<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 28, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 33-82114
SPANISH BROADCASTING SYSTEM, INC.
SEE TABLE OF ADDITIONAL REGISTRANTS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3827791
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
3191 CORAL WAY, SUITE 805, MIAMI, FLORIDA 33145
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(305) 441-6901
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
(X) YES ( ) NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
NUMBER OF SHARES OF REGISTRANT'S COMMON STOCK, PAR VALUE $.01 PER
SHARE, OUTSTANDING AS OF AUGUST 11, 1998; 606,668 SHARES OF COMMON STOCK OF
WHICH 558,135 SHARES ARE DESIGNATED CLASS A COMMON STOCK AND 48,533 SHARES ARE
DESIGNATED CLASS B COMMON STOCK.
<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
PRIMARY
STANDARD
STATE OR OTHER INDUSTRIAL I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION IDENTIFICATION
INCORPORATION NUMBER NUMBER
<S> <C> <C> <C>
SPANISH BROADCASTING SYSTEM, INC. ......................... NEW JERSEY 4832 13-3181941
SPANISH BROADCASTING SYSTEM OF CALIFORNIA, INC. ........... CALIFORNIA 4832 92-3952357
SPANISH BROADCASTING SYSTEM OF FLORIDA, INC. .............. FLORIDA 4832 58-1700848
ALARCON HOLDINGS, INC. .................................... NEW YORK 6512 13-3475833
SPANISH BROADCASTING SYSTEM NETWORK, INC. ................. NEW YORK 4899 13-3511101
SBS PROMOTIONS, INC. ...................................... NEW YORK 7999 13-3456128
SBS OF GREATER NEW YORK, INC. ............................. NEW YORK 4832 13-3888732
SPANISH BROADCASTING SYSTEM OF ILLINOIS, INC. ............. DELAWARE 4832 36-4174296
SPANISH BROADCASTING SYSTEM OF GREATER MIAMI, INC. ........ DELAWARE 4832 65-0774450
SPANISH BROADCASTING SYSTEM OF SAN ANTONIO, INC. .......... DELAWARE 4832 65-0820776
</TABLE>
-1-
<PAGE> 3
SPANISH BROADCASTING SYSTEM, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 28, 1997 AND
JUNE 28, 1998 (UNAUDITED) 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED AND NINE MONTHS ENDED JUNE 29, 1997 AND JUNE 28, 1998 (UNAUDITED) 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
MONTHS ENDED AND NINE MONTHS ENDED JUNE 29, 1997 AND JUNE 28,
1998 (UNAUDITED) 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
</TABLE>
-2-
<PAGE> 4
SPANISH BROADCASTING SYSTEM,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 28,1997 JUNE 28, 1998
ASSETS (AUDITED) (UNAUDITED)
CURRENT ASSETS :
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 12,287,764 $ 32,134,056
RECEIVABLES:
TRADE 17,226,345 19,730,808
LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS 2,385,267 3,984,120
------------- -------------
NET RECEIVABLES - TRADE 14,841,078 15,746,688
BARTER (NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF
$ 3,019,828 AT SEPT.28,1997 AND $4,200,418 AT JUNE 28,1998) 270,900 79,650
------------- -------------
NET RECEIVABLES 15,111,978 15,826,338
OTHER CURRENT ASSETS 1,409,906 2,383,176
------------- -------------
TOTAL CURRENT ASSETS 28,809,648 50,343,570
PROPERTY AND EQUIPMENT, NET 18,409,415 14,901,979
FRANCHISE COSTS, NET 273,631,766 273,971,175
DUE FROM RELATED PARTY 289,869 289,869
DEFERRED FINANCING COSTS, NET 9,262,314 7,782,659
DEFERRED INCOME TAXES 3,674,287 --
OTHER ASSETS 289,784 217,060
------------- -------------
$ 334,367,083 $ 347,506,312
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES :
CURRENT PORTION OF SENIOR SECURED NOTES $ 15,000,000 --
CURRENT PORTION OF LONG TERM DEBT 44,644 36,335
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 5,090,349 7,534,026
ACCRUED INTEREST 4,536,627 3,069,432
UNEARNED REVENUE 1,551,255 1,805,865
DIVIDENDS PAYABLE 960,761 8,165,089
------------- -------------
TOTAL CURRENT LIABILITIES 27,183,636 20,610,747
12.5% SENIOR SECURED NOTES,NET OF UNAMORTIZED DISCOUNT 88,820,963 91,520,331
11% SENIOR SECURED NOTES 75,000,000 75,000,000
DEFERRED INCOME TAXES PAYABLE -- 7,571,291
OTHER LONG-TERM DEBT, LESS CURRENT PORTION 4,147,676 4,337,546
14.25% SENIOR EXCHANGEABLE REDEEMABLE PREFERRED
STOCK, $.01 PAR VALUE. AUTHORIZED 413,930 SHARES; ISSUED
AND OUTSTANDING 199, 997 SHARES 171,261,919 186,448,154
STOCKHOLDERS' DEFICIENCY:
CLASS A COMMON STOCK, $.01 PAR VALUE. AUTHORIZED
5,000,000 SHARES; ISSUED AND OUTSTANDING 558,135
SHARES 5,581 5,581
CLASS B COMMON STOCK, $.01 PAR VALUE. AUTHORIZED
200,000 SHARES; ISSUED AND OUTSTANDING 48,533
SHARES 485 485
ADDITIONAL PAID IN CAPITAL 6,590,473 6,864,301
ACCUMULATED DEFICIT (35,119,184) (42,392,715)
------------- -------------
(28,522,645) (35,522,348)
LESS: LOANS RECEIVABLE FROM STOCKHOLDERS (3,524,466) (2,459,409)
------------- -------------
TOTAL STOCKHOLDERS' DEFICIENCY (32,047,111) (37,981,757)
------------- -------------
$ 334,367,083 $ 347,506,312
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 5
SPANISH BROADCASTING SYSTEM,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 29, 1997 JUNE 28, 1998 JUNE 29, 1997 JUNE 28, 1998
<S> <C> <C> <C> <C>
GROSS BROADCASTING REVENUES $ 20,652,792 $ 23,887,651 $ 47,393,913 $ 62,098,840
LESS: AGENCY COMMISSIONS 2,497,144 2,896,757 5,448,511 7,508,229
------------ ------------ ------------ ------------
NET BROADCASTING REVENUES 18,155,648 20,990,894 41,945,402 54,590,611
------------ ------------ ------------ ------------
OPERATING EXPENSES
ENGINEERING 478,737 499,784 1,563,250 1,380,656
PROGRAMMING 1,949,463 1,919,274 4,981,721 5,996,108
SELLING 4,252,060 4,889,604 10,417,849 13,108,606
GENERAL AND ADMINISTRATIVE 1,654,840 2,210,877 4,589,278 7,811,811
CORPORATE EXPENSES 1,558,779 2,118,768 4,081,114 5,122,297
DEPRECIATION & AMORTIZATION 2,293,084 2,214,911 5,094,240 6,866,961
------------ ------------ ------------ ------------
12,186,963 13,853,218 30,727,452 40,286,439
------------ ------------ ------------ ------------
OPERATING INCOME 5,968,685 7,137,676 11,217,950 14,304,172
OTHER (INCOME) EXPENSES :
GAIN ON SALE OF AM STATIONS -- 117,469 -- (36,246,947)
INTEREST EXPENSE, NET 6,075,201 5,394,375 16,402,849 16,002,451
OTHER, NET (1,901) -- 25,989 --
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (104,615) 1,625,832 (5,210,888) 34,548,668
INCOME TAX EXPENSE (BENEFIT) (20,721) 650,333 (1,961,106) 13,819,467
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (83,894) 975,499 (3,249,782) 20,729,201
EXTRAORDINARY ITEM, NET OF INCOME TAXES -- -- (1,715,206) (1,612,723)
------------ ------------ ------------ ------------
NET INCOME (LOSS) (83,894) 975,499 (4,964,988) 19,116,478
ACCUMULATED DEFICIT AT
BEGINNING OF PERIOD (19,985,046) (34,983,422) (11,906,690) (35,119,184)
DIVIDENDS ON PREFERRED STOCK (6,698,696) (7,125,342) (8,952,027) (20,507,976)
ACCRETION OF PREFERRED STOCK (93,928) (659,652) (1,037,859) (1,883,377)
DIVIDENDS ON COMMON STOCK -- (599,798) -- (3,998,656)
------------ ------------ ------------ ------------
ACCUMULATED DEFICIT AT
END OF PERIOD (26,861,564) (42,392,715) (26,861,564) (42,392,715)
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 6
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 29, 1997 AND JUNE 28, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
NET INCOME (LOSS) $ (4,964,988) $ 19,116,478
------------- -------------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
LOSS ON EXTINGUISHMENT OF DEBT 2,766,460 2,687,872
GAIN ON SALE OF RADIO STATIONS -- (36,246,947)
DEPRECIATION AND AMORTIZATION 5,094,240 6,866,961
CHANGE IN PROVISION FOR LOSSES ON RECEIVABLES 75,494 2,779,443
AMORTIZATION OF DEBT DISCOUNT 4,629,084 477,029
INTEREST SATISFIED THROUGH THE ISSUANCE OF NEW NOTES 2,433,230 --
AMORTIZATION OF DEFERRED FINANCING COSTS 948,580 1,013,387
INTEREST ADDED TO FACE AMOUNT NOTE PAYABLE -- 230,400
DEFERRED INCOME TAXES (2,329,030) 11,245,578
CHANGES IN OPERATING ASSETS AND LIABILITIES:
INCREASE IN RECEIVABLES (3,436,161) (3,493,803)
INCREASE IN OTHER CURRENT ASSETS (1,222,431) (973,270)
DECREASE (INCREASE) IN OTHER ASSETS (150,808) 72,724
INCREASE IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES 722,279 2,443,677
INCREASE (DECREASE) IN ACCRUED INTEREST 459,128 (1,467,195)
INCREASE IN UNEARNED REVENUE 880,235 254,610
------------- -------------
TOTAL ADJUSTMENTS 10,870,300 (14,109,534)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,905,312 5,006,944
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF RADIO STATIONS, NET OF CLOSING COSTS -- 43,165,854
ACQUISITIONS OF RADIO STATIONS NET OF $3,000,000
NOTE PAYABLE ISSUED TO SELLER IN 1997 (143,000,000) (9,327,713)
ADDITIONS TO PROPERTY AND EQUIPMENT (1,740,645) (1,290,128)
------------- -------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (144,740,645) 32,548,013
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PURCHASE OF SENIOR SECURED NOTES -- (15,000,055)
PROCEEDS FROM ISSUANCE OF SENIOR SECURED NOTES
NET OF ISSUANCE COSTS 71,258,995 --
PROCEEDS FROM ISSUANCE OF REDEEMABLE PREFERRED STOCK
AND WARRANTS, NET OF ISSUANCE COSTS 164,734,530 --
REDEMPTION OF SENIOR SECURED NOTES (39,662,074) --
REDEMPTION OF PREFERRED STOCK (42,699,590) --
REDEMPTION OF PRIMARY WARRANTS (8,323,000) --
PAYMENT OF DIVIDENDS -- (3,724,828)
REPAYMENTS OF OTHER LONG-TERM DEBT (29,775) (48,839)
DECREASE (INCREASE) IN LOANS RECEIVABLE FROM STOCKHOLDERS (1,004,929) 1,065,057
------------- -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 144,274,157 (17,708,665)
------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,438,824 19,846,292
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,468,079 12,287,764
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,906,903 $ 32,134,056
============= =============
CASH PAID FOR:
INTEREST $ 8,070,338 $ 15,913,831
============= =============
INCOME TAXES $ 369,162 $ 1,693,335
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE> 7
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 29, 1997 and June 28, 1998
(Unaudited)
(Dollars in Thousands)
(1) BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
the Company and its direct and indirect subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements for the
three and nine month periods ended June 29, 1997 and June 28, 1998 do not
contain all disclosures required by generally accepted accounting principles.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements of the Company as of and for the
fiscal year ended September 28, 1997 included in the Company's 1997 Form 10K.
In the opinion of management of the Company, the accompanying unaudited
condensed consolidated financial statements contain all adjustments, which are
all of a normal, recurring nature, necessary for a fair presentation of the
results of the interim periods. The results of operations for the three and nine
month periods ended June 28, 1998 are not necessarily indicative of the results
for a full year.
(2) ACQUISITIONS, DISPOSITIONS AND FINANCINGS
On March 27, 1997, the Company acquired the FCC broadcast license and
substantially all of the assets used or useful in the operation of radio station
WYSY-FM, serving the Chicago metropolitan area, for a purchase price of $33.0
million, including a $3.0 million seller note, plus closing costs of $0.5
million. The Company subsequently changed the call letters to WLEY-FM.
Additionally, on March 27, 1997, the Company acquired the FCC broadcast licenses
and substantially all of the assets used or useful in the operations of radio
stations WRMA-FM and WXDJ-FM, serving the Miami metropolitan area, for a
purchase price of $111 million plus closing costs of $0.8 million.
On March 27, 1997, the Company completed offerings of (a) 175,000 units
(the "Units Offering") comprised of 175,000 shares of the Company's Series A
Senior Exchangeable Preferred Stock (the "Series A Preferred Stock"),
liquidation preference $1,000 per share, and warrants to purchase 74,900 shares
of the Company's Class A Common Stock, par value $.01 per share ("Common Stock")
and (b) $75.0 million aggregate principal amount of the Company's 11% Senior
Notes due 2004 (the "Senior Notes") (the "Notes Offering") in transactions not
registered under the Securities Act of 1933, as amended (the "Act") in reliance
upon the exemption provided in Section 4(2) of the Act. The proceeds of these
offerings were used to finance the acquisitions of radio stations WRMA-FM,
WXDJ-FM and WLEY-FM (the "Acquisitions") and to retire the notes issued in 1996.
On May 13, 1998, the Company acquired the FCC broadcast license and
substantially all of the assets used or useful in the operation of radio station
KRIO-FM serving the San Antonio area for $9.25 million, plus closing costs of
$0.08 million. The Company financed this purchase from cash on hand and from
operations. The Company subsequently changed the call letters to KLEY-FM.
-6-
<PAGE> 8
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's consolidated results of operations for the nine month
periods ended June 29, 1997 and June 28, 1998 include the operations of WRMA-FM,
WXDJ-FM, WLEY-FM and KRIO-FM from the dates of acquisition. The following
unaudited pro-forma summary presents the consolidated results of operations as
if the acquisition of WRMA-FM and WXDJ-FM had occurred as of the beginning of
fiscal year 1997 after giving effect to certain adjustments, including
amortization of franchise costs and interest expense on the acquisition debt.
These pro-forma results have been prepared for comparative purposes only and do
not purport to be indicative of what would have occurred had the acquisition
been made as of that date or of results which may occur in the future.
The results of WLEY-FM and KRIO-FM prior to their acquisition have not
been included in the pro-forma summary as the acquisitions do not meet the
significance test for presentation of pro-forma information.
<TABLE>
<CAPTION>
Nine Months Ended
June 29, 1997
-------------
Pro-Forma Results:
<S> <C>
Net Revenues..................................... $48,698
Net Loss Before Extraordinary Item............... $(2,127)
</TABLE>
On July 22, 1997, the Company commenced an exchange offer whereby
shares of Series A Preferred Stock were exchanged for an equal number of Series
B Senior Exchangeable Preferred Stock (the "Series B Preferred Stock"). The
exchange of Series A Senior Notes for Series B Senior Notes has been registered
under the Act. Such exchange was completed in August 1997.
On July 22, 1997, the Securities and Exchange Commission declared
effective a shelf registration statement relating to the Series A Preferred
Stock, and to $338,930 in aggregate principal amount of 14-1/4% Exchange
Debentures due 2005, Series A and 23,836 shares of Common Stock that may be
issued upon the occurrence of certain events, each of which may be offered from
time to time by or for the account of the holders thereof. The Company is using
its best efforts to keep such shelf registration continuously effective.
The Company has completed the transfer of certain assets to its newly
formed subsidiaries, Spanish Broadcasting System of Greater Miami, Inc. and
Spanish Broadcasting System of Illinois, Inc. (together the "New Subsidiaries").
The Company has not included separate financial statements for its guarantor
subsidiaries because (a) such guarantor subsidiaries (including the New
Subsidiaries) have jointly and severally guaranteed the Senior Notes on a full
and unconditional basis, (b) the aggregate assets, liabilities, earnings and
equity of the guarantor subsidiaries are substantially equivalent to the assets,
liabilities, earnings and equity of the parent on a consolidated basis and (c)
the separate financial statements and other disclosures concerning the
subsidiary guarantors are not deemed material to investors.
On July 2, 1997, the Company entered into an agreement (as amended, the
"One-on-One Agreement") with One-on-One Sports, Inc. ("One-on-One") to sell the
FCC licenses and all of the assets used or useful in operating its AM stations,
KXMG-AM of Los Angeles, WXLX-AM of New York and WCMQ-AM of Miami for $44
million. Pursuant to the One-on-One Agreement, on September 29, 1997, the
Company sold the assets and FCC licenses of WXLX-AM and WCMQ-AM to One-on-One
for a purchase price of $26 million. On December 2, 1997, the Company
consummated the sale of the assets and FCC license of KXMG-AM to One-on-One for
a purchase price of $18 million (together with the sale of WXLX-AM and WCMQ-AM,
the "Dispositions"). The gain from the sale of these stations amounts to
approximately $36.2 million before income taxes. The Company was required to use
the greater of $25 million or 50% of the net proceeds of such sale to make
offers to purchase 12-1/2% Senior Notes due 2002 ("Old Notes") at 110% of the
principal amount.
-7-
<PAGE> 9
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pursuant to the terms of the Company's debt agreements, in October
1997, the Company made an offer to holders of its Old Notes to acquire $22,730
in principal amount of Notes at a purchase price of $1,100 for each $1,000 in
principal amount. Pursuant to this tender offer, the Company purchased $5,500 in
principal amount of Notes for $6,050. In November 1997, the Company purchased an
additional $7,666 in principal amount of Notes for $8,950. The Company
recognized a loss on the transactions of $1.6 million, resulting from the
premiums paid and the write off of related unamortized debt discount and
deferred financing costs, net of income taxes. This amount has been classified
as an extraordinary item in the accompanying condensed consolidated financial
statements.
In March 1998, the Company declared a dividend of $5.60 per share of
common stock. In April 1998, holders of warrants to purchase shares of Class A
Common Stock that were issued pursuant to the Warrant Agreement dated June 29,
1994 (the "1994 Warrants") were given the option to participate in such dividend
as if they were stockholders, subject to agreeing to waive their anti-dilution
rights with respect to such dividends. Holders of warrants to purchase 58,209
shares participated in the dividend. In May 1998, the Company paid $0.326
million to these warrantholders and issued replacement warrants entitling each
warrantholder to purchase from the Company shares of Class A Common Stock at a
rate of one share of Class A Common Stock per Warrant. The warrantholders that
elected not to participate in the cash dividend continue to hold such 1994
Warrants and are entitled to purchase from the Company shares of Class A Common
Stock at an adjusted rate of 1.01133 shares of Class A Common Stock per 1994
Warrant.
On June 16, 1998, the Company entered into an Asset Purchase Agreement
with Pan Caribbean Broadcasting Corporation to purchase the FCC broadcast
license and substantially all of the assets used or useful in the operation of
WDOY-FM serving Puerto Rico for $8.25 million. The Company has made a $412.5
deposit in connection with this acquisition. The purchase of this station is
subject to certain closing conditions, including FCC approval. The Company
expects this transaction to close during the fourth fiscal quarter. The Company
expects to finance this purchase from cash on hand and from operations.
-8-
<PAGE> 10
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(All Dollar Amounts Are Presented in Thousands).
RESULTS OF OPERATIONS
Three Months Ended June 29, 1997 Compared to the Three Months Ended
June 28, 1998
Net Revenues. Net revenues increased from $18,156 for the three months
ended June 29, 1997 to $20,991 for the three months ended June 28, 1998, an
increase of $2,835 or 15.6%. This increase resulted from increases at several of
the Company's stations including WLEY-FM in Chicago which was purchased by the
Company on March 27, 1997 and successfully converted from a 70's rock format to
a Spanish-language format. The Company's New York stations had strong increases
in net revenues particularly from WSKQ-FM which had a significant increase in
ratings ultimately culminating in it being the #1 ranked station in the recently
released Spring Arbitron ratings. Two of the Company's stations in Miami,
WXDJ-FM and WRMA-FM, which were also purchased on March 27, 1997, had increases
in net revenues as did WCMQ-FM of Miami. All of these increases were partially
offset by the decreased net revenues of KLAX-FM in Los Angeles as well as
decreased net revenues resulting from the Company's sale of the assets of its AM
stations in the quarter ended December 28, 1997.
Operating Expenses. Total operating expenses increased from $12,187 in
the three months ended June 29, 1997 to $13,853 in the three months ended June
28, 1998, an increase of $ 1,666 or 13.7%. The higher operating expenses were
caused by an increase of $1,184 in broadcasting operating expenses and an
increase of $560 in corporate expenses, partially offset by a decrease of $78 in
depreciation and amortization.
The increase in broadcasting operating expenses was caused mainly by
the inclusion of the results of WLEY-FM which was not fully operational in the
three months ended June 29, 1997 as well as an increase in advertising in New
York. The increase in corporate expenses was caused by increased professional
fees due mainly to compliance with securities law requirements. The decrease in
depreciation and amortization was the result of decreased amortization of
franchise costs related to the sale of the AM stations.
Operating Income. Operating income increased from $5,969 during the
three months ended June 29, 1997 to $7,138 during the three months ended June
28, 1998, an increase of $1,169 or 19.6%. The increase was due to the increase
in net revenues, partially offset by the increase in operating expenses.
EBITDA. EBITDA (defined as income before extraordinary item, net
interest expense, income taxes, depreciation and amortization, gains on sales of
radio stations and other income and expenses) increased $1,091 or 13.2% from
$8,262 during the three months ended June 29, 1997 to $9,353 during the three
months ended June 28, 1998. The increase in EBITDA was caused by the increase in
net revenues, partially offset by increases in broadcasting operating expenses
and corporate expenses.
Other (Income) Expenses. Other income and expenses decreased from
$6,073 during the three months ended June 29, 1997 to $5,512 during the three
months ended June 28, 1998. This decrease of $561 or 9.2% resulted from a
decrease in interest expense related to the purchase of the Old Notes and an
increase in interest income, partially offset by expenses related to the sale of
the AM Stations.
Net Income (Loss). The Company's net income for the three months ended
June 28, 1998 was $975 compared to the net loss of $84 for the three months
ended June 29, 1997. The net income was caused by the increase in operating
income and a decrease in interest expense, partially offset by an increase in
income taxes.
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<PAGE> 11
SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(All Dollar Amounts Are Presented in Thousands)
RESULTS OF OPERATIONS
Nine Months Ended June 29, 1997 Compared to the Nine Months Ended June
28, 1998
Net Revenues. Net revenues increased from $41,945 for the nine months
ended June 29, 1997 to $54,591 for the nine months ended June 28, 1998, an
increase of $12,646 or 30.1%. This increase was due primarily to the inclusion
of the results of WRMA-FM, WXDJ-FM, and WLEY-FM which were purchased on March
27, 1997. The increase in net revenues also resulted from a significant increase
in the net revenues of the New York Stations, WPAT-FM and WSKQ-FM and a Miami
station, WCMQ-FM. The increase was offset by a decrease in net revenues from the
Company's Los Angeles station, KLAX-FM in addition to the decrease in revenues
attributable to the sale of the AM stations in New York, Miami and Los Angeles.
Operating Expenses. Total operating expenses increased from $30,727 in
the nine months ended June 29, 1997 to $40,286 in the nine months ended June 28,
1998, an increase of $9,559 or 31.1%. The higher operating expenses were caused
by an increase of $6,745 in broadcasting operating expenses, a $1,041 increase
in corporate expenses and an increase of $1,773 in depreciation and amortization
expense.
The increase in broadcasting operating expenses was caused mainly by
the inclusion of the results of WRMA-FM, WXDJ-FM and WLEY-FM. The increase in
corporate expenses was caused mainly by increased professional fees and
salaries. The increase in depreciation and amortization was the result of
increased amortization of franchise costs related to the acquisitions of
WRMA-FM, WXDJ-FM and WLEY-FM offset by the decrease attributable to the sale of
the AM stations
Operating Income. Operating income increased from $11,218 during the
nine months ended June 29, 1997 to $14,304 during the nine months ended June 28,
1998, an increase of $3,086 or 27.5%. The increase was due to the significant
increase in net revenues partially offset by the increase in operating expenses.
EBITDA. EBITDA (defined as income before extraordinary item, net
interest expense, income taxes, depreciation and amortization, gains on sales of
radio stations and other income and expenses) increased $4,859 or 29.8% from
$16,312 during the nine months ended June 29, 1997 to $21,171 during the nine
months ended June 28, 1998. The increase in EBITDA was caused by the increase in
net revenues, partially offset by increases in broadcasting operating expenses
and corporate expenses.
Other (Income) Expenses. Other income and expenses, changed from an
expense of $16,429 in the nine months ended June 29, 1997 to income of $20,244
in the nine months ended June 28, 1998. The income was a result of the sale of
the AM Stations at a gain of $36,247.
Extraordinary Item. The extraordinary loss of $1,613, net of taxes, in
the nine months ended June 28, 1998 is a result of premiums paid on the purchase
of certain outstanding Old Notes and the write off of related unamortized debt
discount and deferred financing costs. In the nine months ended June 29, 1997,
the Company recorded an extraordinary loss of $1,715, net of income taxes. This
loss was from an amount paid in excess of the Company's carrying value and the
write off of related unamortized debt issuance costs in conjunction with the
refinancing of debt when the Company purchased WRMA-FM, WXDJ-FM and WLEY-FM.
Net Income (Loss). The Company's net income for the nine months ended
June 28, 1998 was $19,116 compared to the net loss of $4,965 for the nine months
ended June 29, 1997. The net income resulted from the increase in operating
income, the gain from the sale of the AM stations and a slight decrease in
interest expense partially offset by additional income taxes.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise primarily from its debt service
obligations, preferred stock dividend requirements, funding of the Company's
working capital needs and capital expenditures. The Company's primary form of
financing is cash generated from operations, long-term indebtedness and the
issuance of preferred stock.
On March 27, 1997, the Company consummated the acquisitions of
WRMA-FM, WXDJ-FM AND WLEY-FM (the "Acquisitions"). The Acquisitions were
financed with proceeds of the March 27, 1997 Units Offering and the Notes
Offering (the "Offerings"). Concurrently with the consummation of the
Acquisitions and the Offerings, the Company effected a series of transactions
including the redemption (the "Redemption") of the Company's Senior Secured
Notes due 2002 and Senior Exchangeable Preferred Stock, Series A and the
repurchase of related warrants to purchase an aggregate of 6.0% of the
Company's Common Stock, on a fully-diluted basis. In addition, simultaneously
with the consummation of the Offerings, the Company announced its intention to
declare a dividend of up to $4 million in the aggregate (the "Distribution") to
its stockholders and existing warrantholders who elected to receive their pro
rata portion of the Distribution in lieu of the anti-dilution adjustment they
would otherwise have been entitled to as a result of the Distribution. A
dividend of $5.60 per share of common stock was declared and distributed to the
stockholders in March 1998. In April 1998, holders of warrants to purchase
shares of Class A Common Stock that were issued pursuant to the Warrant
Agreement dated June 29, 1994 were given the option to participate in such
dividend as if they were stockholders, subject to agreeing to waive their
anti-dilution rights with respect to such dividends. Holders of warrants to
purchase 58,209 shares participated in the dividend and received $0.326 million
in the aggregate. The warrantholders that elected not to participate in the
cash dividend continue to hold such 1994 warrants and are entitled to purchase
from the Company shares of Class A Common Stock at an adjusted rate of 1.0133
shares of Class A Common Stock per 1994 Warrant.
On July 2, 1997, the Company entered into an agreement to sell the FCC
licenses and all of the assets used or useful in operating its AM stations,
KXMG-AM of Los Angeles, WXLX-AM of New York and WCMQ-AM of Miami for $44
million. The Company was required to use the greater of $25 million or 50% of
the net proceeds of such sale to make offers to purchase Old Notes at 110% of
the principal amount. The agreement contained customary representations,
warranties and conditions, including receipt of FCC approval to the transfer of
the FCC licenses. Pursuant to this agreement, the Company sold the assets and
FCC licenses of WXLX-AM and WCMQ-AM to One-on-One for a purchase price of $26
million on September 29, 1997. On December 2, 1997, the Company consummated the
sale of the assets and FCC license of KXMG-AM to One-on-One for a purchase price
of $18 million.
On May 13, 1998, the Company acquired the FCC broadcast license and
substantially all of the assets used or useful in the operation of radio station
KRIO-FM serving the San Antonio area for $9.25 million, plus closing costs of
$0.08 million. The Company financed this purchase from cash on hand and from
operations. The Company subsequently changed the call letters to KLEY-FM.
On June 16, 1998, the Company entered into an Asset Purchase Agreement
with Pan Caribbean Broadcasting Corporation to purchase the FCC broadcast
license and substantially all of the assets used or useful in the operation of
WDOY-FM serving Puerto Rico for $8.25 million. The Company has made a $412.5
deposit in connection with this acquisition. The purchase of this station is
subject to certain closing conditions, including FCC approval. The Company
expects this transaction to close during the fourth fiscal quarter. The Company
expects to finance this purchase from cash on hand and from operations.
Cash flow generated from operations was $5,007 for the nine months
ended June 28, 1998. A portion of the Company's cash flow was used to make its
semiannual interest payments on the Company's Notes of $15,862. Additionally,
the Company purchased KRIO-FM for $9,328, invested $1,290 in capital
expenditures, used $15,000 to purchase Old Notes and paid dividends of $3,725.
Proceeds from the sales of WXLX-AM, WCMQ -AM and KXMG-AM were approximately
$43,166, net of closing costs of $835.
Cash flow generated from operations was $5,905 for the nine months
ended June 29, 1997. A portion of the Company's cash flow was used to make its
semiannual interest payments on the Company's 12 1/2% Senior Notes due 2002 (the
"Old Notes"). The Company received proceeds of $71,259, net of issuance costs,
from the issuance of the Senior Notes and proceeds of $164,735, net of issuance
costs, from the issuance of the Preferred Stock in connection with the
Offerings. The Company used $143,000 of these proceeds to
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acquire WRMA-FM, WXDJ-FM and WLEY-FM, $39,662 for the redemption of Senior
Secured Notes and $42,700 for the redemption of Preferred Stock and $8,323 for
the redemption of warrants. Additionally, the Company invested $1,741 in capital
expenditures, mostly for the construction of a new tower and antenna system for
WXLX-AM in anticipation of the sale of this station.
The Company's revenues fluctuate throughout the year. The Company's
second fiscal quarter (January through March) generally produces the lowest
revenues for the year and its third fiscal quarter (April through June)
generally produces the highest revenues primarily due to increased levels of
advertising during this period.
Management believes, together with cash on hand, that cash from
operating activities should be sufficient to permit the Company to meet required
cash interest obligations (which will consist of cash interest expense on the
Senior Notes and cash interest expense on the Company's Old Notes, which,
commencing June 15, 1997, began to accrue cash interest at a rate of 12 1/2% per
annum) for the foreseeable future as well as capital expenditures, operating
obligations and the pending acquisition of WDOY-FM. The Company anticipates
paying dividends on its Preferred Stock through the issuance of additional
shares as permitted under the Preferred Stock Agreement. However, significant
assumptions (none of which can be assured) underlie this belief, including that
(i) economic conditions within the radio broadcasting market and economic
conditions generally will not deteriorate in any material respect, (ii) the
Company will be able to successfully implement its business strategy, (iii) the
Company will not incur any material unforeseen liabilities, including, without
limitation, environmental liabilities, and (iv) no future acquisitions will
adversely affect the Company's liquidity. The Company expects that it may be
required to refinance the Old Notes on or prior to their maturity date on June
15, 2002, and no assurances can be given that it will not be required to
refinance the Senior Notes and/or the Senior Preferred Stock. No assurance can
be given that any such refinancing, if required, will be obtained on terms
satisfactory to the Company, if at all.
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PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - No. 1 - Asset Purchase Agreement dated June 16,
1998 by and between Spanish Broadcasting System of Puerto
Rico, Inc. and Pan Caribbean Broadcasting Corporation.
(b) Reports on Form 8-K
No Current Report on Form 8-K was filed by the Company
since November 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Spanish Broadcasting System, Inc. ,
a Delaware Corporation.
Spanish Broadcasting System
of California, Inc.
Spanish Broadcasting System, Inc.,
a New Jersey Corporation.
Spanish Broadcasting System of Florida, Inc.
Spanish Broadcasting System Network, Inc.
SBS Promotions, Inc.
Alarcon Holdings, Inc.
SBS of Greater New York, Inc.
Spanish Broadcasting System of Illinois, Inc.
Spanish Broadcasting System of
Greater Miami, Inc.
Spanish Broadcasting System of San Antonio, Inc.
By: /s/Joseph A. Garcia
Joseph A. Garcia
EVP and Chief Financial Officer
(principal financial and accounting officer)
Date: August 11, 1998
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EXHIBIT INDEX
-------------
Exhibits
No. 1 Asset Purchase Agreement dated June 16, 1998 by and
between Spanish Broadcasting System of Puerto Rico, Inc.
and Pan Caribbean Broadcasting Corporation.
<PAGE> 1
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of June
16, 1998, by and between Spanish Broadcasting System of Puerto Rico, Inc., a
Puerto Rico corporation ("Buyer"), and Pan Caribbean Broadcasting Corporation, a
Connecticut corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Seller is the licensee of Radio Station WMDD(AM) and
Radio Station WDOY(FM), licensed to Fajardo, Puerto Rico, and related licenses
and authorizations issued by the Federal Communications Commission ("FCC"); and
WHEREAS, Seller desires to sell certain properties and assets
pertaining to WDOY(FM) only (the "Station"), and Buyer desires to purchase the
same, all subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, Seller and Buyer hereby agree as follows:
<PAGE> 2
Section 1. Purchase and Sale of Properties and Assets.
(a) Station's Assets. Subject to and in reliance upon the
representations, warranties and agreements herein set forth, and subject to the
terms and conditions herein contained, on the Closing Date (as defined in
Section 4), Seller agrees to convey, sell, assign, transfer and deliver to
Buyer, and Buyer agrees to purchase certain of the assets of the Station,
including, but not limited to, the following assets (collectively, the
"Station's Assets"):
(i) Licenses and Authorizations. The licenses,
permits and authorizations issued by the FCC listed on Schedule 1(a)(i) hereto
(collectively, the "Licenses"), and all the rights of Seller in and to the call
letters "WDOY(FM)".
(ii) Records, Etc. Except as excluded in Section
1(b), all files, logs and books (or true copies thereof) relating to the
operation of the Station, including all records, reports, logs and documents
required by the FCC to be maintained and the complete local public file
(collectively, the "Records"); provided, however, that Seller shall be entitled
to keep the originals of records for periods prior to January 1, 1997 (the
"Seller-Retained Records"), it being understood that as to the Records (1)
Seller shall have the right on reasonable request and at its expense to make
copies thereof; (2) Buyer shall have the right on reasonable request and at its
expense to make copies of the Seller-Retained Records; and (3) Buyer shall
preserve and
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protect the originals of all records (except Seller-Retained Records) for a
period of six (6) years from and after the Closing Date.
(iii) Personal Property. The tangible personal
property of Seller located at the El Yunque transmission site and listed on
Schedule (1)(a)(iii) hereto.
(iv) Goodwill. All of Seller's goodwill in, and going
concern value of, the Station.
(v) Agreements, Etc. To the extent Seller, using its
best efforts, is able to secure consents to assignment, the agreements, leases
and contracts listed on Schedule 1(a)(v) hereto, including any renewals,
extensions, amendments or modifications thereof, and any additional agreements,
leases and contracts made or entered into by Seller in the ordinary course of
business including, but not limited to, all unperformed agreements for the sale
of advertising on the Station.
(b) Excluded Assets. It is understood that no: (i) real
property; (ii) cash; (iii) inter-company receivables; (iv) notes receivable; (v)
bank deposits; (vi) other cash equivalents and/or investment securities; (vii)
accounts receivable; (viii) contracts that have expired prior to the Closing
Date in the ordinary course of business; (ix) the articles of incorporation,
by-laws, minute books, stock transfer records and all other corporate, tax and
accounting records relating to the corporate affairs of Seller; (x) sales,
income and other tax refunds and
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claims therefore relating to the period prior to the Closing; (xi) insurance
polices; (xii) claims against third parties, based on activities occurring prior
to Closing, not specifically conveyed and not specifically related to the
Station's Assets; (xiii) any and all insurance proceeds or claims made by Seller
relating to property or equipment repaired, replaced or restored by Seller prior
to the Closing Date; (xiv) all pension, profit-sharing or cash or deferred
compensation plans and trusts and the assets thereof and any other employee
benefit plan or arrangement and the assets thereof, if any; (xv) all choses in
action of Seller relating to the Station, which exist on or prior to the Closing
Date and which related entirely to the period before the Closing Date; (xvi)
assets of Seller used or useful in the operation of Station WMDD(AM); (xvii) all
deposits with utilities, governmental agencies, landlords and the like; (xviii)
broadcast auxiliary licenses issued for use by Station WMDD alone or with the
Station (under its former call letters, WMDD-FM); (xix) the lease for office
space occupied by Seller in San Juan; and (xx) all other assets not specifically
included as the Station's Assets (all of which are referred to as "Excluded
Assets") shall be included in the assets being purchased by Buyer.
(c) Liens. Seller agrees that the Station's Assets to be
conveyed on the Closing Date pursuant to this Agreement will
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be conveyed free and clear of all liens, charges, claims and encumbrances of any
kind.
(d) Liabilities. Buyer shall assume and undertake to pay,
discharge and perform the obligations and liabilities of Seller relating to the
Station and the Station's Assets which are referenced in this Agreement for the
period beginning, or arising out of events occurring on or after, 12:01 A.M. on
the Closing Date. Except as otherwise expressly provided in this Agreement,
Buyer will not assume, incur or be charged with, in connection with the
transactions herein contemplated, any liabilities or obligations of any nature
whatsoever, contingent or otherwise, of the Seller or the Station arising (i)
prior to the Closing, or (ii) in connection with the operation of the Station or
the Station's Assets or any claims asserted against the Station or the Station's
Assets relating to any event (whether act or omission) prior to the Closing.
Except as specified in this Agreement, Seller retains all obligations and
liabilities not expressly assumed by Buyer hereunder without any liability to
Buyer.
(e) Trade Agreements. Schedule 1(e) includes, but is not
limited to, a description of agreements for the sale of time on the Station for
merchandise or services ("Trade Agreements") on the date hereof and correctly
sets forth Seller's current obligations under each such Trade Agreement. On the
Closing Date, Buyer shall assume the Trade Agreements listed on this
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Schedule; provided, however, that if Seller's aggregate obligations under Trade
Agreements as of the Closing Date exceed $20,000.00, then all amounts in excess
of $20,000.00 shall be considered an operating expense of Seller to be pro-rated
in accordance with Section 3. The Trade Agreements shall be considered assumed
by Buyer. Seller shall use reasonable efforts to eliminate any negative balance
in excess of $20,000.00 for Trade Agreements prior to the Closing Date.
Section 2. Purchase Price and Method of Payment.
(a) Purchase Price and Method of Payment. The purchase price
for the assets acquired hereunder shall be Eight Million Two Hundred Fifty
Thousand Dollars ($8,250,000) ("Purchase Price"), which shall be paid to Seller
at Closing in same day funds by wire transfer to an account specified by Seller
at least two business days prior to Closing.
(b) Pre-Payment. Buyer has deposited the sum of Four Hundred
Twelve Thousand Five Hundred Dollars ($412,500) with Seller to be credited
against the Purchase Price at Closing by Seller (the "Pre-Paid Deposit").
(c) Allocation of Purchase Price. Buyer and Seller agree that
the Purchase Price shall be allocated to the Assets by Buyer, which allocation
shall be reasonably acceptable to Seller. Buyer and Seller each shall file IRS
Form 8594 with their respective federal income tax return for the tax year in
which the Closing occurs, containing the information agreed upon by the
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parties pursuant to the immediately preceding sentence. Buyer and Seller each
shall deliver to the other a copy of the IRS Form 8594 as filed with their
respective federal income tax return within 30 days of the filing of such
return.
Section 3. Adjustments and Assumptions; Accounts Receivable.
The expenses and income attributable to the operation of the Station up to 12:01
a.m. on the Closing Date (the "adjustment time") shall be for the account of
Seller and thereafter shall be for the account of Buyer. Any and all expenses
and income (excepting categories of income not included within the Station's
Assets) including, but not limited to, power and utility charges, lease rents,
taxes (excluding taxes arising by reason of the transfer of the Station's
Assets, which shall be paid as specified in Section 15 hereof), Fajardo
municipal license fees and FCC regulatory fees, and similar prepaid and deferred
items shall be prorated between Seller and Buyer as of the adjustment time.
In furtherance hereof:
(a) Preliminary Adjustment. Ten (10) days prior to the Closing Date,
Seller shall prepare and deliver to Buyer, a balance sheet (the "Preliminary
Closing Balance Sheet"), setting forth the adjustment to the Purchase Price
determined in accordance with this Section 3. The Preliminary Closing Balance
Sheet shall be prepared in a form which sets forth the amounts due to or from
Buyer or Seller, as the case may be. Upon receipt
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of the Preliminary Closing Balance Sheet, Buyer and its accounts shall have the
right to examine, at Buyer's expense, the Preliminary Closing Balance Sheet and
all work papers, schedules, and other books and records used in the preparation
of such Preliminary Closing Balance Sheet, and to make reasonable inquiry of
Seller and its accountants. If Buyer objects to the Preliminary Closing Balance
Sheet, Seller and Buyer shall each use their best efforts to resolve their
differences concerning the Preliminary Closing Balance Sheet as soon as possible
but, in any event, prior to the Closing Date. If Seller and Buyer are unable to
resolve the matter, and the amount in dispute is $20,000 or less, the parties
shall proceed to Closing, making prorations then only with respect to undisputed
items with the disputed items to be resolved as postclosing adjustments pursuant
to Section 3(b). If the amount in dispute is more than $20,000, the disputed
shall be submitted to a mutually-acceptable accountant (the "Accountant") for
resolution as soon as practical but in any event within fifteen (15) days, and
the Closing shall be postponed (and all deadlines set forth herein extended) for
the number of days taken by the Accountant to deliver its decision plus three
(3) days. The parties shall use their respective best efforts to cause the
Accountant to reach a decision at the earliest possible date. The decision of
the Accountant shall be final and binding upon the parties. The fees of the
Accountant shall be paid by the parties in inverse
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<PAGE> 9
proportion to the award of the disputed amount to the parties (i.e., if Party A
contends it is due $6,000, Party B contends Party A is due $4,000, and the
Accountant determines that $5,200 is due Party A, then Party A shall pay 40% of
the fees and Party B shall pay 60% of the fees).
(b) Final Adjustment. Within sixty (60) days following the Closing
Date, Buyer shall prepare and deliver to Seller a statement (the "Final Closing
Balance Sheet") indicating the prorations as set forth above. Within ten (10)
days of receipt of the Final Closing Balance Sheet, Seller shall either accept
the prorations set forth in the Final Closing Balance Sheet or give Buyer a
notice disputing such prorations ("Notice of Disagreement"). If Seller fails
either to accept the prorations set forth in the Final Closing Balance Sheet or
to give Buyer a Notice of Disagreement within ten (10) days of receipt of the
Final Closing Balance Sheet, then Seller shall be deemed to have accepted such
prorations. The Notice of Disagreement shall state the amount that Seller
believes is due to Seller ("Seller's Amount"), and Buyer shall have ten (10)
days to accept or reject Seller's Amount. If Buyer rejects Seller's Amount, the
dispute shall be submitted to Accountant for resolution as provided above in
Section 3(a), which resolution shall be final and binding on the parties. The
fees of the Accountant shall be paid as provided in Section 3(a). All amounts
owed pursuant to this Section 3 shall be paid within ten (10) days of resolution
of the
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<PAGE> 10
amount due. If such amount is not paid within such ten (10) day period, interest
on such amount shall accrue until paid at the prime rate as published from time
to time in the Wall Street Journal plus five percent (5%).
(c) Accounts Receivable. All accounts receivable arising out
of the conduct of the business and operations of the Station prior to the
Closing Date ("Seller's Accounts Receivable") shall be identified and valued as
of the day immediately prior to that date. Seller hereby assigns to Buyer
Seller's Accounts Receivable, effective upon the Closing Date, solely for the
collection hereof. For a period of 120 days after the Closing Date, Buyer shall
use reasonable efforts to collect Seller's Accounts Receivable in the normal and
ordinary course of business. Buyer's authority shall not extend to the
compromise of any Seller's Accounts Receivable or the institution of litigation,
employment of counsel or a collection agency or any other extraordinary means of
collection unless authorized by Seller in writing. Buyer shall apply all such
amounts collected on Seller's Accounts Receivable to the debtor's oldest account
receivable first (except that any such accounts collected by Buyer from persons
who are also indebted to Buyer for the purchase of advertising time on the
Station may be applied to Buyer's account where there is a pre-existing bona
fide dispute between Seller and such account debtor with respect to such
account), and Buyer shall provide to Seller an aging report and a
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<PAGE> 11
collections report and shall pay Seller the full amount collected on Seller's
Accounts Receivable, net of commissions, within fifteen (15) days after the end
of each calendar month during the above-mentioned 120 day period. Any of
Seller's Accounts Receivable remaining uncollected at the earlier of the
termination date of this Agreement or the end of such 120 day period shall be
re-assigned to Seller for collection. All accounts receivable arising out of the
conduct of the business and operation of the Station on and after the Closing
Date shall be and remain the property of Buyer.
Section 4. The Closing.
(a) FCC Consent. Consummation of the transactions contemplated
hereunder is conditioned upon the FCC having given its consent in writing to the
assignment to Buyer of the FCC licenses and other authorizations set forth in
subparagraph 1(a)(i) hereof, and such consent having become "final", i.e., no
longer subject to timely review by the FCC or by any court or, in the event of
reconsideration upon its own motion or otherwise by the FCC or an appeal by any
person to any court, upon the decision of such body becoming no longer subject
to review (unless the Buyer agrees to close without such consent having become
"final"). The Closing shall take place on a date not later than March 31, 1999
("Outside Closing Date").
(b) FCC Application. The parties agree to proceed, as
expeditiously as practicable, to file or cause to be filed an
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<PAGE> 12
application requesting FCC consent to the transactions here involved. The
parties agree that said application shall be duly filed with the FCC not later
than five (5) business days after the date of execution of this Agreement, and
that such application shall be prosecuted by all parties in good faith and with
due diligence. The parties hereto shall each bear their own legal fees and any
and all costs and expenses not specified herein with respect to the sale and
purchase of the Station's Assets including, without limitation, the preparation
of the applicable sections of the FCC application. However, all FCC filing fees
shall be paid one-half each by Seller and Buyer.
(c) Closing. The date of Closing and the time thereof (herein
referred to as the "Closing Date"), shall be as mutually agreed to by the
parties; provided, that absent such agreement the Closing shall take place at
10:00 a.m. on the fifth business day after the FCC consent shall have become a
"final order." Closing shall take place at the offices of Buyer's counsel in
Washington, D.C., or at such other place as may be mutually agreed to by the
parties to this Agreement.
Section 5. Seller's Representations and Warranties.
Seller represents, warrants and agrees now and as of the
Closing as follows:
(a) Organization. Seller is a corporation duly organized and
validly existing and in good standing under the laws of the State of Connecticut
and in good standing in the
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Commonwealth of Puerto Rico, the only jurisdiction in which it conducts the
business of operating the Station. Seller has the full power and authority to
own the Station's Assets and to carry on the business of the Station as now
being conducted.
(b) Authorization of Agreement; No Breach.
(1) All corporate action necessary to be taken by or
on the part of Seller in connection with the transactions contemplated hereby
has been duly and validly taken, and the execution, delivery and performance of
this Agreement have been duly and validly authorized. Seller has the full power
and authority to execute, deliver and perform this Agreement and to consummate
all the transactions hereby contemplated. Neither such execution, delivery and
performance nor compliance by Seller with the terms and provisions hereof will
(i) conflict with or result in a breach of any of the terms, conditions or
provisions of the Articles of Incorporation and By-Laws of Seller, (ii)
(assuming receipt of all necessary approvals from the FCC) constitute a
violation of, conflict with or result in any breach of or default under, result
in any termination or modification of, or cause any acceleration of any
obligation of the Station, to which Seller is a party or by which it is bound,
or by which the Station or any of the Station's Assets may be affected, or any
judgment, order, injunction, decree, law, regulation, rule or ruling of any
court or other governmental authority to which Seller, the Station or the
Station' Assets is subject, or (iii)
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result in the creation or imposition of any lien, charge or encumbrance against
the Station or the Station's Assets which is not released on or prior to
Closing. Except for the consent of the FCC and the U.S. Forest Service, and
except for the consent of certain third parties as may be required in contracts
to be assigned to Buyer hereunder (including, but not limited to, the consent of
the Puerto Rico Telephone Company), which consents Seller shall use reasonable,
good faith efforts to obtain but which shall not be a condition precedent to
Closing, no other consent, approval or authorization of, or filing with, any
person, entity or agency of any kind not yet obtained is required. This
Agreement constitutes the valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms.
(2) Seller is not in violation or breach of any of
the terms, conditions or provisions of its Articles of Incorporation or By-Laws,
or any court order, judgment, arbitration award, or decree relating to or
affecting the Station or the Station's Assets to which Seller is a party or by
which it is bound and has received no notices of same.
(c) Licenses and Authorizations. Seller is, and on the Closing
Date will be, the holder of the Licenses relating to the Station, all of which
are in full force and effect (and none of which shall be altered or modified
between the date hereof and the Closing Date). Except as listed and described on
Schedule
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1(a)(i), there is not pending, or to the knowledge of Seller threatened, any
action by or before the FCC to revoke, suspend, cancel, rescind or modify any of
the FCC Licenses.
(d) Personal Property. Schedule 1(a)(iii) hereto contains a
complete and accurate list, as of the date hereof, of the tangible personal
property at El Yunque used in the operation of the Station. At the Closing, all
of such property shall be owned by, and transferred to, Buyer free and clear of
all liens, charges, claims and encumbrances of any kind.
(e) No Litigation. There is no suit, action or other
proceeding pending or, so far as is known to Seller, threatened against Seller
or the Station which would, if determined against Seller or the Station, have a
material adverse effect on the Station or the Station's Assets. There are no
judgments, orders, decrees or injunctions against the Seller or the Station
which adversely affect the Station.
(f) Taxes. All federal, state and local tax returns required
to be filed by Seller by the Closing Date (the "Tax Returns"), have or will have
been filed with the appropriate governmental agencies in all jurisdictions in
which Tax Returns are required to be filed, and all Tax Returns properly reflect
the taxes of Seller for the periods covered thereby.
(g) Brokerage. Seller agrees to indemnify and hold harmless
Buyer against any loss, liability, damage, cost, claim or expense incurred by
reason of any brokerage, commission or
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finder's fee alleged to be payable because of any act, omission or statement of
the Seller.
(h) Compliance With Laws. Seller has materially complied with,
and is not knowingly in violation of any federal or local laws, regulations, or
orders affecting the Station's Assets, or the operation of the Station. Without
limiting the generality of the foregoing:
(i) The Station's transmitting and studio equipment
is operating in material compliance with the terms and conditions of the
Station's Licenses, including without limitation all regulations concerning
equipment authorizations and human exposure to radio frequency radiation.
(ii) Seller has complied, in all material respects,
with all applicable laws, rules and regulations relating to the employment of
labor, including those concerning wages, hours, equal employment opportunity,
collective bargaining, pension and welfare benefit plans, and the payment of
Social Security and similar taxes, and Seller is not liable for any arrearages
of wages, tax withholding obligations, or any tax penalties due to any failure
to comply with any of the foregoing.
(i) Insurance. Seller maintains insurance policies providing
general coverage against risks commonly insured against. To Seller's knowledge,
all of such policies are in full force and effect and Seller is not in default
of any material provision thereof. Seller has not received notice from any
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issuer of any such policies of its intention to cancel, terminate or refuse to
renew any policy issued by it. Seller will continue to maintain such insurance
coverage in full force and effect through the Closing Date.
Section 6. Buyer's Representations and Warranties. Buyer
represents, warrants and agrees now and as of the date of Closing as follows:
(a) Organization. Buyer is a corporation organized, validly
existing and in good standing in the State of Delaware.
(b) Authorization of Agreement; No Breach. The execution,
delivery and performance of this Agreement have been duly and validly authorized
by Buyer, and Buyer has the full corporate power and authority to execute,
deliver and perform this Agreement and to consummate the transactions hereby
contemplated. Neither such execution, delivery and performance nor compliance by
Buyer with the terms and provisions hereof will (assuming receipt of all
necessary approvals from the FCC) conflict with or result in a breach of any of
the terms, conditions or provisions of the Certificate of Incorporation or
By-Laws of Buyer or any judgment, order, or decree of any court or other
governmental authority to which Buyer is subject, or any material agreement to
which the Buyer is subject.
(c) Qualification. Buyer has no knowledge of any facts which
would, under present law (including the Communications Act) and present rules,
regulations and practices
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of the FCC, disqualify Buyer as an assignee of the Licenses, or as an owner
and/or operator of the Station's Assets, and Buyer will not take, or
unreasonably fail to take, any action which Buyer knows or has reason to know
would cause such disqualification.
(d) Litigation. There is no litigation or proceeding pending
or, so far as is known to Buyer, threatened against Buyer that would affect
Buyer's ability to carry out this Agreement.
(e) Brokerage. Buyer agrees to indemnify and hold harmless
Seller against any loss, liability, damage, cost, claim or expense incurred by
reason of any brokerage, commission or finder's fee alleged to be payable
because of any act, omission or statement of the Buyer.
(f) Financial Qualification. Buyer is, and as of the Closing
Date will be, financially qualified to enter into and undertake the performance
of the obligations set forth in this Agreement.
Section 7. Performance by Buyer. The obligations of
Buyer hereunder are subject to the following conditions, which
conditions shall be waivable by Buyer in its sole discretion:
(a) Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true and correct at
the time of Closing hereunder as though made at and as of such time, and each
and all of the agreements of the Seller to be performed on or prior to
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the Closing hereunder pursuant to the terms of this Agreement shall have been
duly performed, and Seller shall have delivered to Buyer certificates, dated as
of the Closing Date, to such effect reasonably acceptable in form and substance
to Buyer.
(b) Litigation, Etc. No litigation, action, suit,
investigation or proceeding of any kind shall have been instituted or threatened
before any court or governmental body, which might reasonably have a material
adverse effect upon the Station's Assets.
(c) FCC Licenses. At the Closing, the Licenses shall be
assigned and transferred to Buyer, shall be valid for the full license term then
currently issued to the Station, and shall contain no material adverse
modifications of the terms of any such License from the terms in effect as of
the date of this Agreement.
(d) Legal Opinion. Buyer shall have received the respective
written opinions of corporate and communications counsel for Seller, dated the
Closing Date, in form and content reasonably acceptable to counsel for Buyer and
collectively to the effect that:
(i) Seller is organized and validly existing and in
good standing under the laws of the State of Connecticut and qualified to do
business in the Commonwealth of Puerto Rico.
(ii) The Agreement has been duly authorized, executed
and delivered by Seller and is the valid and binding
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obligation of Seller, enforceable against Seller in accordance with its terms
(subject to any applicable bankruptcy, reorganization, insolvency or other laws,
now or hereafter in effect, affecting creditors' rights generally as well as all
rights in equity).
(iii) Neither the execution, delivery and performance
of this Agreement nor any instrument of sale required hereunder nor compliance
by Seller with the terms and provisions of this Agreement will conflict with or
result in a breach of any of the terms, conditions or provisions of the Articles
of Incorporation of Seller or any judgment, order or decree known to such
counsel, or any agreement known to such counsel other than an agreement listed
in Schedule 1(a)(v). Such opinion, at the option of such counsel rendering the
opinion, may be in the form and be governed by and interpreted in accordance
with the Legal Opinion Accord of the ABA Section of Business Law (1991).
(e) Performance. Seller shall have performed and complied with
all agreements, obligations and conditions required by this Agreement to be
performed or complied with by Seller prior to or at the Closing hereunder.
Section 8. Seller's Performance. The obligations of
Seller hereunder are subject to the following conditions, which
conditions shall be waivable by Seller in its sole discretion:
(a) Payments, Etc. All payments hereunder which are
due and payable by Buyer on or before the Closing Date shall have
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been paid in accordance with the terms of this Agreement, and Buyer shall have
executed all of the documents required of it herein.
(b) Representations and Warranties. Each of Buyer's
representations and warranties contained herein shall be true at the time of
Closing, as though made at and as of such time and Buyer shall have delivered to
Seller certificates to that effect, dated as of the Closing Date, reasonably
acceptable in form and substance to Seller.
(c) Performance. Buyer shall have performed and complied with
all agreements, obligations and conditions required by this Agreement to be
performed or complied with by Buyer prior to or at the Closing hereunder.
(d) Litigation. No litigation, investigation or proceeding of
any kind shall have been instituted or threatened which would adversely affect
the ability of Buyer to comply in all material respects with the provisions of
this Agreement.
(e) Legal Opinion. Seller shall have received an opinion of
counsel for Buyer, dated the Closing Date, in form and content reasonably
acceptable to Seller's counsel to the effect that:
(i) Buyer is organized and validly existing and in good
standing under the laws of each state in which it conducts business.
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(ii) The Agreement has been duly authorized, executed
and delivered by the Buyer, and duly ratified by Buyer's Board of Directors, and
is the valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms (subject to any applicable bankruptcy, reorganization,
insolvency or other laws, now or hereafter in effect, affecting creditors,
rights generally as well as all rights in equity).
(iii) Neither the execution, delivery and performance
of this Agreement nor compliance by Buyer with the terms of this Agreement will
conflict with or result in a breach of any of the terms, conditions or
provisions of the Certificate of Incorporation or By-Laws of Buyer or any
judgment, order or decree known to such counsel, or any material agreement known
by such counsel to which Buyer is subject. Such opinion, at the option of such
counsel rendering the opinion, may be in the form and be governed by and
interpreted in accordance with the Legal Opinion Accord of the ABA Section of
Business Law (1991).
Section 9. Rights of Indemnification.
(a) Except as specifically assumed by Buyer hereunder,
it is understood and agreed that Buyer does not assume and shall not be
obligated to pay, any liabilities of the Seller under the terms of this
Agreement, and it shall not be obligated to perform any obligations of the
Seller, of any kind or manner. All representations, warranties and agreements by
Seller shall survive the Closing for a period of one (1) year from the date of
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Closing notwithstanding any investigation at any time by or on behalf of Buyer.
Seller hereby agrees to indemnify and hold Buyer and its successors and assigns
(collectively, "Indemnified Parties" and individually, an "Indemnified Party")
harmless for a period of one (1) year from the date of Closing from and against
any and all damage, liability, deficiency or expense (including, without
limitation, reasonable attorney's fees) arising out of or resulting from any
material misrepresentation or breach of warranty on the part of Seller under
this Agreement. Seller hereby agrees to indemnify and hold Buyer and its
successors and assigns (collectively, "Indemnified Parties", and individually,
an "Indemnified Party") for a period of one (1) year from the date of Closing,
harmless from and against:
(i) Any and all claims, liabilities and obligations,
damages, liability, deficiency or expense not expressly assumed by Buyer
pursuant to this Agreement, arising from or related to the Seller's ownership or
operation of the Station or the Station's Assets prior to the Closing hereunder,
including without limitation, any claims arising in connection with any failure
by Seller to pay or discharge any liability relating to the Station that is not
expressly assumed by Buyer pursuant to the provisions of this Agreement;
(ii) Any and all damage, liability, deficiency or expense
(including, without limitation, reasonable attorneys' fees arising out of all
third party disputes), excepting such
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matters as may arise under the lease contemplated in Section 12 (the "Lease").
(iii) Any and all fees, costs and expenses of any
kind, related or incident to any of the foregoing (including, without
limitation, reasonable legal fees and expenses).
(iv) Any and all severance pay or other payment
required to be paid with respect to any employee of the Station prior to Closing
terminated by Seller or arising by reason of the sale of the Station or any
liability or obligation arising under any assumed employment contract relating
to the payment of compensation, bonuses or benefits accrued prior to the Closing
Date or as respects the deferred compensation or phantom equity arising by
reason of the sale of Station or otherwise.
(v) Notwithstanding the foregoing, Seller shall have
no obligation to indemnify Buyer unless and until the aggregate amount of
damages exceeds Ten Thousand Dollars ($10,000) (the "Basket"), at which time
indemnification for the full amount of all damages (including the first $10,000)
shall be due; provided, however, that payments due or made in connection with
the prorations specified in Section 3 shall not be applied to the Basket.
(b) If any claim or liability shall be asserted against any
Indemnified Party which would give rise to a claim by such Indemnified Party
against Seller for indemnification under the provisions of this Section, such
Indemnified Party shall
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promptly notify the Seller in writing of the same and give all reasonable
cooperation in the defense thereof and the Seller shall be entitled at its own
expense to compromise or defend any such claim provided. Failure to give prompt
notification shall not limit the Seller's obligation except to the extent it is
actually prejudiced by the delay in notice.
(c) Except for obligations arising under the Lease (for which
there are separate indemnification provisions), Buyer hereby agrees to indemnify
and hold the Seller and its successors and assigns (collectively, "Indemnified
Parties", and individually, an "Indemnified Party"), for a period of one year
from the date of Closing, harmless from and against:
(i) Any and all claims, liabilities and obligations
arising from or related to the ownership or operation of the Station subsequent
to the Closing hereunder; and
(ii) Any and all damage, liability, deficiency or
expense (including, without limitation, reasonable attorneys' fees) resulting
from any material misrepresentation or breach of warranty, or obligation of
Buyer arising under this Agreement.
(iii) Notwithstanding the foregoing, Buyer shall have
no obligation to indemnify Seller unless and until the aggregate amount of
damages exceeds the Basket, at which time indemnification for the full amount of
all damages (including the amount of the Basket) shall be due; provided,
however, that
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payments due or made in connection with the prorations specified in Section 3
shall not be applied to the Basket.
(d) If any claim or liability shall be asserted against the
Seller which would give rise to a claim by the Seller against Buyer for
indemnification under the provisions of this Section, Seller shall promptly
notify Buyer of the same and give all reasonable cooperation in the defense
thereof and Buyer shall be entitled at its own expense to compromise or defend
any such claim.
(e) Anything in this Section 9 to the contrary
notwithstanding, the indemnifying party shall not, without the written consent
of the Indemnified Party, settle or compromise any third party claim or consent
to the entry of judgment (i) which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnified Party of
an unconditional release from all liability in respect of the third party claim,
or (ii) if there is a reasonable probability that a claim may impose any
non-monetary obligation upon the Indemnified Party.
(f) Except for specific performance of Seller's obligation to
effectively and lawfully convey the Station's Assets to Buyer as provided in
this Agreement, the right to indemnification hereunder shall be the exclusive
post-Closing remedy of any party in connection with or arising out of this
Agreement including, without limitation, any breach by another
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party of its representations, warranties or covenants in this Agreement. SELLER
MAKES NO REPRESENTATIONS OR WARRANTIES EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND
HEREBY DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION, THE
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Except for
specific performance of Seller's obligation to effectively and lawfully convey
the Station's Assets to Buyer as provided in this Agreement, and except as
provided in the Lease referenced in Section 12, each party hereby releases and
discharges the other party from any liability or claim with respect to
post-Closing remedies for which there is not an express indemnity under this
Agreement.
Section 10. Risk of Loss. The risk of any loss, damage or
destruction to any of the Station's Assets to be transferred hereunder from fire
or other casualty or cause shall be borne by the Seller at all times prior to
the Closing Date hereunder. Subject to the provisions hereof, Buyer shall have
the option in the event the loss or damage exceeds Fifty Thousand Dollars
($50,000.00) and the property cannot be substantially repaired or restored
before the Closing Date, exercisable within ten (10) days after receipt of such
notice from Seller to:
(i) Postpone the Closing until such time as the property has
been completely repaired, replaced or restored to Buyer's reasonable
satisfaction, unless the same cannot be
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reasonably effected within five (5) months of notification, at which time Buyer
may terminate this Agreement.
(ii) Elect to consummate the Closing and accept the property in
its "then" condition, in which event Seller shall assign all rights under any
insurance claims covering the loss and pay over (as part of the Station's
Assets) any proceeds under any such insurance policy theretofore received by
Seller with respect thereto. Upon the assignment of such insurance claims to
Buyer, Seller shall have no further obligation to Buyer for any loss of value to
the Station's Assets. In the event Buyer elects to postpone the Closing Date as
provided in Subparagraph (i) above, the parties hereto will cooperate and extend
the time during which this Agreement must be closed as specified in Section 4(a)
hereof.
Section 11. Seller's Performance at Closing. At the
Closing hereunder, the Seller will:
(a) FCC Licenses. Deliver to Buyer assignments of all Licenses
to Buyer in customary form and substance.
(b) Personal Property. Deliver to Buyer a bill of sale and all
other appropriate documents and instruments in customary form and substance
assigning good title to all personal property being sold to Buyer pursuant to
this Agreement, free and clear of any liens, charges, claims or encumbrances of
any kind.
(c) Assignment of Agreements. Except as qualified in Section
5(b)(1), deliver to Buyer such assignments and further
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instruments of transfer as Buyer may reasonably require to effectuate the
assignment to it of those Station contracts, leases and agreements to be
assigned to it as set forth on Schedule 1(a)(v) to this Agreement, as updated
with Buyer's reasonable consent, not to be unreasonably withheld.
(d) Adjustments and Payment. If the adjustments and
assumptions provided for in Section 3 result in a net amount owing by the Seller
to Buyer, deliver a cashier's check or wire transfer to Buyer for such amount at
the Closing.
(e) Opinions. Deliver to Buyer the written opinions of
Seller's respective corporate and communications counsel, dated as of the
Closing Date, pursuant to the provisions of this Agreement.
(f) Officer's Certificate. Deliver to Buyer its certificate
attesting to the accuracy of all representations and warranties and due
performance of all obligations.
(g) Originals. Deliver to Buyer the originals, if available,
of all contracts, leases, agreements, commitments and trademark and copyright
registrations to be assigned to Buyer under this Agreement.
(h) Consents. Deliver to Buyer copies of any consents and
approvals Seller has been able to obtain including, but not limited to, estoppel
certificates and consents to assignment and collateral assignments to Buyer's
senior lender from all landlords.
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(i) Resolutions. Deliver to Buyer certified resolutions of
Seller's directors and stockholders authorizing Seller to enter into this
Agreement.
(j) Other Documents. Deliver to Buyer such other documents as
counsel for Buyer may reasonably request for the purpose of consummating the
transactions described herein.
Section 12. Buyer's Performance at Closing. At the
Closing:
(a) Payment. Buyer will deliver to Seller by confirmed wire
transfer, the monies payable at the Closing as set forth in the appropriate
provisions of Section 2 hereof.
(b) Adjustments and Payment. Buyer will, if the adjustments
and assumptions provided for in Section 3 hereof result in a net amount owing to
the Seller by Buyer, deliver a cashier's check or wire transfer to Seller for
such amount at the Closing.
(c) Opinion. Deliver the written opinion of its counsel, dated
as of the Closing Date, pursuant to the provisions of this Agreement.
(d) Officer's Certificate. Deliver to Seller its certificate
attesting to the accuracy of all of Buyer's representations and warranties and
due performance of all obligations.
(e) Assumptions. Buyer shall deliver to Seller such assumption
agreements and other documents in form and substance
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reasonably satisfactory to Seller as are required to make, confirm and evidence
Buyer's assumption of and obligation to pay, perform, or discharge Seller's
obligations under those contracts to be assumed by Buyer pursuant to this
Agreement.
(f) Resolutions. Buyer shall deliver certified resolutions of
Buyer's directors and stockholders authorizing Buyer to enter into this
Agreement.
(g) Certificate. Buyer shall deliver a Certificate of
Incorporation regarding Delaware and a Certificate of Good Standing regarding
the Commonwealth of Puerto Rico, dated not more than five (5) business days
prior to the Closing Date.
(h) Lease. Buyer shall deliver the Lease attached hereto as
Exhibit A duly executed.
(i) Other Documents. Deliver to the Seller such other
documents as counsel for Seller may reasonably request for the purpose of
consummating the transactions described herein.
Section 13. Default and Remedies.
(a) Breach and Opportunity to Cure. If either party believes
the other to be in default hereunder, the nondefaulting party shall provide the
defaulting party with notice specifying in reasonable detail the nature of such
default. If such default has not been cured by the earlier of: (i) the Closing
Date, or (ii) within twenty (20) days after delivery of such notice (a "Default
Notice"), then the party giving such notice may (x) terminate this Agreement,
(y) extend the Closing Date under
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Section 4 (but no such extension shall constitute a waiver of such nondefaulting
party's right to terminate as a result of such default), and/or (z) exercise the
remedies available to such party pursuant to Section 13(b) or 13(c), subject to
the right of the other party to contest such action through appropriate
proceedings.
(b) Seller's Remedies. Buyer recognizes that if, as a result
of Buyer's default, the transactions contemplated hereby are not consummated,
Seller would be entitled to compensation, the extent of which is extremely
difficult and impractical to ascertain. The parties, therefore, agree that if
this Agreement is not consummated due to the material default of Buyer (any
failure on Buyer's part to consummate in accordance with its obligations under
this Agreement being deemed "material"), provided that Seller is not in material
default, Seller shall be entitled to retain the Pre-Paid Deposit (plus
interest). The parties agree that this sum shall constitute liquidated damages
and shall be Seller's sole and exclusive remedy and shall be in lieu of any and
all other relief to which Seller might otherwise be entitled due to Buyer's
failure to consummate, or default under, this Agreement.
(c) Buyer's Remedies. Seller agrees that the Station's Assets
include unique property that cannot be readily obtained on the open market and
that Buyer would be irreparably injured if this Agreement is not specifically
enforced after
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default. Therefore, Buyer shall have the right to specifically enforce Seller's
performance under this Agreement, and Seller agrees to waive the defense in any
such suit that Buyer has an adequate remedy at law and to interpose no
opposition, legal or otherwise, as to the propriety of specific performance as a
remedy. In the event Buyer elects to terminate this Agreement as a result of
Seller's material default instead of seeking specific performance (the remedies
being alternative, not cumulative), Buyer shall be entitled to return of the
Pre-Paid Deposit (plus interest) and any other legal remedies for damages which
may be available.
Section 14. Termination.
(a) Absence of Commission Consent or Court Approval. This
Agreement may be terminated at the option of either party upon notice to the
other if the FCC consent has not become a final order by March 31, 1999;
provided, however, that a party may not terminate this Agreement if (i) such
party's action, inaction or qualifications, has caused, or materially
contributed to, a delay in any decision or determination by the FCC, or (ii) the
party seeking to terminate the Agreement pursuant to this Section 14(a) is in
material default hereunder. In the event of termination pursuant to this
Section, the Pre-Paid Deposit (plus interest) shall be returned to Buyer (unless
the Buyer's action, inaction or qualifications shall have caused, or materially
contributed to, the delay or Buyer be in material default
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hereunder) or retained by Seller (unless Seller's action, inaction or
qualifications shall have caused, or materially contributed to, the delay or
Seller be in material default hereunder), and the parties shall be released and
discharged from any further obligation hereunder.
(b) Designation for Hearing. The provisions of Section 14(a)
notwithstanding, either party may terminate this Agreement upon notice to the
other, if, for any reason, the assignment application is designated for hearing
by the FCC, unless such designation for hearing arises from, is based upon, or
relates to the action, inaction or qualifications of the party seeking to
terminate, in which case such party shall have no right of termination;
provided, however, that notice of termination must be given within twenty (20)
days after release of the hearing designation order. Upon termination pursuant
to this Section 14(b), the Pre-Paid Deposit (plus interest) shall be retained by
Seller in the event the application is designated for hearing on grounds
relating to Buyer's qualifications, or returned to Buyer in the event the
application is designated for hearing on grounds relating to Seller's
qualifications, and the parties shall then be released and discharged from any
further obligation hereunder.
(c) Legal Actions. If, prior to the Closing Date, any action,
suit, or proceeding shall have been instituted by or before any court or other
governmental authority (other than the
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FCC) to enjoin, restrain, or prohibit the consummation of the transactions
contemplated hereby, the Closing may be adjourned at the option of either party
(with prior consent of the FCC if necessary, which consent both parties will use
their reasonable best efforts to obtain), for a period of up to ninety (90)
days, and if, at the end of such period, the action, suit, or proceeding shall
not have been favorably resolved, either party may, by written notice to the
other, terminate this Agreement, provided, however, that if such action, suit,
or proceeding shall have been solicited or encouraged by, or instituted as a
result of, any act or omission of, Seller or Buyer, then such party shall not
have any right of adjournment or termination pursuant to this Section.
(d) In addition, this Agreement may be terminated at any time
on or prior to the Closing Date: (i) by the mutual written consent of Seller and
Buyer; or (ii) by any non-defaulting party hereto if within seven (7) business
days after the date hereof, an application for FCC consent to the assignment of
the FCC Licenses to Buyer and the consummation of the transactions contemplated
by this Agreement that is acceptable for filing, subject to reasonable
supplementation and modification, has not been tendered for filing with the FCC
(provided that the non-defaulting party shall have used all reasonable efforts
to cooperate in the preparation of such application). A termination pursuant to
this Section 14 shall
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not relieve any party of any liability it may otherwise have for a breach of
this Agreement.
Section 15. Sales and Transfer Taxes and Fees. All Sales,
Transfer and Gains Taxes incident to this transaction shall be paid one-half
each by Seller and Buyer.
Section 16. Survival of Representations and Warranties. The
several representations and warranties of the parties contained herein shall
survive the Closing for a period of one (1) year; provided, however, that the
representations and warranties set forth in Section 5(f) (Taxes) and Section
9(a)(iv) (obligations to employees) shall survive until the expiration of the
applicable statute of limitations, as may be extended by waiver thereof, as the
case may be.
Section 17. Public Announcements.
(a) Prior to the Closing Date, no party shall, without the
approval of the other party hereto, make any press release or other public
announcement concerning the transactions contemplated by this Agreement, except
as and to the extent that such party shall be so obligated by law, in which case
such party shall give advance notice to the other party and the parties shall
use their best efforts to cause a mutually agreeable release or announcement to
be issued. Nothing in this Agreement shall be construed to limit Seller's normal
duty to publish all announcements required by the FCC and to make the filings
with the FCC contemplated by this Agreement.
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(b) Notwithstanding the foregoing, the parties acknowledge
that the rules and regulations of the FCC require that public notice of the
transactions contemplated by this Agreement be made after the application for
the FCC's consent has been filed with the FCC. The form and substance of such
public notice, to the extent not dictated by the Communications Act or the rules
and regulations of the FCC, shall be mutually agreed upon by Seller and Buyer.
Section 18. Miscellaneous.
(a) Schedules and Exhibits. All schedules and exhibits
attached to this Agreement (and all other documents referred to therein) shall
be deemed part of this Agreement and incorporated herein, where applicable, as
if fully set forth herein.
(b) No Assignment, Successors, Assigns, Etc. This Agreement
shall not be assigned or conveyed by any party hereto to any other person or
entity without the prior written consent of the other parties hereto, except
that Buyer may assign this Agreement and the rights and obligations hereunder to
any of its affiliates which will not release Buyer from any of the obligations
and undertakings provided for herein, and except that Seller may assign its
rights and duties to a commonly-controlled entity, which assignment will not
release Seller from any of its obligations and undertakings provided for herein.
37
<PAGE> 38
(c) Construction. This Agreement shall be construed and
enforced in accordance with the laws of the District of Columbia.
(d) Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument.
(e) Notices. Any notice or other communications shall be in
writing and shall be considered to have been duly given when personally
delivered or deposited into first class certified mail, postage prepaid, return
receipt requested:
(i) If to the Buyer to:
Spanish Broadcasting System
of Puerto Rico, Inc.
c/o 1001 Ponce de Leon Blvd
Coral Gables, Florida 33134
ATTN: Raul Alarcon, Jr., President
cc: Jason L. Shrinsky, Esq.
Kaye, Scholer, Fierman, Hays
& Handler, LLP
901 Fifteenth Street, N.W.
Washington, D.C. 20005
(ii) If to Seller to:
Pan Caribbean Broadcasting Corporation
Condomino Emajagua #9A-B
Calle Emajagua
Punta Las Marias
San Juan, Puerto Rico 00913
ATTN: Richard Friedman
38
<PAGE> 39
cc: William K. Keane, Esq.
Arter & Hadden LLP
1801 K Street, N.W.
Suite 400K
Washington, D.C. 20006
(g) Integration. Except as herein expressly provided, this
Agreement embodies the entire agreement and understanding among Seller and
Buyer, and supersedes all prior agreements and understandings, whether oral or
in writing, with respect to the purchase and sale of the Station's Assets.
(h) Amendment. This Agreement shall not be amended or modified
in any manner except by a written document executed by the party or parties
against whom enforcement of such amendment or modification may be sought.
(i) Confidentiality. Buyer and Seller agree that each will use
its best efforts to keep confidential all of the information of a business or
confidential nature obtained by it from the other (including, but not limited
to, the identity of Buyer, the proposed terms of this Agreement, and information
pertaining to Seller, whether related to the Station or otherwise; and, in the
event that the transactions contemplated herein are not consummated, in addition
to the other continuing obligations of the parties which shall survive the term
of this Agreement, the duties and obligations of the parties and their
respective agents and confidants shall continue for a term of twelve (12) months
from its termination regarding maintaining confidentiality as hereinabove set
forth; and, further, each of
39
<PAGE> 40
the parties will return to the other all documents, copies and other materials
obtained from the other in connection therewith. This Section shall not prevent
either party from disclosing such confidential information to their respective
attorneys, bankers, underwriters or investors as may be appropriate in
furtherance of this transaction (provided, however, such party shall similarly
be bound by this confidentiality provision) or to comply with any governmental
policy, regulation or law.
IN WITNESS WHEREOF, the parties hereto have caused these
presents to be executed through their duly authorized officers on the day and
year first above written.
SPANISH BROADCASTING SYSTEM OF
OF PUERTO RICO, INC.
By:/s/ Raul Alarcon, Jr.
Name: Raul Alarcon, Jr.
Title: President
PAN CARIBBEAN BROADCASTING CORPORATION
By:/s/ Richard J. Friedman
Name: Richard J. Friedman
Title: President
40
<PAGE> 41
WDOY LIST OF SCHEDULES & EXHIBITS
<TABLE>
<S> <C> <C>
Schedule 1(a)(i) Licenses & Authorizations Page 2
Schedule 1(a)(iii) Personal Property Page 3
Schedule 1(a)(v) Contracts, Leases &
Agreements Page 3
Schedule 1(e) Trade Agreements Page 5
Exhibit A Studio Lease
</TABLE>
41
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-28-1998
<PERIOD-START> SEP-29-1997
<PERIOD-END> JUN-28-1998
<CASH> 32,134,056
<SECURITIES> 0
<RECEIVABLES> 19,730,808
<ALLOWANCES> 3,984,120
<INVENTORY> 0
<CURRENT-ASSETS> 50,343,570
<PP&E> 14,901,979
<DEPRECIATION> 0
<TOTAL-ASSETS> 347,506,312
<CURRENT-LIABILITIES> 20,610,747
<BONDS> 0
0
186,448,154
<COMMON> 5,581
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 347,506,312
<SALES> 62,098,840
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (36,246,947)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,002,451
<INCOME-PRETAX> 34,548,668
<INCOME-TAX> 13,819,467
<INCOME-CONTINUING> 20,729,201
<DISCONTINUED> 0
<EXTRAORDINARY> (1,612,723)
<CHANGES> 0
<NET-INCOME> 19,116,478
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
