<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1999
REGISTRATION NO. 333-82561
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RADIO UNICA COMMUNICATIONS CORP.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 4832 65-0856900
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
8400 N.W. 52(ND) STREET, SUITE 101
MIAMI, FLORIDA 33166
(305) 463-5000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------------
STEVEN E. DAWSON
RADIO UNICA COMMUNICATIONS CORP.
8400 N.W. 52(ND) STREET, SUITE 101
MIAMI, FLORIDA 33166
(305) 463-5000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
MARTIN H. NEIDELL, ESQ. ALLAN G. SPERLING, ESQ.
STROOCK & STROOCK & LAVAN LLP CLEARY, GOTTLIEB, STEEN & HAMILTON
180 MAIDEN LANE ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10038-4982 NEW YORK, NEW YORK 10006
(212) 806-5400 (212) 225-2000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value..................... 6,555,000 shares $16.00 $104,880,000 $29,157(3)
</TABLE>
(1) Includes 855,000 shares issuable upon exercise of over-allotment option
granted to the Underwriters.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
(3) A registration fee in the amount of $27,175 was previously paid.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 7, 1999
P R O S P E C T U S
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[LOGO]
5,700,000 SHARES
RADIO UNICA COMMUNICATIONS CORP.
COMMON STOCK
$ PER SHARE
---------
Radio Unica is selling 5,700,000 shares of its common stock. The
underwriters named in this prospectus have the option to purchase up to 855,000
additional shares of common stock from one of our stockholders, Warburg, Pincus
Ventures, L.P., to cover over-allotments. Radio Unica will not receive any
proceeds from the sale of the shares by this stockholder.
This is an initial public offering of common stock. Radio Unica currently
expects the initial public offering price to be between $14.00 and $16.00 per
share, and has applied to have the common stock included for quotation on the
Nasdaq National Market under the symbol "UNCA".
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ---------
<S> <C> <C>
Public Offering Price......................................... $ $
Underwriting Discount......................................... $ $
Proceeds to Radio Unica (before expenses)..................... $ $
</TABLE>
--------------
SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
CIBC WORLD MARKETS
October , 1999
<PAGE>
Map of U.S. showing
locations of Radio Unica stations
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. RADIO UNICA HAS NOT AUTHORIZED ANYONE TO PROVIDE
YOU WITH DIFFERENT INFORMATION. RADIO UNICA IS NOT MAKING AN OFFER OF THESE
SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME
THAT THE INFORMATION PROVIDED BY THIS PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary......................................................................................... 1
Risk Factors............................................................................................... 6
Use of Proceeds............................................................................................ 12
Dividend Policy............................................................................................ 12
Capitalization............................................................................................. 13
Dilution................................................................................................... 14
Unaudited Pro Forma Combined Financial Data................................................................ 15
Selected Consolidated Financial Data....................................................................... 20
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 22
Business................................................................................................... 29
Management................................................................................................. 48
Certain Stockholders....................................................................................... 52
Certain Transactions....................................................................................... 54
Description of Capital Stock............................................................................... 56
Description of Indebtedness................................................................................ 58
Shares Eligible for Future Sale............................................................................ 60
Underwriting............................................................................................... 62
Legal Opinions............................................................................................. 64
Experts.................................................................................................... 64
Where You Can Find More Information........................................................................ 64
Index To Financial Statements.............................................................................. F-1
</TABLE>
Until , 1999 (25 days after the date of this prospectus), all
dealers that buy, sell or trade the common stock, whether or not participating
in this offering, may be required to deliver a prospectus. This delivery
requirement is in addition to the obligation of dealers to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
i
<PAGE>
PROSPECTUS SUMMARY
This summary contains a general discussion of our business and this
offering. We encourage you to read the entire prospectus, including "Risk
Factors" and the financial statements, for a more complete understanding of
Radio Unica and this offering.
RADIO UNICA
OUR COMPANY
Radio Unica is a leading Spanish-language national radio network operating
in the United States. Radio Unica's uniform delivery of national programming to
our stations 24 hours a day differentiates us from other Spanish-language radio
groups. We were formed by Joaquin F. Blaya, the former President of Univision
Holdings, Inc. and former CEO of Telemundo Group, Inc. The significant aspects
of our network and operations are as follows:
- Our network reaches markets where approximately 78% of the Hispanic
population resides through our 12 owned and/or operated and 33 affiliate
stations
- Our owned and/or operated radio stations are located in ten markets,
including eight of the top ten Hispanic markets
- Our proprietary programming is focused on a news/talk format, which is the
most popular radio program format in the United States
Our nationwide distribution allows us to produce high quality programming
and spread the cost of that programming over our large base of stations. Our
network offers advertisers the only Hispanic radio platform capable of
delivering a consistent and controlled message to a national audience.
Additionally, our network allows national advertisers to reach a large portion
of the Hispanic population more effectively and at a lower cost than would be
the case if they had to purchase advertising separately in each market.
We believe that our high quality, original programming gives us a
competitive advantage over other Spanish-language radio broadcasters in
marketing to the Hispanic audience. Popular Hispanic television personalities
host our programs and their broad appeal extends beyond any particular Hispanic
cultural or geographical boundaries. These national personalities include Pedro
Sevcec, Dr. Isabel Gomez-Bassols, Jorge Ramos, Raul and Fulvia Peimbert,
Charytin and Mauricio Zeilic. We also air segments featuring Cristina, the most
popular Hispanic talk show host in the U.S., and Maria Elena Salinas, the most
recognized Hispanic female news anchor. Many of our radio programs are
fully-interactive talk shows that allow listeners nationwide to call in as
active participants in the on-air dialogue. Live sporting events are an integral
part of Radio Unica's network programming, and we have acquired the broadcast
rights in the United States to numerous marquee sporting events. Our programming
includes the following:
- contemporary talk
- entertainment and information programs
- news programs
- hourly local and national newscasts
- sports talk programs
- sports broadcasting
1
<PAGE>
OUR BUSINESS STRATEGY
Our strategy is to provide a leading national Spanish-language broadcast
network comparable to the Univision and Telemundo television networks. To this
end, we have employed the following business strategy:
- Create popular, national, high-impact programming
- Foster strong brand identity
- Focus on the news/talk radio format
- Sell advertising to the top 50 Spanish-language advertisers
Our principal executive offices are located at 8400 N.W. 52(nd) Street,
Suite 101, Miami, Florida 33166, and our telephone number is (305) 463-5000.
2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered..................... 5,700,000 shares
Common stock to be outstanding after this
offering............................... 19,666,996 shares
Use of proceeds.......................... We intend to use the net proceeds of this
offering:
- to prepay all indebtedness outstanding under
our credit facility;
- for acquisitions and upgrades;
- for general corporate purposes and working
capital requirements.
Proposed Nasdaq National Market symbol... "UNCA"
</TABLE>
This information and other information in this prospectus, unless otherwise
specifically stated, are based on the number of shares of common stock
outstanding on June 30, 1999. The number of shares:
- excludes 2,867,152 shares issuable upon the exercise of outstanding
options (of which 1,126,242 are exercisable), at an average exercise price
of $0.58 per share
- excludes shares available for issuance upon the exercise of options which
may be granted in the future under our stock option plan
- excludes any shares issuable upon the exercise of the underwriters'
over-allotment option
- gives effect to the exchange of 353,906.62 shares of preferred stock for
2,885,072 shares of common stock, which will occur immediately prior to
the closing of this offering
- has been adjusted to reflect the 310-for-one split of our common stock
which is expected to occur prior to the closing of this offering
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table presents (a) summary historical consolidated financial
data of Radio Unica as of the date and for the periods indicated and (b) summary
unaudited pro forma as adjusted financial data of Radio Unica as of the date and
for the periods indicated giving effect to the events described in the
"Unaudited Pro Forma Combined Financial Data" included elsewhere in this
prospectus as though they had occurred on the dates indicated therein. The
summary unaudited pro forma as adjusted financial data are not necessarily
indicative of the operating results or the financial condition that would have
been achieved had these events been consummated on the date indicated and should
not be construed as representative of future operating results or financial
condition. The summary historical consolidated and unaudited pro forma financial
data should be read in conjunction with the consolidated financial statements
and related notes, with the "Unaudited Pro Forma Combined Financial Data" and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
SEPTEMBER 12, PRO FORMA AS ADJUSTED
1996 ----------------------------
(INCEPTION) SIX MONTHS ENDED SIX MONTHS
THROUGH YEAR ENDED YEAR ENDED JUNE 30, YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------ DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 1998 1999
------------- ------------ ------------ ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue.............. $ -- $ -- $8,218,043 $ 3,463,962 $ 6,347,282 $8,945,883 $ 6,347,282
Operating expenses:......
Stock option
compensation
expense.............. -- -- -- -- -- 18,981,000 --
Other.................. 40,000 1,802,816 28,196,739 13,797,053 19,455,585 31,674,180 19,779,600
------------- ------------ ------------ ----------- ----------- ------------ --------------
Operating loss........... (40,000) (1,802,816) (19,978,696) (10,333,091) (13,108,303) (41,709,297) (13,432,318)
Interest income
(expense), net......... -- (12,765) (4,289,658) (153,350) (6,102,941) (11,222,935) (6,102,941)
Other income (loss)...... -- -- (14,867) 2,882 -- -- --
------------- ------------ ------------ ----------- ----------- ------------ --------------
Loss before income
taxes.................. (40,000) (1,815,581) (24,283,221) (10,483,559) (19,211,244) (52,932,232) (19,535,259)
Income tax benefit....... -- -- (2,446,745) -- -- (2,446,745) --
------------- ------------ ------------ ----------- ----------- ------------ --------------
Net loss................. (40,000) (1,815,581) (21,836,476) (10,483,559) (19,211,244) (50,485,487) (19,535,259)
Accrued dividends on
preferred stock........ -- 119,490 2,850,608 1,003,014 1,935,762 -- --
------------- ------------ ------------ ----------- ----------- ------------ --------------
Net loss applicable
to common
stockholders........... $ (40,000) $(1,935,071) ($24,687,084) $(11,486,573) $(21,147,006) ($50,485,487) $ (19,535,259)
------------- ------------ ------------ ----------- ----------- ------------ --------------
------------- ------------ ------------ ----------- ----------- ------------ --------------
Net loss per common share
applicable
to common
stockholders--
basic and diluted...... $ (2.93) $ (0.99)
------------ --------------
------------ --------------
Weighted average common
shares outstanding--
basic and diluted...... 17,221,954 19,665,678
------------ --------------
------------ --------------
OTHER FINANCIAL DATA:....
Depreciation and
amortization........... $ -- $ -- $1,696,376 $ 372,144 $ 2,413,072 $4,919,051 $ 2,737,087
Broadcast cash flow(1)... -- (843,778) (15,511,113) (8,654,422) (9,355,375) -- --
EBITDA(2)................ (40,000) (1,802,816) (18,282,320) (9,960,947) (10,695,231) -- --
Adjusted EBITDA(2)....... -- -- -- -- -- -- --
After tax cash flow(1)... (40,000) (1,815,581) (20,140,100) (10,111,415) (16,798,172) -- --
Net cash used in
operating activities... (40,000) (2,209,553) (21,689,140) (8,894,958) (11,199,911) -- --
Net cash used in
investing activities... -- (2,238,585) (60,605,902) (28,334,589) (36,518,756) -- --
Net cash provided by
financing activities... 45,000 5,570,000 120,062,324 36,795,000 9,109,419 -- --
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
AS OF AS ADJUSTED
JUNE 30, AS OF JUNE
1999 30, 1999
----------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................. $ 284,896 $67,084,896
Working capital....................................................................... (7,149,472) 69,850,528
Total assets.......................................................................... 121,057,769 187,857,769
Long-term debt........................................................................ 111,199,589 111,199,589
Series A redeemable cumulative preferred stock........................................ 40,246,750 --
Stockholders' equity (deficit)........................................................ $(47,452,080) $69,794,670
</TABLE>
- ------------------------
(1) Broadcast cash flow is defined as operating loss before corporate expenses
and depreciation and amortization. We define after tax cash flow as net loss
plus depreciation and amortization and stock option compensation expense.
Although broadcast cash flow and after tax cash flow are not measures of
performance calculated in accordance with generally accepted accounting
principles ("GAAP"), we believe that they are useful to an investor in
evaluating Radio Unica because they are measures widely used in the radio
broadcast industry to evaluate a radio company's operating performance.
However, you should not consider broadcast cash flow and after tax cash flow
in isolation or as substitutes for net loss, cash flows from operating
activities and other statement of operations or cash flow data prepared in
accordance with GAAP. These measures are not necessarily comparable to
similarly titled measures employed by other companies since all companies do
not calculate these non-GAAP measures in the same fashion.
(2) EBITDA is defined as operating loss plus depreciation and amortization.
Adjusted EBITDA is defined as EBITDA plus stock option compensation expense.
EBITDA and Adjusted EBITDA are presented not as alternative measures of
operating results or cash flow from operations (as determined in accordance
with GAAP), but because they are widely accepted supplemental financial
measures of a company's operating performance. Radio Unica's calculation of
EBITDA and Adjusted EBITDA may not be comparable to similarly titled
measures reported by other companies. Radio Unica's EBITDA and Adjusted
EBITDA calculations are not intended to represent cash used in operating
activities, since they do not include interest, taxes and changes in
operating assets and liabilities, nor are they intended to represent the net
increase or decrease in cash, since they do not include cash provided by
(used in) investing and financing activities.
5
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION IN
THIS PROSPECTUS BEFORE DECIDING TO INVEST IN SHARES OF OUR COMMON STOCK.
OUR SUBSTANTIAL LEVEL OF DEBT COULD LIMIT OUR ABILITY TO GROW AND COMPETE.
As of June 30, 1999, we had outstanding long-term indebtedness of
approximately $111.2 million.
Our substantial level of indebtedness could have adverse consequences to the
holders of our common stock, including the following:
- it may be difficult for us to obtain additional financing in the future
for working capital, capital expenditures, acquisitions, general corporate
or other purposes;
- our bank credit facility is secured by substantially all of our assets;
- we may be less able to compete with competitors which have less debt than
we do; and
- we may be more vulnerable to economic downturns, limited in our ability to
withstand competitive pressures and less flexible in adjusting rapidly to
changing business and economic conditions.
Our ability to satisfy all of our debt obligations depends upon our future
operating performance, which will be affected by general economic conditions and
financial, business and other factors, many of which are beyond our control.
WE HAVE A HISTORY OF LOSSES THAT IF CONTINUED INTO THE FUTURE COULD ADVERSELY
AFFECT THE MARKET PRICE OF OUR COMMON STOCK AND OUR ABILITY TO RAISE CAPITAL.
Since our inception, Radio Unica has not generated significant revenue, has
incurred substantial net losses and has never generated positive cash flow from
operations. We had net losses from operations of $1.8 million and $20.0 million
for the years ended December 31, 1997 and 1998, and a net loss from operations
of $13.1 million for the six months ended June 30, 1999. We believe that losses
will continue while we pursue our strategy of acquiring radio stations and
developing our network. We will also incur losses during the initial
reformatting and assimilation process with respect to the radio stations that we
acquire. We cannot be certain that we will achieve an adequate revenue base or
that our radio stations will become profitable or generate positive cash flow.
If we are unable to become profitable this may adversely affect the market price
of our common stock, which in turn may adversely affect our ability to raise
additional equity capital and to incur additional debt.
6
<PAGE>
A DECREASE OF INTEREST BY OUR AUDIENCE IN OUR SPANISH-LANGUAGE NEWS/TALK, SPORTS
AND INFORMATION FORMAT COULD RESULT IN A LOSS OF ADVERTISING REVENUE.
Our strategy is to broadcast Spanish-language news/talk, sports and
information to a national audience on AM radio. Accordingly, we depend
significantly upon the following, among other factors:
- the popularity of the news/talk, sports and information format with a
national audience
- the desire of Spanish-speaking persons in the United States to listen to
talk programming
- the growth of the Spanish-speaking audience by continued immigration and
the continued use of Spanish among Hispanics in the United States
- the continued availability and reasonable cost of broadcast rights in the
United States of programming, including sporting events
A decrease in any of these factors could result in a loss of our listening
audience and a loss of advertising revenue.
THE LOSS OF KEY PERSONNEL AND TALENT COULD DISRUPT OUR BUSINESS AND RESULT IN A
LOSS OF ADVERTISING REVENUE.
Our business depends on the continued efforts, abilities and expertise of
our senior officers, key employees and on-air radio talent. We do not have
employment agreements with any of our senior officers. The loss of our key
personnel or talent could result in a loss of our listening audience and a loss
of advertising revenue. We believe that our future success will depend on our
ability:
- to attract and retain highly skilled and qualified management personnel
- to expand, train and manage our employee base
- to develop, attract and retain our on-air radio talent
THE TERMS OF OUR DEBT RESTRICT THE DECISIONS WE CAN MAKE ABOUT OUR BUSINESS.
Our bank credit facility and indenture governing our other outstanding debt
contain covenants that restrict our ability to:
- incur additional indebtedness
- issue guarantees
- make negative pledges
- enter into sale and lease-back transactions
- pay cash dividends
- purchase our capital stock
- consummate asset sales
- create liens on assets
- enter into transactions with affiliates
- make investments, loans or advances
- consolidate or merge with or into any other person
- convey, transfer or lease all or substantially all of our assets
- amend material agreements
- change our business
7
<PAGE>
In addition, our bank credit facility requires us to maintain financial
ratios. A breach of any of these covenants could result in a default under the
bank credit facility or the indenture. Upon the occurrence of an event of
default under the bank credit facility, the lenders could elect to declare this
debt to be due and payable and could terminate their commitments to make further
extensions of credit. If the indebtedness under the bank credit facility were
accelerated, there could be no assurance that our assets would be sufficient to
repay in full such indebtedness and our other indebtedness.
IF WE ARE UNABLE TO COMPETE EFFECTIVELY FOR ADVERTISING REVENUE AGAINST OTHER
RADIO STATIONS AND OTHER MEDIA COMPANIES, MANY OF WHICH HAVE GREATER RESOURCES
THAN WE DO, WE MAY SUFFER A DECREASE IN ADVERTISING REVENUE.
Radio broadcasting is a highly competitive business. The financial success
of each of our radio stations will depend, to a significant degree, upon our
audience ratings, our share of the overall radio advertising revenue within each
geographic market and the economic health of the market. In addition, our
advertising revenues depend upon the desire of marketers to reach our audience
demographic. Our radio stations compete for audience share and advertising
revenue directly with other FM and AM radio stations and with other media within
their respective markets, such as the following:
- newspapers
- broadcast and cable television
- magazines
- billboard advertising
- transit advertising
- direct mail advertising
Some of these radio stations and networks also broadcast Spanish-language
talk radio. Many of these entities are larger and have significantly greater
resources than Radio Unica. The Telecommunications Act of 1996 facilitates the
entry of other radio broadcasting companies into the markets in which we operate
or may operate in the future.
OUR STOCKHOLDERS WILL NOT RECEIVE A CURRENT RETURN ON THEIR INVESTMENT IN OUR
COMMON STOCK SINCE WE DO NOT INTEND TO PAY CASH DIVIDENDS.
We do not intend to declare or pay any cash dividends in the near future. We
are a holding company and perform all of our operations through our
subsidiaries. Should we begin paying dividends, our sole source of cash from
which to pay them will be dividends paid or payments made to us by our
subsidiaries, which may be restricted in their ability to pay cash to us. Our
credit facility prohibits the payment of cash dividends.
INVESTORS WHO PURCHASE SHARES IN THIS OFFERING WILL NOT BE ABLE TO EXERCISE
CONTROL OVER US SINCE ONE PRINCIPAL STOCKHOLDER WILL CONTINUE TO HAVE A MAJORITY
INTEREST AND THE POWER TO CONTROL RADIO UNICA.
Upon completion of this offering, Warburg, Pincus Ventures will hold
approximately 70.1% (65.7% if the underwriters exercise their over-allotment
option) of Radio Unica's outstanding common stock. Accordingly, Warburg, Pincus
Ventures will be able to exercise control over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions, and over our dividend policy and access to capital. This
concentration of ownership might also prevent or delay a change in control of
Radio Unica. In addition, our bank credit facility requires Warburg, Pincus
Ventures to maintain specified ownership interests in Radio Unica.
8
<PAGE>
STOCKHOLDERS WHO DESIRE TO CHANGE CONTROL OF RADIO UNICA MAY BE PREVENTED FROM
DOING SO BY PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND LAW.
Our certificate of incorporation and federal and Delaware law contain
provisions that could have the effect of discouraging a third party from
attempting to acquire Radio Unica. This may prevent a transaction in which the
holders of common stock might receive a premium for their shares over then
existing market prices. These provisions include:
- Radio Unica's certificate of incorporation authorizes the board of
directors to issue preferred stock and to determine the terms of this
preferred stock without stockholder approval.
- Delaware law could prohibit us from engaging in a business transaction
with any affiliated stockholder for three years.
- The Communications Act and FCC rules require the prior consent of the FCC
to any change in control of Radio Unica and restrict ownership by non-U.S.
persons.
THE FAILURE TO MAINTAIN OUR LICENSES WITH THE FCC COULD TERMINATE OUR ABILITY TO
OWN AND OPERATE OUR RADIO NETWORK.
Radio broadcasters depend upon maintaining radio broadcasting licenses
issued by the FCC. These licenses are ordinarily issued for a maximum term of
eight years and may be renewed. Although we may apply to renew these licenses,
third parties may challenge our renewal applications. There can be no assurance
that the licenses will be renewed. In addition, if Radio Unica or any of our
officers, directors or significant stockholders violates the FCC's rules and
regulations or the Communications Act of 1934, is convicted of a felony, or is
otherwise found to be disqualified from being a party to a FCC license, the FCC
may commence a proceeding to impose sanctions against us.
WE MAY BE UNABLE TO RECEIVE FCC APPROVAL FOR TRANSFERS OF LICENSES RELATED TO
FUTURE ACQUISITIONS.
The radio broadcasting industry is subject to extensive and changing federal
regulation. Among other things, the Communications Act and FCC rules and
policies limit the number of stations that one individual or entity can own
(directly or by attribution) in a market, and require FCC approval for transfers
of control of FCC licensees and assignments of FCC licenses. The filing of
petitions or complaints against Radio Unica or any FCC licensee from which we
are acquiring a station could result in the FCC delaying the grant of, or
refusing to grant or imposing conditions on its consent to the assignment or
transfer of FCC licenses. The FCC and the Department of Justice evaluate
acquisitions to determine whether they serve the public interest and whether
they should be challenged under federal antitrust laws. The Communications Act
and FCC rules also impose limitations on non-U.S. ownership and voting of the
capital stock of Radio Unica. FCC rules also require, in certain circumstances,
prior approval for changes in voting rights of our common stock and changes in
our board of directors.
WE MAY NOT HAVE THE FINANCIAL RESOURCES NEEDED TO RESPOND TO TECHNOLOGY CHANGES
AND TO REMAIN COMPETITIVE.
The radio broadcasting industry is subject to technological change, evolving
industry standards and the emergence of new media technologies. The FCC is
considering ways to introduce new technologies to the radio broadcast industry
that would significantly enhance the sound quality of AM broadcasts. We cannot
assure you that we will have the resources to acquire new technologies or to
introduce new services that could compete with these new technologies.
9
<PAGE>
THE INABILITY OF OUR COMPUTERS OR THE COMPUTERS OF OUR SUPPLIERS TO DISTINGUISH
21ST CENTURY DATES FROM 20TH CENTURY DATES MAY RESULT IN A DISRUPTION OF OUR
OPERATIONS.
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21(st) century dates from 20(th) century dates. As a result,
computer systems and software used by many companies need to be upgraded to
comply with such "Year 2000" requirements. There is a risk that the computers
and other systems on which we depend to conduct our operations are not yet Year
2000 compliant. Failure to achieve Year 2000 compliance could cause a system
failure or miscalculations in our broadcast and corporate locations which could
cause disruptions of operations, including a temporary inability to produce
broadcast signals, process financial transactions, or engage in similar normal
business activities. Significant uncertainty exists concerning the potential
costs and effects associated with any year 2000 compliance.
14.0 MILLION, OR 71.0%, OF OUR TOTAL OUTSTANDING SHARES ARE RESTRICTED FROM
IMMEDIATE RESALE BUT MAY BE SOLD INTO THE MARKET IN THE NEAR FUTURE. THIS COULD
CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DROP SIGNIFICANTLY, EVEN IF OUR
BUSINESS IS DOING WELL.
After this offering, we will have outstanding 19,666,996 shares of common
stock. This includes the 5,700,000 shares we are selling in this offering, which
may be resold in the public market immediately. The remaining 71.0%, or
13,966,996 shares, of our total outstanding shares will become available for
resale in the public market as shown in the chart below.
As restrictions on resale end, the market price could drop significantly if
the holders of these restricted shares sell them or are perceived by the market
as intending to sell them.
<TABLE>
<CAPTION>
NUMBER OF SHARES / %
OF TOTAL OUTSTANDING DATE OF AVAILABILITY FOR RESALE INTO PUBLIC MARKET
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
13,966,996 / 71.0% 180 days after the date of this prospectus due to an agreement these
stockholders have with the underwriters. However, the underwriters can
waive this restriction and allow these stockholders to sell their shares at
any time.
</TABLE>
SINCE THE PRICE INVESTORS WILL PAY FOR OUR COMMON STOCK IN THIS OFFERING WAS NOT
ESTABLISHED IN A COMPETITIVE MARKET, THE SUBSEQUENT MARKET PRICE MAY BE LOWER.
Prior to this offering, there has been no public market for our common
stock. We have applied to list the common stock for trading on the Nasdaq
National Market. After this offering, an actual trading market might not develop
or continue. If you purchase shares of common stock in this offering, you will
pay a price that was not established in a competitive market. The price being
paid in this offering was negotiated with our underwriters, which is
substantially greater than that paid by our existing stockholders. The price of
the common stock that will prevail in the market after this offering may be
higher or lower than the price you pay. Even if an active trading market does
develop, the market price of our common stock is likely to be highly volatile
and could be subject to wide fluctuations in response to factors such as:
- actual or anticipated variations in quarterly and annual operating
results;
- changes in financial estimates by securities analysts;
- technological innovations;
- additions or departures of key personnel;
- sales of common stock; and
- general market conditions and other factors, many of which are beyond our
control.
10
<PAGE>
ALTHOUGH INVESTORS WILL PAY $15.00 PER SHARE IN THIS OFFERING, EACH SHARE ONLY
HAS A TANGIBLE BOOK VALUE OF A NEGATIVE $1.36 PER SHARE.
The initial public offering price per share will significantly exceed the
net tangible book value per share. Therefore, based upon an assumed initial
public offering price of $15.00 per share, if you purchase our common stock in
this offering, you will incur immediate and substantial dilution of
approximately $16.36 per share in the net negative tangible book value per share
of common stock from the initial public offering price.
FORWARD-LOOKING STATEMENTS REGARDING TRANSACTIONS MAY NOT BE CORRECT WHICH COULD
ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
When used in this prospectus, the words "believes," "anticipates," "expects"
and other words of similar import are used to identify "forward-looking
statements." All statements other than statements of historical fact included in
this prospectus, including, without limitation, the statements under "Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere herein, regarding us or any of
the transactions described in this prospectus, including the timing, financing,
strategies and effects of such transactions, are forward-looking statements.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, we can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from expectations are disclosed in this prospectus, including,
without limitation, in conjunction with the forward-looking statements in this
prospectus and/or under "Risk Factors." We do not intend to update these
forward-looking statements.
11
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the 5,700,000
shares of common stock will be approximately $77.0 million, at an assumed
initial public offering price of $15.00 per share and after deducting the
estimated underwriting discounts and commissions and offering expenses. We
intend to use the net proceeds of this offering as follows:
<TABLE>
<CAPTION>
PURPOSE AMOUNT
- ------------------------------------------------------------------------------- -------------
<S> <C>
Prepay indebtedness under our credit facility.................................. $ 16,000,000
Acquisition of radio stations in Sacramento, CA area........................... 4,625,000
Acquisition and upgrades of radio stations..................................... 52,000,000
General corporate purposes and working capital requirements.................... 4,375,000
</TABLE>
Indebtedness under our credit facility accrues interest at variable rates
and must be repaid in full on September 30, 2002. At June 30, 1999, borrowings
under our credit facility aggregated approximately $10.2 million and the
interest rate of such indebtedness was approximately 7.9%. At the date hereof,
borrowings under our credit facility aggregated approximately $15.2 million.
Amounts prepaid under the credit facility may be reborrowed by us.
Although we have signed a letter of intent to acquire radio stations in the
Sacramento, California area, we do not currently have any binding agreements to
make any acquisitions. Until we use the net proceeds of this offering as
described above, we will invest them in short-term, interest-bearing, investment
grade securities.
DIVIDEND POLICY
We have never paid or declared any cash dividends on our common stock and
have no plans to do so in the foreseeable future. We currently intend to retain
future earnings, if any, to finance the expansion of our business. Future
dividends, if any, will depend on, among other things, our results of
operations, capital requirements and on such other factors as our Board of
Directors may, in its discretion, consider relevant. Our credit facility
prohibits the payment of cash dividends.
12
<PAGE>
CAPITALIZATION
The following table describes our capitalization as of June 30, 1999, (a) on
an actual basis and (b) as adjusted to give effect to our receipt of the
estimated net proceeds from the sale of 5,700,000 shares of common stock offered
by us at an assumed initial public offering price of $15.00 per share, after
deducting the estimated underwriting discounts and commissions and offering
expenses.
When you read this table, it is important that you also read "Use of
Proceeds," "Unaudited Pro Forma Combined Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and their related notes.
<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------------- --------------
<S> <C> <C>
Cash and cash equivalents........................................................ $ 284,896 $ 67,084,896
-------------- --------------
-------------- --------------
Short-term debt:
Notes payable.................................................................. $ 10,950,000 $ 750,000
-------------- --------------
-------------- --------------
Long-term debt:
Senior discount notes.......................................................... $ 111,199,589 $ 111,199,589
-------------- --------------
Series A redeemable cumulative preferred stock, $.01 par value, 450,000 shares
authorized and 353,907 shares issued and outstanding on an actual basis;
450,000 shares authorized and 0 shares outstanding on a pro forma as adjusted
basis.......................................................................... 40,246,750 --
Common stockholders' deficit
Common stock, $.01 par value, 40,000,000 shares authorized and 11,081,924
shares issued and outstanding on an actual basis; 40,000,000 shares
authorized and 19,666,996 shares issued and outstanding on a pro forma as
adjusted basis............................................................... 110,819 196,670
Additional paid in capital (capital deficiency)................................ (4,659,598) 112,501,301
Accumulated deficit............................................................ (42,903,301) (42,903,301)
-------------- --------------
Total common stockholders' equity (deficit)...................................... (47,452,080) 69,794,670
-------------- --------------
Total capitalization............................................................. $ 103,994,259 $ 180,994,259
-------------- --------------
-------------- --------------
</TABLE>
13
<PAGE>
DILUTION
The pro forma net negative tangible book value of our common stock as of
June 30, 1999 was $(103,700,633), or $(7.42) per share of common stock. Pro
forma net negative tangible book value per share is equal to our pro forma total
assets less intangible assets, less total liabilities, divided by the pro forma
number of shares of common stock outstanding as of June 30, 1999 after giving
effect to the exchange of the preferred stock for 2,885,072 shares of common
stock. Assuming that we sell the 5,700,000 shares offered by this prospectus at
an initial public offering price of $15.00 per share (the mid-point of the
estimated range set forth on the cover page of this prospectus), after deducting
the estimated underwriting discounts and commissions and offering expenses
payable by us, our pro forma as adjusted net negative tangible book value as of
June 30, 1999 would have been $(26,700,633), or $(1.36) per share. This
represents an immediate increase in our pro forma as adjusted net negative
tangible book value of $6.06 per share to existing stockholders and an immediate
dilution in our pro forma as adjusted net negative tangible book value of $16.36
per share to investors purchasing shares in this offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share................... $ 15.00
---------
Pro forma net negative tangible book value per share as
of June 30, 1999...................................... $ (7.42)
Increase per share attributable to new investors........ 6.06
---------
Pro forma as adjusted net negative tangible book value per
share after this offering............................... (1.36)
---------
Dilution per share to new investors....................... $ 16.36
---------
---------
</TABLE>
The following table shows at June 30, 1999 on a pro forma as adjusted basis
the number of shares of common stock purchased from us, the total consideration
paid to us and the average price per share paid by existing stockholders for
their common stock and by new investors purchasing common stock in this
offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- --------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders................................ 13,966,996 71.0% $ 35,748,143 29.5% $ 2.56
New investors........................................ 5,700,000 29.0 85,500,000 70.5 15.00
------------ ----- -------------- ----- -----------
Total............................................ 19,666,996 100.0% $ 121,248,143 100.0% $ 6.17
------------ ----- -------------- ----- -----------
------------ ----- -------------- ----- -----------
</TABLE>
At June 30, 1999, there were outstanding options to purchase 2,867,152
shares of common stock at an average exercise price of $0.58. Additionally,
there were 2,132,848 options available for future grant under our stock option
plan. Options to purchase 1,127,411 shares of common stock at an average
exercise price of $1.43 per share will vest as a result of this offering. To the
extent we issue additional shares or the option holders exercise these
outstanding options or any options we grant in the future, there will be further
dilution to new investors.
14
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The pro forma amounts in the column "Pro Forma" are adjusted to give effect
to the following transactions as if they had occurred (a) on June 30, 1999 with
respect to the Unaudited Pro Forma Condensed Combined Balance Sheet, (b) on
January 1, 1999 with respect to the Unaudited Pro Forma Condensed Combined
Statement of Operations for the six months ended June 30, 1999 and (c) on
January 1, 1998 with respect to the Unaudited Condensed Combined Statement of
Operations for the year ended December 31, 1998:
- the purchase of all of the common stock of Oro Spanish Broadcasting Inc.
(KIQI(AM) in San Francisco)
- the purchase of assets of WNMA(AM) and WAFN(AM) in Miami
- the purchase of assets of KBLA(AM) in Los Angeles
- the purchase of all of the common stock of Blaya, Inc. (KXYZ(AM) in
Houston)
- the purchase of assets of KAHZ(AM) in Dallas
- the purchase of assets of KIDR(AM) in Phoenix
- the purchase of assets of WJDM(AM) and WWRU(AM) in New York
- the purchase of assets of WNTD(AM) in Chicago
- the issuance of our senior discount notes
- the conversion of promissory notes and stockholders' notes into preferred
stock
The pro forma amounts in the column "Pro Forma as Adjusted" are further
adjusted to give effect to the completed transactions described above and to the
following transactions as if they had occurred (a) on June 30, 1999 with respect
to the Unaudited Pro Forma Condensed Combined Balance Sheet and (b) on January
1, 1998 with respect to the Unaudited Pro Forma Condensed Combined Statements of
Operations for the six months ended June 30, 1999 and for the year ended
December 31, 1998:
- this offering
- the repayment of our bank credit facility
- the conversion of our outstanding preferred stock
The Unaudited Pro Forma Condensed Combined Statement of Operations for the
year ended December 31, 1998 is based on the audited statement of operations of
Radio Unica for the year ended December 31, 1998 and the unaudited statement of
operations of Oro for the four months ended April 30, 1998. The Unaudited Pro
Forma Condensed Combined Statement of Operations for the six months ended June
30, 1999 is based on the unaudited statement of operations of Radio Unica for
the six months ended June 30, 1999. The Unaudited Pro Forma Condensed Combined
Balance Sheet has been derived from the unaudited balance sheet of Radio Unica
as of June 30, 1999.
Our acquisitions described above have been accounted for using the purchase
method of accounting. The total consideration of each such acquisition has been
allocated to the tangible and intangible assets acquired and liabilities assumed
based upon their respective estimated fair values.
The Unaudited Pro Forma Combined Financial Data should be read in
conjunction with the financial statements of Radio Unica and Oro, including the
notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," appearing elsewhere in this prospectus. We believe
that the assumptions used in the following statements provide a reasonable basis
on which to present pro forma financial data. The Unaudited Pro Forma Combined
Financial Data is presented for illustrative purposes only and is not
necessarily indicative of what our actual financial position or results of
operations would have been had these transactions been consummated as of the
above-referenced dates or the financial position or results of operations of
Radio Unica for any future period.
15
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
RADIO UNICA
COMMUNICATIONS OFFERING PRO FORMA
CORP. ADJUSTMENTS AS ADJUSTED
-------------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 284,896 $ 66,800,000(7) $ 67,084,896
Restricted cash................................. 2,635,553 -- 2,635,553
Accounts receivable, net........................ 3,697,089 -- 3,697,089
Prepaid expenses................................ 1,409,990 -- 1,409,990
-------------- ------------ ------------
Total current assets.............................. 8,027,528 66,800,000 74,827,528
Property and equipment, net....................... 16,214,652 -- 16,214,652
Broadcast licenses and other intangibles, net..... 96,495,303 -- 96,495,303
Other assets...................................... 320,286 -- 320,286
-------------- ------------ ------------
Total assets...................................... $121,057,769 $ 66,800,000 $187,857,769
-------------- ------------ ------------
-------------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................ $ 940,243 $ -- $ 940,243
Accrued expenses................................ 3,286,757 -- 3,286,757
Notes payable................................... 10,950,000 (10,200,000)(7) 750,000
-------------- ------------ ------------
Total current liabilities......................... 15,177,000 (10,200,000) 4,977,000
Other liabilities................................. 244,520 -- 244,520
Deferred taxes.................................... 1,641,990 -- 1,641,990
Senior discount notes............................. 111,199,589 -- 111,199,589
Commitments and contingencies
Series A redeemable cumulative preferred stock.... 40,246,750 (40,246,750)(6) --
Stockholders' equity (deficit):
Common stock.................................... 110,819 57,000(7) 196,670
28,851(6) --
Additional paid-in capital (deficiency)......... (4,659,598) 76,943,000(7) 112,501,301
40,217,899(6)
Accumulated deficit............................. (42,903,301) -- (42,903,301)
-------------- ------------ ------------
Total stockholders' equity (deficit).............. (47,452,080) 117,246,750 69,794,670
-------------- ------------ ------------
Total liabilities and stockholders' equity
(deficit)....................................... $121,057,769 $ 66,800,000 $187,857,769
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
16
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
RADIO UNICA
COMMUNICATIONS PRO FORMA OFFERING PRO FORMA
CORP. ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
-------------- ----------- ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenue........................... $ 6,347,282 $ -- $ 6,347,282 $ -- $ 6,347,282
Operating expenses:
Direct operating expenses........... 1,708,467 -- 1,708,467 -- 1,708,467
Selling, general and administrative
expenses.......................... 6,362,150 -- 6,362,150 6,362,150
Network............................. 5,632,040 -- 5,632,040 5,632,040
Corporate........................... 1,339,856 -- 1,339,856 1,339,856
Depreciation and amortization....... 2,413,072 324,015(1) 2,737,087 -- 2,737,087
LMA termination fee................. 2,000,000 -- 2,000,000 -- 2,000,000
Stock option expense................ -- -- -- -- --
-------------- ----------- ------------ ------------------ ------------
19,455,585 324,015 19,779,600 -- 19,779,600
-------------- ----------- ------------ ------------------ ------------
Loss from operations.................. (13,108,303) (324,015) (13,432,318) -- (13,432,318)
Interest expense, net................. (6,102,941) (211,547)(2) (6,314,488) 211,547(8) (6,102,941)
-------------- ----------- ------------ ------------------ ------------
Loss before income taxes.............. (19,211,244) (535,562) (19,746,806) 211,547 (19,535,259)
Income taxes.......................... -- -- -- -- --
-------------- ----------- ------------ ------------------ ------------
Net loss.............................. (19,211,244) (535,562) (19,746,806) 211,547 (19,535,259)
Accrued dividends on Series A
redeemable
cumulative preferred stock.......... 1,935,762 -- 1,935,762 (1,935,762)(10) --
-------------- ----------- ------------ ------------------ ------------
Net loss applicable to common
stockholders........................ $(21,147,006) $(535,562) $(21,682,568) $ 2,147,309 $(19,535,259)
-------------- ----------- ------------ ------------------ ------------
-------------- ----------- ------------ ------------------ ------------
Net loss per common share applicable
to common stockholders-- basic and
diluted............................. $ (1.91) $ (1.96) $ (0.99)
-------------- ------------ ------------
-------------- ------------ ------------
Weighted average common shares
outstanding-- basic and diluted..... 11,080,606 11,080,606 19,665,678
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
17
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
RADIO
UNICA
COMMUNICATIONS PRO FORMA OFFERING PRO FORMA AS
CORP. ORO(3) ADJUSTMENTS PRO FORMA ADJUSTMENTS ADJUSTED
--------------- --------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net revenue......................... $ 8,218,043 $ 727,840 $ -- $ 8,945,883 $ -- $ 8,945,883
Operating expenses:
Direct operating expenses......... 1,852,832 97,204 -- 1,950,036 -- 1,950,036
Selling, general and
administrative expenses......... 10,064,219 617,729 -- 10,681,948 -- 10,681,948
Network expenses.................. 11,812,105 -- (460,167)(4) 11,351,938 -- 11,351,938
Corporate expenses................ 2,771,207 -- -- 2,771,207 -- 2,771,207
Depreciation and amortization..... 1,696,376 32,400 3,073,898(1) 4,919,051 -- 4,919,051
116,377(4)
Stock option compensation
expense......................... -- -- -- -- 18,981,000(9) 18,981,000
--------------- --------- ----------- ----------- ----------- ------------
28,196,739 747,333 2,730,108 31,674,180 18,981,000 50,655,180
--------------- --------- ----------- ----------- ----------- ------------
Loss from operations................ (19,978,696) (19,493) (2,730,108) (22,728,297) (18,981,000) (41,709,297)
Other income (expense):
Interest expense, net............. (4,289,658) (129,166) (264,230)(4) (11,803,495) 580,560(8) (11,222,935)
(7,120,441)(2)
Equity in loss of equity
investee........................ (14,867) -- 14,867(4) -- -- --
--------------- --------- ----------- ----------- ----------- ------------
Loss before income taxes............ (24,283,221) (148,659) (10,099,912) (34,531,792) (18,400,440) (52,932,232)
Income tax benefit.................. 2,446,745 -- -- 2,446,745 -- 2,446,745
--------------- --------- ----------- ----------- ----------- ------------
Net loss............................ (21,836,476) (148,659) (10,099,912) (32,085,047) (18,400,440) (50,485,487)
Accrued dividends on Series A
redeemable cumulative preferred
stock............................. 2,850,608 -- 848,967(5) 3,699,575 (3,699,575) 10) --
--------------- --------- ----------- ----------- ----------- ------------
Net loss applicable to common
stockholders...................... $ (24,687,084) $(148,659) ($10,948,879) $(35,784,622) ($14,700,865) $(50,485,487)
--------------- --------- ----------- ----------- ----------- ------------
--------------- --------- ----------- ----------- ----------- ------------
Net loss per common share applicable
to common stockholders--basic and
diluted........................... $ (2.86) $ (4.14) $ (2.93)
--------------- ----------- ------------
--------------- ----------- ------------
Weighted average common shares
outstanding--basic and diluted.... 8,636,882 8,636,882 17,221,954
--------------- ----------- ------------
--------------- ----------- ------------
</TABLE>
18
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(1) Represents amortization and depreciation of the broadcasting licenses,
goodwill, property and equipment, and covenant not to compete acquired in
connection with the acquisitions. The assets are amortized or depreciated
over a five to thirty year period.
(2) Represents the additional interest expense that would have been incurred if
our senior discount notes and the borrowings under our credit facility had
been outstanding for the entire period:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------
<S> <C> <C>
Interest expense on the senior discount notes..................... $ 6,663,699 $ --
Bank credit facility unused commitment fee........................ 15,712 (14,940)
Interest expense on existing indebtedness......................... (573,972) --
Debt issuance cost amortization................................... 393,442 --
Interest expense on borrowings on our bank credit facility........ 621,560 226,487
----------------- --------
Net increase in interest expense.................................. $ 7,120,441 $ 211,547
----------------- --------
----------------- --------
</TABLE>
(3) Represents Oro's results of operations for the four months ended April 30,
1998.
(4) Reflects the adjustment to record the acquisition of the remaining 50.1% of
the voting rights and 20% of the ownership rights of Blaya, Inc.:
<TABLE>
<S> <C>
Eliminate LMA charge..................................................... $ 460,167
Eliminate income in equity investee...................................... 14,867
Depreciation and amortization............................................ (116,377)
Eliminate interest income from equity investee........................... (264,230)
---------
$ 94,427
---------
---------
</TABLE>
(5) Represents accrued dividends on our preferred stock into which the
promissory notes and the stockholder notes were converted. These dividends
have not been declared.
(6) Represents the exchange of 353,907 shares of preferred stock for 2,885,072
shares of common stock at $13.95 per share.
(7) Represents the net proceeds of this offering assuming the sale of 5,700,000
shares of common stock at an estimated offering price of $15.00 per share,
less underwriting discounts, commissions and offering cost of approximately
$8,500,000 and retirement of debt.
(8) Represents reduction in interest expenses related to the repayment of the
bank credit facility.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------
<S> <C> <C>
Interest on bank credit facility.................................. $ (621,560) $ (266,487)
Facilities fees................................................... 41,000 14,940
----------------- ----------------
$ (580,560) $ (211,547)
----------------- ----------------
----------------- ----------------
</TABLE>
(9) To record compensation expense in connection with the vesting of options to
purchase 1,324,695 shares of common stock with exercise prices ranging from
$.03 to $1.72 per share.
(10) Represents the elimination of the accrued dividends in connection with the
exchange of the preferred stock for common stock.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for, and as of the
end of the period from September 12, 1996 (inception) through December 31, 1996,
for, and as of the years ended December 31, 1997 and 1998 and for, and as of the
six months ended June 30, 1998 and 1999 have been derived from the consolidated
financial statements of Radio Unica, of which (a) the consolidated financial
statements for, and as of the end of the period from September 12, 1996
(inception) through December 31, 1996 and, for, and as of the years ended
December 31, 1997 and 1998 are included elsewhere in this prospectus, (b) the
consolidated financial statements for, and as of the period from September 12,
1996 (inception) through December 31, 1996 and, for, and as of the years ended
December 31, 1997 and 1998 were audited by Ernst & Young LLP, independent
certified public accountants and (c) the consolidated financial statements for,
and as of the six months ended June 30, 1998 and 1999 are unaudited, and are
included elsewhere in this prospectus. In the opinion of management, the
consolidated financial statements for, and as of the six months ended June 30,
1998 and 1999 include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations for,
and the financial position at the end of each of such periods. The results of
operations for the six months ended June 30, 1999 are not necessarily indicative
of the results to be expected for the full year or any future period. The
selected historical financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Radio Unica's consolidated financial statements, including the
notes thereto, appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
SEPTEMBER 12, 1996
(INCEPTION) SIX MONTHS ENDED
THROUGH YEAR ENDED YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, DECEMBER 31, -----------------------
1996 1997 1998 1998 1999
------------------ ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue................................. $ -- $ -- $8,218,043 $3,463,962 $ 6,347,282
Operating expenses.......................... 40,000 1,802,816 28,196,739 13,797,053 19,455,585
-------- ------------ ------------ ---------- -----------
Operating loss.............................. (40,000) (1,802,816) (19,978,696) (10,333,091) (13,108,303)
Interest income (expense), net.............. -- (12,765) (4,289,658) (153,350) (6,102,941)
Other income (loss)......................... -- -- (14,867) 2,882 --
-------- ------------ ------------ ---------- -----------
Loss before income taxes.................... (40,000) (1,815,581) (24,283,221) (10,483,559) (19,211,244)
Income tax benefit.......................... -- -- (2,446,745) -- --
-------- ------------ ------------ ---------- -----------
Net loss.................................... (40,000) (1,815,581) (21,836,476) (10,483,559) (19,211,244)
Accrued dividends on preferred stock........ -- 119,490 2,850,608 1,003,014 1,935,762
-------- ------------ ------------ ---------- -----------
Net loss applicable to common
stockholders.............................. $ (40,000) $(1,935,071) ($24,687,084) $11,486,573 $(21,147,006)
-------- ------------ ------------ ---------- -----------
-------- ------------ ------------ ---------- -----------
OTHER FINANCIAL DATA:
Depreciation and amortization............... $ -- $ -- $1,696,376 $ 372,144 $ 2,413,072
Broadcast cash flow (1)..................... -- (843,778) (15,511,113) (8,654,422) (9,355,375)
EBITDA (2).................................. (40,000) (1,802,816) (18,282,320) (9,960,947) (10,695,231)
After tax cash flow (1)..................... (40,000) (1,815,581) (20,140,100) (10,111,415) (16,798,172)
Net cash used in operating activities....... (40,000) (2,209,553) (21,689,140) (8,894,958) (11,199,911)
Net cash used in investing activities....... -- (2,238,585) (60,605,902) (28,334,589) (36,518,756)
Net cash provided by financing activities... 45,000 5,570,000 120,062,324 36,795,000 9,109,419
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------------- -----------------------
1996 1997 1998 1998 1999
--------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 5,000 $1,126,862 $38,894,144 $ 692,315 $ 284,896
Working capital................................... 5,000 1,047,193 52,867,136 (2,597,505) (7,149,472)
Total assets...................................... 5,000 6,678,088 123,503,442 44,514,087 121,057,769
Long-term debt.................................... -- -- 105,029,128 -- 111,199,589
Series A redeemable cumulative preferred stock.... -- 5,316,990 38,266,437 36,639,969 40,246,750
Stockholders' equity (deficit).................... $ 5,000 $(1,922,571) $(26,305,524) $(13,102,882) $(47,452,080)
</TABLE>
- ------------------------
(1) Broadcast cash flow is defined as operating loss before corporate expenses
and depreciation and amortization. We define after tax cash flow as net loss
plus depreciation and amortization and stock option compensation expense.
Although broadcast cash flow and after tax cash flow are not measures of
performance calculated in accordance with generally accepted accounting
principles ("GAAP"), we believe that they are useful to an investor in
evaluating Radio Unica because they are measures widely used in the radio
broadcast industry to evaluate a radio company's operating performance.
However, you should not consider broadcast cash flow and after tax cash flow
in isolation or as substitutes for net loss, cash flows from operating
activities and other statement of operations or cash flow data prepared in
accordance with GAAP. These measures are not necessarily comparable to
similarly titled measures employed by other companies since all companies do
not calculate these non-GAAP measures in the same fashion.
(2) EBITDA is defined as operating loss plus depreciation and amortization.
EBITDA is presented not as an alternative measure of operating results or
cash flow from operations (as determined in accordance with GAAP), but
because it is a widely accepted supplemental financial measure of a
company's operating performance. Radio Unica's calculation of EBITDA may not
be comparable to similarly titled measures reported by other companies.
Radio Unica's EBITDA calculation is not intended to represent cash used in
operating activities, since it does not include interest, taxes and changes
in operating assets and liabilities, nor is it intended to represent the net
increase or decrease in cash, since it does not include cash provided by
(used in) investing and financing activities.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
We were incorporated on September 12, 1996 (inception), for the purpose of
producing, broadcasting and distributing Spanish-language radio programming in
the United States. Our strategy is to develop our radio network into an
advertising platform that is attractive to national advertisers. The Radio Unica
network is comprised of radio stations that we own, radio stations that we
operate under local marketing agreements and affiliated radio stations. From
inception through the year ended December 31, 1997, we had no revenue and had
not commenced operations. We launched our network on January 5, 1998 with 30
affiliated stations and three stations operated under local marketing
agreements. We expect to incur operating losses for the foreseeable future as we
develop our network and stations and establish our base of advertising revenues.
We generate revenue from sales of network advertising time, and sales of
local and national advertising time on radio stations that we own and those that
we operate. Advertising rates are, in large part, based upon the network's and
each station's ability to attract audiences in demographic groups targeted by
advertisers. All revenues are stated net of any agency commissions. We recognize
advertising revenue when the commercials are broadcast.
Our operating expenses consist of network programming expenses, marketing
and selling costs, including commissions paid to our sales staff, technical and
engineering costs, and general and administrative expenses.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
NET REVENUE. Net revenue increased by approximately $2.8 million to
approximately $6.3 for the six months ended June 30, 1999 from approximately
$3.5 million for the comparable period in the prior year. The increase in net
revenue relates to an increase in our customer base due to the development of
our network and increase in the number of owned and/or operated stations.
OPERATING EXPENSES. Operating expenses increased by approximately $5.7 to
approximately $19.5 million for the six months ended June 30, 1999 from
approximately $13.8 million for the comparable period in the prior year. The
increase in operating expenses is mainly due to the increase in the number of
owned and/or operated stations, as well as a one-time payment of $2.0 million to
terminate the local marketing agreement for Los Angeles radio station KVCA-AM.
If this agreement had continued pursuant to its terms the sum of the amounts due
would have been approximately $6.1 million. We now reach the market through our
radio station KBLA-AM in Los Angeles. Operating expenses for the six months
ended June 30, 1998 included non-recurring network expenses for programming
rights and production expenses relating to the World Cup.
Direct operating expenses increased by approximately $0.8 million to
approximately $1.7 million for the six months ended June 30, 1999 from
approximately $0.9 million for the comparable period in the prior year. The
increase in direct operating expenses is primarily due to the increase in the
number of owned and/or operated stations.
Selling, general and administrative expenses increased by approximately $2.0
million to approximately $6.4 million for the six months ended June 30, 1999
from approximately $4.4 million for the comparable period in the prior year. The
increase in selling, general and administrative expenses primarily relates to
the increase in the number of owned and/or operated stations.
Network expenses decreased by approximately $1.3 million to approximately
$5.6 million for the six months ended June 30, 1999 from approximately $6.9
million for the comparable period in the prior
22
<PAGE>
year. The decrease in network expenses reflected the absence of non-recurring
costs incurred during 1998 for programming rights and production expenses
relating to the World Cup.
Corporate expenses were approximately $1.3 million for the six months ended
June 30, 1999 which was consistent with the comparable period in the prior year.
Depreciation and amortization increased by approximately $2.0 million to
approximately $2.4 million for the six months ended June 30, 1999 from
approximately $0.4 million for the comparable period in the prior year. The
increase in depreciation and amortization is due to the additional fixed and
intangible assets from acquisitions of owned and/or operated stations.
Local marketing termination fee relates to a one-time payment of $2.0
million to terminate the local marketing agreement for Los Angeles radio station
KVCA-AM. We now reach the market through our radio station KBLA-AM in Los
Angeles.
OTHER INCOME (EXPENSE). Other income (expense) for the six months ended
June 30, 1999 included interest income of approximately $0.6 million and
interest expense of approximately $6.7 million. Interest income primarily
relates to interest earned on the remaining proceeds from our senior discount
notes. Interest expense primarily relates to the interest on the outstanding
balance of our senior discount notes. We had approximately $0.3 million in
interest income and $0.5 million in interest expense during the six months ended
June 30, 1998.
NET LOSS. Net loss increased by approximately $8.7 million to approximately
$19.2 million for the six months ended June 30, 1999 as compared to a loss of
approximately $10.5 million for the comparable period in the prior year. The
increase in net loss is a result of increased costs associated with the
operation of our owned and/or operated stations, the increase in interest
expense resulting from our senior discount notes, as well as the termination of
the local marketing agreement for Los Angeles radio station KVCA-AM. This
increase is offset in part by a decrease in network expenses related to
non-recurring costs in 1998 for programming rights and production expenses
relating to the World Cup.
EBITDA. EBITDA decreased by approximately $0.7 million to approximately
$(10.7) million for the six months ended June 30, 1999 as compared to
approximately $(10.0) million for the comparable period in the prior year. The
decrease in EBITDA is due to costs incurred during 1999 associated with the
increase in the number of owned and/or operated stations, as well as the
termination of the local marketing agreement for Los Angeles radio station
KVCA-AM. This decrease was offset in part by an increase in net revenue as well
as a decrease in network expenses related to non-recurring costs in 1998 for
programming rights and production expenses relating to the World Cup.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
NET REVENUE. Net revenue for the year ended December 31, 1998 was
approximately $8.2 million relating to the sales of network advertising and
sales of advertising on our owned and/or operated stations. Radio Unica was not
operating its network or owned and/or operated stations during the year ended
December 31, 1997 and as a result had no revenues.
OPERATING EXPENSES. Operating expenses for the year ended December 31, 1998
were approximately $28.2 million as compared to approximately $1.8 million for
the year ended December 31, 1997.
Direct operating expenses of approximately $1.9 million related to
engineering and programming costs of our owned and/or operated stations.
Selling, general and administrative expenses of approximately $10.1 million
related to the operations of our owned and/or operated stations, an increase of
approximately $10.0 million over the year ended December 31, 1997. Selling,
general and administrative expenses for the year ended
23
<PAGE>
December 31, 1997 primarily related to sales personnel hired for our stations
operated under local marketing agreements.
Network expenses of approximately $11.8 million related to the operations of
our network including engineering, programming, sales and administration, an
increase of approximately $11 million over the year ended December 31, 1997.
Network expenses for the year ended December 31, 1997 included costs related to
the developing and launching of the network including programming, sales,
engineering and administration.
Corporate expenses for the year ended December 31, 1998 of approximately
$2.8 million related to the costs of executive management, legal and
professional fees and other costs, an increase of approximately $1.8 million
over the year ended December 31, 1997. Corporate expenses for the year ended
December 31, 1997 included primarily legal and professional fees, promotional
costs and travel expenses incurred during the development stage.
Depreciation and amortization for the year ended December 31, 1998 of
approximately $1.7 million related to the depreciation of our fixed assets as
well as the amortization of our intangibles. We placed a majority of our
property and equipment as well as our broadcast licenses and other intangibles
into service on or about December 31, 1997; therefore, there was no depreciation
and amortization expense recorded for the year ended December 31, 1997.
OTHER INCOME (EXPENSE). Other income (expense) for the year ended December
31, 1998 included interest income of approximately $1.7 million, interest
expense of approximately $6.0 million and equity in loss of equity investee of
approximately ($15,000) related to our share of the losses in our 49.9% equity
investment in Blaya, Inc. Interest income primarily related to interest earned
on the remaining proceeds from our senior discount notes. Interest expense
related primarily to the interest on the outstanding balance of our senior
discount notes. We had approximately $13,000 in interest expense during the year
ended December 31, 1997 associated with promissory notes due to stockholders.
INCOME TAX BENEFIT. We recorded an income tax benefit in 1998 of
approximately $2.4 million. The benefit results from our ability to utilize a
portion of our net operating loss to offset existing deferred tax liabilities.
NET LOSS. We incurred a net loss of approximately $21.8 million for the
year ended December 31, 1998 as compared to a loss of approximately $1.8 million
for the year ended December 31, 1997. The increase in the net loss is a result
of the increased costs associated with the operation of our network and owned
and/or operated stations as well as the increase in interest expense resulting
from our senior discount notes.
EBITDA. EBITDA was approximately $(18.3) million for the year ended
December 31, 1998 as compared to approximately $(1.8) million for the year ended
December 31, 1997. The decrease in EBITDA is a result of the increased costs
associated with the operations of our network and owned and/or operated
stations.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE PERIOD FROM SEPTEMBER 12, 1996
(INCEPTION) THROUGH
DECEMBER 31, 1996
NET REVENUE. During the year ended December 31, 1997 and for the period
from inception through December 31, 1996, we had no revenue and had not begun
operations.
OPERATING EXPENSES. Operating expenses for the year ended December 31, 1997
were approximately $1.8 million as compared to $40,000 for the period from
inception through December 31, 1996. The increase in costs was associated with
our planned launching of our network and operations.
24
<PAGE>
Selling, general and administrative expenses of $31,124 for the year ended
December 31, 1997 primarily related to sales personnel hired for our stations
operated under local marketing agreements.
Network expenses of $812,654 for the year ended December 31, 1997 included
costs related to the developing and launching of the network including
programming, sales, engineering and administration.
Corporate expenses of $959,038 for the year ended December 31, 1997
primarily related to the costs of personnel, legal and professional fees and
travel associated with our development. Corporate expenses for the period from
inception through December 31, 1996 were primarily related to legal and
professional fees and travel expenses.
INTEREST EXPENSE. Interest expense for the year ended December 31, 1997
related to certain promissory notes due to stockholders.
NET LOSS. We incurred a net loss of approximately $1.8 million for the year
ended December 31, 1997 and $40,000 for the period from inception through
December 31, 1996. The increase in the net loss was related to the increased
costs incurred in 1997 associated with our planned launching of our network and
operations.
EBITDA. EBITDA was approximately $(1.8) million for the year ended December
31, 1997 as compared to $(40,000) for the period from inception through December
31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Due to our developmental nature, we have had negative cash flows since
inception. Working capital and financing for our acquisitions to date have been
provided primarily by the issuance of our senior discount notes and preferred
stock.
Our primary source of liquidity will be our credit facility. Our credit
facility is a senior secured revolver with $20.0 million of available borrowings
subject to certain conditions. At June 30, 1999, $10.2 million was outstanding
under our credit facility.
Net cash used in operating activities increased by approximately $2.3
million to approximately $11.2 million for the six months ended June 30, 1999 as
compared to approximately $8.9 million for the comparable period in the prior
year. The increase in cash used in operating activities during the six-month
period ended June 30, 1999 is primarily due to the increase in the loss from
operations partially offset by noncash items consisting of depreciation and
amortization of approximately $2.4 million, interest expense of approximately
$6.2 million and amortization of deferred financing cost of approximately $0.4
million.
Net cash used in operating activities was approximately $21.7 million for
the year ended December 31, 1998 as compared to approximately $2.2 million for
the year ended December 31, 1997. The increase in cash used in operating
activities during the year ended December 31, 1998 is due to the increased costs
associated with the operations of our network and owned and/or operated
stations. Net cash used in operating activities for the period from inception
through December 31, 1996 was approximately $40,000. Net cash used in operating
activities increased during 1997 as compared to 1996 as a result of our planned
launching of our network and programming.
Net cash used in investing activities increased by approximately $8.2
million to $36.5 million for the six months ended June 30, 1999 as compared to
approximately $28.3 million for the comparable period in the prior year. The
increase in cash used in investing activities during the six month period ended
June 30, 1999 is primarily due to the acquisition of substantially all the
assets of radio stations WWRU(AM) and WJDM(AM) New York, KAHZ(AM) Dallas/Fort
Worth and KIDR(AM) Phoenix and WNTD(AM) Chicago.
25
<PAGE>
Net cash used in investing activities for the year ended December 31, 1998
was approximately $60.6 million as compared to approximately $2.2 million for
the year ended December 31, 1997. The increase in cash used in investing
activities during the year ended December 31, 1998 is due to the acquisition of
radio stations, funding of escrow accounts related to acquisitions and
acquisitions of property and equipment. Net cash used in investing activities
for the year ended December 31, 1997 was due to our advancing funds to an equity
investee and acquiring property and equipment related to our network and
stations operated under local marketing agreements. No cash was used in
investing activities in 1996.
Capital expenditures primarily relate to the purchase of broadcast equipment
for the network and owned and/or operated stations, leasehold improvements,
computer equipment and telecommunications equipment. For the six months ended
June 30, 1999 capital expenditures were approximately $1.7 million as compared
to approximately $2.6 million for the comparable period in the prior year. The
decrease in capital expenditures is primarily due to the significant capital
expenditures made during the six-month period ended June 30, 1998 related to the
development of our network and owned and/or operated stations. For the year
ended December 31, 1998, capital expenditures were approximately $5.3 million as
compared to approximately $1.2 million for the year ended December 31, 1997. We
expect to spend, in the aggregate, approximately $2.0 million over the next two
years for planned equipment purchases and for upgrades of existing stations.
Net cash provided by financing activities for the six months ended June 30,
1999 was approximately $9.1 million as compared to $36.8 million for the
comparable period in the prior year. Cash provided by financing activities for
the six months ended June 30, 1998 included the proceeds from the issuance of
preferred and common stock.
Net cash provided by financing activities for the year ended December 31,
1998 was approximately $120.1 million as compared to approximately $5.6 million
for the year ended December 31, 1997. The increase in cash provided by financing
activities during the year ended December 31, 1998 is primarily related to the
net proceeds from the issuance of our senior discount notes as well as
additional capital which was raised through the issuance of preferred and common
stock. In addition, we entered into promissory notes payable with Warburg,
Pincus Ventures of approximately $21.8 million. Net cash provided by financing
activities for the year ended December 31, 1997 primarily related to the
issuance of $5.2 million in preferred and common stock. The funds were mainly
used to acquire radio stations, fund escrow accounts related to acquisitions,
make investments and advances to Blaya, Inc., our equity investee and acquire
property and equipment.
We are proposing to sell 5.7 million shares of our common stock in an
initial public offering, which is estimated to result in net proceeds to us of
$77.0 million. The proceeds from this offering are intended to be used as set
forth under "Use of Proceeds". We believe that our current cash position, net
proceeds from this offering and the borrowing availability under our credit
facility will provide adequate resources to fund our operating expenses, working
capital requirements, capital expenditures and acquisitions until our business
provides us with sufficient operating cash flow. When we have implemented our
business strategy, we believe that cash from operating activities should be
sufficient to permit us to meet required cash interest obligations, capital
expenditures and operating obligations. The prepayment of indebtedness from the
proceeds of this offering will reduce our interest expense. In the event that we
are unable to generate the cash flow that is sufficient to service our
obligations, we may be forced to adopt one or more alternatives, such as
refinancing or restructuring our indebtedness, selling material assets or
operations or selling equity.
There can be no assurance that our business strategy will be successfully
implemented. Furthermore there can be no assurance that any such actions could
be effected on satisfactory terms or at all, that they would enable us to
satisfy our debt service requirements or that they would be permitted by the
terms of our senior discount notes or our credit facility. The failure to
generate such
26
<PAGE>
sufficient cash flow or to achieve such alternatives could significantly
adversely affect the market value of our senior discount notes and our ability
to pay the principal of and interest on the senior discount notes.
SEASONALITY
We expect that our revenue and cash flow will typically be lowest in the
first calendar quarter and highest in the fourth calendar quarter. Seasonal
fluctuations are common in the radio broadcasting industry and are due primarily
to fluctuations in consumer spending.
YEAR 2000 ISSUES
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21(st) century dates from 20(th) century dates. As a result,
computer systems and software used by many companies need to be upgraded to
comply with such "Year 2000" requirements. There is a risk that the computers
and other systems on which we depend to conduct our operations are not yet Year
2000 compliant. Failure to achieve Year 2000 compliance could cause a system
failure or miscalculations in our broadcast and corporate locations which could
cause disruptions of operations, including a temporary inability to produce
broadcast signals, process financial transactions, or engage in similar normal
business activities. Other areas where there is a risk that devices are not Year
2000 compliant include:
- products purchased from third parties
- computers
- software
- telephone systems
- other equipment used internally
All our major systems were purchased in 1997 and 1998. At the time of
purchase, these systems were year 2000 compliant. We have taken year 2000
initiatives in three general areas which represent the areas that could have an
impact on us: information technology systems, non-information technology systems
and third-party issues. The following is a summary of these initiatives:
INFORMATION TECHNOLOGY: We have focused our efforts on the high-risk areas
of the corporate office computer hardware, operating systems and software
applications. Our assessment and testing of existing equipment revealed that our
hardware, network operating systems and software applications are year 2000
compliant.
NON-INFORMATION TECHNOLOGY: Non-information technology consists mainly of
facilities management systems such as telephone, utility and security systems
for the corporate headquarters, offices, studios and towers where broadcasting
equipment is located. We have reviewed the management systems at our corporate
headquarters and made inquiries and concluded that the systems are year 2000
compliant. We have identified date-sensitive systems and equipment at our other
facilities. Assessment and testing of critical systems has been substantially
completed and deemed year 2000 compliant. Virtually all of the non-critical
systems have been assessed and tested and are either year 2000 compliant or have
manual control features that we can manipulate so that the systems' dates are
reflected accurately. Any non-critical systems that may be identified as
non-compliant will be replaced if necessary. Based on our assessment to date, no
systems have been identified which would require replacement. Therefore, the
cost of replacement is not expected to be significant.
27
<PAGE>
THIRD PARTIES: We have third-party relationships with advertisers,
suppliers, service providers and corporate partners. We have assessed the year
2000 readiness of the third parties that are most important to us. Our
management believes there is no material risk of being unable to procure
necessary supplies and services. Third-party assessment has been completed in
all material respects.
COSTS. At June 30, 1999, we had expended less than $10,000 for year 2000
compliance. We do not expect to incur any additional future costs of compliance.
The assessment of third-party readiness is being conducted by in-house
personnel whose costs are recorded as normal operating expenses. We are not yet
in a position to estimate the cost of third-party compliance issues, but have
reason to believe, based upon our evaluations to date, that such costs will not
exceed the amounts already expended by us.
RISKS. The principal risks to us relating to information technology are
failure to broadcast our programs, to correctly bill advertisers, produce
financial reports and pay invoices when due. We believe we have adequate
resources, or could obtain the needed resources, to manually perform these
operations if necessary until the systems become operational. The principal
risks to us relating to non-information technology are failure to identify
time-sensitive systems and inability to find suitable replacement systems. Our
assessment of critical systems has revealed year 2000 compliance. We believe
that adequate replacement components or new systems are available, if necessary,
at reasonable prices and are in good supply.
The principal risks to us in our relationships with third parties are the
failure of third-party systems used to conduct business such as advertisers
being unable to supply advertising material; banks being unable to process
receipts and disbursements; vendors being unable to supply needed materials and
services; and processing of outsourced employee payroll. Based on year 2000
compliance work done to date, we have no reason to believe that key advertisers,
banks and suppliers will not be year 2000 compliant in all material aspects.
CONTINGENCY PLANS: We do not intend to develop any contingency plans to
address possible failures by us or our vendors related to year 2000 compliance.
We do not believe that such contingency plans are required because we believe
that we and our significant vendors will be year 2000 compliant before January
2000.
Our description of our year 2000 compliance issue is based upon information
obtained by management through evaluations of internal business systems and from
third party compliance efforts. No assurance can be given that we will be able
to address the year 2000 issues for all our systems in a timely manner or that
we will not encounter unexpected difficulties or significant expenses relating
to adequately addressing the year 2000 issue. If we or third parties with whom
we do business fail to address their major year 2000 issues, operating results
could be materially adversely affected.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk exposure with respect to financial instruments is to changes
in the "prime rate" in the United States. We may borrow up to $20 million under
our credit facility. Amounts outstanding under the credit facility bear
interest, at Radio Unica's option, at the bank's prime rate plus 1.25% or LIBOR
plus 2.50%. At June 30, 1999 there was $10.2 million outstanding under our
credit facility.
28
<PAGE>
BUSINESS
OUR COMPANY
Radio Unica is a leading Spanish-language national radio network operating
in the United States. Our network reaches markets where approximately 78% of the
Hispanic population resides through our 12 owned and/or operated and 33
affiliate stations. Our owned and/or operated radio stations are located in ten
markets, including eight of the top ten Hispanic markets. Our proprietary
programming is based on a news/talk format, which is the most popular radio
program format in the United States. We produce 19 hours of live and first-run,
celebrity based programming each weekday and 23 hours of such programming each
weekend. Our owned and operated stations broadcast this network programming 24
hours a day, seven days a week and our affiliate stations broadcast it for a
minimum of eight hours a day, each weekday. Many of our affiliates have branded
themselves as Radio Unica stations and broadcast a significant portion of our
available programming.
Radio Unica's uniform delivery of national programming to our stations 24
hours a day differentiates us from other Spanish-language radio groups.
Importantly, our nationwide distribution allows us to produce high quality
programming and spread the cost of that programming over our large base of
stations. Our network offers advertisers the only Hispanic radio platform
capable of delivering a consistent and controlled message to a national
audience. Additionally, our network allows national advertisers to reach a large
portion of the Hispanic population more effectively and at a lower cost than
would be the case if they had to purchase advertising separately in each market.
We believe that our high quality, original programming gives us a
competitive advantage over other Spanish-language radio broadcasters in
marketing to the Hispanic audience. Popular Hispanic television personalities
host our programs and their broad appeal extends beyond any particular Hispanic
cultural or geographical boundaries. These national personalities include Pedro
Sevcec, Dr. Isabel Gomez-Bassols, Jorge Ramos, Raul and Fulvia Peimbert,
Charytin and Mauricio Zeilic. We also air segments featuring Cristina, the most
popular Hispanic talk show host in the U.S., and Maria Elena Salinas, the most
recognized Hispanic female news anchor. Our programming includes contemporary
talk, entertainment and information programs, news programs, hourly local and
national newscasts, sports talk programs, sports broadcasting, and other
programming relevant to our national Hispanic audience. Many of our radio
programs are fully-interactive talk shows that allow listeners nationwide to
call in as active participants in the on-air dialogue. These programs continue
to grow in popularity, as demonstrated by an increase in call volume from 5,000
weekday telephone calls in early 1998 to over 25,000 calls today.
Live sporting events are an integral part of Radio Unica's network
programming, and we have acquired the broadcast rights in the United States to
numerous marquee sporting events. We have acquired the exclusive
Spanish-language radio rights for several of the most popular sporting events
among Hispanics, including the World Cup 1998, Copa America 1999 and 2001, Copa
Oro 2000 and 2002, the Summer Olympics in 2000 and 2004, the World Cup 2002
qualifying matches, the NBA Finals in 1999 and 2000 and Mexican soccer league
games. In addition to being an important part of our programming, major sporting
events are an important means of attracting first-time listeners. To capture
these first-time listeners, we sponsor major promotional events in conjunction
with our sports programming which serve to solidify listener loyalty and raise
awareness of the Radio Unica network.
Radio Unica is a corporation formed in 1998. Our wholly-owned operating
subsidiary was formed in 1996 by Joaquin F. Blaya, the former President of
Univision Holdings, Inc. and former CEO of Telemundo Group, Inc. In these roles,
Mr. Blaya was instrumental in establishing Spanish-language television in the
United States and developed some of the most popular personalities in Hispanic
television. Mr. Blaya is also responsible for many of today's most successful
Spanish-language programs on Univision and Telemundo, including SABADO GIGANTE,
CRISTINA, PRIMER IMPACTO, SEVCEC and the national news for both networks.
Additionally, he launched TELENOTICIAS, the most widely distributed
Spanish-language cable news channel in the Americas. He established Radio Unica
based
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upon the belief that nationwide advertisers would support a national
Spanish-language radio network with appealing, original programming reaching
large numbers of Hispanics. Prior to Radio Unica's formation, Univision and
Telemundo were the only national network alternatives for companies seeking to
cost-effectively advertise to a large portion of the Hispanic population
throughout the United States. Our network began broadcasting in January 1998.
THE HISPANIC MARKET OPPORTUNITY
We believe that Spanish-language radio targeting the Hispanic market will
continue to benefit from the following:
- Strong projected growth and high concentration of the Hispanic population
- Continued use of Spanish among Hispanics
- Attractive profile of Hispanic consumers
- Increasing Hispanic buying power
- Growing use of Spanish-language media by advertisers
STRONG PROJECTED GROWTH AND GEOGRAPHIC CONCENTRATION OF THE HISPANIC
POPULATION. Hispanics represent the most rapidly growing segment of the U.S.
population. From 1989 to 1998, the Hispanic population increased from 23.7
million to 30.5 million, a 29% increase. The strong growth of the Hispanic
population is expected to continue, increasing approximately 50% by 2010, five
times the growth rate of the U.S. population as a whole. Additionally, the
Hispanic population is highly concentrated, with over 60% of all Hispanics
located in the top ten Hispanic markets. This concentration allows us to cost
effectively reach the majority of Hispanics through our existing network
platform.
USE OF SPANISH AMONG HISPANICS. Spanish is the language spoken at home by
the majority of Hispanics, regardless of income or education. The number of
Hispanics who speak Spanish at home is expected to increase substantially from
over 21 million today. We believe that the continued use of Spanish among
Hispanics indicates that Spanish-language media has been and will continue to be
an important source of news, sports, information, advice and entertainment for
Hispanics.
ATTRACTIVE PROFILE OF HISPANIC CONSUMERS. The demographic profile of the
Hispanic audience makes it attractive to advertisers. We believe the larger size
(3.6 persons per household compared to the general public's average of 2.6
persons per household) and younger age of Hispanic households leads Hispanics to
spend more per household on many categories of consumer goods and services. For
example, Hispanic households spend more each year on food to be eaten at home,
children's clothing, footwear, phone services, and laundry and household
cleaning products than the average U.S. household.
INCREASING HISPANIC BUYING POWER. The Hispanic population will spend an
estimated $421 billion in 1999 on consumer goods and services, an increase of
98% since 1990. Hispanics are expected to spend $965 billion by 2010, an
increase of 129%. This increase is five times the expected growth rate in
expenditures by all consumers in the United States.
GROWING USE OF SPANISH-LANGUAGE MEDIA BY ADVERTISERS. Expenditures on
advertising to Hispanics grew from $730 million in 1992 to $1.7 billion in 1998,
a compound annual growth rate of 15%. Although Hispanic consumers represent
approximately 7% of U.S. consumer spending, advertising targeting Hispanics
represents only 1% of total advertising expenditures. We believe that the lack
of Spanish-language media outlets relative to the size of the Hispanic
population has historically caused the differential between Hispanic consumer
spending and Spanish-language advertising expenditures. For example, in the
radio segment, there are approximately 474 Spanish-language commercial stations,
which constitute only 4.6% of all commercial radio stations in the United
States, although the Hispanic population comprises approximately 11% of the
United States population. With the increasing media
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access to this population, we believe advertising expenditures will move closer
towards parity with Hispanic consumer spending. We also believe that advertisers
who re-direct a portion of their English-language budgets to Spanish-language
media are able to increase overall audience reach without incurring additional
cost. Furthermore, we believe that advertisers have found Spanish-language radio
advertising to be a particularly effective means to reach the growing Hispanic
audience. As a result, approximately 26% of Hispanic advertising expenditures in
1998 were directed to radio, a substantially higher percentage than radio's
overall share of national advertising expenditures.
OUR BUSINESS STRATEGY
Our strategy is to provide a leading national Spanish-language broadcast
network comparable to the Univision and Telemundo television networks. To this
end, we have employed the following business strategy:
CREATE POPULAR, NATIONAL, HIGH-IMPACT PROGRAMMING. Radio Unica's
programming is differentiated from other radio groups by its focus on topics and
issues relevant to today's Hispanic audience, its strong line-up of top Hispanic
personalities and its national reach. Radio Unica takes advantage of its
management's established relationships with talent, built over numerous years of
industry experience, to secure top personalities and to create high-impact
programming. In addition, management draws upon its expertise and established
track record of having created some of the most well-received Spanish-language
television programs, including SABADO GIGANTE and CRISTINA. We believe that our
access to talent and the programming expertise of our senior management will
continue to serve as a strong competitive advantage in attracting advertisers
and listeners.
FOSTER STRONG BRAND IDENTITY. We continue to build a strong brand identity
for our radio stations and network by promoting the Radio Unica name on-air,
using music that listeners associate with our radio stations and programs and by
engaging in a wide array of marketing and promotional activities. Our marketing
strategy includes personal appearances by on-air personalities, promotional
tie-ins with sporting events covered on our network and advertising on
Spanish-language television and billboards and in Spanish-language print media.
We believe a strong brand identity will allow us to retain and increase our
listening audience, continue to grow our advertiser base, and attract and retain
top talent.
FOCUS ON THE NEWS/TALK RADIO FORMAT. We will continue to focus on the
news/talk radio format which has broad listener appeal and is the most popular
radio format in the United States. News/talk programming typically allows twice
as many minutes of commercials per hour as music-based formats. As a result, the
news/talk format permits stations to capture a larger share of advertising
revenue relative to audience share. We believe that a news/talk format is a more
effective advertising medium than a music based format, since the audience is
actively listening and more attentive to the programming. The news/talk format
also enables on-air personalities to mention the names of their station, program
and network more frequently, which promotes a high degree of name recognition
and listener loyalty leading to higher ratings and higher advertising revenue.
SELL ADVERTISING TO THE TOP 50 SPANISH-LANGUAGE ADVERTISERS. Our sales
strategy is to target the top 50 national Spanish-language advertisers who
collectively purchase the majority of Spanish-language network and national
advertising in the United States. We employ 15 in-house national sales people in
ten sales offices nationwide, as well as 60 local sales people situated
throughout the markets where we own and/or operate stations. Our large, in-house
sales force allows us to maintain better control and accountability over the
sales process. We also believe that our sales force is important in maintaining
relationships with key advertisers and agencies and identifying new advertisers.
The combination of our commitment to pursue the largest Spanish-language
advertisers and our captive sales force has enabled us to secure many premier
national advertisers, including Procter & Gamble, Sears, Walmart, Chevrolet,
American Airlines, Honda, Americatel, Corona and Moneygram.
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MAINTAIN MODERN TECHNOLOGY AND REDUCE OPERATING COSTS. We operate
technologically advanced and automated nationwide production and delivery
systems which provide live programming via satellite to our owned and/or
operated and affiliate stations. At our modern production studios in Miami, we
produce substantially all of our radio programs, commercials and promotional
recordings. We deliver this programming to stations 24 hours a day via satellite
and our computer-based wide-area network. By employing modern technology and
producing and coordinating our programming from a centralized location, we are
able to operate with minimal staffing at our stations, thereby reducing
operating costs and increasing both quality of delivery and efficiency. For
example, our network is capable of simultaneously broadcasting different
versions of commercials in different regions which allows our advertisers
flexibility in targeting their messages.
OUR EXPANSION STRATEGY
MAXIMIZE NETWORK REACH THROUGH OWNED/OPERATED AND AFFILIATE STATIONS. We
currently own and/or operate radio stations in eight of the top ten Hispanic
markets and in two other U.S. markets. Our owned and operated stations reach
markets where almost 60% of the Hispanic audience resides and our network
(including affiliates) reaches markets where approximately 78% of the Hispanic
audience resides. We seek to enter into agreements with affiliate stations in
smaller, less concentrated Hispanic markets so as to broaden the reach of our
network and increase its appeal to national advertisers while reducing the
amount of capital required to do so. We will continue to acquire stations which
help achieve our goal of owning stations in the largest, most concentrated
Hispanic markets while maintaining affiliates in other markets.
PURSUE STRATEGIC INFRASTRUCTURE UPGRADES. We continue to pursue signal and
other operational upgrades at our existing stations that will allow us to
enhance our market coverage. We are currently pursuing upgrades at our radio
stations in New York, Miami and Dallas. By expanding our market coverage at
existing and acquired stations, we believe we can further increase the Radio
Unica audience and enhance the value of our radio stations.
INTERNET STRATEGY
We are seeking to exchange our radio programming, promotional capabilities
and celebrity and sports based content for equity ownership in a
Spanish-language Internet portal. We intend to use audio streaming technology to
broadcast our network programming through this Web portal and thereby further
increase the reach of our radio network. In addition, such a Web site would
contain information and resources for the Hispanic community, links to Web pages
relating to Radio Unica's programs and celebrities, links to other entertainment
related sites, the ability to purchase merchandise on-line and the opportunity
to interact with other Hispanics worldwide. Aligning ourselves with such a
company will provide Radio Unica with a larger base over which to amortize the
costs of our programming, enhance our name recognition, and create significant
opportunities to cross-sell and cross-promote our radio and Internet properties.
For example, we intend to promote our Web site on the air, jointly advertise our
radio and Internet properties in Spanish-language television, billboard and
print media campaigns and jointly sponsor promotional events. We believe that
with the combination of Radio Unica's existing content, other well-known Latin
celebrities and our promotional capabilities, we will be able to attract a large
number of visitors to such a Web site and create an attractive and successful
Internet enterprise.
PROGRAMMING
Radio Unica's network programming is broadcast 24 hours a day, seven days a
week and is designed to appeal to the general Hispanic audience, including
Hispanics located in different geographic regions of the United States and from
varying cultural backgrounds. The news/talk radio format is a proven format used
by several major networks, including ABC Radio Networks, Westwood One and
Premiere Radio Networks. The share of the audience listening to stations with
this format
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has increased over the last several years and news/talk is currently the most
listened to format in the United States.
Radio Unica currently produces 19 hours per day of live and first-run
programming, Monday through Friday, at our network production studios in Miami.
A typical 24 hour schedule during the week of network programming is as follows:
<TABLE>
<CAPTION>
WEST COAST EAST COAST
<S> <C> <C>
3:00 AM MUY TEMPRANO CON RAUL Y FULVIA PEIMBERT AM 6:00
4:00 Entertaining and informative morning show 7:00
5:00 hosted by husband and wife team 8:00
(Live)
6:00 SEVCEC EN VIVO 9:00
7:00 Host: Pedro Sevcec 10:00
8:00 Talk show with contemporary themes 11:00
and topical discussions of current events
(Live)
9:00 DRA. ISABEL PM 12:00
10:00 Host: Dr. Isabel Gomez-Bassols 1:00
11:00 Talk show on family issues and personal relationships 2:00
(Live)
12:00 PM CHARYTIN UNICAMENTE DE NOVELAS 3:00
Host: Charytin
Discussions of daily novelas
(Live)
1:00 INMIGRACION PREGUNTAS Y RESPUESTAS 4:00
Host: Fulvia Peimbert
Talk show on immigration issues
(Live)
2:00 ESTA TARDE EN UNICA 5:00
3:00 Hosts: Jose Luis Arenas, Eduardo Ibarrola, India 6:00
Edelmira & Mauricio Zeilic
Comedy show
(Live)
4:00 UNICA EN DEPORTES 7:00
5:00 Host: Jorge Ramos 8:00
6:00 Talk/Sports show 9:00
7:00 (Live) 10:00
8:00 ESTA NOCHE EN UNICA 11:00
9:00 Host: Olga Palmer AM 12:00
Talk show covering relationships and romantic
interests
(Live)
10:00 ESTA TARDE EN UNICA 1:00
11:00 Hosts: Jose Luis Arenas, Eduardo Ibarrola, India 2:00
Edelmira & Mauricio Zeilic
(Repeat)
12:00 AM SEVCEC EN VIVO 3:00
1:00 Host: Pedro Sevcec 4:00
2:00 (Repeat) 5:00
</TABLE>
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Our daily schedule features programs hosted by celebrities, many of whom
also host or appear on popular shows on the Univision and Telemundo networks.
These on-air personalities create radio shows exclusively for Radio Unica.
Cristina and Maria Elena Salinas also host daily segments on the network.
Our programming includes:
MUY TEMPRANO CON RAUL Y FULVIA PEIMBERT. Hosted by this husband and wife
team, this entertaining morning show entertains and informs listeners with
opposing opinions on interesting topics. Raul Peimbert was anchor of Telemundo's
and Telenoticias' network news. Fulvia Peimbert is the host of our immigration
program.
SEVCEC EN VIVO. Hosted by Pedro Sevcec, this three-hour talk show is
devoted to in-depth coverage of the top news stories of the day, other issues of
importance to the Hispanic population and interviews with prominent figures,
Pedro Sevcec was a senior reporter for Telemundo's popular TV news magazine,
OCURRIO ASI, and currently hosts his own talk show called SEVCEC which is one of
Telemundo's highest rated shows.
DRA. ISABEL. This advice program hosted by Dr. Isabel Gomez-Bassols focuses
on such topics as family issues and personal relationships. Dr. Isabel
Gomez-Bassols is a noted psychologist and educator and makes frequent
appearances on such popular television shows as CRISTINA, SEVCEC and MIAMI
AHORA.
CHARYTIN. Charytin is a well-known singer and performer who has frequently
appeared on Univision's and Telemundo's programs. This one-hour program hosted
by Charytin discusses novelas (i.e., Spanish-language soap operas) and the lives
of soap opera stars.
INMIGRACION . . . PREGUNTAS Y RESPUESTAS. This program, hosted by Fulvia
Peimbert, focuses on the rules of the U.S. immigration system. This program
features lawyers and immigration experts as guests.
ESTA TARDE EN UNICA. Hosted by Mauricio Zeilic and others, this afternoon
entertainment program features comedians, entertainment-world news, gossip and
interviews with major Hispanic celebrities. Mauricio Zeilic has been hosting
entertainment shows for more than 20 years and is currently the host of an
entertainment segment on Telemundo's daily afternoon magazine show.
UNICA EN DEPORTES. This sports talk show hosted by Jorge Ramos features
sports, talk, news and interviews appealing to Hispanic audiences. Jorge Ramos
has served as sports anchor for Telemundo since 1994 and in his career has
broadcast four World Cups.
SPORTS. During our major sporting events, we broadcast live, play-by-play
coverage and daily programs and interviews with players and participants. We
have obtained the exclusive United States Spanish-language radio broadcasting
rights for a number of popular sporting events including the following:
SUMMER OLYMPICS 2000, 2004 AND 2008. Radio Unica has acquired the
Spanish-language radio broadcast rights in the United States for the 2000
and 2004 Summer Olympics and has a right of first refusal for the 2008
games. The Olympic games are the highest profile sporting event in the
world. Radio Unica's broadcasts will highlight soccer, boxing and other
events and athletes that interest Hispanics. We will also utilize the
universal awareness of the Olympics to continue to promote our brand and
attract new listeners.
COPA AMERICA 1999 AND 2001. Copa America is the most popular international
soccer event for Hispanics after the World Cup and is held every other year.
This event is the oldest international soccer tournament and is a forum for
Latin Americans to listen to their teams compete against
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neighboring countries. With South America and Mexico participating, this
event offers the soccer fan the opportunity to listen to some of the best
soccer stars playing for their national teams.
COPA ORO 2000 AND 2002. Copa Oro tournaments are held in the alternate
years from Copa America. Similar to Copa America, Copa Oro is an
international soccer event with countries in North and Central America
participating.
WORLD CUP 2002 QUALIFYING MATCHES. The World Cup is the most popular soccer
event in the world. These matches are of interest to the Hispanic audience
since they pit Latin American countries against each other in the qualifying
rounds in their quest for a World Cup trophy.
MEXICAN NATIONAL SOCCER. Radio Unica has the U.S. Spanish-language radio
rights to some of the most popular Mexican soccer league team games and the
Mexican national team games.
NBA FINALS 1999 AND 2000. Radio Unica has the rights to broadcast the 1999
and 2000 NBA Finals and the 2000 All Star Game.
NEWS. We produce a three-hour national morning news and talk program,
Monday through Saturday, which allows local stations the opportunity to insert
local segments of news, weather, sports and other information. We also produce
newscasts on the hour, 24 hours a day, which focus on events of interest to
Hispanic audiences.
ADVERTISING REVENUE
Substantially all of our revenue is generated from the sale of network,
national and local advertising on our radio stations. The classes of advertising
are described in the following table:
CLASSES OF RADIO ADVERTISING
<TABLE>
<S> <C>
Network....................... Represents commercial air time sold directly by a network to
a national advertiser to be aired during "network"
programming.
This unique type of advertising is sold by a "networked"
group of stations airing uniform programming simultaneously
over a significant portion of the United States. English
language networks with capabilities similar to Radio Unica
include ABC Radio Networks, Westwood One and Premiere Radio
Networks.
Radio Unica sells this advertising time through its own
national sales force.
National Spot................. Represents commercial air time sold to a national advertiser
within a specific local market.
Most radio stations and station groups sell this time
through third party independent representatives. Radio Unica
sells this advertising time through its own national sales
force.
Local Spot.................... Represents commercial air time sold to an in-market
advertiser or advertising agency. Local advertisers consist
primarily of local merchants and service providers.
Radio Unica sells this time generally through its station's
local sales staff.
</TABLE>
Sales of network and national advertising are made by our in-house national
sales force located in ten regional sales offices. Sales of local advertising
are made by our sales staffs located at each of our stations. We do not use
third party national representatives or "rep" firms. As a result, we have more
control over and greater accountability from our sales force. We also believe
that our sales force is important in maintaining relationships with key
advertisers and agencies and identifying new advertisers. We do not pass along
any of our network advertising revenue or pay cash compensation to our
affiliates.
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Advertising rates charged by a radio station or network are based primarily
on the station's or network's ability to attract listeners and on the
attractiveness to advertisers of the station's or the network's listener
demographics. Rates vary depending upon a program's ability to increase sales
and popularity among an advertiser's target audience, the number of advertisers
seeking similar time slots, and the availability of alternative media in the
market. Radio advertising rates are generally highest during the morning and
afternoon drive-time hours.
RADIO UNICA NETWORK
Radio Unica's 12 owned and/or operated AM stations in ten markets and 33
affiliate stations comprise a network that reaches approximately 78% of the
Hispanic population. We are the only national radio network available to
advertisers targeting the fast growing Hispanic market. We are one of only three
national Hispanic advertising platforms in the U.S., the other two consisting of
the Univision and Telemundo television networks. Radio Unica's network is
differentiated from other Spanish-language radio broadcasters by its ability to
deliver uniform programming to the national Hispanic audience over a 24 hour
period. We believe that advertisers prefer this delivery as it allows them to
reach a national audience in a consistent and controlled manner. With one
contract, advertisers can reach a large portion of the Hispanic population at a
cost lower than if they had to purchase advertising separately in each market.
Radio Unica offers advertisers the opportunity to associate their advertising
message with a particular program that will consistently be aired at a specific
time. No other Spanish-language broadcasters have this capability on a national
level.
ADVANTAGES TO RADIO UNICA. Although our owned and/or operated stations
reach markets where almost 60% of Hispanics reside, through our affiliates we
are able to increase our reach to approximately 78%. Our 33 affiliates have
allowed us to cost-effectively enter an additional 28 markets and expand our
reach and appeal to advertisers. Affiliates allow us to enter a market without
the capital expenditures that would be required in buying or building a station.
Many of our affiliates have branded themselves as Radio Unica stations which
helps build brand awareness and listener loyalty. Additionally, the network
enables us to share the cost of programming over a larger base. We believe that
this sharing of expenses allows us to invest a larger amount in programming
compared to our competitors.
ADVANTAGES TO AFFILIATES. Affiliate stations benefit by gaining access to
Radio Unica's high-impact programming, including programs hosted by some of the
most popular Hispanic personalities and live sporting events, which would be
prohibitively expensive to create or purchase on their own. In addition,
affiliates benefit from our national advertising campaigns and promotional
materials. Affiliates also have access to our sales, marketing and operating
managerial expertise.
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RADIO STATIONS
The following table lists information concerning all of our owned and/or
operated and selected affiliate stations and their respective markets:
<TABLE>
<CAPTION>
HISPANIC
HISPANIC POPULATION
OWNED BY HISPANIC POPULATION AS A % OF
RANK BY RADIO UNICA, POPULATION IN AS A % OF HISPANICS
HISPANIC MARKET LMA OR MARKET TOTAL IN THE
POPULATION SERVED STATION AFFILIATE (IN THOUSANDS) MARKET UNITED STATES
- --------------- ---------------- ----------------- --------------- --------------- ----------- -----------------
<C> <S> <C> <C> <C> <C> <C>
1 Los Angeles KBLA(AM) Owned 6,326 38.7% 20.8%
2 New York WWRU(AM) Owned 3,645 18.1% 12.0%
WJDM(AM) Owned
3 Miami WNMA(AM) Owned 1,423 38.1% 4.7%
WAFN(AM) Owned
4 San Francisco/ KIQI(AM) Owned 1,243 18.4% 4.1%
San Jose
5 Chicago WNTD(AM) Owned 1,198 12.7% 3.9%
6 Houston KXYZ(AM) Owned 1,141 24.2% 3.7%
7 San Antonio KZDC(AM) LMA 1,065 51.6% 3.5%
9 Dallas/Ft. Worth KAHZ(AM) Owned 787 14.9% 2.6%
10 San Diego XEMMM(AM) Affiliate 706 25.3% 2.3%
11 Fresno KGST(AM) Affiliate 680 41.6% 2.2%
12 El Paso KSVE(AM) Affiliate 667 74.5% 2.2%
13 Phoenix KIDR(AM) Owned 668 18.7% 2.2%
14 Albuquerque KALY(AM) Affiliate 656 38.4% 2.2%
15 Sacramento/ Pending Letter of 612 17.9% 2.0%
Stockton/ intent
Modesto
16 Denver KCUV(AM) LMA 398 13.0% 1.3%
------ ------
21,215 69.7%
------ ------
------ ------
All other
affiliates (29) 2,406 7.9%
------ ------
------ ------
Totals 23,621 77.6%
------ ------
------ ------
</TABLE>
OWNED STATIONS
LOS ANGELES. Radio Unica's radio station KBLA(AM), broadcasting on 1580
kHz, serves the Los Angeles market. This market has a population of
approximately 16.3 million, of which approximately 6.3 million or 38.7% are
Hispanic. Los Angeles has more Spanish-speaking persons than any other market in
the United States. In 1998, Spanish-language radio advertising spending in the
market was approximately $119 million. In July 1998, Radio Unica acquired KBLA
for approximately $21 million. The purchase of KBLA was financed primarily
through the proceeds from our senior discount notes. KBLA is licensed at 50,000
watts during the daytime. KBLA's transmitter is located in Los Angeles and
enables this station to reach substantially all of the Los Angeles market.
NEW YORK CITY. Radio Unica's radio station WWRU(AM), broadcasting on 1660
kHz in the expanded band, serves the New York City market. The expanded band
consists of the radio spectrum from 1605 kHz to 1705 kHz which most radios
manufactured after 1990 can receive. The New York City market has a population
of approximately 20.1 million, of which approximately 3.6 million or
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18.1% are Hispanic. In 1998, Spanish-language radio advertising spending in the
market was approximately $47 million. In January 1999, Radio Unica acquired
WWRU, along with WJDM, KAHZ, Dallas/Fort Worth, and KIDR, Phoenix, for a
purchase price of approximately $30 million. The purchase of WWRU and WJDM, KAHZ
and KIDR were financed primarily through the proceeds from our senior discount
notes. WWRU is authorized at 10,000 watts during the daytime. WWRU's transmitter
is located in Carlstadt, New Jersey and enables this station to reach
substantially all of the New York City market during the day. We have received
FCC approval to upgrade our night signal in New York City which will provide us
with significantly improved market coverage at night.
In connection with the acquisition of WWRU, Radio Unica also acquired
WJDM(AM), broadcasting on 1530 kHz. WJDM is licensed at 1,000 watts during the
daytime. Broadcast time on this station has been sold to a third party. WJDM's
transmitter is located in Elizabeth, New Jersey. Based on current FCC guidelines
regarding the expanded band, Radio Unica must relinquish the license of either
WWRU or WJDM by March 12, 2003.
MIAMI. Radio Unica's radio station WNMA(AM), broadcasting on 1210 kHz,
serves the Miami market. This market has a population of approximately 3.7
million, of which approximately 1.4 million or 38.1% are Hispanic. In 1998,
Spanish-language radio advertising spending in the market was approximately $62
million. In May 1998, Radio Unica acquired WNMA for approximately $9 million.
The purchase of WNMA was financed primarily through the proceeds from the
issuance of preferred stock as well as the issuance of notes payable to one of
our stockholders, Warburg, Pincus Ventures. WNMA is licensed at 25,000 watts
during the daytime. WNMA's transmitter is located in Miami Springs, Florida and
enables this station to reach substantially all of the Miami market. We are
currently pursuing a signal upgrade beyond the Miami market to another county
which will increase our coverage of South Florida's Hispanic population by
approximately 10%.
In connection with the acquisition of WNMA, Radio Unica acquired WAFN(AM),
broadcasting on 1700 kHz. Broadcast time on this station has been sold to a
third party. Based on current FCC guidelines, Radio Unica must relinquish the
license of either WNMA or WAFN by October 8, 2002.
SAN FRANCISCO/SAN JOSE. Radio Unica's station KIQI(AM), broadcasting on
1010 kHz, serves the San Francisco/San Jose market. This market has a population
of approximately 6.8 million, of which approximately 1.2 million or 18.4% are
Hispanic. In 1998, Spanish-language radio advertising spending in the market was
approximately $18 million. In April 1998, Radio Unica acquired Oro Spanish
Broadcasting, Inc., the parent of the licensee of KIQI, for approximately $12
million. The purchase of KIQI was financed primarily through the proceeds from
the issuance of preferred stock, the issuance of notes payable to the former
owners of KIQI and the issuance of notes payable to one of our stockholders,
Warburg, Pincus Ventures. Prior to the acquisition, Oro operated the station for
approximately 17 years with a Spanish-language format. KIQI is licensed at
10,000 watts during the daytime. KIQI's transmitter is located in Oakland,
California and enables this station to reach substantially all of the San
Francisco/San Jose market during the day.
CHICAGO. Radio Unica's radio station WNTD(AM), broadcasting on 950 kHz,
serves the Chicago market. This market has a population of approximately 9.4
million, of which approximately 1.2 million or 12.7% are Hispanic. In 1998,
Spanish-language radio advertising spending in the market was approximately $25
million. In May 1999, Radio Unica acquired WNTD for approximately $16.75
million. The purchase of WNTD was financed through the proceeds from our senior
discount notes as well as proceeds from borrowings under our credit facility.
WNTD is licensed at 1,000 watts during the daytime. WNTD's transmitter is
located in Chicago, Illinois and enables this station to reach substantially all
of the Chicago market.
HOUSTON. Radio Unica's station KXYZ(AM), broadcasting on 1320 kHz, serves
the Houston market. This market has a population of approximately 4.7 million,
of which approximately 1.1 million
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or 24.2% are Hispanic. In 1998, Spanish-language radio advertising spending in
the market was approximately $32 million. In March 1998, Radio Unica acquired an
80% economic interest in KXYZ and acquired the remaining interest in September
1998 for a total of approximately $6.4 million. The purchase of KXYZ was
financed primarily through the proceeds from our senior discount notes. Prior to
the acquisition, the station was operated for approximately 13 years with a
Spanish-language format. KXYZ is licensed at 5,000 watts during the daytime.
KXYZ's transmitter is located in Pasadena, Texas and enables this station to
reach substantially all of the Houston market.
DALLAS/FORT WORTH. Radio Unica's station KAHZ(AM), broadcasting on 1360
kHz, serves the Dallas/Fort Worth market. This market has a population of
approximately 5.3 million, of which approximately 787,000 or 14.9% are Hispanic.
In 1998, Spanish-language radio advertising spending in the market was
approximately $13 million. KAHZ is licensed at 5,000 watts during the daytime.
KAHZ's transmitter is located in Fort Worth, Texas and enables this station to
reach a significant portion of the Dallas/Forth Worth market. We are considering
various opportunities to improve both our day and night signals. The upgrade in
Dallas will increase day time population coverage by 23% and will expand the
night time signal reach from Fort Worth to Dallas.
PHOENIX. Radio Unica's station KIDR(AM), broadcasting on 740 kHz, serves
the Phoenix market. This market has a population of approximately 3.6 million,
of which approximately 667,000 or 18.7% are Hispanic. We estimate that in 1998
Spanish-language radio advertising spending in the market was approximately $6.0
million. KIDR is licensed at 1,000 watts during the daytime. KIDR's transmitter
is located in Phoenix, Arizona and enables this station to reach substantially
all of the Phoenix market.
LOCAL MARKETING AGREEMENTS (OPERATED STATIONS)
We have time brokerage agreements, also known as local marketing agreements
or LMAs, with radio stations in San Antonio and Denver. Under these agreements,
we operate and supply all programming for these stations.
SAN ANTONIO. Radio Unica operates station KZDC(AM), broadcasting on 1250
kHz, in San Antonio under an agreement with Lotus Oxnard Corp. In 1998,
Spanish-language radio advertising spending in the market was approximately $20
million. The term of the agreement ends on December 31, 2001. Radio Unica's
annual payment under this agreement ranges from $225,000 in 1999 to $275,000 in
2001. Radio Unica has an option to purchase KZDC. The option is exercisable from
June 24, 2001 through September 30, 2001. KZDC is licensed at 1,000 watts during
the daytime. KZDC's transmitter is located in San Antonio and enables this
station to reach substantially all of the San Antonio market.
DENVER. Radio Unica operates KCUV(AM) broadcasting on 1150 kHz, in Denver
under an agreement with Den-Mex LLC. We estimate that in 1998, Spanish-language
radio advertising spending in the market was approximately $6.0 million. The
term of the agreement ends on June 14, 2002. Radio Unica's annual payment under
this agreement is $300,000 throughout the term. Radio Unica has an option to
purchase KCUV throughout the term. KCUV is licensed at 5,000 watts during the
daytime. KCUV's transmitter is located in Englewood, Colorado and enables the
station to reach substantially all of the Denver market.
AFFILIATE STATIONS
Radio Unica has 33 affiliate radio stations. Under our arrangements with
these stations, they are generally required to carry a minimum of eight hours
per day of our network programming. Currently, our affiliates are substantially
exceeding this minimum, broadcasting an average of 14 hours of our programming
each weekday. Our arrangements typically provide that our programming will
include a certain number of minutes per hour of network advertising to be sold
by us. We do not pass along any
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<PAGE>
of our network advertising revenue or pay cash compensation to our affiliates.
We also provide our affiliates with marketing, sales and promotional support.
The terms of these arrangements are generally one to two years, but may be
terminated earlier for certain reasons. Some of these arrangements give us a
right of first refusal to buy the station if the station owner offers to sell
it.
COMPETITION
Radio broadcasting is a highly competitive business. The financial success
of each of our radio stations will depend, to a significant degree, upon our
audience ratings, our share of the overall radio advertising revenue within each
geographic market and the economic health of the market. In addition, our
advertising revenue depends upon the desire of marketers to reach our audience
demographic. Our radio stations compete for audience share and advertising
revenue directly with other FM and AM radio stations and with other media within
their respective markets, such as newspapers, broadcast and cable television,
magazines, billboard advertising, transit advertising, and direct mail
advertising. Some of these radio stations and networks also broadcast
Spanish-language talk radio. Our primary competitors are Univision, Telemundo,
Hispanic Broadcasting Corporation and Spanish Broadcasting System. Many of these
entities are larger and have significantly greater resources than Radio Unica.
Additionally, since we are in the early stages of our operations, our network
has not yet been rated by Arbitron. If a competing station converts to a format
similar to that of one of our stations, or if one of our competitors strengthens
its operations, our stations could suffer a reduction in ratings and advertising
revenue. The audience ratings and advertising revenue of our individual stations
are subject to change and any adverse change in a particular market could have a
material adverse effect on our operations. There is no ranking of
Spanish-language radio networks.
The Telecommunications Act of 1996 facilitates the entry of other radio
broadcasting companies into the markets in which we operate or may operate in
the future, some of which may be larger and have more financial resources than
Radio Unica. In addition, certain of our stations compete, and in the future
other stations of Radio Unica may compete, with combinations of stations
operated by a single operator. There can be no assurance that our radio stations
will be able to develop, maintain or increase their current audience ratings and
radio advertising revenue.
The radio broadcasting industry is subject to rapid technological change,
evolving industry standards and the emergence of new media technologies. The FCC
is considering ways to introduce new technologies to the radio broadcast
industry which would significantly enhance the sound quality of AM broadcasts.
We cannot assure you that we will have the resources to acquire new technologies
or to introduce new services that could compete with these new technologies.
There are several new media technologies that are currently under development
including the following:
- audio programming by cable television systems, direct broadcast satellite
systems, Internet content providers and other digital audio broadcast
formats;
- satellite digital audio service, which could result in the introduction of
several new satellite radio services with sound quality comparable to that
of compact discs; and
- in-band on-channel digital radio, which could provide multi-channel,
multi-format digital radio services in the same bandwidth currently
occupied by traditional AM and FM radio services.
In addition to the competition faced by our radio stations, we face
competition from other providers of radio programs, including other radio groups
that offer Spanish-language programming. Our network also competes with other
radio networks and individual radio stations for the services of talk show
personalities. Competition from existing and new radio networks may limit the
growth and profitability of our network.
40
<PAGE>
PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS
In the course of our business, we use various trademarks, names and service
marks, including our logos, in our 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.
We do not hold or depend upon any material patent, government license, franchise
or concession, except the broadcast licenses granted by the FCC. Our FCC
licenses expire as set forth below:
<TABLE>
<CAPTION>
CITY OF LICENSE CALL SIGN EXPIRATION DATE OF LICENSE
<S> <C> <C>
Chicago, IL WNTD 12/01/04
950 kHz
Ft. Worth, TX KAHZ 08/01/05
1360 kHz
Houston, TX KXYZ 08/01/05
1320 kHz
Santa Monica, CA KBLA 12/01/05
1580 kHz
Miami Springs, FL WNMA 02/01/04 (see next entry)
1210 kHz
Miami Springs, FL WAFN The license for either WNMA or WAFN must
1700 kHz be relinquished by 10/08/02
Elizabeth, NJ WJDM 06/01/06 (see next entry)
1530 kHz
Elizabeth, NJ WWRU The license for either WJDM or WWRU must
1660 kHz be relinquished by 03/12/03
Phoenix, AZ KIDR 10/01/05
740 kHz
San Francisco, CA KIQI 12/01/05
1010kHz
</TABLE>
FEDERAL REGULATION OF RADIO BROADCASTING
The ownership, operation and sale of radio stations are subject to
regulation by the FCC. The FCC regulates radio broadcast stations under
authority granted by the Communications Act. Among other things, the FCC:
- assigns frequency bands for broadcasting;
- determines the particular frequencies, locations and power of stations;
- issues, renews, revokes and modifies station licenses;
- determines whether to approve changes in ownership or control of station
licenses;
- regulates equipment used by stations;
- imposes regulations and takes other action to prevent harmful interference
between stations;
- adopts and implements regulations and policies that directly or indirectly
affect the ownership, management, programming, operation and employment
practices of stations; and
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- has the power to impose penalties for violations of its rules or the
Communications Act.
In February 1996, Congress enacted the Telecommunications Act of 1996 to
amend the Communications Act. The Telecommunications Act, among other measures,
directed the FCC to:
- eliminate the national radio ownership limits;
- liberalize the local radio ownership limits as specified in the
Telecommunications Act;
- issue broadcast licenses for periods of up to eight years; and
- eliminate the opportunity for the filing of competing applications against
broadcast license renewal applications.
In the Balanced Budget Act of 1997, Congress authorized the FCC for the
first time to conduct auctions for the awarding of construction permits for
commercial radio and television stations. To settle already pending mutually
exclusive applications without auctions, Congress directed the FCC to waive
existing rules as necessary. The FCC has begun to implement these provisions.
While Radio Unica is not a participant in any implementation proceeding, this
recent action should result in the awarding of construction permits for
additional radio stations, some of which might compete with Radio Unica's radio
stations.
LICENSE GRANTS AND RENEWALS. The Communications Act provides that a
broadcast license may be granted to an applicant if the grant would serve the
public interest, convenience and necessity, subject to limitations referred to
below. In deciding whether to grant a license, the FCC considers the legal,
technical, financial and other qualifications of the applicant, including
compliance with the Communications Act's limitations on alien ownership,
compliance with various rules limiting common ownership of broadcast, cable and
newspaper properties, and the "character" of the licensee and those persons
holding "attributable" interests in the licensee. Broadcast licenses are granted
for specific periods of time and, upon application, are renewable for additional
periods of time. The Telecommunications Act amended the Communications Act to
provide that broadcast licenses be granted, and thereafter renewed, for
successive terms of up to eight years each, if the FCC finds that the public
interest, convenience, and necessity would be served thereby.
Generally, the FCC renews broadcast licenses without a hearing. The
Telecommunications Act requires the FCC to grant an application for renewal of a
broadcast license if:
- the station has served the public interest, convenience and necessity;
- there have been no serious violations by the licensee of the
Communications Act or the rules and regulations of the FCC; and
- there have been no other violations by the licensee of the Communications
Act or the rules and regulations of the FCC which, taken together, would
constitute a pattern of abuse.
Accordingly, the FCC does not entertain competing applications against
broadcast license renewal applications. The Telecommunications Act provides that
if the FCC, after notice and an opportunity for a hearing, decides that the
requirements for renewal have not been met and that no mitigating factors
warrant lesser sanctions, it may deny a renewal application. Only after denying
an application for renewal may the FCC accept applications by third parties to
operate on the frequency of the former licensee. The Communications Act
continues to authorize the filing of petitions to deny against the renewal of
broadcast license applications during particular periods of time following the
filing of renewal applications. Petitions to deny can be used by interested
parties, including members of the public, to raise issues concerning the
qualifications of the renewal applicant.
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There are no renewal applications currently pending for any of Radio Unica's
broadcast licenses. Radio Unica does not anticipate any material difficulty in
obtaining license renewals for full terms in the future, however, there can be
no assurance that the licenses of each of our stations will be renewed or will
be renewed without conditions or sanctions.
The FCC or its staff may reconsider its renewal of an application during
specified time periods on their own motion or by request of the petitioner, and
the petitioner may also appeal within a certain period actions by the FCC to the
U.S. Court of Appeals. If the FCC does not, on its own motion, or upon a request
by an interested party for reconsideration or review, review a staff grant or
its own action within the applicable time periods, and if no further
reconsideration, review or appeals are sought within the applicable time
periods, an action by the FCC or its staff becomes a "Final Order."
LICENSE ASSIGNMENTS AND TRANSFERS OF CONTROL. The Communications Act
prohibits the assignment of an FCC license or the transfer of control of a
corporation holding such a license without the prior approval of the FCC.
Applications to the FCC for such assignments or transfers are subject to
petitions to deny by interested parties and must satisfy requirements similar to
those for renewal and new station applications. Many transactions involving
radio stations provide, as a waivable pre-condition to closing, that the FCC
consent to the transaction has become a "Final Order."
OWNERSHIP RULES. Rules of the FCC limit the number and location of
broadcast stations in which one licensee may have an attributable interest.
"Attributable interests" are discussed in greater detail below. The FCC,
pursuant to the Telecommunications Act, eliminated the previously existing
"national radio ownership rule." Consequently, there now is no limit imposed by
the FCC on the number of radio stations one party may own nationally.
The "local radio ownership rule" limits the number of stations in a radio
market in which any one individual or entity may have a control position or
attributable ownership interest. Under the Telecommunications Act, the FCC
revised its rules to set the local radio ownership limits as follows:
- in markets with 45 or more commercial radio stations, a party may own up
to eight commercial radio stations, no more than five of which are in the
same service (AM or FM);
- in markets with 30-44 commercial radio stations, a party may own up to
seven commercial radio stations, no more than four of which are in the
same service;
- in markets with 15-29 commercial radio stations, a party may own up to six
commercial radio stations, no more than four of which are in the same
service; and
- in markets with 14 or fewer commercial radio stations, a party may own up
to five commercial radio stations, no more than three of which are in the
same service, provided that no party may own more than 50% of the
commercial stations in the market.
FCC cross-ownership rules also prohibit one party from having attributable
interests in a radio station as well as in a local television station or daily
newspaper in the same market, although such limits may be waived by the FCC. On
August 5, 1999, the FCC adopted a new radio television cross-ownership rule
which, when effective, will permit common ownership of up to two television
stations and up to six radio stations or one television station and seven radio
stations in any market where at least 20 independently owned media voices remain
in the market. A party will be permitted to own up to two television stations
and up to four radio stations in any market where at least 10 voices remain
after the combination is effected and to own up to two television stations and
one radio station regardless of the number of voices in the market. Media voices
include other radio stations, television stations, daily newspapers and cable
systems. The new rule will be effective 60 days after publication in the FEDERAL
REGISTER. In addition, the FCC has a "cross interest" policy that may prohibit a
party with an attributable interest in one station in a market from also holding
either a "meaningful" non-attributable equity interest (e.g., non-voting stock,
voting stock, limited partnership interests) or key management
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<PAGE>
position in another station in the same market, or which may prohibit local
stations from combining to build or acquire another local station. On August 5,
1999, the FCC adopted an order, which will be effective 60 days after its
publication in the FEDERAL REGISTER, repealing the cross-interest policy. The
FCC is presently evaluating its radio/newspaper rule. Radio Unica cannot predict
whether the FCC will adopt any change in this rule.
ATTRIBUTION RULES. All holders of attributable interests must comply with,
or obtain waivers of, the FCC's multiple and cross-ownership rules. Under the
current FCC rules, an individual or other entity owning or having voting control
of 5% or more of a corporation's voting stock is considered to have an
attributable interest in the corporation and its stations, except that banks
holding such stock in their trust accounts, investment companies, and certain
other passive interests are not considered to have an attributable interest
unless they own or have voting control over 10% or more of such stock. On August
5, 1999, the FCC revised its attribution rules, effective 60 days after
publication in the FEDERAL REGISTER, increasing the threshold for passive
investors to 20 percent. An officer or director of a corporation or any general
partner of a partnership also is deemed to hold an attributable interest in the
media entity. Currently, when a single shareholder holds a majority of the
voting stock of a corporate licensee, the FCC considers other shareholders of
the licensee, unless they are also officers or directors of the licensee, exempt
from attribution. Holders of non-voting stock generally will not be attributed
an interest in the issuing entity, and holders of debt and instruments such as
warrants, convertible debentures, options, or other non-voting interests with
rights to conversion to voting interests generally will not be attributed such
an interest unless and until such conversion is effected. Under the newly
revised attribution rules, if the holder of an otherwise nonattributable
interest is either (1) a "major program supplier" or (2) a same-market media
entity subject to the broadcast multiple ownership rules, its interest in a
licensee or other media entity will be attributed if the total interest
(aggregating both debt and equity) exceeds 33 percent of the total asset value
of the licensee or media entity. A "major program supplier" is defined as any
entity that provides more than 15 percent of a station's total weekly broadcast
programming hours. This new "Equity/Debt Plus" rule will also become effective
60 days after publication in the FEDERAL REGISTER.
Under current FCC rules, any stockholder of Radio Unica with 5% or more of
the outstanding votes (except for qualified institutional investors, for which
the 20% threshold is applicable), will be considered to hold attributable
interests in Radio Unica. Such holders of attributable interests must comply
with or obtain waivers of the FCC's multiple and cross-ownership rules.
Currently, none of the attributable stockholders, officers or directors of Radio
Unica have any other media interests besides those of Radio Unica that implicate
the FCC's multiple ownership limits except that affiliates of Warburg, Pincus
Ventures hold interests in several daily newspapers none of which is published
in communities served by Radio Unica stations.
The FCC will consider a radio station providing programming and sales on
another local radio station pursuant to a local marketing agreement to have an
attributable ownership interest in the other station for purposes of the FCC's
radio multiple ownership rules. In particular, a radio station is not permitted
to enter into a local marketing agreement giving it the right to program more
than 15% of the broadcast time, on a weekly basis, of another local radio
station which it could not own under the FCC's local radio ownership rules.
Under the new attribution rules, same-market local marketing agreements will
also be subject to the FCC's prohibition against common ownership of a radio
station and a local daily newspaper.
ALIEN OWNERSHIP LIMITS. Under the Communications Act, broadcast licenses
may not be granted, transferred or assigned to any corporation of which more
than one-fifth of the capital stock is owned of record or voted by aliens, who
consist of non-U.S. citizens or entities or their representatives or foreign
governments or their representatives or by foreign corporations. Where the
corporation owning the license is controlled by another corporation, the parent
corporation cannot have more than one-fourth of its capital stock owned of
record or voted by aliens, if the FCC finds it in the public interest to
44
<PAGE>
refuse or revoke the license. The FCC has issued interpretations of existing law
under which these ownership restrictions in slightly modified form apply to
other forms of business organizations, including general and limited
partnerships. The FCC also prohibits a licensee from continuing to control
broadcast licenses if the licensee otherwise falls under alien influence or
control in a manner determined by the FCC to be in violation of the
Communications Act or contrary to the public interest.
PROGRAMMING REQUIREMENTS. While the FCC has relaxed or eliminated many of
its regulatory requirements related to programming and content, radio stations
are still required to broadcast programming responsive to the problems, needs
and interests of the stations' service areas and must comply with various rules
promulgated under the Communications Act that regulate political broadcasts and
advertisements, sponsorship identifications, indecent programming and other
matters. Failure to observe these or other FCC rules can result in the
imposition of monetary forfeitures, in the grant of a "short" (less than full
term) license term or, where there have been serious or a pattern of violations,
license revocation. Until last year, the FCC imposed equal employment
opportunity rules on licensees. The U.S. Court of Appeals for the D.C. Circuit
found that these requirements were unconstitutional. In light of the D.C.
Circuit's decision, the Commission is considering what equal employment
opportunity rules and policies to adopt.
AGREEMENTS WITH OTHER BROADCASTERS. Over the past several years a
significant number of broadcast licensees, including Radio Unica, have entered
into cooperative agreements with other stations in their markets. One typical
example is a local marketing agreement between two separately or co-owned
stations, whereby the licensee of one station programs substantial portions or
all of the broadcast day on the other licensee's station, subject to ultimate
editorial and other controls being exercised by the latter licensee, and sells
advertising time during such program segments for its own account. The FCC has
held that local marketing agreements do not per se constitute a transfer of
control and are not contrary to the Communications Act provided that the
licensee of the station maintains ultimate responsibility for and control over
operations of its broadcast station. As is the case with Radio Unica in certain
circumstances the local marketing agreement is entered into in anticipation of
the sale of the station, with the proposed acquirer providing programming for
the station while the parties are awaiting the necessary regulatory approvals to
the transaction.
FCC rules also prohibit a radio licensee from simulcasting more than 25% of
its programming on other radio stations in the same broadcast service (i.e.,
AM-AM), whether it owns both stations or operates one or both through a LMA,
where such stations serve substantially the same geographic area as defined by
the stations' principal community contours. One exception to the simulcast rule
permits unlimited simulcasting on an expanded band AM station of the programming
of a corresponding commonly owned non-expanded band AM station in the same
market. Radio Unica formerly took advantage of the FCC's exception to the
general rule for simulcasting on an expanded band station (WAFN) in order to
simulcast in Miami.
LOW POWER RADIO BROADCAST SERVICE. The FCC recently adopted a Notice of
Proposed Rulemaking seeking public comment on a proposal to establish two
classes of a low power radio service both of which would operate in the existing
FM radio band: a primary class with a maximum operating power of 1 kW and a
secondary class with a maximum power of 100 watts. These proposed low power
radio stations would have limited service areas of 8.8 miles and 3.5 miles,
respectively. The FCC also has sought public comment on the advisability of
establishing a very low power secondary "microbroadcasting" service with a
maximum power limit of one to ten watts. These "microradio" stations would have
a service radius of only one to two miles. The service would target "niche
markets" and be possibly supported by advertising revenue. Existing licensees,
like Radio Unica, would be prohibited from owning or having a relationship with
these new stations. Implementation of a low power radio service or
microbroadcasting would provide an additional audio programming service that
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<PAGE>
could compete with Radio Unica's stations for listeners, but the effect on Radio
Unica cannot be predicted.
PROPOSED REGULATORY CHANGES. The FCC has not yet formally implemented
certain of the changes to its rules necessitated by the Telecommunications Act.
Moreover, the Congress and the FCC have under consideration, and may in the
future consider and adopt, new laws, regulations and policies regarding a wide
variety of matters that could, directly or indirectly:
- affect the operation, programming, technical requirements, ownership and
profitability of Radio Unica and its radio broadcast stations;
- result in the loss of audience share and advertising revenues of Radio
Unica's radio broadcast stations;
- affect the ability of Radio Unica to acquire additional radio broadcast
stations or finance such acquisitions;
- affect cooperative agreements and/or financing arrangements with other
radio broadcast licensees; or
- affect Radio Unica's competitive position in relationship to other
advertising media in its markets.
Such matters include, for example:
- changes to the license, authorization and renewal process;
- proposals to revise the FCC's equal employment opportunity rules and other
matters relating to minority and female involvement in broadcasting;
- proposals to alter the benchmark or thresholds for attributing ownership
interest in broadcast media;
- proposals to change rules or policies relating to political broadcasting;
- changes to technical and frequency allocation matters, including those
relative to the implementation of digital audio broadcasting on both a
satellite and terrestrial basis;
- proposals to restrict or prohibit the advertising of beer, wine and other
alcoholic beverages on radio;
- changes in the FCC's cross-interest, multiple ownership, Alien ownership
and cross-ownership policies; and
- proposals to limit the tax deductibility of advertising expenses by
advertisers.
Although Radio Unica believes the foregoing discussion is sufficient to
provide the reader with a general understanding of all material aspects of FCC
regulations that affect Radio Unica, it does not purport to be a complete
summary of all provisions of the Communications Act or FCC rules and policies.
Reference is made to the Communications Act, FCC rules, and the public notices
and rulings of the FCC for further information.
SUBSIDIARIES AND RELATED ENTITIES
Radio Unica Communications Corp. is a holding company, the sole asset of
which is all of the issued and outstanding stock of Radio Unica Corp. Radio
Unica Corp. owns stock of various subsidiaries, each of which owns the assets of
one of our radio stations. Each of these subsidiaries owns all of the issued and
outstanding shares of a subsidiary that owns the license for such radio station.
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<PAGE>
LEGAL PROCEEDINGS
We are involved from time to time in various routine legal and
administrative proceedings and threatened legal and administrative proceedings
incidental to the ordinary course of our business. We believe the resolution of
such matters will not have a material adverse effect on our business, financial
condition or results of operations.
EMPLOYEES
As of June 30, 1999, approximately 254 persons were employed full-time.
Although we refer to these persons as our employees, for administrative
convenience, substantially all of these persons are employees of record, for our
benefit, of a company that provides payroll and employee benefits services. As
of such date, none of our employees were represented by unions. We believe our
relations with our employees are good.
STATION AND OFFICE FACILITIES
Our corporate headquarters are located in Miami, Florida. The types of
properties required to support each of our owned and/or operated stations
include offices, studios and towers where broadcasting transmitters and antenna
equipment are located. We lease space in the building housing our corporate
headquarters under a lease expiring in 2004. The studios and offices of our
owned and operated stations and of the stations operated by us under LMAs are
located in leased facilities with lease terms expiring 2000 to 2007.
We own the transmitter, building and equipment and, in certain markets, the
building and land for each of our owned and operated stations. The transmitter
sites for our stations are material to our overall operations. We believe that
our properties are in good condition and are suitable for their operations;
however, we continually seek opportunities to upgrade our properties.
The following sets forth information about our significant properties:
<TABLE>
<CAPTION>
TYPE OF FACILITY
-------------------------------
TOWER TOWER
LOCATION STUDIO SITE 1 SITE 2
- -------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Los Angeles, California....................................... Leased Owned N/A
New York, New York............................................ Leased Leased Leased
Miami, Florida................................................ Leased Leased N/A
San Francisco, California..................................... Leased Leased N/A
Chicago, Illinois............................................. Leased Owned Leased
Houston, Texas................................................ Leased Leased N/A
San Antonio, Texas............................................ Leased Leased N/A
Dallas, Texas................................................. Leased Owned N/A
Phoenix, Arizona.............................................. Leased Owned N/A
Denver, Colorado.............................................. Leased Leased N/A
</TABLE>
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of individuals who
are directors, executive officers and key employees of Radio Unica:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ---------------------------------------------------------------------------
<S> <C> <C>
Joaquin F. Blaya.............. 53 Chairman of the Board and Chief Executive Officer
Jose C. Cancela............... 41 President and Director
Steven E. Dawson.............. 35 Executive Vice President, Chief Financial Officer, Secretary and Director
Andrew C. Goldman............. 52 Executive Vice President, Business Affairs and Director
Blaine R. Decker.............. 47 Executive Vice President, Network Sales
Omar Marchant................. 64 Vice President, Programming of Radio Unica Network, Inc.
Adriana Grillet............... 46 Vice President, Affiliate Relations of Radio Unica Network, Inc.
Roy Pressman.................. 46 Vice President, Engineering of Radio Unica Network, Inc.
John D. Santoleri............. 36 Director
Sidney Lapidus................ 61 Director
</TABLE>
Each director holds office until the next annual meeting of stockholders and
until his successor has been duly elected and qualified.
JOAQUIN F. BLAYA. Mr. Blaya has been our Chairman of the Board of Directors
and Chief Executive Officer since Radio Unica was founded in 1996. From 1995
through 1996, Mr. Blaya served as the President of Solomon International Latino,
the Latin American division of Solomon International Enterprises, an
international telecommunications company. From 1992 through 1995, Mr. Blaya was
the President, Chief Executive Officer and a member of the Board of Directors of
Telemundo, the second largest U.S. Spanish-language television network. Prior to
that, Mr. Blaya was employed by Univision since 1971 in various positions, the
latest being President and a member of Univision's Board of Directors. Mr. Blaya
is responsible for many of the most popular Spanish language programs on
Univision and Telemundo including SABADO GIGANTE, CRISTINA, PRIMER IMPACTO,
SEVCEC and the national news for both Spanish-language television networks.
Additionally, he launched TeleNoticias, the most widely distributed
Spanish-language cable news channel in the Americas.
JOSE C. CANCELA. Mr. Cancela has been our President since September 1998.
He initially joined us in July 1998 serving as President, Network. From 1992
through 1998, Mr. Cancela served as Executive Vice President of Telemundo,
responsible for the overall management of Telemundo's owned and operated
television stations in Puerto Rico and Miami. From 1990 to 1992, Mr. Cancela was
the Vice President of the Univision Southwest Station Group.
STEVEN E. DAWSON. Mr. Dawson has been our Chief Financial Officer,
Executive Vice President, Secretary and a Director since August 1997. From 1991
through 1997, Mr. Dawson was employed by Telemundo in several positions, the
most recent being Vice President, Finance and Controller. Prior to that, Mr.
Dawson was employed at Coopers & Lybrand since 1986. Mr. Dawson is a Certified
Public Accountant.
ANDREW C. GOLDMAN. Mr. Goldman has been our Director and Executive Vice
President, Business Affairs since August 1997. Mr. Goldman served in different
capacities for Univision from 1981 to 1993 including as Executive Vice President
and President of Galavision. Prior to joining Univision, Mr. Goldman was the
Senior Vice President of Marketing at Teleprompter Corporation. Mr. Goldman has
served as President and Director of Cable Television Administration and
Marketing Society (CTAM), and as Founder and Director of the Cable Advertising
Bureau (CAB).
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<PAGE>
BLAINE R. DECKER. Mr. Decker has served as our Executive Vice President,
Network Sales since October 1997. He was previously employed by KWHY-TV--Los
Angeles as General Sales Manager from November 1995 through October 1997. From
February 1984 through February 1995, Mr. Decker was employed by Univision as
Senior Vice President, Network Sales and in other management positions. Prior to
joining Univision, Mr. Decker was employed by Arbitron Ratings Company as Vice
President of Sales and Marketing from January 1980 through February 1984.
OMAR MARCHANT. Mr. Marchant has served as Radio Unica Network, Inc.'s Vice
President, Programming and as Creative Director since September 1997. Mr.
Marchant has been employed in various media-related capacities including TV
host, radio disc jockey, radio director, producer and creator of jingles, and
producer of TV specials for the Latin and general market. Additionally, Mr.
Marchant served as Senior Vice President and Creative Director for Telemundo
from June 1992 through July 1994 and as Vice President and Director of
Promotions and Special Events or in other capacities for Univision from
September 1972 through July 1994.
ADRIANA GRILLET. Ms. Grillet has served as Radio Unica Network, Inc.'s Vice
President, Affiliate Relations since August 1997. Ms. Grillet had previously
served as Director of Affiliate Relations for Caracol (Latino Broadcasting
Company) from April 1996 through July 1997 and CBS--Americas from February 1992
through April 1996. From 1992 through 1996 Ms. Grillet also served as a program
production consultant at WADO-NY and from 1988 through 1992 as Senior Program
Producer.
ROY PRESSMAN. Mr. Pressman has served as Radio Unica Network, Inc.'s Vice
President, Engineering since December 1997. Mr. Pressman has over 20 years of
experience in building and managing radio station facilities. From August 1997
to December 1997, Mr. Pressman served as Director of Engineering at Clear
Channel Communications, Inc. He was employed as Vice President, Engineering at
Paxson Communications Corp., the predecessor to Clear Channel, from August 1993
to July 1997. Prior to that, Mr. Pressman was employed as Director of
Engineering at Gilmore Broadcasting, Inc.
JOHN D. SANTOLERI. Mr. Santoleri has been a Director since August 1997. Mr.
Santoleri is a Managing Director and a member of E.M. Warburg, Pincus & Co. LLC
("Warburg"), where he has been employed since 1989. Warburg is the managing
entity of Warburg, Pincus Ventures, our controlling stockholder. Prior to
joining Warburg, Mr. Santoleri was a Vice President of the New York based real
estate consulting firm, The Harlan Company, Inc. Mr. Santoleri is also a
director of Axxess Technologies, Inc., Grubb & Ellis Company and NexCycle, Inc.
SIDNEY LAPIDUS. Mr. Lapidus, a Director since September 1998, is a Managing
Director and a member of Warburg, where he has been employed since 1967. Mr.
Lapidus is also a director of Caribiner International, Inc., Four Media Company,
Grubb & Ellis Company, Information Holdings Inc., Knoll Inc., Lennar Corp. and
several private companies.
BOARD COMMITTEES
The Board intends to establish an Audit Committee and a Compensation
Committee.
The Compensation Committee will review and recommend for Board approval
grants of options pursuant to our stock option plan, decide salaries and
incentive compensation for our employees and consultants, and recommend
compensation for executive officers.
The Audit Committee will recommend to the Board the selection of independent
auditors, review the results and scope of the audit and other services provided
by our independent auditors, and review and evaluate our audit and control
functions.
49
<PAGE>
EXECUTIVE COMPENSATION
The following sets forth all compensation paid by Radio Unica for each year
since it began operations to its Chief Executive Officer and each of the four
other most highly compensated executive officers of Radio Unica as of the end of
1998, and to one executive officer whose employment terminated prior to the end
of 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
--------------------------------------- COMPENSATION
OTHER -------------
ANNUAL STOCK ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
NAME AND PRINCIPAL POSITION YEAR $ $ $ # $
- -------------------------------------------- --------- --------- --------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Joaquin F. Blaya............................ 1998 350,000 160,000 -- 905,347 5,000
Chief Executive Officer 1997 145,834 -- -- -- 4,375
Jose C. Cancela............................. 1998 168,500 -- -- 275,900 438
President 1997 -- -- -- -- --
Steven E. Dawson............................ 1998 200,000 -- -- 275,900 4,006
Chief Financial Officer 1997 88,667 -- -- -- 2,065
Blaine R. Decker............................ 1998 165,000 65,100 -- 130,510 --
Executive Vice President 1997 52,500 -- -- -- --
Andrew C. Goldman........................... 1998 129,168 -- -- 290,057 --
Executive Vice President 1997 50,019 -- -- -- --
Herbert M. Levin(2)......................... 1998 183,312 -- -- -- --
Chief Operating Officer and President 1997 114,583 -- -- -- 2,005
</TABLE>
- ------------------------
(1) Consists of contributions under a 401(k) Plan.
(2) Mr. Levin resigned from his position as Chief Operating Officer, President
and Director in August 1998 and his options were terminated.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the previous two fiscal years, Radio Unica did not have a
compensation committee or other Board committee performing similar functions.
During that period, the entire board of directors had authority to consider
executive compensation matters. Messrs. Blaya, Cancela, Dawson and Goldman, our
officers, participated in deliberations of our board of directors concerning
executive compensation.
DIRECTOR COMPENSATION
FEES. We intend to establish fees for all non-employee directors within six
months after the date of this prospectus. We also will reimburse our
non-employee directors for reasonable expenses they incur in attending Board or
Committee meetings.
NON-COMPETE AGREEMENTS
Joaquin F. Blaya and Steven E. Dawson each entered into separate
Non-Competition and Confidentiality Agreements on August 13, 1997 pursuant to
which they have each agreed, among other things, that:
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<PAGE>
- until the later of (a) August 13, 2002 or (b) two years after the
termination of their respective employment (if terminated for cause or if
they voluntarily resign) they will not engage directly or indirectly in
any competitive business;
- during the two year period after their respective termination (if
terminated for cause or if they voluntarily resign) they will not hire,
offer to hire or entice away any of our officers, employees, affiliates or
agents; and
- they will not at any time divulge, furnish, use, publish or make
accessible to others any of our confidential information.
STOCK OPTION PLAN
Our Board of Directors and stockholders approved our 1998 stock option plan
which provides directors, officers, key employees, consultants and independent
contractors with additional incentives by increasing their ownership interests
in Radio Unica. Individual awards under our plan may take the form of:
- incentive stock options,
- non-qualified stock options.
The compensation committee administers the plan and selects the individuals
who will receive options and the terms and conditions of those options. The
maximum number of shares of common stock that may be issued under the plan may
not exceed 5,000,000 shares. Shares of common stock subject to awards which have
expired, terminated or been canceled or forfeited are available for issuance or
use in connection with future awards.
The plan may be amended by the board of directors without the consent of the
stockholders, except that any amendment, although effective when made, will be
subject to stockholder approval if required by any federal or state law or
regulation or by the rules of any stock exchange or automated quotation system
on which the common stock may then be listed or quoted. To date, 2,867,152
options have been granted under our 1998 stock option plan.
OPTIONS GRANTED
The table below shows information regarding the grant of options made to the
executive officers named in the Summary Compensation Table during the fiscal
year ended December 31, 1998.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------
% GRANTS TO EXERCISE GRANT DATE
NUMBER ALL PRICE PER EXPIRATION PRESENT
NAME GRANTED EMPLOYEES SHARE ($) DATE VALUE(1)
- ------------------------------------------------- --------- --------------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Joaquin F. Blaya................................. 905,347 31.6 .03-1.72 9/29/07 $ 9,053.47
Jose C. Cancela.................................. 275,900 9.6 .03-1.72 9/29/07 $ 2,759.00
Steven E. Dawson................................. 275,900 9.6 .03-1.72 9/29/07 $ 2,759.00
Blaine R. Decker................................. 130,510 4.4 .03-1.72 9/29/07 $ 1,305.10
Andrew C. Goldman................................ 290,057 10.1 .03-1.72 9/29/07 $ 2,900.57
Herbert M. Levin................................. 0 0.0 -- -- --
</TABLE>
- ------------------------
(1) The grant date present value per option was calculated using a modified
Black-Scholes option valuation model, using the assumptions set forth in
Note 11 to the notes to our consolidated financial statements.
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<PAGE>
The table below sets forth information for the executive officers named in
the Summary Compensation Table concerning option exercises during 1998 and
outstanding options at December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN 1998 AND
DECEMBER 31, 1998 OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
OPTIONS/SARS
NUMBER OF SECURITIES VALUE OF UNEXERCISED BASED
UNDERLYING UNEXERCISED IN-THE-MONEY ON PUBLIC
OPTIONS/SARS AT OPTIONS/SARS AT OFFERING
SHARES DECEMBER 31, 1998(#) DECEMBER 31, 1998($) PRICE ($)
ACQUIRED ON VALUE -------------------------- -------------------------- -----------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
- ---------------------- ----------------- --------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Joaquin F. Blaya...... 0 -- 428,320 477,027 0 0 6,411,950
Jose C. Cancela....... 0 -- 151,900 124,000 0 0 2,273,943
Steven E. Dawson...... 0 -- 151,900 124,000 0 0 2,273,943
Blaine R. Decker...... 0 -- 11,904 118,606 0 0 178,203
Andrew C. Goldman..... 0 -- 180,211 109,846 0 0 2,697,759
Herbert M. Levin...... 0 -- 0 0 -- -- --
<CAPTION>
NAME UNEXERCISABLE
- ---------------------- -------------
<S> <C>
Joaquin F. Blaya...... 6,726,138
Jose C. Cancela....... 1,754,135
Steven E. Dawson...... 1,754,135
Blaine R. Decker...... 1,668,582
Andrew C. Goldman..... 1,539,027
Herbert M. Levin...... --
</TABLE>
CERTAIN STOCKHOLDERS
The following table summarizes information regarding the beneficial
ownership of our outstanding common stock as of June 30, 1999 for
- each person or group that we know owns more than 5% of the common stock,
- each of our directors,
- our chief executive officer and four other highest paid executive
officers, and
- all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with rules of the SEC and
includes shares over which the indicated beneficial owner exercises voting
and/or investment power. The shares listed below assume that all our preferred
stock is converted to common stock immediately prior to the offering. Shares of
common stock subject to options currently exercisable or exercisable within 60
days are deemed outstanding for computing the percentage ownership of the person
holding the options but are not deemed outstanding for computing the percentage
ownership of any other person. Except as otherwise indicated, we believe the
beneficial owners of the common stock listed below, based on information
furnished by them, have sole voting and investment power with respect to the
number of shares listed opposite their names, and can be reached at our
principal offices.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES OUTSTANDING
NUMBER OF SHARES
BENEFICIALLY ----------------------------------
NAME OWNED BEFORE OFFERING AFTER OFFERING
- --------------------------------------------------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
Warburg, Pincus Ventures, L.P. (a) (b)......................... 13,781,806 98.7% 70.1%
Joaquin F. Blaya (c)........................................... 809,080 5.5 4.0
Jose C. Cancela (d)............................................ 242,844 1.7 1.2
Steven E. Dawson (d)........................................... 248,644 1.8 1.2
Blaine R. Decker (e)........................................... 89,404 * *
Andrew C. Goldman (f).......................................... 291,317 2.0 1.5
Sidney Lapidus (a) (b)......................................... 0 -- --
John D. Santoleri (a) (b)...................................... 0 -- --
All Directors and Executive Officers as a Group (g) (10
persons)..................................................... 15,463,095 99.8 73.0
</TABLE>
- ------------------------
* Less than 1%.
52
<PAGE>
(a) The business address for such person is 466 Lexington Avenue, New York, New
York 10017.
(b) The sole general partner of Warburg, Pincus Ventures is Warburg, Pincus &
Co. ("WP"), a New York general partnership. E. M. Warburg, Pincus & Co., LLC
("Warburg") manages Warburg, Pincus Ventures. The members of Warburg are
substantially the same as the partners of WP. Lionel I. Pincus is the
managing partner of WP and the managing member of Warburg and may be deemed
to control both entities. Mr. Lapidus and Mr. Santoleri are each Managing
Directors and members of Warburg and general partners of WP. As such, Mr.
Lapidus and Mr. Santoleri may each be deemed to have an indirect pecuniary
interest in an indeterminate portion of the shares beneficially owned by
Warburg, Pincus Ventures.
(c) Includes 725,035 shares issuable upon exercise of options that are currently
exercisable or exercisable within sixty days of this prospectus.
(d) Includes 229,400 shares issuable upon exercise of options that are currently
exercisable or exercisable within sixty days of this prospectus.
(e) Consists of 89,404 shares issuable upon exercise of options that are
currently exercisable or exercisable within sixty days of this prospectus.
(f) Includes 255,437 shares issuable upon exercise of options that are currently
exercisable or exercisable within sixty days of this prospectus.
(g) Includes 1,528,676 shares issuable upon exercise of options that are
currently exercisable or exercisable within sixty days of this prospectus.
53
<PAGE>
CERTAIN TRANSACTIONS
PURCHASE OF RADIO STATION KXYZ(AM); TRANSACTIONS INVOLVING BLAYA, INC.
Blaya, Inc., a Delaware corporation, was formed in October 1997 to
facilitate the purchase of radio station KXYZ(AM) located in Houston, Texas.
Upon such formation, we acquired 499 shares of Blaya, Inc.'s common stock (which
represented a 49.9% interest in Blaya, Inc.) and Joaquin F. Blaya acquired 501
shares of Blaya, Inc.'s common stock (which represented a 50.1% interest in
Blaya, Inc.). On December 24, 1997, Blaya, Inc. entered into an asset purchase
agreement with 13 Radio to acquire substantially all of the assets necessary to
operate KXYZ for a cash purchase price of $6.4 million. In connection with the
purchase, we advanced $1,016,590 to Blaya, Inc.
On March 6, 1998, we acquired 800 shares of Blaya, Inc.'s Class B common
stock, representing 49.9% of the voting rights and 80% of the economic ownership
rights in Blaya, Inc., in exchange for its 499 shares of Blaya, Inc.'s common
stock and $640,000. On the same day, we loaned Mr. Blaya $160,000 in exchange
for a 10 year 9% promissory note. These proceeds were used by Mr. Blaya
(together with the surrender of 501 shares of Blaya, Inc.'s common stock then
held by him) to acquire 200 shares of Blaya, Inc.'s Class A common stock,
representing 50.1% of the voting rights and 20% of the ownership rights in
Blaya, Inc.
On March 10, 1998, we loaned $5.7 million to Blaya, Inc. in exchange for a
promissory note. The proceeds were used to complete the asset purchase agreement
with 13 Radio and to pay related closing costs. The promissory note bore
interest at 9%, compounded quarterly and payable annually, and was secured by
substantially all of the assets of Blaya, Inc.
On September 11, 1998, we purchased all of Mr. Blaya's interest in Blaya,
Inc. for $160,000 and Mr. Blaya repaid the $160,000, plus interest, he owed to
us pursuant to the 10 year 9% promissory note. Effective September 11, 1998, the
$5.7 million promissory note was cancelled by us and accounted for as a
contribution to Blaya, Inc.'s capital.
The purchase of the radio station was structured to have Mr. Blaya make the
acquisition since we believed the seller would be receptive to consummating the
transaction in this fashion. We provided the funds to Mr. Blaya to make the
acquisition and retained 80% of the economic interests. When we sold our senior
discount notes in 1998, the placement agents required us to purchase Mr. Blaya's
interest and obtain sole voting and economic interests in the station. Mr. Blaya
did not realize any gain or profit from these transactions.
INITIAL INVESTMENTS IN RADIO UNICA; AGREEMENTS AMONG STOCKHOLDERS
On August 11, 1997, Warburg, Pincus Ventures, Joaquin F. Blaya, Herbert M.
Levin, Andrew C. Goldman, and other investors, entered into a securities
purchase agreement with us pursuant to which they purchased an aggregate of
6,510,000 shares of our common stock and 207,900 shares of our preferred stock.
Additional officers and directors purchased common stock and preferred stock
from us in December 1998 and January 1999. The purchase price for all the common
stock was $0.03 per share and the purchase price for all the preferred stock was
$100 per share. The investors had the option to acquire additional preferred and
common stock.
Holders of our preferred stock are entitled to receive cumulative dividends
at the rate of 10% per annum, if declared. Each share of preferred stock is
entitled to ten votes per share on all matters upon which our common
stockholders are entitled to vote. The preferred stock has a redemption price
and liquidation value of $100 per share, together with accrued and unpaid
dividends. At the option of the holders of our preferred stock, the preferred
stock must be redeemed by us upon the occurrence of:
- a change in control;
- an initial public offering; or
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<PAGE>
- August 6, 2007.
Upon an initial public offering, the underwriters may require that the
preferred stock be exchanged (and not redeemed) for a number of shares of common
stock equal to the liquidation value divided by $15.00, which is the midpoint of
the proposed public offering price range of $14.00 to $16.00 per share, less the
underwriter's discount. In the event of any liquidation, dissolution or winding
up of our affairs, holders of preferred stock will be paid the liquidation value
plus all accrued dividends before any payment is made to our other stockholders.
As part of this offering, all of our outstanding shares of preferred stock will
be exchanged for an aggregate of 2,885,072 unregistered shares of common stock,
which, based on the assumed initial public offering price, have a value of
$43,276,080. All the common stock issued in this exchange will not be registered
under the Securities Act.
The securities purchase agreement contains our obligations to provide
information to the investors and to obtain their approval for various actions
and provides various rights to the investors. Except as to the registration
rights and indemnities contained in this agreement, it will be terminated upon
the exchange of all of our preferred stock for common stock. A related
stockholder agreement entered into among all our stockholders will be terminated
on the date of this offering.
LOANS TO RADIO UNICA
On July 15, 1997, Joaquin F. Blaya, Herbert M. Levin and Andrew C. Goldman,
each an executive officer of Radio Unica at that time, and Barrett Alley, a
stockholder, loaned us an aggregate of $100,000. The loan was due upon demand
and bore interest at a rate of 9% per annum. In April 1998, we fully repaid the
loan by issuing Messrs. Blaya, Levin, Goldman and Alley 12,580, 12,580, 5,627
and 2,317 shares of our common stock, respectively, and 401.7816, 401.7816,
179.7444 and 74.0124 shares of our preferred stock, respectively. As part of the
termination of Mr. Levin's employment with us, all of his stock has been
cancelled.
On July 24, 1997, Warburg, Pincus Ventures loaned us $265,000. The loan was
due upon demand and bore interest at a rate of 8% per annum. The funds from the
loan were used to pay a deposit to Univision Network Limited Partnership
pursuant to a radio broadcasting rights agreement, dated as of July 30, 1997,
entered into by and between Univision and us for the exclusive Spanish-language
radio broadcast rights in the United States for the 1998 World Cup. Warburg,
Pincus Ventures also arranged for the issuance of a letter of credit in the
amount of $2,385,000 to Univision on our behalf to secure our payments under
this agreement. In April 1998, we fully repaid the loan by issuing Warburg,
Pincus Ventures 86,962 shares of common stock and 2,777.1788 shares of preferred
stock. On July 9, 1998, the original letter of credit was replaced by a letter
of credit issued by Canadian Imperial Bank of Commerce for the remaining amount
of $795,000.
On April 3, April 27, May 19 and June 16, 1998, Warburg, Pincus Ventures
loaned us $5,000,000, $11,000,000, $5,000,000 and $795,000 in exchange for
promissory notes. The funds from the promissory notes were primarily used to
finance the acquisition of KIQI from Oro and the acquisition of WNMA from
One-on-One. Each of the promissory notes was due upon demand and bore interest
at the rate of 10% per annum. On June 30, 1998, we repaid $15,000,000 of the
promissory notes plus accrued interest by issuing Warburg, Pincus Ventures
4,724,090 shares of common stock and 150,865.1507 shares of preferred stock. The
remaining $6,795,000 due under the promissory notes was repaid in July 1998 from
amounts borrowed under our credit facility.
The preferred stock issued in all these transactions was from the same
series as the preferred stock issued by us in 1997. See "-- Initial Investments
in Radio Unica; Agreements Among Shareholders." The common stock was issued at
$0.03 per share and the preferred stock was issued at $100 per share. When the
preferred stock is exchanged for common stock as part of this offering, based on
$15.00, which is the assumed initial public offering price, the unregistered
common stock received by Messrs. Blaya, Cancela, Dawson and Goldman and by
Warburg, Pincus Ventures will have a value of
55
<PAGE>
$237,354, $39,884, $57,557, $106,172 and $90,413,478, respectively. Based on
$15.00, which is the assumed initial public offering price, the common stock
owned by Messrs. Blaya, Cancela, Dawson and Goldman and by Warburg, Pincus
Ventures will have a value of $990,840, $162,750, $232,500, $456,420, and
$164,002,830, respectively.
DESCRIPTION OF CAPITAL STOCK
The following summarizes important provisions of our capital stock and our
certificate of incorporation and bylaws, each of which will be in effect prior
to the closing of this offering. This summary is not complete, and is qualified
by our certificate of incorporation and bylaws, copies of which have been filed
as exhibits to the registration statement of which this prospectus is a part,
and by the provisions of applicable law.
Our authorized capital stock consists of 40,000,000 shares of common stock,
par value $.01 per share, and 5,000,000 shares of preferred stock, par value
$.01 per share.
COMMON STOCK
As of June 30, 1999, there were 11,081,924 shares of common stock
outstanding and held of record by seven stockholders.
Holders of common stock are entitled to one vote per share in the election
of directors and on all other matters on which stockholders are entitled or
permitted to vote. Holders of common stock are not entitled to cumulative voting
rights. Therefore, holders of a majority of the shares voting for the election
of directors can elect all the directors. Subject to the terms of any
outstanding series of preferred stock and to the terms of our credit facility,
the holders of common stock are entitled to dividends in amounts and at times as
may be declared by the Board of Directors out of funds legally available for
distribution. Upon liquidation or dissolution, holders of common stock are
entitled to share ratably in all net assets available for distribution to
stockholders after payment of any liquidation preferences to holders of
preferred stock. Holders of common stock have no redemption, conversion or
preemptive rights.
PREFERRED STOCK
Concurrently with this offering, all our issued and outstanding shares of
preferred stock will be exchanged for common stock. The Board of Directors has
the authority to issue up to 5,000,000 shares of preferred stock and to fix the
price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by the stockholders.
The rights of the holders of our common stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that we
may issue in the future. The issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, may have the effect of delaying, deferring or preventing a
change in control of Radio Unica, may discourage bids for our common stock at a
premium over the market price of the common stock and may adversely affect the
market price of and the voting and other rights of the holders of the common
stock. We have no present plans to issue shares of preferred stock.
DELAWARE ANTI-TAKEOVER LAW AND CHARTER PROVISIONS
Provisions of our certificate of incorporation are intended to enhance
continuity and stability in our Board of Directors and in our policies, but
might have the effect of delaying or preventing a change in control of Radio
Unica and may make more difficult the removal of incumbent management
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<PAGE>
even if the transactions could be beneficial to the interests of stockholders. A
summary description of these provisions follows:
CHANGE IN CONTROL. We are subject to the provisions of Section 203 of the
DGCL, an anti-takeover law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. For purposes of Section
203, a "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder, and an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
The provisions of Section 203, together with the ability of our Board of
Directors to issue preferred stock without further stockholder action, could
delay or frustrate the removal of incumbent directors or a change in control of
our company. The provisions also could discourage, impede or prevent a merger,
tender offer or proxy contest, even if this event would be favorable to the
interests of stockholders. Our stockholders, by adopting an amendment to the
certificate of incorporation or bylaws, may elect not to be governed by Section
203 effective 12 months after adoption. Neither our certificate of incorporation
nor bylaws currently exclude us from the restrictions imposed by Section 203.
AUTHORITY TO ISSUE PREFERRED STOCK. The certificate of incorporation
authorizes the Board, without stockholder approval, to establish and to issue
shares of one or more series of preferred stock, each series having the voting
rights, dividend rates, liquidation, redemption, conversion and other rights as
may be fixed by the Board.
LIMITATION OF DIRECTOR LIABILITY. Section 102(b)(7) of the DGCL authorizes
corporations to limit or eliminate the personal liability of directors to
corporations and their stockholders for monetary damages for breach of
directors' fiduciary duty of care. Although Section 102(b) does not change
directors' duty of care, it enables corporations to limit available relief to
equitable remedies such as injunction or rescission. Our certificate of
incorporation limits the liability of directors to the company or its
stockholders (in their capacity as directors but not in their capacity as
officers) to the fullest extent permitted by Section 102(b). Specifically, our
directors will not be personally liable for monetary damages for breach of a
director's fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders,
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
- for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL, or
- for any transaction from which the director derived an improper personal
benefit.
INDEMNIFICATION. To the maximum extent permitted by law, our certificate of
incorporation and bylaws provide for mandatory indemnification of directors and
permit indemnification of our officers, employees and agents against all
expense, liability and loss to which they may become subject or which they may
incur as a result of being or having been our director, officer, employee or
agent. In addition, we may advance or reimburse directors, officers, employees
and agents for expenses incurred by them as a result of indemnifiable claims.
57
<PAGE>
REGISTRATION RIGHTS
Warburg, Pincus Ventures has been granted registration rights by us pursuant
to which Warburg, Pincus Ventures may require us, from time to time after the
expiration of 180 days from this offering, to register for sale to the public
under the Securities Act any shares of common stock owned by them. In addition,
Warburg, Pincus Ventures and other stockholders owning an aggregate of
13,966,996 shares have piggyback registration rights that allow them to include
their shares of common stock in registration statements initiated by us. These
registration rights are subject to conditions and limitations, including the
right of the underwriters of an offering to limit the number of shares to be
included in a registration statement.
TRANSFER AGENT
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
DESCRIPTION OF INDEBTEDNESS
BANK CREDIT FACILITY
On July 8, 1998, Radio Unica entered into a credit facility providing for up
to $20 million of availability. The credit facility matures on September 30,
2002. Amounts outstanding under the credit facility bear interest at a rate of
the higher of the lender's prime rate plus 1.25% or LIBOR plus 2.50%. Our
obligations under the credit facility have been guaranteed by all of our
subsidiaries and have been secured by first liens on all of our present and
future assets and a pledge of the stock of all of our wholly-owned subsidiaries.
We pay a commitment fee of 0.50% per annum on the aggregate unused portion of
the credit facility.
The credit facility contains financial and operational covenants and other
restrictions with which we must comply, including, among others, requirements to
maintain minimum loan-to-value and leverage ratios, and limitations on the
following:
- indebtedness
- guarantees
- liens
- negative pledges
- sales and leasebacks
- mergers, acquisitions and dispositions
- consummate certain asset sales
- transactions with affiliates
- dividends
- investments
- changes in business lines
- amendments of material agreements
The credit facility contains events of default, including payment defaults
and default in the performance of other covenants, breach of representations or
warranties, cross-default to other indebtedness, bankruptcy or ERISA defaults,
the entry of judgments against us, and any security interest or guarantee ceases
to be in effect. The credit facility also provides that an event of default
58
<PAGE>
will occur upon the occurrence of a change of control. In connection with this
offering, we have obtained a waiver from the lenders under the credit facility
with respect to our obligations under the credit facility not to issue shares of
common stock.
SENIOR DISCOUNT NOTES
On July 27, 1998, we sold $158,088,000 aggregate principal amount at
maturity of 11 3/4% senior discount notes due August 1, 2006. Cash interest on
these notes will not accrue or be payable prior to August 1, 2002. From August
1, 2002, cash interest will accrue at a rate of 11 3/4% per annum on the
principal amount at maturity of the notes through and including the maturity
date and will be payable semi-annually on August 1 and February 1 of each year.
In connection with the sale of these notes, we received net proceeds of
approximately $94.4 million after deducting issuance expenses of approximately
$5.6 million.
The notes are general senior unsecured obligations and rank equally in right
of payment with all our existing and future unsecured and unsubordinated
indebtedness and senior in right of payment to any of our subordinated
indebtedness. The notes are guaranteed by our subsidiaries. The notes are
redeemable at any time and from time to time at our option, in whole or in part
on or after August 1, 2002, plus accrued and unpaid interest.
In addition, on or prior to August 1, 2001, we may redeem, at our option, up
to 35% of the aggregate principal amount at maturity of the notes with the net
proceeds of one or more equity offerings, at 111.75% of the accreted value
thereof, as long as notes representing at least $65.0 million of the aggregate
initial accreted value of the notes originally issued remain outstanding after
each redemption and that the redemption occurs within 90 days of the closing of
any equity offering.
Upon a change of control, we are required to offer to repurchase the notes
at a purchase price equal to (a) 101% of the accreted value thereof, if the
purchase date is on or prior to August 1, 2002, or (b) 101% of the principal
amount at maturity thereof, plus accrued and unpaid interest thereon, if any, to
the purchase date, if such date is after August 1, 2002.
The notes restrict, among other things, our ability to:
- incur additional indebtedness
- pay dividends or make other restricted payments
- consummate certain asset sales
- create liens on assets
- enter into transactions with affiliates
- make investments, loans or advances
- enter into sale and lease-back transactions
- consolidate or merge with or into any other person
- convey, transfer or lease all or substantially all of our assets
- change our business
59
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our common
stock. We cannot predict the effect, if any, that sales of shares or the
availability of shares for sale will have on the market price of our common
stock. Nevertheless, sales of substantial amounts of our common stock in the
public market, or the perception that such sales might occur, could adversely
affect the market price of our common stock and could impair our future ability
to raise capital through the sale of our equity securities.
Upon the closing of this offering, we will have an aggregate of 19,666,996
shares of our common stock outstanding, assuming no exercise of outstanding
options. All of the 5,700,000 shares sold in this offering will be freely
tradable without restriction or further registration under the Securities Act,
except that any shares purchased by our "affiliates," as that term is defined in
Rule 144 under the Securities Act, may only be sold in compliance with the
limitations described below. Shares of common stock purchased by our affiliates
will be "restricted securities" under Rule 144. Restricted securities may be
sold in the public market only if registered or if they qualify for an exemption
from registration under Rules 144 or 701 promulgated under the Securities Act.
Warburg, Pincus Ventures and other stockholders have registration rights that
allow them to initiate a registration statement or to include their shares of
common stock in a registration statement filed by us. The number of shares to be
sold in the public market could increase if such rights are exercised. See
"Description of Capital Stock-Registration Rights."
LOCK-UP AGREEMENTS
Prior to the closing of this offering, all of our officers, directors and
securityholders will have signed agreements under which they may not, for a
period of 180 days after the date of this prospectus, directly or indirectly
transfer or dispose of any shares of common stock or any securities convertible
into or exchangeable or exercisable for shares of common stock. The shares could
be available for resale immediately upon the expiration of the 180-day period if
they are available for resale under Rule 144. Transfers or dispositions can be
made sooner with the prior written consent of Salomon Smith Barney Inc.
RULE 144
In general, under Rule 144, a person (or persons whose shares are required
to be aggregated), including an affiliate, who has beneficially owned shares for
at least one year is entitled to sell, within any three-month period commencing
90 days after the date of this prospectus, a number of shares that does not
exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately 196,670 shares after the closing of this offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a notice on Form 144 with respect
to such sale.
Sales under Rule 144 also are subject to manner-of-sale provisions and notice
requirements and to the availability of current public information about us.
RULE 144(K)
Under paragraph (k) of Rule 144, persons who are not our affiliate at any
time during the 90 days preceding a sale and who have beneficially owned the
shares proposed to be sold for at least two years are entitled to sell such
shares without complying with the manner-of-sale, public information, volume
limitation or notice provisions of Rule 144. The two-year holding period
includes the holding period of
60
<PAGE>
any prior owner who is not our affiliate. Therefore, unless otherwise
restricted, shares covered by Rule 144(k) may be sold immediately upon the
closing of this offering.
RULE 701
In general, under Rule 701, any of our employees, consultants or advisors
who purchase shares from us in connection with a compensatory stock or option
plan or other written agreement is eligible to resell such shares 90 days after
the date of this prospectus in reliance on Rule 144, but without compliance with
other restrictions, including the holding period, contained in Rule 144.
STOCK OPTIONS
As of the date of this prospectus, options to purchase a total of 2,867,152
shares of common stock are outstanding, of which options to purchase 1,126,242
shares are currently exercisable. Of the options to purchase 1,740,910 shares of
common stock that are not currently exercisable, options to purchase 1,127,411
shares of common stock shall immediately vest and become exercisable upon the
closing of this offering. Upon the closing of this offering, we intend to file a
registration statement to register for resale the shares of common stock
reserved for issuance under the stock option plan. That registration statement
will automatically become effective upon filing. Upon the expiration of the
lock-up agreements described above, at least 2,570,355 shares of common stock
will be subject to vested options. Accordingly, shares issued upon the exercise
of stock options granted under the stock option plan, which are being registered
under that registration statement, will, giving effect to vesting provisions and
in accordance with Rule 144 volume limitations applicable to our affiliates, be
eligible for resale in the public market from time to time immediately after the
lock-up agreements referred to above expire.
61
<PAGE>
UNDERWRITING
Radio Unica and the underwriters named below have entered into an
underwriting agreement with respect to the shares being offered. Each
underwriter named below has separately agreed to purchase the number of shares
listed next to its name in the following table:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Salomon Smith Barney Inc...................................................
Bear, Stearns & Co. Inc....................................................
Donaldson, Lufkin & Jenrette ..............................................
CIBC World Markets.........................................................
-----------------
Total.................................................................. 5,700,000
-----------------
-----------------
</TABLE>
The underwriters expect to deliver the shares to purchasers on or about
, 1999.
If the underwriters sell more than 5,700,000 shares, the underwriters have
an option to buy up to 855,000 additional shares from Warburg, Pincus Ventures,
L.P., at the public offering price less the underwriting discount to cover these
sales. The underwriters may exercise that option for 30 days. If any shares are
purchased pursuant to this option, the underwriters will separately purchase
shares in approximately the same proportion as set forth in the table above.
Shares sold by the underwriters to the public will initially be offered at
the public offering price set forth on the cover of this prospectus. Any shares
sold by the underwriters to securities dealers may be sold at a discount from
the public offering price of up to $ per share. Any of these securities
dealers may resell any shares to other brokers or dealers at a discount from the
public offering price of up to $ . If all the shares are not sold at the
public offering price, the underwriters may change the offering price and the
other selling terms.
Radio Unica, its officers and directors and the principal stockholders of
Radio Unica have agreed that, for a period of 180 days from the date of this
prospectus, they will not dispose of any shares of common stock of Radio Unica
or any securities convertible into or exchangeable for common stock. Salomon
Smith Barney Inc. in its sole discretion may waive this restriction at any time
without notice.
At our request underwriters have reserved up to 5% of the shares for sale at
the initial public offering price to persons who are directors, officers or
employees of Radio Unica, or who are otherwise associated with us and our
affiliates, and who have advised us of their desire to purchase shares. The
number of shares available for sale to the general public will be reduced to the
extent of sales of these shares to any of the persons for whom they have been
reserved. Any shares not purchased by these persons will be offered by the
underwriters to the general public on the same basis as all other shares. We
have agreed to indemnify these underwriters for liabilities and expenses,
including liabilities under the Securities Act, in connection with the sales of
these reserved shares.
Prior to this offering, there has been no market for the shares.
Consequently, the public offering price for the shares was determined by
negotiations among Radio Unica, Warburg, Pincus Ventures, L.P., and the
underwriters. Among the factors considered in determining the public offering
price were:
- Radio Unica's results of operations
- our current financial condition
- our future prospects
- our markets
- the economic conditions in and future prospects for the industry in which
Radio Unica competes
62
<PAGE>
- our management
- currently prevailing general conditions in the equity securities markets,
including current market valuations of publicly traded companies
considered comparable to Radio Unica
The prices at which the shares will sell in the public market after this
offering may be lower than the price at which they are sold by the underwriters.
An active trading market in the common stock may not develop and continue after
this offering.
Radio Unica has applied to have the common stock included for quotation on
the Nasdaq National Market under the symbol "UNCA".
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by Radio Unica and, if the underwriters' option to
purchase additional shares is exercised, by Warburg, Pincus Ventures, L.P., in
connection with this offering. These amounts are shown assuming both no exercise
and full exercise of the underwriters' option to purchase additional shares.
<TABLE>
<CAPTION>
PAID BY WARBURG, PINCUS
PAID BY RADIO UNICA VENTURES, L.P.
------------------------------ --------------------------------
<S> <C> <C> <C> <C>
NO EXERCISE FULL EXERCISE NO EXERCISE FULL EXERCISE
------------- --------------- --------------- ---------------
Per Share.................................................. $ $ $ 0 $
Total...................................................... $ $ $ 0 $
</TABLE>
In connection with this offering, the underwriters may purchase and sell
shares in the open market. These transactions may include short sales, purchases
to cover short sales and stabilizing transactions. Short sales involve the sale
of a greater number of shares than the underwriters are required to purchase in
the offering. Purchases to cover short sales involve purchases of shares in the
open market after the offering has been completed. Stabilizing transactions
consist of bids or purchases made for the purpose of preventing or retarding a
decline in the market price of the shares while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the other underwriters a portion of the
underwriting discount received by it because the other underwriters have
repurchased shares sold by or for the account of the underwriter in stabilizing
or short covering transactions.
Any of these activities may cause the price of the shares to be higher than
the price that otherwise would exist in the open market in the absence of these
activities. These activities may be effected on the Nasdaq National Market or in
the over-the-counter market, or otherwise, and, if commenced, may be
discontinued at any time.
Bear, Stearns & Co. Inc. and an affiliate of CIBC World Markets have
performed investment banking and advisory services for Radio Unica from time to
time for which they have received customary fees and expenses. The underwriters
may, from time to time, engage in transactions with and perform services for
Radio Unica in the ordinary course of their business.
Under NASD rules, if more than 10% of the net proceeds of a public offering
of equity securities are to be paid to members of the NASD that are
participating in the offering, or to their affiliated or associated persons, the
price of the equity securities distributed to the public must be no higher than
that recommended by an underwriter, who is a "qualified independent
underwriter," under NASD rules. An affiliate of CIBC World Markets is the lender
under our credit facility and will receive prepayment of amounts outstanding
under this facility from the net proceeds of this offering that are, in the
aggregate, more than 10% of the net proceeds of this offering. Accordingly,
Salomon Smith Barney Inc. will act as a qualified independent underwriter in
connection with this offering. Salomon Smith Barney Inc., in its role as
qualified independent underwriter, has performed due diligence investigations
and reviewed and participated in the preparation of this prospectus and the
registration
63
<PAGE>
statement of which this prospectus forms a part. Salomon Smith Barney Inc. will
not receive any additional fees for serving as a qualified independent
underwriter in connection with this offering. The price of the shares sold to
the public will be no higher than that recommended by Salomon Smith Barney Inc.
Radio Unica and Warburg, Pincus Ventures, L.P., have agreed to indemnify the
underwriters for liabilities, including liabilities under the Securities Act of
1933, or to contribute to payments the underwriters may be required to make in
respect of these liabilities.
This prospectus is not, under any circumstances, to be construed as an
advertisement or a public offering of the common stock in Canada or in any
province or territory of Canada. Any offer or sale of common stock in Canada may
only be made pursuant to an exemption from the requirement to file a prospectus
in the province or territory of Canada in which the offer or sale is made.
LEGAL OPINIONS
The validity of the shares of common stock offered by this prospectus will
be passed upon for us by Stroock & Stroock & Lavan LLP, New York, New York, and
for the underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New York.
EXPERTS
Ernst & Young LLP, independent certified public accountants, have audited
our consolidated financial statements and schedules at December 31, 1998 and
1997, and for each of the two years in the period ended December 31, 1998, and
for the period from September 12, 1996 (inception) through December 31, 1996, as
set forth in their report. We have included our financial statements and
schedules in the prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
Ernst & Young LLP, independent certified public accountants, have audited 13
Radio Corporation's financial statements for each of the two years in the period
ended December 31, 1997, as set forth in their report. We have included 13 Radio
Corporation's financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
Miller Kaplan Arase & Co., LLP, independent certified public accountants,
have audited Oro Spanish Broadcasting, Inc's financial statements at August 31,
1997 and 1996, and for each of the two years in the period ended August 31,
1997, as set forth in their report. We have included Oro Spanish Broadcasting,
Inc's statements in the prospectus and elsewhere in the registration statement
in reliance on Miller Kaplan Arase & Co., LLP's report, given on their authority
as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 (including
exhibits, schedules and amendments thereto) under the Securities Act with
respect to the shares of common stock to be sold in this offering. This
prospectus does not contain all the information set forth in the registration
statement. Certain parts of the registration statement are omitted as allowed by
the rules and regulations of the SEC. We refer to the registration statement and
the exhibits to such registration statement for further information with respect
to us and the shares of common stock to be sold in this offering. Statements
contained in this prospectus as to the contents of any contract, agreement or
other document referred to are not necessarily complete and in each instance we
refer you to the copy of that contract, agreement or other document filed as an
exhibit to the registration statement; each such statement is deemed qualified
in all respects by such reference.
You may read and copy all or any portion of the registration statement or
any other information we file at the SEC's public reference room at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W.,
64
<PAGE>
Washington, D.C. 20549 and at the regional offices of the SEC located at Seven
World Trade Center, 13(th)Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our filings with the SEC, including the registration statement,
are also available to you on the SEC's Web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act, and, in accordance with
those requirements, we will file periodic reports, proxy statements and other
information with the SEC.
We intend to furnish our stockholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each year containing unaudited interim financial information.
65
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
RADIO UNICA COMMUNICATIONS CORP.
Report of Independent Certified Public Accountants......................................................... F-2
Consolidated Balance Sheets................................................................................ F-3
Consolidated Statements of Operations...................................................................... F-4
Consolidated Statements of Changes in Series A Redeemable Cumulative Preferred Stock and Stockholders'
(Deficit) Equity......................................................................................... F-5
Consolidated Statements of Cash Flows...................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
Consolidated Balance Sheet (Unaudited)..................................................................... F-23
Consolidated Statements of Operations (Unaudited).......................................................... F-24
Consolidated Statements of Cash Flows (Unaudited).......................................................... F-25
Notes to Consolidated Financial Statements (Unaudited)..................................................... F-26
13 RADIO CORPORATION
Report of Independent Certified Public Accountants......................................................... F-30
Statements of Operations and Accumulated Deficit........................................................... F-31
Statements of Cash Flows................................................................................... F-32
Notes to Consolidated Financial Statements................................................................. F-33
ORO SPANISH BROADCASTING, INC.
Independent Auditors' Report............................................................................... F-37
Independent Accountants' Report............................................................................ F-38
Balance Sheets............................................................................................. F-39
Statements of Operations and Accumulated Deficit........................................................... F-40
Statements of Cash Flows................................................................................... F-41
Notes to Financial Statements.............................................................................. F-42
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Radio Unica Communications Corp.
We have audited the accompanying consolidated balance sheets of Radio Unica
Communications Corp. and subsidiaries (formerly Radio Unica Holdings Corp.) as
of December 31, 1997 and 1998, and the related consolidated statements of
operations, changes in Series A redeemable cumulative preferred stock and
stockholders' (deficit) equity and cash flows for the period from September 12,
1996 (inception) through December 31, 1996 and for each of the two years in the
period ended December 31, 1998. Our audits also included the financial statement
schedules listed in the Index of Item 16(b). These financial statements and
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Radio Unica Communications Corp. and subsidiaries as of December 31, 1997 and
1998, and the consolidated results of their operations and their cash flows for
the period from September 12, 1996 (inception) through December 31, 1996 and for
the years ended December 31, 1997 and 1998, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
Ernst & Young LLP
Miami, Florida
February 24, 1999, except for the
second paragraph of Note 2, as
to which the date is September 16, 1999
F-2
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C>
1997 1998
------------ --------------
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 1,126,862 $ 38,894,144
Restricted cash.................................................................. -- 12,600,000
Accounts receivable, net of allowance for doubtful accounts of $116,031.......... -- 1,232,402
Prepaid expenses................................................................. 554,000 5,012,001
Radio broadcasting rights........................................................ 2,650,000 --
------------ --------------
Total current assets............................................................... 4,330,862 57,738,547
Property and equipment, net...................................................... 1,221,995 11,769,654
Broadcast licenses, net of accumulated amortization of $752,775.................. -- 43,729,708
Other intangible assets, net..................................................... -- 9,894,522
Investments and advances to equity investee...................................... 1,016,590 --
Other assets..................................................................... 108,641 371,011
------------ --------------
$ 6,678,088 $ 123,503,442
------------ --------------
------------ --------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................................................. $ 354,120 $ 922,064
Accrued expenses................................................................. 179,549 3,199,347
Radio broadcasting rights obligation............................................. 2,385,000 --
Notes payable.................................................................... 365,000 750,000
------------ --------------
Total current liabilities.......................................................... 3,283,669 4,871,411
Deferred taxes..................................................................... -- 1,641,990
Senior discount notes.............................................................. -- 105,029,128
Commitments and contingencies
Series A redeemable cumulative preferred stock $.01 par value; 450,000 shares
authorized; 51,975 and 353,560 issued and outstanding at December 31, 1997 and
1998, respectively............................................................... 5,316,990 38,266,437
Stockholders' deficit:
Common stock $.01 par value; 40,000,000 shares authorized; 1,627,500 shares and
11,071,074 shares issued and outstanding at December 31, 1997 and 1998,
respectively................................................................... 16,275 110,711
Capital deficiency............................................................... (83,265) (2,724,178)
Accumulated deficit.............................................................. (1,855,581) (23,692,057)
------------ --------------
Total stockholders' deficit........................................................ (1,922,571) (26,305,524)
------------ --------------
$ 6,678,088 $ 123,503,442
------------ --------------
------------ --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
SEPTEMBER 12, 1996
(INCEPTION) FOR THE YEAR
THROUGH ENDED DECEMBER 31,
DECEMBER 31, -----------------------------
1996 1997 1998
------------------ ------------- --------------
<S> <C> <C> <C>
Net revenue.................................................... $ -- $ -- $ 8,218,043
Operating expenses:
Direct operating expenses.................................... -- -- 1,852,832
Selling, general and administrative expenses................. -- 31,124 10,064,219
Network expenses............................................. -- 812,654 11,812,105
Corporate expenses........................................... 40,000 959,038 2,771,207
Depreciation and amortization................................ -- -- 1,696,376
-------- ------------- --------------
40,000 1,802,816 28,196,739
-------- ------------- --------------
Loss from operations........................................... (40,000) (1,802,816) (19,978,696)
Other income (expense):
Interest expense............................................. -- (12,765) (6,038,483)
Interest income.............................................. -- -- 1,748,825
Equity in loss of equity investee............................ -- -- (14,867)
-------- ------------- --------------
-- (12,765) (4,304,525)
-------- ------------- --------------
Loss before income taxes....................................... (40,000) (1,815,581) (24,283,221)
Income tax benefit............................................. -- -- 2,446,745
-------- ------------- --------------
Net loss....................................................... (40,000) (1,815,581) (21,836,476)
Accrued dividends on Series A redeemable cumulative preferred
stock........................................................ -- 119,490 2,850,608
-------- ------------- --------------
Net loss applicable to common stockholders..................... $ (40,000) $ (1,935,071) $ (24,687,084)
-------- ------------- --------------
-------- ------------- --------------
Net loss per common share applicable to common
stockholders--basic and diluted.............................. $ (0.04) $ (1.15) $ (2.86)
-------- ------------- --------------
-------- ------------- --------------
Weighted average common shares outstanding--
basic and diluted 930,000 1,684,540 8,636,882
-------- ------------- --------------
-------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CHANGES
IN SERIES A REDEEMABLE CUMULATIVE PREFERRED STOCK
AND STOCKHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
SERIES A
REDEEMABLE
CUMULATIVE ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN
--------------------- -------------------- CAPITAL ACCUMULATED
SHARES AMOUNT SHARES AMOUNT (DEFICIENCY) DEFICIT TOTAL
--------- ---------- --------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 12, 1996.......... -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock............... -- -- 930,000 9,300 35,700 -- 45,000
Net loss............................... -- -- -- -- -- (40,000) (40,000)
--------- ---------- --------- --------- ----------- ------------ -----------
Balance at December 31, 1996........... -- -- 930,000 9,300 35,700 (40,000) 5,000
Issuance of common stock............... -- -- 2,170,000 21,700 433,300 -- 455,000
Conversion of Predecessor Company
common stock to Series A redeemable
cumulative preferred stock and common
stock................................ 4,950 495,000 (2,945,000) (29,450) (465,550) -- (495,000)
Issuance of Series A redeemable
cumulative preferred stock and common
stock................................ 47,025 4,702,500 1,472,500 14,725 32,775 -- 47,500
Accrued dividends in arrears on Series
A redeemable cumulative preferred
stock................................ -- 119,490 -- -- (119,490) -- (119,490)
Net loss............................... -- -- -- -- -- (1,815,581) (1,815,581)
--------- ---------- --------- --------- ----------- ------------ -----------
Balance at December 31, 1997........... 51,975 5,316,990 1,627,500 16,275 (83,265) (1,855,581) (1,922,571)
Issuance of Series A redeemable
cumulative preferred stock and common
stock................................ 148,500 14,850,000 4,650,000 46,500 103,500 -- 150,000
Conversion of notes payable and
promissory notes payable to
stockholders to Series A redeemable
cumulative preferred stock and common
stock................................ 154,700 15,469,965 4,844,130 48,441 107,821 -- 156,262
Redemption and cancellation of Series A
redeemable cumulative preferred stock
and common stock..................... (2,110) (221,126) (66,056) (660) (1,471) -- (2,131)
Issuance of Series A reedemable
cumulative preferred stock and common
stock................................ 495 49,500 15,500 155 345 -- 500
Stockholder note receivable issued for
Series A redeemable cumulative
preferred stock and common stock..... -- (49,500) -- -- (500) -- (500)
Accrued dividends in arrears on Series
A redeemable cumulative preferred
stock................................ -- 2,850,608 -- -- (2,850,608) -- (2,850,608)
Net loss............................... -- -- -- -- -- (21,836,476) (21,836,476)
--------- ---------- --------- --------- ----------- ------------ -----------
Balance at December 31, 1998........... 353,560 $38,266,437 11,071,074 $ 110,711 ($2,724,178) ($23,692,057) $(26,305,524)
--------- ---------- --------- --------- ----------- ------------ -----------
--------- ---------- --------- --------- ----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
SEPTEMBER 12,
1996
(INCEPTION) FOR THE YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, -----------------------
1996 1997 1998
------------- ---------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................................. $ (40,000) $(1,815,581) $(21,836,476)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.......................................... -- -- 1,696,376
Equity in loss of equity investee...................................... -- -- 14,867
Interest on notes payable paid with the issuance of preferred and
common stock......................................................... -- -- 261,227
Accretion of interest on senior discount notes......................... -- -- 5,029,128
Amortization of deferred financing costs............................... -- -- 321,181
Deferred taxes......................................................... -- -- (2,446,745)
Change in assets and liabilities:
Accounts receivable.................................................. -- -- (1,136,353)
Prepaid expenses..................................................... -- (554,000) (3,433,576)
Radio broadcasting rights............................................ -- (2,650,000) 1,650,000
Other assets......................................................... -- (108,641) (299,558)
Accounts payable..................................................... -- 354,120 551,046
Accrued expenses..................................................... -- 179,549 324,743
Radio broadcasting rights obligation................................. -- 2,385,000 (2,385,000)
------------- ---------- -----------
Net cash used in operating activities.................................... (40,000) (2,209,553) (21,689,140)
------------- ---------- -----------
INVESTING ACTIVITIES
Acquisition of property and equipment.................................... -- (1,221,995) (5,336,309)
Restricted cash-escrow account........................................... -- -- (12,600,000)
Advances to equity investee.............................................. -- (1,016,590) --
Repayment of advances to equity investee................................. -- -- 1,016,590
Acquisition of WNMA-AM and WAFN-AM Miami................................. -- -- (9,167,000)
Acquisition of KIQI-AM San Francisco..................................... -- -- (6,276,520)
Acquisition of KBLA-AM Los Angeles....................................... -- -- (21,465,920)
Acquisition of KXYZ-AM Houston........................................... -- -- (6,500,000)
Covenant not to compete.................................................. -- -- (276,743)
------------- ---------- -----------
Net cash used in investing activities.................................... -- (2,238,585) (60,605,902)
------------- ---------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of senior discount notes, net..................... -- -- 95,535,581
Proceeds from issuance of Series A redeemable cumulative preferred stock
and common stock....................................................... 45,000 5,205,000 15,000,000
Proceeds from issuance of notes payable to stockholders.................. -- 365,000 21,795,000
Repayment on notes payable to stockholders............................... -- -- (6,795,000)
Repayment on note payable issued in connection with the acquisition of
KIQI-AM San Francisco.................................................. -- -- (5,250,000)
Redemption and cancellation of preferred stock and common stock.......... -- -- (223,257)
------------- ---------- -----------
Net cash provided by financing activities................................ 45,000 5,570,000 120,062,324
------------- ---------- -----------
Net increase in cash and cash equivalents................................ 5,000 1,121,862 37,767,282
Cash and cash equivalents at beginning of period......................... -- 5,000 1,126,862
------------- ---------- -----------
Cash and cash equivalents at end of period............................... $ 5,000 $1,126,862 $38,894,144
------------- ---------- -----------
------------- ---------- -----------
Supplemental disclosures of cash flow information:
Note payable issued in connection with the acquisition of KIQI-AM San
Francisco............................................................ $ -- $ -- $ 6,000,000
------------- ---------- -----------
------------- ---------- -----------
Cash paid for interest................................................. $ -- $ -- $ 413,712
------------- ---------- -----------
------------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND PRESENTATION
Radio Unica Corp., a Florida corporation incorporated on September 12, 1996
("Old Radio Unica"), was merged into Radio Unica Corp. ("Corp"), a Delaware
corporation, on August 7, 1997. As a result of the merger, the investors of Old
Radio Unica exchanged all of their common shares in Old Radio Unica for 500
shares of common stock and 4,950 shares of preferred stock of Corp, the
surviving corporation. The merger was accounted for as a combination of entities
under common control in a manner similar to a pooling.
Radio Unica Communications Corp. (the "Company") (formerly Radio Unica
Holdings Corp.), a Delaware corporation, was incorporated on June 29, 1998,
pursuant to which Corp was reorganized and became a wholly owned subsidiary of
the Company (the "Reorganization"). The Company has no assets other than the
shares of Corp's common stock. In connection with the Reorganization, the
holders of Corp's common stock and Series A redeemable cumulative preferred
stock exchanged their shares for shares of the Company's common stock and Series
A redeemable cumulative preferred stock bearing identical rights and preferences
to Corp's then existing common stock and Series A cumulative redeemable
preferred stock. The existing shares of Corp's common stock and Series A
redeemable cumulative preferred stock were cancelled. Corp subsequently
authorized and issued 100 shares par value $0.01 of common stock to the Company.
The Reorganization was accounted for as a combination of entities under common
control in a manner similar to a pooling.
The Company was formed for the purpose of producing, broadcasting and
distributing Spanish language radio programming in the United States. The
Company launched its network on January 5, 1998 and began broadcasting
programming to radio broadcast stations that it operates and to affiliated
stations in the United States and abroad. Prior to the launch, the Company was a
development stage company.
The Company has entered into Affiliation Agreements ("AFAs") with
substantially all of its affiliated radio stations. Pursuant to the AFAs, the
Company supplies programming for the affiliated stations which are typically
required to carry a minimum of eight hours per day of the Company's network
programming. The AFAs typically provide that the Company's programming will
include a certain number of minutes per hour of network advertising to be sold
by the Company and a certain number of minutes per hour for local advertising to
be sold by the station. The terms of the AFAs are generally one to two years,
subject to earlier termination under certain circumstances. Some of the AFAs
grant the Company a right of first refusal in the event the station owner offers
to sell the station.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation. The Company accounts for investments in
20% to 50% owned companies and for investments in over 50% owned companies over
which the Company does not have control under the equity method of accounting.
PROPOSED SHARE DIVIDEND
Effective July 6, 1999, the Company changed its name from Radio Unica
Holdings Corp. to Radio Unica Communications Corp. Effective July 6, 1999, the
Company's Board of Directors approved a
F-7
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
share dividend of 370 common shares payable for each common share, subject to
consummation of the Company's proposed initial public offering. As a result, all
references in the financial statements to number of shares and per shares
amounts have been restated to give retroactive recognition to such share
dividend. Also on that date, the Company's Board of Directors approved an
increase in the authorized common shares from 100,000 common shares to
40,000,000 common shares, and an increase in the authorized preferred shares
from 450,000 preferred shares to 5,000,000 preferred shares. Effective September
16, 1999, the Company's Board of Directors rescinded the share dividend of 370
common shares payable for each common share. Also on that date, the Company's
Board of Directors approved a share dividend of 310 common shares payable for
each common share, subject to consummation of the Company's initial public
offering. As a result, all references in the financial statements to number of
shares and per share amounts have been restated to give retroactive recognition
to such dividend.
CASH EQUIVALENTS
The Company defines as cash equivalents all highly liquid investments with a
maturity of three months or less at the time of purchase.
RESTRICTED CASH
Restricted cash represents escrow accounts established by the Company in
connection with asset purchase agreements or local marketing agreements entered
into during the year.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is recorded on a
straight-line basis over the estimated useful lives of the related assets, which
range from 3 to 30 years. Leasehold improvements are capitalized and amortized
over their estimated useful lives or the remaining life of the lease, whichever
is shorter. The Company placed a majority of its property and equipment into
service on or about December 31, 1997; therefore, there was no depreciation
expense recorded for the year ended December 31, 1997 and for the period from
September 12, 1996 (inception) through December 31, 1996.
INTANGIBLE ASSETS
Intangible assets are recorded at cost. Amortization of intangible assets is
provided in amounts sufficient to relate the asset cost to operations over the
estimated useful lives on a straight-line basis. Intangible assets consist
primarily of broadcast licenses, goodwill and other identifiable intangible
assets. The estimated useful lives are as follows:
<TABLE>
<S> <C>
Broadcast licenses................................................ 30 years
Goodwill.......................................................... 30 years
Other intangibles................................................. 1-5 years
</TABLE>
The Company evaluates periodically the propriety of the carrying amount of
intangible assets as well as the amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value and/or
revised estimates of useful lives. This evaluation consists of the projection of
undiscounted operating income before depreciation, amortization, nonrecurring
F-8
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
charges and interest for each of the Company's radio stations over the remaining
amortization periods of the related intangible assets. If such projections
indicate that undiscounted operating income is not expected to be adequate to
recover the carrying amounts of the related intangible assets, a loss is
recognized to the extent the carrying amount of the asset exceeds its fair
value. At this time, the Company believes that no impairment of goodwill or
other intangible assets has occurred and that no reduction of the estimated
useful lives is warranted.
REVENUE RECOGNITION
Revenue is derived primarily from the sale of commercial announcements to
local, national and network advertisers. Revenue is recognized as commercials
are broadcast.
ADVERTISING COSTS
The Company incurs various marketing and promotional costs to add and
maintain listenership. These costs are charged to expense as incurred and for
the periods ended December 31, 1996, 1997 and 1998 amounted to approximately
$1,150, $82,000 and $3.6 million, respectively.
BARTER TRANSACTIONS
Barter transactions represent advertising time exchanged for promotional
items, advertising, supplies, equipment and services. Barter transactions are
recorded at the estimated fair value of the goods or services received. Revenues
from barter transactions are recognized as income when advertisements are
broadcast. Expenses are recognized when goods or services are received. Barter
amounts are not significant to the Company's consolidated financial statements.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
Prior to August 7, 1997, the Company, with the consent of its shareholders,
elected S Corporation treatment for the Company. As a result, the shareholders
of the Company were taxed on their proportionate share of the Company's taxable
income. Accordingly, no provision or credit for federal income tax amounts has
been included in the consolidated financial statements for the period prior to
August 7, 1997. On August 7, 1997, upon the merger of Old Radio Unica into Corp,
the Company became a C Corporation.
Deferred tax assets and liabilities are determined based upon differences
between the financial statements and income tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences are
expected to reverse. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
of the deferred tax assets will not be realized.
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for the impairment of long-lived assets under the
provisions of SFAS No. 121, "Accounting For The Impairment Of Long-Lived
Assets". SFAS No. 121 requires impairment losses to be recorded on long-lived
assets when indications of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets
carrying
F-9
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
amounts. If the carrying value of the assets will not be recoverable, as
determined based on the undiscounted cash flows estimated, the carrying value of
the assets are reduced to fair value. Generally, fair value will be determined
using valuation techniques such as expected discounted cash flows or appraisals,
as appropriate. The Company has not recorded any impairment losses.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments of cash and cash equivalents, accounts
receivable, accounts payable, and accrued expenses approximate fair value
because of their short duration to maturity. The fair value of the long term
debt is based on quoted market prices. At December 31, 1998, the fair value of
the Senior Discount Notes was $85,367,520.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Accordingly, actual results could differ from those
reported.
BUSINESS SEGMENTS
Pursuant to SFAS No. 131, "Disclosure About Segments of a Business
Enterprise and Related Information", the Company is required to report segment
information. As the Company only operates in one business segment, no additional
reporting is required.
LOSS PER SHARE
In 1997, the Company retroactively adopted SFAS No. 128, "Earnings Per
Share", which replaced the calculations of primary and fully diluted earnings
per share (EPS) with basic and diluted EPS. For the period from September 12,
1996 (inception) through December 31, 1996 and for the years ended December 31,
1997 and 1998, there was no difference between the basic and diluted EPS
calculations.
Net loss per common share is calculated using the weighted average number of
common shares for the basic EPS presentation, and the weighted average number of
common and common equivalent shares for the diluted EPS presentation,
outstanding during the respective periods.
3. RADIO BROADCASTING RIGHTS AGREEMENTS
On July 30, 1997, the Company entered into a Radio Broadcasting Rights
Agreement with Univision Network Limited Partnership for the 1998 World Cup
Soccer Championship (1998 World Cup). This agreement granted the Company
exclusive Spanish-language radio broadcast rights in the United States for the
1998 World Cup. The Company amortized the cost of the Rights Agreement, on a
pro-rata basis, as revenue for the 1998 World Cup was earned.
4. ACQUISITIONS
On January 26, 1998, the Company entered into an asset purchase agreement
with One-on-One Sports License of Florida, L.L.C. and One-on-One Sports Radio of
Florida L.L.C. to acquire Miami radio stations WNMA-AM and WAFN-AM for a cash
purchase price of $9.0 million. Other costs
F-10
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITIONS (CONTINUED)
associated with the transaction were approximately $167,000. On May 13, 1998,
after receiving the consent of the Federal Communications Commission (the "FCC")
to assign the broadcasting licenses, the Company completed the acquisitions. The
Company operated the stations under a Time Brokerage Agreement (also known as
local marketing agreements and referred to herein as "LMAs") for a monthly fee
of $72,500 from February 1, 1998 to May 13, 1998. Based on current FCC
guidelines, the license of either WNMA or WAFN must be relinquished by the
Company by October 8, 2002.
On February 20, 1998, the Company entered into a stock purchase agreement
with Oro Spanish Broadcasting, Inc. to acquire San Francisco radio station
KIQI-AM for $11.5 million. In connection with this acquisition, the Company
entered into a five-year non-compete agreement with the seller for $500,000.
Other costs associated with the transactions were approximately $277,000. On
April 30, 1998, after receiving the consent of the FCC to transfer the
broadcasting license, the Company completed the acquisition of all the common
stock of Oro Spanish Broadcasting, Inc. The purchase price was comprised of a $6
million cash payment and a $6 million promissory note. The promissory note bears
interest at 8% and is payable monthly. On July 2, 1998 the Company revised
certain terms of and paid down $5.25 million against the promissory note. The
remaining $750,000 is due on or before October 31, 1999. The Company operated
the station under an LMA for a monthly fee of $58,000 from March 2, 1998 to
April 30, 1998. Effective February 1999, the Company ceased interest payments on
the note. The Company has made a claim to offset certain costs and expenses
related to the acquired transmitter site against the balance due. The Company
accounted for the acquisition as a purchase and, accordingly, the purchase price
was allocated to the assets acquired and liabilities assumed based on appraisals
and other estimates of the underlying values.
On May 20, 1998, the Company entered into an asset purchase agreement to
acquire the assets of Los Angeles radio station KBLA-AM from subsidiaries of
Sinclair Communications, Inc. for $21 million in cash. Other costs associated
with the transaction were approximately $466,000. On July 30, 1998, after
receiving the FCC's consent to assign the broadcasting licenses, the Company
completed the acquisition.
On October 27, 1997, the Company obtained 49.9% of the ownership and voting
rights of Blaya, Inc., a newly formed company. The remaining ownership interest
was held by one of the stockholders of the Company.
On December 24, 1997, Blaya, Inc. entered into an asset purchase agreement
with 13 Radio Corporation ("13 Radio"), a CBS Broadcasting ("CBS") subsidiary,
to acquire Houston radio station KXYZ-AM, for a cash purchase price of $6.4
million. In connection with this acquisition, the Company advanced $1,016,590 to
Blaya, Inc., which was reflected in investments and advances to equity investee.
Also on December 24, 1997, Blaya, Inc. entered into an LMA with 13 Radio
effective as of January 5, 1998. The LMA made available to Blaya, Inc.
substantially all of the broadcasting time of the station, pending the
completion of the acquisition, which was subject to FCC consent. The Company
entered into an LMA with Blaya, Inc. for substantially all of the broadcasting
time of the station for a fee of $165,000 per quarter. The Company began
operating the station under its LMA on January 5, 1998. Blaya, Inc. did not have
any operations during 1997.
On March 6, 1998, Blaya, Inc.'s capital stock was divided into the following
two classes: (i) Class A common stock with rights identical to all other shares
of Blaya, Inc.'s capital stock except that each share is entitled to cast 4.016
votes and (2) Class B common stock with rights identical to all other shares of
Blaya, Inc.'s capital stock except that each share is entitled to cast 1 vote.
On March 6, 1998,
F-11
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITIONS (CONTINUED)
the Company acquired 800 shares of Blaya, Inc.'s Class B common stock,
representing 49.9% of the voting rights and 80% of the economic ownership rights
in Blaya, Inc., in exchange for its 499 shares of common stock in Blaya, Inc.
and $640,000. On the same day, the Company loaned Mr. Blaya $160,000 in the form
of a 10 year 9% promissory note. These proceeds were used by Mr. Blaya to
purchase 200 shares of Blaya, Inc.'s Class A common stock representing 50.1% of
the voting rights and 20% of the ownership rights in Blaya, Inc. In connection
with this equity investment, the stockholders of Blaya, Inc. entered into a
stockholders agreement that provided the Company the right of first refusal if
the majority voting stockholder decided to sell any interest in Blaya, Inc.
On March 10, 1998, the Company entered into a promissory note in the amount
of $5.7 million with Blaya, Inc. The proceeds were used to complete the asset
purchase agreement with 13 Radio and to pay related closing costs. The
promissory note bore interest of 9% compounded quarterly and was payable
annually. The entire principal amount outstanding under the promissory note was
due and payable in full on the earliest to occur of (i) the termination of the
LMA, (ii) fifteen days following the date when 50% of the voting stock was
transferred to any party or substantially all the assets of Blaya, Inc. were
sold, or (iii) March 10, 2008. The promissory note was secured by substantially
all of the assets of Blaya, Inc.
On March 11, 1998, Blaya, Inc. completed the acquisition of certain assets
of 13 Radio for $6.4 million pursuant to an asset purchase agreement dated
December 24, 1997. Other costs associated with the transaction were
approximately $100,000.
On June 10, 1998, the Company entered into a stock purchase agreement with
the majority-voting stockholder of Blaya, Inc. to purchase his remaining 50.1%
voting rights and 20% ownership interest in Blaya, Inc. (the "Remaining
Interest"). On September 11, 1998, the Company completed the acquisition of the
Remaining Interest for $160,000 and, accordingly, Blaya, Inc., became a wholly
owned subsidiary of the Company and Radio Unica of Houston License Corp., a
wholly owned subsidiary of Blaya, Inc., became an indirect, wholly owned
subsidiary of the Company. The majority-voting stockholder of Blaya, Inc. repaid
the $160,000, plus interest, he owed the Company pursuant to the 10 year 9%
promissory note. In addition, the $5.7 million promissory note was cancelled by
the Company and accounted for such cancellation as a contribution to Blaya,
Inc.'s capital.
The Company accounted for the acquisition of Blaya, Inc. as a purchase and
accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based on appraisals and other estimates of the underlying
values. The operations of Blaya, Inc. are included in the consolidated statement
of operations of the Company beginning on September 11, 1998.
On October 27, 1998, the Company entered into an asset purchase agreement
with Children's Broadcasting Corporation to acquire certain assets of New York
City area radio stations WWRU-AM and WJDM-AM, Dallas/Ft. Worth radio station
KAHZ-AM and Phoenix radio station KIDR-AM for a purchase price of $29.25
million. In connection with this acquisition, the Company entered into a
two-year non-compete agreement with the seller for $750,000. Pursuant to this
agreement, the Company established escrow accounts totaling $10 million. The
Company operated these stations under an LMA for a monthly fee of $200,000 until
the transaction closed. An advanced payment of $2.5 million was made to
Children's Broadcasting Corporation with the execution of the LMA. On January
14, 1999, after receiving the consent of the FCC to assign the broadcasting
licenses, the Company completed the acquisitions. Based on current FCC
guidelines, the license of either WWRU or WJDM must be relinquished by the
Company by March 12, 2003.
F-12
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITIONS (CONTINUED)
The acquisitions of the assets of WNMA-AM and WAFN-AM, Miami and KBLA-AM,
Los Angeles, were not the purchases of businesses, as the format and language of
the stations were changed and the Company did not assume responsibility for any
employees. The acquisitions were accounted for as purchases and, accordingly,
the purchase price was allocated to the assets acquired and liabilities assumed
based on appraisals and other estimates of their underlying values.
The pro forma results of operations of the Company for the years ended
December 31, 1997 and 1998 assuming the Oro Spanish Broadcasting, Inc. and
Blaya, Inc. acquisitions had been consummated as of January 1, 1997 and assuming
Blaya, Inc. had acquired 13 Radio as of January 1, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998
------------- --------------
<S> <C> <C>
Net revenue.................................................... $ 3,586,407 $ 8,529,015
------------- --------------
------------- --------------
Net loss applicable to common stockholders..................... $ (3,433,090) $ (25,004,564)
------------- --------------
------------- --------------
Net loss per common share applicable to common
stockholders--basic and diluted.............................. $ (2.04) $ (2.90)
------------- --------------
------------- --------------
</TABLE>
5. SENIOR DISCOUNT NOTES AND SENIOR SECURED REVOLVING CREDIT FACILITY
SENIOR DISCOUNT NOTES
On July 27, 1998, Corp sold in an unregistered offering to qualified
institutional buyers and accredited institutional investors $158,088,000
aggregate principal amount at maturity of Corp's 11 3/4% Senior Discount Notes
due August 1, 2006 (the "Old Notes"). Cash interest on the Old Notes would not
accrue or be payable prior to August 1, 2002. Thereafter, cash interest would
accrue at a rate of 11 3/4% per annum on the principal amount at maturity of the
Old Notes through and including the maturity date and would be payable
semi-annually on August 1 and February 1 of each year. In connection with this
transaction, Corp received net proceeds of approximately $94.4 million after
deducting issuance expenses of approximately $5.6 million of which approximately
$1.1 million are accrued for at December 31, 1998.
The Old Notes were general senior unsecured obligations of Corp and ranked
PARI PASSU in right of payment with all existing and future unsecured and
unsubordinated indebtedness of Corp and senior in right of payment to any
subordinated indebtedness of Corp. The Old Notes were guaranteed on a senior
unsecured basis, as to payment of principal, premium if any, and interest, by
the Guarantors, which consist of Corp's Domestic Restricted Subsidiaries, (as
defined in the Indenture, dated July 27, 1998 between Corp, Wilmington Trust as
trustee and the Guarantors named therein (the "Indenture")), on a full,
unconditional, joint and several basis. The Old Notes were redeemable at any
time and from time to time at the option of Corp, in whole or in part on or
after August 1, 2002, plus accrued and unpaid interest thereon to the date of
redemption.
In addition, on or prior to August 1, 2001, Corp could redeem, at its
option, up to 35% of the aggregate principal amount at maturity of the Old Notes
with the net proceeds of one or more Equity Offerings, as defined, at 111.75% of
the Accreted Value thereof, as defined in the Indenture, as long as Old Notes
representing at least $65.0 million of the aggregate initial Accreted Value of
the Old Notes
F-13
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. SENIOR DISCOUNT NOTES AND SENIOR SECURED REVOLVING CREDIT FACILITY
(CONTINUED)
originally issued remained outstanding after each such redemption and that such
redemption occurred within 90 days of the closing of any such Equity Offering.
Upon a Change of Control as defined in the Indenture, Corp would be required
to offer to repurchase the Old Notes at a purchase price equal to (i) 101% of
the Accreted Value thereof, if the purchase date was on or prior to August 1,
2002, or (ii) 101% of the principal amount at maturity thereof, plus accrued and
unpaid interest thereon, if any, to the purchase date, if such date was after
August 1, 2002.
The Old Notes restricted, among other things, Corp's ability to incur
additional indebtedness, pay dividends or make certain other restricted
payments, consummate certain asset sales, create liens on assets, enter into
transactions with affiliates, make investments, loans or advances, consolidate
or merge with or into any other person or convey, transfer or lease all or
substantially all of its assets or change the business conducted by Corp.
On December 17, 1998, in order to satisfy certain obligations of Corp under
a Registration Rights Agreement, dated July 22, 1998, between Corp, CIBC
Oppenheimer Corp. and Bear, Stearns & Co. Inc., Corp completed the registration
of newly issued 11 3/4% Senior Discount Notes Series B due 2006 (the "New
Notes") and exchanged the Old Notes for the New Notes.
The form and terms of the New Notes are substantially the same as the Old
Notes, except that the New Notes have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), and hence are not subject to certain
transfer restrictions, registration rights and related liquidated damages
provisions applicable to the Old Notes. The New Notes evidence the same debt as
the Old Notes and are entitled to the benefits of the Indenture. The Indenture
provides for the issuance of both the Old Notes and the New Notes.
SENIOR SECURED REVOLVING CREDIT FACILITY
On July 8, 1998, Corp entered into a credit agreement with a bank for a
senior secured revolving credit facility (the "Revolving Credit Facility")
providing for up to $20.0 million of availability. The Revolving Credit Facility
will mature in May 2002. Amounts outstanding under the Revolving Credit Facility
bear interest at the higher of the (i) bank's prime rate plus 1.25% or (ii)
LIBOR plus 2.50%. The obligations under the Revolving Credit Facility are
guaranteed by the Company and secured by substantially all the assets of Corp
and its subsidiaries.
Corp has paid and pays certain fees in connection with the Revolving Credit
Facility, including a commitment fee of 0.50% per annum on the aggregate unused
portion of the Revolving Credit Facility. At December 31, 1998, there were no
amounts outstanding under the Revolving Credit Facility.
The Revolving Credit Facility contains certain financial and operational
covenants and customary events of default, including, among others, payment
defaults and default in the performance of other covenants, breach of
representations or warranties, cross-default to other indebtedness, certain
bankruptcy or ERISA defaults, the entry of certain judgments against Corp or any
subsidiary, and any security interest or guarantee that ceases to be in effect.
The Revolving Credit Facility also provides that an event of default will occur
upon the occurrence of a "change of control", as defined. As of December 31,
1998 Corp was in compliance with these covenants.
F-14
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. PROMISSORY NOTES PAYABLE
On July 15 and July 24, 1997, the Company entered into promissory notes
payable with several stockholders amounting to $365,000. On April 17, 1998 the
Company converted $365,000 in notes payable to stockholders plus accrued
interest of $22,323 into 3,835 shares of Series A redeemable cumulative
preferred stock and 119,970 shares of common stock valued at $383,450 and
$3,873, respectively.
On January 5, 1998, WPV purchased 148,500 shares of preferred stock and
4,650,000 shares of common stock in exchange for $15,000,000.
In April, May and June 1998, the Company entered into four promissory notes
payable to Warburg, Pincus Ventures, L.P. ("WPV") in the aggregate amount of
approximately $21.8 million. Such notes bore interest at 10% per annum and were
due on demand. On June 30, 1998, the Company converted $15 million of the
promissory notes payable to preferred stock. The Company paid the remaining
$6.795 million on July 15, 1998.
On June 30, 1998, the Company converted $15 million in promissory notes
payable to WPV plus $238,904 in accrued interest into 150,865 shares of Series A
redeemable cumulative preferred stock and 4,724,090 shares of common stock
valued at $15,086,515 and $152,389, respectively.
7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIVES ---------------------------
(YEARS) 1997 1998
--------------- ------------ -------------
<S> <C> <C> <C>
Land............................................... -- $ -- $ 2,629,241
Buildings.......................................... 30 -- 1,064,349
Broadcast equipment................................ 7 867,735 6,273,644
Leasehold improvements............................. 10 147,759 910,393
Office equipment, computers & software............. 3-5 146,804 1,205,049
Furniture & fixtures............................... 5 59,697 380,804
------------ -------------
1,221,995 12,463,480
Less: Accumulated depreciation and amortization.... -- 693,826
------------ -------------
$ 1,221,995 $ 11,769,654
------------ -------------
------------ -------------
</TABLE>
Depreciation expense for the period from September 12, 1996 (inception)
through December 31, 1996 and the years ended December 31, 1997 and 1998 was $0,
$0 and $693,826, respectively.
F-15
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. OTHER INTANGIBLE ASSETS
Other intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIVES ---------------------------
(YEARS) 1997 1998
--------------- ------------- ------------
<S> <C> <C> <C>
Goodwill........................................... 30 $ -- $ 4,088,735
Deferred financing costs........................... 4-8 -- 5,600,000
Covenants not to compete........................... 1-5 -- 776,743
------------- ------------
-- 10,465,478
Less: Accumulated amortization..................... -- 570,956
------------- ------------
$ -- $ 9,894,522
------------- ------------
------------- ------------
</TABLE>
There was no amortization expense for the period from September 12, 1996
(inception) through December 31, 1996 and for the year ended December 31, 1997.
Amortization expense for the year ended December 31, 1998 was $570,956.
Amortization expense relating to the deferred financing costs of $321,181 for
the year ended December 31, 1998 was classified as interest expense.
9. INCOME TAXES
Concurrent with the August 7, 1997 merger of Old Radio Unica with and into
Corp, Old Radio Unica's S Corporation election was terminated. Thereafter, the
Company became subject to corporate income taxes. The Company had no income tax
expense or benefit for the year ended December 31, 1997 and for the period from
September 12, 1996 (inception) through December 31, 1996.
HISTORICAL
The components of the income tax benefit are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------
1997 1998
---------- -------------
<S> <C> <C>
Current............................................................ $ -- $ --
Deferred........................................................... -- (2,446,745)
---------- -------------
$ -- $ (2,446,745)
---------- -------------
---------- -------------
</TABLE>
F-16
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
The differences between the federal statutory income tax and the effective
income tax rate are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1998
----------- -------------
<S> <C> <C>
Tax benefit at federal statutory rate............................. $ (493,823) $ (8,499,127)
State income tax benefit, net of federal benefit.................. (52,375) (1,239,329)
Permanent differences............................................. 3,259 60,111
Other............................................................. (7,924) (58,775)
Increase in valuation allowance................................... 550,863 7,290,375
----------- -------------
$ -- $ (2,446,745)
----------- -------------
----------- -------------
</TABLE>
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
1997 1998
----------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................................ $ 542,939 $ 11,079,878
Other........................................................... 7,924 45,340
----------- -------------
550,863 11,125,218
Valuation allowance............................................. (550,863) (7,841,238)
----------- -------------
Total deferred tax assets..................................... -- 3,283,980
Deferred tax liabilities:
Amortization.................................................... -- (4,912,080)
Other........................................................... -- (13,890)
----------- -------------
-- (4,925,970)
----------- -------------
Total net deferred taxes...................................... $ -- $ (1,641,990)
----------- -------------
----------- -------------
</TABLE>
The differences between the federal statutory income tax rate of 34% and the
effective income tax rate are summarized below assuming the Company was a C
corporation for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1996 1997
----------- -----------
<S> <C> <C>
Tax benefit at federal statutory rate............................... $ (13,600) $ (617,298)
State income tax benefit, net of federal benefit.................... (1,422) (65,392)
Permanent differences............................................... 280 4,810
Valuation allowance................................................. 14,742 677,880
----------- -----------
Net deferred tax asset.............................................. $ -- $ --
----------- -----------
----------- -----------
</TABLE>
F-17
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
SFAS No. 109 requires a valuation allowance to reduce the deferred tax
assets reported if based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
After consideration of all the evidence, both positive and negative, management
has determined that a $7,841,238 valuation allowance at December 31, 1998 is
necessary to reduce the deferred tax assets to the amount that will more likely
than not be realized. The change in the valuation allowance for the current year
is approximately $7,290,000. At December 31, 1998, the Company has available net
operating loss carryforwards of approximately $27,575,000, of which
approximately $24,578,000 expire in the year 2018 and the remaining $2,997,000
expires in years 2007 through 2012.
10. SERIES A REDEEMABLE CUMULATIVE PREFERRED STOCK
The Company has 450,000 authorized shares of redeemable, 10% cumulative,
nonconvertible, voting, Series A Preferred Stock (the "Preferred Stock"), $.01
par value, of which 51,975 and 353,560 shares were issued and outstanding at
December 31, 1997 and 1998, respectively. If and when dividends are declared by
the Board of Directors of the Company, holders of the Preferred Stock shall be
entitled to receive cumulative dividends at the rate of 10% per annum. Each
share of Preferred Stock shall be entitled to ten votes per share on all matters
upon which common stockholders of the Company are entitled to vote (one vote per
common share) and have a redemption price of $100 per share, together with
accrued and unpaid dividends thereon. Redemption of the Preferred Stock is at
the option of the holders for any or all the outstanding shares upon the
occurrence of (i) a change in control, (ii) an initial public offering or (iii)
on August 6, 2007. In the event of any liquidation, dissolution or winding up of
the affairs of the Company, holders of Preferred Stock shall be paid the
redemption price plus all accrued dividends to the date of liquidation,
dissolution or wind up of affairs before any payment to other stockholders.
Accrued dividends in arrears of approximately $119,000 and $2,970,000, as of
December 31, 1997 and 1998, respectively, are included in the redemption value
of the Preferred Stock.
On August 28, 1998 the Company, pursuant to a separation agreement between
the Company and its former President and Chief Operating Officer, redeemed and
cancelled 2,110 shares of Series A redeemable cumulative preferred stock and
66,030 shares of common stock of the Company in exchange for $223,257.
11. STOCK OPTION PLAN
On August 8, 1997, Corp adopted the 1997 Stock Option Plan (the Plan) which
provides for the granting of incentive stock options to purchase shares of
Corp's common stock to officers, directors and key employees responsible for the
direction and management of Corp and to non-employee consultants and independent
contractors. At December 31, 1997, Corp reserved 6,200,000 shares of its common
stock for issuance under the Plan. The vesting period and the terms of the
incentive stock options granted are established by a Committee of the Board of
Directors (the Committee). The incentive stock options expire no later than ten
years from the date of grant. Upon the adoption of the Plan, Corp granted
options to its employees to purchase 2,387,000 shares of its common stock. Upon
consummation of the Reorganization, each option to purchase one share of Corp's
common stock was converted into an option to purchase one share of the Company's
common stock, exercisable upon the same terms and conditions as they were under
Corp's stock option plan, and Corp's stock option plan was cancelled.
F-18
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTION PLAN (CONTINUED)
The Company has granted options to its employees to purchase 2,844,870
shares of the Company's common stock. Of the 2,844,870 options granted, 678,280
vested immediately, 407,650 vest ratably over time and 635,500 vest upon the
attainment of certain performance goals as determined by the Committee. Of the
635,500 options, 130,888 vested on December 31, 1998. The exercise price of the
678,280 options which vested immediately, the 407,650 options which vest ratably
over time and the 130,888 options which vested on December 31, 1998 is $0.03 per
share, which was determined by the Committee to be the fair market value at the
date of grant, or, in the case of the 130,888 options, on the date they vested.
As a result, no compensation expense has been recognized on these options under
the provisions of APB Opinion No. 25.
The remaining 1,123,440 options have an exercise price of $1.10 to $1.72 per
share and vest upon (i) the sale of the Company or substantially all of its
assets, (ii) an initial public offering, or (iii) an issuance of capital stock
of the Company that would result in WPV and/or its affiliates in the aggregate
ceasing to control more common stock of the Company than any other single
shareholder. Compensation expense for the 1,123,440 options will be recognized
to the extent that the market value of the shares exceeds the option price when
vesting for these options becomes probable. Vesting for these options was not
deemed probable as of December 31, 1998 and no compensation expense has been
recorded for these options as of December 31, 1998.
Changes to the plan for 1996, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1997 1998
---------------------- ----------------------- ------------------------
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
PRICE PER PRICE PER PRICE PER
OPTIONS SHARE OPTIONS SHARE OPTIONS SHARE
--------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year............ -- $ -- -- $ -- 2,387,000 $ 0.03
Granted..................................... -- -- 2,387,000 $ 0.03 2,844,870 $ 0.58
Exercised................................... -- -- -- -- -- --
Cancelled and reissued...................... -- -- -- -- (2,387,000) $ 0.03
--------- ---------- -----------
Outstanding at end of year.................. -- -- 2,387,000 $ 0.03 2,844,870 $ 0.58
--------- ---------- -----------
--------- ---------- -----------
Options exercisable at year-end............. -- -- 667,430 $ 0.03 972,228 $ 0.03
--------- ---------- -----------
--------- ---------- -----------
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------- ----------------------------
WEIGHTED NUMBER
NUMBER AVERAGE EXERCISABLE WEIGHTED
OUTSTANDING AT REMAINING AT AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL DECEMBER 31, EXERCISE
PRICE 1998 LIFE 1998 PRICE
- ----------- -------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
$ 0.03 1,721,430 6.93 972,228 $ 0.03
$ 1.10 531,030 6.93 -- --
$ 1.72 592,410 6.93 -- --
</TABLE>
F-19
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTION PLAN (CONTINUED)
The weighted average per share fair values of options granted under the
stock option plan during 1997 and 1998, based on the Black-Scholes option
valuation model, were $0.008 and $0.007, respectively. Had compensation expense
for the Company's stock option grants been determined based on the fair value at
the grant date for awards, consistent with the method of SFAS No. 123, the
Company's net loss would have increased the pro forma amounts for each year as
indicated below:
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
SEPTEMBER 12, 1996
(INCEPTION) YEAR ENDED DECEMBER 31,
THROUGH -----------------------------
DECEMBER 31, 1996 1997 1998
------------------ ------------- --------------
<S> <C> <C> <C>
Net loss applicable to common
stockholders:
As reported............................. $ (40,000) $ (1,935,071) $ (24,687,084)
-------- ------------- --------------
-------- ------------- --------------
Pro forma............................... $ (40,000) $ (1,939,851) $ (24,688,270)
-------- ------------- --------------
-------- ------------- --------------
Net loss per share applicable to common
stockholders:
As reported............................. $ (0.04) $ (1.15) $ (2.86)
-------- ------------- --------------
-------- ------------- --------------
Pro forma............................... $ (0.04) $ (1.15) $ (2.86)
-------- ------------- --------------
-------- ------------- --------------
</TABLE>
The following weighted average assumptions were used in the Black-Scholes
model:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1997 1998
--------- --------- ----------
<S> <C> <C> <C>
Expected life.............................................. -- 5 years 5-9 years
Interest rate.............................................. -- 6.00% 6.00%
Volatility................................................. -- -- --
Dividend yield............................................. -- -- --
</TABLE>
The Black-Scholes options valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, the
existing models, in management's opinion, do not necessarily provide a reliable
single measure of the fair value of the Company's stock options.
12. COMMITMENTS
LOTUS OXNARD CORP. TIME BROKERAGE AGREEMENTS
On October 31, 1997, the Company entered into a LMA with Lotus Oxnard Corp.
(Lotus) to operate Simi Valley, CA radio station KVCA, effective January 5,
1998. Simultaneous with the LMA, the Company entered into an escrow agreement
whereby the Company provided a $2.5 million escrow account deposit on January 5,
1998 to secure compliance with the LMA terms. In addition to the LMA and escrow
agreement, the Company entered into an asset purchase option agreement with
Lotus, which provides an option to purchase the assets of KVCA, including its
broadcasting license,
F-20
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. COMMITMENTS (CONTINUED)
from Lotus. This purchase option is exercisable at any time from June 24, 2001
through and including December 31, 2001. The LMA shall end upon the earliest to
occur of (i) the closing or termination as defined in the asset purchase option
agreement or (ii) December 31, 2001.
On October 31, 1997, the Company entered into a LMA with Lotus to operate
San Antonio radio station KZDC, effective January 5, 1998. Simultaneous with the
LMA, the Company entered into an asset purchase option agreement with Lotus
which provides an option to purchase the assets of KZDC, including its
broadcasting license, from Lotus, which is exercisable at any time from June 24,
2001 through and including December 31, 2001. The LMA shall end upon the
earliest to occur of (i) the closing or termination as defined in the asset
purchase option agreement or (ii) December 31, 2001.
The future minimum payments under the Lotus LMAs are as follows:
<TABLE>
<S> <C>
1999............................................................ $2,425,000
2000............................................................ 2,650,000
2001............................................................ 2,875,000
---------
$7,950,000
---------
---------
</TABLE>
TIME BROKERAGE AGREEMENT FOR KDFT-AM DALLAS
On April 27, 1998, the Company entered into a LMA with The Freedom Network,
Inc. to operate Dallas radio station KDFT-AM through May 18, 2000 for a monthly
fee of $44,786 and $56,546 through May 18, 1999 and 2000, respectively. An
advance payment of $146,903 was made to The Freedom Network, Inc. in connection
with the execution of the LMA. In accordance with the terms of the LMA
agreement, on December 11, 1998, the Company gave The Freedom Network, Inc. the
required termination notification. The Company operated the station under the
LMA through March 11, 1999.
TIME BROKERAGE AGREEMENT AND OPTION TO PURCHASE WYPA-AM CHICAGO
On June 9, 1998, the Company entered into a LMA with Achievement Radio
Holdings, Inc. ("Achievement") for substantially all of the broadcast time on
Chicago radio station WYPA-AM for a monthly fee of $118,000 through June 8,
1999. The term of the LMA may be extended at the Company's option through June
9, 2000 (Renewal Term). In addition to the LMA, the Company has an option to
purchase the assets of WYPA-AM, which is exercisable from June 9, 1998 through
June 9, 1999 and will be exercisable for the Renewal Term if the LMA is
extended. The Company has provided Achievement with a termination notification
and expects to cease broadcasting by June, 1999.
RADIO BROADCASTING RIGHTS
On September 28, 1998, the Company entered into Radio Broadcasting Rights
Agreements ("Rights Agreements") with Inter/Forever Sports, Inc. for several
large soccer events including Copa America 1999 and 2001, Copa Oro 2000 and
2002, and elimination games for the 2002 World Cup (collectively the "Soccer
Events"). The Rights Agreements grant the Company exclusive Spanish-language
radio broadcast rights in the United States for the Soccer Events.
F-21
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. COMMITMENTS (CONTINUED)
At December 31, 1998, remaining cash payment obligations under the Rights
Agreements are as follows:
<TABLE>
<S> <C>
January 15, 2000................................................ $ 600,000
June 30, 2000................................................... 600,000
March 31, 2001.................................................. 600,000
---------
$1,800,000
---------
---------
</TABLE>
LEASES
The Company leases office space, broadcasting studios and certain equipment
under operating leases, which expire at various dates through September 2007.
Certain leases contain renewal options and provide for base rental payments plus
escalation charges for real estate taxes and operating expenses.
At December 31, 1998, future minimum lease payments under such leases are as
follows:
<TABLE>
<S> <C>
1999............................................................ $ 638,000
2000............................................................ 632,000
2001............................................................ 556,000
2002............................................................ 538,000
2003............................................................ 462,000
Thereafter...................................................... 539,000
---------
$3,365,000
---------
---------
</TABLE>
Total rent expense for the period from September 12, 1996 (inception)
through December 31, 1996 and for the years ended December 31, 1997 and 1998 was
approximately $0, $109,000 and $526,000, respectively.
13. SUBSEQUENT EVENTS
On February 22, 1999, the Company contracted to acquire substantially all
the assets used in the operation of station WNTD (AM) in Chicago, Illinois from
subsidiaries of One-on-One, for a cash purchase price of approximately $16.75
million. The Company funded a $1 million escrow account in conjunction with this
transaction. The transaction is expected to be finalized upon the receipt of the
FCC's approval and the expiration or termination of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
F-22
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1999
--------------
<S> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents....................................................................... $ 284,896
Restricted cash................................................................................. 2,635,553
Accounts receivable, net of allowance for doubtful accounts of $215,960......................... 3,697,089
Prepaid expenses................................................................................ 1,409,990
--------------
Total current assets.............................................................................. 8,027,528
Property and equipment, net..................................................................... 16,214,652
Broadcast licenses, net of accumulated amortization of $1,994,365............................... 86,134,690
Other intangible assets, net.................................................................... 10,360,613
Other assets.................................................................................... 320,286
--------------
$ 121,057,769
--------------
--------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................................................................ $ 940,243
Accrued expenses................................................................................ 3,286,757
Notes payable................................................................................... 10,950,000
--------------
Total current liabilities......................................................................... 15,177,000
Other liabilities................................................................................. 244,520
Deferred taxes.................................................................................... 1,641,990
Senior discount notes............................................................................. 111,199,589
Commitments and contingencies
Series A redeemable cumulative preferred stock $.01 par value; 450,000 shares authorized; 353,907
shares issued and outstanding................................................................... 40,246,750
Stockholders' deficit:
Common stock; $.01 par value; 40,000,000 shares authorized, 11,081,924 shares issued and
outstanding................................................................................... 110,819
Capital deficiency.............................................................................. (4,659,598)
Accumulated deficit............................................................................. (42,903,301)
--------------
Total stockholders' deficit....................................................................... (47,452,080)
--------------
$ 121,057,769
--------------
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------
<S> <C> <C>
1998 1999
-------------- --------------
Net revenue....................................................................... $ 3,463,962 $ 6,347,282
Operating expenses:
Direct operating expenses....................................................... 888,374 1,708,467
Selling, general and administrative expenses.................................... 4,347,004 6,362,150
Network expenses................................................................ 6,883,006 5,632,040
Corporate expenses.............................................................. 1,306,525 1,339,856
Depreciation and amortization................................................... 372,144 2,413,072
LMA termination fee............................................................. -- 2,000,000
-------------- --------------
13,797,053 19,455,585
-------------- --------------
Loss from operations.............................................................. (10,333,091) (13,108,303)
Other income (expense):
Interest expense................................................................ (465,402) (6,691,384)
Interest income................................................................. 312,052 588,443
Equity in loss (earnings) of equity investee.................................... 2,882 --
-------------- --------------
(150,468) (6,102,941)
-------------- --------------
Net loss.......................................................................... (10,483,559) (19,211,244)
Accrued dividends on Series A redeemable cumulative preferred stock............... 1,003,014 1,935,762
-------------- --------------
Net loss applicable to common stockholders........................................ $ (11,486,573) $ (21,147,006)
-------------- --------------
-------------- --------------
Net loss per common share applicable to common stockholders--
basic and diluted............................................................... $ (1.84) $ (1.91)
-------------- --------------
-------------- --------------
Weighted average common shares outstanding--basic and diluted..................... 6,250,220 11,080,606
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
<S> <C> <C>
1998 1999
------------- -------------
OPERATING ACTIVITIES
Net loss............................................................................ $ (10,483,559) $ (19,211,244)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization..................................................... 372,144 2,413,072
Provision for bad debts........................................................... -- 99,929
Equity in loss of equity investee................................................. (2,882) --
Interest on notes payable paid with the issuance of capital stock................. 261,227 --
Accretion of interest on senior discount notes.................................... -- 6,170,461
Amortization of deferred financing costs.......................................... -- 385,416
Barter revenue from radio broadcasting rights....................................... -- (487,400)
Change in assets and liabilities:
Accounts receivable............................................................... (1,861,490) (2,564,616)
Prepaid expenses.................................................................. 435,331 1,102,011
Radio broadcasting rights......................................................... 1,752,188 --
Other assets...................................................................... (416,143) 36,288
Accounts payable.................................................................. 879,169 18,179
Accrued expenses.................................................................. 1,390,057 672,993
Radio broadcasting rights obligation.............................................. (1,590,000) --
Deferred revenue.................................................................. 369,000 --
Deposit payable................................................................... -- 165,000
------------- -------------
Net cash used in operating activities............................................... (8,894,958) (11,199,911)
------------- -------------
INVESTING ACTIVITIES
Acquisition of property and equipment............................................... (2,594,093) (1,717,121)
Restricted cash-escrow account...................................................... (4,600,000) 9,964,447
Radio broadcasting rights........................................................... -- (42,500)
Investments and advances to equity investee......................................... (5,448,375) --
Note receivable from stockholder.................................................... (163,600) --
Acquisition of WNTD-AM.............................................................. -- (16,782,140)
Acquisition of WWRU-AM and WJDM-AM, KIDR-AM and KAHZ-AM............................. -- (27,941,442)
Acquisition of WNMA-AM and WAFN-AM.................................................. (9,317,000) --
Acquisition of KIQI-AM.............................................................. (6,211,521) --
------------- -------------
Net cash used in investing activities............................................... (28,334,589) (36,518,756)
------------- -------------
FINANCING ACTIVITIES
Proceeds from borrowings under the revolving credit facility........................ -- 10,200,000
Debt financing costs................................................................ -- (1,135,581)
Proceeds from issuance of Series A redeemable cumulative preferred stock and common
stock............................................................................. 15,000,000 45,000
Proceeds from issuance of note payable to stockholder............................... 21,795,000 --
------------- -------------
Net cash provided by financing activities........................................... 36,795,000 9,109,419
------------- -------------
Net decrease in cash and cash equivalents........................................... (434,547) (38,609,248)
Cash and cash equivalents at beginning of period.................................... 1,126,862 38,894,144
------------- -------------
Cash and cash equivalents at end of period.......................................... $ 692,315 $ 284,896
------------- -------------
------------- -------------
Supplemental disclosures of cash flow information:
Reclassification of prepaid expenses to broadcast license upon consummation of the
acquisition of WWRU-AM and WJDM-AM, KIDR-AM and KAHZ-AM......................... $ -- $ 2,500,000
------------- -------------
------------- -------------
Note payable issued in connection with the acquisition
of KIQI-AM San Francisco........................................................ $ 6,000,000 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of
Radio Unica Communications Corp. and subsidiaries (the "Company") (formerly
Radio Unica Holdings Corp.) for the periods indicated herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the six months ended June 30, 1999 and
1998 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. The consolidated financial statements include the
accounts of the Company and all majority owned subsidiaries over which the
Company has control. All significant intercompany accounts and transactions have
been eliminated. For further information, refer to the Company's 1998
consolidated financial statements and notes thereto, included elsewhere in this
prospectus.
The Company's revenues and cash flow are expected to be typically lowest in
the first calendar quarter and highest in the fourth calendar quarter. Seasonal
fluctuations are common in the radio broadcasting industry and are due primarily
to fluctuations in consumer spending.
Radio Unica Communications Corp. (the "Company") (formerly Radio Unica
Holdings Corp.), a Delaware corporation, was incorporated on June 29, 1998,
pursuant to which Corp was reorganized and became a wholly owned subsidiary of
the Company (the "Reorganization"). The Company has no assets other than the
shares of Corp's common stock. In connection with the Reorganization, the
holders of Corp's common stock and Series A redeemable cumulative preferred
stock exchanged their shares for shares of the Company's common stock and Series
A redeemable cumulative preferred stock bearing identical rights and preferences
to Corp's then existing common stock and Series A cumulative redeemable
preferred stock. The existing shares of Corp's common stock and Series A
redeemable cumulative preferred stock were cancelled. Corp subsequently
authorized and issued 100 shares par value $0.01 of common stock to the Company.
The Reorganization was accounted for as a combination of entities under common
control in a manner similar to a pooling.
2. ACQUISITIONS
On October 27, 1998, the Company entered into an asset purchase agreement
with Children's Broadcasting Corporation to acquire certain assets of New York
City area radio stations WWRU-AM and WJDM-AM, Dallas/Ft. Worth radio station
KAHZ-AM and Phoenix radio station KIDR-AM for a purchase price of $29.25
million. In connection with this acquisition, the Company entered into a
two-year non-compete agreement with the seller for $750,000. Pursuant to this
agreement, the Company established escrow accounts totaling $10 million. The
Company operated these stations under an LMA for a monthly fee of $200,000 until
the transaction closed. An advanced payment of $2.5 million was made to
Children's Broadcasting Corporation with the execution of the LMA. On January
14, 1999, after receiving the consent of the Federal Communications Commission
(the "FCC") to assign the broadcasting licenses, the Company completed the
acquisition. Based on current FCC guidelines, the license of either WWRU or WJDM
must be relinquished by the Company by March 12, 2003.
On February 22, 1999, the Company contracted to acquire substantially all
the assets used in the operation of radio station WIDB (AM) in Chicago, Illinois
from subsidiaries of One-on-One, for a cash
F-26
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. ACQUISITIONS (CONTINUED)
purchase price of approximately $16.75 million. The Company funded a $1 million
escrow account in conjunction with this transaction. On May 14, 1999, after
receiving the consent of the FCC to assign the broadcasting license, the Company
completed the acquisition.
The acquisitions of the assets of WWRU-AM and WJDM-AM, New York, KAHZ-AM,
Dallas, KIDR-AM, Phoenix and WNTD-AM, Chicago were not the purchases of
businesses, as the format and language of the stations were changed and the
Company did not assume responsibility for any employees. The acquisitions were
accounted for as purchases and, accordingly, the purchase price was allocated to
the assets acquired and liabilities assumed based on appraisals and other
estimates of their underlying values.
3. STOCK OPTION PLAN
During 1999, the Company has granted options to its employees to purchase
98,890 shares of the Company's common stock. Of the 98,890 options granted,
5,580 vest ratably over time and 31,620 vest upon the attainment of certain
performance goals as determined by the Committee. The exercise price of the
5,580 options which vest ratably over time is $0.03 per share, which was
determined by the Committee to be the fair market value at the date of grant. As
a result, no compensation expense has been recognized on these options under the
provisions of APB Opinion No. 25.
The remaining 61,690 options have an exercise price of $1.10 to $1.72 per
share and vest upon (i) the sale of the Company or substantially all of its
assets, (ii) an initial public offering, or (iii) an issuance of capital stock
of the Company that would result in WPV and/or its affiliates in the aggregate
ceasing to control more common stock of the Company than any other single
shareholder. Compensation expense for the 61,690 options will be recognized to
the extent that the market value of the shares exceeds the option price when
vesting for these options becomes probable. Vesting for these options was not
deemed probable as of June 30, 1999 and no compensation expense has been
recorded for these options as of June 30, 1999.
Changes to the plan for the six months ended June 30, 1999 are as follows:
<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------------
WEIGHTED AVERAGE
EXERCISE PRICE
OPTIONS PER SHARE
---------- -----------------
<S> <C> <C>
Outstanding at beginning of period............................. 2,884,870 $ .58
Granted........................................................ 98,890 .95
Exercised...................................................... -- --
Cancelled and reissued......................................... (76,608) .58
Outstanding at June 30, 1999................................... 2,867,152 .58
----------
----------
Options exercisable at June 30, 1999........................... 972,228 .03
----------
----------
</TABLE>
F-27
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. STOCK OPTION PLAN (CONTINUED)
The following table summarizes information about stock options outstanding
at June 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------- OPTIONS EXERCISABLE
WEIGHTED --------------------------
AVERAGE NUMBER WEIGHTED
NUMBER REMAINING EXERCISABLE AVERAGE
EXERCISE OUTSTANDING AT CONTRACTUAL AT JUNE 30, EXERCISE
PRICE JUNE 30, 1999 LIFE 1999 PRICE
- ----------- -------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
$ 0.03 1,739,741 6.43 972,228 $ 0.03
$ 1.10 524,158 6.43 -- --
$ 1.72 603,253 6.43 -- --
</TABLE>
The weighted average per share fair values of options granted under the
stock option plan during the six months ended June 30, 1999, based on the
Black-Scholes option valuation model, was $0.007. Had compensation expense for
the Company's stock option grants been determined based on the fair value at the
grant date for awards, consistent with the method of SFAS No. 123, the Company's
net loss would have increased the pro forma amounts for the six months ended
June 30, 1999 as indicated below.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
-----------------
<S> <C>
Net loss applicable to common stockholders:
As reported.............................................................. $ (21,147,006)
-----------------
-----------------
Pro forma................................................................ $ (21,147,014)
-----------------
-----------------
Net loss per share applicable to common stockholders:
As reported.............................................................. $ (1.91)
-----------------
-----------------
Pro forma................................................................ $ (1.91)
-----------------
-----------------
</TABLE>
The following weighted average assumptions were used in the Black-Scholes
model:
<TABLE>
<CAPTION>
JUNE 30, 1999
----------------
<S> <C>
Expected life............................................................... 4.5 - 8.5 years
Interest rate............................................................... 6.00%
Volatility.................................................................. --
Dividend yield.............................................................. --
</TABLE>
The Black-Scholes options valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, the
existing models, in management's opinion, do not necessarily provide a reliable
single measure of the fair value of the Company's stock options.
F-28
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. COMMITMENTS
On June 7, 1999, the Company entered into a time brokerage agreement ("TBA")
with DEN-MEX L.L.C. for substantially all of the broadcast time on Denver radio
station KCUV-AM for a monthly fee of $25,000 through June 14, 2002. In addition
to the TBA, the Company has an option to purchase the assets of KCUV-AM, which
is exercisable from June 15, 1999 through June 14, 2002.
On October 31, 1997, the Company entered into a local marketing agreement
("LMA") with Lotus Oxnard Corp. (Lotus) to operate Simi Valley, CA radio station
KVCA, effective January 5, 1998. Simultaneous with the LMA, the Company entered
into an escrow agreement whereby the Company provided a $2.5 million escrow
account deposit on January 5, 1998 to secure compliance with the LMA terms. In
June 1999, the Company began negotiations on the termination of the LMA. On July
30, 1999, upon an agreement reached by the Company and Lotus, the LMA was
terminated for a final payment of $2.0 million and the escrow funds were
released to the Company. The $2.0 million termination payment was reflected in
operations in the accompanying consolidating financial statements.
F-29
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholder
13 Radio Corporation
We have audited the accompanying statements of operations and accumulated
deficit and cash flows of 13 Radio Corporation for each of the two years in the
period ended December 31, 1997. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in
all material respects, the results of operations and accumulated deficit and
cash flows of 13 Radio Corporation for each of the two years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Miami, Florida
June 12, 1998
F-30
<PAGE>
13 RADIO CORPORATION
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
POST
PRE-ACQUISITION ACQUISITION
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
-------------- ------------
<S> <C> <C>
Net revenue........................................................................ $ 1,610,764 $1,606,201
Operating expenses:
Direct expenses.................................................................. 784,118 844,108
Selling, general and administrative expenses..................................... 1,095,456 1,089,792
Depreciation and amortization.................................................... 81,020 105,088
-------------- ------------
1,960,594 2,038,988
-------------- ------------
Loss before income taxes........................................................... (349,830) (432,787)
Deferred income tax benefit........................................................ -- (12,118)
-------------- ------------
Net loss........................................................................... (349,830) (420,669)
Accumulated deficit at beginning of year........................................... (3,902,056) --
-------------- ------------
Accumulated deficit at end of year................................................. $ (4,251,886) $ (420,669)
-------------- ------------
-------------- ------------
</TABLE>
See accompanying notes
F-31
<PAGE>
13 RADIO CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
POST
PRE-ACQUISITION ACQUISITION
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
-------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss......................................................................... $ (349,830) $ (420,669)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization.................................................. 81,020 105,088
Provision for bad debts........................................................ 2,473 69,654
Deferred income taxes.......................................................... -- (12,118)
Changes in operating assets and liabilities:
Accounts receivable.......................................................... (387) (23,290)
Other current assets......................................................... 65,447 1,045
Other assets................................................................. (37,501) 6,387
Accounts payable............................................................. (2,934) 3,066
Accrued expenses............................................................. (109,966) 39,685
-------------- ------------
Cash used by operating activities.................................................. (351,678) (231,152)
INVESTING ACTIVITY
Purchases of property and equipment................................................ (11,993) (37,539)
-------------- ------------
Cash used by investing activity.................................................... (11,993) (37,539)
FINANCING ACTIVITY
Net advances from Parent........................................................... 363,677 362,626
-------------- ------------
Cash provided by financing activity................................................ 363,677 362,626
Increase in cash................................................................... 6 93,935
Cash at beginning of period........................................................ 109,818 109,824
-------------- ------------
Cash at end of period.............................................................. $ 109,824 $ 203,759
-------------- ------------
-------------- ------------
</TABLE>
See accompanying notes
F-32
<PAGE>
13 RADIO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
NATURE OF BUSINESS
13 Radio Corporation (13 Radio or the Company), a Delaware corporation and
subsidiary of CBS Radio Group (CBS), operates Houston radio station KXYZ-AM. 13
Radio, produces, broadcasts and distributes Spanish-language radio programming
in the Houston area.
On December 24, 1997, 13 Radio entered into an asset purchase agreement with
Blaya, Inc. whereby Blaya, Inc. acquired certain assets of 13 Radio for a cash
purchase price of $6.4 million. On March 11, 1998, this transaction was
completed upon receipt of the Federal Communication Commission's (FCC) consent
to transfer the broadcast license from 13 Radio to Blaya, Inc.
ORGANIZATION AND BASIS OF PRESENTATION
For the year ended December 31, 1996, the accounts of 13 Radio were included
in the consolidated accounts of Infinity Broadcasting Corporation (Infinity) and
were not presented as a separate reporting entity. Accordingly, the accounts
included in the accompanying financial statements were carved out of Infinity's
historical accounting records.
On December 31, 1996, CBS completed its acquisition of all of the
outstanding common stock of Infinity. The fair value of net assets acquired
applicable to 13 Radio, including approximately $1.5 million allocated to 13
Radio's broadcast license, was $2.6 million. The fair value of the broadcast
license is being amortized on a straight line basis over forty years. The
acquisition was accounted for using the purchase method of accounting.
For the year ended December 31, 1997, the accounts of 13 Radio were included
in the consolidated accounts of CBS and were not presented as a separate
reporting entity. Accordingly, the accounts included in the accompanying
financial statements were carved out of CBS's historical accounting records.
The accompanying statements of operations and accumulated deficit and cash
flows for the year ended December 31, 1996 represents the results of 13 Radio
when it was owned by Infinity, while the accompanying statements of operation
and accumulated deficit and cash flows for the year ended December 31, 1997
represents the results of 13 Radio after it was acquired by CBS.
The accompanying financial statements include costs allocated to 13 Radio by
Infinity and CBS for certain functions and services they performed centrally.
All allocations and estimates were based on assumptions Infinity's and CBS'
management believed were reasonable in the circumstances. These allocations and
estimates are not necessarily indicative of the costs and expenses that would
have resulted if 13 Radio had been operated as a separate entity. See Note 3 for
a description of the functions and services and the amounts allocated.
2. SIGNIFICANT ACCOUNTING POLICIES
CONCENTRATIONS OF CREDIT RISK
The Company's trade receivables result from advertising sales for
commercials aired. The majority of the Company's trade receivables are due from
local and national advertising agencies and are not collateralized.
Consideration is given to the nature of these receivables and the financial
position of
F-33
<PAGE>
13 RADIO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
customers in determining the appropriate allowance for doubtful accounts. Credit
losses are provided for in the financial statements and have been within
management's expectations.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is recorded on a
straight-line basis over the estimated useful lives of the related assets, which
range from 2 to 10 years. Depreciation expense for the year ended December 31,
1996 amounted to $62,320.
INTANGIBLE ASSETS
The broadcast license represents the fair value allocated to the FCC license
held by 13 Radio upon the acquisition of 13 Radio by CBS, which is being
amortized on a straight-line basis over forty years. Goodwill represents the
excess of purchase price of certain assets of 13 Radio over the fair value of
net assets acquired. Goodwill is being amortized on a straight-line basis over
forty years.
ACCOUNTING FOR THE IMPAIRMENT OF LONG LIVED ASSETS
The Company accounts for the impairment of long lived assets and certain
intangible assets under the provisions of FASB Statement of Financial Accounting
Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG LIVED ASSETS.
SFAS No. 121 requires impairment losses to be recorded on long-lived assets when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. Based
on current circumstances, the Company does not believe that any impairment
indicators are present.
INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, ACCOUNTING FOR
INCOME TAXES. Deferred income tax assets and liabilities are determined based
upon differences between the financial statements and income tax basis of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion of the tax assets will not be realized.
REVENUE RECOGNITION
Advertising revenues are recognized as income when commercials are aired.
Included in revenues are certain barter transactions which represent commercials
aired in exchange for products or services to be provided to the Company. Barter
transactions are recorded at the estimated fair market value of the merchandise
or services received in exchange for the commercial broadcast. If the
merchandise or services are received prior to the broadcast of the commercial, a
liability is recorded. Likewise, if the commercial is broadcast first, a
receivable is recorded. At December 31, 1996 and 1997, accounts receivable and
liabilities remaining from barter transactions were insignificant.
F-34
<PAGE>
13 RADIO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING EXPENSE
The Company expenses advertising costs as incurred. Advertising expense for
the years ended December 31, 1996 and 1997 amounted to approximately $13,000 and
$18,000, respectively.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, accounts payable and
accrued expenses approximate fair value because of their short duration to
maturity.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Accordingly, actual results could differ from those
reported.
3. INCOME TAXES
The Company is a member of a group which files consolidated federal and
state income tax returns. The Company recorded income taxes as if the Company
was filing unconsolidated income tax returns.
The components of the benefit for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
---------------------
<S> <C> <C>
1996 1997
--------- ----------
Current....................................................................................... $ -- $ --
Deferred...................................................................................... -- (12,118)
--------- ----------
$ -- $ (12,118)
--------- ----------
--------- ----------
</TABLE>
The differences between the reported benefit from income taxes and income
taxes computed at the U.S. statutory federal income tax rate are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
<S> <C> <C>
1996 1997
----------- -----------
Income tax benefit computed at the U.S.
statutory rate of 34%................................................................... $ (118,942) $ (147,148)
State taxes, net of federal benefit..................................................... (10,390) (12,291)
Non-deductible items.................................................................... 1,530 4,731
Change in deferred tax valuation allowance.............................................. 127,802 142,590
----------- -----------
Total............................................................................... $ -- $ (12,118)
----------- -----------
----------- -----------
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax
F-35
<PAGE>
13 RADIO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
3. INCOME TAXES (CONTINUED)
purposes. SFAS No. 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
After consideration of all the evidence, both positive and negative, management
has determined that a valuation allowance of $432,246 and $574,836 at December
31, 1996 and 1997, respectively, is necessary to reduce the deferred tax assets
to the amount that will more likely than not be realized. At December 31, 1997,
the Company has available net operating loss carryforwards of $2,090,000 (of
which $1,798,000 would be subject to an IRC section 382 annual limitation) which
expire in the years 2001 through 2012.
4. RELATED PARTY TRANSACTIONS
The 1996 financial statements include significant allocations from Infinity
for the cost of functions and services it performed centrally which are included
in selling, general and administrative expenses. Included in this caption are
allocated costs for general liability, workers' compensation and auto insurance,
and certain corporate salaries. The Company's employees also participated in
certain Infinity sponsored savings plans. Total allocated costs amounted to
approximately $50,000 for the year ended December 31, 1996.
The 1997 financial statements include significant allocations from CBS for
the cost of functions and services it performed centrally which are included in
selling, general and administrative expenses. Included in this caption are
allocated costs for general liability, workers' compensation and auto insurance,
and certain corporate salaries. The Company's employees also participated in
certain CBS sponsored savings plans. Total allocated costs amounted to
approximately $82,000 for the year ended December 31, 1997.
F-36
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Oro Spanish Broadcasting, Inc.
2601 Mission Street
San Francisco, California 94110
We have audited the accompanying balance sheets of Oro Spanish Broadcasting,
Inc. as of August 31, 1996 and 1997 and the related statements of operations and
accumulated deficit and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Oro Spanish Broadcasting,
Inc., as of August 31, 1996 and 1997 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered recurring net losses and has an
accumulated deficit. In addition, the Company's current liabilities exceed its
current assets and the Company has experienced some difficulty meeting
obligations as they become due. Those conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans
regarding those matters are also described in Note 9. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ MILLER, KAPLAN, ARASE & CO., LLP
North Hollywood, California
November 18, 1997
F-37
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Oro Spanish Broadcasting, Inc.
2601 Mission Street
San Francisco, California 94110
We have reviewed the accompanying balance sheet of Oro Spanish Broadcasting,
Inc. as of February 28, 1998 and the statements of operations and accumulated
deficit and cash flows for the six months ended February 28, 1997 and 1998, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of Oro Spanish Broadcasting, Inc.
A review consists principally of inquiries of management personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the February 28, 1997 and 1998 financial statements in order
for them to be in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered recurring net losses and has an
accumulated deficit. In addition, the Company's current liabilities exceed its
current assets and the Company has experienced some difficulty meeting
obligations as they become due. Those conditions raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans
regarding those matters are also described in Note 9. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
MILLER, KAPLAN, ARASE & CO., LLP
North Hollywood, California
June 6, 1998
F-38
<PAGE>
ORO SPANISH BROADCASTING, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31 SIX MONTHS
-------------------------- ENDED
1996 1997 FEBRUARY 28,
------------ ------------ 1998
------------
(REVIEWED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash.................................................................. $ 30,448 $ 49,928 $ 2,135
Accounts Receivable, Net of Allowance for Doubtful Accounts of
$18,506, $50,000 and $62,000........................................ 371,678 431,099 400,887
Prepaid Expenses and Other Current Assets............................. 21,144 19,529 50,067
------------ ------------ ------------
TOTAL CURRENT ASSETS................................................ 423,270 500,556 453,089
PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF $1,164,277,
$1,203,748 AND $1,224,177 (NOTE 2).................................... 132,650 133,098 140,273
------------ ------------ ------------
GOODWILL, NET OF ACCUMULATED AMORTIZATION OF $800,800, $850,800 AND
$875,800.............................................................. 1,199,200 1,149,200 1,124,200
------------ ------------ ------------
OTHER ASSETS
Accounts Receivable--Stockholder (Note 7)............................. 284,335 317,957 325,937
Other Assets.......................................................... 43,392 39,935 40,935
------------ ------------ ------------
TOTAL OTHER ASSETS.................................................. 327,727 357,892 366,872
------------ ------------ ------------
TOTAL ASSETS........................................................ $ 2,082,847 $ 2,140,746 2,084,434
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES
CURRENT LIABILITIES
Accounts Payable...................................................... $ 122,943 $ 137,871 $ 155,453
Accrued Expenses and Other............................................ 190,930 306,784 357,152
Covenant Not To Compete (Note 3)...................................... 50,000 50,000 50,000
Note Payable--Current (Note 4)........................................ 110,000 240,000 340,000
License Payable--Current (Note 5)..................................... 105,727 230,840 219,341
------------ ------------ ------------
TOTAL CURRENT LIABILITIES........................................... 579,600 965,495 1,121,946
------------ ------------ ------------
NON-CURRENT LIABILITIES
Interest Payable--Long Term (Note 4).................................. 1,097,995 1,122,279 1,127,330
Note Payable--Long Term (Note 4)...................................... 3,059,610 2,899,610 2,799,610
License Payable--Long Term (Note 5)................................... 157,107 -- --
Equipment Lease and Loans Payable (Note 4)............................ 20,675 27,590 16,935
------------ ------------ ------------
TOTAL NON-CURRENT LIABILITIES....................................... 4,335,387 4,049,479 3,943,875
------------ ------------ ------------
TOTAL LIABILITIES................................................... 4,914,987 5,014,974 5,065,821
------------ ------------ ------------
COMMITMENTS (NOTES 6 AND 8)
STOCKHOLDER'S DEFICIENCY
COMMON STOCK, AUTHORIZED 1,000,000 SHARES $1 PAR VALUE, ISSUED AND
OUTSTANDING 6,000 SHARES.............................................. 6,000 6,000 6,000
ADDITIONAL PAID-IN CAPITAL.............................................. 994,000 994,000 994,000
ACCUMULATED DEFICIT..................................................... (3,832,140) (3,874,228) (3,981,387)
------------ ------------ ------------
TOTAL STOCKHOLDER'S DEFICIENCY...................................... (2,832,140) (2,874,228) (2,981,387)
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY...................... $ 2,082,847 $ 2,140,746 $2,084,434
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
(Accountants' reports and the attached notes are an integral part of this
statement)
F-39
<PAGE>
ORO SPANISH BROADCASTING, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
AUGUST 31 FEBRUARY 28
---------------------- ----------------------
1996 1997
---------- ----------
1997 1998
---------- ----------
REVIEWED REVIEWED
<S> <C> <C> <C> <C>
NET REVENUE................................ $2,294,107 $2,274,594 $1,025,752 $1,093,602
OPERATING EXPENSES
Direct Operating Expenses................ 301,257 290,492 146,598 147,377
Selling, General and Administrative...... 1,600,611 1,591,888 742,475 840,292
Depreciation and Amortization............ 98,703 89,471 45,258 45,429
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES............... 2,000,571 1,971,851 934,331 1,033,098
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS................. 293,536 302,743 91,421 60,504
OTHER EXPENSES
Interest Expense, Net.................... (333,432) (344,031) (175,996) (166,863)
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAX..................... (39,896) (41,288) (84,575) (106,359)
INCOME TAXES............................... 800 800 800 800
---------- ---------- ---------- ----------
NET LOSS................................... (40,696) (42,088) (85,375) (107,159)
ACCUMULATED DEFICIT AT BEGINNING OF
PERIOD................................... (3,791,444) (3,832,140) (3,832,140) (3,874,228)
---------- ---------- ---------- ----------
ACCUMULATED DEFICIT AT END OF PERIOD....... $(3,832,140) $(3,874,228) $(3,917,515) $(3,981,387)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
(Accountants' reports and the attached notes are an integral part of this
statement)
F-40
<PAGE>
ORO SPANISH BROADCASTING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, SIX MONTHS ENDED
FEBRUARY 28,
---------------------- ------------------------
1996 1997 1997 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVIEWED REVIEWED
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss.................................................... $ (40,696) $ (42,088) $ (85,375) $(107,159)
Adjustments to Reconcile Net Loss to Net Cash.............
Provided (Used) in Operating Activities:
Depreciation and Amortization......................... 98,703 89,471 45,258 45,429
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable.......... 23,326 (59,421) 27,748 30,212
(Increase) Decrease Prepaid Expenses and Other
Current Assets.................................... 22,068 1,615 (23,592) (30,538)
(Increase) Decrease in Other Assets................. (14,733) 3,457 3,457 (1,000)
(Increase) in Advances to Stockholder-- Interest
Receivable Portion................................ (16,097) (17,622) (7,500) (7,980)
Increase in Accounts Payable and Other................ 28,269 51,483 30,653 134
Increase in Interest Payable.......................... 19,927 54,704 30,088 62,052
---------- ---------- ----------- -----------
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES...... 120,767 81,599 20,737 (8,850)
---------- ---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Property and Equipment..................... (15,731) (14,097) (10,027) (27,604)
Increase in Accounts Receivable--Stockholder.............. -- (16,000) (16,000) --
Proceeds from Sale of Assets.............................. 500 -- -- --
---------- ---------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES................. (15,231) (30,097) (26,027) (27,604)
---------- ---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on Equipment Lease and Loans Payable... (16,746) (18,022) (7,582) (11,339)
Proceeds from Refinancing of Automobile Loan Payable...... -- 16,000 16,000 --
Principal Payments on Note Payable........................ (80,000) (30,000) (30,000) --
---------- ---------- ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES................. (96,746) (32,022) (21,582) (11,339)
---------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH............................... 8,790 19,480 (26,872) (47,793)
CASH AT BEGINNING OF PERIOD................................... 21,658 30,448 30,448 49,928
---------- ---------- ----------- -----------
CASH AT END OF PERIOD......................................... $ 30,448 $ 49,928 $ 3,576 $ 2,135
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid for Interest.................................... $ 326,253 $ 307,837 $ 153,907 $ 112,825
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Cash Paid for Income Taxes................................ $ 800 $ 800 $ 800 $ 800
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
During November 1996, the Company incurred a note payable of $17,822 for
property and equipment. In addition, the Company acquired property and equipment
with a cost of $8,000 which was included in accounts payable at August 31, 1997.
(Accountants' reports and the attached notes are an integral part of this
statement)
F-41
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. NATURE OF BUSINESS
Oro Spanish Broadcasting, Inc. ("the Company") is a California Corporation,
that has owned and operated radio station KIQI-AM licensed to San Francisco,
California since September 8, 1980.
B. UNAUDITED INTERIM INFORMATION
In the opinion of management, the financial statements for the unaudited
periods ended February 28, 1997 and 1998 include all adjustments necessary for a
fair presentation in accordance with generally accepted accounting principles.
The results of operations and cash flows for the six months ended February 28,
1997 and 1998 are not necessarily indicative of results which would be expected
for a full year.
C. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company uses the straight
line method of depreciating equipment for both book and income tax purposes over
estimated useful lives of 5-12 years. Amounts expended for improvements to
increase the useful lives of property and equipment, or to replace major units
of property and equipment are capitalized. Expenditures for maintenance and
repairs or minor renewals are charged to expense when incurred.
D. GOODWILL
Goodwill is recorded at cost and amortized using the straight line method,
over 40 years.
E. TRADE ACTIVITY
Under trade agreements with certain advertisers, commercial airtime is
exchanged for goods and services. These transactions are recorded at the
estimated fair market value of the merchandise and services rendered. Revenue is
recognized when commercial spot announcements are broadcast and the value of
merchandise and services are expensed when utilized. Included in net revenue was
trade revenue of $245,003, $198,086, $76,584 and $97,075 and included in
selling, general and administrative was trade expense of $231,003, $191,196,
$73,059 and $94,575 for the years ended August 31, 1996 and 1997 and six months
ended February 28, 1997 and 1998, respectively.
F. INVESTMENT TAX CREDITS
As investment tax credits are utilized, they will be accounted for on the
flow through method.
G. REVENUE RECOGNITION
The Company recognizes revenue when the commercial spot announcements are
aired. Payments received in advance of airing are accounted for as deferred
revenue, which will be recognized in a subsequent period.
F-42
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to credit risk
consist of accounts receivable. Concentration of credit risk with respect to
accounts receivable is somewhat limited due to the large number of customers
comprising the Company's customer base and their dispersion across many
different industries. However, there is a geographical risk as the Company
grants credit to many advertisers located in Northern California.
I. INCOME TAXES
The Company recognizes deferred tax assets and liabilities for future tax
consequences of events that have been previously recognized on the Company's
financial statements or tax returns. The measurement of deferred tax assets and
liabilities is based on the provisions of the tax laws in effect as of the date
of these financial statements; the effects of future changes in tax laws or
rates are not anticipated except as otherwise noted.
For the years ended August 31, 1996 and 1997, the Company utilized federal
net operating loss ("NOL") carryforwards of approximately $25,000 and $105,000,
respectively, and California NOL carryforwards of approximately $37,000 and
$117,000, respectively.
The Company has available to offset future federal Corporation taxable
income, NOL carryforwards of approximately $1,576,000, $1,471,000 and $1,537,000
for years ended August 31, 1996 and 1997 and six months ended February 28, 1998,
respectively, expiring in the years 2005 through 2013. In addition, the Company
has available to offset any future federal Corporation income tax liabilities,
investment tax credit carryovers of approximately $22,000 expiring in the years
1998 through 2001.
At August 31, 1996 and 1997 and February 28, 1998, the Company has available
for California income tax purposes, NOL carryforwards of approximately $579,000,
$412,000 and $452,000, respectively, expiring in the years 1998, 1999 and 2003.
The Company's net deferred tax assets (using a federal rate of 34% and an
effective California rate of 9.3%) consisted of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------------ FEBRUARY 28,
1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
Deferred Tax Asset........................................................ $ 598,395 $ 574,611 $ 609,380
Deferred Tax Asset Valuation.............................................. (598,395) (574,611) (609,380)
Net Deferred Tax Asset.................................................... $ -- -- $ --
</TABLE>
The tax benefit computed at the statutory rate is due primarily to temporary
differences in depreciation and amortization calculated for book and tax
purposes and the NOL carryforwards. Management anticipates that there will not
be sufficient taxable income to utilize the NOL carryforward benefits prior to
their expiration, thus a valuation allowance has been established to fully
offset the deferred tax asset.
F-43
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
J. ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
K. IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for the impairment of long lived assets under the
provisions of Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long Lived Assets. SFAS No. 121 requires
impairment losses to be recorded on long-lived assets when indications of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. If the carrying value
of the assets will not be recoverable, as determined based on the undiscounted
cash flows estimated, the carrying value of the assets are reduced to fair
value. Generally, fair value will be determined using valuation techniques such
as expected discounted cash flows or appraisals, as appropriate. The adoption of
SFAS No. 121 did not have a material impact on the results of operations of the
Company.
L. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practical to estimate
that value
-- Cash
The carrying amount is a reasonable estimate of fair value
-- Accounts Receivable
The carrying value of accounts receivable approximates the fair value due to
the short-term nature of these instruments
-- Accounts Payable and Accrued Liabilities
The carrying value of accounts payable and accrued expenses approximates the
fair value due to the short-term nature of these instruments.
F-44
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 2--PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------------ FEBRUARY 28,
1996 1997 1998
---------- ------------ ------------
<S> <C> <C> <C>
Equipment................................................................ $ 672,127 $ 672,127 $ 672,127
Transmitter.............................................................. 372,807 386,957 412,600
Furniture and Fixtures................................................... 60,935 60,935 61,748
Trucks and Automobiles................................................... 97,167 116,095 117,025
Computer Equipment....................................................... 43,825 48,455 48,455
Leasehold Improvements................................................... 34,342 35,722 35,940
Music Library............................................................ 15,724 16,555 16,555
---------- ------------ ------------
1,296,927 1,336,846 1,364,450
Less: Accumulated Depreciation........................................... 1,164,277 1,203,748 1,224,177
---------- ------------ ------------
$ 132,650 $ 133,098 $ 140,273
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
NOTE 3--COVENANT NOT TO COMPETE
The covenant of $475,000 was amortized over a nine year period, commencing
on the closing date, September 8, 1980 and was to be fully paid, per terms of
the covenant, on September 8, 1989. The current balance in arrears owed is
$50,000.
NOTE 4--LONG TERM DEBT
NOTE PAYABLE
The $3,600,000 note with Bank of America ("the Bank") accrues interest at a
rate per annum equal to the Reference Rate (Bank of America's Prime rate) plus
2%. The agreement provided for the capitalization into principal certain months'
interest totaling $97,995 and allows for $1,000,000 of accrued interest to be
repaid at the loan maturity date. All remaining principal plus any accrued
interest is due and payable on December 31, 1999. Additionally, certain
financial covenants must be met including covenants governing current ratios and
operating profit ratios. Substantially all assets of the Company are pledged as
collateral on the note.
As of August 31, 1996, the Company was in violation of certain covenants and
failed to make required principal and interest payments. The Company entered
into an agreement with the Bank to make weekly payments of interest in the
amount of $10,000, due on Friday of each week, commencing May 9, 1997 and ending
September 26, 1997. Any accrued and unpaid interest as of September 26, 1997 was
due and payable on September 30, 1997. Additionally, principal payments of
$90,000 due through September 10, 1997 were due and payable on September 30,
1997, unless the agreement terminated. As of February 28, 1998, the Company was
five interest payments in arrears totaling approximately $135,000 and was in
violation of some of its loan covenants for which the Bank forbore from pursuing
its remedies with respect to the loan covenant violations.
F-45
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 4--LONG TERM DEBT (CONTINUED)
Aggregate principal payments required on the note payable for each of the
succeeding five years ending February 28 are as follows:
<TABLE>
<S> <C>
1999............................................................ $ 340,000
2000............................................................ 2,799,610
---------
$3,139,610
---------
---------
</TABLE>
The Bank's prime rate on interest at August 31, 1996 and 1997 and February
28, 1998, was 8.50%, 8.25% and 8.50%, respectively.
EQUIPMENT LEASE AND LOANS PAYABLE
The Company has entered into lease and loan agreements for the purchase of
automobiles and office equipment which mature through September 2000. The
agreements call for monthly installments which range from $556 to $1,552 which
includes interest at rates ranging from 8.5% to 15.0%. All agreements are
collateralized by the purchased equipment.
The capitalized cost of the above is $83,958, $68,628 and $68,628 less
accumulated depreciation of $55,841, $35,186 and $42,048 and is included in
property and equipment in the accompanying financial statements for the years
ended August 31, 1996 and 1997 and six months ended February 28, 1998,
respectively. Interest expense related to these loans was $5,283, $5,491, $2,822
and $2,405 for the years ended August 31, 1996 and 1997 and six months ended
February 28, 1997 and 1998, respectively.
Future minimum loan payments for the years ended February 28, are as
follows:
<TABLE>
<S> <C>
1999............................................................... $ 20,716
2000............................................................... 13,951
2001............................................................... 2,984
---------
$ 37,651
---------
---------
</TABLE>
NOTE 5--LICENSE PAYABLE
On April 22, 1993, Broadcast Music, Inc. ("BMI") obtained an arbitration
award of $264,181 against the Company for unpaid license fees.
Effective September, 1995 the Company entered into a Settlement Agreement
and Stipulation of Dismissal with Prejudice ("the Agreement") which superseded
the original award. In this Agreement, the Company is to pay BMI the sum of
$200,000 in monthly payments ranging from $2,500 to $3,200 starting October 1,
1995 and a final balloon payment of $24,800 on October 1, 2000. There is no
interest calculated into the payment schedule. If the Company defaults on the
payment schedule, then the Company will be liable for the original award plus
interest at the California statutory rate, less the total of payments which had
been made to date. As of August 31, 1996, the Company was in compliance with the
payment schedule. As of August 31, 1997 and February 28, 1998, the Company was
four and six payments in arrears, respectively, and as a result, the entire
obligation is presented as a current liability. Under the Agreement, the current
License Agreement dated May, 1994 is excluded from the settlement and the
Company is still bound to its obligation. The License Agreement dated
F-46
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 5--LICENSE PAYABLE (CONTINUED)
May, 1994 is retroactive and covers the period January 1, 1992 through December
31, 1996. The new Agreement settlement plus current license fees under the new
license agreement amounted to a total liability of $239,227, $213,233 and
$203,234 at August 31, 1996 and 1997 and February 28, 1998, respectively.
In addition, the Company fell into arrears with its 1995/1996 ASCAP music
license fee payments for approximately $11,607 and owed an additional $15,000
due to an audit conducted for the period ending December 31, 1994. On May 9,
1996, the Company entered into an arrangement whereas they agreed to make
monthly payments of at least $750 in addition to the regular monthly billing
until paid in full. The balance remaining at August 31, 1996 and 1997 and
February 28, 1998, was $23,607, $17,607 and $16,107, respectively. As of August
31, 1997 and February 28, 1998, the Company was two and six payments in arrears
under the terms of this arrangement and, as a result, the entire obligation is
presented as a current liability.
NOTE 6--OPERATING LEASES
The Company leases its office space and transmitter location under operating
leases. The office spaced is leased for $5,000 per month for the first year
(renegotiated to $4,000 per month beginning October 1, 1996) and subject to CPI
increases thereafter under an agreement dated March, 1993. The lease expires
July 1, 2000. The transmitter location lease dated October 20, 1987 had a term
of 10 years but was renegotiated in October 1997 and extended for an additional
10 years at $3,750 per month. Total rental expense related to the above leases
for the years ended August 31, 1996 and 1997 and six months ended February 28,
1997 and 1998 was $94,431, $89,325, $44,915 and $46,170, respectively.
The future payments are as follows for the years ended February 28:
<TABLE>
<S> <C>
1999.............................................................. $ 93,000
2000.............................................................. 93,000
2001.............................................................. 61,000
2002.............................................................. 45,000
2003.............................................................. 45,000
Thereafter........................................................ 210,000
---------
$ 547,000
---------
---------
</TABLE>
F-47
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 7--ACCOUNTS RECEIVABLE--STOCKHOLDER
Accounts receivable--stockholder accrues interest at 6% until paid. Accounts
receivable-- stockholder consisted of the following:
<TABLE>
<CAPTION>
AUGUST 31,
---------------------- FEBRUARY 28,
1996 1997 1998
---------- ---------- ------------
<S> <C> <C> <C>
Cash Advances for Crosby (Royster) Note Prior to 1982....................... $ 63,298 $ 63,298 $ 63,298
Dividend--Repayment......................................................... (36,650) (36,650) (36,650)
Net Cash Advances........................................................... 91,322 107,322 107,322
Interest.................................................................... 166,365 183,987 191,967
---------- ---------- ------------
$ 284,335 $ 317,957 $ 325,937
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
Interest income related to this note was approximately $16,000, $17,600,
$7,500 and $8,000 for the years ended August 31, 1996 and 1997 and the six
months ended February 28, 1997 and 1998, respectively.
NOTE 8--SIMPLE IRA PLAN
Effective January 1, 1997, the Company established a SIMPLE IRA Plan ("the
Plan") under IRC Section 408(p) covering employees earning over $5,000 during
the calendar year. Under the terms of the Plan, the Company is required to
contribute a matching contribution to each eligible employee's SIMPLE IRA equal
to the employee's salary reduction contributions up to a limit of 3% of the
employee's compensation for the calendar year. The Company may reduce the 3%
limit for the calendar year if: (1) the limit is not reduced below 1%; (2) the
limit is not reduced for more than 2 calendar years during the 5 year period
ending with the calendar year the reduction is effective; and (3) each employee
is notified of the reduced limit within a reasonable period of time before the
employee's 60 day election period for the calendar year. No accrual for the
Company's required contribution for the Plan year ending December 31, 1997 has
been made as of February 28, 1998. Plan expense for the year ended August 31,
1997 and the six months ended February 28, 1997 and 1998 was $-0-.
NOTE 9--GOING CONCERN UNCERTAINTY
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company has suffered net losses of
$40,696, $42,088, $85,375 and $107,159 during the years ended August 31, 1996
and 1997 and the six months ended February 28, 1997 and 1998, respectively; and
as of February 28, 1998, had a negative net worth of $2,981,387. The Company's
current liabilities as of this date exceeded current assets by $668,857. In
addition, the Company has experienced difficulty meeting obligations as they
become due.
In view of the matters described in the preceding paragraph, future
profitability is dependent upon the success of future operations. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classifications of
liabilities that might be necessary should the Company be unable to continue
normal operations.
F-48
<PAGE>
ORO SPANISH BROADCASTING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996 AND 1997 AND FEBRUARY 28, 1997 AND 1998
NOTE 9--GOING CONCERN UNCERTAINTY (CONTINUED)
However, the Company's management believes it will be able to continue as a
going concern due to the sale of the Company's common stock discussed in Note
10. $4,236,321 from the proceeds of the sale was recognized by the Company as
additional paid in capital. This money was used to retire the debt which
contributed to the going concern uncertainty.
NOTE 10--SUBSEQUENT EVENTS (UNAUDITED)
On February 20, 1998, the Company's sole stockholder entered into a Stock
Purchase Agreement to sell all of his common stock interest in the Company to
Radio Unica of San Francisco, Inc. ("Radio Unica") for $12,000,000.
The Company and Radio Unica entered into a Time Brokerage Agreement (the
"LMA") effective March 1, 1998 and expiring on the closing date or termination
of the Stock Purchase Agreement. During this period, the Company is responsible
for all engineering and certain personnel costs and will receive $58,000 per
month from Radio Unica.
On March 2, 1998, the Company and BMI entered into an agreement to settle
the outstanding obligation under the Agreement (Note 5) for $75,000 payable on
or before June 19, 1998, plus interest at 9% per annum accumulating from
February 19, 1998 to the date of payment.
On March 30, 1998, the Company and the Bank entered into an agreement
whereby upon the closing date of the Stock Purchase Agreement, the Company will
pay the Bank $3,800,000, plus interest at prime plus 2% per annum beginning
February 1, 1998, as settlement in full of all principal and accrued interest
owed under the terms of the note (Note 4).
On April 30, 1998, the common stock interest in the Company was sold and the
debt discussed above was retired. At Closing, the receivable from the
stockholder discussed in Note 7 was recognized as a dividend.
F-49
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5,700,000 SHARES
RADIO UNICA COMMUNICATIONS CORP.
COMMON STOCK
[LOGO]
---------
P R O S P E C T U S
OCTOBER , 1999
---------
SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
CIBC WORLD MARKETS
- --------------------------------------------------------
- --------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the registrant in connection with the sale of
the common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<S> <C>
SEC Registration Fee............................................................ $ 29,157
NASD Filing Fee................................................................. 11,555
Nasdaq National Market Listing Fee.............................................. 63,725
Blue Sky Fees and Expenses...................................................... 5,000
Printing and Engraving Costs.................................................... 600,000
Legal Fees and Expenses......................................................... 300,000
Accounting Fees and Expenses.................................................... 300,000
Transfer Agent and Registrar Fees and Expenses.................................. 5,000
Miscellaneous................................................................... 1,185,563
---------
Total......................................................................... $2,500,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our certificate of incorporation provides that, except to the extent
prohibited by the Delaware General Corporation Law (the "DGCL"), our directors
shall not be personally liable to the registrant or its stockholders for
monetary damages for any breach of fiduciary duty as directors of the
registrant. Under the DGCL, the directors have a fiduciary duty to the
registrant which is not eliminated by this provision of the certificate of
incorporation and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of nonmonetary relief will remain available. In
addition, each director will continue to be subject to liability under the DGCL
for breach of the director's duty of loyalty to the registrant, for acts or
omissions which are found by a court of competent jurisdiction to be not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are prohibited by
the DGCL. This provision also does not affect the directors' responsibilities
under any other laws, such as the Federal securities laws or state or Federal
environmental laws. The registrant has liability insurance for its officers and
directors. Section 145 of the DGCL empowers a corporation to indemnify its
directors and officers and to purchase insurance with respect to liability
arising out of their capacity or status as directors and officers, provided that
this provision shall not eliminate or limit the liability of a director: (1) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) arising under Section
174 of the DGCL, or (4) for any transaction from which the director derived an
improper personal benefit. The DGCL provides further that the indemnification
permitted thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under the corporation's bylaws, any
agreement, a vote of stockholders or otherwise. The certificate of incorporation
eliminates the personal liability of directors to the fullest extent permitted
by Section 102(b)(7) of the DGCL and provides that the registrant may fully
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that
person is or was a director or officer of the registrant, or is or was serving
at the request of the registrant as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against
II-1
<PAGE>
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
any threatened, pending or completed action, suit or proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the certificate of incorporation. The registrant is
not aware of any threatened litigation or proceeding that may result in a claim
for any indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following is a summary of the sales during the past three years by Radio
Unica, or its predecessor, of securities that were not registered under the
Securities Act.
<TABLE>
<CAPTION>
PREFERRED
INVESTOR DATE AMOUNT COMMON SHARES SHARES
- ---------------------------------------------------- --------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Warburg, Pincus Ventures............................ 8/12/97 $ 1,000,000 310,000 9,900
10/24/97 1,000,000 310,000 9,900
11/7/97 2,750,000 852,500 27,225
1/5/98 15,000,000 4,650,000 148,500
4/17/98 280,523 86,962 2,777
6/30/98 15,238,904 4,724,060 150,865
Joaquin F. Blaya.................................... 12/31/96 15,000 4,650 148.50
1/20/97 10,000 3,100 99.00
2/12/97 15,000 4,650 148.50
2/28/97 20,000 6,200 198.00
3/14/97 40,000 12,400 396.00
6/4/97 50,000 15,500 495.00
6/25/97 22,500 6,975 222.75
4/17/98 40,584 12,581 401.78
Allan Stess......................................... 12/31/96 15,000 4,650 148.50
1/20/97 10,000 3,100 99.00
2/12/97 15,000 4,650 148.50
2/28/97 10,000 3,100 99.00
Barrett Alley....................................... 1/23/97 2,500 775 24.75
2/12/97 1,500 465 14.85
2/28/97 5,000 1,550 49.50
4/7/97 11,599 3,596 114.83
4/28/97 4,401 1,364 43.57
4/17/98 7,476 2,318 74.01
Andrew C. Goldman................................... 4/18/97 46,377 14,377 459.13
6/4/97 33,623 10,423 332.87
4/17/98 18,156 5,628 179.74
Steven E. Dawson.................................... 12/15/98 50,000 15,500 495.00
Jose C. Cancela..................................... 1/22/99 35,000 10,850 346.50
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
PREFERRED
INVESTOR DATE AMOUNT COMMON SHARES SHARES
- ---------------------------------------------------- --------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Herbert Levin....................................... 12/31/96 15,000 4,650 148.50
1/20/97 10,000 3,100 99.00
2/12/97 15,000 4,650 148.50
4/18/97 12,000 3,720 118.80
4/24/97 28,000 8,680 277.20
4/28/97 20,000 6,200 198.00
5/14/97 25,000 7,750 247.50
5/29/97 25,000 7,750 247.50
6/25/97 22,500 6,975 222.75
4/17/98 40,584 12,581 401.78
</TABLE>
In addition, Radio Unica, from time to time, has issued an aggregate of
2,867,152 stock options to various people pursuant to its stock option plan.
All the foregoing securities were issued in reliance on the exemption from
registration under Section 4(2) of the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<C> <S>
1.1** Form of Underwriting Agreement.
3.1** Certificate of Incorporation
3.2** Bylaws.
4.1* Purchase Agreement, dated July 22, 1998, among Radio Unica Corp., each of its
subsidiaries set forth therein, CIBC Oppenheimer Corp. and Bear, Stearns & Co.
Inc.
4.2* Indenture dated as of July 27, 1998 between Radio Unica Corp. and Wilmington
Trust Company, as Trustee.
5.1** Opinion of Stroock & Stroock & Lavan LLP
10.1* Credit Agreement, dated as of July 8, 1998 among Radio Unica Corp., Radio Unica
Holdings Corp., the several banks and other financial institutions from time to
time parties thereto and Canadian Imperial Bank of Commerce, in its individual
capacity and as Agent ("CIBC").
10.2* Securities Purchase Agreement, dated as of August 11, 1997, by and among Radio
Unica Corp., Warburg, Pincus Ventures, L.P. and the other investors named
therein.
10.3* Supplement to Securities Purchase Agreement, dated as of June, 1998, among
Radio Unica Corp., Radio Unica Holdings Corp., Warburg, Pincus Ventures, L.P.
and the other investors named therein.
10.4* Stockholders' Agreement, dated as of June 30, 1998, by and among Radio Unica
Holdings Corp., Warburg, Pincus Ventures, L.P., Joaquin Blaya, Herbert Levin
and the other persons listed therein.
10.5* Time Brokerage Agreement, dated as of October 31, 1997, by and between Radio
Unica and Texas Lotus Corp. relating to KZDC(AM).
10.6*(a) Asset Purchase Agreement, dated as of January 26, 1998, by and among Radio
Unica, One-on-One Sports License of Florida, L.L.C. and One-on-One Sports Radio
of Florida, L.L.C.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.7*(a) Stock Purchase Agreement, dated as of February 20, 1998, by and among Radio
Unica, Oro Spanish Broadcasting, Inc. and Rene De La Rosa.
10.8* Asset Purchase Agreement, dated as of May 20, 1998, by and among Radio Unica,
Sinclair Radio of Los Angeles, Inc. and Sinclair Radio of Los Angeles Licensee,
Inc.
10.9* Form of Non Competition and Confidentiality Agreement with each of Joaquin F.
Blaya and Steven E. Dawson, dated August 13, 1997.
10.10* Agreement, dated as of January 15, 1998, entered into by and between Radio
Unica Corp. and Jorge Ramos.
10.11* Amended and Restated Artist Agreement, dated as of June 5, 1998, entered into
by and between Radio Unica Network, Inc. and Raque Productions (for services of
Pedro Sevcec).
10.12* Independent Contractor Agreement dated as of June 30, 1998 between Radio Unica
Network, Inc. and Dra Isabel, Inc. (for services of Isabel Gomez Bassols).
10.13* Stock Purchase Agreement, dated as of June 10, 1998, by and among Radio Unica,
Blaya, Inc. and Joaquin F. Blaya.
10.14* Option Agreement, dated as of October 31, 1997, by and between Texas Lotus
Corp. and Radio Unica.
10.15*(a) Agreement, dated as of September 28, 1998, between Radio Unica and
Inter/Forever Sports, Inc.
10.16*(a) Agreement, dated as of September 28, 1998, between Radio Unica and
Inter/Forever Sports, Inc.
10.17* Asset Purchase Agreement, dated as of October 26, 1998, among Radio Unica,
Children's Broadcasting Corporation, Children's Radio of Dallas, Inc.,
Children's Radio of Phoenix, Inc. and Children's Radio of New York, Inc.
10.18* First Amendment to Asset Purchase Agreement, dated as of October 27, 1998,
among Radio Unica, Children's Radio of Dallas, Inc., Children's Radio of
Phoenix, Inc., and Children's Radio of New York, Inc.
10.19**** Asset Purchase Agreement, dated as of February 22, 1999, among Radio Unica,
One-on-One Sports License of Illinois, L.L.C. and One-on-One Sports Radio of
Illinois, L.L.C.
21.1***** Subsidiaries
23.1** Consent of Ernst & Young LLP
23.2** Consent of Miller, Kaplan, Arase & Co., LLP
23.3 Consent of Stroock & Stroock & Lavan LLP (included in Exhibit 5.1)
24.1***** Power of Attorney (included on signature page).
27.1***** Financial data schedule
27.2***** Financial data schedule
</TABLE>
II-4
<PAGE>
- ------------------------
*Incorporated by reference from Registration Statement on Form S-4 (No.
333-61211) of Radio Unica Corp., as amended, as declared effective by the
Securities and Exchange Commission on December 18, 1998.
**Filed herewith.
****Incorporated by reference from Annual Report on Form 10-K for the year
ended December 31, 1998 filed by Radio Unica Corp.
*****Previously filed.
(a) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment and have been filed separately with the Securities
and Exchange Commission.
(b) Financial Statement Schedules.
Schedule I--Condensed Financial Information of Radio Unica Communications
Corp.
Schedule II--Valuation and Qualifying Accounts.
All other financial statement schedules have been omitted because they are
not required, not applicable, or the information to be included in the financial
statement schedules is included in the Consolidated Financial Statements or the
notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
this 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.
The undersigned registrant hereby undertakes that:
(1) It will provide to the underwriters at the closing specified in the
underwriting agreements, certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
(2) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424
(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(3) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and this offering of these securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this amendment to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Miami, State of Florida, on this 7th day of October, 1999.
RADIO UNICA COMMUNICATIONS CORP.
BY: /S/ STEVEN E. DAWSON
-----------------------------------------
Name: Steven E. Dawson
Title: Executive Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment to the Registration Statement has been signed by the following persons
on October 7, 1999 in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ ---------------------------
* /s/ JOAQUIN F. BLAYA Chief Executive Officer and
- ------------------------------ Director (principal
Joaquin F. Blaya executive officer)
/s/ STEVEN E. DAWSON Chief Financial Officer
- ------------------------------ (principal financial
Steven E. Dawson officer) and Director
/s/ MANUEL A. BORGES Chief Accounting Officer
- ------------------------------
Manuel A. Borges
* /s/ JOSE C. CANCELA Director
- ------------------------------
Jose C. Cancela
* /s/ ANDREW C. GOLDMAN Director
- ------------------------------
Andrew C. Goldman
* /s/ SIDNEY LAPIDUS Director
- ------------------------------
Sidney Lapidus
* /s/ JOHN D. SANTOLERI Director
- ------------------------------
John D. Santoleri
<TABLE>
<S> <C> <C> <C>
*By: /s/ STEVEN E. DAWSON
-------------------------
Steven E. Dawson
Attorney-in-fact
</TABLE>
II-6
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF
RADIO UNICA COMMUNICATIONS CORP.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1998
--------------
<S> <C>
ASSETS
Investments in wholly owned subsidiary............................................................ $ (12,184,170)
--------------
--------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Due to subsidiary............................................................................... $ 223,257
Commitments and contingencies
Series A redeemable cumulative preferred stock $.01 par value; 450,000 shares authorized and
353,560 shares issued and outstanding........................................................... 38,266,437
Stockholders' deficit:
Common stock $.01 par value; 40,000,000 shares authorized and 11,071,074 shares issued and
outstanding................................................................................... 110,711
Capital deficiency.............................................................................. (2,724,178)
Accumulated deficit............................................................................. (23,692,057)
--------------
Total stockholders' deficit....................................................................... (26,305,524)
--------------
$ 12,184,170
--------------
--------------
</TABLE>
S-1
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF
RADIO UNICA COMMUNICATIONS CORP.
CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1998
------------------
<S> <C>
Equity in net loss of subsidiary.............................................................. $ (11,352,917)
------------------
Net loss.................................................................................... (11,352,917)
------------------
Accrued dividends on Series A reedemable cumulative preferred stock........................... 1,847,594
------------------
Net loss applicable to common stockholders.................................................... $ (13,200,511)
------------------
------------------
</TABLE>
S-2
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF
RADIO UNICA COMMUNICATIONS CORP.
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1998
------------------
<S> <C>
OPERATING ACTIVITIES:
Net loss...................................................................................... $ (11,352,917)
Adjustments to reconcile net loss to net cash used in operating activities:
Equity in net loss of subsidiary.......................................................... 11,352,917
------------------
Net cash used in operating activities......................................................... --
------------------
FINANCING ACTIVITIES:
Due to subsidiary............................................................................. 223,257
Redemption and cancellation of Series A reedemable preferred stock and common stock........... (223,257)
------------------
Net cash provided by financing activities..................................................... --
------------------
Net increase in cash and cash equivalents..................................................... --
Cash and cash equivalents at the beginning of period.......................................... --
------------------
Cash and cash equivalents at end of period.................................................... $ --
------------------
------------------
</TABLE>
S-3
<PAGE>
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF
RADIO UNICA COMMUNICATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENT
1. BASIS OF PRESENTATION
In the parent company-only financial statements of Radio Unica
Communications Corp. (formerly Radio Unica Holdings Corp.) (the Company), the
investment in the wholly owned subsidiary is stated at cost plus equity in the
net loss of subsidiary since inception. The parent company-only financial
statements should be read in conjunction with Radio Unica Communications Corp.'s
consolidated financial statements which are included herein.
S-4
<PAGE>
RADIO UNICA COMMUNICATIONS CORP.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
ADDITIONS
------------------------- BALANCE AT
BALANCE AT CHARGED CHARGES END OF
BEGINNING OF TO COSTS TO OTHER DESCRIPTION
YEAR AND EXPENSES ACCOUNTS DEDUCTION YEAR
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1998:
Allowance for doubtful trade accounts
Receivable.................................... $ -- $ 118,098 $ -- $ 2,067 $ 116,031
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
Deferred tax valuation allowance................ $ 550,863 $7,290,375 $ -- $ -- $ 7,841,238
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
1997:
Allowance for doubtful trade accounts
Receivable.................................... $ -- $ -- $ -- $ -- $ --
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
Deferred tax valuation allowance................ $ -- $ 550,863 $ -- $ -- $ 550,863
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
1996:
Allowance for doubtful trade accounts
Receivable.................................... $ -- $ -- $ -- $ -- $ --
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
Deferred tax valuation allowance................ $ -- $ -- $ -- $ -- $ --
------------ ------------ ----------- ----------- ------------
------------ ------------ ----------- ----------- ------------
</TABLE>
S-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
INDEX DESCRIPITON
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1** Certificate of Incorporation
3.2** Bylaws.
4.1* Purchase Agreement, dated July 22, 1998, among Radio Unica Corp., each of its subsidiaries set
forth therein, CIBC Oppenheimer Corp. and Bear, Stearns & Co. Inc.
4.2* Indenture dated as of July 27, 1998 between Radio Unica Corp. and Wilmington Trust Company, as
Trustee.
5.1** Opinion of Stroock & Stroock & Lavan LLP
10.1* Credit Agreement, dated as of July 8, 1998 among Radio Unica Corp., Radio Unica Holdings Corp., the
several banks and other financial institutions from time to time parties thereto and Canadian
Imperial Bank of Commerce, in its individual capacity and as Agent ("CIBC").
10.2* Securities Purchase Agreement, dated as of August 11, 1997, by and among Radio Unica Corp.,
Warburg, Pincus Ventures, L.P. and the other investors named therein.
10.3* Supplement to Securities Purchase Agreement, dated as of June, 1998, among Radio Unica Corp., Radio
Unica Holdings Corp., Warburg, Pincus Ventures, L.P. and the other investors named therein.
10.4* Stockholders' Agreement, dated as of June 30, 1998, by and among Radio Unica Holdings Corp.,
Warburg, Pincus Ventures, L.P., Joaquin Blaya, Herbert Levin and the other persons listed therein.
10.5* Time Brokerage Agreement, dated as of October 31, 1997, by and between Radio Unica and Texas Lotus
Corp. relating to KZDC(AM).
10.6*(a) Asset Purchase Agreement, dated as of January 26, 1998, by and among Radio Unica, One-on-One Sports
License of Florida, L.L.C. and One-on-One Sports Radio of Florida, L.L.C.
10.7*(a) Stock Purchase Agreement, dated as of February 20, 1998, by and among Radio Unica, Oro Spanish
Broadcasting, Inc. and Rene De La Rosa.
10.8* Asset Purchase Agreement, dated as of May 20, 1998, by and among Radio Unica, Sinclair Radio of Los
Angeles, Inc. and Sinclair Radio of Los Angeles Licensee, Inc.
10.9* Form of Non Competition and Confidentiality Agreement with each of Joaquin F. Blaya and Steven E.
Dawson, dated August 13, 1997.
10.10* Agreement, dated as of January 15, 1998, entered into by and between Radio Unica Corp. and Jorge
Ramos.
10.11* Amended and Restated Artist Agreement, dated as of June 5, 1998, entered into by and between Radio
Unica Network, Inc. and Raque Productions (for services of Pedro Sevcec).
10.12* Independent Contractor Agreement dated as of June 30, 1998 between Radio Unica Network, Inc. and
Dra Isabel, Inc. (for services of Isabel Gomez Bassols).
10.13* Stock Purchase Agreement, dated as of June 10, 1998, by and among Radio Unica, Blaya, Inc. and
Joaquin F. Blaya.
10.14* Option Agreement, dated as of October 31, 1997, by and between Texas Lotus Corp. and Radio Unica.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
INDEX DESCRIPITON
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
10.15*(a) Agreement, dated as of September 28, 1998, between Radio Unica and Inter/Forever Sports, Inc.
10.16*(a) Agreement, dated as of September 28, 1998, between Radio Unica and Inter/Forever Sports, Inc.
10.17* Asset Purchase Agreement, dated as of October 26, 1998, among Radio Unica, Children's Broadcasting
Corporation, Children's Radio of Dallas, Inc., Children's Radio of Phoenix, Inc. and Children's
Radio of New York, Inc.
10.18* First Amendment to Asset Purchase Agreement, dated as of October 27, 1998, among Radio Unica,
Children's Radio of Dallas, Inc., Children's Radio of Phoenix, Inc., and Children's Radio of New
York, Inc.
10.19**** Asset Purchase Agreement, dated as of February 22, 1999, among Radio Unica, One-on-One Sports
License of Illinois, L.L.C. and One-on-One Sports Radio of Illinois, L.L.C.
21.1***** Subsidiaries
23.1** Consent of Ernst & Young LLP
23.2** Consent of Miller, Kaplan, Arase & Co., LLP
23.3 Consent of Stroock & Stroock & Lavan LLP (included in Exhibit 5.1)
24.1***** Power of Attorney (included on signature page).
27.1***** Financial data schedule
27.2***** Financial data schedule
</TABLE>
- ------------------------
*Incorporated by reference from Registration Statement on Form S-4 (No.
333-61211) of Radio Unica Corp., as amended, as declared effective by the
Securities and Exchange Commission on December 18, 1998.
**Filed herewith.
****Incorporated by reference from Annual Report on Form 10-K for the year
ended December 31, 1998 filed by Radio Unica Corp.
*****Previously filed.
(a) Portions of this exhibit have been omitted pursuant to a request for
confidential treatment and have been filed separately with the Securities
and Exchange Commission.
<PAGE>
Exhibit 1.1
Radio Unica Communications Corp.
5,700,000 Shares (a)
Common Stock
($.01 par value)
Underwriting Agreement
New York, New York
October __, 1999
Salomon Smith Barney Inc.
Bear, Stearns & Co. Inc.
CIBC World Markets
Donaldson, Lufkin & Jenrette Securities
As Representatives of the several Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Radio Unica Communications Corp., a corporation organized under the
laws of Delaware (the "Company"), proposes to sell to the several underwriters
named in Schedule I hereto (the "Underwriters"), for whom you (the
"Representatives") are acting as representatives, 5,700,000 shares of Common
Stock, $.01 par value ("Common Stock") of the Company (said shares to be issued
and sold by the Company being hereinafter called the "Underwritten Securities").
The persons named in Schedule II hereto (the "Selling Stockholders") also
propose to grant to the Underwriters an option to purchase up to 855,000
additional shares of Common Stock to cover over-allotments (the "Option
Securities"; the Option Securities, together with the Underwritten Securities,
being hereinafter called the "Securities"). To the extent there are no
additional Underwriters listed on Schedule I other than you, the term
Representatives as used herein shall mean you, as Underwriters, and the terms
Representatives and Underwriters shall mean either the singular or plural as the
context requires. In addition, to the extent that there is not more than one
Selling Stockholder named in Schedule II, the term Selling Stockholders shall
mean either the singular or plural. The use of the neuter in this Agreement
shall include the feminine and masculine wherever appropriate. Certain terms
used herein are defined in Section 17 hereof.
- ----------------
(a) Plus an option to purchase from the Selling Stockholders up to
855,000 additional Securities to cover over-allotments.
<PAGE>
As part of the offering contemplated by this Agreement, Salomon Smith
Barney Inc. ("Salomon Smith Barney") has agreed to reserve out of the Securities
set forth opposite its name on Schedule I hereto, up to _______ shares, for sale
to the Company's employees, officers, and directors and other parties associated
with the Company (collectively, "Participants"), as set forth in the Prospectus
under the heading "Underwriting" (the "Directed Share Program"). The Securities
to be sold by Salomon Smith Barney pursuant to the Directed Share Program (the
"Directed Shares") will be sold by Salomon Smith Barney pursuant to this
Agreement at the public offering price. Any Directed Shares not orally confirmed
for purchase by any Participants by the end of the business day on which this
Agreement is executed will be offered to the public by Salomon Smith Barney as
set forth in the Prospectus.
1. REPRESENTATIONS AND WARRANTIES.
(i) The Company represents and warrants to, and agrees with, each
Underwriter as set forth below in this Section 1.
(a) The Company has prepared and filed with the Commission a
registration statement (file number 333-82561) on Form S-1, including a
related preliminary prospectus, for registration under the Act of the
offering and sale of the Securities. The Company may have filed one or
more amendments thereto, including a related preliminary prospectus,
each of which has previously been furnished to you. The Company will
next file with the Commission either (1) prior to the Effective Date of
such registration statement, a further amendment to such registration
statement (including the form of final prospectus) or (2) after the
Effective Date of such registration statement, a final prospectus in
accordance with Rules 430A and 424(b). In the case of clause (2), the
Company has included in such registration statement, as amended at the
Effective Date, all information (other than Rule 430A Information)
required by the Act and the rules thereunder to be included in such
registration statement and the Prospectus. As filed, such amendment and
form of final prospectus, or such final prospectus, shall contain all
Rule 430A Information, together with all other such required
information, and, except to the extent the Representatives shall agree
in writing to a modification, shall be in all substantive respects in
the form furnished to you prior to the Execution Time or, to the extent
not completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company has advised you, prior to
the Execution Time, will be included or made therein.
(b) The Securities are to be offered and sold to United States
and Canadian Persons (as defined herein). For purposes of distribution
to Canadian Persons the Prospectus shall have a Canadian "wrap-around"
(the "Canadian Offering Memorandum"). Insofar as it relates to offers
or sales of Securities in Canada, all references to the Prospectus
shall include the Canadian Offering Memorandum.
2
<PAGE>
(c) On the Effective Date, the Registration Statement did or
will, and when the Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date (as defined herein)
and on any date on which Option Securities are purchased, if such date
is not the Closing Date (a "settlement date"), the Prospectus (and any
supplements thereto) will, comply in all material respects with the
applicable requirements of the Act and the rules thereunder; on the
Effective Date and at the Execution Time, the Registration Statement
did not or will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and,
on the Effective Date, the Prospectus, if not filed pursuant to Rule
424(b), will not, and on the date of any filing pursuant to Rule 424(b)
and on the Closing Date and any settlement date, the Prospectus
(together with any supplement thereto) will not, include any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that the Company makes no representations or warranties as to
the information contained in or omitted from the Registration
Statement, or the Prospectus (or any supplement thereto) in reliance
upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through the Representatives
specifically for inclusion in the Registration Statement or the
Prospectus (or any supplement thereto).
(d) (i) the Registration Statement, the Prospectus and any
preliminary prospectus comply, and any further amendments or
supplements thereto will comply, with any applicable laws or
regulations of foreign jurisdictions in which the Prospectus or any
preliminary prospectus, as amended or supplemented, if applicable, are
distributed in connection with the Directed Share Program, and that
(ii) no authorization, approval, consent, license, order, registration
or qualification of or with any government, governmental
instrumentality or court, other than such as have been obtained, is
necessary under the securities laws and regulations of foreign
jurisdictions in which the Directed Shares are offered outside the
United States.
(e) The Company has not offered, or caused the Underwriters to
offer, Securities to any person pursuant to the Directed Share Program
with the specific intent to unlawfully influence (i) a customer or
supplier of the Company to alter the customer's or supplier's level or
type of business with the Company, or (ii) a trade journalist or
publication to write or publish favorable information about the Company
or its products.
(f) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or
organized with full corporate power and authority to own or lease, as
the case may be, and to operate its properties and conduct its business
as described in the Prospectus, and is duly qualified to do business as
a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification wherein it owns or
leases material
3
<PAGE>
properties or conducts material business and where the failure to be so
qualified would, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and its subsidiaries,
taken as a whole, whether or not arising from transactions in the
ordinary course of business, except as set forth in or contemplated in
the Prospectus (exclusive of any supplement thereto); notwithstanding
the foregoing, either the Company or its relevant subsidiary is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of Arizona, California, Colorado, Florida,
Illinois, New York and Texas.
(g) All the outstanding shares of capital stock of each
Subsidiary (as defined in paragraph (dd) of this Section 1) have been
duly and validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth in the Prospectus,
all outstanding shares of capital stock of the Subsidiaries are owned
by the Company either directly or through wholly owned subsidiaries
free and clear of any perfected security interest or any other security
interests, claims, liens or encumbrances.
(h) The Company's authorized equity capitalization is as set
forth in the Prospectus; the capital stock of the Company conforms in
all material respects to the description thereof contained in the
Prospectus; the outstanding shares of Common Stock (including the
Securities being sold hereunder by the Selling Stockholders) have been
duly and validly authorized and issued and are fully paid and
nonassessable; the Securities being sold hereunder by the Company have
been duly and validly authorized, and, when issued and delivered to and
paid for by the Underwriters pursuant to this Agreement, will be fully
paid and nonassessable; the Securities being sold by the Selling
Stockholders are duly listed, and admitted and authorized for trading,
on the Nasdaq National Market and the Securities being sold hereunder
by the Company are duly listed, and admitted and authorized for
trading, subject to official notice of issuance and evidence of
satisfactory distribution, on the Nasdaq National Market; the
certificates for the Securities are in valid and sufficient form; the
holders of outstanding shares of capital stock of the Company are not
entitled to preemptive or other rights to subscribe for the Securities
except for such rights as have been effectively waived; and, except as
set forth in the Prospectus, no options, warrants or other rights to
purchase, agreements or other obligations to issue, or rights to
convert any obligations into or exchange any securities for, shares of
capital stock of or ownership interests in the Company are outstanding.
(i) There is no license, permit, franchise, contract or other
document of a character required to be described in the Registration
Statement or Prospectus, or to be filed as an exhibit thereto, which is
not described or filed as required; and the statements in the
Prospectus under the headings "Business - Radio Stations", "Business -
Federal Regulation of Radio Broadcasting" and "Business - Legal
Proceedings" fairly summarize the matters therein described.
4
<PAGE>
(j) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding obligation
of the Company enforceable against the Company in accordance with its
terms.
(k) The Company is not and, after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as defined in the Investment Company Act of 1940, as amended.
(l) No consent, approval, authorization, filing with or order
of any court or governmental agency or body is required in connection
with the transactions contemplated herein, except such as have been
obtained under the Act , the federal and provincial securities laws of
Canada or the blue sky laws of any jurisdiction in connection with the
purchase and distribution of the Securities by the Underwriters in the
manner contemplated herein and in the Prospectus.
(m) Neither the issue and sale of the Securities nor the
consummation of any other of the transactions herein contemplated nor
the fulfillment of the terms hereof will conflict with, result in a
breach or violation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries
pursuant to, (i) the charter or by-laws of the Company or any of its
subsidiaries, (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which the
Company or any of its subsidiaries is a party or bound or to which its
or their property is subject, (iii) the Communications Act of 1934, as
amended, and the rules, regulations and administrative orders
promulgated thereunder (collectively, the "Federal Communications
Law"), (iv) any other statute, law, rule, regulation, judgment, order
or decree applicable to the Company or any of its subsidiaries of any
court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or
any of its subsidiaries or any of its or their properties, or (v) the
Permits (as defined in paragraph (y)(i) of this Section 1) .
(n) No holders of securities of the Company have rights to the
registration of such securities under the Registration Statement except
for such rights as have been effectively waived.
(o) The consolidated historical financial statements and
schedules of the Company and its consolidated subsidiaries included in
the Prospectus and the Registration Statement present fairly in all
material respects the financial condition, results of operations and
cash flows of the Company as of the dates and for the periods
indicated, comply as to form with the applicable accounting
requirements of the Act and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as otherwise noted therein).
The selected financial data set forth under the caption "Summary
Consolidated Financial Data" and "Selected Consolidated Financial Data"
in the Prospectus and Registration Statement fairly
5
<PAGE>
present, on the basis stated in the Prospectus and the Registration
Statement, the information included therein. The pro forma financial
statements included in the Prospectus and the Registration Statement
include assumptions that provide a reasonable basis for presenting the
significant effects directly attributable to the transactions and
events described therein, the related pro forma adjustments give
appropriate effect to those assumptions, and the pro forma adjustments
reflect the proper application of those adjustments to the historical
financial statement amounts in the pro forma financial statements
included in the Prospectus and the Registration Statement. The pro
forma financial statements included in the Prospectus and the
Registration Statement comply as to form in all material respects with
the applicable accounting requirements of Regulation S-X under the Act
and the pro forma adjustments have been properly applied to the
historical amounts in the compilation of those statements.
(p) No action, suit or proceeding by or before any court or
governmental agency, authority or body, including but not limited to
the Federal Communications Commission (the "FCC") or any arbitrator
involving the Company or any of its subsidiaries or its or their
property is pending or, to the best knowledge of the Company,
threatened that (i) could reasonably be expected to have a material
adverse effect on the performance of this Agreement or the consummation
of any of the transactions contemplated hereby or (ii) could reasonably
be expected to have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto).
(q) Each of the Company and each of its subsidiaries owns or
leases all such properties as are necessary to the conduct of its
operations as presently conducted.
(r) Neither the Company nor any subsidiary is in violation or
default of (i) any provision of its charter or bylaws, (ii) the terms
of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which it is a party or bound or to which its
property is subject, except where such violation or default would not
have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement
thereto), or (iii) any statute, law, including but not limited to the
Federal Communications Law, rule, regulation, judgment, order or decree
of any court, regulatory body, administrative agency, governmental
body, including but not limited to the FCC, arbitrator or other
authority having jurisdiction over the Company or such subsidiary or
any of its properties, as applicable, except where such violation or
default would not have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or properties
of the
6
<PAGE>
Company and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except as set
forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).
(s) Ernst & Young LLP, who have certified certain financial
statements of the Company and its consolidated subsidiaries and
delivered their report with respect to the audited consolidated
financial statements and schedules included in the Prospectus, and
Miller, Kaplan, Arase & Co., LLP, who have certified certain financial
statements of Oro Spanish Broadcasting, Inc. and delivered their report
with respect to the audited consolidated financial statements of Oro
Spanish Broadcasting, Inc., are independent public accountants with
respect to the Company within the meaning of the Act and the applicable
published rules and regulations thereunder.
(t) There are no transfer taxes or other similar fees or
charges under Federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance by the Company
or sale by the Company of the Securities.
(u) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file
would not have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement thereto)
and has paid all taxes required to be paid by it and any other
assessment, fine or penalty levied against it, to the extent that any
of the foregoing is due and payable, except for any such assessment,
fine or penalty that is currently being contested in good faith or as
would not have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement
thereto).
(v) No labor problem or dispute with the employees of the
Company or any of its subsidiaries exists or, to the knowledge of the
Company, is threatened or pending, and the Company is not aware of any
existing or pending labor disturbance by the employees of any of its or
its subsidiaries' principal suppliers, contractors or customers, that
could have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement
thereto).
(w) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such
7
<PAGE>
amounts as are prudent and customary in the businesses in which they
are engaged; all policies of insurance and fidelity or surety bonds
insuring the Company or any of its subsidiaries or their respective
businesses, assets, employees, officers and directors are in full force
and effect; the Company and its subsidiaries are in compliance with the
terms of such policies and instruments in all material respects; and
there are no claims by the Company or any of its subsidiaries under any
such policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause; and
neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost
that would not have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto).
(x) No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from
making any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such subsidiary from
the Company or from transferring any of such subsidiary's property or
assets to the Company or any other subsidiary of the Company, except as
described in or contemplated by the Prospectus.
(y) (i) The Company and its subsidiaries possess all licenses,
certificates, permits, consents, orders, approvals and other
authorizations issued by and have made all declarations and filings
with the appropriate Federal, state, local or foreign governmental
authorities, including but not limited to the FCC, all self-regulatory
organizations and all courts and other tribunals presently required or
necessary to own or lease, as the case may be, and to operate their
respective properties and to conduct their respective businesses as now
or proposed to be conducted as set forth in the Prospectus (the
"Permits"), except where the failure to obtain the Permits would not
have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement
thereto), and neither the Company nor any such subsidiary has received
any notice of proceedings relating to the revocation or modification of
any such Permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse
effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course
of business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto) and the Company knows of no
reason why any such proceedings might be initiated; (ii) each of the
Company and its subsidiaries has fulfilled and performed in all
material respects all of its obligations with respect to
8
<PAGE>
and is in compliance with the terms and conditions of such Permits and
no event has occurred which allows, or after notice or lapse of time
would allow, revocation or modification thereof or results in any other
material impairment of the rights of the holder of any such Permit,
except where such revocation or modification would not, individually or
in the aggregate, have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectus (exclusive of any
supplement; and (iii) all of the Permits are valid and in full force
and effect, for the maximum term customarily issued, with no material
conditions, restrictions or qualifications, except when the invalidity
of such Permits or the failure of such Permits to be in full force and
effect or the restrictions would not have a material adverse effect on
the condition (financial or otherwise), prospects, earnings, business
or properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(z) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(aa) The Company has not taken, directly or indirectly, any
action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(bb) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, Federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received and are in
compliance with all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective
businesses, (iii) have not received notice of any actual or potential
liability for the investigation or remediation of any disposal or
release of hazardous or toxic substances or wastes, pollutants or
contaminants and (iv) are not subject to any costs, liabilities, or
pending or threatened claims or proceedings arising from, relating to
or based on the Environmental Laws, except where such non-compliance
with Environmental Laws, failure to receive required permits,
9
<PAGE>
licenses or other approvals, or costs, liabilities, claims or
proceedings would not, individually or in the aggregate, have a
material adverse change in the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement
thereto). Except as set forth in the Prospectus, neither the Company
nor any of the subsidiaries has been named as a "potentially
responsible party" under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
(cc) Each of the Company and its subsidiaries has fulfilled
its obligations, if any, under the minimum funding standards of Section
302 of the United States Employee Retirement Income Security Act of
1974 ("ERISA") and the regulations and published interpretations
thereunder with respect to each "plan" (as defined in Section 3(3) of
ERISA and such regulations and published interpretations) in which
employees of the Company and its subsidiaries are eligible to
participate and each such plan is in compliance in all material
respects with the presently applicable provisions of ERISA and such
regulations and published interpretations. The Company and its
subsidiaries have not incurred any unpaid liability to the Pension
Benefit Guaranty Corporation (other than for the payment of premiums in
the ordinary course) or to any such plan under Title IV of ERISA.
(dd) The subsidiaries listed on Annex A attached hereto are
the only significant subsidiaries of the Company as defined by Rule
1-02 of Regulation S-X (the "Subsidiaries").
(ee) The Company and its subsidiaries own, possess, license or
have other rights to use, on reasonable terms, all patents, patent
applications, trade and service marks, trade and service mark
registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, know-how and other intellectual property
(collectively, the "Intellectual Property") necessary for the conduct
of the Company's business as now conducted or as proposed in the
Prospectus to be conducted. Except as set forth in the Prospectus under
the caption "Business - Patents, Trademarks, Licenses, Franchises and
Concessions", (a) to the Company's knowledge, there are no rights of
third parties to any such Intellectual Property; (b) to the Company's
best knowledge, there is no material infringement by third parties of
any such Intellectual Property; (c) there is no pending or, to the
Company's best knowledge, threatened action, suit, proceeding or claim
by others challenging the Company's rights in or to any such
Intellectual Property, and the Company is unaware of any facts which
would form a reasonable basis for any such claim; (d) to the Company's
best knowledge, there is no pending or threatened action, suit,
proceeding or claim by others challenging the validity or scope of any
such Intellectual Property, and the Company is unaware of any facts
which would form a reasonable basis for any such claim; (e) there is no
pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others that the Company infringes or otherwise
violates any patent, trademark,
10
<PAGE>
copyright, trade secret or other proprietary rights of others, and the
Company is unaware of any other fact which would form a reasonable
basis for any such claim.
(ff) The Company and its subsidiaries have taken initiatives
to analyze and address the risk that the computer hardware and software
used by them may be unable to recognize and properly execute
date-sensitive functions involving certain dates prior to and any dates
after December 31, 1999 (the "Year 2000 Problem"), and reasonably
believe that such risk has been or will be remedied on a timely basis
without material expense and will not have a material adverse effect
upon the financial condition and results of operations of the Company
and its subsidiaries, taken as a whole; and the Company believes, after
a reasonable assessment, that each supplier, vendor, customer or
financial service organization used or serviced by the Company and its
subsidiaries has remedied or will remedy on a timely basis the Year
2000 Problem, except to the extent that a failure to remedy by any such
supplier, vendor, customer or financial service organization would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole. The Company is in compliance with Commission Release
Nos. 33-7558 and 33-7609 related to Year 2000 compliance, as amended or
supplemented to date.
(gg) The statistical and market and industry-related data
included in the Prospectus are based on or derived from sources which
the Company believes to be reliable and accurate or represent the
Company's good faith estimates that are made on the basis of data
derived from such sources.
(hh) Except as stated in the Prospectus, the Company does not
know of any claims for services, either in the nature of a finder's fee
or financial advisory fee, with respect to the offering of the
Securities and the transactions contemplated by the Prospectus.
(ii) Except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto), none of the Company or its
subsidiaries is in default under any of the contracts described in the
Prospectus, has received a notice or claim of any such default or has
knowledge of any breach of such contracts by the other party or parties
thereto, except such defaults or breaches as would not, individually or
in the aggregate, have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto).
(jj) Except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto), none of the Company or its
subsidiaries has taken or will take any action that would cause this
Agreement or the issuance or sale of the Securities to violate
Regulation T, U or X of the Board of Governors of the
11
<PAGE>
Federal Reserve System, in each case as in effect, or as the same may
hereafter be in effect, on the Closing Date.
(kk) Each of the Company and its subsidiaries has good and
marketable title to all real property described in the Prospectus as
being owned by it and good and marketable title to the leasehold estate
in the real property described therein as being leased by it, free and
clear of all liens, charges, encumbrances or restrictions, except, in
each case, as described in the Prospectus or such as would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto). All leases, contracts and
agreements, including those referred to in the Prospectus to which the
Company or any of its subsidiaries is a party or by which any of them
is bound are valid and enforceable against the Company or any such
subsidiary, are valid and enforceable against the other party or
parties thereto and are in full force and effect, except where the
failure to be valid and enforceable against the other party or other
parties thereto or to be in full force and effect would not have a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement
thereto).
(ll) Subsequent to the respective dates as of which
information is given in the Prospectus and except as described therein,
(i) the Company and its subsidiaries have not incurred any material
liabilities or obligations, direct or contingent, or entered into any
material transactions, in either case whether or not in the ordinary
course of business and (ii) there shall not have been any change in the
capital stock or long-term indebtedness of the Company or any of the
subsidiaries.
Any certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Underwriters in connection
with the offering of the Securities shall be deemed a representation and
warranty by the Company, as to matters covered thereby, to each Underwriter.
(ii) Each Selling Stockholder severally, and not jointly and
severally, represents and warrants to, and agrees with, each Underwriter that:
(a) Such Selling Stockholder is the record and beneficial
owner of the Option Securities free and clear of all liens,
encumbrances, equities or claims and have duly indorsed such Option
Securities [in blank], and assuming that each Underwriter acquires its
interest in the Option Securities it has purchased without notice of
any adverse claim (within the meaning of Section 8-105 of the UCC),
each Underwriter that has purchased Option Securities delivered to the
Depository
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Trust Company (the "DTC") will have acquired a security entitlement
(within the meaning of Section 8-102(a)(17) of the UCC) to such Option
Securities purchased by such Underwriter, and no action based on an
adverse claim, may be asserted against such Underwriter with respect to
such Option Securities.
(b) Such Selling Stockholder has not taken, directly or
indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result, under the Exchange Act
or otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities.
(c) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation by such
Selling Stockholder of the transactions contemplated herein, except
such as may have been obtained under the Act , the federal and
provincial securities laws of Canada or the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters and such other approvals as have been
obtained.
(d) Neither the sale of the Securities being sold by such
Selling Stockholder nor the consummation of any other of the
transactions herein contemplated by such Selling Stockholder or the
fulfillment of the terms hereof by such Selling Stockholder will
conflict with, result in a breach or violation of, or constitute a
default under any law or the charter or by-laws or partnership
agreement of such Selling Stockholder or the terms of any indenture or
other agreement or instrument to which such Selling Stockholder is a
party or bound, or any judgment, order or decree applicable to such
Selling Stockholder of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over such
Selling Stockholder.
(e) Such Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in this Section
1 are not true and correct in all material respects, is familiar with
the Registration Statement and has no knowledge of any material fact,
condition or information not disclosed in the Prospectus or any
supplement thereto which has adversely affected or may adversely affect
the business of the Company and its subsidiaries taken as a whole.
(f) In respect of any statements in or omissions from the
Registration Statement or the Prospectus or any supplements thereto
made in reliance upon and in conformity with information furnished in
writing to the Company by such Selling Stockholder specifically for use
in connection with the preparation thereof, such Selling Stockholder
hereby makes the same representations and warranties to each
Underwriter as the Company makes to such Underwriter under paragraph
(i)(c) of this Section.
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Any certificate signed by any officer or representative of any
Selling Stockholder and delivered to the Representatives or counsel for the
Underwriters in connection with the offering of the Securities shall be deemed a
representation and warranty by such Selling Stockholder, as to matters covered
thereby, to each Underwriter.
2. PURCHASE AND SALE. (a) Subject to the terms and conditions
and in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
$ per share, the amount of the Underwritten Securities set forth opposite such
Underwriter's name in Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Selling Stockholders
named in Schedule II hereto hereby grant an option to the several Underwriters
to purchase, severally and not jointly, up to 855,000 Option Securities at the
same purchase price per share as the Underwriters shall pay for the Underwritten
Securities. Said option may be exercised only to cover over-allotments in the
sale of the Underwritten Securities by the Underwriters. Said option may be
exercised in whole or in part at any time (but not more than once) on or before
the 30th day after the date of the Prospectus upon written or telegraphic notice
by the Representatives to the Company and such Selling Stockholders setting
forth the number of shares of the Option Securities as to which the several
Underwriters are exercising the option and the settlement date. The number of
Option Securities to be purchased by each Underwriter shall be the same
percentage of the total number of shares of the Option Securities to be
purchased by the several Underwriters as such Underwriter is purchasing of the
Underwritten Securities, subject to such adjustments as you in your absolute
discretion shall make to eliminate any fractional shares.
3. DELIVERY AND PAYMENT. Delivery of and payment for the
Underwritten Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the third Business
Day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
[October] , 1999, or at such time on such later date not more than three
Business Days after the foregoing date as the Representatives shall designate,
which date and time may be postponed by agreement among the Representatives, the
Company and the Selling Stockholders or as provided in Section 9 hereof (such
date and time of delivery and payment for the Securities being herein called the
"Closing Date"). Delivery of the Securities shall be made to the Representatives
for the respective accounts of the several Underwriters against payment by the
several Underwriters through the Representatives of the respective aggregate
purchase prices of the Securities being sold by the Company and each of the
Selling Stockholders to or upon the order of the Company and the Selling
Stockholders by wire transfer payable in same-day funds to the accounts
specified by the Company and the Selling Stockholders. Delivery of the
Underwritten Securities and the Option Securities shall be made through the
facilities of DTC unless the Representatives shall otherwise instruct.
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Each Selling Stockholder will pay all applicable state
transfer taxes, if any, involved in the transfer to the several Underwriters of
the Securities to be purchased by them from such Selling Stockholder and the
respective Underwriters will pay any additional stock transfer taxes involved in
further transfers.
If the option provided for in Section 2(b) hereof is exercised
after the third Business Day prior to the Closing Date, the Selling Stockholders
named in Schedule II hereto will deliver the Option Securities (at the expense
of the Company) to the Representatives, at 388 Greenwich Street, New York, New
York, on the date specified by the Representatives (which shall be within three
Business Days after exercise of said option) for the respective accounts of the
several Underwriters, against payment by the several Underwriters through the
Representatives of the purchase price thereof to or upon the order of the
Selling Stockholders named in Schedule II by wire transfer payable in same-day
funds to the accounts specified by the Selling Stockholders named in Schedule II
hereto. If settlement for the Option Securities occurs after the Closing Date,
the Selling Stockholders will deliver to the Representatives on the settlement
date for the Option Securities, and the obligation of the Underwriters to
purchase the Option Securities shall be conditioned upon receipt of,
supplemental opinions, certificates and letters confirming as of such date the
opinions, certificates and letters delivered on the Closing Date pursuant to
Section 6 hereof.
4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. AGREEMENTS.
(i) The Company agrees with the several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the Securities, the Company will not file any amendment of
the Registration Statement or supplement to the Prospectus or any Rule
462(b) Registration Statement unless the Company has furnished you a
copy for your review prior to filing and will not file any such
proposed amendment or supplement to which you reasonably object.
Subject to the foregoing sentence, if the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the
Prospectus is otherwise required under Rule 424(b), the Company will
cause the Prospectus, properly completed, and any supplement thereto to
be filed with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed and will provide evidence
satisfactory to the Representatives of such timely filing. The Company
will promptly advise the Representatives (1) when the Registration
Statement, if not effective at the Execution Time, shall have become
effective, (2) when the Prospectus, and any supplement thereto, shall
have been filed (if required) with the Commission pursuant to Rule
424(b) or when any Rule 462(b) Registration Statement shall have been
filed with the Commission, (3) when, prior
15
<PAGE>
to termination of the offering of the Securities, any amendment to the
Registration Statement shall have been filed or become effective, (4)
of any request by the Commission or its staff for any amendment of the
Registration Statement, or any Rule 462(b) Registration Statement, or
for any supplement to the Prospectus or for any additional information,
(5) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (6) of the receipt
by the Company of any notification with respect to the suspension of
the qualification of the Securities for sale in any jurisdiction or the
institution or threatening of any proceeding for such purpose. The
Company will use its best efforts to prevent the issuance of any such
stop order or the suspension of any such qualification and, if issued,
to obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs
as a result of which the Prospectus as then supplemented would include
any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall
be necessary to amend the Registration Statement or supplement the
Prospectus to comply with the Act or the rules thereunder, the Company
promptly will (1) notify the Representatives of any such event, (2)
prepare and file with the Commission, subject to the second sentence of
paragraph (i)(a) of this Section 5, an amendment or supplement which
will correct such statement or omission or effect such compliance and
(3) supply any supplemented Prospectus to you in such quantities as you
may reasonably request.
(c) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an
earnings statement or statements of the Company and its subsidiaries
which will satisfy the provisions of Section 11(a) of the Act and Rule
158 under the Act.
(d) The Company will furnish to the Representatives and
counsel for the Underwriters signed copies of the Registration
Statement (including exhibits thereto) and to each other Underwriter a
copy of the Registration Statement (without exhibits thereto) and, so
long as delivery of a prospectus by an Underwriter or dealer may be
required by the Act, as many copies of each Preliminary Prospectus and
the Prospectus and any supplement thereto as the Representatives may
reasonably request.
(e) The Company will arrange, if necessary, for the
qualification of the Securities for sale under the laws of such
jurisdictions as the Representatives may designate and will maintain
such qualifications in effect so long as required for the distribution
of the Securities; provided that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not
now so qualified or to take any action that would subject it to service
of process in suits, other than those arising out of the offering or
sale of the Securities, in any jurisdiction where it is not now so
subject.
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<PAGE>
(f) The Company will not, without the prior written consent of
Salomon Smith Barney, offer, sell, contract to sell, pledge or
otherwise dispose of (or enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to
cash settlement or otherwise) by the Company or any affiliate of the
Company), directly or indirectly, including the filing (or
participation in the filing) of a registration statement with the
Commission in respect of, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position within the
meaning of Section 16 of the Exchange Act, any other shares of Common
Stock or any securities convertible into, or exercisable, or
exchangeable for, shares of Common Stock; or publicly announce an
intention to effect any such transaction, for a period of 180 days
after the date of this Agreement, provided, however, that the Company
may issue and sell Common Stock pursuant to any employee stock option
plan, stock ownership plan or dividend reinvestment plan of the Company
in effect at the Execution Time and the Company may issue Common Stock
issuable upon the conversion of securities or the exercise of warrants
outstanding at the Execution Time. [CARVE-OUT FOR COMMON STOCK AND
OPTIONS TO PURCHASE COMMON STOCK SOLD IN CONNECTION WITH ACQUISITIONS
OR JOINT VENTURES UNDER CONSIDERATION BY THE UNDERWRITERS].
(g) The Company will not take, directly or indirectly, any
action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(h) The Company agrees to pay the costs and expenses relating
to the following matters: (i) the preparation, printing or reproduction
and filing with the Commission of the Registration Statement (including
financial statements and exhibits thereto), each Preliminary
Prospectus, the Prospectus, and each amendment or supplement to any of
them; (ii) the printing (or reproduction) and delivery (including
postage, air freight charges and charges for counting and packaging) of
such copies of the Registration Statement, each Preliminary Prospectus,
the Prospectus, and all amendments or supplements to any of them, as
may, in each case, be reasonably requested for use in connection with
the offering and sale of the Securities; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the
Securities, including any stamp or transfer taxes in connection with
the original issuance and sale of the Securities; (iv) the printing (or
reproduction) and delivery of this Agreement, any blue sky memorandum
and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Securities; (v) the
registration of the Securities under the Exchange Act and the listing
of the Securities on the Nasdaq National Market; (vi) any registration
or qualification of the Securities for offer and sale under the
securities or blue sky laws of the several states (including filing
fees and the reasonable fees and expenses of counsel for the
Underwriters relating to such registration and qualification); (vii)
any filings required to be
17
<PAGE>
made with the National Association of Securities Dealers, Inc.
(including filing fees and the reasonable fees and expenses of counsel
for the Underwriters relating to such filings); (viii) the
transportation and other expenses incurred by or on behalf of Company
representatives in connection with presentations to prospective
purchasers of the Securities; (ix) the fees and expenses of the
Company's accountants and the fees and expenses of counsel (including
local and special counsel) for the Company and the Selling
Stockholders; and (x) all other costs and expenses incident to the
performance by the Company and the Selling Stockholders of their
obligations hereunder.
(i) The Company will apply the net proceeds from the sale of
the Securities as set forth under "Use of Proceeds" in the Prospectus.
(j) In connection with the Directed Share Program, the Company
will ensure that the Directed Shares will be restricted to the extent
required by the National Association of Securities Dealers, Inc. (the
"NASD") or the NASD rules from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of the
effectiveness of the Registration Statement. Salomon Smith Barney will
notify the Company as to which Participants will need to be so
restricted. The Company will direct the removal of the transfer
restrictions upon the expiration of such period of time.
(k) The Company will pay all fees and disbursements of counsel
incurred by the Underwriters in connection with the Directed Share
Program and stamp duties, similar taxes or duties or other taxes, if
any, incurred by the Underwriters in connection with the Directed Share
Program.
Furthermore, the Company covenants with Salomon Smith Barney
that the Company will comply with all applicable securities and other
applicable laws, rules and regulations in each foreign jurisdiction in
which the Directed Shares are offered in connection with the Directed
Share Program.
(ii) Each Selling Stockholder severally, and not jointly and
severally, agrees with the several Underwriters that:
(a) Such Selling Stockholder will not, without the prior
written consent of Salomon Smith Barney, offer, sell, contract to sell,
pledge or otherwise dispose of, (or enter into any transaction which is
designed to, or might reasonably be expected to, result in the
disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Selling
Stockholder or any affiliate of the Selling Stockholder) directly or
indirectly, or file (or participate in the filing of) a registration
statement with the Commission in respect of, or establish or increase a
put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Exchange Act with
respect to, any shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for such
capital stock, or publicly announce an intention to effect any such
transaction, for a period of
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<PAGE>
180 days after the date of this Agreement, other than shares of Common
Stock disposed of as bona fide gifts subject to the restrictions in
this Section 5(ii)(a) or transfers to its limited partners who take
subject to the restrictions in this Section 5(ii)(a).
(b) Such Selling Stockholder will not take any action designed
to or which has constituted or which might reasonably be expected to
cause or result, under the Exchange Act or otherwise, in stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities.
(c) Such Selling Stockholder will advise you promptly, and if
requested by you, will confirm such advice in writing, so long as
delivery of a prospectus relating to the Securities by an underwriter
or dealer may be required under the Act, of (i) any material change in
the Company's condition (financial or otherwise), prospects, earnings,
business or properties which comes to the attention of such Selling
Stockholder, (ii) any change in information in the Registration
Statement or the Prospectus relating to such Selling Stockholder or
(iii) any new material information relating to the Company or relating
to any matter stated in the Prospectus which comes to the attention of
such Selling Stockholder.
6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholders contained herein as of the Execution Time, the Closing Date and any
settlement date pursuant to Section 3 hereof, to the accuracy of the statements
of the Company and the Selling Stockholders made in any certificates pursuant to
the provisions hereof, to the performance by the Company and the Selling
Stockholders of their respective obligations hereunder and to the following
additional conditions:
(a) If the Registration Statement has not become effective
prior to the Execution Time, unless the Representatives agree in
writing to a later time, the Registration Statement will become
effective not later than (i) 6:00 PM New York City time on the date of
determination of the public offering price, if such determination
occurred at or prior to 3:00 PM New York City time on such date or (ii)
9:30 AM on the Business Day following the day on which the public
offering price was determined, if such determination occurred after
3:00 PM New York City time on such date; if filing of the Prospectus,
or any supplement thereto, is required pursuant to Rule 424(b), the
Prospectus, and any such supplement, will be filed in the manner and
within the time period required by Rule 424(b); and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or threatened.
(b) The Company shall have requested and caused Stroock &
Stroock & Lavan LLP, counsel for the Company, to have furnished to the
Representatives
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<PAGE>
their opinion (which opinion shall not include matters relating to the
Federal Communications Law), dated the Closing Date and addressed to
the Representatives, to the effect that:
(i) each of the Company and the Subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or
organized, with full corporate power and authority to own or lease, as
the case may be, and to operate its properties and conduct its business
as described in the Prospectus, and is duly qualified to do business as
a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification wherein it owns or
leases material properties or conducts material business and where the
failure to be so qualified would, individually or in the aggregate,
have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement
thereto); notwithstanding the foregoing, either the Company or its
relevant subsidiary is duly qualified to do business as a foreign
corporation and is in good standing under the laws of Arizona,
California, Colorado, Florida, Illinois, New York and Texas;
(ii) all the outstanding shares of capital stock of each
Subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, and, except as otherwise set forth in the
Prospectus, all outstanding shares of capital stock of the Subsidiaries
are owned by the Company either directly or through wholly owned
subsidiaries free and clear of any perfected security interest and, to
the knowledge of such counsel, any other security interest, claim, lien
or encumbrance;
(iii) the Company's authorized equity capitalization is as set
forth in the Prospectus; the capital stock of the Company conforms in
all material respects to the description thereof contained in the
Prospectus; the outstanding shares of Common Stock (including the
Securities being sold hereunder by the Selling Stockholders) have been
duly and validly authorized and issued and are fully paid and
nonassessable; the Securities being sold hereunder by the Company have
been duly and validly authorized, and, when issued and delivered to and
paid for by the Underwriters pursuant to this Agreement, will be fully
paid and nonassessable; the Securities being sold by the Selling
Stockholders are duly listed, and admitted and authorized for trading,
on the Nasdaq National Market and the Securities being sold hereunder
by the Company are duly listed, and admitted and authorized for
trading, subject to official notice of issuance and evidence of
satisfactory distribution, on the Nasdaq National Market; the
certificates for the Securities are in valid and sufficient form; the
holders of outstanding shares of capital stock of the Company are not
entitled to preemptive or other rights to subscribe for the Securities
except for such as have been effectively waived; and, except as set
forth in the Prospectus, to the knowledge of
20
<PAGE>
such counsel no options, warrants or other rights to purchase,
agreements or other obligations to issue, or rights to convert any
obligations into or exchange any securities for, shares of capital
stock of or ownership interests in the Company are outstanding;
(iv) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding by or before any court or
governmental agency, authority or body, excluding the FCC, or any
arbitrator involving the Company or any of its subsidiaries or its or
their property of a character required to be disclosed in the
Registration Statement which is not adequately disclosed in the
Prospectus, and to the knowledge of such counsel there is no license,
permit, franchise, contract or other document of a character required
to be described in the Registration Statement or Prospectus, or to be
filed as an exhibit thereto, which is not described or filed as
required; and the statements in the Prospectus under the heading
"Business - Legal Proceedings" fairly summarize the matters therein
described;
(v) the Registration Statement has become effective under the
Act; any required filing of the Prospectus, and any supplements
thereto, pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); to the knowledge of such
counsel, no stop order suspending the effectiveness of the Registration
Statement has been issued, no proceedings for that purpose have been
instituted or threatened and the Registration Statement and the
Prospectus (other than the financial statements and other financial
information contained therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the applicable
requirements of the Act and the rules thereunder; and such counsel has
no reason to believe that on the Effective Date or at the Execution
Time the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus as of its date and on the Closing
Date included or includes any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading (in each case, other than the financial
statements and other financial information contained therein, as to
which such counsel need express no opinion);
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the Company is not and, after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Prospectus, will not be, an "investment
company" as defined in the Investment Company Act of 1940, as amended;
(viii) no consent, approval, authorization, filing with or
order of any court or governmental agency or body is required in
connection with the transactions
21
<PAGE>
contemplated herein, except such as have been obtained under the Act,
the federal and provincial securities laws of Canada or the blue sky
laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the Underwriters in the manner
contemplated in this Agreement and in the Prospectus and such other
approvals (specified in such opinion) as have been obtained;
(ix) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated nor
the fulfillment of the terms hereof will conflict with, result in a
breach or violation of or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or its subsidiaries pursuant
to, (i) the charter or by-laws of the Company or its subsidiaries, (ii)
the terms of any indenture, contract, lease, mortgage, deed of trust,
note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which the Company or its
subsidiaries is a party or bound or to which its or their property is
subject of which such counsel has knowledge, (iii) any statute, law
(excluding the Federal Communications Law), rule, regulation, judgment,
order or decree applicable to the Company or its subsidiaries of any
court, regulatory body (excluding the FCC), administrative agency,
governmental body, arbitrator or other authority having jurisdiction
over the Company or its subsidiaries or any of its or their properties;
(x) no holders of securities of the Company have rights to the
registration of such securities under the Registration Statement except
for such as have been effectively waived;
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of Delaware or the
Federal laws of the United States, to the extent they deem proper and specified
in such opinion, upon the opinion of other counsel of good standing whom they
believe to be reliable and who are satisfactory to counsel for the Underwriters
and (B) as to matters of fact, to the extent they deem proper, on certificates
of responsible officers of the Company and public officials. References to the
Prospectus in this paragraph (b) include any supplements thereto at the Closing
Date.
(c) The Representatives shall have received an opinion, dated the
Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP, FCC counsel to the
Company, to the effect that:
(i) the statements in the Prospectus under the headings "Risk
Factors," "Business--Radio Stations" and "Business--Federal Regulation
of Radio Broadcasting," to the extent that such statements constitute a
summary of the Federal Communications Law, fairly summarize the matters
therein described;
(ii) no consent, approval, authorization, filing with, or
order of any court or governmental agency or body is required under
the Federal Communications Law to be obtained or made by the Company
or any subsidiary of the Company in order for the Company to
consummate the transactions contemplated herein;
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(iii) based upon their review of information publicly
available at the FCC conducted on October [ ], 1999, (a) each
subsidiary of the Company is the holder of the Permits issued by the
FCC (the "FCC Permits") listed opposite such subsidiary's name on
Attachment A hereto, (b) the FCC Permits include all FCC licenses,
permits and authorizations necessary for each such subsidiary to
operate an AM radio broadcast station using the channel or frequency
assignment and serving the community of license listed opposite such
subsidiary's name on Attachment A, (c) all of the FCC Permits are in
full force and effect, and (d) the FCC Permits are not subject to any
condition or requirement, other than conditions or requirements that
appear on the face of the FCC Permits or pertain to the FCC Permits
under generally applicable rules or policies of the FCC except where
the failure of such FCC Permits to be in full force and effect or the
conditions or restrictions would not have a material adverse effect on
the condition (financial or otherwise), prospects, earnings, business
or properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto);
(iv) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated [nor
the fulfillment of the terms hereof] will conflict with, result in a
breach or violation of the terms or provisions of, or constitute a
default under (i) the Federal Communications Law or (ii) the FCC
Permits; and
(v) to their knowledge, there are no published or unpublished
FCC orders, decrees or rulings outstanding against the Company or any
of its subsidiaries or any pending or threatened actions, suits or
proceedings against the Company or any of its subsidiaries by or
before the FCC that, in any such case, relate to the revocation or
modification of any FCC Permits (other than a modification requested
by the Company), or that, if determined adversely to the Company or
any of its subsidiaries, would result in a revocation or modification
of, any of the FCC Permits except where such revocation or
modification would not have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except
as set forth or contemplated in the Prospectus (exclusive of any
supplement thereto).
On Closing Date, Skadden, Arps, Slate, Meagher & Flom LLP
shall additionally state that it has reviewed the contents of the
Prospectus and the Registration Statement relating to the Federal
Communications Law under the headings "Risk Factors," "Business-Radio
Stations" and "Business-Federal Regulation of Broadcasting," and,
although (except as otherwise expressly stated in opinion (i) above)
such counsel is not passing upon, and does not assume any
responsibility for, the accuracy, completeness or fairness of such
statements and has made no independent check or verification thereof,
on the basis of the
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foregoing, no facts have come to such counsel's attention that have led
it to believe that the contents of the Registration Statement under the
aforementioned headings, on the Effective Date or at the Execution
Time, contained an untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading or that the contents of the
Prospectus under the aforementioned headings, as of its date and on the
Closing Date, contains contained an untrue statement of a material fact
or omits or omitted to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading.
(d) The Selling Stockholders shall have requested and caused
Stroock & Stroock & Lavan LLP, counsel for the Selling Stockholders, to have
furnished to the Representatives their opinion dated the Closing Date and
addressed to the Representatives, to the effect that:
(i) this Agreement has been duly executed and delivered by the
Selling Stockholders and each Selling Stockholder has full legal right
and authority to sell, transfer and deliver in the manner provided in
this Agreement the Securities being sold by such Selling Stockholder
hereunder;
(ii) Assuming that (a) the DTC is a "clearing corporation" as
defined in Section 8-102(a)(5) of the UCC, and (b) each of the
Underwriters acquires its interest in the Option Securities it has
purchased without notice of any adverse claim (within the meaning of
Section 8-105 of the UCC), each Underwriter that has purchased Option
Securities from a Selling Stockholder delivered on the date hereof to
DTC, made payment thereof pursuant to this Agreement and has had such
Option Securities credited to a Securities account of such Underwriter
maintained with DTC will have acquired a Securities entitlement (within
the meaning of Section 8-102(a)(17) of the UCC) to such Option
Securities, and no action based on an adverse claim may be asserted
against such Underwriter.
(iii) no consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
by any Selling Stockholder of the transactions contemplated herein,
except such as may have been obtained under the Act , the federal and
provincial securities laws of Canada or the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters and such other approvals (specified in
such opinion) as have been obtained; and
(iv) neither the sale of the Securities being sold by the
Selling Stockholders nor the consummation of any other of the
transactions herein contemplated by the Selling Stockholders or the
fulfillment of the terms hereof by the Selling Stockholders will
conflict with, result in a breach or violation of, or constitute a
default under any law or the charter, By-laws or partnership agreement
of the Selling Stockholders or the terms of any indenture or other
agreement or instrument known to such counsel and to which any Selling
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Stockholder is a party or bound, or any judgment, order or decree known
to such counsel to be applicable to any Selling Stockholder of any
court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over any Selling Stockholder.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of Delaware or the
Federal laws of the United States, to the extent they deem proper and specified
in such opinion, upon the opinion of other counsel of good standing whom they
believe to be reliable and who are satisfactory to counsel for the Underwriters,
and (B) as to matters of fact, to the extent they deem proper, on certificates
of responsible officers of the Selling Stockholders and public officials.
(e) The Representatives shall have received from Cleary,
Gottlieb, Steen & Hamilton, counsel for the Underwriters, such opinion or
opinions, dated the Closing Date and addressed to the Representatives, with
respect to the issuance and sale of the Securities, the Registration Statement,
the Prospectus (together with any supplement thereto) and other related matters
as the Representatives may reasonably require, and the Company and each Selling
Stockholder shall have furnished to such counsel such documents as they request
for the purpose of enabling them to pass upon such matters.
(f) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the President
and the principal financial or accounting officer of the Company, dated the
Closing Date, to the effect that the signers of such certificate have carefully
examined the Registration Statement, the Prospectus, any supplements to the
Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and the Company has complied in all material respects with all the
agreements and satisfied in all material respects all the conditions on
its part to be performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the date of the most recent financial statements
included in the Prospectus (exclusive of any supplement thereto), there
has been no material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement
thereto).
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<PAGE>
(g) Each Selling Stockholder shall have furnished to the
Representatives a certificate, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of such Selling
Stockholder or by a partner of the general partner of a Selling Stockholder
which is a limited partnership, dated the Closing Date, to the effect that the
representations and warranties of such Selling Stockholder in this Agreement are
true and correct in all material respects on and as of the Closing Date to the
same effect as if made on the Closing Date.
(h) The Company shall have requested and caused Ernst & Young
LLP to have furnished to the Representatives letters, at the Execution Time and
at the Closing Date, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Representatives,
confirming that they are independent accountants within the meaning of the Act
and the applicable rules and regulations adopted by the Commission thereunder
and that they have performed a review of the unaudited interim financial
information of the Company for the six-month period ended June 30, 1999 and as
at June 30, 1999, in accordance with Statement on Auditing Standards No. 71, and
stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included in the Registration Statement
and the Prospectus and reported on by them comply as to form in all
material respects with the applicable accounting requirements of the
Act and the related rules and regulations adopted by the Commission;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; their limited review, in accordance with standards
established under Statement on Auditing Standards No. 71, of the
unaudited interim financial information for the six-month period ended
June 30, 1999, and as at June 30, 1999; carrying out certain specified
procedures (but not an audit in accordance with generally accepted
auditing standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such letter; a
reading of the minutes of the meetings of the stockholders, and
directors of the Company and its subsidiaries; and inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters of the Company and its subsidiaries as to
transactions and events subsequent to December 31, 1998, nothing came
to their attention which caused them to believe that:
(1) any unaudited financial statements included in
the Registration Statement and the Prospectus do not comply as
to form in all material respects with applicable accounting
requirements of the Act and with the related rules and
regulations adopted by the Commission with respect to
registration statements on Form S-1; and said unaudited
financial statements are not in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included in the Registration Statement and the
Prospectus;
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<PAGE>
(2) with respect to the period subsequent to June 30,
1999, there were any changes, at a specified date not more
than five days prior to the date of the letter, in the
long-term debt of the Company and its subsidiaries, or Series
A redeemable cumulative preferred stock (other than to give
effect to the conversion of 353,906.62 shares of such
preferred stock into Common Stock as contemplated in the
Prospectus) or Common Stock of the Company (other than to give
effect to the 310-for-one stock split contemplated in the
Prospectus and the conversion of the Series A redeemable
cumulative preferred stock into Common Stock as contemplated
in the prospectus) or decreases greater than $________ in the
stockholders' equity of the Company, or greater than $________
in net current assets as compared with the amounts shown on
the June 30, 1999 consolidated balance sheet included in the
Registration Statement and the Prospectus, or for the period
from July 1, 1999 to such specified date there were any
decreases greater than $_________ in net revenues, or greater
than $_______ in the total or per share amounts of
consolidated net loss, or greater than $____ in broadcast cash
flow, or greater than $_________ in EBITDA, or any increases
greater than $_________________ in borrowing under the
Company's bank credit facility except in all instances for
changes or decreases set forth in such letter, in which case
the letter shall be accompanied by an explanation by the
Company as to the significance thereof unless said explanation
is not deemed necessary by the Representatives; [DOLLAR
FIGURES FOR LINE ITEM MAXIMUM CHANGE AMOUNTS TO BE DETERMINED]
(3) the information included in the Registration
Statement and Prospectus in response to Regulation S-K, Item
301 (Selected Financial Data), and Item 402 (Executive
Compensation) is not in conformity with the applicable
disclosure requirements of Regulation S-K; and
(iii) they have performed certain other specified procedures
as a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth in the Registration Statement and the Prospectus, including the
information set forth under the captions, "Summary Consolidated
Financial Data", "Unaudited Pro Forma Combined Financial Data",
"Selected Consolidated Financial Data", "Management's Discussion and
Analysis of Financial Condition and Results of Operation",
"Capitalization", "Dilution", "Management", "Certain Stockholders",
"Certain Transactions", "Description of Capital Stock" and "Shares
Eligible for Future Resale" in the Prospectus, agrees with the
accounting records of the Company and its subsidiaries, excluding any
questions of legal interpretation; and
(iv) on the basis of a reading of the unaudited pro forma
financial statements included in the Registration Statement and the
Prospectus (the "pro forma financial statements"); carrying out certain
specified procedures; inquiries
27
<PAGE>
of certain officials of the Company who have responsibility for
financial and accounting matters; and proving the arithmetic accuracy
of the application of the pro forma adjustments to the historical
amounts in the pro forma financial statements, nothing came to their
attention which caused them to believe that the pro forma financial
statements do not comply as to form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X or
that the pro forma adjustments have not been properly applied to the
historical amounts in the compilation of such statements.
References to the Prospectus in this paragraph (h) include any
supplement thereto at the date of the letter.
(i) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (h) of this Section 6 or (ii) any change, or
any development involving a prospective change, in or affecting the condition
(financial or otherwise), earnings, business or properties of the Company and
its subsidiaries taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto) the effect of which, in any
case referred to in clause (i) or (ii) above, is, in the sole judgment of the
Representatives, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Registration Statement (exclusive of any amendment thereof)
and the Prospectus (exclusive of any supplement thereto).
(j) Prior to the Closing Date, the Company and the Selling
Stockholders shall have furnished to the Representatives such further
information, certificates and documents as the Representatives may reasonably
request.
(k) All proceedings taken in connection with the issuance of
the Securities and the transactions contemplated herein and all documents and
papers relating hereto shall be reasonably satisfactory to the Representatives
and counsel to the Underwriters.
(l) The Securities shall have been listed and admitted and
authorized for trading on the Nasdaq National Market, and satisfactory evidence
of such actions shall have been provided to the Representatives.
(m) At the Execution Time, the Company shall have furnished to
the Representatives a letter substantially in the form of Exhibit A hereto from
each officer and director of the Company and from all other stockholders of the
Company, addressed to the Representatives.
(n) On the Closing Date, 353,906.62 shares of the Series A
redeemable cumulative preferred stock held by the Selling Shareholders shall
have been converted into Common Stock.
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<PAGE>
(o) On the Closing Date, the 310-for-one stock split described
in the Prospectus (exclusive of any supplement thereto) shall have occurred.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representatives and counsel for the
Underwriters, this Agreement and all obligations of the Underwriters hereunder
may be canceled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Company and
each Selling Stockholder in writing or by telephone or facsimile confirmed in
writing.
The documents required to be delivered by this Section 6 shall
be delivered at the office of Cleary, Gottlieb, Steen & Hamilton, counsel for
the Underwriters, at One Liberty Plaza, New York, NY 10006, on the Closing Date.
7. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company or any Selling
Stockholders to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally through Salomon Smith Barney on demand for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the proposed
purchase and sale of the Securities. If the Company is required to make any
payments to the Underwriters under this Section 7 because of any Selling
Stockholder's refusal, inability or failure to satisfy any condition to the
obligations of the Underwriters set forth in Section 6, the Selling Stockholders
PRO RATA in proportion to the percentage of Securities to be sold by each shall
reimburse the Company on demand for all amounts so paid.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and each
of the Selling Stockholders jointly and severally agree to indemnify and hold
harmless each Underwriter, the directors, officers, employees and agents of each
Underwriter and each person who controls any Underwriter within the meaning of
either the Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement for the registration of the Securities
as originally filed or in any amendment thereof, or in any Preliminary
Prospectus or the Prospectus, or in any amendment thereof or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred
29
<PAGE>
by them in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the Company and the Selling
Stockholders will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the Representatives
specifically for inclusion therein. This indemnity agreement will be in addition
to any liability which the Company or the Selling Stockholders may otherwise
have.
(b) The Company agrees to indemnify and hold harmless Salomon
Smith Barney, and each person, if any, who controls Salomon Smith Barney within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act ("Salomon Smith Barney Entities"), from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) (i) caused by any untrue statement or
alleged untrue statement of a material fact contained in the prospectus wrapper
material prepared by or with the consent of the Company for distribution in
foreign jurisdictions in connection with the Directed Share Program attached to
the Prospectus or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statement therein, when considered in conjunction with
the Prospectus or any applicable preliminary prospectus, not misleading; (ii)
caused by the failure of any Participant to pay for and accept delivery of the
Securities which immediately following the Effective Date of the Registration
Statement, were subject to a properly confirmed agreement to purchase; or (iii)
related to, arising out of, or in connection with the Directed Share Program,
provided that, the Company shall not be responsible under this subparagraph
(iii) for any losses, claim, damages or liabilities (or expenses relating
thereto) that are finally judicially determined to have resulted from the bad
faith or gross negligence of Salomon Smith Barney Entities.
(c) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the Registration Statement, and each person who controls the
Company within the meaning of either the Act or the Exchange Act and each
Selling Stockholder, to the same extent as the foregoing indemnity to each
Underwriter, but only with reference to written information relating to such
Underwriter furnished to the Company by or on behalf of such Underwriter through
the Representatives specifically for inclusion in the documents referred to in
the foregoing indemnity. This indemnity agreement will be in addition to any
liability which any Underwriter may otherwise have. The Company and each Selling
Stockholder acknowledge that the statements set forth in the last paragraph of
the cover page regarding delivery of the Securities and, under the heading
"Underwriting", (i) the list of underwriters and their respective participation
in the sale of the Securities, (ii) the sentences related to concessions and
reallowances and (iii) the paragraph related to stabilization, syndicate
covering transactions and penalty bids, in any Preliminary Prospectus and the
Prospectus constitute the only information furnished in writing by or
30
<PAGE>
on behalf of the several Underwriters for inclusion in any Preliminary
Prospectus or the Prospectus.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a), (b), (c) or (f) unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a), (b), (c) or (f). The indemnifying party
shall be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
PROVIDED, HOWEVER, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding. Notwithstanding
anything contained herein to the contrary, if indemnity may be sought pursuant
to paragraph (b) of this Section 8 in respect of such action or proceeding, then
in addition to such separate firm for the indemnified parties, the indemnifying
party shall be liable for the reasonable fees and expenses of not more than one
separate firm (in addition to any local counsel) for Salomon Smith Barney, for
the defense of any losses, claims, damages and liabilities arising out of the
Directed Share Program, and all persons, if any, who control Salomon Smith
Barney within the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act.
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(e) In the event that the indemnity provided in paragraph (a), (b), (c)
or (f) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Selling Stockholders,
jointly and severally, and the Underwriters severally agree to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company, the Selling Stockholders and one
or more of the Underwriters may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and by the Underwriters on the other from the
offering of the Securities; PROVIDED, HOWEVER, that in no case shall (i) any
Underwriter (except as may be provided in any agreement among underwriters
relating to the offering of the Securities) be responsible for any amount in
excess of the underwriting discount or commission applicable to the Securities
purchased by such Underwriter hereunder or (ii) Salomon Smith Barney (the
"Independent Underwriter") in its capacity as "qualified independent
underwriter" (within the meaning of National Association of Securities Dealers,
Inc. Conduct Rule 2720) be responsible for any amount in excess of the
compensation received by the Independent Underwriter for acting in such
capacity. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Selling Stockholders, jointly
and severally, and the Underwriters severally shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Selling Stockholders on the one hand
and of the Underwriters on the other in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company and the Selling Stockholders
shall be deemed to be equal to the total net proceeds from the offering (before
deducting expenses) received by it, and benefits received by the Underwriters
shall be deemed to be equal to the total underwriting discounts and commissions,
in each case as set forth on the cover page of the Prospectus. Benefits received
by the Independent Underwriter in its capacity as "qualified independent
underwriter" shall be deemed to be equal to the compensation received by the
Independent Underwriter for acting in such capacity. Relative fault shall be
determined by reference to, among other things, whether any untrue or any
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information provided by the Company or the
Selling Stockholders on the one hand or the Underwriters on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
Company, the Selling Stockholders and the Underwriters agree that it would not
be just and equitable if contribution were determined by pro rata allocation or
any other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (e), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls an Underwriter within the meaning of
either the Act or the Exchange Act and each director, officer, employee and
agent of an Underwriter shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within the meaning of
either the Act or the Exchange Act, each officer of
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the Company who shall have signed the Registration Statement and each director
of the Company shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions of this paragraph
(e).
(f) Without limitation of and in addition to its obligations
under the other paragraphs of this Section 8, the Company agrees to indemnify
and hold harmless the Independent Underwriter, its directors, officers,
employees and agents and each person who controls the Independent Underwriter
within the meaning of the Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject,
insofar as such losses, claims, damages or liabilities (or action in respect
thereof) arise out of or are based upon Independent Underwriter's acting as a
"qualified independent underwriter" (within the meaning of National Association
of Securities Dealers, Inc. Conduct Rule 2720) in connection with the offering
contemplated by this Agreement, and agrees to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
results from the gross negligence or willful misconduct of the Independent
Underwriter.
(g) The liability of each Selling Stockholder under such
Selling Stockholder's representations and warranties contained in Section 1
hereof and under the indemnity and contribution agreements contained in this
Section 8 shall only apply if the over-allotment option is exercised and shall
be limited to an amount equal to the initial public offering price of the
Securities (less the underwriting discount) sold by such Selling Stockholder to
the Underwriters. Each Selling Stockholder, severally and not jointly and
severally, shall only be liable under such Selling Stockholder's representations
and warranties contained in Section 1 hereof and under the indemnity and
contribution agreements contained in this Section 8 to the extent the
indemnification and contribution agreements of the Company contained in this
Section 8 are unavailable or insufficient to hold the Underwriters harmless in
respect of any losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject, insofar as such losses, claims,
damages or liabilities (or action in respect thereof) arise in connection with
the offering contemplated by this Agreement. The Company and the Selling
Stockholders may agree, as among themselves and without limiting the rights of
the Underwriters under this Agreement, as to the respective amounts of such
liability for which they each shall be responsible.
9. DEFAULT BY AN UNDERWRITER. If any one or more Underwriters
shall fail to purchase and pay for any of the Securities agreed to be purchased
by such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; PROVIDED, HOWEVER, that in the event that the aggregate amount of
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Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter, the
Selling Stockholders or the Company. In the event of a default by any
Underwriter as set forth in this Section 9, the Closing Date shall be postponed
for such period, not exceeding five Business Days, as the Representatives shall
determine in order that the required changes in the Registration Statement and
the Prospectus or in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve any defaulting Underwriter of
its liability, if any, to the Company, the Selling Stockholders and any
nondefaulting Underwriter for damages occasioned by its default hereunder.
10. TERMINATION. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company prior to delivery of and payment for the Securities, if at any
time prior to such time (i) trading in the Company's Common Stock shall have
been suspended by the Nasdaq National Market or trading in securities generally
on the New York Stock Exchange or the Nasdaq National Market shall have been
suspended or limited or minimum prices shall have been established on either of
such Exchanges, (ii) a banking moratorium shall have been declared either by
Federal or New York State authorities or (iii) there shall have occurred any
outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war, or other calamity or crisis the effect of which on
financial markets is such as to make it, in the sole judgment of the
Representatives, impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Prospectus (exclusive of any
supplement thereto).
11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers, of each Selling Stockholder and of the Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter,
any Selling Stockholder or the Company or any of the officers, directors,
employees, agents or controlling persons referred to in Section 8 hereof, and
will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
12. NOTICES. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representatives, will be
mailed, delivered or telefaxed to the Salomon Smith Barney General Counsel (fax
no.: (212) 816-7912) and confirmed to the General Counsel, Salomon Smith Barney
Inc., at 388 Greenwich Street, New York, New York, 10013, Attention: General
Counsel; or, if sent to the Company, will be mailed, delivered or telefaxed to
Radio Unica Communications Corp. (fax no.: (305) 463-5001) and confirmed to it
at Radio Unica Communications Corp., 8400 N.W. 52nd Street, Suite 101, Miami, FL
33166, attention of Steven E. Dawson; or if
34
<PAGE>
sent to the Selling Stockholders, will be mailed, delivered or telefaxed and
confirmed to it at the address set forth in Schedule II hereto.
13. SUCCESSORS. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in
Section 8 hereof, and no other person will have any right or obligation
hereunder.
14. APPLICABLE LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
15. COUNTERPARTS. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. HEADINGS. The section headings used herein are for
convenience only and shall not affect the construction hereof.
17. DEFINITIONS. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or
trust companies are authorized or obligated by law to close in New York
City.
"Commission" shall mean the Securities and Exchange
Commission.
"Effective Date" shall mean each date and time that the
Registration Statement, any post-effective amendment or amendments
thereto and any Rule 462(b) Registration Statement became or become
effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder.
"Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.
"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 1(i)(a) above and any preliminary prospectus
included in the Registration Statement at the Effective Date that omits
Rule 430A Information.
"Prospectus" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 424(b) after the
Execution Time or, if no filing
35
<PAGE>
pursuant to Rule 424(b) is required, shall mean the form of final
prospectus relating to the Securities included in the Registration
Statement at the Effective Date.
"Registration Statement" shall mean the registration statement
referred to in paragraph 1(i)(a) above, including exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto or
any Rule 462(b) Registration Statement becomes effective prior to the
Closing Date, shall also mean such registration statement as so amended
or such Rule 462(b) Registration Statement, as the case may be. Such
term shall include any Rule 430A Information deemed to be included
therein at the Effective Date as provided by Rule 430A.
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules
under the Act.
"Rule 430A Information" shall mean information with respect to
the Securities and the offering thereof permitted to be omitted from
the Registration Statement when it becomes effective pursuant to Rule
430A.
"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b)
relating to the offering covered by the registration statement referred
to in Section 1(a) hereof.
"United States or Canadian Person" shall mean any person who
is a national or resident of the United States or Canada, any
corporation, partnership, or other entity created or organized in or
under the laws of the United States or Canada or of any political
subdivision thereof, or any estate or trust the income of which is
subject to United States or Canadian Federal income taxation,
regardless of its source (other than any non-United States or
non-Canadian branch of any United States or Canadian Person), and shall
include any United States or Canadian branch of a person other than a
United States or Canadian Person. "U.S." or "United States" shall mean
the United States of America (including the states thereof and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction.
18. CANADA. Each of the Underwriters hereby covenants and
agrees that it will not distribute the Securities in such a manner as to require
the filing of a prospectus or similar document (excluding a private placement
offering memorandum) with respect to the Securities under the laws of any
Province or Territory in Canada.
36
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Company
and the several Underwriters.
Very truly yours,
Radio Unica Communications Corp.
By:
------------------------------------
Name:
Title:
Warburg, Pincus Ventures, L.P.
By: Warburg, Pincus & Co.,
General Partner
By:
------------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Smith Barney Inc.
Bear, Stearns & Co. Inc.
CIBC World Markets
Donaldson, Lufkin & Jenrette Securities
By: Salomon Smith Barney Inc.
By:
------------------------------------
Name:
Title:
For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
37
<PAGE>
SCHEDULE I
UNDERWRITERS NUMBER OF UNDERWRITTEN SECURITIES
TO BE PURCHASED
Salomon Smith Barney Inc.
Bear, Stearns & Co. Inc.
CIBC World Markets
Donaldson, Lufkin & Jenrette Securities
-------------
Total
=============
<PAGE>
SCHEDULE II
NUMBER OF UNDERWRITTEN MAXIMUM NUMBER OF OPTION
SELLING STOCKHOLDER: SECURITIES TO BE SOLD SECURITIES TO BE SOLD
- -------------------- --------------------- ---------------------
Warburg, Pincus 0
Ventures, LP
466 Lexington Avenue
New York, New York 10017
(fax no.: (212) 878-6162)
Attn: John D. Santoleri
------------- -------------
Total ..............
============= =============
<PAGE>
[FORM OF LOCK-UP AGREEMENT]
EXHIBIT A
[LETTERHEAD OF OFFICER, DIRECTOR OR MAJOR STOCKHOLDER OF
RADIO UNICA COMMUNICATIONS CORP.]
RADIO UNICA COMMUNICATIONS CORP.
PUBLIC OFFERING OF COMMON STOCK
, 1999
Salomon Smith Barney Inc.
Bear, Stearns & Co. Inc.
CIBC World Markets
Donaldson, Lufkin & Jenrette Securities
As Representatives of the several Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement"), between Radio Unica
Communications Corp., a Delaware corporation (the "Company"), and each of you as
representatives of a group of Underwriters named therein, relating to an
underwritten public offering of Common Stock, $.01 par value (the "Common
Stock"), of the Company.
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned will not, without the prior written
consent of Salomon Smith Barney Inc., offer, sell, contract to sell, pledge or
otherwise dispose of, (or enter into any transaction which is designed to, or
might reasonably be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise)) directly or indirectly, including the filing of (or participation in
the filing of) a registration statement with the Securities and Exchange
Commission in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of Section
16 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder
with respect to, any shares of capital stock of the Company or any securities
convertible into, or exercisable or exchangeable for such capital stock, or
publicly announce an intention to effect any such transaction, for a period of
180 days after the date of this Agreement, other than shares of Common Stock
sold to cover over-allotments pursuant to the Underwriting Agreement or disposed
of as bona fide gifts subject to the restrictions in this Agreement or transfers
to its affiliates who agree in writing to be bound by this Agreement. Nothing in
this Agreement will prevent the exercise of options to purchase
<PAGE>
Common Stock owned as of the date of this Agreement or the conversion or
exchange of securities owned as of the date of this Agreement into Common Stock.
If for any reason the Underwriting Agreement shall be terminated prior
to the Closing Date (as defined in the Underwriting Agreement), the agreement
set forth above shall likewise be terminated.
Yours very truly,
[SIGNATURE OF OFFICER, DIRECTOR OR MAJOR
STOCKHOLDER]
[NAME AND ADDRESS OF OFFICER, DIRECTOR OR
MAJOR STOCKHOLDER]
<PAGE>
ANNEX A
The subsidiaries listed below are the only significant subsidiaries of
the Company as defined by Rule 1-02 of Regulation S-X (the "Subsidiaries").
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
RADIO UNICA HOLDINGS CORP.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware") hereby
certifies that:
FIRST: The name of this Corporation (hereinafter called the
"Corporation") is Radio Unica Holdings Corp.
SECOND: The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is Corporation
Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle (zip
code 19801); and the name of the registered agent of the Corporation in the
State of Delaware at such address is The Corporation Trust Company.
THIRD: The nature of the business and of the purposes to be conducted
and promoted by the Corporation are to conduct any lawful business, to promote
any lawful purpose, and to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
FOURTH: (A) The total number of shares of stock which this Corporation
shall have authority to issue is five hundred fifty thousand (550,000)
shares, of which four hundred fifty thousand (450,000) shares of the par value
of $.01 per share shall be Preferred Stock and one hundred thousand (100,000)
shares of the par value of $.01 per share shall be Common Stock. The holders
of shares of Common Stock shall have one vote per share.
(B) The Board of Directors of this Corporation is
hereby expressly granted the authority by resolution or resolutions to establish
and issue the Preferred Stock in one or more series with such voting powers ,
full or limited, or no voting powers, and with such designations, preferences
and relative, participating, optional or other special rights and with such
qualifications, limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions providing for the establishment and
issuance thereof adopted by the Board of Directors.
FIFTH: The name and mailing address of the incorporator are as follows:
Martin H. Neidell, c/o Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York,
New York 10038.
<PAGE>
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders, of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders, of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
SEVENTH: The original By-Laws of the Corporation shall be adopted by
the incorporator. Thereafter, the power to make, alter, or repeal the By-Laws,
and to adopt any new By-Law, shall be vested in the Board of Directors.
EIGHTH: To the fullest extent that the General Corporation Law of the
State of Delaware, as it exists on the date hereof or as it may hereafter be
amended, permits the limitation or elimination of the liability of directors, no
director of this Corporation shall be personally liable to this Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Notwithstanding the foregoing, a director shall be liable to the
extent provided by applicable law (1) for any breach of the directors' duty of
loyalty to the Corporation or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (3) under Section 174 of the General Corporation Law of the State of
Delaware, or (4) for any transaction from which the director derived any
improper personal benefit. Neither the amendment or repeal of this Article, nor
the adoption of any provision of this Certificate of Incorporation inconsistent
with this Article shall adversely affect any right or protection of a director
of the Corporation existing at the time of such amendment or repeal.
NINTH: The Corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, or by any successor thereto, indemnify any and
all persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section. The Corporation shall advance expenses to the
fullest extent permitted by said section. Such right to indemnification and
advancement of expenses shall continue as to a person who has ceased to be a
director, officer,
-2-
<PAGE>
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person. The indemnification and advancement of expenses
provided for herein shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise.
Executed at New York, New York on June 29, 1998.
--------------------------------------
Martin H. Neidell, Incorporator
-3-
<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL
OR OTHER SPECIAL RIGHTS OF SERIES A
PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
OF
RADIO UNICA HOLDINGS CORP.
1. DESIGNATION. The designation of the series of Preferred Stock
created hereby is Series A Preferred Stock and the number of shares constituting
such series is 450,000 (the "Series A Preferred Stock").
2. RANK. The Series A Preferred Stock shall, with respect to dividend
rights, rights on redemption and rights on liquidation, winding up and
dissolution, rank prior to any other equity securities of the Corporation,
including all classes of Common Stock and any other series of Preferred Stock
established by the Board of Directors (all of such equity securities of the
Corporation to which the Series A Preferred Stock ranks prior are collectively
referred to herein as the "Junior Stock").
3. DIVIDENDS.
(i) The holders of Series A Preferred Stock shall be entitled to
receive in preference to the holders of any Junior Stock, when, as and if
declared by the Board of Directors, out of funds legally available for the
payment of dividends, cumulative dividends at the rate per annum of 10% of the
Accrued Liquidation Preference (as hereinafter defined) from time to time in
effect. Such dividends shall begin to accrue from and after the date of issuance
and shall be payable in equal semi-annual installments on a cumulative basis,
compounded quarterly, on the lst day of January and July in each year, with the
first such payment to be made January 1, 1999;
<PAGE>
provided, however, that effective January 1, 2005 and on each January 1
thereafter the dividends on the Series A Preferred Stock shall increase at the
rate per annum of 2% of the Accrued Liquidation Preference, but in no event
shall such dividend be more than the rate per annum of 20% of the Accrued
Liquidation Preference.
(ii) All dividends paid with respect to shares of the Series A
Preferred Stock pursuant to paragraph 3(i) hereof shall be paid pro rata (both
as to the amount of declaration and form of payment) to the holders entitled
thereto. Any dividend not paid shall be fully cumulative and shall accrue and be
compounded quarterly (whether or not declared), at the rate provided above.
(iii) So long as any shares of the Series A Preferred Stock are
outstanding, the Corporation shall not declare, pay or set apart for payment any
dividend on any of the Junior Stock or make any payment on account of, or set
apart for payment money for a sinking or other similar fund for, the purchase,
redemption or other retirement of, any of the Junior Stock or any warrants,
rights, calls or options exercisable for or convertible into any of the Junior
Stock, or make any distribution in respect thereof, either directly or
indirectly, and whether in cash, obligations or shares of the Corporation or
other property (other than distributions or dividends in Junior Stock to the
holders of Junior Stock or repurchases of stock from former employees of the
Corporation), and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any of the Junior
Stock or any warrants, rights, calls or options exercisable for or convertible
into any of the Junior Stock, unless prior to or concurrently with such
declaration, payment, setting apart for payment, purchase, redemption and/or
distribution, as the case may be, all accrued and unpaid dividends on shares of
the Series
-2-
<PAGE>
A Preferred Stock not paid on the dates provided for in paragraph 3(i) hereof
shall have been or are paid.
(iv) Each fractional share of Series A Preferred Stock
outstanding shall be entitled to a ratably proportionate amount of all dividends
accruing with respect to each outstanding share of Series A Preferred Stock
pursuant to paragraph 3(i) hereof, and all such dividends with respect to such
outstanding fractional shares shall be fully cumulative and accrue (whether or
not declared), with interest at the rate set forth above, and shall be payable
in the same manner and at such times as provided for in paragraph 3(i) hereof
with respect to dividends on each outstanding share of Series A Preferred Stock.
4. LIQUIDATION PREFERENCE.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
shares of Series A Preferred Stock then outstanding shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders an amount in cash equal to $100.00 for each share outstanding, plus
an amount in cash equal to all accrued but unpaid dividends thereon to the date
fixed for liquidation, dissolution or winding up (the "Accrued Liquidation
Preference") before any payment shall be made or any assets distributed to the
holders of any of the Junior Stock. Except as provided in the preceding
sentence, holders of Series A Preferred Stock shall not be entitled to any
distribution in the event of liquidation, dissolution or winding up of the
affairs of the Corporation. If the assets of the Corporation are not sufficient
to pay in full the Accrued Liquidation Preference to the holders of outstanding
shares of Series A Preferred Stock, then the holders of all such shares shall
share ratably in such distribution of assets in accordance with the
-3-
<PAGE>
amount which would be payable on such distribution if the amounts to which the
holders of outstanding shares of Series A Preferred Stock are entitled were paid
in full.
(ii) For the purposes of this paragraph 4, the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets (including
stock of a subsidiary) of the Corporation or the consolidation or merger of the
Corporation with one or more other corporations shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary.
(iii) The Accrued Liquidation Preference with respect to each
outstanding fractional share of Series A Preferred Stock shall be equal to a
ratably proportionate amount of the Accrued Liquidation Preference with respect
to each outstanding share of Series A Preferred Stock.
5. REDEMPTION AT THE OPTION OF THE CORPORATION.
(i) The Series A Preferred Stock shall be redeemable, at the
option of the Corporation, in whole or in part, at any time or from time to
time, at a redemption price of $100.00 per share, together with accrued and
unpaid dividends thereon to the date fixed for redemption, to the extent the
Corporation shall have funds legally available for such payment.
(ii) Shares of Series A Preferred Stock which have been issued
and reacquired in any manner, including shares purchased or redeemed, shall
(upon compliance with any applicable provisions of the laws of the State of
Delaware) have the status of authorized and unissued shares of the class of
Preferred Stock undesignated as to series and may be redesignated and reissued
as part of any series of the Preferred Stock; provided, however, that no such
issued and reacquired shares of Series A Preferred Stock shall be reissued or
sold as Series A Preferred Stock unless reissued as a stock dividend on shares
of Series A Preferred Stock.
-4-
<PAGE>
(iii) Notwithstanding the foregoing provisions of this
paragraph 5, unless the full cumulative dividends on all outstanding shares of
Series A Preferred Stock shall have been paid or contemporaneously are declared
and paid for all past dividend periods, none of the shares of Series A Preferred
Stock shall be redeemed unless all outstanding shares of Series A Preferred
Stock are simultaneously redeemed.
6. PROCEDURE FOR REDEMPTION.
(i) In the event that fewer than all the outstanding shares of
Series A Preferred Stock are to be redeemed pursuant to paragraph 5, the number
of shares to be redeemed shall be determined by the Board of Directors and the
shares to be redeemed shall be redeemed on a pro rata basis.
(ii) In the event the Corporation shall redeem shares of Series A
Preferred Stock pursuant to paragraph 5, notice of such redemption shall be
given by first class mail, postage prepaid, mailed not less than 30 days nor
more than 60 days prior to the redemption date, to each holder of record of the
shares to be redeemed at such holder's address as the same appears on the stock
register of the Corporation. Each such notice shall state: (a) the redemption
date; (b) the number of shares of Series A Preferred Stock to be redeemed and,
if less than all the shares held by such holder are to be redeemed from such
holder, the number of shares to be redeemed from such holder; (c) the redemption
price; (d) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (e) that dividends on the
shares to be redeemed will cease to accrue on such redemption date, unless the
Corporation shall fail to pay the redemption price as set forth herein.
(iii) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in providing
money for the payment of the
-5-
<PAGE>
redemption price of the shares called for redemption) dividends on the shares of
Series A Preferred Stock so called for redemption shall cease to accrue, and
said shares shall no longer be deemed to be outstanding and shall have the
status of authorized but unissued shares of Preferred Stock, unclassified as to
series, and shall not be reissued as shares of Series A Preferred Stock (unless
reissued as a stock dividend on Series A Preferred Stock), and all rights of the
holders thereof as stockholders of the Corporation (except the right to receive
from the Corporation the redemption price and any accrued and unpaid dividends)
shall cease. Upon surrender in accordance with said notice of the certificates
for any shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors of the Corporation shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the redemption price
aforesaid. In the event fewer than all of the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
7. REDEMPTION AT THE OPTION OF THE HOLDERS. (a) The holders of a
majority of the outstanding Series A Preferred Stock may elect to cause the
Corporation to redeem the outstanding Series A Preferred Stock upon the
occurrence of any of the following events:
(i) A consolidation or merger of the Corporation with or into
another entity where the holders of the capital stock of the Corporation
immediately prior to such merger or consolidation hold 50% or less of the
outstanding capital stock of the entity surviving such merger or consolidation
immediately after such transaction (based on voting power), or the sale of all
or substantially all of the Corporation's assets;
-6-
<PAGE>
(ii) The Corporation's sale of Common Stock in a bona fide firm
commitment underwriting pursuant to a registration statement filed with, and
declared effective by, the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended; or
(iii) August 6, 2007.
(b) The Corporation shall give the holders of Series A Preferred Stock
at least 30 days' notice prior to the scheduled occurrence of any of the events
specified in clauses (i) or (ii) (collectively, the "Liquidity Events"). Notice
of election to redeem shall be given to the holders of Series A Preferred Stock
at least five days prior to the scheduled Liquidity Events or by June 25, 2007
with respect to clause (iii). If the Liquidity Event arises pursuant to clause
(ii) and if the underwriters require that Series A Preferred Stock be exchanged
for Common Stock of the Corporation and not redeemed, then each share of Series
A Preferred Stock valued at the Accrued Liquidation Preference shall be
exchanged for a number of shares of Common Stock equal to the Accrued
Liquidation Preference divided by the midpoint of the proposed public offering
price range of a share of Common Stock less the underwriter's discount.
8. VOTING RIGHTS.
(i) Except as otherwise required by law, the holders of record of
shares of Series A Preferred Stock shall have the right to vote, together with
the holders of outstanding shares of Common Stock and not by classes, on all
matters on which holders of Common Stock shall have the right to vote. The
holders of Series A Preferred Stock shall have the right to cast 10 votes for
each share of Series A Preferred Stock.
(ii) So long as any shares of Series A Preferred Stock are
outstanding, the Corporation will not without the affirmative vote or consent of
the holders of a majority of the issued and outstanding Series A Preferred Stock
voting as a separate class create any class or
-7-
<PAGE>
series of shares ranking on a parity with or prior to the Series A Preferred
Stock either as to dividends or redemption or upon liquidation, or amend, alter
or repeal (whether by merger, consolidation or otherwise) the Corporation's
certificate of incorporation to adversely affect the voting powers, rights or
preferences of the Series A Preferred Stock.
(iii) The Corporation will not without the affirmative vote or
consent of the holders of a majority of the issued and outstanding Series A
Preferred Stock amend the terms or any provisions of the Series A Preferred
Stock.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by Joaquin Blaya, its Chief Executive Officer and attested by Steven
Dawson, its Secretary, this 30th day of June, 1998.
RADIO UNICA HOLDINGS CORP.
By:
-------------------------------------
Name: Joaquin Blaya
Title: Chief Executive Officer
Attest:
- -----------------------------------
Name: Steven Dawson
Title: Secretary
-8-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
RADIO UNICA HOLDINGS CORP.
--------------------------
It is hereby certified that:
1. The name of the corporation is Radio Unica Holdings Corp. (the
"Corporation").
2. The certificate of incorporation of the Corporation is hereby
amended to delete Article FIRST in its entirety and substitute the following:
"FIRST: The name of this Corporation (hereinafter called the
"Corporation") is Radio Unica Communications Corp."
3. The amendment of the certificate of incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this certificate has been signed this 2nd day of
July, 1999.
RADIO UNICA HOLDINGS CORP.
By:
----------------------------------
ATTEST:
- -----------------------------
Steven E. Dawson, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
RADIO UNICA COMMUNICATIONS CORP.
--------------------------
It is hereby certified that:
1. The name of the corporation is Radio Unica Communications Corp. (the
"Corporation").
2. The certificate of incorporation of the Corporation is hereby
amended to delete Article FOURTH (A) in its entirety and substitute the
following:
"FOURTH: (A) The total number of shares of stock which this
Corporation shall have authority to issue is forty-five million
(45,000,000) shares, of which five million (5,000,000) shares of the
par value of $.01 per share shall be Preferred Stock and forty million
(40,000,000) shares of the par value of $.01 per share shall be Common
Stock. The holders of shares of Common Stock shall have one vote per
share."
3. Simultaneously with the effectiveness of the amendment to Article
FOURTH (A), each of the issued and outstanding shares of Common Stock, par value
$.01 per share, shall be changed and reclassified into three hundred ten (310)
shares of Common Stock, par value $.01 per share.
4. The amendment of the certificate of incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, this certificate has been signed this 7th day of
October, 1999.
RADIO UNICA COMMUNICATIONS CORP.
By:
---------------------------------------
Joaquin F. Blaya, Chairman of the Board
ATTEST:
- ---------------------------------------
Steven E. Dawson, Secretary
2
<PAGE>
Exhibit 3.2
BY-LAWS
OF
RADIO UNICA COMMUNICATIONS CORP.
(A Delaware corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK.
(a) Every holder of stock in the Corporation shall be entitled to have
a certificate signed by, or in the name of, the Corporation by the Chairman or
Vice-Chairman of the Board of Directors, if any, or by the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation representing the number of shares
owned by such person in the Corporation. If such certificate is countersigned by
a transfer agent other than the Corporation or its employee or by a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such officer, transfer agent or registrar at
the date of issue.
(b) Whenever the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever the
Corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
(c) The Corporation may issue a new certificate of stock in place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Board of Directors may require the owner of any lost, stolen
or destroyed certificate, or such person's legal representative, to give the
Corporation a bond sufficient to indemnify the Corporation against any claim
that may be made against it on account of the alleged loss, theft or destruction
of any such certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS.
<PAGE>
The Corporation may, but shall not be required to, issue fractions of a
share.
3. STOCK TRANSFERS.
Upon compliance with provisions restricting the transfer or
registration of transfer of shares of stock, if any, transfers or registration
of transfer of shares of stock of the Corporation shall be made only on the
stock ledger of the Corporation by the registered holder thereof, or by such
person's attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the Corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than sixty nor less than ten days before the date of such meeting. If no record
date has been fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; PROVIDED, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date has been fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
5. MEANING OF CERTAIN TERMS.
As used herein in respect of the right to notice of a meeting of
stockholders or a waiver thereof or to participate or vote thereat or to consent
or dissent in writing in lieu of a meeting, as
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<PAGE>
the case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the Corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the Certificate of Incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the Certificate of Incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; PROVIDED, HOWEVER, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the Certificate of Incorporation, including any preferred stock
which is denied voting rights under the provisions of the resolution or
resolutions adopted by the Board of Directors with respect to the issuance
thereof.
6. STOCKHOLDER MEETINGS.
(a) TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the Board of Directors. A special meeting shall be
held on the date and at the time fixed by the Board of Directors.
(b) PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as the Board of Directors may,
from time to time, fix. Whenever the Board of Directors shall fail to fix such
place, the meeting shall be held at the registered office of the Corporation in
the State of Delaware.
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<PAGE>
(c) CALL. Annual meetings and special meetings may be called by the
Board of Directors or by any officer instructed by the Board of Directors to
call the meeting.
(d) NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date and hour of the meeting. The notice of an annual
meeting shall state that the meeting is called for the election of Directors and
for the transaction of other business which may properly come before the
meeting, and shall (if any other action which could be taken at a special
meeting is to be taken at such annual meeting), state such other action or
actions as are known at the time of such notice. The notice of a special meeting
shall in all instances state the purpose or purposes for which the meeting is
called. If any action is proposed to be taken which would, if taken, entitle
stockholders to receive payment for their shares of stock, the notice shall
include a statement of that purpose and to that effect. Except as otherwise
provided by the General Corporation Law, a copy of the notice of any meeting
shall be given, personally or by mail, not less than ten days nor more than
sixty days before the date of the meeting, unless the lapse of the prescribed
period of time shall have been waived, and directed to each stockholder at such
person's address as it appears on the records of the Corporation. Notice by mail
shall be deemed to be given when deposited, with postage thereon prepaid, in the
United States mail. If a meeting is adjourned to another time, not more than
thirty days hence, and/or to another place, and if an announcement of the
adjourned time and place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the Board of Directors, after
adjournment, fixes a new record date for the adjourned meeting. Notice need not
be given to any stockholder who submits a written waiver of notice before or
after the time stated therein. Attendance of a person at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice.
(e) STOCKHOLDER LIST. There shall be prepared and made, at least ten
days before every meeting of stockholders, a complete list of the stockholders,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list required by this section or the books of the
Corporation, or to vote at any meeting of stockholders.
(f) CONDUCT OF MEETING. Meetings of the stockholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting: the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice President, a
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<PAGE>
chairman for the meeting chosen by the Board of Directors or, if none of the
foregoing is in office and present and acting, by a chairman to be chosen by the
stockholders. The Secretary of the Corporation or, in such person's absence, an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present the chairman for the meeting
shall appoint a secretary of the meeting.
(g) PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for such stockholder by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of any
meeting, voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by such
person's attorney-in-fact. No proxy shall be voted or acted upon after three
years from its date unless such proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and, if,
and only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally.
(h) INSPECTORS AND JUDGES. The Board of Directors, in advance of any
meeting, may, but need not, appoint one or more inspectors of election or judges
of the vote, as the case may be, to act at the meeting or any adjournment
thereof. If an inspector or inspectors or judge or judges are not appointed by
the Board of Directors, the person presiding at the meeting may, but need not,
appoint one or more inspectors or judges. In case any person who may be
appointed as an inspector or judge fails to appear or act, the vacancy may be
filled by appointment made by the person presiding thereat. Each inspector or
judge, if any, before entering upon the discharge of such person's duties, shall
take and sign an oath faithfully to execute the duties of inspector or judge at
such meeting with strict impartiality and according to the best of his ability.
The inspectors or judges, if any, shall determine the number of shares of stock
outstanding and the voting power of each, the shares of stock represented at the
meeting, the existence of a quorum and the validity and effect of proxies,
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such other acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the person presiding at the meeting, the inspector or inspectors or
judge or judges, if any, shall make a report in writing of any challenge,
question or matter determined by such person or persons and execute a
certificate of any fact so found.
(i) QUORUM. Except as the General Corporation Law or these By-Laws may
otherwise provide, the holders of a majority of the outstanding shares of stock
entitled to vote shall constitute a quorum at a meeting of stockholders for the
transaction of any business. The stockholders present may adjourn the meeting
despite the absence of a quorum. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any shareholders.
(j) VOTING. Each stockholder entitled to vote in accordance with the
terms of the Certificate of Incorporation and of these By-Laws, or, with respect
to the issuance of preferred
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<PAGE>
stock, in accordance with the terms of a resolution or resolutions of the Board
of Directors, shall be entitled to one vote, in person or by proxy, for each
share of stock entitled to vote held by such stockholder. In the election of
Directors, a plurality of the votes present at the meeting shall elect. Any
other action shall be authorized by a majority of the votes cast except where
the Certificate of Incorporation or the General Corporation Law prescribes a
different percentage of votes and/or a different exercise of voting power.
Voting by ballot shall not be required for corporate action except as
otherwise provided by the General Corporation Law.
7. STOCKHOLDER ACTION WITHOUT MEETINGS.
Any action required to be taken, or any action which may be taken, at
any annual or special meeting of stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of the
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing and shall
be delivered to the Corporation by delivery to its registered office in
Delaware, its principal place of business or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION.
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors of the Corporation. The use of the
phrase "whole Board" herein refers to the total number of Directors which the
Corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER.
A Director need not be a stockholder, a citizen of the United States,
or a resident of the State of Delaware. The initial Board of Directors shall
consist of three persons. Thereafter the number of Directors constituting the
whole board shall be at least one. Subject to the foregoing limitation and
except for the first Board of Directors, such number may be fixed from time to
time by action of the stockholders or of the Board of Directors, or, if the
number is not fixed, the
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<PAGE>
number shall be three. The number of Directors may be increased or decreased by
action of the stockholders or of the Board of Directors.
3. ELECTION AND TERM.
The first Board of Directors, unless the members thereof shall have
been named in the Certificate of Incorporation, shall be elected by the
incorporator or incorporators and shall hold office until the first annual
meeting of stockholders and until their successors have been elected and
qualified or until their earlier resignation or removal. Any Director may resign
at any time upon written notice to the Corporation. Thereafter, Directors who
are elected at an annual meeting of stockholders, and Directors who are elected
in the interim to fill vacancies and newly created Directorships, shall hold
office until the next annual meeting of stockholders and until their successors
have been elected and qualified or until their earlier resignation or removal.
In the interim between annual meetings of stockholders or of special meetings of
stockholders called for the election of Directors and/or for the removal of one
or more Directors and for the filling of any vacancies in the Board of
Directors, including vacancies resulting from the removal of Directors for cause
or without cause, any vacancy in the Board of Directors may be filled by the
vote of a majority of the remaining Directors then in office, although less than
a quorum, or by the sole remaining Director.
4. MEETINGS.
(a) TIME. Regular meetings shall be held at such time as the Board
shall fix. Special meetings may be called upon notice.
(b) FIRST MEETING. The first meeting of each newly elected Board may be
held immediately after each annual meeting of the stockholders at the same place
at which the meeting is held, and no notice of such meeting shall be necessary
to call the meeting, provided a quorum shall be present. In the event such first
meeting is not so held immediately after the annual meeting of the stockholders,
it may be held at such time and place as shall be specified in the notice given
as provided for special meetings of the Board of Directors, or at such time and
place as shall be fixed by the consent in writing of all of the Directors.
(c) PLACE. Meetings, both regular and special, shall be held at such
place within or without the State of Delaware as shall be fixed by the Board.
(d) CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, or the President, or of a majority of the Directors.
(e) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral or any
<PAGE>
other mode of notice of the time and place shall be given for special meetings
at least twenty-four hours prior to the meeting; notice may be given by
telephone of telefax (in which case it is effective when given) or by mail (in
which case it is effective seventy-two hours after mailing by prepaid first
class mail). The notice of any meeting need not specify the purpose of the
meeting. Any requirement of furnishing a notice shall be waived by any Director
who signs a written waiver of such notice before or after the time stated
therein. Attendance of a Director at a meeting of the Board shall constitute a
waiver of notice of such meeting, except when the Director attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the Directors in office shall constitute a quorum, provided that
such majority shall constitute at least one-third (1/3) of the whole Board. Any
Director may participate in a meeting of the Board by means of a conference
telephone or similar communications equipment by means of which all Directors
participating in the meeting can hear each other, and such participation in a
meeting of the Board shall constitute presence in person at such meeting. A
majority of the Directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
act of the Board shall be the act by vote of a majority of the Directors present
at a meeting, a quorum being present. The quorum and voting provisions herein
stated shall not be construed as conflicting with any provisions of the General
Corporation Law and these By-Laws which govern a meeting of Directors held to
fill vacancies and newly created Directorships in the Board.
(g) CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other Director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS.
Any or all of the Directors may be removed for cause or without cause
by the stockholders.
6. COMMITTEES.
The Board of Directors may, by resolution passed by a majority of the
whole Board, designate one or more committees, each committee to consist of one
or more of the Directors of the Corporation. The Board may designate one or more
Directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Any such committee, to the
extent provided in the resolution of the Board, shall have and may exercise the
powers of the Board of Directors in the management of the business and affairs
of
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the Corporation, and may authorize the seal of the Corporation to be affixed to
all papers which may require it. In the absence or disqualification of any
member of any such committee or committees, the members thereof present at any
meeting and not disqualified from voting, whether or not they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.
7. ACTION IN WRITING.
Any action required or permitted to be taken at any meeting of the
Board of Directors or any committee thereof may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
ARTICLE III
OFFICERS
1. EXECUTIVE OFFICERS.
The Board of Directors may elect or appoint a Chairman of the Board of
Directors, a President, one or more Vice Presidents (which may be denominated
with additional descriptive titles), a Secretary, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers and such other
officers as it may determine. Any number of offices may be held by the same
person.
2. TERM OF OFFICE: REMOVAL.
Unless otherwise provided in the resolution of election or appointment,
each officer shall hold office until the meeting of the Board of Directors
following the next annual meeting of stockholders and until such officer's
successor has been elected and qualified or until the earlier resignation or
removal of such officer.
The Board of Directors may remove any officer for cause or without cause.
3. AUTHORITY AND DUTIES.
All officers, as between themselves and the Corporation, shall have
such authority and perform such duties in the management of the Corporation as
may be provided in these By-Laws, or, to the extent not so provided, by the
Board of Directors.
4. THE CHAIRMAN OF THE BOARD OF DIRECTORS.
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<PAGE>
The Chairman of the Board of Directors, if present and acting, shall
preside at all meetings of the Board of Directors, otherwise, the President, if
present, shall preside, or if the President does not so preside, any other
Director chosen by the Board shall preside. The Chairman of the Board shall be
the chief executive officer of the Corporation.
5. THE PRESIDENT.
The President shall be the chief operating officer of the Corporation.
6. VICE PRESIDENTS.
Any Vice President that may have been appointed, in the absence or
disability of the President, shall perform the duties and exercise the powers of
the President, in the order of their seniority, and shall perform such other
duties as the Board of Directors shall prescribe.
7. THE SECRETARY.
The Secretary shall keep in safe custody the seal of the Corporation
and affix it to any instrument when authorized by the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors.
The Secretary (or in such officer's absence, an Assistant Secretary, but if
neither is present another person selected by the Chairman for the meeting)
shall have the duty to record the proceedings of the meetings of the
stockholders and Directors in a book to be kept for that purpose.
8. THE TREASURER.
The Treasurer shall have the care and custody of the corporate funds,
and other valuable effects, including securities, and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board, taking proper vouchers for such
disbursements, and shall render to the President and Directors, at the regular
meetings of the Board, or whenever they may require it, an account of all
transactions as Treasurer and of the financial condition of the Corporation. If
required by the Board of Directors, the Treasurer shall give the Corporation a
bond for such term, in such sum and with such surety or sureties as shall be
satisfactory to the Board for the faithful performance of the duties of such
office and for the restoration to the Corporation, in case of such person's
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in such person's possession
or under such person's control belonging to the Corporation.
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ARTICLE IV
CORPORATE SEAL
AND
CORPORATE BOOKS
The corporate seal shall be in such form as the Board of Directors
shall prescribe. The books of the Corporation may be kept within or without the
State of Delaware, at such place or places as the Board of Directors may, from
time to time, determine.
ARTICLE V
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be subject
to change, by the Board of Directors.
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ARTICLE VI
INDEMNITY
(a) Any person who was or is a party or threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he or she is or was a
Director, officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(including employee benefit plans) (hereinafter an "indemnitee"), shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification than
permitted prior thereto), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such indemnitee in connection with such action, suit or proceeding, if the
indemnitee acted in good faith and in a manner he or she 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 reasonable cause to believe such
conduct was unlawful. The termination of the proceeding, whether by judgment,
order, settlement, conviction or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he or she 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 reasonable cause to believe such conduct was
unlawful.
(b) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he or she is or was a Director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another Corporation, partnership, joint venture, trust or
other enterprise (including employee benefit plans) shall be indemnified and
held harmless by the Corporation to the fullest extent authorized by the General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification than permitted prior thereto),
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection with the defense or settlement of such action or suit
if he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court in which such suit or action was
brought, shall determine, upon application, that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) All reasonable expenses incurred by or on behalf of the indemnitee
in connection
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<PAGE>
with any suit, action or proceeding, may be advanced to the indemnitee by the
Corporation.
(d) The rights to indemnification and to advancement of expenses
conferred in this article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, the Certificate of
Incorporation, a By-Law of the Corporation, agreement, vote of stockholders or
disinterested Directors or otherwise.
(e) The indemnification and advancement of expenses provided by this
article shall continue as to a person who has ceased to be a Director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
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<PAGE>
Exhibit 5.1
STROOCK & STROOCK & LAVAN LLP
180 Maiden Lane
New York, New York 10038
October 7, 1999
Radio Unica Communications Corp.
8400 N.W. 52nd Street, Suite 101
Miami, Florida 33166
Ladies and Gentlemen:
We have acted as counsel to Radio Unica Communications Corp., a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), of a Registration Statement on Form S-1
(Registration No. 333-82561), as amended (the "Registration Statement"),
relating to the proposed public offering (the "Offering") by the Company of
5,700,000 shares of its Common Stock, par value $.01 per share (the "Common
Stock"), and up to 855,000 additional shares of Common Stock which may be sold
by a stockholder of the Company in the event the underwriters for the Offering
elect to exercise their over-allotment option (all such shares of Common Stock
being hereinafter collectively referred to as the "Shares").
As such counsel, we have examined copies of the Certificate of Incorporation and
By-Laws of the Company, each as amended to the date hereof, the Registration
Statement, the Prospectus which forms a part of the Registration Statement and
originals or copies of such corporate minutes, records, agreements and other
instruments of the Company, certificates of public officials and other
documents, and have made such examinations of law, as we have deemed necessary
to form the basis for the opinion hereinafter expressed. In our examination of
such materials, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all copies submitted to us. As to various questions of
fact material to such opinion, we have relied, to the extent we deemed
appropriate, upon representations, statements and certificates of officers and
representatives of the Company and others.
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not purport to express any opinion herein
concerning any law other than the laws of the State of New York, the federal
laws of the United States of America and the General Corporation Law of the
State of Delaware.
<PAGE>
Page 2
Based upon and subject to the foregoing, we are of the opinion that (i) the
Shares being offered by the Company, when and if issued and sold under the
circumstances contemplated by the Registration Statement, will be legally
issued, fully paid and non-assessable and (ii) the Shares being offered by a
stockholder of the Company, when and if sold under the circumstances
contemplated by the Registration Statement, will be legally issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Opinions" in the Prospectus which forms a part of the Registration
Statement. In giving such consent, we do not admit hereby that we come within
the category of persons whose consent is required under Section 7 of the Act or
the Rules and Regulations of the Commission thereunder.
Very truly yours,
STROOCK & STROOCK & LAVAN LLP
ex-5-1.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated June 12, 1998 and February 24, 1999, except for the
second paragraph of Note 2, as to which the date is September 16, 1999, in
Amendment No. 2 to the Registration Statement (Form S-1 No. 333-82561) and
related Prospectus of Radio Unica Communications Corp. for the registration of
5,700,000 shares of its common stock.
Ernst & Young LLP
Miami, Florida
October 6, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report dated November 18, 1997, on our audits of the financial statements of Oro
Spanish Broadcasting, Inc. We also consent to the reference to our firm under
the caption "Experts".
Miller, Kaplan, Arase & Co., LLP
North Hollywood, California
October 6, 1999
