UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(Amendment No. 1)
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
Or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-27823
Spanish Broadcasting System, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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13-3827791 |
(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
2601 South Bayshore Drive, PH II
Coconut Grove, Florida 33133
(Address of principal executive offices and zip code)
Registrants telephone number, including area code: (305) 441-6901
Former name, former address and former fiscal year, if changed since last report: None
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered |
Class A common stock, par value $0.0001 per share
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The NASDAQ Global Market |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act.
Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Exchange Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes o No þ
As of June 30, 2010, the last business day of the registrants most recently completed second
fiscal quarter, the registrant had 41,596,513 shares of Class A common stock, par value $0.0001 per
share (Class A common stock), and 23,403,500 shares of Class B common stock, par value $0.0001
per share (Class B common stock), outstanding. As of June 30, 2010, the aggregate market value of
the Class A common stock held by non-affiliates of the registrant was approximately $47.1 million
and the aggregate market value of the Class B common stock held by non-affiliates of the registrant
was approximately $4 thousand. We calculated the aggregate market value based upon the closing
price of our Class A common stock reported on the NASDAQ Global Market on June 30, 2010 of $1.14
per share, and we have assumed that our shares of Class B common stock would trade at the same
price per share as our shares of Class A common stock. (For purposes of this paragraph, directors
and executive officers have been deemed affiliates.)
As of April 11, 2011, 41,669,805 shares of Class A common stock, 23,403,500 shares of Class B
common stock and 380,000 shares of Series C convertible preferred stock, $0.01 par value per share
(Series C preferred stock), which are convertible into 7,600,000 shares of Class A common stock,
were outstanding.
Documents Incorporated by Reference:
None.
EXPLANATORY NOTE
This Amendment
No. 1 amends the Annual Report on Form 10-K for the year ended
December 31, 2010, of Spanish Broadcasting System, Inc. (also referred to
as “SBS,” the “Company,” “we,”
“us” or “our”) which was filed with the Securities and
Exchange Commission (the “SEC”) on March 31, 2011 (the
“Original 10-K”). SBS is filing this Amendment No. 1 to
include the information required by Items 10, 11, 12, 13 and 14 of
Part III, which was not included in the Original 10-K. In addition, in
connection with the filing of this Amendment No. 1 and pursuant to the
rules of the SEC, the Company is including with this Amendment No. 1
currently dated certifications. Accordingly, Item 15 of Part IV has
also been amended to reflect the filing of these currently dated certifications.
This Amendment
No. 1 does not include the entire Form 10-K. Except as described in this
Explanatory Note, this Amendment No. 1 does not amend any other
information set forth in the Original 10-K, and the Company has not updated
disclosures to reflect any events that occurred subsequent to March 31,
2011. Therefore, this Amendment No. 1 should be read in conjunction with our Original
10-K and our other filings made with the SEC subsequent to the filing of the
Original 10-K.
Special Note Regarding Forward-Looking Statements
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995.
This annual report on Form 10-K/A contains both historical and forward-looking statements. All
statements other than statements of historical fact are, or may be deemed to be, forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the
Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the
Exchange Act).
Spanish Broadcasting System, Inc. intends such forward-looking statements to be covered by the
safe harbor provisions for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995, and includes this statement for purposes of such safe harbor
provisions.
Forward-looking
statements, as such term is defined by the Securities Exchange Commission in its rules, regulations and releases, represent our expectations or beliefs,
including, but not limited to, statements concerning our operations, economic performance,
financial condition, growth and acquisition strategies, investments and future operational plans,
such as those disclosed under the caption Risk Factors
appearing in Item 1A of Part I of the Original 10-K. For this purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the generality of the
foregoing, words such as may, will, expect, believe, anticipate, intend, forecast,
seek, plan, predict, project, could, estimate, might, or continue or the negative
or other variations thereof or comparable terminology are intended to identify forward-looking
statements.
These statements, by their nature, involve substantial risks and uncertainties, certain of
which are beyond our control, and actual results may differ materially depending on a variety of
important factors, including uncertainty related to acquisitions, governmental regulation and any
other factors discussed in our filings with the SEC and we do not have any obligation to
publicly update any forward-looking statements to reflect subsequent events or circumstances.
PART III
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Item 10. |
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Directors, Executive Officers and Corporate Governance |
Board of Directors
The following table sets forth the
name, age and position of each of the current members of our Board of Directors.
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Name |
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Age |
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Position with SBS |
Incumbent Nominees for Director |
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Raúl Alarcón, Jr.
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54 |
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Chairman of the Board of Directors, CEO and President |
Joseph A. García
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67 |
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Senior Executive Vice President,
CFO, CAO, Secretary and Director |
José A. Villamil
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64 |
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Director |
Mitchell A. Yelen
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63 |
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Director |
Manuel E. Machado
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43 |
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Director |
Jason L. Shrinsky
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73 |
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Director |
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Raúl Alarcón, Jr. joined us in 1983 as an account executive and has been our
President and a director since October 1985 and our CEO since June 1994. On
November 2, 1999, Mr. Alarcón, Jr. became our Chairman of the Board and continues
as our CEO and President. Currently, Mr. Alarcón, Jr. is responsible for our
long-range strategic planning and operational matters and is instrumental in the
acquisition and related financing of each of our stations. Mr. Alarcón, Jr. is the
son of the late Pablo Raúl Alarcón, Sr. Mr. Alarcón, Jr. provides an historical perspective to our long
operating history, having joined us in 1983 and has extensive experience in
Spanish-language media broadcasting. |
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Joseph A. García has been our CFO since 1984, Executive Vice President since 1996
to 2008, and Secretary since November 2, 1999. On June 3, 2008, Mr. García was
elected to the Board and on August 4, 2008, became our Chief Administrative
Officer and Senior Executive Vice President. Mr. García is responsible for our
financial affairs, operational and administrative matters, investor relations, and
has been instrumental in the acquisition and related financing of our stations.
Before joining us in 1984, Mr. García spent thirteen years in international
financial planning positions with Philip Morris Companies, Inc. and with Revlon,
Inc., where he was manager of financial planning for Revlon Latin America. Mr. García provides a historical perspective to
our long operating history, having joined us in 1984. |
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José A. Villamil
became one of our directors on June 30, 2004. Mr. Villamil
has over 30 years of successful experience as a senior business economist, university educator and as a public official of both the
Federal and State of Florida governments. Mr. Villamil was the Chief Executive Officer of The Washington Economics Group, Inc.
(WEG), an economic consulting firm, serving in such position from 1993 to 1998 and from 2000 to July 2008. Since August 2008,
Mr. Villamil has served as the Dean of the School of Business of St. Thomas University, Miami Florida, while continuing to serve
as Principal Advisor to the clients of WEG. From 1999 to 2000, he directed the Tourism, Trade and Economic Development activities
of the State in the Office of Governor Jeb Bush. Mr. Villamil is the immediate past Chairman of the Governors Council of Economic
Advisors of Florida. Since April 2003, Mr. Villamil has been director of Mercantil CommerceBank, N.A. and CommerceBank Holding Corp.,
and since November 2010, he has been director of Pan-American Life Insurance Group (PALIG). Presently, he is Director of Enterprise
Florida the States principal economic development organization. Mr. Villamil is active in professional and community affairs. He
is currently Chairman of the Economic Roundtable of the Beacon Council Miami-Dade Countys official economic development organization.
He is also a Senior Research Fellow of Florida TaxWatch, an established fiscal and policy research organization of the State of
Florida. From 1989 to 1993, Mr. Villamil served as Chief Economist and later as Undersecretary for Economic Affairs at the United States Department of
Commerce. Mr. Villamils professional experience and his expertise in the field of economics provides a unique
perspective to the Board of Directors |
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Mitchell A. Yelen became one of our directors on September 28, 2007. Mr. Yelen is
currently the Director of tax services at Pinchasik, Strongin, Muskat, Stein &
Company, P.A., a CPA firm, where he has been employed since 1984 specializing in
litigation support, complex tax research and financial planning. Mr. Yelen
previously held positions at CPA firms: Kaufman, Rossin & Co., P.A. and Alexander
Grant & Co., P.A. Among other degrees, he holds an M.B.A. in Finance from
Northwestern University and a J.D. and L.L.M. in taxation from the University of
Miami. Mr. Yelens knowledge of accounting and finance makes him a valuable member of the Board of Directors. |
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Manuel E. Machado became one of our directors on June 3, 2010. Mr. Machado has
been the Chief Executive Officer and Co-Chairman of MGSCOMM, an integrated
marketing communications agency, one of the fastest-growing marketing
communications agencies in the country, since its formation in March 2003. Mr.
Machado was also elected to the board of directors of Worldwide Partners, Inc.
(worldwidepartners.com) on May 26, 2010. MGSCOMM and Worldwide Partners, Inc. are
not affiliates of the Company. Prior to the formation of MGSCOMM in 2003, Mr.
Machado developed successful communications programs for some of the worlds most
renowned brands such as McDonalds Corporation, Coors Brewing, Ford Motor Co.,
Bacardi, Coca Cola, MasterCard International, Ralston Purina, Proctor & Gamble,
Nike, Pisco Chile and the Government of Chile. He is also the founder of The Meka
Group, a marketing communications agency later known as BVK/Meka, and served as
its CEO from 1994 to 2003. Mr. Machado has also held key positions in companies of
worldwide recognition such as Univision Network, Burson-Marsteller and Bacardi.
Mr. Machado is a Past Chairman of the Association of Hispanic Advertising Agencies
(AHAA), www.ahaa.org. He has been involved with the community through several
organizations, including being named Trustee of the Vizcaya Museum and Gardens,
the Latin Grammys Host Committee, the WLRN Board of Trustees, the Voices for
Children Foundation Board of Directors, the Miami-Dade County Sister Cities
Program, the Mercy Foundation Ambassadors Board of Directors, the Hialeah
Foundation Board of Directors, Trustee of the Greater Miami Chamber of Commerce,
and Trustee of the Beacon Council. Mr. Machados knowledge of media advertising and
marketing communications makes Mr. Machado an important contributor to the Board of Directors. |
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Jason L. Shrinsky became one of our directors on November 2,
1999. Mr. Shrinsky is a retired partner from the law firm Kaye
Scholer LLP, which he joined as a partner in 1986. Mr. Shrinsky
has been a lawyer counseling corporations and high net worth
individuals on financings, mergers and acquisitions, other
related financial transactions and regulatory procedures since
1964. Kaye Scholer LLP has served as our legal counsel for more
than 20 years. Mr. Shrinskys legal background and long-time relationship with the Company provides him with a broad
understanding of the financial transactions undertaken by the Company and the operational, financial, legal, regulatory and
strategic issues facing the Company and the Board of Directors. |
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Executive Officers Who Are Not Directors
In addition to those directors named above who are also our executive officers, the following
table sets forth information concerning non-director employees who serve as our executive officers. Our executive officers serve at the discretion of the Board
of Directors.
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Name |
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Position with SBS |
Executive Officers |
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Albert Rodriguez
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46 |
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Chief Revenue Officer of the Company and General Manager
of the Miami Television Market |
Marko Radlovic
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47 |
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Chief Revenue Officer of Radio Segment and General Manager
of the Los Angeles Radio Market |
Melanie M. Montenegro
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36 |
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Executive Vice President and General Counsel |
Albert Rodriguez became the Chief Revenue Officer of the Companys consolidated operations on January
3, 2011 and continued in his position as the General Manager of the Miami television market. Mr.
Rodriguez is responsible for overseeing the revenue and profit performance of the Companys
consolidated operations, including radio, television, interactive and entertainment divisions, and
the day-to-day operational matters of the Miami television market. From October 12, 2010 to January
2, 2011, Mr. Rodriguez was the Chief Revenue Officer of the television segment and General Manager of
the Miami television market, and he was General Manager of the Miami television market from January
21, 2010 through October 11, 2010. From November 1999 through January 2010, Mr. Rodriguez was the
General Sales Manager for the Companys radio properties in Miami WCMQ-FM 92.3 Clásica 92,
WRMA-FM 106.7 Romance, and WXDJ-FM 95.7 El Zol 95.7. Under Mr. Rodriguezs management, El Zol
95.7 set the record for being the highest billing station in Floridas history in 2005.
Marko Radlovic became our Chief Revenue Officer of the Companys radio segment and General Manager and
Senior Vice President of the Los Angeles radio market on July 19, 2010. Mr. Radlovic is responsible
for overseeing the revenue and profit performance of the Companys radio segment and the day-to-day
operational matters of the Los Angeles radio market. Previously, Mr. Radlovic was the Companys Chief
Operating Officer from July 21, 2005 through November 6, 2007 and the Chief Revenue Officer from
December 2003 through July 2005. Mr. Radlovic was Vice President/General Manager for our Los Angeles
radio cluster from January 2002 until November 2003 and previously served as Vice President of Sales
for the Los Angeles cluster. Prior to joining us, he was Market Manager for Cumulus Media in Southern
California from January 2001 until August 2001 and was Vice President/General Manager for AM/FM Inc.
in Los Angeles from October 1998 to October 2000.
Melanie M. Montenegro became our Executive Vice President and General Counsel on December 14, 2010. As
executive vice president and general counsel, Ms. Montenegro is responsible for a wide range of
corporate functions, including legal, governance, securities, mergers and acquisitions, litigation,
business development, and compliance. Previously, Ms. Montenegro served as corporate counsel for the
Company managing the day-to-day activities and operations of the legal department. Prior to joining
the Company in 2006, Ms. Montenegro was an attorney with the law firm Kaye Scholer, LLP in New York
City from August 1999 to May 2005. She received her J.D., from Hofstra University School of Law and
also holds a B.A. in Political Science, Spanish Language and Literature.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers and persons
who own more than 10% of a registered class of our equity securities (collectively, Reporting
Persons) to file reports of ownership and changes in ownership of our securities with the SEC.
Reporting Persons are required by the SEC to furnish us with copies of all Section 16(a) forms they
file.
Based on the review of copies of such reports furnished to us and written representations that
no other reports were required, we believe that, during Fiscal Year 2010, the Reporting Persons
timely complied with all Section 16(a) filing requirements applicable to them, except that Mr.
Yelen filed one late report with respect to one transaction that occurred prior to his appointment
to the Board of Directors.
Code of Business Conduct and Ethics
We have a Code of Ethics, which is within the meaning of Item 406(b) of Regulation S-K. All of
our directors, officers and employees, including our CEO and CFO, are required to abide by our
business conduct policies to ensure that our business is conducted in a consistently legal and
ethical manner.
The purpose of the Code of Ethics is to deter wrongdoing and to promote (i) honest and ethical
conduct, including the ethical handling of conflicts of interest; (ii) full, fair, accurate, timely
and understandable disclosures in reports and documents filed by us with, or submitted to, the SEC
or otherwise publicly communicated by us; (iii) compliance with applicable governmental laws, rules
and regulations; (iv) the prompt internal reporting of violations to the Code of Ethics to
appropriate persons identified therein and (v) accountability for adherence to the Code of Ethics.
Employees are required to report any conduct that they believe in good faith to be an actual or
apparent violation of the Code of Ethics.
This Code of Ethics is publicly available on our Internet website at
www.spanishbroadcasting.com under the tab entitled Investor Info/Code of Conduct. If we
make substantive amendments to the Code of Ethics or grant any waiver from its provisions to our
principal executive, financial or accounting officers, or persons performing similar functions,
including any implicit waiver, we will disclose the nature of such amendment or waiver on our
website or in a report on Form 8-K within four business days of such amendment or waiver.
Procedures to Recommend Nominees to the Board of Directors
There were no material changes to the procedures by which securityholders
may recommend nominees to the Companys Board of Directors for the fiscal year ended December 31, 2010.
The Board of Directors
Our business and affairs are managed under the direction of the Board. The Board meets on a
regularly scheduled basis during our fiscal year to review significant developments affecting us
and to act on matters requiring its approval. The Board also holds special meetings as required
from time to time when important matters arise between scheduled meetings that require action by
the Board. During 2010, the Board consisted of Raúl Alarcón, Jr., Joseph A. García, José A.
Villamil, Mitchell A. Yelen, Manuel E. Machado and Jason L. Shrinsky. Messrs. Villamil, Machado and
Yelen were deemed to be independent as defined under Rule 5605(a)(2) of the National Association of
Securities Dealers (Nasdaq) Listing Rules. Mr. Machado was appointed to the Board, the Audit
Committee and the Compensation Committee on June 3, 2010.
The Board held a total of nine meetings during the fiscal year ended December 31, 2010
(Fiscal Year 2010). Each incumbent director who was a director of SBS during Fiscal Year 2010
attended 75% or more of the aggregate number of meetings of the Board and the meetings of all
committees of the Board on which he served during the period of time in which he served. The
independent members of the Board regularly meet in executive session without any employee directors
or other members of management in attendance.
Our Board has a separately-designated standing Audit Committee established in accordance with
Section 3(a)58(A) of the Securities Exchange Act of 1934 (the Exchange Act) and a Compensation
Committee. The functions and membership of each committee of the Board are set forth below. Our
Board does not have, and as a controlled company, the Nasdaq Listing Rules do not require us to
have, a standing nominating committee.
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Controlled Company Exemption
We are a controlled company as defined in Rule 5615(c)(1) of the Nasdaq Listing Rules
because more than 50% of our voting power is held by Raúl Alarcón, Jr., our Chairman of the Board,
President and Chief Executive Officer (CEO). As a controlled company, we are exempt from the
requirements of Rule 5605(b), (d) and (e) of the Nasdaq listing standards that would otherwise
require us to have (i) a majority of independent directors on the Board, (ii) compensation and
nominating committees composed solely of independent directors, (iii) the compensation of executive
officers determined by a majority of the independent directors or a compensation committee composed
solely of independent directors, and (iv) director nominees selected or recommended to the Board
for selection, either by a majority of the independent directors, or a nominating committee
composed solely of independent directors. Consequently, we are exempt from independent director
requirements of Rule 5605(b), (d) and (e) of the Nasdaq Listing Rules, except for the requirements
under subsection (b)(2) thereof pertaining to executive sessions of independent directors and those
under subsection (c) thereof pertaining to the Audit Committee. Currently, we have an Audit
Committee and Compensation Committee composed solely of independent directors.
Board Leadership Structure
Raúl Alarcón, Jr. serves as our Chairman of the Board, President and CEO. Our Board believes
that combining the role of Chairman of the Board and CEO furthers development and execution of the
Companys strategy, facilitates information flow between management and the Board and promotes
efficiency given the size of the Company and its operations. Our Board believes that Mr. Alarcóns
service as both Chairman of the Board and CEO is in our and our stockholders best interests. In
addition, Mr. Alarcón has extensive experience in radio broadcasting and possesses detailed and
in-depth knowledge of the issues, opportunities and challenges that we face. Our Board believes
that he is, therefore, best positioned to develop agendas that ensure that our Boards time and
attention are focused on the most critical matters.
Mr. Alarcón is not an independent director. We do not have a lead independent director. We
believe the governance structure we have is customary for public companies in which the lead
stockholder continues to retain a majority voting interest, and we regard Mr. Alarcóns leadership
role on the Board as positive for the Company in that it fosters stability and encourages
consensus-building between Board initiatives and stockholder support.
Although our Board believes that the combination of the Chairman of the Board and CEO roles is
appropriate in the current circumstances, our Board has not established this approach as policy,
and will routinely review its determination as circumstances dictate and from time to time.
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Risk Oversight
Our Board as a whole has responsibility for risk oversight. Our Board meets regularly to
discuss the strategic direction and the issues and opportunities facing our company in light of
trends and developments in the broadcasting industry and general business environment. Throughout
the year, our Board provides guidance to management regarding our strategy and helps to refine our
operating plans to implement our strategy. The involvement of the Board in setting our business
strategy is critical to the determination of the types and appropriate levels of risk undertaken by
the Company. Our Board is responsible for risk oversight as part of its fiduciary duties to the
stockholders and the Company, and our Board administers its risk oversight function as a whole and
through its committees. For example, the Audit Committee is charged with the task of overseeing the
Companys risk management process on behalf of the Board. The Audit Committee periodically meets
with the Companys senior management to review the Companys major financial risk exposures and the
steps management has taken to monitor and control such exposures. In addition, the Compensation
Committee considers the risks that may be affected by the Companys executive compensation
programs. While the full Board, and its committees, oversee the Companys risk management, the
Companys management is responsible for the implementation of the Companys risk management
guidelines and policies and the Companys day-to-day risk management process. Finally, the Board
believes that the combined Chairman and CEO leadership structure of the Board allows for quick and
definitive assessment of issues that should be brought to the Boards attention.
Committees of our Board of Directors
Audit Committee
The Audit Committee currently consists of José A. Villamil, Manuel E. Machado and Mitchell A.
Yelen, each of whom has been determined to be independent as defined under Rule 5605(a)(2) of the
Nasdaq Listing Rules and the SECs director independence standards for Audit Committee members. Mr.
Machado was elected to serve on the Audit Committee on June 3, 2010.
The Audit Committee has determined that Mr. Yelen qualifies as an audit committee financial
expert as that term is defined by applicable SEC rules and regulations and serves as the Chairman
of the Audit Committee. All members of the Audit Committee are able to read and understand basic
financial statements, including a balance sheet, income statement, and cash flow statement. The
Audit Committee held four meetings during Fiscal Year 2010.
The primary purpose of the Audit Committee is to assist the Board in its oversight of the
integrity of our financial statements, our compliance with legal and regulatory requirements, and
the qualifications, independence, financial reporting process, and performance of the Companys
independent registered public accounting firm (the Independent Registered Public Accounting
Firm). In fulfilling its oversight responsibilities, the Audit Committee:
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reviews our annual audited and quarterly unaudited consolidated financial statements; |
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reviews and approves related party transactions; |
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reviews our financial reporting process and disclosure and internal controls and procedures,
including major issues regarding accounting principles and financial statement presentation, and
critical accounting policies to be used in the consolidated financial statements; |
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reviews and discusses with management and the Independent Registered Public Accounting Firm the
Companys internal controls and the Independent Registered Public Accounting Firms attestation of
the report; |
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appoints, oversees, and approves the fees paid to the Independent Registered Public Accounting Firm; |
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reviews with the Independent Registered Public Accounting Firm the scope of the annual audit,
including fees and staffing, and approves all audit and permitted non-audit services provided by
the Independent Registered Public Accounting Firm; |
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reviews findings and recommendations of the Independent Registered Public Accounting Firm and
managements response to the recommendations of the Independent Registered Public Accounting Firm; |
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discusses policies with respect to risk assessment and risk management, our major risk exposures,
and the steps management has taken to monitor and mitigate such exposures; and |
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reviews compliance with the Companys Code of Business Conduct and Ethics (Code of Ethics) and
whistleblower policies.
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A full description of the Audit Committees primary responsibilities is contained in its
written charter, which is publicly available on our Internet website at
www.spanishbroadcasting.com under the tab entitled Investor Information/Audit Committee
Charter.
Compensation Committee
The Compensation Committee currently consists of Messrs. Villamil, Machado and Yelen, each of
whom has been determined to be independent as defined under Rule 5605(a)(2) of the Nasdaq Listing
Rules. Mr. Villamil serves as the Chairman of the Compensation Committee. Mr. Machado was elected
to serve on the Compensation Committee on June 3, 2010. The Compensation Committee held five
meetings during Fiscal Year 2010.
The Board has determined that all Compensation Committee members are independent under the
Nasdaq Listing Rules listing standards. The Board has also determined that each Compensation
Committee member qualifies as a Non-Employee Director under Rule 16b-3 of the Exchange Act and
that each member, qualifies as an outside director under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the Internal Revenue Code).
The Compensation Committee reviews our compensation practices and policies, annually reviews
performance and approves the compensation for the CEO and other senior executives, and reviews and
discusses with management the compensation disclosures prepared in accordance with the SECs
disclosure rules for executive compensation. In addition, the Compensation Committee:
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reviews and makes recommendations to management with respect to our overall compensation programs and policies; |
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approves the adoption, amendment, and termination of incentive compensation and deferred compensation programs
for our employees; |
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approves employment agreements and severance arrangements for the CEO, as appropriate; |
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approves employment agreements and severance arrangements for our senior executives (other than the CEO), as
appropriate; |
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interprets and supervises the administration of our stock and long-term incentive compensation programs; and |
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exercises all authority of the Board under our equity-based plans. |
A full description of the Compensation Committees primary responsibilities is contained in
its written charter, which is publicly available on our Internet website at
www.spanishbroadcasting.com under the tab entitled Investor Info/Compensation Committee
Charter.
The Role of Executive Officers in Determining Executive Compensation
Our CEO develops recommendations regarding executive compensation, including proposals
relative to compensation for individual executive officers, using internal and external
resources. These resources include such things as compensation surveys, external data and reports
from consultants and data, reports and recommendations from internal staff. Recommendations from
our CEO include and consider all aspects of the compensation program philosophy, design,
compliance and competitive strategy as well as specific actions regarding individual executive
officer compensation. The Compensation Committee reviews these recommendations, and decides
whether to accept, reject, or revise the proposals.
Our CEO and Chief Financial
Officer (CFO) assist the Compensation Committee in
understanding key business drivers included in program designs, especially incentive programs.
This may include defining related measures and explaining the mutual influence on or by other
business drivers and the accounting and tax treatment relating to certain awards. Our CEO and
CFO also provide updates to the Compensation Committee regarding current and anticipated
performance outcomes and their impact on executive compensation.
Our General Counsel, with the assistance of outside counsel for the
Compensation Committee, ensures that appropriate
plan documentation and approvals are received in order to keep executive pay programs in
compliance with applicable laws and stock exchange listing requirements. Our General Counsel and
outside counsel also advise the Audit Committee, the Compensation Committee and our Board
regarding compliance with appropriate governance standards and requirements.
7
Role of the Compensation Committee Advisor
The Compensation Committee has retained an outside consultant, Towers Watson, to assist it
in formulating and evaluating
our executive compensation program for Fiscal Year 2011. Towers Watson will work with the Compensation Committee
to:
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Provide comparative market data for our peer group, developed with the Compensation
Committee and management, with respect to compensation matters; |
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Analyze our compensation and benefit programs relative to our peer group; |
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Advise the Compensation Committee on compensation matters; |
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Summarize the results of the benchmarking and peer group analysis in a report to the
Compensation Committee and members of management, as appropriate; and |
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Participate in meetings with the full Board to present the results of the peer group
analysis. |
In order to encourage an independent view point, the Compensation Committee and its members have
access to Towers Watson at any time without management present and have consulted from time to
time with Towers Watson without management present.
If the Company wishes to engage Tower Watson for services
other than those that Tower Watson provides to the Compensation Committee, such services will be
subject to approval by the Compensation Committee. Tower Watson did
not provide any services to
the Compensation
Committee or the Company during Fiscal Year 2010.
Disclosure Committee
The Disclosure Committee, as described below, was established by us to ensure compliance
with the reporting requirements established by the SEC and is made up of certain key employees of
the Company. The Disclosure Committee currently consists of Joseph A. García (Senior Executive
Vice President, CFO, Chief Administrative Officer and Secretary), the chairman of the committee,
Melanie M. Montenegro (Executive Vice President and General Counsel), Albert Rodriguez (Chief
Revenue Officer of the Company), Marko Radlovic (Chief Revenue Officer of the radio segment),
José Molina (Vice President of Finance), Frank Soricelli (Corporate Controller), and Nelson
Santos (Vice President of Management Information Systems).
The general purpose of the Disclosure Committee is to design, establish and maintain a
system of controls and procedures to ensure that information required to be disclosed in the
reports and statements filed by us pursuant to the Exchange Act, is reported in conformity with
the rules and forms of the SEC. The Disclosure Committee assists the CEO, CFO and the Audit
Committee in monitoring (i) the integrity of the financial statements, policies, procedures and
the internal financial and disclosure controls and risks of the Company, and (ii) our compliance
with regulatory requirements, to the extent that these policies, procedures and controls may
generate either financial or non-financial disclosures in our filings with the SEC.
Nominating Committee
Our Board does not have a standing nominating committee or a committee serving a similar
function. As a controlled company, the Nasdaq Listing Rules do not require us to have such a
committee. The Board has determined that rather than a nominating committee, it is the most
appropriate body for identifying director candidates and selecting nominees to be presented at
the annual meeting of stockholders.
Director Nominations
As noted above, because Raúl Alarcón, Jr., our CEO, President and Chairman of the Board, holds
more than 50% of our voting power, we are deemed to be a controlled company under the Nasdaq
Listing Rules. Because we are a controlled company, the Board has not elected to establish a
separate nominating committee or formal rules governing director nominations from stockholders. The
functions of evaluating and nominating director candidates are performed by the Board as a whole.
The Board will, from time to time, review biographical information and background material relating
to potential candidates and interview selected candidates. The Board does not currently have a
charter or written policy with regard to the nomination process. We have not engaged a third party
to assist us in identifying and evaluating the individuals nominated for election as directors at
the 2011 Annual Meeting of Stockholders.
The Board has not set specific, minimum qualifications that must be met by director
candidates. In deciding whether to nominate any particular candidate for election to the Board, the
Board considers the appropriate skills and personal characteristics needed in light of the makeup
of the current Board, including considerations of each candidates integrity, character, sound
judgment, business acumen, professional skills and experience, knowledge of our business and
industry, differences in viewpoint, education, possible conflicts of interest, the ability to act
in the interests of our stockholders and other individual qualities and attributes. Further, while
the Board does not have a formal diversity policy, it identifies qualified potential candidates
without regard to any candidates race, color,
disability, gender, national origin, sexual orientation, religion or creed. The Board seeks to
ensure the fair representation of all stockholder interests on the Board. The Board believes that
the use of these general criteria, along with a non-discriminatory policy, will best result in a
Board that evidences that diversity in many respects. The Board believes that it currently
maintains that diversity. The Board also considers whether a potential nominee would satisfy the
Nasdaq Listing Rules definition of independent and the SECs definition of audit committee
financial expert. We believe that the backgrounds and qualifications of our directors, considered
as a group, provides a composite mix of experience, knowledge and abilities that allows the Board
to fulfill its responsibilities.
8
Stockholder Communications with the Board of Directors
Stockholders of SBS seeking to communicate with the Board, the chairs of the Audit and
Compensation Committees of the Board, or with any of our other directors, should submit any
communications in writing to the following address: Spanish Broadcasting System, Inc., c/o Melanie
M. Montenegro, General Counsel, 2601 South Bayshore Drive, PH 2, Coconut Grove, Florida 33133. The
mailing envelope must contain a clear notation indicating that the enclosed letter is a
Stockholder-Board Communication. Any such communication must identify the author as a
stockholder, must include the stockholders full legal name, address, valid telephone number, the
number of shares beneficially owned by the stockholder and, if applicable, the name of any specific
intended recipient. We will forward any such communication to the full Board or to any individual
director or directors to whom the communication is directed following its clearance through normal
review and appropriate security procedures.
Whistleblower Hotline
We have a whistleblower policy (the Whistleblower Policy), which establishes procedures for
(i) the receipt, retention and treatment of complaints received by our company regarding
accounting, internal accounting controls or auditing matters, and (ii) the confidential and
anonymous submission by our employees of concerns regarding questionable accounting or auditing
matters.
If you wish to contact our Audit Committee to report complaints or concerns relating to the
financial reporting of our company, you may do so by using the various alternatives provided by us,
such as (i) writing directly to the Chairman of the Audit Committee, c/o Director of Internal
Audit, Spanish Broadcasting System, Inc., 2601 South Bayshore Drive, PH 2, Coconut Grove, Florida
33133 or (ii) confidentially and anonymously by calling a toll free telephone hotline operated by
an independent party at (866) 789-1229. A copy of our Whistleblower Policy is available on our
Internet website at www.spanishbroadcasting.com under the tab entitled Investor
Info/Ethics and Compliance Hotline .
9
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Item 11. |
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Executive Compensation |
Summary Compensation Table
The following table discloses compensation for the fiscal years ended December 31, 2010 and
December 31, 2009 received by our (i) President and CEO, Raúl Alarcón, Jr., (ii) Senior Executive
Vice President, CFO, CAO and Secretary, Joseph A. García, (iii) our former Chief Revenue Officer of
the radio segment and General Manager of the New York market, Frank Flores, who resigned on July
19, 2010, and (iv) Chief Revenue Officer of the radio segment and General Manager of the Los
Angeles market, Marko Radlovic. These individuals are also referred to in this Form 10-K/A as
our named executive officers or NEOs.
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Stock |
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Option |
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All Other |
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Salary |
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Bonus |
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Awards |
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Awards |
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Compensation |
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Total |
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Name and Principal Position |
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Year |
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($) |
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($) |
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($)(a) |
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($)(a) |
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($) |
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($) |
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Raul Alarcon, Jr. |
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2010 |
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1,250,000 |
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518,133 |
(b) |
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64,360 |
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|
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150,390 |
(c) |
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1,982,883 |
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Chief Executive Officer, President and Chairman of the Board of the Directors |
|
2009 |
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1,250,000 |
|
|
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1,002,295 |
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|
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61,560 |
|
|
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172,503 |
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|
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2,486,358 |
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Joseph A. Garcia |
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2010 |
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525,000 |
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50,000 |
(d) |
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|
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|
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47,513 |
(e) |
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622,513 |
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Senior Executive Vice President, Chief Financial Officer, Chief Administrative Officer and Secretary |
|
2009 |
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|
525,000 |
|
|
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100,000 |
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|
|
|
|
|
|
|
|
|
|
37,027 |
|
|
|
662,027 |
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|
|
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Frank Flores(f) |
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2010 |
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129,427 |
(f) |
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|
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|
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|
|
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|
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11,716 |
(g) |
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141,143 |
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Chief Revenue Officer of the radio segment and General Manager of the New York market |
|
2009 |
|
|
292,310 |
|
|
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317,381 |
|
|
|
|
|
|
|
|
|
|
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* |
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|
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609,691 |
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|
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|
|
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Marko
Radlovic(h) |
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2010 |
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275,000 |
(h) |
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72,273 |
(i) |
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15,552 |
(j) |
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362,825 |
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Chief Revenue Officer of the radio segment and General Manager of the Los Angeles market |
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* |
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Indicates amounts less than $10,000. |
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(a) |
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Represents the aggregate grant date fair value computed in accordance with FASB Topic ASC 718 (ASC 718). See Note 10(c) to the Notes to
Consolidated Financial Statements, included in Part IV, Item 15 of the Original 10-K, for a discussion of the assumptions
used to value equity-based compensation. |
|
(b) |
|
For Fiscal Year 2010, Mr. Alarcón received a $18,133 contractual performance bonus and a $500,000 discretionary bonus. |
|
(c) |
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Per Mr. Alarcóns employment agreement, he is entitled to the use of an automobile and driver, personal tax services, telecommunication
services, health insurance benefits and a separate life insurance policy. In Fiscal Year 2010, we incurred expenses related to the usage of an
automobile and driver of $74,361, telecommunication services of
$33,009, health insurance premiums of
$25,684, computer equipment of $621, and life insurance premium of $
16,715, respectively. |
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(d) |
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For Fiscal Year 2010, Mr. García received a
$50,000 discretionary bonus. |
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(e) |
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Per Mr. Garcías employment agreement, he is entitled to the use of an automobile, related car expenses, health insurance benefits and
telecommunication services. In Fiscal Year 2010, we incurred expenses related to the usage of an automobile of
$20,036, telecommunications services of $1,500, and health insurance
premiums of $25,977, respectively. |
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(f) |
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Mr. Flores resigned on July 19, 2010. |
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(g) |
|
Per Mr. Flores employment agreement, he was
entitled to automobile related allowance and certain health insurance
benefits. For Fiscal Year 2010, we incurred expenses of $2,700
related to the automobile related allowance and health insurance
premiums of $9,016, respectively. |
|
(h) |
|
Mr. Radlovic was appointed Chief Revenue Officer of the radio segment and General Manager of the Los Angeles market effective July 19, 2010.
This table reflects his complete compensation for Fiscal Year 2010, the only year covered by the table in which he served as a named executive
officer. Mr. Radlovic previously was a named executive officer in 2007 and 2008. |
|
(i) |
|
For Fiscal Year 2010, Mr. Radlovic received a $72,273 discretionary performance bonus in his role as General Manager of the Los Angeles market. |
|
(j) |
|
Mr. Radlovic is entitled to a monthly automobile allowance
and certain health insurance benefits. For Fiscal Year 2010, we incurred expenses of $6,000
related to the automobile allowance and health insurance premiums of $9,552, respectively. |
10
Employment Agreements
To further assist our stockholders in understanding the elements of compensation disclosed in
the Summary Compensation Table, the material terms of our agreements with Messrs. Alarcon, Garcia,
Flores and Radlovic are described below.
The Compensation Committee seeks to ensure that our executive compensation aligns with our
corporate strategies, business objectives and the long-term interests of our stockholders and helps
attract, retain and motivate the key personnel it needs to conduct its business. Compensation
levels are intended to fairly compensate the Companys named executive officers. We use base salary
to provide each named executive officer a fixed amount of money during the year with the
expectation that he will perform his job to the best of his ability and in the best interests of
the Company. Executive salaries for Fiscal Year 2010 were not increased. For Fiscal Year 2010,
discretionary performance bonuses were intended to reward the named executive officers for both
Company and individual performance for the year. In evaluating performance for Fiscal Year 2010
for purposes of making a subjective determination of appropriate bonus amounts, the Compensation
Committee considered the Companys Fiscal Year 2010 operating
results. We believe that by providing our executives the opportunity to increase their ownership of stock, the
benefits of stockholders and executives will be more aligned, and we will encourage long-term
performance. We provide executive officers with limited personal benefits and perquisites that are
intended to enhance the attraction and overall retention value of the compensation program. The
Compensation Committee believes that severance benefits help retain qualified executives and are an
important component of a competitive compensation program.
Raúl Alarcón, Jr.
The compensation of Mr. Alarcón, Jr., our Chairman of the Board, CEO and President, in Fiscal
Year 2010 was primarily determined by the amended and restated employment agreement we entered into
with him on October 25, 1999 (the Alarcón Employment Agreement). The Alarcón Employment Agreement
has automatically renewed for successive one-year periods since December 31, 2004, and will
continue to do so unless terminated by either party on 90-days notice prior to December 31 of any
year.
Base Salary. Pursuant to the Alarcón Employment Agreement, Mr. Alarcón, Jr. is entitled to an
annual base salary of not less than $1,000,000. On March 10, 2007, the Compensation Committee
increased Mr. Alarcón Jr.s base salary to $1,250,000, effective April 1, 2007.
Bonus. Under the Alarcón Employment Agreement, Mr. Alarcón, Jr. is entitled to an annual
contractual bonus equal to 7.5% of same station annual broadcast cash flow (now known as station
operating income) growth, including (on a pro rata basis from the date the station was acquired)
acquired stations on a pro forma basis or a greater amount in the discretion of the Board. For
Fiscal Year 2010, Mr. Alarcón, Jr. received a contractual bonus of $18,133 and a
discretionary performance bonus of $500,000. Mr. Alarcóns discretionary bonus was determined by the
Compensation Committee after a thorough review of the Companys financial results for 2010,
Mr. Alarcóns management of the Companys affairs and his efforts to promote the Companys
interests and guide its business and programming. The Compensation Committee commended his
tireless efforts to seek opportunities for the Companys growth. In particular, the Compensation Committee
cited with approval his work with the Puerto Rico operations and his identification of acquisition opportunities.
Securities. During each year of his employment term, Mr. Alarcón, Jr. is entitled to receive
an option to purchase 100,000 shares of Class A common stock, which vests immediately, at an
exercise price equal to the fair market value of the Class A common stock on the applicable grant
date. On October 27, 2010, Mr. Alarcón, Jr. received an option to purchase 100,000 shares of Class
A common stock, at an exercise price of $0.77 per share.
Benefits; Perquisites. Mr. Alarcón, Jr. is entitled to receive executive health insurance
benefits provided to all of our executives, such as life and long-term disability insurance for
himself and health insurance for himself and his family. In addition, Mr. Alarcón, Jr. is entitled
to certain perquisites, such as life insurance, reimbursement for personal tax, accounting
expenses, telecommunications services and the use of a company car and a driver.
Severance. Mr. Alarcón, Jr. is entitled to receive severance benefits upon termination in
certain circumstances. The severance benefits are described in Potential Payments upon Termination
or Change in Control table below.
The Compensation Committee determined that Mr. Alarcón, Jr.s compensation for Fiscal Year
2010 was fair and reasonable based on his individual performance and his unique
contribution to our operational, financial and strategic results for Fiscal Year 2010 and that his
compensation for the year was in line with the Companys overall compensation objectives.
11
Joseph A. García
The compensation of Mr. García, our Senior Executive Vice President, CFO, CAO and Secretary,
in Fiscal Year 2010 was determined by the amended and restated employment agreement we
entered into with him on August 4, 2008, as amended on April 19, 2011
(the Employment Agreement). The term of the Employment Agreement is for
three years and will automatically renew for additional one-year periods, unless either party gives
notice at least 60 days prior to the end of the then-current term.
Base Salary. On August 4, 2008, pursuant to the
Employment Agreement, Mr. Garcías annual base
salary was increased to $525,000. The base salary is subject to an annual review and may be
increased from time to time as recommended by the CEO and approved by the Compensation Committee.
The Compensation Committee did not increase Mr. Garcias base salary in Fiscal Year 2010.
Bonus.
Under the Employment Agreement, if the threshold level of performance is achieved, Mr.
García is eligible to receive an annual cash bonus upon the attainment of individual
pre-established goals and the Companys performance goals, of no less than $100,000 and no more
than $300,000 for each fiscal year completed during the term. No bonus is guaranteed for
performance that fails to meet the threshold level of performance. In the event that the Company is
required to prepare an accounting restatement due to material noncompliance with any financial
reporting requirement under the Federal securities laws, Mr. García is required to reimburse the
Company for the amount of any annual bonus or any other incentives paid to him based on the
financial results that are materially restated downward. In Fiscal Year 2010, Mr. García received a
discretionary bonus of $50,000. Mr. Garcias bonus was determined by the Compensation Committee after a thorough review of the
Companys financial results for 2010, managements recommendations and his handling of the
Companys finances, cash flow and expenses. The Compensation Committee commended his efforts to
manage expenses and begin the process of refinancing the Companys debt in 2012.
Securities. Mr. Garcia received equity grants in 2008, pursuant to the Employment Agreement. The
Employment Agreement did not provide for equity grants in Fiscal Year 2010.
Benefits; Perquisites. Mr. García is entitled to
receive executive health insurance benefits
provided to all of our executives, such as life and long-term disability insurance for himself and
health insurance for himself and his family. In addition, under the
Employment Agreement Mr. García is entitled to certain
perquisites, such as the use of an automobile, related car expenses and telecommunications
services. On April 19, 2011, the Compensation Committee amended this
automobile perquisite, Mr. Garcia is now entitled to an annual
automobile allowance equal to $20,400.
Severance. Mr. García is entitled to receive severance benefits upon termination in certain
circumstances. The severance benefits are described in Potential Payments upon Termination or
Change in Control table below.
The Compensation Committee determined that Mr. Garcias compensation for Fiscal Year 2010 was
fair and reasonable based on his individual performance and his unique contribution
to our operational, financial and strategic results for Fiscal Year 2010 and that his compensation
for the year was in line with the Companys overall compensation objectives.
Frank Flores
The compensation of Mr. Flores, our former Chief Revenue Officer and General Manager of the
New York market, in Fiscal Year 2010 was primarily determined by the amended and restated
employment agreement we entered into with him on April 6, 2009 and effective April 1, 2009, (the
Flores Employment Agreement). Mr. Flores resigned effective June 19, 2010.
Base Salary. Pursuant to the Flores Employment Agreement, Mr. Flores was entitled to receive
an annual base salary of $250,000.
Bonus. Under the Flores Employment Agreement, Mr. Flores was entitled to (i) an annual New
York consolidated station operating income performance bonus and (b) an annual radio consolidated
station operating income performance bonus, based on achieving certain station operating income
targets based upon the CEOs recommendation and subject to the Compensation Committees approval.
In Fiscal Year 2010, Mr. Flores did not receive a consolidated station operating income performance
bonus as a result of his resignation.
Benefits; Perquisites. Mr. Flores was entitled to receive executive medical insurance benefits
provided to all of our executives, such as life and long-term disability insurance for himself and
health insurance for himself and his family.
Severance. Mr. Flores did not receive severance or any other post-termination benefits in
connection with his resignation.
The Compensation Committee determined that Mr. Flores compensation for Fiscal Year 2010 was
fair and reasonable based on his individual performance and contribution to our
operational, financial and strategic results for Fiscal Year 2010 and that his compensation for the
year would have been in line with its overall compensation objectives.
12
Marko Radlovic
The compensation of Mr. Radlovic, our Chief Operating Officer of the radio segment and General
Manager of the Los Angeles radio market, in Fiscal Year 2010 was primarily determined by a letter
agreement we entered into with him on July 19, 2010 (the Letter Agreement).
Base Salary. Pursuant to the Letter Agreement, Mr. Radlovic is entitled to receive an annual
base salary of $275,000.
Bonus. Under the Letter Agreement, Mr. Radlovic is eligible to receive an annual performance
bonus based on achieving certain performance targets for the Los Angeles radio market and the
Companys radio segment. In Fiscal Year 2010, Mr. Radlovic received a $72,273 discretionary
performance bonus in his role as General Manager of the Los Angeles
market for achieving certain targets
of his station operating income performance budget.
Benefits; Perquisites. Mr. Radlovic is entitled to receive executive medical insurance
benefits provided to all of our executives, such as life and long-term disability insurance for
himself and health insurance for himself and his family. In addition, Mr. Radlovic is entitled to
certain perquisites, including a monthly automobile allowance.
Severance. Mr. Radlovic is entitled to receive severance benefits upon termination in certain
circumstances. The severance benefits are described in Potential Payments upon Termination or
Change in Control table below.
The Compensation Committee determined that Mr. Radlovics compensation for Fiscal Year 2010
was fair and reasonable based on his individual performance and contribution to our
operational, financial and strategic results for Fiscal Year 2010 and that his compensation for the
year was in line with the Companys overall compensation objectives.
13
Outstanding Equity Awards At Fiscal Year-End 2010
The following table summarizes equity awards outstanding as of December 31, 2010 for each of our
named executive officers. The closing price of our Class A common stock on December 31, 2010 was
$0.72.
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Option Awards |
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Stock Awards |
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Number of |
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Number of |
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Number of |
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Market Value |
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Securities |
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Securities |
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Shares or |
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of Shares or |
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Underlying |
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Underlying |
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Units of |
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Units of |
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Unexercised |
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Unexercised |
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Option |
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Stock That |
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Stock That |
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Options |
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Options |
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Exercise |
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Option |
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Have Not |
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Have Not |
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Exercisable |
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Unexercisable |
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Price |
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Expiration |
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Vested |
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Vested |
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Name |
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(#) |
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(#) |
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($) |
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Date (a) |
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(#) |
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($) |
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Raul Alarcon, Jr. |
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100,000 |
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$ |
7.77 |
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10/27/2011 |
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100,000 |
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$ |
6.13 |
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10/27/2012 |
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|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
8.69 |
|
|
|
10/25/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
9.98 |
|
|
|
10/27/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
6.27 |
|
|
|
10/25/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
4.79 |
|
|
|
10/27/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
2.62 |
|
|
|
10/27/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
0.20 |
|
|
|
10/27/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
0.73 |
|
|
|
10/27/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
0.77 |
|
|
|
10/27/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
(b) |
|
|
21,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph A. Garcia |
|
|
150,000 |
|
|
|
|
|
|
$ |
9.10 |
|
|
|
1/16/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
$ |
11.78 |
|
|
|
1/21/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
|
|
|
$ |
10.79 |
|
|
|
3/7/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
125,000 |
|
|
|
|
|
|
$ |
0.45 |
|
|
|
9/3/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marko Radlovic |
|
|
20,000 |
|
|
|
|
|
|
$ |
9.20 |
|
|
|
8/30/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
$ |
9.10 |
|
|
|
1/16/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
90,000 |
|
|
|
|
|
|
$ |
9.44 |
|
|
|
11/6/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
62,500 |
|
|
|
|
|
|
$ |
10.10 |
|
|
|
11/3/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
|
|
|
$ |
8.50 |
|
|
|
7/21/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
62,500 |
|
|
|
|
|
|
$ |
5.08 |
|
|
|
11/23/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The expiration date of each option occurs 10 years after the stock option grant date. If a NEO is terminated, the stock options
will expire based on the plans terms. |
|
(b) |
|
Restricted stock vested on January 1, 2011. |
14
Elements of Post-Termination Compensation
We do not have a practice of providing retirement benefits, including any supplemental
executive retirement plans, to our NEOs. Our NEOs have entered into employment agreements with us
in which these agreements each contain certain post-termination compensation, such as severance
payments or change-in-control provisions. In addition, we retain the discretion to utilize the
offer of severance and/or change-in-control protection as an incentive in hiring our NEOs.
Pension Benefits
We do not provide pension arrangements or post-retirement health coverage for our executives
or employees. Our executive officers are eligible to participate in our 401(k) contributory defined
contribution plan.
Nonqualified Deferred Compensation
We do not provide any nonqualified defined contribution or other deferred compensation plans.
Potential Payments upon Termination or Change in Control
In accordance with the rules of the SEC, the following table presents our estimate of amounts
payable to the NEOs, under our 1999 Stock Option Plan, Omnibus Plan and their employment
agreements, assuming that each of the indicated triggering events discussed in the table below
occurred on December 31, 2010, and the equity awards under the 1999 Stock Option Plan and Omnibus
Plan were neither assumed by a successor corporation nor replaced with a cash retention program.
15
The following table describes and quantifies the benefits and compensation to which the NEOs
would have been entitled to under their employment agreements and other existing plans and
arrangements if their employment had terminated on December 31, 2010, based on their compensation
and services on that date. The amounts shown on the table do not include payments and benefits
available generally to salaried employees upon termination of employment, such as accrued vacation
pay, distribution from the 401(k) plan, or any death, disability or health benefits available under
broad-based employee plans. Post-termination benefits vary by executive and type of termination.
Potential Payments Upon Termination or Change of Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of |
|
|
Value of |
|
|
|
|
|
|
|
|
|
Severance |
|
|
Severance |
|
|
Stock |
|
|
Option |
|
|
Other |
|
|
|
|
|
|
(Salary) |
|
|
(Bonus) |
|
|
Acceleration |
|
|
Acceleration |
|
|
Benefits |
|
|
Total |
|
Name |
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
Raúl Alarcón, Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without Cause |
|
|
917,808 |
(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,866 |
(b) |
|
|
949,674 |
|
With Cause |
|
|
458,904 |
(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
458,904 |
|
Death |
|
|
917,808 |
(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,858 |
(b) |
|
|
936,666 |
|
Disability |
|
|
917,808 |
(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,866 |
(b) |
|
|
949,674 |
|
Joseph A. García |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death or Disability |
|
|
1,050,000 |
(d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,050,000 |
|
Prior to a Change of
Control: Without
Cause /With Good
Reason/Non-Renewal
by Company |
|
|
1,050,000 |
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,866 |
(f) |
|
|
1,077,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to the Second
Anniversary of a
Change of Control: Without Cause /With
Good
Reason/Non-Renewal
by Company |
|
|
1,050,000 |
(g) |
|
|
100,000 |
(g) |
|
|
|
|
|
|
|
|
|
|
27,866 |
(f) |
|
|
1,177,866 |
|
Marko Radlovic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without Cause |
|
|
47,596 |
(h) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,596 |
|
|
|
|
(a) |
|
Represents the aggregate base salary payments which the executive would have received during the employment term if such termination had not occurred. |
|
(b) |
|
Represents the aggregate value of the continuation of the executives health and life insurance benefits for up to the employment term. |
|
(c) |
|
Represents 50% of the aggregate base salary payments which the executive would have received
during the employment term if such termination had not occurred. |
|
(d) |
|
Represents two times the aggregate base salary payments which the executive would have
received during a one-year period, provided we receive a release in a form acceptable to us. |
|
(e) |
|
Represents the aggregate base salary payments of the greater of the remainder of the term or
24 months, which the executive would have received if such termination had not occurred,
provided we receive a release in a form acceptable to us. |
|
(f) |
|
Represents the aggregate value of the continuation of executive health insurance benefits for
up to 12 months after such date of termination. |
|
(g) |
|
Represents two times the aggregate base salary and bonus payments which the executive would
have received during a one-year period, provided we receive a release in a form acceptable to
us. |
|
(h) |
|
At December 31, 2010, employment was at-will. In the event that the employment is
terminated without cause, in exchange for a release in a form acceptable to us, Mr. Radlovic
shall receive one week severance of his then annual base salary for every year served. |
While we believe that the amounts shown above and the assumptions upon which they are
based provide reasonable estimates of the amounts that would have been due to the NEOs in the event
that any of the circumstances described above had occurred on December 31, 2010, the actual amounts
due to the NEOs upon a triggering event will depend upon the actual circumstances and the
employment agreements.
Change
of Control Triggering Event
A change of control for purposes of Mr. Garcías employment agreement is a change of control
as defined under the Omnibus Plan. Pursuant to the Omnibus Plan, a change of control means a change
in the ownership of the voting power or effective control of the Company, or in the ownership of a
substantial portion of the assets of the Company within the meaning of Section 409A of the Internal
Revenue Code.
16
Non-Competition
Provision
Mr. García has agreed that during his employment term and for a period of twelve months
thereafter, he would not engage in certain competitive activities with us, including solicitation
of employees or customers and interference with the relationship between us and any such person. In
addition, he has also agreed to maintain the confidentiality of certain proprietary information
during the term of his employment and thereafter.
Overview of Director Compensation and Procedures
The Compensation Committee may review the level of compensation of our non-employee directors
periodically. Directors who are also our employees do not receive cash or equity compensation for
service on the Board or any committee thereof. To determine how appropriate the current level of
compensation for our non-employee directors is, SBS has historically obtained data from a number of
different sources including:
|
|
|
publicly available data describing director compensation in peer companies; |
|
|
|
|
survey data collected by our human resources department; and |
|
|
|
|
information obtained from other companies. |
Director
Compensation
The annual fees paid to non-employee directors are $25,000 for service on the Board; $25,000
for service on the Audit Committee; and $25,000 for service on the Compensation Committee. All
directors are reimbursed for the out-of-pocket expenses they incur in connection with their
service. Our non-employee directors are also eligible to receive stock options under our Omnibus
Plan.
2010 Director Compensation
The following table summarizes total compensation earned by each non-employee director
during Fiscal Year 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
or Paid in |
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
Cash |
|
|
Option Awards |
|
|
Compensation |
|
|
Total |
|
Name (a) |
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
Manuel E. Machado (b) |
|
|
37,500 |
|
|
|
75,015 |
(c) |
|
|
|
|
|
|
112,515 |
|
Jose Antonio Villamil (b) |
|
|
75,000 |
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
Mitchell Yelen (b) |
|
|
75,000 |
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
Jason Shrinsky (b) |
|
|
25,000 |
|
|
|
|
|
|
|
50,000 |
(d) |
|
|
75,000 |
|
|
|
|
(a) |
|
Raúl Alarcón, Jr. and Joseph A. García are omitted from this table because they did not
receive any additional compensation for service as a director. |
|
(b) |
|
The following are the aggregate number of option awards outstanding as of December 31, 2010
for each of our non-employee directors. The expiration date of each option occurs 10 years
after the stock option grant date. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Options |
|
|
Number of Options |
|
|
Option Exercise |
|
|
Grant Date Fair |
|
|
Option Expiration |
|
Director |
|
Outstanding |
|
|
Exercisable |
|
|
Price |
|
|
Value per Share |
|
|
Date |
|
Manuel E. Machado |
|
|
50,000 |
|
|
|
10,000 |
|
|
$ |
1.79 |
|
|
$ |
1.50 |
|
|
|
6/03/2020 |
|
Jose Antonio Villamil |
|
|
50,000 |
|
|
|
50,000 |
|
|
$ |
9.33 |
|
|
$ |
6.83 |
|
|
|
6/30/2014 |
|
Mitchell Yelen |
|
|
50,000 |
|
|
|
40,000 |
|
|
$ |
2.58 |
|
|
$ |
1.65 |
|
|
|
9/28/2017 |
|
Jason Shrinsky |
|
|
50,000 |
|
|
|
50,000 |
|
|
$ |
10.79 |
|
|
$ |
6.71 |
|
|
|
3/7/2015 |
|
|
|
|
(c) |
|
Mr. Machado received an option grant in connection with his appointment to the Board of
Directors in June 2010. This amount represents the aggregate grant date fair value computed in accordance
with FASB Topic ASC 718 (ASC 718). See Note 10(c) to the Notes to Consolidated Financial
Statements, included in Part IV, Item 15 of the Original 10-K, for a
discussion of the assumptions used to value equity-based compensation. |
|
(d) |
|
On March 16, 2009, we entered into a consulting agreement effective April 1, 2009, with Mr.
Shrinsky. The term of the agreement is through December 31, 2011 and may be renewed at our
option on or before December 31st of each succeeding year. Under the terms of the consulting
agreement, he is paid a retainer of $50,000 per year to advise us with respect to various
business matters. |
17
Stock
Option Plan for Non-Employee Directors
We adopted a separate option plan for our non-employee directors, but this plan terminated on
September 26, 2009. The terms of this plan provided that the Board had the discretion to grant
stock options to any non-employee director. An aggregate of 300,000 shares of Class A common stock
were reserved for issuance under this option plan. The plan was administered by the Board. Although
the plan has terminated, the expiration of each option granted occurs 10 years after the stock
option grant date.
Under the plan, any non-exercisable options will immediately vest and become exercisable upon
a change in control of the Company. If a non-employee director ceases to be a member of the Board
due to death, retirement or disability, all his unvested options will terminate immediately and all
his exercisable options on such date will remain exercisable based on the plan terms. If a
non-employee directors service as a director is terminated for any reason other than the
preceding, all his unvested options will terminate immediately and all his exercisable options on
such date will remain exercisable for thirty days.
2006
Omnibus Equity Compensation Plan
On July 18, 2006, our stockholders approved the Omnibus Plan. The Board previously approved
the Omnibus Plan at a meeting held on May 3, 2006, which was subject to stockholder approval. An
aggregate of 3,500,000 shares of Class A common stock have been reserved for issuance under this
plan.
Stockholder approval of the Omnibus Plan allows (i) the compensation attributable to grants
under the Omnibus Plan to meet an exception to the $1,000,000 deduction limit under Section 162(m)
of the Code, (ii) incentive stock options issued under the Omnibus Plan to meet the requirements of
the Code, and (iii) the Omnibus Plan to meet the Nasdaq Stock Market listing requirements.
The Omnibus Plan provides that grants may be made to participants of any of the following: (i)
incentive stock options, (ii) nonqualified stock options, (iii) stock appreciation rights (SARs),
(iv) stock units, (v) stock awards, (vi) dividend equivalents, and (vii) other stock-based awards.
All employees, members of the Board, and all non-employee directors are eligible to participate.
The Compensation Committee approves those individuals who will participate in the Omnibus Plan.
Limitations
on Directors and Officers Liability
Our third amended and restated certificate of incorporation has a provision which limits the
liability of directors to us to the maximum extent permitted by Delaware law. The third amended and
restated certificate of incorporation specifies that our directors will not be personally liable
for monetary damages for breach of fiduciary duty as a director. This limitation does not apply to
actions by a director or officer that do not meet the standards of conduct which make it
permissible under the Delaware General Corporation Law for SBS to indemnify directors or officers.
Our amended and restated by-laws provide for indemnification of directors and officers (and
others) in the manner, under the circumstances and to the fullest extent permitted by the Delaware
General Corporation Law, which generally authorizes indemnification as to all expenses incurred or
imposed as a result of actions, suits or proceedings if the indemnified parties acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best interests of SBS. Each
director has entered into an indemnification agreement with us that provides for indemnification to
the fullest extent provided by law. We believe that these provisions are necessary or useful to
attract and retain qualified persons as directors and officers. We currently have directors and
officers liability insurance that provides for coverage of up to $20.0 million.
On November 28, 2001, a complaint was filed against us in the United States District Court for
the Southern District of New York (the Southern District of New York) and was amended on April
19, 2002. The amended complaint alleges that the named plaintiff, Mitchell Wolf, purchased shares
of our Class A common stock pursuant to the October 27, 1999 prospectus and registration statement
relating to our initial public offering, which closed on November 2, 1999 (the IPO). The
complaint was brought on behalf of Mr. Wolf and an alleged class of similarly situated purchasers
against us, eight underwriters and/or their successors-in-interest who led or otherwise
participated in our IPO, two members of our senior management team, one of whom is the Chairman of
our Board of Directors, and an additional director (collectively, the Individual Defendants). The
complaint was never served upon the Individual Defendants.
18
This case is one of more than 300 similar cases brought by similar counsel against more than
300 issuers, 40 underwriters and 1,000 individual defendants alleging, in general, violations of
federal securities laws in connection with initial public offerings, in particular, failing to
disclose that the underwriters allegedly solicited and received additional, excessive and
undisclosed commissions from certain investors in exchange for which they allocated to those
investors material portions of the restricted shares issued in connection with each offering. All
of these cases, including the one involving us, have been assigned for consolidated pretrial
purposes to one judge of the Southern District of New York. The issuer defendants in the
consolidated cases (collectively, the Issuer Defendants) filed motions to dismiss the
consolidated cases. These motions to dismiss covered issues common among all Issuer Defendants and
issues common among all underwriter defendants (collectively, the Underwriter Defendants) in the
consolidated cases. As a result of these motions, the Individual Defendants were dismissed from one
of the claims against them, specifically the Section 10b-5 claim. On September 21, 2007, Kaye
Scholer LLP, on behalf of the Individual Defendants, executed a tolling agreement with plaintiffs
providing for the dismissal without prejudice of all claims against the Individual Defendants upon
the provision to plaintiffs of documentation showing that SBS has entity coverage for the period in
question. Documentation of such coverage was subsequently provided to plaintiffs on December 19,
2007.
On October 13, 2004, the Southern District of New York granted plaintiffs motion for class
certification in six focus cases out of the more than 300 consolidated class actions. The Company
was not named in any of the six focus cases. On August 31, 2005, the Southern District of New
York issued an order of preliminary approval of a settlement proposal among the investors in the
plaintiff class, the Issuer Defendants (including us) and the Issuer Defendants insurance carriers
(the Issuers Settlement). The principal components of the Issuers Settlement were: (1) a release
of all claims against the Issuer Defendants and their directors, officers and certain other related
parties arising out of the alleged wrongful conduct in the amended complaint; (2) the assignment to
the plaintiffs of certain of the Issuer Defendants potential claims against the Underwriters; and
(3) a guarantee by the insurers to the plaintiffs of the difference between $1.0 billion and any
lesser amount recovered by the plaintiffs from the Underwriter Defendants. The payments were to be
charged to each Issuer Defendants insurance policy on a pro rata basis. The plaintiffs appealed
the Issuers Settlement to the United States Court of Appeals for the Second Circuit (the Second
Circuit).
On December 5, 2006, the Second Circuit reversed the order, holding that plaintiffs could not
satisfy the predominance requirement for a Federal Rule of Civil Procedure 23(b)(3) class action.
On June 25, 2007, in light of the Second Circuits reversal of the class certification order and
its subsequent denial of plaintiffs petition for a rehearing or rehearing en banc, the Southern
District of New York entered a stipulation between plaintiffs and the Issuer Defendants,
terminating the proposed Issuers Settlement which the Southern District of New York had
preliminarily approved on August 31, 2005.
On August 14, 2007, plaintiffs filed amended complaints in the six focus cases and amended
master allegations in the consolidated actions. On November 13, 2007, the Underwriter Defendants
and Issuer Defendants moved to dismiss the amended complaints in the six focus cases. On March
26, 2008, the Southern District of New York granted in part the motion as to a subset of
plaintiffs Section 11 claims (alleging civil liabilities on account of false registration
statements), but denied the motion as to plaintiffs other claims.
On September 27, 2007, plaintiffs filed a renewed motion for class certification with respect
to the six focus cases, based on newly proposed class definitions. On October 10, 2008, at
plaintiffs request, the Southern District of New York ordered the withdrawal without prejudice of
plaintiffs renewed motion, which had been fully briefed and was sub judice.
On January 7, 2008, the Underwriter Defendants filed a motion (in which the Issuer Defendants
joined) to strike class allegations in 26 of the consolidated cases, including the case against the
Company, on the ground that plaintiffs lacked a putative class representative in those cases at the
time of their May 30, 2007 oral motion. On May 13, 2008, the Southern District of New York issued
an order granting the motion in part and striking certain of the class allegations relating to the
Section 10b-5 claims in 8 of the 26 actions, including the Section 10b-5 claim against SBS. The
order also requires plaintiffs to make certain disclosures with respect to the putative class
representatives in the remaining 18 actions. Once the disclosures are filed, the Underwriter
Defendants and the Issuer Defendants may seek clarification of the Southern District of New Yorks
May 13, 2008 order with respect to the status of the remaining 10b-5-related class allegations in
the other 8 actions, including the SBS action, as well as the status of the Section 11-related
class allegations.
On June 11, 2009, pursuant to a motion filed on April 2, 2009, the Southern District of New
York issued a preliminary order of approval of a settlement of all of the consolidated cases,
including the case against SBS. On September 19, 2009, the Southern District of New York conducted
a hearing regarding the final approval of the settlement of all consolidated cases and, on October
5, 2009, issued an opinion finally approving the settlement. The settlement, which is subject to
appeal, will result in a release of all claims against the Underwriter Defendants and the Issuer
Defendants, and their officers and directors, in exchange for an aggregate sum of approximately
$600 million (the Settlement Amount) to be paid into a settlement fund for the benefit of the
class plaintiffs. The Companys and the Individual Defendants share of the Settlement Amount would
be fully funded by insurance.
19
On October 23, 2009, several objecting members of the class (the Objectors) filed a petition
for leave in the Second Circuit to appeal the Southern District of New Yorks class definition for
purposes of the October 5, 2009 settlement (the Objectors petition). Several Objectors have also
filed notices of appeal in the Second Circuit from the Southern District of New Yorks order
approving the settlement. On October 29, 2009 plaintiffs filed an answer in opposition to the
Objectors petition. On November 2, 2009, the Underwriter Defendants filed a response to the
Objectors petition, taking no position on the petition, but noting that the classes were approved
for settlement purposes only and reserving the right to oppose class certification in the event the
settlement is not finally approved. The Issuer Defendants have not taken a position on the appeals.
On October 7, 2010, all but two of the Objectors entered into a stipulation with plaintiffs
withdrawing their appeals with prejudice. The two remaining Objectors have since submitted briefs
to the Second Circuit in support of their appeals. On December 8, 2010, plaintiffs moved to dismiss
with prejudice one of the remaining Objectors appeals based on alleged violations of the Second
Circuits rules. The motion is fully briefed and is sub judice. The deadline for filing answering
briefs regarding the remaining Objectors appeals is stayed pending determination of the motion to
dismiss.
Compensation Committee
The
subheading Compensation Committee in Item 10 is incorporated herein by reference.
20
|
|
|
Item 12. |
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters |
The following table sets forth information concerning the beneficial ownership of our Class A
common stock and our Class B common stock as of April 11, 2011, by:
|
|
|
each person known by us to beneficially own more than 5% of any class of our common stock; |
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|
each director; |
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|
each executive officer named in the Summary Compensation Table (the NEOs); and |
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|
all named executive officers and directors as a group. |
Unless indicated below, each stockholder listed had sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property laws, if applicable. As of
April 11, 2011, there were 41,669,805 shares of Class A common stock and 23,403,500 shares of
Class B common stock outstanding. In addition, as of April 11, 2011, there were 380,000 shares of
Series C convertible preferred stock, par value $.01 per share (Series C preferred stock), which
are convertible into 7,600,000 shares of Class A common stock and vote on an as-converted basis
with the common stock. Accordingly, in the percentage calculations in the table below, we treat the
7,600,000 shares of Class A common stock (into which the Series C preferred stock is convertible)
as outstanding.
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Class A Shares |
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Class B Shares |
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|
Percent of |
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|
Percent of |
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Percent of |
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Percent of |
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Total |
|
|
Total |
|
|
|
Number of |
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|
Class A |
|
|
Number of |
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|
Class B |
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Economic |
|
|
Voting |
|
Name and Address(1)(2) |
|
Shares |
|
|
Shares |
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|
Shares |
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|
Shares |
|
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Interest |
|
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Power |
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Raúl Alarcón, Jr.(3) |
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1,162,000 |
|
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2.3 |
% |
|
|
23,400,000 |
|
|
|
100.0 |
% |
|
|
33.3 |
% |
|
|
82.7 |
% |
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|
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Joseph A. García(4) |
|
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500,000 |
|
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1.0 |
% |
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|
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|
|
* |
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|
|
* |
|
|
|
* |
|
Marko Radlovic(6) |
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275,000 |
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|
* |
|
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|
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
Manuel E. Machado(6) |
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10,000 |
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* |
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|
|
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
Mitchell A. Yelen(5) |
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45,000 |
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|
|
* |
|
|
|
|
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
Jose A. Villamil(6) |
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50,000 |
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* |
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* |
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|
* |
|
|
|
* |
|
Jason L. Shrinsky(7) |
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65,000 |
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|
|
* |
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|
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|
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* |
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|
* |
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|
|
* |
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All named executive
officers and
directors as a
group(8) |
|
|
2,107,000 |
|
|
|
4.1 |
% |
|
|
23,400,000 |
|
|
|
100.0 |
% |
|
|
34.3 |
% |
|
|
82.8 |
% |
|
|
|
|
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|
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CBS Corporation(9) |
|
|
7,600,000 |
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15.4 |
% |
|
|
|
|
|
|
* |
|
|
|
10.5 |
% |
|
|
2.7 |
% |
Columbia Wanger Asset
Management, L.P.(10) |
|
|
3,468,600 |
|
|
|
7.0 |
% |
|
|
|
|
|
|
* |
|
|
|
4.8 |
% |
|
|
1.2 |
% |
Attiva Capital
Partners, LTD(11) |
|
|
3,190,246 |
|
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|
6.5 |
% |
|
|
|
|
|
|
* |
|
|
|
4.4 |
% |
|
|
1.1 |
% |
Beach Point Capital
Management(12) |
|
|
2,632,418 |
|
|
|
5.3 |
% |
|
|
|
|
|
|
* |
|
|
|
3.6 |
% |
|
|
* |
|
|
|
|
* |
|
Indicates less than 1%. |
|
(1) |
|
The address of all directors and executive officers in this table, unless otherwise
specified, is c/o Spanish Broadcasting System, Inc., 2601 South Bayshore Drive, PH 2, Coconut
Grove, Florida 33133. |
21
|
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|
(2) |
|
As used in this table, beneficial ownership means the sole or shared power to vote or
direct the voting of a security, or the sole or shared power to dispose, or direct the
disposition, of a security. A person is deemed as of any date to have beneficial ownership of
any security that the person has the right to acquire within 60 days after that date,
regardless if the security is in-the-money or not. For purposes of computing the percentage of
outstanding shares held by each person named above, any security that the person has the right
to acquire within 60 days of the date of calculation is deemed to be outstanding, but is not
deemed to be outstanding for purposes of computing the percentage ownership of any other
person. |
|
(3) |
|
Includes 1,000,000 shares of Class A common stock issuable upon the exercise and/or vesting
of securities that the holder has the right to within sixty days of the date of this table.
Also includes 1,070,000 shares of Class B common stock owned by Pablo Raúl Alarcón, Sr.s
estate. Raúl Alarcón, Jr. is the executor of the estate of Pablo Raúl Alarcón, Sr., and has
the power to vote Mr. Alarcón Sr.s shares. |
|
(4) |
|
Includes 350,000 shares of Class A common stock issuable upon the exercise and/or vesting of
securities that the holder has the right to within sixty days of the date of this table. |
|
(5) |
|
Includes 40,000 shares of Class A common stock issuable upon the exercise and/or vesting of
securities that the holder has the right to within sixty days of the date of this table. |
|
(6) |
|
Shares of Class A common stock beneficially owned by Messrs. Radlovic, Machado, and Villamil
are issuable upon the exercise and/or vesting of securities that the holder has the right to
within sixty days of the date of this table. |
|
(7) |
|
Includes 50,000 shares of Class A common stock issuable upon the exercise and/or vesting of
securities that the holder has the right to within sixty days of the date of this table. Mr.
Shrinsky holds these options for the benefit of the law firm, Kaye Scholer LLP. Mr. Shrinsky
shares ownership of, and voting and investment power for, 15,000 shares of Class A common
stock with his spouse. |
|
(8) |
|
Includes 1,775,000 shares of Class A common stock issuable upon the exercise and/or vesting
of securities that the holder has the right to within sixty days of the date of this table. |
|
(9) |
|
Reflects ownership of Mr. Sumner M. Redstone, National Amusements, Inc. (NAI), NAIRI, Inc.
(NAIRI), CBS Corporation (CBS), Westinghouse CBS Holding Company, Inc. (W/CBS HCI), CBS
Broadcasting Inc. (CBSBI), CBS Radio Inc. (CBS Radio) and CBS Radio Media Corporation
(CRMC) (collectively, the Reporting Entities) of 380,000 shares of our Series C Preferred
Stock. Upon conversion, each of the shares of Series C Preferred Stock will convert into
twenty fully paid and non-assessable shares of Class A Common Stock. Mr. Sumner M. Redstone,
by virtue of his stock ownership in NAI, may be deemed to be the beneficial owner, with shared
dispositive and voting power, of the Series C Preferred Stock held or controlled by the
Reporting Entities. The address of the Reporting Entities and Mr. Redstone is c/o CBS
Corporation, 51 West 52nd Street, New York, NY 10019. We obtained this information from a
Schedule 13D/A filed by CBS Corporation on February 14, 2006. Nonetheless, the percentage
which appears in this table may differ from the percentage disclosed in such filing. |
|
(10) |
|
Reflects the ownership of Columbia Wanger Asset Management, L.P. and Columbia Acorn Trust, a
Massachusetts business trust that is advised by Columbia Wanger Asset Management, L.P. The
address of Columbia Wanger Asset Management, L.P. is 227 West Monroe Street, Suite 3000,
Chicago, Illinois 60606. Columbia Wanger Asset Management, L.P. has sole investment discretion
and voting power with respect to all the shares. We obtained this information from a Schedule
13G/A filed by Columbia Wanger Asset Management, L.P. on February 11, 2011. Nonetheless, the
percentage which appears in this table may differ from the percentage disclosed in such
filing. |
|
(11) |
|
Includes 114,000 shares of Class A common stock held by Attiva Capital Partners, LTD
(Attiva), 140,000 shares of Class A common stock held by Complejo Metalurgico de Cumana -
Venezuela, 67,000 shares of Class A common stock held by David Tomasello and 2,869,246 shares
of Class A common stock held by Antonio Tomasello. Antonio Tomasello is the father of David
Tomasello, who is the managing member of Attiva and Chairman of Complejo Metalurgico de Cumana
- Venezuela and, for the purposes of the reporting requirements of the Securities Exchange Act
of 1934, may be deemed to be a beneficial owner of the shares held by that entity which
represent 6.5% of the shares of Class A common stock outstanding. David Tomasello has sole
voting power and shared dispositive power with respect to such securities. We obtained this
information from a Schedule 13D filed August 7, 2009. The address for Attiva is 275 Madison
Avenue, 4th floor, New York, New York 10016. Nonetheless, the percentage which appears in this
table may differ from the percentage disclosed in such filing. |
|
(12) |
|
The address of Beach Point Capital Management LP is 1620 26th Street, Suite 6000N,
Santa Monica, California 90404. Beach Point GP LLC is the general partner of Beach Point
Capital Management LP and, for the purposes of the reporting requirements of the Securities
Exchange Act of 1934, may be deemed to be a beneficial owner of the shares held by that entity
which represent 5.3% of the shares of Class A common stock outstanding. Beach Point Capital
Management LP has sole investment discretion and voting power with respect to all the shares.
The shares are owned by various individual and institutional investors for which Beach Point
Capital Management LP serves as an investment advisor. We obtained this information from a
Schedule 13G/A filed by Beach Point Capital Management LP on January 21, 2011. Nonetheless,
the percentage which appears in this table may differ from the percentage disclosed in such
filing. |
22
Equity Compensation Plan Information
The following table sets forth, as of December 31, 2010, the number of securities outstanding
under our equity compensation plans, the weighted average exercise price of such securities and the
number of securities available for grant under these plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
|
|
|
to be Issued |
|
|
Weighted-Average |
|
|
Number of Securities |
|
|
|
Upon |
|
|
Exercise |
|
|
Remaining Available |
|
|
|
Exercise of |
|
|
Price of |
|
|
for Future Issuance |
|
|
|
Outstanding |
|
|
Outstanding |
|
|
Under Equity |
|
|
|
Options, |
|
|
Options, |
|
|
Compensation Plans |
|
|
|
Warrants |
|
|
Warrants |
|
|
(excluding |
|
Plan Category |
|
and Rights |
|
|
and Rights |
|
|
Column (a)) |
|
Equity Compensation Plans Approved by
Stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
2006 Omnibus Equity Compensation Plan |
|
|
280,000 |
|
|
$ |
0.86 |
|
|
|
2,958,000 |
|
1999 Stock Option Plan |
|
|
1,517,900 |
|
|
$ |
6.55 |
|
|
|
|
|
Non-Employee Directors Stock Option Plan |
|
|
150,000 |
|
|
$ |
7.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,947,900 |
|
|
|
|
|
|
|
2,958,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 13. |
|
Certain Relationships and Related Transactions, and Director Independence |
Approval Policies and Procedures
In accordance with our Audit Committee charter, our Audit Committee is responsible for
reviewing and approving the terms and conditions of all related party transactions in accordance
with the Nasdaq Listing Rules. Our Audit Committee also reviews and approves our proxy statement
and the information contained therein. In determining whether to approve or ratify a related party
transaction, the Audit Committee takes into account, among other factors it deems appropriate,
whether the transaction is on terms no less favorable to us than terms generally available from an
unrelated person under the same or similar circumstances, and the extent of the related persons
interest in the transaction. An Audit Committee member cannot participate in any approval or
ratification of a related party transaction in which such member is a related person, other than to
provide all material information regarding the transaction to the Audit Committee.
Related Party Transactions
During fiscal years 2010 and 2009, we paid CBS Radio, Inc. various payments totaling
approximately $0.3 million per year, respectively, pursuant to a lease for tower and antenna space.
In June 1992, Spanish Broadcasting System of Florida, Inc., one of our subsidiaries, entered
into a 20-year lease with Mr. Alarcón, Sr., our late Chairman Emeritus and Mr. Alarcón, Jr., our
Chairman of the Board, CEO and President, for a building which provides for a base monthly rent of
$9,000. The lease is cancellable by the lessors upon sixty days notice to us, except during the
months of November through May. Effective June 1, 1998, the lease for this building was assigned to
SBS Realty Corp., a realty management company owned by Messrs. Alarcón, Sr. and Alarcón, Jr. This
building is currently vacant. During fiscal years 2010 and 2009, we paid SBS Realty Corp. aggregate
amounts of approximately $0.1 million per year, respectively.
Our corporate headquarters are located in office space previously owned by Irradio Holdings
Ltd., a Florida limited partnership, for which the general partner is Irradio Investments, Inc., a
Florida subchapter S corporation, wholly owned by our CEO. In January 2011, Irradio Holdings sold
the leased space to Agave Acquisitions, LLC and transferred all of its rights and obligations;
therefore, eliminating the related party transaction. The lease term of the office space is through
April 30, 2015, with the option to renew all or some of the existing office space for an additional
five years. During fiscal years 2010 and 2009, we paid Irradio Holdings Ltd. an aggregate amount of
approximately $2.5 million, in rent and related expenses. Additionally, during fiscal years 2010
and 2009, the Company subleased certain of its existing office space to subtenants to reduce
expenses. In Fiscal Year 2011, we estimate paying an annual rent of approximately $2.0 million for all the
space leased under the lease, which will be offset by rent income of approximately $1.0 million.
On January 1, 2008, we entered into a local marketing agreement with South Broadcasting
System, Inc., a company owned by the estate of Mr. Alarcón, Sr., our late Chairman Emeritus. Mr.
Alarcón, Jr., our Chairman of the Board, CEO and President, is the executor and one of the
beneficiaries of the estate. Pursuant to the local marketing agreement, we are permitted to
broadcast our Mexican Regional programming on radio station 106.3 FM (the LMA Station). We are
required to pay the operating costs of the LMA Station and in exchange we retain all revenues from
the sale of the advertising within the programming we provide. Under the terms of the local
marketing agreement, we have the right of first negotiation and the right of first refusal to match
a competing offer. However, after the first anniversary of the effective date, if we do not agree
to match the terms of the competing offer within the ten (10) business day period or fail to notify
South Broadcasting of our intent to match the competing offer, then South Broadcasting has the
right to accept such offer, provided South Broadcasting pays us the early termination fee equal to
the lesser of 5% of the aggregate purchase price of the LMA Station or $1.0 million. The local
marketing agreement terminated on its terms on December 31, 2008, after which we continued to
operate the LMA Station on the same financial terms on a month to month basis. On May 8, 2009, the
local marketing agreement was renewed for three years and will terminate on its terms on December
31, 2011.
23
On March 16, 2009, we entered into a consulting agreement effective April 1, 2009, with Mr.
Shrinsky, one of our Board members. The term of the agreement is through December 31, 2011 and may
be renewed at our option on or before December 31st of each succeeding year. Under the terms of the
consulting agreement, he is paid a retainer of $50,000 per year to advise us with respect to
various business matters. We paid a retainer of $50,000 during fiscal year 2010 and 2009.
Certain Relationships
Eric García, the son of Mr. García, our CFO, is employed by us as a sales executive for our
New York radio stations. Based on commissions earned during the fiscal years 2010 and 2009, he was
paid $183,845 and $211,032, respectively.
See Item 12.
Security Ownership of Certain Beneficial Owners and Management.
Director Independence
The subheading The Board of Directors in
Item 10 is incorporated herein by reference.
|
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Item 14. |
|
Principal Accountant Fees and Services |
Our consolidated financial statements for Fiscal Year 2010 have been audited by KPMG, our
Independent Registered Public Accounting Firm.
Audit and Audit-Related Fees, Tax Fees and All Other Fees
The following table sets forth the aggregate fees billed to us for professional audit services
rendered by KPMG for the audit of our annual consolidated financial statements for the fiscal years
ended December 31, 2010 and 2009, the review of the consolidated financial statements included in
our quarterly reports on Form 10-Q for such periods and fees billed for other services rendered by
KPMG for such periods. Fees include amounts related to the year indicated, which may differ from
amounts billed.
|
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|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
Fiscal Year Ended |
|
|
|
December 31, 2010 |
|
|
December 31, 2009 |
|
|
|
($ in thousands) |
|
Annual audit fees(1) |
|
$ |
690 |
|
|
$ |
620 |
|
Audit related fees(2) |
|
|
20 |
|
|
|
24 |
|
Tax fees(3) |
|
|
265 |
|
|
|
350 |
|
All other fees(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fees for services |
|
$ |
976 |
|
|
$ |
994 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Annual audit fees for the audit of the consolidated financial statements included in the
Companys Annual Report on Form 10-K and the review of the interim condensed consolidated
financial statements included in the Companys quarterly reports on Form 10-Q. This category
also includes fees for statutory audits required by the Puerto Rico tax authorities, consents,
review of registration statements and other documents filed with the SEC, and accounting
consultations. |
|
(2) |
|
Audit related fees are the fees for the financial statement audit of the Companys employee
benefit plan. |
|
(3) |
|
Tax fees are the fees for professional services rendered for tax compliance, tax advice, and
tax planning for the Companys U.S. and Puerto Rico entities. |
|
(4) |
|
All other fees are the fees for services other than those in the above three categories. |
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of the
Independent Registered Public Accounting Firm
In accordance with the Audit Committee Charter, the Audit Committee is responsible for
appointing and overseeing the work of the Independent Registered Public Accounting Firm. The Audit
Committee has not established or adopted pre-approval policies and procedures for the pre-approval
of all audit and permissible non-audit services provided by the Independent Registered Public
Accounting Firm. The Audit Committee may, however, adopt pre-approval policies and procedures in
the future if it deems pre-approval policies and procedures to be appropriate for us. The Audit
Committee did not rely upon the exception to the pre-approval requirements provided in 17 C.F.R
210.2-01(c)(7)(i)(c). The Audit Committee provided its prior approval for all audit and non-audit
related services reflected in the above table. The Audit Committee reviewed the provision of all
non-audit services by the Independent Registered Public Accounting Firm and concluded that the
provision of these services was compatible with maintaining the Independent Registered Public
Accounting Firms independence.
24
Before engaging the Independent Registered Public Accounting Firm for the Fiscal Year 2011
audit, the Independent Registered Public Accounting Firm submitted to the Audit Committee for
approval a detailed description of services it expected to render to the Company during that year
for each of the following categories of services:
|
|
|
Audit services include audit work performed in the preparation of the
consolidated financial statements, as well as work that generally only
the Independent Registered Public Accounting Firm can reasonably be
expected to provide, including comfort letters, statutory audits, and
attest services and consultation regarding financial accounting and/or
reporting standards. |
|
|
|
|
Audit related services are for assurance and related services that are
traditionally performed by the Independent Registered Public
Accounting Firm, including due diligence related to mergers and
acquisitions, employee benefit plan audits, and special procedures
required to meet certain regulatory requirements. |
|
|
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|
Tax services include all services performed by the Independent
Registered Public Accounting Firms tax personnel except those
services specifically related to the audit of the financial
statements, and includes fees in the areas of tax compliance, tax
planning, and tax advice. |
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Other services are those services not captured in the other categories. |
Before engagement, the Audit Committee pre-approved these services by category of service. The
fees are budgeted and the Audit Committee requires the Independent Registered Public Accounting
Firm to report actual fees versus the budget periodically throughout the year by category of
service. During the year, circumstances may arise when it may become necessary to engage the
Independent Registered Public Accounting Firm for additional services not contemplated in the
original pre-approval. In those instances, the Audit Committee requires specific pre-approval
before engaging the Independent Registered Public Accounting Firm.
25
PART IV
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Item 15. |
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Exhibits and Financial Statement Schedules |
The
following exhibits, which are numbered in accordance with Item 601 of
Regulation S-K, are filed herewith or, as noted, incorporated by
reference herein:
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Exhibit number |
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Exhibit description |
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31.1 |
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Chief Executive Officers Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. |
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31.2 |
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Chief Financial Officers Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. |
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32.1 |
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Chief Executive Officers Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2 |
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Chief Financial Officers Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on the 9th day of May, 2011.
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Spanish Broadcasting System, Inc. |
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By: |
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/s/ Raúl Alarcón, Jr. |
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Name:
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Raúl Alarcón, Jr. |
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Title:
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Chairman of the Board of Directors, |
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Chief Executive Officer and President |
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities indicated on the
9th day of May, 2011.
Signature
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/s/
Raúl Alarcón, Jr.
Raúl Alarcón, Jr.
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Chairman of the Board of Directors, Chief Executive Officer
and President (principal executive officer) |
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/s/
Joseph A. García
Joseph A. García
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Director, Senior Executive Vice President, Chief Financial
Officer, Chief Administration Officer and
Secretary (principal financial and accounting officer) |
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/s/
Jose A. Villamil
Jose A. Villamil
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Director |
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/s/
Mitchell A. Yelen
Mitchell A. Yelen
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Director |
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/s/
Jason L. Shrinsky
Jason L. Shrinsky
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Director |
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/s/
Manuel E. Machado
Manuel E. Machado
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Director |
27
SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES
Exhibit Index
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Exhibit number |
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Exhibit description |
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31.1 |
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Chief Executive Officers Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. |
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31.2 |
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Chief Financial Officers Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. |
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32.1 |
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Chief Executive Officers Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2 |
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Chief Financial Officers Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
28