-----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, A8mEzGQ46sFLoGjWAbb6BXRCRORojNXwNlZfgzbQe5pIN0WRUP0DBEdwXhp7ZS2h +/SVg3a26+LS3cE2TlcJRw== 0001047469-99-020614.txt : 19990517 0001047469-99-020614.hdr.sgml : 19990517 ACCESSION NUMBER: 0001047469-99-020614 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 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: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24516 FILM NUMBER: 99623710 BUSINESS ADDRESS: STREET 1: 3102 OAK LAWN AVENUE STREET 2: STE 215 CITY: DALLAS STATE: TX ZIP: 75219 BUSINESS PHONE: 2145257700 MAIL ADDRESS: STREET 1: 3102 OAK LAWN AVENUE STREET 2: SUITE 215 CITY: DALLAS STATE: TX ZIP: 75219 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q
(Mark One) [x] Quarterly report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1999 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition period from to Commission file number 0-24516
HEFTEL BROADCASTING CORPORATION (Exact name of registrant as specified in its charter) Delaware 99-0113417 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3102 Oak Lawn Avenue, Suite 215 Dallas, Texas 75219 (Address of principal executive offices) (Zip Code) (214) 525-7700 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at May 14, 1999 - ----- --------------------------- Class A Common Stock, $.001 Par Value 35,182,719 Class B Non-Voting Common Stock, $.001 Par Value 14,156,470
HEFTEL BROADCASTING CORPORATION March 31, 1999 INDEX
PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998........................................... 2 Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 1999 and 1998...................... 3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1999 and 1998...................... 4 Notes to Condensed Consolidated Financial Statements ........... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .............................................. 7 Item 3. Quantitative and Qualitative Disclosures about Market Risk ....................................................... 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings.................................................. 10 Item 6. Exhibits and Reports on Form 8-K .................................. 10
1 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, December 31, 1999 1998 -------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 20,328,920 $ 10,293,241 Accounts receivable, net 29,276,300 34,309,106 Prepaid expenses and other current assets 1,266,235 456,843 ------------- ------------- Total current assets 50,871,455 45,059,190 Property and equipment, at cost, net 33,334,876 33,807,371 Intangible assets, net 642,736,570 646,200,359 Deferred charges and other assets 21,097,438 21,622,079 ------------- ------------- Total assets $ 748,040,339 $ 746,688,999 ------------- ------------- ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 24,683,612 $ 27,769,816 Current portion of long-term obligations 122,059 121,052 ------------- ------------- Total current liabilities 24,805,671 27,890,868 ------------- ------------- Long-term obligations, less current portion 1,523,909 1,547,130 ------------- ------------- Deferred income taxes 95,380,353 94,630,353 ------------- ------------- Stockholders' equity: Preferred Stock, cumulative, $.001 par value; authorized 5,000,000 shares; no shares issued or outstanding - - Class A Common Stock, $.001 par value; authorized 100,000,000 shares; issued and outstanding 35,182,719 at March 31, 1999 and 35,171,980 at December 31, 1998 35,182 35,172 Class B Common Stock, convertible, $.001 par value; authorized 50,000,000 shares; issued and outstanding 14,156,470 shares 14,156 14,156 Additional paid-in capital 665,730,087 665,339,306 Accumulated deficit (39,449,019) (42,767,986) ------------- ------------- Total stockholders' equity 626,330,406 622,620,648 ------------- ------------- Total liabilities and stockholders' equity $ 748,040,339 $ 746,688,999 ------------- ------------- ------------- -------------
See notes to condensed consolidated financial statements. 2 HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, ------------------------------ 1999 1998 ------------------------------ Net revenues $ 37,709,139 $ 31,347,088 Operating expenses 24,051,015 20,136,524 Depreciation and amortization 6,229,693 4,338,556 ------------- ------------- Operating income before corporate expenses 7,428,431 6,872,008 Corporate expenses 1,663,141 1,186,734 ------------- ------------- Operating income 5,765,290 5,685,274 Interest income (expense), net (139,923) 1,678,162 ------------- ------------- Income before income tax 5,625,367 7,363,436 Income tax 2,306,400 3,019,018 ------------- ------------- Net income $ 3,318,967 $ 4,344,418 ------------- ------------- ------------- ------------- Net income per common share - basic and diluted $ 0.07 $ 0.09 ------------- ------------- ------------- ------------- Weighted average common shares outstanding: Basic 49,338,831 48,109,168 Diluted 49,729,084 48,462,844
See notes to condensed consolidated financial statements. 3 HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, ------------------------------ 1999 1998 ------------- ------------- Cash flows from operating activities: Net income $ 3,318,967 $ 4,344,418 Adjustments to reconcile net income to net cash provided by operating activities: Provision for bad debts 468,628 368,949 Depreciation and amortization 6,229,693 4,338,556 Deferred income taxes 750,000 500,000 Other 56,589 (16,694) Changes in operating assets and liabilities 668,581 4,166,995 ------------ ------------- Net cash provided by operating activities 11,492,458 13,702,224 ------------ ------------- Cash flows from investing activities: Property and equipment acquisitions (1,074,350) (518,894) Dispositions of property and equipment 11,846 104,813 Additions to intangible assets (4,822) (102,888) Increase in deferred charges and other assets (758,030) (56,095) Acquisitions of radio stations - (1,698,088) ------------ ------------- Net cash used in investing activities (1,825,356) (2,271,152) ------------ ------------- Cash flows from financing activities: Payments on long-term obligations (22,214) (12,170,457) Proceeds from stock issuances 390,791 205,662,235 ------------ ------------- Net cash provided by financing activities 368,577 193,491,778 ------------ ------------- Net increase in cash and cash equivalents 10,035,679 204,922,850 Cash and cash equivalents at beginning of period 10,293,241 6,553,271 ------------ ------------- Cash and cash equivalents at end of period $ 20,328,920 $ 211,476,121 ------------ ------------- ------------ -------------
See notes to condensed consolidated financial statements. 4 HEFTEL BROADCASTING CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1999 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Heftel Broadcasting Corporation and subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"), REPORTING COMPREHENSIVE INCOME. SFAS 130 requires the reporting of comprehensive income in financial statements by all entities that provide a full set of financial statements. The Company's net income is the same as its comprehensive income and no additional disclosures are necessary. 2. ACQUISITIONS AND DISPOSITIONS 1999 ACQUISITIONS On March 1, 1999, the Company entered into an asset purchase agreement to acquire the assets of KISF(FM), serving the Las Vegas market, for $20.3 million (the "KISF(FM) Acquisition"). The KISF(FM) Acquisition closed on April 30, 1999. The asset acquisition was financed with a borrowing from the Company's $300.0 million revolving credit facility (the "Credit Facility") and cash generated from operations. Immediately after closing, the station's programming was converted to a Spanish language format. On January 27, 1999, the Company entered into an asset purchase agreement to acquire the assets of KHOT(FM), serving the Phoenix market, for $18.3 million (the "KHOT(FM) Acquistion"). The KHOT(FM) Acquisition closed on April 5, 1999. The asset acquisition was made with cash generated from operations. Immediately after closing, the station's programming was converted to a Spanish language format. The Company is in the process of building out new studios and office space in Phoenix. The anticipated capital costs will approximate $0.5 million. PENDING TRANSACTIONS On April 14, 1999, the Company entered into a letter of intent with Z-Spanish Media Corporation ("Z"), the fourth largest Spanish radio operator in the United States, to purchase approximately 4.1% of Z's fully diluted shares of common stock for $6.0 million. The Company will also be granted an option to purchase additional shares of Z common stock that, if exercised, would increase the Company's ownership to approximately 10.1%. Z has the right, under certain conditions, to require the Company to purchase additional shares of Z common stock for approximately $4.8 million. Additionally, the Company has agreed to exchange the assets of KRTX(FM), a radio station serving Houston, Texas for the assets of KLNZ(FM), a radio station owned by Z serving Phoenix, Arizona. Consummation of the investment in Z common stock and the asset exchange is subject to a number of conditions, including approval by the FCC 5 of the transfer of the FCC licenses. The Z common stock investment will be financed with a borrowing from the Credit Facility. On January 2, 1997, the Company acquired an option to purchase all of the assets used in connection with the operation of KSCA(FM), Glendale, California (the "KSCA Option"). In connection with the acquisition of the KSCA Option, the Company began providing programming to KSCA(FM) under a time brokerage agreement on February 5, 1997. The KSCA Option, which is exercisable only upon the death of Gene Autry, the indirect principal stockholder of the seller, had an initial term which expired on December 31, 1997. The KSCA Option was renewable for additional one-year terms during the lifetime of Mr. Autry upon payment by the Company of $3.0 million on or before the then scheduled expiration date of the KSCA Option. On February 4, 1997, the Company made an initial payment of $10.0 million, as required under the option agreement. On December 29, 1997, the Company renewed the KSCA Option through December 31, 1998. All such payments will be credited against the purchase price for the KSCA(FM) assets. The purchase price for the KSCA(FM) assets is the greater of (a) $112.5 million, or (b) the sum of (i) $105.0 million, plus (ii) an amount equal to $13,699 per day during the term of the time brokerage agreement. Gene Autry died on October 2, 1998, and the Company exercised the KSCA Option. The closing is expected to occur during the third quarter of 1999. If the acquisition of KSCA(FM) closes on August 1, 1999, the purchase price for the KSCA(FM) assets will be approximately $117.4 million, and approximately $104.4 million ($117.4 million less $13.0 million in option payments credited against the purchase price) will be paid at closing. This transaction will be financed with a borrowing from the Credit Facility. Consummation of the purchase is subject to a number of conditions, including approval by the FCC of the transfer of the FCC licenses. 3. LONG-TERM OBLIGATIONS The Company's ability to borrow under the Credit Facility is subject to compliance with certain financial ratios and other conditions set forth in the Credit Facility. The Credit Facility is secured by the stock of the Company's subsidiaries. Borrowings under the Credit Facility bear interest at a rate based on the LIBOR rate plus an applicable margin as determined by the Company's leverage ratio. The Company has $300.0 million of credit available, and may elect under the terms of the Credit Facility to increase the facility by $150.0 million. Availability under the Credit Facility decreases quarterly commencing September 30, 1999 and ending December 31, 2004. As of March 31, 1999, the Company had no outstanding balance due on the Credit Facility. On January 29, 1998, the Company repaid the $12.0 million outstanding balance on the Credit Facility from the proceeds of the January 1998 secondary public stock offering (the "January 1998 Offering"). 4. STOCKHOLDERS' EQUITY On January 22, 1998, the Company completed the January 1998 Offering, selling 5,175,000 shares of Class A Common Stock at $39.75 per share, net of underwriters' discounts and commissions. The net proceeds of the offering were approximately $205.1 million. 6 The following is a reconciliation of the denominators of the basic and diluted earnings per share computations:
Three Months Ended March 31, ---------------------------- 1999 1998 ---------- ---------- Weighted average common shares 49,338,831 48,109,168 Effect of dilutive securities: Stock options 383,604 347,546 Employee Stock Purchase Plan 6,649 6,130 ---------- ---------- Denominator for diluted earnings per share 49,729,084 48,462,844 ---------- ---------- ---------- ----------
5. LONG-TERM INCENTIVE PLAN On May 21, 1997, the stockholders of the Company approved the Heftel Broadcasting Corporation Long-Term Incentive Plan (the "Incentive Plan"). The types of awards that may be granted under the Incentive Plan include (a) incentive stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d) rights to receive a specified amount of cash or shares of Class A Common Stock and (e) restricted stock. In addition, the Incentive Plan provides that directors of the Company may elect to receive some or all of their annual director compensation in the form of shares of Class A Common Stock. Subject to certain exceptions set forth in the Incentive Plan, the aggregate number of shares of Class A Common Stock that may be the subject of awards under the Incentive Plan at one time shall be an amount equal to (a) five percent of the total number of shares of Class A Common Stock outstanding from time to time minus (b) the total number of shares of Class A Common Stock subject to outstanding awards on the date of calculation under the Incentive Plan and any other stock-based plan for employees or directors of the Company (other than the Company's Employee Stock Purchase Plan). The Company has granted incentive and non-qualified stock options for 1,408,934 shares of Class A Common Stock to directors and key employees. The exercise prices range from $16.44 to $48.88 per share and were equal to the fair market value of the Class A Common Stock on the dates such options were granted. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The performance of a radio station group is customarily measured by its ability to generate broadcast cash flow. The two components of broadcast cash flow are net revenues (gross revenues net of agency commissions) and operating expenses (excluding depreciation, amortization and corporate general and administrative expense). The primary source of revenues is the sale of broadcasting time for advertising. The Company's most significant operating expenses for purposes of the computation of broadcast cash flow are employee salaries and commissions, programming expenses, and advertising and promotion expenses. The Company strives to control these expenses by working closely with local station management. The Company's revenues vary throughout the year. As is typical in the radio broadcasting industry, the Company's first calendar quarter generally produces the lowest revenues. The second and third quarters generally produce the highest revenues. Another measure of operating performance is EBITDA. EBITDA consists of operating income or loss excluding depreciation and amortization. Broadcast cash flow and EBITDA are not calculated in accordance with generally accepted accounting principles. These measures should not be considered in isolation or as substitutes for operating income, cash flows from operating activities or any other measure for determining the Company's operating performance or liquidity that is calculated in accordance with generally accepted accounting 7 principles. Broadcast cash flow and EBITDA do not take into account the Company's debt service requirements and other commitments and, accordingly, broadcast cash flow and EBITDA are not necessarily indicative of amounts that may be available for dividends, reinvestment in the Company's business or other discretionary uses. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH 31,1998 The results of operations for the three months ended March 31, 1999 are not comparable to results of operations for the same period in 1998 primarily due to the start-up of radio stations WCAA(FM) in New York on May 22, 1998 (WPAT(AM) was exchanged for WCAA(FM)), KRTX(AM/FM) in Houston on May 29, 1998, and KLQV(FM) and KLNV(FM) in San Diego on August 10, 1998. Net revenues increased by $6.4 million or 20.4% to $37.7 million in the three months ended March 31, 1999 from $31.3 million in the same quarter of 1998. Net revenues increased for the three months ended March 31, 1999, compared to the same period in 1998 primarily because of revenue growth of same stations offset somewhat by the loss of revenues generated by WPAT(AM), which was exchanged in the WCAA(FM) transaction and a decrease in barter revenue. Operating expenses increased by $4.0 million, or 19.9% to $24.1 million for the three months ended March 31, 1999 from $20.1 million for the same period of 1998. Operating expenses increased primarily due to operating expenses of start-up stations offset somewhat by the elimination of operating expenses generated by WPAT(AM) which was exchanged in the WCAA(FM) transaction and a decrease in barter expense. Operating income before corporate expenses, depreciation and amortization ("broadcast cash flow")for the three months ended March 31, 1999 increased 22.3% to $13.7 million, compared to $11.2 million, for the three months ended March 31, 1998. Corporate expenses increased by $0.5 million, or 41.7% to $1.7 million for the three months ended March 31, 1999, compared to the same period of 1998. The increase was primarily due to higher staffing costs of the Company and the one-time expenses related to the resignation of an executive officer. EBITDA increased $2.0 million, or 20.0% to $12.0 million for the three months ended March 31, 1999, compared to the same period of 1998. Depreciation and amortization for the quarter ended March 31, 1999 increased 44.2% to $6.2 million compared to $4.3 million for the same period in 1998. The increase is due to radio station acquisitions and capital expenditures. Interest income, net of interest expense decreased from $1.7 million for the three months ended March 31, 1998 to $0.1 of interest expense, net of interest income for the three months ended March 31, 1999. The reduction of interest income was due to the proceeds of the January 1998 Offering being spent on the acquisition of radio stations WCAA(FM), KLTN(FM), KLQV(FM) and KLNV(FM) in 1998. Federal and state income taxes are being provided at an effective rate of 41.0% in 1999 and 41.5% in 1998. The decrease in the effective tax rate in 1999 is due to a decrease in the estimated effective state tax rate. For the three months ended March 31, 1999, the Company's net income totaled $3.3 million ($0.07 per common share) compared to $4.3 million ($0.09 per common share) in the same period of 1998. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities for the three months ended March 31, 1999 was $11.5 million as compared to $13.7 million for the same period of 1998. Net cash used in investing activities was 8 $1.8 and $2.3 million for the three months ended March 31, 1999 and 1998, respectively. The $0.5 million decrease from 1998 to 1999 is due to $1.7 million spent in 1998 on radio station acquisitions offset by increases in 1999 for property and equipment acquisitions ($0.5 million) and deferred charges and other assets ($0.7 million). Net cash provided by financing activities was $0.4 and $193.5 million for the three months ended March 31, 1999 and 1998, respectively. The $193.1 million decrease from 1998 to 1999 is due to a $205.3 million decrease in proceeds from stock issuances offset by a $12.2 million decrease in payments on long-term obligations. Generally, capital expenditures are made with cash provided by operations. Capital expenditures totaled $1.1 million and $0.5 million for the three months ended March 31, 1999 and 1998, respectively. The increase in capital expenditures was due primarily to the office space improvement costs for New York and the corporate office in Dallas as well as equipment purchased for HBC Radio Network. Available cash on hand plus cash flow provided by operations was sufficient to fund the Company's operations, meet its debt obligations, and to fund capital expenditures. The Company believes it will have sufficient cash on hand and cash provided by operations to finance its operations, satisfy its debt service requirements, and to fund capital expenditures. The Company regularly reviews potential acquisitions. The Company intends to finance acquisitions primarily through proceeds from additional borrowings under the Credit Facility, proceeds from securities offerings, and/or from cash provided by operations. YEAR 2000 The Year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in system failures or miscalculations. The Company has been replacing its software and hardware as part of its long-term technological plans. The new software being implemented functions properly with respect to dates in the year 2000 and thereafter. All software used in the accounting system is in the process of being replaced. The key software components used in the accounting system are the general ledger and traffic system. The general ledger is used to record all transactional activity whereas the traffic system is used to record the airing of commercials, perform billing and maintain the accounts receivable detail. The new general ledger software has been implemented in thirteen of the fourteen locations in which the Company operates. The one remaining location will implement the new general ledger software by June 1, 1999. Ten of the thirteen radio station markets in which the Company operates have implemented the new traffic software. The three remaining radio station markets will implement the new traffic software at or around September 1999. The Company is in the process of reviewing the hardware used in its operations that might be affected by the Year 2000 problem. Hardware testing for Year 2000 compliance is anticipated to be completed by June 30, 1999. Inquiries of the Company's top ten customers, vendors and service providers regarding Year 2000 compliance will be made during 1999. The Company decided, after the merger with Tichenor Media System, Inc. in February 1997, to change its general ledger and traffic system software so all locations would be on the same system. The replacement of the general ledger and traffic system software was not accelerated due to Year 2000 issues. The Company does not believe the costs related to the Year 2000 compliance project will be material to its financial position or results of operations. Unanticipated failures by critical customers, 9 vendors and service providers, as well as the failure by the Company to execute its own remediation efforts, could have a material adverse effect on the cost of the Year 2000 project, its completion date, and the Company's financial position or results of operations. The Company has not yet established contingency plans in the event of the failure of its system with regard to Year 2000 compliance or those of its significant customers, vendors and service providers. Based on its assessment of the Year 2000 issue, the Company will establish contingency plans, however there is no assurance that such plans will be adequate to meet the Company's needs in the event of any disruption in the Company's operations. FORWARD LOOKING STATEMENTS Certain statements contained in this report are not based on historical facts, but are forward looking statements that are based on numerous assumptions made as of the date of this report. When used in the preceding and following discussions, the words "believes," "intends," "expects," "anticipates" and similar expressions are intended to identify forward looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in any of the forward looking statements. Such risks and uncertainties include, but are not limited to, industry-wide market factors and regulatory developments affecting the Company's operations, acquisitions and dispositions of broadcast properties described elsewhere herein, the financial performance of start-up stations, and efforts by the new management to integrate its operating philosophies and practices at the station level. This report should be read in conjunction with the Company's Annual Report on Form 10-K. The Company disclaims any obligation to update the forward looking statements in this report. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company does not have significant market risk exposure since it does not have any outstanding variable rate debt or derivative financial and commodity instruments as of March 31, 1999. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is involved in various claims and lawsuits, which are generally incidental to its business. The Company is vigorously contesting all such matters and believes that their ultimate resolution will not have a material adverse effect on its consolidated financial position or results of operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
Exhibit No. Description of Exhibit - ----------- ---------------------- 3.1 Second Amended and Restated Certificate of Incorporation of the Company dated February 14, 1997 (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed March 3, 1997). 3.2 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Registrant dated June 4, 1998 (incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q filed on November 11, 1998). 3.3 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1, as amended Reg. No. 33-78370). 10 4.1 Credit Agreement among the Registrant and its subsidiaries, The Chase Manhattan Bank, as administrative agent, and certain other lenders, dated February 14, 1997 without Exhibits (Schedules omitted) (incorporated by reference to Exhibit 10.5 to the Registrant's Form 8-K filed on March 3, 1997). 10.1 Asset Purchase Agreement, dated April 28, 1999, by and among Golden West Broadcasters, Jacqueline Autry and Stanley B. Schneider, as co-trustees of the Autry Qualified Interest Trust, KTNQ/KLVE, Inc., HBC License Corporation and Heftel Broadcasting Corporation. 10.2 Asset Purchase Agreement dated January 27, 1999, by and between New Century Arizona LLC, New Century Arizona License Partnership and the Company (incorporated by reference to Exhibit 10.24 to the Company's Form 10-K for the year ended December 31, 1998). 10.3 Asset Purchase Agreement, dated March 1, 1999, by and between Radio Vision, Inc., George E. Tobin and the Company (incorporated by reference to Exhibit 10.25 to the Company's Form 10-K for the year ended December 31, 1998). 27 Financial Data Schedule
(b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Heftel Broadcasting Corporation -------------------------------------- (Registrant) /s/ Jeffrey T. Hinson ------------------------------------ Jeffrey T. Hinson Senior Vice President/ Chief Financial Officer Dated: May 14, 1999 11
Index To Exhibits ----------------- Exhibit No. Description ----------- ----------- 3.1 Second Amended and Restated Certificate of Incorporation of the Company dated February 14, 1997 (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed March 3, 1997). 3.2 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Registrant dated June 4, 1998 (incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q filed on November 11, 1998). 3.3 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1, as amended Reg. No. 33-78370). 4.1 Credit Agreement among the Registrant and its subsidiaries, The Chase Manhattan Bank, as administrative agent, and certain other lenders, dated February 14, 1997 without Exhibits (Schedules omitted) (incorporated by reference to Exhibit 10.5 to the Registrant's Form 8-K filed on March 3, 1997). 10.1 Asset Purchase Agreement, dated April 28, 1999, by and among Golden West Broadcasters, Jacqueline Autry and Stanley B. Schneider, as co-trustees of the Autry Qualified Interest Trust, KTNQ/KLVE, Inc., HBC License Corporation and Heftel Broadcasting Corporation. 10.2 Asset Purchase Agreement dated January 27, 1999, by and between New Century Arizona LLC, New Century Arizona License Partnership and the Company (incorporated by reference to Exhibit 10.24 to the Company's Form 10-K for the year ended December 31, 1998). 10.3 Asset Purchase Agreement, dated March 1, 1999, by and between Radio Vision, Inc., George E. Tobin and the Company (incorporated by reference to Exhibit 10.25 to the Company's Form 10-K for the year ended December 31, 1998). 27 Financial Data Schedule
12 EX-10.1 2 EXHIBIT 10.1 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into on April 28, 1999 by and among GOLDEN WEST BROADCASTERS, a California corporation ("Seller"), JACQUELINE AUTRY and STANLEY B. SCHNEIDER, AS CO-TRUSTEES OF THE AUTRY QUALIFIED INTEREST TRUST (collectively, the "Trustees"), KTNQ/KLVE, INC., a California corporation ("KTNQ-KLVE") and HBC LICENSE CORPORATION, a Delaware corporation ("HBC") (KTNQ-KLVE and HBC collectively are referred to herein as "Buyers") and HEFTEL BROADCASTING CORPORATION, a Delaware corporation ("Heftel" and together with Buyers the "Buying Parties"), with reference to the following facts: RECITALS A. Seller operates radio station KSCA(FM), Glendale, California (the "Station") pursuant to licenses issued by the Federal Communications Commission (the "FCC"); B. Seller, Clear Channel Radio, Inc. ("CCR") and Stanley B. Schneider and Orvon Gene Autry, as co-trustees of the Autry Survivor's Trust, predecessor in interest to the Autry Qualified Interest Trust, entered into an Option Agreement, dated as of December 23, 1996, (the "Option Agreement"). CCR assigned its rights under the Option Agreement to Heftel, and Heftel assigned some of its rights under the Option Agreement to KTNQ-KLVE and the rest of its rights under the Option Agreement to HBC. This Agreement is being entered into pursuant to the exercise of the option rights granted to Buyers under the Option Agreement. C. Seller desires to sell to KTNQ-KLVE, and KTNQ-KLVE desires to purchase from Seller, substantially all of the assets used or held for use in connection with the operation of the Station, with the exception of the FCC Licenses, all on the terms and subject to the conditions set forth herein. D. Seller desires to sell to HBC, and HBC desires to purchase from Seller, the FCC Licenses, all on the terms and subject to the conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE 1 PURCHASE OF ASSETS 1.1 TRANSFER OF ASSETS BY SELLER. On the Closing Date, subject to the conditions contained herein, Seller shall sell, assign, transfer and convey to KTNQ-KLVE, and KTNQ-KLVE shall purchase from Seller, all of the assets, properties, interests and rights of Seller which are used or held for use in connection with the operation of the Station, with the exception of the FCC Licenses (collectively, the "Purchased Assets"), including, without limitation, the following: (a) All furniture, equipment and other tangible personal property relating to the operation of the Station, including, without limitation, the property listed on SCHEDULE 1.1(a) attached hereto, together with any additions thereto made between the date hereof and the Closing Date, and less any dispositions thereof made in the ordinary course of business between the date hereof and the Closing Date which are replaced with items of equal or greater value (collectively, the "Tangible Personal Property"); (b) All of Seller's right, title and interest in and to each permit, contract, agreement, license and lease, written or oral, relating to the operation of the Station listed in SCHEDULE 1.1(b) hereto, together with all contracts, agreements and leases entered into by Seller between the date hereof and the Closing Date if KTNQ-KLVE agrees to assume such agreement in writing at the Closing (collectively, the "Contracts"); at KTNQ-KLVE's option, exercisable by delivery of written notice before the Closing, the Auxiliary Site Lease shall be included in the Contracts; (c) All of Seller's right, title and interest in and to all of its intellectual property associated with the Station, including, but not limited to, the call letters "KSCA(FM)," together with any associated goodwill (collectively, the "Intellectual Property"); (d) All files, records, and reports which Seller must retain under FCC rules and regulations; (e) All rights of way and other interests of every kind in and to any real property and buildings thereon leased by Seller and used or held for use in connection with the business and operations of the Station; and (f) All goodwill in, and going concern value of, the Station; (g) All claims and rights against third parties relating to the Purchased Assets, including, without limitation, all rights under manufacturers' and vendors' warranties; and -2- (h) Any books and records relating to any of the foregoing, except to the extent that Seller wishes to make, at its expense, a duplicate copy of such materials. 1.2 TRANSFER OF FCC LICENSES BY SELLER. On the Closing Date, subject to the conditions contained herein, Seller shall assign, transfer and convey to HBC, and HBC shall purchase from Seller, all licenses, permits and other authorizations relating to the Station issued to Seller by the FCC on or prior to the Closing Date, together with renewals or modifications thereof, including, without limitation, the licenses, permits and authorizations listed on SCHEDULE 1.2 attached hereto (collectively, the "FCC Licenses"); 1.3 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained herein, it is expressly understood and agreed that the neither the Purchased Assets nor the FCC Licenses shall include the following assets along with all right, title and interest therein (collectively, the "Excluded Assets"): (a) All cash, cash equivalents or similar type investments of Seller, such as certificates of deposit, Treasury bills and other marketable securities on hand and/or in banks; (b) All of Seller's accounts receivable existing prior to the TBA Effective Date; (c) All contracts or agreements to which Seller is a party that KTNQ-KLVE has not assumed pursuant to the terms of Section 2.1 hereof; (d) Seller's corporate seal, minute books, charter documents, corporate stock record books and such other books and records as pertain to the organization, existence or share capitalization of Seller and duplicate copies of such records as are necessary to enable Seller to file its tax returns and reports as well as any other records or materials relating to Seller generally and not involving the Station's operations; (e) All pension, profit sharing or cash or deferred (Section 401(k)) plans and trusts and the assets thereof and any other employee benefit plan or arrangement and the assets thereof, if any maintained by Seller; (f) Contracts of insurance and all insurance proceeds or claims made by Seller relating to property or equipment repaired, replaced or restored by Seller prior to the Closing Date; (g) Any and all claims (except as set forth in Section 1.1(h)) made by Seller with respect to transactions prior to the Closing Date and the proceeds thereof, except claims with -3- respect to obligations to be assumed by KTNQ-KLVE pursuant to Section 2.1 hereof; and (h) All other assets of Seller which are not used or held for use in the operation of the Station. 1.4 NO LIENS. The Purchased Assets shall be transferred to KTNQ-KLVE free and clear of all Liens and the FCC Licenses shall be transferred to HBC free and clear of all Liens. ARTICLE 2 ASSUMPTION OF OBLIGATIONS 2.1 ASSUMPTION OF OBLIGATIONS. In addition to the provisions of Section 3.4, on the Closing Date, KTNQ-KLVE shall assume and undertake to pay, satisfy or discharge the obligations and commitments of Seller arising or to be performed on or after the Closing Date under the Contracts. All of the foregoing assumed obligations and commitments shall be referred to herein collectively as the "Assumed Liabilities." If any required approval of or consent to the assignment of any Contract is not obtained and the Closing occurs, such Contract shall not be assigned until such consent is obtained, but on the Closing Date KTNQ-KLVE and Seller shall enter into an equitable arrangement pursuant to which KTNQ-KLVE shall pay, satisfy, perform, and discharge Seller's obligations which arise or are to be performed under such Contract on or after the Closing Date and Seller shall provide to KTNQ-KLVE the rights and benefits under such Contract arising on or after the Closing Date. 2.2 RETAINED LIABILITIES. Except as set forth in Sections 2.1 and 3.4, KTNQ-KLVE expressly does not, and shall not, assume or be deemed to assume, under this Agreement or otherwise by reason of the transactions contemplated hereby, any liability, obligation, commitment, undertaking, expense or agreement of Seller of any nature whatsoever, whether known or unknown or absolute or contingent. All of such liabilities and obligations shall be referred to herein collectively as the "Retained Liabilities." Without limiting the generality of the foregoing, (a) KTNQ-KLVE shall have no obligation or liability to employees of Seller due to or because of any past service liability, vested benefits, retirement plan insolvencies or other retirement plan or past employment obligation under local, state or federal law (including the Employee Retirement Income Security Act of 1974, as amended) as a result of the purchase of the Purchased Assets or former employees of Seller becoming employees of KTNQ-KLVE and (b) KTNQ-KLVE shall have no liability to any employees of Seller under any employment agreement between Seller and such employee, whether or not listed on any Schedule attached hereto. Nothing contained herein shall limit the obligations of KTNQ-KLVE under the TBA to reimburse Seller for certain expenses or pay certain severance obligations. -4- ARTICLE 3 CONSIDERATION 3.1 PURCHASE PRICE. In consideration for the transfer of the Purchased Assets and the FCC Licenses, Buyers shall pay to Seller an amount (the "Purchase Price") equal to the greater of (a) $112.5 million or (b) the sum of (i) $105 million plus (ii) an amount equal to the product of the Daily Amount (the parties acknowledge the Daily Amount may be different for each day) multiplied by the number of days elapsed from the TBA Effective Date until (but not including) the Closing Date. The Purchase Price shall be subject to any adjustment to be made pursuant to Section 3.4 hereof and shall be subject to adjustment for any damages incurred by a party as a result of termination of the TBA due to a breach thereof or a termination of the TBA not made in accordance with the terms thereof. In addition, as consideration for the transfer of the Purchased Assets to KTNQ-KLVE, KTNQ-KLVE shall assume the Assumed Liabilities. 3.2 PAYMENT OF PURCHASE PRICE. On the Closing Date, KTNQ-KLVE shall pay the Purchase Price, plus or minus any adjustment to be made pursuant to Sections 3.1 and 3.4 hereof and minus all payments made under the Option Agreement, in lawful money of the United States of America by bank cashier's check or wire-transfer of immediately available funds. 3.3 ALLOCATION OF PURCHASE PRICE. Within 90 days after the Closing, KTNQ-KLVE and Seller shall mutually determine the allocation of the Purchase Price in accordance with Treasury Regulation Section 1.1060-1T based upon the approximate replacement values of the Purchased Assets and the FCC Licenses determined by a nationally recognized appraisal firm chosen by KTNQ-KLVE and reasonably acceptable to Seller (it being anticipated that the Purchase Price will be allocated first to such of the Purchased Assets and the FCC Licenses as are tangible to the extent of the approximate replacement values thereof on the Closing Date, with the balance to intangible assets). KTNQ-KLVE shall pay all fees and expenses of such appraisal firm. Seller and KTNQ-KLVE will report the federal income tax consequences of the sale and acquisition of the Purchased Assets and the FCC Licenses under this Agreement in a manner consistent with the foregoing, and will file Forms 8594 in the manner and at the times required by Treasury Regulation Section 1.1060-1T. KTNQ-KLVE shall prepare drafts of Form 8594 reflecting the respective Purchase Price allocations determined as provided above in accordance with Treasury Regulation Section 1.1060-1T for Seller and KTNQ-KLVE, such draft of Form 8594 to be provided to Seller within 180 days following the Closing Date, but in no event later than the due date for Seller's federal income tax return for the period including the Closing Date; and Seller's consent to such drafts shall not be unreasonably withheld or delayed. -5- 3.4 PRORATION OF INCOME AND EXPENSES. (a) Except as otherwise provided herein or in the TBA, all income and expenses arising from the conduct of the business and operation of the Station, including, without limitation, all ad valorem, real estate and other property taxes (but excluding taxes arising by reason of the transfer of the Purchased Assets and the FCC Licenses as contemplated hereby, which shall be paid as set forth in Article 11 of this Agreement), business and license fees, music and other license fees, utility expenses, rents and similar prepaid and deferred items attributable to the ownership and operation of the Station, shall be prorated between KTNQ-KLVE and Seller in accordance with generally accepted accounting principles as of 11:59 p.m., California time, on the date immediately preceding the Closing Date (the "Effective Time") in accordance with the principle that Seller shall receive all revenues and be responsible for all expenses, costs, and liabilities allocable to the period prior to the Effective Time, and KTNQ-KLVE shall receive all revenues, and be responsible for all expenses, costs, and obligations, allocable to the period after the Effective Time, subject to the following: (i) There shall be no adjustment with respect to any contracts not included in the Contracts; (ii) There shall be no adjustment for any expenses or payments to terminated employees which are the responsibility of KTNQ-KLVE, or for which KTNQ-KLVE is obligated to reimburse Seller, pursuant to the TBA or for any revenue to which KTNQ-KLVE is entitled under the TBA; and (iii) Revenues, expenses, taxes, costs and liabilities earned or incurred in connection with particular programs and announcements shall be allocated to the time of performance of such programs and announcements without regard to the date of payment therefor. (b) The prorations and adjustments contemplated by this Section, to the extent practicable, shall be made on the Closing Date. As to those prorations and adjustments not capable of being ascertained on the Closing Date, an adjustment and proration shall be made within sixty (60) days of the Closing Date. In the event of any disputes between the parties as to such adjustments, the amounts not in dispute shall nonetheless be paid at such time and such disputes shall be resolved by an independent certified public accountant mutually acceptable to the parties, and the fees and expenses of such accountant shall be paid one-half by Seller and one-half by KTNQ-KLVE. The decision of such accountant shall be conclusive and binding on the parties. All prorations and adjustments made on the Closing Date shall be paid in the form of an increase or decrease of the amount payable by KTNQ-KLVE at the Closing. All prorations and -6- adjustments made after the Closing shall be paid within five (5) business days of the determination thereof. ARTICLE 4 GOVERNMENTAL CONSENTS 4.1 FCC CONSENT. It is specifically understood and agreed by the parties hereto that consummation of the transactions contemplated hereby is expressly conditioned on and is subject to the prior consent and approval of the FCC ("FCC Consent"). 4.2 FCC APPLICATION. Within five business days after execution of this Agreement, the parties shall file with the FCC an application for assignment of the FCC Licenses ("FCC Application") from Seller to HBC. The parties shall thereafter prosecute the FCC Application with all reasonable diligence and otherwise use commercially reasonable efforts to obtain the grant of the FCC Application as expeditiously as practicable. If the FCC Consent imposes any condition on a party hereto, such party shall use commercially reasonable efforts to comply with such condition. If reconsideration or judicial review is sought with respect to the FCC Consent, the parties shall oppose such efforts for reconsideration or judicial review. 4.3 HART-SCOTT-RODINO FILINGS. If the HSR Act and the rules and regulations of the Federal Trade Commission require the parties to file Notification and Report Forms after the execution hereof, as soon as possible after the date hereof, but in no event later than 30 days after the date hereof, Buyers and Seller shall prepare and file all documents with the Federal Trade Commission and the United States Department of Justice as are required to comply with the HSR Act and shall promptly furnish all materials thereafter requested by any of the regulatory agencies having jurisdiction over such filings. ARTICLE 5 CLOSING 5.1 CLOSING DATE. Except as otherwise agreed upon by the parties hereto, the consummation of the transactions contemplated herein (the "Closing") shall occur within five (5) business days after the FCC Consent shall have become a Final Order, subject to extension to allow Seller to comply with Section 15.1 (the "Closing Date"). As used herein, the term "Final Order" means a written action or order issued by the FCC setting forth the FCC Consent and (a) which has not been reversed, stayed, enjoined, set aside, annulled or suspended, and (b) with respect to which (i) no requests have been filed for administrative or judicial review, reconsideration, appeal or stay, and the time for filing any such requests and for the FCC to set aside the action on its own motion (whether upon reconsideration or otherwise) has expired, or (ii) in the event of -7- review, reconsideration, appeal or stay, the time for further review, reconsideration or appeal has expired or such requests have been withdrawn or denied. Notwithstanding the foregoing, at KTNQ-KLVE's election the Closing shall occur within five (5) business days after the date on which public notice of the grant of FCC Consent is given (even though the FCC Consent shall not have become a Final Order), subject to extension to allow Seller to comply with Section 15.1. In addition, notwithstanding anything to the contrary contained herein, if a party has a condition to its obligations which has not been satisfied by the 5th business day after the date on which public notice of the grant of the FCC Consent is given or the date on which the FCC Consent becomes a Final Order, as the case may be, such party may extend the Closing Date for such time as is necessary to cause such condition to be satisfied. All actions taken at the Closing will be considered as having been taken simultaneously and no such actions will be considered to be completed until all such actions have been completed. 5.2 CLOSING PLACE. The Closing shall be held at such place as the parties hereto may agree. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Buyers as follows: 6.1 ORGANIZATION. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has the requisite corporate power to carry on its business as it is now being conducted. 6.2 AUTHORITY. (a) Seller has the corporate power and authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Seller. This Agreement has been duly executed and delivered by Seller and constitutes a valid and binding obligation of Seller, enforceable against Seller in accordance with its terms. (b) Except as set forth in SCHEDULE 6.2(b) attached hereto, the execution and delivery by Seller of this Agreement do not, and the consummation of the transactions contemplated hereby will not, (i) conflict with, or result in a violation of, any provision of the Articles of Incorporation or Bylaws of Seller, (ii) constitute or result in a material breach of or material default (or an event which with notice or lapse of time, or both, would constitute a material default) under, or -8- result in the termination or suspension of, or accelerate the performance required by, or result in a right of termination, cancellation or acceleration of any contract or agreement of Seller, (iii) create any Lien upon any of the Purchased Assets or the FCC Licenses, or (iv) constitute, or result in, a violation of any judgment, ruling, order, writ, injunction, decree, statute, law, rule or regulation applicable to Seller or any of its properties or assets, other than in the cases of clauses (ii) and (iv) a breach, default, termination or suspension, acceleration of performance, cancellation or violation which would not adversely affect the Purchased Assets or the FCC Licenses, Buyers' use or enjoyment of the Purchased Assets or the FCC Licenses or the ability of Seller to complete the sale of the Purchased Assets and FCC Licenses to Buyers pursuant to this Agreement. (c) No consent, approval, order or authorization of, notice to, or registration, declaration of filing with, any governmental entity is necessary in connection with the execution and delivery of this Agreement by Seller or the consummation of the transactions contemplated hereby by Seller, except for the FCC Consent and the filings which may be required under the HSR Act. 6.3 STATION LICENSES. SCHEDULE 1.1(c) attached hereto contains a true and complete list of the FCC Licenses. Seller is the authorized legal holder of the FCC Licenses. The FCC Licenses are in full force and effect. The FCC Licenses are all of the licenses, permits or other authorizations required under the Communications Act and the rules and regulations of the FCC to operate the Station as currently operated. No proceedings are pending or, to the best knowledge of Seller, threatened which may result in the revocation, modification, non-renewal or suspension of any of the FCC Licenses. Except as caused by non-compliance by Buyers with the TBA, the Station is operating in compliance in all material respects with the Communications Act and all FCC rules and regulations, including, but not limited to, the timely filing of all accurate reports required by the FCC. The representations and warranties contained in this Section 6.3 are subject to SCHEDULE 6.3 attached hereto. 6.4 EQUIPMENT. SCHEDULE 1.1(a) attached hereto contains a true and complete list of the Tangible Personal Property. Seller (a) is the lawful owner of all of the Tangible Personal Property it purports to own, and (b) has valid leasehold interests in the Tangible Personal Property it purports to lease, in all cases free and clear of any Liens. Seller will not be a party to any equipment financing leases as of the Closing Date. 6.5 CONTRACTS. Seller is not in violation or breach of, nor has Seller received in writing any claim or threat that it has breached any of the terms and conditions of, any Contract, including any real property leases. To the best knowledge of -9- Seller, no other party to any Contract is in default thereunder or breach thereof. Seller has delivered to Heftel a true, accurate and complete copy of each Contract. Except as set forth in SCHEDULE 6.5 attached hereto, neither the execution and delivery by Seller of this Agreement nor the consummation by Seller of the transactions contemplated under this Agreement requires the consent of any party to a Contract. With respect to the Transmitter Site Lease, (a) such lease is in full force and effect and is valid, binding and enforceable in accordance with its terms, (b) to the best knowledge of Seller, no event has occurred or condition exists that, with notice or lapse of time or both, would become a breach or default by either party to such lease, (c) Seller's interest in such lease is not subject to any Liens, and (d) the term thereof has been extended to May 30, 1999 and the term "Master Sublease" as used therein means the KCET Sublease. The rights under the Transmitter Site Lease provide sufficient access to the tower and other facilities for the Station which are located on the premises described in such lease without the need to obtain any other access rights. Seller has not received any notice that any of the Senior Leases are being terminated. 6.6 INTELLECTUAL PROPERTY. None of the Intellectual Property was granted to Seller pursuant to any licensing or sublicensing agreement under which Seller is the licensee or the sublicensee. No person has a right to receive a royalty or similar payment in respect of any Intellectual Property pursuant to any contractual arrangements entered into by Seller. Seller has not granted to any other person any right to use the Intellectual Property pursuant to any licensing or sublicensing agreement. No notices have been received by Seller that Seller's use of the Intellectual Property infringes upon or otherwise violates any proprietary rights of others. To the best knowledge of Seller, no third-party is infringing on the Intellectual Property. The Intellectual Property, including any registered marks or applications, is owned by Seller free and clear of any Liens. The representations and warranties contained in this Section 6.6 are subject to SCHEDULE 6.6 attached hereto. 6.7 BROKERS. Seller has not entered into any contract, agreement, arrangement or understanding with any person or entity which will result in the obligation to pay any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement. 6.8 LITIGATION. There are no claims, actions, suits, litigation, labor disputes, arbitrations, proceedings or investigations pending or, to the best knowledge of Seller, threatened against Seller which would have an adverse effect on Buyers' ability to purchase the Purchased Assets or the FCC Licenses, Buyers' ability to full use and enjoyment of the Purchased Assets or the FCC Licenses or the ability of Seller to sell the Purchased Assets or the FCC Licenses to Buyers pursuant -10- to this Agreement. Seller is not subject to any order, judgment, writ, injunction or decree of any court or governmental agency or entity. 6.9 INSURANCE. Seller maintains the insurance policies relating to the Station and the Purchased Assets bearing the policy numbers, for the terms, with the companies, in the amounts, and providing the general coverage set forth on SCHEDULE 6.9 attached hereto. All of such policies are in full force and effect and Seller is not in default of any material provision thereof. Seller has not received notice from any issuer of any such policies of its intention to cancel, terminate or refuse to renew any policy issued by it. 6.10 LABOR, EMPLOYMENT CONTRACTS AND BENEFIT PROGRAMS. (a) There are no collective bargaining agreements, or written or oral agreements, relating to the terms and conditions of employment or termination of employment, covering any employees, consultants or agents of Seller relating to the Station, except as listed and described in SCHEDULE 6.10(a) attached hereto. Seller has provided to Heftel a copy of all of the agreements listed on SCHEDULE 6.10(a) together with any amendments or modifications thereof. Except as listed and described in SCHEDULE 6.10(a), none of the employees of Seller relating to the Station have written employment contracts. There is no strike, picketing, slowdown or work stoppage by or concerning the employees of Seller relating to the Station pending against or involving Seller. Except as permitted by the Settlement Agreement with AFTRA described in SCHEDULE 6.10(a), Seller has no knowledge of any organizational effort currently being made or threatened respecting any of the employees of Seller relating to the Station. (b) All handbooks, policies and procedures of Seller relating to all aspects of employment of employees of Seller relating to the Station, including but not limited to compensation, benefits, equal employment opportunity and safety, are listed and described in SCHEDULE 6.10(b) attached hereto. (c) Seller has provided to KTNQ-KLVE the names of all present employees of Seller and the positions, total annual compensation and accrued vacation and sick time of each. 6.11 ABSENCE OF MATERIAL CHANGE. Except as caused by non-compliance by Buyers with the TBA, since the date of the Option Agreement: (a) Seller has not taken any action with respect to the Station outside of the ordinary and usual course of business, except as related to the transactions contemplated hereby; -11- (b) Seller has not granted a security interest in the Purchased Assets or the FCC Licenses to secure any borrowings of Seller or any obligation or liability of others; (c) Seller has with respect to the Station paid all of its debts and obligations under the Contracts as they became due; (d) Seller has not waived any right of substantial value under the Contracts; and (e) Seller has maintained its books, accounts and records with respect to the Contracts in the usual, customary and ordinary manner. 6.12 SHAREHOLDERS. The Trustees, as co-trustees of the Autry Qualified Interest Trust, are the sole shareholders of Seller. 6.13 REAL PROPERTY. Seller has no interest in any real property other than the Antenna Leases. Neither Seller nor, to the best knowledge of Seller, any of Seller's lenders possess a title insurance policy with respect to such interests. To the best knowledge of Seller, the real property on which the tower for the Station is located is owned by Katella, Katella leases such property to BALP pursuant to the Ground Lease, BALP leases such property to RMBC pursuant to the RMBC Lease, RMBC leases such property to Metromedia pursuant to the Metromedia Sublease, Metromedia leases such property to Fox pursuant to the Fox Sublease, Fox leases such property to KCET pursuant to the KCET Sublease and KCET leases a portion of such property to Seller pursuant to the Transmitter Site Lease. 6.14 SALES TAX. Seller has not made any sales which would cause the sale of the Purchased Assets or the FCC Licenses to Buyers hereunder to fail to be exempt from sales tax under California law. 6.15 SCHEDULES. The Schedules attached hereto are the same as the Schedules attached to the Option Agreement, except for the changes indicated in the redlined Schedules attached hereto, changes which are not materially adverse to Buyers, and changes which are not due to the actions or omissions of Seller, and are accurate and complete as of the date hereof. 6.16 DISCLOSURE. No provision of this Agreement relating to Seller, the Station, the Purchased Assets or the FCC Licenses or any other document, Schedule or other written information furnished by Seller to Buyers in connection with the execution, delivery and performance of this Agreement, or the consummation of the transactions contemplated hereby, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact required to be stated in order -12- to make the statement, in light of the circumstances in which it is made, not misleading. Except for facts affecting the radio industry generally and except for facts or circumstances caused by non-compliance by Buyers with the TBA, there is no fact now known to Seller relating to the Station which in Seller's reasonable opinion adversely affects the condition of the Purchased Assets, the status of the FCC Licenses for the Station or the ownership, operation, financial condition or business of the Station which has not been disclosed to Buyers or set forth in the Schedules attached hereto. ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF BUYING PARTIES Buying Parties jointly and severally represent and warrant to Seller as follows: 7.1 ORGANIZATION, STANDING AND POWER. KTNQ-KLVE is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has the requisite corporate power to carry on its business as it is now being conducted. Each of HBC and Heftel is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to carry on its business as it is now being conducted. 7.2 AUTHORITY. (a) Each Buying Party has all requisite corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Buying Parties and the consummation by Buying Parties of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of each Buying Party. This Agreement has been duly executed and delivered by each Buying Party and constitutes a valid and binding obligation of each Buying Party enforceable against each Buying Party in accordance with its terms. (b) No consent, approval, order or authorization of, notice to, or registration, declaration or filing with, any governmental entity or any third party is necessary in connection with the execution and delivery of this Agreement by Buying Parties or the consummation by Buying Parties of the transactions contemplated hereby, except the FCC Consent and the filings required under the HSR Act. 7.3 BROKERS. No Buying Party has entered into any contract, agreement, arrangement or understanding with any person or entity which will result in the obligation to pay any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement. -13- 7.4 LITIGATION. There are no claims, actions, suits, litigation, labor disputes, arbitrations, proceedings or investigations pending or, to the best knowledge of each Buying Party, threatened against any Buying Party relating to the transactions contemplated by this Agreement. 7.5 QUALIFICATION. There are no facts which, under the Communications Act or the existing rules and regulations of the FCC, would disqualify HBC as an assignee of the FCC Licenses. ARTICLE 8 COVENANTS 8.1 OPERATION OF BUSINESS. Except as caused by non-compliance by Buyers with the TBA, notwithstanding anything to the contrary contained herein, between the date of this Agreement and the Closing Date, Seller: (a) except in accordance with Section 1.1, shall not sell or otherwise dispose of any of the Purchased Assets or FCC Licenses or grant a Lien thereon or permit a Lien to remain on the Purchased Assets or the FCC Licenses if such Lien was placed thereon as a result of the actions or omissions of Seller; (b) shall not commit any act or omit to do any act which will cause a breach of any Contract; (c) shall not amend or renew any Contract or terminate the lease for the Station's main transmitter site; (d) will operate in the ordinary course of business, consistent with past practice, and will take no actions to diminish materially the goodwill of the business of the Station; (e) will operate the Station in material compliance with the Communications Act and the FCC's rules and regulations; (f) will maintain the insurance coverage listed on SCHEDULE 6.9 in full force and effect through the Closing Date; and (g) will take all action necessary to maintain the FCC Licenses in full force and effect without material modification. 8.2 ACCESS TO INFORMATION. From the date hereof to the Closing Date, Seller shall afford, and shall cause its respective officers, directors, employees and agents to afford, to KTNQ-KLVE and the officers, employees and agents of KTNQ-KLVE complete access at all reasonable times to Seller's officers, employees, -14- independent contractors, agents, properties and to Seller's books, records and contracts relating to the Station. 8.3 CONFIDENTIALITY. (a) Each Buying Party shall hold, and shall cause its officers, employees and agents and representatives, including, without limitation, attorneys, accountants, consultants and financial advisors who obtain such information to hold, in confidence, and not use for any purpose other than evaluating the transactions contemplated by this Agreement or performing its obligations hereunder or under the TBA, any confidential information of Seller or the Trustees, which for the purposes hereof shall not include any information which (i) is or becomes generally available to the public other than as a result of disclosure by a Buying Party or one of its affiliates in violation of its obligations under this subsection, (ii) becomes available to a Buying Party on a nonconfidential basis from a source, other than Seller, the Trustees or affiliates of Seller, which has represented that such source is entitled to disclose it, or (iii) was known to a Buying Party on a nonconfidential basis prior to its disclosure to a Buying Party hereunder. If this Agreement is terminated, Buying Parties shall deliver, and cause their officers, employees, agents, and representatives, including, without limitation, attorneys, accountants, consultants and financial advisors who obtain confidential information of Seller or the Trustees to deliver, to Seller all such confidential information that is written (including copies or extracts thereof), whether such confidential information was obtained before or after the execution hereof. Buying Parties shall be jointly and severally liable for a breach of this Section 8.3 by any Buying Party. (b) Seller shall hold, and shall cause its officers, employees and agents and representatives, including, without limitation, attorneys, accountants, consultants and financial advisors who obtain such information to hold, in confidence, and not use for any purpose other than evaluating the transactions contemplated by this Agreement, any confidential information of each Buying Party, which for the purposes hereof shall not include any information which (i) is or becomes generally available to the public other than as a result of disclosure by Seller or one of its affiliates in violation of its obligations under this subsection, (ii) becomes available to Seller on a nonconfidential basis from a source, other than a Buying Party or its affiliates, which has represented that such source is entitled to disclose it, or (iii) was known to Seller on a nonconfidential basis prior to its disclosure to Seller hereunder. If this Agreement is terminated, Seller shall deliver, and cause its officers, employees, agents, and representatives, including, without limitation, attorneys, accountants, consultants and financial advisors who obtain confidential information of Buying Parties to deliver, to Heftel -15- all such confidential information that is written (including copies or extracts thereof), whether such confidential information was obtained before or after the execution hereof. (c) If a person who receives confidential information is requested or becomes legally compelled (by oral questions, interrogatories, requests for information or documents, subpoena, criminal or civil investigative demand or similar process) to disclose any of such confidential information, such person will provide the other party with prompt written notice so that such other party may seek a protective order or other appropriate remedy or waive compliance with Section 8.3(a) or (b), as the case may be. If such protective order or other remedy is not obtained, or if the applicable party waives compliance with Section 8.3(a) or (b), as the case may be, the person subject to the request will furnish only that portion of such confidential information which is legally required and will exercise reasonable efforts to obtain reliable assurance that confidential treatment will be accorded such confidential information. 8.4 NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt notice to Buying Parties of the discovery of (i) any material inaccuracy in any representation or warranty made by it, (ii) any material failure of Seller to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement or (iii) any legal proceedings related to the Station or the transactions contemplated hereby. Buying Parties shall give prompt notice to Seller of the discovery of (1) any material inaccuracy in any representation or warranty made by any of them,(2) any material failure of any Buying Party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement or (3) any legal proceedings related to the Station or the transactions contemplated hereby. Notwithstanding the foregoing, no notification made under this Section shall affect the representations or warranties or covenants or agreements of the parties or the conditions to the obligations of the parties hereunder. 8.5 CONSENTS AND APPROVALS. Seller and Buying Parties shall use commercially reasonable efforts to obtain any and all consents, transfers, authorizations, or approvals required for the consummation of the transactions contemplated by this Agreement. Buying Parties and Seller will cooperate with each other in obtaining, and will provide all information necessary to obtain, such consents. 8.6 CONTROL OF STATION. From the date hereof to the Closing Date, no Buying Party shall, directly or indirectly, control, supervise or direct the operation of the Station. Such operation, including complete control and supervision of all Station programs, employees and policies, shall be the sole responsibility of Seller. Notwithstanding the foregoing, the -16- parties have entered into the TBA, pursuant to which Seller has granted to Heftel (or its permitted assignee) the right to program the Station in accordance with the Communications Act and the rules and regulations of the FCC. 8.7 NEWS RELEASES. Except for announcements required by applicable law, prior to the Closing Date, any news releases pertaining to the transactions contemplated hereby shall be reviewed and approved by Heftel and Seller, or their respective representatives, and shall be acceptable to them prior to the dissemination thereof. 8.8 BUYERS' COVENANT. Buying Parties agree that none of them shall take any action which would cause HBC to be disqualified under the Communications Act or the FCC's rules or regulations as an assignee of the FCC Licenses. ARTICLE 9 CONDITIONS 9.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYERS. The obligations of Buyers to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions, except to the extent KTNQ-KLVE shall have waived in writing satisfaction of such condition: (a) The representations and warranties made by Seller in this Agreement shall be true and correct in all material respects as of the date of this Agreement and on the Closing Date as though such representations and warranties were made on such date. (b) Seller shall have performed and complied in all material respects with all covenants, agreements, representations, warranties and undertakings required by this Agreement to be performed or complied with by it prior to or at the Closing. (c) No action, suit or proceeding before any court or any governmental or regulatory authority shall have been completed which restrains, enjoins, rescinds, prevents or changes the transactions contemplated hereby in a material manner. (d) Seller shall have delivered to Buyers all of the documents required by Section 10.1 hereof. (e) The conditions set forth in Section 5.1 regarding the FCC Consent shall have been satisfied. (f) Any applicable waiting period under the HSR Act shall have expired or been terminated. -17- 9.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of Seller to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions, except to the extent Seller shall have waived in writing satisfaction of such condition: (a) The representations and warranties made by Buying Parties in this Agreement shall be true and correct in all material respects as of the date of this Agreement and on the Closing Date as though such representations and warranties were made on such date. (b) Buying Parties shall have performed and complied in all material respects with all covenants, agreements, representations, warranties and undertakings required by this Agreement to be performed or complied with by any of them prior to or at the Closing. (c) No action, suit or proceeding before any court or any governmental or regulatory authority shall have been completed which restrains, enjoins, rescinds, prevents or changes the transactions contemplated hereby in a material manner. (d) Buying Parties shall have delivered to Seller all of the documents required by Section 10.2 hereof. (e) The conditions set forth in Section 5.1 regarding the FCC Consent shall have been satisfied. (f) Any applicable waiting period under the HSR Act shall have expired or been terminated. ARTICLE 10 CLOSING DELIVERIES 10.1 DELIVERIES BY SELLER. At the Closing, Seller shall deliver or cause to be delivered to Buyers the following: (a) Bill of Sale, assignment and other good and sufficient instruments of conveyance, transfer and assignment, all in form and substance reasonably satisfactory to counsel for KTNQ-KLVE, as shall be effective to vest in KTNQ-KLVE title in and to the Purchased Assets and to vest in HBC title in and to the FCC Licenses. (b) A certificate, executed by an officer of Seller, in such detail as KTNQ-KLVE shall reasonably request, certifying to the fulfillment or satisfaction of the conditions set forth in Sections 9.1(a), (b) and (c). The delivery of such certificate shall constitute a representation and warranty of Seller as to the statements set forth therein. -18- (c) Resolutions of the Board of Directors of Seller authorizing the execution, delivery and performance of this Agreement by Seller, certified by the corporate secretary of Seller. (d) Updated Schedules to this Agreement reflecting any changes necessary to render the information contained therein true and accurate on the Closing Date. (e) Originals or copies of all program, operations, transmissions, or maintenance logs and all other records required to be maintained by the FCC with respect to the Station, including the Station's public file, shall be left at the Station and thereby delivered to Buyers. (f) An opinion of Jeffer, Mangels, Butler & Marmaro LLP covering the following matters: (i) Seller is a corporation validly existing and in good standing under the laws of the State of California and has the requisite corporate power to carry on its business as it is being conducted on the Closing Date; (ii) Seller has the corporate power and authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Seller; and (iii) This Agreement constitutes a valid and binding obligation of Seller and the Trustees. (g) An estoppel certificate executed by each of KCET and Fox containing the following information: (i) The lease or leases to which it is a party are in full force and effect; (ii) To its knowledge, no party to such lease(s) or any other agreement related to the property is in default thereof; (iii) Stating the expiration date of the lease(s); (iv) No consent by Fox or KCET to the assignment of the Transmitter Site Lease to KTNQ-KLVE is necessary; and -19- (v) To its knowledge, no proceedings are pending which would effect the use of the property as a site for a broadcasting tower. (h) An estoppel certificate executed by Metromedia containing the following information: (i) The lease or leases to which it is a party are in full force and effect; (ii) To its knowledge, no party to such lease(s) or any other agreement related to the property is in default thereof; (iii) Stating the expiration date of the lease(s); (iv) No consent by Metromedia to the assignment of the Transmitter Site Lease to KTNQ-KLVE is necessary; (v) To its knowledge, no proceedings are pending which would effect the use of the property as a site for a broadcasting tower; and (vi) To its knowledge, attached to the certificate are the Ground Lease and the RMBC Lease. (i) A Certification of Trust pursuant to California Probate Code Section 18100.5 executed by the Trustees. 10.2 DELIVERIES BY KTNQ-KLVE. At the Closing, KTNQ-KLVE shall deliver or cause to be delivered to Seller the following: (a) The payment required under Section 3.2 hereof. (b) An Assignment and Assumption Agreement reasonably satisfactory in form and substance to counsel to Seller effecting the assumption of the Assumed Liabilities on the terms and conditions hereof. (c) A certificate, executed by an officer of each Buying Party, in such detail as Seller shall reasonably request, certifying to the fulfillment or satisfaction by Buying Parties of the conditions set forth in Sections 9.2(a), (b) and (c). The delivery of such certificate shall constitute a representation and warranty of Buying Parties as to the statements set forth therein. -20- ARTICLE 11 TRANSFER TAXES, FEES AND EXPENSES 11.1 EXPENSES. Except as set forth in Section 11.2 hereof, each party hereto shall be solely responsible for all costs and expense incurred by it in connection with the negotiation and preparation of this Agreement and the documents contemplated hereby and completion of the transactions contemplated thereby, including, without limitation, attorneys' fees and costs related to any governmental filings or any response to requests made by a governmental agency in connection with such filings. 11.2 GOVERNMENTAL FILING OR GRANT FEES. Any filing or grant fees imposed by any governmental authority the consent of which is required to complete the transactions contemplated hereby shall be borne by Buying Parties. ARTICLE 12 INDEMNIFICATION AND SPECIFIC PERFORMANCE 12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in this Agreement shall survive the Closing for a period of six months from the Closing Date; provided, however, the representation and warranty regarding title to any of the Purchased Assets or the FCC Licenses shall survive until the expiration of all applicable statutes of limitation. The right of any party to recover Damages on any claim shall not be affected by the termination of any representations and warranties as set forth above provided that notice of the existence of such claim has been given by the Indemnified Party to the Indemnifying Party prior to such termination. 12.2 INDEMNIFICATION OF BUYERS BY SELLER. Subject to Section 12.4, from and after the Closing Date, Seller shall indemnify and hold Buyers and their attorneys, affiliates, representatives, agents, officers, directors, successors or assigns harmless from and against any Damages resulting from, arising out of or incurred with respect to: (a) A breach of any representation, warranty, covenant or agreement of Seller contained herein, subject to notice of a claim being given before the expiration of the applicable period specified in Section 12.1 hereof with respect to the representations or warranties by Seller contained herein; (b) The Retained Liabilities; or (c) Except as provided by the TBA, any and all claims, liabilities or obligations of any nature, absolute or contingent, relating to the business and operation of the Station as conducted by Seller before the Closing Date. -21- Notwithstanding the foregoing, Seller shall not have any indemnity obligations for expenses or liabilities for which Buyers are responsible under the TBA. 12.3 INDEMNIFICATION OF SELLER BY BUYING PARTIES. Subject to Section 12.4, from and after the Closing Date, Buying Parties jointly and severally shall indemnify and hold Seller and its attorneys, affiliates, representatives, agents, officers, directors, successors or assigns, harmless from and against any Damages resulting from, arising out of, or incurred with respect to: (a) A breach of any representation, warranty, covenant or agreement by any Buying Party contained herein, subject to notice of a claim being given before the expiration of the applicable period specified in Section 12.1 hereof with respect to the representations and warranties made by any Buying Party herein; (b) The Assumed Liabilities; or (c) Any and all claims, liabilities or obligations of any nature, absolute or contingent, relating to the business and operation of the Station as conducted by Buyers on or after the Closing Date. 12.4 LIMITATIONS ON INDEMNIFICATION LIABILITIES. (a) The indemnification obligations of Seller under Section 12.2(a) shall not be effective until the aggregate dollar amount of all Damages indemnified against under such Section exceeds $100,000, at which time, all Damages in excess of $100,000 shall be subject to such indemnification obligations. The maximum amount payable by Seller for indemnity under Section 12.2(a) shall be $20 million. (b) The indemnification obligations of Buying Parties under Section 12.3(a) shall not be effective until the aggregate dollar amount of all Damages indemnified against under such Section exceeds $100,000, at which time, all Damages in excess of $100,000 shall be subject to such indemnification obligations. The maximum amount payable by Buying Parties for indemnity under Section 12.3(a) shall be $20 million. 12.5 PROCEDURES. (a) Promptly after the receipt by a party (the "Indemnified Party") of notice of (i) any claim or (ii) the commencement of any action or proceeding which may entitle such party to indemnification under this Section, such party shall give the other party (the "Indemnifying Party") written notice of such claim or the commencement of such action or proceeding and shall permit the Indemnifying Party to assume the defense of any -22- such claim or any litigation resulting from such claim. The failure to give the Indemnifying Party timely notice under this subsection shall not preclude the Indemnified Party from seeking indemnification from the Indemnifying Party unless, and then only to the extent, such failure has materially prejudiced the Indemnifying Party's ability to defend the claim or litigation. If such claim does not arise from the claim of a third party, the Indemnifying Party shall have 30 days after such notice to cure the conditions giving rise to such claim to the Indemnified Party's satisfaction. Failure by the Indemnifying Party to notify an Indemnified Party of its election to defend any such claim or action by a third party within 30 days after notice thereof shall have been given to the Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its rights to defend such claim or action. (b) If the Indemnifying Party assumes the defense of any such claim or litigation resulting therefrom with counsel reasonably acceptable to the Indemnified Party, the Indemnified Party may participate, at its expense, in the defense of such claim or litigation provided that the Indemnifying Party shall direct and control the defense of such claim or litigation. The Indemnified Party shall cooperate and make available all books and records reasonably necessary and useful in connection with the defense. Except with the prior written consent of the Indemnified Party, the Indemnifying Party shall not, in the defense of such claim or any litigation resulting therefrom, consent to the entry of any judgment (other than a judgment of dismissal on the merits without cost) or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party of a release from all Damages in respect of such claim or litigation. (c) If the Indemnifying Party shall not assume the defense of any such claim or litigation resulting therefrom, the Indemnified Party may, but shall have no obligation to, defend against such claim or litigation in such manner as it may deem appropriate; provided, however, the Indemnified Party may not compromise or settle such claim or litigation without the Indemnifying Party's prior written consent. 12.6 INDEMNITY PAYMENTS. The parties agree that any payments made pursuant to this Article 12 will be treated by the parties on all applicable tax returns as an adjustment to the Purchase Price. 12.7 SOLE REMEDY. After the Closing, indemnity hereunder shall be the sole remedy for a breach of a representation, warranty, covenant or agreement of a party. 12.8 SPECIFIC PERFORMANCE. Seller recognizes that, in the event Seller defaults in the performance of its obligations to close under this Agreement, monetary damages will not be an -23- adequate remedy. Therefore, unless either Buyer is in material breach of this Agreement, Buyers shall be entitled to obtain specific performance of the terms of this Agreement. In any action to enforce specifically the performance of this Agreement, Seller waives the defense that there is another adequate remedy at law or equity and agrees that Buyers shall have the right to obtain specific performance of Seller's obligations to close under the terms of this Agreement without being required to prove actual damages, post bond or furnish other security. As a condition to seeking specific performance, Buyers shall not be required to have tendered the Purchase Price, but shall be required to demonstrate that it is ready, willing and able to do so and to perform its other obligations hereunder in accordance with the terms hereof. If the parties close under this Agreement as a result of an order for specific performance or otherwise, Buyers shall still be entitled to bring an action for indemnification of Damages under Section 12.2. ARTICLE 13 TERMINATION RIGHTS 13.1 TERMINATION. This Agreement may be terminated at any time prior to the Closing Date only as follows (provided the terminating party is not in material breach of any of its obligations, representations, warranties or duties hereunder): (a) By mutual written consent of the parties; (b) Subject to Section 15.2, by written notice from Buying Parties or Seller, if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action, in each case permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action is not subject to appeal or further administrative or judicial review; (c) By written notice from Buying Parties, if Seller fails to perform or breaches any of its material obligations or duties under this Agreement and Seller has not cured such failure to perform or breach within 30 days after delivery of written notice from Buying Parties or upon a material breach of any representation and warranty of Seller contained herein, in either case such that the conditions set forth in Sections 9.1(a) and (b) would not be satisfied; (d) By written notice from Seller, if any Buying Party fails to perform or breaches any of its material obligations or duties under this Agreement and such Buying Party has not cured such failure to perform or breach within 30 days after delivery of written notice from Seller or upon a material breach of any representation and warranty of any Buying Party -24- contained herein, in either case such that the conditions set forth in Sections 9.2(a) and (b) would not be satisfied; (e) By written notice from Buying Parties or Seller, if the FCC denies the FCC Application in a decision which is not subject to appeal or further administrative or judicial review; (f) Subject to Section 15.2, by written notice from Seller or Buying Parties, if the Federal Trade Commission or the United States Department of Justice prohibits the acquisition of the Purchased Assets pursuant to this Agreement under a decision, order or decree which is not subject to appeal or further administrative or judicial review; or (g) By any party which was not in material breach of the TBA at the time of the termination thereof if the Closing has not occurred on or before the later of (i) one year from the date hereof, or (ii) one year from the date of the termination of the TBA; the parties agree the termination right under this subparagraph (g) only applies if the TBA is terminated. 13.2 LIABILITY OF PARTIES. Upon a termination of this Agreement in accordance with its terms no party shall have any liability hereunder, except (a) as provided in Section 8.3, (b) for liability for a breach of such party's representations and warranties contained herein and (c) for liability for nonperformance of any of such party's obligations, covenants or agreements contained herein. Nothing contained herein shall limit the obligations of Seller under the Option Agreement to refund payments made under the Option Agreement. 13.3 SURVIVAL. Notwithstanding anything to the contrary contained herein, the provisions of Section 8.3 and Article 15 shall survive the termination hereof. ARTICLE 14 DEFINITIONS The following terms shall have the following meaning: "Antenna Leases" shall mean the Transmitter Site Lease and the Auxiliary Site Lease. "Auxiliary Site Lease" shall mean the Radio Transmission Site and Joint Occupancy Agreement, dated April 12, 1983, between Golden West Television, Inc., a California corporation, and Seller. "BALP" shall mean Branford Associates Limited Partnership. -25- "Communications Act" shall mean the Communications Act of 1934, as amended. "Daily Amount" shall mean $13,698.63; provided, however, (i) for any day on which Heftel (or its permitted assignee) is unable to broadcast its programming on the Station under the TBA because of preemption thereof by Seller or because the Station is unable to broadcast (except if the reason for the inability to broadcast is a capital expenditure was not made under the TBA due to Heftel (or its permitted assignee) not consenting to such expenditure), the "Daily Amount" shall be reduced by an amount equal to (1) $570.78, multiplied by (2) the number of hours (rounded to the nearest whole number) for which Heftel (or its permitted assignee) is unable to broadcast its programming on the Station under the TBA and (ii) for each day on which the TBA is not in effect due to a termination thereof, the "Daily Amount" shall be zero. "Damages" shall mean any liability, loss, cost, expense, judgment, order, settlement, obligation, deficiency, claim, suit, proceeding (whether formal or informal), investigation, Lien or other damage, including, without limitation, attorney's fees and expenses. Notwithstanding the foregoing, "Damages" shall not include any consequential damages, including, but not limited to, loss of future revenue or income, cost of capital or loss of business reputation or opportunity. "Fox" shall mean Fox Television Stations, Inc. "Fox Sublease" shall mean the Sublease, dated March 3, 1986, between Fox and Metromedia, as amended. "Ground Lease" shall mean the Ground Lease Agreement, dated November 1, 1983, between Katella and BALP. "HSR Act" shall mean Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Katella" shall mean Katella Realty Corporation. "KCET" shall mean Community Television of Southern California, a California non-profit corporation. "KCET Sublease" shall mean the Master Sublease, dated October 1, 1994, between Fox and KCET. "Liens" shall mean all claims, liens, encumbrances, security interests, mortgages, or pledges of any kind except for (i) rights of the lessor of the Station's main transmitter site, and (ii) rights of any parties to any Contract set forth in such Contract. -26- "Metromedia" shall mean Metromedia Company, successor-in-interest to Metromedia, Inc. "Metromedia Sublease" shall mean the Sublease and Agreement dated November 1, 1983, between Metromedia and RMBC. "RMBC" shall mean R.M. Branford Corporation. "RMBC Lease" shall mean the Lease and Agreement, dated November 1, 1983, between RMBC and BALP. "Senior Leases" shall mean the Ground Lease, the RMBC Lease, the Metromedia Sublease, the Fox Sublease and the KCET Sublease collectively. "TBA" shall mean the First Amended and Restated Time Brokerage Agreement, dated as of December 1, 1998, between Seller and Heftel, as permitted assignee of CCR, and consented to by CCR pursuant to a letter dated as of December 1, 1998 to Heftel and Seller. "TBA Effective Date" shall mean February 5, 1997. "Transmitter Site Lease" shall mean the Sublease, dated February 1, 1992, between KCET and Seller, as amended by a First Amendment dated December 4, 1996. Each of the following terms shall have the meanings set forth in the Section opposite such term:
Term Section ---- ------- Agreement Preamble Assumed Liabilities 2.1 Buyers Preamble Buying Parties Preamble Closing 5.1 Closing Date 5.1 Contracts 1.1(b) Effective Time 3.4(a) Excluded Assets 1.2 FCC Recital A FCC Application 4.2 FCC Consent 4.1 FCC Licenses 2.1 Final Order 5.1 HBC Preamble Heftel Preamble Indemnified Party 12.5(a) Indemnifying Party 12.5(a) Intellectual Property 1.1(d) KTNQ-KLVE Preamble Option Agreement Recital B -27- 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 15 MISCELLANEOUS PROVISIONS 15.1 RISK OF LOSS. The risk of loss or damage to any of the Purchased Assets prior to the Closing Date shall be upon the Seller. In consultation with KTNQ-KLVE, Seller shall repair, replace and restore any such damaged or lost Purchased Asset to the condition necessary to cause Buyers to be able to broadcast under the FCC Licenses. If the provisions of this Section conflict with the TBA, the TBA shall control. 15.2 BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. No party may voluntarily or involuntarily assign its interest under this Agreement without the prior written consent of the other parties, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, (a) either Buyer may assign its rights hereunder, without the consent of Seller or the Trustees, to Heftel or any of its wholly-owned subsidiaries and (b) if no Buying Party is in material breach of any of its obligations, representations, warranties or duties hereunder and the acquisition of the Purchased Assets by KTNQ-KLVE or the FCC Licenses by HBC is prohibited by law, Buyers may assign their rights hereunder, without the consent of Seller or the Trustees, to an entity which is financially capable of performing the obligations of Buyers hereunder. No assignment by either Buyer hereunder shall relieve that Buyer or Heftel of its obligations hereunder. Notwithstanding anything to the contrary contained herein, no assignment of any rights hereunder may be made unless the rights of the assigning party under the Option Agreement are also assigned to the same person. 15.3 HEADINGS. The headings set forth in this Agreement are for convenience only and will not control or affect the meaning or construction of the provisions of this Agreement. 15.4 GOVERNING LAW. This Agreement and the rights of the parties hereto shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the choice of law principles thereof. 15.5 AMENDMENT. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. -28- 15.6 SEVERABILITY. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. 15.7 ATTORNEYS' FEES. Should any party hereto institute any action or proceeding at law or in equity to enforce any provision of this Agreement, including an action for declaratory relief, or for damages by reason of an alleged breach of any provision of this Agreement, or otherwise in connection with this Agreement, or any provision hereof, the prevailing party shall be entitled to recover from the losing party or parties reasonable attorneys' fees and costs for services rendered to the prevailing party in such action or proceeding. 15.8 MULTIPLE COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 15.9 NOTICES. Unless applicable law requires a different method of giving notice, any and all notices, demands or other communications required or desired to be given hereunder by any party shall be in writing. Assuming that the contents of a notice meet the requirements of the specific Section of this Agreement which mandates the giving of that notice, a notice shall be validly given or made to another party if served either personally or if deposited in the United States mail, certified or registered, postage prepaid, or if transmitted by telegraph, telecopy or other electronic written transmission device or if sent by overnight courier service, and if addressed to the applicable party as set forth below. If such notice, demand or other communication is served personally, service shall be conclusively deemed given at the time of such personal service. If such notice, demand or other communication is given by mail, service shall be conclusively deemed given seventy-two (72) hours after the deposit thereof in the United States mail. If such notice, demand or other communication is given by overnight courier, or electronic transmission, service shall be conclusively deemed given at the time of confirmation of delivery. The addresses for the parties are as follows: If to Seller: 4383 Colfax Avenue Studio City, California 91604 Attention: Mrs. Jackie Autry Telecopier: (818) 752-7779 -29- with a copy to: Jeffer, Mangels, Butler & Marmaro LLP 2121 Avenue of the Stars, Tenth Floor Los Angeles, California 90067 Attention: Frederick W. Gartside, Esq. Telecopier No.: (310) 203-0567 If to the Trustees: Gursey, Schneider & Co., LLP 10351 Santa Monica Boulevard, Suite 300 Los Angeles, California 90025 Attention: Stanley B. Schneider, Co-Trustee Telecopier No.: (310) 557-3468 with a copy to: Jeffer, Mangels, Butler & Marmaro LLP 2121 Avenue of the Stars, Tenth Floor Los Angeles, California 90067 Attention: Frederick W. Gartside, Esq. Telecopier No.: (310) 203-0567 If to any Buying Party: 3102 Oak Lawn, Suite 215 Dallas, Texas 75219 Attention: Mr. McHenry T. Tichenor, Jr. Telecopier No.: (214) 525-7750 Any party hereto may change its or his address for the purpose of receiving notices, demands and other communications as herein provided, by a written notice given in the aforesaid manner to the other party hereto. 15.10 INCORPORATION BY REFERENCE. All Schedules attached hereto or to be delivered in connection herewith are incorporated herein by this reference. 15.11 WAIVERS. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 15.12 NO THIRD PARTY BENEFICIARIES. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity other than the parties hereto and their successors or permitted assigns, any rights or remedies under or by reason of this Agreement. -30- 15.13 ENTIRE AGREEMENT. This Agreement, the Schedules attached hereto, the TBA, the Option Agreement and the other ancillary documents provided for herein, constitute the entire agreement and understanding of the parties hereto relating to the matters provided for herein and supersede any and all prior agreements, arrangements, negotiations, discussions and understandings relating to the matters provided for herein. To the extent this Agreement conflicts with the TBA or the Option Agreement, this Agreement shall control. 15.14 RULE OF CONSTRUCTION. Each party and counsel for each party have reviewed this Agreement. The parties hereto hereby agree that the normal rule of construction, which requires a court to resolve any ambiguities against the drafting party, shall not apply in interpreting this Agreement. 15.15 NEUTER AND GENDER. In this Agreement, the masculine, feminine or neuter gender shall each be deemed to include the others when the context so requires. 15.16 REFERENCE TO BUYING PARTIES. In the context of references herein to representations, warranties, covenants, obligations or duties of any Buying Parties under, or any Buying Party's non-compliance with, the Option Agreement or the TBA, Buying Parties shall be deemed to include any of their assigns under this Agreement or the TBA. ARTICLE 1 GUARANTEES 16.1 GUARANTEE OF THE TRUSTEES. The Trustees, as co-trustees of the Autry Qualified Interest Trust, hereby guarantee the obligations of Seller hereunder; provided, however, Buyers hereby agree the monetary liability of the co-trustees under this guarantee shall be limited to the assets of the Autry Qualified Interest Trust. 16.2 REPRESENTATIONS AND WARRANTIES OF THE TRUSTEES. The Trustees represent and warrant to Buyers that (a) they have the power and authority to enter into this Agreement, to perform their obligations hereunder and to consummate the transactions contemplated hereby and (b) this Agreement has been duly executed and delivered by the Trustees and constitutes a valid and binding obligation of the Trustees, enforceable against the Trustees in accordance with its terms. 16.3 GUARANTEE OF HEFTEL. Heftel hereby absolutely and unconditionally guarantees payment and performance of all of the obligations of Buyers hereunder whether now existing or hereafter arising. This guaranty is a guaranty of payment not merely a guaranty of collection. Seller shall be entitled to collect from, or take action against, Heftel without first being obligated to pursue any collection from, or take any action -31- against, either Buyer or any other person liable for the obligations of Buyers hereunder. Heftel hereby waives its rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to it by reason of Section 2787 to 2855, inclusive, of the California Civil Code. -32- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. GOLDEN WEST BROADCASTERS, a California corporation By: /s/ Jacqueline Autry ------------------------------------ Jacqueline Autry, President /s/ Jacqueline Autry --------------------------------------- JACQUELINE AUTRY, as co-trustee of the Autry Qualified Interest Trust /s/ Stanley B. Schneider --------------------------------------- STANLEY B. SCHNEIDER, as co-trustee of the Autry Qualified Interest Trust -33- KTNQ/KLVE, INC., a California corporation By: /s/ McHenry T. Tichenor, Jr. ----------------------------------- Name: McHenry T. Tichenor, Jr. --------------------------------- Title: -------------------------------- HBC LICENSE CORPORATION, a Delaware corporation By: /s/ McHenry T. Tichenor, Jr. ----------------------------------- Name: McHenry T. Tichenor, Jr. --------------------------------- Title: -------------------------------- HEFTEL BROADCASTING CORPORATION, a Delaware corporation By: /s/ McHenry T. Tichenor, Jr. ----------------------------------- Name: McHenry T. Tichenor, Jr. --------------------------------- Title: -------------------------------- -34- EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 20,329 0 31,459 2,183 0 50,871 50,676 17,341 748,040 24,806 0 0 0 49 626,281 748,040 0 37,709 0 31,944 (112) 0 252 5,625 2,306 3,319 0 0 0 3,319 0.07 0.07
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