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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
/ / 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 000-23105
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HISPANIC TELEVISION NETWORK, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 75-2504551
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
6125 AIRPORT FREEWAY, SUITE 200, 76117
FORT WORTH, TEXAS (Zip Code)
(Address of Principal Executive offices)
Issuer's telephone number, including area code: (817) 222-1234
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
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Indicate by check mark whether the issuer (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 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 / /
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge in the definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/
State issuer's revenues for its most recent fiscal year: $278,186
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common equity
as of a specified date within the past 60 days. The aggregate market value of
our common stock held by non-affiliates as of April 11, 2000 was approximately
$44, 241,251.00.
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date. As of April 20, 2000, there
were approximately 88,006,427 shares of our common stock issued and outstanding.
Transitional Small Business Disclosure Format: Yes / / No /X/
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<PAGE>
Effective December 14, 1999, American Independent Network, Inc. merged
with Hispano Television Ventures, Inc. and changed its name to Hispanic
Television Network, Inc. and its Over the Counter Bulletin Board trading
symbol to "HTVN."
<PAGE>
HISPANIC TELEVISION NETWORK, INC.
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business......................................................1
Item 2. Properties....................................................16
Item 3. Legal Proceedings.............................................16
Item 4. Submission of Matters to a Vote of Security Holders...........17
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.......................................................19
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................20
Item 7. Financial Statements and Supplementary Data...................25
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure......................................25
PART III
Item 9. Directors and Executive Officers of the Registrant............25
Item 10. Executive Compensation........................................28
Item 11. Security Ownership of Certain Beneficial Owners and
Management....................................................30
Item 12. Certain Relationships and Related Transactions................31
Item 13. Exhibits, Lists and Reports on Form 8-K.......................32
Index to Consolidated Financial Statements and Consolidated
Financial Statement Schedule.................................F-1
ii
<PAGE>
PART I
This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 24A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements appear in a number of places
including Item 1. "Business-Overview," Item 2. "Properties," Item 3. "Legal
Proceedings and Administrative Matters," Item 5. "Market for Registrant's Common
Equity and Related Stockholder Matters," and Item 6. "Management's Discussion
and Analysis of Financial Condition and Results of Operations." Such statements
can be identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "estimates," "will," "should," "plans" or "anticipates" or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy. Readers are cautioned that any such forward-looking
statements are not guarantees of future performance and involve significant
risks and uncertainties, and that actual results could differ materially from
those projected in the forward-looking statements as a result of the risk
factors set forth below under "Risk Factors." This report also identifies other
factors that could cause such differences. No assurance can be given that these
are all of the factors that could cause actual results to vary materially from
the forward-looking statements.
ITEM 1. BUSINESS
OVERVIEW
Hispanic Television Network, Inc. operates the only U.S. based,
Spanish-language television network focused primarily on serving the Mexican
origin Hispanic population, or Mexican Hispanics, which is the largest and
fastest growing segment of the U.S. Hispanic population. Through this network,
named Television Hispana and going by the call letters HTVN, we own or operate
16 television stations in 12 markets, of which 13 are currently broadcasting
HTVN programming in nine markets, including two of the top ten markets ranked by
Designated Market Area, or DMA. Currently, we are in negotiations to acquire an
additional station in Dallas, Texas and a minority equity interest in an entity
that owns stations in each of San Francisco, San Jose and Sacramento,
California. In addition as part of our Internet strategy, we recently entered
into an agreement to acquire a 48% interest in a Spanish-language Internet
Portal, Cubico.com.
HTVN delivers first run and syndicated, Spanish-language programming 24
hours a day, seven days a week. We have the exclusive broadcast rights to a
variety of sports and entertainment programming, primarily directed at Mexican
Hispanics. HTVN broadcasts a variety of other Spanish-language shows, including,
sports (including boxing and Mexican Division I soccer), movies, news,
entertainment, variety, and family programming. We obtain our programming from a
variety of sources, including Multivision of Mexico, which is the third largest
producer of Spanish-language programming in Mexico, Mex-Cinema, which licenses
broadcast rights to Mexican movies, and various other third-party producers, as
well as our own production studios. In addition, we anticipate that we will be
producing local interest programming upon the completion of our production
studios.
We are targeting the Mexican Hispanic market because we believe that it
contains vast marketing opportunities and is currently under-served. According
to Census Bureau statistics, the Hispanic population as a whole is growing at
approximately six times the rate of the non-Hispanic population in the U.S.
Mexican Hispanics, which constitute 65.2% (or nearly 21.0 million people as of
March 1998), are the largest segment of this growing group. As of March 1998,
there were over 5.5 million Mexican Hispanic households, earning approximately
$27,361 annually on average, according to US Census Bureau statistics. In
addition to their size and resources, Mexican Hispanics tend to be
geographically concentrated.
We also own a general market, family-oriented English-language television
network, the American Independent Network or AIN, that provides programming 24
hours a day, seven days a week to more than 35 affiliate stations reaching
approximately 14.0 million households. In addition to our affiliates, viewers
can view AIN programming over the Internet at www.broadcast.com. We have
recently decided to focus primarily on the development of HTVN. In order to
focus the majority of our time on the development of HTVN, we are exploring
various opportunities for the best use of the AIN assets.
1
<PAGE>
TELEVISION HISPANA NETWORK
We own or operate 16 television stations in 12 markets, of which 13 are
currently broadcasting HTVN programming in nine markets including two of the top
ten markets ranked by DMA. We operate several stations through a local marketing
agreement pursuant to which we control all programming, are entitled to all
revenues and are liable for all expenses pending consummation of our acquisition
of these stations. Additionally, we are negotiating the acquisition of an
additional television station in Dallas, Texas, and a minority equity interest
in an entity that owns stations in each of San Francisco, San Jose and
Sacramento, California. We broadcast our programming to a combination of
full-power and low-power stations, the latter of which are generally located
close to or are directed at urban areas.
The following table lists information concerning our owned or operated
stations and their respective markets:
<TABLE>
<CAPTION>
POPULATION IN MARKET POPULATION AS A % OF % OF
(IN THOUSANDS) TOTAL DMA HISPANIC
RANK BY POPULATION
HISPANIC DMA MARKET HISPANIC MEXICAN HISPANIC MEXICAN THAT IS
POPULATION SERVED (1) STATION(S) POPULATION POPULATION POPULATION POPULATION MEXICAN
---------- ---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
7 San Antonio/ K52EA 1,078 988 54.3% 49.7 91.7%
Eagle Pass/ KSAA LP
Uvalde/Del Rio/ KVAW
Carrizo Springs (6) K07WU
KTRG
K11UG
8 Harlingen/McAllen K69HZ 831 790 88.1% 83.7 94.9%
12 Phoenix/Globe (3) K28FV 715 627 19.6% 17.2 87.8%
KTVP56
K30ES
19 Corpus Christi K12HP 337 309 60.4% 55.4 91.7%
55 Oklahoma City (2) KTOU LP 72 55 4.5% 3.5 76.7%
KI7EX
81 Tulsa K29DZ 32 21 2.5% 1.7 66.0%
88 Beaumont/ K09VO 24 18 5.3% 4.1 76.5%
Port Arthur
Clovis K53FU 9 5 28.9% 18.3 63.1%
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(1) If more than one station, total number of stations appears in parenthesis
next to market name.
Source: Claritas, 1999
</TABLE>
<PAGE>
MARKETS SERVED
Prior to our acquisition or assumption of operations of the following
stations, none were broadcasting in Spanish. Currently, 12 of these stations,
including K09VO (Beaumont), K11UG (Carrizo Springs), K12HP (Corpus Christi),
KTRG (Del Rio), KVAW (Eagle Pass), K30ES (Globe), K69HZ (Harlingen/McAllen),
KTOU LP, K17EK (Oklahoma City), K28FV (Phoenix), K52EA and KSAA LP (San
Antonio), are broadcasting HTVN's Spanish-language programming.
SAN ANTONIO. HTVN's television stations K52EA, KSAA LP, KVAW, K07WU, KTRG
and K11UG serve the San Antonio, market, which includes Eagle Pass, Uvalde, Del
Rio and Carrizo Springs. Combined, these markets have a total population of over
1.9 million, of which 998,217 are Mexican Hispanic, or 91.7% of all Hispanics in
these markets. We acquired KSAALP in November 1999, and KVAW in February 2000.
We assumed operations of K52EA, KO7WU, KTRG and K11UG in January 2000.
HARLINGEN/MCALLEN. HTVN's television station K69HZ serves the Harlingen
and McAllen markets. These markets have a combined population of 943,995, of
which 789,652 are Mexican Hispanic, or 94.97% of all Hispanics in these markets.
In January 2000, we assumed operations of this station.
PHOENIX/GLOBE. HTVN's television stations K28FV, KTVP56 and K30ES serve
the Phoenix and Globe markets. These markets have a population of 3.6 million,
of which 627,402 are Mexican Hispanic, or 8.7% of all Hispanics in these
markets. We assumed operations of K28FV in January 2000.
CORPUS CHRISTI. HTVN's television station K12HP serves the Corpus Christi
market, which has a population of 557,633, of which 309,095 are Mexican
Hispanic, or 91.7% of the total Hispanic population in the Corpus Christi DMA.
In January 2000, we assumed operations of K13WD and subsequently merged it with
K12HP to increase station power.
2
<PAGE>
OKLAHOMA CITY. HTVN's television stations KTOULP and K17EZ serve the
Oklahoma City, Norman and Enid markets. Combined, these markets have a total
population of 1.2 million, of which 54,873 are Mexican Hispanic, or 76.7% of the
Hispanic population in this DMA. We acquired KTOULP in May 1999 and assumed
operations of K17EZ in January 2000.
TULSA. HTVN's television station K29DZ serves the Tulsa market, which has
a population of 928,900, of which 20,892 are Mexican Hispanic, or 66% of the
Hispanic population. We assumed operations of this station in January 2000.
BEAUMONT. HTVN's television station K09VO serves the Beaumont and Port
Arthur markets with a population of 444,534, of which 18,092 are Mexican
Hispanic, or 76.5% of the Hispanic population. We acquired this station in April
1999.
CLOVIS. HTVN's television station K53FU serves the Clovis, New Mexico
market, which has 5,870 Mexican Hispanics in a total population of 37,933. We
assumed operations of this station in January 2000.
PROGRAMMING
HTVN broadcasts first-run Spanish-language programming 24 hours a day,
seven days a week. To insure the quality of our programming, we have decided
that we will not air "infomercials," or program-like commercials on HTVN.
A typical 24 hour schedule during the week of network programming is as
follows:
3
<PAGE>
<TABLE>
<CAPTION>
CENTRAL MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY SUNDAY CENTRAL
T-ZONE T-ZONE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6:00am Entranas del Pueblo 6:00am
6:30am MVS Noticias Desafio Academico 6:30am
7:00am Cartoons Aventuras 7:00am
de...
7:30am Cartoons 7:30am
8:00am Cartoons 8:00am
8:30am Novela Cartoons 8:30am
9:00am 9:00am
9:30am Novela Chiqui Movie 9:30am
Show
10:00am Bartolo Explosivo 10:00am
Mus
10:30am La Paloma La Paloma 10:30am
11:00am La Pareja Lucha 11:00am
Sin Libre
11:30am Movie VIP Mexicana 11:30am
12:00pm Vamos Bandazo 12:00pm
Musical
12:30pm Chismes y 12:30pm
Mas
1:00pm Movie Musica No 1:00pm
sin Confies
1:30pm Fronteras 1:30pm
2:00pm 2:00pm
2:30pm Movie 2:30pm
3:00pm Chespirito Bartolo Los La Media Los Movie Movie 3:00pm
Polivoces Ochoa Beverly
3:30pm 3:30pm
4:00pm Cartoons 4:00pm
4:30pm A Tu Salud Movie Movie 4:30pm
5:00pm Musica 5:00pm
Sin
5:30pm Agua y Chocolate Fronteras 5:30pm
6:00pm Recuerdos de Mi Vida Quien Movie Vamos 6:00pm
Tiene
6:30pm Cronica Especial La Razon Chismes y 6:30pm
Mas
7:00pm Cuanto 7:00pm
7:30pm Super Facil Cuesta Movie Boxeo 7:30pm
Mundial
8:00pm Cuentos 8:00pm
8:30pm Cuentos 8:30pm
9:00pm Movie 9:00pm
9:30pm MVS Noticias 9:30pm
10:00pm Score Final 10:00pm
10:30pm Libertad Para Elegir Movie Movie 10:30pm
11:00pm Bartolo Lucha 11:00pm
Libre
11:30pm Novela Mexicana 11:30pm
12:00am Movie 12:00am
12:30am Novela Pareja 12:30am
Sin Par
1:00am Bartolo 1:00am
1:30am Los Movie 1:30am
Beverly
2:00am La Media 2:00am
Ochoa
2:30am Movie Explosivo 2:30am
Mus
3:00am Movie 3:00am
3:30am 3:30am
4:00am Movie Movie 4:00am
4:30am Movie 4:30am
5:00am 5:00am
5:30am Movie Movie Bandazo 5:30am
Musical
</TABLE>
4
<PAGE>
We designed our programming to appeal to Mexican Hispanics in particular
and Hispanics in general. We believe that we achieve this goal by the following:
WE PROVIDE TAILORED CONTENT. We broadcast programming designed to appeal
to the Mexican Hispanic population, including Spanish-language sporting events
(such as boxing and Mexican Division I soccer), news, movies, variety shows
(such as Chismes y Mas, Explosivo Musical and Pulsar), family and talk shows
(such as Agua y Chocolate, Show con Toni and Quien Tiene La Razon). We will also
provide and produce local interest segments, such as community affairs shows.
Furthermore, we will tailor our programming in each market to reflect the
majority segment of the Hispanic populations in that market.
WE HAVE SECURED RIGHTS TO SPANISH-LANGUAGE PROGRAMMING. In order to
provide quality Spanish-language programming, we have entered into arrangements
with various third party producers. Currently we are negotiating the terms of a
programming agreement with Multivision. Pending execution of this agreement,
Multivision has granted us the exclusive rights to broadcast all of its
Spanish-language production in the U.S., which includes first-run sporting
events, variety shows, talk shows and family programming. We have also obtained
the exclusive right (except in Los Angeles) to broadcast over 400 movies in the
Mex-Cinema library. Additionally, we have contracted with Auckland
Entertainment, which produces Cuanto Cuesta el Show, Quien Tiene la Razon, La
Tarde Lunatica and Chiqui Show, for the exclusive right to broadcast their
programming for 6 months. We obtain Mexican Division I men's soccer from
Excalibur, from which we have the right to air from 22 games during the 2000
season. We also obtain additional programming from Enigma.
WE INTEND TO PRODUCE ORIGINAL PROGRAMMING. As part of establishing our
HTVN brand identity, we intend to produce original programming at our production
studio, currently under construction.
AMERICAN INDEPENDENT NETWORK
We also own a general market, family-oriented television network, the
American Independent Network or AIN, that provides programming 24 hours a day,
seven days a week to more than 35 affiliate stations reaching approximately 14.0
million households. In addition to our affiliates, viewers can view AIN
programming over the Internet at www.broadcast.com.
We have recently decided to focus primarily on the development of HTVN. In
order to focus the majority of our time on the development of HTVN, we are
exploring various opportunities for the best use of the AIN assets.
PROGRAMMING
AIN provides general market, family-oriented programming to our
affiliates. Our programming includes movies, second run television shows, events
and educational programs. We currently own the exclusive rights to approximately
2,000 shows and movies. Although we have the ability to produce our own
programming for AIN, we believe that we can obtain licenses to additional
programming for less than it costs us to produce comparable programming. As a
result, we have obtained licenses from third-party production companies and
syndicators for the broadcast of additional programming.
Our form of licensing rights agreement contains barter terms pursuant to
which we obtain broadcasting rights to certain identified programming and in
exchange, we give the licensor advertising time during the broadcast of such
programs. Generally speaking, in a thirty (30) minute program there are normally
seven and one-half (7.5) minutes of commercial time, which time is allocated as
follows:
o two (2) minutes to the licensor;
o two (2) minutes to our affiliate station; and
o three and one-half (3.5) minutes to AIN.
5
<PAGE>
The licensor can then sell this advertising time to outside parties, thereby
earning income on the licensing of their program. Our licensing agreements are
generally for a term of 52 weeks and are cancelable by either party upon two (2)
weeks written notice. We also have the right to refuse any program, without
prior notice, if the content, subject matter, or production quality does not
meet our standards.
AFFILIATES
Currently, we have over 35 affiliates located in over 35 markets and
reaching approximately 14.0 million households. Our affiliates are comprised of
both television and cable stations.
Generally, we require that an affiliate broadcast a minimum of 12 hours of
our programming within a 24 hour period. Approximately half of our affiliates
broadcast 18 hours or more of our AIN programming, with the remaining half
airing at least 12 hours. We receive revenue for network advertising only for
that portion of time that the affiliate broadcasts our programming.
We grant our AIN affiliates a limited license pursuant to a license
agreement. This limited license permits our affiliates to receive AIN
programming via satellite transmissions and to exhibit and rebroadcast our
programming. Affiliates may rebroadcast any portion of the programming received
up to a maximum of two times within 24 hours of receipt. They must broadcast the
programming received in its entirety at least one time between the hours of 7:00
a.m. and 1:00 a.m. Additionally, we review affiliates' weekly broadcast logs in
order to monitor compliance with these requirements. Our affiliates agree that
they will not preempt, cover or in any way disrupt national advertisements
contained in any program or portion thereof that they broadcast with the
exception of two (2) two-minute spots per hour as well as two (2) ten-second
station breaks per hour. Additionally, our affiliate agreements generally
provide that each affiliate may use approximately four (4) minutes per hour for
local commercials or other announcements. Either we or our affiliate may cancel
the agreement at any time with thirty (30) days written notice.
In exchange for providing the affiliate with programming and commercial
time, we retain the remainder of the advertising time, which we sell to
advertising firms and independent advertisers, or use it to barter with
third-parties to acquire additional programs.
MARKETING
Marketing professionals, known as account executives, will target
advertisers in key Hispanic markets. They will consist of network and national
spot account executives and local spot account executives. Account executives
targeting network advertisers will serve a dual role as national spot sellers.
These sales executives will have the flexibility of offering a network wide
sales package or a market specific sales package. Generally, the majority of
network and national spot advertising sales is generated from the same
advertising agencies. This efficiency will allow us to generate greater profits
while controlling our own sales efforts. Account executives responsible for
local spot sales will be located in each of our owned and operated stations.
They will target advertising agencies, businesses and service providers in their
individual markets.
These marketing efforts will be enhanced through the use of research
developed by our in-house research department utilizing both qualitative and
quantitative information. This research will allow the sales departments to
better negotiate and price our commercial inventory. The research department
will further help our sales efforts by identifying and targeting advertisers who
either do not purchase advertising in Spanish language broadcasting or under
utilize this medium.
We intend to operate national and network sales offices in Los Angeles,
New York, Miami, Chicago, San Francisco, Dallas and San Antonio.
COMPETITION
SPANISH-LANGUAGE TELEVISION BROADCASTING
The television broadcast industry is highly competitive. We compete for
available airtime, channel capacity, advertiser revenue, revenue from license
fees, number of viewing households, and programming material. The financial
success of our television stations is dependent on audience ratings and revenues
from advertisers within each station's geographic market. Our stations compete
for revenues with other television stations in their respective markets, as well
as with other advertising media, such as newspapers, radio, magazines, outdoor
advertising, transit advertising, yellow page directories, direct mail and local
cable systems. Some competitors are part of larger companies with substantially
greater financial resources than we have.
6
<PAGE>
Univision and Telemundo are our main competitors in the Spanish-language
television market. Currently, Univision has an 84% market audience share whereas
Telemundo has a 13% market audience share. Competition in the broadcast industry
occurs primarily in individual markets. Most of our owned or affiliate stations
compete directly with a station owned by or affiliated with Univision or
Telemundo.
Conventional commercial television broadcasters also face competition from
other programming, entertainment and video distribution systems, the most common
of which is cable television. These other programming, entertainment and video
distribution systems can increase competition for a broadcasting station by
bringing into its market distant broadcast signals not otherwise available to a
station's audience and also by serving as distribution systems for non-broadcast
programming. Programming is now being distributed to cable television systems by
both terrestrial microwave systems and by satellite. Other sources of
competition include home entertainment systems (including video cassette
recorders and playback systems, video discs and television game devices),
multi-point distribution systems, multi-channel multi-point distribution
systems, video programming services available through the Internet and other
video delivery systems. Our television stations also face competition from
direct broadcast satellite services which transmit programming directly to homes
equipped with special receiving antennas and from video signals delivered over
telephone lines. Satellites may be used not only to distribute non-broadcast
programming and distant broadcasting signals but also to deliver certain local
broadcast programming which otherwise may not be available to a station's
audience.
The broadcasting industry is continuously faced with technological change
and innovation and the possible rise in popularity of competing entertainment
and communications media. The rules and the policies of the FCC also encourage
increased competition among different electronic communications media. As a
result, we may experience increased competition from other free or pay systems
that deliver entertainment programming directly to consumers and this could
possibly have a material adverse effect on our operations and results. For
example, commercial television broadcasting may face future competition from
interactive video and data services that provide two-way interaction with
commercial video programming, along with information and data services that may
be delivered by commercial television stations, cable television, direct
broadcast satellites, multi-point distribution systems, multi-channel
multi-point distribution systems, Class A low power television stations, digital
television and radio technologies, or other video delivery systems.
In addition, actions by the FCC, Congress and the courts all presage
significant future involvement in the provision of video services by telephone
companies. The Telecommunications Act of 1996 lifts the prohibition on the
provision of cable television services by telephone companies in their own
telephone areas subject to regulatory safeguards and permits telephone companies
to own cable systems under certain circumstances. It is not possible to predict
the effect on our television stations of any future relaxation or elimination of
the existing limitations on the ownership of cable systems by telephone
companies. The elimination or further relaxation of the restriction, however,
could increase competition that our television stations face from other
distributors of video programming.
Factors that are material to a television station's competitive position
include signal coverage, local program acceptance, network affiliation, audience
characteristics, assigned frequency and strength of local competition. Although
there is competition for our target market, we believe that we possess certain
competitive advantages over our competitors, including:
OUR FOCUS ON THE MEXICAN HISPANIC MARKET. Unlike our main competitors, we
are focusing primarily on the Mexican Hispanic market, which we believe is
grossly under-served. In spite of the fact that Mexican Hispanics represent
roughly 65.2% of the total Hispanic population in the U.S., our competitors do
not focus to any special degree on this group's specific cultural likes and
dislikes. We believe that this market will respond favorably to a television
market that tailors its programming to their tastes.
7
<PAGE>
OUR ABILITY TO BROADCAST IN DIGITAL. Unlike many television networks, we
have a fully-digital earth station from which we broadcast our programming in
digital. We completed this conversion in anticipation of an FCC regulation
requiring all television stations to broadcast in digital by 2006. The operation
of a digital control room requires much less input and effort than a traditional
analog station. Although, not all of our owned or operated and affiliate
stations have the ability to broadcast in digital, sending out a digital signal
helps reduce our operating costs because operating a digital station requires
less employees. Further, we have already borne the cost of converting our
facilities to digital, unlike many of our competitors which will have to convert
to digital in order to comply with FCC regulations.
OUR MANAGEMENT TEAM REFLECTS OUR TARGET AUDIENCE. From our Chief Executive
Officer, Marco Camacho, to our Director of Sales, Rod Rodriguez, Program
Director, Sara Garibay, our director of Network Operations, Joe Castro, and our
Director of Community Affairs, Lupe Casares, our team is comprised of many
Mexican Hispanics as well as other Hispanic individuals. We believe that the
best way to understand the needs and wants our of target market is to include
people that share a similar cultural background to our target audience. The
nature of our management team is also reflective of our dedication to the
creation of a Spanish-language television network for Mexican Hispanics. In
addition and in contrast to other Spanish-language networks, we are
headquartered in Texas, where over 19% of the U.S. Hispanic population resides.
NEW MEDIA STRATEGIC RELATIONSHIP
In connection with our plan to become a new media company, we have entered
into a strategic agreement with Cubico.com on March 15, 2000. Cubico is a
Spanish-language Internet portal that is focused on the Hispanic youth market.
Cubico will offer free, bundled integrated Web-based services that closely suit
existing sharing and intercommunication needs of the Hispanic community.
We have agreed to a three year term after which we can renew or either
party can terminate. Pursuant to the terms of this letter of intent, we will
receive from Cubico the following:
o 24-hour display of the HTVN logo, exclusive of all other
Spanish-language television networks;
o Continuous display of a hyperlink button displayed on the Cubico
home page that links users to real time HTVN programming;
o 7,800,000 shares of Cubico's Series B Preferred Stock, resulting in
an equity position equaling approximately 48% of total outstanding
stock, prior to any dilution resulting from subsequent financing
rounds;
o Revenues from click through, advertising and e-commerce
transaction fees;
o $500,000 in cash, paid $100,000 at closing if certain events have
occurred and $400,000 upon consummation of a subsequent financing
round; and
o $5.0 million from the sale of 5.0 million shares of our stock at
$1.00 per share.
In exchange for the hyperlink and equity position in Cubico, we have
agreed to give Cubico the following:
o Aggregate of $100 million in advertising time over the HTVN network,
to be used by Cubico in their discretion over a period of three
years;
o An ownership interest of no more than 50% and no less than 25% in 10
(ten) of HTVN's owned stations in such markets as HTVN and Cubico
agree and 10% of the gross revenues from such stations pursuant to
the terms of a three-year License Management Agreement;
o Sell 5.0 million shares of our common stock at a $1.00 per share,
including certain registration rights, subject to an all or nothing
repurchase by HTVN under certain circumstances; and
o Sponsorship of educational programs explaining different aspects
of Internet use;
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o Exclusive display rights of the Cubico.com logo on the HTVN network,
in the form of "billboards," which are five second full screen
images identifying an advertiser as the sponsor of a specific
program or segment;
o Use and access to HTVN's program inventory;
o Use of HTVN's sales force to aid in the sale of advertising on
Cubico.com
In the event that either party terminates the relationship at the end of
the three year term, we have repurchase rights with respect to the shares of our
common stock and minority interests in the stations. If we assume up to $5.0
million in liabilities of Cubico within 90 days of the end of the terms and (a)
Cubico has yet to have an effective registration statement covering shares of
Cubico for at least $7.00 per share and gross proceeds of at least $10.0 million
or (b) Cubico is acquired by merger or sells it assets, then we can repurchase
all of the 5 million shares of our common stock for $1.00 per share and all the
interests in the stations for their fair market value.
MATERIAL PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS
In the course of its business, our networks use various trademarks, trade
names and service marks, including their logos in their advertising and
promotions. We believe the strength of our trademarks, trade names and service
marks are important to our business and intend to continue to protect and
promote our marks as appropriate. Currently, we have applied for trademark
protection on HTVN and certain other brand identification. There can be no
assurance that we will receive each of these trademarks. Other than these
pending trademarks and our FCC licenses, we do not hold or depend upon any
material patent, government license, franchise or concession.
FEDERAL COMMUNICATIONS COMMISSION REGULATION
FCC LICENSES
Television broadcasting is a regulated industry and is subject to the
jurisdiction of the FCC under the Communications Act of 1934, as amended from
time to time. The Communications Act prohibits the operation of television
broadcasting stations except under a license issued by the FCC. The
Communications Act empowers the FCC, among other things:
o to issue, revoke and modify broadcast licenses;
o to decide whether to approve a change of ownership or control of
station licenses;
o to regulate the equipment used by stations; and
o to adopt and implement regulations to carry out the provisions of
the Communications Act.
Failure to observe FCC or other governmental rules and policies can result in
the imposition of various sanctions, including monetary forfeitures, the grant
of short, or less than maximum, license renewal terms or, for particularly
egregious violations, the denial of a license renewal application, the
revocation of a license or denial of FCC consent to acquire additional broadcast
properties.
LICENSE GRANT & RENEWAL
Television broadcast licenses are granted for a maximum period of eight
years upon a finding by the FCC that the "public interest, convenience and
necessity" would be served thereby. Television licenses are subject to renewal
upon application to the FCC, which is required under the Communications Act to
grant the renewal application if it finds that the station: (1) has served the
public interest, convenience and necessity; (2) has committed no serious
violations of the Communications Act or the FCC's rules; and (3) has committed
no other violations of the Communications Act or the FCC's rules which would
constitute a pattern of abuse. If the FCC cannot make such a finding, it may
deny a renewal application, and only then may the FCC accept other applications
to operate the station of the former licensee. Under the Telecommunications Act
of 1996 ("1996 Act"), as implemented in the FCC's rules, a competing application
for authority to operate a station and replace the incumbent licensee may not be
filed against a renewal application and considered by the FCC in deciding
whether to grant a renewal application. FCC licenses generally are renewed.
Although there can be no assurance that our current licenses will be renewed, we
are not aware of any facts or circumstances that would prevent such license
renewals.
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Currently, we have FCC licenses for KTOU LP and KTVP and have pending
license applications for each of KSAA LP, K09VO, KVAW and K30ES. The remainder
of our stations are operated under a local marketing agreement. We intend to
convert these remaining stations from the local marketing agreement to FCC
licenses in our name in calendar 2000, although we can offer no assurances that
we will file license applications for these stations during 2000. Although there
can be no assurance that these pending or planned license applications will be
granted, we are not aware of any facts or circumstances that would prevent such
license grants.
Recently, we have made application on each station that we own and have
had the owner of each station that we operate make application in order to
obtain Class A status for each of the stations. We anticipate the granting of
such status in May 2000. Although there can be no assurances that we will
receive such status, if we do, the license expiration date for all of the full
and low power stations will become March 2006 and January 2006, respectively.
The licenses for our owner or operated stations expire as follows:
<TABLE>
<CAPTION>
EXPIRATION FULL OR LOW
STATION LICENSE DATE(1) POWER UHF/VHF
--------------- -------- ----- -------
<S> <C> <C> <C>
K52EA August 1, 2006 LP UHF
KSAALP August 1, 2006 LP UHF
KVAW August 1, 2006 FP UHF
K07WU* August 14, 2000 LP VHF
KSTI* September 23, 2000 LP UHF
K28FV October 1, 2006 LP UHF
KTVP56 October 1, 2006 LP UHF
K12PH August 1, 2006 LP VHF
KTOULP June 1, 2006 LP UHF
K17EX June 1, 2006 LP UHF
K29DZ* October 7, 2001 LP UHF
K09VO August 1, 2006 LP VHF
KTRG August 1, 2006 FP VHF
K53FU* January 16, 2001 LP UHF
K30ES* December 22, 2000 LP UHF
K11UG* October 16, 2000 LP VHF
</TABLE>
- ---------------
(1) Upon receipt of Class A status, the expiration date for Full Power
stations will be March 2006 and for Low Power Stations will be January 2006.
* Currently being operated under a construction permit.
TRANSFERS OR ASSIGNMENT OF LICENSE
The Communications Act prohibits the assignment of a broadcast license or
transfer of control of a broadcast licensee without the prior approval of the
FCC. In determining whether to permit the assignment or transfer of control of,
or the grant or renewal of, a broadcast license, the FCC considers a number of
factors pertaining to the licensee, including:
o compliance with various rules limiting common ownership of media
properties;
o the character of the licensee and those persons holding
attributable interests therein; and
o compliance with the Communications Act's limitations on alien
ownership.
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Character generally refers to the likelihood that the licensee or applicant will
comply with applicable law and regulation. Attributable interests generally
refers to the level of ownership or other involvement in station operations that
would result in the FCC attributing ownership of that station or other media
outlets to the person or entity in determining compliance with FCC ownership
limitations.
To obtain the FCC's prior consent to assign a broadcast license or
transfer control of a broadcast licensee, an application must be filed with the
FCC. If the application involves a substantial change in ownership or control,
the application must be placed on public notice for a period of no less than 30
days during which petitions to deny the application or other objections may be
filed by interested parties, including certain members of the public. If the FCC
grants the application, interested parties have no less than 30 days from the
date of public notice of the grant to seek reconsideration or review of that
grant by the full commission or, as the case may be, a court of competent
jurisdiction. The full FCC has an additional 10 days to set aside on its own
motion any action taken by the FCC's staff acting under delegated authority.
When passing on an assignment or transfer application, the FCC is prohibited
from considering whether the public interest might be served by an assignment or
transfer to any party other than the assignee or transferee specified in the
application.
MULTIPLE AND CROSS-OWNERSHIP RESTRICTIONS
The FCC imposes significant restrictions on certain positional and
ownership, or "attributable", interests that a single entity can hold in
broadcast television stations, cable systems and other media. These rules limit
the number of television stations that a single entity can own, control or
influence in both national and local markets, and also limit the permissible
ownership combinations involving television stations and other types of media,
such as radio, cable and newspapers.
Under the FCC's rules, officers, directors and equity holders who own 5%
or more of the outstanding voting stock of a licensee are deemed to have an
"attributable" interest in the Company. Certain institutional investors who
exert no control or influence over a licensee may, however, own up to 20% of the
outstanding voting stock before their interest will be attributed. Nonvoting
stockholders, minority voting stockholders in companies controlled by a single
majority stockholder, and holders of options and warrants are generally exempt
from attribution under current rules. However, under the FCC's new equity-debt
plus rule, a party will be deemed to be attributable if it owns a non-voting
interest exceeding 33% of the total asset value (including debt and equity) of
the licensee and it either provides 15% of the station's weekly programming or
owns an attributable interest in another broadcast station, cable system or
daily newspaper in the market, even if there is a single majority shareholder.
Under the FCC's rules, an individual or entity may hold attributable
interests in an unlimited number of television stations nationwide, subject to
the restriction that no individual or entity may have an attributable interest
in television stations reaching, in the aggregate, more than 35% of the national
viewing audience. For purposes of this calculation, stations in the UHF band,
which covers channels 14 - 69, are attributed with only 50% of the households
attributed to stations in the VHF band, which covers channels 2 - 13. Under its
recently revised ownership rules, if an entity has attributable interests in two
television stations in the same market, the FCC will count the audience reach of
that market only once for purposes of applying the national ownership cap.
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Last year, the FCC relaxed it "television duopoly" rule, which previously
barred any entity from having an attributable interest in two television
stations with overlapping service areas. The FCC's new television duopoly rule
permits a party to have attributable interests in two television stations
without regard to signal contour overlap provided the stations are licensed to
separate Designated Market Areas ("DMA"), as determined by Nielsen. In addition,
the new rule permits parties to own up to two television stations in the same
DMA as long as at least eight independently owned and operating full-power
television stations remain in the market at the time of acquisition, and at
least one of the two stations is not among the top four ranked stations in the
DMA based on specified audience share measures. The FCC also may grant a waiver
of the television duopoly rule if one of the two television stations is a
"failed" or "failing" station, if the proposed transaction would result in the
construction of an unbuilt television station, or if extraordinary public
interest factors are present.
Last year, the FCC also relaxed its "one-to-a-market" rule, which
restricts the common ownership of television and radio stations in the same
market. One entity may now own up to two television stations and six radio
stations in the same market provided that: (1) 20 independent voices (including
certain newspapers and a single cable system) will remain in the relevant market
following consummation of the proposed transaction, and (2) the proposed
combination is consistent with the television duopoly and local radio ownership
rules. If fewer than 20 but more than 9 independent voices will remain in a
market following a proposed transaction, and the proposed combination is
consistent with the FCC's rules, a single entity may have attributable interests
in up to two television stations and four radio stations. If neither of these
various "independent voices" tests are met, a party generally may have an
attributable interest in no more than one television station and one radio
station in a market. The FCC's rules restrict the holder of an attributable
interest in a television station from also having an attributable interest in a
daily newspaper or cable television system serving a community located within
the coverage area of that television station.
Although the FCC's recent revisions to its broadcast ownership rules
became effective on November 16, 1999, several petitions have been filed at the
FCC seeking reconsideration of the new rules. The Company cannot predict the
outcome of these reconsideration requests.
RESTRICTIONS ON FOREIGN OWNERSHIP
The Communications Act prohibits the issuance of broadcast licenses to, or
the holding of a broadcast license by foreign citizens or any corporation of
which more than 20% of the capital stock is owned of record or voted by non-U.S.
citizens or their representatives or by a foreign government or a representative
thereof, or by any corporation organized under the laws of a foreign country.
The Communications Act also authorizes the FCC to prohibit the issuance of a
broadcast license to, or the holding of a broadcast license by, any corporation
controlled by any other corporation of which more than 25% of the capital stock
is owned of record or voted by aliens. The FCC has interpreted these
restrictions to apply to other forms of business organizations, including
partnerships.
PROGRAMMING AND OPERATION
The Communications Act requires broadcasters to serve the public interest,
convenience and necessity. The FCC has gradually restricted or eliminated many
of the more formalized procedures it had developed to promote the broadcast of
programming responsive to the needs of the station's community of license.
Licensees continue to be required, however, to present programming that is
responsive to community problems, needs and interests and to maintain certain
records demonstrating such responsiveness. Complaints from listeners concerning
a station's programming will be considered by the FCC when it evaluates the
licensee's renewal application, but these complaints may be filed and considered
at any time.
Stations must also pay regulatory and application fees and follow various
FCC rules that regulate, among other things:
o political advertising;
o children's programming;
o commercial advertising on children's programming;
o the broadcast of obscene or indecent programming;
o sponsorship identification; and
o technical operations and equal employment opportunity
requirements.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
short or less than the maximum renewal terms, or for particularly egregious
violations, the denial of a license renewal application or the revocation of a
license.
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MUST-CARRY / RETRANSMISSION CONSENT
As part of the Cable Television Consumer Protection and Competition Act of
1992, television broadcasters are required to make triennial elections to
exercise either "must-carry" or "retransmission consent" rights with respect to
their carriage by cable systems in each broadcaster's local market. By electing
must-carry rights, a broadcaster demands carriage on a specified channel on
cable systems within its television market or DMA. Alternatively, if a
broadcaster chooses to exercise retransmission consent rights, it can negotiate
the terms under which the cable system will carry its broadcast signal.
The United States Supreme Court upheld the validity of the must-carry
rules in a 1997 decision. These must-carry rights are not absolute and their
exercise is dependent on a variety of factors, including: (i) the number of
active channels on the cable system; (ii) the location and size of the cable
system; and (iii) the amount of programming on a broadcast station that
duplicates the programming of another broadcast station carried by the cable
system. Therefore, under certain circumstances, a cable system may decline to
carry a given station.
Under the FCC's rules, television stations were required to make their
election between must-carry and retransmission consent status by October 1,
1999, for the period from January 1, 2000 through December 31, 2002. Television
stations that failed to make an election by the specified deadline were deemed
to have elected must-carry status for the relevant three-year period. Each of
our stations has elected must carry status.
The FCC is currently conducting a rulemaking proceeding to determine the
scope of the cable systems' carriage obligations with respect to digital
broadcast signals during and following the transition from analog to digital
broadcasting.
REVIEW OF MUST CARRY RULES
FCC regulations implementing the Cable Television Consumer Protection and
Competition Act of 1992 require each television broadcaster to elect, at three
year intervals beginning October 1,1993, to either:
o require carriage of its signal by cable systems in the station's
market, which is referred to as must carry rules; or
o negotiate the terms on which such broadcast station would permit
transmission of its signal by the cable systems within its market,
which is referred to as retransmission consent.
The United States Supreme Court upheld the must-carry rules in a 1997
decision. These must carry rights are not absolute, and their exercise is
dependent on a variety of factors such as:
o the number of active channels on the cable system;
o the location and size of the cable system; and
o the amount of programming on a broadcast station that duplicates the
programming of another broadcast station carried by the cable
system.
Therefore, under certain circumstances, a cable system may choose to decline to
carry a given station. We have elected must carry with respect to each of our
stations which are each carried on the related cable system.
LOCAL MARKETING AGREEMENTS
We have, from time to time, entered into local marketing agreements, or
LMAs, generally in connection with pending station acquisitions. By using LMAs,
we can provide programming and other services to a station that we intend to
acquire before we receive all applicable FCC and other governmental approvals
that are necessary to consummate that assignment.
FCC rules and policies generally permit LMAs if the station licensee
retains ultimate responsibility for and control of the applicable station,
including finances, personnel, programming and compliance with the FCC's rules
and policies. We cannot be sure that we will be able to air all of our scheduled
programming on a station with which we have LMAs or that we will receive the
anticipated revenue from the sale of advertising for such programming.
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For purposes of its national and local multiple ownership rules, the FCC
attributes LMAs that involve more than 15% of the brokered station's weekly
program time. Thus, if an entity owns one television station in a market and has
a qualifying LMA with another station in the same market, this arrangement must
comply with all of the FCC's ownership rules including the television duopoly
rule. LMA arrangements entered into prior to November 5, 1996 are grandfathered
until 2004. LMAs entered into on or after November 5, 1996 have until
approximately August 2001 to comply with this requirement. Petitions for
reconsideration have been filed against the FCC order that adopted these
requirements.
DIGITAL TELEVISION SERVICES
The FCC has adopted rules for implementing digital television service in
the United States. Implementation of digital television will improve the
technical quality of television signals and provide broadcasters the flexibility
to offer new services, including high-definition television and data
broadcasting. The FCC has established service rules and adopted a table of
allotments for digital television. The table of digital allotments provides each
existing television station licensee or permittee with a second broadcast
channel to be used during the transition to digital television, conditioned upon
the surrender of one of the channels at the end of the digital television
transition period. We have commenced construction of digital facilities for each
of its stations. We have also preserved our ability to maximize the DTV
facilities for each of our stations, and we will file maximization applications
by the FCC's May 1, 2000 deadline.
The digital television implementing rules permit broadcasters to use their
assigned digital spectrum to provide a variety of ancillary or supplemental
services including, for example, data transfer, subscription video, interactive
materials, and audio signals, subject to the requirement that they continue to
provide at least one free, over-the-air television service. The FCC has
established May 1, 2002 as the deadline for initiation of digital television
service for all television stations and 2006 as the date that television
broadcasters must return their analog license to the FCC unless specified
conditions exist, that in effect limit the public's access to digital television
in a particular market. These dates are subject to biennial reviews that will
evaluate the progress of the DTV transition, including the rate of consumer
acceptance. The FCC also has adopted rules that require broadcasters to pay a
fee of 5% of gross revenues received from ancillary or supplementary uses of the
digital spectrum for which they receive subscription fees or compensation other
than advertising revenues derived from free over-the-air broadcasting services.
Equipment and other costs associated with the digital television
transition, including the necessity of temporary dual-mode operations, will
impose some near-term financial costs on television stations providing the
services. The potential also exists for new sources of revenue to be derived
from digital television. We cannot predict the overall effect the transition to
digital television might have on our business.
SATELLITE HOME VIEWER IMPROVEMENT ACT
The Satellite Home Viewer Improvement Act ("SHVIA") enables satellite
carriers to provide more television programming to subscribers. Specifically,
SHVIA: (1) provides a statutory copyright license to enable satellite carriers
to retransmit a local television broadcast station into the station's local
market (i.e., provide "local-into-local" service); (2) permits the continued
importation of distant network signals (i.e., network signals that originate
outside of a satellite subscriber's local television market or DMA) for certain
existing subscribers; (3) provides broadcast stations with retransmission
consent rights; and (4) mandates carriage of broadcast signals on a
"local-into-local" basis after a phase-in period. "Local markets" are defined to
include both a station's DMA and its county of license.
SHVIA requires that, with several exceptions, satellite carriers may not
retransmit the signal of a television broadcast station without the express
authority of the originating station. Such express authorization is not needed,
however, when satellite carriers retransmit a station's signal into its local
market (i.e., provide local-into-local transmissions) prior to May 28, 2000.
This retransmission can occur without the station's consent. Beginning May 29,
2000, however, a satellite carrier must obtain a station's consent before
retransmitting its signal within the local market. Additional exceptions to the
retransmission consent requirement exist for noncommercial stations, certain
superstations and broadcast stations that have asserted their must-carry rights.
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In addition, SHVIA permits satellite carriers to provide distant or
nationally broadcast programming to subscribers in "unserved" households (i.e.,
households are unserved by a particular network if they do not receive a signal
of at least Grade B intensity from a station affiliated with that network) until
December 31, 2004. However, satellite television providers can retransmit the
distant signals of no more than two stations per day for each television
network.
SHVIA also provides for mandatory carriage of all television broadcast
stations by satellite carriers, effective January 1, 2002, under certain
circumstances. Effective January 1, 2002, a satellite carrier that retransmits
one local television broadcast station into its local market under a
retransmission consent agreement, must carry upon request all television
broadcast stations in that same market. Satellite carriers are not required,
however, to carry the signal of a station that substantially duplicates the
programming of another station in the market, and are not required to carry more
than one affiliate of the same network in a given market unless the television
stations are located in different states.
In addition, SHVIA requires the FCC to commence a rulemaking proceeding
that extends the network nonduplication, syndicated exclusivity and sports
blackout rules to the satellite retransmission of nationally distributed
superstations. The FCC already has initiated several rulemaking proceedings, as
required by SHVIA, to implement certain aspects of this Act.
CHILDREN'S TELEVISION ACT
The FCC's rules limit the amount of commercial matter that may be
broadcast during programming designed for children 12 years of age and younger
to 12 minutes per hour on weekdays and 10.5 minutes per hour on weekends.
Violations of the children's commercial limitations may result in monetary fines
or non-renewal of a station's broadcast license. FCC rules further require
television stations to serve the educational and informational needs of children
16 years old and younger through the stations' own programming as well as
through other means. The FCC has guidelines for processing television station
renewals under which stations are found to have complied with the children's
programming requirements if they broadcast three hours per week of "core"
children's educational programming, which among other things, must have as a
significant purpose serving the educational and informational needs of children
16 years of age and younger. A television station that the FCC finds not to have
complied with the "core" programming processing guideline could face sanctions,
including monetary fines and the possible non-renewal of its broadcasting
license, if it has not demonstrated compliance with the children's programming
requirements in other ways. The FCC has indicated its intent to strictly enforce
its children's television rules. Television broadcasters must file periodic
reports with the FCC to document their compliance with foregoing obligations.
PROPOSED REGULATIONS AND LEGISLATION
In 1995, the FCC issued notices of proposed rulemaking proposing to modify
or eliminate most of its remaining rules governing the broadcast
network-affiliate relationship. The network-affiliate rules were originally
intended to limit networks' ability to control programming aired by affiliates
or to set station advertising rates and to reduce barriers to entry by networks.
The dual network rule, which generally prevents a single entity from owning more
than one broadcast television network, is among the rules under consideration in
these proceedings. Although the Telecommunications Act substantially relaxed the
dual network rule by providing that an entity may own more than one television
network, none of the four major national television networks may merge with each
other or acquire certain other networks in existence on February 8, 1996. We
cannot predict how or when the FCC proceeding will be resolved or how those
proceedings or the relaxation of the dual network rule may affect our business.
LOW POWER TELEVISION
Low power television ("LPTV") stations are regarded by the FCC as having
secondary status to full power television stations and are subject to being
displaced by changes in full power stations resulting from digital television
allotments. On November 29, 1999, Congress enacted the Community Broadcasters
Protection Act, which created a new "Class A" low power television station.
Class A LPTV stations are entitled to protection from future displacement by
full-power television stations under certain circumstances. The FCC has
initiated rulemaking proceedings to adopt rules governing the extent of
interference protection that must be afforded to Class A stations and the
eligibility criteria for these stations. Certain of our stations are low power
television stations, and we have already requested Class A status for these
stations. We cannot predict how the establishment of this new Class A status
will impact our operations.
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In addition, the U.S. Congress and the FCC have under consideration, and
in the future may consider and adopt new laws, regulation and policies regarding
a wide variety of matters that could affect, directly or indirectly, the
operation, ownership and profitability of our broadcast stations. Any such
changes could result in the loss of audience share and advertising revenues for
such station, and affect our ability to acquire additional broadcast stations or
finance such acquisitions. In addition to the issues noted above, such changes
may include:
o spectrum use fees;
o political advertising rates;
o potential restrictions on the advertising of certain products
(beer, wine and hard liquor);
o further revisions in the FCC's cross-interest, multiple ownership
and attribution policies;
o foreign ownership of broadcast licenses;
o technical and frequency allocation matters; and
o DTV tower siting issues.
The FCC also has initiated a notice of inquiry to examine whether additional
public interest obligations should be imposed on DTV licensees. We cannot
predict the resolution of these issues or other issues discussed above, although
their outcome could, over a period of time, affect, either adversely or
favorably, the broadcasting industry generally or us specifically.
The foregoing summary of FCC and other governmental regulations is not
intended to be comprehensive. For further information concerning the nature and
extent of federal regulation of broadcast stations, you should refer to the
Communications Act, the Telecommunications Act, other Congressional acts, FCC
rules and the public notices and rulings of the FCC.
FACILITIES
We own our principal offices of approximately 40,000 square feet located
at 6125 Airport Freeway, Suite 200, Fort Worth, Texas 76117. We use this space
for our general office and administrative purposes, as well as for programming
services, including our earth station and uplink facility, warehouse needs and
full-time production studio. We broadcast our programming to our owned or
operated and affiliate stations from a satellite transponder, which can transmit
ten digital signals and which is leased pursuant to an agreement that expires in
2006. We believe that this space is adequate for our current and future needs.
EMPLOYEES
As of December 31, 1999, we had 56 full time employees. Our employees are
not represented by any collective bargaining organization, and we have never
experienced a work stoppage. We believe that our relations with our employees
are satisfactory.
ITEM 2. PROPERTIES
A description of the Registrant's properties is included in Item 1,
Business, and is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS AND ADMINISTRATIVE MATTERS
Currently, we are a party to the following actions:
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1. In American Independent Network, Inc. v. Knapp Petersen and Clarke, No.
4-99CV-0124P, U.S. District Court, Northern District of Texas, Ft.
Worth Division, we sued for damages claiming a breach of fiduciary
duties and the law firm filed a counterclaim seeking fees for legal
services. This case was transferred to the Southern District of
California. This matter is subject to a binding arbitration agreement.
2. In American Independent Network, Inc. v. John Priscella, et al., Civil
Action No. 4:99-CV-850-Y, U.S. District Court, Northern District of
Texas, Fort Worth Division, we sued John Priscella, Data West and
others for the recovery of (1) 680,000 shares of common stock issued to
Data West and John Priscella in connection with financing that was
never provided, (2) certain personal property and (3) other damages.
We have recovered all 680,000 shares of common stock, which we
subsequently cancelled, and certain personal property, however, we
intend to pursue our claims against Data West and John Priscella to
recover our remaining property and damages.
In addition, in March 2000, Telemundo sought a temporary restraining order
against us and Marco Camacho to prevent us from hiring any of their Houston
station employees. We were able to reach a mutually agreeable settlement with
Telemundo, pursuant to which we agreed to refrain from hiring any additional
Telemundo employees from their Houston station for period of six months.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On November 19, 1999, we held an Annual Meeting of stockholders for
our stockholders of record as of October 12, 1999.
(b) At the Annual Meeting, our stockholders elected four directors,
James Ryffel, P. Alan Luckett, Bob J. Bryant and Douglas Miller.
(c) On October 12, 1999, there were 19,007,466 shares of common stock
outstanding. Below is a listing of each matter on which our stockholders had the
opportunity to vote at the Annual Meeting, including the number of votes cast
with respect to each item:
o the election of four (4) directors, James Ryffel, P. Alan
Luckett, Bob J. Bryant and Douglas Miller to serve a term of one
year;
DIRECTOR FOR AGAINST ABSTENTIONS
-------- --- ------- -----------
James Ryffel 16,546,567 0 86,061
P. Alan Luckett 16,546,613 0 86,015
Bob J. Bryant 16,548,165 0 84,463
Douglas K. Miller 16,546,567 0 86,061
o the amendment of our Certificate of Incorporation (1) to authorize a
total of 200,000,000 shares of common stock, (2) to authorize
20,000,000 shares of preferred stock and (3) to reset the par value
of preferred stock;
FOR AGAINST ABSTENTIONS
--- ------- -----------
15,934,489 109,246 9,257
o the ratification of our Board's decision to merge with Hispano
Television Ventures, Inc. and the Agreement and Plan of Merger
between American Independent Network, Inc. and Hispano Television
Ventures, Inc., dated as of October 15, 1999;
FOR AGAINST ABSTENTIONS
--- ------- -----------
15,967,356 85,047 589
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o the amendment of our Certificate of Incorporation to change our
name to "Hispanic Television Network, Inc." in connection with
our merger;
FOR AGAINST ABSTENTIONS
--- ------- -----------
16,540,362 86,631 5,635
o the ratification of the selection of Jack F. Burke, Jr. as our
independent auditor for the fiscal year ending December 31, 1999;
and
FOR AGAINST ABSTENTIONS
--- ------- -----------
16,543,262 80,812 8,554
o the amendment of our Bylaws to authorize our Board of Directors
to amend the Bylaws.
FOR AGAINST ABSTENTIONS
--- ------- -----------
15,934,616 111,160 7,216
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common stock has been traded on the Over the Counter Bulletin Board of
the Nasdaq Stock Market, under the symbol "HTVN" (formerly "AINW").
No trades were reported prior to October 18, 1998. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.
PRICE RANGE OF STOCK
--------------------
HIGH BID LOW BID
-------- -------
1998 FISCAL YEAR
Fourth Quarter (from October 18).. $ 1.00 $0.13
1999 FISCAL YEAR
First Quarter..................... $ 2.13 $0.63
Second Quarter.................... $ 2.13 $0.31
Third Quarter..................... $ 0.94 $0.13
Fourth Quarter.................... $ 4.31 $0.16
2000 FISCAL YEAR
First Quarter..................... $21.00 $4.00
Second Quarter (through April 20). $14.25 $9.00
On April 20, 2000, the closing bid price of our common stock reported on
Nasdaq's Over the Counter Bulletin Board was $10.88 per share. As of April 20,
2000, there were approximately 925 stockholders of record of our common stock.
We have never paid cash dividends on our common stock and our board of
directors does not anticipate paying cash dividends in the foreseeable future.
We currently intend to retain future earnings to finance the growth of our
business. Therefore, it is unlikely that you will receive any funds from your
investment in our common stock without selling your shares. We cannot assure you
that you will receive a gain on your investment when you sell your shares or
that you will not lose the entire amount of your investment.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BACKGROUND
On December 14, 1999, American Independent Network, or AIN, merged with
Hispano Television Ventures, Inc., a producer of Spanish-language programming,
and was renamed Hispanic Television Network, Inc. Originally formed on December
11, 1992, AIN has historically operated as a general market, family-oriented
television network providing programming and other services. We currently
operate two networks, AIN, which has over 35 affiliates, and HTVN, which owns or
operates 16 television stations in 13 markets of which 12 stations are currently
broadcasting HTVN programming in 9 markets, including 2 that are in the top ten
markets ranked by DMA. We intend, whether through the acquisition of or
affiliation with stations, to acquire a presence in certain of the top 20
markets ranked by Hispanic population in order to reach approximately 75% of the
Hispanic population. The purpose of the merger was to position the company to
become a major Hispanic media company.
We are targeting the Mexican Hispanic market because we believe that it
presents vast marketing opportunities and that it is currently under-served by
our competition. With few competitors in this rapidly growing market, we feel
that there are unlimited opportunities to provide a quality broadcasting service
to a Hispanic population that is experiencing an explosive growth rate.
Our financial results depend on a number of factors, including the
strength of the national economy and the local economies served by our stations,
total advertising dollars dedicated to the markets served by our stations,
advertising dollars dedicated to the Hispanic consumers in the markets served by
our stations, our stations' audience ratings, our ability to provide interesting
programming, local market competition from other television stations and other
media, and government regulations and policies.
As is common in other media companies, our performance is measured by our
ability to generate broadcast cash flow, EBITDA and after-tax cash flow.
Broadcast cash flow consists of operating income before depreciation,
amortization and corporate expenses. EBITDA consists of earnings before
extraordinary items, net interest expense, income taxes, depreciation,
amortization, and other income and expenses. After-tax cash flow consists of
income before income tax benefit (expense) and extraordinary items, minus the
current income tax provision, plus depreciation and amortization expense.
Although broadcast cash flow, EBITDA and after-tax cash flow are not measures of
performance calculated in accordance with generally acceptable accounting
principals, we feel that broadcast cash flow, EBITDA and after-tax cash flow are
useful in evaluating us because these measures are acceptable by the
broadcasting industry as generally recognized measures of performance and are
used by securities industry analysts who publish reports on the performance of
broadcasting companies. Broadcast cash flow, EBITDA and after-tax cash flow are
not intended to be substitutes for operating income as determined in accordance
with generally acceptable accounting principles, or alternatives to cash flow
from operating activities (as a measure of liquidity) or net income.
For accounting purposes, the merger was treated as a reverse acquisition
of the Company by Hispanic Television Network, Inc. The following discussion
reflects the material operations of Hispano Television Ventures, Inc. from its
inception in February 1998 to December 31, 1999 and the historical operation of
AIN as the Company's predecessor for the year ended December 31, 1998 and for
the period January 1, 1999 to September 2, 1999, the date on which Hispano
Television Ventures, Inc. initially acquired a controlling interest in AIN.
Results of AIN from September 2, 1999 until December 31, 1999 are included in
the consolidated statement of operations of the Company for the year ended
December 31, 1999.
REVENUES
Our primary source of revenue is the sale of advertising on our networks
to national advertisers and on our television stations to local and national
advertisers. Our revenues are affected primarily by the advertising rates that
we are able to charge on our networks and that our television stations are able
to charge as well as the overall demand for Hispanic television advertising
time. Advertising rates are determined primarily by:
o the markets covered by our networks,
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o the number of competing Hispanic television stations in the same
market as our stations,
o the television audience share in the demographic groups targeted
by advertisers, and
o the supply and demand for Hispanic advertising time.
Seasonal fluctuations are also common to the broadcast industry and are due
primarily to fluctuations in advertising expenditures by national and local
advertisers. The first calendar quarter typically produces the lowest broadcast
revenues for the year because of the normal post-holiday decreases in
advertising
Historically, our network advertising has been sold targeting direct
response and per inquiry advertisers. Going forward, we will deploy a network
advertising team consisting of account executives that will solicit advertising
directly from national advertisers as well as soliciting advertising from
national advertising agencies. Each of our stations will also have account
executives that will solicit local and national advertising directly from
advertisers and from advertising agencies.
We market our advertising time on our HTVN and AIN networks to:
o ADVERTISING AGENCIES AND INDEPENDENT ADVERTISERS. We sell
commercial time to advertising agencies and independent
advertisers. The monetary value of this time is based upon the
estimated size of the viewing audience; the larger the audience,
the more we are able to charge for the advertising time. To
measure the size of a viewing audience networks and stations
generally subscribe to nationally recognized rating services,
such as Nielsen. Currently, a number of AIN's affiliate stations
are located in the smaller market areas of the country. Our goal
is to enter into affiliate agreements with stations located in
the top demographic market areas for both AIN and HTVN, in order
to obtain Nielsen ratings that justify charging higher rates for
our advertising time.
o AFFILIATE STATIONS. In exchange for providing programming and
advertising time to our affiliate stations, we retain advertising
time and gain access to the affiliate stations' markets. In a
traditional broadcasting contract, an affiliate station would
retain all available advertising time, which it would then sell
to outside advertisers, and the network would receive a fee from
the affiliate station. However, we believe that by selling
retained commercial time to outside advertisers, we are able to
generate higher revenues than we would otherwise receive in fees
from our affiliate stations. Advertising time is generally a
component of the programming contract with affiliate stations. As
a result, we are not required to separately market the
advertising time to our affiliate stations.
o PROGRAM OWNERS: In exchange for licensing rights to select
programming, we give the program owner advertising time during the
broadcast of such programming. The program owner is then able to
sell the advertising time to outside parties. We generally contract
with program owners at the National Association of Television
Program Executives convention and accordingly, are not required to
actively market this segment of our advertising time.
Furthermore, election year advertising is expected to be comprehensive
with coverage targeting broad demographic groups. We believe that this increase
in political advertising expenditures will provide both HTVN and AIN with a
significant opportunity to increase its advertising revenues for 2000.
EXPENSES
Our most significant expenses are employee compensation, rating services,
advertising and promotional expenses, engineering and transmission expenses and
production and programming expenses. In some cases, we are required to incur
upfront programming expenses when procuring exclusive programming usages and
licenses. In most all cases associated with upfront programming payments, the
upfront payments will be amortized over the applicable contract term.
Historically, significant exclusive programming usages and licenses have not
been procured. We will maintain tight controls over our operating expenses by
centralizing our master control, network programming, finance, human resources
and management information system functions. Depreciation of fixed assets and
amortization of costs associated with the acquisition of additional stations are
also significant elements in determining our total expense level.
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As a result of attracting key officers and personnel to HTVN, we have
offered stock options as an alternate form of compensation. In the event that
the strike price of the stock option is less than the fair market value of the
stock on the date of grant, any difference will be amortized as compensation
expense over the vesting period of the stock options.
Our monthly operating expense level will vary from month to month due
primarily to the timing of significant advertising and promotion expenses. We
will incur significant advertising and promotion expenses associated with the
ramp up of HTVN and with the establishment of our presence in new markets
associated with our new station acquisitions. Increased advertising revenue
associated with these advertising and promotional expenses typically lag behind
the incurrence of these expenses.
ADVERTISING
The majority of all revenues generated come from the sale of network,
national spot and local spot advertising on our owned and operated stations.
NETWORK ADVERTISING. All owned and operated stations as well as affiliates
have a percentage of available commercial time dedicated for "network" sales.
The commercials sold on the network are broadcast simultaneously in all markets
that we serve.
NATIONAL SPOT ADVERTISING. National advertisers have the opportunity to
buy "spot" advertising in specific markets. For example, an advertising agency
in New York would use spot advertising to purchase commercials in San Antonio
and Oklahoma City.
LOCAL SPOT ADVERTISING. Advertising agencies and businesses located in a
market will buy commercial air time in their respective market. This commercial
time is sold in the market by a local sales force. Local spot advertising also
includes event marketing. In conjunction with a spot buy the station
incorporates events that may be held on the premise of a business or advertiser
for the purpose of driving traffic to that place of business.
Our in-house sales department will generate our Network and National spot
advertising sales. They will be located in all major markets that have a large
concentration of advertising agencies targeting the Hispanic market. The sales
of our local spot advertising will be generated by the local sales staff
established at each of our television stations.
RESULTS OF OPERATIONS
HISPANIC TELEVISION NETWORK, INC. - HISTORICAL RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Revenues. Revenues are primarily derived from our programming services,
sales of advertising and programming time, and leasing of digital satellite
channels. Revenues for fiscal 1999 were $278,186 compared to $1,997 for fiscal
1998, an increase of $276,189. The increase in revenues is primarily the result
of the impact of the September 2, 1999 merger with AIN, which resulted in the
inclusion of four months of AIN revenues (September 3, 1999 - December 31,
1999).
Cost of Operations. Costs of operations were $3,565,863 for the 1999
fiscal year and $105,923 for the 1998 fiscal year. The increase in 1999 is
primarily due to the impact of the September 2, 1999 merger with AIN, which
resulted in the inclusion of four months of AIN expenses (September 3, 1999 -
December 31, 1999). Cost of operations has significantly increased over prior
year as a result of rapid expansion and positioning of our networks.
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General and Administrative. General and administrative expenses for the
fiscal year ended December 31, 1999 were $2,943,782. There were no significant
general and administrative expenses for fiscal year 1998. 1999 general and
administrative expenses are comprised primarily of salaries & wages ($862,000),
bank loan securitization ($495,000), professional fees ($343,000), taxes, rent
and office related expenses.
Interest expense for the fiscal year 1999 was $39,443. There was no
interest expense for fiscal year 1998. The 1999 interest expense is a result of
convertible debt issued in connection with the September 2, 1999 merger with
AIN.
Operating Results. We had a net operating loss of $3,333,393 for fiscal
year ended December 31, 1999 compared to a net operating loss of $103,926 for
the fiscal year ended December 31, 1998. The increased loss for 1999 was
primarily attributed to general and administrative expenses, satellite and
building rent, depreciation and amortization resulting from the ramp up in
operations and the impact of the September 2, 1999 merger with AIN.
Earnings Per Share of Common Stock. The net losses per common share are
based upon the weighted average of outstanding common stock. In 1999, the net
loss per share of common stock was $0.05. The loss is reflective of the increase
in cost of operations. For fiscal 1998, net loss per share of common stock was
$0.01.
AMERICAN INDEPENDENT NETWORK, INC. - HISTORICAL RESULTS OF OPERATIONS
PERIOD ENDED SEPTEMBER 2, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31,
1998
Revenues. Revenues are primarily derived from our programming services,
sales of advertising and programming time, and leasing of digital satellite
channels. Revenues for fiscal 1999 were $93,376 compared to $377,380 for fiscal
1998, a decrease of $284,004. The decrease in revenues is primarily the result
of the impact of the September 2, 1999 merger with Hispano Television Ventures,
Inc., which resulted in the exclusion of four months of AIN revenues (September
3, 1999 - December 31, 1999). These four months (September 3, 1999 - December
31, 1999) have been included in HTVN's 1999 financials.
Cost of Operations. Costs of operations were $4,948,346 for the 1999
fiscal year and $2,914,474 for the 1998 fiscal year. The increase in 1999 was
due to an increase in general and administrative expenses offset by the impact
of the September 2, 1999 merger with Hispano Television Ventures, Inc., which
resulted in the exclusion of four months of AIN expenses (September 3, 1999 -
December 31, 1999).
General and Administrative. General and administrative expenses for the
period ended September 2, 1999 were $4,032,889 compared to $557,367 for fiscal
year 1998, an increase of $3,475,522. The majority of these expenses pertain to
the issuance of stock for services rendered at a time when the company had
insufficient capital to fund such expenses. Our general and administrative
expenses consist primarily of legal expenses, consulting and professional fees,
payroll and wages, taxes and general office costs.
Interest expense for the period ended September 2, 1999 was $4,731,212 and
for fiscal year 1998 was $314,275, an increase of $4,416,937. This increase
pertains the settlement of outstanding debt for stock where the fair market
value of stock issued for debt exceeded the book value of the debt. Excess fair
market value of the stock issued over the book value of the debt has been
recorded as interest expense.
Operating Results. We had a net operating loss of $9,552,207 for the
period ended September 2, 1999 compared to the net operating loss of $2,221,343
for the fiscal year ended December 31, 1998. The loss for 1999 was primarily
attributed to services and interest expense related to the issuance of common
stock for services and the issuance of stock for the conversion and extension of
debt and bridge loans.
Earnings Per Share of Common Stock. The net earnings per common share are
based upon the weighted average of outstanding common stock. In 1999, the net
loss per share of common stock was $1.60. The loss is reflective of the increase
in operating expenses from the conversion of services and debt for stock. For
fiscal 1998, net loss per share of common stock was $0.60.
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LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations through a combination of the issuance of
equity securities to private investors, issuance of private debt, loans from
affiliates, and cash flow from operations. We have had cumulative losses of
$3,437,319 from inception through December 31, 1999.
Current liabilities at December 31, 1999 were $3,801,838, which exceeds
current assets of $239,644 by $3,562,194. December 31, 1999 current liabilities
have been reduced by approximately $1.7 million and December 31, 1999 current
assets have increased by approximately $2.7 million as March 31, 2000.
Financing activities during 1999 consisted of (i) $400,000 of a
$10,000,000 private placement which commenced in December 1999 (balance received
in 2000) consisting of units of 10,000 shares of common stock and warrants to
purchase 10,000 shares of common stock at $2.00 per share and (ii) a Line of
Credit for $500,000 with Bank One. Our financing activities for 1998 consisted
of private and related party debt in the aggregate of $740,396. These loans were
used primarily for the repayment of debt and working capital needs. In addition,
we have repaid $283,501 during fiscal 2000 of the $817,994 total bridge notes
outstanding as of December 31, 1999 and $1,008,659 during fiscal 2000 of the
$1,642,695 accounts payable outstanding (includes $500,000 Line of Credit) as of
December 31, 1999 with proceeds from our December 1999 private placement.
Our continued growth will require additional funds that may come from a
variety of sources, including equity issuances, capital lease financings and
bank borrowings. We currently intend to use any funds raised through these
sources to fund various aspects of our continued growth, including to acquire
new stations, to perform digital upgrades of acquired stations, to fund key
programming acquisitions, to perform station capital upgrades, to secure cable
connections, to fund master control / network equipment upgrades, to make
strategic investments and to fund our working capital needs.
We had net losses of $103,926 in 1998 and $3,333,393 in 1999. We expect
these losses to continue as we incur significant capital expenditures and
operating expenses to acquire new television stations and convert them to a
Hispanic format. We currently anticipate that our revenues as well as cash from
financings will be sufficient to satisfy operating expenses by the end of 2000.
We may need to raise additional funds, however. If adequate funds are not
available on acceptable terms, our business, results of operations and financial
condition could be materially adversely affected.
IMPACT OF INFLATION
Management does not believe that general inflation has had or will have a
material effect on operations.
TRANSACTIONS IN 2000
On January 10, 2000, we completed funding of the initial payment of $1.5
million to Carlos Ortiz in connection with the Purchase Agreement, dated
December 15, 1999, pursuant to which we agreed to purchase 10 television
stations in Texas, New Mexico, Oklahoma, and Arizona for an aggregate of $10.0
million from Carlos Ortiz. The purchase price was comprised of $7.0 million in
cash and $3.0 million in shares of our common stock, which equals 695,652 shares
based on our common stock's closing price on December 31, 1999. Currently, we
are operating all of these stations under a local marketing agreement whereby we
control all programming, receive all revenues from and pay all expenses
associated with each of these stations pending the closing of this transaction,
which we have the right to schedule at any time during the two years following
the execution of the purchase agreement. We currently anticipate that we will
close this transaction during calendar 2000. The cost of this acquisition will
be depreciated over the life of the assets.
On March 24, 2000, we entered into a strategic partnership with
Cubico.com, Inc., a Latin-based Internet portal, which gives us a 48% ownership
interest in the operations of Cubico and provides us with joint marketing
opportunities whereby Cubico will maintain HTVN's logo on Cubico's home page
with a "hyperlink" button which will link users to our Hispanic programming
through video streaming. For this, HTVN will give Cubico a minority interest in
ten of HTVN's television stations, $100.0 million of advertising on HTVN's
networks (over a three year period), 5,000,000 shares of HTVN at $1.00 per
share, use of HTVN's sales force to sell advertising for Cubico, sponsorship of
educational programs explaining different aspects of Internet use and HTVN will
maintain Cubico's logo on our Internet home page. Our ownership interest in
Cubico will be accounted for using the equity method of accounting.
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ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Financial Statement Schedule filed as a part
of this Annual Report on Form 10-KSB are listed on the Index to Consolidated
Financial Statements and Consolidated Financial Statement Schedule on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Although there were no changes during fiscal 1999, on March 8, 2000 we
dismissed Jack F. Burke, Jr. as our independent auditor. Also on March 8,
2000, we retained Ernst & Young LLP as our new independent auditor.
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company as of March 9, 2000
are as follows:
NAME AGE POSITION
Jim Ryffel.............. 40 Chairman of the Board
Marco Camacho........... 40 Chief Executive Officer and
Director
P. Alan Luckett......... 43 Chief Operating Officer, President
and Director
Franklin Byrd........... 35 Chief Financial Officer
Bob J. Bryant........... 60 Director
Douglas K. Miller....... 39 Director
JAMES A. RYFFEL. Mr. Ryffel serves as our Chairman of the Board, a
position he has held since December 1999. Mr. Ryffel is also the President of
Woodcrest Enterprises, Inc., a real estate firm, since 1983. Mr. Ryffel was a
founding investor and former director of Flashnet Communications, Inc. and a
founding investor in Data Tailor Corporation. Mr. Ryffel currently serves as
a director on the board of directors of the Worth National Bank in Lake
Worth, Texas. Mr. Ryffel holds a B.B.A. Degree, 1981, and an M.B.A Degree,
1984, from Texas Christian University. Since April 2000, Mr. Ryffel has
served as a trustee of Texas Christian University.
MARCO CAMACHO. Mr. Camacho serves as our Chief Executive Officer and a
director, positions he has held since February 2000. From July 1998 to
February 2000, Mr. Camacho was the Vice President and General Manager with
Telemundo Station Group, Inc., a Spanish-language television network. From
May 1997 to July 1998, Mr. Camacho was the Vice President-Strategic Planning
for Metro Networks Communications, Inc., which produced television and radio
news and traffic reports. Mr. Camacho was the Vice President and General
Manager with El Dorado Communications, Inc., a radio broadcasting company,
from August 1995 to May 1997. Prior to August 1995, Mr. Camacho was the Sales
Manager with the radio broadcasting division of CBS, Inc. from March 1989 to
July 1995.
P. ALAN LUCKETT. Mr. Luckett serves as a director, as well as our Chief
Operating Officer, since February 2000, and President, since November 1999.
From November 1999 to February 2000, Mr. Luckett also served as our Chief
Executive Officer. Prior to November 1999 and from November 1993, Mr. Luckett
was President of Hispano Television Ventures, Inc., the firm with which we
merged in December 1999. From 1988 to 1993, Mr. Luckett was the Chief
Financial Officer of Rural Health Associates. From 1988 to present, Mr.
Luckett also served as a consultant in the health care industry. In 1989, Mr.
Luckett founded Phymed, the first non-doctor/non-hospital-owned diagnostic
imaging center in Dallas, and served as its Chief Financial Officer until
1993. In 1998, Mr. Luckett founded HTV and was also a director. Mr. Luckett
holds a B.B.A. Degree, 1979, from the University of Texas, Austin.
FRANKLIN BYRD. Mr. Byrd joined as our Chief Financial Officer in March
2000. From October 1997 to March 2000, Mr. Byrd was the Vice President of
Finance with AMFM, Inc., formerly known as Chancellor Media Corp., a national
radio broadcasting company. Prior to October 1997 and from January 1996, Mr.
Byrd served as the Director of Finance at Disney, Inc. with the ABC Radio
Networks, Inc., a radio broadcasting company. From May 1991 to January 1996,
Mr. Byrd held a variety of positions with Duke Energy Corp., a natural gas
and energy company, including Manager of Strategic Planning, Financial
Planner, and Financial Analyst. Mr. Byrd holds a B.B.A. degree, 1987, in
Finance from Texas A&M University, a B.B.A. Degree, 1988, in Accounting from
Texas A&M University and an M.B.A. Degree, 1995, from Houston Baptist
University. Mr. Byrd is also a C.P.A.
BOB J. BRYANT. Mr. Bryant, a director since December 1999, is the
founder and is the current President of Bryant Financial Services, the latter
position he has held since 1983. Prior to 1983, Mr. Bryant was the President
of Texas Commerce Medical Bank in Houston, and Texas Commerce in Ft. Worth.
Mr. Bryant holds a B.B.A. Degree, 1963, from Texas Tech University. For more
than 17 years, Mr. Bryant has been a trustee of Texas Wesleyan University.
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DOUGLAS K. MILLER. Mr. Miller is a director and from December 1999 to
March 2000 he served as our interim Chief Financial Officer. From October
1992 to March 1999, Mr. Miller was a loan officer and an asset manager with
G. E. Capital. Concurrently, since April 1999, Mr. Miller has been a Manager
with Woodcrest Capital, L.L.C. a real estate firm. From 1984 to 1992, Mr.
Miller was a controller for various real estate firms. Mr. Miller holds a
B.B.A. Degree, 1982, from Baylor University. Mr. Miller is also a licensed
C.P.A.
MEETINGS OF BOARD OF DIRECTORS
The Board of Directors held 1 meeting and 13 meetings by written consent
during 1999. All directors attended the Board of Directors meeting and executed
the written consents.
COMPENSATION OF DIRECTORS
The Company does not pay any cash compensation for attendance at directors
meetings or participation in directors' functions.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE
During the year ending December 31, 1999, we did not have a formal Audit
Committee of the Board of Directors. On January 18, 2000, however, our Board
approved an Audit Committee Charter. Although we have not yet appointed
directors to this committee, the audit committee will make recommendations
concerning the engagement of independent public accountants, review with the
independent public accountants the plans and results of such audit engagement,
approve professional services provided by the independent public accountants,
review the independence of the independent public accountants, consider the
range of audit and non-audit fees and review the adequacy of our internal
accounting controls.
COMPENSATION COMMITTEE
We did not have a formal Compensation Committee during 1999. We anticipate
forming such a committee to make recommendations to the Board concerning
compensation of our executive officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer or director of HTVN serves as an executive officer,
director or member of a compensation committee of any other entity for which an
executive officer, director or member of such entity is a member of the Board or
the Compensation Committee of the Board. There are no other interlocks.
LIMITATIONS OF DIRECTORS' AND OFFICERS' LIABILITY
Section 145 of the Delaware General Corporation Law permits a corporation,
under specified circumstances, to indemnify its directors, officers, employees
or agents against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties by
reason of the fact that they were or are directors, officers, employees or
agents of the corporation, if such directors, officers, employees or agents
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
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Expenses for the defense of any action for which indemnification may be
available may be advanced by the Registrant under certain circumstances. The
general effect of the foregoing provisions may be to reduce the circumstances
which an officer or director may be required to bear the economic burden of the
foregoing liabilities and expenses. Directors and officers will be covered by
liability insurance indemnifying them against damages arising out of certain
kinds of claims which might be made against them based on their negligent acts
or omissions while acting in their capacity as such.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
POLICY REGARDING TRANSACTIONS WITH OFFICERS AND DIRECTORS
Our policy regarding any future transactions with our directors, officers,
employees or affiliates is that such transactions be approved in advance by a
majority of our Board, including a majority of the disinterested members of the
Board, and be on terms no less favorable to us than we could obtain from
non-affiliated parties.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Our executive officers and directors and beneficial owners of more than
10% of our common stock are required under Section 16(a) of the Exchange Act to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Copies of those reports must also be furnished to us. Based
solely on a review of the copies of reports furnished to us, and written
representations from certain reporting persons that no other reports were
required, we believe that during 1999 no person who was a director, executive
officer or beneficial owner of more than 10% of our common stock failed to file
on a timely basis all reports required by Section 16(a).
ITEM 10. EXECUTIVE COMPENSATION
The following table provides information about our Chief Executive Officer
and each of our executive officers who received salary and bonus in the year
ended December 31, 1999, that exceeded $100,000, these persons being
collectively referred to as "named executive officers."
<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- --------------------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Dr. Donald W. Shelton 1999 $ 935.00 -- -- --
Chief Executive Officer
(Jan. - March)
Kris Lamans 1999 $4,000.00 -- -- --
Chief Executive Officer
(March - July)
Walter Morgan 1999 $9,000.00 -- -- --
Chief Executive Officer
(July - Nov.)
P. Alan Luckett 1999 $5,000.00 -- -- --
Chief Executive Officer and
President
(Nov. - Dec.)
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
We did not grant any options to our named executive officers during fiscal
year 1999.
28
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
During fiscal year 1999, no options were exercised.
EMPLOYMENT AND NONCOMPETITION AGREEMENTS WITH EXECUTIVE OFFICERS
On May 28, 1999, Hispano Television Ventures entered into a full-time
exclusive employment agreement with Mr. Luckett, our President and Chief
Operating Officer. This agreement expires on May 28, 2004, subject to our
ability to extend the agreement in one-year periods. If we extend the agreement,
either party can terminate with 60 days notice. Currently, this agreement
provides for a base annual salary of $60,000, and performance bonuses of $3,000
to $15,000 per quarter if the company sustains certain minimum revenue and
profit levels for three consecutive months. Mr. Luckett is also entitled to
receive two to three months of his base salary upon his disability, death, or
termination without cause.
Although we have not entered into an employment agreement with Mr.
Camacho, we agreed to do certain things in connection with his termination. We
have agreed, in the event that we terminate Mr. Camacho without cause, to pay
Mr. Camacho an amount equal to one year's salary.
Additionally, Hispano Television Ventures entered into a consulting
arrangement with Woodcrest Capital, L.L.C., which is owned by our Chairman of
the Board, Mr. Ryffel, and a director, Mr. Miller. Pursuant to the terms of this
May 28, 1999 agreement, Woodcrest agreed to provide the company with business
consulting services for a period of one year. Unless either party elects to
terminate this arrangement, the agreement will automatically renew for another
one year term. In exchange for services rendered prior to the date of the
agreement, Woodcrest received 1,066,667 shares of common stock. Woodcrest is
also entitled to receive reimbursement for all of its expenses and additional
shares of common stock if we issue stock or issue options or warrants to
purchase common stock for a price less than $0.09375 per share.
In connection with the termination of Victor Mantecon as Hispano
Television Ventures' President of Network Operations on July 31, 1999, the
company agreed to issue to Mr. Mantecon $35,000 worth of common stock upon a
public offering of common stock. The number of shares to be issued would equal
$35,000 divided by the public offering price. On November 3, 1999, we paid
$4,000.00 to Mr. Mantecon in complete satisfaction of this obligation.
29
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of April 20, 2000, we had 88,006,427 shares of common stock
outstanding. The following table sets forth information concerning beneficial
ownership of shares of our common stock as of April 20, 2000:
o each person (or group within the meaning of Section 13(d)(3) of the
Exchange Act) known to us to own more than 5% of our outstanding
common stock;
o each director;
o each executive officer; and
o all directors and executive officers as a group.
Except as otherwise noted, the named beneficial holder has sole voting and
investment power. The address for all officers and directors is 6125 Airport
Freeway, Suite 200, fort Worth, Texas, 76117.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)
----------------------
NUMBER PERCENT
------ -------
Woodcrest Capital, L.L.C. (2)... 12,728,712 14.5%
Donald B. Sallee (3)............ 4,578,823 5.2%
James A. Ryffel (4)............. 23,922,712 24.0%
Marco Camacho (5)............... 100,000 *
P. Alan Luckett ................ 13,646,715 15.5%
Franklin Byrd (6)............... 10,000 *
Bob J. Bryant .................. 5,085,750 5.8%
Douglas K. Miller (7)........... 13,778,713 13.7%
All officers and directors as a
group (6 persons) (8)........ 56,993,889 49.9%
- ------------------
* Less than 1%
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security, or the sole or
shared investment power with respect to a security (i.e., the power to
dispose of, or to direct the disposition of, a security) and includes the
ownership of a security through corporate, partnership, or trust entities.
In addition, for purposes of this table, a person is deemed, as of any
date, to have "beneficial ownership" of any security that such person has
the right to acquire within 60 days after such date.
(2) Woodcrest Capital L.L.C. is owned by Mr. Ryffel (75%) and Mr. Miller
(25%). Woodcrest Capital L.L.C.'s address is 3113 S. University Drive,
6th Floor, Fort Worth, Texas 76019
(3) Mr. Sallee's address is 1360 Peachtree Street N.E., #100, Atlanta,
Georgia 30309.
(4) Includes 12,728,712 shares owned by Woodcrest Capital, L.L.C. of which
Mr. Ryffel owns 75% and 500,000 shares issuable upon exercise of
outstanding options.
(5) Includes 100,000 shares issuable upon exercise of outstanding options.
(6) Includes 10,000 shares issuable upon exercise of outstanding options.
(7) Includes 12,728,712 shares owned by Woodcrest Capital, L.L.C. of which
Mr. Miller owns 25%.
(8) Includes 610,000 shares issuable upon exercise of options held by
Messrs. Ryffel, Camacho and Byrd.
30
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH HISPANO TELEVISION VENTURES, INC.
In August 1999, our predecessor entered into an asset transfer agreement
with Hispano Television Ventures, Inc. whereby Hispano Television Ventures, Inc.
agreed to pay certain of our obligations totaling $82,500, and whereby we agreed
to repay this amount to Hispano Television Ventures, Inc. on or before August
20, 1999 and to give Hispano Television Ventures, Inc. eight months of free use
of the satellite uplink equipment and the satellite transponder, both of which
we lease from third parties. The asset transfer agreement provided that if we
did not perform our obligations under the agreement, that we would be obligated
to immediately transfer and assign to Hispano Television Ventures, Inc. (1) the
leases to the uplink equipment and the satellite transponder and, (2) our FCC
radio station authorization, which was granted to us in 1997 and which
authorized us to build and operate a domestic fixed transmit/receive C-band
earth station uplink system, commonly known as an earth station, on our
premises.
We failed to repay Hispano Television Ventures, Inc. sums that we owed it
under the agreement. Despite our breach of obligations under the agreement, we
have not transferred our lease and our radio station authorization to Hispano
Television Ventures, Inc. We believe that our merger with Hispano Television
Ventures, Inc. makes such a transfer moot.
On September 2, 1999, our predecessor closed a transaction whereby it
issued and sold 11,000,000 shares of our common stock to Hispano Television
Ventures, Inc. for $500,000 in cash. We believe that Hispano Television
Ventures, Inc. issued convertible debt to pay for the shares. These 11,000,000
shares were cancelled as a result of merger with Hispano Television Ventures,
Inc.
TRANSACTIONS WITH OUR OFFICERS AND DIRECTORS
Mr. P. Alan Luckett serves as our Chief Operating Officer and
President. Prior assuming these positions with us, he was a control person of
Hispano Television Ventures, Inc. As a result of a matter decided in binding
arbitration, we had been a judgment debtor in a judgment styled as Showplace
Video v. American Independent Network, Inc., No. 98-2154-E, County Court At
Law No. 5, Dallas County, Texas. In 1998, P. Alan Luckett purchased the
judgment and against and released it in exchange for 500,000 shares of common
stock in our predecessor, and for access to our digital up-link equipment,
certain bandwidth of the satellite transponder that we lease, and the right
of first refusal on our transponder rights and equipment leases in the event
that we cease operations.
In November, 1998, Bob Bryant, who is a director of our company, loaned
our predecessor $250,000 on 90 day terms at 10% interest. In June, 1999, Mr.
Luckett loaned our predecessor $150,000 at 10% interest and maturing in March
2000. On December 14, 1999, Messrs. Luckett and Bryant released us from the
$250,000 remaining balance of these debts as a result of our merger with Hispano
Television Ventures, Inc.
In connection with the termination of Victor Mantecon as Hispano
Television Ventures' President of Network Operations on July 31, 1999, the
company agreed to issue to Mr. Mantecon $35,000 worth of common stock upon a
public offering of common stock. The number of shares to be issued would equal
$35,000 divided by the public offering price. On November 3, 1999, we paid
$4,000.00 to Mr. Mantecon in complete satisfaction of this obligation.
In November 1999, we entered into a Revolving Line of Credit with Bank
One, N.A. pursuant to which we were able to borrow up to $500,000. In exchange
for Mr. Ryffel's agreement to guarantee our borrowings under the Revolving Line
of Credit, we granted him an option to purchase 500,000 shares of our common
stock at $0.20 per share. These options expire within two years from the date of
funding of the Revolving Line of Credit.
Additionally, Hispano Television Ventures entered into a consulting
arrangement with Woodcrest Capital, L.L.C., which is owned by our Chairman of
the Board, Mr. Ryffel, and a director, Mr. Miller. Pursuant to the terms of this
May 28, 1999 agreement, Woodcrest agreed to provide the company with business
consulting services for a period of one year. Unless either party elects to
terminate this arrangement, the agreement will automatically renew for another
one year term. In exchange for services rendered prior to the date of the
agreement, Woodcrest received 1,066,667 shares of common stock. Woodcrest is
also entitled to receive reimbursement for all of its expenses and additional
shares of common stock if the company issues stock or issues options or warrants
to purchase common stock for a price less than $0.09375 per share.
31
<PAGE>
On May 31, 1999, Mr. Ryffel purchased $200,000 principle amount and Mr.
Miller purchased $15,000 principle amount of Hispano Television Ventures'
convertible notes. James R. Ryffel, Mr. Ryffel's father, also purchased
$10,000 principle amount of notes.
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT NO. DESCRIPTION AND METHOD OF FILING
- ----------- --------------------------------
2.1 Merger Agreement with Hispano Television Ventures, Inc.,
dated October 15, 1999 (Incorporated by reference to Exhibit
10.1 of our Current Report on Form 8-K, dated December 30,
1999).
3.1 Certificate of Incorporation (Incorporated by reference to
Exhibit 2.1 of American Independent Network, Inc.'s General
Form for Registration of Small Business Issuers on Form 10-SB,
dated September 18, 1997), amended by a Certificate of Merger
(Incorporated by reference to Exhibit 10.3 of our Current
Report on Form 8-K, dated December 30, 1999).
3.2 Bylaws (Incorporated by reference to Exhibit 2.2 of American
Independent Network, Inc.'s General Form for Registration of
Small Business Issuers on Form 10-SB, dated September 18,
1997), with a Bylaw Amendment (Incorporated by reference to
Exhibit 3.2 of our Current Report on Form 8-K, dated December
30, 1999).
4.1* Certificate of Designation Preferences, Rights and
Limitations of Series B Preferred Stock of American
Independent Network, Inc.
10.01* Stock disbursement agreement by and between Hispano
Television Ventures, Inc., Patrick Alan Luckett, Victoria O.
Luckett and Victor Mantecon, dated June 9, 1998.
10.02* Letter Agreement & Asset Transfer Agreement, between Hispano
Television Ventures, Inc. and American Independent Network,
Inc.
10.03* Promissory Note, dated November 17, 1998, made by American
Independent Network, Inc., in favor of Bob J. Bryant.
10.04* Agreement and Bill of Sale by and between ATN Network, Inc.,
and Hispano Television Ventures, Inc., dated May 28, 1999.
10.05* Employment Agreement by and between P. Alan Luckett and
Hispano Television Ventures, Inc., dated May 28, 1999.
10.06* Consulting Agreement by and between Hispano Television
Ventures, Inc. and Woodcrest Capital, L.L.C., dated May 28,
1999.
10.07* Bill of Sale by and between Hispano Television Ventures,
Inc., P. Alan Luckett, and Victoria O. Luckett, dated May
28, 1999.
10.08* Letter agreement by and between Bob J. Bryant and Hispano
Television Ventures, Inc., dated May 28, 1999.
10.09* Stock Option Agreement, dated November 8, 1999, between
Hispanic Television Network, Inc. and James A. Ryffel.
10.10* Asset Purchase Agreement, dated December 15, 1999, between
Carlos Ortiz and Hispanic Television Network, Inc.
10.11* Agreement for Sale, dated February 14, 2000, by and between
Van Eynsbergen and Holland Partnership, and Hispanic
Television Network, Inc.
10.12* Form of Assignment and Assumption of Leases by and between
Van Eynsbergen and Holland Partnership in Texas and Hispanic
Television Network, Inc.
10.13* Agreement Establishing Strategic Relationship, dated March
16, 2000, between Cubico.com and Hispanic Television
Network, Inc.
21* Subsidiaries of the Registrant.
27* Financial Data Schedule (included in SEC-filed copy only).
*Filed herewith.
(b) REPORTS ON FORM 8-K.
During the last quarter of 1999, we filed the following Current Reports on
Form 8-K:
1. On October 15, 1999, regarding (i) a change of control resulting
from the sale of 11 million shares of our common stock to Hispano
Television Ventures, Inc. ("HTV") and (ii) the sale of use of
certain satellite uplink equipment and transponders to HTV in
exchange for HTV's repayment of certain of our outstanding
obligations; and
2. On December 30, 1999 reporting the merger of our merger with HTV
and related transactions.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HISPANIC TELEVISION NETWORK INC.
By: /S/ JAMES A. RYFFEL
-------------------------------
James A. Ryffel
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities indicated on April 21, 2000.
<TABLE>
<CAPTION>
<S> <C> <C>
By: /S/ JAMES A. RYFFEL Title: Chairman of the Date: April 21, 2000
- --------------------------- Board
James A. Ryffel
By: /S/ MARCO CAMACHO Title: Chief Executive Date: April 21, 2000
- --------------------------- Officer and
Marco Camacho Director
By: /S/ B. FRANKLIN BYRD Title: Chief Financial Date: April 21, 2000
- --------------------------- Officer
B. Franklin Byrd
By: /S/ P. ALAN LUCKETT Title: Chief Operating Date: April 21, 2000
- --------------------------- Officer,
P. Alan Luckett President and
Director
By: /S/ DOUGLAS K. MILLER Title: Director Date: April 21, 2000
- ---------------------------
Douglas K. Miller
By: /S/ BOB J. BRYANT Title: Director Date: April 21, 2000
- ---------------------------
Bob J. Bryant
</TABLE>
<PAGE>
Form 10-K Item 14(a) and (2)
HISPANIC TELEVISION NETWORK, INCORPORATED
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following financial statements of Hispanic Television Network, Inc.
for the year ended December 31, 1999 and for the period February 24, 1998
(Inception) to December 31, 1998 and for its predecessor American Independent
Network, Inc. for the period January 1, 1999 to September 2, 1999 and for the
year ended December 31, 1998 are included in Item 8:
Hispanic Television Network, Inc.
FINANCIAL STATEMENTS
Report of Independent Auditors .....................................F-2
Report of Independent Auditor.......................................F-3
Balance Sheet ......................................................F-4
Statements of Operations ...........................................F-5
Statement of Stockholders' Equity...................................F-6
Statements of Cash Flows ...........................................F-7
Notes to Financial Statements.......................................F-8
American Independent Network, Inc.
Report of Independent Auditors .....................................F-19
Report of Independent Auditor ......................................F-20
Statements of Operations ...........................................F-21
Statement of Stockholders' Equity ..................................F-22
Statements of Cash Flows ...........................................F-23
Notes to Financial Statements.......................................F-24
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Hispanic Television Network, Inc.
We have audited the accompanying consolidated balance sheet of Hispanic
Television Network, Inc. as of December 31, 1999, and the related statements of
operations, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Hispanic
Television Network, Inc. at December 31, 1999 and the results of operations and
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States.
/S/ ERNST & YOUNG LLP
March 31, 2000
Dallas, Texas
F-2
<PAGE>
Jack F. Burke, Jr.
CERTIFIED PUBLIC ACCOUNTANT
P.O. Box 15728
Hattiesburg, Mississippi 39404
REPORT OF INDEPENDENT AUDITOR
The Board of Directors
Hispanic Television Network, Inc.
6125 Airport Freeway
Haltom City, Texas 76117
I have audited the accompanying statements of operations, stockholders' equity
and cash flows for the period from February 24, 1998 to December 31, 1998 of
Hispanic Television Network, Inc. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
As discussed in Note 9 to the financial statements, the Company restated its
financial statements to adjust assets, expenses and common stock for
transactions which occurred during the period February 24, 1998 to December 31,
1998.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the results of operations and cash flows of Hispano
Television Ventures, Inc. for the year ended December 31, 1998 in conformity
with generally accepted accounting principles.
Sincerely,
Jack F. Burke, Jr.
January 18, 2000
F-3
<PAGE>
<TABLE>
Hispanic Television Network, Inc.
Balance Sheet
<CAPTION>
ASSETS DECEMBER 31,
1999
------------
<S> <C>
Current Assets
Cash and cash equivalents $ 52,655
Accounts Receivable 19,250
Prepaids 41,666
Trade Credit Receivable 126,073
--------------
Total current assets 239,644
Property and equipment, net 1,423,826
Goodwill and other assets 2,832,121
--------------
Total assets $ 4,495,591
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts Payable $ 1,142,697
Accrued Liabilities 66,489
Revolving line of credit 500,000
Due to private placement participants 400,000
Notes Payable 1,356,299
Interest Due Notes Payable 336,353
--------------
Total Current Liabilities 3,801,838
Stockholders' equity:
Convertible Preferred Stock, $1.00 par value:
Authorized shares - 10,000,000
Issued and outstanding - 42,427 275,774
Common Stock, $0.01 par value:
Authorized shares - 200,000,000
Issued and outstanding - 78,101,596 781,016
Additional Capital 3,074,282
Accumulated Deficit (3,437,319)
--------------
Total stockholders' equity 693,753
--------------
Total liabilities and stockholders' equity $ 4,495,591
==============
See accompanying notes
</TABLE>
F-4
<PAGE>
<TABLE>
Hispanic Television Network, Inc.
Statements of Operations
<CAPTION>
(RESTATED)
PERIOD FROM
FEBRUARY 24,
1998
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
1999 1998
------------ -------------
<S> <C> <C>
Revenue $ 278,186 $ 1,997
Expenses:
Programming expenses 26,472 95,945
Satellite rental 274,400 -
Productions expenses 45,926 -
Rental expense (net) 52,765 -
Bad debt expense 95,917
Administrative expenses 2,943,782
Depreciation 80,867 9,978
Amortization 45,734 -
----------- ----------
Total expenses 3,565,863 105,923
----------- ----------
Loss from Operations (3,287,677) (103,926)
Other expenses
Loss on Sale of Assets 6,273 -
Interest expense, net 39,443 -
----------- ----------
Total Other expenses 45,716
----------- ----------
Net loss $(3,333,393) $ (103,926)
=========== ==========
Basic and diluted net loss per share $ (0.05) $ (0.01)
=========== ==========
Weighted average shares outstanding 61,058,844 21,000,000
=========== ==========
</TABLE>
F-5
<PAGE>
<TABLE>
Hispanic Television Network, Inc.
Statement of Stockholders' Equity
December 31, 1999 and 1998
<CAPTION>
PREFERRED PREFERRED COMMON COMMON ADDITIONAL ACCUMULATED
SHARES STOCK SHARES STOCK CAPITAL DEFICIT TOTAL
--------- --------- ---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at February 24, 1998
(Inception) (Restated) -- $ -- 12,800,000 $128,000 $ 11,768 $ -- $ 139,768
Adjustment to reflect
recapitalization resulting
from merger with AIN -- -- 8,200,000 82,000 (82,000) -- --
Net loss (Restated) -- -- -- -- -- (103,926) (103,926)
--------- --------- ---------- -------- ----------- ----------- -----------
Balance at December 31, 1998
(Restated) -- -- 21,000,000 210,000 (70,232) (103,926) 35,842
Options issued in connection
with shareholder guarantee
of line of credit -- -- -- -- 495,000 -- 495,000
Common stock issued for
services -- -- 7,000,000 70,000 30,000 -- 100,000
Common stock issued for
broadcasting assets -- -- 7,000,000 70,000 30,000 -- 100,000
Common stock issued upon
conversion of convertible
debt -- -- 35,000,000 350,000 650,000 -- 1,000,000
Common stock issued for
services -- -- 896,397 8,964 2,011,566 -- 2,020,530
Common stock of American
Independent Network previously
outstanding prior to reverse
acquisition merger agreement,
net of shares cancelled 42,427 $ 275,774 7,205,229 72,052 (72,052) -- 275,774
Net loss -- -- -- -- -- (3,333,393) (3,333,393)
--------- --------- ---------- -------- ----------- ----------- -----------
Balance at December 31, 1999 42,427 $ 275,775 78,101,596 $781,016 $ 3,074,282 $(3,437,319) $ 693,753
========= ========= ========== ======== =========== =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE>
<TABLE>
Hispanic Television Network, Inc.
Statements of Cash Flows
<CAPTION>
(RESTATED)
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(3,333,393) $ (103,926)
Adjustment to reconcile net loss to net cash used operating
activities:
Common stock issued for services 2,120,530 20,000
Compensation expense related to stock options 495,000 -
Amortization 25,281 -
Depreciation 52,765 9,978
Changes in assets and liabilities:
Increase in accounts receivable (819) -
Decrease in trade credits receivable 20,000 -
Increase in other assets (270,539) -
Increase in prepaid assets (41,666) -
Increase in accounts payable 366,313 -
Decrease in other liabilities 90,183 -
----------- -----------
Total cash used in operating activities (476,345) (73,948)
----------- -----------
INVESTING ACTIVITIES
Capital expenditures (490,554) (5,100)
Acquisition of AIN, net of cash acquired (500,000) -
----------- -----------
Total cash used by investing activities (990,554) (5,100)
----------- -----------
FINANCING ACTIVITIES
Borrowings under line of credit 1,500,000 -
Borrowings on notes payable - 14,137
Principal payments on notes payable (380,535) -
Proceeds from issurance of common stock - 65,000
Proceeds from private placement 400,000 -
----------- -----------
Total cash provided by financing activities 1,519,465 79,137
----------- -----------
Net cash increase 52,566 89
Cash, beginning of year 89 -
----------- -----------
Cash at end of year $ 52,655 $ 89
=========== ===========
Cash paid for interest $ 54,442 $ -
=========== ===========
Cash paid for income taxes $ - $ -
=========== ===========
See accompanying notes.
</TABLE>
F-7
<PAGE>
Hispanic Television Network, Inc.
Notes to Financial Statements
December 31, 1999 and 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Hispanic Television Network, Inc. ("The Company") is the successor
entity formed by the merger on December 15, 1999 of American
Independent Network, Inc. ("AIN") and Hispano Television Ventures,
Inc. ("HT Ventures"). AIN, a publicly held corporation, was
incorporated in Delaware on December 11, 1992. HTV, a privately held
corporation, was incorporated in Texas on February 24, 1998. The
Company's purpose is to provide television network service to the
Hispanic community. The Company has FCC licenses to begin operations
in eight US cities in Arizona, Oklahoma and Texas.
On September 2, 1999, HT Ventures entered into a transaction ("HT
Ventures Transaction") whereby HT Ventures purchased 11,000,000
previously unissued shares of AIN common stock for total purchase
consideration of $500,000 in cash. As a result, of the HT Ventures
Transaction, HT Ventures owned approximately 60% of the then
outstanding shares of common stock of AIN. Subsequently, on December
15, 1999, HT Ventures completed the merger ("the Merger") with and
into AIN, the legal surviving entity, and changed AIN's name to the
Hispanic Television Network, Inc. ("the Company"). Pursuant to the
terms of the Merger Agreement, stockholders of HT Ventures received a
total of 70,000,000 shares of AIN common stock in exchange for the
then outstanding shares of HT Ventures. As part of the Merger
Agreement, the 11,000,000 shares purchased by HT Ventures on September
2, 1999, in connection with the HT Ventures Transaction, were canceled
upon the finalization of the Merger on December 15, 1999. The Merger
Agreement provided for AIN to issue 70,000,000 shares of common stock
in exchange for all the outstanding shares of HT Ventures. The common
stock exchanged, in addition to the existing AIN preferred and common
shares previously outstanding, collectively results in the new
capitalization of Hispanic Television Network, Inc. formerly American
Independent Network, Inc. Subsequent to the Merger, HTV stockholders
owned approximately 90% of AIN.
Accordingly, the Merger was accounted for as a "reverse acquisition"
using the purchase method of accounting with HT Ventures being the
"accounting acquirer". In a reverse acquisition, the historical
stockholders' equity of the accounting acquirer prior to the merger is
retroactively restated (a recapitalization) for the equivalent number
of shares received in the merger after giving effect to any difference
in par value of the issuers and acquirer's stock by an offset to paid
in capital. All share and per share information has been presented in
the accompanying financial statements as if the recapitalization had
occurred as of the first day presented in the financial statements.
The financial statements reflect the operations of AIN and for the
period subsequent to acquisition on September 2, 1999. A summary of
the combined purchase price allocation is as follows:
Cash paid $ 500,000
Liabilities assumed 2,729,240
Preferred stock 275,774
----------
Amount to allocate to assets $3,505,014
==========
Net tangible assets $1,034,939
Goodwill 2,470,075
----------
$3,505,014
==========
The purchase price allocation is based on preliminary estimates of the
fair value of the acquired assets and liabilities.
F-8
<PAGE>
Hispanic Television Network, Inc.
Notes to Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with an
original maturity date of ninety days or less.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from these estimates.
Property and Equipment
Property and equipment are recorded at cost. The cost of property and
equipment is depreciated over the estimated useful lives of the assets
ranging from five to seven years. Depreciation is calculated using the
straight line method.
Long-lived Assets
Long-lived assets, including goodwill, are evaluated when indicators of
impairment are present and provisions for possible losses are recorded
when undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount.
Revenue Recognition
The Company's primary source of revenue is the sale of airtime on its
television stations. Broadcast revenue is recorded when commercials are
aired.
Stock Based Compensation
The Company accounts for its stock-based compensation utilizing the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," because, the alternative fair value accounting
provided for under SFAS 123, "Accounting for Stock-Based Compensation,"
requires the use of option valuation models that were not developed for
use in valuing employee stock options. However, SFAS 123 requires
disclosure of pro forma information regarding net income and net income
per share based on fair value accounting for stock-based compensation.
F-9
<PAGE>
Hispanic Television Network, Inc.
Notes to Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentration of credit risk, principally consist of accounts receivable.
At December 31, 1999, no single customer represented greater than 10% of
the total receivable balance. The Company's billings are due generally
upon 30 days, and the Company does not require collateral on accounts.
Earnings Per Share
Basic and diluted net loss per share is computed based on the loss divided
by the weighted average number of shares of common stock outstanding
during each period. Potentially dilutive securities totalling 584,854
additional shares of common stock resulting from the conversion or
exercise of preferred stock and stock options were not included in the
calculation as their effect is antidilutive. Impairment of Long-lived
Assets
The carrying amount of long-lived assets including goodwill is reviewed if
facts and circumstances suggest that it may be impaired. The review would
be based on the estimated undiscounted cash flows of the Company's
operations at the lowest level for which there are identifiable cash
flows. If this review indicates impairment, the goodwill would be adjusted
to its fair value through a charge to operations.
Goodwill
Goodwill reflects the excess of purchase price over the fair value of net
assets purchased. Goodwill is amortized on a straight-line basis over ten
years. Amortization of goodwill was $25,281 at December 31, 1999.
Fair Value of Financial Instruments
The Company's financial instruments, including accounts receivable, trade
credits receivable, accounts payable and notes payable, approximate fair
value due to their short term nature.
F-10
<PAGE>
Hispanic Television Network, Inc.
Notes to Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred Income Taxes
The Company accounts for income taxes using the asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the company's financial statements or tax returns.
Valuation allowances are provided for deferred tax assets when their
realization is not reasonably assumed.
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1999:
Machinery and equipment $ 890,399
Digital compression equipment 852,152
Leasehold improvements and other 36,440
-----------
1,778,991
Less: accumulated depreciation (355,165)
-----------
Total property and equipment $ 1,423,826
===========
F-11
<PAGE>
Hispanic Television Network, Inc.
Notes to Financial Statements
3. DEBT
<TABLE>
<CAPTION>
1999
----
<S> <C>
Notes payable to various individuals, matured December, 1996, interest payable
at maturity at a rate of 15% per annum. $ 321,994
Notes payable to various individuals, matured March 1997, interest payable at
maturity at a rate of 15% per annum. 496,000
Note payable to Pacific Acquisition Group, matured December 31, 1998, interest
payable quarterly at a rate of 11%
per annum 250,500
Note payable to Logistic Services International, Inc., matured December 31, 1997,
principal and interest were due December 31, 1997, interest at a rate of
15% per annum 45,000
Note payable to an individual, matured May, 1998, interest payable quarterly
at a rate of 24% per annum 45,000
Note payable to an individual, matured February, 1999, interest payable monthly
at a rate of 10% per annum 90,000
Note payable to an individual, principal collateralized by assets of the Company,
matured May, 1998, interest payable at maturity at a rate of 20% per annum 100,000
Capital lease obligation for equipment with a maturity date of May ,2000;
bearing interest at 29.165% per annum in 1999 7,805
----------
Total $1,356,299
==========
</TABLE>
F-12
<PAGE>
Hispanic Television Network, Inc.
Notes to Financial Statements
3. DEBT (CONTINUED)
On November 8, 1999, the Company entered into a credit agreement with a
bank which provides for a $500,000 revolving line of credit with
outstanding principle and interest due March 8, 2000. At December 31,
1999, there were $500,000 of borrowings outstanding. Borrowings under the
revolving line of credit bear interest at the lenders prime rate plus 1%
(9.5% at December 31, 1999). Borrowings are guaranteed up to a maximum of
$500,000 by the Chairman of the Board of the Company. In consideration for
the guarantee, the Chairman received an option to purchase 500,000 shares
of the Company's common stock with an exercise price of $0.20 per share.
The option is fully vested and exercisable. The Company recorded $495,000
of additional expense for the estimated fair value of the option. Such
option was valued using the Black-Scholes option pricing model.
On May 28, 1999, the Company entered into a loan agreement for convertible
notes with a group of investors. The Company borrowed $500,000 under the
loan agreement. The convertible notes were convertible into shares of
Series A Preferred stock. The convertible notes were secured by the
Company's assets. The notes were to be due May 2001 and bore interest at
11%. The notes convert at a price of $0.09375 per share. On September 1,
1999, the investors loaned an additional $500,000 to the Company under the
Note Modification and Extension of Lien Agreement. The terms of the
convertible notes remained the same under the Note Modification except
that the conversion ratio changed to $0.1875 per share. On December 15,
1999, as part of the Merger agreement, the convertible notes were
converted into 35,000,000 shares of AIN common stock (effected for the
above conversion and the three to one stock dividend).
The borrowing was repaid in January 2000.
4. STOCKHOLDERS' EQUITY
In addition, to the exchange of common shares, the new capital structure
includes existing preferred stock from AIN of 42,427 shares. The preferred
stock is convertible into two shares of common stock and receives
cumulative interest payments 9% per annum in lieu of dividends.
In May 1999, the Company issued 7,000,000 shares of common stock (as
adjusted for the stock dividend and merger exchange rate) to an
individual to purchase assets in a transaction with an estimated fair
value of $100,000.
F-13
<PAGE>
Hispanic Television Network, Inc.
Notes to Financial Statements
4. STOCKHOLDERS' EQUITY (CONTINUED)
In May 1999, the Company also entered into a consulting agreement with an
investor. The Company issued 7,000,000 shares of common stock (as
adjusted for the stock dividend and merger exchange rate.) The fair
value of the common stock was determined to be $100,000 and the expense
is recorded over the one year term of the agreement.
During the fourth quarter of 1999, the Company issued approximately
896,000 shares of common stock in return for services and conversion of
debt. These services consisted of primarily legal services and other
professional advisory services and were valued at approximately
$2 million.
5. OPERATING LEASES
The Company has commitments under operating leases for television
communication equipment which are renewable at the option of the Company.
During the year ended December 31, 1999 rent expense was $73,265. There
was no rent expense for television communication expense for the year
ended December 31, 1998.
Minimum future rentals under noncancelable operating lease commitments in
effect at December 31, 1999 are as follows:
2000.............................. $ 26,100
2001.............................. 21,600
2002.............................. 17,100
2003.............................. 16,225
2004.............................. 6,600
Thereafter........................ 6,600
---------
$ 94,225
=========
6. PRO FORMA NET LOSS (UNAUDITED)
The following table presents unaudited pro forma information for the
Company as if the merger had taken place January 1, 1999 and 1998,
respectively. Additionally, amortization of goodwill has been adjusted to
reflect a full year of amortization as if the merger had taken place on
January 1, 1999 and 1998, respectively.
1999 1998
---- ----
Revenues $ 371,562 $ 379,377
Net Loss (14,170,923) (2,452,898)
Net Loss Per Share (0.23) (0.12)
F-14
<PAGE>
Hispanic Television Network, Inc.
Notes to Financial Statements
7. INCOME TAXES
The provision for income taxes is reconciled with the statutory rate for
the years ended December 31, 1999 and 1998 as follows:
<TABLE>
<CAPTION>
(RESTATED)
1999 1998
---- ----
<S> <C> <C>
Provision computed at federal statutory
rate $(1,133,354) $(35,335)
State income taxes, net of federal tax
effect (130,385) (4,115)
Change in deferred tax assets valuation
allowance 1,249,855 39,450
Other 13,884 -
--------- --------
$ - $ -
========= ========
</TABLE>
Significant components of the deferred tax asset at December 31, 1999
are as follows:
1999
----
Net operating loss carryforward $ 6,461,558
Stock compensation not currently deductible 187,902
Other, net 1,414
-----------
6,650,874
Valuation allowance of deferred tax assets (6,425,792)
-----------
Deferred tax assets net of valuation allowance 225,082
Deferred tax liabilities: Property and equipment (225,082)
-----------
Deferred tax assets net of deferred tax liabilities $ -
===========
F-15
<PAGE>
Hispanic Television Network, Inc.
Notes to Financial Statements
The Company has federal and state net operating loss carryovers in the
amount of approximately $17,000,000 which begin to expire in 2010. The
realization of deferred tax assets with the net operating loss is
dependent on generating sufficient taxable income prior to its expiration.
A significant portion of the federal net operating loss carryover may be
subject to limitations under Internal Revenue Code Section 382 as a result
of the Merger Transaction. Due to the uncertainty of the Company's ability
to generate such future taxable income, management has established a
valuation allowance off setting the deferred tax asset.
8. LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions arising from
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's financial condition, results of operations or cash
flows.
9. RESTATEMENT OF FINANCIAL STATEMENTS
The company restated its 1998 financial statements to reflect the proper
recording of expenses, assets and common stock for transactions which
occurred during the period February 24, 1999 (inception) to December 31,
1998.
10. SUBSEQUENT EVENTS
Purchase of Building
Effective February 13, 2000, the Company purchased the office space it was
previously leasing for a cash purchase price of $800,000.
F-16
<PAGE>
Hispanic Television Network, Inc.
Notes to Financial Statements
Private Placement
Effective December 15, 1999, the Company began a Private Placement whereby
the Company sold 100 units, each unit consisting of 100,000 shares of
common stock of the Company (the units were offered pursuant to Rule 506
of Regulation D promulgated under the Securities and Exchange Act) and
100,000 warrants to purchase one share of the Company's common stock at an
exercise price of $2.00 per share. The warrants expire one year after the
termination of the Private Placement. The Company received gross proceeds
in January of $10,000,000 pursuant to the Private Placement.
Stock Options
Subsequent to December 31, 1999, the Company issued options to purchase
1,880,500 shares of the Company's Common Stock. The options vest over a
three year period and have exercise prices ranging from $0.01 to $14.88
per share. Options to purchase 520,000 shares were granted at amounts less
than the fair value of the underlying stock on the grant date, resulting
in $4,158,550 of deferred compensation expense to be recognized over the
remaining vesting term beginning in 2000.
Stock Option Plan
In February 2000, the Company adopted the 2000 Stock Incentive Plan
(the Plan). The Board of Directors will appoint a committee to administer
the Plan. At the discretion of the committee, stock options may be
granted to eligible participants, as defined. The options will generally
vest over two to three years and the exercise price must be equal to or
greater than the market value of the Company's stock on the date of grant.
Asset Acquisitions
Effective January 10, 2000, the Company entered into an Asset Purchase
Agreement with an individual to purchase certain broadcasting assets in
Texas, New Mexico, Oklahoma and Arizona. The Company effected the purchase
through the issuance of $3,000,000 of the Company's common stock, a cash
payment of $1,500,000 and an additional $5,500,000 to be paid by December
2001. The cash payment will be made upon FCC approval of the broadcasting
licensing transfer.
On March 24, 2000, the Company entered into a strategic arrangement with
Cubico.com, Inc., a Latin based Internet portal, whereby the Company
obtains a 48% ownership interest in the operations of Cubico. The
arrangement further provides for joint marketing opportunities. For this,
the Company will give Cubico a minority interest in ten of the Company's
television stations, 5,000,000 shares of common stock, use of HTVN's sales
force to sell advertising for Cubico, sponsorship of educational programs
explaining different aspects of Internet use and Cubico's logo on the
Company's Internet home page.
F-17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Hispanic Television Network, Inc. (formerly American Independent Network, Inc.)
We have audited the accompanying statements of operations, stockholders' equity,
and cash flows for the period January 1, 1999 to September 2, 1999 of Hispanic
Television Network, Inc., formerly American Independent Network, Inc. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, results of operations and cash flows for the period
January 1, 1999 to September 2, 1999 of Hispanic Television Network, Inc.,
formerly American Independent Network, Inc. in conformity with accounting
principles generally accepted in the United States.
/S/ ERNST & YOUNG LLP
March 31, 2000
Dallas, Texas
F-18
<PAGE>
Jack F. Burke, Jr.
CERTIFIED PUBLIC ACCOUNTANT
P.O. Box 15728
Hattiesburg, Mississippi 39404
REPORT OF INDEPENDENT AUDITOR
The Board of Directors
Hispanic Television Network, Inc.
6125 Airport Freeway
Haltom City, Texas 76117
I have audited the accompanying statements of operations, stockholders' equity
and cash flows for the year ended December 31, 1998 of Hispanic Television
Network, Inc. formerly American Independent Network, Inc., a Texas Corporation.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
As discussed in Note 6 to the financial statements, the Company restated its
1998 financial statements to adjust additional capital and expense for common
stock issued as incentives to extend loan terms.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the results of operations and cash flows for the year ended
December 31, 1998, for Hispanic Television Network, Inc. formerly American
Independent Network, Inc. in conformity with generally accepted accounting
principles.
Sincerely,
Jack F. Burke, Jr.
March 31, 2000
F-19
<PAGE>
<TABLE>
Hispanic Television Network, Inc. formerly
American Independent Network, Inc.
Statements of Operations
<CAPTION>
FOR THE PERIOD (RESTATED) FOR
JANUARY 1, 1999 TO THE YEAR ENDED
SEPTEMBER 2, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
Revenues $ 93,376 $ 377,380
Expenses:
Satellite rental 153,900 360,000
Programming expenses - 24,992
Productions expenses 84,421 103,750
Rental expense (net) 52,368 64,809
Bad debt expense - 1,584,595
Administrative expenses 4,032,889 557,367
Depreciation 71,312 80,445
Amortization 70,680 138,516
Write off Senior Channel 482,776 -
----------- -----------
Total expenses 4,948,346 2,914,474
Loss from Operations (4,854,970) (2,537,094)
Other expenses:
Loss on Sale of Assets - 31,798
Interest expense, net 4,731,212 314,275
----------- -----------
Total other expenses 4,731,212 346,073
Income tax benefit - (661,824)
----------- -----------
Net Loss $(9,552,207) $(2,221,343)
=========== ===========
Basic and diluted net loss per
share (1.60) (0.60)
=========== ===========
Weighted average shares
outstanding 5,958,914 3,705,036
=========== ===========
</TABLE>
F-20
<PAGE>
<TABLE>
Hispanic Television Network, Inc. formerly
American Independent Network, Inc.
Statement of Stockholder's Equity
For the Period January 1, 1998 to September 2, 1999
<CAPTION>
PREFERRED
PREFERRED STOCK COMMON COMMON ADDITIONAL RETAINED
SHARES AMOUNT SHARES STOCK CAPITAL EARNINGS TOTAL
------ ------ ------ ----- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1998
(Restated) 53,427 $ 53,427 3,646,501 $ 36,465 $ 3,756,865 $ (4,228,034) $ (381,277)
Preferred Stock Conversion (11,000) (11,000) 4,400 44 $ 10,956 -- --
Bridge Loan Conversion -- -- 56,004 560 87,325 -- 87,885
Common stock issued for
conversion and
extension of debt
(Restated) -- -- 668,718 6,687 1,534,774 -- 1,541,461
Net Loss (Restated) -- -- -- -- -- (2,221,343) (2,221,343)
------ ----------- --------- ------------ ------------ ------------ -----------
Balance December 31, 1998
(Restated) 42,427 42,427 4,375,623 43,756 5,389,920 (6,449,377) (973,274)
Bridge Loan Conversion -- -- 687,381 6,874 1,024,198 -- 1,031,072
Common stock issued for
conversion and extension
of debt -- -- 381,593 3,816 568,574 -- 572,390
Common stock issued for
services -- -- 3,158,998 31,590 7,147,603 -- 7,179,193
Shares cancelled -- -- (1,398,366) (13,984) 13,984 -- --
Net Loss -- -- -- -- -- (9,586,182) (9,586,182)
------ ----------- --------- ------------ ------------ ------------ -----------
Balance September 2, 1999 42,427 $ 42,427 7,205,229 $ 72,052 $ 14,144,279 $(16,035,599) $(1,776,801)
====== =========== ========= ============ ============ ============ ===========
</TABLE>
See accompanying notes.
F-21
<PAGE>
<TABLE>
Hispanic Television Network, Inc. formerly
American Independent Network, Inc.
Statements of Cash Flows
<CAPTION>
For the
Period (Restated)
January 1, For the year
1999 to ended
September 2, December 31,
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net gain (loss) $(9,247,765) $(2,221,343)
Adjustment to reconcile net income to net cash from operating
activities:
Services expense related to issuance of common stock 1,089,962 -
Interest expense related to conversion or extension of
debt and bridge loans 7,820,687 92,310
Depreciation and Amortization 73,024 218,961
Changes in assets and liabilities:
Increase in accounts receivable (15,300) (538)
Decrease in trade credits receivable 145,138 30,000
Decrease in other assets 403,351 2,253,476
Decrease in accounts payable (284,915) 226,588
Increase in accrued liabilities 109,562 150,550
----------- -----------
Total cash provided by operating activities 93,744 88,180
----------- -----------
INVESTING ACTIVITIES
Capital expenditures (101,882) (19,246)
----------- -----------
Total cash used in investing activities (101,882) (19,246)
----------- -----------
FINANCING ACTIVITIES
Principal payments on notes payable (1,326) (93,895)
----------- -----------
Total cash used in financing activities (1,326) (93,895)
----------- -----------
Net cash increase (decrease) (9,464) (24,961)
Cash, beginning of year 9,807 34,768
----------- -----------
Cash at end of year $ 343 $ 9,807
=========== ===========
Cash paid for interest $ 201,607 $ 63,441
=========== ===========
Cash paid for income taxes $ - $ -
=========== ===========
</TABLE>
See accompanying notes.
F-22
<PAGE>
Hispanic Television Network, Inc. formerly
American Independent Network, Inc.
Notes to Financial Statements
For the Period January 1, 1999 to September 1, 1999 and for the
Year ended December 31, 1998
1. ORGANIZATION
The Company
AIN was incorporated in the State of Delaware on December 11, 1992 under
the name Strictly Business, Inc. On September 16, 1993, the Company
changed its name to American Independent Network, Inc. ("AIN"). In March
1994, the Company began providing programming, media production, and
syndication services to television stations. AIN operates a television
network. AIN has entered into agreements to provide television broadcast
stations with programming (television shows) for digital television
broadcasting. Such agreements typically provide that the Company retains
certain of the advertising time and advertising revenues generated from
the programming.
On September 2, 1999, Hispano Television Ventuires, Inc. ("HT
Ventures") entered into a transaction with AIN ("HT Ventures
Transaction") whereby HT Ventures purchased 11,000,000 previously
unissued shares of AIN common stock for total purchase consideration
of $500,000 in cash. As a result, of the HT Ventures Transaction, HT
Ventures owned approximately 60% of the then outstanding shares of
common stock of AIN. Subsequently, on December 15, 1999, HT Ventures
completed the merger ("the Merger") with and into AIN, the legal
surviving entity, and changed AIN's name to the Hispanic Television
Network, Inc. ("the Company"). Pursuant to the Merger Agreement,
shareholders of HT Ventures received a total of 70,000,000 shares of
AIN common stock in exchange for the then outstanding shares of HT
Ventures. The 11,000,000 shares previously issued to HT Ventures were
immediately canceled pursuant to the Merger Agreement. Subsequent to
the Merger, HT Ventures stockholders owned approximately 90% of AIN.
Accordingly, the Merger was accounted for as a "reverse acquisition"
using the purchase method of accounting with HT Ventures being the
"accounting acquirer".
F-23
<PAGE>
Hispanic Television Network, Inc. formerly
American Independent Network, Inc.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from these estimates.
Revenue Recognition
The Company's primary sources of revenue are the sale of airtime on its
television stations. Broadcast revenue is recorded when commercials are
aired.
Earnings Per Share
Basic and diluted net loss per share is computed based on the loss divided
by the weighted average number of shares of common stock outstanding
during each period. Potentially dilutive securities totalling 84,854
additional shares of common stock resulting from the conversion or
exercise of preferred stock and stock options were not included in the
calculation as their effect is antidilutive.
3. INCOME TAXES
The provision for income taxes is reconciled with the statutory rate for
the period January 1, 1999 to September 2, 1999 and the year ended
December 31, 1998 as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1999 FOR THE YEAR ENDED
TO SEPTEMBER 2, DECEMBER 31, 1998
1999 (RESTATED)
---- ---------
<S> <C> <C>
Provision computed at federal
statutory rate $(3,144,240) $(755,257)
State income taxes, net of
federal tax effect (366,211) (87,965)
----------- ---------
Increase in deferred tax assets
valuation allowance 3,510,451 843,222
----------- ---------
$ - $ -
=========== =========
</TABLE>
The Company fully reserves its net deferred tax asset position due to
uncertainty over future income. The Company has federal and state net
operating loss carryovers in the amount of $5 million which begin to
expire in 2010. A signfificant portion of the federal net operating loss
carryover may be subject to limitations under Internal Revenue Code
Section 382.
F-24
<PAGE>
Hispanic Television Network, Inc. formerly
American Independent Network, Inc.
NOTES TO FINANCIAL STATEMENTS
4. OPERATING LEASES
The Company has commitments under operating leases for television
communication equipment which are renewable at the option of the Company.
During the period January 1, 1999 to September 2, 1999 and the year ended
December 31, 1998, rent expense was $52,638 and $64,800, respectively.
5. LEGAL PROCEEDINGS
The company is involved in various claims and legal actions arising from
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's financial condition, results of operations, or
cash flows.
6. RESTATEMENT OF FINANCIAL STATEMENTS
The company restated its 1998 financial statements to reflect the
recording of shares of stock issued for the extending of notes payable.
Based on the issuing of stock as incentives to extend loan terms, $48,836
of interest expense was recorded for the year ended December 31, 1998.
Exhibit 4.1
CERTIFICATE OF DESIGNATION
PREFERENCES, RIGHTS AND LIMITATIONS OF
SERIES B PREFERRED STOCK OF
AMERICAN INDEPENDENT NETWORK, INC.
(Pursuant to Section 151(g) of the General Corporation
Law of the State of Delaware)
AMERICAN INDEPENDENT NETWORK, INC. (the "Corporation"), a corporation
organized and existing under the laws of the State of Delaware, does hereby
certify that:
Pursuant to authority vested in this Board of Directors by Article IV of
the Corporation's Certificate of Incorporation, as amended, the Board of
Directors of the Corporation has duly adopted the following recitals, and
resolutions:
WHEREAS, this corporation is authorized by its Certificate of
Incorporation, as amended, to issue 10,000,000 shares of Preferred Stock.
Issuable from time to time in one or more series; and
WHEREAS, this Board of Directors is authorized to determine the rights.
preferences, privileges and restrictions granted to or imposed upon any such
series, to fix the number of shares constituting any such series, and to
determine the designation thereof, or any of them; and
WHEREAS, this Board of Directors desires, pursuant to its authority as
aforesaid, to issue and to determine and fix the rights, preferences, privileges
and restrictions relating to the second series of said Preferred Stock. and the
number of shares constituting and the designation of said series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby fixes
and determines the designation of, the number of shares constituting, and the
rights, preferences, privileges and restrictions relating to the second series
of Preferred Stock, as follows:
1. DESIGNATION. The series of Preferred Stock provided for by this
resolution shall be designated "9% Convertible Redeemable Series B
Preferred Stock" (hereafter referred to as "Series B Stock").
2. AUTHORIZATION. The number of shares constituting the Series B Stock
shall be 1,000,000 shares.
3. RANK. The Series B Stock shall. with respect to dividend rights,
rights on redemption, rights on conversion and rights on liquidation,
winding up and dissolution, rank senior to all warrants and options to
purchase Common Stock established by the Board of Directors or the
Stockholders (all of such equity securities of the Corporation to which the
Series B Stock ranks senior are collectively referred to herein as "Junior
Stock").
4. DIVIDENDS. The holders of outstanding Series B Stock shall be entitled
to receive, in preference to the holders of any Junior Stock in any fiscal year,
when and as declared by the Board of Directors, dividends at the annual rate of
$0.585 per share of Series B Stock, and no more, payable in cash quarterly, on
the 30th day of March, June, September and December, to holders of Series B
Stock of record on a date not more than 60 nor fewer than 10 days preceding each
respective payment date as specified by the Board of Directors or, if not so
specified, as provided by law, out of any assets at the time legally available
therefor. Dividends shall accrue on each share of Series B Stock from the date
of its original issuance and shall accrue from day to day, whether or not earned
or declared. Dividends shall be cumulative so that if dividends in respect of
any previous quarterly dividend period at that annual rate per share shall not
have been paid on or declared and set apart for all shares of Series B Stock at
the time outstanding, the deficiency shall be fully paid on or declared and set
apart for those shares before the corporation makes any distribution (as defined
below) to holders of Common Stock. "Distribution" in this paragraph 4 means the
transfer of cash or property without consideration, whether by way of dividend
or otherwise (except a dividend in Junior Stock as to dividends or assets) or
the purchase or redemption of shares of the corporation for cash or property
(except such Junior Stock), including any such transfer, purchase or redemption
by a subsidiary of the corporation.
5. LIQUIDATION PREFERENCE. In the event of a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of Series
B Stock shall be entitled to receive, out of the assets of the Corporation,
whether those assets are capital or surplus of any nature, an amount equal to
$10.00 per share of Series B Stock, plus all accrued and unpaid dividends on the
date of that distribution, and no more, before any payment shall be made or any
assets distributed to the holders of Junior Stock, and the remaining assets
shall be distributed ratably to the holders of Junior Stock. If upon
liquidation, dissolution, of winding up of the Corporation the assets thus
distributed among the holders of Series B Stock shall be insufficient to permit
the payment to those stockholders of the full preferential amounts, then the
entire assets of the Corporation to be distributed shall be distributed ratably
among the holders of Series B Stock.
A consolidation or merger of the Corporation with or into any other
corporation or corporations, or a sale of all or substantially all of the assets
of the Corporation, shall not be deemed to be a liquidation, dissolution or
winding up, within the meaning of this paragraph.
6. NO VOTING RIGHTS. Only shares of Common Stock shall entitle the holder
thereof to vote on matters requiring approval of the stockholders of the
Corporation. Series B Stock shall not, except as otherwise may be provided by
law, be entitled to vote on the election of directors or any other matter.
7. REDEMPTION RIGHTS. The Corporation. at the option of the Board of
Directors, may at any time or from time to time after July 24, 1999 redeem the
whole or any part of Series B Stock by converting each outstanding share of
Series B Stock into two shares of Common Stock ("Redemption Shares"). In the
event less than all the outstanding Series B Stock is redeemed, the number of
shares to be redeemed and the method of effecting such redemption, which shall
be pro rata, shall be determined by the Board of Directors of the Corporation,
with such adjustments as may be reasonably necessary to eliminate the redemption
of fractional interests.
Notice of every proposed redemption of Series B Stock shall be given not
more than 60 and not less than 30 days prior to any redemption date ("Redemption
Date") set by the Board of Directors for the redemption of shares of Series B
Stock pursuant to this paragraph. Such notice shall be given to each holder of
record of Series B Stock by mail, postage prepaid, addressed to each holder at
his or her post office address as shown by the records of the Corporation. Any
notice which is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the holder receives such
notice. Failure to give such notice by mail, or any defect in such notice, to
any holder of Series B Stock designated for redemption shall not affect the
validity of the proceedings for the redemption of other shares of Series B
Stock.
On or after the Redemption Date, each holder of Series B Stock called for
redemption shall surrender his or her certificate or certificates evidencing
Series B Stock to be redeemed to the Corporation at the place designated in such
notice and shall thereupon be entitled to receive the Redemption Shares. In case
less than all of the shams represented by any such surrendered certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares.
8. CONVERSION RIGHTS.
(a) Each holder of Series B Stock may at any time following the
earlier of (i) the completion of any merger or other business combination by the
Corporation wherein a controlling interest in the Corporation is acquired by
another entity or (ii) July 24, 1999 upon surrender of the certificates
therefor, convert any or all of such holder's Series B Stock into fully paid and
non-assessable Common Stock of the Corporation, at the rate of two shares of
Common Stock for each share of Series B Stock so surrendered for conversion,
subject to adjustment as provided hereinafter. Such option to convert shall be
exercised by surrendering for such purpose to the Corporation, at any place
where the Corporation shall maintain a transfer agent for its Common Stock or
Series B Stock, certificates representing the shares to be converted, duly
endorsed in blank or accompanied by proper instruments of transfer, and at the
time of such surrender, the person exercising such option to convert shall be
deemed to be the holder of record of Common Stock issuable on such conversion,
notwithstanding that the share register of the Corporation shall then be closed
or the certificates representing such shares of Common Stock shall not then be
actually delivered to such person.
(b) The number of shares of Common Stock into which Series B Stock may
be converted shall be subject to adjustment from time to time in certain cases
as follows:
(i) The Corporation shall be entitled to make such further
adjustments as it considers advisable in order that any event treated for
federal income tax purposes as a dividend or other distribution of stock or
stock rights will not be taxable, so far as practicable, to the recipient of
such dividends or distributions.
(c) Whenever the amount of Common Stock deliverable upon the
conversion of Series B Stock shall be adjusted pursuant to the provisions
hereof, the Corporation shall forthwith file, at its principal executive office
and with any transfer agent or agents for Series B Stock and for its Common
Stock, a statement stating the adjusted amount of its Common Stock or other
securities deliverable per Series B Stock and setting forth in reasonable detail
the method of calculation and the facts requiring such adjustment and upon which
such calculation is based. Each adjustment shall remain in effect until a
subsequent adjustment hereunder is required.
(d) The Corporation shall at all times reserve and keep available, out
of its authorized but unissued shares of Common Stock, the full number of shares
of Common Stock deliverable upon the conversion of all the then outstanding
shares of Series B Stock and shall take all such action and obtain all such
permits or orders as may be necessary to enable the Corporation lawfully to
issue such shares of Common Stock upon the conversion of shares of Series B
Stock.
(e) No fractional shares of Common Stock shall be issued upon
conversion of Series B Stock. In lieu of any fractional shares to which the
holder would otherwise be entitled, the Corporation shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of the
Corporation's Common Stock on the date of conversion, as determined in good
faith by the Board of Directors.
9. EXCLUSION OF OTHER RIGHTS. Except as herein provided or as may otherwise
be required by law, the shares of Series B Stock shall not have any preferences
or relative, participating, optional or other special rights other than those
specifically set forth in this resolution and in the Certificate of
Incorporation of the Corporation.
IN WITNESS WHEREOF, AMERICAN INDEPENDENT NETWORK, INC. has caused this
Certificate of Designation to be signed by its President and Secretary this
30th day of August, 1996.
AMERICAN INDEPENDENT NETWORK. INC.
By: /S/ RANDY MOSELEY
---------------------------------
Randy Moseley
President and Secretary
Exhibit 10.01
HISPANO TELEVISION VENTURES
2426 ARBUCKLE COURT, DALLAS, TEXAS 75229
972-488-2959 972-488-2956 (FAX)
AGREEMENT
---------
TO WHOM IT MAY CONCERN:
This shall serve as a formal agreement between Patrick Alan and Victoria O.
Luckett and Victor Mantecon (principal shareholders of Hispano Television
Ventures, Inc.) relative to stock disbursement.
AGREED that an account shall be established for the recovery of capital by the
principals. This account shall consist of 360,000 shares of stock which shall be
sold at the earliest possible date. The proceeds from 60,000 shares shall be
used to help retire IRS debts incurred by Victor Mantecon. All remaining
proceeds from the sale of this stock (60,000 shares) will be disbursed to Victor
Mantecon. The remaining 300,000 shares shall be used for partial capital
recovery of Patrick Alan and Victoria O. Luckett.
This Agreement will not affect the original voting status of either party.
Patrick Alan and Victoria O. Luckett and Victor Mantecon shall maintain equal
voting rights proportional to 1,360,000 shares.
Signed this 9th day of June , 1998.
------ ------------
/s/ Victor Mantecon
- ------------------------------------------
VICTOR MANTECON, President
/s/ Patrick A. Luckett
- ------------------------------------------
PATRICK ALAN LUCKETT, Vice President, CFO
/s/ Victoria O. Luckett
- ------------------------------------------
VICTORIA O. LUCKETT, Secretary/Treasurer
Exhibit 10.02
LETTER AGREEMENT
ASSET TRANSFER AGREEMENT
Hispano Television Ventures, Inc. (HTV) does hereby agree to pay the
following obligations of American Independent Network, Inc. (AIN):
1. $30,000.00 to Data Sales for the June and July equipment payments.
2. $30,000.00 to Miralite for the July satellite payment.
3. $20,000.00 to the Holland Company for May (partial), June, July, &
August rent.
4. $2,500.00 to Bank One Escrow account.
5. $82,500.00: Total
In consideration for these payments, AIN does hereby agree to pay to HTV
$82,500.00 on or before August 20, 1999. In addition, AIN will provide HTV with
eight months of free uplink use of the equipment and satellite transponder
through AIN.
TRANSFER IN EVENT OF DEFAULT:
Should the above terms not be met, AIN shall immediately transfer and
assign their equipment lease with Data Sales, Inc. Satellite lease with
Miralite, and transfer the FCC Earth Station License to HTV. HTV would then
allow AIN to continue their feed for a fee of $22,500.00 per month starting
September 1, 1999 with one month free usage of the feed if needed with the
payment for use starting in that contingency on or about October 1, 1999.
American Independent Network, Inc. Hispano Television
Ventures, Inc.
By: /S/ KRIS LEMANS By: /S/ BOB J. BRYANT
-------------------------------- ----------------------------
Kris Lemans Bob J. Bryant
CEO Director
Data Sales, Co. Miralite Corporation
By: /S/ RAYMOND MARR By: /S/ NANCY EDILENOUR
--------------------------------- ---------------------------
Raymond Marr Nancy Edilenour
Vice President Director of Finance
Exhibit 10.03
AMERICAN INDEPENDENT NETWORK, INC.
PROMISSORY NOTE
Amount: $ 250,000 Dated: November 17, 1998
FOR VALUE RECEIVED, the undersigned, American Independent Network, Inc., a
Delaware corporation ("Maker"), promises to pay to the order of Bob and Judy
Bryant ("Lender") pursuant to the terms of this promissory note (the "Note"),
the principal sum of two hundred fifty thousand dollars ($250,000) (the "Amount
Advanced"), maturing ninety days (90) months (the "Maturity Date") from the date
first written above (the "Execution Date").
1. INTEREST RATE.
The unpaid principal under the Note shall bear interest at a rate of
ten percent (10%) per annum to be paid monthly for the term of this Note.
2. COMPUTATION.
Interest not paid when due shall be added to the unpaid principal
balance and shall thereafter bear interest at the same rate as principal. All
payments (including prepayments) hereunder are to be applied first to the
payment of accrued interest and the remaining balance shall be applied to the
payment of principal. Accrued interest shall be computed on the basis of a three
hundred and sixty (360) day year, based on the actual number of days elapsed.
3. PAYMENTS.
The Amount Advanced shall be payable in full at the Maturity Date.
4. VOLUNTARY PREPAYMENTS.
Maker may at any time, prepay the unpaid Amount Advanced evidenced
by this Note, or any interest or principal due hereunder, in whole or in part,
without penalty or premium, by paying to Lender, in cash or by wire transfer or
immediately available federal funds, the amount of such prepayment. If any such
prepayment is less than a full prepayment, then such prepayment shall be applied
first to the payment of accrued interest and the balance remaining applied to
the payment of principal.
5. LAWFUL MONEY: DESIGNED PLACES OF PAYMENT.
All principal and interest due hereunder is payable by cashiers
check or wire transfer at Lender's designated address. Except as otherwise set
forth herein, the Amount Advanced under this Note, plus all accrued interest but
unpaid interest thereon, shall be due and payable at the Maturity Date. All
principal and interest payments are due at 5:00 P.M. Pacific Standard Time on
the date due, payable in lawful money of the United States.
6. COMMON STOCK: PIGGY-BACK REGISTRATION RIGHTS.
6.1 COMMON STOCK. In consideration of the Amount Advanced,
Maker will issue to Lender 30,000 shares of Common Stock (the "Shares").
6.2 PIGGY-BACK REGISTRATION RIGHTS. All shares of Common Stock
issued to Lender, pursuant to Section 6 of this Agreement, shall include
unlimited piggy-back registration rights as set forth in the attached
"Registration Rights Agreement."
7. WAIVERS.
Except as set forth elsewhere herein, Maker, for itself and its
legal representatives, successors, and assigns, expressly waives presentment,
protest, demand, notice of dishonor, notice of nonpayment, notice of maturity,
notice of protest, notice of intent to accelerate, notice of acceleration,
presentment for the purpose of accelerating maturity, and diligence in
collection.
8. DEFAULT.
Maker will be in default if any of the following occurs: (a) Maker
fails to make payments when due; (b) Maker breaks any promise made herein to
Lender, or Maker fails to perform at the time and strictly in the manner
provided in this Note; (c) any representation or statement made or furnished to
Lender by Maker or on Maker's behalf is false or misleading in any material
respect; (d) Maker becomes insolvent, a receiver is appointed for any part of
Maker's property, Maker makes an assignment for the benefit of creditors, or any
proceeding is commenced either by Maker or against Maker under any bankruptcy or
insolvency laws; or (e) any creditor attempts to take or takes any of Maker's
property on or in which lender has a lien or security interest. It is expressly
agreed that, upon the occurrence of an event of default, as defined herein, the
unpaid principal balance of this Note, together with interest accrued thereon,
shall be due and payable immediately without presentment, demand, protest,
notice of protest, all of which are hereby expressly waived.
9. ATTORNEYS' FEES.
In the event it should become necessary to employ counsel to collect
this Note, Maker agrees to pay the reasonable attorneys' fees and cost of the
Lender incurred in connection with Lender's collection efforts, irrespective of
whether suit is brought.
10. LENDERS ADDRESS OF RECORD.
All payments of principal and interest, provided by Section 3
herein, shall be mailed to Lender at:
Bob and Judy Bryant
4733 Trail Bend Circle
Fort Worth, Texas 76109
----------------------------
11. SECTION HEADINGS.
Headings and numbers have set forth for convenience only. Unless the
contrary is complied by the context, everything contained in each Section
applies equally to the entire Note.
12. AMENDMENTS IN WRITING.
This Note may be changed, modified or amended only by a writing
signed by both Maker and Lender.
13. CHOICE OF LAW.
This Note and all transactions hereunder and/or evidenced hereby
shall be governed by, construed under, and enforced in accordance with the laws
of the State of Texas.
Maker agrees that the venue of any and all disputes, including
collections, arising from this promissory note shall be in Forth Worth, Tarrant
County, Texas, United States of America.
14. WAIVER OF TRIAL BY JURY.
Maker hereby waives, to the extend permitted under applicable law,
any right to trial by jury in any action or proceeding relating to this Note.
Made and Executed at
American Independent Network, Inc.
6125 Airport Freeway #200
Fort Worth, Texas 76117
/S/ DR. DON SHELTON
- ----------------------
Dr. Don Shelton, CEO
Exhibit 10.04
AGREEMENT AND BILL OF SALE
This Agreement and Bill of Sale (this "Agreement") is made and entered
into this 28th day of May, 1999, by and between ATN Network, Inc., a Texas
corporation ("Seller"), and Hispano Television Ventures, Inc., a Texas
corporation ("Purchaser").
RECITALS
Seller owns and operates a television station located at #1 Microwave Tower
Road, Usury Peak, Mesa, Arizona 85281, hereinafter referred to as the
"Business." Seller desires to sell, and Purchaser desires to purchase, the
assets composing the Business on the terms and conditions set forth in this
Agreement.
AGREEMENT
In consideration of the mutual representations, warranties and covenants
set forth in this Agreement, and on the terms and subject to the conditions
herein set forth, the parties hereby agree as follows:
1. PURCHASE AND SALE. For the consideration specified in Section 3 below,
and subject to the terms, conditions and agreements contained in this Agreement,
Seller agrees to sell, transfer, convey and deliver to Purchaser, and does
hereby sell, transfer, convey and deliver to Purchaser, free and clear of all
liens charges, claims and encumbrances, and Purchaser agrees to purchase and
accept from Seller, and has purchased and accepted from Seller, the following
described property (collectively, the "Assets"), being intended to describe all
of the assets of the Business, except those excluded pursuant to Section 2
below:
A. All furniture, fixtures, production and other equipment, supplies,
tape libraries and other fixed assets of Seller used by Seller in the
operation of the Business, including, but not limited to, those items
described in Exhibit "A" attached hereto and incorporated herein for
all purposes by this reference;
B. All inventory owned and/or acquired through the Business or otherwise
located at the location of the Business and all existing rights to its
advertising and programming;
C. All accounts receivable arising out of the Business together with all
promissory notes and evidences of indebtedness owed to Seller on such
accounts receivable, together with all rights to evidences of
indebtedness, claims, choses in action, liens, pledges and other
instruments and security of every kind and nature owned by Seller as
security for and in any manner securing or collateral to or for said
accounts receivable;
D. All of Seller's right, title and interest in and to the leasehold
interests and leasehold assets in and upon the premises described
above and presently leased by Seller and occupied by the Business (the
"Leaseholds"), including all prepaid rentals and all security and
utility deposits paid by Seller in connection with the Leaseholds;
E. Those certain contracts, agreements, arrangements and/or commitments
relating to the Business and/or Assets which Purchaser has elected to
assume as expressly indicated on Exhibit "B" attached hereto (the
"Assumed Contracts"); and
F. All compilations and lists of present or former customers, all mailing
lists, all business records, files and papers relevant to the Business
or relating to the Assets described in Sections 1(A) through l(E)
(including all records relating to all inventory records, customer
files, customer credit histories and other data related to the Assets
described in Sections 1(A) through Sections 1(E), all telephone
numbers, listings and advertisements (including specifically the
telephone number(s) presently used by Seller in the Business and all
presently utilized "yellow pages" advertisements), the right (but not
the obligation) to assume Seller's experience rating or other rating
with any employment commission or regulatory agency, all licenses,
permits, applications and franchises (specifically including Seller's
Federal Communications Commission license) ("FCC License") relating to
the Assets, to the extent the same are transferable and unless
otherwise excluded, and all good will and intangible assets and other
rights and privileges of Seller desirable or useful to Purchaser for
the purpose of continuing the Business and maintaining and retaining
the existing customers, advertisers, vendors and business of Seller,
together with the right to use any trade names presently or formerly
used by Seller in the Business and any name derived from or so similar
as to require the consent of Seller to its rightful use, for any
lawful business purpose. Purchaser shall have the ongoing right,
either on its own behalf or as Seller's agent, to contest any attempt
by any third party to use such name in the areas in which the Business
is conducted. In connection with the right to use such similar name,
Seller shall withdraw all Certificates or Notices on file in any
recording office in the County and State in which the Business is
located in order that the name referred to above or any similar name
may be used by Purchaser. Further, Purchaser shall have the right, but
not the obligation, to hire any and all of the present employees of
Seller. Except as expressly provided to the contrary in this
Agreement, Purchaser shall also have the right, but not the
obligation, to assume any rights', privileges or duties under any
continuing contracts not specifically listed in Exhibit "B" but
relating in any way to the operation of the Business.
TO HAVE AND TO HOLD all and singular the Assets unto Purchaser, its
successors and assigns, forever, and Seller does hereby bind itself, its
successors and assigns, to warrant and forever defend, all and singular, title
to the Assets unto Purchaser, its successors and assigns, against every person
whomsoever lawfully claiming or attempting to claim the same, or any part
thereof.
2. EXCLUDED ASSETS. Seller and Purchaser recognize and agree that the
following described assets shall not be sold as a part of the Business:
A. Records of the Business which Seller is required to retain by law;
B. Cash on hand and cash equivalents; and
3. CONSIDERATION. Seller hereby agrees that Purchaser's assumption of the
Assumed Contracts and Purchaser's prior payment of certain expenses on behalf of
Seller prior to the date of this Agreement, constitute adequate and sufficient
consideration for the sale to Purchaser of all interests held by Seller in and
to the Assets and for the performance by Seller of all of its covenants and
agreements hereunder.
4. THE CLOSING. The Closing of the transactions contemplated under this
Agreement (the "Closing") shall take place on May 28, 1999 at the offices of
Cantey & Hanger, L.L.P., at 801 Cherry Street, Suite 2100, Fort Worth, Texas
76102, at 2:00 p.m. central time (the "Closing Date"), or at such other time and
date as mutually agreed upon by the parties. At the Closing, the following shall
take place:
A. Seller shall have provided Purchaser with written evidence of all
approvals of Seller's lenders, vendors, lessors and other parties
required to be obtained in connection with the consummation of the
transactions contemplated under this Agreement. If any governmental
license or permit exists, which, by its terms or applicable law,
expires, terminates or is otherwise rendered invalid upon the transfer
of the Assets and is required in order for the Business to be
conducted following such transfer in the same manner as conducted
previously, Purchaser shall have received an equivalent of that
license or permit, effective as of and after the Closing Date, with
the exception of the FCC License, for which Seller shall provide to
Purchase all necessary documentation to apply for the FCC License's
transfer on the Closing Date.
B. Without additional consideration, Seller agrees to aid, assist and
cooperate with Purchaser in all respects in the orderly transfer of
the Business to Purchaser and to use all reasonable efforts to the end
that Purchaser shall realize a maximum retention of the customers and
general business and good will of the Business. At the Closing, and at
all times thereafter as may be necessary, Seller shall execute and
deliver and use its best efforts to cause other persons to execute and
deliver to Purchaser such other instruments, releases or documents,
and will do or use its best efforts to cause to be done such acts, as
shall be reasonably necessary to vest in Purchaser good and
indefeasible title to the Assets described in Sections l(A) through
Sections 1(F) hereof and to comply with the purposes and intents of
this Agreement and to more completely consummate or make effective the
transactions contemplated hereunder.
5. LIMITED ASSUMPTION OF LIABILITIES. It is specifically agreed and
understood that Purchaser does not and shall not assume or agree to pay, perform
or discharge any accounts payable of Seller, nor any other obligations,
liabilities or duties of Seller, whether accrued, absolute, contingent or
otherwise, arising out of or in any way connected with Seller's activities
and/or the operation of the Business prior to the Closing, except as
specifically fisted on Exhibit "C" attached hereto and incorporated herein for
all purposes by this reference, which lists liabilities Purchaser hereby
expressly assumes. Seller agrees to take such actions after the Closing as may
be required to defend the title of Purchaser and confirm the sale of the assets
described in Sections 1(A) through Sections 1(F) to Purchaser sold hereunder.
Seller agrees to fully indemnify, defend and hold Purchaser harmless from any
Losses (as hereinafter defined) incurred by Purchaser arising from or in any way
related to any such prior obligations, liabilities or duties of Seller.
6. POSSESSION/TRANSFER OF PROPERTY/TRANSITION AGREEMENTS. Possession of all
property sold pursuant to this Agreement shall be effectively transferred to
Purchaser as of the Closing and title to all such property shall be delivered on
the same date. In recognition that Seller has been operating the Business and
Purchaser intends to continue operating it without interruption, the following
additional agreements are made:
A. All income earned before the Closing shall be credited or received by
Seller, and all income earned or accrued on or after the Closing shall
be credited and received by Purchaser;
B. All expenses incurred or benefiting operations before the Closing
shall be paid by Seller, and all expenses incurred or benefiting
operations on or after the Closing shall be paid by Purchaser; and
C. Both parties agree to cooperate with each other so that there is an
orderly transfer of the business operations of the Business,
collection of all applicable income of each party and the payment of
all applicable expenses attributable to each party in accordance with
this Agreement. All income collected by one party attributable to the
other shall upon receipt be immediately remitted to the other party
entitled to the income. Any expenses attributable to one party
presented for payment after the Closing shall be immediately paid by
the party owing such expense in accordance herewith, or such party
shall immediately reimburse the other party for any such expense paid
by such other party upon accounting therefor.
7. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents,
warrants and guarantees to Purchaser that the following are true and correct as
of the Closing Date and are in addition to and not exclusive of any other
representations, warranties or guarantees made elsewhere in this Agreement:
A. All accounts, accounts receivable, notes and other evidences of
indebtedness reflected by Seller's books and records as owed to and
owned by Seller and which are being transferred and sold to Purchaser
represent bona fide assets of Seller and bona fide transactions
between Seller and the respective parties to such transactions.
Seller's books and records which are being delivered to Purchaser
contain an accurate record of the Business.
B. Seller owns the Business and all Assets of every kind and nature being
transferred to Purchaser hereunder, free and clear of all contracts,
interests, security interests, claims, liens, pledges, penalties,
charges, encumbrances, buy-sell agreements and all other rights of any
party whatsoever of every kind and character, and has good and
indefeasible title to, and the unconditional right to sell, assign,
convey, transfer and deliver to Purchaser the Business and such
Assets, free and clear of any contracts, interests, security
interests, claims, liens, pledges, penalties, charges, encumbrances,
buy-sell agreements and all other rights of any party whatsoever of
every kind and character. Upon the issuance and delivery of the
Consideration Shares in accordance with this Agreement, good and
indefeasible title to all Assets shall be and has become vested in
Purchaser, free and clear of any contracts, interests, security
interests, claims, liens, pledges, penalties, charges, encumbrances,
buy-sell agreements or other rights of any party whatsoever.
C. No refunds, repayments or claims of any nature are now due or will
become due and payable, outside of the ordinary course of business,
relating to any transactions of Seller and, to Seller's knowledge, all
transactions of any nature have been entered into and/or completed in
accordance with all applicable statutes, laws, rules, codes,
regulations and ordinances.
D. Seller is not a party to, nor, to Seller's knowledge, is there any
threat of, any action, lawsuit, claim, investigation or proceeding,
whether judicial or administrative, arising out of, in connection
with, against, in any way affecting, or that could affect, Seller or
any of the assets of Seller, or any of the business, assets or
property being transferred under or in connection with the terms of
this Agreement and Seller knows of no basis for any such action,
proceeding or investigation.
E. There are no judgments, writs, injunctions, decrees, liens, claims,
encumbrances, charges, demands or security interests in effect or
outstanding against Seller or applicable to its business, assets,
operations or employees including the Business or any of the Assets
being transferred in connection with this Agreement.
F. EXHIBIT "B", attached hereto and incorporated herein for all purposes
by this reference, sets forth a fist of all contracts, agreements,
leases, commitments, and other similar obligations of Seller relating
to the Business involving (1) the Leaseholds, or (2) an unperformed
commitment in excess of $5,000 per year, or (3) a duration exceeding
one year from the date hereof (collectively, the "Contracts"). Those
Contracts which Purchaser has elected to assume are identified on
Exhibit B and are the Assumed Contracts mentioned in Section 1(E)
hereof Purchaser shall not be responsible for or liable with respect
to any Contract not identified as an Assumed Contract. True and
correct copies of all Contracts (including any amendments, addenda or
supplements thereto) have been delivered to Purchaser prior to the
date hereof and true and correct and complete written descriptions of
all oral contracts have been delivered to Purchaser prior to the date
hereof With respect to the Contracts, and, except as expressly set
forth in Exhibit "B" attached hereto:
(1) Each Contract is in full force and effect and is a valid and
binding agreement of Seller and the other parties thereto
enforceable in accordance with its terms, and no defenses,
offsets or counterclaims have been asserted or may be made by any
party thereto, nor has Seller waived any rights thereunder;
(2) Neither Seller nor, to Seller's knowledge, any other party to any
Contract is in default with respect to any material term or
provision thereof, nor has any event occurred which, with the
giving of notice or the lapse of time, or both, would constitute
such a default and no penalties have been incurred nor are any
amendments pending;
(3) Seller knows of no fact or circumstance which reasonably can be
expected in the future to cause Seller or Purchaser (after
assignment) to be in default under any Contract; and
(4) Except for the Contracts, Seller has not entered into nor are the
Assets of the Business bound by, whether or not in writing any
(i) partnership or joint venture agreement; (ii) mortgage, deed
of trust, security agreement or any other lien, security interest
or charge; (iii) guaranty, indemnification or contribution
agreement; (iv) employment, consulting or compensation agreement;
(v) lease of real or personal property, whether as lessor,
lessee, sublessor, or sublessee; (vi) agreement relating to any
matter or transaction in which an interest is held by a person or
entity that is an affiliate of Seller; (vii) powers of attorney;
or (viii) contracts containing any non-competition covenants.
Neither the Business nor any of the Assets are subject to or otherwise
affected by any agreement or instrument or any charter or other
restriction that could or does materially affect such Assets or the
Business. Seller has not received notice of any plan or intention of
any other party to any Assumed Contract to exercise any right to
cancel or terminate any Assumed Contract, and Seller knows of no fact
that would justify the exercise of such right. Seller currently has no
knowledge that any other person or entity currently contemplates any
amendment or change to any Contract.
G. Seller has not been and is not presently in violation, to Seller's
knowledge, of any statute, rule, ordinance, regulation, licensing
requirement, decision, charge or order of any Court or official or
administrative body, nor, to Seller's knowledge, is any type of action
or proceeding pending or threatened against Seller that could
materially adversely affect the business and/or assets to be
transferred pursuant to the terms of this Agreement.
H. Seller has duly and timely filed all income, excise, corporate,
franchise, property, sales, payroll, withholding and other tax returns
and reports required to be filed by it as of the date hereof by the
United States, the State and County in which the Business is located,
or any political subdivision thereof and has timely paid and
discharged all obligations (including penalties and interest) which
have become due pursuant to such returns and any assessments which
have been received by it or otherwise. All such tax returns or reports
fairly reflect the taxes of Seller for the periods covered thereby.
Seller is not delinquent in the payment of any tax, assessment or
governmental charge, there is no tax deficiency or delinquency
asserted against Seller and there is no unpaid assessment, proposal
for additional taxes, deficiency or delinquency in the payment of any
of the taxes of Seller that could be asserted by any taxing authority.
To the knowledge of Seller, Seller is not in material violation of any
federal, state, local or foreign tax law. No Internal Revenue Service
audit or audit by any State tax collection agency of Seller is pending
or, to the knowledge of Seller, threatened, and the results of any
completed audits are properly reflected in the financial statements of
Seller. Seller has not granted any extension to any taxing authority
of the limitation period during which any tax liability may be
asserted. All monies required to be withheld by Seller from employees
or collected from customers for income taxes, social security and
unemployment insurance taxes and sales, excise and use taxes, and the
portion of any such taxes to be paid by Seller to governmental
agencies, have been collected or withheld and either paid to the
respective governmental agencies or set aside in accounts for such
purpose.
I. There are no agreements with any labor union, other labor organization
or labor representatives applicable to or covering the employees of
the Business, nor are any discussions or negotiations in anticipation
of any such agreement presently under way or anticipated, nor does
Seller know of any current or contemplated union organization efforts
or negotiations, nor has there been any request made to enter any such
negotiations or to hold any type of election relating to
employer/employee relations or bargaining. Seller has not experienced
and is not experiencing, nor does Seller know of any reason to expect,
any labor troubles or strikes, work stoppages, slow downs, or other
material interference with or impairment of the Business of Seller by
labor, nor has Seller committed any unfair labor practices.
J. There are no oral or written agreements of employment with any
employee of the Business which are not terminable at will with no
liability for such termination or which have not been terminated and
satisfied in full prior to Closing. Seller has no knowledge of any
facts that would indicate that a significant number of employees of
the Business would not, if offered, accept employment with Purchaser
on a basis no less favorable than that upon which such employees are
currently employed by Seller.
K. Seller has made no commitment to past or present employees regarding
expenses, pension, profit sharing or any other type of compensation,
benefit, option, remuneration or reimbursement that has not been
terminated and satisfied in full prior to Closing or that will not be
satisfied by Seller promptly after Closing, and Seller has no direct
or indirect, express or implied, obligation to pay severance or
termination pay to any officer or employee of the Business, or to pay
any amounts to any consultant, agent, or similar person or entity.
Seller has not granted or become obligated to grant any increases in
wages or salary of, or paid or become obligated to pay any bonus to,
or made or become obligated to make any similar payment to, or granted
or become obligated to grant any benefit to or on behalf of, any
officer, employee or agent of the Business. Seller does not maintain,
sponsor or make, and is not required to make contributions to, any
pension, profit-sharing, stock loans, stock options, thrift or other
retirement plan, medical, hospitalization, vision, dental, life,
disability, vacation or other insurance plan or other funded benefit
plan for the employees of the Business.
L. Purchaser will suffer no loss, cost or expense because of the
non-compliance of the parties hereto with any bulk transfer statute or
law.
M. Except as contemplated hereby, Seller has received no notice of any
plan or intention on the part of any supplier, vendor, or provider of
any other business services or products to the Business to exercise
the right to cancel or terminate or substantially curtail its business
arrangement with Seller, and Seller knows of no fact that would
justify the exercise of such a right.
N. Seller has full power and authority to execute, deliver and perform
this Agreement. All necessary action has been taken by Seller to duly
authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby. This Agreement has been duly
executed and delivered and is a valid and binding obligation of
Seller, enforceable in accordance with its terms. Except as
contemplated in Section 4 above, no consent, waiver, approval or
authorization of, or declaration, designation, permit or license of,
or filing, registration or qualification with, any governmental or
regulatory authority, or any lender or lessor or other third party, is
required to be made or obtained in connection with the execution,
delivery and performance of this Agreement or the transactions
contemplated hereby, or to preserve for Purchaser any rights and
benefits enjoyed by Seller on the date hereof following the
consummation of this transaction.
O. The execution, delivery and performance of this Agreement by Seller
will not (1) conflict with or result in any breach of any of the
terms, conditions or provisions of, or with the passage of time or by
the giving of notice, constitute a default under, any contract,
indenture, mortgage, deed of trust, agreement or other instrument to
which Seller is a party or by which any of the property covered hereby
may be bound or affected, (2) result in the creation of any lien,
charge, claim or encumbrance upon any of the properties or assets of
Seller covered hereby, or (3) violate any applicable law or regulation
or judgment or order of any court or governmental agency.
P. The representations, warranties and guarantees and all other
information contained in any exhibits hereto, and in any other
information and written documents furnished by Seller in connection
with the transactions contemplated hereby are true, correct and
complete in all material respects. Such representations, warranties
and guaranties and such documents and information state all material
facts required to be stated therein and do not omit to state any
material facts necessary to make the statements contained herein or
therein not misleading. There is no material misrepresentation in, or
material omission from, any written information or data furnished by
Seller to Purchaser.
8. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Seller that the following are true and correct on and as of the
Closing Date:
A. Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas and is qualified to
transact business and is in good standing in the jurisdictions where
it is required to qualify in order to conduct its businesses as
presently conducted. Purchaser has the power and authority to own,
lease or operate all properties and assets now owned, leased or
operated by it and to carry on its businesses as now conducted.
B. Purchaser may execute, deliver and perform this Agreement without the
necessity of Purchaser obtaining any consent, approval, authorization
or waiver or giving any notice or otherwise, except for such consents,
approvals, authorizations, waivers and notices which are expressly
contemplated under this Agreement or which have been obtained and are
unconditional and are in full force and effect and such notices which
have been given.
C. The execution, delivery and performance of this Agreement by Purchaser
will not:
(1) constitute a violation of Purchaser's Restated Articles of
Incorporation or Bylaws;
(2) to Purchaser's knowledge, constitute a violation of any statute,
judgment, order, decree or regulation or rule of any court,
governmental authority or arbitrator applicable or relating to
Purchaser; or
(3) constitute a default under any contract to which Purchaser is a
party except where such default would not have a material adverse
effect upon the ability of Purchaser to perform its obligations
under this Agreement.
D. This Agreement has been duly authorized, executed and delivered by
Purchaser. This Agreement constitutes the legal, valid and binding
obligation of Purchaser, enforceable in accordance with its terms,
except as may be limited by bankruptcy, reorganization, insolvency and
similar laws of general application relating to or affecting the
enforcement of rights of creditors.
9. MUTUAL COVENANTS. Purchaser and Seller further agree as follows:
A. Each party shall bear its own expenses incurred in connection with the
preparation, execution and performance of this Agreement and the
transactions contemplated hereby, including all fees and expenses of
agents, representatives, counsel and accountants. In case of
termination of this Agreement, the obligation of each party to pay its
own expenses shall be subject to any rights of such party arising from
a breach of this Agreement by the other party.
B. In connection with the transactions contemplated by this Agreement,
all information furnished to a party shall be kept confidential by
such party and its associates, agents, employees, consultants and
advisors prior to the Closing Date, or in the event the Closing does
not occur, at all times, and the same will not be used in any manner
adverse to the furnishing party. In the event the Closing does not
occur, all such information in any tangible form shall be returned
immediately to the furnishing party. Neither party hereto shall issue
any press release or make any public statement regarding the
transactions contemplated by this Agreement without obtaining the
prior consent of the other party, which consent shall not be
unreasonably withheld.
10. INDEMNIFICATION.
A. Except as otherwise expressly provided in this Section 10, Seller
shall defend, indemnify and hold harmless Purchaser and each of
Purchaser's shareholders, affiliates, officers, directors, employees,
agents, successors and assigns (Purchaser and such persons and
entities, collectively, "Purchaser's Indemnified Persons"), and shall
reimburse Purchaser's Indemnified Persons, for, from and against each
and every demand, claim, loss, liability, judgment, damage, cost and
expense (including, without limitation, interest, penalties, costs of
preparation and investigation, and the reasonable fees, disbursements
and expenses of attorneys, accountants and other professional
advisors) (collectively, the "Losses") imposed on or incurred by
Purchaser's Indemnified Persons, directly or indirectly, relating to,
resulting from or arising out of any inaccuracy in any representation
or warranty of Seller in any respect, whether or not Purchaser's
Indemnified Persons relied thereon or had knowledge thereof, or any
breach or nonfulfillment of any covenant, agreement or other
obligation of Seller under this Agreement or any certificate or other
document delivered or to be delivered pursuant hereto or any tax
filing or return or payment made, or position taken by Seller, which
any authority challenges and which results in assertion of Losses
against Purchaser.
B. Except as otherwise expressly provided in this Section 10, Purchaser
shall defend, indemnify and hold harmless Seller and each of Seller's
shareholders, affiliates, officers, directors, employees, agents,
successors and assigns (Seller and such persons, collectively,
"Seller's Indemnified Persons"), and shall reimburse Seller's
Indemnified Persons, for, from and against all Losses imposed on or
incurred by Seller's Indemnified Persons, directly or indirectly,
relating to, resulting from or arising out of (i) any inaccuracy in
any representation or warranty of Purchaser in any respect, whether or
not Seller's Indemnified Persons relied thereon or had knowledge
thereof, or any breach or nonfulfillment of any covenant, agreement or
other obligation of Purchaser under this Agreement or any certificate
or other document delivered or to be delivered pursuant hereto; (ii)
obligations maturing after the Closing in connection with the
liabilities fisted on Exhibit "C"; or (iii) the ownership, use,
possession or operation of the Business from and after the Closing.
C. If any action, claim or proceeding shall be brought or asserted by one
or more third parties against a party hereto or any successor or
indemnified person related thereto (the "Indemnified Person") in
respect of which indemnity may be sought under this Section 10 from an
indemnifying person or any successor thereto (the "Indemnifying
Person"), the Indemnified Person shall give prompt written notice of
such action, claim or proceeding, together with a copy of such claim,
process or other legal pleading, to the Indemnifying Person, who shall
assume the defense thereof, including the employment" of counsel
reasonably satisfactory to the indemnified Person and the payment of
all expenses; except that any delay or failure to so notify the
Indemnifying Person shall relieve the Indemnifying Person of its
obligations hereunder only to the extent, if at all, that it is
prejudiced by reason of such delay or failure. The Indemnified Person
shall have the right to employ separate counsel in any of the
foregoing actions, claims or proceedings and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at
the expense of the Indemnified Person unless both the Indemnified
Person and the Indemnifying Person are named as parties and the
Indemnified Person shall in good faith determine that representation
by the same counsel is inappropriate. In the event that the
Indemnifying Person, within ten days after notice of any such action,
claim or proceeding (or, if earlier, by the 10th day preceding the day
on which an answer or other pleading must be served in order to
prevent judgment by default in favor of the person asserting such
action, claim or proceeding), fails to assume the defense thereof, the
Indemnified Person shall have the right (upon further notice to the
Indemnifying Person) to undertake the defense, compromise or
settlement of such action, claim or proceeding for the account and at
the risk of the Indemnifying Person and at the Indemnifying Person's
expense, subject to the right of the Indemnifying Person to assume the
defense of such action, claim or proceeding with counsel reasonably
satisfactory to the Indemnified Person at any time prior to the
settlement, compromise or final determination thereof. Anything in
this Section 10 to the contrary notwithstanding, the Indemnifying
Person shall not, without the Indemnified Persons prior written
consent, settle or compromise any action, claim or proceeding, or
consent to the entry of any judgment with respect to any action, claim
or proceeding for anything other than money damages paid by the
Indemnifying Person, and then only if the claimant provides to the
Indemnified Person a release from all liability in respect of such
action, claim or proceeding. The Indemnifying Person may, without the
Indemnified Person's prior written consent, settle or compromise any
such action, claim or proceeding or consent to entry of any judgment
with respect to any such action, claim or proceeding that requires
solely the payment of money damages by the Indemnifying Person, and
that includes as an unconditional term thereof the release by the
claimant or the plaintiff of the Indemnified Person from all liability
in respect of such action, claim or proceeding. The Indemnified Party
and the Indemnifying Party will cooperate with all reasonable requests
of the other. As a condition to asserting any rights under this
Section 10, each Purchaser's Indemnified Person must appoint
Purchaser, and each Seller's Indemnified Person must appoint Seller,
as its sole agent for all matters relating to any claim hereunder.
D. The remedies provided in this Section 10 shall not be exclusive of any
other rights and remedies available by one party against the other,
either in law or in equity. The foregoing indemnification is given
solely for the purpose of protecting the parties to this Agreement and
the persons in the capacities named in this Section 10 and shall not
be deemed extended to, or interpreted in any manner to confer any
benefit, right or cause of action upon any other person.
11. RIGHT OF ACCESS. It is agreed that, after the Closing, Seller shall
have, upon reasonable notice, the right of reasonable access to the accounts,
books, records and other information relating to the Business to meet any
requirements imposed upon Seller by any statute, code or rule of law. Purchaser
shall not be required to keep or maintain such items longer than it normally
retains its own such items.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND LIMITATION AS TO
KNOWLEDGE. The representations and warranties of the parties shall survive the
Closing. Whenever a statement regarding the existence or absence of facts in
this Agreement is qualified by a phrase such as "to such person's knowledge,"
"known to such person," or variations thereof, it is intended by the parties
that the only information to be attributed to such person is information
actually or constructively known to (i) such person, in the case of an
individual, or (ii) in the case of a corporation an officer or managerial
employee as a result of him or her having devoted substantive attention to
matters of such nature during the ordinary course of his or her employment. A
person shall be deemed to have "constructive knowledge" of those matters which
the individual involved could reasonably be expected to have discovered as a
result of undertaking an investigation of such a scope and extent as a
reasonably prudent person would undertake concerning the particular subject
matter during the ordinary course of conducting his or her business affairs.
13. GOVERNING LAW; BINDING EFFECT; SEVERABILITY. This Agreement shall be
construed under and in accordance with the laws of the State of Texas, without
regard for conflict of law rules. All of the terms, agreements, covenants,
warranties, representations, promises and conditions contained in this Agreement
shall apply to, be binding upon and inure to the benefit of the parties hereto
and their respective heirs, executors, administrators, legal representatives,
successors and assigns, and shall survive the Closing hereunder. In case any one
or more of the provisions contained in this Agreement or any instrument(s)
executed pursuant to the terms of this Agreement shall be held to be invalid,
illegal or unenforceable in any respect for any reason, such invalidity,
illegality or unenforceability shall not affect any other provision hereof, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision(s) had never been contained herein. In lieu of any invalid, illegal or
unenforceable provision herein, there shall be added automatically as a part of
this Agreement, a provision as similar in its terms to such invalid, illegal or
unenforceable provision as may be possible and be valid, legal and enforceable.
14. ENTIRE AGREEMENT; MODIFICATION. This Agreement supersedes any and all
other prior understandings and agreements, either oral or in writing, between
the parties hereto with respect to the subject matter hereof and constitutes the
sole and only agreement between the parties with respect to the matter covered
hereby, except that the obligations of any party under any agreement executed
pursuant to this Agreement shall not be affected by this Section 14. Each party
to this Agreement acknowledges that no representations, inducements, warranties,
covenants, guarantees, statements, promises or other agreements, oral or
otherwise, have been made by any party, or by anyone acting on behalf of any
party, which are not embodied herein, and that no representation, inducement,
warranty, covenant, guarantee, agreement, statement or promise not contained in
this writing shall be valid or binding or of any force or effect.
Notwithstanding any investigation by Purchaser of the accounts, books, records
or other business of Seller, Purchaser shall be entitled to rely upon all
agreements, covenants, promises, warranties, representations and guarantees of
Seller and Covenant or contained in this Agreement. No change or modification of
this Agreement shall be valid or binding upon the parties hereto unless such
change or modification shall be in writing and signed by all of the parties
hereto.
15. NO BROKER'S OR FINDER'S FEE. Purchaser represents and warrants that it
has not incurred any obligation to pay any brokerage commission or finder's fee
with regard to the transaction contemplated by this Agreement, and Seller
represents and warrants that any commission or other compensation payable to any
broker(s) engaged by it will be borne by Seller. Purchaser hereby agrees to
fully indemnify Seller, and Seller hereby agrees to fully indemnify Purchaser,
from and against any and all liability (including, without limitation,
reasonable attorneys' fees and other costs of defending any such liability and
enforcing its indemnification) for payment of any commission, fee or other
compensation in the nature of a brokerage commission or finder's fee to any
person, firm or corporation claiming to have acted on behalf of such
indemnifying party in connection with the transaction contemplated by this
Agreement.
16. NOTICES. Except as expressly provided herein, all notices permitted or
required to be given in connection with this Agreement shall be in writing and
shall be delivered either by personal delivery, telegram, or facsimile means, by
certified or registered mail, return receipt requested, or by express courier or
delivery service, addressed to the parties hereto at the following addresses:
Seller: ATN Network, Inc.
Attention: P. Alan Luckett
2426 Arbuckle Court
Dallas, Texas 75229
Tel. No.: 972-488-2959
Fax No.: 972-488-2956
Purchaser: Hispano Television Ventures, Inc.
Attention: Victor F. Mantecon
2426 Arbuckle Court
Dallas, Texas 75229
Tel. No.: 972-488-2959
Fax No.: 972-488-2956
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner herein and
above set forth. Notices shall be deemed given when received, if sent by
telegram, telex, telecopy or similar facsimile means (confirmation of such
receipt by confirmed facsimile transmission being deemed receipt of
communications sent by telex, telecopy or other facsimile means); and when
delivered and receipted for (or upon the date of attempted delivery if delivery
is refused), if hand delivered, sent by express courier or delivery service, or
sent by certified or registered mail, return receipt requested.
17. ATTORNEYS FEES. If any action, at law or in equity, including any
action for declaratory relief, is brought to enforce or interpret the provisions
of this Agreement or to prove that a party is in breach of this Agreement, the
prevailing party or parties shall be entitled to recover reasonable attorneys'
fees from the other party or parties, which fees may be set by the Court in the
trial of such action or may be enforced in a separate action brought for that
purpose, and which fees shall be in addition to any other relief that may be
awarded.
18. COUNTERPARTS. This Agreement may be executed in separate or multiple
counterparts, each of which shall be deemed an original, but all of which
together shall be considered as one and the same Agreement.
19. CONSTRUCTION; SECTION HEADINGS. Whenever the context hereof shall so
require, the singular shall include the plural, the male gender shall include
the female gender and the neuter, and vice versa. The Section headings contained
in this Agreement are provided for convenience only and form no part of this
Agreement and shall not effect its construction or interpretation.
20. ASSIGNMENT. Neither party may assign this Agreement without the express
written consent of the other party.
21. WAIVER. Neither the failure nor any delay on the part of any party in
exercising any right, power or privilege under this Agreement or the documents
referred to herein shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any right, power or privilege. No
waiver of any provision of this Agreement or of any parties failure to comply
with this Agreement shall be valid unless such waiver is in writing and signed
by the party to be charged with waiving the benefits of such provision or
compliance.
22. SPECIFIC PERFORMANCE. The parties hereto acknowledge that a refusal by
any party to consummate the transactions contemplated hereby will cause
irrevocable harm to the other parties hereto, for which there may be no adequate
remedy at law and for which the ascertainment of damages would be difficult.
Therefore, such parties shall be entitled; in addition to, and without having to
prove the inadequacy of, other remedies at law, to specific performance of this
Agreement, as well as injunctive relief (without being required to post bond or
other security).
23. TIME OF THE ESSENCE. With regard to all time periods set forth or
referred to in this Agreement, time is of the essence.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
SELLER:
ATN NETWORK, INC., a Texas corporation
By: /S/ P. ALAN LUCKETT
-----------------------------------
P. Alan Luckett, President
PURCHASER:
Hispano televiSION VENTURES, INC.,
a Texas corporation
By: /s/ Victor F. Mantecon
---------------------------------
Victor F. Mantecon, President of
Network Operations
<PAGE>
EXHIBIT "A"
LIST OF ASSETS
1. One ARS three bay antenna.
2. One Bext 40,000 watt transmitter.
3. One Sony 5850 one-quarter inch record play deck.
4. Two digital IRD's.
5. One four meter satellite dish.
6. Assorted cables, co-ax and other miscellaneous transmission equipment and
supplies required for transmission of Seller's television station.
<PAGE>
EXHIBIT "B"
CONTRACTS ASSUMED
License, dated September 25, 1995, between Tri-Communications, Inc. as
Licensor, and Seller as Licensee.
<PAGE>
EXHIBIT "C"
LIABILITIES ASSUMED
License, dated September 25, 1995, between Tri-Communications, Inc. as
Licensor, and Seller, as Licensee.
Exhibit 10.05
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
as of the 28th day of May, 1999 ("Effective Date"), by and between P. Alan
Luckett ("Luckett") and Hispano Television Ventures, Inc., a Texas
corporation ("Company").
RECITALS
WHEREAS, pursuant to that certain Loan Agreement dated as of this date
(the "Loan Agreement"), by and among the Company and the Investors named
therein, and joined in by Woodcrest Capital, L.L.C., Victor F. Mantecon,
Luckett and Victoria 0. Luckett, the Investors have made a loan to the
Company; and
WHEREAS, Luckett has been employed by the Company since its formation
and the Company and the Investors desire the continued services of Luckett as
an employee of the Company; and
WHEREAS, Luckett desires to serve in the employment of the Company on
the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the parties hereto agree as follows:
1. Employment. The Company hereby employs Luckett to serve in the
capacity of Chief Executive Officer of the Company, and Luckett hereby
accepts such employment, upon the terms and conditions set forth in this
Agreement.
2. Term. The term of this Agreement (the "Term") shall commence on
the Effective Date and shall terminate on the fifth anniversary of such date,
subject to earlier termination as hereinafter provided. Thereafter, this
Agreement shall continue on a year-to-year basis and can be terminated by
either party on 60 days prior written notice.
3. Duties. During the Term, Luckett shall perform such duties for
the Company which are customarily performed by one holding the position of
Chief Executive Officer in other, same or similar businesses or enterprises
and such other consistent duties and responsibilities as established from
time to time by the board of directors of the Company. Luckett agrees that
he will devote his entire time, attention and energies to the business of the
Company and its subsidiaries and affiliates, if applicable, and to the
performance of his duties hereunder which shall include such executive duties
on behalf of the Company as from time to time may be assigned to him by the
board of directors of the Company. In the performance of such duties,
Luckett shall report directly to the board of directors of the Company and
will at all times be subject to the direction of the board of directors of
the Company.
4. Compensation.
(a) Base Compensation. During the Term of this Agreement, the
Company shall pay to Luckett a salary in the amount of $60,000 per annum.
Such annual salary shall be payable during the Term in substantially equal
installments on the last day of each and every month in accordance with the
Company's standard payroll policy or in such other installments as the
parties may mutually agree. Such annual salary shall be in addition to any
bonuses (cash or otherwise), insurance, pension, profit sharing, stock
options, retirement and other fringe benefits which may be provided from time
to time in the discretion of the Company. Such fringe benefits shall be
subject to such rules and procedures as are from time to time specified by
the Company except to the extent to which such rules and procedures are
inconsistent with the provisions of this Agreement, in which case the
provisions of this Agreement shall be controlling.
(b) Management Bonus. In addition to the base compensation provided
for in Section 4(a) above, in the event the Company sustains the levels of total
revenue and net profit margin specified below for a period of three consecutive
months, a Management Bonus in the amount indicated shall be paid to Luckett each
month thereafter:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Targeted Amounts Management Bonus
- ------------------------------------------------------------------------------------
<S> <C>
$200,000 per month in total revenue and Management Bonus in the total amount
a Company net profit margin of 40% of $1,000 per month
- ------------------------------------------------------------------------------------
$300,000 per month in total revenue and Management Bonus in the total amount
a Company net profit margin of 40% of $2,500 per month
- ------------------------------------------------------------------------------------
$500,000 per month in total revenue and Management Bonus in the total amount
a Company net profit margin of 40% of $5,000 per month
- ------------------------------------------------------------------------------------
</TABLE>
Luckett shall be entitled to receive a Management Bonus only if and as
the Company meets the above referenced total revenue and net profit margin
targets (the "Targeted Amounts") and any Management Bonus payment which
commences shall be discontinued if the Company fails to sustain the
applicable Targeted Amounts in any month. Following a discontinuance of a
Management Bonus payment, resumption of the Management Bonus payment will
only occur following achievement of the applicable Targeted Amounts for a
period of three consecutive months following the discontinuance.
Failure of the Company to sustain the Targeted Amounts qualifying
Luckett for a $5,000 per month Management Bonus will not preclude Luckett
from receiving a $2,500 per month Management Bonus or a $ 1,000 per month
Management Bonus if the applicable Targeted Amounts are sustained by the
Company; provided, however, Management Bonuses are not cumulative and receipt
of a Management Bonus for higher Targeted Amounts shall preclude receipt of a
Management Bonus for lower Targeted Amounts. For purposes of this Section
4(b), total revenue and net profit margin shall be determined by reference to
the Company's regularly prepared monthly financial statements and the
determination as to Luckett's entitlement to any Management Bonus by the
Company's board of directors shall be final and conclusive.
(c) Expenses; Benefits. During the Term, Luckett shall be entitled
to an appropriate office, secretarial and clerical staff, as well as
reimbursement, upon proper accounting, of reasonable expenses and disbursements
incurred by Luckett in the course of Luckett's duties in accordance with the
Company's then existing reimbursement policies. Except to the extent that
greater benefits are provided in this Agreement, Luckett shall further be
entitled to fully participate in all other benefits made available or applicable
to other employees of the Company. The receipt of such benefits by Luckett shall
be subject to the Company's eligibility and enrollment requirements pertaining
to such benefit programs.
(d) Vacations. During the Term, Luckett shall be entitled to paid
vacations and personal leaves of absence and leaves to attend professional
conventions and meetings as indicated in the Company's policy manual.
5. Confidentiality and Competitive Activities.
(a) Confidentiality. In view of the fact that Luckett's work as an
executive of the Company will bring him into close contact with many
confidential affairs of the Company and of its subsidiaries and affiliates,
including matters of a business nature such as information about costs, profits,
markets, sales, trade secrets, business ideas, customer lists, plans for future
developments, and information of any other kind not known within the Company's
industry generally (hereinafter, collectively, "Confidential Matters"), Luckett
agrees:
(i) To keep secret all Confidential Matters of the Company and of
any subsidiaries and affiliates of the Company, and not to disclose
them to anyone outside of the Company or its subsidiaries or
affiliates, or otherwise use them or use his knowledge of them for his
own benefit, including, without limitation, use of the trade names or
trademarks of the Company, either during or after the Term, except
with the Company's prior written consent; and
(ii) To deliver promptly to the Company at the termination of the
Term, or at any time the Company may request, all memoranda, notices,
records, reports and other documents (and all copies thereto) relating
to the business of the Company or any of its subsidiaries or
affiliates, including, but not limited to, Confidential Matters, which
he may then possess or have under his control.
(b) Competitive Activities. During the term of the Agreement and for a
period of 60 months from the date of termination of Luckett's employment, if the
Company terminates this Agreement for Cause or if Luckett terminates this
Agreement, without Good Reason, Luckett shall not, directly or indirectly
(whether for compensation or otherwise), alone or as an officer, director,
stockholder (excepting not more than 5% stockholdings for investment purposes in
securities of publicly held and traded companies), partner, associate, employee,
agent, principal, trustee, salesman, consultant, or in any other employment,
management or ownership capacity whatsoever, take any action in or participate
with or become interested in or associated with any person, firm, partnership,
corporation or other entity whatsoever that at the time Luckett joins such
party, (a) is engaged in any manner in the television programming and television
network business in United States of America or Mexico, or (b) plans to enter
such business (the "Competitive Activities"). In the event this Agreement is
terminated by the Company without Cause or if Luckett resigns for Good Reason,
the above restrictions shall also apply, however, the Competitive Activities
shall be limited to the Hispanic television programming and television network
business in the United States of America or Mexico.
6. Remedies for Breach. If Luckett breaches any of the provisions of
Section 5 of this Agreement, the Company shall have the following rights and
remedies, in addition to any others, each of which shall be independent of the
other and severally enforceable:
(i) The right to have the provisions of Section 5 of this
Agreement specifically enforced by any court having equity
jurisdiction in Tarrant County, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury to
the Company and that money damages will not provide an adequate remedy
to the Company;
(ii) The right and remedy to recover from Luckett the Company's
actual damages, including court costs and attorneys' fees, arising from
such default;
(iii) The right to require Luckett to account for and pay over to
the Company all compensation, profits, monies, accrual increments, or
other benefits (collectively the "Benefits") derived or received by
Luckett as a result of any transaction constituting a breach of any of
the provisions of Section 5, Luckett hereby agreeing to account for and
pay over the benefits to the Company; and
(iv) The right to terminate Luckett's employment pursuant to
Section 7 of this Agreement.
7. Termination of Agreement.
(a) Death or Total and Permanent Disability. This Agreement shall
automatically terminate upon the death or total and permanent disability of
Luckett. Total and permanent disability shall mean an infirmity preventing
Luckett from performing his duties under this Agreement without any hope or
expectation of an ability to resume such duties during the Term as determined by
Luckett's treating physician. If Luckett's employment is terminated due to death
or total and permanent disability, Luckett or Luckett's estate, as the case may
be, shall be entitled to receive (i) his then current daily salary for a period
of two months following the date of such termination, based upon the per annum
salary set forth in Subsection 4(a) hereof The timing and manner of payment of
such salary shall be in accordance with the salary arrangements in effect as to
Luckett prior to his termination of employment.
(b) Temporary Disability. For purposes of this Subsection 7(b),
temporarily disabled or temporary disability shall mean an infirmity preventing
Luckett from performing his duties hereunder which cannot or is not considered
total and permanent disability as defined in Subsection 7(a) hereof In the event
Luckett is temporarily disabled, this Agreement shall not terminate and Luckett
shall be entitled to receive (i) his then current salary during the first two
months of such disability, based upon the per annum salary set forth in
Subsection 4(a) hereof. The timing and manner of payment of such salary shall be
in accordance with the salary arrangements in effect as to Luckett at the onset
of the disability. No additional salary shall be paid to Luckett until he is
able to perform his duties on a full-time basis.
(c) Termination For Cause. The Company may terminate this Agreement
any time for "Cause" in accordance with the procedures provided in this
Subsection 7(c). Termination by the Company of Luckett's employment for "Cause"
shall mean conduct amounting to (i) substantial neglect or inattention by
Luckett of his duties under this Agreement, (ii) fraud or dishonesty against the
Company, (iii) Luckett's willful misconduct, repeated refusal to follow the
reasonable directions of the board of directors of the Company, or knowing
violation of law in the course of performance of the duties of Luckett's
employment with the Company, (iv) repeated absences from work without a
reasonable excuse, (v) repeated intoxication with alcohol or drugs while on the
Company's premises during regular business hours, (vi) a conviction or plea of
guilty or nolo contendere to a felony or a crime involving dishonesty, or
(vii) a breach or violation of the terms to this Agreement or other agreement to
which Luckett and the Company are party. In the event of termination of
Luckett's employment for Cause, Luckett shall be entitled to receive the base
salary set forth in Subsection 4(a) hereof through the date of termination and
shall not be entitled to any Management Bonus or other benefits on a prospective
basis. Prior to termination of Luckett's employment for "Cause," the Company
shall be required to provide written notice to Luckett of the act or omission
complained of, giving reasonably specific details, and Luckett shall be given a
period of 30 days in which to cure or correct such act or omission, in which
event the right to terminate for "Cause" in respect of such act or omission
shall be extinguished.
(d) Other Termination. During the Term, if Luckett's employment is
terminated without Cause or if Luckett resigns for Good Reason (as hereinafter
defined), he shall nevertheless be entitled to receive, in consideration in part
for his compliance with Section 5, total post-termination compensation equal
(i) to his then current daily salary for a period of three months, based upon
the per annum salary set forth in Subsection 4(a) of this Agreement; provided,
however, if Luckett engages in any competitive activity directly or indirectly,
at any time subsequent to termination without Cause or resignation for Good
Reason, thereafter he shall not be entitled to any such post-termination
compensation. The timing and manner of payment of such salary shall be in
accordance with the salary arrangements in effect as to Luckett prior to his
employment termination. "Good Reason" shall mean the continuing breach of a
material provision of this Agreement by the Company. Prior to termination of
Luckett's employment for Good Reason, Luckett shall be required to provide
written notice to the Company of the act or omission complained of, giving
reasonably specific details, and the Company shall be given a period of 30 days
in which to cure or correct such act or omission, in which event the right to
terminate for "Good Reason" in respect of such act or omission shall be
extinguished.
8. Communications. Any notice, request or other communication required
or permitted by this Agreement to be mailed, given or delivered to Luckett shall
be in writing, addressed to- him at his address shown below or at such other
address as he shall have furnished from time to time to the Company for the
purposes hereof, and any payment to Luckett under this Agreement may be made by
check delivered to him or mailed to or delivered at such address. Any notice,
request or other communication required or permitted by this Agreement to be
given to the Company is to be in writing, addressed to the Company, for the
attention of Chief Executive Officer, at the address of the Company's principal
office in 2426 Arbuckle Court, Dallas, Texas 75229, or at such other address as
the Company shall have furnished to Luckett for the purposes hereof
9. Amendments. This Agreement may be amended or modified only by a
written instrument executed by the Company and Luckett.
10. BINDING EFFECT. This Agreement shall be binding upon, and shall
inure to the benefit of, Luckett; the obligations of Luckett under the Agreement
are personal and this Agreement may not be assigned by Luckett. This Agreement
shall be binding upon, and shall inure to the benefit of, the Company and shall
also bind and inure to the benefit of any successor of the Company by merger or
consolidation or any assignee of all or substantially all of its properties or
business, but, except to any such successor or assignee of the Company, this
Agreement may not be assigned by the Company. The Company agrees that it shall
be a condition to consummation of any transaction involving a permitted
assignment of this Agreement that such successor or assignee agree in writing to
assume the obligations of the Company under this Agreement; provided, however,
such permitted assignment shall not relieve the Company of such obligations.
11. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, without regard for conflicts
of law rules and, in the event that any party to this Agreement shall bring a
suit or cause of action in a court of law for construction, interpretation, or
enforcement of this Agreement, or for damages or injunctive relief for an
alleged breach of the terms or provisions of this Agreement, then venue for any
such suit or cause of action shall be exclusively in Tarrant County, Texas.
12. Severability. If any provision of this Agreement shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement shall not
be affected, and each term hereof shall be valid and shall be enforced to the
extent permitted by law.
13. Counterparts. This Agreement may be executed in multiple
counterparts, each of which is to be deemed an original, but all of which,
together, constitute one and the same instrument.
14. Entire Agreement. This Agreement shall constitute the entire
agreement between the parties superseding all prior agreements, and may not be
modified or amended, and no waiver shall be effective, unless by written
document signed by both parties hereto; provided, however, no modification,
amendment or waiver by the Company shall be effective unless approved by the
board of directors of the Company and recorded in the approved minutes of such
meeting. In the event of any inconsistency between the provisions of this
Agreement and the provisions of any other document or instrument, or rule or
procedure of the Company, the provisions of this Agreement shall be controlling.
15. Enforcement. In the event either party resorts to a lawsuit or
initiation of arbitration to enforce this Agreement, the prevailing party shall
be entitled to recover the reasonable costs of pursuing a lawsuit or
arbitration, including court costs and reasonable attorney's fees.
EXECUTED effective as of the day and year first above written.
HISPANO TELEVISION VENTURES, INC., a
Texas corporation
By: /s/ P. Alan Luckett
----------------------------------
Title: Chief Executive Officer
/s/ P. Alan Luckett
----------------------------------
P. Alan Luckett
Address
4610 River Forest Drive
Arlington, Texas 76017
Exhibit 10.06
CONSULTING AGREEMENT
This Consulting Agreement (hereinafter "Agreement") is made this 28th day
of May, 1999 ("Effective Date"), by and between Hispano Television Ventures,
Inc., a Texas corporation (the "Company"), and Woodcrest Capital, L.L.C., a
Texas limited liability company (the "Consultant").
RECITALS
WHEREAS, pursuant to that certain Loan Agreement dated as of this date (the
"Loan Agreement"), by and among the Company and the Investors named therein, and
joined in by Consultant, Victor F. Mantecon, P. Alan Luckett and Victoria O.
Luckett, the Investors have made a loan to the Company; and
WHEREAS, the Company is in the business of producing Hispanic programming,
with offices located at 2426 Arbuckle Court, Dallas, Texas 75229 (the
"Production Business"); and
WHEREAS, Consultant has valuable experience in general business and
financial consulting and has assisted the Company in obtaining the loan from the
Investors; and
WHEREAS, the Company desires to continue to receive the services of
Consultant on an ongoing basis, to the exclusion of all other parties in a like
or similar business;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, it is agreed as follows:
AGREEMENT
1. ENGAGEMENT OF CONSULTANT: The Company hereby engages Consultant as
an advisor, counselor and general resource person in the conduct of the
Company's business.
2. TERM OF ENGAGEMENT AND TERMINATION:
(a) Subject to earlier termination as hereinafter provided, the
term of this Agreement shall commence on the Effective Date and shall
continue for a minimum period of twelve months. At the end of such
twelve month period, this Agreement shall renew automatically for
successive twelve month periods, subject to termination by either
party upon delivery of thirty (30) days advance written notice of
termination.
(b) This Agreement may be terminated by either party upon written
notice, if the other party breaches any obligation provided hereunder
and the breaching party fails to cure such breach within thirty (30)
days following request for cure; provided that the cure period for any
failure of Company to pay charges due hereunder shall be 15 days from
the date of receipt by Customer of notice of such failure.
(c) Within 60 days of termination of this Agreement for any
reason, Consultant shall submit to Company an itemized invoice for any
expenses theretofore accrued under this Agreement.
3. PLACE OF ENGAGEMENT: Consultant shall perform services under this
Agreement at the Company's or Consultant's offices, or at such other interim
locations as the Company may from time to time reasonably request, or at such
other places as the parties hereto agree upon from time to time.
4. DUTIES AND RESTRICTIONS: During the Term of this Agreement, the
Consultant's duties shall consist of the following:
(a) Providing general business advisory services to Company's
President, including support and guidance of the Company's direction
in the following areas: (i) development and implementation of a
business plan and strategy; (ii) determination of management
organizational structure and staffing needs; (iii) identification and
recruitment of qualified personnel in conjunction with Company's
management; (iv) engagement and supervision of legal and accounting
advisors; and (v) assessment of working capital needs and arrangement
of financing for such needs as necessary; and
(b) Performance of the functions of the Secretary and Treasurer
of the Company until such time as qualified officers are elected by
the Board of Directors to act in such capacities.
Consultant shall be required to be available to the Company's President,
either by telephone or at the Company's facilities, if reasonably necessary, at
such times as Company reasonably requests. Consultant shall not be precluded
from other similar or related employment.
5. CONSULTING FEES AND REIMBURSEMENTS. Consulting fees and
expense reimbursements accruing to Consultant shall be as follows
(a) The Company shall issue to Consultant, as compensation for
services and reimbursement of all expenses rendered to or incurred on
behalf of the Company prior to the Effective Date, a total of
1,066,667 shares of the Company's common stock, $.001 par value per
share, constituting a 10% equity share of the Company's fully diluted
equity upon consummation of the transactions contemplated by the Loan
Agreement. Company shall issue and deliver to Consultant a stock
certificate representing such shares on the Effective Date.
(b) Subsequent to the Effective Date, the Company shall reimburse
Consultant for any direct expenses paid or incurred in furthering
Company's business, including automobile, travel, entertainment and
the like, but exclusive of salaries and related expenses of
Consultant's personnel.
(c) In case at any time the Company shall (i) issue any shares of
its common stock for a price less than $.09375 per share (the "Stated
Value") or (ii) issue any option, warrant or other convertible
security or right to subscribe for or purchase capital stock of the
Company at a price per share less than the Stated Value, then the
Company shall immediately issue to Consultant an additional number of
shares of its common stock determined by subtracting 1,066,667 from
the number obtained by dividing $100,000 by the price per share at
which such common stock was so issued or by the exercise or conversion
price of such option, warrant or other convertible security or right
to subscribe for or purchase capital stock of the Company; provided,
however, that no additional shares will be issued to Consultant on
account of securities issued by the Company in connection with (i)
stock option plans in which employees, independent directors, or
consultants of the Company are eligible to participate, (ii) exercises
of rights, that are outstanding on or before the date of this
Agreement, to acquire shares of common stock, or (iii) a Qualified IPO
or Qualified Sale, as such terms are defined in the Certificate of
Designations for the Company's Series A Convertible Preferred Stock
filed with the Texas Secretary of State on May 26, 1999. The
provisions of this Section 5(c) shall survive the termination of this
Agreement for a period of five (5) years from the date of this
Agreement and Consultant shall be entitled to receive the additional
shares of common stock referred to above whether or not Consultant is,
at the time such additional shares become issuable, rendering services
to the Company under this Agreement.
6. INDEPENDENT CONTRACTOR STANDING. Consultant is an independent
contractor under the terms of this Agreement and its personnel shall not be
deemed nor construed to be employees of the Company. Consultant shall have full
authority to employ personnel at such compensation and on such other condition
as Consultant may deem proper to perform its services under this Agreement.
MISCELLANEOUS PROVISIONS
8. DISCLAIMER OF CONSEQUENTIAL DAMAGES. The Company shall not in any
action or proceeding, or otherwise assert any claim for consequential damages
against Consultant on account of any loss, cost, damage or expense which the
Company may suffer or incur because of any act or omission of Consultant or its
employees in the performance of the services pursuant to this Agreement and the
Company hereby expressly waivers all such claims.
9. AMENDMENTS AND ASSIGNMENT. This Agreement can be altered or otherwise
amended only by a written instrument signed by both of the parties hereto.
Assignment of any interest in this Agreement by Consultant shall not be
permitted.
10. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed in all respects by the laws of the State of Texas, without regard
to its conflict of law rules. Obligations hereunder are performable in Tarrant
County, Texas, and venue for any action arising out of or involving this
Agreement shall be in said County.
11. COMPLETE AGREEMENT. This Agreement constitutes the entire agreement
between the parties concerning the subject matter hereof, and it supersedes all
previous written or oral negotiations, commitments and understandings.
12. COUNTERPARTS AND HEADINGS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument. All headings herein are
inserted for convenience or reference only and shall not affect the meaning or
interpretations of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
CONSULTANT:
WOODCREST CAPITAL, L.L.C., a Texas
limited liability company
By: /S/ DOUGLAS K. MILLER
---------------------------
Name: DOUGLAS K. MILLER
Title: MANAGER
COMPANY:
HISPANO TELEVISION VENTURES, INC.
By: /S/ VICTOR F. MANTECON
-----------------------------
Victor F. Mantecon, President
Exhibit 10.07
BILL OF SALE
This Bill of Sale, dated effective May 28, 1999, is executed and delivered by P.
Alan Luckett and Victoria O. Luckett (the "Assignors"), and the Assignee herein
named in accordance with that one certain Loan Agreement, dated effective May
28, 1999, between Hispano Television Ventures, Inc., and certain investors
listed therein, and joined in by Assignors, Victor F. Mantecon and Woodcrest
Capital, L.L.C. (the "Loan Agreement").
RECITALS
The Assignors, for and in consideration of the payment of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, do hereby grant, bargain, sell convey, assign,
transfer, set over and deliver to Hispano Television Ventures, Inc., a Texas
corporation (hereinafter, together with its successors and assigns referred to
as the "Assignee"), all of the Assignors' right, title and interest in and to
all of the Assignors' assets and properties listed on Exhibit A.
TO HAVE AND TO HOLD the above described assets and properties assigned hereunder
(hereinafter collectively the "Assets") unto Assignee, its successors and
assigns, forever.
The Assignors hereby assign to Assignee with full right of subrogation, to the
extent so transferable, the benefit of and right to enforce the covenants and
warranties, if any, which Assignors are entitled to enforce with respect to the
Assets. The Assignors represent and warrant to Assignee, its successors and
assigns, that (i) Assignors have good and valid title to all the Assets, free of
all liens, security interests, encumbrances, pledges, charges, and claims of any
kind; (ii) the Assets are all of the Assignors' assets which have, prior to the
date hereof, been used by the Assignors as principals of the Assignee in
relation to the business of Assignee; and (iii) Assignors will defend the title
to the Assets against all claims and demands of all persons whomsoever.
Assignors and Assignee each agree to execute, acknowledge and deliver to the
other all such additional instruments, notices and other documents and to do all
such further acts and things as may be necessary or useful to more fully and
effectively effect the intent of this Bill of Sale.
This Bill of Sale may be executed simultaneously in one or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
This Bill of Sale shall bind and inure to the benefit of Assignors and Assignee
and their respective successors and assigns.
This Bill of Sale shall be construed in accordance with and be governed in all
respects by the laws of the State of Texas, without regard to its conflict of
law rules.
Executed effective the 28th day of May, 1999.
ASSIGNORS:
/S/ P. ALAN LUCKETT
-----------------------------
P. Alan Luckett
/S/ VICTORIA O. LUCKETT
-----------------------------
Victoria O. Luckett
ASSIGNEE:
HISPANO TELEVISION VENTURES, INC.
By: /S/ VICTOR F. MANTECON
------------------------
Victor F. Mantecon,
President
<PAGE>
STATE OF TEXAS
COUNTY OF TARRANT
Before me, the undersigned authority, on this day personally appeared P. Alan
Luckett and Victoria O. Luckett, known to me to be the person whose name is
subscribed to the foregoing instrument, and he acknowledged to me that he had
executed the same for the purposes and consideration herein expressed, as his
act and deed, in the capacity therein stated.
Given under my hand and seal of office, this 28th day of May, 1999.
/S/ DAISY B. ROGERS
-----------------------------
Notary Public in and for the
State of Texas
DAISY B. ROGERS
-----------------------------
[Seal] Printed Name of Notary
My Commission Expires:
-----------------------------
9/16/2001
STATE OF TEXAS
COUNTY OF TARRANT
Before me, the undersigned authority, on this day personally appeared Victor F.
Mantecon, President of Hispano Television Ventures, Inc., a Texas corporation,
known to me to be the person whose name is subscribed to the foregoing
instrument, and he acknowledged to me that he had executed the same for the
purposes and consideration herein expressed, as the act and deed of said
corporation, in the capacity therein stated.
Given under my hand and seal of office, this 28th day of May, 1999.
/S/ DAISY B. ROGERS
-----------------------------
Notary Public in and for the
State of Texas
DAISY B. ROGERS
-----------------------------
[Seal] Printed Name of Notary
My Commission Expires:
-----------------------------
9/16/2001
<PAGE>
ALAN LUCKETT
BALANCE SHEET
AS OF MAY 26,1999
<TABLE>
<CAPTION>
ASSETS LIABILITY & EQUITY
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash $ 0 Notes Payable $6,000
Accounts Receivables 0 Accounts Payable 0
Other Current Assets 0 Taxes Owing:
------- Real Estate Taxes 0
Total Current Assets 0 Income Taxes 0
LONG TERM ASSETS: Other Taxes 0 0
Real Estate 0 -----
Operating Assets: Other Liabilities 0
Television Production ------
Equipment 82,000 Total Current Liabilities 6,000
Production Supplies and LONG TERM LIABILITIES:
Material 54,900 Loans from Shareholders
Furniture and Fixtures 0 136,900 Other Liabilities 0
------ ------
Organizational Costs/ Total Liabilities 0
Prepaid Exp. 0 Stockholders Equity:
Tape and Video Library 0 Common Stock 0
------- Excess Assets over Liabilities 130,900
Total Long Term Assets 136,900 -------
Total Assets 136,900 Total Stockholder Equity 130,900
Total Liabilities and Equity $136,900
</TABLE>
Specify any of the above assets pledged as collateral: None
Specify any of the above liabilities secured by collateral: None
Contingent Liabilities: None
Judgements or suits pending against the undersigned at this time: None
The undersigned declares and certifies that the above statement are a true and
correct account of the condition of our business as of the above date.
Signature: /S/ PATRICK ALAN LUCKETT
---------------------------------------------
Patrick Alan Luckett- Chief Financial Officer
Exhibit 10.08
May 28, 1999
Mr. Alan Luckett
Hispano Television Ventures, Inc.
2426 Arbuckle Court
Dallas, Texas 75229
Re: Loan Agreement, dated May 28, 1999, by and among
Hispano Television Ventures, Inc. and certain Investors
named therein
Dear Alan:
In connection with the above referenced agreement (the "Loan Agreement"),
this letter confirms that I am the sole shareholder of ATN Network, Inc., a
Texas corporation ("ATN"), having acquired the shares by assignment from Don
Shelton, Randy Moseley, Jerald Powell and Judy L. Bryant in December 1998. To
avoid legal action by me against the other shareholders for misrepresentation in
connection with my original investment in ATN, the prior shareholders of ATN
conveyed all the common stock of ATN to me at that time. I have furnished to you
original stock certificates endorsed in blank by all the prior shareholders as
evidence of the foregoing.
Also accompanying this letter is an Assignment Separate from Certificate
conveying all of the issued and outstanding shares of ATN's capital stock to
Hispano Television Ventures, Inc. ("HTV"). This delivery is being made in
consideration for the issuance to me of 1,066,667 shares of HTV's common stock
pursuant to Section 4.01(f) of the Loan Agreement. In connection with such
issuance, I agree to be bound as though I were a "Principal" to the covenants
and agreements of the "Principals" set forth in Sections 5 and 6 of the Loan
Agreement relating to the election of directors of HTV and restrictions on
transfers of my shares of common stock of HTV; provided, however I intend to
transfer 533,333 of my HTV shares to Mr. Donald B. Sallee at the earliest date
possible. My transfer to Mr. Sallee will be subject to his agreement to be
similarly bound by Sections 5 and 6 of the Loan Agreement.
Except for my intended transfer to Mr. Sallee, I represent to HTV that I am
acquiring its shares of common stock for my own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution of the shares. I further understand that the HTV shares have not
been registered under the Securities Act of 1933, as amended, and that my
certificate and Mr. Sallee's certificate for the HTV shares will bear a legend
to that effect.
Sincerely,
/s/ Bob J. Bryant
Bob J. Bryant
cc: Doug Miller
Exhibit 10.09
Stock Option Agreement
This Stock Option Agreement (the "Agreement") is made and entered into by and
between American Independent network, Inc., a Delaware Corporation (the
"Company"), and James A. Ryffel, an individual ("Ryffel").
Introductory Provision
Ryffel is a nominee for Director of the Company in the upcoming annual meeting
of shareholders and is a beneficial interest in Company stock currently owned by
Hispano Television Ventures, Inc.
The Company lacks the liquidity to meet its current operating obligations
including the on payment of payroll, rent, electricity, phone, legal, etc. And
lacks the credit capacity to secure a loan to raise the necessary funds from a
third party banking institution to meet these obligations.
The Company believes that it is in the best interest of the Company to enter
into an agreement with Ryffel which will facilitate a bank loan that will bring
in an infusion of $5000,000 cash to the Company to meet its current operating
obligations. The Company has agreed to utilize the credit capacity of Ryffel as
a guarantor of bank indebtedness with Bank One, N.A.
The Company acknowledges its ability to secure a bank loan from Bank One was
based solely upon Mr. Ryffel providing a personal guarantee to the bank.
Agreements
For valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and for the purposes and intents expressed in this Agreement, and
for other separate and valuable consideration, the Company and Ryffel agree as
follows:
The Board of Directors and The Company in return for and as consideration for
Mr. James A. Ryffel providing a personal guarantee to Bank One, N.A. hereby
approves the issuance to Mr. Ryffel the following stock option:
1) If the bank loan is repaid within 90 days of the funding of the loan,
an option granting Mr. Ryffel the right to acquire 500,000 shares of
Company stock at an option price of $.20 per share is awarded. This
Option is exercisable any time within 2 years of funding of the loan.
2) If the bank loan has not been repaid within the 90 days and its
repayment occurs within 90 to 120 days, an option granting Mr. Ryffel
the right to acquire 500,000 shares of Company stock at an option
price of $.10 per share is awarded. This option is exercisable any
time within 2 years of funding of the loan.
3) If the bank loan has not been repaid within the 120 days, an option
granting Mr. Ryffel 500,000 shares of Company stock at an option price
of $.01 per share is awarded as consideration for guaranteeing the
Company's loan.
Miscellaneous
This Agreement contains the full and complete agreement of the parties hereto.
In any case any one or more of the provisions contained in this Agreement shall
for any reason be held to be invalid, illegal, or unenforceable in any respect,
such invalidity, illegality, or unenforceability shall not affect any other
provisions thereof and this Agreement shall be construed as if such invalid, or
unenforceable provision had never been contained herein.
This Agreement shall be construed under and in accordance with laws of the State
of Texas, and all obligations contained herein shall be performable in Tarrant
County, Texas.
This Agreement may be executed in multiple counterparts, by one or more
signatories, separately and each of such counterparts shall be deemed an
original for all purposes, and all such signed counterparts shall constitute but
one and the same instrument.
For purposes of the parties' execution of this Agreement, it is expressly agreed
that a facsimile or telecopy of a party's signature hereto shall be as valid,
binding and enforceable as the original.
Executed this 8th day of November, 1999.
/S/ RANDY MOSELEY
------------------------------
By: RANDY MOSLEY By: /S/ JAMES A. RYFFEL
------------------------------ ------------------------------
Title: CHIEF FINANCIAL OFFICER Title:
------------------------------ ------------------------------
Exhibit 10.10
ASSET PURCHASE AGREEMENT
BETWEEN
AND
AMONG
[CARLOS ORTIZ]
AS SELLER
AND
HISPANIC TELEVISION NETWORK, INC.
AS BUYER
Dated as of December 15, 1999
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("AGREEMENT") is made and entered into as of
December 15, 1999, between and among [CARLOS ORTIZ, an INDIVIDUAL ] ("SELLER"),
and HISPANIC TELEVISION VENTURES, INC., a Delaware corporation ("BUYER").
Background
This Agreement provides for the sale by Seller to Buyer of certain assets,
real, personal and mixed, tangible and intangible, owned by Seller and
associated with or employed in the operations of [10] television stations
located in Del Rio, Texas; San Antonio, Texas; Corpus Christi, Texas; Phoenix,
Arizona; Oklahoma City, Oklahoma; McAllen, Texas; Tulsa, Oklahoma; Uvalde,
Texas; Carrizo Springs, Texas; and Clovis, New Mexico (the "STATIONS"),
including, without limitation, all buildings and all real property, whether
developed or undeveloped, associated with the Stations, but specifically
excluding the Excluded Assets as hereinafter defined and provided. The Stations
are described more fully in Schedule 1 attached hereto and made a part hereof.
In consideration of the agreements, covenants, representations and
warranties hereinafter set forth, and other good and valuable consideration, the
receipt and adequacy of all of which are forever acknowledged and confessed, the
parties hereto agree as follows:
1. SALE OF ASSETS AND CERTAIN RELATED MATTERS.
1.1 SALE OF ASSETS. Subject to the terms and conditions of this
Agreement, Seller agrees to sell, convey, transfer and deliver to Buyer and
Buyer agrees to purchase as of Closing, as hereinafter defined, all assets,
real, personal and mixed, tangible and intangible, owned by Seller and
associated with or employed in the operations of the Stations (whether owned by
Seller or one or more of its affiliates), including, without limitation, the
following items (collectively, the "ASSETS"):
(a) Fee title to all real property together with all
improvements, buildings and fixtures located thereon or therein (collectively,
the "REAL PROPERTY");
(b) All major, minor or other equipment (including without
limitation, all computers and all data processing, software and source codes),
vehicles, furniture and furnishings;
(c) All usable supplies and inventory;
(d) Prepaid expenses, claims for refunds and rights to
offset;
(e) All notes and accounts receivable, whether recorded
or unrecorded or assigned for collection;
(f) All claims, recorded or unrecorded interests in real
property, choses in action and judgments in favor of Seller;
(g) All partnership and joint venture interests, whether
as a general partner or a limited partner;
(h) All financial and personnel records (including, without
limitation, all accounts receivable records, equipment records, administrative
libraries, billing records, documents, catalogs, books, records, files,
operating manuals and current personnel records);
(i) All of Seller's interest in all commitments, contracts,
leases and agreements outstanding in respect of the Assets which Buyer elects to
assume in writing (collectively, the "CONTRACTS");
(j) All licenses and permits, to the extent assignable, held
by Seller relating to the ownership, development and operations of the Stations
(including, without limitation, any pending or approved governmental approvals
regarding the Stations);
(k) All patents and patent applications and all names, trade
names, trademarks and service marks (or variations thereof) associated with the
Stations; and
(l) Seller's interest in all property, real, personal and
mixed, tangible and intangible, arising or acquired in the ordinary course of
Seller's business in respect of the Stations between the effective date hereof
and Closing.
Seller shall convey good and marketable title to the Assets and all parts
thereof to Buyer free and clear of all agreements, liabilities, claims,
assessments, security interests, liens, restrictions and encumbrances, except as
expressly provided herein to the contrary.
1.2 EXCLUDED ASSETS. The following items (the "EXCLUDED Assets"),
which are related to the Assets, are not intended by the parties to be a part of
the sale and purchase contemplated hereunder and are excluded from the Assets:
(a) Restricted and unrestricted cash and cash
equivalents; and
(b) Any records which by law Seller is required to retain
in its possession.
All other assets of Seller associated with or employed in the operation of the
Stations, whether or not scheduled or described herein, are included in the
Assets to be conveyed to Buyer pursuant to this Agreement.
1.3 ASSUMED LIABILITIES. As of Closing, Buyer agrees to assume the
future payment and performance of the following items (collectively, the
"ASSUMED LIABILITIES"):
(a) The Contracts; and
(b) Such other liabilities of Seller which Buyer elects
to assume in writing.
Buyer shall not be liable for, and Seller shall indemnify and hold Buyer and the
Assets harmless from and against, any asserted liability relating to (i)
Seller's assignment and Buyer's assumption of the Assumed Liabilities, (ii)
uncured defaults in performance of the Assumed Liabilities for periods prior to
December 31, 1999, (iii) unpaid amounts in respect of the Assumed Liabilities
that are past due as of December 31, 1999 and/or (iv) rights or remedies claimed
by third parties against Buyer which broaden or vary the rights and remedies
such third parties would have had against Seller if the sale and purchase of the
Assets were not to occur.
1.4 EXCLUDED LIABILITIES. Except as expressly provided to the
contrary in Section 1.3 above, under no circumstance shall Buyer be obligated to
pay or assume, and none of the Assets shall be or become liable for or subject
to, any liability of Seller, whether fixed or contingent, recorded or unrecorded
(collectively, the "EXCLUDED LIABILITIES").
1.5 PURCHASE PRICE. Subject to the terms and conditions hereof, in
reliance upon the representations and warranties of Seller herein set forth and
as consideration for the sale and purchase of the Assets as herein contemplated,
Buyer agrees to tender to Seller at Closing as the purchase price hereunder (the
"PURCHASE PRICE"), and in the manner hereinafter provided, the total amount of
[Ten Million Dollars ($10,000,000)]. The Purchase Price shall be due and payable
at Closing as follows:
(a) Buyer shall tender to Seller in cash an amount equal to
the Purchase Price less Three Million Dollars ($3,000,000).
(b) Buyer shall deliver to Seller _____________ shares of
Buyer's common stock registered in the name of Seller (the "Shares"), the Shares
having a current value of Three Million Dollars ($3,000,000) based upon the
average of the high "bid" and the low "asked" price of Buyer's common stock on
December ___31ST_, 1999.
1.6 CASH DEPOSIT AND LMA FEE. Buyer has tendered to Seller the
amount of Fifty Thousand Dollars ($50,000.00) as a cash deposit (the "CASH
DEPOSIT"). On or before December 31, 1999, Buyer will tender to Seller the
amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) to serve as
a license management agreement fee ("LMA FEE"). The LMA Fee shall entitle Buyer
to (i) full and complete operational access to and (ii) all revenue generated by
all of the Stations commencing on the date of payment of the LMA Fee to Seller
and continuing until Closing or for a period not to exceed twenty-four (24)
months from the date of this Agreement. Seller and Buyer will enter into a
License Management Agreement substantially in the form of EXHIBIT A attached
hereto and made a part hereof with respect to each of the Stations to evidence
Buyer's rights in respect of the Stations pending the Closing or during such
twenty-four (24) month period. Upon Closing, the Cash Deposit and the LMA Fee
shall be credited against the cash portion of the Purchase Price due and payable
by Buyer. In the event Closing does not occur as a result of Seller's breach of
this Agreement, Seller shall immediately refund the Cash Deposit and the LMA Fee
to Buyer, without limiting any remedies available to Buyer at law or in equity.
2. CLOSING.
2.1 CLOSING. Subject to the satisfaction or waiver by the
appropriate party of all of the conditions precedent to Closing specified in
Sections 7 and 8 hereof, the consummation of the sale and purchase of the Assets
and the other transactions contemplated by and described in this Agreement (the
"Closing") shall take place at the offices of Buyer at 10:00 a.m. local time on
or before December 15, 2001, or at such later date and/or at such other location
as the parties hereto may mutually designate in writing (the "Closing Date").
2.2 ACTIONS OF SELLER AT CLOSING. At the Closing and unless
otherwise waived in writing by Buyer, Seller shall deliver to Buyer the
following:
(a) Deeds containing general warranty of title, fully executed
by Seller in recordable form, conveying to Buyer good and marketable fee title
to the Real Property, subject only to the liens and encumbrances permitted
herein;
(b) A General Bill of Sale and Assignment, fully executed by
Seller, conveying to Buyer good and marketable title to all the Assets other
than the Real Property;
(c) An Assignment of Leases and Contracts, fully executed
by Seller, conveying to Buyer Seller's interest in the Contracts;
(d) An Owner's Policy of Title Insurance covering the
Real Property;
(e) Copies of resolutions duly adopted by the Board of
Directors and shareholders of Seller authorizing and approving the performance
of the transactions contemplated hereby and the execution and delivery of this
Agreement and the documents described herein, certified as true and of full
force as of Closing, by the appropriate officers of Seller;
(f) Certificates of the President or a Vice President of
Seller certifying that as of Closing all of the representations and warranties
made by or on behalf of Seller contained in this Agreement are true and correct
in all respects and that each covenant and agreement of Seller to be performed
prior to or as of Closing pursuant to this Agreement has been performed;
(g) Certificates of incumbency for the officers of Seller
executing this Agreement and the documents described herein or making
certifications for Closing, dated as of Closing;
(h) Certificates of existence and good standing of Seller from
the State in which it is incorporated, dated the most recent practical date
prior to Closing;
(i) An investment undertaking of Seller in respect of the
Shares, substantially in the form of Exhibit B attached hereto and made a part
hereof; and
(j) Such other instruments and documents, including, without
limitation, third party consents and estoppel certificates, as Buyer reasonably
deems necessary to effect the transactions contemplated hereby and to place
Buyer in legal and operational possession of the Assets.
2.3 ACTIONS OF BUYER AT CLOSING. At the Closing and unless otherwise
waived in writing by Seller, Buyer shall deliver to Seller the following:
(a) An amount equal to the cash portion of the Purchase Price
in same day funds reduced by the amount of the Cash Deposit and the LMA Fee;
(b) A valid certificate representing the Shares;
(c) Copies of resolutions duly adopted by the Board of
Directors of Buyer authorizing and approving the performance of the transactions
contemplated hereby and the execution and delivery of this Agreement and the
documents described herein, certified as true and of full force as of Closing,
by the appropriate officers of Buyer;
(d) Certificates of the President or a Vice-President of Buyer
certifying that as of Closing all of the representations and warranties made by
or on behalf of Buyer contained in this Agreement are true and correct in all
respects and that each covenant and agreement of Buyer to be performed prior to
or as of Closing pursuant to this Agreement has been performed;
(e) Certificates of incumbency for the officers of Buyer
executing this Agreement or making certifications for Closing, dated as of
Closing;
(f) A certificate of existence and good standing of Buyer from
the state of its organization, dated the most recent practical date prior to
Closing;
(g) Such other instruments and documents as Seller reasonably
deems necessary to effect the transactions contemplated hereby.
2.4 ADDITIONAL ACTS. From time to time after Closing, Seller shall
execute and deliver such other instruments of conveyance and transfer, and take
such other actions as Buyer reasonably may request, to more effectively convey
and transfer full right, title and interest to, vest in, and place Buyer in
legal and actual possession of, any and all of the Assets. In the case of
Contracts and rights which cannot be transferred effectively without the
consents of third parties, Seller shall use its best efforts to obtain such
consents promptly. Seller shall also furnish Buyer with such information and
documents in Seller's possession or under Seller's control, or which Seller can
execute or cause to be executed, as will enable Buyer to prosecute any and all
petitions, applications, claims and demands relating to or constituting a part
of the Assets. Additionally, Seller shall cooperate and use Seller's best
efforts to have Seller's present directors, officers, employees and shareholders
cooperate with Buyer on and after Closing in furnishing information, evidence,
testimony and other assistance in connection with any action, proceeding,
arrangement or dispute of any nature with respect to matters pertaining to all
periods prior to Closing in respect of the items subject to this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
As of the date hereof, Seller represents and warrants to Buyer the
following:
3.1 CORPORATE CAPACITY. Seller is a corporation, duly organized and
validly existing and in good standing under the laws of the State in which it is
incorporated. Seller has the requisite power and authority to enter into this
Agreement, perform its obligations hereunder and to conduct its business as now
being conducted and Seller is duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances and orders of governmental authorities
having jurisdiction over the Assets and operations of the Stations to own its
properties and conduct its business in the place and in the manner now
conducted.
3.2 CORPORATE POWERS; CONSENTS; ABSENCE OF CONFLICTS WITH OTHER
AGREEMENTS, ETC. The execution, delivery and performance of this Agreement by
Seller and the consummation of the transactions contemplated herein by Seller:
(a) Are within Seller's corporate powers, are not in
contravention of law or of the terms of Seller's Articles of Incorporation,
Bylaws or any amendments thereto and have been duly authorized by all
appropriate corporate action;
(b) Except as otherwise expressly herein provided, do not
require any approval or consent of, or filing with, any governmental agency or
authority bearing on the validity of this Agreement which is required by law or
the regulations of any such agency or authority;
(c) Will neither conflict with nor result in any breach or
contravention of, nor permit the acceleration of the maturity of or the creation
of any lien under, any indenture, mortgage, agreement, lease, contract,
instrument or understanding to which Seller is a party or by which Seller or the
Assets are bound;
(d) Will not violate any statute, law, rule or regulation
of any governmental authority to which Seller or the Assets may be subject;
(e) Will not violate any judgment, decree, order, writ or
injunction of any court or governmental authority to which Seller or the Assets
may be subject; and
(f) Are and will constitute the valid and legally binding
obligations of Seller, enforceable in accordance with the terms of this
Agreement, except as enforceability may be restricted, limited or delayed by
applicable bankruptcy or other laws affecting creditors' rights generally and
except as enforceability may be subject to general principles of equity.
3.3 LICENSES. Seller has delivered to Buyer an accurate list and
summary description of all licenses and permits and of all other franchises,
certificates of need and certificate of need applications, trademarks, trade
names, patents, patent applications and copyrights, owned or held by Seller
relating to the ownership, development or operations of the Stations and the
Assets, all of which are now and as of Closing shall be valid, in good standing
and not subject to meritorious challenge.
3.4 REGULATORY COMPLIANCE. Seller is in full compliance with all
applicable rules, regulations and requirements of all federal, state and local
commissions, boards, bureaus and agencies having jurisdiction over the Stations
and the operations of the Stations, including, without limitation, the Internal
Revenue Service, Federal Communications Commission, and Seller has timely filed
all reports, data and other information required to be filed with such
commissions, boards, bureaus and agencies.
3.5 AGREEMENTS AND COMMITMENTS. Seller has delivered to Buyer an
accurate list and summary description of all material commitments, contracts,
leases and agreements which relate to, or may affect, the Stations, the Assets
or the operation thereof, to which Seller is a party or by which Seller or any
of the Assets are bound (including, without limitation, employment agreements,
contracts, tenant leases, equipment leases, equipment maintenance agreements,
agreements with municipalities and labor organizations, loan agreements, bonds,
mortgages, liens or other security agreements). Seller has delivered true and
correct copies of such agreements to Buyer. None of such agreements unduly
burdens or restricts the Stations in the ordinary course of their businesses.
All parties to such agreements have complied with all material commitments and
obligations thereunder, such agreements constitute the entire agreements by and
between the parties thereto relating to the subject matter thereof, and such
agreements are now in full force and effect.
3.6 REAL PROPERTY. Seller owns good and marketable fee title to the
Real Property, together with all buildings, improvements and fixtures thereon
and all appurtenances and rights thereto, free and clear of all mortgages,
liens, restrictions, agreements, claims and other encumbrances, except for such
encumbrances or defects in title which will not render title to the Real
Property unmarketable or uninsurable and which will not interfere with Buyer's
use of the Assets in a manner consistent with that of Seller, liens securing any
indebtedness assumed by Buyer, any lease obligations assumed by Buyer and
easements of record (the "PERMITTED ENCUMBRANCES"). The Real Property comprises
all of the real property owned or leased by Seller or otherwise associated with
the Stations.
3.7 LITIGATION OR PROCEEDINGS. Seller is not in default under any
law or regulation, or under any order of any court or federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality wherever located. There are no claims, actions, suits,
proceedings or investigationspending, threatened against or affecting Seller
with respect to the Stations or the Assets, at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality wherever located.
3.8 TAX LIABILITIES.
(a) All tax returns, including, without limitation, income tax
returns, employee payroll tax returns, employee unemployment tax returns and
franchise tax returns, for periods prior to and including Closing which are
required to be filed by Seller (collectively "RETURNS") have been filed or will
be filed within the time and in the manner provided by law (including any valid
extensions thereof), all Returns are or will be true and correct and accurately
reflect the tax liabilities of Seller and all Returns which have not been filed
prior to Closing will be consistent with those Returns filed prior to Closing;
(b) All taxes, penalties, interest, and any other statutory
additions which have become due by Seller pursuant to Returns, and any
assessments received by Seller have been paid or adequately provided for;
(c) There are no tax liens on any of the Assets; and
(d) There are no pending questions nor are there any issues
known to Seller, relating to, or claims or assessments for, taxes payable by
Seller. Proper and accurate amounts have been withheld by Seller from employees
of Seller for all periods in full and complete compliance with the tax and
otherwithholding provisions of all applicable laws.
3.9 FULL DISCLOSURE. This Agreement and Schedules hereto and all
other documents and information furnished to Buyer and Buyer's representatives
by Seller pursuant hereto do not and will not include any untrue statement of
material fact or omit to state any material fact necessary to make the
statements made and to be made not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
As of the date hereof, Buyer represents and warrants to Seller the
following:
4.1 CORPORATE CAPACITY. Buyer is a corporation, duly organized and
validly existing in good standing under the laws of the State of Delaware.
4.2 CORPORATE POWERS; CONSENTS; ABSENCE OF CONFLICTS WITH OTHER
AGREEMENTS, ETC. The execution, delivery and performance of this Agreement by
Buyer and the consummation of the transactions contemplated herein by Buyer:
(a) Are within Buyer's corporate powers and are not in
contravention of the terms of Buyer's Articles of Incorporation or Bylaws and
have been approved by all requisite corporate action;
(b) Will neither conflict with nor result in any breach or
contravention of, or the creation of any lien under, any indenture, agreement,
lease, instrument or understanding to which Buyer is a party of by which Buyer
is bound; and
(c) Are and will constitute the valid and legally binding
obligations of Buyer, enforceable in accordance with the terms of this
Agreement, except as enforceability may be restricted, limited or delayed by
applicable bankruptcy or other laws affecting creditors' rights generally and
except as enforceability may be subject to general principles of equity.
4.3 SEC FILINGS.
(a) Buyer has filed and made available to Seller all forms,
reports and documents required to be filed by Buyer with the Securities and
Exchange Commission ("SEC") since January 1, 1999 (collectively, the "BUYER'S
SEC REPORTS"). The Buyer's SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as the case may be;
and (ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such Buyer's SEC Reports or necessary in order to make
the statements in which Buyer's SEC Reports, in the light of the circumstances
under which they were made, not misleading.
(b) Since the date of filing of the last Buyer's SEC Report,
there has not been any material adverse change in the assets, liabilities,
financial condition or results of operations of Buyer and its subsidiaries,
taken as a whole.
5. COVENANTS OF SELLER PRIOR TO CLOSING.
Between the date of this Agreement and the Closing Date:
5.1 INFORMATION. Seller shall afford to the officers and authorized
representatives and agents of Buyer full and complete access to and the right to
inspect the plants, properties, books and records of Seller and the Assets, and
will furnish Buyer with such additional financial and operating data and other
information as to the business and properties of Seller and the Assets as Buyer
may from time to time reasonably request without regard to where such
information may be located.
5.2 OPERATIONS. From the date hereof until the Closing Date,
Seller will:
(a) Cooperate with Buyer in the management and operation
of the Stations in accordance with the License Management Agreements; and
(b) Take all actions necessary and appropriate to render title
to the Assets free and clear of all liens, security agreements, claims, charges
and encumbrances (except for the Permitted Encumbrances) and obtain appropriate
releases, consents, estoppels and other instruments as Buyer may reasonably
request.
5.3 NEGATIVE COVENANTS. From the date hereof to the Closing Date,
Seller will not, without the prior written consent of Buyer:
(a) Amend or terminate any of the Contracts or enter into any
contract or commitment, or incur or agree to incur any liability with respect to
the Stations;
(b) Create, assume or permit to exist any new mortgage, pledge
or other lien or encumbrance upon any of the Assets, whether now owned or
hereafter acquired; and
(c) Acquire (whether by purchase or lease) or sell, assign,
lease or otherwise transfer or dispose of any property, plant or equipment
associated with or employed in the operations of the Stations.
5.4 GOVERNMENTAL APPROVALS. Seller shall assist and cooperate with
Buyer and Buyer's representatives and counsel in obtaining all governmental
consents, approvals and licenses which Buyer deems necessary or appropriate and
in the preparation of any document or other material which may be required by
any governmental agency as a predicate to or result of the transactions
contemplated herein.
5.5 NO-SHOP CLAUSE. From and after the date of the execution and
delivery of this Agreement by Seller, and for a period of ninety (90) days after
the termination of this Agreement, Seller will not, without the prior written
consent of Buyer: (i) offer for sale the Assets (or any material portion
thereof) or any ownership interest of any entity owning any of the Assets, (ii)
solicit offers to buy all or any material portion of the Assets or any ownership
interest of any entity owning any of the Assets, (iii) hold discussions with any
party (other than Buyer) looking toward such an offer or solicitation or looking
toward a merger or consolidation of any entity owning any of the Assets, or (iv)
enter into any agreement with any party (other than Buyer) with respect to the
sale or other disposition of the Assets (or any material portion thereof) or any
ownership interest in any entity owning any of the Assets or with respect to any
merger, consolidation, or similar transaction involving any entity owning any of
the Assets.
6. COVENANTS OF BUYER PRIOR TO CLOSING.
Between the date of this Agreement and the Closing Date:
6.1 GOVERNMENTAL APPROVALS. Buyer shall promptly make all required
applications, and file such notices as are necessary to obtain all licenses for
the operation of the Stations and shall use Buyer's reasonable efforts to
promptly obtain the approval of all local, state and federal authorities
necessary to allow Buyer to operate the Stations pursuant to the License
Management Agreements and subsequent to the Closing.
6.2 OPERATIONS. From December 31, 1999 until the Closing Date or the
expiration of twenty-four (24) months from the date of this Agreement, whichever
first occurs, Buyer will operate the Stations in accordance with the License
Management Agreements.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
The obligations of Buyer hereunder are, at the option of Buyer, subject to
the satisfaction, on or prior to the Closing Date, of the following conditions
unless waived in writing by Buyer:
7.1 REPRESENTATIONS/WARRANTIES. The representations and warranties
of Seller contained in this Agreement shall be true when made and on and as of
the Closing Date as though such representations and warranties had been made on
and as of such Closing Date; and each and all of the terms, covenants and
conditions of this Agreement to be complied with or performed by Seller on or
before the Closing Date pursuant to the terms hereof shall have been duly
complied with and performed.
7.2 DUE DILIGENCE. Buyer shall have completed Buyer's due diligence
in respect of Seller and the Assets prior to Closing and be fully satisfied with
the results thereof. In order to facilitate Buyer's due diligence, Seller will
provide Buyer and Buyer's representatives and agents with full and complete
access to the books, records and management staff of Seller and shall further
provide such written consents and authorizations as may be necessary for Buyer
to have access to materials on file with governmental agencies. Such due
diligence shall not have disclosed any previously unknown or undisclosed
material adverse circumstance or condition on the basis of which Buyer
reasonably and in good faith deems it inappropriate to proceed with the
transactions described herein.
7.3 PRE-CLOSING CONFIRMATIONS. Buyer shall have obtained
documentation or other evidence satisfactory to Buyer that Buyer has:
(a) Received approval from all governmental agencies
whose approval is required to complete the transactions herein contemplated;
(b) Received written confirmation from all applicable
licensure agencies that upon Closing all licenses required by law to operate the
Stations as currently operated will be transferred to, or reissued in the name
of Buyer; and
(c) Obtained such other consents and approvals as may be
legally or contractually required by Buyer's consummation of the transactions
described herein.
7.4 ACTION/PROCEEDING. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions herein contemplated, and no governmental
agency or body shall have taken any other action or made any request of Seller
or Buyer as a result of which Buyer deems it inadvisable to proceed with the
transactions hereunder.
7.5 VESTING/RECORDATION. Seller shall have furnished to Buyer in
form acceptable to Buyer and approved by Buyer's counsel, deeds, bills of sale,
assignments or other instruments of transfer and (except in minor instances)
consents and waivers by others, necessary or appropriate to transfer to
andeffectively vest in Buyer all right, title and interest in and to the Assets,
in proper statutory form for recording if such recording is necessary or
appropriate.
7.6 TITLE POLICY AND SURVEY. Buyer shall have received commitments,
satisfactory to Buyer, from a title insurance company mutually acceptable to
Seller and Buyer to issue as of the Closing Date an owner's title insurance
policy (with survey and zoning endorsements) for the Real Property, together
with improvements, buildings and fixtures thereon, in the customary form
prescribed for use in the State where the Real Property is located. The
commitment shall provide for the issuance of said policy to Buyer as of Closing
and shall insure good and marketable fee title to the Real Property in Buyer
subject only to (i) the lien of accrued taxes not yet due and payable, (ii)
liens, if any, which secure indebtedness of Seller assumed by Buyer or which are
created by Buyer, and (iii) such utility and similar easements as do not
materially adversely effect the present operation and business of the Assets.
Additionally, Buyer shall have received an as-built survey of the Real Property
reflecting all improvements visible on the grounds and all easements, rights of
way, encroachments and drainage ditches, whether abutting or interior, of record
or on the grounds. The costs of such title policies and survey shall be borne by
Seller.
7.7 PROPERTY TAXES. Seller shall have paid all property taxes on the
Assets for all calendar years prior to Closing. Any taxes for the calendar year
in which Closing occurs shall be prorated to the Closing Date.
7.8 RECENT AGREEMENTS AND COMMITMENTS. Seller shall have delivered
to Buyer an accurate list and substantially complete description, as of the
Closing Date, showing all contracts and commitments relating to the Assets
entered into by Seller since the date hereof, which agreements Buyer may assume
at its option.
7.9 CONSENTS TO ASSIGNMENTS. All material consents, waivers and
estoppels of third parties which are reasonably necessary, in the opinion of
Buyer, to effectively complete the transactions herein contemplated shall have
been obtained and will be in form and substance reasonably satisfactory to
Buyer.
7.10 BUYER'S FINANCING. Buyer shall have entered into credit
agreements, upon terms and conditions satisfactory to Buyer, with one or more
financial institutions, and such financial institutions shall have funded an
amount equal to the cash portion of the Purchase Price less the Cash Deposit and
the LMA Fee.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
The obligations of Seller hereunder are, at the option of Seller, subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions unless waived in writing by Seller:
8.1 REPRESENTATIONS/WARRANTIES. The representations and warranties
of Buyer contained in this Agreement shall be true when made and as of the
Closing Date as though such representations and warranties had been made on and
as of such Closing Date; and each and all of the terms, covenants and conditions
of this Agreement to be complied with or performed by Buyer on or before the
Closing Date pursuant to the terms hereof shall have been duly complied with and
performed.
8.2 ACTION/PROCEEDING. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transaction herein contemplated, and no governmental
agency or body shall have taken any other action or made any request of Seller
or Buyer as a result of which Seller deems it inadvisable to proceed with the
transactions hereunder.
9. NONCOMPETITION.
Seller recognizes that (i) Buyer's entering into this Agreement is induced
primarily because of the covenants and assurances made by Seller hereunder,
including, without limitation, the covenants and assurances contained in this
Section 9, (ii) Seller's covenant not to compete is necessary to insure the
continuation of the business of Buyer in respect of the Assets subsequent to
Closing and (iii) irreparable harm and damage will be done to Buyer in the event
that Seller, or any of Seller's affiliates, competes with Buyer within the area
or areas specified in this Section. Therefore, in consideration of the premises
and as an inducement for Buyer to enter into this Agreement and consummate the
transactions contemplated herein, Seller and Seller's affiliates, including,
without limitation, all of Seller's shareholders, who have joined in the
execution of this Agreement for the purpose of acknowledging their agreement to
be bound by the provisions of this Section 9, agree that for a period of five
(5) years from and after the Closing Date, neither Seller nor Seller's
affiliates will, directly or indirectly, in any capacity, own, manage, operate,
control, participate in the management or control of, be employed by, or
maintain or continue any interest whatsoever in any enterprise engaged in any
business similar to the business of Buyer in respect of the Assets within a
100-mile radius of the Stations. Seller further agrees that if any restriction
contained in this Section is held by any Court to be unenforceable or
unreasonable, a lesser restriction shall be severable therefrom and be enforced
in its place, and the remaining restrictions contained herein shall be
enforceable independently of each other. In the event of an actual or threatened
breach of this covenant by Seller, Buyer shall be entitled to injunctive relief,
without the necessity of posting a bond, cash or otherwise.
10. ADDITIONAL AGREEMENTS.
10.1 TERMINATION PRIOR TO CLOSING. Notwithstanding anything herein
to the contrary, this Agreement may be terminated at any time: (i) on or prior
to the Closing Date by mutual consent of Buyer and Seller; (ii) on or prior to
the Closing Date by Buyer, if there has been a material and adverse change in
the financial condition or prospects for future results of operations of the
Assets since the date hereof: (iii) by Buyer on the Closing Date if any of the
conditions specified in Section 7 of this Agreement have not been satisfied and
shall not have been waived by Buyer; (iv) by Seller if on the Closing Date any
of the conditions specified in Section 8 of this Agreement have not been
satisfied and shall not have been waived by Seller; and (v) by Buyer or Seller
if the Closing shall not have taken place on or before [December 15, 2001]
(which date may be extended by mutual agreement of Buyer and Seller), unless the
party giving notice of termination is in default hereunder.
10.2 POST-CLOSING ACCESS TO INFORMATION. Seller and Buyer
acknowledge that subsequent to Closing each party may need access to information
or documents in the control or possession of the other party for the purposes of
concluding the transactions herein contemplated, audits, compliance with
governmental requirements and regulations, and the prosecution or defense of
third party claims. Accordingly, Seller and Buyer agree that for a period of two
(2) years after Closing each will make reasonably available to the other's
agents, independent auditors and/or governmental agencies upon written request
and at the expense of the requesting party such documents and information as may
be available relating to the Assets for periods prior and subsequent to Closing
to the extent necessary to facilitate concluding the transactions herein
contemplated, audits, compliance with governmental requirements and regulations
and the prosecution or defense of claims.
11. GENERAL.
11.1 ADDITIONAL ASSURANCES. The provisions of this Agreement shall
be self-operative and shall not require further agreement by the parties except
as may be herein specifically provided to the contrary; provided, however, at
the request of either party, the other party shall execute such additional
instruments and take such additional acts as the requesting party may deem
necessary to effectuate this Agreement.
11.2 CONSENTED ASSIGNMENT. Anything contained herein to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
claim, right, contract, license, lease, commitment, sales order or purchase
order if an attempted assignment thereof without the consent of another party
thereto would constitute a breach thereof or in any material way affect the
rights of Seller thereunder, unless such consent is obtained. If such consent is
not obtained, or if an attempted assignment would be ineffective or would
materially affect Seller's rights thereunder so that Buyer would not in fact
receive all such rights, Seller shall cooperate in any reasonable arrangement
designed to provide for Buyer the benefits under any such claim, right,
contract, license, lease, commitment, sales order or purchase order, including,
without limitation, enforcement of any and all rights of Seller against the
other party or parties thereto arising out of the breach or cancellation by such
other party or otherwise.
11.3 CONSENTS, APPROVALS AND DISCRETION. Except as herein expressly
provided to the contrary, whenever this Agreement requires any consent or
approval to be given by either party or either party must or may exercise
discretion, the parties agree that such consent or approval shall not be
unreasonably withheld or delayed and such discretion shall be reasonably
exercised.
11.4 LEGAL FEES AND COSTS. In the event either party elects to incur
legal expenses to enforce or interpret any provision of this Agreement, the
prevailing party will be entitled to recover such legal expenses, including,
without limitation, attorney's fees, costs and necessary disbursements, in
addition to any other relief to which such party shall be entitled.
11.5 CHOICE OF LAW. The parties agree that this Agreement shall be
governed by and construed in accordance with the laws of the State of Texas, and
that the courts of such State shall be the exclusive courts of jurisdiction and
venue for any litigation, special proceedings or other proceedings as between
the parties that may be brought, or arise out of, in connection with or by
reason of this Agreement.
11.6 BENEFIT/ASSIGNMENT. Subject to provisions herein to the
contrary, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives, successors and
assigns; provided, however, that no party may assign this Agreement without the
prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, further, however, that Buyer may, without the
prior written consent of Seller, assign its rights and delegate its duties
hereunder to one or more entities controlled by Buyer.
11.7 ACCOUNTING DATE. The transactions contemplated hereby shall be
effective for accounting purposes as of 12:01 a.m. on the day after the Closing
Date, unless otherwise agreed in writing by Seller and Buyer.
11.8 NO BROKERAGE. Seller and Buyer represent to each other that no
broker has in any way been contracted in connection with the transactions
contemplated hereby. Seller and Buyer agree to indemnify the other party from
and against all loss, cost, damage or expense arising out of claims for fees or
commissions of brokers employed or alleged to have been employed by such
indemnifying party.
11.9 COST OF TRANSACTION. Whether or not the transactions
contemplated hereby shall be consummated and except as otherwise provided
herein, the parties agree as follows: (i) Seller will pay the fees, expenses,
and disbursements of Seller and its agents, representatives, accountants, and
counsel incurred in connection with the subject matter hereof and any amendments
hereto and shall pay any and all recording fees and sales or recording taxes
incurred in connection with the transfer and conveyance of the Assets to Buyer;
and (ii) Buyer shall pay the fees, expenses and disbursements of Buyer and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter hereof and any amendments hereto.
11.10 CONFIDENTIALITY. It is understood by the parties hereto that
the information, documents and instruments delivered to Buyer by Seller or
Seller's agents and the information, documents and instruments delivered to
Seller by Buyer or Buyer's agents are of a confidential and proprietary nature.
Each of the parties hereto agrees that both prior and subsequent to Closing it
will maintain the confidentiality of all such confidential information,
documents or instruments delivered to it by the other party hereto or its agents
in connection with the negotiation of this Agreement or in compliance with the
terms,conditions and covenants hereof and only disclose such information,
documents and instruments to its duly authorized officers, directors,
representatives and agents. Each of the parties hereto further agrees that if
the transactions contemplated hereby are not consummated, it will return all
such documents and instruments and all copies thereof in its possession to the
other party to this Agreement. Each of the parties hereto recognizes that any
breach of this Section would result in irreparable harm to the other parties to
this Agreement and their affiliates and that therefore either Seller or Buyer
shall be entitled to an injunction to prohibit any such breach or anticipated
breach, without the necessity of posting a bond, cash or otherwise, in addition
to all of their other legal and equitable remedies. Nothing in this Section,
however, shall prohibit the use of such confidential information, documents or
information for such governmental filings as in the mutual opinion of Buyer's
Counsel and Seller's Counsel are (i) required by law or governmental regulations
or (ii) otherwise appropriate.
11.11 PUBLIC ANNOUNCEMENTS. Seller and Buyer mutually agree that no
party hereto shall release, publish or otherwise make available to the public in
any manner whatsoever any information or announcement regarding the transactions
herein contemplated without the prior written consent of Seller and Buyer,
except for information and filings reasonably necessary to be directed to
governmental agencies to fully and lawfully effect the transactions herein
contemplated or required in connection with securities and other laws. Nothing
herein shall prohibit either party from responding to questions presented by the
press or media without first obtaining prior consent of the other party hereto.
11.12 WAIVER OF BREACH. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, or be
construed to constitute, a waiver of any subsequent breach of the same or other
provision hereof.
11.13 NOTICE. Any notice, demand or communication required,
permitted, or desired to be given hereunder shall be deemed effectively given
when personally delivered, when received by telegraphic or other electronic
means (including telecopy and telex) or overnight courier, or five (5) days
after being deposited in the United States mail, with postage prepaid thereon,
certified or registered mail, return receipt requested, addressed as follows:
Seller: CARLOS ORTIZ
168 MEADOWBROOK
SAN BENITO, TEXAS 78586
Buyer: Hispanic Television Network, Inc.
6125 Airport Freeway, #200
Fort Worth, Texas 76117
Attention: ALAN LUCKETT, Chief Executive Officer
or to such other address, and to the attention of such other person or officer
as any party may designate, with copies thereof to the respective counsel
thereof as notified by such party.
11.14 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws during the term
hereof, such provision shall be fully severable, this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision there shall be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to the illegal, invalid or unenforceable provision
as may be possible.
11.15 GENDER AND NUMBER. Whenever the context of this Agreement
requires, the gender of all words herein shall include the masculine, feminine
and neuter, and the number of all words herein shall include the singular and
plural.
11.16 DIVISIONS AND HEADINGS. The divisions of thisAgreement into
sections and subsections and the use of captions and headings in connection
therewith are solely for convenience and shall have no legal effect in
construing the provisions of this Agreement.
11.17 ENTIRE AGREEMENT/AMENDMENT. This Agreement supersedes all
previous contracts, and constitutes the entire agreement of whatsoever kind or
nature existing between or among the parties respecting the within subject
matter and no party shall be entitled to benefits other than those specified
herein. As between or among the parties, no oral statements or prior written
material not specifically incorporated herein shall be of any force and effect.
The parties specifically acknowledge that in entering into and executing this
Agreement, the parties rely solely upon the representations and agreements
contained in this Agreement and no others. All prior representations or
agreements, whether written or verbal, not expressly incorporated herein are
superseded and no changes in or additions to this Agreement shall be recognized
unless and until made in writing and signed by all parties hereto. The
provisions of this Agreement shall survive the Closing and remain of full force
and effect until the expiration of the applicable statute of limitation for
claims brought hereunder, and shall survive the execution and delivery of all
other agreements described, referenced or contemplated herein and shall not be
merged therewith. This Agreement may be executed in two or more counterparts,
each and all of which shall be deemed an original and all of which together
shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed in multiple originals by their duly authorized officers, all as of the
day and year first above written.
SELLER:
/S/ CARLOS ORTIZ
--------------------------------
Name: Carlos Ortiz
TITLE: Pastor-Individual
BUYER:
HISPANIC TELEVISION NETWORK, INC.,
a Delaware corporation
Name: /S/ PATRICK ALAN LUCKETT
--------------------------------
Title: CEO
<PAGE>
SCHEDULE 1
DESCRIPTIONS OF STATIONS
Carlos Ortiz, an individual, shall issue a blanket operation authorization and
shall obtain all necessary releases and permits to fully transfer and assign the
following properties:
K07WU Uvalde, TX Assignment to Faith
Pleases God Church
KTRG Del Rio, TX Full Power Ortiz Broadcasting Corp.
K11UG Carrizo Springs, TX Carlos Ortiz
K13WD Corpus Christi, TX Cark Ortiz
K17EX Oklahoma City, OK Carlos Ortiz
K28FV Phoenix, AZ Carlos Ortiz
K29DZ Tulsa, OK Carlos Ortiz
K52EA San Antonio, TX Ortiz Broadcasting Corp.
K53FU Clovis, NM Faith Pleases God Church
K69HZ McAllen, TX Faith Pleases God Church
/s/ Patrick Alan Luckett
/s/ Carlos Ortiz
<PAGE>
EXHIBIT A
LICENSE MANAGEMENT AGREEMENT
This document shall serve as a formal License Management Agreement (LMA)
to be filed with the Federal Communications Commission (FCC). This Agreement is
made between _______________________ ("Licensor") and ______________________
("Licensee"). The property to be managed is listed as SEE EXHIBIT SCHEDULE 1
with the FCC, with a city of license registered as SEE SCHEDULE 1.
Licensee will comply with all aspects of regulatory policy regarding the
station and will run programming schedule consisting of: Hispanic
Programming--Network to provide available time to Pastor Ortiz ministry as per
separate agreement - 3 hours M-S and Sunday Service. Additional $100,000 to be
paid on or before 12-20-99. Pastor Ortiz to work with company on balance which
shall not go beyond 1-10-2000.
The programming above will comply with all aspects of over air broadcast
requirements including appropriateness of content public service announcements,
required testing and all other requirements existing now or determined to be
required by the FCC in the future.
Licensee will be responsible for all aspects of operations and shall pay
all items required for the ongoing operations including but not limited to:
Utilities, tower rental, maintenance, upkeep and all required operational costs
of the station. The fee for this license management agreement will be 1,500,000
per 24 months. Other pertinent terms and conditions of this transaction are
listed as follows:
Pastor Ortiz New Years Eve live event Dec 31 - Jan 1, 2000
shall not be preempted on any station.
The term of this Agreement shall be 24 months and shall only be cancelable
in the event of non-payment of fees, non-compliance with Federal regulatory
policy or mutual agreement of both parties. Cancellation will require a minimum
of 30 days notice based upon the following first day of a calendar month and
will require cancellation notice and acceptance by the FCC. This Agreement will
be followed by formal LMA sign-off and notification with the FCC.
AGREED to this 15TH day of DECEMBER, 1999.
/S/ CARLOS ORTIZ /S/ PATRICK ALAN LUCKETT, CEO
- ---------------- -------------------------------
Licensor Licensee
<PAGE>
EXHIBIT B
December _____, 20_____
Hispanic Television Network, Inc.
_____________________
_____________________
Gentlemen:
Pursuant to the terms of the Asset Purchase Agreement (the "Agreement") by
and between Hispanic Television Network, Inc. ("HTN") and the undersigned, the
undersigned has this day delivered the Assets, as defined in the Agreement, to
you in exchange for the purchase price set forth in the Agreement, which
purchase price includes the issuance to the undersigned of ______________ shares
of the common stock of HTN (the "HTN Shares").
In consideration of the issuance of the HTN Shares pursuant to the
Agreement, I hereby covenant, agree and represent to you as follows:
1. I hereby acquire the HTN Shares issued or to be issued to me by HTN
pursuant to the Agreement solely for investment and not with a view to or for
sale in connection with any distribution thereof to the public within the
meaning of the Securities Act of 1933, as amended (the "Act").
2. I agree not to offer, sell, pledge, transfer or otherwise dispose of
the HTN Shares or any portion thereof (or solicit any offers to buy, purchase or
otherwise acquire or to take a pledge of any of said HTN Shares) which I have
received or will receive pursuant to the Agreement if under the Act and the
applicable Rules and Regulations of the Securities and Exchange Commission, I
would be deemed to be an "underwriter" or to be engaged in a distribution with
respect to such shares otherwise than in conformity with the Act.
3. I understand that the following legend will be placed on all
certificates representing the HTN Shares issued or to be issued to me pursuant
to the Agreement.
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. NO TRANSFER, SALE OR OTHER DISPOSITION OF
THESE SHARES MAY BE MADE UNLESS A REGISTRATION STATEMENT WITH RESPECT TO
THESE SHARES HAS BECOME EFFECTIVE UNDER SAID ACT, OR COMPLIANCE WITH RULE
144 PROMULGATED UNDER SAID ACT, OR THE CORPORATION IS FURNISHED WITH AN
OPINION FROM ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
Very truly yours,
-------------------------------------
Exhibit 10.11
STATE OF TEXAS
COUNTY OF TARRANT KNOW ALL MEN BY THESE PRESENTS that:
Van Eynesbergen and Holland Partnership (hereinafter called "Seller,"
whether one or more) hereby sells and agrees to convey to Hispanic Television
Network, Inc., trustee and/or assigns (hereinafter called "Purchaser," whether
one or more) and Purchaser hereby buys and agrees to pay for the following
described real estate situated in Tarrant County, Texas, to wit:
6125 Airport Freeway
Fort Worth, TX
Lot 12, 13 and 14, Block 15, Parkdale Gardens / including North
Parking Lot
an addition to the City of Fort Worth, now in Haltom City,
Tarrant County, Texas according to the Plat recorded in Volume
1607, Page 287, Deed Records, Tarrant County, Texas
together with, all and singular, all improvements thereon and all rights and
appurtenances pertaining thereto, including any right, title and interest of
Seller in and to adjacent streets, alleys, or rights-of-way, such real estate,
improvements, rights and appurtenances being herein referred to as the
"Property." This Contract and the Property also covers and includes all fixtures
and articles of personal property attached to said real estate and owned by
Seller, such as air conditioning and heating equipment.
This Contract is executed upon the following terms and conditions:
1. Purchase Price. The purchase price for the Property if $800,000 payable
as follows:
A. $ ALL in cash.
Any prior Note or Notes to be executed by Purchaser hereunder shall be
secured by vendor's lien by deed of trust with power of attorney containing such
covenants to taxes, insurance, default and other matters as Seller may
reasonably require.
2. Earnest Money. Upon full and final execution of this Contract, Purchaser
shall deliver the sum of $80,000.00 to SAFECO Title Company, Ft. Worth, Texas
("Title Company") to be held by the Title Company as Earnest Money herein so
called pursuant to the terms of this Contract.
3. Survey and Title Binder.
A. Within ten (10) days after the date of this Contract, Seller shall,
at Seller's expense, deliver or cause to be delivered to Purchaser, a copy of a
current on-the-ground survey ("Survey") of the Property made by a duly licensed
surveyor reasonably acceptable to the Purchaser. The Survey shall be in a form
acceptable to the Title Company in order to allow the Title Company to delete
the survey exception (except as to "shortages in area") from the Title Policy to
be issued by the Title Company. The Survey shall show the location of all
improvements on the Property, if any. If this Contract does not close through no
fault of Seller, in addition to the other rights of Seller hereunder, Purchaser
shall pay for the Survey.
B. Within ten (10) days after the date of this Contract, Seller shall,
at Seller's expense, deliver or cause to be delivered to Purchaser:
(1) A title commitment ("Title Binder") covering the Property
binding the Title Company to issue a Texas Owner's Policy of
Title Insurance on the standard form of policy prescribed by
the Texas State Board of Insurance at the Closing in the
full amount of the Purchase price; and
(2) True, correct, and legible copies of any and all instruments
referred to in the Title Binder as constituting exceptions
or restrictions upon the title of Seller, except that copies
of any liens which are to be released as the closing may be
omitted.
4. Approval Period and Title.
A. Purchaser shall have fourteen (14) days after the receipt of the
Survey and Title Binder to review them and to deliver in writing to Seller such
objections as Purchaser may have to anything contained in them. Any such item to
which Purchaser shall not object shall be deemed a "Permitted Exception." If
there are objections by Purchaser, Seller shall in good faith attempt to satisfy
them prior to closing but Seller shall not be required to incur any cost to do
so. If Seller delivers written notice to Purchaser on or before the closing date
that Seller is unable to satisfy such objections, or if, for any reason, Seller
is unable to convey title in accordance with Section 7(b) below, Purchaser may
either waive such objections and accept title as Seller is able to convey or
terminate this Contract by written notice to Seller. Zoning ordinances and the
lien for current taxes shall be deemed to be Permitted Exceptions.
B. Seller represents and warrants to Purchaser that at the closing
Seller will have and will convey to Purchaser good and marketable title to the
Property free and clear of any and all encumbrances except the Permitted
Exceptions. Delivery of the Title Policy pursuant to Section 7 below shall be
deemed to fulfill all duties of Seller as to the sufficiency of title required
hereunder; provided, however, Seller shall not thereby be released from the
warranties of Seller's Deed.
5. [Intentionally omitted.]
6. Casualty Loss. All risk of loss to the Property shall remain upon Seller
prior to the closing. If, prior to the closing, the Property shall be damaged or
destroyed by fire or other casualty, to a material extent, Purchaser may either
terminate this Contract by written notice to Seller or close. If Purchaser
elects to close, despite said material damage or destruction, there shall be no
reduction in the purchase price, and Seller shall assign to Purchaser Seller's
right, title and interest in and to all insurance proceeds resulting or to
result from said damage or destruction. Unless otherwise provided herein, the
term "material" shall mean damage or destruction, the cost of repairing which
exceeds ten percent (10%) of the purchase price. In the event of less than
material damage or destruction to the Property prior to the closing, Seller
shall either repair the same prior to the closing, at Seller's expense, or
reimburse Purchaser for the cost of repairing the same by assigning any
insurance proceeds resulting therefrom to Purchaser and/or by allowing Purchaser
to deduct such cost from the cash payable to Seller at the closing. If the
extent of damage or the amount of insurance proceeds to be made available is not
able to be determined prior to the closing date specified in Section 7 below, or
the repairs are not able to be completed prior to said date, either party, by
written notice to the other, may postpone the date of the closing to such date
as shall be designated in such notice, but not more than thirty (30) days after
the closing date specified in Section 7 below.
7. Closing.
A. The closing of this Contract shall be held on or before February
28, 2000 at the offices of the Title Company as its address stated below;
provided, however, that if on such date the Title Company has not yet approved
title or if there are objections made by Purchaser which have not yet been cured
by Seller, either party, by written notice to the other, may postpone the date
of the closing to such date as shall be designated in such notice but not more
than thirty (30) days after the closing date above specified.
B. At the closing, Seller shall deliver to Purchaser: (i) a General
Warranty Deed (with Vendor's Lien retained if not a cash purchase) conveying the
Property according to the legal description prepared by the surveyor as shown on
the Survey of the Property, subject only to the Permitted Exceptions; (ii) a
Title Policy issued by the underwriter for the Title Company pursuant to the
Title Binder with the survey exception deleted (except as to shortages in area)
subject only to the Permitted Exceptions; and (iii) possession of the Property.
C. At the closing, Purchaser shall deliver to Seller (i) the cash
portion of the purchase price (the Earnest Money being applied thereto) and (ii)
the Note and the Deed of Trust, if any.
D. Each party hereto shall pay his share of the closing costs which
are normally assessed by the Title Company against a seller or purchaser in a
transaction of this character in the county where the Property is located.
E. Rents and lease commissions, interest, and ad valorem taxes for the
then current year shall be prorated at the closing effective as of the date of
closing. Purchaser agrees to execute and deliver to Seller in duplicate an
Assumption Agreement in recordable form agreeing to pay all commissions payable
under any lease of the Property. Any security deposits held by Seller shall be
delivered to Purchaser. If the closing shall occur before the tax rate is fixed
for the then current year, the apportionment of the taxes shall be upon the
basis of the tax rate for the preceding year applied to the latest assessed
valuation but any difference in actual and ad valorem taxes for the year of sale
actually paid by Purchaser shall be adjusted between the parties upon receipt of
written evidence of the payment thereof. All taxes imposed because of a change
of use of the property after the closing shall be for the account of Purchaser.
F. If Purchaser is to assume an existing loan, Purchaser shall pay any
transfer fee, and a sum equal to the amount of any reserve account is held by
the mortgagee for the payment of taxes and/or insurance shall be paid to Seller
by Purchaser. Purchaser shall execute, at the option and expense of Seller a
Deed of Trust for Secure Assumption with a Trustee named by Seller.
G. If the Property is situated within a utility district subject to
the provisions of Section 50.301, Texas Water Code, then at or prior to, the
closing, Seller agrees to give Purchaser the written notice required by said
Section and Purchaser agrees to sign and acknowledge the notice to evidence
receipt thereof.
8. Termination. If this contract is terminated by Purchaser in accordance
with Section 4 or 6 above, the Earnest Money shall be promptly refunded to
Purchaser, and the parties shall have no further obligation of liabilities one
to the other.
9. Default. If Seller shall fail to consummate the Contract for any reason,
except Purchaser's default, Purchaser may enforce specific performance of this
Contract or may bring suit for damages against Seller. If Purchaser shall fail
to consummate this Contract for any reason, except Seller's default or the
termination of this Contract pursuant to a right to terminate given herein,
Seller shall have the right to have the Earnest Money paid to Seller liquidated
damages for the breach of this Contract as Sellers sole and exclusive remedy.
10. Commission.
A. Seller agrees to pay the Real Estate Agent first named below
(referred to herein as the "Principal Agent") for negotiating this contract a
commission in cash equal to the following percent of the total purchase price of
the Property computed as follows:
---------------------------------------------
- -------------------------------------------------------------------------------
The Principal Agent's right to such commission shall irrevocably vest upon the
execution of this Contract, notwithstanding any subsequent termination or
variation of this Contract or any default by Seller or Purchaser, except that no
commission shall be payable in the event that the Contract shall be terminated
under Section 4 or 6 above, and except that if this contract is not consummated
by reason of Purchaser's default and Seller does not elect to enforce specific
performance, the commission shall not exceed one-half of the Earnest Money. Said
commission shall be paid by Seller to the Principal Agent in Tarrant County,
Texas, at the closing or in the event of default by Seller or Purchaser, within
ten days after the scheduled closing date. The Principal Agent shall be entitled
to apply any escrow deposit to the extent necessary, toward payment of the
commission payable to the Principal Agent hereunder, and the Title Company or
other escrow agent is hereby authorized and directed to pay to the Principal
Agent hereunder. The Principal Agent may divide any commission payable hereunder
with other licensed real estate brokers or salesman, including any cooperating
agent named below but, notwithstanding any such agreement to division of
commissions, Seller shall be fully protected in paying all commissions payable
hereunder solely to the Principal Agent.
B. At the time of the execution of this Contract, the undersigned
Principal Agent has advised and hereby advises Purchaser, by this writing, that
Purchaser should have the abstract covering the real estate which is the subject
of this Contract examined by an attorney of Purchaser's own selection or that
Purchaser should be furnished with or obtain a policy of title insurance; and
Purchaser hereby acknowledges that Purchaser has been so advised.
11. Miscellaneous Provisions.
A. Date of Contract. The term "date of this Contract" as used herein
shall mean the later of the two dates on which this Contract is signed by Seller
or Purchaser, as indicated by their signature below, which later date shall be
the date of final execution and agreement by the parties hereto.
B. Notices. Any notice or communication required or permitted
hereunder shall be deemed to be delivered, whether actually received or not,
when deposited in the United States mail, postage fully prepaid, registered or
certified mail, addressed to the intended recipient at the address on the
signature page of this Contract. Any address for notice may be changed by
written notice so given.
C. Forms. In case of a dispute as to the form of any document required
hereunder, the current form prepared by the State Bar of Texas shall be
conclusively deemed reasonable.
D. Attorneys' Fees. If either party shall be required to employ an
attorney to enforce or defend the rights of such party hereunder, the prevailing
party shall be entitled to recover reasonable attorneys' fees.
E. Integration. This Contract contains the complete agreement between
the parties and cannot be varied except by the written agreement of the parties.
The parties agree that there are no oral agreements, understanding,
representations or warranties which are not expressly set forth herein.
F. Survival. Any portion of this Contract not otherwise consummated at
the Closing will survive the closing of this transaction as a continuing
agreement by and between the parties.
G. Binding Effect. This Contract shall insure to the benefit of and
bind the parties hereto and their respective heirs, representatives, successors
and assigns.
12. Contract as Offer. The execution of this Contract by the first party to
do so constitutes an offer to purchase or sell the Property unless within three
(3) days from the date of execution of this Contract by the first party, this
Contract is accepted by the other party and a fully executed copy is delivered
to the first party, the offer of this Contract shall be automatically revoked
and terminated and the earnest money, if any, shall be returned to Purchaser.
13. Other Provisions.
<PAGE>
EXECUTED on the dates stated below.
AGENTS SELLER
Van Eysenbergen and Holland
- ------------------------------------ Partnership
Principal Agent, member of the Greater
Fort Worth Board of Realtors By: /S/ ANTONIA PHILLIPS
-------------------------------
OWNERS
-------------------------------------
Title
-------------------------------------
Address
FEBRUARY 14, 2000
- ------------------------------------ -------------------------------------
Date of Execution
PURCHASER
Hispanic Television Network Inc.,
- ------------------------------------ trustee and/or assigns
Cooperating Agent
By: /S/ P. ALAN LUCKETT
-------------------------------
PRESIDENT, COO
-------------------------------------
Title
3113 SOUTH UNIVERSITY DEIVE,
SUITE 600
FORTH WORTH, TEXAS 76109
-------------------------------------
Address
- ------------------------------------ -------------------------------------
Date of Execution
Earnest money received from Hispanic Television Network, Inc. this 15
day of February, 2000.
SAFECO TITLE
-------------------------------------
Title Company
By: /S/ EVE MAEKRER
-------------------------------
ESCROW
-------------------------------------
Title
-------------------------------------
Address
<PAGE>
INVESTIGATION/FESIBILITY STUDY ADDENDUM
INVESTIGATION/FEASIBILITY STUDY.
[AS IS]
Buyer shall have ________ days from the effective date hereof to perform
such investigation and/or study. Buyer or Buyer's agents shall have the right of
access to the Property prior to closing for the purpose of conducting such
investigation and/or study, and shall have the right to conduct tests and obtain
core samples. Seller agrees to cooperate with Buyer in connection with the
investigation and/or study, agrees to furnish Buyer with copies of any and all
documents relating to the Property that might be necessary to complete such
investigation and/or study, and agrees to execute any and all documents that
might be required in order to obtain any necessary governmental authority or
consent with respect to the above-described matters. If Buyer determines, in
Buyer's sole judgment and discretion, that the Property is not suitable for
Buyer's intended use, within the ______ days, Buyer shall give Seller written
notice of such fact on or before the end of the period stated above with a copy
to Escrow Agent. Upon receipt of such written notice, the Escrow Agent shall
refund the Earnest Money to Buyer, and both parties shall be released from all
further obligations under this Contract. If Buyer does not send such written
notice to Seller, then it shall be presumed that the Property is suitable for
Buyer's intended use, and the Contract may not be terminated by Buyer for the
reasons set forth in this Section. In the event this contract does not close,
through no fault of Seller, Buyer shall restore the Property to its original
condition, if changed due to the investigation and/or study performed by Buyer.
/S/ MARCO A. CAMACHO
- ------------------------------------ ------------------------------------
Buyer Seller
- ------------------------------------ ------------------------------------
Buyer Seller
FEBRUARY 14, 2000
- ------------------------------------ ------------------------------------
Date Date
<PAGE>
PROPERTY CONDTION ADDENDUM
PROPERTY CONDITION (CHECK "A" OR "B")
[ ] A. Buyer accepts the Property in its present condition, subject only to
--------------------------------------------------------------------
[ ] B. Buyer requires inspections and repairs as follows:
Check Applicable Boxes
[ ] i. Termites: Seller, at Seller's expense, shall furnish to Buyer at or
prior to closing a written report by a Structural Pest Control
Business Licensee, dated within 30 days before Closing Date and
stating that there is no visible evidence of active termites or
visible damage to the improvements from the same in need of repair.
Such report shall not cover fences, trees and shrubs.
[X] ii. Condition of Property. [AS IS]
Buyer shall have the right at Buyer's expense (i) within ______ days
from the date of this contract to have any of the STRUCTRAL items
indicated below, and (ii) within _____ days from the date of this
contract to have any of the EQUIPMENT AND SYSTEMS items indicated
below, inspected by inspectors of Buyer's choice and to give Seller
within such time periods a written report of required repairs to any
of the items checked below which are not performing the function for
which intended or which are in need of immediate repair. Failure to do
so shall be deemed a waiver of Buyer's inspection and repair rights
and Buyer agrees to accept Property in its present condition.
ITEMS THAT BUYER MAY REQUIRE TO BE INSPECTED (check applicable boxes):
[ ] foundation, [ ] roof, [ ] load bearing walls, [ ] floors, [ ]
ceilings, [ ] basement, [ ] water penetration, and
---------------------------------------------------------------------
EQUIPMENT AND SYSTEMS:
[ ] plumbing system (including any water heaters), [ ] central heating
and air conditioning [ ] electrical system, [ ] heating and cooling
units in the walls, floors, ceilings, roof or windows, [ ] any built
in appliances, [ ] swimming pools and related mechanical equipment,
[ ] sprinkler systems, and
------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Repairs required by inspections and reports shall be at Seller's
expense.
[ ] iii. Seller shall make the following repairs in addition to those required
above:
---------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
All inspections shall be by trained and qualified persons who
regularly provide such service and all repairs shall be by trained and
qualified persons who are, whenever possible, manufacturer-approved
service persons or are licensed or bonded whenever such license or
bond is required by law. For these purposes and for re-inspections
after repairs have been completed. Seller shall permit access to the
Property at any reasonable time.
[ ] iv. Where gas supplier, regulations or ordinances require inspection on
transfer of gas service, Seller consents to transfer of gas service to
Buyer's name within 7 days prior to closing. Seller shall arrange and
pay at closing for any repairs necessary if gas leak is discovered.
Buyer's failure to request such transfer in time to complete the
inspection prior to closing shall release the Seller of liability for
repair of gas leaks.
Upon Seller's receipt of all loan approvals and inspection reports Seller shall
commence and complete prior to closing all required repairs at Seller's expense.
All inspections, reports and repairs required of Seller by this contract shall
not exceed $____________. If Seller fails to complete such requirements, Buyer
may do so and Seller shall be liable up to the amount specified and the same
paid from the proceeds of the sale. If such expenditures exceed the stated
amount and Seller refuses to pay such excess, Buyer may pay the additional cost
or accept the Property with the limited repairs and this sale shall be closed as
scheduled, or Buyer may terminate this contract and the Earnest Money shall be
refunded to Buyer. Broker and sales associates have no responsibility or
liability for repair or replacement of any of the Property.
/S/ MARCO A. CAMACHO
- ------------------------------------ ------------------------------------
Buyer Seller
/S/ ANTONIA PHILLIPS
- ------------------------------------ ------------------------------------
Buyer Seller
FEBRUARY 14, 2000
- ------------------------------------ ------------------------------------
Date Date
Exhibit 10.13
AGREEMENT ESTABLISHING STRATEGIC RELATIONSHIP
BETWEEN
CUBICO.COM, INC. ("CUBICO.COM")
AND
HISPANIC TELEVISION NETWORK, INC. ("HTVN")
March 15, 2000
WHEREAS, the mission of Cubico.com is to become central to the lives of
young Latinos by providing integrated services and access to state-of-the-art
world wide web technology, which will empower and facilitate the development of
the Latin community;
WHEREAS, HTVN is a leading U.S. provider of Latino television
programming, media production and syndication services;
WHEREAS, Cubico.com desires to enter into a strategic relationship with
HTVN for the purpose of becoming the leading provider of web services and
commerce for young Latinos in the U.S. and in Latin America; and
WHEREAS, HTVN desires to enter into a strategic relationship with
Cubico.com for the purpose of establishing a leading Internet presence.
NOW, THEREFORE, the parties hereto agree as follows:
1. ISSUANCE OF CUBICO.COM, SERIES B PREFERRED STOCK. The strategic
relationship will be consummated at a Closing, at which, among other things,
Cubico.com. will issue and sell to HTVN, and HTVN will purchase, 7,800,000
shares of Cubico.com Series B Preferred Stock (the "CUBICO.COM SHARES"), having
the rights preferences and privileges summarized in EXHIBIT A attached hereto,
in exchange for the following considerations that the parties agree has a total
value of approximately $36,036,000, for $4.62 per share:
o The transfer to Cubico.com of a minority equity interest in ten (10)
of HTVN's Television Stations, subject to conditional repurchase, as
more particularly described below in Sections 2 and 4 below;
o HTVN's agreement to sell 5,000,000 shares of restricted HTVN Common
Stock to Cubico.com, subject to conditional repurchase, as more
particularly described in Sections 3 and 4 below;
o A Licensed Management Agreement with a 3 year Minimum Fee Guaranty
equal to 10% of the amount of Gross Revenues of the 10 Television
Stations, as more particularly described in Section 5 below; and
o 3 year HTVN Co-Marketing Efforts Obligations, as more particularly
described in Section 6 below.
Upon Closing, the capitalization of Cubico.com will be as follows:
- ---------------------------------------------------------------------------
Class Shares % of Total CS
Equivalents
- ---------------------------------------------------------------------------
3,000,000 18.46%
Series A Preferred Stock
- ---------------------------------------------------------------------------
7,800,000 48.0%
Series B Preferred Stock
- ---------------------------------------------------------------------------
5,450,000 13.54%
Common Stock, Options and Future
Employee Common Stock and Option Pool
- ---------------------------------------------------------------------------
*Total CS Equivalents: 16,250,000 100%
- ---------------------------------------------------------------------------
*Post Series A (at a minimum of $1.00 per share) and
Series B Financings
Cubico.com anticipates that it will conduct a Series C Preferred Stock
Financing 6 months after the Closing, in which it will seek to raises additional
funds in the amount of approximately $20,000,000.
2. TRANSFER OF INTERESTS IN TELEVISION STATIONS. Upon Closing, HTVN will
sell and transfer to Cubico.com less than 50%, but more than 25%, of all of the
equity interests in ten (10) television stations to be agreed upon during due
diligence (the "TELEVISION STATIONS"), provided that such transfer may be made
to Cubico.com, or to its nominee without approval by the Federal Communications
Commission, and without licensing of, or transfer of any FCC license to,
Cubico.com, as determined by FCC counsel to HTVN and Cubico.com, and otherwise
in compliance with all communications and other laws and, provided further, that
following such transfer HTVN shall have management and control of such
Television Stations sufficient to enter in the LMA described in Section 5 below.
The parties will agree on the form of an equity interests transfer agreement,
which will include customary terms and conditions, customary representations and
warranties, as well as customary conditions to closing.
(a) SELECTION OF TELEVISION STATIONS. In determining which
television stations will be transferred to Cubico.com, Cubico.com will be given
preference in choosing the geographical markets served by such stations, except
for existing stations serving the markets of Dallas, Houston, San Antonio and
Del Rio, Texas.
3. HTVN SHARES. At the Closing, HTVN will agree to sell to Cubico.com.
5,000,000 restricted shares of HTVN Common Stock (the "HTVN Shares") upon the
closing of Cubico.com's Series C Preferred Stock Financing. The purchase price
for the HTVN Shares will be $1.00 per share. The parties will agree on the form
of a stock purchase agreement, which will include customary terms and
conditions, customary representations and warranties, as well as customary
conditions to closing.
(a) RESTRICTIONS ON TRANSFER OF HTVN SHARES. The HTVN Shares will
not be registered under the Securities Act, will be restricted securities, will
not be subject to transfer during the time they are subject to the HTVN
Repurchase Right (described in paragraph 4 below), and the certificates
evidencing the HTVN Shares or the transfer agent instructions will bear
appropriate legends or contain appropriate stop-transfer instructions, as the
case may be. The HTVN Shares will only be able to be sold or otherwise
transferred if subsequently registered under the Securities Act or if an
exemption from registration is available therefor. HTVN will grant to Cubico.com
(a) piggyback registration rights subject to underwriter cutback to 30%; and (b)
one (1) S-3 registration per 12-month period with minimum offering of
$10,000,000; in each case exercisable on or after January 1, 2001, but subject
to a right of first offer at fair market value in favor of HTVN, exercisable for
10 business days following Cubico.com's notice of proposed offering. HTVN will
agree to maintain current public information within the meaning of SEC Rule 144.
4. HTVN REPURCHASE RIGHTS. All HTVN Shares sold to Cubico.com and all.
other Cubico.com assets, including, but not limited to, all equity interests in
Television Stations that have been transferred to Cubico.com, will be subject to
all-or-nothing repurchase by HTVN, subject to the assumption by HTVN of up to
$5,000,000 of Cubico.com liabilities within ninety (90) days after the date that
is 3 years from the Closing Date, in the event that Cubico.com has not yet (a)
had a registration statement with respect to an initial public offering of
shares of its Common Stock (with a per share price of not less than $15.00 and
aggregate gross proceeds to the Company of not less than $50 Million) become
effective, or (b) the closing of an acquisition by merger or sale of assets in
which Cubico.com or the shareholders of Cubico.com, as the case may be, receive
cash, securities or other consideration in exchange for their shares or for such
assets, as the case may be, provided that the holders of Series A and Series B
Preferred Stock or the Company, as the case may be receive net proceeds of such
sale or exchange which, in the aggregate, exceeds the original cost of such
Preferred Stock then outstanding plus the amount of all declared and unpaid
dividends thereon, if any (each a "QUALIFIED LIQUIDITY EVENT"). In the event
that HTVN exercises its repurchase right, the HTVN Shares will be repurchased
at, a price of $1 .00 per share, and all other Cubico.com, assets will be
repurchased at fair market value as determined by independent third parties.
HTVN will be responsible for reimbursing Cubico.com for any sales, income or
other taxes incurred by Cubico.com in connection with the repurchase. All HTVN
Shares not repurchased by HTVN as provide in this paragraph will be released
from the repurchase right.
5. LICENSED MANAGEMENT AGREEMENT. On. the Closing Date, HTVN and
Cubico.com will enter into a 3 year exclusive and non-cancelable Licensed
Management Agreement ("LMA") with respect to all of the Television Station
owning or operating entities in which Cubico.com receives equity interests
pursuant to Section 2 above. Pursuant to such LMA which HTVN will provide
management services free of charge. Under the terms of the LMA, HTVN will make
LMA fee payments to Cubico.com in accordance with an industry standard fee
schedule for management of similar stations, provided that HTVN will agree to
make minimum guaranteed quarterly fee payments, in the amount equal to 10% of
the amount of Gross Revenues of the 10 Television Stations in which Cubico.com
holds equity interests, for such quarter, each due within 30 days of HTVN
quarter-end, for 3 years. Cubico.com will have customary audit rights.
6. JOINT MARKETING EFFORTS.
(a) HTVN MARKETING EFFORTS. For three (3) years from the Closing
Date, HTVN will agree to provide Cubico.com with the following marketing
efforts:
(i) Exhibition of Cubico.com's logo on HTVN's network
sponsorship billboards airing 5 times per week, but not more
than once per day, exclusive of all other continuous ".com,"
".net," ".org," or ".gov" logos of any type;
(ii) Advertising across HTVN's network with an
equivalent cost measured in accordance with generally
applicable pricing by HTVN for equivalent advertising equal to
an aggregate of no less than $100,000,000. Such advertising
shall run and be placed on such days and at such times and
locations as the parties shall mutually agree, and HTVN shall,
upon request by Cubico.com, which may be made from time to
time, use reasonable best efforts to acquire for Cubico.com
radio and print advertising or cash, in exchange for
Cubico.com's advertising rights based on the allocated cost
thereof, from and with third parties reasonably acceptable to
HTVN;
(iii) Programming time of 30 continuous minutes 5 times
per week, but not more than once per day, during the hours of
noon through 2:00 am. across HTVN's network, for use by
Cubico.com for sponsored program presentation based on
guidelines for content to be mutually agreed;
(iv) Production of Cubico.com sponsored programs at HTVN
production cost, provided that Cubico.com shall reimburse HTVN
for all extraordinary costs, including, but not limited to,
any and all costs of outside actors, special services not
otherwise generally provided by HTVN, and non-HTVN writers and
directors as may be requested by Cubico.com, with HTVN to have
a right of prior review and approval of content, which may not
be unreasonably withheld, the number of sponsored programs to
be produced by HTVN to be determined by Cubico.com in the
exercise of reasonable discretion, subject to general
availability of HTVN facilities;
(v) At no cost to HTVN, use and access to all HTVN
program inventory by license or sublicense of broadcasting
rights, all necessary owner and syndication consents, an
infringement indemnity, and no reciprocal advertising
obligations due from Cubico.com; and
(vi) Use of HTVN sales force to sell advertising for
Cubico.com, as will be agreed by the parties at or before the
Closing.
(b) CUBICO.COM MARKETING EFFORTS. For three (3) years from the
Closing Date, Cubico.com will agree to provide HTVN with all of the following
marketing efforts:
(i) Exhibition of HTVN's logo continuously on
Cubico.com's home page, exclusive of all other logos of
providers of television programming; and
(ii) Hyperlink buttons for general Hispanic/Latin
program video streaming content to be provided only by HTVN
and not by Univision, Telemundo, TV Azteca and Televisa.
(c) CUBICO.COM PAYMENTS. In connection with HTVN's marketing
efforts, Cubico.com will pay HTVN the following amounts: (i) $100,000 upon
Closing, provided that Cubico.com has raised at least $3,000,000 in its Series A
Preferred Stock Financing, and (ii) $400,000 upon closing of Cubico.com's Series
C Preferred Stock Financing.
(d) RENEWAL OF TERM. The term will renew for additional three (3)
year periods unless either party gives the other notice of termination at least
180 days prior to the end of the current term, provided that such patty has
reasonable commercial grounds for termination as will be agreed upon.
7. CONDITIONS. The consummation of the proposed relationship shall
be subject to customary closing conditions as well as the following:
(a) Completion of satisfactory due diligence review by each
party of the other;
(b) Negotiation, execution and delivery of definitive
agreements;
(c) Approval of the definitive agreements by the Boards of
Directors of the parties;
(d) Satisfaction of any applicable federal or state filing or
licensing requirements and the receipt of any applicable federal or state
regulatory approvals which are required in connection with the
transactions; and
(e) The parties shall enter into an agreement not to compete
directly with each other or to solicit each other's employees for a period
of three (3) years from the Closing Date.
(f) Cubico.com shall have closed its Series A Financing in an amount
not less than $3 Million.
8. DISCLOSURE AND ANNOUNCEMENTS. Each party agrees that the other may
disclose the existence and terms of this Agreement in connection with its
financings and other corporate transactions, provided that each party agrees to
consult with the other in advance concerning the form timing and contents of all
general public announcements, disclosures and filings, to the extent that such
public announcements, disclosures and filings otherwise concern the parties'
relationship, or concern the other party's operations, condition or prospects.
9. NO-SHOP. Each party agrees that, until termination in accordance with
Section 13 below, (a) such party shall not facilitate, solicit, encourage, or
take any action to facilitate any inquiry with respect to, or making of, any
potential or actual proposal for a strategic relationship of a kind described
herein with any third party, and (b) such party shall not engage in any
negotiation or discussion with, or furnish any information or data to, any third
party relating to any such proposal.
10. ACCESS FOR DUE DILIGENCE. In connection with the establishment of the
relationship described herein each party will afford the other and its
accountants, counsel and other representatives with reasonable access to its
properties, books, records, personnel, business and commercial relationships in
order that such party may have full opportunity to make such investigation as it
reasonably desires.
11. EXPENSES. Each party shall bear its own expenses in connection
with preparing for and consummating the transactions contemplated herein.
12. NO BROKER'S OR FINDER'S FEE. Each party represents and warrants to the
other than no person or entity will have any claim to any broker's or finder's
fee arising out of the transactions contemplated hereunder by any person
claiming to have been engaged by such party. Each party agrees to indemnify the
other for any loss caused by inaccuracy or breach of the foregoing
representation and warranty.
13. TERMINATION. This Agreement may be abandoned or terminated (a) at any
time by the mutual written agreement of the parties hereto, (b) at the option of
either party hereto on written notice to the other if the Closing shall not have
taken place by June 30, or (c) by Cubico.com, in the event that Cubico.com does
not raise $3 Million or is otherwise unable to close its Series A Financing by
April 15, 2000.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding between the parties with regard to the subjects hereof.
[Signature Page Follows]
<PAGE>
WHEREFORE, the parties have executed and delivered this Agreement in
Principal as of the date first written above.
CUBICO.COM, INC.,
a California corporation
By /S/ HECTOR SALDANA
-----------------------------------
Name: Hector Saldana
Title: Founder, Cubico Inc., 3-20-00
HISPANIC TELEVISION
NETWORK, INC.,
a Delaware corporation
By /S/ MARCO A. CAMACHO
----------------------------------
Name: Marco Camacho
Title: Chief Executive Officer
<PAGE>
EXHIBIT A
to AGREEMENT IN PRINCIPAL
SUMMARY OF RIGHTS, PREFERENCES AND PRIVILEGES
SERIES B PREFERRED STOCK
Dividends: The holders of the Series B Preferred Stock shall
be entitled to receive noncumulative dividends in
preference to any dividend on the Common Stock,
but pari passu with any dividends on the Company's
Series A Preferred Stock, at a rate of 8.0% per
annum per share, payable when as and if declared
by the Board of Directors.
Liquidation Preference: The holders of Series B Preferred Stock shall be
entitled to liquidation preference relative to the
Common Stock of a per share amount equal to $4.62
(the "ORIGINAL SERIES B PURCHASE PRICE"), plus any
declared but unpaid dividends (the "INITIAL
LIQUIDATION PREFERENCE"). If upon any liquidation,
the assets of the Company are insufficient to pay
the Initial Liquidation Preference and the
applicable liquidation preference of the holders
of the Company's Series A Preferred Stock in full,
then such assets shall be distributed among the
holders of Series B Preferred Stock and the
Company's Series A Preferred Stock ratably in
proportion of the full amounts to which they would
otherwise be entitled.
After the payment of the Initial Liquidation
Preference to the holders of the Series B Preferred
Stock and the applicable liquidation preference to
the holders of the Company's Series A Preferred
Stock, and any other distribution that may be
required with respect to Series B Preferred Stock
that may from time to time come into existence, which
shall be pari passu with all other distributions that
may be required with respect to the Company's Series
A Preferred Stock that may from time to time come
into existence, the remaining assets of the Company
shall be distributed pro rata to the holders of the
Common Stock.
Immediately prior to a liquidating event, a holder of
Series B Preferred Stock may convert any of such
shares of Series B Preferred Stock into shares of
Common Stock. A merger, consolidation, share
exchanges, acquisition, sale of voting control or
sale of substantially all of the assets of the
Company in which the current shareholders of the
Company do not own a majority of the outstanding
shares of the surviving corporation shall be deemed
to be a liquidation.
Conversion: The holders of the Series B Preferred Stock shall
have the right to convert the Series B Preferred
Stock, at any time, into shares of Common Stock. The
initial conversion rate shall be 1:1, subject to
adjustment as provided below.
Automatic Conversion: All shares of Series B Preferred Stock shall be
converted automatically into shares of Common
Stock, at the then applicable conversion rate, (i)
in the event that the holders of at least a
majority of the outstanding Series B Preferred
Stock, voting as a separate class, consent to such
conversion, (ii) upon the closing of a firmly
underwritten public offering of shares of Common
Stock of the Company at a per share price not less
than $15.00 and for aggregate gross proceeds to
the Company of not less than $50 million (before
deduction of underwriters commissions and
expenses) (a "QUALIFIED IPO"), or (iii) upon the
closing of a consolidation or merger of the
Company or a sale of all or substantially all of
its assets in a transaction in which the Company
or the shareholders of the Company, as the case
may be, receive net cash, securities or other
consideration which, in the aggregate, exceeds the
amount determined by adding the product of the
Original Series A Purchase Price multiplied by the
number of shares of Series A Preferred Stock then
outstanding, plus the product of the Original
Series B Purchase Price multiplied by the number
of shares of Series B Preferred Stock then
outstanding, plus the total amount of all declared
and unpaid dividends thereon, if any, as
determined by the Board of Directors.
Anti-dilution Provisions: The conversion rate of the Series B Preferred Stock
will be subject (a) to a broad based, weighted
average adjustment (based on all outstanding
shares of Series A Preferred Stock, Series B
Preferred Stock and Common Stock, as well as
outstanding and reserved options) to reduce dilution
in the event chat the Company issues additional
equity securities (other than the 2,450,000 reserved
employee shares described under "EMPLOYEE POOL"
below, and such additional shares issued under such
Employee Pool as may be approved in the future by the
Board) at a purchase price less than the Series B
Preferred Stock purchase price, and (b) to adjustment
upon the closing of the Company's Series C Preferred
Stock Financing, as is necessary to provide the
holders of Series B Preferred Stock with the right to
convert such Series B Preferred Stock into common
stock representing in the aggregate 48% of the
Company's common stock and common stock equivalents,
calculated on a fully-diluted and as-converted basis,
and after giving effect to the Series C Preferred
Stock Financing and to the initial Employee Pool, in
the event that the purchase price of the Company's
Series C Preferred Stock is greater than the Series B
Preferred Stock purchase price. The conversion rate
will also be subject to proportional adjustment for
stock splits, stock dividends, combinations of
shares, recapitalizations and the like.
Redemption: The Series B Preferred Stock shall be non-redeemable.
Board of Directors: The size of the Company's Board of Directors shall be
set at 5. Holders of the outstanding shares of the
Company's capital stock to be entitled to elect
Directors to the Board of Directors as follows:
Common Stock - Holders of a majority of the
outstanding shares of Common Stock, voting separately
as a class, shall be entitled to elect one (1)
Director.
Series A Preferred - Holders of a majority of the
outstanding shares of Series A Preferred Stock,
voting separately as a class, shall be entitled to
elect one (1) Director.
Common Stock and Series A Preferred - One (1)
Director shall be such person as the holders of a
majority of the outstanding shares of Common Stock,
voting separately as a class. and the holders of a
majority of the outstanding shares of Series A
Preferred Stock, voting separately as a class, shall
agree.
Series B Preferred - Holders of a majority of the
outstanding shares of Series B Preferred Stock,
voting separately as a class, shall be entitled to
elect Two (2) Directors.
Voting Rights: The holders of the Series B Preferred Stock will
vote together with the holders of Series A Preferred
Stock and Common Stock and not as a separate class
except as specifically provided herein or as
otherwise required by law. Each share of the Series B
Preferred Stock shall have a number of votes equal to
the number of shares of Common Stock then issuable
upon conversion of such shares of Preferred Stock.
Protective Provisions: For so long as any shares of Series B Preferred
Stock remain outstanding, consent of the holders
of at least a majority of the Series B Preferred
Stock shall be required for any action that (i)
increases or decreases the authorized number of
shares of Common Stock, Series A Preferred Stock
or Series B Preferred Stock, (ii) creates (by
reclassification or otherwise) any new class or
series of shares having any rights, preferences or
privileges senior to or on a parity with Series A
Preferred Stock and Series B Preferred Stock,
(iii) results in the redemption of any shares of
Common Stock (other than pursuant to equity
incentive agreements with service providers giving
the Company the right to repurchase shares upon
the termination of services), Series A Preferred
Stock or Series B Preferred Stock, (iv) results in
any merger, consolidation, share exchange, other
corporate reorganization, sale of control, or any
transaction in which all or substantially all of
the assets of the Company are sold, (v) amends or
waives any provision of the Company's Articles. of
Incorporation or Bylaws so as to adversely alter
or change the rights of the Series B Preferred
Stock, including, but not limited to the right to
elect a number of Directors, or (vi) results in
the payment or declaration of any dividend on any
shares of Common Stock, Series A Preferred Stock
or Series B Preferred Stock.
Information Rights: So long HTVN continues to hold at least
250,000 shares of Series B Preferred Stock or Common
Stock issued upon conversion of the Series B
Preferred Stock, the Company shall deliver to HTVN
audited annual and unaudited quarterly financial
statements. This provision shall terminate upon a
Qualified IPO.
Registration Rights: Registrable Securities shall include Common
Stock issuable or issued upon conversion of the
Series B Preferred Stock, and any securities issued
or issuable upon or in exchange therefor or
replacement thereof.
DEMAND RIGHTS: If HTVN requests that the Company file
a Registration Statement having an aggregate offering
price to the public of not less than $10,000,000 nor
comprising less than 20% of the Registrable
Securities, the Company will use its best efforts to
cause such shares to be registered for resale to the
public; provided, however, that the Company shall not
be obligated to effect any such registration before
the earlier of December 31, 2004 or six months after
the occurrence of a Qualified IPO. The Company shall
have the right to delay such registration under
certain circumstances for periods not in excess of
ninety (90) days in the aggregate in any twelve (12)
month period. In connection with any such
registration, the Company will enter into customary
agreements with the underwriters selected by the
Investors.
The Company shall not be obligated to effect more
than one (1) registration under these demand right
provisions, and shall not be obligated to effect a
registration during the forty-five (45) day period
prior to the Company's good faith estimate of the
date of filing of, and ending on a date one hundred
eighty (180) days after the effective date of the
registration affecting the Company's initial public
offering. Any demand registration shall include only
the Registrable Securities held by HTVN.
COMPANY REGISTRATION: HTVN shall be entitled to
"piggy-back" registration rights on all registrations
of the Company or on any demand registrations of any
other investor subject to the right, however, of the
Company and its underwriters (in the case of
Company-initiated registrations) to reduce the number
of shares proposed to be registered pro rata among
the piggy-back holders in view of market conditions.
S-3 RIGHTS: In addition to the other registration
rights described herein, HTVN shall be entitled to
one (1) demand registration on Form S-3 (if available
to the Company) per twelve-month period so long as
such registered offerings are not less than
$2,000,000.
EXPENSES: With the exception of Company
registrations which will be borne by the Company,
the registration expenses of any registration
hereunder will be borne by the selling
Shareholders.
TRANSFER OF RIGHTS: The registration rights may
not be transferred, except to affiliates of the
holders of such registration rights.
LOCK-UP PROVISION: If requested by the Company and
its underwriters, HTVN will not sell its shares for a
specified period (but not to exceed 180 days)
following the effective date of the Company's initial
public offering.
OTHER PROVISIONS: Other provisions shall be contained
in the Shareholders Agreement with respect to
registration rights as are reasonable, including
cross-indemnification, the period of time in which
the Registration Statement shall be kept effective,
and underwriting arrangements.
Right of First Refusal
and First Offer: In the event the Company proposes to offer equity
securities to any person (other than securities
issues pursuant to permitted employee benefit
plans or pursuant to acquisitions), HTVN shall
have the right of first offer to purchase its pro
rata portion of such shares to maintain its
percentage ownership in the Company. Such right of
first refusal will terminate upon a Qualified IPO.
Co-Sale Rights: HTVN shall have co-sale rights with respect
to sales or transfers of Common Stock by Hector
Saldana and Luis Saldana (the "FOUNDERS"), other than
transfers to family trusts for estate planning
purposes and other typical exceptions.
Purchase Agreement: The investment shall be made pursuant to a Stock
Purchase Agreement reasonably acceptable to the
Company and HTVN, which agreement shall contain,
among other things, appropriate representations and
warranties of the Company, covenants of the Company
reflecting the provisions set forth herein and
appropriate conditions of closing, including an
opinion of counsel for the Company. The Stock
Purchase Agreement shall provide that it may only be
amended and any waivers thereunder shall only be made
with the approval of HTVN. Registration rights
provisions may be amended or waived solely with the
consent of HTVN.
Founders Vesting: Hector Saldana and Luis Saldana will both be
subject to a Company right of repurchase on two-
thirds (2/3)of their respective shares over a 2 year
period subject to linear monthly vesting. All of
their shares which are subject to the repurchase
option will receive accelerated release from the
repurchase option in the event of any involuntary
cessation of employment (including constructive
termination) other than "for cause" within twelve
months after an acquisition of the Company.
Employee Option Pool: Upon the Closing of this financing there will be
2,450,000 shares of Common Stock reserved for
issuance to key employees, and directors and
consultants.
Stock Vesting: Options granted to purchase such reserved
shares shall be subject to vesting over a three year
period with 1/3 of the shares vesting on the first
anniversary of the date of grant and the remainder
vesting as to 1/24 per month thereafter.
Restrictions on Sales: The Company shall have a right of first refusal on
all employee transfers of Common Stock, subject to
normal exceptions.
Proprietary Information
and Inventions Agreement: Each officer, employee and consultant of the
Company shall enter into an acceptable proprietary
information and inventions agreement.
Finders: The Company and HTVN shall each indemnify the
other for any broker's or finder's fees for which
either is responsible.
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
NONE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
financial statements for fiscal year December 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 52,655 0
<SECURITIES> 0 0
<RECEIVABLES> 145,323 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 41,666 0
<PP&E> 1,778,991 0
<DEPRECIATION> (355,165) 0
<TOTAL-ASSETS> 4,495,591 0
<CURRENT-LIABILITIES> 3,801,838 0
<BONDS> 0 0
0 0
275,774 0
<COMMON> 781,016 0
<OTHER-SE> 3,074,282 0
<TOTAL-LIABILITY-AND-EQUITY> 4,495,591 0
<SALES> 278,186 1,997
<TOTAL-REVENUES> 278,186 0
<CGS> 0 0
<TOTAL-COSTS> 3,565,863 105,923
<OTHER-EXPENSES> 6,273 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 39,443 0
<INCOME-PRETAX> (3,333,393) (103,926)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,333,393) (103,926)
<EPS-BASIC> (0.05) (0.01)
<EPS-DILUTED> (0.05) (0.01)
</TABLE>
