSOL-FM and KYLZ-FM (Divisions of Crescent Communications, L.P.) San Francisco, California To the Partners: We have audited the accompanying combined balance sheets of KSOL-FM and KYLZ-FM (Divisions of Crescent Communications, L.P.) as of December 31, 1994 and 1995 and the related combined statements of operations and partners' deficiency, and cash flows for the nine months ended December 31, 1994 and the year ended December 31, 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of KSOL-FM and KYLZ-FM (Divisions of Crescent Communications, L.P.) as of December 31, 1994 and 1995, and the results of their operations and their cash flows for the nine months ended December 31, 1994 and the year ended December 31, 1995 in accordance with generally accepted accounting principles. MILLER, KAPLAN, ARASE & CO. North Hollywood, California March 1, 1996 (Except for Note 11 as to which the date is August 16, 1996). F-16 57 EXHIBIT "A" KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.) COMBINED BALANCE SHEETS
DECEMBER 31, -------------------------- JUNE 30, 1994 1995 1996 ----------- ----------- ----------- (UNAUDITED) ASSETS: Cash............................................. $ 500 $ 500 $ 500 Accounts receivable (net of allowance for doubtful accounts of $65,869, $95,537 and $105,411)..................................... 443,840 643,752 722,446 Trade receivable................................. -- 4,156 11,391 Other receivables................................ 1,537 9,759 14,802 Other prepaid expenses........................... 154,320 410,990 35,903 ----------- ----------- ----------- Total current assets..................... 600,197 1,069,157 785,042 Property and equipment, net of accumulated depreciation (Note 2)............................ 50,840 554,502 496,604 Intangible assets, net of accumulated amortization (Note 3)......................................... 84,805 15,428,597 15,210,071 ----------- ----------- ----------- Total assets............................. $ 735,842 $17,052,256 $16,491,717 =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses............ $ 109,178 $ 199,497 $ 121,416 Accrued wages and commissions.................... 108,681 52,300 76,074 Trade liability.................................. 90,931 285,356 285,356 Deferred income.................................. 16,192 6,928 5,272 ----------- ----------- ----------- Total current liabilities................ 324,982 544,081 488,118 Interdivisional payable (Note 4)................... 2,811,206 22,740,589 24,440,358 ----------- ----------- ----------- Total liabilities........................ 3,136,188 23,284,670 24,928,476 Commitments and contingencies (Notes 5 and 6) Partners' deficiency............................. (2,400,346) (6,232,414) (8,436,759) ----------- ----------- ----------- Total liabilities and partners' deficiency............................. $ 735,842 $17,052,256 $16,491,717 =========== =========== ===========
(Attached notes are an integral part of this statement) F-17 58 EXHIBIT "B" KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.) COMBINED STATEMENTS OF OPERATIONS AND PARTNERS' DEFICIENCY
SIX MONTHS ENDED NINE MONTHS JUNE 30, ENDED YEAR ENDED (UNAUDITED) DECEMBER 31, DECEMBER 31, -------------------------- 1994 1995 1995 1996 ----------- ------------ ----------- ----------- Net Revenues......................... $ 1,796,162 $ 3,411,596 $ 1,631,085 $ 1,946,686 ----------- ----------- ----------- ----------- Operation Expenses: Operating expenses excluding Depreciation and amortization, General and administrative, and Corporate expenses.............. 2,249,380 2,886,877 1,342,712 1,729,652 Depreciation and amortization...... 6,942 430,609 146,035 287,805 General and administrative expense......................... 704,309 1,082,252 474,054 638,873 Corporate expense.................. 1,235,877 755,573 543,727 206,986 ----------- ----------- ----------- ----------- Total operating expenses... 4,196,508 5,155,311 2,506,528 2,863,316 ----------- ----------- ----------- ----------- Loss from operations....... (2,400,346) (1,743,715) (875,443) (916,630) ----------- ----------- ----------- ----------- Other income (expense): Interest expense................... -- (2,104,583) (547,049) (1,296,502) Other income....................... -- 16,230 9,140 8,787 ----------- ----------- ----------- ----------- Net other (expense)........ -- (2,088,353) (537,909) (1,287,715) ----------- ----------- ----------- ----------- Net loss............................. (2,400,346) (3,832,068) (1,413,352) (2,204,345) Partners' deficiency -- beginning of period............................. -- (2,400,346) (2,400,346) (6,232,414) ----------- ----------- ----------- ----------- Partners' deficiency -- end of period............................. $(2,400,346) $(6,232,414) $(3,813,698) $(8,436,759) =========== =========== =========== ===========
(Attached notes are an integral part of this statement) F-18 59 EXHIBIT "C" KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.) COMBINED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED NINE MONTHS JUNE 30, ENDED YEAR ENDED (UNAUDITED) DECEMBER 31, DECEMBER 31, -------------------------- 1994 1995 1995 1996 ------------ ------------ ----------- ----------- Cash Flows From Operating Activities: Net loss.......................... $ (2,400,346) $ (3,832,068) $(1,413,352) $(2,204,345) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation................... 6,942 102,570 29,275 69,279 Amortization................... -- 328,039 116,760 218,526 (Increase) decrease in: Accounts receivable.......... (443,840) (199,912) (258,457) (78,695) Trade receivable............. -- (4,156) (103,133) (7,235) Other receivables............ (1,537) (8,222) (18,899) (5,043) Other prepaid expenses....... (154,320) (171,865) 206,766 375,087 Increase (decrease) in: Accounts payable and accrued expenses.................. 109,178 90,319 68,501 (78,081) Accrued wages and commissions............... 108,681 (56,381) (55,386) 23,774 Trade liability.............. 90,931 194,425 57,285 -- Deferred revenue............. 16,192 (9,264) (16,192) (1,656) Interdivisional payable...... 2,811,206 3,929,383 1,726,966 1,699,769 ----------- ----------- ----------- ----------- Net cash provided by operating activities.... 143,087 362,868 340,134 11,380 ----------- ----------- ----------- ----------- Cash Flows From Investing Activities: Purchase of property and equipment...................... (57,782) (59,942) (37,208) (11,380) Purchase of intangibles........... (84,805) (302,926) (302,926) -- ----------- ----------- ----------- ----------- Net cash used by investing activities.............. (142,587) (362,868) (340,134) (11,380) ----------- ----------- ----------- ----------- Net increase (decrease) in cash..... 500 -- -- -- Cash, beginning of period........... -- 500 500 500 ----------- ----------- ----------- ----------- Cash, end of period................. $ 500 $ 500 $ 500 $ 500 =========== =========== =========== ===========
Supplemental Disclosure of Non-Cash Activity: The Partnership purchased KSOL-FM and KYLZ-FM on March 22, 1995 by incurring approximately $16,000,000 in additional debt. This transaction was recorded on the station's books through the interdivisional payable account. (Attached notes are an integral part of this statement.) F-19 60 KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.) NOTES TO COMBINED FINANCIAL STATEMENTS NINE MONTHS ENDED DECEMBER 31, 1994 (AUDITED) YEAR ENDED DECEMBER 31, 1995 (AUDITED) SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED) NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Nature of Business and Basis of Presentation Radio stations KSOL-FM and KYLZ-FM ("the stations"), licensed to San Francisco, California and Santa Cruz, California, respectively, are divisions of Crescent Communications, L.P. ("the Partnership"). The Partnership was established as a limited partnership for the purpose of acquiring and operating radio stations and commenced operations on November 19, 1993. The Partnership purchased radio stations KSOL-FM and KYLZ-FM on March 22, 1995 which it had been operating on a contract basis since April 1, 1994. KYLZ-FM was simulcast with another station owned by the Partnership since April 1, 1994. The accompanying combined financial statements present only the accounts of KSOL-FM and KYLZ-FM, after eliminating all significant interdivisional accounts and transactions between the stations. B. Unaudited Interim Information In the opinion of management, the combined financial statements for the six month periods ended June 30, 1995 and 1996 (unaudited) include all adjustments necessary for a fair presentation in accordance with generally accepted accounting principles consisting solely of normal recurring accruals and adjustments. The results of operations and cash flows for the six months ended June 30, 1995 and 1996 are not necessarily indicative of results which would be expected for a full year. C. Revenue Recognition Revenue is recognized when commercial spot announcements are aired. Unbilled commercial air time is accrued at year end and included in accounts receivable. Payments received in advance are included in deferred revenue. D. Property and Equipment Property and equipment are stated at cost. Amounts expended for improvements which increase the useful life or replace major units of property and equipment are capitalized, while expenditures for repairs, maintenance and minor renewals are charged to expense as incurred. The cost and related accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and any gain or loss is reflected in current year earnings. E. Depreciation Depreciation of property and equipment is computed using the straight-line method over the estimated economic lives of the assets as follows: Broadcasting Equipment............................................. 5 years Furniture and Fixtures............................................. 7 years Music Library...................................................... 5 years Vehicles........................................................... 3 years Computers.......................................................... 3 years
F-20 61 KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.) NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) NINE MONTHS ENDED DECEMBER 31, 1994 (AUDITED) YEAR ENDED DECEMBER 31, 1995 (AUDITED) SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED) F. Amortization Amortization of intangible assets is computed using the straight-line method over the estimated lives of the assets as follows: FCC License....................................................... 40 years Goodwill.......................................................... 40 years Going Concern Value............................................... 40 years Acquisition Costs................................................. 5 years
G. Trades Under trade agreements with certain advertisers, the Partnership provides commercial spot announcements in exchange for goods and services, as is customary in the broadcasting industry. These transactions are recorded at the estimated fair market value of the goods and services received. Trade sales are recognized when commercial spot announcements are broadcast and the value of goods or services is recorded when received or utilized. The value of air time provided and goods or services received are reflected in the balance sheet as a trade receivable and a trade liability until they are paid for and earned, respectively. H. Concentration of Risk Financial instruments that potentially subject the Partnership to credit risk consist of accounts receivable. Concentration of credit risk with respect to accounts receivable is limited due to the large number of diversified customers and the geographic diversification of KSOL-FM and KYLZ-FM's national customer base. I. Allowance for Doubtful Accounts The allowance for doubtful accounts is based on management's estimate of the collectability of accounts receivable. J. Income Taxes As a Limited Partnership, all income and losses of Crescent Communications, L.P. are passed directly to the partners for federal and state income tax purposes. Accordingly, income tax expense is not reflected on the statements of operations and partners' deficiency. K. Accounting Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires that management use estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. Corporate and interest expenses were allocated among the individual radio station divisions of Crescent Communications, L.P. on a pro rata basis. Corporate expenses were allocated based on F-21 62 KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.) NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) NINE MONTHS ENDED DECEMBER 31, 1994 (AUDITED) YEAR ENDED DECEMBER 31, 1995 (AUDITED) SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED) revenues and interest expenses were allocated based on station purchase price. The amounts allocated to KSOL-FM and KYLZ-FM have been reflected in these financial statements. The accounting records of KYLZ-FM were combined with those of another station also owned by Crescent Communications, L.P. Approximately 12.7% of the combined revenues and expenses were allocated to KYLZ-FM based on a combination of wattage, sales price and spot rate. NOTE 2 -- PROPERTY AND EQUIPMENT Property and Equipment consist of the following at December 31,:
1994 1995 ------- --------- Broadcasting Equipment........................................ $20,671 $ 438,922 Furniture and Fixtures........................................ 618 88,768 Music Library................................................. -- 47,600 Vehicles...................................................... 22,181 38,881 Computers..................................................... 14,312 49,842 ------- --------- 57,782 664,013 Accumulated Depreciation...................................... (6,942) (109,511) ------- --------- $50,840 $ 554,502 ======= =========
NOTE 3 -- INTANGIBLE ASSETS Intangible assets consist of the following at December 31,:
1994 1995 ------- ----------- FCC Licenses................................................ $ -- $15,000,000 Goodwill.................................................... -- 409,004 Going Concern Value......................................... -- 100,000 Acquisition Costs........................................... 84,805 247,632 ------- ----------- 84,805 15,756,636 Accumulated Amortization.................................... -- (328,039) ------- ----------- $84,805 $15,428,597 ======= ===========
The majority of the intangibles were acquired in the March 22, 1995 purchase of KSOL-FM and KYLZ-FM. NOTE 4 -- INTERDIVISIONAL PAYABLE As discussed in Note 1A, these combined financial statements present only the accounts of KSOL-FM and KYLZ-FM. The interdivisional transactions which would have been eliminated had the financial statements been prepared on a consolidated basis have resulted in an interdivisional payable to those entities which have not been included herein. This payable consists primarily of KSOL-FM and KYLZ-FM station acquisition debt recorded on the books of the Partnership, and interdivisional allocations of Corporate and interest expenses. F-22 63 KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.) NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) NINE MONTHS ENDED DECEMBER 31, 1994 (AUDITED) YEAR ENDED DECEMBER 31, 1995 (AUDITED) SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED) Since KSOL-FM and KYLZ-FM do not maintain significant cash balances, all of the receipts and disbursements of the stations are also recorded through this account. NOTE 5 -- COMMITMENTS A. Long-Term Debt The secured long-term debt of the Partnership is not reflected in these financial statements although interest expense has been allocated to the stations as discussed in Note 1K. This long-term debt is secured by a lien on all tangible and intangible assets of the Partnership, including KSOL-FM and KYLZ-FM. This secured long-term debt outstanding of the Partnership totaled $8,800,000 and $40,755,000 at December 31, 1994 and 1995, respectively. On August 16, 1996, immediately subsequent to the sale of KSOL-FM and KYLZ-FM to Tichenor Media System, Inc. (see Note 11) the debt mentioned above was retired and all liens on the Stations were released. At December 31, 1995, loan covenant violations had been waived by certain Partnership lenders concerning outstanding debt totaling $40,755,000. B. Lease Commitments The Partnership is committed to four KSOL-FM and KYLZ-FM operating lease agreements for office space, transmitter facilities and equipment, which expire in various years through February, 2000. Payments on these leases range from $600 to $10,200 per month. One of the leases includes a renewal option and calls for an annual rental increase ranging from $270 to $2,290 per year as provided in the lease agreement. KSOL-FM and KYLZ-FM rental expense for the nine months ended December 31, 1994 and the year ended December 31, 1995 was $159,103 and $206,359, respectively. Future KSOL-FM and KYLZ-FM minimum rental payments under these lease agreements for each of the years ending December 31 are as follows: 1996............................................. $204,746 1997............................................. 116,026 1998............................................. 108,533 1999............................................. 104,157 2000............................................. 14,400
NOTE 6 -- COMMITMENTS -- RELATED PARTY A. Management Agreements The Partnership entered into a two year management agreement with a series of one year automatic renewals with Crescent Communications Corporation. Two key management members of this corporation are also related party stockholders of S&W LP Corporation (Note 7). During the year ended December 31, 1995, the Partnership paid $520,000 to Crescent Communications Corporation for 1995 management fees which included a bonus of $89,874 based on 1994's operating cash flow. During the nine months ended December 31, 1994 and the year ended December 31, 1995, $386,714 and $476,207 was charged to corporate expenses of which $90,491 and $136,195 has been allocated to KSOL-FM and KYLZ-FM on a pro rata basis. F-23 64 KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.) NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) NINE MONTHS ENDED DECEMBER 31, 1994 (AUDITED) YEAR ENDED DECEMBER 31, 1995 (AUDITED) SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED) Crescent Communications Corporation incurs certain costs on behalf of the Partnership, which are periodically reimbursed. These reimbursable expenses totalled $113,626 and $132,581 during the nine months ended December 31, 1994 and the year ended December 31, 1995 of which $26,588 and $32,918 have been allocated to KSOL-FM and KYLZ-FM on a pro rata basis, respectively. B. Capital Bonus Plan During the nine months ended December 31, 1994 and the year ended December 31, 1995, the Partnership implemented a Capital Bonus Plan as an incentive for certain key employees of the Partnership whereby the Board of Directors may award "units" representing the right to receive a percentage of the net equity growth of the stations owned by the Partnership including KSOL-FM and KYLZ-FM. No bonuses were awarded under the plan for the year ended December 31, 1995. NOTE 7 -- OTHER RELATED PARTY ACTIVITY During the nine months ended December 31, 1994 and the year ended December 31, 1995, the Partnership incurred reimbursable expenses to a related party stockholder of S&W LP Corporation (a partner of Crescent Communications, L.P.) for expenses paid on behalf of the Partnership totalling $7,013 and $22,887, of which $1,642 and $6,546 has been allocated to KSOL-FM and KYLZ-FM on a pro rata basis, respectively. NOTE 8 -- EMPLOYEE BENEFIT PLAN The Partnership has adopted a Savings Retirement Program (the "Program") under Section 401(k) of the Internal Revenue Code. The Program allows all employees who are at least 21 years of age and have been employed with the Company for a minimum of three months with a full time status to defer up to 15% of their income on a pretax basis through contributions to the Program, limited to an annual maximum ($9,240 in 1994 and 1995). The Program does not provide for any matching of contributions, but the Partnership pays the annual administration fee which was $1,700 and $2,226 for the nine months ended December 31, 1994 and the year ended December 31, 1995, respectively. NOTE 9 -- RADIO STATION PURCHASE On March 22, 1995, Crescent Communications L.P. purchased substantially all the assets of radio stations KSRY-FM (operating as KSOL-FM under a Program Service and Time Brokerage Agreement since April 1, 1994) licensed to San Francisco, California and KSRI-FM (operating as KYLZ-FM under LMA since April 1, 1994) licensed to Santa Cruz, California for an aggregate price of $16,000,000. F-24 65 KSOL-FM AND KYLZ-FM (DIVISIONS OF CRESCENT COMMUNICATIONS, L.P.) NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) NINE MONTHS ENDED DECEMBER 31, 1994 (AUDITED) YEAR ENDED DECEMBER 31, 1995 (AUDITED) SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED) NOTE 10 -- LOCAL MARKETING AGREEMENTS As mentioned in Note 9, the Partnership entered into a Program Service and Time Brokerage Agreement (the "LMA") with the sellers of KSRY-FM and KSRI-FM under which the Partnership operated the Stations until the purchase closed (March 22, 1995). During this time, the Partnership retained all the revenues and paid virtually all the expenses related to the Stations' operations. In addition, the Partnership paid the sellers the following monthly fees while the LMA was in effect: April - July, 1994....................................................... $100,000 August - November, 1994.................................................. 125,000 December, 1994 - March, 1995............................................. 150,000
During the nine months ended December 31, 1994 and the year ended December 31, 1995, an aggregate amount of $1,050,000 and $401,613 was paid under the above agreement and is included in corporate expenses. NOTE 11 -- SUBSEQUENT EVENTS Sale of Stations On May 3, 1996, the Partnership entered into an Asset Purchase Agreement to sell substantially all the assets of radio stations KSOL-FM and KYLZ-FM for $40,000,000 in cash pending FCC approval. On August 15, 1996, subsequent to the FCC approval the sale closed transferring ownership of KSOL-FM and KYLZ-FM to Tichenor Media System, Inc. F-25 66 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary..................... 3 Risk Factors........................... 10 Use of Proceeds........................ 15 Price Range of Class A Common Stock.... 16 Dividend Policy........................ 16 Capitalization......................... 17 The Tichenor Merger.................... 18 Unaudited Pro Forma Financial Information.......................... 21 Selected Consolidated Financial Data... 27 The Company............................ 28 Management............................. 31 Selling Shareholder.................... 33 Shares Eligible For Future Sale........ 33 Description of Capital Stock........... 34 Underwriting........................... 37 Legal Opinions......................... 38 Experts................................ 38 Available Information.................. 38 Incorporation of Certain Documents by Reference............................ 39 Index to Financial Statements.......... F-1
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3,850,000 SHARES HEFTEL BROADCASTING CORPORATION CLASS A COMMON STOCK ------------------- PROSPECTUS ------------------- ALEX. BROWN & SONS INCORPORATED CREDIT SUISSE FIRST BOSTON LEHMAN BROTHERS MONTGOMERY SECURITIES SMITH BARNEY INC. , 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 67 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The estimated expenses (other than underwriting discounts and commissions) in connection with the issuance and distribution of the Class A Common Stock registered hereby are as follows: SEC registration fee...................................................... $ 50,617 NASD filing fee........................................................... 17,405 NASDAQ National Market listing fee........................................ 17,500 Legal fees and expenses................................................... 100,000* Accounting fees and expenses.............................................. 100,000* Blue Sky fees and expenses................................................ 1,660* Printing and engraving expenses........................................... 100,000* Miscellaneous............................................................. 112,818* -------- Total........................................................... $500,000* =========
- --------------- * Estimated. The foregoing expenses will be paid by the Registrant. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Pursuant to provisions of the Delaware General Corporation Law, the Restated Certificate of Incorporation of Registrant (the "Company") includes a provision which eliminates the personal liability of its directors to the Company and its stockholders for monetary damage to the fullest extent permissible under Delaware law. This provision does not eliminate liability (a) for any breach of a director's duty of loyalty to the Company or its stockholders; (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (c) in connection with payment of any illegal dividend or an illegal stock repurchase; or (d) for any transaction from which the director derives an improper personal benefit. Further, this provision has no effect on claims arising under federal or state securities laws and does not affect the availability of injunctions and other equitable remedies available to the Company's stockholders for any violation of a director's fiduciary duty to the Company or its stockholders. The Company's Restated Certificate of Incorporation authorizes the Company to indemnify its officers, directors and other agents to the fullest extent permitted by Delaware law, exclusive of rights provided through bylaw provisions, agreements, vote of stockholders or disinterested directors or otherwise. The Company's Restated Certificate of Incorporation also authorizes the Company to indemnify its officers, directors and agents for breach of duty to the corporation and its stockholders through bylaw provisions, agreements or both, in excess of the indemnification otherwise permitted under Delaware law, subject to certain limitations. The Company has entered into indemnification agreements with all of its directors and executive officers whereby the Company will indemnify each such person (an "indemnitee") against certain claims arising out of certain past, present or future acts, omissions or breaches of duty committed by an indemnitee while serving in his employment capacity. Such indemnification does not apply to acts or omissions which are knowingly fraudulent, deliberately dishonest or arise from willful misconduct. Indemnification will only be provided to the extent the indemnitee has not already received payments in respect of such claim from the Company or from an insurance company. Under certain circumstances, such indemnification (including reimbursement of expenses incurred) will be allowed for liability arising under the Securities Act of 1933. II-1 68 The Bylaws of the Company require the Company to provide indemnification for directors and officers to the fullest extent permitted under Delaware law and the Company's Restated Certificate of Incorporation. The Underwriting Agreement provides for indemnification by the Underwriters of the Registrant, its directors and officers, and by the Registrant of the Underwriters, for certain liabilities, including liabilities arising under the Securities Act. An insurance policy obtained by the registrant provides for indemnification of officers and directors of the Registrant and certain other persons against liabilities and expenses incurred by any of them in certain stated proceedings and under certain stated conditions. ITEM 16. EXHIBITS
EXHIBITS. DESCRIPTION ----------------------------------------------------------------------------- 1 Form of Underwriting Agreement 2.1.1 Amended and Restated Agreement and Plan of Reorganization, dated September 7, 1995, among the Company, Viva Acquisition Corporation, Mambisa Broadcasting Corporation ("Mambisa"), SFS Management Corporation, Amancio Victor Suarez, Charles Fernandez and Amancio Jorge Suarez, Jr., (such three individuals are referred to herein collectively as the ("Stockholders") (the "Purchase Agreement") (Schedules omitted) (incorporated by reference to Exhibit 1.1.1 to Registrant's Form 8-K filed on September 22, 1995) 2.1.2 Escrow Agreement, dated September 7, 1995, among the Company, Mambisa, the Stockholders and Citibank, N.A. (incorporated by reference to Exhibit 1.1.2 to Registrant's Form 8-K filed on September 22, 1995) 2.1.3 Mutual Release, dated September 7, 1995, among the parties to the Purchase Agreement and other parties (incorporated by reference to Exhibit 1.1.3 to Company's Form 8-K filed on September 22, 1995) 2.1.4 Agreement of Purchase and Sale, dated September 7, 1995, among the Company, Mambisa, Amancio Victor Suarez and Amancio Jorge Suarez, Jr. (incorporated by reference to Exhibit 1.1.4 to Registrant's Form 8-K filed on September 22, 1995) 2.1.5 Promissory Note dated January 9, 1996, executed by the Company and HBC Florida, Inc. to the order of Mambisa Broadcasting Corporation (incorporated by reference to the identically numbered exhibit to the Company's Form 10-K filed on December 23, 1996.) 2.2.1 Tender Offer Agreement, dated June 1, 1996, between the Company and Clear Channel Radio, Inc. ("Clear Channel") (incorporated herein by reference to Exhibit 99(c)(1) of Clear Channel's Schedule 14D-1 filed on June 7, 1996) 2.2.2 Amendment No. 1 to Tender Offer Agreement, dated June 6, 1996 (incorporated herein by reference to Exhibit 99(c)(9) of Clear Channel's Schedule 14D-1 filed on June 7, 1996) 2.2.3 Amendment No. 2 to Tender Offer Agreement, dated June 20, 1996 (incorporated by reference to Exhibit (c)(3) of the Company's Schedule 14D-9 dated June 20, 1996) 2.2.4 Amendment No. 3 to Tender Offer Agreement, dated July 2, 1996 (incorporated by reference to Exhibit 99(c)(15) of Amendment No. 2 to the Schedule 14D-1 of Clear Channel filed on July 9, 1996) 2.3 Confidentiality Letter Agreement dated May 31, 1996, between the Company and Clear Channel (incorporated herein by reference to Exhibit 99(c)(12) of Clear Channel's Schedule 14D-1 filed on June 7, 1996) 2.4.1 Asset Purchase Agreement, dated November 1, 1995, between HBC New York, Inc. and Park Radio of Greater New York, Inc. (incorporated by reference to Exhibit 2.2 of Company's Form 10-K filed on December 29, 1995)
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EXHIBITS. DESCRIPTION ----------------------------------------------------------------------------- 2.4.2 First Amendment to Asset Purchase Agreement, dated March 25, 1996 between HBC New York, Inc. and Park Radio of Greater New York, Inc. (incorporated by reference to Exhibit 1.1.2 of Company's Form 8-K filed on March 28, 1996) 2.5.1 Agreement and Plan of Merger, dated July 9, 1996, between Clear Channel Communications, Inc. and Tichenor Media System, Inc. with Exhibits (Schedules omitted) (incorporated by reference to Exhibit 99(c)(16) of Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9, 1996) 2.5.2 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel Communications, Inc., and McHenry T. Tichenor, Sr. (incorporated by reference to Exhibit 99(c)(17) of Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9, 1996) 2.5.3 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel Communications, Inc., and McHenry T. Tichenor, Jr. (incorporated by reference to Exhibit 99(c)(18) of Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9, 1996) 2.5.4 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel Communications, Inc., and Warren Tichenor (incorporated by reference to Exhibit 99(c)(19) of Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9, 1996) 2.5.5 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel Communications, Inc., and William Tichenor (incorporated by reference to Exhibit 99(c)(20) of Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9, 1996) 2.5.6 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel Communications, Inc., and Jean Russell (incorporated by reference to Exhibit 99(c)(21) of Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9, 1996) 2.5.7 Amended and Restated Agreement and Plan of Merger, dated October 10, 1996, between Clear Channel Communications, Inc. and Tichenor Media System, Inc. without Exhibits (Schedules omitted) (incorporated by reference to the identically numbered exhibit to the Company's Form 10-K filed on December 23, 1996.) 2.5.8 Assignment Agreement, dated October 10, 1996 by Company and Heftel Merger Sub, Inc. (incorporated by reference to the identically numbered exhibit to the Company's Form 10-K filed on December 23, 1996.) 2.5.9 Form of Registration Rights Agreement by and among the Company, McHenry T. Tichenor, Sr., McHenry T. Tichenor, Jr., Warren W. Tichenor, William E. Tichenor, Jean T. Russell, McHenry T. Tichenor, Jr., as Custodian for David T. Tichenor, Alta Subordinated Debt Partners III, L.P., Prime II Management, LP, PrimeComm, LP, Ricardo A. del Castillo, Jeffrey T. Hinson and David D. Lykes. (included in Exhibit 2.5.1) 2.5.10 Form of Employment Agreement by and between the Company and McHenry T. Tichenor, Jr. (included in Exhibit 2.5.1) 2.5.11 Form of Stockholders Agreement by and among the Company and each of the stockholders listed on the signature pages thereto. (included in Exhibit 2.5.1) 2.5.12 Form of the Company's Indemnification Agreement. (included in Exhibit 2.5.1) 2.5.13 Form of Registration Rights Agreement by and among the Company and Clear Channel Communications, Inc. (included in Exhibit 2.5.1) 2.5.14 Option Agreement, dated as of December 23, 1996, among Clear Channel Radio, Inc., Golden West Broadcasters ("GWB"), and Gene Autry and Stanley B. Schneider, as co-trustees of the Autry Survivor's Trust, with Exhibits (Schedules omitted)
II-3 70
EXHIBITS. DESCRIPTION ----------------------------------------------------------------------------- 2.5.15 Time Brokerage Agreement, dated as of December 23, 1996, between GWB and Clear Channel Radio, Inc. (exhibits omitted) 2.5.16 Assignment and Assumption Agreement, dated as of January 2, 1997, among the Company, Clear Channel Radio, Inc. and Tichenor Media System, Inc. 4.1 Specimen certificate for the Class A Common Stock (a) 4.2 Article 4 of the Restated Certificate of Incorporation (b) 4.3 Credit Agreement, dated August 5, 1996, among the Company, NationsBank of Texas, N.A. and the other lenders signatory thereto (incorporated by reference to Exhibit 1.0 of Registrant's Form 8-K filed on August 20, 1996.) 4.4 Form of Second Amended and Restated Certificate of Incorporation of the Company. (included in Exhibit 2.5.7) 4.5 Loan Agreement, dated July 9, 1996, between Clear Channel Communications, Inc., as the lender, and TMS Assets California, Inc., as the borrower. (incorporated by reference to the identically numbered exhibit to the Company's Form 10-K filed on December 23, 1996.)(c) 4.6 Guarantee, dated July 9, 1996, by Tichenor Media System, Inc., in favor of Clear Channel Communications, Inc. (incorporated by reference to the identically numbered exhibit to the Company's Form 10-K filed on December 23, 1996.)(c) 5 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. 23.1.1 Consent of Ernst & Young LLP 23.1.5 Consent of KPMG Peat Marwick LLP 23.1.6 Consent of Miller, Kaplan, Arase & Co. 23.2.1 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in Exhibit 5) 24(d) Power of Attorney 99.1(d) Consent of McHenry T. Tichenor, Jr. 99.2(d) Consent of McHenry T. Tichenor, Sr. 99.3(d) Consent of Robert W. Hughes
- --------------- (a) Incorporated by reference to the identically numbered exhibit to the Company's Registration Statement on Form S-1, as amended (Reg. No. 33-78370). (b) Incorporated by reference to Exhibit No. 4.3 to the Company's Registration Statement on Form S-1, as amended (Reg. No. 33-78370). (c) The Company is not a party to this agreement. Upon consummation of the Tichenor Merger, a subsidiary of the Registrant will be the beneficiary of this agreement. (d) Previously filed. The Company agrees to furnish supplementally a copy of any omitted schedules or exhibits to the Commission upon request. ITEM 17. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Company's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in II-4 71 reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions set forth or described in Item 15 of the Registration Statement, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Exchange Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Exchange Act and will be governed by the final adjudication of such issue. II-5 72 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on January 9, 1997. HEFTEL BROADCASTING CORPORATION By: /s/ L. LOWRY MAYS ------------------------------------ L. Lowry Mays President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2 to this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated below.
NAME TITLE DATE - --------------------------------------------- ------------------------------------------------ /s/ L. LOWRY MAYS President, Chief Executive January 9, 1997 - --------------------------------------------- Officer and Director L. Lowry Mays /s/ JOHN T. KENDRICK Senior Vice President, Chief January 9, 1997 - --------------------------------------------- Financial Officer and John T. Kendrick Assistant Secretary (Principal Financial and Accounting Officer) /s/ ERNESTO CRUZ* Director January 9, 1997 - --------------------------------------------- Ernesto Cruz /s/ B.J. MCCOMBS* Director January 9, 1997 - --------------------------------------------- B.J. McCombs /s/ JAMES M. RAINES* Director January 9, 1997 - --------------------------------------------- James M. Raines /s/ JOHN H. WILLIAMS* Director January 9, 1997 - --------------------------------------------- John H. Williams
*By L. Lowry Mays, attorney-in-fact pursuant to a Power of Attorney previously filed II-6 73 INDEX TO EXHIBITS
SEQUENTIALLY EXHIBIT NUMBERED NUMBER EXHIBIT PAGE - -------------------- -------------------------------------------------------------------------- 1 Form of Underwriting Agreement 2.1.1 Amended and Restated Agreement and Plan of Reorganization, dated September 7, 1995, among the Company, Viva Acquisition Corporation, Mambisa Broadcasting Corporation ("Mambisa"), SFS Management Corporation, Amancio Victor Suarez, Charles Fernandez and Amancio Jorge Suarez, Jr., (such three individuals are referred to herein collectively as the ("Stockholders") (the "Purchase Agreement") (Schedules omitted) (incorporated by reference to Exhibit 1.1.1 to Registrant's Form 8-K filed on September 22, 1995) 2.1.2 Escrow Agreement, dated September 7, 1995, among the Company, Mambisa, the Stockholders and Citibank, N.A. (incorporated by reference to Exhibit 1.1.2 to Registrant's Form 8-K filed on September 22, 1995) 2.1.3 Mutual Release, dated September 7, 1995, among the parties to the Purchase Agreement and other parties (incorporated by reference to Exhibit 1.1.3 to Company's Form 8-K filed on September 22, 1995) 2.1.4 Agreement of Purchase and Sale, dated September 7, 1995, among the Company, Mambisa, Amancio Victor Suarez and Amancio Jorge Suarez, Jr. (incorporated by reference to Exhibit 1.1.4 to Registrant's Form 8-K filed on September 22, 1995) 2.1.5 Promissory Note dated January 9, 1996, executed by the Company and HBC Florida, Inc. to the order of Mambisa Broadcasting Corporation (incorporated by reference to the identically numbered exhibit to the Company's Form 10-K filed on December 23, 1996.) 2.2.1 Tender Offer Agreement, dated June 1, 1996, between the Company and Clear Channel Radio, Inc. ("Clear Channel") (incorporated herein by reference to Exhibit 99(c)(1) of Clear Channel's Schedule 14D-1 filed on June 7, 1996) 2.2.2 Amendment No. 1 to Tender Offer Agreement, dated June 6, 1996 (incorporated herein by reference to Exhibit 99(c)(9) of Clear Channel's Schedule 14D-1 filed on June 7, 1996) 2.2.3 Amendment No. 2 to Tender Offer Agreement, dated June 20, 1996 (incorporated by reference to Exhibit (c)(3) of the Company's Schedule 14D-9 dated June 20, 1996) 2.2.4 Amendment No. 3 to Tender Offer Agreement, dated July 2, 1996 (incorporated by reference to Exhibit 99(c)(15) of Amendment No. 2 to the Schedule 14D-1 of Clear Channel filed on July 9, 1996) 2.3 Confidentiality Letter Agreement dated May 31, 1996, between the Company and Clear Channel (incorporated herein by reference to Exhibit 99(c)(12) of Clear Channel's Schedule 14D-1 filed on June 7, 1996) 2.4.1 Asset Purchase Agreement, dated November 1, 1995, between HBC New York, Inc. and Park Radio of Greater New York, Inc. (incorporated by reference to Exhibit 2.2 of Company's Form 10-K filed on December 29, 1995) 2.4.2 First Amendment to Asset Purchase Agreement, dated March 25, 1996 between HBC New York, Inc. and Park Radio of Greater New York, Inc. (incorporated by reference to Exhibit 1.1.2 of Company's Form 8-K filed on March 28, 1996)
74
SEQUENTIALLY EXHIBIT NUMBERED NUMBER EXHIBIT PAGE - -------------------- -------------------------------------------------------------------------- 2.5.1 Agreement and Plan of Merger, dated July 9, 1996, between Clear Channel Communications, Inc. and Tichenor Media System, Inc. with Exhibits (Schedules omitted) (incorporated by reference to Exhibit 99(c)(16) of Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9, 1996) 2.5.2 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel Communications, Inc., and McHenry T. Tichenor, Sr. (incorporated by reference to Exhibit 99(c)(17) of Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9, 1996) 2.5.3 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel Communications, Inc., and McHenry T. Tichenor, Jr. (incorporated by reference to Exhibit 99(c)(18) of Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9, 1996) 2.5.4 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel Communications, Inc., and Warren Tichenor (incorporated by reference to Exhibit 99(c)(19) of Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9, 1996) 2.5.5 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel Communications, Inc., and William Tichenor (incorporated by reference to Exhibit 99(c)(20) of Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9, 1996) 2.5.6 Stock Purchase Agreement dated as of July 9, 1996, by and among Clear Channel Communications, Inc., and Jean Russell (incorporated by reference to Exhibit 99(c)(21) of Amendment No. 2 to Schedule 14D-1 of Clear Channel Communications, Inc., filed on July 9, 1996) 2.5.7 Amended and Restated Agreement and Plan of Merger, dated October 10, 1996, between Clear Channel Communications, Inc. and Tichenor Media System, Inc. without Exhibits (Schedules omitted) (incorporated by reference to the identically numbered exhibit to the Company's Form 10-K filed on December 23, 1996.) 2.5.8 Assignment Agreement, dated October 10, 1996 by Company and Heftel Merger Sub, Inc. (incorporated by reference to the identically numbered exhibit to the Company's Form 10-K filed on December 23, 1996.) 2.5.9 Form of Registration Rights Agreement by and among the Company, McHenry T. Tichenor, Sr., McHenry T. Tichenor, Jr., Warren W. Tichenor, William E. Tichenor, Jean T. Russell, McHenry T. Tichenor, Jr., as Custodian for David T. Tichenor, Alta Subordinated Debt Partners III, L.P., Prime II Management, LP, PrimeComm, LP, Ricardo A. del Castillo, Jeffrey T. Hinson and David D. Lykes. (included in Exhibit 2.5.1) 2.5.10 Form of Employment Agreement by and between the Company and McHenry T. Tichenor, Jr. (included in Exhibit 2.5.1) 2.5.11 Form of Stockholders Agreement by and among the Company and each of the stockholders listed on the signature pages thereto. (included in Exhibit 2.5.1)
75
SEQUENTIALLY EXHIBIT NUMBERED NUMBER EXHIBIT PAGE - -------------------- -------------------------------------------------------------------------- 2.5.12 Form of the Company's Indemnification Agreement. (included in Exhibit 2.5.1) 2.5.13 Form of Registration Rights Agreement by and among the Company and Clear Channel Communications, Inc. (included in Exhibit 2.5.1) 2.5.14 Option Agreement, dated as of December 23, 1996, among Clear Channel Radio, Inc., Golden West Broadcasters ("GWB"), and Gene Autry and Stanley B. Schneider, as co-trustees of the Autry Survivor's Trust, with Exhibits (Schedules omitted) 2.5.15 Time Brokerage Agreement, dated as of December 23, 1996, between GWB and Clear Channel Radio, Inc. (exhibits omitted) 2.5.16 Assignment and Assumption Agreement, dated as of January 2, 1997, among the Company, Clear Channel Radio, Inc. and Tichenor Media System, Inc. 4.1 Specimen certificate for the Class A Common Stock (a) 4.2 Article 4 of the Restated Certificate of Incorporation (b) 4.3 Credit Agreement, dated August 5, 1996, among the Company, NationsBank of Texas, N.A. and the other lenders signatory thereto (incorporated by reference to Exhibit 1.0 of Registrant's Form 8-K filed on August 20, 1996.) 4.4 Form of Second Amended and Restated Certificate of Incorporation of the Company. (included in Exhibit 2.5.7) 4.5 Loan Agreement, dated July 9, 1996, between Clear Channel Communications, Inc., as the lender, and TMS Assets California, Inc., as the borrower. (incorporated by reference to the identically numbered exhibit to the Company's Form 10-K filed on December 23, 1996.)(c) 4.6 Guarantee, dated July 9, 1996, by Tichenor Media System, Inc., in favor of Clear Channel Communications, Inc. (incorporated by reference to the identically numbered exhibit to the Company's Form 10-K filed on December 23, 1996.)(c) 5 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. 23.1.1 Consent of Ernst & Young LLP 23.1.5 Consent of KPMG Peat Marwick LLP 23.1.6 Consent of Miller, Kaplan, Arase & Co. 23.2.1 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in Exhibit 5) 24(d) Power of Attorney 99.1(d) Consent of McHenry T. Tichenor, Jr. 99.2(d) Consent of McHenry T. Tichenor, Sr. 99.3(d) Consent of Robert W. Hughes
- --------------- (a) Incorporated by reference to the identically numbered exhibit to the Company's Registration Statement on Form S-1, as amended (Reg. No. 33-78370). (b) Incorporated by reference to Exhibit No. 4.3 to the Company's Registration Statement on Form S-1, as amended (Reg. No. 33-78370). (c) The Company is not a party to this agreement. Upon consummation of the Tichenor Merger, a subsidiary of the Registrant will be the beneficiary of this agreement. (d) Previously filed. EX-1 2 UNDERWRITING AGREEMENT 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3,850,000 SHARES HEFTEL BROADCASTING CORPORATION CLASS A COMMON STOCK ------------------------ UNDERWRITING AGREEMENT ------------------------ , 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 3,850,000 SHARES HEFTEL BROADCASTING CORPORATION CLASS A COMMON STOCK UNDERWRITING AGREEMENT , 1997 ALEX. BROWN & SONS INCORPORATED CREDIT SUISSE FIRST BOSTON CORP. LEHMAN BROTHERS INC. MONTGOMERY SECURITIES SMITH BARNEY INC. c/o Alex. Brown & Sons Incorporated 135 East Baltimore Street Baltimore, Maryland 21202 Gentlemen: Heftel Broadcasting Corporation, a Delaware corporation (the "Company"), and Clear Channel Communications, Inc., a Texas corporation, or its subsidiary (together, the "Selling Shareholder"), propose to sell to the several underwriters (the "Underwriters") named in Schedule I hereto 3,850,000 shares of the Company's Class A Common Stock, $.001 par value (the "Firm Shares"), of which 3,500,000 shares are to be sold by the Company (the "Company Shares") and 350,000 of which are to be sold by the Selling Shareholder (the "Selling Shareholder Shares"). The respective amounts of the Firm Shares to be so purchased by the several Underwriters are set forth opposite their names in Schedule I hereto. The Company also proposes to sell at the Underwriters' option an aggregate of up to 525,000 additional shares of the Company's Class A Common Stock (the "Option Shares") as set forth below. The Selling Shareholder has executed a Custody Agreement (the "Custody Agreement"), the form of which has been previously delivered to you, pursuant to which the Selling Shareholder has placed its Selling Shareholder Shares in custody with the Company and agreed to take certain other actions with respect thereto and hereto. As the Underwriters, you have advised the Company and the Selling Shareholder (a) that you are authorized to enter into this Agreement, and (b) that the Underwriters are willing, acting severally and not jointly, to purchase the numbers of Firm Shares set forth opposite their respective names in Schedule I, plus their pro rata portion of the Option Shares if you elect to exercise the over-allotment option in whole or in part for the accounts of the several Underwriters. The Firm Shares and the Option Shares (to the extent the aforementioned option is exercised) are herein collectively called the "Shares." In consideration of the mutual agreements contained herein and of the interests of the parties in the transactions contemplated hereby, the parties hereto agree as follows: 1. Representations and Warranties of the Company. The Company represents and warrants as follows: (a) A registration statement on Form S-3 (File No. 333-14207) with respect to the Shares has been carefully prepared by the Company in conformity in all material respects with the requirements of the Securities Act of 1933, as amended, (the "Act") and the Rules and Regulations (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder and has been filed with the Commission under the Act. The Company has complied with the conditions for the use of Form S-3. Copies of such registration statement, including any amendments thereto, the preliminary prospectuses (meeting the requirements of Rule 430A of the Rules and Regulations) contained therein and the exhibits, financial statements and schedules, as finally amended and revised, have heretofore been delivered by the Company to you. Such -1- 3 registration statement, together with any registration statement filed by the Company pursuant to Rule 462(b) of the Act, herein referred to as the "Registration Statement," which shall be deemed to include all information omitted therefrom in reliance upon Rule 430A and contained in the Prospectus referred to below, has been declared effective by the Commission under the Act and no post-effective amendment to the Registration Statement has been filed as of the date of this Agreement. "Prospectus" means (i) the form of prospectus first filed by the Company with the Commission pursuant to its Rule 424(b) or (ii) the last preliminary prospectus included in the Registration Statement filed prior to the time it becomes effective or filed pursuant to Rule 424(a) under the Act that is delivered by the Company to the Underwriters for delivery to purchasers of the Shares, together with any term sheet or abbreviated term sheet filed with the Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus included in the Registration Statement prior to the time it becomes effective is herein referred to as a "Preliminary Prospectus." Any reference herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein, as of the date of such Preliminary Prospectus or Prospectus, as the case may be, and, in the case of any reference herein to any Prospectus, also shall be deemed to include any documents incorporated by reference therein, and any supplements or amendments thereto, filed with the Commission after the date of filing of the Prospectus under Rules 424(b) and 430A, and prior to the termination of the offering of the Shares by the Underwriters. (b) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Registration Statement; each of the subsidiaries of the Company as listed in Exhibit A hereto (collectively, the "Subsidiaries") has been duly organized and, except as set forth in Exhibit A hereto, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement; the Company and each of the Subsidiaries are duly qualified to transact business in all jurisdictions in which the conduct of their business requires such qualification and a failure to qualify would have a materially adverse effect upon the business or financial condition of the Company and the Subsidiaries taken as a whole; the outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of all liens, encumbrances and security interests except for a lien on 100% of the outstanding capital stock of each of the Subsidiaries granted to NationsBank of Texas, N.A., as agent on behalf of multiple lenders, and no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligations into shares of capital stock or ownership interests in the Subsidiaries are outstanding. (c) The 7,000,000 authorized shares of Class B Common Stock of the Company have been duly authorized. The outstanding shares of Class A Common Stock of the Company have been duly authorized and are validly issued, fully-paid and non-assessable; the Shares to be issued and sold by the Company have been duly authorized and when issued and paid for as contemplated herein will be validly issued, fully-paid and non-assessable; and no preemptive rights of stockholders exist with respect to any of the Shares or the issue and sale thereof. Neither the filing of the Registration Statement nor the offering or sale of the Shares as contemplated by this Agreement gives rise to any rights, other than those which have been waived or satisfied, for or relating to the registration of any shares of Common Stock. (d) The information set forth under the caption "Capitalization" in the Prospectus is true and correct. The Shares conform in all material respects with the statements concerning them in the Registration Statement. (e) The Commission has not issued an order preventing or suspending the use of any Prospectus relating to the proposed offering of the Shares nor instituted proceedings for that purpose. The Registration Statement contains and the Prospectus and any amendments or supplements -2- 4 thereto will contain all statements which are required to be stated therein by, and in all material respects conform or will conform, as the case may be, to the requirements of, the Act and the Rules and Regulations. The documents incorporated by reference in the Prospectus, at the time they were filed with the Commission conformed in all material respects to the requirements of the Securities Exchange Act of 1934 or the Act, as applicable, and the Rules and Regulations of the Commission thereunder. Neither the Registration Statement nor any amendment thereto, and neither the Prospectus nor any supplement thereto, including any documents incorporated by reference therein, contains or will contain, as the case may be, any untrue statement of a material fact or omits or will omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to information contained in or omitted from the Registration Statement or the Prospectus, or any such amendment or supplement, or any documents incorporated by reference therein in reliance upon, and in conformity with, written information furnished to the Company by or on behalf of any Underwriter, specifically for use in the preparation thereof. (f) The consolidated financial statements of the Company and the Subsidiaries, together with related notes and schedules included in the Registration Statement, present fairly the financial position and the results of operations of the Company and Subsidiaries consolidated, at the indicated dates and for the indicated periods. Such financial statements have been prepared in accordance with generally accepted principles of accounting, consistently applied throughout the periods involved, and all adjustments necessary for a fair presentation of results for such periods have been made. The selected and summary financial and statistical data included in the Registration Statement presents fairly the information shown therein and have been compiled on a basis consistent with the financial statements presented therein and the books and records of the Company. The pro forma financial statements and other pro forma financial information included in the Registration Statement and the Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements, have been properly compiled on the pro forma bases described therein, and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. (g) Except for those license renewal applications of the Company or its Subsidiaries currently pending before the Federal Communications Commission (the "FCC"), there is no action or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of the Subsidiaries before any court or administrative agency which might result in any material adverse change in the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) of the Company and of the Subsidiaries (taken as a whole), except as set forth in the Registration Statement. (h) The Company and the Subsidiaries have good and marketable title to all of the properties and assets reflected in the financial statements hereinabove described (or as described in the Registration Statement) subject to no lien, mortgage, pledge, charge or encumbrance of any kind except those reflected in such financial statements (or as described in the Registration Statement) or which are not material in amount. The Company and the Subsidiaries occupy their leased properties under valid leases with such exceptions as are not material to the Company and the Subsidiaries taken as a whole and do not materially interfere with the use made and proposed to be made of such properties by the Company and the Subsidiaries. (i) The Company and the Subsidiaries have filed all Federal, State and foreign income tax returns which have been required to be filed and have paid all taxes indicated by said returns and all assessments received by them or any of them to the extent that such taxes have become due and are not being contested in good faith. The Company has no knowledge of any tax deficiency that has been or might be asserted against the Company. -3- 5 (j) Since the respective dates as of which information is given in the Registration Statement, as it may be amended or supplemented, there has not been any material adverse change or any development involving a prospective material adverse change in or affecting the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or business prospects of the Company and its Subsidiaries (taken as a whole), whether or not occurring in the ordinary course of business, other than general economic and industry conditions changes in the ordinary course of business and changes or transactions described or contemplated in the Registration Statement and there has not been any material transaction entered into by the Company or the Subsidiaries, other than transactions in the ordinary course of business and changes and transactions contemplated by the Registration Statement, as it may be amended or supplemented. None of the Company or the Subsidiaries have any material contingent obligations which are not disclosed in the Registration Statement, as it may be amended or supplemented. (k) Neither the Company nor any of the Subsidiaries is or with the giving of notice or lapse of time or both, will be in default under its Certificate of Incorporation or By-Laws or any agreement, lease, contract, indenture or other instrument or obligation to which it is a party or by which it, or any of its properties, is bound and which default is of material significance in respect of the business or financial condition of the Company and its Subsidiaries (taken as a whole). The execution and delivery of this Agreement and the consummation of the transactions herein contemplated and the fulfillment of the terms hereof will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other material agreement or instrument to which the Company or any Subsidiary is a party, or of the Certificate of Incorporation or by-laws of the Company or any order, rule or regulation applicable to the Company or any Subsidiary, or of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction, except in all cases a conflict, breach or default which would not have a materially adverse effect on the business or financial condition of the Company and the Subsidiaries (taken as a whole). (l) Each approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body necessary in connection with the execution and delivery by the Company of this Agreement and the consummation of the transactions herein contemplated (except such additional steps as may be required by the National Association of Securities Dealers, Inc. (the "NASD") or may be necessary to qualify the Shares for public offering by the Underwriters under State securities or Blue Sky laws) has been obtained or made and is in full force and effect. (m) The Company and each of the Subsidiaries hold all material licenses, certificates and permits from governmental authorities which are necessary to the conduct of their businesses; and neither the Company nor any of the Subsidiaries has received notice of any infringement of any material patents, patent rights, trade names, trademarks or copyrights, which infringement is material to the business of the Company and the Subsidiaries (taken as a whole). (n) Ernst & Young LLP, who have certified the consolidated financial statements of the Company, filed with the Commission as part of, or incorporated by reference in, the Registration Statement and Prospectus, are to the knowledge of the Company independent public accountants as required by the Act and the Rules and Regulations. (o) To the best of the Company's knowledge, there are no affiliations or association between any member of the National Association of Securities Dealers, Inc. and any of the Company's officers, directors or 5% or greater security holders, except as set forth in the Registration Statement or as otherwise disclosed in writing to the Underwriters. (p) Neither the Company, nor to the Company's knowledge, any of the Subsidiaries, has taken or may take, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. The Company -4- 6 acknowledges that the Underwriters may engage in passive market making transactions in the Shares on The Nasdaq Stock Market in accordance (and in compliance) with Rule 10b-6A under the Exchange Act. (q) Neither the Company nor any Subsidiary is an "investment company" within the meaning of such term under the Investment Company Act of 1940 and the rules and regulations of the Commission thereunder. (r) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (s) The Company and each of its Subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar industries. (t) The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company would have any liability that is intended t be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. (u) The Company confirms as of the date hereof that it is in compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to Disclosure of doing Business with Cuba, and the Company further agrees that if it commences engaging in business with the government of Cuba or with any person or affiliate located in Cuba after the date the Registration Statement becomes or has become effective with the Commission or with the Florida Department of Banking and Finance (the "Department"), whichever date is later, or if the information reported or incorporated by reference in the Prospectus, if any, concerning the Company's business with Cuba or with any person or affiliate located in Cuba changes in any material way, the Company will provide the Department notice of such business or change, as appropriate, in a form acceptable to the Department. 2. Representations and Warranties of the Selling Shareholder. The Selling Shareholder represents and warrants to the Underwriters that: (a) The Selling Shareholder has and at the Closing Date will have good and valid title to the Selling Shareholder Shares, free and clear of any outstanding liens, encumbrances, security interests, rights, subscriptions, warrants, calls, preemptive rights, options or other agreements of any kind, and full right, power and authority to effect the sale and delivery of the Selling Shareholder Shares; and upon the delivery of and payment for the Selling Shareholder Shares pursuant to this Agreement, good and valid title thereto, free and clear of any liens, encumbrances, security interests, rights, subscriptions, warrants, calls, preemptive rights, options or other agreements of any kind, will be transferred to the several Underwriters. (b) The consummation of the transactions herein contemplated and the fulfillment of the terms hereof will not conflict with or result in a breach of any of the terms or provisions of, or constitute a -5- 7 default under, any indenture, mortgage, deed of trust or other material agreement or instrument to which the Selling Shareholder is a party, or any order, rule or regulation applicable to the Selling Shareholder of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction. (c) The Selling Shareholder has not taken and will not take, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result, under the Exchange Act, or otherwise, in stabilization or manipulation of the price of the Company's Class A Common Stock to facilitate the sale or resale of the Shares. (d) The Selling Shareholder has executed and delivered this Agreement and the Custody Agreement, and in connection herewith, the Selling Shareholder further represents, warrants and agrees that the Selling Shareholder has deposited with the Company, pursuant to the Custody Agreement, the certificates in negotiable form representing the Selling Shareholder Shares for the purpose of further delivery pursuant to this Agreement; and the form of the Custody Agreement has been previously delivered to you. (e) Without having undertaken to determine independently the accuracy or completeness of either the representations and warranties of the Company contained herein or the information contained in the Registration Statement and documents incorporated therein by reference, the Selling Shareholder (i) has no reason to believe that the representations and warranties of the Company contained in Section 1 hereof are not true and correct, and (ii) is familiar with the Registration Statement and has no knowledge of any material fact, condition or information not disclosed in the Registration Statement or the documents incorporated therein by reference which has adversely affected or may adversely affect the business of the Company or any of the Subsidiaries; and the sale of the Selling Shareholder Shares by the Selling Shareholder pursuant hereto is not prompted by any information concerning the Company or any of the Subsidiaries which is not set forth in the Registration Statement or the documents incorporated therein by reference. (f) On the Closing Date, all transfer and other taxes (other than income taxes) that are required to be paid in connection with the sale and transfer of the Selling Shareholder Shares to the Underwriters will have been paid by the Selling Shareholder. 3. Purchase, Sale and Delivery of the Shares. (a) On the basis of the representations, warranties and covenants herein contained, and subject to the conditions herein set forth, (i) the Company agree to sell to the Underwriters the Company shares, and each Underwriter agrees, severally and not jointly, to purchase at a price of $ per share, the number of Firm Shares set forth opposite the name of each Underwriter in Schedule I hereof, subject to adjustments in accordance with Section 10 hereof and (ii) the Selling Shareholder agrees to sell to the Underwriters the Selling Shareholder Shares, subject to adjustments in accordance with Section 10 hereof. The number of Firm Shares to be purchased by each Underwriter from the Company and the Selling Shareholder shall be as nearly as practical in the same proportion to the total number of Firm Shares being sold by the Company and the Selling Shareholder as the number of Firm Shares being purchased by each Underwriter bears to the total number of Firm Shares to be sold hereunder. The obligations of the Company and the Selling Shareholder shall be several and not joint. (b) Certificates in negotiable form for the total number of Shares to be sold hereunder by the Selling Shareholder have been placed in custody with the Company as custodian (the "Custodian") pursuant to the Custody Agreement executed by the Selling Shareholder for delivery of all Selling Shareholder Shares. The Selling Shareholder specifically agrees that the Firm Shares represented by the certificates held in custody for the Selling Shareholder under the Custody Agreement are subject to the interest of the Underwriters hereunder, and that the arrangements made by the Selling Shareholder for such custody are to that extent irrevocable, and that the obligations of the Selling Shareholder hereunder shall not be terminable by any act or deed of the Selling Shareholder (or by any other person, firm or corporation, including the Company, the Custodian or the Underwriters) or by operation of law or by the occurrence -6- 8 of any other event or events, except as set forth in the Custody Agreement. If any such event should occur prior to the delivery to the Underwriters of the Firm Shares hereunder, certificates for the Firm Shares shall be delivered by the Custodian in accordance with the terms and conditions of this Agreement as if such event had not occurred. The Custodian is authorized to receive and acknowledge receipt of the proceeds of the sale of the Selling Shareholder Shares held by it against the delivery of such Shares. (c) Payment for the Firm Shares to be sold hereunder by the Company and the Selling Shareholder is to be made via wire transfer of immediately available funds or such other payment procedures agreed to by the parties. Such payment and delivery are to be made at the offices of Alex. Brown & Sons Incorporated, 1 South Street, Baltimore, Maryland, at 10:00 a.m., Baltimore time, on the third business day after the date of this Agreement or at such other time and date not later than five business days thereafter as you and the Company shall agree upon, such time and date being herein referred to as the "Closing Date." (As used herein, "business day" means a day on which the Nasdaq Stock Market (National Market) is open for trading and on which banks in New York are open for business and not permitted by law or executive order to be closed.) The certificates for the Firm Shares will be delivered in such denominations and in such registrations as the Representatives request in writing not later than the second full business day prior to the Closing Date, and will be made available for inspection by the Underwriters at least one business day prior to the Closing Date. (d) In addition, on the basis of representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the several Underwriters to purchase the Option Shares at the price per share as set forth in the first paragraph of this Section 3. The option granted hereby may be exercised in whole or in part by giving written notice only once within 30 days after the date of this Agreement, by you, the Underwriters, to the Company, setting forth the number of Option Shares as to which the several Underwriters are exercising the option, the names and denominations in which the Option Shares are to be registered and the time and date at which such certificates are to be delivered. The time and date at which certificates for Option Shares are to be delivered shall be determined by the Underwriters but shall not be earlier than three nor later than ten full business days after the exercise of such option, nor in any event prior to the Closing Date (such time and date being herein referred to as the "Option Closing Date"). If the date of exercise of the option is three or more days before the Closing Date, the notice of exercise shall set the Closing Date as the Option Closing Date. The number of Option Shares to be purchased by each Underwriter shall be in the same proportion to the total number of Option Shares being purchased as the number of Firm Shares being purchased by such Underwriter bears to the total number of Firm Shares, adjusted by you in such manner as to avoid fractional shares. The option with respect to the Option Shares granted hereunder may be exercised only to cover over-allotments in the sale of the Firm Shares by the Underwriters. You, the Underwriters, may cancel such option at any time prior to its expiration by giving written notice of such cancellation to the Company. To the extent, if any, that the option is exercised, payment for the Option Shares shall be made on the Option Closing Date via wire transfer of immediately available funds or other payment procedures agreed to by the parties against delivery of certificates therefor at the offices of Alex. Brown & Sons Incorporated, 1 South Street, Baltimore, Maryland. 4. Offering by the Underwriters. It is understood that the Underwriters are to make a public offering of the Firm Shares as soon as the Representatives deem it advisable to do so. The Firm Shares are to be initially offered to the public at the public offering price set forth in the Prospectus. The Underwriters may from time to time thereafter change the public offering price and other selling terms. To the extent, if at all, that any Option Shares are purchased pursuant to Section 3 hereof, the Underwriters will offer them to the public on the foregoing terms. It is further understood that you will act as the Underwriters in the offering and sale of the Shares will take place in accordance with a Master Agreement Among Underwriters entered into by you and the several other Underwriters. -7- 9 5. Covenants of the Company and the Selling Shareholder. The Company (and the Selling Shareholder with respect to Paragraph (j) of the Section 5 only) covenants and agrees with the several Underwriters that: (a) The Company will (i) prepare and timely file with the Commission under Rule 424(b) of the Rules and Regulations a Prospectus containing information previously omitted at the time of effectiveness of the Registration Statement in reliance on Rule 430A of the Rules and Regulations, (ii) not file any amendment to the Registration Statement or supplement to the Prospectus or documents incorporated by reference therein of which the Representatives shall not previously have been advised and furnished with a copy or to which the Representatives shall have reasonably objected in writing or which is not in compliance with the Rules and Regulations and (iii) file on a timely basis all reports and any definitive proxy or information statements required to be filed by the Company with the Commission subsequent to the date of the Prospectus and prior to the termination of the offering of the Shares by the Underwriters. (b) The Company will advise the Underwriters promptly of any request of the Commission for amendment of the Registration Statement or for supplement to the Prospectus or for any additional information, or of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the use of the Prospectus or of the institution of any proceedings for that purpose, and the Company will use reasonable efforts to prevent the issuance of any such stop order preventing or suspending the use of the Prospectus and to obtain as soon as possible the lifting thereof, if issued. (c) The Company will cooperate with the Underwriters in endeavoring to qualify the Shares for sale under the securities laws of such jurisdictions as the Underwriters may reasonably have designated in writing and will make such applications, file such documents, and furnish such information as may be reasonably required for that purpose, provided the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction where it is not now so qualified or required to file such a consent. The Company will, from time to time, prepare and file such statements, reports, and other documents, as are or may be required to continue such qualifications in effect for so long a period as the Underwriters may reasonably request for distribution of the Shares. (d) The Company will deliver to, or upon the order of, the Underwriters, from time to time, as many copies of any Preliminary Prospectus as the Underwriters may reasonably request. The Company will deliver to, or upon the order of, the Underwriters during the period when delivery of a Prospectus is required under the Act, as many copies of the Prospectus in final form, or as thereafter amended or supplemented, as the Underwriters may reasonably request. The Company will deliver to the Underwriters at or before the Closing Date, four signed copies of the Registration Statement and all amendments thereto including all exhibits filed therewith, and will deliver to the Underwriters such number of copies of the Registration Statement, but without exhibits, and of all amendments thereto, as the Underwriters may reasonably request, including documents incorporated by reference therein. (e) The Company will make generally available to its security holders, as soon as it is practicable to do so, but in any event not later than 15 months after the effective date of the Registration Statement, an earnings statement (which need not be audited) in reasonable detail, covering a period of at least 12 consecutive months beginning after the effective date of the Registration Statement, which earnings statement shall satisfy the requirements of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you in writing when such statement has been so made available. (f) The Company will, for a period of five years from the Closing Date, deliver to the Underwriters copies of annual reports and copies of all other documents, reports and information furnished by the Company to its stockholders or filed with any securities exchange pursuant to the -8- 10 requirements of such exchange or with the Commission pursuant to the Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (g) No offering, sale, short sale or other disposition of any Common Stock of the Company will be made for a period of 90 days after the date of this Agreement, directly or indirectly, by the Company otherwise than hereunder, or with the prior written consent of Alex. Brown & Sons Incorporated, except that (i) the Company may, without such consent, issue shares as consideration for future acquisitions and grant options or issue shares of Common Stock pursuant to the exercise of options granted under the Company's current option plans and (ii) the Company may issue shares of its Class A Common Stock and Class B Common Stock pursuant to that certain Agreement and Plan of Merger between the Selling Shareholder and Tichenor Media, Inc., a Texas Corporation, as amended (the "Merger Agreement"). (h) The Company will comply with the Act and the Rules and Regulations, and the Exchange Act, and the rules and regulations of the Commission thereunder, so as to permit the completion of the distribution of the Shares as contemplated in this Agreement and the Prospectus. If during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, any event shall occur as a result of which, in the judgment of the Company or in the reasonable opinion of the Underwriters, it becomes necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances existing at the time the Prospectus is delivered to a purchaser, not misleading, or, if it is necessary at any time to amend or supplement the Prospectus to comply with any law, the Company promptly will either (i) prepare and file with the Commission an appropriate amendment to the Registration Statement or supplement to the Prospectus or (ii) prepare and file with the Commission an appropriate filing under the Exchange Act which shall be incorporated by reference in the Prospectus so that the Prospectus as so amended or supplemented will not, in the light of the circumstances when it is so delivered, be misleading, or so that the Prospectus will comply with the law. (i) The Company will use its best efforts to list, subject to notice of issuance, the Shares on the Nasdaq Stock Market. (j) The Selling Shareholder agrees, on behalf of itself and its subsidiaries (other than the Company), not to offer, sell, sell short or otherwise dispose of any shares of Class A or Class B Common Stock of the Company or other capital stock of the Company, or any other securities convertible, exchangeable or exercisable for common shares or derivative of common shares owned by such person or request the registration for the offer or sale of any of the foregoing (or as to which such person has the right to direct the disposition of) for a period of 90 days after the date of this Agreement, directly or indirectly, except with the prior written consent of Alex. Brown & Sons Incorporated ("Lockup Agreements"). (k) The Company shall not invest, or otherwise use the proceeds received by the Company from its sale of the Shares in such a manner as would require the Company or any of the Subsidiaries to register as an investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). (l) The Company will maintain a transfer agent and, if necessary under the jurisdiction of incorporation of the Company, a registrar for the Common Stock. (m) The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company. 6. Costs and Expenses. The Company will pay all costs, expenses and fees incident to the performance of the obligations of the Company and the Selling Shareholder under this Agreement, including, without limiting the generality of the foregoing, the following: accounting fees of the Company; the fees and disbursements of counsel for the Company and the Selling Shareholder; the cost of printing and delivering to, or as requested by, the Underwriters copies of the Registration Statement, Preliminary Prospectuses, the -9- 11 Prospectus, this Agreement, the Invitation Letter, the Blue Sky Survey and any supplements or amendments thereto; the filing fees of the Commission; the filing fees of the NASD; and the expenses, including the fees and disbursements of counsel for the Underwriters, up to $10,000, incurred in connection with the qualification of the Shares under State securities or Blue Sky laws. The Company and the Selling Shareholder shall not, however, be required to pay for any of the Underwriters' expenses (other than those related to qualification under State securities or Blue Sky laws) except that, if this Agreement shall not be consummated because the conditions in Section 8 hereof are not satisfied, or because this Agreement is terminated by the Representatives pursuant to Section 7 hereof, or by reason of any failure, refusal or inability on the part of the Company to perform any undertaking or satisfy any condition of this Agreement or to comply with any of the terms hereof on its part to be performed, unless such failure to satisfy said condition or to comply with said terms is due to the default or omission of any Underwriter, then the Company shall reimburse the several Underwriters for reasonable out-of-pocket expenses, including fees and disbursements of counsel, reasonably incurred in connection with investigating, marketing and proposing to market the Shares or in contemplation of performing their obligations hereunder; but the Company and the Selling Shareholder shall not in any event be liable to any of the several Underwriters for damages on account of loss of anticipated profits from the sale by them of the Shares. 7. Conditions of Obligations of the Underwriters. The several obligations of the Underwriters to purchase the Firm Shares on the Closing Date and the Option Shares, if any, on the Option Closing Date are subject to the accuracy, as of the Closing Date or the Option Closing Date, as the case may be, of the representations and warranties of the Company contained herein, and to the performance by the Company of its covenants and obligations hereunder and to the following additional conditions: (a) The Registration Statement and all post-effective amendments thereto shall have become effective and any and all filings required by Rule 424 and Rule 430A of the Rules and Regulations shall have been made, and any request of the commission for additional information (to be included in the Registration Statement or otherwise) shall have been disclosed to the Representatives and complied with to their reasonable satisfaction. No stop order suspending the effectiveness of the Registration Statement, as amended from time to time, shall have been issued and no proceedings for that purpose shall have been taken or, to the knowledge of the Company, shall be contemplated by the Commission and no injunction, restraining order, or order of any nature by a Federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance of the Shares. (b) The Underwriters shall have received on the Closing Date or the Option Closing Date, as the case may be, the opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the Company and the Selling Shareholder, or Jeffer, Mangels, Butler & Marmoro LLP, counsel for the Company (as such respective counsel shall mutually determine) dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Underwriters to the effect that: (i) The Company is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; each of the Subsidiaries has been duly incorporated and, except as set forth in Exhibit A hereto, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; the Company and each of the Subsidiaries are duly qualified to transact business in all jurisdictions in which the conduct of their business requires such qualification, or in which the failure to qualify would have a materially adverse effect upon the business of the Company and the Subsidiaries taken as a whole; and the outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company or a Subsidiary; and, to the best of such counsel's knowledge, the outstanding shares of capital stock of each of the Subsidiaries are owned free and clear of all liens, encumbrances and security interests, except for a lien on 100% of the outstanding shares of each of the Subsidiaries granted to NationsBank of Texas, N.A., as agent on behalf of multiple lenders, and no options, warrants or other rights to purchase, agreements or other -10- 12 obligations to issue, or other rights to convert any obligations into any shares of capital stock or of ownership interests in the Subsidiaries are outstanding. (ii) The Company has authorized and outstanding capital stock as set forth under the caption "Capitalization" in the Prospectus; the authorized shares of its Class A and Class B Common Stock have been duly authorized; the outstanding shares of its Class A Common Stock have been duly authorized and validly issued and are fully-paid and non-assessable; all of the Shares conform to the description thereof contained in the Prospectus; the Shares, including the Option Shares, if any, to be sold by the Company pursuant to this Agreement have been duly authorized and will be validly issued, fully paid and non-assessable when issued and paid for as contemplated by this Agreement; and, to the best knowledge of such counsel, no preemptive rights of stockholders exist with respect to any of the Shares or the issue and sale thereof. (iii) Except as described in or contemplated by the Prospectus, to the knowledge of such counsel, there are no outstanding securities of the Company convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of capital stock of the Company and there are no outstanding or authorized options, warrants, or rights of any character obligating the Company to issue any shares of its capital stock or any securities convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of such stock; and except as described in the Prospectus, to the knowledge of such counsel, no holder of any securities of the Company or any other person has the right, contractual or otherwise, which has not been satisfied or effectively waived, to cause the Company to sell or otherwise issue to them, or to permit them to underwrite the sale of, any of the Shares or the right to have any Common Stock or other securities of the Company included in the Registration Statement or the right, as a result of the filing of the Registration Statement, to require registration under the Act of any shares of Common Stock or other securities of the Company. (iv) The Registration Statement has become effective under the Act and, to the best of the knowledge of such counsel, no stop order proceedings with respect thereto have been instituted or are pending or threatened under the Act. (v) The Registration Statement, all Preliminary Prospectuses, the Prospectus and each amendment or supplement thereto and documents incorporated by reference therein comply as to form in all material respects with the requirements of the Act or the Exchange Act, as applicable and the applicable rules and regulations thereunder (except that such counsel need express no opinion as to, the statistical information contained in the Prospectus or financial statements, schedules and other financial information incorporated by reference therein). The conditions for the use of Form S-3, set forth in the General Instructions thereto, have been satisfied. (vi) The statements under the captions "Risk Factors -- Tichenor Merger," "-- Relationship Between the Company and Clear Channel," "The Tichenor Merger," "Management -- Management of the Company Following the Tichenor Merger," "Shares Eligible for Future Sale -- Registration Rights" and "Description of Capital Stock" in the Prospectus, insofar as such statements constitute a summary of documents referred to therein or matters of law, are accurate summaries and fairly and correctly present the information called for with respect to such documents and matters. (vii) To the best of such counsel's knowledge, there are no contracts or documents required to be filed as exhibits to the Registration Statement or described in the Registration Statement or the Prospectus (excluding any document incorporated therein by reference) which are not so filed or described as required, and such contracts and documents as are summarized in the Registration Statement or the Prospectus (excluding any document incorporated therein by reference) are fairly summarized in all material respects. (viii) To the best of such counsel's knowledge, there are no material legal proceedings pending or threatened against the Company or any of the Subsidiaries which is of a character required to be disclosed in the Prospectus and which has not been properly disclosed therein. -11- 13 (ix) The execution and delivery of this Agreement and the consummation of the transactions herein contemplated do not and will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, the Certificate of Incorporation or By-laws of the Company, or any agreement or instrument known to such counsel to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries may be bound (other than licenses or permits granted by the Federal Communications Commission, on which such counsel need not express any opinion), except a conflict, breach or default which would not have a materially adverse effect on the business or financial condition of the Company and the Subsidiaries taken as a whole. (x) This Agreement has been duly authorized, executed and delivered by the Company. (xi) No approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body having jurisdiction over the Company is necessary in connection with the execution and delivery of this Agreement and the consummation of the transactions herein contemplated (other than as may be required by the National Association of Securities Dealers, Inc. or as required by State securities and Blue Sky laws as to which such counsel need express no opinion) except such as have been obtained or made, specifying the same. (xii) The Company is not, and will not become, as a result of the consummation of the transactions contemplated by this Agreement, and application of the net proceeds therefor as described in the Prospectus, required to register as an investment company under the 1940 Act. (xiii) This Agreement and the Custody Agreement have been duly authorized, executed and delivered by the Selling Shareholder. (xiv) The Selling Shareholder has full legal right, power and authority, and any approval required by law (other than as required by the NASD or state securities and Blue Sky laws as to which such counsel need express no opinion), to sell, assign, transfer and deliver the Selling Shareholder Shares by such Selling Shareholder. (xv) The Underwriters (assuming they are bona fide purchasers within the meaning of the Uniform Commercial Code) have acquired good and marketable title to the Selling Shareholder Shares, free and clear of all claims, liens, encumbrances and security interests whatsoever. In rendering such opinion, such counsel may rely (A) as to matters governed by the laws of states other than California and Delaware or Federal laws on local counsel in such jurisdictions, provided that in each case such counsel shall state that they believe that they and the Underwriters are justified in relying on such other counsel and (B) as to matters of fact, on certificates of responsible officers of the Company and certificates or other written statements of officers or departments of various jurisdictions having custody of documents respecting the corporate existence or good standing of the Company and any Subsidiary. In addition to the matters set forth above, such opinion shall also include a statement to the effect that nothing has come to the attention of such counsel which leads them to believe that the Registration Statement, as of the time it became effective under the Act, the Prospectus or any amendment or supplement thereto, on the date it was filed pursuant to Rule 424(b) and the Registration Statement and the Prospectus, or any amendment or supplement thereto, as of the Closing Date or the Option Closing Date, as the case may be, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (except that such counsel need express no view as to matters pertaining to statistical information contained in the Prospectus or financial statements, schedules and other financial information contained or incorporated by reference in the Prospectus). With respect to such statement, such counsel may state that their belief is based upon the procedures set forth therein, but is without independent check and verification. (c) The Underwriters shall have received on the Closing Date or the Option Closing Date, as the case may be, the opinion of Wiley, Rein and Fielding, special Federal Communications Commission -12- 14 counsel to the Company, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Underwriters to the effect that: (i) The statements under the captions "Risk Factors -- Government Regulation of Broadcasting Industry" contained in the Prospectus and "Item 1. Business -- Federal Regulation of Radio Broadcasting" contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1996, insofar as such statements constitute a summary of documents referred to therein or matters of law, are accurate summaries and fairly and correctly present the information called for with respect to such documents and matters. (ii) No approval, consent, order, authorization, designation, declaration or filing by or with the Federal Communications Commission is necessary in connection with the execution and delivery of this Agreement and the consummation of the transactions herein contemplated except such as have been obtained or made, specifying the same. (d) The Underwriters shall have received from Piper & Marbury L.L.P., counsel for the Underwriters, an opinion dated the Closing Date or the Option Closing Date, as the case may be, substantially to the effect specified in subparagraphs (ii), (iv), (v) and (x) of Paragraph (b) of this Section 7, and that the Company is a validly organized and existing corporation under the laws of the State of Delaware. In rendering such opinion Piper & Marbury L.L.P. may rely as to all matters governed other than by the laws of the State of Maryland and Delaware or Federal laws on the opinion of counsel referred to in paragraph (b) of this Section 7. In addition to the matters set forth above, such opinion shall also include a statement to the effect that nothing has come to the attention of such counsel which leads them to believe that the Registration Statement, as of the time it became effective under the Act, and the Prospectus or any amendment or supplement thereto, on the date it was filed pursuant to Rule 424(b) and the Registration Statement and the Prospectus, or any amendment or supplement thereto, as of the Closing Date or the Option Closing Date, as the case may be, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (except that such counsel need express no view as to financial statements, schedules and other financial information included therein). With respect to such statement, Piper & Marbury L.L.P. may state that their belief is based upon the procedures set forth therein, but is without independent check and verification. (e) The Underwriters shall have received at or prior to the Closing Date from Piper & Marbury L.L.P. a memorandum or summary, in form and substance satisfactory to the Underwriters, with respect to the qualification for offering and sale by the Underwriters of the Shares under the State securities or Blue Sky laws of such jurisdictions as the Representatives may reasonably have designated to the Company. (f) The Representatives shall have received on each of the date hereof, the Closing Date or the Option Closing Date, as the case may be, signed letters from Ernst & Young LLP, KPMG Peat Marwick LLP and Miller, Kaplan, Arase & Co., dated the Closing Date or the Option Closing Date, as the case may be, which shall confirm, on the basis of a review in accordance with the procedures set forth in the letters signed by such firms and dated and delivered to the Underwriters on the date hereof that nothing has come to their attention during the period from the date five days prior to the date hereof, to a date not more than five days prior to the Closing Date or the Option Closing Date, as the case may be, which would require any change in their letter dated the date hereof if it were required to be dated and delivered on the Closing Date or the Option Closing Date, as the case may be. All such letters shall be in form and substance satisfactory to the Underwriters. (g) The Underwriters shall have received on the Closing Date or the Option Closing Date, as the case may be, a certificate or certificates of the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer of the Company to the effect that, as of the Closing Date or the Option Closing Date, as the case may be, each of them severally represents as follows: (i) The Registration Statement has become effective under the Act and no stop order suspending the effectiveness of the Registration Statement has been issued, and no proceedings for such purpose have been taken or are, to his knowledge, contemplated by the Commission. -13- 15 (ii) He does not know of any litigation instituted or threatened against the Company of a character required to be disclosed in the Registration Statement which is not so disclosed. (iii) He has carefully examined the Registration Statement and the Prospectus and, in his opinion to the best of his knowledge, as of the effective date of the Registration Statement, the statements contained in the Registration Statement were true and correct in all material respects, and such Registration Statement and Prospectus did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading and, in his opinion, since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement to or an amendment of the Prospectus which has not been so set forth in such supplement or amendment. (h) The Company shall have furnished to the Underwriters such further certificates and documents confirming the representations and warranties contained herein and related matters as the Underwriters may reasonably have requested. (i) The Company Shares and Option Shares, if any, have been approved for designation upon official notice of issuance on the Nasdaq Stock Market (National Market). The opinions and certificates mentioned in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in all material respects satisfactory to the Underwriters and to Piper & Marbury L.L.P., counsel for the Underwriters. If any of the conditions hereinabove provided for in this Section 7 shall not have been fulfilled when and as required by this Agreement to be fulfilled, the obligations of the Underwriters hereunder may be terminated by the Underwriters by notifying the Company and the Selling Shareholder of such termination in writing or by telegram at or prior to the Closing Date or the Option Closing Date, as the case may be. In such event, the Company and the Selling Shareholder and the Underwriters shall not be under any obligation to each other (except to the extent provided in Sections 6 and 9 hereof). 8. Conditions of the Obligations of the Company and the Selling Shareholder. The obligations of the Company and the Selling Shareholder to sell and deliver the Shares required to be delivered as and when specified in this Agreement are subject to the conditions that at the Closing Date or the Option Closing Date, as the case may be, no stop order suspending the effectiveness of the Registration Statement shall have been issued and in effect or proceedings therefor initiated or threatened. 9. Indemnification (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act against any losses, claims, damages or liabilities to which such Underwriter or such controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter and each such controlling person for any legal or other expenses reasonably incurred by such Underwriter or such controlling person in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Prospectus, or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or through the Representatives specifically for use in the preparation thereof, and provided further that the Company shall not be liable with respect to any untrue statement contained in or any omission from a Preliminary Prospectus if the untrue statement contained in or such omission from such Preliminary Prospectus was corrected in the applicable Prospectus and the person -14- 16 asserting any such loss, liability, claim or damage was not given or sent a copy of the applicable Prospectus (excluding the documents incorporated by reference therein) in the manner and at such time as required by the Act, provided the Company has furnished you copies of such applicable Prospectus. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) The Selling Shareholder agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act against any losses, claims, damages or liabilities to which such Underwriter or such controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading to the extent, but in any such case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company or such Underwriter directly or through the Selling Shareholder's representatives specifically for inclusion therein, and the Selling Shareholder will reimburse each Underwriter and each such controlling person for any legal or other expenses reasonably incurred by such Underwriter or such controlling person in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, that the Selling Shareholder will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Prospectus, or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company or the Selling Shareholder by or through the Representatives specifically for use in the preparation thereof, and provided further that the Selling Shareholder shall not be liable with respect to any untrue statement contained in or any omission from a Preliminary Prospectus if the untrue statement contained in or such omission from such Preliminary Prospectus was corrected in the applicable Prospectus and the person asserting any such loss, liability, claim or damage was not given or sent a copy of the applicable Prospectus (excluding the documents incorporated by reference therein) in the manner and at such time as required by the Act, provided the Company has furnished you copies of such applicable Prospectus. In no event, however, shall the liability of the Selling Shareholder for indemnification under this Section 9(b) exceed the lesser of (i) that proportion of the total losses, claims, damages or liabilities indemnified against equal to the proportion of total Shares sold hereunder which is sold by the Selling Shareholder and (ii) the proceeds received by the Selling Shareholder from the Underwriters in the Offering. This indemnity agreement will be in addition to any liability which the Selling Shareholder may otherwise have. (c) Each Underwriter will indemnify and hold harmless the Company, each of its directors or nominees for director, each of its officers who have signed the Registration Statement, the Selling Shareholder, each of its officers and directors, and each person, if any, who controls the Company or the Selling Shareholder within the meaning of the Act, against any losses, claims, damages or liabilities to which the Company, the Selling Shareholder or any such director, nominee for director, officer, or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; and will reimburse any legal or other expenses reasonably incurred by the Company, the Selling Shareholder or any such director, nominee for director, officer, or controlling person in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, that each Underwriter will be liable in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission has been made in the Registration Statement, any Preliminary Prospectus, the Prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by such Underwriter or through the Representatives on behalf of such Underwriter specifically for -15- 17 use in the preparation thereof. This indemnity agreement will be in addition to any liability which such Underwriter may otherwise have. (d) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to this Section 9, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing. No indemnification provided for in Section 9(a), (b) or (c) shall be available to any party who shall fail to give notice as provided in this Section 9(d) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was prejudiced by the failure to give such notice, but the failure to give such notice shall not relieve the indemnifying party or parties from any liability which it or they may have to the indemnified party for contribution or otherwise than on account of the provisions of Section 9(a), (b) or (c). In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel at its own expense. Notwithstanding the foregoing, the indemnifying party shall pay as incurred (or within 30 days of presentation) the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such indemnified parties. Such firm shall be designated in writing by you in the case of parties indemnified pursuant to Section 9(a), by the Selling Shareholder in the case of parties indemnified pursuant to Section 9(b), and by the Company in the case of parties indemnified pursuant to Section 9(c). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. (e) If the indemnification provided for in this Section 9 is unavailable to or insufficient to hold harmless an indemnified party under Section 9(a), (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Shareholder on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Selling Shareholder on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Shareholder on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Selling Shareholder bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Shareholder on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. No party shall be held liable for contribution with respect to any claim or action settled without its consent which shall not be -16- 18 unreasonably withheld. Such consent shall be given within three business days from the date on which the party requesting consent provides a written request to the other party. The Company, the Selling Shareholder and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 9(e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 9(e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above in this Section 9(e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (e), (i) no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions applicable to the Shares purchased by such Underwriter and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this Section 9(e) to contribute are several in proportion to their respective underwriting obligations and not joint. (f) In any proceeding relating to the Registration Statement, any Preliminary Prospectus, the Prospectus or any supplement or amendment thereto, each party against whom contribution may be sought under this Section 9 hereby consents to the jurisdiction of any court having jurisdiction over any other contributing party, agrees that process issuing from such court may be served upon him or it by any other contributing party and consents to the service of such process and agrees that any other contributing party may join him or it as an additional defendant in any such proceeding in which such other contributing party is a party. (g) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 9 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 9 and the representations and warranties of the Company and the Selling Shareholder set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Company, the Selling Shareholder or their respective directors, nominees for director or officers or any persons controlling the Company or the Selling Shareholder, (ii) acceptance of any Shares and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Underwriter, or to the Company, the Selling Shareholder or their respective directors or officers, or any person controlling the Company or the Selling Shareholder, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 9. 10. Default by Underwriters. If on the Closing Date or the Option Closing Date, as the case may be, any Underwriter shall fail to purchase and pay for the portion of the Shares which such Underwriter has agreed to purchase and pay for on such date (otherwise than by reason of any default on the part of the Company or the Selling Shareholder), the non-defaulting Underwriters shall use their best efforts to procure within 24 hours thereafter one or more of the other Underwriters, or any others, to purchase from the Company and the Selling Shareholder such amounts as may be agreed upon and upon the terms set forth herein, the Firm Shares or Option Shares, as the case may be, which the defaulting Underwriter or Underwriters failed to purchase. If during such 24 hours you, the non-defaulting Underwriters, shall not have procured such other Underwriters, or any others, to purchase the Firm Shares or Option Shares, as the case may be, agreed to be purchased by the defaulting Underwriter or Underwriters, then (a) if the aggregate number of shares with respect to which such default shall occur does not exceed 10% of the Firm Shares or Option Shares, as the case may be, covered hereby, the other Underwriters shall be obligated, severally, in proportion to the respective numbers of Firm Shares or Option Shares, as the case may be, which they are obligated to purchase hereunder, to purchase the Firm Shares or Option Shares, as the case may be, which such defaulting Underwriter or Underwriters failed to purchase, or (b) if the aggregate number of shares of Firm Shares or Option Shares, as the case may be, with respect to which such default shall occur exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered hereby, the Company or you as the Underwriters will have the right, by written notice given within the next 24-hour period to the parties to this -17- 19 Agreement, to terminate this Agreement without liability on the part of the non-defaulting Underwriters or of the Company except to the extent provided in Section 9 hereof. In the event of a default by any Underwriter or Underwriters, as set forth in this Section 10, the Closing Date or Option Closing Date, as the case may be, may be postponed for such period, not exceeding seven days, as you, the non-defaulting Underwriters, may determine in order that the required changes in the Registration Statement or in the Prospectus or in any other documents or arrangements may be effected. The term "Underwriter" includes any person substituted for a defaulting Underwriter. Any action taken under this Section 10 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 11. Notices. All communications hereunder shall be in writing and, except as otherwise provided herein, will be mailed, delivered or telegraphed and confirmed as follows: if to the Underwriters, to Alex. Brown & Sons Incorporated, 1 South Street, Baltimore, Maryland 21202, Attention: Jeffrey S. Amling, Managing Director; if to the Company, to Heftel Broadcasting Corporation, 6767 West Tropicana Avenue, Las Vegas, Nevada 89103, Attention: John T. Kendrick, Senior Vice President and Chief Financial Officer; and if to the Selling Shareholder to Clear Channel Communications, Inc., Heftel Broadcasting Corporation, 200 Concord Plaza, Suite 600, San Antonio, Texas 78216, Attention: L. Lowry Mays, President and Chief Executive Officer. 12. Termination. This Agreement may be terminated by you by notice to the Company and the Selling Shareholder as follows: (a) at any time prior to the earlier of (i) the time the Shares are released by you for sale by notice to the Underwriters, or (ii) 11:30 A.M. on the date of this Agreement; (b) at any time prior to the Closing Date if any of the following has occurred: (i) since the effective date of the Registration Statement, any material adverse change or any development involving a prospective material adverse change in or affecting the condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole or the earnings, business affairs, management or business prospects of the Company and its Subsidiaries taken as a whole, whether or not arising in the ordinary course of business, (ii) any outbreak of hostilities or other national or international calamity or crisis or change in economic or political conditions if the effect of such outbreak, calamity, crisis or change on the financial markets of the United States would, in your reasonable judgment, make the offering or delivery of the Shares impracticable, (iii) suspension of trading in securities on the New York Stock Exchange or the American Stock Exchange or limitation on prices (other than limitations on hours or numbers of days of trading) for securities on either such Exchange, (iv) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of any court or other governmental authority which in your reasonable opinion materially and adversely affects or will materially or adversely affect the business or operations of the Company and the Subsidiaries taken as a whole, (v) declaration of a banking moratorium by either federal or New York State authorities, (vi) the suspension of trading of the Company's common stock by the Commission on the Nasdaq Stock Market or (vii) the taking of any action by any federal, state or local government or agency in respect of its monetary or fiscal affairs which in your reasonable opinion has a material adverse effect on the securities markets in the United States; or (c) as provided in Sections 7 and 10 of this Agreement. This Agreement also may be terminated by you, by notice to the Company, as to any obligation of the Underwriters to purchase the Option Shares, upon the occurrence at any time prior to the Option Closing Date of any of the events described in subparagraph (b) above or as provided in Sections 7 and 10 of this Agreement. 13. Successors. This Agreement has been and is made solely for the benefit of the Underwriters, the Company, the Selling Shareholder and their respective successors, executors, administrators, heirs and assigns, and the officers, directors and controlling persons referred to herein, and no other person will have any right or obligation hereunder. The term "successors" shall not include any purchaser of the Shares merely because of such purchase. -18- 20 14. Information Provided by Underwriters. The Company, the Selling Shareholder and the Underwriters acknowledge and agree that the only information furnished or to be furnished by any Underwriter to the Company or the Selling Shareholder for inclusion in any Prospectus or the Registration Statement consists of the information set forth in the last paragraph on the front cover page (insofar as such information relates to the Underwriters), legends required by Item 502(d) of Regulation S-K under the Act and the information under the caption "Underwriting" in the Prospectus. 15. Miscellaneous. The reimbursement, indemnification and contribution agreements contained in this Agreement and the representations, warranties and covenants in this Agreement shall remain in full force and effect regardless of (a) any termination of this Agreement, (b) any investigation made by or on behalf of any Underwriter or controlling person thereof, or by or on behalf of the Company or its directors or officers and (c) delivery of and payment for the Shares under this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland. -19- 21 If the foregoing letter is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicates hereof, whereupon it will become a binding agreement among the Company, the Selling Shareholder and the several Underwriters in accordance with its terms. Very truly yours, HEFTEL BROADCASTING CORPORATION By ------------------------------- L. Lowry Mays President and Chief Executive Officer CLEAR CHANNEL COMMUNICATIONS, INC. By ------------------------------- L. Lowry Mays President and Chief Executive Officer The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. ALEX. BROWN & SONS INCORPORATED CREDIT SUISSE FIRST BOSTON CORP. LEHMAN BROTHERS INC. MONTGOMERY SECURITIES SMITH BARNEY INC. By ALEX. BROWN & SONS INCORPORATED By ------------------------------- Authorized Officer -20- 22 SCHEDULE I SCHEDULE OF UNDERWRITERS
NUMBER OF FIRM SHARES UNDERWRITER TO BE PURCHASED - ------------------------------------------------------------------------- --------------------- Alex. Brown & Sons Incorporated.......................................... Credit Suisse First Boston Corp.......................................... Lehman Brothers Inc...................................................... Montgomery Securities.................................................... Smith Barney Inc......................................................... --------- Total.......................................................... 3,850,000 =========
-21- EX-2.5.14 3 OPTION AGREEMENT 1 EXHIBIT 2.5.14 OPTION AGREEMENT THIS OPTION AGREEMENT (this "Agreement") is made as of December 23, 1996, by and among GOLDEN WEST BROADCASTERS, a California corporation (the "Company"), ORVON GENE AUTRY and STANLEY B. SCHNEIDER, AS CO-TRUSTEES OF THE AUTRY SURVIVOR'S TRUST (collectively, the "Trustees") and CLEAR CHANNEL RADIO, INC., a Nevada corporation ("Optionee"), with reference to the following facts: Recitals A. The Company is authorized to operate radio station KSCA(FM), Glendale, California (the "Station") pursuant to a license issued to the Company by the Federal Communications Commission (the "FCC"); and B. Optionee desires to have, and the Company desires to grant to Optionee, an option to buy certain of the assets relating to the Station, including all FCC licenses, on the terms and conditions hereof. Agreement NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements contained herein, and intending to be legally bound, the parties hereby agree as follows: 1. Option. The Company hereby grants to Optionee, and Optionee hereby accepts for the consideration set forth in Section 2 of this Agreement, the exclusive right (the "Option") to purchase from the Company the assets of the Company described in the Purchase Agreement (the "Assets") on the terms and conditions set forth in the Purchase Agreement. The parties acknowledge included with the Purchase Agreement attached hereto are schedules which provide the information required under the Purchase Agreement and exceptions to the representations and warranties in the Purchase Agreement, assuming the Purchase Agreement was executed on the date hereof. 2. Option Period. (a) Subject to Section 14, the initial term of this Agreement shall commence on the date hereof and shall remain in full force and effect until 5:00 p.m., Pacific Time on December 30, 1997, provided Optionee delivers to the Company within 5 business days after the Initial Payment Date $10 million by bank cashier's check or wire-transfer of immediately available funds. 2 (b) Subject to Section 14, this Agreement shall be automatically renewed for a period of one year (with each period expiring at 5:00 p.m., Pacific Time, on December 30), provided that for each one year extension period Optionee shall have delivered to the Company an additional $3 million by bank cashier's check or wire-transfer of immediately available funds before the expiration time for the one year option period then in effect. For example, assuming the Initial Payment Date is January 1, 1997 for this Agreement to be extended until December 30, 1998, Optionee must have delivered $10 million on or before January 8, 1997 and another $3 million by December 30, 1997, for a total payment of $13 million. Notwithstanding the foregoing, if Optionee exercises the Option during the Exercise Period, this Agreement shall remain in effect (without the need to make any further additional $3 million payments) until the earlier of termination hereof pursuant to Section 14 or the closing of the transactions contemplated by the Purchase Agreement. (c) All amounts due under this Section 2 shall be payable in lawful money of the United States of America. 3. Application and Refund of Option Payments. (a) If Optionee exercises the Option prior to the time this Agreement expires under Section 2 or is terminated under Section 14 (the "Expiration Time") and the transactions contemplated by the Purchase Agreement are consummated, then all amounts paid pursuant to Section 2 (the "Option Payments") shall be applied to the purchase price for the Assets. (b) If (1) the Purchase Agreement is terminated pursuant to Section 13.1(c) thereof, (2) this Agreement is terminated pursuant to Section 14(b)(iv), or (3) the Company terminates this Agreement or the Purchase Agreement other than pursuant to the terms hereof or thereof, the Company shall refund to Optionee the Breaching Refund Amount. (c) If either (1) the Purchase Agreement is terminated pursuant to Section 13.1(b), (e), or (f) thereof, (2) this Agreement is terminated pursuant to Section 14(b)(iii) or Section 14(b)(vi), or (3) Seller terminates the Purchase Agreement pursuant to Section 13.1(g) thereof, the Company shall refund to Optionee the Non-Breaching Refund Amount. (d) If this Agreement is terminated pursuant to Section 14(b)(i) and the schedules referred to in Section 14(b)(i) are different as a result of -2- 3 (1) the Assumed Liabilities (as defined in the Purchase Agreement) at the time the Company delivers the Purchase Agreement for execution pursuant to Section 4 being greater than the Assumed Liabilities on the date hereof (assuming the Purchase Agreement was executed on the date hereof), as a result of a breach by the Company of its covenant contained in Section 8(c)(vi) hereof, (2) if the FCC licenses for the Station have expired, been terminated or been modified in a manner which is materially adverse to the holder thereof due more to the actions or omissions of the Company than the actions or omissions of Optionee (the parties agree the FCC licenses shall not be deemed to have expired or been terminated due solely to the passage of the expiration date for such licenses if the Company has timely filed a renewal application which is pending), or (3) a material reduction in the Assets due to the actions or omissions of the Company (normal wear and tear on any Assets will not be deemed a material reduction in the Assets), then the Company shall refund to Optionee the Breaching Refund Amount. (e) If this Agreement is terminated pursuant to Section 14(b)(i) and the schedules referred to in Section 14(b)(i) are different as a result of (1) the Assumed Liabilities (as defined in the Purchase Agreement) at the time the Company delivers the Purchase Agreement for execution pursuant to Section 4 being greater than the Assumed Liabilities on the date hereof (assuming the Purchase Agreement was executed on the date hereof) for any reason other than as described in Section (d)(1) hereof, or (2) if the FCC licenses for the Station have expired, been terminated or been modified in a manner which is materially adverse to the holder thereof for any reason other than described in Section (d)(2) hereof (the parties agree the FCC licenses shall not be deemed to have expired or been terminated due solely to the passage of the expiration date for such licenses if the Company has timely filed a renewal application which is pending) -3- 4 then the Company shall refund to Optionee the Non-Breaching Refund Amount. (f) Any refund of a portion of the Option Payments due under this Section 3 shall be paid promptly to Optionee, but in no event later than five business days after this Agreement is terminated. (g) Except as set forth in Sections 3(b),(c),(d) and (e), the Company shall be entitled to retain all of the Option Payments. (h) Any refund of any portion of the Option Payments, or retention of all or part of the Option Payments, shall be in addition to all other rights or remedies of Optionee or the Company, as the case may be, including, without limitation, the right to recover damages incurred as a result of a breach by the other party of its obligations, representations, warranties or duties hereunder, under the TBA or under the Purchase Agreement, including, without limitation, any capital expenditures of the Company reimbursed by Optionee under the TBA and any amounts reimbursed by Optionee to the Company under Section 3(b)(iii) of the TBA. 4. Exercise. If Optionee is not in material breach of this Agreement, Optionee may exercise the Option at any time during the period commencing on the date of death of Gene Autry and ending one month after the date of delivery by the Company of written notice of the death of Gene Autry (the "Exercise Period") by delivering to the Company written notice (the "Exercise Notice"). The Company shall have 30 days from the date of delivery of the Exercise Notice to the Company to execute and deliver to Optionee the Purchase Agreement, together with any schedules thereunder, for execution by Optionee (the date of such delivery by the Company is referred to herein as the "Delivery Date"). 5. Hart-Scott-Rodino Filing. As promptly as practical after the date hereof (which in no event shall be later than January 3, 1997), Optionee and the Company shall prepare and file with the Federal Trade Commission and the United States Department of Justice all documents which are required to comply with the HSR Act, and shall promptly furnish all materials thereafter requested by any of the regulatory agencies having jurisdiction over such filings. -4- 5 6. Representations and Warranties of the Company and the Trustees. (a) The Company represents and warrants to Optionee as follows: (i) The Company has the corporate power and authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. (ii) The representations and warranties of the Company in the Purchase Agreement are true and correct on the date hereof. (b) The Trustees represent and warrant to Optionee they have the power and authority to enter into this Agreement, to perform their obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Trustees and constitutes a valid and binding obligation of the Trustees, enforceable against the Trustees in accordance with its terms. 7. Representations and Warranties of Optionee. Optionee hereby represents and warrants to the Company as follows: (a) Optionee has all requisite corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Optionee and the consummation by Optionee of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Optionee. This Agreement has been duly executed and delivered by Optionee and constitutes a valid and binding obligation of Optionee, enforceable against Optionee in accordance with its terms. (b) The representations and warranties of Optionee contained in the Purchase Agreement are true and correct on the date hereof. -5- 6 8. Covenants of the Company. From the date hereof until the Execution Date, the Company agrees: (a) it shall not by its acts or omissions cause the representations and warranties of the Company in the Purchase Agreement to be untrue in any material respect on the Execution Date; (b) to maintain the insurance set forth on Schedule 6.9 attached hereto as part of Exhibit A, to submit a claim to the insurance carriers for each event of loss or damage to any of the Assets and in consultation with Optionee apply any insurance proceeds received by the Company to the repair or replacement of the lost or damaged Asset; (c) Except as caused by non-compliance by Optionee with the TBA, the Company: (i) shall not sell or otherwise dispose of any of the Assets or grant a Lien on the Assets or permit a Lien to remain on the Assets if such Lien was placed thereon as a result of the actions or omissions of the Company; (ii) shall not commit any act or omit to do any act which will cause a breach of any Contract; (iii) shall not amend or renew any Contract or terminate its lease for the Station's main transmitter site; (iv) will operate in the ordinary course of business, consistent with past practice, and will take no actions to diminish materially the goodwill of the business of the Station; (v) will operate the Station in material compliance with the Communications Act and the FCC rules and regulations; (vi) will not increase the liabilities which Optionee will assume under the Purchase Agreement above the amount of the liabilities which Optionee would assume if the Purchase Agreement was executed on the date hereof, other than an increase resulting from any amendment or renewal of a Contract approved in writing by Optionee or any new agreement which Optionee requests in writing for the Company to execute and assign to Optionee under the Purchase Agreement; and (vii) will take all action necessary to maintain the FCC licenses relating to the Station in full force and effect without material modification, including, without limitation, the timely filing of a renewal application and responding to requests thereunder from the FCC, and will keep Optionee informed with -6- 7 respect to any renewal application and requests thereunder from the FCC. 9. Access to Information. From the date hereof until the Execution Date, the Company shall afford, and shall cause its respective officers, directors, employees and agents to afford, to Optionee and the officers, employees and agents of Optionee complete access at all reasonable times to the Company's officers, employees, independent contractors, agents, properties and to the Company's books, records and contracts relating to the Station. 10. Confidentiality. (a) Optionee shall hold, and shall cause its officers, employees and agents and representatives, including, without limitation, attorneys, accountants, consultants and financial advisors who obtain such information to hold, in confidence, and not use for any purpose other than evaluating the transactions contemplated by this Agreement or performing its obligations hereunder or under the TBA, any confidential information of the Company or the Trustees, which for the purposes hereof shall not include any information which (i) is or becomes generally available to the public other than as a result of disclosure by Optionee or one of its affiliates in violation of its obligations under this subsection, (ii) becomes available to Optionee on a nonconfidential basis from a source, other than the Company, the Trustees or affiliates of the Company, which has represented that such source is entitled to disclose it, or (iii) was known to Optionee on a nonconfidential basis prior to its disclosure to Optionee hereunder. If this Agreement is terminated without a closing of the acquisition of the Assets by Optionee, Optionee shall deliver, and cause its officers, employees, agents, and representatives, including, without limitation, attorneys, accountants, consultants and financial advisors who obtain confidential information of the Company or the Trustees to deliver, to the Company all such confidential information that is written (including copies or extracts thereof), whether such confidential information was obtained before or after the execution hereof. (b) The Company shall hold, and shall cause its officers, employees and agents and representatives, including, without limitation, attorneys, accountants, consultants and financial advisors who obtain such information to hold, in confidence, and not use for any purpose other than evaluating the transactions contemplated by this Agreement, any confidential information of Optionee, which for the purposes hereof shall not include any information which (i) is or becomes generally available to the public other than as a result of disclosure by the Company or one of its affiliates in violation of its obligations under this subsection, (ii) becomes available to the Company on a nonconfidential basis from a source, other than -7- 8 Optionee or its affiliates, which has represented that such source is entitled to disclose it, or (iii) was known to the Company on a nonconfidential basis prior to its disclosure to the Company hereunder. If this Agreement is terminated without a closing of the acquisition of the Assets by Optionee, the Company shall deliver, and cause its officers, employees, agents, and representatives, including, without limitation, attorneys, accountants, consultants and financial advisors who obtain confidential information of Optionee to deliver, to Optionee all such confidential information that is written (including copies or extracts thereof), whether such confidential information was obtained before or after the execution hereof. (c) If a person who receives confidential information is requested or becomes legally compelled (by oral questions, interrogatories, requests for information or documents, subpoena, criminal or civil investigative demand or similar process) to disclose any of such confidential information, such person will provide the other party with prompt written notice so that such other party may seek a protective order or other appropriate remedy or waive compliance with Section 10(a) or (b), as the case may be. If such protective order or other remedy is not obtained, or if the applicable party waives compliance with Section 10(a) or (b), as the case may be, the person subject to the request will furnish only that portion of such confidential information which is legally required and will exercise reasonable efforts to obtain reliable assurance that confidential treatment will be accorded such confidential information. 11. Notification of Certain Matters. The Company shall give prompt notice to Optionee, of the discovery of (i) any material inaccuracy in any representation or warranty made by it, (ii) any material failure of the Company to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement or (iii) any legal proceedings related to the Station or the transactions contemplated hereby. Optionee shall give prompt notice to the Company of the discovery of (1) any material inaccuracy in any representation or warranty made by it,(2) any material failure of Optionee to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement or (3) any legal proceedings related to the Station or the transactions contemplated hereby. Notwithstanding the foregoing, no notification made under this Section shall affect the representations or warranties or covenants or agreements of the parties or the conditions to the obligations of the parties hereunder. -8- 9 12. News Releases. Except for announcements required by applicable law, prior to the Execution Date, any news releases pertaining to the transactions contemplated hereby shall be reviewed and approved by Optionee and the Company, or their respective representatives, and shall be acceptable to them prior to the dissemination thereof. 13. Covenants of Optionee. From the date hereof until the Execution Date, Optionee agrees it shall not by its actions or omissions cause (a) the representations and warranties of Optionee in the Purchase Agreement to be untrue in any material respect on the Execution Date or (b) the schedules delivered by the Company pursuant to Section 4 to be different than the Schedules attached hereto as part of Exhibit A in a manner which is materially adverse to Optionee or the Company. 14. Termination and Modification of Purchase Price. This Agreement shall be terminated only as follows: (a) This Agreement shall terminate as follows: (i) At the expiration of the Exercise Period if the Option has not been exercised during the Exercise Period; (ii) Upon a termination of the Purchase Agreement in accordance with its terms; or (iii) If Optionee fails to deliver the $10 million to the Company in accordance with Section 2(a). (b) This Agreement may be terminated as follows, provided, in the case of a termination pursuant to clause (i), (iii), (iv), (v), (vi) or (vii), the terminating party is not in material breach of any of its obligations, representations, warranties or duties hereunder: (i) By written notice from the Optionee, if Optionee exercises the Option during the Exercise Period but the schedules delivered by the Company pursuant to Section 4 are different than the schedules attached hereto as part of Exhibit A in a manner which is materially adverse to Optionee; (ii) By mutual written consent of the parties; (iii) Subject to Section 15, written notice from either the Company or Optionee, if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action, in each case permanently restraining, enjoining or otherwise prohibiting the acquisition of the Assets pursuant to the terms of the Purchase Agreement and such order, decree, ruling or other action is not subject to appeal or further administrative or judicial review; -9- 10 (iv) By written notice from Optionee, if the Company fails to perform or breaches any of its material obligations or duties under this Agreement and the Company has not cured such failure to perform or breach within 30 days after delivery of written notice from Optionee or upon a material breach of any representation and warranty of the Company contained herein; (v) By written notice from the Company, if Optionee fails to perform or breaches any of its material obligations or duties under this Agreement and Optionee has not cured such failure to perform or breach within 30 days after delivery of written notice from the Company or upon a material breach of any representation and warranty of Optionee contained herein; (vi) Subject to Section 15, by written notice from the Company or Optionee, if the Federal Trade Commission or the United States Department of Justice prohibits the acquisition of the Assets pursuant to the Purchase Agreement under a decision, order or decree which is not subject to appeal or further administrative or judicial review; or (vii) By written notice from the Company, if neither of the following occurs: (A) within 30 days of the Delivery Date, Optionee shall have executed, and delivered to the Company, the Purchase Agreement, together with the schedules delivered by the Company pursuant to Section 4, or (B) within 30 days of the Delivery Date, Optionee shall have delivered to the Company a written notice (the "Execution Notice") that Optionee intends to execute the Purchase Agreement, together with the schedules delivered by the Company pursuant to Section 4, but Optionee has determined the parties are required to file Notification and Report Forms under the HSR Act prior to executing such Purchase Agreement and Optionee executes such Purchase Agreement within five business days after the waiting period under the HSR Act has expired or been terminated. (c) Upon a termination of this Agreement in accordance with its terms no party shall have any liability hereunder, except (i) as provided in Sections 3 and 10, (ii) for liability for a breach of such party's representations and warranties contained herein and (iii) for liability for nonperformance of any of such party's obligations, covenants or agreements contained herein. (d) Notwithstanding anything to the contrary contained herein, the provisions of Sections 3, 10 and 18 shall survive the termination hereof and Section 19 (only with respect to Sections 3, 10 and 18) shall survive the termination hereof. -10- 11 (e) If Optionee would be entitled to terminate this Agreement under Section 14(b)(i) but Optionee desires to proceed with the acquisition of the Assets, in lieu of termination of this Agreement the parties agree the Purchase Agreement shall be executed and, if Optionee would have been entitled to receive a refund under Section 3(d) or 3(e) if it had terminated this Agreement, the purchase price for the Assets shall be reduced by the amount of the increase in liabilities or the amount of the reduction in the Assets, as the case may be, described in Section 3(d) or 3(e), as the case may be. 15. Assignment. Optionee shall have no right, without the consent of the Company (which consent may not be unreasonably withheld), to assign, sell, transfer, pledge, hypothecate, delegate or otherwise transfer, whether voluntarily, involuntarily or by operation of law, any of Optionee's rights or obligations hereunder, nor shall Optionee's rights be subject to encumbrance or the claim of creditors. Any such purported assignment, transfer or delegation shall be null and void. Notwithstanding the foregoing, (a) Optionee may assign its rights hereunder, without the consent of the Company or the Trustees, to any of its wholly-owned subsidiaries, as well as to Heftel Broadcasting Corporation, a Delaware corporation, or any of its wholly-owned subsidiaries, and (b) if Optionee is not in material breach of any of its obligations, representations, warranties or duties hereunder and the acquisition of the Assets by Optionee is prohibited by law, Optionee may assign it rights hereunder, without the consent of the Company or the Trustees, to an entity which is financially capable of performing the obligations of Optionee hereunder and under the Purchase Agreement. No assignment by Optionee hereunder shall relieve Optionee of its obligations hereunder. Notwithstanding anything to the contrary contained herein no assignment of any rights hereunder may be made unless the rights of the assigning party under the Purchase Agreement are also assigned to the same person. 16. Recordation and UCC-1. The Company agrees to execute a memorandum of this Agreement in a form reasonably acceptable to the parties which Optionee shall be entitled to record in the applicable county recorders' offices. In addition, the Company shall execute and deliver to Optionee a Financing Statement on Form UCC-1 which shall indicate the existence of this Agreement and which Optionee may file with the California Secretary of State and applicable county recorders' offices for purposes of informing the general public of the existence of this Agreement. 17. Definitions. (a) The following terms shall have the following meaning: -11- 12 "Breaching Refund Amount" shall mean an amount equal to the Option Payments less the lesser of (i) the product of the Daily Amount (the parties acknowledge the Daily Amount may be different for each day) multiplied by the number of days elapsed from the TBA Effective Date until the date of termination of this Agreement or (ii) Optionee's broadcast cash flow from the Station for such period (for purposes hereof "broadcast cash flow" shall mean broadcasting revenues less Station operating expenses). "Communications Act" shall mean the Communications Act of 1934, as amended. "Contracts" shall mean the contracts set forth on Schedule 1.1(b) to the Purchase Agreement attached hereto. "Daily Amount" shall mean $13,698.63; provided, however, (i) for any day on which Optionee is unable to broadcast its programming on the Station under the TBA because of preemption thereof by Licensee or because the Station is unable to broadcast (except if the reason for the inability to broadcast is a capital expenditure was not made under the TBA due to Optionee not consenting to such expenditure), the "Daily Amount" shall be reduced by an amount equal to (1) $570.78, multiplied by (2) the number of hours (rounded to the nearest whole number) for which Optionee is unable to broadcast its programming on the Station under the TBA and (ii) for each day on which the TBA is not in effect due to a termination thereof, the "Daily Amount" shall be zero. "Execution Date" shall mean the date the Purchase Agreement is executed by both parties. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Initial Payment Date" shall mean the earlier of the date on which the waiting period under the HSR Act for the filing described in Section 5 expires or the date of written notice of termination of such waiting period. "Liens" shall mean all claims, liens, encumbrances, security interests, mortgages, or pledges of any kind except for (i) rights of the lessor of the transmitter site and the studio premises, and (ii) rights of any parties to any Contract set forth in such Contract. "Non-Breaching Refund Amount" shall mean an amount equal to the Option Payments less the product of the Daily Amount (the parties acknowledge the Daily Amount may be different for each day) multiplied by the number of days elapsed from the TBA Effective Date until the date of termination of this Agreement. -12- 13 "Purchase Agreement" shall mean the Asset Purchase Agreement attached hereto as Exhibit A and incorporated herein by reference. "TBA" shall mean the Time Brokerage Agreement, of even date herewith, between the Company and Optionee. "TBA Effective Date" shall mean the Effective Date as defined in the TBA. Each of the following terms shall have the meanings set forth in the Section opposite such term:
Term Section ---- ------- Agreement Preamble Applicable Period 21 Assets 1 Company Preamble Delivery Date 4 Execution Notice 14(b)(vii) Exercise Notice 4 Exercise Period 4 Expiration Time 3(a) FCC Recital A Option 1 Optionee Preamble Option Payments 3(a) Station Recital A Trustees Preamble
18. Miscellaneous (a) Benefit. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, permitted assigns, heirs, administrators, executors and representatives. (b) Headings. The headings set forth in this Agreement are for convenience only and will not control or affect the meaning or construction of the provisions of this Agreement. (c) Governing Law. This Agreement and the rights of the parties hereto shall be governed by, and construed in accordance with, the laws of the State of California, without giving effect to the choice of law principles thereof. (d) Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. -13- 14 (e) Severability. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. (f) Attorneys' Fees. Should any party hereto institute any action or proceeding at law or in equity to enforce any provision of this Agreement, including an action for declaratory relief, or for damages by reason of an alleged breach of any provision of this Agreement, or otherwise in connection with this Agreement, or any provision hereof, the prevailing party shall be entitled to recover from the losing party or parties reasonable attorneys' fees and costs for services rendered to the prevailing party in such action or proceeding. (g) Multiple Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. (h) Notices. Unless applicable law requires a different method of giving notice, any and all notices, demands or other communications required or desired to be given hereunder by any party shall be in writing. Assuming that the contents of a notice meet the requirements of the specific Section of this Agreement which mandates the giving of that notice, a notice shall be validly given or made to another party if served either personally or if deposited in the United States mail, certified or registered, postage prepaid, or if transmitted by telegraph, telecopy or other electronic written transmission device or if sent by overnight courier service, and if addressed to the applicable party as set forth below. If such notice, demand or other communication is served personally, service shall be conclusively deemed given at the time of such personal service. If such notice, demand or other communication is given by mail, service shall be conclusively deemed given seventy-two (72) hours after the deposit thereof in the United States mail. If such notice, demand or other communication is given by overnight courier, or electronic transmission, service shall be conclusively deemed given at the time of confirmation of delivery. The addresses for the parties are as follows: -14- 15 If to Optionee: Clear Channel Radio, Inc. 200 Concord Plaza, Suite 600 San Antonio, Texas 78216 Attention: Mr. Mark P. Mays Telecopier No.: (210) 822-2299 If to the Company: 4383 Colfax Avenue Studio City, California 91604 Attention: Mrs. Jackie Autry Telecopier: (818) 752-7779 with a copy to: Jeffer, Mangels, Butler & Marmaro LLP 2121 Avenue of the Stars, Tenth Floor Los Angeles, California 90067 Attention: Richard M. Brown, Esq. Telecopier No.: (310) 203-0567 If to the Trustees: Gursey, Schneider & Co., LLP 10351 Santa Monica Boulevard, Suite 300 Los Angeles, California 90025 Attention: Stanley B. Schneider, Co-Trustee Telecopier No.: (310) 557-3468 with a copy to: Jeffer, Mangels, Butler & Marmaro LLP 2121 Avenue of the Stars, Tenth Floor Los Angeles, California 90067 Attention: Richard M. Brown, Esq. Telecopier No.: (310) 203-0567 Any party hereto may change its or his address for the purpose of receiving notices, demands and other communications as herein provided, by a written notice given in the aforesaid manner to the other parties hereto. (i) Waivers. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. -15- 16 (j) No Third Party Beneficiaries. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties hereto and their respective successors, permitted assigns, heirs, administrators, executors and representatives, any rights or remedies under or by reason of this Agreement. (k) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto relating to the matters provided for herein and supersede any and all prior agreements, arrangements, negotiations, discussions and understandings relating to the matters provided for herein. (l) Rule of Construction. Each party and counsel for each party have reviewed this Agreement. The parties hereto hereby agree that the normal rule of construction, which requires a court to resolve any ambiguities against the drafting party, shall not apply in interpreting this Agreement. (m) Exhibits. Each Exhibit referred to in this Agreement is hereby incorporated herein by reference. (n) HSR Filing Fee. Optionee shall be responsible for paying any governmental filing fee for all filings made under the HSR Act. Each party shall be responsible for its own attorneys fees and costs related to the filings under the HSR Act and responding to any requests for additional information made by the Federal Trade Commission or the United States Department of Justice in response to such filings. (o) References to Optionee. In the context of references herein to representations, warranties, covenants, obligations or duties of Optionee under the Purchase Agreement or the TBA, Optionee shall be deemed to include its assigns under the Purchase Agreement and the TBA. 19. Guaranty. The Trustees, as co-trustees of the Autry Survivor's Trust, hereby guarantee the obligations of the Company hereunder; provided, however, Optionee agrees the monetary liability of Stanley B. Schneider under this guarantee shall be limited to the assets of the Autry Survivor's Trust. 20. Specific Performance. The Company recognizes that, in the event the Company defaults in the performance of its obligations hereunder, monetary damages will not be an adequate remedy. Therefore, unless Optionee is in material breach of this Agreement, Optionee shall be entitled to obtain specific performance of the terms of this Agreement. In any action to enforce specifically the performance of this Agreement, the Company waives the defense that there is another adequate remedy at law or equity and agrees that Optionee shall have the right to obtain specific performance of the Company's obligations under -16- 17 the terms of this Agreement without being required to prove actual damages, post bond or furnish other security. As a condition to seeking specific performance, Optionee shall not be required to have tendered the purchase price for the Assets, but shall be required to demonstrate that it is ready, willing and able to do so at the closing of the transactions contemplated by the Purchase Agreement and to perform its other obligations hereunder and under the Purchase Agreement in accordance with the terms hereof and thereof. 21. Extension of Time Periods. If either the Company or Optionee is required or permitted to perform an action hereunder within a certain time period (the "Applicable Period") but on or before the end of the Applicable Period such party has delivered a notice of breach by the other hereunder, the balance of the Applicable Period shall be suspended until the day after the date on which the breaching party has cured the Subject Breach. -17- 18 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. GOLDEN WEST BROADCASTERS By:/s/ Jacqueline Autry ----------------------------- Jacqueline Autry Executive Vice President CLEAR CHANNEL RADIO, INC. By:/s/ Kenneth E. Wyker ---------------------------- Name: Kenneth E. Wyker Title: Vice President, Legal Affairs /s/ Orvon Gene Autry ------------------------------- ORVON GENE AUTRY, as co-trustee of the Autry Survivor's Trust /s/ Stanley B. Schneider ------------------------------- STANLEY B. SCHNEIDER, as co-trustee of the Autry Survivor's Trust -18- 19 EXHIBIT A Asset Purchase Agreement and Schedules 1. See the attached document consisting of 50 pages. -19- 20 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into on _______ by and among GOLDEN WEST BROADCASTERS, a California corporation ("Seller"), ________________ and STANLEY B. SCHNEIDER, AS CO- TRUSTEES OF THE AUTRY SURVIVOR'S TRUST (collectively, the "Trustees") and CLEAR CHANNEL RADIO, INC., a Nevada corporation ("Buyer"), with reference to the following facts: Recitals A. Seller operates radio station KSCA(FM), Glendale, California (the "Station") pursuant to licenses issued by the Federal Communications Commission (the "FCC"); B. Seller, Buyer and Stanley B. Schneider and Orvon Gene Autry, as co-trustees of the Autry Survivor's Trust, entered into an Option Agreement, dated as of December 23, 1996, (the "Option Agreement") and this Agreement is being entered into pursuant to the exercise of the option granted to Buyer under the Option Agreement. C. Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, substantially all of the assets used or held for use in connection with the operation of the Station, all on the terms and subject to the conditions set forth herein. Agreement NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE 22 PURCHASE OF ASSETS 22.1 Transfer of Assets by Seller. On the Closing Date, subject to the conditions contained herein, Seller shall sell, assign, transfer and convey to Buyer, and Buyer shall purchase from Seller, all of the assets, properties, interests and rights of Seller which are used or held for use in connection with the operation of the Station (collectively, the "Purchased Assets"), including, without limitation, the following: -20- 21 (a) All furniture, equipment and other tangible personal property relating to the operation of the Station, including, without limitation, the property listed on Schedule 1.1(a) attached hereto, together with any additions thereto made between the date hereof and the Closing Date, and less any dispositions thereof made in the ordinary course of business between the date hereof and the Closing Date which are replaced with items of equal or greater value (collectively, the "Tangible Personal Property"); (b) All of Seller's right, title and interest in and to each permit, contract, agreement, license and lease, written or oral, relating to the operation of the Station listed in Schedule 1.1(b) hereto, together with all contracts, agreements and leases entered into by Seller between the date hereof and the Closing Date if Buyer agrees to assume such agreement in writing at the Closing (collectively, the "Contracts"); at Buyer's option, exercisable by delivery of written notice before the Closing, the Auxiliary Site Lease shall be included in the Contracts; (c) All licenses, permits and other authorizations relating to the Station issued to Seller by the FCC on or prior to the Closing Date, together with renewals or modifications thereof, including, without limitation, the licenses, permits and authorizations listed on Schedule 1.1(c) attached hereto (collectively, the "FCC Licenses"); (d) All of Seller's right, title and interest in and to all of its intellectual property associated with the Station, including, but not limited to, the call letters "KSCA(FM)," together with any associated goodwill (collectively, the "Intellectual Property"); (e) All files, records, and reports which Seller must retain under FCC rules and regulations; (f) All rights of way and other interests of every kind in and to any real property and buildings thereon leased by Seller and used or held for use in connection with the business and operations of the Station; and (g) All goodwill in, and going concern value of, the Station; (h) All claims and rights against third parties relating to the Purchased Assets, including, without limitation, all rights under manufacturers' and vendors' warranties; and (i) Any books and records relating to any of the foregoing, except to the extent that Seller wishes to make, at its expense, a duplicate copy of such materials. -21- 22 22.2 Excluded Assets. Notwithstanding anything to the contrary contained herein, it is expressly understood and agreed that the Purchased Assets shall not include the following assets along with all right, title and interest therein (collectively, the "Excluded Assets"): (a) All cash, cash equivalents or similar type investments of Seller, such as certificates of deposit, Treasury bills and other marketable securities on hand and/or in banks; (b) All of Seller's accounts receivable existing prior to the TBA Effective Date; (c) All contracts or agreements to which Seller is a party that Buyer has not assumed pursuant to the terms of Section 2.1 hereof; (d) Seller's corporate seal, minute books, charter documents, corporate stock record books and such other books and records as pertain to the organization, existence or share capitalization of Seller and duplicate copies of such records as are necessary to enable Seller to file its tax returns and reports as well as any other records or materials relating to Seller generally and not involving the Station's operations; (e) All pension, profit sharing or cash or deferred (Section 401(k)) plans and trusts and the assets thereof and any other employee benefit plan or arrangement and the assets thereof, if any maintained by Seller; (f) Contracts of insurance and all insurance proceeds or claims made by Seller relating to property or equipment repaired, replaced or restored by Seller prior to the Closing Date; (g) Any and all claims (except as set forth in Section 1.1(h)) made by Seller with respect to transactions prior to the Closing Date and the proceeds thereof, except claims with respect to obligations to be assumed by Buyer pursuant to Section 2.1 hereof; and (h) All other assets of Seller which are not used or held for use in the operation of the Station. 22.3 No Liens. The Purchased Assets shall be transferred to Buyer free and clear of all Liens. -22- 23 ARTICLE 23 ASSUMPTION OF OBLIGATIONS 23.1 Assumption of Obligations. In addition to the provisions of Section 3.4, on the Closing Date, Buyer shall assume and undertake to pay, satisfy or discharge the obligations and commitments of Seller arising or to be performed on or after the Closing Date under the Contracts. All of the foregoing assumed obligations and commitments shall be referred to herein collectively as the "Assumed Liabilities." If any required approval of or consent to the assignment of any Contract is not obtained and the Closing occurs, such Contract shall not be assigned until such consent is obtained, but on the Closing Date Buyer and Seller shall enter into an equitable arrangement pursuant to which Buyer shall pay, satisfy, perform, and discharge Seller's obligations which arise or are to be performed under such Contract on or after the Closing Date and Seller shall provide to Buyer the rights and benefits under such Contract arising on or after the Closing Date. 23.2 Retained Liabilities. Except as set forth in Sections 2.1 and 3.4, Buyer expressly does not, and shall not, assume or be deemed to assume, under this Agreement or otherwise by reason of the transactions contemplated hereby, any liability, obligation, commitment, undertaking, expense or agreement of Seller of any nature whatsoever, whether known or unknown or absolute or contingent. All of such liabilities and obligations shall be referred to herein collectively as the "Retained Liabilities." Without limiting the generality of the foregoing, (a) Buyer shall have no obligation or liability to employees of Seller due to or because of any past service liability, vested benefits, retirement plan insolvencies or other retirement plan or past employment obligation under local, state or federal law (including the Employee Retirement Income Security Act of 1974, as amended) as a result of the purchase of the Purchased Assets or former employees of Seller becoming employees of Buyer and (b) Buyer shall have no liability to any employees of Seller under any employment agreement between Seller and such employee, whether or not listed on any Schedule attached hereto. Nothing contained herein shall limit the obligations of Buyer under the TBA to reimburse Seller for certain expenses or pay certain severance obligations. -23- 24 ARTICLE 24 CONSIDERATION 24.1 Purchase Price. In consideration for the transfer of the Purchased Assets, Buyer shall pay to Seller an amount (the "Purchase Price") equal to the greater of (a) $112.5 million or (b) the sum of (i) $105 million plus (ii) an amount equal to the product of the Daily Amount (the parties acknowledge the Daily Amount may be different for each day) multiplied by the number of days elapsed from the TBA Effective Date until (but not including) the Closing Date. The Purchase Price shall be subject to any adjustment to be made pursuant to Section 3.4 hereof and shall be subject to adjustment for any damages incurred by a party as a result of termination of the TBA due to a breach thereof or a termination of the TBA not made in accordance with the terms thereof. In addition, as consideration for the transfer of the Purchased Assets to Buyer, Buyer shall assume the Assumed Liabilities. 24.2 Payment of Purchase Price. On the Closing Date, Buyer shall pay the Purchase Price, plus or minus any adjustment to be made pursuant to Sections 3.1 and 3.4 hereof and minus all payments made under the Option Agreement, in lawful money of the United States of America by bank cashier's check or wire-transfer of immediately available funds. 24.3 Allocation of Purchase Price. Within 90 days after the Closing, Buyer and Seller shall mutually determine the allocation of the Purchase Price in accordance with Treasury Regulation Section 1.1060-1T based upon the approximate replacement values of the Purchased Assets determined by a nationally recognized appraisal firm chosen by Buyer and reasonably acceptable to Seller (it being anticipated that the Purchase Price will be allocated first to such of the Purchased Assets as are tangible to the extent of the approximate replacement values thereof on the Closing Date, with the balance to intangible assets). Buyer shall pay all fees and expenses of such appraisal firm. Seller and Buyer will report the federal income tax consequences of the sale and acquisition of the Purchased Assets under this Agreement in a manner consistent with the foregoing, and will file Forms 8594 in the manner and at the times required by Treasury Regulation Section 1.1060-1T. Buyer shall prepare drafts of Form 8594 reflecting the respective Purchase Price allocations determined as provided above in accordance with Treasury Regulation Section 1.1060-1T for Seller and Buyer, such draft Form 8594 to be provided to Seller within 180 days following the Closing Date, but in no event later than the due date for Seller's federal income tax return for the period including the Closing Date; and Seller's consent to such drafts shall not be unreasonably withheld or delayed. -24- 25 24.4 Proration of Income and Expenses. (a) Except as otherwise provided herein or in the TBA, all income and expenses arising from the conduct of the business and operation of the Station, including, without limitation, all ad valorem, real estate and other property taxes (but excluding taxes arising by reason of the transfer of the Purchased Assets as contemplated hereby, which shall be paid as set forth in Article 11 of this Agreement), business and license fees, music and other license fees, utility expenses, rents and similar prepaid and deferred items attributable to the ownership and operation of the Station, shall be prorated between Buyer and Seller in accordance with generally accepted accounting principles as of 11:59 p.m., California time, on the date immediately preceding the Closing Date (the "Effective Time") in accordance with the principle that Seller shall receive all revenues and be responsible for all expenses, costs, and liabilities allocable to the period prior to the Effective Time, and Buyer shall receive all revenues, and be responsible for all expenses, costs, and obligations, allocable to the period after the Effective Time, subject to the following: (i) There shall be no adjustment with respect to any contracts not included in the Contracts; (ii) There shall be no adjustment for any expenses or payments to terminated employees which are the responsibility of Buyer, or for which Buyer is obligated to reimburse Seller, pursuant to Section 3(b) of the TBA or for any revenue to which Buyer is entitled under the TBA; and (iii) Revenues, expenses, taxes, costs and liabilities earned or incurred in connection with particular programs and announcements shall be allocated to the time of performance of such programs and announcements without regard to the date of payment therefor. (b) The prorations and adjustments contemplated by this Section, to the extent practicable, shall be made on the Closing Date. As to those prorations and adjustments not capable of being ascertained on the Closing Date, an adjustment and proration shall be made within sixty (60) days of the Closing Date. In the event of any disputes between the parties as to such adjustments, the amounts not in dispute shall nonetheless be paid at such time and such disputes shall be resolved by an independent certified public accountant mutually acceptable to the parties, and the fees and expenses of such accountant shall be paid one-half by Seller and one-half by Buyer. The decision of such accountant shall be conclusive and binding on the parties. All prorations and -25- 26 adjustments made on the Closing Date shall be paid in the form of an increase or decrease of the amount payable by Buyer at the Closing. All prorations and adjustments made after the Closing shall be paid within five (5) business days of the determination thereof. ARTICLE 25 GOVERNMENTAL CONSENTS 25.1 FCC Consent. It is specifically understood and agreed by the parties hereto that consummation of the transactions contemplated hereby is expressly conditioned on and is subject to the prior consent and approval of the FCC ("FCC Consent"). 25.2 FCC Application. Within five business days after execution of this Agreement, the parties shall file with the FCC an application for assignment of the FCC Licenses ("FCC Application") from Seller to Buyer. The parties shall thereafter prosecute the FCC Application with all reasonable diligence and otherwise use commercially reasonable efforts to obtain the grant of the FCC Application as expeditiously as practicable. If the FCC Consent imposes any condition on a party hereto, such party shall use commercially reasonable efforts to comply with such condition. If reconsideration or judicial review is sought with respect to the FCC Consent, the parties shall oppose such efforts for reconsideration or judicial review. 25.3 Hart-Scott-Rodino Filings. If the HSR Act and the rules and regulations of the Federal Trade Commission require the parties to file Notification and Report Forms after the execution hereof, as soon as possible after the date hereof, but in no event later than 30 days after the date hereof, Buyer and Seller shall prepare and file all documents with the Federal Trade Commission and the United States Department of Justice as are required to comply with the HSR Act and shall promptly furnish all materials thereafter requested by any of the regulatory agencies having jurisdiction over such filings. ARTICLE 26 CLOSING 26.1 Closing Date. Except as otherwise agreed upon by the parties hereto, the consummation of the transactions contemplated herein (the "Closing") shall occur within five (5) business days after the FCC Consent shall have become a Final Order, subject to extension to allow Seller to comply with Section 15.1 (the "Closing Date"). As used herein, the term "Final Order" means a written action or order issued by the FCC setting forth the FCC Consent and (a) which has not been reversed, stayed, enjoined, set aside, annulled or suspended, and (b) with respect to which (i) no requests have been filed for administrative or judicial review, reconsideration, appeal or stay, and the time for filing any such requests and for the FCC to set aside the action on its own motion (whether upon reconsideration or otherwise) has expired, or (ii) in the event of -26- 27 review, reconsideration, appeal or stay, the time for further review, reconsideration or appeal has expired or such requests have been withdrawn or denied. Notwithstanding the foregoing, at Buyer's election the Closing shall occur within five (5) business days after the date on which public notice of the grant of FCC Consent is given (even though the FCC Consent shall not have become a Final Order), subject to extension to allow Seller to comply with Section 15.1. In addition, notwithstanding anything to the contrary contained herein, if a party has a condition to its obligations which has not been satisfied by the 5th business day after the date on which public notice of the grant of the FCC Consent is given or the date on which the FCC Consent becomes a Final Order, as the case may be, such party may extend the Closing Date for such time as is necessary to cause such condition to be satisfied. All actions taken at the Closing will be considered as having been taken simultaneously and no such actions will be considered to be completed until all such actions have been completed. 26.2 Closing Place. The Closing shall be held at such place as the parties hereto may agree. ARTICLE 27 REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Buyer as follows: 27.1 Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has the requisite corporate power to carry on its business as it is now being conducted. 27.2 Authority. (a) Seller has the corporate power and authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Seller. This Agreement has been duly executed and delivered by Seller and constitutes a valid and binding obligation of Seller, enforceable against Seller in accordance with its terms. (b) Except as set forth in Schedule 6.2(b) attached hereto, the execution and delivery by Seller of this Agreement do not, and the consummation of the transactions contemplated hereby will not, (i) conflict with, or result in a violation of, any provision of the Articles of Incorporation or Bylaws of Seller, (ii) constitute or result in a material breach of or material default (or an event which with notice or lapse of time, or both, would constitute a material default) under, or -27- 28 result in the termination or suspension of, or accelerate the performance required by, or result in a right of termination, cancellation or acceleration of any contract or agreement of Seller, (iii) create any Lien upon any of the Purchased Assets, or (iv) constitute, or result in, a violation of any judgment, ruling, order, writ, injunction, decree, statute, law, rule or regulation applicable to Seller or any of its properties or assets, other than in the cases of clauses (ii) and (iv) a breach, default, termination or suspension, acceleration of performance, cancellation or violation which would not adversely affect the Purchased Assets, Buyer's use or enjoyment of the Purchased Assets or the ability of Seller to complete the sale of the Purchased Assets to Buyer pursuant to this Agreement. (c) No consent, approval, order or authorization of, notice to, or registration, declaration of filing with, any governmental entity is necessary in connection with the execution and delivery of this Agreement by Seller or the consummation of the transactions contemplated hereby by Seller, except for the FCC Consent and the filings required under the HSR Act. 27.3 Station Licenses. Schedule 1.1(c) attached hereto contains a true and complete list of the FCC Licenses. Seller is the authorized legal holder of the FCC Licenses. The FCC Licenses are in full force and effect [if the Purchase Agreement is executed after August 1, 1997, this sentence will need to be modified to reflect the filing of the renewal application for the FCC Licenses]. The FCC Licenses are all of the licenses, permits or other authorizations required under the Communications Act and the rules and regulations of the FCC to operate the Station as currently operated. No proceedings are pending or, to the best knowledge of Seller, threatened which may result in the revocation, modification, non-renewal or suspension of any of the FCC Licenses. Except as caused by non-compliance by Buyer with the TBA, the Station is operating in compliance in all material respects with the Communications Act and all FCC rules and regulations, including, but not limited to, the timely filing of all accurate reports required by the FCC. The representations and warranties contained in this Section 6.3 are subject to Schedule 6.3 attached hereto. -28- 29 27.4 Equipment. Schedule 1.1(a) attached hereto contains a true and complete list of the Tangible Personal Property. Seller (a) is the lawful owner of all of the Tangible Personal Property it purports to own, and (b) has valid leasehold interests in the Tangible Personal Property it purports to lease, in all cases free and clear of any Liens. Seller will not be a party to any equipment financing leases as of the Closing Date. 27.5 Contracts. Seller is not in violation or breach of, nor has Seller received in writing any claim or threat that it has breached any of the terms and conditions of, any Contract, including any real property leases. To the best knowledge of Seller, no other party to any Contract is in default thereunder or breach thereof. Seller has delivered to Buyer a true, accurate and complete copy of each Contract. Except as set forth in Schedule 6.5 attached hereto, neither the execution and delivery by Seller of this Agreement nor the consummation by Seller of the transactions contemplated under this Agreement requires the consent of any party to a Contract. With respect to the Transmitter Site Lease, (a) such lease is in full force and effect and is valid, binding and enforceable in accordance with its terms, (b) to the best knowledge of Seller, no event has occurred or condition exists that, with notice or lapse of time or both, would become a breach or default by either party to such lease, (c) Seller's interest in such lease is not subject to any Liens, and (d) the term thereof has been extended to September 30, 1999 and the term "Master Sublease" as used therein means the KCET Sublease. The rights under the Transmitter Site Lease provide sufficient access to the tower and other facilities for the Station which are located on the premises described in such lease without the need to obtain any other access rights. Seller has not received any notice that any of the Senior Leases are being terminated. 27.6 Intellectual Property. None of the Intellectual Property was granted to Seller pursuant to any licensing or sublicensing agreement under which Seller is the licensee or the sublicensee. No person has a right to receive a royalty or similar payment in respect of any Intellectual Property pursuant to any contractual arrangements entered into by Seller. Seller has not granted to any other person any right to use the Intellectual Property pursuant to any licensing or sublicensing agreement. No notices have been received by Seller that Seller's use of the Intellectual Property infringes upon or otherwise violates any proprietary rights of others. To the best knowledge of Seller, no third-party is infringing on the Intellectual Property. The Intellectual Property, including any registered marks or applications, is owned by Seller free and clear of any Liens. The representations and warranties contained in this Section 6.6 are subject to Schedule 6.6 attached hereto. -29- 30 27.7 Brokers. Seller has not entered into any contract, agreement, arrangement or understanding with any person or entity which will result in the obligation to pay any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement. 27.8 Litigation. There are no claims, actions, suits, litigation, labor disputes, arbitrations, proceedings or investigations pending or, to the best knowledge of Seller, threatened against Seller which would have an adverse effect on Buyer's ability to purchase the Purchased Assets, Buyer's ability to full use and enjoyment of the Purchased Assets or the ability of Seller to sell the Purchased Assets to Buyer pursuant to this Agreement. Seller is not subject to any order, judgment, writ, injunction or decree of any court or governmental agency or entity. 27.9 Insurance. Seller maintains the insurance policies relating to the Station and the Purchased Assets bearing the policy numbers, for the terms, with the companies, in the amounts, and providing the general coverage set forth on Schedule 6.9 attached hereto. All of such policies are in full force and effect and Seller is not in default of any material provision thereof. Seller has not received notice from any issuer of any such policies of its intention to cancel, terminate or refuse to renew any policy issued by it. 27.10 Labor, Employment Contracts and Benefit Programs. (a) There are no collective bargaining agreements, or written or oral agreements, relating to the terms and conditions of employment or termination of employment, covering any employees, consultants or agents of Seller relating to the Station, except as listed and described in Schedule 6.10(a) attached hereto [if the Purchase Agreement is signed before the TBA Effective Date, the following language will be included: and except for agreements which will be terminated at the beginning of the term of the TBA]. Buyer has provided to Seller a copy of all of the agreements listed on Schedule 6.10(a) together with any amendments or modifications thereof. Except as listed and described in Schedule 6.10(a), none of the employees of Seller relating to the Station [if the Purchase Agreement is signed before the TBA Effective Date, the following language will be included: who will remain as employees after the beginning of the term of the TBA] have written employment contracts. There is no strike, picketing, slowdown or work stoppage by or concerning the employees of Seller relating to the Station pending against or involving Seller. Other than with respect to the existing AFTRA agreement, Seller has no knowledge of any organizational effort currently being made or threatened respecting any of the employees of Seller relating to the Station. -30- 31 (b) All handbooks, policies and procedures of Seller relating to all aspects of employment of employees of Seller relating to the Station, including but not limited to compensation, benefits, equal employment opportunity and safety, are listed and described in Schedule 6.10(b) attached hereto. (c) Seller has provided to Buyer the names of all present employees of Seller and the positions, total annual compensation and accrued vacation and sick time of each. 27.11 Absence of Material Change. Except as caused by non- compliance by Buyer with the TBA, since the date of the Option Agreement: (a) Seller has not taken any action with respect to the Station outside of the ordinary and usual course of business, except as related to the transactions contemplated hereby; (b) Seller has not granted a security interest in the Purchased Assets to secure any borrowings of Seller or any obligation or liability of others; (c) Seller has with respect to the Station paid all of its debts and obligations under the Contracts as they became due; (d) Seller has not waived any right of substantial value under the Contracts; and (e) Seller has maintained its books, accounts and records with respect to the Contracts in the usual, customary and ordinary manner. 27.12 Shareholders. The Trustees, as co-trustees of the Autry Survivor's Trust, are the sole shareholders of Seller. 27.13 Real Property. Seller has no interest in any real property other than its interest in the K-LITE Studio/Office Lease, dated February 4, 1994, between Seller and Toluca Plaza Company, together with the Addendum dated February 4, 1994, and the Antenna Leases. Neither Seller, nor to the best knowledge of Seller, any of Seller's lenders possess a title insurance policy with respect to such interests. To the best knowledge of Seller, the real property on which the tower for the Station is located is owned by Katella, Katella leases such property to BALP pursuant to the Ground Lease, BALP leases such property to RMBC pursuant to the RMBC Lease, RMBC leases such property to Metromedia pursuant to the Metromedia Sublease, Metromedia leases such property to Fox pursuant to the Fox Sublease, Fox leases such property to KCET pursuant to the KCET Sublease and KCET leases a portion of such property to Seller pursuant to the Transmitter Site Lease. -31- 32 27.14 Sales Tax. Seller has not made any sales which would cause the sale of the Purchased Assets to Buyer hereunder to fail to be exempt from sales tax under California law. 27.15 Schedules. The Schedules attached hereto are the same as the Schedules attached to the Option Agreement, except for changes which are not materially adverse to Buyer and changes which are not due to the actions or omissions of Seller, and are accurate and complete as of the date hereof. 27.16 Disclosure. No provision of this Agreement relating to Seller, the Station or the Purchased Assets or any other document, Schedule or other written information furnished by Seller to Buyer in connection with the execution, delivery and performance of this Agreement, or the consummation of the transactions contemplated hereby, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact required to be stated in order to make the statement, in light of the circumstances in which it is made, not misleading. Except for facts affecting the radio industry generally and except for facts or circumstances caused by non- compliance by Buyer with the TBA, there is no fact now known to Seller relating to the Station which in Seller's reasonable opinion adversely affects the condition of the Purchased Assets, the status of the FCC licenses for the Station or the ownership, operation, financial condition or business of the Station which has not been disclosed to Buyer or set forth in the Schedules attached hereto. ARTICLE 28 REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to Seller as follows: 28.1 Organization, Standing and Power. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has the requisite corporate power to carry on its business as it is now being conducted. 28.2 Authority. (a) Buyer has all requisite corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Buyer and the consummation by Buyer of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer and constitutes a valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. -32- 33 (b) No consent, approval, order or authorization of, notice to, or registration, declaration or filing with, any governmental entity is necessary in connection with the execution and delivery of any of this Agreement by Buyer or the consummation by Buyer of the transactions contemplated hereby, except the FCC Consent and the filings required under the HSR Act. 28.3 Brokers. Buyer has not entered into any contract, agreement, arrangement or understanding with any person or entity which will result in the obligation to pay any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement. 28.4 Litigation. There are no claims, actions, suits, litigation, labor disputes, arbitrations, proceedings or investigations pending or, to the best knowledge of Buyer, threatened against Buyer relating to the transactions contemplated by this Agreement. 28.5 Qualification. There are no facts which, under the Communications Act or the existing rules and regulations of the FCC, would disqualify Buyer as an assignee of the FCC Licenses. ARTICLE 29 COVENANTS 29.1 Operation of Business. Except as caused by non-compliance by Buyer with the TBA, notwithstanding anything to the contrary contained herein, between the date of this Agreement and the Closing Date, Seller: (a) except in accordance with Section 1.1, shall not sell or otherwise dispose of any of the Purchased Assets or grant a Lien thereon or permit a Lien to remain on the Purchased Assets if such Lien was placed thereon as a result of the actions or omissions of Seller; (b) shall not commit any act or omit to do any act which will cause a breach of any Contract; (c) shall not amend or renew any Contract or terminate the lease for the Station's main transmitter site; (d) will operate in the ordinary course of business, consistent with past practice, and will take no actions to diminish materially the goodwill of the business of the Station; (e) will operate the Station in material compliance with the Communications Act and the FCC's rules and regulations; -33- 34 (f) will maintain the insurance coverage listed on Schedule 6.9 in full force and effect through the Closing Date; and (g) will take all action necessary to maintain the FCC Licenses in full force and effect without material modification, including, without limitation, the timely filing of a renewal application and responding to requests thereunder from the FCC, and will keep Buyer informed with respect to any renewal application for the FCC Licenses and requests thereunder from the FCC. 29.2 Access to Information. From the date hereof to the Closing Date, Seller shall afford, and shall cause its respective officers, directors, employees and agents to afford, to Buyer and the officers, employees and agents of Buyer complete access at all reasonable times to Seller's officers, employees, independent contractors, agents, properties and to Seller's books, records and contracts relating to the Station. 29.3 Confidentiality. (a) Buyer shall hold, and shall cause its officers, employees and agents and representatives, including, without limitation, attorneys, accountants, consultants and financial advisors who obtain such information to hold, in confidence, and not use for any purpose other than evaluating the transactions contemplated by this Agreement or performing its obligations hereunder or under the TBA, any confidential information of Seller or the Trustees, which for the purposes hereof shall not include any information which (i) is or becomes generally available to the public other than as a result of disclosure by Buyer or one of its affiliates in violation of its obligations under this subsection, (ii) becomes available to Buyer on a nonconfidential basis from a source, other than Seller, the Trustees or affiliates of Seller, which has represented that such source is entitled to disclose it, or (iii) was known to Buyer on a nonconfidential basis prior to its disclosure to Buyer hereunder. If this Agreement is terminated, Buyer shall deliver, and cause its officers, employees, agents, and representatives, including, without limitation, attorneys, accountants, consultants and financial advisors who obtain confidential information of Seller or the Trustees to deliver, to Seller all such confidential information that is written (including copies or extracts thereof), whether such confidential information was obtained before or after the execution hereof. -34- 35 (b) Seller shall hold, and shall cause its officers, employees and agents and representatives, including, without limitation, attorneys, accountants, consultants and financial advisors who obtain such information to hold, in confidence, and not use for any purpose other than evaluating the transactions contemplated by this Agreement, any confidential information of Buyer, which for the purposes hereof shall not include any information which (i) is or becomes generally available to the public other than as a result of disclosure by Seller or one of its affiliates in violation of its obligations under this subsection, (ii) becomes available to Seller on a nonconfidential basis from a source, other than Buyer or its affiliates, which has represented that such source is entitled to disclose it, or (iii) was known to Seller on a nonconfidential basis prior to its disclosure to Seller hereunder. If this Agreement is terminated, Seller shall deliver, and cause its officers, employees, agents, and representatives, including, without limitation, attorneys, accountants, consultants and financial advisors who obtain confidential information of Buyer to deliver, to Buyer all such confidential information that is written (including copies or extracts thereof), whether such confidential information was obtained before or after the execution hereof. (c) If a person who receives confidential information is requested or becomes legally compelled (by oral questions, interrogatories, requests for information or documents, subpoena, criminal or civil investigative demand or similar process) to disclose any of such confidential information, such person will provide the other party with prompt written notice so that such other party may seek a protective order or other appropriate remedy or waive compliance with Section 8.3(a) or (b), as the case may be. If such protective order or other remedy is not obtained, or if the applicable party waives compliance with Section 8.3(a) or (b), as the case may be, the person subject to the request will furnish only that portion of such confidential information which is legally required and will exercise reasonable efforts to obtain reliable assurance that confidential treatment will be accorded such confidential information. 29.4 Notification of Certain Matters. Seller shall give prompt notice to Buyer, of the discovery of (i) any material inaccuracy in any representation or warranty made by it, (ii) any material failure of Seller to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement or (iii) any legal proceedings related to the Station or the transactions contemplated hereby. Buyer shall give prompt notice to Seller of the discovery of (1) any material inaccuracy in any representation or warranty made by it,(2) any material failure of Buyer to comply with or satisfy any covenant, condition or agreement to be complied with or -35- 36 satisfied by it under this Agreement or (3) any legal proceedings related to the Station or the transactions contemplated hereby. Notwithstanding the foregoing, no notification made under this Section shall affect the representations or warranties or covenants or agreements of the parties or the conditions to the obligations of the parties hereunder. 29.5 Consents and Approvals. Seller and Buyer shall use commercially reasonable efforts to obtain any and all consents, transfers, authorizations, or approvals required for the consummation of the transactions contemplated by this Agreement. Buyer and Seller will cooperate with each other in obtaining, and will provide all information necessary to obtain, such consents. 29.6 Control of Station. From the date hereof to the Closing Date, Buyer shall not, directly or indirectly, control, supervise or direct the operation of the Station. Such operation, including complete control and supervision of all Station programs, employees and policies, shall be the sole responsibility of Seller. Notwithstanding the foregoing, the parties have entered into the TBA, pursuant to which Seller has granted to Buyer (or its permitted assignee) the right to program the Station in accordance with the Communications Act and the rules and regulations of the FCC. 29.7 News Releases. Except for announcements required by applicable law, prior to the Closing Date, any news releases pertaining to the transactions contemplated hereby shall be reviewed and approved by Buyer and Seller, or their respective representatives, and shall be acceptable to them prior to the dissemination thereof. 29.8 Buyer's Covenant. Buyer agrees it shall not take any action which would cause it to be disqualified under the Communications Act or the FCC's rules or regulations as an assignee of the FCC Licenses. ARTICLE 30 CONDITIONS 30.1 Conditions Precedent to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions, except to the extent Buyer shall have waived in writing satisfaction of such condition: (a) The representations and warranties made by Seller in this Agreement shall be true and correct in all material respects as of the date of this Agreement and on the Closing Date as though such representations and warranties were made on such date. -36- 37 (b) Seller shall have performed and complied in all material respects with all covenants, agreements, representations, warranties and undertakings required by this Agreement to be performed or complied with by it prior to or at the Closing. (c) No action, suit or proceeding before any court or any governmental or regulatory authority shall have been completed which restrains, enjoins, rescinds, prevents or changes the transactions contemplated hereby in a material manner. (d) Seller shall have delivered to Buyer all of the documents required by Section 10.1 hereof. (e) The conditions set forth in Section 5.1 regarding the FCC Consent shall have been satisfied. (f) Any applicable waiting period under the HSR Act shall have expired or been terminated. 30.2 Conditions Precedent to Obligations of Seller. The obligations of Seller to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions, except to the extent Seller shall have waived in writing satisfaction of such condition: (a) The representations and warranties made by Buyer in this Agreement shall be true and correct in all material respects as of the date of this Agreement and on the Closing Date as though such representations and warranties were made on such date. (b) Buyer shall have performed and complied in all material respects with all covenants, agreements, representations, warranties and undertakings required by this Agreement to be performed or complied with by it prior to or at the Closing. (c) No action, suit or proceeding before any court or any governmental or regulatory authority shall have been completed which restrains, enjoins, rescinds, prevents or changes the transactions contemplated hereby in a material manner. (d) Buyer shall have delivered to Seller all of the documents required by Section 10.2 hereof. (e) The conditions set forth in Section 5.1 regarding the FCC Consent shall have been satisfied. (f) Any applicable waiting period under the HSR Act shall have expired or been terminated. -37- 38 ARTICLE 31 CLOSING DELIVERIES 31.1 Deliveries by Seller. At the Closing, Seller shall deliver or cause to be delivered to Buyer the following: (a) Bill of Sale, assignment and other good and sufficient instruments of conveyance, transfer and assignment, all in form and substance reasonably satisfactory to counsel for Buyer, as shall be effective to vest in Buyer title in and to the Purchased Assets. (b) A certificate, executed by an officer of Seller, in such detail as Buyer shall reasonably request, certifying to the fulfillment or satisfaction of the conditions set forth in Sections 9.1(a), (b) and (c). The delivery of such certificate shall constitute a representation and warranty of Seller as to the statements set forth therein. (c) Resolutions of the Board of Directors of Seller authorizing the execution, delivery and performance of this Agreement by Seller, certified by the corporate secretary of Seller. (d) Updated Schedules to this Agreement reflecting any changes necessary to render the information contained therein true and accurate on the Closing Date. (e) Originals or copies of all program, operations, transmissions, or maintenance logs and all other records required to be maintained by the FCC with respect to the Station, including the Station's public file, shall be left at the Station and thereby delivered to Buyer. (f) An opinion of Jeffer, Mangels, Butler & Marmaro LLP covering the following matters: (i) Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has the requisite corporate power to carry on its business as it is being conducted on the Closing Date; (ii) Seller has the corporate power and authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Seller; and (iii) This Agreement constitutes a valid and binding obligation of Seller and the Trustees. -38- 39 (g) An estoppel certificate executed by each of KCET and Fox containing the following information: (i) The lease or leases to which it is a party are in full force and effect; (ii) To its knowledge, no party to such lease(s) or any other agreement related to the property is in default thereof; (iii) Stating the expiration date of the lease(s); (iv) No consent to the assignment of the KCET Sublease to Buyer is necessary; and (v) To its knowledge, no proceedings are pending which would effect the use of the property as a site for a broadcasting tower. (h) An estoppel certificate executed by Metromedia containing the following information: (i) The lease or leases to which it is a party are in full force and effect; (ii) To its knowledge, no party to such lease(s) or any other agreement related to the property is in default thereof; (iii) Stating the expiration date of the lease(s); (iv) No consent to the assignment of the KCET Sublease to Buyer is necessary; (v) To its knowledge, no proceedings are pending which would effect the use of the property as a site for a broadcasting tower; and (vi) To its knowledge, attached to the certificate are the Ground Lease and the RMBC Lease. (i) A Certification of Trust pursuant to California Probate Code Section 18100.5 executed by the Trustees. 31.2 Buyer's Deliveries. At the Closing, Buyer shall deliver or cause to be delivered to Seller the following: (a) The payment required under Section 3.2 hereof. -39- 40 (b) An Assignment and Assumption Agreement reasonably satisfactory in form and substance to counsel to Seller effecting the assumption of the Assumed Liabilities on the terms and conditions hereof. (c) A certificate, executed by an officer of Buyer, in such detail as Seller shall reasonably request, certifying to the fulfillment or satisfaction by Buyer of the conditions set forth in Sections 9.2(a), (b) and (c). The delivery of such certificate shall constitute a representation and warranty of Buyer as to the statements set forth therein. ARTICLE 32 TRANSFER TAXES, FEES AND EXPENSES 32.1 Expenses. Except as set forth in Section 11.2 hereof, each party hereto shall be solely responsible for all costs and expense incurred by it in connection with the negotiation and preparation of this Agreement and the documents contemplated hereby and completion of the transactions contemplated thereby, including, without limitation, attorneys' fees and costs related to any governmental filings or any response to requests made by a governmental agency in connection with such filings. 32.2 Governmental Filing or Grant Fees. Any filing or grant fees imposed by any governmental authority the consent of which is required to complete the transactions contemplated hereby shall be borne by Buyer. ARTICLE 33 INDEMNIFICATION AND SPECIFIC PERFORMANCE 33.1 Survival of Representations and Warranties. All representations and warranties made in this Agreement shall survive the Closing for a period of six months from the Closing Date; provided, however, the representation and warranty regarding title to any of the Purchased Assets shall survive until the expiration of all applicable statutes of limitation. The right of any party to recover Damages on any claim shall not be affected by the termination of any representations and warranties as set forth above provided that notice of the existence of such claim has been given by the Indemnified Party to the Indemnifying Party prior to such termination. 33.2 Indemnification of Buyer by Seller. Subject to Section 12.4, from and after the Closing Date, Seller shall indemnify and hold Buyer and its attorneys, affiliates, representatives, agents, officers, directors, successors or assigns harmless from and against any Damages resulting from, arising out of or incurred with respect to: -40- 41 (a) A breach of any representation, warranty, covenant or agreement of Seller contained herein, subject to notice of a claim being given before the expiration of the applicable period specified in Section 12.1 hereof with respect to the representations or warranties by Seller contained herein; (b) The Retained Liabilities; or (c) Except as provided by the TBA, any and all claims, liabilities or obligations of any nature, absolute or contingent, relating to the business and operation of the Station as conducted by Seller before the Closing Date. Notwithstanding the foregoing, Seller shall not have any indemnity obligations for expenses or liabilities for which Buyer is responsible under the TBA. 33.3 Indemnification of Seller. Subject to Section 12.4, from and after the Closing Date Buyer shall indemnify and hold Seller and its attorneys, affiliates, representatives, agents, officers, directors, successors or assigns, harmless from and against any Damages resulting from, arising out of, or incurred with respect to: (a) A breach of any representation, warranty, covenant or agreement by Buyer contained herein, subject to notice of a claim being given before the expiration of the applicable period specified in Section 12.1 hereof with respect to the representations and warranties made by Buyer herein; (b) The Assumed Liabilities; or (c) Any and all claims, liabilities or obligations of any nature, absolute or contingent, relating to the business and operation of the Station as conducted by Buyer on or after the Closing Date. 33.4 Limitations on Indemnification Liabilities. (a) The indemnification obligations of Seller under Section 12.2(a) shall not be effective until the aggregate dollar amount of all Damages indemnified against under such Section exceeds $100,000, at which time, all Damages in excess of $100,000 shall be subject to such indemnification obligations. The maximum amount payable by Seller for indemnity under Section 12.2(a) shall be $20 million. -41- 42 (b) The indemnification obligations of Buyer under Section 12.3(a) shall not be effective until the aggregate dollar amount of all Damages indemnified against under such Section exceeds $100,000, at which time, all Damages in excess of $100,000 shall be subject to such indemnification obligations. The maximum amount payable by Buyer for indemnity under Section 12.3(a) shall be $20 million. 33.5 Procedures. (a) Promptly after the receipt by a party (the "Indemnified Party") of notice of (i) any claim or (ii) the commencement of any action or proceeding which may entitle such party to indemnification under this Section, such party shall give the other party (the "Indemnifying Party") written notice of such claim or the commencement of such action or proceeding and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting from such claim. The failure to give the Indemnifying Party timely notice under this subsection shall not preclude the Indemnified Party from seeking indemnification from the Indemnifying Party unless, and then only to the extent, such failure has materially prejudiced the Indemnifying Party's ability to defend the claim or litigation. If such claim does not arise from the claim of a third party, the Indemnifying Party shall have 30 days after such notice to cure the conditions giving rise to such claim to the Indemnified Party's satisfaction. Failure by the Indemnifying Party to notify an Indemnified Party of its election to defend any such claim or action by a third party within 30 days after notice thereof shall have been given to the Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its rights to defend such claim or action. (b) If the Indemnifying Party assumes the defense of any such claim or litigation resulting therefrom with counsel reasonably acceptable to the Indemnified Party, the Indemnified Party may participate, at its expense, in the defense of such claim or litigation provided that the Indemnifying Party shall direct and control the defense of such claim or litigation. The Indemnified Party shall cooperate and make available all books and records reasonably necessary and useful in connection with the defense. Except with the prior written consent of the Indemnified Party, the Indemnifying Party shall not, in the defense of such claim or any litigation resulting therefrom, consent to the entry of any judgment (other than a judgment of dismissal on the merits without cost) or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party of a release from all Damages in respect of such claim or litigation. -42- 43 (c) If the Indemnifying Party shall not assume the defense of any such claim or litigation resulting therefrom, the Indemnified Party may, but shall have no obligation to, defend against such claim or litigation in such manner as it may deem appropriate; provided, however, the Indemnified Party may not compromise or settle such claim or litigation without the Indemnifying Party's prior written consent. 33.6 Indemnity Payments. The parties agree that any payments made pursuant to this Article 12 will be treated by the parties on all applicable tax returns as an adjustment to the Purchase Price. 33.7 Sole Remedy.. After the Closing, indemnity hereunder shall be the sole remedy for a breach of a representation, warranty, covenant or agreement of a party. 12.8 Specific Performance. Seller recognizes that, in the event Seller defaults in the performance of its obligations to close under this Agreement, monetary damages will not be an adequate remedy. Therefore, unless Buyer is in material breach of this Agreement, Buyer shall be entitled to obtain specific performance of the terms of this Agreement. In any action to enforce specifically the performance of this Agreement, Seller waives the defense that there is another adequate remedy at law or equity and agrees that Buyer shall have the right to obtain specific performance of Seller's obligations to close under the terms of this Agreement without being required to prove actual damages, post bond or furnish other security. As a condition to seeking specific performance, Buyer shall not be required to have tendered the Purchase Price, but shall be required to demonstrate that it is ready, willing and able to do so and to perform its other obligations hereunder in accordance with the terms hereof. If the parties close under this Agreement as a result of an order for specific performance or otherwise, Buyer shall still be entitled to bring an action for indemnification of Damages under Section 12.2. ARTICLE 34 TERMINATION RIGHTS 34.1 Termination. This Agreement may be terminated at any time prior to the Closing Date only as follows (provided the terminating party is not in material breach of any of its obligations, representations, warranties or duties hereunder): (a) By mutual written consent of the parties; -43- 44 (b) Subject to Section 15.2, by written notice from either Buyer or Seller, if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action, in each case permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action is not subject to appeal or further administrative or judicial review; (c) By written notice from Buyer, if Seller fails to perform or breaches any of its material obligations or duties under this Agreement and Seller has not cured such failure to perform or breach within 30 days after delivery of written notice from Buyer or upon a material breach of any representation and warranty of Seller contained herein, in either case such that the conditions set forth in Sections 9.1(a) and (b) would not be satisfied; (d) By written notice from Seller, if Buyer fails to perform or breaches any of its material obligations or duties under this Agreement and Buyer has not cured such failure to perform or breach within 30 days after delivery of written notice from Seller or upon a material breach of any representation and warranty of Buyer contained herein, in either case such that the conditions set forth in Sections 9.2(a) and (b) would not be satisfied; (e) By written notice from Buyer or Seller, if the FCC denies the FCC Application in a decision which is not subject to appeal or further administrative or judicial review; (f) Subject to Section 15.2, by written notice from Seller or Buyer, if the Federal Trade Commission or the United States Department of Justice prohibits the acquisition of the Purchased Assets pursuant to this Agreement under a decision, order or decree which is not subject to appeal or further administrative or judicial review; or (g) By any party which was not in material breach of the TBA at the time of the termination thereof if the Closing has not occurred on or before the later of (i) one year from the date hereof, or (ii) one year from the date of the termination of the TBA; the parties agree the termination right under this subparagraph (g) only applies if the TBA is terminated. 34.2 Liability of Parties. Upon a termination of this Agreement in accordance with its terms no party shall have any liability hereunder, except (a) as provided in Section 8.3, (b) for liability for an breach of such party's representations and warranties contained herein and (c) for liability for nonperformance of any of such party's obligations, covenants or agreements contained herein. Nothing contained herein shall -44- 45 limit the obligations of Seller under the Option Agreement to refund payments made under the Option Agreement. 34.3 Survival. Notwithstanding anything to the contrary contained herein, the provisions of Section 8.3 and Article 15 shall survive the termination hereof. ARTICLE 35 DEFINITIONS The following terms shall have the following meaning: "Antenna Leases" shall mean the Transmitter Site Lease and the Auxiliary Site Lease. "Auxiliary Site Lease" shall mean the Radio Transmission Site and Joint Occupancy Agreement, dated April 12, 1983, between Golden West Television, Inc., a California corporation, and Seller. "BALP" shall mean Branford Associates Limited Partnership. "Communications Act" shall mean the Communications Act of 1934, as amended. "Daily Amount" shall mean $13,698.63; provided, however, (i) for any day on which Buyer is unable to broadcast its programming on the Station under the TBA because of preemption thereof by Licensee or because the Station is unable to broadcast (except if the reason for the inability to broadcast is a capital expenditure was not made under the TBA due to Buyer not consenting to such expenditure), the "Daily Amount" shall be reduced by an amount equal to (1) $570.78, multiplied by (2) the number of hours (rounded to the nearest whole number) for which Buyer is unable to broadcast its programming on the Station under the TBA and (ii) for each day on which the TBA is not in effect due to a termination thereof, the "Daily Amount" shall be zero. "Damages" shall mean any liability, loss, cost, expense, judgment, order, settlement, obligation, deficiency, claim, suit, proceeding (whether formal or informal), investigation, Lien or other damage, including, without limitation, attorney's fees and expenses. Notwithstanding the foregoing, "Damages" shall not include any consequential damages, including, but not limited to, loss of future revenue or income, cost of capital or loss of business reputation or opportunity. "Fox" shall mean Fox Television Stations, Inc. "Fox Sublease" shall mean the Sublease, dated March 3, 1986, between Fox and Metromedia, as amended. -45- 46 "Ground Lease" shall mean the Ground Lease Agreement, dated November 1, 1983, between Katella and BALP. "HSR Act" shall mean Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Katella" shall mean Katella Realty Corporation. "KCET" shall mean Community Television of Southern California, a California non-profit corporation. "KCET Sublease" shall mean the Master Sublease, dated October 1, 1994, between Fox and KCET. "Liens" shall mean all claims, liens, encumbrances, security interests, mortgages, or pledges of any kind except for (i) rights of the lessor of the Station's main transmitter site [and the studio premises], and (ii) rights of any parties to any Contract set forth in such Contract. "Metromedia" shall mean Metromedia Company, successor-in-interest to Metromedia, Inc. "Metromedia Sublease" shall mean the Sublease and Agreement dated November 1, 1983, between Metromedia and RMBC. "RMBC" shall mean R.M. Branford Corporation. "RMBC Lease" shall mean the Lease and Agreement, dated November 1, 1983, between RMBC and BALP. "Senior Leases" shall mean the Ground Lease, the RMBC Lease, the Metromedia Sublease, the Fox Sublease and the KCET Sublease collectively. "TBA" shall mean the Time Brokerage Agreement, dated as of December 23, 1996, between Seller and Buyer. "TBA Effective Date" shall mean the Effective Date, as defined in the TBA. "Transmitter Site Lease" shall mean the Sublease, dated February 1, 1992, between KCET and Seller, as amended by a First Amendment dated December 4, 1996. -46- 47 Each of the following terms shall have the meanings set forth in the Section opposite such term:
Term Section ---- ------- Agreement Preamble Assumed Liabilities 2.1 Buyer Preamble Closing 5.1 Closing Date 5.1 Contracts 1.1(b) Effective Time 3.4(a) Excluded Assets 1.2 FCC Recital A FCC Application 4.2 FCC Consent 4.1 FCC Licenses 1.1(c) Final Order 5.1 Indemnified Party 12.5(a) Indemnifying Party 12.5(a) Intellectual Property 1.1(d) Option Agreement Recital B Purchased Assets 1.1 Purchase Price 3.1 Retained Liabilities 2.2 Seller Preamble Station Recital A Tangible Personal Property 1.1(a) Trustees Preamble
ARTICLE 36 MISCELLANEOUS PROVISIONS 36.1 Risk of Loss. The risk of loss or damage to any of the Purchased Assets prior to the Closing Date shall be upon the Seller. In consultation with Buyer, Seller shall repair, replace and restore any such damaged or lost Purchased Asset to the condition necessary to cause Buyer to be able to broadcast under the FCC Licenses. If the provisions of this Section conflict with the TBA, the TBA shall control. 36.2 Benefit and Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. No party may voluntarily or involuntarily assign its interest under this Agreement without the prior written consent of the other parties, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, (a) Buyer may assign its rights hereunder, without the consent of Seller or the Trustees, to any of its wholly-owned subsidiaries, as well as to Heftel Broadcasting Corporation, a Delaware corporation, or any of its wholly-owned subsidiaries and (b) if Buyer is not in material -47- 48 breach of any of its obligations, representations, warranties or duties hereunder and the acquisition of the Purchased Assets by Buyer is prohibited by law, Buyer may assign its rights hereunder, without the consent of Seller or the Trustees, to an entity which is financially capable of performing the obligations of Buyer hereunder. No assignment by Buyer hereunder shall relieve Buyer of its obligations hereunder. Notwithstanding anything to the contrary contained herein no assignment of any rights hereunder may be made unless the rights of the assigning party under the Option Agreement are also assigned to the same person. 36.3 Headings. The headings set forth in this Agreement are for convenience only and will not control or affect the meaning or construction of the provisions of this Agreement. 36.4 Governing Law. This Agreement and the rights of the parties hereto shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the choice of law principles thereof. 36.5 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 36.6 Severability. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. 36.7 Attorneys' Fees. Should any party hereto institute any action or proceeding at law or in equity to enforce any provision of this Agreement, including an action for declaratory relief, or for damages by reason of an alleged breach of any provision of this Agreement, or otherwise in connection with this Agreement, or any provision hereof, the prevailing party shall be entitled to recover from the losing party or parties reasonable attorneys' fees and costs for services rendered to the prevailing party in such action or proceeding. 36.8 Multiple Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 36.9 Notices. Unless applicable law requires a different method of giving notice, any and all notices, demands or other communications required or desired to be given hereunder by any party shall be in writing. Assuming that the contents of a notice meet the requirements of the specific Section of this -48- 49 Agreement which mandates the giving of that notice, a notice shall be validly given or made to another party if served either personally or if deposited in the United States mail, certified or registered, postage prepaid, or if transmitted by telegraph, telecopy or other electronic written transmission device or if sent by overnight courier service, and if addressed to the applicable party as set forth below. If such notice, demand or other communication is served personally, service shall be conclusively deemed given at the time of such personal service. If such notice, demand or other communication is given by mail, service shall be conclusively deemed given seventy-two (72) hours after the deposit thereof in the United States mail. If such notice, demand or other communication is given by overnight courier, or electronic transmission, service shall be conclusively deemed given at the time of confirmation of delivery. The addresses for the parties are as follows: If to Buyer: Clear Channel Radio, Inc. 200 Concord Plaza, Suite 600 San Antonio, Texas 78216 Attention: Mr. Mark P. Mays Telecopier No.: (210) 822-2299 If to Seller: 4383 Colfax Avenue Studio City, California 91604 Attention: Mrs. Jackie Autry Telecopier: (818) 752-7779 with a copy to: Jeffer, Mangels, Butler & Marmaro LLP 2121 Avenue of the Stars, Tenth Floor Los Angeles, California 90067 Attention: Richard M. Brown, Esq. Telecopier No.: (310) 203-0567 If to the Trustees: Gursey, Schneider & Co., LLP 10351 Santa Monica Boulevard, Suite 300 Los Angeles, California 90025 Attention: Stanley B. Schneider, Co-Trustee Telecopier No.: (310) 557-3468 -49- 50 with a copy to: Jeffer, Mangels, Butler & Marmaro LLP 2121 Avenue of the Stars, Tenth Floor Los Angeles, California 90067 Attention: Richard M. Brown, Esq. Telecopier No.: (310) 203-0567 Any party hereto may change its or his address for the purpose of receiving notices, demands and other communications as herein provided, by a written notice given in the aforesaid manner to the other party hereto. 36.10 Incorporation by Reference. All Schedules attached hereto or to be delivered in connection herewith are incorporated herein by this reference. 36.11 Waivers. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 36.12 No Third Party Beneficiaries. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity other than the parties hereto and their successors or permitted assigns, any rights or remedies under or by reason of this Agreement. 36.13 Entire Agreement. This Agreement, the Schedules attached hereto, the TBA, the Option Agreement and the other ancillary documents provided for herein, constitute the entire agreement and understanding of the parties hereto relating to the matters provided for herein and supersede any and all prior agreements, arrangements, negotiations, discussions and understandings relating to the matters provided for herein. To the extent this Agreement conflicts with the TBA or the Option Agreement, this Agreement shall control. 36.14 Rule of Construction. Each party and counsel for each party have reviewed this Agreement. The parties hereto hereby agree that the normal rule of construction, which requires a court to resolve any ambiguities against the drafting party, shall not apply in interpreting this Agreement. 36.15 Neuter and Gender. In this Agreement, the masculine, feminine or neuter gender shall each be deemed to include the others when the context so requires. 36.16 Reference to Buyer. In the context of references herein to representations, warranties, covenants, obligations or -50- 51 duties of Buyer under, or Buyer's non-compliance with, the Option Agreement or the TBA, Optionee shall be deemed to include its assigns under the Option Agreement or the TBA. ARTICLE 37 GUARANTEE 37.1 Guarantee. The Trustees, as co-trustees of the Autry Survivor's Trust, hereby guarantee the obligations of Seller hereunder; provided, however, Buyer hereby agrees the monetary liability of the co- trustees under this guarantee shall be limited to the assets of the Autry Survivor's Trust. 37.2 Representations and Warranties. The Trustees represent and warrant to Buyer that (a) they have the power and authority to enter into this Agreement, to perform their obligations hereunder and to consummate the transactions contemplated hereby and (b) this Agreement has been duly executed and delivered by the Trustees and constitutes a valid and binding obligation of the Trustees, enforceable against the Trustees in accordance with its terms. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. GOLDEN WEST BROADCASTERS By:_____________________________ Jacqueline Autry, Executive Vice President CLEAR CHANNEL RADIO, INC. By:_____________________________ Name:___________________________ Title:__________________________ ________________________________ ______________, as co-trustee of the Autry Survivor's Trust _______________________________ STANLEY B. SCHNEIDER, as co-trustee of the Autry Survivor's Trust -51- 52 LIST OF SCHEDULES 1.1(a) Equipment 1.1(b) Contracts 1.1(c) FCC Licenses 6.2(b) Exceptions to Section 6.2(b) 6.3 Exceptions to Section 6.3 6.5 Consents to Assignment of Contracts 6.6 Exceptions to Section 6.6 6.9 List of Insurance 6.10(a) Collective Bargaining Agreements and Employment Agreements 6.10(b) Employee Handbooks, Benefits and Policies -52- EX-2.5.15 4 TIME BROKERAGE AGREEMENT 1 EXHIBIT 2.5.15 TIME BROKERAGE AGREEMENT THIS TIME BROKERAGE AGREEMENT (this "Agreement") is made and entered into as of December 23, 1996, by and among GOLDEN WEST BROADCASTERS, a California corporation ("Licensee"), and CLEAR CHANNEL RADIO, INC., a Nevada corporation ("Programmer"), with reference to the following facts: Recitals A. Licensee is authorized to operate radio station KSCA(FM), Glendale, California (the "Station") pursuant to a license issued to Licensee by the Federal Communications Commission (the "FCC"); B. The parties have entered into an Option Agreement, of even date herewith (the "Option Agreement"), pursuant to which Programmer has an option to buy certain of the assets relating to the Station, including all FCC licenses (the "Option"); C. Licensee desires to obtain a regular source of programming and income which will sustain the operation of the Station; and D. Programmer desires to purchase time on the Station for the broadcast of programming on the Station and for the sale of advertising time included in that programming. Agreement NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Time Sale. Subject to the provisions of this Agreement and to applicable rules, regulations and policies of the FCC, Licensee agrees to make the Station's broadcasting transmission facilities available to Programmer for broadcast of Programmer's programs on the Station originating either from Programmer's studio or from Licensee's studio. Programmer will have the right to broadcast on the Station up to twenty-four (24) hours of programming each day during the Term (as defined in Section 2 below); provided, however, Licensee shall be entitled to reserve up to four hours as it determines is necessary to comply with the FCC's policies regarding the broadcast of public affairs' programming, including Spanish programming relating to the Autry Museum of Western Heritage. The time period during which such public affairs' programming is aired shall be mutually determined by Licensee and Programmer. During the Term, Programmer shall provide all on-air personnel for programming originated by Licensee. During the Term, Programmer shall have the sole responsibility for setting the terms and conditions of 2 employment for on-air personnel used in Licensee's programming and for determining which on-air personnel shall be utilized in Licensee's programming. Programmer shall be responsible for delivering its programming and/or Programmer's programming audio signal, suitable and ready for broadcast, to the Station. 2. Term. The term of this Agreement shall begin on the Effective Date and shall continue until the exercise of the Option and the closing of the sale of the assets of the Station pursuant to the terms of the Asset Purchase Agreement contemplated by the Option Agreement (the "Asset Purchase Agreement"), unless earlier terminated in accordance with Section 14 hereof, (the "Term"). 3. Consideration. As consideration for the air time made available hereunder during the Term, Programmer shall (a) pay to Licensee a monthly fee of $8,333.33, and (b) Programmer shall reimburse Licensee for (i) all reasonable operating expenses for the Station and its transmission facilities, including, without limitation, rent, salaries, maintenance costs, taxes (other than income taxes), licensing fees and royalties and premiums for insurance on the Station's equipment and facilities; provided, however, the amounts reimbursed under this clause (i) (other than fees payable to BMI, ASCAP or SESAC) shall not exceed the annual amounts set forth on Exhibit A attached hereto,(ii) all reasonable capital expenditures not covered by insurance necessary to maintain the Station's equipment and transmission facilities in good working order and repair (provided, however, any capital expenditure in excess of $10,000 shall require the prior consent of Programmer, which consent shall not be unreasonably withheld), and (iii) all amounts, up to a maximum of $550,000, payable by Licensee to employees terminated by Licensee as a result of Licensee entering into this Agreement or the closing of the acquisition of the assets of the Company contemplated by the Asset Purchase Agreement. The fee payable under clause (a) shall be paid on or before the first day of each month, except the fee for the first month shall be paid on the Effective Date, and the fee payable for any partial month shall be pro-rated. The amounts payable under clause (b) shall be paid within 15 days after paid invoices are presented to Programmer. Licensee shall be responsible for operating costs of the Station (subject to reimbursement by Programmer hereunder). Programmer shall furnish the materials and personnel for programming it provides hereunder and shall be responsible for all costs related to the production of, broadcast of, and sale of advertising time on the programming it provides hereunder, including, without limitation, salaries and commissions for air personnel, salespersons, employees and other personnel, promotional expenses and licensing fees. Without limiting the generality of the prior sentence, Programmer shall be solely responsible for setting the terms and conditions of employment for all on-air personnel for the programming it provides, including, without limitation, setting the wages and benefits for such on-air personnel; scheduling, directing and -2- 3 assigning such on-air personnel; and hiring, firing, promoting, demoting, and disciplining such on-air personnel, and Licensee shall have no responsibility for setting the terms and conditions of employment for on-air personnel for programming provided by Programmer hereunder. Notwithstanding anything to the contrary contained herein, upon expiration of the lease for Licensee's studio and office premises, during the Term Programmer shall provide station and office premises for Licensee at the Station's main studio. 4. Performance of Air Time and Contracts. Effective on the Effective Date, Licensee hereby assigns to Programmer, and Programmer hereby assumes from Licensee, (a) all obligations of Licensee under the barter agreements set forth on Exhibit B (collectively "Barter Agreements") arising or to be performed on or after the Effective Date and all rights and benefits under the Barter Agreements, including all unused goods and services, and (b) all obligations of Licensee under cash orders for advertising to be aired on or after the Effective Date on the Station which may be canceled without penalty. Licensee represents and warrants to Programmer Exhibit B attached hereto contains a list of the balance (as of the date hereof) of advertising owed under all Barter Agreements on or after the date hereof and all unused goods and services under the Barter Agreements. Programmer agrees Licensee shall have no obligation to reimburse Programmer for any goods or services received by Licensee under the Barter Agreements prior to the date hereof that have been used. Effective on the Effective Date, during the Term Programmer hereby agrees to perform and pay (without duplication of the reimbursement obligations of Programmer under Section 3) all obligations of Licensee under the agreements listed on Exhibit C attached hereto arising or to be performed on or after the Effective Date, and the parties agree to cooperate with each other in having the other parties to such agreements perform directly for the benefit of, and accept performance and payment directly from, Programmer. Licensee acknowledges the programming provided hereunder by Programmer will be in Spanish. Licensee represents and warrants to Programmer that such change in format will not cause Programmer to have to compensate any party to any Barter Agreement for any unused advertising under such Barter Agreement. 5. Licensee's Authority. Notwithstanding anything to the contrary in this Agreement, Licensee shall have full authority and power over the operation of the Station during the Term and the full responsibility to comply in all material respects with the Communications Act and all FCC rules and regulations. Notwithstanding the foregoing, Licensee shall have no power to set the terms and conditions of employment for on-air personnel utilized for programming broadcast on the Station originated by Licensee or Programmer. Licensee shall retain the right to interrupt or preempt Programmer's programming at any time if Licensee determines the programming is not in the public interest or violates this Agreement, or in case of an emergency -3- 4 or Emergency Broadcast System or any successor system ("EBS") activation, or for the purpose of providing programming which Licensee in its sole discretion determines to be of greater national, regional or local importance. 6. Advertising And Programming Revenues. Programmer shall retain, and be entitled to receive, all revenues from the sale of advertising time on programming broadcast on the Station. Licensee shall provide to Programmer all revenues from the sale of advertising time on the programming it provides for broadcast on the Station including without limitation all revenues for sales of advertising time on programming provided by Licensee pursuant to Section 1, 5 or 7 hereof. 7. Political Advertising. Programmer will provide, make available to and shall sell time to political candidates from the time it purchases from Licensee in material compliance with the Communications Act, and the rules, regulations and policies of the FCC, including without limitation, the equal time and lowest unit rate provisions of the Communications Act, and will otherwise cooperate with Licensee, and provide information to Licensee, to ensure compliance with the political broadcasting requirements of the Communications Act and the FCC's rules and regulations. In the event that it is necessary for Licensee to make time directly available to political candidates in order to comply with the provisions of the Communications Act, Programmer shall immediately relinquish such amounts of time as Licensee shall require. 8. Licensee's Representations, Warranties and Covenants. Licensee represents, warrants and covenants to Programmer as follows: (a) Organization and Authorization. Licensee is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has the requisite corporate power to carry on its business as it is now being conducted. Licensee has the corporate power and authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Licensee and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Licensee. This Agreement has been duly executed and delivered by Licensee and constitutes a valid and binding obligation of Licensee, enforceable against Licensee in accordance with its terms. (b) Music Licenses. Licensee shall maintain licenses with BMI, ASCAP and SESAC. (c) Correspondence. Licensee shall promptly forward to Programmer any mail which it may receive from any agency of government or any correspondence from members of the -4- 5 public relating to a material complaint regarding any of Programmer's programming broadcast on the Station reasonably believed by Licensee to be actionable at the FCC. (d) Change in Call Letters. Upon request from Programmer, Licensee shall file an application with the FCC to change the call letters for the Station to letters requested by Programmer and shall prosecute such application. Programmer shall pay all costs and expenses, including attorneys' fees and costs, incurred by Licensee in connection with such application promptly upon presentation of invoices for such costs and expenses. 9. Programmer's Representations, Warranties and Covenants. Programmer represents, warrants and covenants to Licensee as follows: (a) Organization and Authorization. Programmer is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has the requisite corporate power to carry on its business as it is now being conducted. Programmer has the corporate power and authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Programmer and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Programmer. This Agreement has been duly executed and delivered by Programmer and constitutes a valid and binding obligation of Programmer, enforceable against Programmer in accordance with its terms. (b) Compliance. All of the programming, advertising and promotional material Programmer broadcasts on the Station shall comply in all material respects with all applicable laws, rules, regulations and policies, including, without limitation, the Communications Act and the rules and regulations of the FCC, and the reasonable standards established by Licensee. The performing rights to all music contained in broadcast material supplied hereunder by Programmer shall be licensed by BMI, ASCAP, or SESAC, in the public domain, controlled by Programmer, or cleared at the source by Programmer. Programmer shall provide programming hereunder for at least the number of hours necessary to enable Licensee to meet the minimum hours of operation for the Station required under the FCC's rules and regulations. (c) Station Identification. Programmer shall cooperate with Licensee to ensure that all required Station Identifications announcements are broadcast as required by the FCC rules and regulations. Programmer shall, at Licensee's request, have its employees record, on a form to be supplied by Licensee and at intervals to be specified by Licensee, information concerning transmitter operating characteristics, -5- 6 tower lighting information, and EBS test information and shall transmit weekly EBS tests under Licensee's supervision. (d) Documentation. Programmer shall provide to Licensee monthly documentation of the programs it has broadcast which address problems, needs and interests of the community for the Station. Programmer shall provide local news and public affairs programming relevant to the community for the Station and of sufficient quality to assist Licensee in satisfying its obligations to respond to the needs of such communities. (e) Emergency Broadcasting. Programmer shall cooperate with Licensee to ensure that all required EBS announcements are broadcast as required by the FCC rules and regulations. (f) Information. Programmer will promptly prepare and furnish to Licensee such information, records and reports regarding the programming provided by Programmer hereunder in sufficient detail as is necessary to enable Licensee to comply with all rules and policies of the FCC or any other government agency. (g) Correspondence. Programmer shall promptly forward to Licensee any mail which it may receive from any agency of government or any correspondence from members of the public relating to a material complaint regarding the Station or to any of Programmer's programming broadcast on the Station reasonably believed by Programmer to be actionable at the FCC. 10. Certification Regarding Market Overlap. Programmer hereby certifies that this Agreement complies with the provisions of paragraphs (a)(1) and (e)(1) of Section 73.3555 of the FCC's rules. 11. Right to Use Programs. The right to use Programmer's programs and to authorize their use in any manner and in any media whatsoever shall be, and remain, vested in Programmer. 12. Payola and Conflicts of Interest. Programmer agrees that it will not accept, and will not permit any of its employees to accept, any consideration, compensation, gift, or gratuity of any kind whatsoever, regardless of its value or form, including, but not limited to, a commission, discount, bonus, material, supplies, or other merchandise, services, or labor (collectively, "Consideration"), whether or not pursuant to written contracts or agreements between Programmer and merchants or advertisers, unless the payor is identified in the program for which the Consideration was provided as having paid for or furnished such Consideration, in accordance with the Communications Act and FCC requirements. Programmer agrees to execute, and to have each of its employees who are in a position to determine the content of programming to be broadcast on the -6- 7 Station execute, at least once every six (6) months, payola Affidavits in a form reasonably requested by Licensee and Programmer agrees to deliver the originals of all such Affidavits to Licensee as expeditiously as possible following their execution. 13. Indemnification. (a) By Programmer. Programmer shall indemnify and hold Licensee and its attorneys, affiliates, representatives, agents, officers, directors, successors or assigns harmless from and against any Damages resulting from, arising out of or incurred with respect to: (i) a breach of any representation, warranty, covenant or agreement of Programmer contained herein, (ii) any programming provided to Licensee by Programmer pursuant to this Agreement, including, without limitation, liabilities for copyright or proprietary right infringement, libel, slander, defamation, or invasion of privacy, or (iii) any damage to the facilities of Licensee attributable to actions or omissions of employees, representatives or agents of Programmer. (b) Indemnification by Licensee. Licensee shall indemnify and hold Programmer and its attorneys, affiliates, representatives, agents, officers, directors, successors or assigns harmless from and against any Damages resulting from, arising out of, or incurred with respect to: (i) a breach of any representation, warranty, covenant or agreement of Licensee contained herein, or (ii) any programming originated by Licensee for broadcast on the Station, including, without limitation, liabilities for copyright or proprietary right infringement, libel, slander, defamation, or invasion of privacy, . (c) Procedures. (i) Promptly after the receipt by a party (the "Indemnified Party") of notice of (A) any claim or (B) the commencement of any action or proceeding which may entitle such party to indemnification under this Section, such party shall give the other party (the "Indemnifying Party") written notice of such claim or the commencement of such action or proceeding and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting from such claim. The failure to give the Indemnifying Party timely notice under this subsection shall not preclude the Indemnified Party from seeking indemnification from the Indemnifying Party unless, and then only to the extent, such failure has materially prejudiced the Indemnifying Party's ability to defend the claim or litigation. If such claim does not arise from the claim of a third party, the Indemnifying Party shall have 30 days after such notice to cure the conditions giving rise to such claim to the Indemnified Party's satisfaction. Failure by the Indemnifying Party to notify an Indemnified Party of its election to defend any such claim or action by a third party within 30 days after notice thereof shall have been given to the Indemnifying Party shall be -7- 8 deemed a waiver by the Indemnifying Party of its rights to defend such claim or action. (ii) If the Indemnifying Party assumes the defense of any such claim or litigation resulting therefrom with counsel reasonably acceptable to the Indemnified Party, the Indemnified Party may participate, at its expense, in the defense of such claim or litigation provided that the Indemnifying Party shall direct and control the defense of such claim or litigation. The Indemnified Party shall cooperate and make available all books and records reasonably necessary and useful in connection with the defense. Except with the prior written consent of the Indemnified Party, the Indemnifying Party shall not, in the defense of such claim or any litigation resulting therefrom, consent to the entry of any judgment (other than a judgment of dismissal on the merits without cost) or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party of a release from all Damages in respect of such claim or litigation. (iii) If the Indemnifying Party shall not assume the defense of any such claim or litigation resulting therefrom, the Indemnified Party may, but shall have no obligation to, defend against such claim or litigation in such manner as it may deem appropriate; provided, however, the Indemnified Party may not compromise or settle such claim or litigation without the Indemnifying Party's prior written consent. (d) AFTRA Claims. (i) If (A) any claim against Programmer is made that Programmer is subject to or bound by the Agreement dated March 17, 1995, between Licensee and Los Angeles Local, American Federation of Television and Radio Artists (the "AFTRA Contract") due to the existence of this Agreement, including a claim that Programmer has repudiated the AFTRA Contract during the term hereof by not complying with the terms of the AFTRA Contract, (B) any claim is made against Programmer that Programmer is obligated to bargain with the American Federation of Television and Radio Artists ("AFTRA") as a result of the existence of the AFTRA Contract and the existence of this Agreement, or (C) any claim is made against Programmer which is based on a breach of the AFTRA Contract by Licensee, Licensee shall retain counsel mutually acceptable to Licensee and Programmer (the parties agree Jeffer, Mangels, Butler & Marmaro LLP is acceptable to both parties) to defend Programmer (and Licensee, if applicable) against such claim, including acting as defense counsel in any lawsuit, arbitration or administrative proceeding and prosecuting any appeals. In addition, if during the term of this Agreement AFTRA conducts a strike against the Station, KLVE-FM, Los Angeles, California or KTNQ- AM, Los Angeles, California (the Stations, KLVE-FM and KTNQ-AM -8- 9 collectively are referred to herein as the "Subject Stations") or pickets or handbills the Subject Stations' premises, upon request from Programmer Licensee shall retain counsel mutually acceptable to Licensee and Programmer (the parties agree Jeffer, Mangels, Butler & Marmaro LLP is acceptable to both parties) to take affirmative legal action, including seeking an injunction, against AFTRA to cause AFTRA to cease or limit such strike, picketing or handbilling. Licensee shall pay all fees and costs of counsel retained under this subsection. Programmer shall direct and control the defense of the claim or affirmative legal action, as the case may be; provided, however, unless Programmer obtains the prior written consent of Licensee, Programmer may not enter into any settlement which imposes liability on Licensee or which does not include a waiver of all claims against Licensee for a failure by Programmer to comply with the AFTRA Contract. (ii) If it is determined, by an order or decree of an arbitrator, court or administrative agency of competent jurisdiction in an action for which Licensee is required to retain counsel under Section 13(d)(i) that is not subject to appeal or further administrative review or pursuant to a settlement approved by Licensee and Programmer (such order, decree or settlement is referred to herein as the "Final Order"), that any on-air staff announcer at any of the Subject Stations, (collectively, the "Announcers") is covered by the AFTRA Contract or that Programmer is liable for the payment of any wages, including payment for sick days and accrued but unused vacation, reimbursement of business expenses, or contributions to AFTRA Health and Retirement Funds under the AFTRA Contract as a result of a claim described in Section 13(d)(i)(C), Licensee agrees to pay to Programmer 50% of the amount equal to the excess of (A) the minimum wages, including payment for sick days and accrued but unused vacation, and reimbursement of business expenses which must be paid by Programmer under the AFTRA Contract to such Announcer for the period beginning on the Effective Date and ending on March 16, 1998 (the "Union Period") and all contributions which must be made by Programmer to AFTRA Health and Retirement Funds under the AFTRA Contract during the Union Period pursuant to the Final Order, over (B) all wages and reimbursement of business expenses which would have been paid by Programmer to, and all contributions to pension or similar retirement funds which would have been made by Programmer on behalf of, such Announcer during the Union Period if he was not covered under the AFTRA Contract (for purposes of this clause B, an Announcer's wages from Programmer, Programmer's policies of reimbursement for business expenses and contributions by Programmer to pension or similar retirement funds in effect on the date of the Final Order shall be deemed to be the wages which an Announcer would have received after the date of the Final Order, the policy under which such Announcer would have received reimbursement of business expenses after the date of the Final Order and the retirement contributions which would have been made after the date of the Final Order). In addition, if it is determined by a Final Order that any Subject Station is obligated -9- 10 to negotiate with AFTRA concerning a collective bargaining agreement covering any Announcers, Licensee agrees to pay to Programmer 50% of the amount equal to the excess of (1) the minimum wages, including payment for sick days and accrued but unused vacation, and reimbursement of business expenses which must be paid by Programmer to such Announcers under the new collective bargaining agreement with AFTRA for the Union Period and all contributions which must be made by Programmer to AFTRA Health and Retirement Funds under such new collective bargaining agreement during the Union Period, over (2) all wages and reimbursement of business expenses which would have been paid by Programmer to, and all contributions to pension or similar retirement funds which would have been made by Programmer on behalf of, such Announcers during the Union Period if such new collective bargaining agreement had not been entered into (for purposes of this clause 2, an Announcer's wages from Programmer, Programmer's policies of reimbursement for business expenses and contributions by Programmer to pension or similar retirement funds in effect on the date of the Final Order shall be deemed to be the wages which an Announcer would have received after the date of the Final Order, the policy under which such Announcer would have received reimbursement of business expenses after the date of the Final Order and the retirement contributions which would have been made after the date of the Final Order); provided, however, the amount payable by Licensee under this sentence shall not exceed the amount which Licensee would have paid under this sentence if the Subject Station was subject to the AFTRA Contract instead of the new collective bargaining agreement. (iii) Programmer shall take all reasonable action, which does not involve Programmer incurring additional costs or assuming any actual or potential liabilities, suggested by counsel for Licensee to protect against a claim by AFTRA that any Announcer is covered by the AFTRA Contract. (e) Survival. The indemnity obligations of Programmer and Licensee under this Section 13 shall survive any termination of this Agreement, including a termination as a result of the closing of the transactions contemplated by the Asset Purchase Agreement attached as an exhibit to the Option Agreement, and shall continue until the expiration of all applicable statutes of limitations. 14. Termination. (a) This Agreement may be terminated only as follows, provided the party seeking to terminate is not then in material default or breach of this Agreement, the Asset Purchase Agreement or the Option Agreement, as follows: (i) Only after compliance with Section 16(a), by 30 days written notice from Licensee or Programmer, if this Agreement is declared invalid or illegal in whole or -10- 11 material part by an order or decree of the FCC or any other administrative agency or court of competent jurisdiction which is not subject to appeal or further administrative or judicial review; (ii) By written notice from either party, if the other party is in material breach of its obligations hereunder and has failed to cure such breach within thirty (30) days of delivery of written notice from the non-breaching party; provided, however, if the breach is a failure by Programmer to pay the amounts due under Section 3, then Licensee may terminate this Agreement if Programmer has not paid the amount due within five business days of delivery of written notice; (iii) By mutual written consent of the parties; (iv) Only after compliance with Section 16(a), by 30 days written notice from Licensee or Programmer if there has been a change in FCC rules or policies that would cause this Agreement or any material provision hereof to be in violation thereof and such change is not subject to appeal or further administrative or judicial review; or (v) By written notice from Licensee or Programmer, upon termination of the Option Agreement. (b) Survival. The provisions of Sections 3 (only with respect to expenses incurred prior to termination and any payments with respect to terminated employees under Section 3(b)(iii)), 4 (only with respect to obligations incurred prior to termination), 6, 13 and 18 shall survive a termination of this Agreement. 15. Use of Assets. Licensee hereby grants to Programmer an unlimited license to use the term "KSCA(FM)" in conjunction with programming aired on the Station. Licensee agrees to permit Programmer to have access to the equipment for the Station when necessary in connection with airing programming on the Station. 16. Regulatory Matters. (a) Governmental Action. If this Agreement could be terminated under Section 14(a)(i) or 14(a)(iv) after compliance with this Section 16(a), then the parties shall use good faith efforts to reasonably modify this Agreement in a manner that will cure such invalidity, illegality or violation and that will maintain a balance of the material benefits and burdens to Licensee and Programmer comparable to the balance of the material benefits and burdens to Licensee and Programmer provided in this Agreement in its current form. If modifying this Agreement in order to effect such cure without materially changing the balance of benefits and burdens to Licensee and -11- 12 Programmer provided in this Agreement in its current form is not possible, then either party may terminate this Agreement in accordance with Section 14(a)(i) or 14(a)(iv) if such party is in compliance with such Section. (b) FCC Matters. Should a change in FCC policy or rules make it necessary to obtain the FCC's consent to the implementation, continuation, or further effectuation of any element of this Agreement, Licensee and Programmer shall use their commercially reasonable efforts (each party to bear its own costs) diligently to prepare, file, and prosecute before the FCC all petitions, waiver requests, applications, amendments, rulemaking comments, and other documents necessary to secure and/or to retain the FCC's approval of all aspects of this Agreement. Notwithstanding anything in this Agreement to the contrary, no joint filing shall be made with the FCC by Licensee and Programmer with respect to this Agreement, unless both parties hereto shall have reviewed said filing and shall have consented to its submission to the FCC; and neither Licensee nor Programmer shall make any unilateral filing with the FCC with respect to this Agreement, unless the party intending to make such filing shall first have consulted with the other party concerning such filing. 17. Definitions. The following terms shall have the following meaning: "Communications Act" shall mean the Communications Act of 1934, as amended. "Damages" shall mean any liability, loss, cost, expense, judgment, order, settlement, obligation, deficiency, claim, suit, proceeding (whether formal or informal), investigation, lien, encumbrance, security interest, mortgage, pledge or other damage, including, without limitation, attorney's fees and expenses. Notwithstanding the foregoing, "Damages" shall not include any consequential damages, including, but not limited to, loss of future revenue or income, cost of capital or loss of business reputation or opportunity. "Effective Date" shall mean the date after the Initial Payment Date (as defined in the Option Agreement) specified by Programmer in a notice delivered to Licensee, which date shall not be more than 14 days after the Initial Payment Date (as defined in the Option Agreement). -12- 13 Each of the following terms shall have the meanings set forth in the Section opposite such term:
Term Section ---- ------- Agreement Preamble AFTRA 13(d)(i) AFTRA Contract 13(d)(i) Announcers 13(d)(ii) Asset Purchase Agreement 2 Consideration 12 EBS 5 FCC Recital A Final Order 13(d)(ii) Indemnified Party 13(c) Indemnifying Party 13(c) Licensee Preamble Option 5 Option Agreement Recital B Programmer Preamble Station Recital A Subject Station 13(d)(i) Term 2 Union Period 13(d)(ii)
18. Miscellaneous. (a) Force Majeure. Notwithstanding anything contained in this Agreement to the contrary, no party shall be liable to another party for a failure to perform any obligation under this Agreement, if such party shall be prevented from such performance by reason of fires, strikes, labor unrest, embargoes, civil commotion, rationing, or other orders or requirements, acts of civil or military authorities, acts of God, or other contingencies beyond the reasonable control of the parties, including equipment failures, and all provisions herein requiring performance within a specified period shall be deemed to have been modified in order to toll or to extend the period in which such performance shall be required, in order to accommodate the period of the pendency of such contingency which shall prevent such performance. This provision is subject to the provisions of the Asset Purchase Agreement, if executed, which provide for a reduction of the purchase price in certain circumstances relating to preemption of programming and the Station's inability to broadcast. (b) Benefit and Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. No party may voluntarily or involuntarily assign its interest under this Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, Programmer may assign its rights hereunder to any permitted assignee of the optionee -13- 14 under the Option Agreement or buyer under the Purchase Agreement. No assignment by Programmer hereunder shall relieve Programmer of its obligations hereunder. (c) Headings. The headings set forth in this Agreement are for convenience only and will not control or affect the meaning or construction of the provisions of this Agreement. (d) Governing Law. This Agreement and the rights of the parties hereto shall be governed by, and construed in accordance with, the laws of the State of California, without giving effect to the choice of law principles thereof. (e) Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. (f) Severability. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. (g) Attorneys' Fees. Should any party hereto institute any action or proceeding at law or in equity to enforce any provision of this Agreement, including an action for declaratory relief, or for damages by reason of an alleged breach of any provision of this Agreement, or otherwise in connection with this Agreement, or any provision hereof, the prevailing party shall be entitled to recover from the losing party reasonable attorneys' fees and costs for services rendered to the prevailing party in such action or proceeding. (h) Multiple Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. (i) Notices. Unless applicable law requires a different method of giving notice, any and all notices, demands or other communications required or desired to be given hereunder by any party shall be in writing. Assuming that the contents of a notice meet the requirements of the specific Section of this Agreement which mandates the giving of that notice, a notice shall be validly given or made to another party if served either personally or if deposited in the United States mail, certified or registered, postage prepaid, or if transmitted by telegraph, telecopy or other electronic written transmission device or if sent by overnight courier service, and if addressed to the applicable party as set forth below. If such notice, demand or other communication is served personally, service shall be conclusively deemed given at the time of such personal service. If such notice, demand or other communication is given by mail, service shall be conclusively deemed given seventy-two (72) hours after the deposit thereof in the United States mail. If such -14- 15 notice, demand or other communication is given by overnight courier, or electronic transmission, service shall be conclusively deemed given at the time of confirmation of delivery. The addresses for the parties are as follows: If to Programmer: Clear Channel Radio, Inc. 200 Concord Plaza, Suite 600 San Antonio, Texas 78216 Attention: Mr. Mark P. Mays Telecopier No.: (210) 822-2299 If to Licensee: 4383 Colfax Avenue Studio City, California 91604 Attention: Mrs. Jackie Autry Telecopier: (818) 752-7779 with a copy to: Jeffer, Mangels, Butler & Marmaro LLP 2121 Avenue of the Stars, Tenth Floor Los Angeles, California 90067 Attention: Richard M. Brown, Esq. Telecopier No.: (310) 203-0567 Either party hereto may change its address for the purpose of receiving notices, demands and other communications as herein provided, by a written notice given in the aforesaid manner to the other party hereto. (j) Waivers. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. (k) No Third Party Beneficiaries. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity other than the parties hereto and their successors or permitted assigns, any rights or remedies under or by reason of this Agreement. (l) Entire Agreement. This Agreement and the Exhibits hereto constitute the entire agreement and understanding of the parties hereto relating to the matters provided for herein and supersede any and all prior agreements, arrangements, -15- 16 negotiations, discussions and understandings relating to the matters provided for herein. Notwithstanding the foregoing, this Agreement shall not supersede the Option Agreement. (m) Rule of Construction. Each party and counsel for each party have reviewed this Agreement. The parties hereto hereby agree that the normal rule of construction, which requires a court to resolve any ambiguities against the drafting party, shall not apply in interpreting this Agreement. (n) Exhibits. Each Exhibit attached hereto is incorporated herein by reference. -16- 17 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. GOLDEN WEST BROADCASTERS By:/s/ Jacqueline Autry ------------------------ Jacqueline Autry Executive Vice President CLEAR CHANNEL RADIO, INC. By:/s/ Kenneth E. Wyker ----------------------- Name: Kenneth E. Wyker Title: Vice President Legal Affairs -17- 18 LIST OF EXHIBITS A Budget B Barter Agreements C Agreements to be Performed EX-2.5.16 5 ASSIGNMENT & ASSUMPTION AGREEMENT 1 EXHIBIT 2.5.16 ASSIGNMENT AND ASSUMPTION AGREEMENT THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is made as of January 2, 1997 among Clear Channel Radio, Inc., a Nevada corporation ("Assignor"), Heftel Broadcasting Corporation, a Delaware corporation ("Assignee") and Tichenor Media System, Inc., a Texas corporation ("Tichenor"). Recitals Assignor and Golden West Broadcasters, a California corporation ("GWB"), are parties to an Option Agreement (the "Option Agreement") and a Time Brokerage Agreement (the "TBA"), both dated December 23, 1996, with respect to radio station KSCA(FM), Glendale, California (the "Station"). The Option Agreement provides for execution of the Purchase Agreement attached thereto (the "Purchase Agreement") upon exercise of the Option under the Option Agreement. The Option Agreement, Purchase Agreement and TBA are referred to herein collectively as the "Transaction Documents." Tichenor and Clear Channel Communications, Inc., a Texas corporation ("Clear Channel") are parties to an Agreement and Plan of Merger dated July 9, 1996 with respect to Assignee. Assignee and Tichenor desire Assignor to assign and delegate to Assignee the Transaction Documents. This Agreement contains certain representations, warranties, indemnities, releases, covenants and agreements of Assignee and consents and approvals of Tichenor without which Assignor would not assign or delegate the Transaction Documents to Assignee. Agreement NOW, THEREFORE, taking the foregoing recitals into account, and in consideration of the mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and confirmed, the parties agree as follows: 1. Assignment and Assumption. Assignor hereby assigns and delegates to Assignee the Transaction Documents and all Assignor's rights and obligations thereunder. Assignee hereby accepts the foregoing assignment and delegation and assumes all obligations of Assignor under the Transaction Documents. On the date hereof, Assignee shall pay to Assignor an amount equal to (i) $10 million (being the amount of all payments made by Assignor under the Option Agreement) plus (ii) $_____________ being the amount of all payments made by Assignor under the TBA. 2. Representations and Warranties. Assignee represents and warrants to Assignor that all representations and warranties of Assignor under the Transaction Documents are true and correct with respect to Assignee as though made by Assignee (except that Assignee is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware rather than Nevada). Assignee acknowledges and agrees that the 2 assignment and delegation hereunder is made without representation or warranty by, and without recourse to, Assignor. 3. Covenants. Notwithstanding anything to the contrary set forth in the Transaction Documents (including Section 15 of the Option Agreement, Section 18(b) of the TBA and Section 15.2 of the Purchase Agreement), as between Assignor and Assignee, Assignor shall have no obligations under the Transaction Documents and Assignee shall be responsible for the payment and performance of all obligations thereunder. Assignee shall timely pay and perform all obligations of Assignor under the Transaction Documents and shall otherwise fully comply with the terms thereof. Assignor may, but shall not be obligated to, from time to time pay or perform any obligation under any of the Transaction Documents at Assignee's cost and expense. Assignee shall pay to Assignor on demand all costs and expenses incurred by Assignor in paying or performing any such obligations. Assignee covenants and agrees that, without the prior written consent of Assignor (which consent Assignor may withhold in its sole and absolute discretion), Assignee shall not (i) exercise the Option under the Option Agreement or (ii) assign or delegate any of the Transaction Documents or any rights or obligations thereunder or (iii) modify, amend or terminate any of the Transaction Documents. Assignee shall (i) deliver to Assignor copies of all notices, demands and other communications given or received under the Transaction Documents at the same time such notices, demands and communications are given or received by Assignee and (ii) otherwise keep Assignor informed regarding all matters relating to the Transaction Documents. 4. Indemnification and Release. Assignee shall indemnify, defend and hold harmless Assignor and Clear Channel and their respective directors, officers, employees, agents, successors and assigns (each an "Indemnified Person") from and against any and all claims, demands, actions, suits, proceedings, losses, damages, liabilities, obligations, costs and expenses (including without limitation reasonable attorneys' fees) of whatsoever kind or nature (collectively "Claims") which may be imposed on, incurred by or asserted against any Indemnified Person that directly or indirectly arise or result from or are attributable to any of the Transaction Documents or the execution, delivery or performance (or non-performance) thereof, including without limitation any failure by Assignee to comply with the terms thereof, but excluding Claims that arise or result solely from the gross negligence or willful misconduct of Assignor. Assignee hereby releases each Indemnified Person from any and all Claims which Assignee may now or hereafter have, whether known or unknown, that directly or indirectly arise or result from or are attributable to any of the Transaction Documents or the execution, delivery or performance (or non-performance) thereof. 5. Remedies. In addition to any other rights and remedies of Assignor, in the event of a failure by Assignee to comply with the terms of this Agreement or any of the Transaction Documents or if any representation or warranty of Assignee hereunder or thereunder is or becomes untrue, at Assignor's option, the Transaction Documents and all rights thereunder shall be assigned by Assignee to Assignor or Assignor's designee. Assignee hereby assigns the Transaction Documents and all rights thereunder to Assignor or Assignor's designee effective upon any exercise by Assignor of such option, it being the intent of the -2- 3 parties that any such assignment shall occur upon written notice thereof given by Assignor to Assignee, without need for any further act by Assignor or Assignee. Assignee shall execute and deliver all documents and agreements and take all other actions necessary to fully effectuate any such assignment upon Assignor's exercise of such option, and Assignee hereby irrevocably appoints Assignor as Assignee's attorney-in-fact to execute and deliver all such documents and agreements and take all such actions on behalf of Assignee. 6. Consent and Approval. Tichenor hereby irrevocably consents to, authorizes and approves, the execution, delivery and performance of this Agreement by Assignee, including without limitation the assumption and performance by Assignee of the Transaction Documents and the consummation by Assignee of the transactions contemplated by this Agreement and the Transaction Documents. Nothing in this Agreement shall be deemed an assumption by TMS of any obligations or liabilities under any of the Transaction Documents. 7. Miscellaneous. (a) Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but which together shall constitute one agreement. (b) Governing Law. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Texas, without giving effect to principles of conflicts of laws. (c) Severability. Whenever possible, each provision of this Agreement shall be interpreted in a manner as to be valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or any other provision of this Agreement. (d) Attorneys' Fees. In the event of any action or proceeding at law or in equity to enforce any provision of this Agreement (including an action for declaratory relief) or based on or arising out of any alleged breach of any provision of this Agreement, or otherwise in connection with this Agreement or any provision hereof, the prevailing party shall be entitled to recover from the losing party or parties reasonable attorneys' fees and other costs of such action or proceeding. (e) Amendments and Waivers. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall any such waiver constitute a continuing waiver. No waiver of any provision of this Agreement shall be binding unless executed in writing by the party making the waiver. (f) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and any permitted assigns. -3- 4 Neither Assignee nor Tichenor may assign or delegate this Agreement or any rights or obligations hereunder, except as expressly set forth herein. (g) Third Party Beneficiaries. Except that Clear Channel and each other Indemnified Person is an intended beneficiary of this Agreement, nothing herein is intended or shall be construed to confer upon or give to any person or entity other than the parties hereto and their successors and any permitted assigns, any rights or remedies under or by reason of this Agreement. (h) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto relating to the matters provided for herein and supersedes any and all prior agreements, arrangements, negotiations, discussions and understandings relating to the matters provided for herein. [SIGNATURE PAGE FOLLOWS] -4- 5 SIGNATURE PAGE TO KSCA(FM) ASSIGNMENT AND ASSUMPTION AGREEMENT IN WITNESS WHEREOF, Assignor, Assignee and Tichenor have executed this Agreement as of the date first set forth above. ASSIGNOR: CLEAR CHANNEL RADIO, INC. By: /s/ KENNETH E. WYKER ------------------------------- Name: Kenneth E. Wyker Title: Vice President ASSIGNEE: HEFTEL BROADCASTING CORPORATION By: /s/ KENNETH E. WYKER ------------------------------- Name: Kenneth E. Wyker Title: Vice President TICHENOR: TICHENOR MEDIA SYSTEM, INC. By: /s/ McHENRY T. TICHENOR, JR. ------------------------------- Name: McHenry T. Tichenor, Jr. Title: President -5- EX-5 6 OPINION OF AKIN GUMP 1 AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. 1500 NATIONSBANK PLAZA 300 CONVENT STREET SAN ANTONIO, TEXAS 78205 (210) 270-0800 January 9, 1997 Heftel Broadcasting Corporation 200 Concord Plaza, Suite 600 San Antonio, Texas 78216 Gentlemen: We have acted as counsel to Heftel Broadcasting Corporation, a Delaware corporation (the "Company"), in connection with the proposed public offering of up to 4,375,000 shares of the Company's Class A Common Stock, $.001 par value (the "Common Stock"), as described in the Registration Statement on Form S-3, file No. 333-14207 (the "Registration Statement"), originally filed with the Securities and Exchange Commission on October 16, 1996. We have, as counsel, examined such corporate records, certificates and other documents and reviewed such questions of law as we have deemed necessary, relevant or appropriate to enable us to render the opinions expressed below. In rendering such opinions, we have assumed the genuineness of all signatures and the authenticity of all documents examined by us. As to various questions of fact material to such opinions, we have relied upon representations of the Company. Based upon such examination and representations, we advise you that, in our opinion: 1. The shares of Common Stock which are to be sold and delivered by the Company and the selling stockholder of the Company (the "Selling Stockholder") as contemplated by the Underwriting Agreement (the "Underwriting Agreement"), the form of which is filed as Exhibit 1 to the Registration Statement, have been duly and validly authorized by the Company and, in the case of the shares of Common Stock to be sold by the Selling Stockholder, have been validly issued and are fully paid and non-assessable. 2. The shares of Common Stock which are to be sold and delivered by the Company as contemplated by the Underwriting Agreement, when issued and delivered in accordance with the terms of the Underwriting Agreement, will be validly issued, fully paid, and non-assessable. We consent to the filing of this opinion as Exhibit 5 to the Registration Statement and to the reference of this firm under the caption "Legal Opinions" in the Prospectus contained therein. Very truly yours, /s/ AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. ---------------------------------------------- AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. EX-23.1.1 7 CONSENT OF ERNST & YOUNG 1 EXHIBIT 23.1.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in Amendment No. 2 to the Registration Statement (Form S-3 No. 333-14207) and related Prospectus of Heftel Broadcasting Corporation for the registration of 3,850,000 shares of its Class A Common Stock and to the incorporation by reference therein of our report dated November 7, 1996, with respect to the consolidated financial statements of Heftel Broadcasting Corporation included in its Annual Report (Form 10-K) for the year ended September 30, 1996, filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP Ernst & Young LLP Los Angeles, California January 9, 1997 EX-23.1.5 8 CONSENT OF KPMG PEAT MARWICK 1 EXHIBIT 23.1.5 INDEPENDENT AUDITORS' CONSENT The Board of Directors Tichenor Media System, Inc.: We consent to the use of our report included herein and to the reference to our firm under the heading "Experts" in the Prospectus. /s/ KPMG PEAT MARWICK LLP KPMG Peat Marwick LLP Dallas, Texas January 9, 1997 EX-23.1.6 9 CONSENT OF MILLER KAPLAN ARASE 1 EXHIBIT 23.1.6 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the incorporation of our report dated March 1, 1996 (except for Notes 5A and 11 as to which the date is August 16, 1996), with respect to the financial statements of KSOL-FM and KYLZ-FM (Divisions of Crescent Communications, L.P.) for the nine months ended December 31, 1994 and year ended December 31, 1995 included in the Registration Statement on Form S-3 and the related Prospectus of Heftel Broadcasting Corporation for the registration of 3,850,000 shares of its Class A Common Stock. /s/ MILLER, KAPLAN, ARASE & CO. ------------------------------------ Miller, Kaplan, Arase & Co. North Hollywood, California January 9, 1997 -----END PRIVACY-ENHANCED MESSAGE-----