-----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, Rr/KlM1mA7o7LC+oWH1A5LSCncdOQGyaMBua8vqivPiFzMCKZP0LMN3ammAZJwCm D9n8KQ4JD2IDB+rIm5Auew== 0000950148-96-001474.txt : 19960726 0000950148-96-001474.hdr.sgml : 19960726 ACCESSION NUMBER: 0000950148-96-001474 CONFORMED SUBMISSION TYPE: DEF 14C PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960725 FILED AS OF DATE: 19960725 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: DEF 14C SEC ACT: 1934 Act SEC FILE NUMBER: 000-24516 FILM NUMBER: 96598860 BUSINESS ADDRESS: STREET 1: 6767 WEST TROPICANA AVE CITY: LAS VEGAS STATE: NV ZIP: 89603 BUSINESS PHONE: 7023673322 DEF 14C 1 DEF 14C 1 HEFTEL BROADCASTING CORPORATION 6767 West Tropicana Avenue Las Vegas, Nevada 89103 (702) 367-3322 ------------------------ INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER ------------------------ NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING SOLICITED AND YOU ARE NOT REQUESTED TO SEND THE COMPANY A PROXY. This Information Statement is being mailed on or about July 25, 1996, to holders of shares of Class A Common Stock, $0.001 par value, of Heftel Broadcasting Corporation, a Delaware corporation (the "Company") ("Class A Common Stock"), and Class B Common Stock, $0.001 par value, of the Company ("Class B Common Stock"), in connection with the possible election of persons designated by Clear Channel Radio, Inc., a Nevada corporation ("Purchaser"), to the Board of Directors of the Company without a meeting of the stockholders of the Company pursuant to a Tender Offer Agreement, dated June 1, 1996, between the Company and Purchaser, as amended (the "Tender Offer Agreement"). Pursuant to the Tender Offer Agreement, (a) Purchaser has commenced a tender offer (the "Offer") to purchase all of the outstanding shares of Class A Common Stock and Class B Common Stock (collectively, "Common Stock") for $23 per share, and (b) concurrently with the closing of the transactions contemplated by the Tender Offer Agreement (the "Closing"), the Company agreed to take all actions necessary to cause persons designated by Purchaser to become directors of the Company so that such persons shall constitute at least a majority of the Board of Directors of the Company or if Purchaser so requests, all of the directors of the Company, and in furtherance thereof, to increase the size of the Company's Board of Directors, or use its reasonable efforts to secure the resignation of directors, or both, as necessary to permit Purchaser's designees to be elected to the Company's Board of Directors. Purchaser has informed the Company that if, as and when the Closing occurs, it desires to have the designees of Purchaser described in this Information Statement elected as all of the directors of the Company. Concurrently with the Closing, the Company intends to secure the resignation of all of the current directors of the Company and to cause all of Purchaser's designees to be elected to the Board of Directors of the Company. No action is required by the stockholders of the Company in connection with the election or appointment of Purchaser's designees to the Company's Board of Directors. However, Section 14(f) of the Securities Exchange Act of 1934 requires the mailing to the Company's stockholders of the information set forth in this Information Statement prior to a change in a majority of the Company's directors. IN THE EVENT THAT PURCHASER TERMINATES THE OFFER, OR IF THE TENDER OFFER AGREEMENT IS TERMINATED PURSUANT TO ITS TERMS BY PURCHASER OR THE COMPANY PRIOR TO THE ELECTION OR APPOINTMENT OF PURCHASER'S DESIGNEES, PURCHASER WILL NOT HAVE ANY RIGHT UNDER THE TENDER OFFER AGREEMENT TO HAVE PURCHASER'S DESIGNEES ELECTED OR APPOINTED TO THE COMPANY'S BOARD OF DIRECTORS. The information contained in this Information Statement concerning Purchaser, Clear Channel Communications, Inc., a Texas corporation and indirect owner of Purchaser ("Parent"), and the designees of Purchaser has been furnished to the Company by Purchaser and Parent. The Company assumes no responsibility for the accuracy or completeness of such information. 2 VOTING SECURITIES AND STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT On July 22, 1996, there were 6,836,018 shares of Class A Common Stock outstanding, with one vote per share, and 3,356,529 shares of Class B Common Stock outstanding, with ten votes per share. Class A Common Stock and Class B Common Stock vote as one class on all matters to be submitted at the meetings of stockholders. The following table sets forth certain information regarding ownership of the Class A Common Stock and Class B Common Stock as of July 22, 1996 by (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of Class A Common Stock or Class B Common Stock, (ii) each director of the Company, (iii) certain executive officers of the Company, and (iv) all executive officers and directors of the Company as a group. The table does not reflect any beneficial ownership by Parent or the Purchaser of any shares of Class A Common Stock (including shares of Class A Common Stock issuable upon the automatic conversion of shares of Class B Common Stock sold to Purchaser) which have been tendered in the Offer or which are subject to the Stockholder Purchase Agreement, dated June 1, 1996, among Purchaser, Cecil Heftel, Carl Parmer and children of Cecil Heftel (the "Stockholder Purchase Agreement").
SHARES OF CLASS A SHARES OF CLASS B COMMON STOCK OWNED(2)(3) COMMON STOCK OWNED(2)(3) TOTAL VOTING PERCENT OF ------------------------ -------------------------- POWER VOTING POWER PERCENT OF PERCENT OF ------------ ------------ NAME AND ADDRESS(1) NUMBER CLASS NUMBER CLASS - ------------------------------- --------- ---------- --------- ---------- Cecil Heftel................... 13,333(4) * 3,662,181(5)(6) 87.97% 36,635,143 75.57% Richard D. Heftel.............. 5,000(4) * 572,318(7)(8) 17.05 5,728,180 14.18 Margaret A.H. Wilson........... -- -- 458,849(7)(9) 13.67 4,588,490 11.36 Susan Heftel-Liquido........... -- -- 521,327(7)(10) 15.53 5,213,270 12.90 H. Carl Parmer................. 168,044(11) 2.46 413,026 12.31 4,298,304 10.64 Clear Channel Communications, Inc.......... 2,156,799 31.55% 764,651(6) 22.78 9,803,309 24.26 John E. Mason.................. 1,667(4) * -- -- 1,667 * Madison B. Graves, II.......... -- -- -- -- -- -- John T. Kendrick............... -- -- -- -- -- -- Charles M. Fernandez........... -- -- -- -- -- -- All directors and executive officers) as a group (7 persons)..................... 188,044(12) 2.74% 4,088,407(5) 98.20 41,072,114 84.69
- --------------- * Less than one percent. (1) Other than Clear Channel Communications, Inc., each five percent stockholder's address is at the Company's principal executive offices. The address for Clear Channel Communications, Inc. is 200 Concord Plaza, Suite 600, San Antonio, Texas 78216. (2) The persons named in the table, to the Company's knowledge, have sole voting and sole investment power with respect to all shares of stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes hereunder. (3) Shares which a person had the right to acquire within 60 days are deemed outstanding in calculating the percentage ownership of the person but not deemed outstanding as to any other person. (4) All shares are subject to an option which is currently exercisable. (5) Includes 2,855,503 shares subject to a Second Amended and Restated Voting Trust dated July 5, 1994, as amended (the "Voting Trust") and 806,678 shares subject to a currently exercisable warrant. Under the terms of the Voting Trust, Mr. Heftel may vote the shares on all matters submitted to a vote of stockholders. Mr. Heftel does not have investment power over 2,159,322 of the shares subject to the Voting Trust. The Voting Trust expires on December 31, 2000. 2 3 (6) Pursuant to a Voting Rights Agreement dated May 23, 1995, executed by Cecil Heftel, Clear Channel Communications, Inc. has the ability, upon delivery of written notice, to cause Cecil Heftel to vote 764,651 shares of Class B Common Stock in accordance with its instructions. (7) This person has investment power as to these shares. Mr. Cecil Heftel, as Trustee of the Voting Trust, has voting power as to these shares. (8) Includes 13,200 shares held by Mr. Heftel as custodian for his minor children. (9) Includes 13,200 shares held by Ms. Wilson as custodian for her minor children. (10) Includes 503,727 shares held by Ms. Liquido, as trustee of the Susan Heftel-Liquido Trust, dated February 1, 1993, and 17,600 shares held by Ms. Liquido as custodian for her minor children. (11) Includes 8,044 shares subject to an option which is currently exercisable. (12) Includes 28,044 shares subject to options which are currently exercisable. Other than the Tender Offer Agreement, the Stockholder Purchase Agreement and the Agreement and Plan of Merger dated July 2, 1996, between Parent and Tichenor Media System, Inc. described in Purchaser's Schedule 14D-1, as amended, filed with the Securities and Exchange Commission, the Company knows of no contractual arrangements which may at a subsequent date result in a change in control of the Company. DIRECTORS GENERAL The Board of Directors currently consists of five directors. The terms of all directors will expire at the next annual meeting of stockholders or when their successors are elected and qualified. The Board of Directors may fill interim vacancies of directors. PURCHASER'S DESIGNEES Pursuant to the provisions of the Tender Offer Agreement, Purchaser has designated the persons identified below as the persons to be elected to the Board of Directors of the Company (the "Purchaser Designees"). It is expected that the Purchaser Designees will assume office promptly after the Closing and that they will thereafter constitute all of the members of the Board of Directors of the Company. Purchaser has informed the Company that each of the Purchaser Designees has consented to act as a director. None of the executive officers and directors of Parent or Purchaser currently is a director of, or holds any position with, the Company. The Company has been advised that, to the best knowledge of Parent and Purchaser, none of Parent's or Purchaser's directors, executive officers, affiliates or associates beneficially owns any equity securities, or rights to acquire any equity securities, of the Company and none has been involved in any transactions with the Company or any of its directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Securities and Exchange Commission, other than the transactions contemplated by the Tender Offer Agreement, the transactions contemplated by the Stockholder Purchase Agreement and Parent's ownership of Class A Common Stock and ability to cause Cecil Heftel to vote a specific number of shares of Class B Common Stock described herein. 3 4 The following table sets forth the name, address, age, present principal occupation or employment and five-year employment history of each of the Purchaser Designees, as of July 22, 1996. Except as otherwise indicated, each of the Purchaser Designees is a citizen of the United States, and there are no family relationships among any of the Purchaser Designees.
PRINCIPAL OCCUPATION AND BUSINESS NAME AND ADDRESS EXPERIENCE DURING PAST FIVE YEARS AGE - --------------------------------- ---------------------------------------------------- --- Ernesto Cruz..................... Managing Director Credit Suisse First Boston, Inc. 42 55 East 52nd Street New York, New York 10055 L. Lowry Mays.................... Director, President and Chief Executive Officer of 61 400 Geneseo Road Parent San Antonio, Texas 78209 B.J. McCombs..................... Private Investor and Director of Parent 68 825 Contour San Antonio, Texas 78212 James M. Raines.................. President of James M. Raines & Company and Director 56 4040 Broadway, Suite 611 of 50-OFF Stores, Inc. San Antonio, Texas 78209 John H. Williams................. Senior Vice President, Everon Securities, Inc. 62 7810 Glen Albens Circle Director of GAINSCO, Inc. and Parent Dallas, Texas 75228
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES THEREOF The Board of Directors has an Audit Committee and a Compensation Committee, but it does not have a Nominating Committee. The functions of the Audit Committee include recommending to the Board of Directors the independent auditors; reviewing and approving the planned scope of the annual audit, proposed fee arrangements and the results of the annual audit; reviewing the adequacy of accounting and financial controls; reviewing the independence of the independent auditors; approving all assignments to be performed by the independent auditors; and instructing the independent auditors, as deemed appropriate, to undertake special assignments. The current members of the Audit Committee are John Mason (Chairman), Madison Graves, II and Carl Parmer. Purchaser has not indicated who will be the members of the Audit Committee following the Closing, if it occurs. The Audit Committee held one meeting during the last fiscal year. The current members of the Compensation Committee are Madison Graves, II (Chairman) and John Mason. The functions of the Compensation Committee are to approve or recommend the approval to the Board of Directors of the compensation and the remuneration arrangements for directors and senior management. Purchaser has not indicated who will be the members of the Compensation Committee following the Closing, if it occurs. The Compensation Committee held one meeting during the last fiscal year. The Board of Directors held a total of six meetings during the last fiscal year. Each incumbent director attended more than 75% of such meetings. 4 5 EXECUTIVE COMPENSATION Summary Compensation Table The following table sets forth information concerning the compensation of the Co-Chief Executive Officers and the two other most highly compensated executive officers of the Company for the fiscal years ended September 30, 1993, 1994 and 1995: SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION AWARDS ANNUAL COMPENSATION --------------------- --------------------- SECURITIES UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION SALARY BONUS OPTION COMPENSATION - ------------------------------ -------- -------- --------------------- ------------ Cecil Heftel,................. 1995 $500,000 $170,092 $ -- Chairman of the Board and 1994 $416,667(1) $ -- $ -- Co-Chief Executive Officer 1993 $ -- (1) $ -- $ 14,967(2) H. Carl Parmer,............... 1995 $500,000 $467,897 160,000 $ -- President and Co-Chief 1994 $452,985(1) $300,000 $ -- Executive Officer 1993 $180,000(1) $ -- $ -- Charles M. Fernandez,......... 1995 $277,563 $ -- $ -- Executive Vice President 1994 $310,072(3) $ -- $ -- 1993 $273,523(3) $ -- $ -- John T. Kendrick,............. 1995 $160,615(4) $ 14,754 $ -- Senior Vice President, Chief 1994 $128,846 $ 25,000 $ -- Financial Officer and 1993 $ 4,326 $ -- $ -- Secretary
- --------------- (1) Does not include amounts received by Messrs. Heftel and Parmer from Heftel Management Group, of which they were the sole beneficial owners during the applicable period, which received fees of $925,000 from the Company for management services rendered during the year ended September 30, 1993 and fees of $133,400 from the Company for such services for the period from October 1, 1993 until December 1, 1993. Effective December 1, 1993, the Management Agreement was terminated and the Company entered into employment agreements with Messrs. Heftel and Parmer. (2) Includes $14,420 paid by the Company for an automobile for the year ended September 30, 1993, and club dues. (3) All amounts were paid by Viva American Media Group ("Viva Media"), of which the Company owned 49% through a subsidiary until September 7, 1995. On September 7, 1995, the Company acquired the remaining interest in Viva Media and Mr. Fernandez's employment was terminated. (4) On August 1, 1995, the Company entered into an Employment Agreement with Mr. Kendrick. Warrants and Options No options were granted in the last fiscal year to any of the persons named in the Summary Compensation Table. On January 10, 1995, the Company issued to Mr. Carl Parmer, a warrant to purchase 160,000 shares of Class A Common Stock at an exercise price of $10.50 per share, which was the per share closing price of the Class A Common Stock on January 9, 1995. Mr. Parmer exercised this warrant in full on January 24, 1995. 5 6 The following table provides certain information concerning exercises of warrants in the last fiscal year, and unexercised options and warrants held as of September 30, 1995, by the persons named in the Summary Compensation Table: AGGREGATE OPTION AND WARRANT EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END VALUES
VALUE OF UNEXERCISED NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS AND WARRANTS AND WARRANTS AT AT SEPTEMBER 30, 1995(1) SEPTEMBER 30, 1995(2) SHARES ACQUIRED VALUE --------------------------- --------------------------- NAME UPON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---------------------- --------------- ---------- ----------- ------------- ----------- ------------- Cecil Heftel.......... -- -- 806,678(3) 271,075 $14,681,540 $ 1,084,300 H. Carl Parmer........ 160,000 $340,800(4) -- 48,264 -- 193,056 Charles M. Fernandez........... -- -- -- -- -- -- John T. Kendrick...... -- -- 8,333 46,667 77,082 274,170
- --------------- (1) All options and warrants give the holder the right to purchase shares of Class A Common Stock except one warrant to purchase 806,678 shares of Class B Common Stock held by Mr. Cecil Heftel. (2) Value based on closing sale price of $19.25 per share for the Company's Class A Common Stock on September 30, 1995. Shares of Class B Common Stock are automatically converted into shares of Class A Common Stock if they are not held by persons designated in the Company's Restated Certificate of Incorporation. (3) Mr. Heftel exercised a warrant to purchase 806,678 shares of Class B Common Stock on January 5, 1995 but subsequently rescinded such exercise before any shares were issued. (4) Value based on the closing sale price of $12.63 per share of the Company's Class A Common Stock on January 24, 1995, the date of exercise of the warrants. Employment Agreements To replace the Company's Management Agreement with Heftel Management Group, the Company entered into ten-year Employment Agreements with each of Messrs. Cecil Heftel and Carl Parmer on December 1, 1993. These Employment Agreements are substantially similar and provide for each of Messrs. Heftel and Parmer to receive a base annual salary of $500,000 and bonuses based on the performance of the Company. Upon the occurrence of any Termination Event (as defined below) and the vote of a majority of the Board of Directors, which must include two-thirds of the members of the Board of Directors who are not employees of the Company (collectively, "Termination Conditions"), the Company may terminate the Employment Agreement. If such a termination occurs, Mr. Heftel or Mr. Parmer, as the case may be, will be entitled to receive all amounts payable by the Company under his Employment Agreement to the date of termination. If the Company terminates the Employment Agreement without satisfying the Termination Conditions or if Mr. Heftel or Mr. Parmer terminates the Employment Agreement because of a breach by the Company of its obligations thereunder, the assignment to him of duties substantially inferior to the duties of a Co-Chief Executive Officer or a change in control of the Company, Mr. Heftel or Mr. Parmer, as the case may be, will be entitled to receive a lump sum payment equal to the present value of all amounts remaining to be paid by the Company under the Employment Agreement. For purposes of calculating future bonuses, the Company will be deemed to have achieved the performance level necessary to pay the maximum bonus. Payments as a result of a Termination Event have been deferred by Messrs. Heftel and Parmer pursuant to an agreement with the Company's lender. Concurrently with the Closing, if it occurs, Purchaser will cause the Company to terminate the Employment Agreements with Mr. Heftel and Mr. Parmer. See "Certain Transactions." In January 1994, KTNQ/KLVE and Mr. Richard Heftel entered into a seven-year Employment Agreement (which was amended in May 1996) pursuant to which Mr. Heftel receives a yearly salary of $300,000 plus bonuses based on the annual and quarterly performance of KTNQ/KLVE. Upon the occurrence of any Termination Event and the action of a majority of the Board of Directors who are not 6 7 employees of KTNQ/KLVE or its affiliates (collectively, a "Termination Reason"), KTNQ/KLVE may terminate the Employment Agreement. If such a termination occurs, Mr. Heftel will be entitled to receive all amounts payable by KTNQ/KLVE under his Employment Agreement to the date of termination. If KTNQ/KLVE terminates the Employment Agreement for a reason other than the occurrence of a Termination Reason or if Mr. Heftel terminates the Employment Agreement because of a breach by KTNQ/KLVE of its obligations thereunder or the assignment to him of duties substantially inferior to the duties of a President and General Manager, Mr. Heftel will be entitled to receive a lump sum payment equal to the present value of all amounts remaining to be paid by KTNQ/KLVE under the Employment Agreement. For purposes of calculating future annual bonuses, KTNQ/KLVE will be deemed to have achieved the performance level reached in the fiscal year ended immediately prior to the termination and future quarterly bonuses will be deemed earned only if such bonus was earned for the quarter immediately preceding the date of termination. Payments as a result of a Termination Reason have been deferred by Mr. Heftel pursuant to an agreement with the Company's lender. "Termination Event" means any of the following: (i) the commission and proving of an act of fraud or embezzlement against the employer by the executive, (ii) the executive being convicted of a crime constituting a felony; (iii) the executive committing acts involving willful malfeasance or gross misconduct in connection with his employment which have the potential for causing a materially adverse effect on the business or licensing of the employer; (iv) mutual agreement of the employer and the executive to terminate the Employment Agreement; and (v) any material default in performance of the Employment Agreement by the executive which has not been cured within 30 days following written notice by the employer to the executive. On August 1, 1995, the Company and Mr. John Kendrick entered into a three-year Employment Agreement pursuant to which Mr. Kendrick currently receives a yearly salary of $180,000 (subject to increases in the second and third years) plus bonuses determined by the Company subject to a minimum bonus of $35,000 for the first year (the minimum bonus is increased in the second and third years). The Company may terminate the Employment Agreement upon the occurrence of certain events which are similar to Termination Events. If such a termination occurs, Mr. Kendrick will be entitled to receive all amounts payable by the Company under his Employment Agreement to the date of termination. If the Company terminates the Employment Agreement for a reason other than the occurrence of the events set forth in the Employment Agreement, Mr. Kendrick will be entitled to receive his salary and minimum bonus through the later of the one year anniversary of the termination date or the end of the term of the Employment Agreement (the "Period") (which the Company may pay in a lump sum payment equal to the present value of such amounts) and monthly premiums payable for allowing Mr. Kendrick and his family to participate in the Company's health insurance for the shorter of the Period or the maximum COBRA continuation coverage period mandated by law. At the end of the initial three year term, the Employment Agreement is automatically extended for one year unless the Company gives notice of non-renewal at least six months prior to the end of the initial three year period. If a change in control of the Company occurs, the term of the Employment Agreement is automatically extended for three years from the date of the change of control. Stock Option Plan The Company adopted a stock option plan (the "Stock Option Plan") in 1994, under which a maximum of 750,000 shares of Class A Common Stock may be issued upon exercise of options granted to directors, officers or other key employees of the Company or its subsidiaries. The Stock Option Plan is administered by the Board of Directors, or in the discretion of the Board of Directors, a committee of not less than two directors. The Board of Directors or this committee determines employees to whom options will be granted, the timing and manner of grant of options, the exercise price, the number of shares covered by and all of the terms of options, the duration of leaves of absence which may be granted to optionees without constituting termination of employment for purposes of the Stock Option Plan, and all other determinations necessary or advisable for administration of the plan. The Compensation Committee will function as the Stock Option Committee to administer the Stock Option Plan. 7 8 The Stock Option Plan permits the grant of stock options which qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, ("ISOs") and stock options which do not so qualify ("NQSOs"). The purchase price for shares subject to any option must not be less than 100% of the fair market value of the shares of Class A Common Stock on the date the option is granted. No ISO shall be exercisable after the earliest of the expiration of ten years after the date the option is granted, three months after the date the optionee's employment with the Company terminates if termination is for any reason other than permanent disability or death, or one year after the date the optionee's employment terminates if termination is a result of death or permanent disability. Under the Stock Option Plan, each Eligible Director (as defined below) will receive a NQSO to purchase 5,000 shares of Class A Common Stock automatically on the date the person becomes an Eligible Director. An Eligible Director is a non-employee director who does not own directly or indirectly more than 1% of the outstanding shares of Class A or Class B Common Stock and who has not within the preceding three years received any stock option or other similar stock award from the Company or any of its subsidiaries. No NQSO shall be exercisable after the earliest of ten years after the date of grant, three months after the date the holder ceases to be a director for any reason other than permanent disability or death or one year after the holder ceases to be a director of the Company as a result of death or permanent disability. Unless sooner terminated by the Board of Directors, the Stock Option Plan expires in April 2004. DIRECTOR COMPENSATION Each member of the Board of Directors who is not an employee of the Company receives an annual fee of $10,000, payable in quarterly installments of $2,500, and a fee of $2,000 for each board or committee meeting attended. The Company also reimburses directors for expenses related to attending board or committee meetings. For options granted to certain directors, see "Stock Option Plan." CERTAIN TRANSACTIONS The Tower Company, Inc. ("TTC"), a wholly-subsidiary of the Company, previously loaned $293,303 to Mr. Christopher Heftel, the son of Mr. Cecil Heftel. This loan bears interest at 7% per annum, with principal and interest due on demand. At December 31, 1995, Mr. Heftel owed $386,773 to TTC. TTC previously loaned $100,000 to Mr. Cecil Heftel. This loan bears interest at 7% per annum, with principal and interest due on demand. At December 31, 1995, Mr. Heftel owed $135,695 to TTC. On February 11, 1992, the predecessor-in-interest to the Company granted to Mr. Carl Parmer as part of his employment agreement the right to purchase 188,925 shares of Class B Common Stock at a per share price of $4.51. In connection with entering into Mr. Parmer's Employment Agreement in December 1993, the Company issued to Mr. Parmer a warrant to purchase 188,925 shares of Class B Common Stock at the same exercise price as a replacement of the rights of Mr. Parmer to purchase the 188,925 shares of Class B Common Stock under his previous employment agreement. On August 3, 1994, Mr. Parmer exercised these warrants and in connection with such exercise, the Company made a loan in the amount of $1.25 million, approximately $852,000 of which was used to pay the exercise price of the warrants and the remainder of which was used to pay income taxes payable by Mr. Parmer upon exercise of the warrants. The loan bears interest at a rate of 7.67% per annum and is due on August 3, 2004. As of December 31, 1995, Mr. Parmer owed a total of $1,294,318 under this loan. On June 3, 1993, Messrs. Carl Parmer and Richard Heftel each borrowed $366,000 from the Company and used the proceeds to purchase 94,462 shares of Class B Common Stock from a third-party stockholder. These loans accrue interest at a rate of 4.5% per annum. Interest and principal are due on June 2, 2002. As of December 31, 1995, a total of $408,548 was owed by each of Messrs. Parmer and Heftel under this loan. On October 8, 1993, Mr. Carl Parmer borrowed $1 million from the Company and used the proceeds to purchase 226,695 shares of Class B Common Stock. This loan accrues interest at 4.5% per annum. Interest and principal are due on October 8, 2003. As of December 31, 1995, a total of $1,100,250 was owed by Mr. Parmer 8 9 under this loan. Each of Messrs. Parmer and Heftel has agreed to use at least 50% of the after-tax proceeds of any future sales of stock of the Company owned by him to repay his loans. On December 30, 1993, the Company repurchased 220,000 shares of Class B Common Stock from the daughter of Mr. Cecil Heftel. The purchase price for these shares is payable in 60 installments of $10,000 beginning in August 1994 and one installment of $1 million on the first day of the month after the month in which the 60th installment is paid. From time to time, Messrs. Cecil Heftel and Carl Parmer have advanced funds to the Company and the Company has advanced funds to each of them. These advances do not bear interest. At December 31, 1995, the Company owed Mr. Heftel $33,317 and Mr. Parmer owed the Company $330,110. In the year ended September 30, 1995 and 1994, the Company advanced funds to Heftel Management Group, of which Mr. Cecil Heftel is the sole beneficial owner. These advances do not bear interest. At December 31, 1995, Heftel Management Group owed the Company $817,042. In June 1992, the Company repurchased and retired 2,115,468 shares of Series A Preferred Stock held by Mr. Cecil Heftel. Pursuant to an agreement with Mr. Heftel, $1,142,495 of cumulative unpaid dividends from the date of issuance through June 25, 1992 relating to the repurchased Series A Preferred Stock are to be declared and paid at such time as dividends are declared and paid on the remaining outstanding Series A Preferred Stock. In January 1995, the Company repurchased and retired 633,628 shares of the Series A Preferred Stock held by children of Mr. Heftel. A portion of the repurchase price represented unpaid cumulative dividends on such shares. At the same time, the Company used $3,449,976 of the net proceeds of its initial public offering to repurchase and retire 1,326,662 shares of the Series A Preferred Stock owned by Mr. Heftel, a portion of which represented the payment required under the June 1992 agreement with Mr. Heftel. On January 10, 1995, the Company granted to Mr. Carl Parmer a warrant to purchase 160,000 shares of Class A Common Stock at an exercise price of $10.50 per share (which was the closing price for the Class A Common Stock on January 9, 1995). On January 24, 1995, Mr. Parmer exercised this warrant in full. The exercise price was payable on or before June 30, 1995. On June 30, 1995, Mr. Parmer borrowed $1,680,000 from the Company to pay the exercise price and granted to the Company a security interest in these shares to secure his obligation to repay the loan. This loan bears interest at 8.75% per annum. At December 31, 1995, Mr. Parmer owed the Company $1,729,000. On September 7, 1995, the Company, through a subsidiary, acquired from Mambisa Broadcasting Corporation ("Mambisa") the remaining 51% interest in Viva America Media Group, a Florida general partnership ("Viva Media"), which it did not own. Amancio Victor Suarez and Charles Fernandez, former directors of the Company, own part of Mambisa. The purchase price was $19.8 million. At the closing of the acquisition, Messrs. Suarez and Fernandez resigned as directors and officers of the Company. In connection with this transaction, the following were terminated for no additional consideration: (i) the Management Agreement, dated August 19, 1994, among the Company, Viva Media and SFS Management, Inc., an affiliate of Messrs. Suarez and Fernandez, pursuant to which SFS managed the two Miami stations owned by Viva Media and two other stations in Miami owned by the Company; (ii) the Joint Sales Agreement, dated August 19, 1994, between HBC Florida, Inc., a subsidiary of the Company ("HBC Florida"), and Mambisa relating to the sale of advertising on such four Miami stations; and (iii) the Warrant to purchase up to 237,600 shares of Class B Common Stock of the Company held by Mr. Fernandez and the employment arrangements between the Company, and any of its subsidiaries, and Mr. Fernandez. In addition, the Company granted Mr. Suarez a limited right of first refusal on a sale of WAQI-AM, which right expires on September 7, 1997. On January 10, 1996, pursuant to an Agreement of Purchase and Sale, dated September 7, 1995, between the Company and Mambisa (the "Purchase Agreement") the Company, through HBC Florida, purchased the entire parcel of real property on which the radio transmission towers for WAQI-AM (the "WAQI Towers") are located for approximately $1.5 million in cash and a note for approximately $1.5 million (the "Note"). The Company has the right to subdivide such parcel and resell to Mambisa the portion of the parcel on which the WAQI Towers are not located for the same per acre price paid by the Company to Mambisa. The parties 9 10 currently are attempting to complete such a subdivision. The Note is due on the later of the date on which all rights to subdivide the parcel expire or the date on which the resale of the subdivided portion of the parcel is completed. At the time of the execution of the Tender Offer Agreement and the Stockholder Purchase Agreement, Purchaser informed Mr. Heftel and Mr. Parmer that it intended to cause the Company to terminate their employment, without cause, immediately following the purchase of shares of Common Stock pursuant to the Stockholder Purchaser Agreement. Concurrently with the execution of the Stockholder Purchase Agreement, Mr. Heftel and Mr. Parmer each entered into a Settlement Agreement (each, a "Settlement Agreement") with the Company. Pursuant to the respective Settlement Agreements, the employment by the Company of Mr. Heftel and Mr. Parmer will terminate immediately following the purchase of shares of Common Stock pursuant to the Stockholder Purchase Agreement and the Company will pay Mr. Heftel $11,861,069 and Mr. Parmer $6,941,960 in exchange for releases by Mr. Heftel and Mr. Parmer from any claims resulting from termination of their Employment Agreements with the Company. Purchaser has guaranteed the obligations of the Company under the Settlement Agreements. Concurrently with the execution of the Stockholder Purchase Agreement, each of Cecil Heftel and Carl Parmer entered into an Agreement Not To Compete with the Company. Pursuant to these agreements each of Messrs. Heftel and Parmer agreed that for a period of five years commencing on the date of the closing of the transactions contemplated by the Stockholder Purchase Agreement (the "Selling Stockholder Closing Date"), without the prior written consent of the Company, he will not, directly or indirectly, own (except that he may own securities which constitute not more than five percent (5%) of a publicly traded company's issued and outstanding capital stock), work for, act as consultant or advisor to, manage, operate, or control or participate in the ownership, management, operation or control of, any radio station in the markets set forth in the Agreement Not To Compete which broadcasts predominantly in Spanish. In consideration of these agreements not to compete, the Company agreed to pay $4.5 million to Mr. Parmer and $2.5 million to Mr. Heftel on the Selling Stockholder Closing Date. Purchaser guaranteed the obligations of the Company under each Agreement Not To Compete. The total amount to be paid to each of Mr. Heftel and Mr. Parmer under his Settlement Agreement and Agreement Not to Compete does not exceed the present value of all amounts remaining to be paid to him by the Company under his Employment Agreement with the Company. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16 of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers and persons who own more than 10% of a registered class of the Company's equity securities to file various reports with the Securities and Exchange Commission concerning their holdings of, and transactions in, securities of the Company. Copies of these filings must be furnished to the Company. Based on a review of the copies of such forms furnished to the Company and written representations from the Company's executive officers and directors, the Company notes (a) Mr. Cecil Heftel inadvertently failed to file a Form 4 to reflect the exercise of a warrant to purchase 806,678 shares of Class B Common Stock because such exercise was rescinded before any shares were issued, and (b) Mr. Carl Parmer inadvertently failed to file a Form 4 to reflect the issuance and exercise of a warrant to purchase 160,000 shares of Class A Common Stock. COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION During the fiscal year ended September 30, 1995, Messrs. Jeffrey Amling and Amacio Suarez, former directors of the Company, and Mr. John Mason a current director of the Company, served on the Compensation Committee. During the year ended September 30, 1995, the Company obtained legal services from the law firm of Jeffer, Mangels, Butler & Marmaro LLP. Mr. John Mason is of-counsel to this law firm. 10 11 BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee of the Board of Directors makes this report on executive compensation pursuant to Item 402 of Regulation S-K. Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including this Information Statement, in whole or in part, this report and the performance graph which follows this report shall not be incorporated by reference into any such filings, and such information shall be entitled to the benefits provided in Item 402(a)(9). The Compensation Committee reviews the performance of the executive officers of the Company, makes recommendations to the Board of Directors as to the compensation of the executive officers of the Company and reviews the compensation programs for other key employees, including salary and cash bonus levels and option grants under the Stock Option Plan. Compensation Policies and Philosophy The Company's executive compensation policies are designed to attract, retain and reward executive officers who contribute to the Company's success, to provide economic incentives for executive officers to achieve the Company's business objectives by linking the executive officers' compensation to the performance of the Company, to strengthen the relationship between executive pay and stockholder value and to reward individual performance. The Company uses a combination of base salary, cash bonuses and stock options to achieve these objectives. The Compensation Committee considers a number of factors, including the level and types of compensation paid to executive officers in similar positions by comparable companies. In addition, the Compensation Committee evaluates corporate performance by looking at factors such as performance relative to competitors, performance relative to business conditions and the success of the Company in meeting its financial objectives. The Compensation Committee also reviews the performance of each executive officer, including a review of his or her ability to meet individual performance objectives, demonstration of job knowledge and skills and the ability to work with others toward the achievement of the Company's goals. Components of Compensation Executive officer salaries are established in relation to a range of salaries for comparable positions in companies of comparable size and complexity. The Company seeks to pay salaries to executive officers that are commensurate with the qualifications, duties and responsibilities and that are competitive in the marketplace. In making its annual salary recommendations, the Compensation Committee looks at the Company's financial position and performance, the contribution of the individual executive officers during the prior fiscal year in helping to meet the Company's financial and business objectives as well as the executive officers' performance of their individual responsibilities. Executive officer cash bonuses are used to provide executive officers with financial incentives to meet annual performance targets of the Company. Performance targets and bonus recommendations for executives other than the Co-Chief Executive Officers are proposed by the President, reviewed and, when appropriate, revised by the Compensation Committee and approved by the Board of Directors. The Compensation Committee believes that equity ownership by executive officers provides incentive to build stockholder value and align the interests of executive officers with the interests of stockholders. Upon hiring executive officers, the Compensation Committee typically recommends stock option grants to the officers under the Stock Option Plan, subject to applicable vesting periods. Thereafter, the Compensation Committee considers awarding additional grants, usually on an annual basis, under the Stock Option Plan. The Compensation Committee believes these additional annual grants will provide incentives for executive officers to remain with the Company. Options are granted at the current market price of the Company's Class A Common Stock and, consequently, have value only if the price of the Company's Class A Common Stock increases over the exercise price. The size of the initial grant usually is determined based upon prior grants to executive officers. In determining the size of the periodic grants the Compensation Committee considers prior 11 12 option grants to the executive officer, the executive's performance during the current fiscal year and his or her expected contributions during the succeeding fiscal year. Compensation of the Co-Chief Executive Officers The Compensation Committee reviews the performance of the Co-Chief Executive Officers of the Company, as well as other executive officers of the Company, annually. In 1993, the Company entered into Employment Agreements with Cecil Heftel, Chairman of the Board and Co-Chief Executive Officer of the Company, and Carl Parmer, the President and Co-Chief Executive Officer of the Company, which provides an annual base salary of $500,000 each with annual bonuses based on the performance of the Company. See "Executive Compensation and Other Matters -- Employment Agreements." Respectfully submitted, Compensation Committee: Madison B. Graves, II John E. Mason 12 13 STOCKHOLDER RETURN PERFORMANCE PRESENTATION The graph below compares the cumulative total stockholder return on the Company's Class A Common Stock with the cumulative total return on the Standard & Poor's 500 Index and a Radio Station Component Peer Group Index for the period commencing on July 27, 1994 (the date trading of the Company's Class A Common Stock commenced on the Nasdaq National Market) and ending on September 30, 1995. The data set forth below assumes the value of an investment in the Company's Class A Common Stock and each Index was $100 on July 27, 1994.
Radio Station Heftel Broad- Standard & Co mponent Measurement Period casting Cor- Poor's 500 Peer Group (Fiscal Year Covered) poration Index Index* 7/27/94 100.00 100.00 100.00 9/30/94 135.90 103.83 106.66 9/30/95 197.44 134.71 163.82
COMPARISON OF TOTAL RETURN* SINCE THE INITIAL PUBLIC OFFERING OF HEFTEL BROADCASTING CORPORATION
7/27/94 9/30/94 9/30/95 ------- ------- ------- Heftel Broadcasting Corporation.................................. 100.00 135.90 197.44 Standard & Poor's 500 Index...................................... 100.00 103.83 134.71 Radio Station Component Peer Group Index*........................ 100.00 106.66 163.82
- --------------- * Radio Station Component Peer Group Index consists of Emmis Broadcasting, Inc., Evergreen Media Corporation, Infinity Broadcasting Company, Jacor Communications, Inc., EZ Communications, Inc., Broadcasting Partners, Inc., Clear Channel Communications, Inc., SFX Broadcasting, Inc. and Saga Communications, Inc. In calculating cumulative total stockholder return, reinvestment of dividends, if any, was assumed, and the returns of each member of the Radio Station Peer Group Index are weighted for market capitalization. 13 -----END PRIVACY-ENHANCED MESSAGE-----